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闽灿坤B:2019年年度报告(英文版)2020-03-17  

						                       2019 Annual Report of Tsann Kuen (China) Enterprise Co., Ltd.




TSANN KUEN (CHINA) ENTERPRISE CO., LTD.

         2019 ANNUAL REPORT




               March 2020




                   1
                                                      2019 Annual Report of Tsann Kuen (China) Enterprise Co., Ltd.




             Section I. Important Statements, Contents & Terms

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 information,
misleading statements or material omissions. And they shall be jointly and severally liable for that.
All directors attended the board meeting for reviewing this Report.
The Company’s profit distribution preplan upon review and approval of this board meeting: Based
on the total 185,391,680 shares, a cash dividend of RMB1 (tax included) will be distributed for
every 10 shares held by shareholders. No bonus shares will be granted and no capital reserve will be
turned into share capital.
Pan Zhirong, company principal, and Wu Jianhua, head of the accounting work & the accounting
division (head of accounting) jointly declare that the financial statements carried in this Report are
factual, accurate and complete.
Any forward-looking statement such as those involving the future operational plans in this Report
shall not be considered as virtual promises of the Company to investors. And investors are kindly
reminded to pay attention to possible risks.
This Report is prepared in both Chinese and English. Should there be any discrepancy between the
two versions, the Chinese version shall prevail.




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                                                             2019 Annual Report of Tsann Kuen (China) Enterprise Co., Ltd.




                                                  Contents




Section I. Important Statements, Contents & Terms................................................2

Section II. Company Profile & Financial Highlights................................................5

Section III. Business Highlights...................................................................................9

Section IV. Performance Discussion & Analysis......................................................11

Section V. Significant Events......................................................................................27

Section VI. Change in Shares & Shareholders........................................................ 44

Section VII. Preference Shares.................................................................................. 48

Section VIII. Directors, Supervisors, Senior Management Staff & Employees...48

Section IX. Corporate Governance...........................................................................56

Section X. Corporate Bonds.......................................................................................63

Section XI. Financial Report..................................................................................... 63

Section XII. Documents Available for Reference.................................................... 64




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                                                      2019 Annual Report of Tsann Kuen (China) Enterprise Co., Ltd.



                                              Terms

              Term              Refers to                                 Content

Xiamen Tsann Kuen, MCKB,
                                Refers to   Tsann Kuen (China) Enterprise Co., Ltd.
Company, 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 Co.,
South Port Electronics, TKN     Refers to
                                            Ltd.

STD                             Refers to   Shanghai Canxing Trading Co., Ltd.

East Sino Development           Refers to   East Sino Development Limited

SCI                             Refers to   Pt.Star Comgistic Indonesia

Orient Star Investments         Refers to   Orient Star Investments Limited

TKEI                            Refers to   Tsannkuen Edge Intelligence Co., Ltd.

SCPDI                           Refers to   Pt.Star Comgistic Property Development Indonesia

TKI                             Refers to   Tsann Kuen (Zhangzhou) Investment Co., Ltd.

TKW                             Refers to   Xiamen Tsannkuen Property Services Co., Ltd.

Yuan                            Refers to   RMB Yuan




                                  Major Risk Warning


Securities Times, Ta Kung Pao (HK) and www.cninfo.com.cn are designated by the Company as the
media for information disclosure. All information of the Company shall be subject to what is
disclosed by the Company on the said media. And Investors are kindly reminded to pay attention to
possible investment risks.




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                                                         2019 Annual Report of Tsann Kuen (China) Enterprise Co., Ltd.




                 Section II. Company Profile & Financial Highlights

I. Basic information of the Company

 Stock name                TKC-B                             Stock code                  200512
 Stock exchange            Shenzhen Stock Exchange
 Company name         in
                           厦门灿坤实业股份有限公司
 Chinese
 Abbr.                     闽灿坤
 Company name         in
                           TSANNKUEN(CHINA) ENTERPRISE CO. ,LTD.
 English
 Abbr.                     TKC
 Legal representative      Pan Zhirong
 Registered address        No.88 Xinglong Road, Huli Industrial Park, Xiamen, Fujian Province, P.R. China
 Zip code                  361006
                           TSANN KUEN Industrial Park, Taiwanese Investment Zone, Zhangzhou, Fujian
 Office address
                           Province
 Zip code                  363107
 Internet website          www.eupa.com
 Email address             mm_sun@tkl.tsannkuen.com

II. Contact us

                                       Board Secretary                      Securities Representative
Name                       Sun Meimei                              Dong Yuanyuan
                           TSANN KUEN Industrial Park,             TSANN KUEN Industrial Park, Taiwanese
Contact address            Taiwanese Investment Zone, Zhangzhou,   Investment Zone, Zhangzhou, Fujian
                           Fujian Province                         Province
Tel.                       0596-6268161                            0596-6268103
Fax                        0596-6268104                            0596-6268104
E-mail address             mm_sun@tkl.tsannkuen.com                yy_dong@tkl.tsannkuen.com

III. About information disclosure and where this Report is placed

 Newspapers designated by the Company for information Securities Times (domestic), Ta Kung Pao
 disclosure                                                     (HK) (overseas)
 Internet website designated by CSRC for disclosing this Report www.cninfo.com.cn
                                                                TSANN KUEN Industrial Park,
 Where this Report is placed                                    Taiwanese Investment Zone, Zhangzhou,
                                                                Fujian Province




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                                                                 2019 Annual Report of Tsann Kuen (China) Enterprise Co., Ltd.


IV. Changes in the registered information

 Credibility code                                                             91350200612002170L
 Changes of the main business since listing                                   No changes
 Changes of the controlling shareholder                                       No changes

V. Other information

The CPAs firm hired by the Company:
  Name                           Ruihua Certified Public Accountants LLP
                                 11/F, West Tower of China Overseas Property Plaza, Building                                     7,
  Office address
                                 NO.8,Yongdingmen Xibinhe Road, Dongcheng District, Beijing
  Signing accountants            Zhang Liping and Ren Xiaochao
Sponsor engaged by the Company to conduct sustained supervision during the reporting period
□ Applicable √ Inapplicable
Financial consultant engaged by the Company to conduct sustained supervision during the reporting period
□ Applicable √ Inapplicable

VI. Accounting and financial highlights

Does the Company adjust retrospectively or restate accounting data of previous years?
□ Yes √ No
                                                                                                            Unit: RMB Yuan
                                                                                      Increase/decrease
                                                                                        of current year
                Item                          2019                     2018                                        2017
                                                                                        over last year
                                                                                             (%)
 Operating revenue                      2,001,939,841.94         1,790,062,803.08                  11.84     1,872,746,942.25
 Net      profit   attributable to
                                         105,233,212.02            11,831,622.78                  789.42        65,759,896.04
 shareholders of the Company
 Net      profit   attributable to
 shareholders of the Company
                                           57,267,985.97              -968,285.11               6,014.37         6,817,000.41
 before extraordinary gains and
 losses
 Net cash flows from operating
                                         143,620,287.98           106,076,060.82                   35.39        97,869,204.63
 activities
 Basic EPS (RMB Yuan/share)                           0.57                    0.06                850.00                   0.35

 Diluted EPS (RMB Yuan/share)                         0.57                    0.06                850.00                   0.35

 Weighted average ROE (%)                            15.07                    1.82                 13.25                  10.46
                                                                                      Increase/decrease
                                         As at 31 Dec.            As at 31 Dec.           of current          As at 31 Dec.
                Item
                                             2019                     2018              year-end than             2017
                                                                                      last year-end (%)
 Total assets                           1,956,448,835.98         1,842,514,750.64                    6.18    1,781,628,366.79
 Net    assets     attributable    to
                                         748,738,791.34           648,801,684.35                   15.40      650,497,084.17
 shareholders of the Company

Total shares of the Company as at closure of the last trading day before the disclosure of this Report:

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                                                              2019 Annual Report of Tsann Kuen (China) Enterprise Co., Ltd.


Total shares of the Company as at closure of the last trading day before the
                                                                                                            185,391,680
disclosure of this Report (share)
Fully diluted EPS based on the latest total shares (RMB Yuan/share)                                                  0.57

VII. 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.

3. Explain reasons for the differences between accounting data under domestic and overseas accounting
standards

□ Applicable √ Inapplicable

VIII. Financial highlights by quarter

                                                                                                        Unit: RMB Yuan
                  Item                            Q1                   Q2                  Q3                   Q4
Operating revenue                            414,109,550.74     515,339,432.64       567,950,007.62      504,540,850.94
Net profit attributable to shareholders of
                                              34,325,162.34      12,967,405.61        34,915,901.13        23,024,742.94
the Company
Net profit attributable to shareholders of
the Company before extraordinary gains        -3,740,527.91      13,604,262.36        34,968,587.22        12,435,664.30
and losses
Net cash flows from operating activities      12,516,737.69       -8,349,528.26       46,236,107.54        93,216,971.01
Any material difference between the financial indicators above or their summations and those which have been
disclosed in quarterly or semi-annual reports?
□ Yes √ No

IX. Extraordinary gains and losses

√ Applicable □ Inapplicable




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                                                            2019 Annual Report of Tsann Kuen (China) Enterprise Co., Ltd.


                                                                                                      Unit: RMB Yuan

                       Item                           2019               2018               2017               Note
Gain/loss on the disposal of non-current assets
(including the offset part of the asset impairment 63,688,086.21        975,770.89     82,171,778.72
provisions)
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 26,259,614.81      4,903,720.34     35,799,249.27
amounts according to the government’s unified
standards
Capital occupation charges on non-financial
enterprises that are 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 on business reorganization, such as
expenses on staff arrangements, integration, etc.
Gain/loss on the part over the fair value due to
transactions with distinctly unfair prices
Current net gains and losses of subsidiaries
acquired in business combination under the same
control from period-begin to combination date
Gain/loss on contingent events irrelevant to the
Company’s normal business
                                                                                                          Mainly losses
                                                                                                          on delivered
                                                                                                          forward forex
Gains and losses on change in fair value from                                                             contracts,
tradable financial assets and tradable financial                                                          gains on
liabilities, as well as investment income from                                                            undelivered
disposal of tradable financial assets and tradable 19,610,630.54    10,464,696.66      23,997,400.35      forward forex
financial liabilities and financial assets available for                                                  contracts and
sales except for effective hedging related with                                                           income from
normal businesses of the Company                                                                          investments in
                                                                                                          wealth
                                                                                                          management
                                                                                                          products
Impairment provision reversal of accounts
receivable on which the impairment test is carried
out separately


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                                                                 2019 Annual Report of Tsann Kuen (China) Enterprise Co., Ltd.



                          Item                              2019              2018               2017               Note

Gain/loss on entrustment loans
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
Non-operating income and expense other than the
                                                         5,303,835.25      3,563,106.86      -2,584,301.97
above
Other gain and loss items that meet the definition of
an extraordinary gain/loss
Less: Income tax effects                                26,185,728.82      3,099,747.35     28,968,380.43

        Minority interests effects (after tax)          40,711,211.94      4,007,639.51     51,472,850.31

Total                                                   47,965,226.05    12,799,907.89      58,942,895.63



                                       Section III. Business Highlights

   I. Main business during the reporting period

   Development and manufacture of household appliances, electronics, light industrial products, modern office
   supplies; design and manufacture of molds for those products; Sale of the Company’s products in China and to
   other countries and regions as well as provision of relevant after-sales service; wholesale, retail (only in the
   Company’s own shops), import & export and relevant supporting business of household appliances, electronic
   products, electrical equipment, office supplies, kitchen utensils and pre-packaged food as well as provision of
   relevant after-sales service (the aforesaid business scope of the Company does not involve state trading
   commodities; where quota permission or a license is required, it shall be obtained according to the regulations of
   the country before operation). No material changes occurred to the business model of the Company in the
   reporting period.




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                                                               2019 Annual Report of Tsann Kuen (China) Enterprise Co., Ltd.


II. Material changes in main assets

1. Material changes in main assets


         Main assets                                               Material change

                              Up 36.18% from the end of last year, mainly because of higher earnings of subsidiary
Monetary funds                TKL and the receipt of a compensation for the relocation of subsidiary TKS’s phase II
                              plant carried out according to the government policy
Held-for-trading              Up 100% from the end of last year, mainly because of assessed gains on forward forex
financial assets              contracts in the current period
Financial assets
measured by fair value
                              Down 100% from the end of last year, mainly because of changes to the accounting
with changes in fair
                              policies governing financial instruments and the format of financial statements
value recognised in
profit or loss
                              Down 100% from the end of last year, mainly because of the completion of disposal in
Assets held for sale          the relocation of subsidiary TKS’s phase II plant carried out according to the
                              government policy
Fixed assets                  No material change
                              Up 226.19% from the end of last year, mainly because the rebuilt component plant of
Construction in progress
                              subsidiary SCI had yet to be checked for acceptance
Intangible assets             No material change
                              Down 71.22% from the end of last year, mainly because of the acceptance of mold
Other non-current assets
                              and equipment that had been prepaid for

2. Main assets overseas

√ Applicable □ Inapplicable
                                                                                                        Unit: RMB Yuan
                                                                                                                   Any
                                                                                                         In the
                                                                      Measures                                     major
                                                                                                        Compa
                                                        Operatio       taken to                                   impair
 Asset       Nature             Value       Location                                    Earnings        ny’s net
                                                        n status        protect                                    ment
                                                                                                         assets
                                                                     asset safety                                 risk or
                                                                                                          (%)
                                                                                                                    not
                                                                      Periodic
SCI        Investment      154,791,684.73   Indonesia   Normal                       -15,500,417.14        20.67      No
                                                                       review
          Equity                                                      Periodic
TKEI                        19,710,448.44   Taiwan      Normal                         -2,817,850.84        2.63      No
          acquisition                                                  review
Other information: N/A



III. Core competitiveness analysis

No material change occurred to the core competitiveness of the Company during the reporting period.
Following the corporate culture of research and development, the Company has a diversified R&D service system
and provides a well-established customer service and management platform, which are well-received among
major brand customers across the globe. Through constant close interaction with customers and innovation in


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                                                            2019 Annual Report of Tsann Kuen (China) Enterprise Co., Ltd.



R&D, it caters to customer needs from the development to the manufacturing of differentiated products.
Focusing on smart control, the application of IoT, etc. in R&D, the Company supplies smart, quality products with
high added value to create new market demand and compete in the industry.



                   Section IV. Performance Discussion & Analysis

I. Business review for the reporting period

In 2019, American and European countries remained the primary countries we exported our home appliances to
amid the China-U.S. trade war, fluctuating exchange rates, rising comprehensive costs in China, as well as the
complex and changeable economic environment at home and abroad. And global economic growth remained slow.
We carried on with the simplification and transformation strategies. New raw materials, techniques and
manufacturing equipment were brought in, and manufacturing plants were refined to increase our yield rate and
production efficiency, simplifying and improving our production. Upholding the strategy of innovation-driven
transformation, we develop and manufacture differentiated products to compete in the industry. And we aim to
provide products with multi-functions, high added value and high quality for customers.
As the smart control technology grows more mature and is being used more widely and people’s living standards
are improving, they are looking for better home appliances. Consumers are no longer looking for merely the
functions of the appliances, but also a quality in the appliances to improve their living standards. The household
appliance industry is all about how to help people live a better life. Only by providing convenient, smart,
health-improving and delicious-food-cooking solutions, can a household appliance manufacturer keeps on
developing.
Through being more intimate with customers and innovation in R&D, we create new market demand by
developing smart-home and low-carbon products, which effectively expands our market share and strengthens our
operating revenue and profitability.

II. Main business analysis

1. Overview


For 2019, we achieved operating revenues of RMB2.002 billion, up 11.84% from last year, primarily due to more
orders from customers and the factor of the RMB exchange rate.
Net profit attributable to shareholders of the Company amounted to RMB105 million, up 789.42% from last year,
mainly driven by the receipt of a compensation for the relocation of subsidiary TKS’s phase II plant carried out
according to the government policy, growth in operating revenues, continued control over material, labor and


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                                                                 2019 Annual Report of Tsann Kuen (China) Enterprise Co., Ltd.



  manufacturing costs, as well as a smaller allowance made for asset impairments in the current period.

  2. Revenues and costs

  (1) Breakdown of operating revenues

                                                                                                           Unit: RMB Yuan
                                                2019                                      2018
             Item                                         In total                                  In total            +/-%
                                      Amount             operating            Amount               operating
                                                       revenues (%)                              revenues (%)
By segments
Small home          appliance
                                  1,919,745,046.46               95.89    1,718,490,228.47                96.00            11.71
manufacturing
Other services                      82,194,795.48                 4.11       71,572,574.61                  4.00           14.84
Total                             2,001,939,841.94            100.00      1,790,062,803.08               100.00            11.84
By products
Cooking utensils                  1,271,637,191.29               63.52    1,052,786,500.79                58.81            20.79
Everyday home appliances           388,186,251.50                19.39      403,539,698.93                22.54             -3.80
Tea and coffee makers              244,844,541.59                12.23      244,127,431.45                13.64              0.29
Other products                      15,077,062.08                 0.75       18,036,597.30                  1.01          -16.41
Other services                      82,194,795.48                 4.11       71,572,574.61                  4.00           14.84
Total                             2,001,939,841.94            100.00      1,790,062,803.08               100.00            11.84
By areas
Australia                           83,031,966.00                 4.15       90,256,702.79                  5.04            -8.00
Africa                              19,351,407.62                 0.97       17,546,205.71                  0.98           10.29
America                            906,460,709.85                45.28      725,862,556.23                40.55            24.88
Europe                             492,289,796.35                24.59      481,253,682.92                26.89              2.29
Asia                               500,805,962.12                25.01      475,143,655.43                26.54              5.40
Total                             2,001,939,841.94            100.00      1,790,062,803.08               100.00            11.84


  (2) Segments, products or areas contributing over 10% of operating revenues or profit

  √ Applicable □ Inapplicable
                                                                                                           Unit: RMB Yuan
                                                                         Gross      Operating         Cost of     Gross profit
                                Operating                                profit      revenue:       sales: +/-%     margin:
           Item                                  Cost of sales
                                 revenue                                 margin     +/-% from        from last     +/-% from
                                                                          (%)        last year          year        last year
By segments
Small home appliance
                          1,919,745,046.46     1,631,156,891.41             15.03         11.71            6.56             4.10
manufacturing
Other services               82,194,795.48        34,644,195.77             57.85         14.84            5.40             3.77
Total                     2,001,939,841.94     1,665,801,087.18             16.79         11.84            6.54             4.14
By products
Cooking utensils          1,271,637,191.29     1,091,065,894.00             14.20         20.79           16.15             3.43

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                                                                  2019 Annual Report of Tsann Kuen (China) Enterprise Co., Ltd.


                                                                        Gross        Operating         Cost of       Gross profit
                              Operating                                 profit        revenue:       sales: +/-%      margin:
        Item                                    Cost of sales
                               revenue                                  margin       +/-% from        from last      +/-% from
                                                                         (%)          last year          year         last year
Everyday        home
                            388,186,251.50      336,632,218.03              13.28           -3.80           -9.00            4.95
appliances
Tea     and    Coffee
                            244,844,541.59      194,823,071.49              20.43            0.29           -7.49            6.69
makers
Other products                15,077,062.08       8,635,707.89              42.72         -16.41          -20.30             2.79
Other services                82,194,795.48      34,644,195.77              57.85          14.84            5.40             3.77
Total                      2,001,939,841.94   1,665,801,087.18              16.79          11.84            6.54             4.14
By areas
Australia                     83,031,966.00      66,388,350.68              20.04          -8.00          -13.40             4.97
Africa                        19,351,407.62      14,900,668.94              23.00          10.29           -0.67             8.49
America                      906,460,709.85     766,978,154.00              15.39          24.88           18.54             4.53
Europe                       492,289,796.35     417,808,120.75              15.13           2.29           -2.72             4.38
Asia                         500,805,962.12     399,725,792.81              20.18           5.40            1.10             3.39
Total                      2,001,939,841.94   1,665,801,087.18              16.79          11.84            6.54             4.14

 (3) Are the Company’s goods selling revenue higher than the service revenue?

 √ Yes □ No
                                                                                                                    Unit: Unit
                Industry                         Item                   2019                  2018               YoY +/-%

                                              Sales volume              22,450,713            16,709,835                  34.36
  Small home appliance manufacturing            Output                  22,585,389            17,349,834                  30.18
                                                 Stock                   1,745,647             1,610,971                   8.36
 Reasons for any over-30% YoY movement of the data above:
 √ Applicable □ Inapplicable
 The sales volume and output of the reporting period increased over 30% compared to those of last year, mainly
 due to the increase of operating revenues.

 (4) Execution of signed significant sales contracts of the Company up to the reporting period

 □ Applicable √ Inapplicable




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                                                               2019 Annual Report of Tsann Kuen (China) Enterprise Co., Ltd.




 (5) Breakdown of cost of sales

                                                                                                         Unit: RMB Yuan
                                               2019                                   2018
               Item                                                                                           YoY +/-%
                                                      In total cost                          In total cost
                                     Amount                                 Amount
                                                      of sales (%)                           of sales (%)
By segments
Small home appliance
                                 1,631,156,891.41              97.92   1,530,715,289.56             97.90            6.56
manufacturing
Other services                      34,644,195.77             2.08        32,869,228.63              2.10            5.40
Total                            1,665,801,087.18           100.00     1,563,584,518.19            100.00            6.54
By products
Cooking utensils                 1,091,065,894.00            65.50       939,379,669.10             60.08           16.15
Everyday home appliances           336,632,218.03            20.21       369,906,874.98             23.66           -9.00
Tea and Coffee makers              194,823,071.49            11.69       210,594,137.63             13.47           -7.49
Other products                       8,635,707.89             0.52        10,834,607.85              0.69          -20.30
Other services                      34,644,195.77             2.08        32,869,228.63              2.10            5.40
Total                            1,665,801,087.18           100.00     1,563,584,518.19            100.00            6.54

(6) Whether there were changes of the consolidation scope during the reporting period

√ Yes □ No
Xiamen Tsannkuen Property Services Co., Ltd. (“TKW”) was incorporated as a wholly-owned subsidiary of the
Company in May 2019 and has been included in the Company’s consolidated financial statements since the
incorporation day.

(7) List of the significant changes or adjustment of the industries, products or services of the Company
during the reporting period

□ Applicable √ Inapplicable

(8) List of the major trade debtors and major suppliers

List of the major trade debtors of the Company
                                                                                                         Unit: RMB Yuan

Total sales of the top 5 customers                                                                       1,013,442,148.38

Ratio of the total sales of the top 5 customers to the annual total sales (%)                                         50.62

Ratio of the total sales of related parties among the top 5 customers to the annual
                                                                                                                       0.00
total sales (%)
Information of the top 5 customers of the Company




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                                                               2019 Annual Report of Tsann Kuen (China) Enterprise Co., Ltd.


                                                                                                     Unit: RMB Yuan
  Serial No.       Name of customer                   Sales amount                Proportion in annual total sales (%)
      1                 No. 1                               275,299,365.22                                         13.75
      2                 No. 2                               275,682,017.13                                         13.77
      3                 No. 3                               172,111,035.06                                          8.60
      4                 No. 4                               184,462,291.20                                          9.21
      5                 No. 5                               105,887,439.77                                          5.29
    Total                                                 1,013,442,148.38                                         50.62
Notes of the other situation of the major customers
□ Applicable √ Inapplicable
List of the major suppliers of the Company
                                                                                                         Unit: RMB Yuan
Total purchase from the top 5 suppliers                                                                   233,018,913.19
Ratio of the total purchase from the top 5 suppliers to the annual total purchase (%)                              16.96
Ratio of the total purchase from related parties among the top 5 suppliers to the annual
                                                                                                                      2.63
total purchase (%)

Information of the top 5 suppliers of the Company
                                                                                                      Unit: RMB Yuan
                                                                                 Ratio to the annual purchase amount
     No.           Name of supplier              Purchase amount
                                                                                                 (%)
      1                    No. 1                          87,362,483.04                                          6.36
      2                    No. 2                          54,270,174.38                                          3.95
      3                    No. 3                          36,183,028.16                                          2.63
      4                    No. 4                          27,971,200.82                                          2.04
      5                    No. 5                          27,232,026.79                                          1.98
     Total                                               233,018,913.19                                         16.96
Notes of the other situation of the major suppliers
√ Applicable □ Inapplicable
The No.3 supplier among the top 5 supplier is the related party of the Company.

3. Expenses

                                                                                                       Unit: RMB Yuan
                                                                                             Notes of the significant
           Item                  2019                   2018            YoY +/- (%)
                                                                                                    changes
Selling expenses               63,389,947.24          62,065,999.35               2.13
Administrative expenses        83,008,382.58          84,670,918.17              -1.96
R&D expenses                   71,898,743.35          68,706,795.36               4.65
                                                                                         Mainly due to the decrease of
                                                                                         the interests income and gains
Finance costs                  -7,160,360.79        -11,779,703.18              39.21
                                                                                         on the current exchange
                                                                                         evaluation.

4. R&D investment

√ Applicable □ Inapplicable
The Company has been adhering to R&D, continued to promote innovation in R&D to create more intimacy with
customers, and create market demand by developing smart-home and low-carbon products, which effectively
expands our market share and strengthens our operating revenue and profitability.

                                                          15
                                                               2019 Annual Report of Tsann Kuen (China) Enterprise Co., Ltd.


  R&D investment of the Company
                             Item                                       2019                 2018               +/- (%)
  Number of the R&D personnel (person)                                          390                  351             11.11
  Ratio to the R&D personnel (%)                                               10.58                7.96              2.62
  Investment amount of the R&D (RMB Yuan)                            71,898,743.35       68,706,795.36                4.65
  Ratio of the R&D investment to the operating income (%)                       3.59                3.84              -0.25
  Amount of the capitalized R&D investment (RMB Yuan)                           0.00                0.00              0.00
  Ratio of the capitalized R&D investment to the R&D
                                                                             0.00               0.00            0.00
  investment
  Reason of remarkable changes over the last year of the ratio of the total R&D investment amount to the operating
  income
  □ Applicable √ Inapplicable
  Reason of the greatly change of the ratio of the R&D investment capitalization and its reasonable explanation
  □ Applicable √ Inapplicable

  5. Cash flow

                                                                                                   Unit: RMB Yuan
                          Item                                   2019                   2018             +/- (%)
Subtotal of cash inflows from operating activities          2,203,247,739.72       2,009,487,767.54             9.64
Subtotal of Cash outflows for operating activities          2,059,627,451.74       1,903,411,706.72             8.21
Net cash flows from operating activities                      143,620,287.98         106,076,060.82            35.39
Subtotal of cash inflows from investing activities            938,297,482.71       1,152,917,713.28           -18.62
Subtotal of cash outflows from investing activities           880,481,265.12       1,326,181,779.11           -33.61
Net cash flows from investing activities                       57,816,217.59        -173,264,065.83          133.37
Subtotal of cash inflows from financing activities             93,195,400.00         115,283,816.25           -19.16
Subtotal of cash outflows from financing activities            99,593,204.12         164,904,882.95           -39.61
Net cash flows from financing activities                        -6,397,804.12        -49,621,066.70            87.11
Net increase of cash and cash equivalents                     191,130,906.51        -115,889,665.41          264.92
  Notes of the major effects on the YoY significant changes occurred of the data above
  √ Applicable □ Inapplicable
  1. Net cash flows from operating activities increased by 35.39% from last year mainly due to the increase of
  operating revenues and cash received from selling goods.
  2. Net cash flows from investing activities increased by 133.37% from last year mainly due to the payment of
  RMB0.12 billion for investments in finance products by Shanghai Tsann Kuen.
  3. Net cash flows from financing activities decreased by 87.11% from last year mainly due to the recovery of cash
  deposit paid in last year for pledge borrowings and the decrease of dividends distribution for the reporting period.
  Reason for any big difference between the net operating cash flow and the net profit for the reporting period
  □ Applicable √ Inapplicable




                                                          16
                                                                    2019 Annual Report of Tsann Kuen (China) Enterprise Co., Ltd.




  III. Analysis of the non-core business

  √ Applicable □ Inapplicable
                                                                                                                Unit: RMB Yuan
                                               Ratio to the total
                                                                                                                      Recurring
           Items               Amount           profits amount                    Notes of the causes
                                                                                                                       or not
                                                      (%)
                                                                      Investment gains from finance
  Investment income         18,069,441.54                   8.47                                                         Yes
                                                                      products
  Gain from changes                                                   Assessment gains of the undelivered
                               1,541,189.00                 0.72                                                         Yes
  in fair value                                                       forward forex
  Loss on credit                                                      Impairment provisions for accounts
                             -1,186,738.45                 -0.56                                                         Yes
  impairment                                                          receivable
  Loss on asset
                            -13,657,041.57                 -6.40      Inventory falling price loss                       Yes
  impairment
                                                                      Assets disposal income from the policy
  Gain on disposal of
                            63,688,086.21                  29.84      relocation of the phase II plant of                Yes
  non-current assets
                                                                      subsidiary TKS in the current period
                                                                      Government subsidy in relation to
  Other income                 4,979,380.03                 2.33                                                         Yes
                                                                      production and operation
                                                                      Assets disposal income from the policy
  Non-operating
                            27,300,416.65                  12.79      relocation of the phase II plant of                No
  income
                                                                      subsidiary TKS in the current period
  Non-operating                                                       Scrap of former reparative plant of the
                                  834,405.40                0.39                                                         Yes
  expenses                                                            phase III plant of subsidiary TKS.

  IV. Assets and liabilities

  1. Significant changes in asset composition

                                                                                                                Unit: RMB Yuan
                         December 31, 2019                      1 January, 2019
                                           As a                                  As a            Change in          Reason for
    Item                              percentage of                          percentage of       percentage       any significant
                      Amount                              Amount                                    (%)              change
                                       total assets                           total assets
                                           (%)                                    (%)
                                                                                                                 Increase     of
                                                                                                                 profits      of
                                                                                                                 subsidiary
                                                                                                                 TKL        and
Monetary                                                                                                         recovery     of
                   639,623,201.98              32.69   469,692,295.47                  25.48            7.21
funds                                                                                                            subsidy for the
                                                                                                                 policy
                                                                                                                 relocation of
                                                                                                                 the phase II
                                                                                                                 plant of TKS
Accounts
                   285,995,412.05              14.62   281,337,522.38                  15.26            -0.64          No
receivable
Inventories        222,155,587.38              11.36   243,262,500.58                  13.20            -1.84          No
Investment          22,991,059.81               1.18    25,014,648.31                   1.36            -0.18          No

                                                              17
                                                                      2019 Annual Report of Tsann Kuen (China) Enterprise Co., Ltd.



                            December 31, 2019                      1 January, 2019
                                             As a                                  As a            Change in          Reason for
         Item                           percentage of                          percentage of       percentage       any significant
                         Amount                                Amount                                 (%)              change
                                         total assets                           total assets
                                             (%)                                    (%)
     properties
     Fixed assets    185,749,835.56              9.49     191,073,302.46                 10.37            -0.88          No
     Construction
                        2,921,901.51             0.15          895,756.17                 0.05             0.10          No
     in progress
     Short-term                                                                                                    Secured loans
                                 0.00            0.00        10,432,044.21                0.57            -0.57
     borrowings                                                                                                    of last year

       2. Assets and liabilities measured at fair value

       √ Applicable □ Inapplicable
                                                                                                                  Unit: RMB Yuan
                                   Profit/loss
                                                 Cumulat       Impairm
                                     on fair
                                                  ive fair         ent
                                      value                                  Purchased in        Sold in this       Other
                    Opening                        value       provided                                                        Closing
     Item                          changes in                                this reporting       reporting        change
                    balance                       changes        in this                                                       balance
                                       this                                      period            period             s
                                                  charged      reporting
                                    reporting
                                                 to equity       period
                                     period
Financial assets
1. Tradable
financial assets
(excluding
                             0.00          0.00         0.00       0.00              0.00           0.00      0.00           0.00
derivative
financial
assets)
2. Derivative         1,440,700.0 2,179,989.0                               395,789,289.   326,859,000.               3,620,689.0
                                                        0.00       0.00                                       0.00
financial assets                0             0                                        00             00                        0
3. Investments
in other debt
obligations
4. Other equity
instrument
investments
Subtotal of           1,440,700.0 2,179,989.0                               395,789,289.   326,859,000.               3,620,689.0
                                                        0.00       0.00                                       0.00
financial assets                0             0                                        00             00                        0
Investment
                             0.00          0.00         0.00       0.00              0.00           0.00      0.00           0.00
property
Productive
                             0.00          0.00         0.00       0.00              0.00           0.00      0.00           0.00
living assets
Others                       0.00          0.00         0.00       0.00              0.00           0.00      0.00           0.00
Total of the 1,440,700.0 2,179,989.0                                        395,789,289.   326,859,000.               3,620,689.0
                                                        0.00       0.00                                       0.00
above                           0             0                                        00             00                        0
Financial                                                                   448,937,350.   393,850,750.
                             0.00 -638,800.00           0.00       0.00                                       0.00    638,800.00
liabilities                                                                            00             00
         Any significant changes in the major assets’ measurement attributes of the Company in the Reporting Period?
         □ Yes √ No



                                                                 18
                                                            2019 Annual Report of Tsann Kuen (China) Enterprise Co., Ltd.


3. Restricted asset rights as of the end of this reporting period

□ Applicable √ Inapplicable

V. Investments made

1. Total investments made

√ Applicable □ Inapplicable
                                                                                                      Unit: RMB Yuan
 Investments made in this reporting
                                       Investments made in the prior year                        +/-%
              period
                       36,682,533.00                         44,632,189.00                                       -17.81


2. Significant equity investments made in this reporting period

□ Applicable √ Inapplicable

3. Significant non-equity investments ongoing in this reporting period

□ Applicable √ Inapplicable

4. Financial investments

(1) Securities investments

□ Applicable √ Inapplicable




                                                       19
                                                                                                                     2019 Annual Report of Tsann Kuen (China) Enterprise Co., Ltd.



(2) Investment in derivative financial instruments

√ Applicable □ Inapplicable
                                                                                                                                                             Unit: RMB’0,000
                                                                                                                                                                Ratio of
                                                                                                                                                              investment
                                                                                                                                                Investme       amount at
                                                                                              Investmen                              Amoun
                           Relate         Type of                                                                                                   nt         the end of   Actual
                                                                                               t amount      Pursed       Sold in       t
                           d-party     investment        Initial    Commen                                                                       amount      the period to profit/lo
Operati                                                                          Terminati       at the       in this       this     provid
               Relation    transac    in derivative    investme      cement                                                                       at the           the      ss for
ng party                                                                          on date     beginning     reporting    reporting   ed for
                           tion or       financial     nt amount      date                                                                        end of      Company's       the
                                                                                                 of the      period       period     impair
                             not       instruments                                                                                                 the        net asset at  period
                                                                                                 period                               ment       period        the end of
                                                                                                                                                               the period
                                                                                                                                                                  (%)
  Bank      Non-related      No       Forward forex    107,250.90   01/01/2019   12/31/2019     22,778.24    84,472.66   72,070.98               35,179.93            46.99      -216.79
Total                                                  107,250.90                               22,778.24    84,472.66   72,070.98               35,179.93            46.99      -216.79
Source of investment funds                                                                         All from the Company's own funds
    Lawsuits                                                                                                  No lawsuits
Disclosure date of the announcement about the
                                                                                                               03/12/2013
board’s consent for the investment
Disclosure date of the announcement about the
                                                                                                               05/18/2013
general meeting’s consent for the investment
                                                       1. Analysis on risks from holding of derivative products: gains or losses from difference between contracted exchange
                                                       rate and market exchange rate on value date.
                                                       2. Control measures:
                                                       (1) Principle: The purpose of the financial derivative operation is to avoid risks. The Company shall not conduct
Risk analysis and risk control measures for            transactional operation for other purposes than risk avoidance. The Company shall not conduct complex derivative
positions held in derivatives in this reporting        trading above the actual operation needs and shall not speculate in derivative trading with hedging as an excuse. The
period (including but not limited to market            overall contractual amount for risk avoidance of the Company shall not exceed the summation of the net risk exposure of
risk, liquidity risk, credit risk, operational risk,   the existing assets and liabilities and the net risk exposure of assets and liabilities arising from the operation of the
legal risk, etc.)                                      Company in the coming year.
                                                       (2) Staff requirements: Personnel taking part in the investment shall all fully understand the risks of derivative investment
                                                       and strictly execute the business operation and risk management mechanisms for derivative investment.
                                                       (3) Operation standardization: Before making a derivative investment, the Company shall rationally equip itself with
                                                       professional personnel for investment decision-making, business operation, risk control, etc. It shall also inquire and
                                                                                       20
                                                                                                             2019 Annual Report of Tsann Kuen (China) Enterprise Co., Ltd.
                                                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.
                                                (6) Audit system: The audit department audits derivative product trading periodically and submits audit reports to relevant
                                                units.
                                                (1) Losses on delivered derivatives in the Reporting Period were RMB3.7091 million, and assessed gains on those
Changes in market price or fair value of
                                                undelivered were RMB1.5412 million, among which RMB1.4407 million of assessed gains on undelivered forward forex
derivatives invested in this reporting period
                                                contracts of last year was reversed.
(specific methods used and relevant
                                                (2) The former contracted bank provided monthly sheets of estimated exchange rates for the undue contracted forward
assumption and parameter settings shall be
                                                exchanges on the last trading day of the month.
disclosed for analysis of fair value of
                                                (3) The profit and loss from fair value changes of the derivative was confirmed according to the difference between the
derivatives)
                                                contracted amount undue by the month*the estimated exchange rate and the currency amount when bought in.
Significant changes in the Company’s
accounting policies and specific accounting
                                               No significant changes
principles for derivatives in this reporting
period as compared to the prior period
                                               The Company has carried out a strict internal assessment for the financial derivative business and has established a
Special opinions expressed by independent
                                               corresponding supervision mechanism. We are of the opinion that the financial derivative business conducted by the
directors     concerning     the    Company’s
                                               Company is fairly necessary in its routine operation and is in compliance with relevant laws and regulations, with the
derivatives investment and risk control
                                               risks controllable.

5. Use of funds raised

□ Applicable √ Inapplicable

VI. Sale of major assets and equity interests

1. Sale of major assets

□ Applicable √ Inapplicable



                                                                               21
                                                                                                                2019 Annual Report of Tsann Kuen (China) Enterprise Co., Ltd.
2. Sale of major equity interests

□ Applicable √ Inapplicable

VII. Main controlled and joint stock companies

√ Applicable □ Inapplicable
Main subsidiaries and joint stock companies with over 10% effect on the Company’s net profit
                                                                                                                                                          Unit: RMB Yuan
Compa       Relationship         Main business                                                                     Operating             Operating
  ny          with the              scope         Registered capital       Total assets        Net assets                                                     Net profit
                                                                                                                   revenues               profit
 name        Company
                                Small      home
TKL        Subsidiary           appliance         USD160 million         2,063,020,715.59   1,365,166,604.72    1,891,438,194.50      134,985,919.83       117,117,735.59
                                manufacturing
                                Small      home
           Sub-subsidiar
TKS                             appliance          USD40 million          278,694,864.45     227,388,497.54         1,009,359.74       65,566,593.66        64,576,091.37
           y
                                manufacturing
                                Small      home
           Sub-subsidiar
SCI                             appliance          USD35 million          154,791,684.73     112,781,022.55       112,791,823.64      -15,491,578.57       -15,500,417.14
           y
                                manufacturing

Subsidiaries obtained or disposed in this reporting period
√ Applicable □ Inapplicable


                        Name                                           Method                               Impacts on overall production and performance
                                                                                              Matching the need of property management for the Company’s real
Xiamen Tsannkuen Property Services Co., Ltd.                   Newly established              estate lease, the impacts on the net profit of the listed company is
                                                                                              RMB-44,804.28.


VIII. Structured bodies controlled by the Company

□ Applicable √ Inapplicable


                                                                                   22
                                                             2019 Annual Report of Tsann Kuen (China) Enterprise Co., Ltd.




IX. Outlook of the Company’s future development

(I) Strategies for future development

1. Strategy upgrading for main customers, and expansion for new strategic customers


Establish a diversified R&D technical service system, provide a comprehensive customer service and customer
management platform, and provide customers with a structured solution from the perspective of consumers. The
Company's true core strategy is to be close to customers, not cost-orientation. Launch products meeting the
demands of consumers and establish differentiated competitive advantages.
In terms of customer management, we focus our resources, continue to screen customers according to the Pareto
Principle, and devote effective resources to strategic customers in line with our future development, so as to form
a mutually beneficial and win-win business partner.

2. Strategy of domestic market development


Owing to the reforming of the strategy of domestic market development, the development main spindle of the
future products will spread out the brand planning and marketing which focuses on coffee culture, gourmet cuisine
and home life. Strengthen the China brand strategy.
With the wide use of intelligent control (AI/face recognition/voice control), IoT technology and 5G technology in
the future, traditional household appliances manufacturers are urged to upgrade their technology. With the
improvement of people's living standards and the increasing demand for convenient and Smart Home, the future
development of Smart Home in the domestic market has become an inevitable trend. In the future, the Company
will focus on brand strategy and the development of Smart Home.

3. Lean factory management meeting the demands of strategic customers


The Company continues to promote the factory management mode, focusing and dedicating service to win
customer and consumer recognition and satisfaction. The Company adopts big data system upgrade management,
introduces new raw materials, new technology, lean manufacturing equipment, improves production space and
supply chain strategic partnership, improves production yield and production efficiency, and achieves lean
production optimization.

4. Strengthen of overseas manufacturing deployment and enhancement of manufacturing competitiveness


Against the background of Sino-US Trade War in 2019 and that parts of the countries began to adopt trade
protectionism and suppress the domestic products through the methods such as improve the import tariff, the
Company lays an overseas manufacturing base in Indonesia and in 2020 will accelerate the integration of its

                                                        23
                                                              2019 Annual Report of Tsann Kuen (China) Enterprise Co., Ltd.



supply chain as well as laying a new field for transformation. This police is highly integrated with the "One Belt,
One Road" strategic area, taking the lead in seizing opportunities for overseas market development and deepening
international operations. In the future, the Company will continue to actively expand overseas markets, focus on
key international regions, products and resources so as to achieve greater and stronger growth.

(II) Industry development trend and outlook of the market


As the wireless, IT and intelligent era comes, the trend of intelligent home appliances boosts the development and
transformation of small domestic appliances.
1. Europe and the United States are the main consumer markets of small domestic appliances, the average
household small domestic appliances have a large capacity and a short life cycle, the demand for replacement
market is large, the global market demand for small domestic appliances shows a stable trend. With the economic
growth, the improvement of people's living standards and the increasingly stringent international market
environment standards, the series, large-scale and energy-saving environmental protection small domestic
appliances will become the general trend.
2. China is an important base for the production of small domestic appliances. China's advantages in labor, cost,
technology and industrial support have made china undertaken the world's major small domestic appliances
business. With the powerful large domestic appliances and international brands entering the small domestic
appliances market, the competition in the small domestic appliances market will become more intense, and the
business sector will enter the operation of specialization, systematization and branding, in order to compete more
market share, through relying on the advantages of capital and R&D, a number of small brand enterprises which
are relatively weak, lack of R&D, cost advantages and market network management advantages will be phased
out.
3. China is still considered a strong market. The home appliance industry of China has entered an era featuring
brand as the winning trump. Different from the traditional home appliances, the small home appliances are still in
a developing stage in terms of sale. As the way of spending changes, more new products enter the market and old
appliances are being renewed, domestic demand for small home appliances will soar and the industry will enjoy
good prospects. Actually, it is expected that the coming few years will be a golden period for the development of
the small home appliance market of China.

(III) Future risk analysis

1. International


Influenced by Sino-US Trade War, parts of the countries began to adopt trade protectionism and suppress the
domestic electrical home appliances for the methods such as improve the import tariff. The outburst of the global
financial crisis led to the rise of the international trade protection, the aggravation of the tariff barrier and the

                                                         24
                                                              2019 Annual Report of Tsann Kuen (China) Enterprise Co., Ltd.



non-tariff barrier especially such as the technology standard, Intellectual property right protection and
anti-dumping etc., as well as the export of the domestic electrical home appliance encountered more and more
threatens tariff and non-tariff barrier with the more complicated international environment faced with the electrical
home appliances.
Influenced by the slowly recovery of the global economy, the enlarge of the exchange rate fluctuation, the enhance
of the domestic comprehensive cost, and with global inflation pressure that cannot be eased in the short run and
more and more non-economic obstacles from western countries in their trading with China, once the demand in
the international market is insufficient, the Company will face the risk of a decline in sales revenue caused by a
decline of the demand in the international market.

2. Domestic


With the development of domestic production and the improvement of people's living standards, the domestic
market competition will become more intense, the domestic home appliances market competition pattern has
changed significantly, and the new economic model under the background of Internet sales will become a market
opportunity in the next few years.
In view of the domestic market, on the one hand, the Company takes technological innovation as the core to
promote brand image investment and talent team building, establish its own brand, and develop green smart home
appliances to increase the share of the domestic market. On the other hand, the Company continues to improve the
protection of the Company's patent intellectual property rights to face competition in the industry and actively
expand new channels such as Internet sales and TV shopping to promote sales. If the domestic market
development is not effective, the Company will face the risk of declining sales revenue.

3. Exchange rate fluctuation


With the RMB being included in the SDR (Special Drawing Rights), the liquidity of China's cross-border capital
is increasing, which will increase the volatility of the RMB exchange rate. The Company’s products were
export-oriented, so the influence of the exchange rate fluctuation on the Company was rather big. Facing with the
negative influences of the appreciation of the RMB, the main methods are: to avoid the exchange risks by the
financial tools and to fully considerate the influences of the exchange risks when receiving an order, thus to
transfer the exchange risks.

4. Increase of the labor costs and the labor shortage


Factors such as increase of local minimum wage standard, decrease of labor supply and the seasonal human
resource demand of surrounding enterprises, have resulted in increase of comprehensive labor costs of the
Company year by year. To cope with the risk of decline in profitability due to rising labor costs, the Company


                                                         25
                                                             2019 Annual Report of Tsann Kuen (China) Enterprise Co., Ltd.



improves the staff production efficiency by promoting procurement modularization and lean automation,
continuously make the production and manufacturing environment better, promote bonus retention policy,
improve compensation & benefits of the employees, enhance the construction of corporate culture, increase the
work enthusiasm and identity of employees to reduce employee turnover rate.

5. Environmental protection low-carbon


As the execution of the Environmental Protection Act, to prevent and remedy pollution and other public nuisance
as well as to ensure the environmental and public health become the development tendency that the production
processes of the enterprises must active deal with; the Company continuously put the lean manufacturing into the
core goal of the enterprises, and with the introduce of the new environmental protection materials, the input of the
automation and the technical promotion of the environmental manufacture processing, the environment protection
of products of the Company will be continuously promoted.

6. Impact on the epidemic situation of COVID-19 Epidemic


The sudden outbreak of the COVID-19 Epidemic in early 2020 has spread in some countries and regions of the
world, which has a significant impact on the global economic operation, as well as challenges and opportunities
for the development of enterprises.
In terms of challenges, after the outbreak of the epidemic, the phenomenon of labor shortage in China's
manufacturing industry will become more serious, and the order demand date of customers will not be met, so that
customers will transfer the supply chain back to domestic or other countries, and this decentralization from the
global supply chain will have a strong impact on China's manufacturing industry.
In terms of opportunities, the epidemic gave birth to the "house economy", and in the future, people will be more
and more likely to stay at home, less and less likely to contact with people, but people's demands will not be
reduced, then there will be more people likely to cook their own food at home, so there will be greater demand for
small domestic appliances.

X. Visits paid to the Company for purposes of research, communication, interview, etc.

1. In this reporting period

√ Applicable □ Inapplicable
   Date of visit    Way of visit    Type of visitor                 Index to main inquiry information
02/27/2019         By phone        Individual       Inquiry about the operation of the Company and B-share reform.
03/22/2019       By phone          Individual       Inquiry about the operation of the Company and performance
                                                    forecast
09/27/2019       By phone          Individual       Inquiry about the operation of the Company




                                                        26
                                                             2019 Annual Report of Tsann Kuen (China) Enterprise Co., Ltd.


2. From the end of this Reporting Period to the disclosure date of this Report

Times of visit                                                                   3
Number of visiting institutions                                                  0
Number of visiting individuals                                                   3
Number of other visitors                                                         0
Significant undisclosed information disclosed, revealed or leaked                No



                                  Section V. Significant Events


I. List of the profits distribution of the common shares and turning capital reserve into share
capital of the Company

List of the formulation, execution or adjustment of the profits distribution policies of the common shares,
especially the cash dividend policies
√ Applicable □ Inapplicable
                                     Special explanation of cash dividend policy
Whether conformed with the regulations of the Articles of association or the requirements of the
                                                                                                 Yes
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 complete:                                  Yes
Whether the independent director acted dutifully and exerted the proper function:                   Yes
Whether the medium and small shareholders had the chances to fully express their suggestions and
                                                                                                    Yes
appeals, of which their legal interest had gained fully protection:
Whether the conditions and the process met the regulations and was transparent of the adjustment or
                                                                                                    Yes
altered of the cash dividend policy:

List of the dividend distribution proposal (preplan) of the common shares and the proposal (preplan) of turning
capital reserve into share capital of the Company of the recent 3 years (the reporting period inclusive)
For 2017, the Company distributed a cash dividend of RMB0.8 (tax included) for every 10 shares held by its
shareholders and there was no turn from capital reserve to share capital for 2017. For 2018, the Company
distributed a cash dividend of RMB0.4 (tax included) for every 10 shares held by its shareholders and there was
no turn from capital reserve to share capital for 2018. For 2019, the Company intended to distribute a cash
dividend of RMB1 (tax included) for every 10 shares held by its shareholders, and the estimated distributable
profits of the Company was RMB18,539,168 with the retained profits of RMB174,311,830.74 for carry-forward
to the next year. There was no turn from capital reserve to share capital for the year.




                                                        27
                                                                  2019 Annual Report of Tsann Kuen (China) Enterprise Co., Ltd.


                                                                                                         Unit: RMB Yuan
                                                    The ratio                                                  The ratio
                                   Net profit      accounting                                                 accounting
                                 belonging to     in net profit     Amount                                   in net profit
                                                                                 Ratio of    Total amount
             Amount of          shareholders of       which          of the                                      which
                                                                                 the cash     of cash divi
Dividend    cash dividend           the listed     belongs to         cash                                    belongs to
                                                                                 dividend    dend (includi
  year        (including          company in      shareholders      dividend                                 shareholders
                                                                                 by other    ng by other
                 tax)            consolidated     of the listed     by other                                 of the listed
                                                                                 methods          methods)
                                  statement of    company in        methods                                  company in
                                 dividend year    consolidated                                               consolidated
                                                    statement                                                  statement
2019        18,539,168.00       105,233,212.02          17.62%              0            0   18,539,168.00         17.62%
2018         7,415,667.20        11,831,622.78          62.68%              0            0    7,415,667.20         62.68%
2017        14,831,334.40        65,759,896.04          22.55%              0            0   14,831,334.40         22.55%

The Company (including its subsidiaries) made profit in the reporting period and the profits distribution of the
common shares held by the shareholders of the Company (without subsidiaries) was positive, but it did not put
forward a preplan for cash dividend distribution of the common shares:
□ Applicable √ Inapplicable

II. Pre-plan for profit allocation and turning capital reserve into share capital for the
reporting period

√ Applicable □ Inapplicable
Bonus shares for every 10 shares (share)                                                                                     0
Dividend for every 10 shares (RMB Yuan) (tax included)                                                                       1
Turning capital reserve into share capital for every 10 shares (share)                                                       0
Total shares as the basis for the allocation preplan (share)                                                 185,391,680.00
Amount of cash dividend (RMB Yuan) (tax included)                                                             18,539,168.00
Amount of cash dividend by other methods (like share repurchase) (RMB Yuan)                                                  0
Total cash dividends (including those by other methods) (RMB Yuan)                                            18,539,168.00
Distributable profit (RMB Yuan)                                                                       192,850,998.74
Percentage of total cash bonus (including those by other methods) of the total
                                                                                                               100%
profits dividends
                                                Cash dividend situation
If the development stage of the Company belongs to the mature period without any significant assets expenditure
arrangement, when executing the profits distribution, the ratio of the cash dividend to the profits distribution of
the reporting period should at least reach 80%.
                    Details about the profit allocation or turning capital reserve into share capital
For 2019, the Company intended to distribute a cash dividend of RMB1 (tax included) for every 10 shares held by
its shareholders, and the estimated distributable profits of the Company was RMB18,539,168 with the retained
profits of RMB174,311,830.74 for carry-forward to the next year. There was no turn from capital reserve to share
capital for the year.

III. Performance of commitments

1. Commitments of the Company’s actual controller, shareholders, related parties and acquirer, as well as
the Company and other commitment makers, fulfilled in this reporting period or ongoing at the period-end

√ Applicable □ Inapplicable


                                                           28
                                                                    2019 Annual Report of Tsann Kuen (China) Enterprise Co., Ltd.



                                                                                        Time of
                                                                                                 Period of
                               Commitment Commitm                                       making
      Commitment                                                Contents                        commitme              Fulfillment
                                 maker     ent type                                     commit
                                                                                                    nt
                                                                                         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
Commitment on equity
incentive
                                                    Based on the confidence on the
                                                    continuous      and        stable
                                                    development of the Company,
                                                    it committed to increase the
                                                    shareholding if the Company’s
                                                    stock    price lower         than
                                                                                                         The Company’s stocks
                                                    HKD2.40 per share after the
                                                                                                         resumed trading on 31
                                                    implementation of the shares
                                                                                                         Dec. 2012, but the
                                                    contraction     and      trading
                                                                                                         Company’s stock price
                                                    resumption, and it would
                                                                                                         hasn’t    met      the
                                                    increase no more than 2%
                                                                                                         condition      (closing
                                         Commitm shares (i.e. 3.7078 million
                                                                                                         price was lower than
                          FILLMAN        ent on     shares) of the total shares
Other commitments made                                                                12/28/20 Long-term HKD2.40)            for
                          INVESTMEN shareholdi issued by the Company within
to minority shareholders                                                              12       effective shareholding increase
                          TS LIMITED ng             one year since the date of
                                                                                                         since the date of
                                         increase initial shareholding increase. If
                                                                                                         trading    resumption,
                                                    the plan on increasing holding
                                                                                                         FILLMAN Investment
                                                    2% shares of the total shares is
                                                                                                         Limited          hasn’t
                                                    completed within 12 months,
                                                                                                         implemented         the
                                                    and the stock price has also
                                                                                                         shareholding increase
                                                    reached the target price, it will
                                                                                                         plan.
                                                    perform relevant approval
                                                    procedures, and propose to
                                                    CSRC        on       continuous
                                                    implementation                 of
                                                    shareholding     increase      by
                                                    exemption of offering.
Executed on time or not Yes
       During the Reporting Period, there were no Commitments of the Company’s actual controller, shareholders,
       related parties and acquirer, as well as the Company and other commitment makers, fulfilled in this reporting
       period or ongoing at the period-end.

        2. Where there had been an earnings forecast for an asset or project and this reporting period was still
        within the forecast period, explain why the forecast has been reached for this reporting period.

        □ Applicable √ Inapplicable




                                                               29
                                                               2019 Annual Report of Tsann Kuen (China) Enterprise Co., Ltd.


IV. Occupation of the Company’s funds by the controlling shareholder or its related parties
for non-operating purposes

□ Applicable √ Inapplicable

V. Explanations given by the Board of Directors, the Supervisory Board and the independent
directors (if any) regarding the “auditor’s non-standard report” issued by the CPAs firm for
this reporting period

□ Applicable √ Inapplicable

VI. YoY changes in accounting policies, estimations and methods

√ Applicable □ Inapplicable
Changes in accounting policies
1. Changes of accounting policy resulting from changes in financial instruments
On March 3 2017, the Ministry of Finance issued the “Chinese Accounting Standards for Business Enterprises
No.22 - Determination and measurement of financial instruments (Revised in 2017” (Accounting [2017] No. 7),
"Accounting Standards for Business Enterprises No. 23" Transfer of Financial Assets (Revised in 2017)
(Accounting [2017] No. 8), "Accounting Standards for Business Enterprises No. 24 - Hedge Accounting (Revised
in 2017)" (Accounting [2017] No. 9). On May 2 2017, the Ministry of Finance issued “Accounting Standards for
Business Enterprises No. 37 – Financial Instruments Presentation (Revised in 2017)” (Accounting [2017] No. 14)
(the above-mentioned guidelines are collectively referred to as the “New Financial Instruments Guidelines”), and
domestic listed companies are required to implement it from January 1, 2019.
After the resolution of the 2nd meeting of the Board of Directors of the Company on March 16, 2019, the company
will implement the above new financial instrument guidelines from January 1, 2019.
All recognized financial assets under the new financial instrument criteria are subsequently measured at amortised
cost or fair value. On the implementation date of the new financial instrument standard, the business model of
managing financial assets is evaluated based on the facts and circumstances of the company on the
implementation date. According to the contractual cash flow characteristics on the financial assets, which are
evaluated based on the facts and circumstances at the initial recognition of the financial assets, financial assets are
classified into three categories: measured at amortised cost, measured at fair value through other comprehensive
income, and measured at fair value through profit or loss. In case of an equity instrument investment measured at
fair value through other comprehensive income, when the financial asset is derecognised, the accumulated gain or
loss previously recognised in other comprehensive income is transferred to retained earnings, rather than profit
and loss.
Under the new financial instrument standard, the Company accrues impairment provision and recognizes credit
impairment losses for financial assets measured at amortized cost, debt instrument investments measured at fair
value through other comprehensive income, lease receivables, contract assets and the financial guarantee contract

                                                          30
                                                                       2019 Annual Report of Tsann Kuen (China) Enterprise Co., Ltd.



based on expected credit losses.
The company retrospective applies the new financial instrument guidelines, but in terms of classification and
measurement (including impairment) involving inconsistency between the previous comparative financial
statement data and the new financial instrument guidelines, the company chooses not to restate. Therefore, for the
cumulative impact on the first implementation of the guideline, the company adjusts retained earnings or other
comprehensive income of the opening of 2019 and other relevant items in the financial statement. The financial
statements for 2018 were not restated.
The main changes and effects of the company's implementation of the new financial instrument guidelines are as
follows:
-   On and after January 1 2019, the company designated part of non-trading equity investment as financial assets
    measured at fair value through other comprehensive income, which disclosed as other investments in equity
    instruments.
A. Financial assets classification and measurement comparison table before and after the first implementation date
a. The effects on consolidated financial statements
                 31/12/2018 (before changes)                                            1/1/2019 (after changes)
                                                 Net carrying                                                       Net carrying
    Category              Classification                                 Category            Classification
                                                   amount                                                             amount
Monetary funds         Amortised cost            469,692,295.47 Monetary funds            Amortised cost            469,692,295.47
Financial assets
                     Measured at fair                                            Measured at fair
measured at fair                                                Financial assets
                     value through profit          1,440,700.00                  value through profit                 1,440,700.00
value        through                                            held for trading
                     or loss                                                     or loss
profit or loss
Note receibables        Amortised cost              200,000.00 Note receibables           Amortised cost                200,000.00
Accounts                                                        Accounts
                       Amortised cost            280,596,130.89                           Amortised cost            281,337,522.38
receivable                                                      receivable
                                                                Other
Other receivables      Amortised cost             29,944,042.47                           Amortised cost             29,944,042.47
                                                                receivables
                                                                Other                   Measured at fair
Financial assets Measured at cost                               investments          in value through other
                                                      40,000.00                                                          40,000.00
available for sale (equity instrument)                          equity                  comprehensive
                                                                instruments             income
b. The effects on the company’s financial statements
                   31/12/2018 (before changes)                                          1/1/2019 (after changes)
     Category              Classification        Net carrying             Category           Classification         Net carrying
                                                   amount                                                             amount
Monetary funds           Amortised cost             6,985,345.44 Monetary funds          Amortised cost               6,985,345.44
                                                                Note
Note receibables         Amortised cost              200,000.00                          Amortised cost                 200,000.00
                                                                receibables
                                                                Accounts
Accounts receivable      Amortised cost           16,243,882.91                          Amortised cost              16,701,103.45
                                                                receivable
Other receivables        Amortised cost             2,213,373.51 Other                   Amortised cost               2,213,373.51


                                                                  31
                                                                      2019 Annual Report of Tsann Kuen (China) Enterprise Co., Ltd.


                   31/12/2018 (before changes)                                          1/1/2019 (after changes)
     Category              Classification        Net carrying            Category           Classification          Net carrying
                                                   amount                                                             amount
                                                                     receivables
                                                                     Other          Measured at fair
                      Measured at cost
Financial      assets                                                investments in value through other
                      (equity                         40,000.00                                                           40,000.00
available for sale                                                   equity         comprehensive
                      instrument)
                                                                     instruments    income
B. Adjustment table showing the net carrying amout of the original financial assets is adjusted to the net carrying
amount of the new financial assets in accordance with the new financial instrument guidelines on the first
implementation date.
a. The effects on consolidated financial statements
                                              31/12/2018                                                              1/1/2019
             Category                                                Reclassification    Remeasurement
                                            (before changes)                                                       (after changes)
Amortised cost:
Note receivables                                  200,000.00
Less:    transfer    to    accounts
receivable financing
Remeasurement: impairment of
expected credit loss
Closing balance disclosed by the
                                                                                                                         200,000.00
new financial instrument guidelines
Accounts receivable                           280,596,130.89
Add: adjustment of implementing
the new income guidelines
Less:    transfer    to    accounts
receivable financing
Remeasurement: impairment of
                                                                                               741,391.49
expected credit loss
Closing balance disclosed by the
                                                                                                                    281,337,522.38
new financial instrument guidelines
Other receivables                              29,944,042.47
Remeasurement: impairment of
expected credit loss
Closing balance disclosed by the
                                                                                                                     29,944,042.47
new financial instrument guidelines
Measured at fair value through
profit or loss:
Financial assets measured at fair
value through profit or loss (the                1,440,700.00
original guidelines)
Less: transfer to financial assets
                                                                        -1,440,700.00
held for trading
Closing balance disclosed by the
                                                                                                                       ——
new financial instrument guidelines

                                                                32
                                                                  2019 Annual Report of Tsann Kuen (China) Enterprise Co., Ltd.


                                          31/12/2018                                                            1/1/2019
              Category                                           Reclassification      Remeasurement
                                        (before changes)                                                     (after changes)
Financial assets held for trading            ——
Add: transfer from financial assets
measured at fair value through
                                                                     1,440,700.00
profit or loss (the original
guidelines)
Closing balance disclosed by the
                                                                                                                 1,440,700.00
new financial instrument guidelines
Measured at fair value through
other comprehensive income:
Financial assets available for sale
                                               40,000.00
(the original guidelines)
Less: transfer to other investments
                                                                        -40,000.00
in equity instruments
Closing balance disclosed by the
                                                                                                                 ——
new financial instrument guidelines
Other investments in equity
                                             ——
instruments
Add: transfer from financial assets
available for sale (the original                                        40,000.00
guidelines)
Remeasurement: measured at fair
value
Closing balance disclosed by the
                                                                                                                    40,000.00
new financial instrument guidelines
Deferred tax assets                        26,552,328.43
Adjustment resulting from the new
                                                                                          -148,575.26
financial instrument guidelines
Closing balance disclosed by the
                                                                                                                26,403,753.17
new financial instrument guidelines
b. The effects on the company’s financial statements
                                             31/12/2018                                                           1/1/2019
                Category                                            Reclassification     Remeasurement
                                          (before changes)                                                     (after changes)
Amortised cost:
Notes receivable                                    200,000.00
Closing balance disclosed by the new
                                                                                                                   200,000.00
financial instrument guidelines
Accounts receivable                           16,243,882.91
Remeasurement:         impairment  of
                                                                                               457,220.54
expected credit loss
Closing balance disclosed by the new
                                                                                                                16,701,103.45
financial instrument guidelines
Other receivables                               2,213,373.51
Remeasurement:         impairment  of
expected credit loss
Closing balance disclosed by the new
                                                                                                                 2,213,373.51
financial instrument guidelines

                                                            33
                                                                   2019 Annual Report of Tsann Kuen (China) Enterprise Co., Ltd.


                                                 31/12/2018                                                        1/1/2019
                 Category                                            Reclassification     Remeasurement
                                               (before changes)                                                 (after changes)
Measured at fair value through other
comprehensive income:
Financial assets available for sale (the
                                                      40,000.00
original guidelines)
Less: transfer to other investments in
                                                                           -40,000.00
equity instruments
Closing balance disclosed by the new
                                                                                                                     ——
financial instrument guidelines
Other investments in equity instruments             ——
Add: transfer from financial assets
                                                                            40,000.00
available for sale (the original guidelines)
Remeasurement: measured at fair value
Closing balance disclosed by the new
                                                                                                                      40,000.00
financial instrument guidelines
Deferred tax assets                               10,946,860.01
Adjustment resulting from the new
                                                                                                -114,305.13
financial instrument guidelines
Closing balance disclosed by the new
                                                                                                                 10,832,554.88
financial instrument guidelines
C. Table of adjustment of impairment provisions of financial assets
a. The effects on consolidated financial statements
                                                 31/12/2018                                                        1/1/2019
                 Category                                            Reclassification     Remeasurement
                                               (before changes)                                                 (after changes)
Amortised cost
Impairment provisions of accounts
                                                  12,373,081.57                                -741,391.49       11,631,690.08
receivable
Impairment provisions of other
                                                    1,799,236.50                                                  1,799,236.50
receivables
b. The effects on the company’s financial statements
                                                 31/12/2018                                                        1/1/2019
                 Category                                            Reclassification     Remeasurement
                                               (before changes)                                                (after changes)
Amortised cost
Impairment provisions of accounts
                                                    1,991,862.68                               -457,220.54        1,534,642.14
receivable
Impairment provisions of other
                                                       43,914.90                                                     43,914.90
receivables
 D. The effects on retained earnings and other comprehensive income of January 1 2019
                  Category                      Consolidated retained       Consolidated surplus        Consolidated other
                                                     earnings                    reserves             comprehensive income
31/12/2018                                              122,872,551.30             37,804,354.59                  5,924,132.67
1. Reclassify financial assets available for
sale into other investments in equity
instruments and remeasure
2. Remeasurement of impairment of
                                                            494,653.29                  34,291.54                      1,396.19
accounts receivable

                                                              34
                                                              2019 Annual Report of Tsann Kuen (China) Enterprise Co., Ltd.


               Category                    Consolidated retained        Consolidated surplus       Consolidated other
                                                earnings                     reserves            comprehensive income
1/1/2019                                           123,367,204.59              37,838,646.13                 5,925,528.86

2. Other changes of accounting policies
A. Revise the Format of the Annual General Enterprise Financial Statements
On April 30, 2019, the Ministry of Finance issued the "Notice on Amending the Format of the 2019 Annual

General Enterprise Financial Statements" (Accounting [2019] No. 6), and adjusted the financial statement format

of the enterprise accordingly. The notice pointed out that, in order to solve the practical problems in the

preparation of financial reports of enterprises that implement accounting standards for enterprises, standardize the

presentation of financial statements of enterprises, and improve the quality of accounting information, regarding

the "Accounting Standards for Business Enterprises No. 21-Leasing" (Caihui [2018] No. 35, hereinafter referred

to as the New Leasing Standards), which has been implemented in stages from January 1, 2019, and the relevant

situations in the implementation of accounting standards of business enterprises , the corporate financial statement

format was revised. The notice applies to the 2019 interim financial statements and annual financial statements of

non-financial enterprises that implement the Accounting Standards for Business Enterprises, as well as financial

statements for subsequent periods. According to the above provisions, among non-financial enterprises that

implement the Accounting Standards for Business, those that have not implemented the New Financial Standards,

New Revenue Standards and New Lease Standards prepare financial statements in accordance with the

requirements of “Accounting Standards for Business Enterprises” and Appendix 1 “General Financial Statement

Format (Applicable to Enterprises that Have Not Implemented the New Financial Standards, New Revenue

Standards and New Lease Standards); those that have implemented the New Financial Standards, New Revenue

Standards and New Lease Standards or that have implemented the New Financial Standards, New Revenue

Standards and not implemented New Lease Standards should follow the requirements of Appendix 1 “General

Financial Statement Format (Applicable to Enterprises that Have Not Implemented the New Financial Standards,

New Revenue Standards and New Lease Standards) and Appendix 2” General Financial Statement Format

(Applicable to Enterprises that Have Implemented the New Financial Standards, New Revenue Standards and

New Lease Standards) to to make corresponding adjustments to the financial statement items.

In 2019, the Company conducted financial treatment of related economic matters in accordance with the above

provisions as changes in accounting policies for the year, and prepare annual financial statements accordingly.

The above changes of accounting policies have no impact on the company's final financial position, final

operating results and final cash flow in 2019, and are only adjustments between different statement items. The

impact on the beginning of the related statement items is as follows:




                                                         35
                                                              2019 Annual Report of Tsann Kuen (China) Enterprise Co., Ltd.



                  Balance as of 12/31/2018                                       Balance as of 1/1/2019
Note receivables and accounts
                                             281,537,522.38 Note receivables                                   200,000.00
receivbale
                                                                Accounts receivbale                        281,337,522.38
Note payables and accounts
                                             672,895,647.66 Note payables                                   17,120,079.05
payable
                                                                Accounts payable                           655,775,568.61

B. Revision of non-monetary asset exchange and debt restructuring guidelines
According to the Ministry of Finance provisions of the "Notice on Printing and Distributing the ‘Accounting
Standards for Business Enterprises No. 7 - Non-Monetary Asset Exchange ‘” (Caihui [2019] No. 8, issued on May
9, 2019), the "Notice on Printing and Distributing the ‘Accounting Standards for Business Enterprises No. 12 -
Debt Reorganization ‘” (Caihui [2019] No. 9, issued on May 16, 2019), the newly revised Accounting Standards
for Business Enterprises No. 7-Non-Monetary Asset Exchange is implemented from June 10 2019, the newly
revised Accounting Standards for Business Enterprises No. 12 - Debt Reorganization is implemented from June
17 2019. Enterprises should adjust the corresponding economic business that occurred between January 1 2019
and the implementation date of the new standards in accordance with the standards. Enterprises do not need to
make retrospective adjustments to the corresponding economic business that occurred before January 1 2019.

VII. Retroactive restatement due to correction of material accounting errors in this reporting
period

□ Applicable √ Inapplicable

VIII. YoY changes in the scope of the consolidated financial statements

√ Applicable □ Inapplicable
Xiamen Tsannkuen Property Services Co., Ltd. (“TKW”) was incorporated as a wholly-owned subsidiary of the
Company in May 2019 and has been included in the Company’s consolidated financial statements since the
incorporation day.

IX. Engagement and disengagement of CPAs firm

Current CPAs firm
Name of the domestic CPAs firm                           Ruihua Certified Public Accountants (LLP)
The Company’s payment for the domestic CPAs firm
                                                         115
(RMB’0,000)
Consecutive years of the audit service provided by the
                                                         7
domestic CPAs firm
Names of the certified public accountants from the
                                                         Zhang Liping, Ren Xiaochao
domestic CPAs firm
Consecutive years of the audit service provided by the
certified public accountants from the domestic CPAs      1 year for Zhang Liping, 2 year for Ren Xiaochao
firm

                                                         36
                                                           2019 Annual Report of Tsann Kuen (China) Enterprise Co., Ltd.


Indicate by tick mark whether the CPAs firm was changed in this reporting period
□ Yes √ No
Indicate by tick mark whether the CPAs firm was changed during the audit
□ Yes √ No
Indicate by tick mark whether the change of CPAs firm perform the procedure for examination and approval
□ Yes √ No
CPAs firm, financial advisor or sponsor engaged for internal control audit
√ Applicable □ Inapplicable
For the reporting period, the Company engaged Ruihua Certified Public Accountants (LLP) as the internal control
auditor and did not hire any financial advisor or sponsor.

X. Possibility of listing suspension or termination after disclosure of this Report

□ Applicable √ Inapplicable

XI. Bankruptcy and restructuring

□ Applicable √ Inapplicable

XII. Significant litigations and arbitrations

□ Applicable √ Inapplicable

XIII. Punishments and rectifications

□ Applicable √ Inapplicable

XIV. Credit conditions of the Company as well as its controlling shareholder and actual
controller

□ Applicable √ Inapplicable

XV. Implementation of any equity incentive plan, employee stock ownership plan or other
incentive measures for employees

□ Applicable √ Inapplicable




                                                      37
                                                                                                                    2019 Annual Report of Tsann Kuen (China) Enterprise Co., Ltd.


      XVI. Significant related-party transactions

      1. Related-party transactions relevant to routine operation

      √ Applicable □ Inapplicable
                                                                                                                                                             Unit: RMB’0,000
                                                               Pricing                                                                  Settlement
                                               Content of                                       Proportion                Whether
                              Type of the                    principle of                                    Approve                     method of
                                                   the                      Transa   Transact    in same                  exceeded                       Similar    Disclos    Disclos
 Related                      related-part                        the                                            d                           the
             Relationship                     related-part                   ction     ion        kind of                    the                         market       ure        ure
  party                             y                        related-part                                    transacti                  related-part
                                                    y                        price   amount     transactio                approved                        price      date       index
                              transaction                          y                                         on quota                         y
                                              transaction                                         ns (%)                    quota
                                                             transaction                                                                transaction
             Company
             directly
Thermaste
             controlled by     Purchase of                   Based on
r
             actual           commoditie      Purchase of    the market
Electronic                                                                           3,618.30       2.63%    3,658.00                   Settled
             controller and     s from the    raw parts      price and                                                                                                         www.c
(Xiamen)                                                                                                                                according to
             their    close   related party                  both parties                                                                                           03/19/     ninfo.c
Ltd.                                                                        N/A                                          No             the contract    N/A
             family                                          abide by                                                                                                2019      om.cn
                                                                                                                                        signed by
             members                                         the fair and
                                                                                                                                        both parties
   Star                                          Sale of     reasonable
               Ultimate         Sale of
Comgistic                                     components     principle
              controlling     commoditie                                             1,105.96       0.58%    1,866.00
 Trading                                      and finished
               company             s
 Co., Ltd.                                      products
Total                                                                                4,724.26                5,524.00
Details of large amount of sales returns                   N/A
As for the prediction on the total amount of routine N/A
related-party transactions to be occurred in the reporting
period by relevant types, the actual performance in the
reporting period
Reason for significant difference between the transaction N/A
price and the market price




                                                                                       38
                                                              2019 Annual Report of Tsann Kuen (China) Enterprise Co., Ltd.




2. Related-party transactions regarding purchase or sales of assets or equity interests

□ Applicable √ Inapplicable

3. Related-party transitions regarding joint investments

□ Applicable √ Inapplicable

4. Credits and liabilities with related parties

√ Applicable □ Inapplicable
Whether was any contract related to the non-operating credits and liabilities with related parties?
□ Yes √ No

5. Other significant related-party transactions

□ Applicable √ Inapplicable

XVII. Significant contracts and execution

1. Entrustment, contracting and leasing

(1) Entrustment

□ Applicable √ Inapplicable
No such cases in this reporting period.

(2) Contracting

□ Applicable √ Inapplicable
No such cases in this reporting period.

(3) Leasing

□ Applicable √ Inapplicable

2. Significant guarantees

√ Applicable □ Inapplicable




                                                         39
                                                                                2019 Annual Report of Tsann Kuen (China) Enterprise Co., Ltd.




(1) Guarantees


                                                                                                                                      Unit: RMB’0,000
                                                          Guarantees between subsidiaries
                                                                       Actual
                                                                                                                                          Guarantee
                                                                     occurrence
                               Disclosure date of                                     Actual                                                for a
                                                       Line of       date (date                       Type of         Term of     Due
     Guaranteed party          the guarantee line                                    guarantee                                             related
                                                      guarantee          of                          guarantee       guarantee   or not
                                 announcement                                         amount                                               party or
                                                                     agreement
                                                                                                                                             not
                                                                      signing)
PT.STAR COMGISTIC
                              08/08/2018                2,616.07     08/07/2018                  0   Pledged        1 year       No       No
INDONESIA
Tsannkuen Edge
                              08/08/2018                  523.21     08/07/2018                  0   Pledged        1 year       No       No
Intelligence Co., Ltd.
                                                                                    Total actual guarantee
Total guarantee line for subsidiaries approved                                      amount for subsidiaries
                                                                                0                                                              784.82
during this Reporting Period (C1)                                                   during this Reporting
                                                                                    Period (C2)
                                                                                    Total actual guarantee
Total approved guarantee line for subsidiaries at                                   balance for subsidiaries at
                                                                                0                                                                  0
the end of this Reporting Period (C3)                                               the end of this Reporting
                                                                                    Period (C4)
                                                               Total guarantee amount
                                                                                    Total actual guarantee
Total guarantee line approved during this                                       0
                                                                                    amount       during      this                              784.82
Reporting Period (C1)
                                                                                    Reporting Period (C2)
                                                                                    Total actual guarantee
Total approved guarantee line at the end of this                                0
                                                                                    balance at the end of this                                     0
Reporting Period (C3)
                                                                                    Reporting Period (C4)
Proportion of the total actual guarantee amount (A4+B4+C4) in net assets of
                                                                                                                                                   0
the Company
Of which:
Amount of guarantees provided for shareholders, the actual controller and their
                                                                                                                                                   0
related parties (D)
Amount of debt guarantees provided directly or indirectly for entities with a
                                                                                                                                                   0
liability-to-asset ratio over 70% (E)

Portion of the total guarantee amount in excess of 50% of net assets (F)                                                                           0

Total amount of the three kinds of guarantees above (D+E+F)                                                                                        0

Explanation on undue guarantee or possible joint liquidated liability undertaken                                    None

Explanation on providing external guarantee violating established procedures                                        None


(2) Illegal Provision of Guarantees for External Parties

□ Applicable √ Inapplicable




                                                                           40
                                                                                                                                              2019 Annual Report of Tsann Kuen (China) Enterprise Co., Ltd.
           3. Entrusted cash management

           (1) Entrusted asset management

           √ Applicable □ Inapplicable
           Overview of entrusted assets management in Reporting Period
                                                                                                                                                                                           Unit: RMB’0,000
                       Type                              Resource of funds                          Amount incurred                               Undue balance                               Amount overdue

Bank financial product                         Self-owned fund                                                              64,500                                         49,000                                    0.00

Total                                                                                                                       64,500                                         49,000                                    0.00
           Particular information of high-risk entrusted asset management with individual significant amount or low security, poor liquidity and non breakeven
                                                                                                                                                                                           Unit: RMB’0,000
                                                                                                                                                                 Actual
                                                                                                                                                                           Amount                                 Overview
                                                                                                                 Break-                            Amount      recovery               Whether    Whether there
                                                                                                                             Annual                                         withdra                                 of the
                                                                                                                  even                            of actual        of                     go       is wealth
                         Type     Type of                Resou                                                                yield                                           wn                                  item and
                                                                                                                 floatin               Estimate   profits or     profits              through    management
 Name of the trustee     of the     the      Amount      rce of    Initial date   Ended Date     Use of fund                   for                                         impairm                                   the
                                                                                                                    g                   profit    losses in    or losses                stator    entrustment
                        trustee   product                funds                                                               referen                                          ent                                  related
                                                                                                                 procee                           reporting        in                 procedur   plan in future
                                                                                                                                ce                                         provisio                               index for
                                                                                                                    ds                              period      reportin                  es         or not
                                                                                                                                                                               n                                  inquiring
                                                                                                                                                               g period
China Everbright
                                                                                   27 January
Bank-Xiamen                       Break-e     8,000.00            27 July 2018                                               4.70%       188.00     188.00                  N/A         Yes
                                                                                      2019
Branch                               ven                                                          Structural
China Everbright                    fixed                                                          deposit
                                                                   9 October
Bank-Xiamen                       proceeds    4,000.00                            9 April 2019                               4.00%        80.00       80.00                 N/A         Yes
                                                                     2018
Branch
                                                                                                  Structural
Bank of East                                                       29 January
                                              5,000.00                            6 May 2019      financial                  4.15%        55.91       55.91                 N/A         Yes
Asia-Xiamen Branch                                                    2019                                       Payme
                                                                                                  products
                                                                                                                   nt of
                                                                                                                                                                                                 Subject to the
CHINA MINSHENG                                                                                                   interest
                                                         Self-o    10 January                                                                                  Recover                           future market    http://ww
BANK-Xiamen                                   5,000.00                            25 June 2019                     and       4.35%        98.92       98.92                 N/A         Yes
                         Bank                            wned         2019                                                                                     ed upon                             yield and      w.cninfo.
Branch                                                                                            Structural     princip
                                                          fund                                                                                                 maturity                               fund         com.cn
                                  Break-e                                                          deposit         al at
Xiamen International                                               29 August       29 August                                                                                                       condition
                                    ven       5,000.00                                            products       maturit     4.49%       227.62     227.62                  N/A         Yes
Bank                                                                 2018            2019                            y
                                  floating
                                  proceeds                         31 August       30 August
Bank of Quanzhou                              8,000.00                                                                       4.90%       396.35     396.35                  N/A         Yes
                                                                     2018            2019
                                                                                                    Deposit
                                                                                                   taking of
Xiamen International                                              10 December     10 December     interbank,
                                             10,000.00                                                                       4.65%       471.46     471.46                  N/A         Yes
Bank                                                                  2018            2019         National
                                                                                                 debt, central
                                                                                                   bank bill
                                                                                                          41
                                                                                                                                          2019 Annual Report of Tsann Kuen (China) Enterprise Co., Ltd.
                                                                                                                                                             Actual
                                                                                                                                                                       Amount                                 Overview
                                                                                                               Break-                          Amount      recovery               Whether    Whether there
                                                                                                                         Annual                                         withdra                                 of the
                                                                                                                even                          of actual        of                     go       is wealth
                        Type     Type of                 Resou                                                            yield                                           wn                                  item and
                                                                                                               floatin             Estimate   profits or     profits              through    management
 Name of the trustee    of the     the      Amount       rce of    Initial date   Ended Date     Use of fund               for                                         impairm                                   the
                                                                                                                  g                 profit    losses in    or losses                stator    entrustment
                       trustee   product                 funds                                                           referen                                          ent                                  related
                                                                                                               procee                         reporting        in                 procedur   plan in future
                                                                                                                            ce                                         provisio                               index for
                                                                                                                  ds                            period      reportin                  es         or not
                                                                                                                                                                           n                                  inquiring
                                                                                                                                                           g period
                                                                  26 December     26 December
Xiamen Bank                                   5,000.00                                                                   4.70%       238.26     238.26                  N/A         Yes
                                                                      2018            2019
CHINA MINSHENG
                                                                   9 August        9 August
BANK-Xiamen                                  12,000.00                                                                   4.60%       552.00     552.00                  N/A         Yes
                                                                     2018            2019
Branch
China Everbright
Bank-Xiamen                      Break-e      5,000.00            9 April 2019    9 April 2020                           3.90%       195.00                             N/A         Yes
Branch                              ven
China Everbright                   fixed
Bank-Xiamen                      proceeds     5,000.00            7 May 2019      7 May 2020                             3.80%       190.00                             N/A         Yes
Branch
                                                                                                 Structural
Bank of
                                                                                   15 January     deposit
Communication-Puti                            5,000.00            18 June 2019                                           4.30%       124.29                             N/A         Yes
                                                                                      2020
an Branch
                                                                                                                                                            Undue
Xiamen International                                               30 August       29 August
                                              5,000.00                                                                   4.00%       202.78                             N/A         Yes
Bank                             Break-e                             2019            2020
Chiyu Banking                      ven
                                                                  11 December     10 December
Corporation                      floating    15,000.00                                                                   4.35%       661.56                             N/A         Yes
                                                                      2019            2020
Ltd.-Fuzhou Branch               proceeds
CHINA MINSHENG
                                                                   18 January      17 January
BANK-Xiamen                                   4,500.00                                                                   4.10%       183.99                             N/A         Yes
                                                                      2019         2020/1/17
Branch
Xiamen International                                               12 August       11 August
                                              9,500.00                                                                   4.10%       394.91                             N/A         Yes
Bank                                                                 2019            2020
Total                                       111,000.00                                                                             4,261.05   2,308.52


           Whether there is the case where the principal cannot be recovered at maturity or other case which may cause impairment for entrusted asset management
           □ Applicable √ Inapplicable

            (2) Entrusted loans

           □ Applicable √ Inapplicable
           No such cases in this reporting period.



                                                                                                         42
                                                          2019 Annual Report of Tsann Kuen (China) Enterprise Co., Ltd.




4. Other significant contracts

□ Applicable √ Inapplicable
No such cases in this reporting period

XVIII. Social responsibilities

1. Social responsibilities taken

□ Applicable √ Inapplicable

2. Targeted measures taken to help people lift themselves out of poverty

□ Applicable √ Inapplicable

3. Details related to environment protection

□ Applicable √ Inapplicable

XIX. Other significant events

□ Applicable √ Inapplicable

XX. Significant events of subsidiaries

□ Applicable √ Inapplicable




                                                     43
                                                                  2019 Annual Report of Tsann Kuen (China) Enterprise Co., Ltd.



                         Section VI. Change in Shares & Shareholders


  I. Changes in shares

  1. Changes in shares

                                                                                                                  Unit: share
                                  Before                       Increase/decrease (+/-)                            After
                                                             Bonu Increase
                                                     New
                                        Percentag              s       from                 Subtota                      Percenta
                          Number                     issue                      Other                     Number
                                          e (%)              share    capital                  l                          ge (%)
                                                       s
                                                               s     reserve
I. Unlisted tradable
                                    0       0.00%        0         0           0        0          0                0       0.00%
shares
1. Founders’ shares
Among which: shares
held by State
Shares held by
domestic corporation
Shares held by
foreign corporations
Other
2. Raised
corporation shares
3. Staff shares
4. Preferred shares or
other
II. Listed tradable
                         185,391,680       100.00%       0         0           0        0          0    185,391,680      100.00%
shares
1. RMB ordinary
shares
2. Domestically listed
                         185,391,680       100.00%       0         0           0        0          0    185,391,680      100.00%
foreign shares
3. Foreign capital
stocks listed abroad
4. Other
III. Total shares        185,391,680 100.00%             0         0           0        0          0    185,391,680      100.00%
  Reasons for the share changes
  □ Applicable √ Inapplicable
  Approval of share changes
  □ Applicable √ Inapplicable
  Transfer of share ownership
  □ Applicable √ Inapplicable
  Implementation progress of share repurchases
  □ Applicable √ Inapplicable

  2. Changes in restricted shares

  □ Applicable √ Inapplicable




                                                             44
                                                                 2019 Annual Report of Tsann Kuen (China) Enterprise Co., Ltd.


   II. Issuance and listing of securities

   1. Securities (excluding preference shares) issued in this reporting period

   □ Applicable √ Inapplicable

   2. Changes in total shares of the Company and the shareholder structure, as well as the asset and liability
   structures

   □ Applicable √ Inapplicable

   3. Existing staff-held shares

   □ Applicable √ Inapplicable

   III. Shareholders and actual controller

   1. Total number of shareholders and their shareholdings

                                                                                                                 Unit: share
                                                                                             Total number of
                             Total number of
                                                            Total number of                  preference
                             common
Total number                                                preference                       shareholders with
                             shareholders at the
of common                                                   shareholders                     resumed voting
                   15,970    prior month-end       15,939                                0                                       0
shareholders at                                             with resumed                     rights at the prior
                             before the
the period-end                                              voting rights at                 month-end before
                             disclosure of this
                                                            the period-end                   the disclosure of this
                             Report
                                                                                             Report
                                 5% or greater shareholders or the top 10 shareholders
                                                              Increase/dec Numbe                                 Pledged or
                                   Sharehol
                                                Total shares rease during       r of   Number of                frozen shares
    Name of            Nature of     ding
                                                 held at the        this      restrict unrestricted
   shareholder        shareholder percenta                                                                               Numbe
                                                period-end      reporting        ed      shares                Status
                                    ge (%)                                                                                 r
                                                                  period       shares
FORDCHEE
                     Foreign
DEVELOPMENT                           29.10%       53,940,530    Unchanged               0     53,940,530       N/A              0
                     corporation
LIMITED
EUPA INDUSTRY
                     Foreign
CORPORATION                           13.09%       24,268,840    Unchanged               0     24,268,840       N/A              0
                     corporation
LIMITED
GUOTAI JUNAN
SECURITIES(HO        Foreign
                                        4.92%       9,120,182    -76,267                 0      9,120,182       N/A              0
NGKONG)              corporation
LIMITED
FILLMAN
                     Foreign
INVESTMENTS                             2.49%       4,621,596    Unchanged               0      4,621,596       N/A              0
                     corporation
LIMITED
SHENWAN
HONGYUAN             Foreign
                                        1.09%       2,016,752    60.000                  0      2,016,752       N/A              0
SECURITIES           corporation
(HK) LIMITED
CHEN                 Domestic
                                        1.03%       1,900,776    Unchanged               0      1,900,776       N/A              0
YONGQUAN             individual



                                                            45
                                                                2019 Annual Report of Tsann Kuen (China) Enterprise Co., Ltd.


CHEN                   Foreign
                                       0.84%       1,561,249    22,300                  0      1,561,249       N/A              0
YONGQING               individual
                       Foreign
CHEN LIJUAN                            0.76%       1,401,134    19,800                  0      1,401,134       N/A              0
                       individual
                       Domestic
DING XIAOLUN                           0.63%       1,173,500    25,550                  0      1,173,500       N/A              0
                       individual
                       Domestic
XU QIANMING                            0.33%        618,259     Unchanged               0        618,259       N/A              0
                       individual
Strategic investor or general
corporation becoming a top ten
                                    None
shareholder due to placing of new
shares
                                      The first, the second and the fourth shareholders are the Company’s corporate
Related or acting-in-concert          controlling shareholders. It is unknown whether the other public shareholders are
parties among the shareholders        related parties or acting-in-concert parties as prescribed in the Administrative
above                                 Methods for Disclosure of the Shareholding Changes of the Listed Company’s
                                      Shareholders.
                                              Top 10 unrestricted shareholders
                                                      Number of                          Type of shares
                                                  unrestricted shares
             Name of shareholder
                                                      held at the                    Type                    Number
                                                      period-end
FORDCHEE DEVELOPMENT LIMITED                              53,940,530 Domestically listed foreign share        53,940,530
EUPA INDUSTRY CORPORATION
                                                          24,268,840 Domestically listed foreign share        24,268,840
LIMITED
GUOTAI JUNAN
                                                           9,120,182 Domestically listed foreign share         9,120,182
SECURITIES(HONGKONG) LIMITED
FILLMAN INVESTMENTS LIMITED                                4,621,596 Domestically listed foreign share         4,621,596
SHENWAN HONGYUAN SECURITIES
                                                           2,016,752 Domestically listed foreign share         2,016,752
(HK) LIMITED
CHEN YONGQUAN                                              1,900,776 Domestically listed foreign share         1,900,776
CHEN YONGQING                                              1,561,249 Domestically listed foreign share         1,561,249
CHEN LIJUAN                                                1,401,134 Domestically listed foreign share         1,401,134
DINGG XIAOLUN                                              1,173,500 Domestically listed foreign share         1,173,500
XU QIANMING                                                  618,259 Domestically listed foreign share           618,259
                                                  The first, the second and the fourth shareholders are the Company’s
Related or acting-in-concert parties among the
                                                  corporate controlling shareholders. It is unknown whether the other
top ten unrestricted public shareholders and
                                                  public shareholders are related parties or acting-in-concert parties as
between the top ten unrestricted public
                                                  prescribed in the Administrative Methods for Disclosure of the
shareholders and the top ten shareholders
                                                  Shareholding Changes of the Listed Company’s Shareholders.
Top ten common shareholders conducting
                                                  None
securities margin trading

   2. Information about the controlling shareholder

   Nature of controlling shareholder: foreign investment holding
   Type of controlling shareholder: corporation
                                                  Legal
                                             representative /    Date of                                        Business
      Name of controlling shareholder                                               Organization code
                                                company       establishment                                      scope
                                                principal
   Fordchee Development Limited              Chen Yanjun       3 Jan. 1990       14676920-000-01-20-6         Investment
   EUPA Industry Corporation Limited        Chen Yanjun         21 Jul. 1989     12959659-000-07-19-9         Investment
   Fillman Investments Limited              Chen Yanjun         21 Jul. 1992     16269694-000-07-19-2         Investment


                                                           46
                                                              2019 Annual Report of Tsann Kuen (China) Enterprise Co., Ltd.


Shareholdings of the controlling
shareholder in other listed companies
                                        None
at home or abroad in this reporting
period
Change of the controlling shareholder during this reporting period
□ Applicable √ Inapplicable
No such cases in this reporting period.


3. Information about the actual controller and its acting-in-concert party

Nature of actual controller: foreign individual
Type of actual controller: individual
                                                                      Right of residence in other countries or
      Name of actual controller                   Nationality
                                                                                      regions
Wu Tsann Kuen                            Taiwan, China             None
Main occupation and duty                 Promoter of TSANN KUEN Group in China and Taiwan
Used-to-be-holding listed companies Actual controller of Tsann Kuen (Taiwan) Enterprise Co., Ltd. STAR
at home and abroad in the last ten COMGISTIC CAPITAL (Taiwan) CO., LTD. and Star International
years                                    Travel Service (Taiwan) Co., Ltd.
Change of the actual controller during this reporting period
□ Applicable √ Inapplicable
No such cases in this reporting period.

Ownership and control relations between the actual controller and the Company




4. 10% or greater corporate shareholders

□ Applicable √ Inapplicable




                                                         47
                                                                  2019 Annual Report of Tsann Kuen (China) Enterprise Co., Ltd.


    5. Limited shareholding decrease by the Company’s controlling shareholder, actual controller, reorganizer
    and other commitment makers

    □ Applicable √ Inapplicable


                                     Section VII. Preference Shares


    □ Applicable √ Inapplicable
    No preference shares in this reporting period.


         Section VIII. Directors, Supervisors, Senior Management Staff &

                                                     Employees


    I. Changes in shareholdings of directors, supervisors and executive officers

    □ Applicable √ Inapplicable

    II. Changes in directors, supervisors and executive officers

    √ Applicable □ Inapplicable
            Name                  Office title          Type of change               Date                    Reason
    Feng Zhiqing          Financial chief            Contract termination     22 March 2019            Personal reasons
                          Supervisory Board          Left
    Luo Qingxing                                                              17 May 2019              Retirement
                          chairman
    Yang Shunlong         Director                   Left                     1 April 2019             Personal reasons
    Yang Yongquan         Supervisor                 Left                     22 October 2019          Personal reasons

    III. Brief biographies

     Main working experience of current directors, supervisors and senior management staff
  Name     Position Educational Main working experience and chief responsibilities in the Company
                      background
Pan       Chairman Graduated         1990.09-2003.06         TECO Electric & Machinery Co., Ltd. R&D and Business
Zhirong of        the from                                   (Taiwan)                            manager
          Board       Machinery      2003.08-2006.01         Tsann Kuen Enterprise Co., Ltd.     Manager of research
          &GM         Division of                            (Taiwan)                            institute
                      ILMJ           2006.02-2008.09         Tsann Kuen Enterprise Co., Ltd.     Assistant manager of
                                                             (Taiwan)                            research institute
                                     2008.10-2010.07.25 Tsann Kuen (Zhangzhou) Enterprise Vice GM of Trade
                                                             Co., Ltd.                           Department
                                     2010.07.26-2014.5.20 Tsann Kuen (China) Enterprise Co., General manager
                                                             Ltd.
                                     2010.07.07-2014.5.27 Tsann Kuen (Zhangzhou) Enterprise Managing director
                                                             Co., Ltd.
                                     2011.5.21-2014.5.19 Tsann Kuen (China) Enterprise Co., Director


                                                             48
                                                            2019 Annual Report of Tsann Kuen (China) Enterprise Co., Ltd.


  Name     Position Educational   Main working experience and chief responsibilities in the Company
                    background
                                                       Ltd.
                                  2014.03.05-now       East Sino Development Limited (HK)      Director
                                  2014.05.20-2017.04.05Tsann Kuen (China) Enterprise Co.,      Chairman of the
                                                       Ltd.                                    Board
                                  2014.05.27-now       Tsann Kuen (Zhangzhou) Enterprise       Chairman of the
                                                       Co., Ltd.                               Board
                                  2014.06.11-now       PT.STAR COMGISTIC INDONESIA             Chairman of the
                                                                                               Board
                                   2016.08.04-now        PT.STAR COMGISTIC PRORERTY Chairman of the
                                                         DEVELOPMENT INDONESIA                 Board
                                   2015.01.21-2019.04.07 Tsann Kuen China (Shanghai)           Director
                                                         Enterprise Co., Ltd.
                                   2019.04.08-now        Tsann Kuen China (Shanghai)           Chairman of the
                                                         Enterprise Co., Ltd.                  Board
                                   2015.02.25-now        Tsannkuen Edge Intelligence Co., Ltd. Chairman of the
                                                         (Taiwan)                              Board
                                   2015.05.20-now        Orient Star Investments Limited (HK) Director
                                   2016.03.02-2018.10.30 Xiamen Tsann kuen Home Appliance Chairman of the
                                                         Design Co., Ltd.                      Board
                                   2017.04.06-now        Tsann Kuen (China) Enterprise Co., Chairman of the
                                                         Ltd.                                  Board, GM
                                   2018.03.14-2019.01.01 Tsann Kuen (Zhangzhou) South Port Director
                                                         Electronics Enterprise Co., Ltd.
                                   2018.08.14-now        Tsann Kuen Japan Co., Ltd.            Director
                                   2019.01.02-now        Tsann Kuen (Zhangzhou) South Port Chairman of the
                                                         Electronics Enterprise Co., Ltd.      Board
                                   2018.06.15-now        Tsann Kuen (Zhangzhou) Investment Chairman of the
                                                         Co., Ltd.                             Board
                                   2019.01.02-now        Shanghai Canxing Trading Co., Ltd. Chairman of the
                                                                                               Board
Cai      Director   Graduated      1993.02.16-2002.05.21 Tsann Kuen (China) Enterprise Co., Managing director
Yuansong            from                                 Ltd.
                    Manchester 1997.09.02-now            Thermaster Electronic (Xiamen) Ltd. Director
                    State          2002.05.22-2008.05.24Tsann Kuen (China) Enterprise Co., Chairman of the
                    University,                          Ltd.                                  Board
                    Minnesota      2002.07.24-2008.07.25 Tsann Kuen (Zhangzhou) Enterprise Chairman of the
                    with a degree                        Co., Ltd.                             Board
                    in Business    2011.06-now           Sekond Creative Design Co., Ltd.      Chairman of the
                    Administration                       (Taiwan)                              Board
                                   2017.04.06-now        Tsann Kuen (China) Enterprise Co., Director
                                                         Ltd.
                                   2017.04.21-now        Tsann Kuen (Zhangzhou) Enterprise Director
                                                         Co., Ltd.
                                   2018.08.14-now        EUPA Industry Corporation Limited Director
                                                         (HK)
                                   2018.08.14-now        Fillman Investments Limited (HK)      Director
                                   2018.08.14-now        FORDCHEE Development Limited Director
                                                         (HK)
                                   2020.02.25-now        STAR COMGISTIC CAPITAL CO., Director
                                                         LTD.
                                   2020.02.25-now        Tsann Kuen Enterprise Co., Ltd.       Director
                                                         (Taiwan)
Xu       Director   Graduated      2001.12.5-2005.10.9 Tsann Kuen Enterprise Co., Ltd.         Safety Regulation

                                                       49
                                                                2019 Annual Report of Tsann Kuen (China) Enterprise Co., Ltd.


  Name      Position Educational Main working experience and chief responsibilities in the Company
                      background
Degeng                from                                  (Taiwan)                              Specialist on UL
                      Agricultural 2005.10.10-2006.8.31 Tsann Kuen (Zhangzhou) Enterprise Vice Manager of
                      Mechanical                            Co., Ltd.                             EURO MOTOR
                      Engineering of                                                              project
                      National        2006.9.1-2010.5.26    Tsann Kuen (Zhangzhou) Enterprise Quality assurance
                      Taiwan                                Co., Ltd.                             Manager
                      University      2010.5.27-2013.1.12 Tsann Kuen (Zhangzhou) Enterprise Frying roaster
                      (Master)
                                                            Co., Ltd.                             manager of R&D
                                                                                                  Department
                                      2013.1.13-2014.8.31 Tsann Kuen (Zhangzhou) Enterprise Assistant manager of
                                                            Co., Ltd.                             Commerce
                                                                                                  Department in
                                                                                                  Americas
                                      2014.9.1-2019.12.31 Tsann Kuen (Zhangzhou) Enterprise        Senior Assistant
                                                            Co., Ltd.                              manager of R&D
                                                                                                   Department
                                      2015.8.4-now          Tsann Kuen (Zhangzhou) Enterprise Director
                                                            Co., Ltd.
                                      2019.04.24-now        Tsannkuen Edge Intelligence Co., Ltd. Director
                                                            (Taiwan)
                                      2019.5.17-now         Tsann Kuen (China) Enterprise Co., Director
                                                            Ltd.
                                      2020.1.1-now          Tsann Kuen (Zhangzhou) Enterprise Vice GM of R&D
                                                            Co., Ltd.                             Department and
                                                                                                  Commerce
                                                                                                  Department
Tang      Independent Graduated       1988.07-1994.06       Xiamen Municipal Bureau of Finance Clerk
Jinmu     director    from Xiamen 1994.06-1998.12           Xiamen CPA                            Vice director
                      University      1996.07-1998.12       Xiamen Asset Evaluation Institute     Head of the institute
                      with a doctor
                      degree in       1999.01-2001.12       PCCPA                                 Director, Partner
                      Fiscal Finance, 2002.01-now           Xiamen Asset Evaluation Association Secretary-general
                      senior          2002.09-now           Xiamen Association of Certified       Secretary-general
                      accountant                            Public Accountants
                                      2014.05.20-now        Tsann Kuen (China) Enterprise Co., Independent director
                                                            Ltd.
                                      2015.01.15-2019.11.31 Xingye Technology Co., Ltd.           Independent director
                                      2016.02-now           GOPRO                                 Independent director
                                      2017.11.13 -now       Xiamen Red Phase Instruments Inc. Independent director
Bai       Independent Graduated       1994.07.01-1995.09.30 Xiamen TENET Law Office (original Full-time lawyer
Shaoxiang director    from Xiamen                           name of Fujian TENET &
                      University                            PARTNERS Law Office)
                      with a master 1995.10.01-1997.06.30 Xiamen Jinzhao Law Office               Full-time lawyer
                      degree in Law 1997.07.01-2001.07.31 Xiamen TENET Law Office (original Partner
                                                            name of Fujian TENET &
                                                            PARTNERS Law Office)
                                      2001.08.01-2008.12.31 Fujian TENET& PARTNERS Law            Partner
                                                            Office
                                      2005.05-2008.05       Xiamen King Long Motor Group          Independent director
                                      2008.3-now            Xiamen Arbitration Commission         Arbitrator
                                      2008.06-2014.06       Fujian Shengtun Mining Group Co., Independent director
                                                            Ltd.
                                      2009.04-2013.03       Shanghai Xingye Energy Holding Co., Independent director
                                                            Ltd.
                                      2009.01.01-now        Fujian TENET& PARTNERS Law            Partner, executive

                                                           50
                                                               2019 Annual Report of Tsann Kuen (China) Enterprise Co., Ltd.


  Name     Position Educational      Main working experience and chief responsibilities in the Company
                    background
                                                           Office                               director
                                     2010.5-now            Xiamen University Tan Kah Kee        Part-time associate
                                                           College                              professor
                                     2013.9-now            School of Law in Xiamen University Part-time master tutor
                                     2014.05.20-now        Tsann Kuen (China) Enterprise Co., Independent director
                                                           Ltd.
                                     2016.12-now           Fujian Torch Electron Technology     Independent director
                                                           Co., Ltd.
Ge       Independent Graduated       1980.12-1986.11       Hubei Electric                       Accountant
Xiaoping director    from            1986.11-1989.06       Fuzhou Camera Co., Ltd.              Internal auditor
                     Zhongnan        1989.06-1997.01       PLA Military Academy of Finance and Teacher
                     University of                         Economics
                     Economics       1997.01-2000.09       Fujian Mindu CPA                     Department manager
                     and Law with    2000.09-2007.03       Xiamen Andexin CPA                   Chief accountant
                     a degree in
                                     2007.03-2010.03       Fujian Mindu BDO                     CPA and vice director
                     Finance and
                     Accounting                                                                 accountant
                                     2008.05-2014.05       Tsann Kuen (China) Enterprise Co., Independent director
                                                           Ltd.
                                     2014.06-2018.06.29 China Shengmu Organic Milk Limited Independent director
                                     2017.04.06-now        Tsann Kuen (China) Enterprise Co., Independent director
                                                           Ltd.
                                     2017.2.10-2019.01.16 Fujian Xunxing Zipper Science &       Independent director
                                                           Technology Co., Ltd.
                                     2010.03-2019.05       BDO-Xiamen Branch                    Partner and the head
                                                                                                of Xiamen Branch
                                     2019.05-now           BDO-Xiamen Branch                    Senior consultant
Xu      Supervisory Graduated        2002.03.01-2014.02.09 P&G Taiwan Branch                    Vice Financial
Xiaowan Board       from                                                                        Manager
        chairman Department of       2014.02.10-2017.10.31 L'Oréal Taiwan Branch               Assistant manager of
                    Accounting of                                                               Financial management
                    Taiwan           2018.09.01-2019.12.12 Tsann Kuen Enterprise Co., Ltd.      Chief financial officer
                    Tunghai                                (Taiwan)
                    University       2018.09.01-2019.12.12 STAR COMGISTIC CAPITAL CO., Chief risk officer
                                                           LTD.(Taiwan)
                                     2018.12.12-now        Tsann Kuen (Zhangzhou) Investment Director
                                                           Co., Ltd.
                                     2019.01.31-2020.01.13 Yongyi International Investment Co., Chairman of the
                                                           Ltd.                                 Board
                                     2019.02.25-2019.12.12 Tsann Kuen Enterprise Co., Ltd.      Director
                                                           (Taiwan)
                                     2019.05.17-now        Tsann Kuen (China) Enterprise Co., Supervisory Board
                                                           Ltd.                                 chairman
Ding     Supervisor Graduated        1991.8.13-2002.10.9 Tsann Kuen Enterprise Co., Ltd.        QRA section manager
Hongming            from                                   (Taiwan)
                    Department of    2002.10.10-2003.8.31 Tsann Kuen (China) Enterprise Co., Vice manager of glass
                    Industrial                             Ltd.                                 factory
                    Engineering      2003.9.1-2005.5.26    Tsann Kuen China (Shanghai)          Vice manager of
                    and                                    Enterprise Co., Ltd.                 Motor business
                    Management                                                                  department
                    of STUST         2005.5.27-2007.1.12 Tsann Kuen (Zhangzhou) Enterprise Vice manager of
                                                           Co., Ltd.                            Cuisinart factory
                                     2008.1.13-2009.8.31 Tsann Kuen (Zhangzhou) Enterprise Vice manager of Iron
                                                           Co., Ltd.                            business department
                                     2009.9.1-2014.8.31    Tsann Kuen (Zhangzhou) Enterprise Manager of Central
                                                           Co., Ltd.                            Lab

                                                          51
                                                               2019 Annual Report of Tsann Kuen (China) Enterprise Co., Ltd.


  Name     Position Educational     Main working experience and chief responsibilities in the Company
                    background
                                    2014.9.1-2015.8.31     PT.STAR COMGISTIC INDONESIA                  Operations manager
                                    2015.9.1-2016.12.31    Tsann Kuen (Zhangzhou) Enterprise            Assistant manager of
                                                           Co., Ltd.                                    QRA
                                    2017.1.1-2017.12.31    Tsann Kuen (Zhangzhou) Enterprise            Operations assistant
                                                           Co., Ltd.                                    manager of PSO
                                    2018.1.1-now           Tsann Kuen (Zhangzhou) Enterprise            Assistant manager of
                                                           Co., Ltd.                                    QRA/Purchasing
                                                                                                        Department/laboratory
                                    2019.10.22—now        Tsann Kuen (China) Enterprise Co.,           Supervisor
                                                           Ltd.
Zheng     Supervisor Graduated       2016.06-now           Tsann Kuen (China) Enterprise Co.,           Staff-representative
Caiyun               from School of                        Ltd.                                         Supervisor
                     Economics       2011.06- now          Tsann Kuen (China) Enterprise Co.,           Financial manager
                     and                                   Ltd.
                     Management, 2008.07-2011.05           Tsann Kuen (China) Enterprise Co.,           Vice Financial
                     Fujian                                Ltd.                                         Manager
                     Forestry        1998.08-2008.06       Tsann Kuen (China) Enterprise Co.,           Account Specialist
                     College
                                                           Ltd.
                                     2014.03.05-now        East Sino Development Limited (HK)           Director
                                     2017.04.28-now        Orient Star Investments Limited (HK)         Director
                                     2016.03.02-2018.10.30 Xiamen Tsann Kuen Home Appliance             Supervisor
                                                           Design Co., Ltd.
                                     2018.06.15-now        Tsann Kuen (Zhangzhou) Investment            Director
                                                           Co., Ltd.
                                     2019.9.10-now         Tsann Kuen (Zhangzhou) South Port            Director
                                                           Electronics Enterprise Co., Ltd.
                                     2019.9.10-now         Tsann Kuen (Zhangzhou) Enterprise            Vice chairman of the
                                                           Co., Ltd.                                    Board
                                     2019.09.10-now        Shanghai Canxing Trading Co., Ltd.           Director
                                     2019.10.14-now        PT.STAR COMGISTIC INDONESIA                  Supervisor
                                     2019.10.14-now        PT.STAR COMGISTIC PRORERTY                   Supervisor
                                                           DEVELOPMENT INDONESIA
Sun       Board      China Institute 2011.04-now           Tsann Kuen (China) Enterprise Co.,           Board Secretary
Meimei    Secretary of Information                         Ltd.
                     Management 2005.07-2011.04            Tsann Kuen (China) Enterprise Co.,           Securities
                     with a degree                         Ltd.                                         Representative
                     in Business
                     Administration
Wu        Financial Graduated        2003.9.1-2006.6.30    Tsann Kuen (Zhangzhou) Enterprise            Accounting
Jianhua   Chief      from                                  Co., Ltd.                                    Department clerk
                     Department 2006.7.1-2006.12.31 Tsann Kuen (Zhangzhou) Enterprise                   Head of Cost Section
                     of Accounting                         Co., Ltd.                                    of Accounting
                     of Fuzhou                                                                          Department
                     University      2007.1.1-2008.6.30    Tsann Kuen (Zhangzhou) Enterprise            Head of General
                                                           Co., Ltd.                                    Account Section of
                                                                                                        Accounting
                                                                                                        Department
                                    2008.7.1-2010.5.31     Tsann Kuen (Zhangzhou) Enterprise            Head of Sales Section
                                                           Co., Ltd.                                    of Accounting
                                                                                                        Department
                                    2010.6.1-2014.4.30     Tsann Kuen (Zhangzhou) Enterprise            Vice manager of Cost
                                                           Co., Ltd.                                    /Accounts Payable in
                                                                                                        Accounting
                                                                                                        Department
                                    2014.5.1-2019.3.21     Tsann Kuen (China) Enterprise Co.,           Vice manager of Cost
                                                           Ltd.                                         /Accounts Payable in

                                                          52
                                                                   2019 Annual Report of Tsann Kuen (China) Enterprise Co., Ltd.


 Name         Position Educational    Main working experience and chief responsibilities in the Company
                       background
                                                                                                            Accounting
                                                                                                            Department
                                      2019.3.22-now            Tsann Kuen (China) Enterprise Co.,           Accounting
                                                               Ltd.                                         Department manager
                                      2019.3.29-now            Tsann Kuen (China) Enterprise Co.,           Financial Chief
                                                               Ltd.
                                      2019.5.14-now            Xiamen Tsann Kuen Property Service Supervisor
                                                               Co.,Ltd.
                                      2019.9.10-now            Tsann Kuen (Zhangzhou) Investment Supervisor
                                                               Co., Ltd.
                                      2019.9.10-now            Tsann Kuen (Zhangzhou) Enterprise Supervisor
                                                               Co., Ltd.

   Posts concurrently held in shareholding entities
   √ Applicable □ Inapplicable
                                                                              Starting        Ending
                                                                                                            Allowance from the
    Name                   Shareholding entity                 Post           date of         date of
                                                                                                            shareholding entity
                                                                               tenure         tenure
                    EUPA Industry Corporation
Cai Yuansong                                                Director       2018-08-14                       No
                    Limited (HK)
                    FILLMAN Investment Limited
Cai Yuansong                                                Director       2018-08-14                       No
                    (HK)
                    FORDCHEE Development Limited
Cai Yuansong                                                Director       2018-08-14                       No
                    (HK)
Remark: N/A

   Posts held concurrently in other entities
   √ Applicable □ Inapplicable
                                                                                                             Ending    Allowance
                                                                                            Starting date
   Name                        Other entity                               Post                               date of   from other
                                                                                              of tenure
                                                                                                             tenure       entity
Pan Zhirong     East Sino Development Limited (HK)             Director                    2014-03-05                  No
                Tsann Kuen (Zhangzhou) Enterprise Co.,
Pan Zhirong                                                    Chairman of the Board       2014-05-27                  No
                Ltd.
Pan Zhirong     PT.STAR COMGISTIC INDONESIA                    Chairman of the Board       2014-06-11                  No
                Tsann Kuen China (Shanghai) Enterprise
Pan Zhirong                                                    Chairman of the Board       2019-04-08                  No
                Co., Ltd.
                Tsann Kuen Edge Intelligence Co., Ltd.
Pan Zhirong                                                    Chairman of the Board       2015-02-25                  No
                (Taiwan)
Pan Zhirong     Orient Star Investments Limited (HK)           Director                    2015-05-20                  No
                Tsann Kuen (Zhangzhou) Investment Co.,
Pan Zhirong                                                    Chairman of the Board       2018-06-15                  No
                Ltd.
Pan Zhirong     Tsann Kuen Japan Co., Ltd.                     Director                    2018-08-04                  No
                Tsann Kuen (Zhangzhou) South Port
Pan Zhirong                                                    Chairman of the Board       2019-01-02                  No
                Electronics Enterprise Co., Ltd.
Pan Zhirong     Shanghai Canxing Trading Co., Ltd.             Chairman of the Board       2019-01-02                  No
Cai
                Thermaster Electronic (Xiamen) Ltd.            Director                    1997-09-02                  No
Yuansong
Cai
                Sekond Creative Design Co., Ltd. (Taiwan)      Chairman of the Board       2011-06-01                  Yes
Yuansong
Cai             Tsann Kuen (Zhangzhou) Enterprise Co.,
                                                               Director                    2017-04-21                  No
Yuansong        Ltd.
Cai
                EUPA Industry Corporation Limited (HK)         Director                    2018-08-14                  No
Yuansong
Cai
                Fillman Investments Limited (HK)               Director                    2018-08-14                  No
Yuansong

                                                              53
                                                                  2019 Annual Report of Tsann Kuen (China) Enterprise Co., Ltd.


                                                                                                            Ending     Allowance
                                                                                           Starting date
   Name                         Other entity                             Post                               date of    from other
                                                                                             of tenure
                                                                                                            tenure        entity
Cai
              Fordchee Development Limited (HK)              Director                     2018-08-14                  No
Yuansong
Cai
              STAR COMGISTIC CAPITAL CO., LTD.               Director                     2020-02-25                  No
Yuansong
Cai
              Tsann Kuen Enterprise Co., Ltd. (Taiwan)       Director                     2020-02-25                  No
Yuansong
              Xiamen Association of Certified Public
Tang Jinmu                                                   Secretary-general            2002-09-01                  Yes
              Accountants
Tang Jinmu    Xiamen Asset Evaluation Association            Secretary-general            2002-09-01                  Yes
Tang Jinmu    GOPRO                                          Independent director         2016-02-01                  No
Tang Jinmu    Xiamen Red Phase Instruments Inc.              Independent director         2017-11-13                  Yes
Bai
              Xiamen Arbitration Commission                  Arbitrator                   2008-03-01                  Yes
Shaoxiang
Bai                                                          Part-time associate
              Xiamen University Tan Kah Kee College                                       2010-05-01                  No
Shaoxiang                                                    professor
Bai
              School of Law in Xiamen University             Part-time master tutor       2013-09-01                  No
Shaoxiang
Bai
              Fujian Torch Electron Technology Co., Ltd.     Independent director         2016-12-29                  Yes
Shaoxiang
Bai                                                          Partner and executive
              Fujian TENET& PARTNERS Law Office                                           2009-01-01                  Yes
Shaoxiang                                                    director
Ge Xiaoping   BDO-Xiamen Branch                              Senior consultant            2019-05-01                  Yes
Zheng
              East Sino Development Limited (HK)             Director                     2014-03-05                  No
Caiyun
Zheng
              Orient Star Investments Limited (HK)           Director                     2017-04-28                  No
Caiyun
Zheng         Tsann Kuen (Zhangzhou) Investment Co.,         Director
                                                                                          2018-06-15                  No
Caiyun        Ltd.
Zheng         Tsann Kuen (Zhangzhou) South Port              Director
                                                                                          2019-09-10                  No
Caiyun        Electronics Enterprise Co., Ltd.
Zheng         Tsann Kuen (Zhangzhou) Enterprise Co.,         Vice chairman of the         2019-09-10                  No
Caiyun        Ltd.                                           Board
Zheng         Shanghai Canxing Trading Co., Ltd.             Director                     2019-09-10                  No
Caiyun
Zheng         PT.STAR COMGISTIC INDONESIA                    Supervisor
                                                                                          2019-10-14                  No
Caiyun
Zheng         PT.STAR COMGISTIC PRORERTY                     Supervisor
                                                                                          2019-10-14                  No
Caiyun        DEVELOPMENT INDONESIA
Remark: N/A

   Punishments imposed in the recent three years by the securities regulators on the incumbent directors, supervisors
   and executive officers as well as those who left in this reporting period
   Applicable √ Inapplicable

   IV. Remuneration of directors, supervisors and executive officers

   Decision-making procedure, determination basis and actual remuneration payment of directors, supervisors and
   executive officers
   According to the Company Law, the Securities Law and other laws and regulations, the remuneration of the
   directors and supervisors shall be decided by the Shareholders’ General Meeting, while the remuneration of the
   senior management staffs shall be decided by the Board of Directors. And the remuneration of the directors,
   supervisors and senior management staffs is decided by referring the market level and according to the Company’s
   human resource management system.
   Remuneration of directors, supervisors and executive officers in this reporting period

                                                             54
                                                                      2019 Annual Report of Tsann Kuen (China) Enterprise Co., Ltd.


                                                                                                               Unit: RMB’0,000
                                                                                            Total before-tax Remuneration
                                                                                             remuneration     from related
        Name           Office title       Gender            Age            Incumbent/former
                                                                                               from the      parties of the
                                                                                               Company          Company
                   Chairman of the
Pan Zhirong                                Male              53                Incumbent                    68.8        No
                   Board & GM
He Zongyuan        Director                Male              65                Incumbent                     3.6        Yes
Xu Degeng          Director                Male              48                Incumbent                  47.05         No

Cai Yuansong       Director                Male              63                Incumbent                     3.6        No

Yang Shunlong Director                     Male              53                  Former                     23.6        No
              Independent                                                                                               No
Bai Shaoxiang                              Male              47                Incumbent                      12
              director
              Independent                                                                                               No
Tang Jinmu                                 Male              53                Incumbent                      15
              director
              Independent                                                                                               No
Ge Xiaoping                               Female             50                Incumbent                      12
              director
Luo Qingxing       Supervisor              Male              66                  Former                        1        No

Xu Xiaowan         Supervisor             Female             48                Incumbent                     1.6        Yes

Yang Yongquan Supervisor                   Male              55                  Former                        2        Yes

Ding Hongming Supervisor                   Male              54                Incumbent                    33.3        No

Zheng Caiyun       Supervisor             Female             44                Incumbent                    22.1        No

Feng Zhiqing       Financial Chief         Male              50                  Former                      6.7        No

Wu Jianhua         Financial Chief         Male              40                Incumbent                    18.9        No

Sun Meimei         Board Secretary        Female             46                Incumbent                    16.3        No

Total                                                                                                    287.55
Equity incentives for directors, supervisors and executive officers in this reporting period
□ Applicable √ Inapplicable

V. Employees

1. Number, functions and educational backgrounds of employees

Number of in-service employees of the Company                                                                                  163
Number of in-service employees of main subsidiaries                                                                           3,523
Total number of in-service employees                                                                                          3,686
Total number of employees with remuneration in this reporting period                                                          4,063
Number of retirees to whom the Company or its main subsidiaries need to pay
                                                                                                                                 0
retirement pension

 Educational background               Number of employees                     Function                  Number of employees
             Doctor                                         0                   Sales                                          120
             Master                                         23                Financial                                         58
            Bachelor                                    257                   Technical                                        429
        College graduates                               317                Administrative                                      748


                                                                 55
                                                               2019 Annual Report of Tsann Kuen (China) Enterprise Co., Ltd.


 Educational background         Number of employees                    Function                  Number of employees
      Below college                               3,089               Production                                     2,331
          Total                                   3,686                  Total                                       3,686


2. Employee remuneration policy

The Company has established its remuneration system and formulated Remuneration Management Measures and
Performance Appraisal Management Rules based position division according to the Labor Law, the internal HR
Administrative Rules and relevant laws and regulations in line with the Company’s strategic planning, the HR
allocation on the market, the talent demand, job responsibilities and job qualifications. The staff’s remuneration
level has comprehensively taken the Company’s operating conditions, profitability and internal fairness into
consideration based on the position’s value, job performance and personal ability.

3. Employee training plans

1. New Staff Training (On-site Staff/Cadre/Manager/Fresh Graduate Training Camp);
2. Management Cadre Cultivation and Building;
3. Job Qualification Promotion Training;
4. General Curriculum will be held to improve the staff’s comprehensive quality;
5. 3T Internal Lecturer Training Team Building and Management.

4. Labor outsourcing

√Applicable □Inapplicable
Total man-hours (hour)                                                                                          47,473.50
Total remuneration paid (RMB)                                                                                  615,535.33


                             Section IX. Corporate Governance


I. Basic details of corporate governance

During the reporting period, the Company standardize its operations strictly in accordance with requirements of
relevant law and rules of Company Law, Securities Law, Code of Corporate Governance for Listed Companies in
China, Rules for Listing Shares at Shenzhen Stock Exchange and so on, and endlessly amplified and perfected
administration structure and corporate system of the Company as well as established relatively accomplished
corporate governance structure. According to relevant regulations of CSRC, the Company completed the
establishment of Accountability System for Material Error in Annual Report Information Disclosure, and strictly
in line with relevant regulations in the process of disclosing this annual report. Currently, the situation of
corporate governance structure basically accorded with regulations stipulated in regulatory documents on
governance of listed companies reported by CSRC. There were no governance problems remained unsolved.
The governance of the Company is as follows:
1. Shareholders and Shareholders’ General Meeting
The Company convened Shareholders’ General Meeting in line with Articles of Association of the Company and
Rules of Procedures for Shareholders’ General Meeting, treated all shareholders with equity, guaranteed middle
and small shareholders enjoy equal status and ensured all shareholders be able to exercise their rights.
2. Controlling shareholders and the Company
Controlling shareholders were strictly in accordance with requirements to exercise rights of promoters and
assumed responsibilities. The Company realized independence between controlling shareholder and listed


                                                          56
                                                             2019 Annual Report of Tsann Kuen (China) Enterprise Co., Ltd.


companies in business, assets, agencies and finance; and independent operation between the Board of Directors of
the Company, the Supervisory Board and internal agency which ensured independence in accounting, assuming
responsibility and bearing risks, so as to ensure legal rights and interests of investors.
3. Directors and the Board of Directors
The Company strictly in accordance with election procedure of directors in Articles of Association of the
Company to elect directors that the number of directors and the structure of the Board of Directors were in line
with requirements of laws and regulations. The Board of Directors earnestly executed Rules of Procedure for the
Board of Directors so as to guaranteed efficient operation and scientific strategic decision. All directors of the
Company performed their responsibilities honestly, sincerely and assiduously, presented the Board of Directors,
the Shareholders’ General Meeting seriously, and participated in relevant trains actively.
4. Supervisors and the Supervisory Board
The Supervisory Board of the Company strictly in line with relevant provisions of Company Law and the Articles
of Association of the Company that the number of supervisors and the structure of the Supervisory Board were in
accordance with requirements of laws and regulations. All supervisors exercised the Rules of Procedure for the
Supervisory Board, earnestly performed their responsibilities. In light of the responsibility for shareholders, all
supervisors conducted inspection and supervision to the legitimacy corporate finance of the Company and other
significant decisions, legally performed responsibilities to directors of the Company and senior management and
supervised the implement of resolutions of the Board of Directors and Shareholders’ General Meeting.
5. Information disclosure and transparency
The Company strictly in accordance with requirements of relevant provisions and regulatory documents such as
Rules for Listing Shares at Shenzhen Stock Exchange, Guidelines on Fair Information Disclosure of Listed
Companies, performed responsibilities of information disclosure of the Company truthfully, accurately, timely and
completely, and then guaranteed the equal opportunity of all shareholders of the Company to gain relevant
information of the Company.
6. There isn’t any problem on horizontal competition of the Company
In the reporting period, the Company continuing and strictly in accordance with Company Law, Securities Law,
Basic Standards for Enterprise Internal Control, Supporting Guidelines for Corporate Internal Control as well as
requirements of regulated documents of corporate governance for listed companies published by CSRC, endlessly
accomplished corporate governance structure, actively enforced corporate governance work, and gradually
perfected corporate governance and internal control system, intensified supervision of internal control, promoted
operation efficiency, operation regulation and corporate governance level, endeavor to seek optimized profit and
earnestly protected legal profit of minority shareholders.

Any significant incompliance with the regulatory documents issued by the CSRC governing the governance of
listed companies
□ Yes √ No
No such cases in this reporting period.

II. Independence of businesses, personnel, asset, organizations and finance which are separate
from the controlling shareholder

The Company is completely separated from its controlling shareholder in aspects such as business, personnel,
assets, institutions and finance.

III. Horizontal competition

□ Applicable √ Inapplicable




                                                        57
                                                              2019 Annual Report of Tsann Kuen (China) Enterprise Co., Ltd.


IV. Annual and special meetings of shareholders convened during this reporting period

 1. Meetings of shareholders convened during this reporting period


                                                                                                        Index to the
                                               Investor
          Meeting                 Type                        Convened date Disclosure date              disclosed
                                          participation ratio
                                                                                                        information
The First Special Meeting
                                Special             44.96%        2019-01-11       2019-01-12       www.cninfo.com.cn
of Shareholders in 2019
2018 Annual Meeting of
                                Annual              45.60%        2019-05-17       2019-05-18       www.cninfo.com.cn
Shareholders
The First Special Meeting
                                Special             44.90%        2019-10-22       2019-10-23       www.cninfo.com.cn
of Shareholders in 2019
2. Special meetings of shareholders convened at the request of preference shareholders with resumed voting
rights

□ Applicable √ Inapplicable

V. Performance of independent directors in this reporting period

1. Attendance of independent directors in board meetings and meetings of shareholders



               Attendance of independent directors in board meetings and meetings of shareholders
                 Board
               meeting
                                                       Attendance           Absence
             independent
                          Attendance    Attendance at   at board  Absence from board Shareholders’
               director
Independent                 at board board meeting by meeting from board meeting for   meeting
            should attend
  director                meeting on telecommunication through a  meeting     two      attended
                 in this
                          site (times)     (times)        proxy   (times) consecutive   (times)
              Reporting
                                                         (times)             times
                Period
                (times)
Tang Jinmu                  8             7                   0             1             0       No                     3
Bai                                                                                               No
                            8             6                   1             1             0                              2
Shaoxiang
Ge Xiaoping                 8             8                   0             0             0       No                     3


2. Objections raised by independent directors on issues of the Company

Indicate by tick mark whether any independent directors raised any objections on issues of the Company.
□ Yes √ No

3. Other details about the performance of duties by independent directors

Indicate by tick mark whether any suggestions from independent directors were adopted by the Company.
√ Yes □ No

Explanation on the advices of independent directors for the Company being adopted or not adopted


                                                         58
                                                              2019 Annual Report of Tsann Kuen (China) Enterprise Co., Ltd.


The independent director of the Company focused on the Company’s operation and executed responsibilities
independently and at the same issued independent fair advice on the related transaction, trust management, etc.,
which played a positive role of improving the Company’s governance structure, promoting the scientificity and
objectivity of the policy of the Board of Directors as well as protecting the Company’s and the whole shareholders’
interests. See details of the performance of independent directors on the Work Report on 2019 Independent
Director disclosed on http://www.cninfo.com.cn.



VI. Performance of duties by specialized committees under the Board during this reporting
period

The Board of Directors of the Company consists of three special committees, respectively is Strategy Committee,
Audit Committee, Nomination, Remuneration and Appraisal Committee. Each special committee’s responsibilities
are clear, according to execution rules of duty issued by the Company’s board of directors, the special committee
perform his duty, study on professional events, put forward opinions and suggestions as a reference for the
decision-making of the Board.
(1) Performance of the Board of Directors' Strategy Committee
During the reporting period, two meetings were held:
1. The motion on incorporation of wholly-owned subsidiary was reviewed and approved on the First Meeting of
the Board of Directors’ Strategy Committee for 2019 held on 23 April 2019.
2. The motion on capital increase in grandchildren company SCI by controlling subsidiary Tsann Kuen
(Zhangzhou) Enterprise Co., Ltd. was reviewed and approved on the Second Meeting of the Board of Directors’
Strategy Committee for 2019 held on 19 September 2019.
The Board of Directors’ Strategy Committee played an important role in enhancing the Company’s core
competitiveness, strengthening the scientific decision-making and improving decision-making efficiency and
quality through discussing and analyzing the above motions and bringing forward opinions and suggestions.
  (2) Performance of the Board of Directors’ Audit Committee
During the reporting period, six meetings were held:
1. The First Meeting of the Board of Directors’ Audit Committee for 2019 held on 18 January 2019 reviewed and
approved the annual estimated daily related transactions for year 2019.
2. The Second Meeting of the Board of Directors’ Audit Committee for 2019 was held on 16 March 2019, on
which the following proposals were reviewed and approved: internal self-evaluation report, annual report for 2018
and the abstract, annual financial statements for 2018, annual profit distribution planning for 2018, the final report
for 2018 on the audit working of the Company made by Ruihua CPA, further employment of audit accounting
firm, the payment of audit expense for 2019 to Ruihua CPA (LLP), changes in accounting policies, the motion on
the asset management of the company-owned fund by the controlling subsidiary Tsann Kuen (Zhangzhou)
Enterprise Co., Ltd. and the motion on the asset management of the company-owned fund by the controlling
grandchildren company Tsann Kuen China (Shanghai) Enterprise Co., Ltd.
In terms of the annual financial report auditing, the company’s board of directors audit committee fully performed
its supervisory responsibilities and maintained the independence of such audit based on such principle as diligence
and conscientiousness:
①Before the CPA participated in the annual audit, all financial statements formulated by the Company were
carefully reviewed, and relevant review opinions were also issued in written form.
②The audit committee communicated with the accountant in charge of the annual audit of the Company, Ruihua
CPA, and confirmed the schedule for the execution of 2018 auditing works. During such annual audit, the audit
committee fully communicated with the responsible CAP, and urged the execution of such annual audit as
scheduled.
③After Ruihua CPA issued its opinions on primary audit, the audit committee reviewed the Company’s financial
statements again, and issued written review comments.
④After Ruihua Certified Public Accountants issued annual auditing report, objective evaluated the auditing work
in the Company this year.


                                                         59
                                                                 2019 Annual Report of Tsann Kuen (China) Enterprise Co., Ltd.


   ⑤The proposal on continued hiring Ruihua CPA was put forward based on the understanding and evaluation of
   the working of Ruihua CPA.
   3. The Third Meeting of the Board of Directors’ Audit Committee for 2019 held on 23 April 2019 reviewed and
   approved the First Quarter Report for 2019 and the Abstract.
   4. The Fourth Meeting of the Board of Directors’ Audit Committee for 2019 held on 6 August 2019 reviewed and
   approved Semi-annual Report for 2019 and the Abstract.
   5. The Fifth Meeting of the Board of Directors’ Audit Committee for 2019 held on 25 October 2019 reviewed and
   approved the Third Quarter Report and the Abstract.
   6. The Sixth Meeting of the Board of Director’s Audit Committee for 2019 held on 6 December 2019 reviewed
   and approved the Audit Scheme for 2020 and the motion on changes in accounting policies.

   (3) Particulars about Nomination, Remuneration and Appraisal Committee of the Board
   During reporting period, there were three meetings held by the Nomination, Remuneration and Appraisal
   Committee of the Board:
   1. The First Meeting of the Nomination, Remuneration and Appraisal Committee of the Board for 2019 held on 16
   March 2019 reviewed and approved the summary report on the performance of duties by the Nomination,
   Remuneration and Appraisal Committee of the Board for 2018.
   2. The Second Meeting of the Nomination, Remuneration and Appraisal Committee of the Board for 2019 held on
   29 March 2019 reviewed and approved the motion on hiring financial chief of the Company.
   3. The Third Meeting of the Nomination, Remuneration and Appraisal Committee of the Board for 2019 held on
   23 April 2019 reviewed and approved the motion on initial examination on candidates for by-election directors of
   the Board.

   VII. Performance of duties by the Supervisory Board

   Did the Supervisory Board find any risks to the Company during its supervision in this reporting period?
   □ Yes √ No

   VIII. Appraisal and incentive for executive officers

   The Company regularly appraised the performance of Senior Management Staffs strictly in accordance with the
   relevant laws and regulations as well as existing performance appraisal system. The Board of Directors was
   divided into nomination, remuneration and appraise committee, of which conducted appraise and encouragement
   to senior management and relevant personnel. The Company also placed limitation to resumption behavior,
   authority and responsibility of senior management in line with Articles of Association and internal control system.

   IX. Internal control

   1. Serious internal control defects found in this reporting period

   □ Yes √ No

   2. Internal control self-evaluation report

Disclosure date of the internal control self-evaluation report                          2020-03-17
Index to the disclosed internal control self-evaluation report                          www.cninfo.com.cn
Total assets of the evaluated entities as a percentage in the consolidated total assets 100.00%
Operating revenues of the evaluated entities as a percentage in the consolidated
                                                                                        100.00%
operating revenues
                                                    Defect identification standards

                                                            60
                                                                   2019 Annual Report of Tsann Kuen (China) Enterprise Co., Ltd.


         Type                           Financial-report related                            Non-financial-report related
                                                                                  Serious defect:
                                                                                  Safety-a number of employee fatalities
                                                                                  Company reputation- negative news spread
                        Serious defect:                                           around, the government or regulators
                        Refer to one or several controlling defects groups in the investigated which lead to public attention,
                        enterprise which lead to the enterprise's serious and cause huge loss of customers, or need be
                        deviation from controlling target.                        report.
                        Important defect:                                         Important defect:
                        Refer to one or several controlling defects groups, its Safety-lead to a employ or citizen disability or
Nature standard         severity and economic results lower than great defect fatality       Company reputation- negative news
                        which may lead to the enterprise’s deviation from spread around the state, had complained the
                        controlling target.                                       media or lead to the contract will be cancelled
                        Common defect:                                            by the customers.
                        Refer to any financial-report related internal control Common defect:
                        defect that does not constitute serious defect or Has occurred or is about to cause harm to the
                        important defect.                                         health of workers or citizensCompany
                                                                                  reputation-negative news spread around
                                                                                  certain region damaging the Company’s
                                                                                  reputation to some extent
                        Serious defect:
                        >5% of total profits of consolidated statements in
                        recent period
                        >1% of total assets of consolidated statements in recent
                        period
                        >2% of total operation revenue of consolidated
                        statements in recent period
                        A serious violation of laws, regulations and rules and
                        the government's policy, was restricted enter industry, Serious defect::RMB5 million (including
                        suspended business licenses, forced to shut down.         RMB5 million) or above.
                        Important defect:                                         Important defect: Within RMB1 million
                        Within 3%~5% of total profits of consolidated (including RMB1 million) to RMB5 million
Quantitative standard
                        statements in recent period                               (including RMB5 million)
                        Within 0.5%~1% of total assets of consolidated Common defect: less than RMB1 million
                        statements in recent period
                        Within1%~2% of total operation revenue of
                        consolidated statements in recent period
                        Common defect:
                        < 3% of total profits of consolidated statements in
                        recent period < 0.5% of total assets of consolidated
                        statements in recent period < 1%of total operation
                        revenue of consolidated statements in recent period
                        A serious violation of laws, regulations and rules and
                        the government's policy, lead to fines and penalty
Number of serious
financial-report-related 0
defects
Number of serious
non-financial-report-rel 0
ated defects
Number of important
financial-report-related 0
defects
Number of important
non-financial-report-rel 0
ated defects



                                                             61
                                                              2019 Annual Report of Tsann Kuen (China) Enterprise Co., Ltd.


X. Auditor’s report on internal control

√ Applicable □ Inapplicable
                               Opinion paragraph in the auditor’s report on internal control
TSANN KUEN (CHINA) ENTERPRISE CO., LTD. has maintained effective internal control on financial report in all
significant respects according to the Basic Rules for Enterprise Internal Control and relevant regulations on 31 Dec.
2019.
Auditor’s report on internal
                                  Disclosed
control disclosed or not
Disclosure date                   2020-03-17
Index to the disclosed auditor’s
                                  http://www.cninfo.com.cn
report on internal control
Type of the auditor’s opinion    Standard unqualified opinion
Serious
non-financial-report-related      None
defects

Indicate by tick mark whether any modified opinions are expressed by the CPAs firm in its auditor’s report on the
Company’s internal control.
□ Yes √ No
Indicate by tick mark whether the auditor’s report on the Company’s internal control issued by the CPAs firm is
consistent with the self-evaluation report of the Board.
√ Yes □ No




                                                         62
                                              2019 Annual Report of Tsann Kuen (China) Enterprise Co., Ltd.




                               Section X. Corporate Bonds

Are there any corporate bonds publicly offered and listed on the stock exchange, which were undue
before the approval date of this Report or were due but could not be redeemed in full?
No




                               Section XI. Financial Report

I. Auditor’s Report

Type of audit opinions                          Standard unqualified opinions
Signing date of audit report                    2020-3-14
Name of audit institution                       Ruihua Certified Public Accountants (LLP)
No. of audit report                             Ruihua Shen Zi [2020] NO.48510009
Name of CPA                                     Zhang Liping, Ren Xiaochao

II. Financial statements (attached)

1. Balance sheet
2. Income statement
3. Cash flow statement
4. Statement of Change in Owners’ Equity
5. Notes to the Financial Statements




                                               63
                                                 2019 Annual Report of Tsann Kuen (China) Enterprise Co., Ltd.



             Section XII. Documents Available for Reference

1. This Annual Report carrying the signature and seal of the Board Chairman;
2. The financial statements signed and sealed by the legal representative, the accounting head for this
Report and the accounting head of the Company; and
3. The originals of all the Company’s documents and announcements which were disclosed on Securities
Times, Hong Kong Ta Kung Pao and http://www.cninfo.com.cn/ in the reporting period designated by the
CSRC.




                                                                            Board Chairman: Pan Zhirong


                                     The Board of Directors of Tsann Kuen (China) Enterprise Co., Ltd.

                                                                                            14 March 2020




                                                  64
                                         2019 Annual Report of Tsann Kuen (China) Enterprise Co., Ltd.




                               TsannKuen (China) Enterprise Co., Ltd.


                               Independent Auditors' Report

                                       Ruihua Shen Zi [2020] NO.48510009




                           Content                                                     Page

A.   IndependentAuditors' Report                                                          1
B.   Audited Financial Statements

1.   Consolidated Statement of Financial Position                                         7

2.   Consolidated Statement of Comprehensive Income                                       9

3.   Consolidated Statement of Cash Flows                                                10

4.   Consolidated Statement of Changes in Equity                                         11

5.   Statement of Financial Position                                                     13

6.   Statement of Comprehensive Income                                                   15

7.   Statement of Cash Flows                                                             16

8.   Statement of Changes in Equity                                                      17

9.   Notes to the Financial Statements                                                   19




                                         65
                                                        2019 Annual Report of Tsann Kuen (China) Enterprise Co., Ltd.


                     通讯地址:北京市东城区永定门西滨河路 8 号院 7 号楼中海地产广场西塔 11 层

                     Postal Address:11/F,West Tower of China Overseas Property Plaza, Building 7,NO.8,Yongdingmen

                     Xibinhe Road, Dongcheng District, Beijing

                     邮政编码(Post Code):100077

                     电话(Tel):+86(10)88095588     传真(Fax):+86(10)88091199




                   Independent Auditors' Report

                                                                  Ruihua Shen Zi [2020] NO.48510009

To the Shareholders of TsannKuen (China) Enterprise Co., Ltd.

      I. Audit Opinion
      We have audited the accompanying financial statements of TsannKuen (China)
Enterprise Co., Ltd., (hereafter, the Company), which include the Consolidated and
Separate Statements of Financial Position as of 31 December 2019, the
Consolidated and Separate Statements of Comprehensive Income, the
Consolidated and Separate Statements of Cash Flows and the Consolidated and
Separate Statements of Changes in Shareholders' Equity for the year then ended
and the notes to the financial statements.
      In our opinion, the financial statements have been prepared in accordance with
the requirements of the Enterprises Accounting Standards of China and presented
fairly, in all material respects, the consolidated and separate financial position of
TsannKuen (China) Enterprise Co., Ltd. as at 31 December 2019, and the
Company’s consolidated and separate results of operations and consolidated and
separate cash flows for the year then ended.

     II. Basis of Forming the Audit Opinion
     We conducted our audit in accordance with the Chinese Certified Public
Accountant Auditing Standards. The section “Auditors’ Responsibility for the
Financial Statements” in the audit report further describes our responsibilities in
accordance with these standards. According to the Code of Ethics for Chinese
Certified Public Accountants, we are independent of the Company and fulfilled other
responsibilities of code of ethics. We believe that the audit evidence we have
obtained is sufficient and appropriate to provide a basis for our audit opinion.

    III. Key Audit Items
    Key audit items are the items which we believe, based on our professional
judgment, to be significant in the audit of financial statements for the current period.


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                                          2019 Annual Report of Tsann Kuen (China) Enterprise Co., Ltd.


Audit response to these items has been designed and implemented in the context of
auditing the financial statements as a whole for the purpose of expressing an audit
opinion on the financial statements; and we do not express an opinion on each of
these items individually. We believe that the following items are the key audit items
which warrant disclosure in the audit report.
      1. Impairment allowance for inventories
      1.1 Description
      Please refer to Note 4.10 of accounting policy and Note 4.27 of accounting
assessment and estimation of impairment allowance for inventories, and please
refer to Note 6.7 to the Financial Statements for relevant disclosure.
      As of 31 December 2019, the closing balance of inventories in the Company’s
consolidated statement is CNY 258,963,844.41, and impairment allowance for
inventories is CNY 36,808,257.03. At the balance sheet date, impairment test is
carried out by management and impairment allowance for inventories is made if the
cost is higher than their net realizable value. Net realizable value is determined by
the estimated selling prices minus the estimated costs of completion, the estimated
selling expense and related taxes.
      Management needs to make significant judgments and assumptions in the
forecast, especially for future selling prices, production costs, operating expenses
and related taxes and fees. Due to the complexity of the impairment test, the annual
inventory impairment test involves key judgments and estimates, therefore, we listed
the inventory impairment allowance as a key audit item.
      1.2 Audit Response
      In response to the Company’s impairment of inventories, we have implemented
the following audit procedures:
      1.2.1 To understand and evaluate the effectiveness of the design and operation
of management's internal control related to inventory impairments allowance.
      1.2.2 To obtain the aging list of inventory and review the aging list and turn over
situation, and to discuss the accounting estimation of inventory impairment
allowance with management, to assess the reasonable of the inventory impairment
allowance.
      1.2.3 To perform the inventory observation procedures, check the quantity and
status of inventories, and inspect inventory products with high value or idle.
      1.2.4 For products that were able to obtain open market sales prices, we
independently looked up the open market price information and compare it to the
estimated selling prices.
      1.2.5 For products that were not able to obtain open market sales prices, we
selected samples to compare the estimated selling prices with the actual selling
prices in the near future or subsequent period.

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                                         2019 Annual Report of Tsann Kuen (China) Enterprise Co., Ltd.


     1.2.6 To select samples to compare costs of completion with similar raw
materials and work in process in the current year, and assessed the rationality of the
costs of completion estimated by the Company.
     2. Recognition of revenue
     2.1 Description
     Please refer to Note 4.22 of accounting policy of revenue, and please refer to
Note 6.32 to the Financial Statements for relevant disclosure.
     In 2019, the operating revenue of the consolidated financial statements is CNY
2,001,939,841.94, an increase of 11.84% over the previous period.
     Since operating revenue is one of the Company's key performance indicators,
and changes in gross profit margin have a significant impact on the operating results
of current period of the Company, we identify revenue recognition as a key audit
item.
     2.2 Audit Response
     In response to the Company’s recognition of revenues, we have implemented
the following audit procedures:
     2.2.1 To understand and evaluate the effectiveness of the design and operation
of management's internal control related to revenue recognition.
     2.2.2 Selecting the samples to check the sales contract and combining with
interviews with management to identify contract terms and conditions related to the
transfer of risks and rewards on product ownership, and to evaluate the timing of
transfer of significant risks and rewards related to product sales confirmation,
evaluating whether the timing of the company's revenue recognition comply with the
requirements of corporate accounting standards.
     2.2.3 Selecting the samples of sales transactions during this year, checking the
collection records, sales invoices, sales receipts, performing confirmation letter or
other alternative test procedures for the closing balance of accounts receivable, and
audit the authenticity of sales.
     2.2.4 Performing analytical procedures, including monthly revenue, cost, and
gross profit margin fluctuations for the current period, analysis of revenue, cost, and
gross margin fluctuations for the current period and the previous period. The factor
analysis method is used to analyze the influence of each factor on gross profit, and
analyze the reasonableness of each factor affecting the gross profit.
     2.2.5 For revenues recognized before and after the balance sheet date, we
performed sales cut-off test, including checking out the outbound orders, export
declarations and other supporting documents to assess whether the revenues were
included in the appropriate accounting period.




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                                         2019 Annual Report of Tsann Kuen (China) Enterprise Co., Ltd.


     IV. Other Information
     The management of the Company is responsible for other information, which
includes the information contained in the Company’s 2019 annual report except for
the financial statements and our auditor report.
     Our audit opinion on the financial statements does not cover other information,
and we do not express assurance opinion in any form on the other information.
     In parallel to our audit of the financial statements, our responsibilities include
reading other information and to assess if the information included in other
information is significantly inconsistent with the financial statements or information
obtained during the audit, and if there is possible material misstatement in other
information.
     Where we identify material misstatement in other information on the basis of our
work, we shall report such fact. Based on our work, we have no such matter to be
reported.

     V. Responsibilities of Management and Those Charged with Governance
for the Financial Statements
     Management of the Company (hereafter, the management) is responsible for
preparing and presenting the financial statements in accordance with Enterprise
Accounting Standards of China and for the purpose of fair presentation and
designing, implementing and maintaining internal control necessary to the
preparation of financial statements that are free from material misstatements,
whether due to fraud or error.
     During the preparation of the financial statements, the management is
responsible for assessing the Company’s going-concern capability; disclosing,
where applicable, matters in relation to the going-concern status; and applying the
going-concern assumption for preparation of the financial statements, unless the
management plans to liquidate the Company, terminates operation of the Company
or has no other practical alternative choice.
     Those charged with governance are responsible for monitoring the Company’s
financial reporting process.

    VI. Auditors’ Responsibility for the Financial Statements
    Our objective is to obtain reasonable assurance as to whether the financial
statements are free from material misstatement, whether due to frauds or errors,
and issue an audit report with audit opinion. Reasonable assurance is a high level
assurance, but there is no guarantee that a material misstatement will always be
found in the audit performed in accordance with the auditing standards.


                                          69
                                          2019 Annual Report of Tsann Kuen (China) Enterprise Co., Ltd.


Misstatements may be caused by fraud or error. Misstatements are considered to be
material if they, individually or in aggregate, could reasonably be expected to
influence the economic decisions of users based on the financial statements.
    During the performance of our audit in accordance with the auditing standards,
we use professional judgment and maintain professional skepticism. We also
perform the following procedures:
    A. Identify and assess the risks of material misstatement of the financial
statements due to fraud and error, design and implement audit procedures to
address these risks, and obtain sufficient and appropriate audit evidence as a basis
for forming the audit opinion. As fraud may involve collusion, forgery, willful omission,
misrepresentation or override of internal control, the risk of not discovering a
material misstatement due to fraud is higher than the risk of failing to detect a
material misstatement resulting from a mistake.
    B. Understand the internal controls related to auditing in order to design
appropriate audit procedures.
    C. Evaluate the appropriateness of accounting policies adopted by the
management and the reasonableness of accounting estimates and relevant
disclosures made by management.
    D. Conclude on the appropriateness of management’s application of the going
concern assumption. Meanwhile, based on the audit evidence obtained, conclude
whether there is material uncertainty about the Company’s ability to continue as a
going-concern. If we conclude that there is material uncertainty, the auditing
standards require us to draw attention of the users of the financial statements to the
relevant disclosures in the financial statements. If the disclosure is inadequate, we
shall express a qualified opinion. Our conclusion is based on information available
as of the date of the audit report. However, future events or circumstances may
cause the Company not being able to continue as a going-concern.
    E. Evaluate the overall presentation, structure and content of financial
statements (including disclosures), and evaluate whether the financial statements
present fairly the relevant transactions and events.
    F. Obtain sufficient and appropriate audit evidence regarding to the Company’s
financial information of the entities or business activities in order to express opinion
on the financial statements. We are responsible for the guidance, supervision and
execution of the group audit. We take full responsibility for the audit opinion.
    We communicate with those charged with governance on the scope and time
schedule of the audit, and significant audit findings, etc., including deficiency of
internal control that we identified during the audit which warrants attention.


                                           70
                                         2019 Annual Report of Tsann Kuen (China) Enterprise Co., Ltd.



    We also provide a statement to those charged with governance regarding the
fact that we comply with the requirements of professional ethics relating to
independence, and also communicate with them about all relationships and other
matters that may be reasonably deemed to affect our independence , as well as,
where applicable, the relevant precautions.
    Through the matters we communicate with those charged with governance, we
identify matters that are significant in the audit of the financial statements for the
current period, which therefore become the key audit items. We disclose these items
in the audit report, unless public disclosure of such items is prohibited by laws and
regulations; in exceptional circumstances, where the benefit arising from public
disclosure of certain matters is outweighed by the negative consequence brought by
such disclosure in consideration of public interest, we do not disclosure such items
in the audit report.




Ruihua Certified Public Accountants     Chinese CPA
  (Special General Partnership)         (Engagement Partner):______________
                                                              Li Ping Zhang


            Beijing, China              Chinese CPA:                    ______________
                                                                         Xiao Chao Ren


                                                         14 March 2020




                                         71
                                                             2019 Annual Report of Tsann Kuen (China) Enterprise Co., Ltd.


                                         Consolidated Statement of Financial Position
                                                  as of 31 December 2019
Prepared by: TSANN KUEN (CHINA) ENTERPRISE CO., LTD.                                                   Currency: CNY
                       Item                         Note   31 December 2019        1 January 2019      31 December 2018
 Current assets
   Monetary funds                                   6.1        639,623,201.98        469,692,295.47         469,692,295.47
   Financial assets held for trading                6.2            3,620,689.00         1,440,700.00         Not applicable
    Financial assets measured by fair value
with changes in fair value recognised in profit                   Not applicable      Not applicable          1,440,700.00
or loss
   Derivative financial assets
   Notes receivable                                 6.3             274,548.00           200,000.00             200,000.00
   Accounts receivable                              6.4        285,995,412.05        281,337,522.38         280,596,130.89
   Accounts receivable financing                                                                             Not applicable
   Advances to suppliers                            6.5            3,112,312.06         2,668,796.33          2,668,796.33
   Other receivables                                6.6           29,271,999.53       29,944,042.47          29,944,042.47
    Including: Interests receivable
                       Dividends receivable
   Inventories                                      6.7        222,155,587.38        243,262,500.58         243,262,500.58
   Held-for-sale assets                             6.8                                 4,311,436.92          4,311,436.92
   Non-current assets due within one year
   Other current assets                             6.9        501,139,597.55        527,497,484.82         527,497,484.82
              Total current assets                           1,685,193,347.55      1,560,354,778.97       1,559,613,387.48
 Non-current assets
   Debt investments                                                                                          Not applicable

   Available-for-sale financial assets                            Not applicable      Not applicable             40,000.00

   Other debt investments                                                                                    Not applicable
   Held-to-maturity investments                                   Not applicable      Not applicable
   Long-term receivables
   Long-term equity investments
   Other equity investments                        6.10               40,000.00           40,000.00          Not applicable
   Other non-current financing assets                                                                        Not applicable
   Investment properties                           6.11           22,991,059.81       25,014,648.31          25,014,648.31
   Fixed assets                                    6.12        185,749,835.56        191,073,302.46         191,073,302.46
   Construction in progress                        6.13            2,921,901.51          895,756.17             895,756.17
   Biological assets held for production
   Oil and gas assets
   Intangible assets                               6.14           30,733,280.24       27,771,236.03          27,771,236.03
   Development expenditure
   Goodwill
   Long-term deferred charge                       6.15            7,225,915.80         8,058,867.12          8,058,867.12
   Deferred tax assets                             6.16           20,587,480.85       26,403,753.17          26,552,328.43
   Other non-current assets                        6.17            1,006,014.66         3,495,224.64          3,495,224.64
          Total non-current assets                             271,255,488.43        282,752,787.90         282,901,363.16
                  Total asset                                1,956,448,835.98      1,843,107,566.87       1,842,514,750.64



                                                             72
                                                               2019 Annual Report of Tsann Kuen (China) Enterprise Co., Ltd.


(Continued)
                   Item                         Note    31 December 2019         1 January 2019           31 December 2018
 Current liabilities
   Short-term borrowings                       6.18                                  10,432,044.21                10,432,044.21
  Financial liabilities held for trading       6.19              638,800.00                                       Not applicable
   Financial liabilities measured by fair
value with changes in fair value                              Not applicable          Not applicable
recognised in profit or loss
   Derivative financial liabilities
   Notes payable                               6.20           16,429,247.30          17,120,079.05                17,120,079.05
   Accounts payable                            6.21          594,978,594.45         655,775,568.61              655,775,568.61
   Advances from customers                     6.22           13,294,285.78             9,747,158.90               9,747,158.90
   Employment benefits payable                 6.23           46,433,996.56          48,587,140.78                48,587,140.78
   Taxes and fees payable                      6.24           19,660,673.84             3,768,531.07               3,768,531.07
   Other payables                              6.25           48,482,744.38          52,818,204.91                52,818,204.91
   Including: Interests payable                6.25                                       23,919.09                   23,919.09
                       Dividends payable
   Held-for-sale liabilities
   Non-current liabilities due within
one year
   Other current liabilities
        Total current liabilities                            739,918,342.31         798,248,727.53              798,248,727.53
 Non-current liabilities
   Long-term borrowings
   Debt instruments payable
   Including: Preferred shares
                    Sustainable debts
   Long-term payables
   Long-term employee benefits
                                               6.26              425,896.17              361,923.23                  361,923.23
payable
   Provisions
   Deferred income
   Deferred tax liabilities                    6.16           48,835,721.94          27,505,224.10                27,505,224.10
   Other non-current liabilities
      Total non-current liabilities                           49,261,618.11          27,867,147.33                27,867,147.33
            Total liabilities                                789,179,960.42         826,115,874.86              826,115,874.86
 Shareholders' equity
   Share capital                               6.27          185,391,680.00         185,391,680.00              185,391,680.00
   Other equity instruments
   Including: Preferred shares
                    Sustainable debts
   Capital reserves                            6.28          296,808,965.79         296,808,965.79              296,808,965.79
   Less: Treasury shares
   Other comprehensive income                  6.29            7,514,750.01             5,925,528.86               5,924,132.67
   Designated reserves
   Surplus reserves                            6.30           40,499,488.55          37,838,646.13                37,804,354.59
    Retained earnings                          6.31          218,523,906.99         123,367,204.59              122,872,551.30
    Equity attributable to shareholders
                                                             748,738,791.34         649,332,025.37              648,801,684.35
of the Parent
    Minority interests                                       418,530,084.22         367,659,666.64              367,597,191.43
     Total shareholders' equity                            1,167,268,875.56       1,016,991,692.01             1,016,398,875.78
  Total liabilities and shareholders'
                                                           1,956,448,835.98       1,843,107,566.87             1,842,514,750.64
                  equity

Legal Representative:             Person in Charge of Accounting Work:       Person in Charge of Financial Department:
Pan   zhirong                         Wu    jianhua                                Wu    jianhua




                                                                73
                                                                       2019 Annual Report of Tsann Kuen (China) Enterprise Co., Ltd.


                                   Consolidated Statement of Comprehensive Income
                                              for the Year ended 31 December 2019
    Prepared by: TSANN KUEN (CHINA) ENTERPRISE CO., LTD.                                                             Currency: CNY
                                       Item                                             Note           2019                  2018
  Total revenue                                                                                    2,001,939,841.94      1,790,062,803.08
     Including: Revenue from operation                                                 6.32        2,001,939,841.94      1,790,062,803.08
  Total operating costs                                                                            1,888,431,236.36      1,777,004,148.61
     Including: Cost for operation                                                     6.32        1,665,801,087.18      1,563,584,518.19
                        Taxes and surcharges                                           6.33           11,493,436.80          9,755,620.72
                        Selling expenses                                               6.34           63,389,947.24         62,065,999.35
                        Administrative expenses                                        6.35           83,008,382.58         84,670,918.17
                        R&D expenses                                                   6.36           71,898,743.35         68,706,795.36
                        Financial costs                                                6.37           -7,160,360.79        -11,779,703.18
                          Including: Interests expenses                                6.37              941,366.70          1,102,100.88
                                             Interests incomes                         6.37            5,218,650.55          7,491,747.10
     Add: Other income                                                                 6.38            4,979,380.03          4,601,286.14
               Investment income (loss presented with "-" prefix)                      6.39           18,069,441.54         12,949,846.66
               Including: Investment income from associates and joint ventures
                                 Derecognition of financial assets at amortized cost                                        Not applicable
               Gains from net exposure to hedging gains (loss presented with "-"
                                                                                                                            Not applicable
prefix)
               Gain from changes in fair value (loss presented with "-" prefix)        6.40            1,541,189.00          -2,485,150.00
               Losses on credit impairment (loss presented with "-" prefix)            6.41           -1,186,738.45          Not applicable
               Loss on asset impairment (loss presented with "-" prefix)               6.42          -13,657,041.57         -21,499,075.27
               Gain on disposal of non-current assets (loss presented by "-" prefix)   6.43           63,688,086.21             975,770.89
  Profit from operation (loss presented with "-" prefex)                                             186,942,922.34           7,601,332.89
     Add: Non-operating income                                                         6.44           27,300,416.65           4,027,812.46
     Less: Non-operating expenses                                                      6.45              834,405.40             162,271.40
  Profit before taxation (loss presented with "-" prefix)                                            213,408,933.59          11,466,873.95
     Less: Income tax expenses                                                         6.46           49,353,924.80          -1,278,631.37
  Net profit (loss presented with "-" prefix)                                                        164,055,008.79          12,745,505.32
  A. Classified by business continuity
  1. Net profit from continued operations (loss presented with "-" prefix)                           164,055,008.79         12,745,505.32
  2. Net profit from discontinued operations (loss presented with "-" prefix)
  B. Classified by ownership
  1. Net profit attributable to minority interests (loss presented with "-" prefix)                  105,233,212.02         11,831,622.78
  2. Net profit attributable to shareholders of the Parent (loss presented with "-"
                                                                                                      58,821,796.77            913,882.54
prefix)
  After-tax other comprehensive income                                                 6.47               2,118,961.53        1,739,082.39
  After-tax other comprehensive income attributable to shareholders of the parent      6.47               1,589,221.15        1,304,311.80
  A. Other comprehensive income not reclassifiable to profit or loss in subsequent
                                                                                       6.47                  8,394.48          -100,859.20
periods
  1. Remeasurement of net assets or net liabilities of defined benefit plans           6.47                  8,394.48          -100,859.20
  2. Other comprehensive income measured by the equity method not
reclassifiable to profit or loss
  3. Gain or loss on change in fair value of other equity investment                                                        Not applicable
  4. Gain or loss on change in fair value of own expected credit risk                                                       Not applicable
  5. Others
  B. Other comprehensive income reclassifiable to profit or loss in subsequent
                                                                                       6.47               1,580,826.67        1,405,171.00
periods
  1. Other comprehensive income measured by the equity method reclassifiable to
profit or loss
  2. Gain or loss on changes in fair value of other debt investment                                                         Not applicable
  3. Gain or loss on changes in fair value of financial assets available for sale                     Not applicable
  4. Amount of financial assets reclassified and included in other comprehensive
income
  5. Gain or loss on reclassification of held-to-maturity investments to financial
                                                                                                      Not applicable
assets available for sale
  6. Impairment of other debt investments                                                                                   Not applicable
  7. Effective elements of gain or loss of cash flow hedges
  8. Exchange difference on translation of foreign financial statements                6.47               1,580,826.67        1,405,171.00
  9. Others
  After-tax other comprehensive income attributable to minority interests              6.47              529,740.38            434,770.59
  Total comprehensive income                                                                         166,173,970.32         14,484,587.71
  Total comprehensive income attributable to shareholders of the Parent                              106,822,433.17         13,135,934.58
  Total comprehensive income attributable to minority interests                                       59,351,537.15          1,348,653.13
  Earning per share
  A. Basic earning per share                                                                                     0.57                 0.06
  B. Diluted earning per share                                                                                   0.57                 0.06

    Legal Representative:             Person in Charge of Accounting Work:           Person in Charge of Financial Department:
    Pan    zhirong                         Wu    jianhua                                   Wu   jianhua




                                                                        74
                                                                2019 Annual Report of Tsann Kuen (China) Enterprise Co., Ltd.


                                     Consolidated Statement of Cash Flows
                                      for the Year ended 31 December 2019
Prepared by: TSANN KUEN (CHINA) ENTERPRISE CO., LTD.                                                          Currency: CNY
                                 Item                                        Note             2019                     2018
 Cash flows from operating activities
   Cash received for sales of goods and rendering of services                             1,955,902,503.92     1,776,146,683.86
   Tax refund received                                                                      158,146,279.37       172,342,600.95
   Other cash receipts relating to operating activities                     6.48.1           89,198,956.43        60,998,482.73
                Cash inflows from operating activities                                    2,203,247,739.72     2,009,487,767.54
   Cash payments for purchase of goods and services                                       1,650,115,355.00     1,504,050,714.36
   Cash paid to or on behalf of employees                                                   283,829,082.26       255,089,740.09
   Taxes and fees paid                                                                       24,500,977.75        15,183,113.18
   Other cash payments relating to operating activities                     6.48.2          101,182,036.73       129,088,139.09
                 Cash outflows for operating activities                                   2,059,627,451.74     1,903,411,706.72
                Net cash flows from operating activities                      6.49          143,620,287.98       106,076,060.82
 Cash flows from investing activities
   Cash received from investment withdrawal                                                 620,000,000.00       437,821,540.00
   Cash investment income received                                                           21,778,521.54        15,128,306.66
    Net cash received from disposal of fixed assets, intangible assets
                                                                                             68,470,997.38            3,275,366.62
or other non-current assets
    Net cash received from disposal of subsidiaries or other invested
entities
   Other cash receipts relating to investing activities                     6.48.3          228,047,963.79       696,692,500.00
               Cash inflows from investing activities                                       938,297,482.71     1,152,917,713.28
    Cash paid for purchase or construction of fixed assets,
                                                                                             59,768,023.19        69,489,279.11
intangibles assets or other non-current assets
   Cash paid for investment                                                                 592,665,278.14       560,000,000.00
   Net cash paid for acquisition of subsidiaries and other invested
entities
   Other cash payments relating to investing activities                     6.48.4          228,047,963.79       696,692,500.00
                 Cash outflows for investing activities                                     880,481,265.12     1,326,181,779.11
                Net cash flows from investing activities                                     57,816,217.59      -173,264,065.83
 Cash flows from financing activities
   Cash received from investors
   Including: Cash received from minority shareholders of
subsidiaries
   Cash received from loans raised                                                           71,995,400.00       109,563,901.81
   Other cash receipts relating to financing activities                     6.48.5           21,200,000.00            5,719,914.44
                Cash inflows from financing activities                                       93,195,400.00       115,283,816.25
   Cash paid for debt repayment                                                              83,696,417.30       110,890,680.00
   Cash paid for dividends, profit distribution and interests                                15,896,786.82        27,094,288.51
   Including: Cash dividends and profit distribution paid to minority
                                                                                              8,481,119.57        11,182,518.61
shareholers of subsidiaries
   Other cash payments relating to financing activities                     6.48.6                                26,919,914.44
                 Cash outflows for financing activities                                      99,593,204.12       164,904,882.95
                Net cash flows from financing activities                                      -6,397,804.12       -49,621,066.70
 Impact of change of foreign exchange rates on cash and cash
                                                                                              -3,907,794.94            919,406.30
equivalents
 Net increase of cash and cash equivalents                                                  191,130,906.51      -115,889,665.41
   Add: cash and cash equivalents brought forward                                           448,492,295.47       564,381,960.88
 Cash and cash equivalents carried forward                                                  639,623,201.98       448,492,295.47

Legal Representative:      Person in Charge of Accounting Work:        Person in Charge of Financial Department:
Pan   zhirong                       Wu    jianhua                                    Wu   jianhua




                                                                75
                                                                                                                                                                                               2019 Annual Report of Tsann Kuen (China) Enterprise Co., Ltd.



                                                                                                   Consolidated Statement of Changes in Shareholders' Equity
                                                                                                             for the Year ended 31 December 2019
                     Prepared by: TSANN KUEN (CHINA) ENTERPRISE CO., LTD.                                                                                                                                                             Currency: CNY
                                                                                                                                                         2019
                                                                                                             Equity attributable to shareholders of the Parent
              Item                                       Other equity instruments                                                                                                                                                                                  Total
                                                                                                          Less:           Other                                                   Provision                                                     Minority
                                                                                                                                            Designated             Surplus                           Retained                                                  shareholders'
                                     Share capital                                   Capital reserves   Treasury     comprehensive                                               for general                                   Subtotal         interest
                                                      Preferred   Sustaina     Oth                                                           reserves             reserves                           earnings        Other                                        equity
                                                                                                         stock          income                                                      risks
                                                       shares     ble debts    ers
 Balance brought forward             185,391,680.00                                   296,808,965.79                      5,924,132.67                           37,804,354.59                     122,872,551.30            648,801,684.35   367,597,191.43   1,016,398,875.78
 Add: Changes of accounting
policies
                                                                                                                              1,396.19                              34,291.54                          494,653.29               530,341.02        62,475.21         592,816.23
 Correction of prior period errors
Business combination under
common control
                Others
 Balance as at 1 January             185,391,680.00                                   296,808,965.79                      5,925,528.86                           37,838,646.13                     123,367,204.59            649,332,025.37   367,659,666.64   1,016,991,692.01
 Changes for the period
(decrease presented by "-"                                                                                                1,589,221.15                            2,660,842.42                      95,156,702.40             99,406,765.97    50,870,417.58    150,277,183.55
prefix)
 1. Total comprehensive
                                                                                                                          1,589,221.15                                                             105,233,212.02            106,822,433.17    59,351,537.15    166,173,970.32
income
 2. Changes in shareholders'
contribution
 a. Capital contributed
 b. Contribution by holders of
other equity instruments
 c. Share-based payments
directly recognised in equity
 d. Others
 3. Profit distribution                                                                                                                                           2,660,842.42                      -10,076,509.62            -7,415,667.20    -8,481,119.57     -15,896,786.77
 a. Recognition of surplus
reserves
                                                                                                                                                                  2,660,842.42                       -2,660,842.42
 b. Recognition of provision for
general risks
 c. Distribution to shareholders                                                                                                                                                                     -7,415,667.20            -7,415,667.20    -8,481,119.57     -15,896,786.77
 d. Others
 4. Movements within equity
 a. Capital reserves transferred
to share capital
 b. Surplus reserves transferred
to share capital
 c. Loss set-off by surplus
reserves
 d. Change amount of defined
benefit plans that carry forward
retained earnings
 e. Change amount of Other
comprehensive income that carry
forward retained earnings
 f. Others
 5. Designated reserves
a. Recognition during the current
period
 b. Withdrawal during the current
period
 6. Others
 Balance carried forward             185,391,680.00                                   296,808,965.79                      7,514,750.01                           40,499,488.55                     218,523,906.99            748,738,791.34   418,530,084.22   1,167,268,875.56


                     (Continued)




                                                                                                                                            76
                                                                                                                                                                                               2019 Annual Report of Tsann Kuen (China) Enterprise Co., Ltd.




                                                                                                                                                                      2018
                                                                                                                           Equity attributable to shareholders of the Parent
                项            目                                         Other equity instruments                              Less:                                                                                                                                       Total
                                                                                                                                               Other                                            Provisio                                           Minority interest   shareholders'
                                                                                                                               Treas                                             Surplus                     Retained
                                                    Share capital    Preferred                          Capital reserves                  comprehensiv       Designated                           n for                     Oth     Subtotal                              equity
                                                                                  Sustaina      Other                           ury                                             reserves                     earnings
                                                                      shares                                                                e income          reserves                          general                      er
                                                                                  ble debts       s                            stock
                                                                                                                                                                                                 risks
 Balance brought forward                            185,391,680.00                                       296,808,965.79                     4,619,820.87                       33,888,636.90               129,787,980.61         650,497,084.17    377,431,056.91     1,027,928,141.08
     Add: Changes of accounting policies
               Correction of prior period errors
            Business combination under
common control
               Others
 Balance as at 1 January                            185,391,680.00                                       296,808,965.79                     4,619,820.87                       33,888,636.90               129,787,980.61         650,497,084.17    377,431,056.91     1,027,928,141.08
 Changes for the period (decrease
                                                                                                                                            1,304,311.80                        3,915,717.69                -6,915,429.31          -1,695,399.82      -9,833,865.48      -11,529,265.30
presented by "-" prefix)
 1. Total comprehensive income                                                                                                              1,304,311.80                                                    11,831,622.78          13,135,934.58       1,348,653.13      14,484,587.71
 2. Changes in shareholders' contribution
 a. Capital contributed
  b. Contribution by holders of other equity
instruments
  c. Share-based payments directly recognised
in equity
 d. Others
 3. Profit distribution                                                                                                                                                         3,915,717.69               -18,747,052.09         -14,831,334.40     -11,182,518.61      -26,013,853.01
 a. Recognition of surplus reserves                                                                                                                                             3,915,717.69                -3,915,717.69
 b. Recognition of provision for general risks
 c. Distribution to shareholders                                                                                                                                                                           -14,831,334.40         -14,831,334.40     -11,182,518.61      -26,013,853.01
 d. Others
 4. Movements within equity
 a. Capital reserves transferred to share capital
 b. Surplus reserves transferred to share capital
 c. Loss set-off by surplus reserves
 d. Change amount of defined
benefit plans that carry forward retained
earnings
  e. Change amount of Other comprehensive
income that carry forward retained earnings
 f. Others
 5. Designated reserves
 a. Recognition during the current period
 b. Withdrawal during the current period
 6. Others
 Balance carried forward                            185,391,680.00                                       296,808,965.79                     5,924,132.67                       37,804,354.59               122,872,551.30         648,801,684.35    367,597,191.43     1,016,398,875.78


                  Legal Representative:            Pan zhirong                               Person in Charge of Accounting Work: Wu jianhua                                                             Person in Charge of Financial Department:Wu jianhua




                                                                                                                                               77
                                                        2019 Annual Report of Tsann Kuen (China) Enterprise Co., Ltd.


                                           Statement of Financial Position
                                    as of 31 December 2019
Prepared by: TSANN KUEN (CHINA) ENTERPRISE CO., LTD.                                           Currency: CNY
                 Item                   Note 31 December 2019                    1 January 2019   31 December 2018
 Current assets
   Monetary funds                                               7,624,622.27         6,985,345.44            6,985,345.44
    Tradable financial assets                                                                               Not applicable
    Financial assets measured by fair
value with changes in fair value recognised                    Not applicable       Not applicable
in profit or loss
    Derivative financial assets
   Notes receivable                                               274,548.00           200,000.00              200,000.00
   Accounts receivable                           14.1           5,867,958.20        16,701,103.45           16,243,882.91
   Accounts receivable financing                                                                            Not applicable
   Advances to suppliers                                           96,278.32           260,472.55              260,472.55
   Other receivables                             14.2           2,622,732.62         2,213,373.51            2,213,373.51
    Including: Interests receivable
                       Dividends receivable
   Inventories                                                  4,155,837.12         9,339,180.06            9,339,180.06
   Held-for-sale assets
   Non-current assets due within one year
   Other current assets                                                                381,431.15              381,431.15
           Total current assets                                20,641,976.53        36,080,906.16           35,623,685.62
 Non-current assets
   Debt investments                                                                                         Not applicable
   Available-for-sale financial assets                         Not applicable       Not applicable              40,000.00
   Other debt investments                                                                                   Not applicable
   Held-to-maturity investments                                Not applicable       Not applicable
   Long-term receivables
   Long-term equity investments                  14.3         923,414,701.56       921,914,701.56         921,914,701.56
   Other equity investments                                        40,000.00             40,000.00          Not applicable
   Other non-current financing assets                                                                       Not applicable
   Investment properties                                       27,532,926.93        29,863,349.12           29,863,349.12
   Fixed assets                                                   963,505.93         1,189,309.65            1,189,309.65
   Construction in progress                                       355,339.84
   Biological assets held for production
   Oil and gas assets
   Intangible assets                                                 2,249.99            29,249.99              29,249.99
   Development expenditure
   Goodwill
   Long-term deferred charge                                      590,108.66
   Deferred tax assets                                          6,125,040.53        10,832,554.88           10,946,860.01
   Other non-current assets                                                              53,879.31              53,879.31
        Total non-current assets                              959,023,873.44       963,923,044.51         964,037,349.64
                 Total asset                                  979,665,849.97     1,000,003,950.67         999,661,035.26




                                                         78
                                                                 2019 Annual Report of Tsann Kuen (China) Enterprise Co., Ltd.



(Continued)
                         Item                               Note       31 December 2019             1 January 2019           31 December 2018
 Current liabilities
    Short-term borrowings
   Financial liabilities held for trading                                                                                           Not applicable
    Financial liabilities measured by fair
value with changes in fair value recognised                                  Not applicable            Not applicable
in profit or loss
    Derivative financial liabilities
    Notes payable
    Accounts payable                                                         40,632,779.54             58,463,830.39                58,463,830.39
    Advances from customers                                                   1,826,178.67              1,708,795.17                  1,708,795.17
    Employment benefits payable                                               7,403,395.56              5,338,618.00                  5,338,618.00
    Taxes and fees payable                                                    1,255,578.53                 666,695.14                   666,695.14
    Other payables                                                         238,315,460.56            262,786,311.87               262,786,311.87
    Including: Interests payable
                          Dividends payable
    Held-for-sale liabilities
    Non-current liabilities due within one year
    Other current liabilities
              Total current liabilities                                    289,433,392.86            328,964,250.57               328,964,250.57
 Non-current liabilities
    Long-term borrowings
    Debt instruments payable
    Including: Preferred shares
                        Sustainable debts
    Long-term payables
    Long-term employee benefits payable
    Provisions
    Deferred income
    Deferred tax liabilities
    Other non-current liabilities
          Total non-current liabilities
                   Total liabilities                                       289,433,392.86            328,964,250.57               328,964,250.57
 Shareholders' equity
    Share capital                                                          185,391,680.00            185,391,680.00               185,391,680.00
    Other equity instruments
    Including: Preferred shares
                        Sustainable debts
    Capital reserves                                                       271,490,289.82            271,490,289.82               271,490,289.82
    Less: Treasury shares
    Other comprehensive income
    Designated reserves
    Surplus reserves                                                         40,499,488.55             37,838,646.13                37,804,354.59
    Retained earnings                                                      192,850,998.74            176,319,084.15               176,010,460.28
           Total shareholders' equity                                      690,232,457.11            671,039,700.10               670,696,784.69
 Total liabilities and shareholders' equity                                979,665,849.97          1,000,003,950.67               999,661,035.26

Legal Representative:Pan zhirong      Person in Charge of Accounting Work:Wu jianhua   Person in Charge of Financial Department:Wu jianhua




                                                                  79
                                                                      2019 Annual Report of Tsann Kuen (China) Enterprise Co., Ltd.


                                               Statement of Comprehensive Income
                                              for the Year ended 31 December 2019
       Prepared by: TSANN KUEN (CHINA) ENTERPRISE CO., LTD.                                                           Currency: CNY
                                   Item                                                       Note            2019              2018
 Total revenue                                                                               14.4          82,165,558.32   105,978,000.19
   Less: Cost for operation                                                                  14.4          62,973,095.21     86,058,017.91
              Taxes and surcharges                                                                          2,067,746.41      2,022,994.78
              Selling expenses                                                                              4,110,826.64      6,587,546.11
              Administrative expenses                                                                       6,602,895.94      3,856,945.48
              R&D expenses
              Financial costs                                                                                  -96,658.30                123,947.26
                  Including: Interests expenses
                  Interests incomes                                                                           144,864.48                97,600.81
   Add: Other income                                                                                           72,081.85               126,494.05
   Investment income (loss presented with "-" prefix)                                        14.5          25,443,358.87            33,564,036.62
   Including: Investment income from associates and joint ventures

   Derecognition of financial assets at amortized cost                                                                               Not applicable
   Gains from net exposure to hedging gains (loss presented with "-"
                                                                                                                                     Not applicable
prefix)
      Gain from changes in fair value (loss presented with "-" prefix)
       Losses on credit impairment (loss presented with "-" prefix)                                             91,100.66            Not applicable
      Loss on asset impairment (loss presented with "-" prefix)                                            -1,501,628.65             -3,268,944.12

      Gain on disposal of non-current assets (loss presented by "-" prefix)
 Profit from operation (loss presented with "-" prefex)                                                    30,612,565.15            37,750,135.20
   Add: Non-operating income                                                                                  703,468.01             1,059,666.16
   Less: Non-operating expenses                                                                                    94.60               107,016.00
 Profit before taxation (loss presented with "-" prefix)                                                   31,315,938.56            38,702,785.36
   Less: Income tax expenses                                                                                4,707,514.35              -454,391.51
 Net profit (loss presented with "-" prefix)                                                               26,608,424.21            39,157,176.87
 A. Net profit from continued operations (loss presented with "-" prefix)                                  26,608,424.21            39,157,176.87

 B. Net profit from discontinued operations (loss presented with "-" prefix)
 After-tax other comprehensive income
 A. Other comprehensive income not reclassifiable to profit or loss in
subsequent periods
 1. Remeasurement of net assets or net liabilities of defined benefit plans
 2. Other comprehensive income measured by the equity method not
reclassifiable to profit or loss
 3. Gain or loss on change in fair value of other equity investment                                                                  Not applicable
 4. Gain or loss on change in fair value of own expected credit risk                                                                 Not applicable
  5. Others
  B. Other comprehensive income reclassifiable to profit or loss in
subsequent periods
  1. Other comprehensive income measured by the equity method
reclassifiable to profit or loss
  2. Gain or loss on changes in fair value of other debt investment                                                                  Not applicable
  3. Gain or loss on changes in fair value of financial assets available for
                                                                                                           Not applicable
sale
  4. Amount of financial assets reclassified and included in other
                                                                                                                                     Not applicable
comprehensive income
  5. Gain or loss on reclassification of held-to-maturity investments to
                                                                                                           Not applicable
financial assets available for sale
  6. Impairment of other debt investments                                                                                            Not applicable
  7. Effective elements of gain or loss of cash flow hedges
 8. Exchange difference on translation of foreign financial statements
 9. Others
 Total comprehensive income                                                                                26,608,424.21            39,157,176.87
        Legal Representative:Pan zhirong   Person in Charge of Accounting Work:Wu jianhua   Person in Charge of Financial Department:Wu jianhua




                                                                       80
                                                               2019 Annual Report of Tsann Kuen (China) Enterprise Co., Ltd.



                                            Statement of Cash Flows
                                    for the Year ended 31 December 2019
Prepared by: TSANN KUEN (CHINA) ENTERPRISE CO., LTD.                                                                Currency: CNY
                      Item                           Note                                      2019                     2018
 Cash flows from operating activities
   Cash received for sales of goods and rendering of
                                                                                           86,819,019.73             109,353,929.84
services
   Tax refund received
    Other cash receipts relating to operating activities                                   14,804,925.85               12,937,881.83
           Cash inflows from operating activities                                        101,623,945.58              122,291,811.67
    Cash payments for purchase of goods and services                                       80,633,383.09               90,290,565.29
    Cash paid to or on behalf of employees                                                   1,893,059.17               -2,429,332.64
    Taxes and fees paid                                                                      5,594,861.55                5,517,428.87
    Other cash payments relating to operating activities                                   28,378,869.41               46,935,776.40
           Cash outflows for operating activities                                        116,500,173.22              140,314,437.92
 Net cash flows from operating activities                                                 -14,876,227.64              -18,022,626.25
 Cash flows from investing activities
    Cash received from investment withdrawal
    Cash investment income received                                                        25,443,358.87               33,547,555.83
    Net cash received from disposal of fixed assets,
intangible assets or other non-current assets
    Other cash receipts relating to investing activities                                                                 1,016,480.79
          Cash inflows from investing activities                                           25,443,358.87               34,564,036.62
    Cash paid for purchase or construction of fixed assets,
                                                                                               975,913.79                    67,120.48
intangibles assets or other non-current assets
    Cash paid for investment                                                                 1,500,000.00
    Other cash payments relating to investing activities
            Cash outflows for investing activities                                           2,475,913.79                    67,120.48
          Net cash flows from investing activities                                         22,967,445.08               34,496,916.14
 Cash flows from financing activities
    Cash received from investors
    Cash received from loans raised
    Other cash receipts relating to financing activities
           Cash inflows from financing activities
    Cash paid for debt repayment
    Cash paid for dividends, profit distribution and
                                                                                             7,415,667.20              14,831,334.40
interests
    Other cash payments relating to financing activities
           Cash outflows for financing activities                                            7,415,667.20              14,831,334.40
        Net cash flows from financing activities                                            -7,415,667.20             -14,831,334.40
 Impact of change of foreign exchange rates on cash
                                                                                                -36,273.41
and cash equivalents
 Net increase of cash and cash equivalents                                                     639,276.83                1,642,955.49
    Add: cash and cash equivalents brought forward                                           6,985,345.44                5,342,389.95
 Cash and cash equivalents carried forward                                                   7,624,622.27                6,985,345.44

Legal Representative:Pan zhirong    Person in Charge of Accounting Work:Wu jianhua   Person in Charge of Financial Department:Wu jianhua




                                                                81
                                                                                                                                                                              2019 Annual Report of Tsann Kuen (China) Enterprise Co., Ltd.



                                                                                                        Statement of Changes in Shareholders' Equity
                                                                                                            for the Year ended 31 December 2019
             Prepared by: TSANN KUEN (CHINA) ENTERPRISE CO., LTD.                                                                                                                          Currency: CNY
                                                                                                                                                                           2019

                                                                                                              Other equity instruments                                Less:            Other                                                         Total
                                                 Item                                                                                                                                              Designated    Surplus         Retained
                                                                                       Share capital    Preferred    Sustainable                  Capital reserves   Treasury      comprehensive                                                 shareholders'
                                                                                                                                         Others                                                     reserves     reserves        earnings
                                                                                                         shares         debts                                         stock           income                                                        equity

 Balance brought forward                                                               185,391,680.00                                               271,490,289.82                                              37,804,354.59   176,010,460.28    670,696,784.69

     Add: Changes of accounting policies                                                                                                                                                                           34,291.54       308,623.87        342,915.41

               Correction of prior period errors

               Others

 Balance as at 1 January                                                               185,391,680.00                                               271,490,289.82                                              37,838,646.13   176,319,084.15    671,039,700.10

 Changes for the period (decrease presented by "-" prefix)                                                                                                                                                       2,660,842.42    16,531,914.59     19,192,757.01

 1. Total comprehensive income                                                                                                                                                                                                   26,608,424.21     26,608,424.21

 2. Changes in shareholders' contribution

 a. Capital contributed

 b. Contribution by holders of other equity instruments

 c. Share-based payments directly recognised in equity

 d. Others

 3. Profit distribution                                                                                                                                                                                          2,660,842.42   -10,076,509.62     -7,415,667.20

 a. Recognition of surplus reserves                                                                                                                                                                              2,660,842.42    -2,660,842.42

 b. Recognition of provision for general risks

 c. Distribution to shareholders                                                                                                                                                                                                 -7,415,667.20     -7,415,667.20

 d. Others

 4. Movements within equity

 a. Capital reserves transferred to share capital

 b. Surplus reserves transferred to share capital

 c. Loss set-off by surplus reserves

 d. Change amount of defined

benefit plans that carry forward retained earnings

 e. Change amount of Other comprehensive income that carry forward retained earnings

 f. Others

 5. Designated reserves

 a. Recognition during the current period

 b. Withdrawal during the current period

 6. Others

 Balance carried forward                                                               185,391,680.00                                               271,490,289.82                                              40,499,488.55   192,850,998.74    690,232,457.11




                                                                                                                                   82
                                                                                                                                                                            2019 Annual Report of Tsann Kuen (China) Enterprise Co., Ltd.



             (Continued)
                                                                                                                                                                            2018

                                                                                                              Other equity instruments
                                                                                                                                                                        Less:          Other                                                        Total
                                                 Item                                                                                                                                                            Surplus        Retained
                                                                                       Share capital    Preferred                                   Capital reserves   Treasury    comprehensiv   Designated                                    shareholders'
                                                                                                                     Sustainable         Others                                                                 reserves        earnings
                                                                                                        shares                                                          stock        e income      reserves                                        equity
                                                                                                                        debts

 Balance brought forward                                                               185,391,680.00                                                271,490,289.82                                            33,888,636.90   155,600,335.50    646,370,942.22

     Add: Changes of accounting policies

               Correction of prior period errors

               Others

 Balance as at 1 January                                                               185,391,680.00                                                271,490,289.82                                            33,888,636.90   155,600,335.50    646,370,942.22

 Changes for the period (decrease presented by "-" prefix)                                                                                                                                                      3,915,717.69    20,410,124.78     24,325,842.47

 1. Total comprehensive income                                                                                                                                                                                                  39,157,176.87     39,157,176.87

 2. Changes in shareholders' contribution

 a. Capital contributed

 b. Contribution by holders of other equity instruments

 c. Share-based payments directly recognised in equity

 d. Others

 3. Profit distribution                                                                                                                                                                                         3,915,717.69   -18,747,052.09    -14,831,334.40

 a. Recognition of surplus reserves                                                                                                                                                                             3,915,717.69    -3,915,717.69

 b. Recognition of provision for general risks

 c. Distribution to shareholders                                                                                                                                                                                               -14,831,334.40    -14,831,334.40

 d. Others

 4. Movements within equity

 a. Capital reserves transferred to share capital

 b. Surplus reserves transferred to share capital

 c. Loss set-off by surplus reserves

 d. Change amount of defined
benefit plans that carry forward retained earnings

 e. Change amount of Other comprehensive income that carry forward retained earnings

 f. Others

 5. Designated reserves

 a. Recognition during the current period

 b. Withdrawal during the current period

 6. Others

 Balance carried forward                                                               185,391,680.00                                                271,490,289.82                                            37,804,354.59   176,010,460.28    670,696,784.69


             Legal Representative: Pan zhirong                                               Person in Charge of Accounting Work:               Wu jianhua                          Person in Charge of Financial Department: Wu jianhua



                                                                                                                                   83
                                   TsannKuen (China) Enterprise Co.,Ltd.
                  Notes to the Financial Statements for the Year ended 31 December 2019

                     TsannKuen (China) Enterprise Co., Ltd.
                          Notes to the Financial Statements
                     For the Year Ended 31 December 2019
     (All amounts are expressed, unless otherwise stated, in Renminbi (CNY).)


Note 1: Company Profile
TsannKuen (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 TsannKuen China (Xiamen)
Ltd., firstly, invested by the Fordchee (Hongkong) 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
TsannKuen (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. According to the “Intended Implementation of Share Reducing
Proposal” of the 5th extraordinary board of director of 2012 and the 3rd
extraordinary shareholders’ general meeting of 2012, obtained the consent from the
Investment Promotion Bureau of Xiamen which is authorized by the Ministry of
Commerce and the approval documents ”The Approval by Investment Promotion
Bureau of Xiamen to Consent the Capital Reduction of TsannKuen (China)
Enterprise Co., Ltd”(IPB audit [2012] NO. 698), as the base 1,112,350,077 shares of
the total original share capital, for implementation of share reducing model that all
registered shareholders who was recorded on 28 December 2012 with the
proportion 6:1 to reduce the shares. After the implementation of share reducing
model, total share capital was reduced from 1,112,350,077 shares to 185,391,680
shares of the company. Until 31 December 2019, the Company’s share capital is
CNY 185,391,680.
Follow The Ministry of Commerce of the People’s Republic of China approved (The
No. [2005]3107 “Agreed in Principle to the Ministry of Commerce on TsannKuen
(China) Enterprise Co., Ltd. Shares Traded Sponsor of the Approval” ) , On 6
December 2006, the Company received the [2006] No.266 file “The notice of
TsannKuen (China) Enterprise Co., Ltd, concerning the Approval of non-listed
Foreign Shares Traded” from China Securities Regulatory Commission. The China

                                                   84
                                    TsannKuen (China) Enterprise Co.,Ltd.
                   Notes to the Financial Statements for the Year ended 31 December 2019

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. On 29 November 2007 these B shares could be listed and
exercised on Shenzhen Stock Exchange. Up to 31 December 2019, total B shares
hold by the three legal shareholders (EUPA Industry Corporation Limited, Fordchee
Development Limited and Fillman Investment Limited) are 82,830,966 shares after
the implementation of share reducing model. (Account for 44.68% 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).
The financial statements approved by the resolution of the Board of Directors on 14
March 2020, in accordance with the Articles of Association, the financial statements
will be submitted to the shareholders meeting for consideration Conference.
11 subsidiaries were included in the scope of consolidation as of December 31 2019,
please see Note 8 “The equity in other main entities” for details. 1 new subsidiarie is
included in the consolidation scope in 2019. Please see Note 7 “Change in the
scope of consolidation” for details.




                                                     85
                                   TsannKuen (China) Enterprise Co.,Ltd.
                  Notes to the Financial Statements for the Year ended 31 December 2019

Note 2: Basis for preparation of the financial statements
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) on15 February 2006, and revised Accounting
Standards (order 42 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, allowances for asset impairment are made
in accordance with relevant requirements.


Note 3: Statement of Compliance with Enterprise Accounting Standards
The financial statements of the company are recognised 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 31 December 2019. 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.


Note 4: Important Accounting Principles and Accounting Estimates
The Company and subsidiaries in accordance with the actual production and
management features, according to the relevant provisions of Accounting Standards,
to make several specific accounting policies and accounting estimates for other
transactions and events of revenue recognition, see Note 4.22 “Revenue” for the
description. For description of significant accounting judgments and estimates made
    by management, see Note 4.27 “Significant accounting judgments and

                                                   86
                                     TsannKuen (China) Enterprise Co.,Ltd.
                    Notes to the Financial Statements for the Year ended 31 December 2019

estimates”.
4.1 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.
4.2 Operating cycle
Normal business cycle is realised 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.
4.3 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, USD, NTD or IDR 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.
4.4 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.
4.4.1 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

                                                     87
                                     TsannKuen (China) Enterprise Co.,Ltd.
                    Notes to the Financial Statements for the Year ended 31 December 2019

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 recognised as an expense through profit or
loss for the current period when incurred.
4.4.2 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 recognised in
profit or loss when they are incurred.
The transaction cost arose from issuing of equity securities or liability securities shall
be initially recognised 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

                                                     88
                                    TsannKuen (China) Enterprise Co.,Ltd.
                   Notes to the Financial Statements for the Year ended 31 December 2019

recognised 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
recognise the remaining difference immediately in profit or loss for the current
period.
Where the temporary difference obtained by the acquirer was not recognised 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 recognised, and goodwill offset. If the
goodwill is not sufficient, the difference shall be recognised 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” (CaiKuai [2012] No. 19) and Article55 of “Accounting Standards
for Business Enterprises No.33 - Consolidated Financial Statements” on the
“package deal” criterion (see Note 4.5), 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 4.12
“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

                                                    89
                                   TsannKuen (China) Enterprise Co.,Ltd.
                  Notes to the Financial Statements for the Year ended 31 December 2019

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 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).
4.5 Preparation of the consolidated financial statements
4.5.1 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.
4.5.2 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.

                                                   90
                                    TsannKuen (China) Enterprise Co.,Ltd.
                   Notes to the Financial Statements for the Year ended 31 December 2019

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 unrealised 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 the transaction that resulted in the
loss of control and the fair value of the remaining equity investment and 2) the

                                                    91
                                    TsannKuen (China) Enterprise Co.,Ltd.
                   Notes to the Financial Statements for the Year ended 31 December 2019

carrying amounts of the interest in the former subsidiary’s net assets immediately
before the loss of the control is recognised 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
(ie, 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 4.12 Long-term equity investments and Note 4.8
Financial instruments for details.
The company get through multiple transactions step deal 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, ②these transactions as a whole in order to achieve
a complete business results; ③the 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 4.12.2.4)) 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 disposals, recognised in the



                                                    92
                                    TsannKuen (China) Enterprise Co.,Ltd.
                   Notes to the Financial Statements for the Year ended 31 December 2019

consolidated financial statements as other comprehensive income, loss of control
over the transferred together with the loss of control or loss in the period.
4.6 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.
4.7 Foreign exchange
4.7.1 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.
4.7.2 Translation of monetary foreign currency and non-monetary foreign currency
At 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 ①those 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 recognised in profit or loss of the period;
exchange difference from changes of other account balance of foreign currency
monetary items, ③ available-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 recognised in profit or loss for the current period or as
capital reserve.
4.7.3 The translation of financial statement in foreign currency

                                                    93
                                      TsannKuen (China) Enterprise Co.,Ltd.
                     Notes to the Financial Statements for the Year ended 31 December 2019

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 recognised 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
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.

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                                     TsannKuen (China) Enterprise Co.,Ltd.
                    Notes to the Financial Statements for the Year ended 31 December 2019

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.
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
recognised 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.
4.8 Financial instruments
A financial asset or financial liability is recognised in the balance sheet when the
Company becomes a party to the contractual provisions of a financial instrument.
4.8.1 Classification, recognition and initial measurement of financial assets
The classification of financial assets is generally based on the business model in
which a financial asset is managed and its contractual cash flow characteristics. On
initial recognition, a financial asset is classified as measured at amortised cost, at
fair value through other comprehensive income (“FVOCI”), or at fair value through
profit or loss (“FVTPL”).
Financial assets are measured at fair value on initial recognition. For FVTPL, the
related transaction expense is directly recognised in current profit or loss. For other
types of financial assets, related transaction costs are included in the initial
recognition amount. For the accounts receivable or notes receivable arising from the
sale of products or the provision of labor services that do not contain or consider the
significant financing components, the Company shall use the consideration amount
that is expected to be received as the initial confirmation amount.
4.8.1.1 Financial asset at amortised cost
A financial asset is measured at amortised cost if it meets both of the following
conditions and is not designated as at FVTPL:
- it is held within a business model whose objective is to hold assets to collect
contractual cash flows; and
- its contractual terms give rise on specified dates to cash flows that are solely

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                                     TsannKuen (China) Enterprise Co.,Ltd.
                    Notes to the Financial Statements for the Year ended 31 December 2019

payments of principal and interest on the principal amount outstanding. For these
financial assets, the Company adopts the effective interest rate method and
performs subsequent measurement according to the amortized cost. The gains or
losses arising from amortization or impairment are recognised in profit or loss for the
current period.
4.8.1.2 Financial asset at FVOCI
A debt investment is measured at FVOCI if it meets both of the following conditions
and is not designated as at FVTPL:
-- it is held within a business model whose objective is achieved by both collecting
contractual cash flows and selling financial assets; and
-- its contractual terms give rise on specified dates to cash flows that are solely
payments of principal and interest on the principal amount outstanding. These
financial assets are measured at fair value and their changes are included in other
comprehensive income. The impairment loss or gains, exchange gains and losses
and interest income calculated according to the effective interest method are
included in the current profit and loss.
In addition, the Company has designated certain non-trading equity instrument
investments as FVOCI. The relevant dividend income of such financial assets is
included in the current profit and loss, and changes in fair value are included in other
comprehensive income. When the financial assets are derecognised, the
accumulated gains or losses previously recognised in other comprehensive income
are transferred from other comprehensive income to retained earnings, which are
not recognised in profit or loss.
4.8.1.3 Financial asset at FVTPL
All financial assets not classified as measured at amortised cost or FVOCI as
described above are measured at FVTPL. On initial recognition, the Company may
irrevocably designate a financial asset that otherwise meets the requirements to be
measured at amortised cost or at FVOCI as at FVTPL if doing so eliminates or
significantly reduces an accounting mismatch that would otherwise arise.
4.8.2 Classification, recognition and initial measurement of financial liabilities
On initial recognition, a financial liability is classified as measured at amortised cost,
at fair value through other comprehensive income (“FVOCI”), or at fair value through
profit or loss (“FVTPL”).
For financial liabilities at fair value through profit or loss, any related directly
attributable transaction costs are charged to profit or loss; for other categories of

                                                     96
                                        TsannKuen (China) Enterprise Co.,Ltd.
                       Notes to the Financial Statements for the Year ended 31 December 2019

financial liabilities, any related directly attributable transaction costs are included in
their initial costs.
4.8.2.1 Financial liabilities at FVTPL
A financial liability is classified as at FVTPL if it is classified as held-for-trading
(including derivative financial liability) or it is designated as such on initial
recognition.
Trading financial liabilities (including derivatives that are financial liabilities) are
subsequently measured at fair value and changes in fair value are recognised in
profit or loss except for hedge accounting.
A financial liabilities designated as at FVTPL, its changes in fair value of liabilities
arising from changes in the Company's own credit risk are included in other
comprehensive income. When the liability is derecognised, the accumulated
changes in fair value arising from changes in the credit risk of other comprehensive
income are transferred to retained earnings, othe changes in value are included in
the current profit and loss. If the effects of changes in the credit risk of these financial
liabilities are treated as described above, the accounting mismatch in profit or loss
will be caused or expanded, and the entire gain or loss of the financial
liability(including the amount of the company's own credit risk changes) will be
included in the current profit and loss.
4.8.2.2 Other financial liabilities
An entity shall classify all financial liabilities as measured at amortised cost, except
for financial liabilities that arise when a transfer of a financial asset does not qualify
for derecognition or when the continuing involvement approach applies, and
financial guarantee contracts. It is subsequently measured at amortised costs and
any gains or losses arising from derecognition and amortisation are recognised in
profit or loss.
4.8.3 Recognition and measurement of transfer of financial assets
A financial asset is de-recognised if any of the following conditions is satisfied:
a. the right to receive the cash flows attached to the financial asset ceases; or
b. the financial asset has been transferred and significant risks and rewards
attached to the ownership of the financial asset has been transferred to the
transferee; or
c. the financial asset has been transferred, the entity has neither transferred nor
retained significant risks and rewards attached to the ownership of the financial
asset, and the entity has given up the control over the financial assets.

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                                     TsannKuen (China) Enterprise Co.,Ltd.
                    Notes to the Financial Statements for the Year ended 31 December 2019

Where an entity has neither transferred nor retained significant risks and rewards
attached to the ownership of a transferred financial asset, and has not given up the
control over it, the transferred financial asset is continued to be recognised
proportionate to the degree of the entity's continual involvement. The degree of the
entity's continual involvement with the transferred financial asset is represented by
the risk faced by the entity resulting from changes in the value of the transferred
financial assets.
Where transfer of a financial asset as a whole satisfies the de-recognition criteria, an
investment income is recognised as the excess of the sum of the consideration
received and the cumulative changes in fair value previously recognised in other
comprehensive income over the carrying amount of the transferred financial asset
and the investment income is recognised in profit or loss for the period during which
the financial asset is transferred.
Where transfer of a financial asset partly satisfies the de-recognition criteria, the
carrying amount of the transferred financial asset is allocated to the de-recognised
part and the part of continual involvement with reference to the respective fair value
of the two parts; the excess of the sum of the consideration received and the
cumulative changes in fair value attributable to the de-recognised part previously
recognised in other comprehensive income over the carrying amount allocated to
the de-recognised part is recognised in profit or loss for the period during which the
transfer occurs.
For financial assets transferred in which the Company has continued involvement,
the financial assets are accounted for in accordance with the following criteria:
a. if the risks and rewards associated with the ownership of the financial assets are
transferred to the transferee, the Company de-recognises the financial assets;
b. if the risks and rewards associated with the ownership of the financial assets are
retained by the Company, the Company continue to recognise the financial assets;
c. if the Company neither retain nor transfer almost all the risks and rewards
associated with the ownership of the financial assets, the Company accounts for the
financial assets in accordance with the provisions present in previous paragraph
with reference to whether the Company retains control of the financial assets.
4.8.4 Derecognition of financial liabilities
A financial liability is wholly or partly de-recognised when the present obligation
attached to it has been wholly or partly released. Where an agreement is entered
into by the Group and the creditor(s) which provides for the replacement of the

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                                     TsannKuen (China) Enterprise Co.,Ltd.
                    Notes to the Financial Statements for the Year ended 31 December 2019

existing financial liabilities by new financial liabilities that are different in substance to
the existing financial liabilities, the existing and new financial liabilities are
de-recognised and recognised respectively.
When a financial liability is wholly or partly de-recognised, the difference between
the consideration paid (including non-monetary assets given away and new financial
liabilities assumed) and the book value of the de-recognised part is recognised in
profit or loss for the period during which the de-recognition occurs.
4.8.5 Offsetting financial assets and financial liabilities
When the Company has a legal right that is currently enforceable to set off the
recognised financial assets and financial liabilities, and intends either to settle on a
net basis, or to realise 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.
4.8.6 Determination of the fair value of financial assets and financial liabilities
Fair value refers to the price that a market participant must pay to sell or transfer a
liability in an orderly transaction that occurs on the measurement date. Where there
is an active market for financial instruments, the Company uses quoted prices in an
active market to determine its fair value. Quotations in an active market refer to
prices that are readily available from exchanges, brokers, industry associations,
pricing services, etc., and represent the prices of market transactions that actually
occur in an arm's length transaction. If there is no active market for financial
instruments, the company uses valuation techniques to determine its fair value.
Valuation techniques include reference to prices used in recent market transactions
by parties familiar with the situation and voluntary transactions, current fair values of
other financial instruments that are substantially identical, discounted cash flow
methods, and option pricing models. At the time of valuation, the company uses
valuation techniques that are available in the current situation with sufficient data
and other information to support it. The company selects input values that are
consistent with the characteristics of the asset or liability that the market participants
consider in the transaction of the relevant asset or liability, and prioritizes the
relevant observable inputs as much as possible. Use unallowable values if the
relevant observable input values are not available or are not practicable.
4.8.7 Equity instrument

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                                    TsannKuen (China) Enterprise Co.,Ltd.
                   Notes to the Financial Statements for the Year ended 31 December 2019

An equity instrument is a contract that evidences a residual interest in the assets of
the company after deducting all liabilities. The Company issues (including
refinancing), repurchases, sells or cancels equity instruments as changes in equity,
and transaction costs related to equity transactions are deducted from equity. The
Company does not recognize changes in the fair value of equity instruments.
The distribution of dividends by the Company's equity instruments during the
existence period (including "interest" generated by tools that are classified as equity
instruments) is treated as profit distribution.
4.9 Impairment of financial asset
The financial assets that the Company needs to recognise impairment loss are
financial assets measured at amortized cost, debt instruments that are measured at
fair value and whose changes are included in other comprehensive income, lease
receivables, mainly including notes receivable, accounts receivables, other
receivables, debt investments, other debt investments, long-term receivables, etc. In
addition, for contract assets and some financial guarantee contracts, impairment
and credit losses are recognized in accordance with the accounting policies
described in this section.
4.9.1 Impairment
Based on expected credit losses, the Company makes provision for impairment and
confirms credit impairment losses for above items in accordance with its applicable
expected credit loss measurement method (general method or simplified method).
Credit loss refers to the difference between all contractual cash flows receivable
from the contract and all cash flows expected to be received by the Company at the
original actual interest rate, that is, the present value of all cash shortages. Among
them, for the purchase or source of financial assets that have suffered credit
impairment, the company discounts the financial assets at the actual interest rate
adjusted by credit.
The general method for estimating the credit loss is that the credit risk of the
company's financial assets (including other applicable items such as contract assets,
the same below) has been significantly increased since the initial confirmation on
each balance sheet date. If the credit risk has increased significantly since the initial
recognition, the Company measures the impairment based on the amount
equivalent to the expected credit loss during the entire life period; If the credit risk
has not increased significantly since the initial recognition, the Company measures
the impairment based on the amount of expected credit loss in the next 12 months.

                                                   100
                                        TsannKuen (China) Enterprise Co.,Ltd.
                       Notes to the Financial Statements for the Year ended 31 December 2019

The Company considers all reasonable and evidenced information, including
forward-looking information, when evaluating expected credit losses.
For financial instruments with lower credit risk on the balance sheet date, the
Company measures the impairment based on the expected credit loss amount
within the next 12 months or the whole life period based on whether its credit risk
has increased significantly since the initial recognition.
4.9.2 Criteria for whether credit risk has increased significantly since initial
recognition
If the probability of default of a financial asset on the estimated duration of existence
determined on balance sheet date is significantly higher than the probability of
default during the estimated duration of the initial recognition, it indicates a
significant increase in the credit risk of the financial asset. Except for special
circumstances, the Company uses the change in default risk occurring within the
next 12 months as a reasonable estimate of the change in default risk throughout
the life period to determine whether the credit risk has increased significantly since
the initial recognition.
4.9.3 Assess expected credit risk on a portfolio basis
The Company evaluates credit risk individually for financial assets with significantly
different credit risks, such as: receivables from related parties; receivables that are
in dispute with the other party or involve litigation or arbitration; receivables with
clear indications that the debtor is likely to be unable to meet the repayment
obligations of the receivables, etc.
In addition to individual financial assets that assess credit risk, the Company
classifies financial assets into different groups based on common risk characteristics
and evaluates credit risk on a portfolio basis.
4.9.4 Accounting treatment of financial assets impairment
For carrying amout of the end of the period, the difference is recognized as the
impairment loss; if it is less than the carrying amount of the current impairment
provision, the difference is recognized as an impairment gain.
4.9.5 Determination method for credit loss of various financial assets
4.9.5.1 Notes receivable
               Item                         Reason for determining the groups
Bank acceptance bill                  The acceptor is a bank with less credit risk
                                      According to the credit risk of the acceptor, it should be the same as the "
Commercial acceptance bill
                                      accounts receivable" combination.


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                                          TsannKuen (China) Enterprise Co.,Ltd.
                         Notes to the Financial Statements for the Year ended 31 December 2019

4.9.5.2 Accounts receivable
For accounts receivable and contract assets that do not contain significant financing
components, the company measures the loss impairment in accordance with the
amount equivalent to the expected credit loss in the whole duration.
For accounts receivable, contract assets and lease receivables that contain
significant financing components, the company chooses to always measure the loss
impairment in accordance with the amount equivalent to the expected credit loss in
the whole duration.
In addition to accounts receivable and contract assets for individual assessing credit
risk, they are classified into different goups based on their credit risk characteristics:
                  Item                        Reason for determining the groups
                                        This group uses the age of accounts receivable as the credit risk
Age
                                        characteristics.
                                        Related party relationships (except for evidencing that they cannot be
Related parties
                                        received)

4.9.5.3 Other receivables
In accordance with whether the credit risk of other receivables has significantly
increased since initial recognition, the company utilizes the amount equivalent to the
expected credit loss in the next 12 months or the whole duration to measures the
impairment loss. In addition to other receivables for individual assessing credit risk,
they are classified into different goups based on their credit risk characteristics:
                  Item                        Reason for determining the groups
Deposit guarantee                       This group is deposits receivables,
                                        This group is the declared export tax refund funds that have not been
Export tax refund
                                        received
                                        This group uses the age of accounts receivable as the credit risk
Current account
                                        characteristics.
                                        Related party relationships (except for evidencing that they cannot be
Related parties
                                        received)

4.10 Inventories
4.10.1 Classification of inventory
Inventories include finished goods and merchandises held for sale, work-in-progress
and materials and supplies to be consumed in the course of production of goods or
rendering of services. Inventories are classified into materials in transit, raw
materials, work-in-progress, finished goods, materials and goods of consignment


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                                    TsannKuen (China) Enterprise Co.,Ltd.
                   Notes to the Financial Statements for the Year ended 31 December 2019

and revolving materials etc.


4.10.2 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.
4.10.3 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
declines 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.
4.10.4 The perpetual inventory system is maintained for stock system.
4.10.5 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
methods.
4.11 Non-current Assets Held for Sale and Discontinued Operations

                                                   103
                                    TsannKuen (China) Enterprise Co.,Ltd.
                   Notes to the Financial Statements for the Year ended 31 December 2019

The company classifies a non-current asset or disposal group as held for sale if its
carrying amount will be recovered principally through a sale transaction rather than
through continuing use. For this to be the case, the following conditions shall be met:
a) the asset (or disposal group) must be available for immediate sale in its present
condition subject to terms that are usual and customary for sales of such assets or
disposal groups; b) the company has made the resolution on the disposal plan and
must be committed to a plan to sell the asset (or disposal group); c) the sale is
expected to be completed within one year from the date of classification. A disposal
group is a group of assets to be disposed of, by sale or otherwise, together as a
group in a single transaction, and liabilities directly associated with those assets that
will be transferred in the transaction. The group shall include goodwill acquired in a
business combination if the group is a cash-generating unit to which goodwill has
been allocated in accordance with the requirements of Accounting Standard for
Business Enterprises No. 8 – Impairment of assets.
The company measure a non-current asset or disposal group classified as held for
sale at the lower of its carrying amount and fair value less costs to sell on initial
recognition and subsequent remeasuremnt on the balance sheet date. An
impairment loss is recognised when the carrying amount is higher than the fair value
less costs to sell, and allowance for impairment is recognised accordingly. For the
disposal group, the recognised impairment loss on assets is offset against the
carrying amount of the goodwill in the disposal group, and then reduced in
proportion of the book value of the non-current assets applicable to "Accounting
Standard for Business Enterprises No. 42 - Non-current Assets Held for Sale,
Disposal Group and Discontinued Operations (hereinafter referred to as "held for
sale accounting principle") measurement requirements. The company shall
recognise a gain during the period for any subsequent increase in fair value less
costs to sell of an asset, but not in excess of the cumulative impairment loss that has
been recognised after the reclassification to non-current assets held for sale. The
book value of assets in the disposal group is increased proportionately according to
the proportion of the book value of each non-current asset except for goodwill.
Impairment loss recognised before the reclassification to non-current assets held for
sell shall not be recovered.
Non-current asset or non-current asset in the disposal group classified as held for
sale are not subject to depreciation or amortization. The interest and other expenses
on liabilities held in the disposal group for sale are continuously recognised.

                                                   104
                                    TsannKuen (China) Enterprise Co.,Ltd.
                   Notes to the Financial Statements for the Year ended 31 December 2019

Non-current assets or disposal group that no longer meet the conditions of
non-current asset held for sell shall be removed from the category, and shall be
measured at the lower of the following: (a) The carrying amount before classification
as held for sale after adjustment of depreciation, amortization or impairment that
should be recognised if it is not classified as non-current assets held for sell; (b)
recoverable amount.
4.12 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 4.8 “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 cannot control or with other parties’ joint
control over those policies.
4.12.1 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 cost 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 acquistions shall be viewed as one single
transaction. If the multiple acquistions shall be viewed as one single transaction, the

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                                     TsannKuen (China) Enterprise Co.,Ltd.
                    Notes to the Financial Statements for the Year ended 31 December 2019

multiple acquistions 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 acquistions shall be viewed as one single transaction. If the multiple
acquistions shall be viewed as one single transaction, the multiple acquistions 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 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

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                                    TsannKuen (China) Enterprise Co.,Ltd.
                   Notes to the Financial Statements for the Year ended 31 December 2019

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.
4.12.2 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 recognised 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 recognised 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 acquistion. The

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                                    TsannKuen (China) Enterprise Co.,Ltd.
                   Notes to the Financial Statements for the Year ended 31 December 2019

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 unrealised profit or loss arising from related party
transactions between the Company and an associate or joint venture is deducted
from investment income. Unrealised 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 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 recognised 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 recognised 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 reocgnised 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. The Company has obligation to share additional net loss of the investee,
the estimated share of loss recognised as accrued liabilities and investment loss.
Where the Company has unrecognised share of loss of the investee when the
investee generates net profit, the Company's unrecognised share of loss is reduced
by the Company's share of net profit and when the Company's unrecognised share
or loss is eliminated in full, the Company's share of net profit, if any, is recognised 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 recognised 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

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                   Notes to the Financial Statements for the Year ended 31 December 2019

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
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
4.5.2 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 recognised in profit or loss.
The 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 acquistion 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 reocgnised in profit or loss
proportionate to the disposal.
The 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 reocgnised in profit or loss proportionate to the disposal.
The Company's control over an investee is lost due to partial disposal of investment
in the 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; 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

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                    Notes to the Financial Statements for the Year ended 31 December 2019

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 recognised 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 reocgnised 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.
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 recognised 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 reocgnised in profit or loss when
joint control or significant influence is lost.
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
is accounted for one single transaction which result 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.

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                   Notes to the Financial Statements for the Year ended 31 December 2019

4.13 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 expenditure is record in to the profit or loss when it 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 4.19 “Non-current and non-financial assets impairment ".
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.
4.14 Fixed assets
4.14.1 The conditions of recognition
Fixed assets refer to the tangible assets that are held for the sake of producing

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                       Notes to the Financial Statements for the Year ended 31 December 2019

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.
4.14.2 The method for depreciation
Fixed assets are stated at cost and consider the impact of expected costs of
abandoning the initial measurement. 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:
                                   Depreciation               Estimated         Expected
            Category                                                                               Depreciation(%)
                                      method            residual value(%)       useful life
                                        Straight-line
 Houses and building                                             7.00-10.00                   20           4.50-4.65
                                            method
                                        Straight-line
 Machineries                                                          0.00              5-15              6.67-20.00
                                            method
 Electronic device、modules             Straight-line
                                                                      0.00                5-6           16.67-20.00
 and others                                 method
                                        Straight-line
 Vehicles                                                             0.00                     6               16.67
                                            method
 Improvement expense of                 Straight-line                                  the shorter of lease term and
                                                                      0.00
 leased fixed assets                        method                                                    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.
4.14.3 Measurement and recognition of fixed assets impairment
Impairment and provisions of fixed assets are disclosed on Note 4.19 “Impairment of
long-term assets”.
4.14.4 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;


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                   Notes to the Financial Statements for the Year ended 31 December 2019

otherwise, the leased assets are depreciated over the shorter of the lease terms and
the useful lives of the leased assets.
4.14.5 Others
A fixed asset is recognised 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 derecognised. Otherwise,
such expenditure shall be recognised 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.
4.15 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 4.19 “Impairment of long-term
assets”.
4.16 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 recognised 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 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

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                   Notes to the Financial Statements for the Year ended 31 December 2019

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 recognised 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 recognised as an expense for the current period
until the acquisition, construction or production is resumed.
4.17 Intangible assets
4.17.1 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 the land use rights and buildings are accounted

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                    Notes to the Financial Statements for the Year ended 31 December 2019

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.
4.17.2 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 recognised 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
recognised 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 recognised in the profit or loss for the period in which it is incurred.
4.17.3 Impairment of intangible assets
Impairment and provisions of intangible assets are disclosed on Note 4.19
“Impairment of long-term assets”.
4.18 Long-term deferred expenditure
An item long-term deferred expenses is an expense which has been incurred and

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                  Notes to the Financial Statements for the Year ended 31 December 2019

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 expenses is recognised
at the actual amount of the expense incurred and allocated in each month of the
beneficial period using the straight-line method.
4.19 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.

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                   Notes to the Financial Statements for the Year ended 31 December 2019

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 recognised, the recoverable part
cannot be reserved in the subsequent periods.
4.20 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 recognised 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 mainly include basic old-age insurance, unemployment
insurance and annuities. Post-employment benefits include defined contribution
plans and defined benefit plans. Relevant contribution amount in the defined
contribution plan shall be recognised as cost of related assets or profit or loss during
the year. The defined benefit plan in the company is old-age insurance. Projected
unit credit cost method (“PUC”) was used by independent actuaries engaged by the
Company to determine the present value of the defined benefit obligations with
unbiased and consistent actuarial assumptions regarding population variables and
financial variables. Defined benefit obligation was presented with the present value
and the related current service cost was accounted into current profit or loss.
When the Company terminates the labor relationship with employees prior to the
employment contracts, or         encourages employees to accept voluntary redundancy
compensation proposals in this company, a provision shall be recognised for the
compensation arising from the termination of employment relationship with
employees at the time when the Company can not unilaterally withdraw layoff
proposal termination benefits provided due to termination of employment, or the

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                   Notes to the Financial Statements for the Year ended 31 December 2019

company ensures the costs related to the payment for termination benefits related to
the restructuring, which one is early to confirm employee benefits liabilities, and
recorded as profit or loss. However, if termination benefits can not be fully paid after
twelve months of the reporting date,the liability shall be processed in accordance
with other long-term employee benefits.
Retirement plan adopts the same principles as the termination benefits. The salaries
and insurance to be paid from the date when employees stop providing services to
the date of normal retirement shall be recognised in profit or loss (termination
benefits) when satisfying the requirements of a provision.
Other long-term employee benefits provided by the company to employees that is in
line with defined contribution plans shall adopt the accounting treatment in
accordance with defined contribution plans, otherwise the accounting treatment of
defined benefit plans.
4.21 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 determine 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 recognised as an asset, and is recognised in the
amount of compensation does not exceed the carrying value of estimated liabilities.
4.22 Revenue
4.22.1 Revenue from sales of goods
Revenue from sales of goods is recognised when significant risks and rewards
attached to the ownership of the goods sold are passed to the buyer, when neither

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                   Notes to the Financial Statements for the Year ended 31 December 2019

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 the export product sales is mainly used the FOB ports
settlement, and the realization of the sales revenue is confirmed after the products
are shipped and the export declaration and export procedures are completed.
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 recognised for the events, but the amount shall be
recognised 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
recognise the claim indemnity expense.
4.22.2 Revenue from rendering of service
Revenue arising from rendering of services is recognised 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
recognised as cost reimbursement received or to be received, if any, and cost
incurred is recognised in profit or loss for the period in which the cost is incurred. No
revenue is recognised if cost reimbursement is not probable.

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                    Notes to the Financial Statements for the Year ended 31 December 2019

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.
4.22.3 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
recognised as revenue and expenses according to the percentage of completion. at
the balance sheet date.
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; ③ the 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, ④ both 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 recognised only to the extent of contract costs incurred that it is
probable will be recoverable; and If the cost cannot be recovered, contract costs
should be recognised as an expense in the period in which they are incurred and the
contract revenue cannot be recognised. When the uncertainty that makes the
outcome of the construction unable to be estimated reliably disappears, the revenue
and cost are recognised according to the percentage of completion.
An expected loss on the construction contract should be recognised as an expense
during the year when the total contract cost is expected to be higher than the total
contract revenue.
The incurred cost and accumulated gross profit (loss) and the settled price of the
construction contract are disclosed as a net amount in the balance sheet. The
excess amount of the incurred cost and accumulated gross profit (loss) over the
settled price of the construction contract is disclosed as inventory, while the excess
amount of the settled price over the incurred cost and accumulated gross profit (loss)
of the construction contract is disclosed as advance from customers.
4.22.4 Royalty Revenue



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                   Notes to the Financial Statements for the Year ended 31 December 2019

According to the contract or agreement, the revenue is recognised on an accrual
basis.
4.22.5 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.
4.23 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.
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 recognised immediately in profit or loss for the period.
When received the government grants actually, recognised 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)grants receivable of government
departments issued a document entitled have been confirmed, or could reasonably
are estimated in accordance with the relevant provisions of its own official release of

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                   Notes to the Financial Statements for the Year ended 31 December 2019

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 recognised as deferred income, and
evenly amortized to profit or loss over the useful life of the related asset in a
reasonable and systematic manner. 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 recognised as deferred income, and recognised in profit or loss
over the periods in which the related costs are recognised. If the grant is a
compensation for related expenses or losses already incurred, the grant is
recognised immediately in profit or loss for the period.
Government subsidies including both assets-related parts and income-related parts
should be treated separately. If it is difficult to seperate, the government subsidies as
a whole will be classified as income-related government grants.
The government grants related to the daily activities of the Company are included in
other income or offset the related costs according to the essence of the economic
business. The government grants unrelated to the daily activities are included in the
non-operating income and expenses.
When government subsidy needs to be returned, if the related deferred income
balance exists, the book value of related deferred income shall be offset and the
excess part shall be included in the current profit or loss; if it is other cases, it shall
be directly carried to the current profits and losses.
4.24 Deferred tax assets and deferred tax liabilities
4.24.1 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 realised or the
liability is settled, according to the requirements of tax laws. The measurement of

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                                     TsannKuen (China) Enterprise Co.,Ltd.
                    Notes to the Financial Statements for the Year ended 31 December 2019

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.
At the balance sheet date, current income tax liabilities or assets for the current and
prior period, 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.
4.24.2 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
recognised as assets or liabilities and their tax base that can be determined
according to tax laws, deferred tax assets and liabilities are recognised 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
recognised.
For taxable temporary differences associated with investments in subsidiaries and
associates, and interests in joint ventures, no deferred income tax liability related is
recognised 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 recognised.
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 recognised.
For taxable temporary deductible differences associated with investments in
subsidiaries and associates, and interests in joint ventures, no deferred income tax
asset related is recognised 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.

                                                    123
                                      TsannKuen (China) Enterprise Co.,Ltd.
                     Notes to the Financial Statements for the Year ended 31 December 2019

Except mentioned above, the Company recognises 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 recognised 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 law, that are expected to apply in the period in which the asset
is realised 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.
4.24.3 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.
4.24.4 Income tax offset
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,



                                                     124
                                     TsannKuen (China) Enterprise Co.,Ltd.
                    Notes to the Financial Statements for the Year ended 31 December 2019

the Company shall present net value after the offset of deferred income tax asset
and deferred income tax liability.
4.25 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.
4.25.1 The Company as Lessee under operating Lease
Lease payments under an operating lease are recognised 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.
4.25.2 The Company as Leasor under operating Lease
Lease income from operating leases shall be recognised 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.
4.25.3 Financial lease to which the Company is the leasee
At the commencement of a financial lease to which the Company is the Leasee, the
lower of the lease-commencement-date fair value of the leased asset and the
present value of the minimum lease payment is recognised as the cost of the leased
asset; the minimum lease payment is recognised as a long-term payable; and the
excess of the long-term payable over the amount recognised as the cost of the
leased asset is recognised as unrecognised lease expenditure. Expenses incurred
during the negotiation and signing of the lease contract for activities directly
attributable to the lease are recognised as part of the cost of the leased asset. The
residual amount after deducting the unrecognised lease expenditure from the
long-term payable is divided into non-current liability and non-current liability due
within one year depending on maturity and presented on (consolidated) financial
statements separately.
The unrecognised lease expenditure is amortised over the lease term using the
effective interest rate method and the amortisation is recognised as lease expense
in profit or loss for the relevant period. Contingency lease rental is recognised in
profit or loss when it is incurred.



                                                    125
                                    TsannKuen (China) Enterprise Co.,Ltd.
                   Notes to the Financial Statements for the Year ended 31 December 2019

4.25.4 Financial lease to which the Company is the leasor
At the commencement of a financial lease to which the Company is the leasor, the
sum of the minimum lease rental receivable and the initial expenses incurred for
activities directly attributable to the lease is recognised as the initial amount of the
respective financial lease rental receivable; unguaranteed residual value is recorded,
if any; the excess of the present value of the sum of the minimum lease rental
receivable, the initial expenses incurred for activities directly attributable to the lease
and the unguaranteed residual value over the sum itself is recognised as
unrecognised lease income. The residual amount after deducting the unrecognised
lease income from the financial lease rental receivable is divided into non-current
receivable and non-current receivable due within one year depending on maturity
and presented on (consolidated) financial statements separately.
The unrecognised lease income is amortised over the lease term using the effective
interest rate method and the amortisation is recognised as lease income in profit or
loss for the relevant period. Contingency lease rental income is recognised in profit
or loss when it is received or becomes receivable.
4.26 Significant changes in accounting policies and accounting estimates
4.26.1 Changes of accounting policies
4.26.1.1 Changes of accounting policy resulting from changes in financial
instruments
On March 3 2017, the Ministry of Finance issued the “Chinese Accounting
Standards for Business Enterprises No.22 - Determination and measurement of
financial instruments (Revised in 2017” (Accounting [2017] No. 7), "Accounting
Standards for Business Enterprises No. 23" Transfer of Financial Assets (Revised in
2017) (Accounting [2017] No. 8), "Accounting Standards for Business Enterprises
No. 24 - Hedge Accounting (Revised in 2017)" (Accounting [2017] No. 9). On May 2
2017, the Ministry of Finance issued “Accounting Standards for Business
Enterprises No. 37 – Financial Instruments Presentation (Revised in 2017)”
(Accounting [2017] No. 14) (the above-mentioned guidelines are collectively referred
to as the “New Financial Instruments Guidelines”), and domestic listed companies
are required to implement it from January 1, 2019.
After the resolution of the 2nd meeting of the Board of Directors of the Company on
March 16, 2019, the company will implement the above new financial instrument
guidelines from January 1, 2019.
All recognized financial assets under the new financial instrument criteria are

                                                   126
                                      TsannKuen (China) Enterprise Co.,Ltd.
                     Notes to the Financial Statements for the Year ended 31 December 2019

subsequently measured at amortised cost or fair value. On the implementation date
of the new financial instrument standard, the business model of managing financial
assets is evaluated based on the facts and circumstances of the company on the
implementation date. According to the contractual cash flow characteristics on the
financial assets, which are evaluated based on the facts and circumstances at the
initial recognition of the financial assets, financial assets are classified into three
categories: measured at amortised cost, measured at fair value through other
comprehensive income, and measured at fair value through profit or loss. In case of
an    equity    instrument      investment         measured          at    fair    value     through   other
comprehensive income, when the financial asset is derecognised, the accumulated
gain or loss previously recognised in other comprehensive income is transferred to
retained earnings, rather than profit and loss.
Under the new financial instrument standard, the Company accrues impairment
provision and recognizes credit impairment losses for financial assets measured at
amortized cost, debt instrument investments measured at fair value through other
comprehensive income, lease receivables, contract assets and the financial
guarantee contract based on expected credit losses.
The company retrospective applies the new financial instrument guidelines, but in
terms of       classification    and measurement                  (including impairment) involving
inconsistency between the previous comparative financial statement data and the
new financial instrument guidelines, the company chooses not to restate. Therefore,
for the cumulative impact on the first implementation of the guideline, the company
adjusts retained earnings or other comprehensive income of the opening of 2019
and other relevant items in the financial statement. The financial statements for 2018
were not restated.
The main changes and effects of the company's implementation of the new financial
instrument guidelines are as follows:
-    On and after January 1 2019, the company designated part of non-trading equity
     investment as financial assets measured at fair value through other
     comprehensive income, which disclosed as other investments in equity
     instruments.
A. Financial assets classification and measurement comparison table before and
after the first implementation date
a. The effects on consolidated financial statements



                                                     127
                                                    TsannKuen (China) Enterprise Co.,Ltd.
                                   Notes to the Financial Statements for the Year ended 31 December 2019

                  31/12/2018 (before changes)                                               1/1/2019 (after changes)
                                                     Net carrying                                                      Net carrying
    Category               Classification                                   Category           Classification
                                                       amount                                                            amount
                                                                       Monetary
Monetary funds            Amortised cost             469,692,295.47                         Amortised cost             469,692,295.47
                                                                       funds
Financial assets Measured                  at
                                                                       Financial            Measured at fair
measured at fair fair                   value
                                                       1,440,700.00 assets held for value               through          1,440,700.00
value       through through profit or
                                                                       trading              profit or loss
profit or loss            loss
Note                       Amortised                                   Note
                                                         200,000.00                         Amortised cost                 200,000.00
receibables               cost                                         receibables
Accounts                                                               Accounts
                          Amortised cost             280,596,130.89                         Amortised cost             281,337,522.38
receivable                                                             receivable
Other                                                                  Other
                          Amortised cost              29,944,042.47                         Amortised cost              29,944,042.47
receivables                                                            receivables
                                                                                            Measured at fair
                                                                       Other
Financial assets Measured                  at                                               value       through
                                                                       investments in
available         for     cost        (equity             40,000.00                         other                           40,000.00
                                                                       equity
sale                      instrument)                                                       comprehensive
                                                                       instruments
                                                                                            income
 b. The effects on the company’s financial statements
                  31/12/2018 (before changes)                                               1/1/2019 (after changes)
       Category                  Classification       Net carrying            Category           Classification        Net carrying
                                                         amount                                                           amount
                                                                           Monetary
Monetary funds              Amortised cost              6,985,345.44                          Amortised cost             6,985,345.44
                                                                           funds
                                                                           Note
Note receibables            Amortised cost                200,000.00                          Amortised cost               200,000.00
                                                                           receibables
Accounts                                                                   Accounts
                            Amortised cost             16,243,882.91                          Amortised cost            16,701,103.45
receivable                                                                 receivable
                                                                           Other
Other receivables           Amortised cost              2,213,373.51                          Amortised cost             2,213,373.51
                                                                           receivables
                                                                                              Measured at fair
                                                                           Other
                            Measured            at                                            value          through
Financial        assets                                                    investments in
                            cost         (equity           40,000.00                          other                         40,000.00
available for sale                                                         equity
                            instrument)                                                       comprehensive
                                                                           instruments
                                                                                              income




                                                                     128
                                              TsannKuen (China) Enterprise Co.,Ltd.
                             Notes to the Financial Statements for the Year ended 31 December 2019

B. Adjustment table showing the net carrying amout of the original financial assets is
adjusted to the net carrying amount of the new financial assets in accordance with
the new financial instrument guidelines on the first implementation date.
a. The effects on consolidated financial statements
                                           31/12/2018                                                1/1/2019 (after
              Category                                        Reclassification     Remeasurement
                                        (before changes)                                               changes)
 Amortised cost:
 Note receivables                              200,000.00
 Less: transfer to accounts
 receivable financing
 Remeasurement:          impairment
 of expected credit loss
 Closing balance disclosed by
 the new financial instrument                                                                             200,000.00
 guidelines
 Accounts receivable                      280,596,130.89
 Add:         adjustment          of
 implementing the new income
 guidelines
 Less: transfer to accounts
 receivable financing
 Remeasurement:          impairment
                                                                                        741,391.49
 of expected credit loss
 Closing balance disclosed by
 the new financial instrument                                                                         281,337,522.38
 guidelines
 Other receivables                         29,944,042.47
 Remeasurement:          impairment
 of expected credit loss
 Closing balance disclosed by
 the new financial instrument                                                                          29,944,042.47
 guidelines
 Measured at fair value through
 profit or loss:
 Financial assets measured at
 fair value through profit or loss           1,440,700.00
 (the original guidelines)
 Less: transfer      to financial
                                                                   -1,440,700.00
 assets held for trading
 Closing balance disclosed by                                                                             ——


                                                             129
                                                   TsannKuen (China) Enterprise Co.,Ltd.
                                  Notes to the Financial Statements for the Year ended 31 December 2019

                                                31/12/2018                                                 1/1/2019 (after
              Category                                             Reclassification     Remeasurement
                                             (before changes)                                                changes)
the new financial instrument
guidelines
Financial      assets        held     for
                                                   ——
trading
Add: transfer from financial
assets measured at fair value
                                                                        1,440,700.00
through profit or loss (the
original guidelines)
Closing balance disclosed by
the new financial instrument                                                                                  1,440,700.00
guidelines
Measured at fair value through
other comprehensive income:
Financial assets available for
                                                     40,000.00
sale (the original guidelines)
Less:        transfer        to     other
investments             in         equity                                 -40,000.00
instruments
Closing balance disclosed by
the new financial instrument                                                                                    ——
guidelines
Other investments in equity
                                                   ——
instruments
Add: transfer from financial
assets available for sale (the                                            40,000.00
original guidelines)
Remeasurement: measured at
fair value
Closing balance disclosed by
the new financial instrument                                                                                     40,000.00
guidelines
Deferred tax assets                             26,552,328.43
Adjustment resulting from the
new       financial          instrument                                                      -148,575.26
guidelines
Closing balance disclosed by
the new financial instrument                                                                                 26,403,753.17
guidelines




                                                                  130
                                             TsannKuen (China) Enterprise Co.,Ltd.
                            Notes to the Financial Statements for the Year ended 31 December 2019

b. The effects on the company’s financial statements
                                               31/12/2018                                                1/1/2019 (after
               Category                                           Reclassification    Remeasurement
                                            (before changes)                                               changes)
Amortised cost:
Notes receivable                                  200,000.00
Closing balance disclosed by the
                                                                                                            200,000.00
new financial instrument guidelines
Accounts receivable                            16,243,882.91
Remeasurement:         impairment     of
                                                                                            457,220.54
expected credit loss
Closing balance disclosed by the
                                                                                                         16,701,103.45
new financial instrument guidelines
Other receivables                               2,213,373.51
Remeasurement:         impairment     of
expected credit loss
Closing balance disclosed by the
                                                                                                          2,213,373.51
new financial instrument guidelines
Measured at fair value through other
comprehensive income:
Financial assets available for sale
                                                    40,000.00
(the original guidelines)
Less: transfer to other investments in
                                                                        -40,000.00
equity instruments
Closing balance disclosed by the
                                                                                                              ——
new financial instrument guidelines
Other     investments       in    equity
                                                  ——
instruments
Add: transfer from financial assets
available for sale (the original                                         40,000.00
guidelines)
Remeasurement: measured at fair
value
Closing balance disclosed by the
                                                                                                              40,000.00
new financial instrument guidelines
Deferred tax assets                            10,946,860.01
Adjustment resulting from the new
                                                                                           -114,305.13
financial instrument guidelines
Closing balance disclosed by the
                                                                                                         10,832,554.88
new financial instrument guidelines




                                                            131
                                             TsannKuen (China) Enterprise Co.,Ltd.
                            Notes to the Financial Statements for the Year ended 31 December 2019

C. Table of adjustment of impairment provisions of financial assets
a. The effects on consolidated financial statements
                                     31/12/2018 (before                                                  1/1/2019 (after
             Category                                        Reclassification    Remeasurement
                                         changes)                                                          changes)
 Amortised cost
 Impairment provisions of
                                          12,373,081.57                               -741,391.49          11,631,690.08
 accounts receivable
 Impairment provisions of
                                              1,799,236.50                                                  1,799,236.50
 other receivables

b. The effects on the company’s financial statements
                                     31/12/2018 (before                                                  1/1/2019 (after
             Category                                        Reclassification    Remeasurement
                                         changes)                                                          changes)
 Amortised cost
 Impairment provisions of
                                              1,991,862.68                            -457,220.54           1,534,642.14
 accounts receivable
 Impairment provisions of
                                                43,914.90                                                      43,914.90
 other receivables

 D. The effects on retained earnings and other comprehensive income of January 1
2019
                 Category                         Consolidated            Consolidated              Consolidated other
                                                retained earnings       surplus reserves        comprehensive income
 31/12/2018                                         122,872,551.30          37,804,354.59                   5,924,132.67
 1.   Reclassify        financial    assets
 available     for   sale     into    other
 investments in equity instruments
 and remeasure
 2. Remeasurement of impairment of
                                                        494,653.29               34,291.54                       1,396.19
 accounts receivable
 1/1/2019                                           123,367,204.59          37,838,646.13                   5,925,528.86

4.26.1.2 Other changes of accounting policies
A. Revise the Format of the Annual General Enterprise Financial Statements
On April 30, 2019, the Ministry of Finance issued the "Notice on Amending the
Format of the 2019 Annual General Enterprise Financial Statements" (Accounting
[2019] No. 6), and adjusted the financial statement format of the enterprise
accordingly. The notice pointed out that, in order to solve the practical problems in
the preparation of financial reports of enterprises that implement accounting

                                                             132
                                   TsannKuen (China) Enterprise Co.,Ltd.
                  Notes to the Financial Statements for the Year ended 31 December 2019

standards for enterprises, standardize the presentation of financial statements of
enterprises, and improve the quality of accounting information, regarding the
"Accounting Standards for Business Enterprises No. 21-Leasing" (Caihui [2018] No.
35, hereinafter referred to as the New Leasing Standards), which has been
implemented in stages from January 1, 2019, and the relevant situations in the
implementation of accounting standards of business enterprises , the corporate
financial statement format was revised. The notice applies to the 2019 interim
financial statements and annual financial statements of non-financial enterprises
that implement the Accounting Standards for Business Enterprises, as well as
financial statements for subsequent periods. According to the above provisions,
among non-financial enterprises that implement the Accounting Standards for
Business, those that have not implemented the New Financial Standards, New
Revenue Standards and New Lease Standards prepare financial statements in
accordance with the requirements of “Accounting Standards for Business
Enterprises” and Appendix 1 “General Financial Statement Format (Applicable to
Enterprises that Have Not Implemented the New Financial Standards, New
Revenue Standards and New Lease Standards); those that have implemented the
New Financial Standards, New Revenue Standards and New Lease Standards or
that have implemented the New Financial Standards, New Revenue Standards and
not implemented New Lease Standards should follow the requirements of Appendix
1 “General Financial Statement Format (Applicable to Enterprises that Have Not
Implemented the New Financial Standards, New Revenue Standards and New
Lease Standards) and Appendix 2” General Financial Statement Format (Applicable
to Enterprises that Have Implemented the New Financial Standards, New Revenue
Standards and New Lease Standards) to to make corresponding adjustments to the
financial statement items.
In 2019, the Company conducted financial treatment of related economic matters in
accordance with the above provisions as changes in accounting policies for the year,
and prepare annual financial statements accordingly.
The above changes of accounting policies have no impact on the company's final
financial position, final operating results and final cash flow in 2019, and are only
adjustments between different statement items. The impact on the beginning of the
related statement items is as follows:


                                                  133
                                        TsannKuen (China) Enterprise Co.,Ltd.
                       Notes to the Financial Statements for the Year ended 31 December 2019




                Balance as of 12/31/2018                                      Balance as of 1/1/2019
Note     receivables    and
                                             281,537,522.38 Note receivables                              200,000.00
accounts receivbale
                                                                Accounts receivbale                  281,337,522.38
Note payables and accounts
                                             672,895,647.66 Note payables                             17,120,079.05
payable
                                                                Accounts payable                     655,775,568.61

B. Revision of non-monetary asset exchange and debt restructuring guidelines
According to the Ministry of Finance provisions of the "Notice on Printing and
Distributing the ‘Accounting Standards for Business Enterprises No. 7 -
Non-Monetary Asset Exchange ‘” (Caihui [2019] No. 8, issued on May 9, 2019), the
"Notice on Printing and Distributing the ‘Accounting Standards for Business
Enterprises No. 12 - Debt Reorganization ‘” (Caihui [2019] No. 9, issued on May 16,
2019), the newly revised Accounting Standards for Business Enterprises No.
7-Non-Monetary Asset Exchange is implemented from June 10 2019, the newly
revised Accounting            Standards         for    Business         Enterprises            No.   12    -   Debt
Reorganization is implemented from June 17 2019. Enterprises should adjust the
corresponding economic business that occurred between January 1 2019 and the
implementation date of the new standards in accordance with the standards.
Enterprises do not need to make retrospective adjustments to the corresponding
economic business that occurred before January 1 2019.
4.26.2 Change of accounting estimates
No change of accounting estimates need to be disclosed for the current period.
4.27 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 reviewed the judgments, estimates and assumptions regularly on


                                                       134
                                    TsannKuen (China) Enterprise Co.,Ltd.
                   Notes to the Financial Statements for the Year ended 31 December 2019

the basis of going concern. Where the changes in accounting estimates only affect
the period when changes occurred, and they are recognised within the same period.
Where the changes in accounting estimates affect both current period and future
period, the changes are recognised 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:
4.27.1 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.
4.27.2 Impairment of financial assets
The Company uses the expected credit loss model to assess the impairment of
financial instruments. The application of the expected credit loss model requires
significant judgment and estimation, and all reasonable and evidenced information,
including forward-looking information, needs to be considered. In making such
judgments and estimates, the Company infers the expected changes in the debtor's
credit   risk   based   on      historical      data      combined          with     economic   policies,
macroeconomic      indicators,        industry        risks,      external       market    environment,
technological environment, and changes in customer circumstances.
4.27.3 Impairment of inventories
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.
4.27.4 The fair value of financial instruments

                                                   135
                                    TsannKuen (China) Enterprise Co.,Ltd.
                   Notes to the Financial Statements for the Year ended 31 December 2019

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. If an equity instrument investment or contract has a
public offer, the company does not use cost as the best estimate of its fair value.
4.27.5 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.
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.
4.27.6 Depreciation and amortization
Investment property, fixed assets and intangible assets are depreciated and


                                                   136
                                     TsannKuen (China) Enterprise Co.,Ltd.
                    Notes to the Financial Statements for the Year ended 31 December 2019

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.
4.27.7 Deferred tax assets
The group shall recognise 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.
4.27.8 Income tax
There are some transactions where ultimate tax treatments and calculations have
uncertainties in the Company’s everyday operation. Whether there are 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.
4.27.9 Internal retirement benefits and supplementary retirement benefits
The amount of internal retirement benefits and supplementary retirement benefits
expenses and liabilities of the Company are determined based on various
assumptions. These assumptions include discount rates, growth rates for average
medical expenses, growth rates for retired and retired personnel subsidies, and
other factors. Differences between actual results and assumptions will be confirmed
immediately when incurred and included in the current year's expenses. Although
management believes that reasonable assumptions have been adopted, changes in
actual experience values and assumptions will still affect the company's internal
retirement benefits and supplementary retirement benefits expenses and balance of
liabilities.
4.27.10 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 recognised as accrued liabilities.



                                                    137
                                            TsannKuen (China) Enterprise Co.,Ltd.
                           Notes to the Financial Statements for the Year ended 31 December 2019

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 recognised 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.
4.27.11 Fair value measurement
Some of the Company's assets and liabilities are measured at fair value in the
financial statements. In estimating the fair value of an asset or liability, the Company
adopts available observable market data. If first level of input value cannot be
obtained, the company will hire third-party qualified appraisers to perform the
valuation. See Note 10 for disclosure of the valuation techniques and input values
used in determining the fair value of various types of assets and liabilities.


Note 5: Taxation
5.1 Taxes and surcharges applicable to the Company
         Taxes and
                                                          Tax base                                   Tax rate%
       surcharges
                           According to the revenues from sales to calculate the output tax, and   3、5、6、9、
 Value added tax
                           use the balance after deduct the deductible input tax to pay the VAT    10、13、16
 Urban maintenance
                           Sum of VAT payable, consumption duty payable and business tax
 and        construction                                                                                 7
                           payable for the reporting period, and exempt and deductible tax
 surcharge
                           Sum of VAT payable, consumption duty payable and business tax
 Education surcharge                                                                                     3
                           payable for the reporting period, and exempt and deductible tax
 Local        education Sum of VAT payable, consumption duty payable and business tax
                                                                                                         2
 surcharge                 payable for the reporting period, and exempt and deductible tax
 Corporate      income
                           Taxable profits                                                              25
 tax

5.2 Taxes and surcharges applicable to the primary subsidiaries
5.2.1 TsannKuen (Zhangzhou) Enterprise Co., Ltd. (hereafter, TKL)

                                                           138
                                             TsannKuen (China) Enterprise Co.,Ltd.
                            Notes to the Financial Statements for the Year ended 31 December 2019

Taxes and surcharges                                       Tax base                                     Tax rate%
                           According to the revenues from sales to calculate the output tax, and     0、5、6、9、10、
Value added tax
                           use the balance after deduct the deductible input tax to pay the VAT          13、16
Urban maintenance
                           Sum of VAT payable, consumption duty payable and business tax
and         construction                                                                                    5
                           payable for the reporting period, and exempt and deductible tax
surcharge
                           Sum of VAT payable, consumption duty payable and business tax
Education surcharge                                                                                         3
                           payable for the reporting period, and exempt and deductible tax
Local         education Sum of VAT payable, consumption duty payable and business tax
                                                                                                            2
surcharge                  payable for 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%.
5.2.2 TsannKuen China (Shanghai) Enterprise Co., Ltd. (hereafter, TKS)
Taxes and surcharges                                      Tax base                                      Tax rate%
                           According to the revenues from sales to calculate the output tax, and
Value added tax                                                                                     5、9、10、13、16
                           use the balance after deduct the deductible input tax to pay the VAT
Urban maintenance
                           Sum of VAT payable, consumption duty payable and business tax
and         construction                                                                                   1
                           payable for the reporting period, and exempt and deductible tax
surcharge
                           Sum of VAT payable, consumption duty payable and business tax
Education surcharge                                                                                        3
                           payable for the reporting period, and exempt and deductible tax
Local         education Sum of VAT payable, consumption duty payable and business tax
                                                                                                           2
surcharge                  payable for the reporting period, and exempt and deductible tax
Corporate income tax Taxable profits                                                                       25

5.2.3 Tsannkuen Edge Intelligence Co., Ltd. (hereafter, TKEI)
Taxes and surcharges                                      Tax base                                      Tax rate%
                           According to the revenues from sales to calculate the output tax, and
Value added tax                                                                                            5
                           use the balance after deduct the deductible input tax to pay the VAT
Corporate income tax Taxable profits                                                                       20

5.2.4 Pt.Star Comgistic Indonesia(hereafter, SCI)
Taxes and surcharges                                      Tax base                                      Tax rate%
                           According to the revenues from sales to calculate the output tax, and
Value added tax                                                                                            10
                           use the balance after deduct the deductible input tax to pay the VAT
Corporate income tax Taxable profits                                                                       25



                                                            139
                                           TsannKuen (China) Enterprise Co.,Ltd.
                          Notes to the Financial Statements for the Year ended 31 December 2019

5.3 Tax concessions and government approvals
According to the principle of “The Notice Regarding to Fujian Province 2017 Second
Group of High Technology Enterprise Review” (Mingkegao No. [2018]1), TKL was
identified as Fujian Province High Technology Enterprise (The certification No.
GR201735000565), the validity is from the year 2017 to 2019.The current income
tax is 15%.
Note 6: Notes to significant elements of the financial statements
Unless otherwise stated, the meaning of "B/f", "C/f", “last year end”, "Current year",
"Prior yea" in the following notes (incl. Notes to elements of the separate financial
statements) is "January 1 2019", "December 31 2019", “December 31 2018”, "2019",
and "2018" respectively.
6.1 Monetary funds
                      Item                            Balance as of 31/12/2019            Balance as of 31/12/2018
Cash in hand                                                           926,966.65                          729,204.57
Bank deposit                                                       638,696,235.33                      447,763,090.90
Other monetary fund                                                                                     21,200,000.00
                      Total                                        639,623,201.98                      469,692,295.47
Including: The total amount of deposit abroad                       32,960,640.75                       20,593,490.50

6.2 Financial assets held for trading
6.2.1 Classification
                       Item                           Balance as of 31/12/2019            Balance as of 31/12/2018
 Financial assets measured at fair value
                                                                      3,620,689.00                      1,440,700.00
 through profit or loss
 Including: Derivative financial assets                               3,620,689.00                      1,440,700.00
                      Total                                           3,620,689.00                      1,440,700.00
 Including: Reclassified to other non-current
 financial assets

6.2.2 Explanation
The derivative financial asset is forward foreign exchange contract signed with
financial institutions.
6.3 Notes receivable
                       Item                           Balance as of 31/12/2019            Balance as of 31/12/2018
 Bank acceptance                                                        274,548.00                        200,000.00
                      Total                                             274,548.00                        200,000.00

6.4 Accounts receivable

                                                          140
                                               TsannKuen (China) Enterprise Co.,Ltd.
                              Notes to the Financial Statements for the Year ended 31 December 2019

6.4.1 Disclosure by age
                                 Age                                              Balance as of 31/12/2019
Within 1 year                                                                                                289,295,483.59
Including: 1-90 days                                                                                         260,722,448.72
             91-180 days                                                                                      28,058,035.00
             181-270days                                                                                        182,376.78
             271-365 days                                                                                       332,623.09
1 to 2 years                                                                                                   1,073,716.11
2 to 3 years                                                                                                    453,694.77
Over 3 years                                                                                                   4,647,605.17
                               Subtotal                                                                      295,470,499.64
Less: Allowance for bad debt                                                                                   9,475,087.59
                                Total                                                                        285,995,412.05

6.4.2 Disclosure by method for measurement of allowance for bad debt
                                                                        Balance as of 31/12/2019
                    Item                            Carrying amount             Allowance for bad debt
                                                                                                              Book value
                                                   Amount         % of total     Amount       % of total
Accounts receivable of individually
assessment for impairment
Accounts receivable of assessment for
                                                 295,470,499.64      100.00 9,475,087.59              3.21   285,995,412.05
impairment by portfolio
Including: Portfolio by age                      293,206,700.42       99.23 9,475,087.59              3.23   283,731,612.83
             Portfolio by related parties          2,263,799.22         0.77                                   2,263,799.22
                   Total                         295,470,499.64      100.00 9,475,087.59              3.21   285,995,412.05

(Continued)
                                                                        Balance as of 31/12/2018
                    Item                           Carrying amount             Allowance for bad debt
                                                                                                              Book value
                                                  Amount       % of total      Amount        % of total
Accounts receivable of individually
assessment for impairment
Including:     Accounts       receivable    of
individual     significance     subject     to
individually assessment for impairment
Accounts receivable of assessment for 292,969,212.46                100.00 11,631,690.08              3.97   281,337,522.38



                                                              141
                                            TsannKuen (China) Enterprise Co.,Ltd.
                           Notes to the Financial Statements for the Year ended 31 December 2019

                                                                         Balance as of 31/12/2018
                  Item                            Carrying amount                   Allowance for bad debt
                                                                                                                         Book value
                                                 Amount         % of total          Amount            % of total
impairment by portfolio
Including: Portfolio by age                   289,329,935.10          98.76 11,631,690.08                      4.02     277,698,245.02
           Portfolio by related parties         3,639,277.36           1.24                                                3,639,277.36
Accounts receivable of individually
insignificance subject to individually
assessment for impairment
                  Total                       292,969,212.46         100.00 11,631,690.08                      3.97     281,337,522.38

6.4.2.1 Portfolio by related parties
                                                                         Balance as of 31/12/2019
          Accounts receivable                                     Allowance for bad                                   Reasons for
                                              Carrying amount                                 % of total
                                                                             debt                                   measurement
Due from related parties                          2,263,799.22
                 Total                            2,263,799.22                                     ——                  ——

6.4.2.2 Accounts receivable using age for measurement of allowance for bad debt
                                                                        Balance as of 31/12/2019
                                                                                                                   Rate of expected
                 Item
                                                 Carrying amount               Allowance for bad debt              credit loss for the
                                                                                                                whole duration\ (%)
Current                                                255,331,295.08                        1,276,656.48                              0.50
1-30 days past due                                        30,327,562.45                      1,364,740.31                              4.50
31-60 days past due                                         841,208.62                          168,241.72                            20.00
61-90 days past due                                            74,882.17                           33,696.98                          45.00
Over 90 days past due                                      6,631,752.10                      6,631,752.10                            100.00
                 Total                                 293,206,700.42                        9,475,087.59                              3.23

6.4.3 Allowance for bad debt
                                                                Current period movement
                                                                                                                          Balance as
                              Balance as of                       Recove
          Item                                                                        Used or                                   of
                               31/12/2018        Recognition         ry or                                Others
                                                                                     written off                          31/12/2019
                                                                  reversal
 Accounts receivable
                              11,631,690.08     1,070,365.41                        3,240,003.03          13,035.13      9,475,087.59
 of assessment for


                                                               142
                                               TsannKuen (China) Enterprise Co.,Ltd.
                              Notes to the Financial Statements for the Year ended 31 December 2019

 impairment              by
 portfolio
             Total            11,631,690.08       1,070,365.41                3,240,003.03             13,035.13    9,475,087.59

6.4.4 Accounts receivable written off during the current year
                              Item                                                       Written off amount
Sporadic accounts receivable written off                                                                             3,240,003.03

Including: significant accounts receivable written off

                              Nature of accounts       Written off     reasons for written Written off
     Company name                                                                                             Result from related
                                     receivable         amount                     off            procedure
                                                                                                                   transaction
                                 Long-term bad                         Cannot               be
MTN PRODUCTS INC.                                       3,240,003.03                             Yes          No
                                       debt                            recoverd
              Total                    ——             3,240,003.03            ——                ——              ——
6.4.5 Details of top five accounts receivable
The total amount of top five accounts receivables summarized by debtors as at the
end of current year is CNY 202,879,990.56, accounting for 68.66% of the total
accounts receivable as at the end of current year, the total corresponding allowance
for bad debts is CNY 1,942,086.56.
6.5 Advances to suppliers
6.5.1 Disclosure by age
                                                  Balance as of 31/12/2019                       Balance as of 31/12/2018
                      Age
                                                  Amount              % of total                 Amount             % of total
Within 1 year                                      3,083,417.46               99.07              2,569,822.31                 96.29
1 to 2 years                                          28,894.60                 0.93                98,974.02                  3.71
                      Total                        3,112,312.06             100.00               2,668,796.33                100.00
6.5.2 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 650,036.64, accounting for 20.89% of the total advance to suppliers.
6.6 Other receivables
                     Items                        Balance as of 31/12/2019                       Balance as of 31/12/2018
Interests receivable
Other receivables                                                    29,271,999.53                                  29,944,042.47
                     Total                                           29,271,999.53                                  29,944,042.47
6.6.1 Interests receivable
None
6.6.2 Other receivables



                                                              143
                                            TsannKuen (China) Enterprise Co.,Ltd.
                           Notes to the Financial Statements for the Year ended 31 December 2019

6.6.2.1 Disclosure by age
                            Age                                              Balance as of 31/12/2019
Within 1 year                                                                                              27,838,457.65
Including: 1-90 days                                                                                       27,247,664.61
            91-180 days                                                                                      316,067.72
            181-270days                                                                                        84,201.57
            271-365 days                                                                                     190,523.75
1 to 2 years                                                                                                2,106,002.95
2 to 3 years
Over 3 years                                                                                                1,243,148.47
                          Subtotal                                                                         31,187,609.07
Less: Allowance for bad debt                                                                                1,915,609.54
                            Total                                                                          29,271,999.53

6.6.2.2 Disclosure by nature
                           Nature                               Balance as of 31/12/2019        Balance as of 31/12/2018
Deposit                                                                        1,420,512.67                 2,099,828.20
Export tax refund                                                             17,500,000.00                20,000,000.00
Due from related parties                                                         206,827.94                  208,665.92
Other current account                                                         12,060,268.46                 9,434,784.85
                          Subtotal                                            31,187,609.07                31,743,278.97
Less: Allowance for bad debt                                                   1,915,609.54                 1,799,236.50
                            Total                                             29,271,999.53                29,944,042.47
6.6.2.3 Recognition of allowance for bad debt
                                        Stage 1             Stage 2                   Stage 3
                                    Expected credit      Expected credit
                                                                              Expected credit loss for
  Allowance for bad debt            loss for the next   loss for the whole                                     Total
                                                                             the whole duration(Credit
                                      12 months         duration(no credit
                                                                             impairment has occurred)
                                                          impairment)
 Closing balance as of
                                          561,088.03                                       1,238,148.47    1,799,236.50
 1/1/2019
 Carrying amount of other
 receivables    in     current
 period on 1/1/2019
 Turn to stage 2
 Turn to stage 3
 Turn back to stage 2
 Turn back to stage 1
 Recognition                              116,373.04                                                         116,373.04


                                                            144
                                                 TsannKuen (China) Enterprise Co.,Ltd.
                                Notes to the Financial Statements for the Year ended 31 December 2019

                                              Stage 1               Stage 2                       Stage 3
                                        Expected credit         Expected credit
                                                                                        Expected credit loss for
  Allowance for bad debt                loss for the next      loss for the whole                                            Total
                                                                                       the whole duration(Credit
                                             12 months         duration(no credit
                                                                                       impairment has occurred)
                                                                  impairment)
 Reversal
 Used
 Written off
 Other movements
 Closing balance as of
                                               677,461.07                                                1,238,148.47    1,915,609.54
 31/12/2019

6.6.2.4 Recognition of allowance for bad debt
                                                                       Current period movement
                                    Balance as at                                                                       Balance as at
               Item                                                         Recovery        Used or
                                       31/12/2018        Recognition                                        Others       31/12/2019
                                                                         or reversal       written off
 Other      receivables     of
 assessment                 for      1,799,236.50         116,373.04                                                     1,915,609.54
 impairment by portfolio
             Total                   1,799,236.50         116,373.04                                                     1,915,609.54

6.6.2.5 Details of top five other receivables
                                                         Carrying amount                                        Allowance for bad debt
         Debtors                       Nature                                   Age          % of total
                                                         as of 31/12/2019                                         as of 31/12/2019
Zhangzhou Longchi
Development zone
                                Export tax refund           17,500,000.00 1-90 days                   56.11
State Administration of
Taxation
                                Rent              fee,
Shanghai              Tanghai                                               Over       1
                                electricity       and        1,238,148.47                                3.97             1,238,148.47
Investment Co., Ltd.                                                        year
                                water bill
Xiamen          Laodeshun
Logistics       Co.,     Ltd. Rent fee                        791,117.64 1-90 days                       2.54
Zhangzhou Branch
China Export & Credit
                                                                            Over       1
Insurance       Corporation Deposit                           648,450.00                                 2.08
                                                                            year
Fujian Branch
State       Grid       Fujian
Longhai Power Supply Electricity bill                         555,784.42 1-90 days                       1.78
Co., Ltd.


                                                                   145
                                            TsannKuen (China) Enterprise Co.,Ltd.
                           Notes to the Financial Statements for the Year ended 31 December 2019

                                               Carrying amount                                     Allowance for bad debt
         Debtors                 Nature                               Age          % of total
                                               as of 31/12/2019                                       as of 31/12/2019
          Total                   ——            20,733,500.53       ——                66.48              1,238,148.47

6.7 Inventories
6.7.1 Disclosure by classification
                                                                      Balance as of 31/12/2019
                   Item                      Carrying amount before             Impairment
                                                                                                      Net carrying amount
                                              impairment allowance               allowance
Raw material                                             100,565,847.78           18,759,173.06             81,806,674.72
Work in progress                                           3,545,082.48                                      3,545,082.48
Self-manufactured semi-finished goods                     30,034,902.11            1,770,861.39             28,264,040.72
Finished goods                                           122,743,114.25           16,278,222.58            106,464,891.67
Low-value consumables                                       517,277.32                                         517,277.32
Materials in transit                                       1,557,620.47                                      1,557,620.47
                   Total                                 258,963,844.41           36,808,257.03            222,155,587.38

(Coutinued)
                                                                      Balance as of 31/12/2018
                   Item                      Carrying amount before             Impairment
                                                                                                      Net carrying amount
                                              impairment allowance               allowance
Raw material                                             120,531,455.44           31,555,886.94             88,975,568.50
Work in progress                                           1,535,640.55                                      1,535,640.55
Self-manufactured semi-finished goods                     26,783,292.38            1,680,377.22             25,102,915.16
Finished goods                                           134,736,708.94            9,530,554.60            125,206,154.34
Low-value consumables                                      1,083,138.58                                      1,083,138.58
Materials in transit                                       1,359,083.45                                      1,359,083.45
                   Total                                 286,029,319.34           42,766,818.76            243,262,500.58

6.7.2 Impairment allowance for inventories
                                               Increase in current year       Decrease in current year
                           Balance as of                      Impact of                                   Balance as of
          Item                                                                 Recovered or
                            31/12/2018         Accrual        changes in                          Other     31/12/2019
                                                                                Written off
                                                            exchange rates
Raw material               31,555,886.94 2,134,387.31             28,106.76 14,959,207.95                   18,759,173.06
Self-manufactured
                             1,680,377.22     887,262.69                          796,778.52                 1,770,861.39
semi-finished goods
Finished goods               9,530,554.60 9,349,383.33            18,603.54     2,620,318.89                16,278,222.58


                                                            146
                                                  TsannKuen (China) Enterprise Co.,Ltd.
                                 Notes to the Financial Statements for the Year ended 31 December 2019

                                                      Increase in current year           Decrease in current year
                                 Balance as of                           Impact of                                   Balance as of
            Item                                                                          Recovered or
                                  31/12/2018          Accrual           changes in                           Other    31/12/2019
                                                                                            Written off
                                                                      exchange rates
                                                    12,371,033.3
            Total                42,766,818.76                              46,710.30 18,376,305.36                   36,808,257.03
                                                                  3

6.8 Held-for-sale assets
                    Items                        Book value as at31/12/2018             Book value as at31/12/2019      time of sale
Non-current Assets Held for Sale:                         ——                                    ——                    ——
Including: Fixed assets                                                       0.00                                      Year 2019
           Investment property                                        4,311,436.92                                      Year 2019
                    Total                                             4,311,436.92                                         ——

Note:On 19 December 2018, TKS, a subsidiary of the Company, signed the second
phase plant expropriation compensation agreement with the People's Government
of Anting Town, Jiading District, Shanghai, and made an announcement to
supplement the second phase
 of land, house and related assets of TKS. The handover was completed on 23
January 2019. The total compensation cost was CNY 88,344,133.00.
6.9 Other current assets
                      Item                        Carrying amounts as of 31/12/2019              Carrying amounts as of 31/12/2018
Input tax to be deducted                                                      8,473,290.63                             7,497,484.82
Financial products                                                          492,665,278.14                           520,000,000.00
Prepaid income tax                                                                   1,028.78
                     Total                                                  501,139,597.55                           527,497,484.82

Note: financial products are mainly bank financial products purchased by the
company using idle funds.
6.10 Other investments in equity instruments
                      Item                        Carrying amounts as of 31/12/2019               Carrying amounts as of 31/12/2018
Non-trading investments in equity
                                                                                     40,000.00                             40,000.00
instruments
                     Total                                                           40,000.00                             40,000.00
6.11 Investment property
6.11.1 Investment property measured using the historical cost convention
                        Item                            Houses and buildings               Land use rights             Total
1. Cost:
1.1 Balance as of 31/12/2018                                           72,075,695.00             29,260,577.51       101,336,272.51


                                                                      147
                                             TsannKuen (China) Enterprise Co.,Ltd.
                            Notes to the Financial Statements for the Year ended 31 December 2019

                   Item                           Houses and buildings         Land use rights             Total
1.2 Increased in current year
1.2.1 Purchase
1.2.2 Transferred from inventory/fixed
assets/construction in process
1.2.3 Increased due to merger
1.3 Decreased in current year                                 6,118,223.12                                  6,118,223.12
1.3.1 Disposal                                                6,118,223.12                                  6,118,223.12
1.3.2 Other transferd out
1.4 Balance as of 31/12/2019                                 65,957,471.88         29,260,577.51           95,218,049.39
2.   Accumulated        Depreciation     and
accumulated amortization
2.1 Balance as of 31/12/2018                                 62,041,542.46         14,280,081.74           76,321,624.20
2.2 Increased in current year                                     789,654.39           622,111.80           1,411,766.19
2.2.1 Accrual or amortization                                     789,654.39           622,111.80           1,411,766.19
2.2.2 Other transferd out
2.3 Decreased in current year                                 5,506,400.81                                  5,506,400.81
2.3.1 Disposal                                                5,506,400.81                                  5,506,400.81
2.3.2 Other transferd out
2.4 Balance as of 31/12/2019                                 57,324,796.04         14,902,193.54           72,226,989.58
3. Provision for impairment
3.1 Balance as of 31/12/2018
3.2 Increased in current year
3.2.1 Accrual
3.2 Decreased in current year
3.3.1 Disposal
3.3.2 Other transferd out
3.4 Balance as of 31/12/2019
4. Carrying amount
4.1 Carrying amount as at 31/12/2019                          8,632,675.84         14,358,383.97           22,991,059.81
4.2 Carrying amount as at 31/12/2018                         10,034,152.54         14,980,495.77           25,014,648.31
6.11.2 Investment property with pending ownership registration
                 Item                          Carrying amount                        Reason for pending
Lvyuan three country villa                                645,985.38

Note: Lvyuan three country villa is the houses with limited property rights and it is
bought by the TsannKuen China (Shanghai) Enterprise Co., Ltd. which is the
subsidiary of the Company from Shanghai Lvsheng Real State Development Co.,
Ltd. in year 1999, and there has no land expropriation. Shanghai Lvsheng Real



                                                            148
                                            TsannKuen (China) Enterprise Co.,Ltd.
                           Notes to the Financial Statements for the Year ended 31 December 2019

State Development Co., Ltd. and Shanghai Jiading district, Huangdu town Lvyuan
community residents' committees issued Certificate jointly to prove the right of this
property belongs to TsannKuen China (Shanghai) Enterprise Co., Ltd. in January
2006.
6.12 Fixed assets
               Item                       Balance as of 31/12/2019                    Balance as of 31/12/2018
Fixed assets                                                185,749,835.56                             191,073,302.46
Disposal of fixed assets
               Total                                        185,749,835.56                             191,073,302.46
6.12.1 Fixed assets
General information




                                                           149
                                                                             TsannKuen (China) Enterprise Co.,Ltd.
                                                            Notes to the Financial Statements for the Year ended 31 December 2019


                                                                                                                                                      Improvement
                                                                                                Electronic device, modules
                    Item                    Houses and buildings         Machineries                                                Vehicles        expense of leased     Total
                                                                                                        and others
                                                                                                                                                      fixed assets
1.Cost
1.1 Balance as of 31/12/2018                       96,522,040.15             156,735,004.25                   900,180,280.19        19,456,238.19       66,386,732.06   1,239,280,294.84
1.2 Increase in current year                        1,414,998.56               7,602,393.33                    32,495,854.33           921,292.27          692,280.17     43,126,818.66
1.2.1 Purchase                                                                 7,021,906.01                    31,996,604.84           804,061.48          266,932.54     40,089,504.87
1.2.2 Transferred from
                                                      851,408.35                                                                                           248,359.79      1,099,768.14
construction in-progress
1.2.3 Impact of changes in exchange rates             563,590.21                 580,487.32                       499,249.49           117,230.79          176,987.84      1,937,545.65
1.3 Decreased in current year                          99,289.76                3,519,135.11                   68,040,963.21            18,461.10        3,925,637.49     75,603,486.67
1.3.1 Disposal or scrap                                99,289.76                3,519,135.11                   68,040,963.21            18,461.10        3,925,637.49     75,603,486.67
1.3.2 Other reduction
1.3.3 Impact of changes in exchange rates
1.4 Balance as of 31/12/2019                       97,837,748.95             160,818,262.47                   864,635,171.31        20,359,069.36       63,153,374.74   1,206,803,626.83
2.   Accumulated Depreciation
2.1 Balance as of 31/12/2018                       52,380,702.19              83,608,930.62                   795,600,297.86        14,848,074.77       64,057,357.58   1,010,495,363.02
2.2 Increased in current year                       3,811,052.20               7,559,373.72                    30,491,118.29         1,118,520.65          808,402.83     43,788,467.69
2.2.1 Accrual                                       3,627,930.67               7,248,982.35                    30,141,896.98         1,071,867.54          669,685.87     42,760,363.41
2.2.2 Transferd from fixed assets
2.2.3Impact of changes in exchange rates              183,121.53                 310,391.37                       349,221.31            46,653.11          138,716.96      1,028,104.28
2.3 Decreased in current year                          55,906.44               2,925,824.92                    63,308,598.10            16,929.68        3,925,637.49     70,232,896.63

                                                                                            150
                                                                             TsannKuen (China) Enterprise Co.,Ltd.
                                                            Notes to the Financial Statements for the Year ended 31 December 2019


                                                                                                                                                      Improvement
                                                                                                Electronic device, modules
                     Item                   Houses and buildings         Machineries                                                Vehicles        expense of leased    Total
                                                                                                        and others
                                                                                                                                                      fixed assets
2.3.1 Disposal or scrap                                55,906.44               2,925,824.92                    63,308,598.10            16,929.68        3,925,637.49    70,232,896.63
2.3.2 Other reduction
2.3.3 Impact of changes in exchange rates
2.4 Balance as of 31/12/2019                       56,135,847.95              88,242,479.42                   762,782,818.05        15,949,665.74       60,940,122.92   984,050,934.08
3. Impairment allowance
3.1Balance as at 31/12/2017                                                   19,728,505.65                    17,912,323.93            43,417.90           27,381.88    37,711,629.36
3.2 Increased in current year                                                    257,224.32                       955,388.93           133,579.61           10,890.41     1,357,083.27
3.2.1 Accrual                                                                     211,184.95                      936,205.52           127,854.81           10,762.96     1,286,008.24
3.2.2 Others
3.2.3 Impact of changes in exchange rates                                          46,039.37                       19,183.41             5,724.80              127.45        71,075.03
3.3 Decreased in current year                                                    197,136.26                     1,867,389.71             1,329.47                         2,065,855.44
3.3.1 Disposal or scrap                                                          197,136.26                     1,867,389.71             1,329.47                         2,065,855.44
3.3.2 Other reduction
3.3.3 Impact of changes in exchange rates
3.4 Balance as of 31/12/2019                                                  19,788,593.71                    17,000,323.15           175,668.04           38,272.29    37,002,857.19
4. Carrying amount
4.1 Carrying amount as of 31/12/2019               41,701,901.00              52,787,189.34                    84,852,030.11         4,233,735.58        2,174,979.53   185,749,835.56
4.2 Carrying amount as of 31/12/2018               44,141,337.96              53,397,567.98                    86,667,658.40         4,564,745.52        2,301,992.60   191,073,302.46



                                                                                            151
                                            TsannKuen (China) Enterprise Co.,Ltd.
                           Notes to the Financial Statements for the Year ended 31 December 2019

6.12.1.1 Temporarily idle fixed assets
                                                Accumulated           . Impairment          Carrying
        Item                 Cost                                                                            Note
                                                Depreciation           allowance             amount
 Machineries               43,961,071.97         27,124,707.46         16,608,539.40         227,825.11
 Electronic
 device, modules       168,851,725.26           159,753,649.36          7,931,489.94       1,166,585.96
 and others
 Vehicles                      69,304.00              69,304.00
 Improvement
 expense of fixed            999,659.75             972,277.87             27,381.88
 assets
       Total           213,881,760.98           187,919,938.69         24,567,411.22       1,394,411.07

6.12.1.2 Fixed assets with pending ownership registration
               Items                       Carrying amount                           Reason for pending
Lvyuan three country villa                            193,795.61

Qingying garden                                       142,455.38                            Legal procedures in process

Note: Lvyuan three country villa is the houses with limited property rights and it is
bought by the TsannKuen China (Shanghai) Enterprise Co., Ltd. which is the
subsidiary of the Company from Shanghai Lvsheng Real State Development Co., Ltd.
in year 1999, and there has no land expropriation. Shanghai Lvsheng Real State
Development Co., Ltd. and Shanghai Jiading district, Huangdu town Lvyuan
community residents' committees issued Certificate jointly to prove the right of this
property belongs to TsannKuen China (Shanghai) Enterprise Co., Ltd. in January
2003.
6.12.2 Disposal of fixed assets
None
6.13 Construction in progress
               Item                  Carrying amounts of at 31/12/2019           Carrying amounts as of 31/12/2018
Construction in progress                                       2,921,901.51                                 895,756.17
Material holds for construction
of fixed assets
               Total                                           2,921,901.51                                 895,756.17




                                                           152
                                          TsannKuen (China) Enterprise Co.,Ltd.
                         Notes to the Financial Statements for the Year ended 31 December 2019

6.13.1 Construction in progress
                           Carrying amounts as of 31/12/2019                  Carrying amounts as of 31/12/2018
           Item           Carrying                      Net carrying       Carrying                      Net carrying
                                         Impairment                                     Impairment
                          amounts                         amounts          amounts                        amounts
Sporadic project          2,921,901.51                   2,921,901.51      895,756.17                        895,756.17
           Total          2,921,901.51                   2,921,901.51      895,756.17                        895,756.17

6.13.2 Material holds for construction of fixed assets
None
6.14 Intangible assets
6.14.1 Intangible assets
                           Item                                 Land rights           Software              Total
1. Cost:
1.1 Balance as of 31/12/2018                                    18,300,959.04         36,256,825.70       54,557,784.74
1.2 Increased in current year                                     1,151,496.03          8,003,762.29       9,155,258.32
1.2.1 Purchase                                                      508,403.80          7,977,026.80       8,485,430.60
1.2.2 Impact of changes in exchange rates                           643,092.23            26,735.49          669,827.72
1.3 Decreased in current year                                          43,523.07                     -        43,523.07
1.3.1 Disposal
1.3.2 Impact of changes in exchange rates                              43,523.07                              43,523.07
1.4 Balance as of 31/12/2019                                    19,408,932.00         44,260,587.99       63,669,519.99
2. Accumulated amortization
2.1 Balance as of 31/12/2018                                      3,677,664.21        23,108,884.50       26,786,548.71
2.2 Increased in current year                                       692,579.16          5,457,111.88       6,149,691.04
2.2.1 Accrual                                                       603,721.31          5,429,710.32       6,033,431.63
2.2.2 Impact of changes in exchange rates                              88,857.85          27,401.56          116,259.41
2.3 Decreased in current year
2.3.1 Accrual
2.3.2 Impact of changes in exchange rates
2.4 Balance as of 31/12/2019                                      4,370,243.37        28,565,996.38       32,936,239.75
3. Carrying amount
3.1 Carrying amount of at 31/12/2019                            15,038,688.63         15,694,591.61       30,733,280.24
3.2 Carrying amount of at 31/12/2018                            14,623,294.83         13,147,941.20       27,771,236.03




                                                         153
                                               TsannKuen (China) Enterprise Co.,Ltd.
                              Notes to the Financial Statements for the Year ended 31 December 2019

6.15 Long-term deferred charge
                                                     Increase                                 Other decrease
                            Carrying amount                               Amortisation                         Carrying amount
          Item                                       during the                                  during the
                            as of 31/12/2018                          for the current year                     as of 31/12/2019
                                                    current year                                current year
Houses                and
buildings renovation           7,833,237.73          1,715,103.10             2,485,088.02                         7,063,252.81
expenses
Wall projects of 3
                                   225,629.39                                   62,966.40                            162,662.99
phases
          Total                8,058,867.12          1,715,103.10             2,548,054.42                         7,225,915.80

6.16 Deferred tax assets and deferred tax liabilities
6.16.1 Deferred tax assets
                                       Carrying amount as of 31/12/2019                  Carrying amount as of 31/12/2018
             Item                  Deductible temporary            Deferred          Deductible temporary        Deferred tax
                                        difference                 tax assets            difference                assets
Impairment allowance                      59,473,136.87              9,463,194.19             65,861,645.32       10,342,592.45
Credit               impairment
                                            9,094,485.90             1,512,918.53             11,761,016.91        1,922,008.25
provision
Unrealised        profits   from
                                              569,182.52               142,295.63                 736,143.60         184,035.90
  intragroup transactions
Accrued expenses                          11,382,495.34              1,882,789.81               9,125,886.93       1,505,944.87
Payroll liability                             416,881.95                 83,376.40                321,335.06          64,267.00
Undistributed deficit                     29,628,345.15              7,407,086.29             49,539,618.81       12,384,904.70
Financial liabilities held for
                                              638,800.00                 95,820.00
trading
             Total                       111,203,327.73             20,587,480.85            137,345,646.63       26,403,753.17

6.16.2 Deferred tax liabilities
                                      Carrying amount as of 31/12/2019                   Carrying amount as of 31/12/2018
            Item                   Taxable temporary            Deferred tax          Taxable temporary        Deferred tax
                                       difference                   assets                   difference           assets
Policy relocation                       193,170,474.36              48,292,618.59            109,137,778.28       27,284,444.57
Financial assets held for
                                          3,620,689.00                 543,103.35               1,440,700.00         216,105.00
  trading
Others                                                                                             23,372.70           4,674.53
            Total                       196,791,163.36              48,835,721.94            110,601,850.98       27,505,224.10



                                                                   154
                                             TsannKuen (China) Enterprise Co.,Ltd.
                            Notes to the Financial Statements for the Year ended 31 December 2019

6.16.3 Details of unrecognised deferred tax assets
                    Item                     Carrying amount as of 31/12/2019        Carrying amount as of 31/12/2018
Impairment allowance for assets                                      14,337,977.35                        14,616,802.80
Credit impairment provision                                           2,296,211.23                         1,669,909.67
Accrued expenses                                                     14,687,122.47                        19,164,421.53
Payroll liability                                                     9,201,884.77                         9,751,674.95
Undistributed deficit                                               139,107,798.31                       108,813,092.06
                    Total                                           179,630,994.13                       154,015,901.01

Note: Due to whether the availability of future to obtain sufficient taxable income is
uncertain that is list in above, and therefore no deferred tax assets are recognised as
deductible temporary differences and recoverable losses.
6.16.4 The deductible losses of unrecognised deferred tax assets shall be matured in
the following years
                                            Carrying amount as of       Carrying amount as of
                    Year                                                                                 Note
                                                 31/12/2019                  31/12/2018
2019                                                                             7,616,045.12
2020                                                 10,341,578.00              10,341,578.00
2021                                                 42,160,374.19              42,160,374.19
2022                                                  4,828,378.89               4,828,378.89
2023                                                 15,495,274.18              15,495,274.18
2024-2028                                            66,282,193.05              28,371,441.68
                    Total                          139,107,798.31              108,813,092.06

Note: The annual loss of Tsannkuen Edge Intelligence Co., Ltd. continued to make up
for a maximum period of 10 years.
6.17 Other non-current assets
                                Carrying amount as of 31/12/2019                 Carrying amount as of 31/12/2018
           Item               Carrying                     Net carrying       Carrying                    Net carrying
                                            Impairment                                      Impairment
                              amounts                         amounts        amounts                        amounts
Prepaid mold fee               148,718.90                     148,718.90 1,332,192.80                      1,332,192.80
Prepaid facilities etc.        857,295.76                     857,295.76 2,163,031.84                      2,163,031.84
          Total              1,006,014.66                   1,006,014.66 3,495,224.64                      3,495,224.64




                                                            155
                                              TsannKuen (China) Enterprise Co.,Ltd.
                             Notes to the Financial Statements for the Year ended 31 December 2019

6.18 Short-term loan
                    Item                        Carrying amount as of 31/12/2019       Carrying amount as of 31/12/2018
Pledged loan                                                                                                10,432,044.21
                    Total                                                                                   10,432,044.21

6.19 Financial liabilities held for trading
6.19.1 Classificaiton
                                                Carrying amount       Increase in        Decrease in     Carrying amount
                    Item
                                                as of 31/12/2018      current year       current year    as of 31/12/2019
Financial liabilities held for trading                                   638,800.00                            638,800.00
Including: Derivative financial liabilities                              638,800.00                            638,800.00
                    Total                                                638,800.00                            638,800.00
6.19.2 Other explanation
The derivative financial liabilities are forward exchange settlement / sale contracts
signed by the company and financial institutions.
6.20 Notes payable
                    Item                        Carrying amount as of 31/12/2019       Carrying amount as of 31/12/2018
Commercial acceptance                                                 12,319,017.22                         15,490,917.98
Bank acceptance                                                        4,110,230.08                          1,629,161.07
                    Total                                             16,429,247.30                         17,120,079.05

Note: There are no expired notes payable that have not been paid as at the end of
current year.
6.21 Accounts payable
6.21.1 Accounts payable
                    Item                        Carrying amount as of 31/12/2019       Carrying amount as of 31/12/2018
Within 1 year                                                         590,887,361.06                      651,780,435.83
Over 1 year                                                             4,091,233.39                         3,995,132.78
                    Total                                             594,978,594.45                      655,775,568.61

6.21.2 Details of significant accounts payable remaining unsettled for more than one
year
                     Item                        Carrying amount as of 31/12/2019          Reason(s) for unsettlement
Ningbo Chaochao Electrical Equipment
                                                                          500,237.01             Quality disputes
Co., Ltd.
                     Total                                                500,237.01




                                                             156
                                                  TsannKuen (China) Enterprise Co.,Ltd.
                                 Notes to the Financial Statements for the Year ended 31 December 2019

6.22 Advances from customers
6.22.1 Disclosure by classification
                       Item                         Carrying amount as of 31/12/2019          Carrying amount as of 31/12/2018
Within 1 year                                                              7,925,968.34                               6,077,948.25
Over 1 year                                                                5,368,317.44                               3,669,210.65
                       Total                                              13,294,285.78                               9,747,158.90

6.23 Employee benefits payable
6.23.1 Disclosure by classification
                                                                                               Impact of
                                Carrying amount       Increase in         Decrease in                            Carrying amount as
            Item                                                                             exchange rate
                                as of 31/12/2018      current year        current year                             of 31/12/2019
                                                                                               changes
1.Short-term        employee
                                   41,713,004.45 267,550,465.62          264,658,412.23           85,231.98           44,690,289.82
benefits
2.        Post-employment
                                      723,650.33      10,895,695.08       10,899,357.48           12,592.81             732,580.74
benefits
3.Termination benefits              6,150,486.00       3,541,739.68        8,681,099.68                      -         1,011,126.00
4.Other     benefits     due
within one year
            Total                  48,587,140.78 281,987,900.38          284,238,869.39           97,824.79           46,433,996.56

6.23.2 Disclosure by classification of short-term employee benefits
                               Carrying amount       Increase          Decrease in       Impact of exchange Carrying amount
            Item
                               as of 31/12/2018 in current year        current year        rate changes          as of 31/12/2019
 1. Wages, salaries
                                 29,186,607.80 233,750,543.73 230,798,058.68                      64,296.40         32,203,389.25
 and subsidies
 2. Employee welfare                   2,218.05     17,861,129.36 17,863,429.90                       82.49                         -
 3. Social insurance:               724,520.14       9,779,058.79      9,384,034.78               13,950.89          1,133,495.04
 Including:         Medical
                                    466,648.35       6,908,572.15      6,540,055.99                9,723.93            844,888.44
 insurance
 Employment           injury
                                    257,076.29       2,401,515.21      2,400,972.21                4,226.96            261,846.25
 insurance
 Maternity insurance                     795.50        468,971.43        443,006.58                          -          26,760.35
 4.Housing provident
                                  9,757,892.95       5,295,450.52      5,845,549.70                          -       9,207,793.77
 fund
 5.Labour union fee
 and employee                                  -       636,851.26        636,851.26                          -                      -
 education fee


                                                                 157
                                          TsannKuen (China) Enterprise Co.,Ltd.
                         Notes to the Financial Statements for the Year ended 31 December 2019

                       Carrying amount         Increase            Decrease in     Impact of exchange Carrying amount
          Item
                       as of 31/12/2018 in current year            current year       rate changes             as of 31/12/2019
6. Short-term paid
                          2,041,765.51           194,931.96           97,987.91                 6,902.20              2,145,611.76
         absences
7.Short-term
profit-sharing plan
8.Other short-term
                                        -            32,500.00        32,500.00                            -                      -
employee benefits
         Total           41,713,004.45 267,550,465.62 264,658,412.23                           85,231.98             44,690,289.82

6.23.3 Disclosure by defined contribution plan
                                                                                               Impact of
                                Carrying amount         Increase          Decrease in                              Carrying amount
             Item                                                                         exchange rate
                                as of 31/12/2018 in current year          current year                             as of 31/12/2019
                                                                                               changes
1. Basic pension                     723,232.93        10,601,255.50      10,604,923.50          12,592.81              732,157.74

2.Unemployment insurance                    417.40       294,439.58          294,433.98                        -            423.00

3. Annuity payment
            Total                    723,650.33        10,895,695.08      10,899,357.48          12,592.81              732,580.74

Note: the company participates the endowment insurance and unemployment
insurance plan established by the government, according to these plans, the
Company pays planed fees to the company location. In addition to the monthly fee
deposit, the Company no longer bears further payment obligations. Corresponding
expenses are expensed as incurred or costs related assets.
6.24 Taxes payable
                                                                 Carrying amount as of            Carrying amount as of
                        Item
                                                                      31/12/2019                           31/12/2018
Value added tax                                                                   348,837.48
Corporate income tax                                                         16,326,545.55                            1,314,697.77
Personal income tax                                                               927,844.25                            518,057.12
Urban maintenance and construction surcharge                                      731,213.68                            653,751.41
Education surcharge                                                               745,436.58                            668,997.40
Others                                                                            580,796.30                            613,027.37
                        Total                                                19,660,673.84                            3,768,531.07




                                                            158
                                           TsannKuen (China) Enterprise Co.,Ltd.
                          Notes to the Financial Statements for the Year ended 31 December 2019

6.25 Other payables
                                                            Carrying amount as of            Carrying amount as of
                         Item
                                                                  31/12/2019                       31/12/2018
Interest payables                                                                                               23,919.09
Dividends payable
Other payables                                                           48,482,744.38                   52,794,285.82
                         Total                                           48,482,744.38                   52,818,204.91

6.25.1 Interest payables
                                                            Carrying amount as of            Carrying amount as of
                         Item
                                                                  31/12/2019                       31/12/2018
Interest payables for short-term loan                                                                           23,919.09
                         Total                                                                                  23,919.09

6.25.2 Other payables
6.25.2.1 Detail for other payables
                                                           Carrying amount as of            Carrying amount as of
                         Item
                                                                 31/12/2019                        31/12/2018
Within 1 year                                                          38,467,673.13                     41,912,027.59

Over 1 year                                                            10,015,071.25                     10,882,258.23

                         Total                                         48,482,744.38                     52,794,285.82

6.25.2.2 Details of significant other payables remaining unsettled for more than one
year
                                                            Carrying amount as of
                         Item                                                              Reason(s)for unsettlement
                                                                 31/12/2019
                                                                                        Return upon termination of
Deposit                                                                  8,561,194.00
                                                                                        contract
                         Total                                           8,561,194.00                 ——

6.26 Long-term employee benefits payable
6.26.1 Disclosure by classification
                                                           Carrying amount as of             Carrying amount as of
                         Item
                                                                 31/12/2019                        31/12/2018
 1. Post-employment benefits - net liabilities of                         425,896.17                         361,923.23
 defined benefit plans
                         Total                                            425,896.17                         361,923.23




                                                          159
                                              TsannKuen (China) Enterprise Co.,Ltd.
                             Notes to the Financial Statements for the Year ended 31 December 2019

6.26.2 Movement of defined benefit plan
                            Item                              Amount in current year               Amount in prior year
 1. Balance as of 31/12/2018                                                   361,923.23                       156,540.09
 2. Defined benefit cost recognised in profit or loss
                                                                                  80,874.55                      56,036.04
 in the current period
 3. Defined benefit cost recognised in other
                                                                                -13,990.74                      164,825.72
 comprehensive income
 4. Other movements                                                               -2,910.87                     -15,478.62
  4.1 Consideration payment at the time of
 settlement
  4.2 Benefit paid                                                              -18,199.35                      -21,812.47
  4.3 Others                                                                      15,288.48                       6,333.85
 5. Balance as of 31/12/2019                                                   425,896.17                       361,923.23

6.27 Share capital
                                             Movements during the current reporting period (+、
                                                                       -)
                          Carrying amount                                                               Carrying amount as
        Item                                                       Conversion
                          as of 31/12/2018    Share     Bonus                     Other                   of 31/12/2019
                                                                      from                 Subtotal
                                               issue     issue                      s
                                                                    reserves
Total   amount       of
                           185,391,680.00                                                                    185,391,680.00
floating shares

6.28 Capital reserves
                                             Carrying amount        Increase in         Decrease in     Carrying amount as
                  Item
                                             as of 31/12/2018 current year              current year       of 31/12/2019
Share premium                                  210,045,659.80                                                210,045,659.80
Other capital reserves                          86,763,305.99                                                 86,763,305.99
                  Total                        296,808,965.79                                                296,808,965.79

6.29 Other comprehensive income




                                                             160
                                                                                 TsannKuen (China) Enterprise Co.,Ltd.
                                                                Notes to the Financial Statements for the Year ended 31 December 2019


                                                                                                                   Current year
                                                                               Less: previously            Less: previously
                                               Carrying                         recognised in            recognised in other                     After tax         After tax         Carrying
                                                                                                                                    Less:
                  Item                       amount as of   Amount for the           other                 comprehensive                       attributable to   attributable to   amount as of
                                                                                                                                  Income tax
                                             31/12/2018     year before tax    comprehensive            income transferred into                 the parent          minority       31/12/2019
                                                                                                                                   expense
                                                                              income transferred          retained earnings                      company         shareholders
                                                                               into profit or loss
1. Other comprehensive income not
reclassifiable to profit or loss in            -47,037.70        13,990.74                                                          2,798.10          8,394.48         2,798.16       -38,643.22
subsequent periods
Including:       Movements            from
re-measurement             of          net
                                               -47,037.70        13,990.74                                                          2,798.10          8,394.48         2,798.16       -38,643.22
liabilities(assets) of defined benefit
plan
The share of other comprehensive
income that cannot be reclassified
into profit or loss under the equity
method
Changes in fair value of other
investments in equity instruments
Changes in fair value of corporate
credit risks
2. Other comprehensive Income
reclassifiable to profit or loss in          5,972,566.56    2,107,768.89                                                                        1,580,826.67       526,942.22     7,553,393.23
subsequent periods


                                                                                                  161
                                                                             TsannKuen (China) Enterprise Co.,Ltd.
                                                            Notes to the Financial Statements for the Year ended 31 December 2019


                                                                                                               Current year
                                                                           Less: previously            Less: previously
                                           Carrying                         recognised in            recognised in other                     After tax         After tax         Carrying
                                                                                                                                Less:
                 Item                    amount as of   Amount for the           other                 comprehensive                       attributable to   attributable to   amount as of
                                                                                                                              Income tax
                                         31/12/2018     year before tax    comprehensive            income transferred into                 the parent          minority       31/12/2019
                                                                                                                               expense
                                                                          income transferred          retained earnings                      company         shareholders
                                                                           into profit or loss
Including:
The share of other comprehensive
income that can be reclassified into
profit or loss under the equity method
Changes in fair value of other
investments in equity instruments
Reclassification of financial assets
included in other comprehensive
income
Provision for credit impairment of
other debt investments
Cash flow hedge reserve
Foreign exchange difference on
                                         5,972,566.56    2,107,768.89                                                                        1,580,826.67       526,942.22     7,553,393.23
translation of financial Statements
Total                                    5,925,528.86    2,121,759.63                                                           2,798.10     1,589,221.15       529,740.38     7,514,750.01




                                                                                              162
                                              TsannKuen (China) Enterprise Co.,Ltd.
                             Notes to the Financial Statements for the Year ended 31 December 2019

6.30 Surplus reserves
                                Carrying amount as of Increase in current          Decrease in        Carrying amount as of
           Item
                                     31/12/2018                  year              current year                31/12/2019
Statutory surplus reserve              37,838,646.13            2,660,842.42                                    40,499,488.55
           Total                       37,838,646.13            2,660,842.42                                    40,499,488.55

Note: According to the provisions of the Company Law and the Articles of
Association of the Company to accrual statutory surplus reserve of 10 % of net profit,
and no longer to accrual the statutory surplus reserve has reached more than 50%
of the registered capital of the company.
After the Company has accrual the statutory surplus reserve, the Company can
accrual any surplus reserve fund. Upon approval, the discretionary surplus reserve
fund may be used to cover future losses or increase in share capital.
6.31 Retained earnings
                              Item                                      Current year                      Prior year
Pre-adjustment balance brought forward                                     122,872,551.30                       90,105,224.21
Total adjustment to retained earnings b/f (+, -)                                494,653.29                      39,682,756.40
Retained earnings b/f after adjustment                                     123,367,204.59                      129,787,980.61
Add: Net profit attributable to shareholders of the parent                 105,233,212.02                       11,831,622.78
Less: Appropriation to statutory surplus reserve                               2,660,842.42                      3,915,717.69
     Appropriation to discretionary surplus reserve
     General reserve
     Ordinary dividends declared                                               7,415,667.20                     14,831,334.40
     Bonus issue
Balance carrying forward                                                   218,523,906.99                      122,872,551.30

Due to changes in accounting policies, the Company adjusted retained earnings of
prior year by CNY 494,653.29.
6.32 Operating revenues and costs
6.32.1 General information
                                                Current year                                      Prior year
            Item
                                     Revenues                  Costs               Revenues                      Costs
Principal operating activities 1,919,745,046.46           1,631,156,891.41        1,718,490,228.47         1,530,715,289.56
Other operating activities           82,194,795.48             34,644,195.77         71,572,574.61               32,869,228.63
            Total                 2,001,939,841.94        1,665,801,087.18        1,790,062,803.08         1,563,584,518.19




                                                             163
                                                  TsannKuen (China) Enterprise Co.,Ltd.
                                 Notes to the Financial Statements for the Year ended 31 December 2019

6.32.2 Revenues from principal operating activities by business
                                                         Current year                                    Prior year
               Industry
                                         Operating revenues        Operating costs       Operating revenues Operating costs
Household appliances industry                1,919,745,046.46       1,631,156,891.41       1,718,490,228.47 1,530,715,289.56
                Total                        1,919,745,046.46       1,631,156,891.41       1,718,490,228.47 1,530,715,289.56

6.32.3 Revenues from principal operating activities by products
                                                         Current year                                    Prior year
               Products
                                         Operating revenues       Operating costs        Operating revenues Operating costs
Catering and Cooking                        1,271,637,191.29        1,091,065,894.00       1,052,786,500.79       939,379,669.10
Home helper                                   388,186,251.50            336,632,218.03       403,539,698.93       369,906,874.98
Tea/Coffee makers                             244,844,541.59            194,823,071.49       244,127,431.45       210,594,137.63
Others                                          15,077,062.08             8,635,707.89        18,036,597.30           10,834,607.85
                Total                       1,919,745,046.46        1,631,156,891.41       1,718,490,228.47 1,530,715,289.56

6.32.4 Revenues from principal operating activities by regions
                                          Current year                                           Prior year
       Area
                        Operating revenues            Operating costs           Operating revenues            Operating costs
Australia                          83,031,966.00            66,388,350.68                 90,256,702.79               76,657,318.46
Africa                             19,351,407.62            14,900,668.94                 17,546,205.71               15,000,882.37
America                          906,460,709.85            766,978,154.00                725,862,556.23           647,040,779.11
Europe                           492,289,796.35            417,808,120.75                481,253,682.92           429,505,550.95
Asia                             418,611,166.64            365,081,597.04                403,571,080.82           362,510,758.67
       Total                 1,919,745,046.46            1,631,156,891.41             1,718,490,228.47          1,530,715,289.56

6.32.5 Details of operating revenues from top five clients
                                                      Total amount of operating revenues       % of operating revenues in the
                        Period
                                                              from top five clients                       same period
Year 2019                                                                  1,013,442,148.38                                  50.62
Year 2018                                                                    842,993,643.21                                  47.09

6.33 Business tax and surcharges
                          Item                                   Current year                              Prior year
Urban maintenance and construction tax                                        4,344,437.75                             3,246,262.70
Education surcharge                                                           4,276,791.97                             3,185,390.35
Property tax                                                                  1,484,363.10                             1,610,252.80
Land holding tax                                                                393,321.00                              770,025.18
Stamp duty                                                                      985,573.31                              943,618.82


                                                                 164
                                            TsannKuen (China) Enterprise Co.,Ltd.
                           Notes to the Financial Statements for the Year ended 31 December 2019

                   Item                                    Current year                            Prior year
Others                                                                      8,949.67                                70.87
                   Total                                              11,493,436.80                         9,755,620.72

Note: the recognition criteria for taxes and surcharges refer to Note 5 Taxation.
6.34 Sales expenses
                   Item                                    Current year                            Prior year
Export expanses                                                       29,409,292.34                        28,537,682.06
Employee remunerations                                                16,960,247.48                        16,921,890.91
Advertisements    charges        and     sales
                                                                       2,345,198.27                         4,516,913.35
promotion
Claims experiment expenses                                             6,666,539.88                         4,058,248.12
Sales commission and after sales service
                                                                       3,612,254.90                         3,128,248.98
fees
Travel expenses                                                        2,193,296.51                         2,557,317.64
Transportation charges                                                    281,331.30                            622,714.73
Administrative expenses                                                   202,296.32                            279,671.91
Others                                                                 1,306,722.79                         1,043,775.82
Assets lease expenses                                                     412,767.45                            399,535.83
                   Total                                              63,389,947.24                        62,065,999.35

6.35 General and administrative expenses
                   Item                                    Current year                            Prior year
Employee remunerations                                                37,160,444.19                        37,278,881.09
Rental expenses                                                       10,488,506.08                        13,285,686.78
Depreciation and amortization of assets                                8,094,423.95                         8,533,612.55
Others                                                                 7,966,318.16                         7,927,689.64
Maintenance expenses                                                   6,801,817.68                         5,208,204.43
Travel expenses                                                        4,188,371.76                         4,315,168.49
Consultant fees                                                        4,072,610.10                         4,152,679.07
Insurance expenses                                                     2,409,628.91                         2,177,717.70
Administrative expenses                                                1,826,261.75                         1,791,278.42
                   Total                                              83,008,382.58                        84,670,918.17




                                                           165
                                             TsannKuen (China) Enterprise Co.,Ltd.
                            Notes to the Financial Statements for the Year ended 31 December 2019

6.36 Research and development expenses
                    Item                                    Current year                            Prior year

Employee remunerations                                                 43,111,232.54                        39,945,903.03
Text expenses                                                           7,452,505.41                         8,209,555.59
Depreciation and amortization of assets                                 6,896,148.91                         6,011,500.58
Certification expenses                                                  2,958,178.50                         3,175,341.35
Rental expenses                                                         2,685,197.90                         2,794,707.36
Patent expenses                                                         2,757,390.62                         2,467,608.49
Travel expenses                                                         1,764,315.41                         2,006,549.70
Maintenance expenses                                                       879,622.91                             937,632.89
Consultant fees                                                            747,912.93                             653,903.27
Others                                                                  2,646,238.22                         2,504,093.10
                    Total                                              71,898,743.35                        68,706,795.36

6.37 Financial costs
                    Item                                    Current year                            Prior year
Interest expenses                                                          941,366.70                        1,102,100.88
Less: Interest income                                                   5,218,650.55                         7,491,747.10
Exchange gain or loss                                                  -4,017,602.90                        -6,340,830.84
Bank charges                                                            1,134,525.96                              950,773.88
                    Total                                              -7,160,360.79                       -11,779,703.18

6.38 Other income
                    Item                                     Current year                            Prior year
 Export credit insurance subsidies                                       2,065,671.50                       1,534,628.53
 Patent subsidies                                                           339,000.00                           378,900.00
 Technology innovation subsidies                                            400,000.00                           425,000.00
 Exhibition subsidies                                                                                             45,000.00
 Employment stabilization subsidies                                         684,008.53                           315,957.61
 Increasing production&efficiency reward                                    447,500.00
 Special subsidies for online technology
                                                                             18,400.00                           108,800.00
 trading projects
 Enterprise R&D investment subsidies                                     1,024,800.00                            693,000.00
 Foreign trade support funds                                                                                1,000,000.00
 Excellent Taiwan talent awards                                                                                  100,000.00
                    Total                                                4,979,380.03                       4,601,286.14


                                                            166
                                              TsannKuen (China) Enterprise Co.,Ltd.
                             Notes to the Financial Statements for the Year ended 31 December 2019

6.39 Investment income
                                    Item                                      Current year                 Prior year
Investment income from disposal of financial assets measured by
                                                                                    -3,709,080.00             -2,178,460.00
fair value with changes in fair value recognised in profit or loss
Investment income from financial products                                           21,778,521.54             15,128,306.66
                                    Total                                           18,069,441.54             12,949,846.66

6.40 Gain from changes in fair value
               Source of fair value change                            Current year                       Prior year
Financial assets held for trading                                                2,179,989.00                 -2,485,150.00
Including: Derivative financial assets                                           2,179,989.00                 -2,485,150.00
Financial liabilities held for trading                                             -638,800.00
                            Total                                                1,541,189.00                 -2,485,150.00

6.41 Losses on credit impairment
                             Item                                     Current year                       Prior year
Bad debt losses of accounts receivable                                           1,070,365.41               ——

Bad debt losses of other receivables                                                116,373.04              ——

                            Total                                                1,186,738.45               ——

6.42 Losses on assets impairment
                            Item                                      Current year                       Prior year
Allowance for bad debt                                                    ——                                     393,133.54
Inventory impairment losses                                                   12,371,033.33                   16,839,835.30
Impairment losses on fixed assets                                                1,286,008.24                  4,266,106.43
                            Total                                             13,657,041.57                   21,499,075.27

6.43 Income from asset disposal
                                                                                              Included in current year
                 Item                        Current year             Prior year
                                                                                            non-recurring profit and loss
 Income from fixed asset disposal              63,688,086.21              975,770.89                         63,688,086.21
                 Total                         63,688,086.21              975,770.89                         63,688,086.21

6.44 Non-operating income
                                                                                                 Included in current year
                         Item                          Current year         Prior year
                                                                                             non-recurring profit and loss
Government grants (see the following table for
                                                        21,162,176.00          302,434.20                     21,162,176.00
detail: Details for government grants)
Others                                                   6,138,240.65        3,725,378.26                      6,138,240.65
                         Total                          27,300,416.65        4,027,812.46                     27,300,416.65


                                                             167
                                               TsannKuen (China) Enterprise Co.,Ltd.
                              Notes to the Financial Statements for the Year ended 31 December 2019

Details of government grants which are recognised into profit or loss during current
year
                                    Current year                                     Prior year
                    Recognised                                      Recognised
 Government                           Recognised       Write off                      Recognised      Write off    Related with
                           into                                         into
  assistance                           into other      cost and                        into other     cost and assets/income
                   non-operating                                    non-operating
                                        income         expense                          income        expense
                       income                                          income
Government                                                                                                          Related with
relocation          21,162,176.00                                                                                          income
compensation
                                                                                                                    Related with
Others                                4,979,380.03                    302,434.20 4,601,286.14
                                                                                                                           income
Equipment
                                                                                                                    Related with
investment                                            118,058.78
                                                                                                                           assets
subsidies
     Total          21,162,176.00 4,979,380.03 118,058.78             302,434.20 4,601,286.14

6.45 Non-operating expenses
                                                                                                      Included in current year
                    Item                            Current year                Prior year            non-recurring profit and
                                                                                                                  loss
Loss on scrapping of non-current
                                                          673,056.59                      17,043.22                  673,056.59
assets
Including: Fixed assets                                   673,056.59                      17,043.22                  673,056.59
             Intangible assets
External donations                                        157,185.88                     131,549.18                  157,185.88
Fines                                                        4,162.93                     11,295.00                      4,162.93
Others                                                                                     2,384.00
                    Total                                 834,405.40                     162,271.40                  834,405.40

6.46 Income tax expenses
6.46.1 General information
                                    Items                                           Current year              Prior year
Current income tax calculated in accordance with relevant tax law                      22,206,953.28                 979,950.64
Deferred tax                                                                           27,146,971.52              -2,258,582.01
                                    Total                                              49,353,924.80              -1,278,631.37




                                                              168
                                           TsannKuen (China) Enterprise Co.,Ltd.
                          Notes to the Financial Statements for the Year ended 31 December 2019

6.46.2 Reconciliation of account profit and income tax expenses
                                        Item                                                      Current year
Profit before tax                                                                                        213,408,933.59
Income tax computed in accordance with the applicable tax rate                                            53,352,233.40
Impact of differing tax rates applicable to subsidiaries                                                 -11,778,337.22
Impact of adjustment for prior period tax expenses                                                           114,978.76
Impact of non-taxable income                                                                                -111,634.56
Impact of non-deductible costs, expenses and losses                                                          842,659.70
Impact of utilisation of prior period deductible temporary differences and taxable
temporary differences for which no deferred tax asset has been recognised
Impact of current period deductible temporary differences and taxable temporary
                                                                                                          11,311,012.68
differences fo which no deferred tax asset has been recognised
Changes in balance of prior year deferred tax asset/liabilities due to tax rate
adjustment
Impact of additional deduction for R&D expenses                                                           -4,376,987.96
Income tax expenses                                                                                       49,353,924.80

6.47 Other comprehensive income
Please see Note 6.29 for details.
6.48 Notes to the statement of cash flows
6.48.1 Other cash received relating to operating activities
                               Item                                       Current year                 Prior year
Government grants                                                               26,961,556.03              4,903,720.34
Interests income                                                                 5,218,650.55              7,491,747.10
Rent income                                                                     50,324,606.89             39,624,272.24
Funds in current account and others                                              6,694,142.96              8,978,743.05
                               Total                                            89,198,956.43             60,998,482.73

6.48.2 Other cash payments relating to operating activities
                               Item                                       Current year                 Prior year
Penalties and donations paid                                                       161,348.81                142,844.18
Bank charges paid by cash                                                        1,134,525.96                950,773.88
Sales expenses and general and administrative expenses paid
                                                                                97,204,731.46            115,905,891.22
by cash
Current accounts and others                                                      2,681,430.50             12,088,629.81
                               Total                                           101,182,036.73            129,088,139.09




                                                           169
                                            TsannKuen (China) Enterprise Co.,Ltd.
                           Notes to the Financial Statements for the Year ended 31 December 2019


6.48.3 Other cash received relating to investing activities
                                Item                                       Current year            Prior year
To recover the maturity time deposits that for purpose to earn
                                                                               228,047,963.79       696,692,500.00
interest income in financial institutions
                               Total                                           228,047,963.79       696,692,500.00

6.48.4 Other cash payments relating to investing activities
                                Item                                       Current year            Prior year
Deposits in financial institutions for the purpose of earning
                                                                               228,047,963.79       696,692,500.00
interest income
                               Total                                           228,047,963.79       696,692,500.00

6.48.5 Other cash received relating to financing activities
                                Item                                       Current year            Prior year
Capital absorbed and loan between related parties                                                      5,719,914.44
Security deposit of pledged loan                                                21,200,000.00
                               Total                                            21,200,000.00          5,719,914.44

6.48.6 Other cash payments relating to financing activities
                                Item                                       Current year            Prior year
Security deposit of pledged loan                                                                      21,200,000.00
Capital absorbed and loan between related parties                                                      5,719,914.44
                               Total                                                                  26,919,914.44

6.49 Supplementary information to the statement of cash flows
6.49.1 Supplementary information to the statement of cash flows
                                  Items                                        Current year         Prior year
 ① Reconciliation of cash flows from operating activities to net
 profit:
 Net profit                                                                     164,055,008.79       12,745,505.32
 Add: Loss on asset impairment                                                   13,657,041.57       21,499,075.27
       Losses on credit impairment                                                1,186,738.45                   ——
       Depreciation of fixed assets, oil and gas assets, biological
                                                                                 44,172,129.60       44,641,659.73
 assets held for production
       Amortisation of intangible assets                                          6,033,431.63        4,882,397.22
       Amortisation of Long-term deferred expenditure                             2,548,054.42        2,402,565.74
       Loss on non-current assets disposal (gain presented by "-"
                                                                                -63,688,086.21         -975,770.89
 prefix)


                                                           170
                                          TsannKuen (China) Enterprise Co.,Ltd.
                         Notes to the Financial Statements for the Year ended 31 December 2019

                                Items                                        Current year         Prior year

      Loss on scrap of fixed assets (gain presented by "-" prefix)                673,056.59           17,043.22
      Loss on fair value changes (gain presented by "-" prefix)                 -1,541,189.00       2,485,150.00
      Financial costs (gain presented by "-" prefix)                            4,849,161.64        2,921,113.57
      Investment loss (gain presented by "-" prefix)                          -18,069,441.54      -12,949,846.66
      Decrease of deferred tax assets (increase presented by "-"
                                                                                5,816,473.68       -1,253,065.42
prefix)
      Increase of deferred tax liabilities (increase presented by "-"
                                                                               21,330,497.84       -1,208,649.49
prefix)
      Decrease of inventories (increase presented by "-" prefix)                8,689,169.57      -64,530,050.49
      Decrease of operating receivables (increase presented by "-"
                                                                                -3,558,046.68       8,188,725.94
prefix)
      Increase of operating payables (decrease presented by "-"
                                                                              -42,533,712.37      87,210,207.76
prefix)
      Others
      Net cash flows generated from operating activities                      143,620,287.98     106,076,060.82
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 of 31/12/2019                                                         639,623,201.98     448,492,295.47
Less: Cash as of 31/12/2018                                                   448,492,295.47     564,381,960.88
Add: Cash equivalents as of 31/12/2019
Less: Cash equivalents as of 31/12/2018
Net increase of cash and cash equivalents                                     191,130,906.51     -115,889,665.41

6.49.2 Composition of cash and cash equivalents
                                Items                                        Current year         Prior year

①Cash                                                                         639,623,201.98     448,492,295.47
      Including: Cash at hand                                                       926,966.65         729,204.57
                 Demand bank deposit                                           638,696,235.33     447,763,090.90
                 Demand other monetary funds
                 Demand deposit in the Central Bank
                 Deposit in peer firms


                                                         171
                                          TsannKuen (China) Enterprise Co.,Ltd.
                         Notes to the Financial Statements for the Year ended 31 December 2019

                                Items                                        Current year             Prior year

                  Loan to peer firms
②Cash equivalents
      Including: Debt instrument matured within three months
③Cash and cash equivalents as of 31/12/2019                                   639,623,201.98          448,492,295.47
      Including: restricted cash and cash equivalents in parent
company or subsidiary

Note 1: Cash and cash equivalents excluding restricted cash and cash equivalents
in parent company or subsidiary.
Note 2: On 31 December 2018, the amount of cash and cash equivalents of
statement of cash flows was CNY 448,492,295.47, the balance of monetary funds of
balance sheet was CNY 469,692,295.47, and the difference was CNY
21,200,000.00. Because the amount of cash and cash equivalents of statement of
cash flows was deducted from the pledge loan guarantee of CNY 21,200,000.00,
which does not meet the cash and cash equivalent standard.
6.50 Foreign currency monetary items
6.50.1 Foreign currency monetary items
                                Original amount as at                                       Translated amount as at
          Items                                             Foreign exchange rate
                                       31/12/2019                                                 31/12/2019
Monetary funds
Including:-USD                             23,560,721.37                     6.976200                  164,364,304.42
         -EUR                                  51,365.46                     7.815500                      401,446.75
         -HKD                                  36,312.52                     0.895780                       32,528.03
         -JPY                              35,209,847.39                     0.064086                    2,256,458.28
         -GBP                                   9,519.72                     9.150100                       87,106.39
         -IDR                             970,560,358.57                     0.000502                      487,221.30
         -HUF                                  81,016.09                     0.023610                          1,912.79
         -NTD                              39,871,784.28                     0.231763                    9,240,804.34
         Total                                                                                         176,871,782.30
Accounts receivable
Including:-USD                             40,208,823.03                     6.976200                  280,504,791.22
         -JPY                              61,025,050.00                     0.064086                    3,910,851.35
         -IDR                             866,860,240.00                     0.000502                      435,163.84
         Total                                                                                         284,850,806.41



                                                         172
                                     TsannKuen (China) Enterprise Co.,Ltd.
                    Notes to the Financial Statements for the Year ended 31 December 2019

                           Original amount as at                                      Translated amount as at
          Items                                        Foreign exchange rate
                                31/12/2019                                                  31/12/2019
Accounts payable
Including:-USD                        9,266,761.67                      6.976200                 64,646,782.75
         -EUR                           318,734.20                      7.815500                   2,491,067.14
         -HKD                           813,404.91                      0.895780                    728,631.85
         -JPY                        29,943,146.14                      0.064086                   1,918,936.46
         -IDR                     2,059,261,779.84                      0.000502                   1,033,749.41
         -NTD                         4,171,371.00                      0.231763                    966,769.46
         Total                                                                                   71,785,937.07
Other receivables

Including:-USD                            22,706.00                     6.976200                     158,401.60
         -JPY                         1,036,866.00                      0.064086                      66,448.59
         -NTD                         1,076,423.00                      0.231763                     249,475.02
         -IDR                     1,278,752,222.00                      0.000502                     641,933.62
         Total                                                                                     1,116,258.83
Other payables
Including:-USD                          178,228.26                      6.976200                   1,243,355.99
         -HKD                             10,000.00                     0.895780                         8,957.80
         -NTD                         1,018,714.00                      0.231763                     236,100.21
         -IDR                     1,655,738,341.43                      0.000502                     831,180.65
         Total                                                                                     2,319,594.65

6.50.2 Description of overseas operating entities
The Company's holding sub-subsidiaries company Pt. Star Comgistic Indonesia
locates at West Java province in Indonesia, due to Pt. Star Comgistic Indonesia is
mostly settled in US dollars by usual purchases and sales, so that it adopts the US
dollar as its functional currency.
The Company's holding sub-subsidiaries company SCPDI locates at West Java
province in Indonesia, due to SCPDI is mostly settled in IDR by usual purchases and
sales, so that it adopts the IDR as its functional currency.
The Company's holding sub-subsidiaries company Tsannkuen Edge Intelligence Co.,
Ltd. locates at Taiwan, due to Tsannkuen Edge Intelligence Co., Ltd. is mostly settled
in NTD by usual purchases and sales, so that it adopts the NTD as its functional
currency.
The Company's holding sub-subsidiaries company East Sino Development Limited


                                                    173
                                           TsannKuen (China) Enterprise Co.,Ltd.
                          Notes to the Financial Statements for the Year ended 31 December 2019

locates at HongKong, due to East Sino Development Limited is mostly settled in
HKD by usual purchases and sales, so that it adoptsthe HKD as its functional
currency.
The Company's holding sub-subsidiaries company Orient Star Investments Limited
locates at HongKong, due to Orient Star Investments Limited is mostly settled in
USD by usual purchases and sales, so that it adopts the USD as its functional
currency.
6.51 Government grants
6.51.1 General information
                                                                                                   Amount recorded in
                     Category                              Amouny             Disclosure
                                                                                                  current profit and loss
Equipment investment subsidies                               820,000.00      Fixed assets                      118,058.78
Export credit insurance subsidies                          2,065,671.50      Other income                    2,065,671.50
2017 Fujian Science and Technology Award                     100,000.00      Other income                      100,000.00
2017 R & D funding input subsidies                         1,024,800.00      Other income                    1,024,800.00
Special subsidies for online technology trading                              Other income
                                                                18,400.00                                       18,400.00
projects
2018 patent grant fund award                                 150,000.00      Other income                      150,000.00
The first batch of patent funding in 2019                       51,000.00    Other income                       51,000.00
Intellectual property advantage enterprise funding           100,000.00      Other income                      100,000.00
Provincial increase in production and efficiency                             Other income
                                                             447,500.00                                        447,500.00
incentive funds in 2019 Q1
Subsidies for high-level R & D and innovation                                Other income
                                                             300,000.00                                        300,000.00
platforms
The second batch of patent funding in 2019                      38,000.00    Other income                       38,000.00
Enterprise employment incentives                             611,926.68      Other income                      611,926.68
Employment stabilization subsidies                              72,081.85    Other income                       72,081.85
                                                                            Non-operating
Demolition funds                                          21,162,176.00                                    21,162,176.00
                                                                                income
6.51.2 Return of government grants
None


Note 7: Change of consolidated scope
7.1 Business combination involving entities under common control
None



                                                          174
                                             TsannKuen (China) Enterprise Co.,Ltd.
                            Notes to the Financial Statements for the Year ended 31 December 2019

7.2 Business combination involving entities not under common control
None
7.3 Other reasons for change of consolidated scope
In May 2019, the Company registered and established Xiamen Cankun Property
Services Co., Ltd. Xiamen Cankun Property Services Co., Ltd. has been included in
the scope of consolidated financial statements since the date of incorporation.


Note 8: The equity in other main entities
8.1 The equity in subsidiaries
8.1.1 The construction of the company
                                    Place of        Place           Nature      Holding proportion %
         Subsidiaries                                                                                    Acquired method
                                   operation of registration      of business    Directly Indirectly
                                                               Manufacture
TsannKuen         (Zhangzhou)                                  home                                     Acquired   through
                                  Zhangzhou Zhangzhou                               75.00       75.00
Enterprise Co., Ltd.(TKL)                                      electronic                               establishment
                                                               appliance
                                                                                                        Acquired   through
                                                               Manufacture
                                                                                                        business
TsannKuen China (Shanghai)                                     home
                                  Shanghai     Shanghai                            46.875       62.50 combination under
Enterprise Co., Ltd. (TKS)                                     electronic
                                                                                                        common
                                                               appliance
                                                                                                        control
                                                               Manufacture
TsannKuen         (Zhangzhou)
                                                               home                                     Acquired   through
South     Port     Electronics Zhangzhou Zhangzhou                                  56.25       75.00
                                                               electronic                               establishment
Enterprise Co., Ltd. (TKN)
                                                               appliance
Shanghai Canxing Trading                                       Sales of home                            Acquired   through
                                  Shanghai     Shanghai                             56.25      100.00
Co.,Ltd (STD)                                                  electronic                               establishment
Xiamen    Tsannkuen     Home                                   Home
                                                                                                        Acquired   through
Appliance Design Co., Ltd. Xiamen              Xiamen          appliance           100.00      100.00
                                                                                                        establishment
(TKW)                                                          design
                                                                                                        Acquired   through
                                                                                                        business
East     Sino    Development                                   Investment,
                                  Hong Kong Hong Kong                               75.00      100.00 combination under
Limited. (East Sino)                                           Trading
                                                                                                        common
                                                                                                        control
Pt.Star Comgistic Indonesia.                                   Manufacture                              Acquired   through
                                  Indonesia    Indonesia                            75.00      100.00
(SCI)                                                          home                                     business



                                                            175
                                             TsannKuen (China) Enterprise Co.,Ltd.
                            Notes to the Financial Statements for the Year ended 31 December 2019


                                      Place of            Place              Nature         Holding proportion %
         Subsidiaries                                                                                                      Acquired method
                                      operation of registration            of business        Directly Indirectly
                                                                      electronic                                          combination under
                                                                      appliance                                           common
                                                                                                                          control
Pt.Star Comgistic Property
                                                                      Real         estate                                 Acquired       through
Development            Indonesia Indonesia            Indonesia                                   75.00      100.00
                                                                      development                                         establishment
( SCPDI)
                                                                                                                          Acquired       through
Orient    Star      Investments                                       Investment,                                         business
                                    Hong Kong Hong Kong                                           75.00      100.00
Limited (OSI)                                                         Trading                                             combination under
                                                                                                                          uncommon control
                                                                                                                          Acquired       through
Tsannkuen Edge Intelligence                                           Industrial                                          business
                                    Taipei            Taipei                                      75.00      100.00
Co., Ltd. (TKEI)                                                      design                                              combination under
                                                                                                                          common control
TsannKuen           (Zhangzhou)                                       Investment,                                         Acquired       through
                                    Zhangzhou Zhangzhou                                           75.00      100.00
Investment Co., Ltd. (TKI)                                            Trading                                             establishment

8.1.2 Important non-wholly-owned subsidiary
                                                      Profit and loss attributable Dividends attributable                  Total amount of
                     Holding proportion of
 Subsidiaries                                          to minority equity during               to minority               minority equity at the
                   minority shareholders (%)
                                                               current year                  shareholders                end of current year
TKL                                          25.00                  29,279,433.90                   8,481,119.62              341,291,651.18
TKS                                      53.125                     34,306,048.54                                             120,800,139.32
SCI                                          25.00                  -3,875,104.29                                              28,195,255.64
TKEI                                         25.00                    -704,462.71                                                3,902,497.41

8.1.3 The main financial information of important non-wholly-owned subsidiary
                                                                  Balance as of 31/12/2019

 Subsidiaries                           Non-current                                                       Non-current
                   Current assets                                  Total           Current liabilities                                Total
                                             assets                                                        liabilities

TKL                1,585,989,781.79     477,030,933.80         2,063,020,715.59      697,311,007.52          543,103.35          697,854,110.87

TKS                 266,758,090.65       11,936,773.80          278,694,864.45         3,013,748.32       48,292,618.59             51,306,366.91

SCI                  81,050,940.01       73,740,744.72          154,791,684.73        42,010,662.19                                 42,010,662.19

TKEI                 16,327,132.09        3,383,316.35            19,710,448.44        3,674,562.65          425,896.15              4,100,458.80




                                                                   176
                                         TsannKuen (China) Enterprise Co.,Ltd.
                        Notes to the Financial Statements for the Year ended 31 December 2019

(Continued)
                                                      Balance as of 31/12/2018
 Subsidiaries                      Non-current                            Current       Non-current
                 Current assets                          Total                                                Total
                                       assets                             liabilities    liabilities
TKL             1,588,259,064.08 447,605,556.35 2,035,864,620.43 753,675,167.81           216,105.00 753,891,272.81
TKS              180,423,244.43 12,266,644.24 192,689,888.67             2,593,037.93 27,284,444.57 29,877,482.50
SCI               59,553,081.28 72,448,137.92 132,001,219.20 39,932,472.21                                39,932,472.21
TKEI              18,139,521.40    3,985,824.81        22,125,346.21     3,899,810.79     366,597.76        4,266,408.55

(Continued)
                                                   Total amount during current year
 Subsidiaries                                                       Total amount of             Cash flow relating to
                     Revenues               Net profit
                                                                 comprehensive income           operating activities
TKL                 1,891,438,194.50        117,117,735.59                                               121,362,837.92
TKS                     1,009,359.74            64,576,091.37                                              20,111,191.73
SCI                  112,791,823.64         -15,500,417.14                                                 -6,027,787.01
TKEI                    7,893,221.28            -2,817,850.84                                              -1,395,768.29

 (Continued)
                                                    Total amount during prior year
 Subsidiaries                                                       Total amount of             Cash flow relating to
                     Revenues               Net profit
                                                                 comprehensive income           operating activities
TKL                 1,673,115,731.37            37,693,864.99                                            154,928,203.41

TKS                      880,007.16             -2,709,070.17                                              -1,670,577.00

SCI                  120,588,666.38         -21,639,003.36                                               -22,922,887.07

TKEI                  10,234,356.91             -5,348,092.34                                              -6,129,051.57

8.2 The share of owner's equity in the subsidiary has changed and still
controls the transactions of the subsidiary
TsannKuen (Zhangzhou) Enterprise Co., Ltd.(TKL), the Company’s holding
subsidiary, increased capital in its wholly-owned subsidiary East Sino Development
Limited, at the same time, East Sino Development Limited increased capital in its
subsidiary Pt.Star Comgistic Indonesia (SCI), after the capital increase, the
shareholdings held by TsannKuen (Zhangzhou) Enterprise Co., Ltd. in East Sino
Development Limited and sub-subsidiary Pt.Star Comgistic Indonesia remain
unchanged.




                                                         177
                                        TsannKuen (China) Enterprise Co.,Ltd.
                       Notes to the Financial Statements for the Year ended 31 December 2019

Note 9: The risk associated with financial instruments
The main financial instruments of the Company including equity investments, loans,
accounts receivable, accounts payable and etc., please see Note 6 for detail of
related items. The risk associated with financial instruments, and risk management
policies which the company use 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.
9.1 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 proceed the risk
management, and supervise a variety of risks timely and reliably, and control the risk
within a limited range.
9.1.1 Market Risk
9.1.1.1 Foreign exchange risk
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, HKD and NTD, in addition to the Company's subsidiary SCI
purchases and sales used by USD, SCPDI purchases and sales used by IDR, TKEI
purchases and sales used by NTD, the other main business activities of the
Company used by CNY. On 31 December 2019, 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.
            Item                    31/12/2019                     1/1/2019                    31/12/2018
 Cash and cash equivalent              176,871,782.30                178,177,559.98              178,177,559.98
 Accounts receivable                   284,850,806.41                270,582,962.97              270,582,962.97
 Other receivables                        1,116,258.83                  1,211,986.43                1,211,986.43
 Accounts payable                       71,785,937.07                  75,359,292.22               75,359,292.22
 Other payables                           2,319,594.65                  2,762,052.62                2,762,052.62
 Short-term loan                                                       10,432,044.21               10,432,044.21



                                                       178
                                        TsannKuen (China) Enterprise Co.,Ltd.
                       Notes to the Financial Statements for the Year ended 31 December 2019

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.
9.1.2. Credit Risk
That could cause 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 and financial guarantees undertaken by the Company , as of
31 December 2019.
the carrying amount of the financial asset recognised in the consolidated balance
sheet; in terms of financial instruments at fair value, the carrying amount reflects its
risk exposure, but not its maximum risk exposure, its maximum risk exposure will
change with changes in its future fair value.
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 recognised 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.
(1) Age analysis of financial assets that are past due and not impaired
No financial assets that are past due and not impaired.
(2) Analysis of financial assets that have suffered an individual impairment
No financial assets that have suffered an individual impairment
9.1.3 Liquidity risk
When managing liquidity risk, the Company’s management believes that
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.




                                                       179
                                            TsannKuen (China) Enterprise Co.,Ltd.
                           Notes to the Financial Statements for the Year ended 31 December 2019

Note 10: Disclosure of fair value
10.1 Year-end fair value of assets & liabilities that are measured by fair value
                                                                     Fair value as of 31/12/2019
                                                  First level      Second level         Third level
                    Item
                                                measurement        measurement        measurement        Total
                                                of Fair Value       of Fair Value      of Fair Value
1. Continuous measurement of Fair
Value
1.1 Financial assets held for trading
1.1.1 Financial assets at fair value
                                                 3,620,689.00                                          3,620,689.00
through current profit and loss
1.1.1.1 Liabilities investment
1.1.1.2 Equity investment
1.1.1.3 Derivative financial asset               3,620,689.00                                          3,620,689.00
1.2     Other   investments       in   equity
instruments
1.3 Other non-current financial assets
Total amount of asset that is continually
                                                 3,620,689.00                                          3,620,689.00
measured by fair value
1.4 Financial liabilities held for trading
1.4.1 Financial liabilities at fair value
                                                   638,800.00                                           638,800.00
through current profit and loss
Including: Tradable bonds
           Derivative financial liabilities        638,800.00                                           638,800.00
           Others
Total amount of liabilities that is
                                                   638,800.00                                           638,800.00
continually measured by fair value

10.2 The basis for determining the market price of continuous and
non-continuous fair value measurement items of the first level
Unadjusted quotations obtained on active markets from the same assets or liabilities
on the balance sheet date.




                                                           180
                                           TsannKuen (China) Enterprise Co.,Ltd.
                          Notes to the Financial Statements for the Year ended 31 December 2019

Note 11: Related parties and related party transaction
11.1 Details of the parent
                                                                                         Shareholding       Voting right
                                Place of
           Parents                           Nature of business Registered capital           in the            in the
                              registration
                                                                                         Company %          Company %
                                             Manufacture       and
       STAR COMGISTIC                                                      NTD
                                 Taiwan      sales       electrical                               42.90                 44.68
       CAPITAL CO.,LTD.                                               3,000,000,000.00
                                             equipment

Note: the ultimate controlling party of the Company is STAR COMGISTIC CAPITAL
CO.,LTD.
11.2 Subsidiaries
See Note 8.1 “The equity in subsidiaries”.
11.3 Details of other related parties
                  Other related parties                                               Relationship
                                                             The company directly controlled by the key management
Thermaster Electronic (Xiamen) Ltd.
                                                             and closed family members
Xiamen Wuhuama Restaurant Management Co., Ltd.               Ultimate holding company have equity
TsannKuen Enterprise Co., Ltd.                               Same actual controller
Kuaisan Electric Business Services Limited                   Same actual controller
Gold mine chain enterprise Co., Ltd                          Same actual controller
Canxing International Travel Service Co., Ltd                Same ultimate holding company

11.4 Transactions with related parties
11.4.1 Transactions through purchase or sell goods and accept or supply services
11.4.1.1 The situation of purchases goods or accepts services
                                                 Content                   Total amount during        Total amount during
           Related parties
                                              of transaction                  current year                prior year
Thermaster Electronic (Xiamen)
                                      Purchase of goods                            36,183,028.16            33,879,904.28
Ltd.
TsannKuen Enterprise Co., Ltd.        Purchase of goods                                  2,909.57               15,214.75
Gold mine chain enterprise Co.,
                                      Purchase of goods                                  2,317.48                 2,710.11
Ltd
STAR COMGISTIC CAPITAL CO.,
                                      Purchase of goods                                  7,181.83                4,964.01
LTD.
                Total                                                              36,195,437.04            33,902,793.15




                                                            181
                                           TsannKuen (China) Enterprise Co.,Ltd.
                          Notes to the Financial Statements for the Year ended 31 December 2019

The situation of sells goods or rendering services
                                                     Content                Total amount during        Total amount during
             Related parties
                                                 of transaction                 current year                 prior year
STAR COMGISTIC CAPITAL CO., LTD. Sale of goods                                     11,059,581.80                13,184,324.56
                  Total                                                            11,059,581.80                13,184,324.56

11.4.2 Lease between related parties
11.4.2.1 The Company is as the lessor
                                                                          Lease rental recognised Lease rental recognised
                Lessee                           Classification
                                                                              in current year               in prior year
Xiamen       Wuhuama           Restaurant
                                            Property                                   51,828.96                    76,475.75
Management Co., Ltd.
                 Total                                                                 51,828.96                    76,475.75

11.4.2.2 The Company is as the lessee
                                                                          Lease rental recognised Lease rental recognised
                 Lessor                          Classification
                                                                              in current year               in prior year
STAR COMGISTIC CAPITAL CO., LTD. Property                                           1,129,317.89                 1,280,449.71
                 Total                                                              1,129,317.89                 1,280,449.71

11.4.3 Assets transfer, Debt restructuring between related parties
                                                                            Total amount during        Total amount during
             Related parties                 Content of transaction
                                                                                current year                 prior year

STAR COMGISTIC CAPITAL CO., LTD. Sale of fixed assets                                   23,060.39                   22,881.17
                  Total                                                                 23,060.39                   22,881.17
                                            Purchase       of     fixed
Thermaster Electronic (Xiamen) Ltd.                                                             0.00                12,820.51
                                            assets
                  Total                                                                         0.00                12,820.51

11.4.4 Remunerations of key management personals
Currency: Ten thousand yuan
                     Items                             Total amount during current year Total amount during prior year
Remunerations of key management personals                                          287.55                             284.14

11.4.5 Other transactions with related parties
                                                                                       Total amount           Total amount
                 Related parties                        Content of transaction
                                                                                    during current year during prior year

Canxing International Travel Service Co., Ltd        Accept service                            374,204.59          659,234.47
Gold mine chain enterprise Co., Ltd                  Provide service                            29,777.74
Kuaisan Electric Business Services Limited           Accept service                                                   1,185.79


                                                            182
                                             TsannKuen (China) Enterprise Co.,Ltd.
                            Notes to the Financial Statements for the Year ended 31 December 2019


                                                                                       Total amount       Total amount
                  Related parties                       Content of transaction
                                                                                    during current year during prior year

TsannKuen Enterprise Co., Ltd.                       Provide service                                            27,680.39
STAR COMGISTIC CAPITAL CO., LTD.                     Money lending                                           5,719,914.44
STAR COMGISTIC CAPITAL CO., LTD.                     Money lending interest                                     17,966.72
                         Total                                                              403,982.33       6,425,981.81

11.5 The balance of payables and receivables among related parties
11.5.1 Receivables owed by related parties
                                        Carrying amount as of 31/12/2019             Carrying amount as of 31/12/2018
            Related party               Carrying amount Allowance for bad        Carrying amount      Allowance for bad
                                                                  debt                                       debt
Accounts receivable:
STAR COMGISTIC CAPITAL
                                            2,263,799.22                               3,639,277.36
CO., LTD.
                Total                       2,263,799.22                               3,639,277.36
Other receivables:
STAR COMGISTIC CAPITAL
                                              206,827.94                                 208,665.92
CO., LTD.
                Total                         206,827.94                                 208,665.92

11.5.2 Payables owed to related parties
                                                                Carrying amount as of           Carrying amount as of
                        Related party
                                                                       31/12/2019                     31/12/2018
Accounts payable:
Thermaster Electronic (Xiamen) Ltd.                                            7,317,114.51                  7,417,343.11
                            Total                                              7,317,114.51                  7,417,343.11
Advances from customers
Xiamen Wuhuama Restaurant Management Co., Ltd.                                      19,731.63                    4,026.00
                            Total                                                   19,731.63                    4,026.00
Other payables:
Xiamen Wuhuama Restaurant Management Co., Ltd.                                      27,056.60                   18,376.60
TsannKuen Enterprise Co., Ltd.                                                                                      927.36
STAR COMGISTIC CAPITAL CO., LTD.                                                 117,215.44                     17,596.97
Canxing International Travel Service Co., Ltd                                       27,990.96                   16,487.05
Kuaisan Electric Business Services Limited                                                                           65.89
                            Total                                                172,263.00                     53,453.87


                                                            183
                                          TsannKuen (China) Enterprise Co.,Ltd.
                         Notes to the Financial Statements for the Year ended 31 December 2019

Note 12: Commitments and contingencies
12.1 Important commitments
12.1.1 Operating lease commitments
Irrevocable lease contracts under performance and their financial effects as at the
end of current year.
                Items                    Carrying amount as of 31/12/2019         Carrying amount as of 31/12/2018
The minimum lease payments of
irrevocable operating lease contracts:
1st year after the balance sheet date                                3,638.00                              3,638.00
2nd year after the balance sheet date                                3,638.00                              3,638.00
3rd year after the balance sheet date                                3,638.00                              3,638.00
Subsequent years                                                   112,771.00                            116,409.00
                Total                                              123,685.00                            127,323.00

12.1.2 Other commitments
None
12.2 Contingencies
No significant contingencies need to be disclosed as of 31 December 2019.


Note 13: Post reporting date events
13.1 Profit distribution
On March 14, 2020, the 1st Board Meeting of 2020 held by the Company reviewed
and approved the profit distribution plan for 2019. Based on the total share capital of
185,391,680 shares as at the end of 2019, cash dividend of CNY 1 per 10 shares
will be distributed to all shareholders of the Company (Tax included). The profit for
distribution of the Company was CNY 18,539,168.00. The proposal still needs to be
approved by the shareholders' general meeting of the Company.
13.2 Evaluation of impact of Coronavirus disease (COVID-19)
Since COVID-19 outbroke nationwide from January 2020, prevention and control of
the disease have been continuing within the whole country. The company and its
subsidiaries will effectively implement the "Notice of Prevention and Control of
COVID-19 Infections" issued by the Xiamen Municipal Government, the
"Announcement of the Command Headquarters on the Prevention and Control of
COVID-19 Infections" issued by the Zhangzhou Municipal Government, and various
requirements issued by various goverments to strengthen support for epidemic
prevention and control.
The disease will affect the company and its subsidiaries on customer orders, product


                                                         184
                                            TsannKuen (China) Enterprise Co.,Ltd.
                           Notes to the Financial Statements for the Year ended 31 December 2019

development, production and shipment, and company's overall operations. To some
extent, it will affect the company's financial status and operating results in 2020. And
the degree of impact will depend on the situation of disease prevention and control,
duration of the disease and implementations of various prevention and control
policies.
The Company will continue to pay close attention to the development of the
pneumonia epidemic situation, evaluate and actively respond to its impact on the
company's financial position and operating results. As of the reporting date of this
report, the evaluation is still in progress.
13.3 Impact of the new accounting standards from 1 January 2020
On 5 July 2017, the Ministry of Finance issued the "Notice on the Revision and
Issuance of CAS 14-Revenue "(CaiKuai [2017] No. 22), and requires companies
that are both domestic and oversea listed and listed overseas which utilize
International Financial Reporting Standards or Business Accounting Standards to
prepare financial statements to implement from 1 January 2018. Other domestic
listed companies implement from 1 January 2020. Approved by the Company's first
board meeting on 14 March 2020, the Company implement the above new revenue
standard from 1 January 2020, and change relevant accounting policies in
accordance with the provisions of the new revenue standards.


Note 14: Notes to the main elements of the separate financial statement of the
Company
14.1 Accounts receivable
                             Age                                               Balance as of 31/12/2019
Within 1 year                                                                                             6,124,172.21
Including: 1-90 days                                                                                      4,141,000.56
            91-180 days                                                                                   1,883,171.65
            181-270days                                                                                    100,000.00
            271-365 days
1 to 2 years                                                                                               725,880.65
2 to 3 years                                                                                               432,446.13
Over 3 years                                                                                                 5,645.49
                           Subtotal                                                                       7,288,144.48
Less: Allowance for bad debt                                                                              1,420,186.28
                             Total                                                                        5,867,958.20



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                                               TsannKuen (China) Enterprise Co.,Ltd.
                              Notes to the Financial Statements for the Year ended 31 December 2019

14.2 Disclosure by method for measurement of allowance for bad debt
                                                                        Balance as of 31/12/2019
                    Item                           Carrying amount                Allowance for bad debt
                                                                                                                   Book value
                                                 Amount         % of total       Amount           % of total
Accounts receivable of individually
assessment for impairment
Accounts receivable of assessment for
                                                7,288,144.48         100.00     1,420,186.28             19.49     5,867,958.20
impairment by portfolio
ncluding: Portfolio by age                      7,175,859.42          98.46     1,420,186.28             19.79     5,755,673.14
        Portfolio by related parties              112,285.06           1.54                                          112,285.06
                   Total                        7,288,144.48         100.00     1,420,186.28             19.49     5,867,958.20

  (Continued)
                                                                        Balance as of 31/12/2018
                   Item                           Carrying amount                 Allowance for bad debt
                                                                                                                   Book value
                                                Amount          % of total       Amount           % of total
Accounts receivable of individually
assessment for impairment
Including: Accounts receivable of
individual     significance    subject   to
individually assessment for impairment
Accounts receivable of assessment for
                                              18,235,745.59          100.00     1,534,642.14               8.42 16,701,103.45
impairment by portfolio
Including: Portfolio by age                   18,211,345.83           99.87     1,534,642.14               8.43 16,676,703.69
        Portfolio by related parties               24,399.76           0.13             0.00               0.00       24,399.76
Accounts receivable of individually
insignificance subject to individually
assessment for impairment
                   Tota                       18,235,745.59          100.00     1,534,642.14               8.42 16,701,103.45

14.2.1 Portfolio by related parties
                                                                        Balance as of 31/12/2019
             Accounts receivable                                 Allowance for bad                             Reasons for
                                              Carrying amount                             % of total
                                                                         debt                               measurement
 Due from related parties                           112,285.06
                    Total                           112,285.06




                                                               186
                                              TsannKuen (China) Enterprise Co.,Ltd.
                             Notes to the Financial Statements for the Year ended 31 December 2019

14.2.2 Accounts receivable using age for measurement of allowance for bad debt
                                                                      Balance as of 31/12/2019
                  Item
                                                 Carrying amount           Allowance for bad debt            %
Current                                                    3,886,655.88                  19,433.28                      0.50
1-30 days past due                                         1,730,745.30                  77,883.54                      4.50
31-60 days past due                                          294,485.97                  58,897.19                     20.00
61-90 days past due                                                                                                    45.00
Over 90 days past due                                      1,263,972.27               1,263,972.27                100.00
                  Total                                    7,175,859.42               1,420,186.28                     19.79

14.2.3 Allowance for bad debt
                                                          Current period movement
                    Balance as of                                                                         Balance as of
       Item                             Recognition     Recovery or       Used or written     Others
                       31/12/2018                                                                          31/12/2019
                                                          reversal              off
 Accounts
 receivable of
 assessment
                         1,534,642.14                     114,455.86                                        1,420,186.28
 for
 impairment
 by portfolio
       Total             1,534,642.14                     114,455.86                                        1,420,186.28

14.2.4 Details of top five accounts receivable
The total amount of top five accounts receivables summarized by debtors as at the
end of current year is CNY 6,884,112.72, accounting for 94.46% of the total
accounts receivable as at the end of current year, the total corresponding allowance
for bad debts is CNY 1,411,382.64.
14.2 Other receivables
                Items                           Balance as of 31/12/2019                    Balance as of 31/12/2018
Interests receivable
Dividend receivable
Other receivables                                                    2,622,732.62                            2,213,373.51
                 Total                                               2,622,732.62                            2,213,373.51

14.2.1 Interests receivable
None
14.2.2 Dividend receivable
None

                                                             187
                                            TsannKuen (China) Enterprise Co.,Ltd.
                           Notes to the Financial Statements for the Year ended 31 December 2019

14.2.3 Other receivables
14.2.3.1 Disclosure by age
                            Age                                                Balance as of 31/12/2019
Within 1 year                                                                                               2,439,584.72

Including: 1-90 days                                                                                        2,271,063.69

            91-180 days                                                                                      168,521.03

            181-270days
            271-365 days
1 to 2 years                                                                                                 250,418.00

2 to 3 years
Over 3 years
Subtotal                                                                                                    2,690,002.72

                Less: Allowance for bad debt                                                                   67,270.10

Total                                                                                                       2,622,732.62

14.2.3.2 Disclosure by nature
                           Nature                               Balance as of 31/12/2019        Balance as of 31/12/2018
Deposit                                                                           214,400.00                 235,000.00
Due from related parties                                                        1,800,844.03                1,777,060.97
Other current account                                                             674,758.69                 245,227.44

                          Subtotal                                              2,690,002.72                2,257,288.41

Less: Allowance for bad debt                                                       67,270.10                   43,914.90

                           Total                                                2,622,732.62                2,213,373.51

14.2.3.3 Recognition of allowance for bad debt
                                         Stage 1              Stage 2                Stage 3
                                                                               Expected credit loss
                                     Expected credit      Expected credit
                                                                                  for the whole
   Allowance for bad debt            loss for the next   loss for the whole                                  Total
                                                                                 duration (Credit
                                       12 months         duration (no credit
                                                                                 impairment has
                                                            impairment)
                                                                                    occurred)
 Closing balance as of                      43,914.90                                                         43,914.90
 1/1/2019
 Carrying amount of other
 receivables      in   current
 period on 1/1/2019
 Turn to stage 2



                                                            188
                                            TsannKuen (China) Enterprise Co.,Ltd.
                           Notes to the Financial Statements for the Year ended 31 December 2019

                                      Stage 1                 Stage 2                  Stage 3
                                                                                Expected credit loss
                                  Expected credit          Expected credit
                                                                                    for the whole
   Allowance for bad debt         loss for the next     loss for the whole                                        Total
                                                                                   duration (Credit
                                     12 months          duration (no credit
                                                                                   impairment has
                                                            impairment)
                                                                                      occurred)
 Turn to stage 3
 Turn back to stage 2
 Turn back to stage 1
 Recognition                                23,355.20                                                              23,355.20
 Reversal
 Used
 Written off
 Other movements
 Closing balance as of                      67,270.10                                                              67,270.10
 31/12/2019
14.2.3.4 Recognition of allowance for bad debt
                                                            Current period movement
                          Balance as at                                                                        Balance as at
         Item                                Recognition     Recovery          Used or        Others
                           31/12/2018                                                                           31/12/2019
                                                             or reversal      written off
 Other receivables
 of assessment for
                              43,914.90        23,355.20                                                           67,270.10
 impairment          by
 portfolio
         Total                43,914.90        23,355.20                                                           67,270.10

14.2.3.5 Details of top five other receivables
                                                                                                             Allowance for bad
                                                           Carrying amount
               Debtors                    Nature                                    Age      % of total         debt as of
                                                           as of 31/12/2019
                                                                                                                31/12/2019
TKL                                Current account              1,800,844.03 1-90 days              66.95
PICC P&C                           Others                         230,374.72 1-90 days                8.56
Xiamen Xiangji Coffee Trading
                                   Others                         108,210.18 1-90 days                4.02
Co., Ltd.
Tsann Kuen Flagship Store          Deposit                        120,000.00 Over 1 year              4.46
Alipay                             Deposit                        100,000.00 Over 1 year              3.72
                 Total                      ——                2,359,428.93        ——            87.71




                                                            189
                                                  TsannKuen (China) Enterprise Co.,Ltd.
                                 Notes to the Financial Statements for the Year ended 31 December 2019

   14.3 Long-term equity investments
   14.3.1 Classification of long-term equity investments
                                              Carrying amount                                         Carrying amount
                                              as of 31/12/2019                                        as of 31/12/2018
                                                    Provisio                                               Provisio
          Item
                                 Carrying             n for                                                 n for
                                                                    Book value        Carrying amount                     Book value
                                 amount             impairm                                                impairm
                                                      ent                                                    ent
 Investment in
                             923,414,701.56                        923,414,701.56      921,914,701.56                   921,914,701.56
 subsidiaries
 Investment in
 associates and joint
 ventures
          Total              923,414,701.56                        923,414,701.56      921,914,701.56                   921,914,701.56

   14.3.2 Investment in subsidiaries
                                 Carrying                                              Carrying        Provision for     Balance as of
                                                                     Decrease
                                 amount              Increase in                       amount          impairment        31/12/2019 of
       Investee                                                      in current
                                  as of             current year                        as of           accrued in       provision for
                                                                        year
                              31/12/2018                                             31/12/2019        current year       impairment
 TsannKuen
 (Zhangzhou)                 921,914,701.56                                         921,914,701.56
 Enterprise Co., Ltd.
 Xiamen           Cankun
 Property       Services                            1,500,000.00                      1,500,000.00
 Co., Ltd.
          Total              921,914,701.56         1,500,000.00                    923,414,701.56

   14.4 Operating revenues and costs
             Item                                       Current year                                       Prior year
                                            Revenues                     Costs                  Revenues                  Costs
Principal operating activities                    33,560,529.62         30,591,361.25              61,669,712.11          56,799,853.11
Other operating activities                        48,605,028.70         32,381,733.96              44,308,288.08          29,258,164.80
             Total                                82,165,558.32         62,973,095.21             105,978,000.19          86,058,017.91

   14.5 Investment income
                                          Item                                              Current year                Prior year
Investment income from disposal of long-term equity investments                                                               16,480.79
Long-term equity investment income calculated by cost method                                      25,443,358.87           33,547,555.83
                                          Total                                                   25,443,358.87           33,564,036.62


                                                                     190
                                           TsannKuen (China) Enterprise Co.,Ltd.
                          Notes to the Financial Statements for the Year ended 31 December 2019

Note 15: Supplementary information
15.1 Extraordinary gains or losses for current year
                              Supplemental information                                  Total amount      Explanation
Gains or losses arising from disposal of non-current assets                               63,688,086.21
Tax repayments or waiving of taxes not officially authorized or not with proper
authorization
Government grants accounted for through profit or loss for the current reporting
period (excl. grants directly associated with the Company’s operations and               26,259,614.81
subject to national quotas)
Cost of monetary funds charged on non-financial institutions accounted for
through profit or loss for the current reporting period
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
Gains or losses arising from changes in the fair values of financial instruments
held for trading (excl. effective hedging instruments associated with the
Company’s operating activities) or disposal of financial instruments held for            19,610,630.54
trading and available-for-sale financial assets (excl. effective hedging
instruments associated with the Company’s operating activities)
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


                                                          191
                                           TsannKuen (China) Enterprise Co.,Ltd.
                          Notes to the Financial Statements for the Year ended 31 December 2019

                             Supplemental information                                      Total amount      Explanation
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                       5,303,835.25
Other gains or losses satisfying the definition of extraordinary gains or losses
                                       Subtotal                                             114,862,166.81
Less: Effect of corporate income tax                                                        -26,185,728.82
Less: Net amount attributable to minority interests (after tax)                             -40,711,211.94
                                        Total                                                47,965,226.05

Note: Extraordinary gains or losses event use “+”express revenue and income, “-”
express loss and expenditure.
The Company recognised non-recurring categories of activities in accordance with
the Explanatory Announcement regarding Information Disclosure by Publicly Listed
Company No. 1 - Non-recurring Profit and Loss (Zhengjianhui Gonggao [2008]
No.43).
15.2 Yield Rate of Net Assets and Earnings Per Share
                                                            Weighted average          Earnings Per Share(Yuan per share)
             Profits for the reporting period                 yield rate of net
                                                                                         Basic EPS        Diluted EPS
                                                                  assets%
Net profits attributable to ordinary shareholders                             15.07                0.57             0.57
Net profits attributable to ordinary shareholders (excl.
                                                                               8.20                0.31             0.31
extraordinary gains or losses)

15.3 Supplementary Information on Changes in Accounting Policies
Please see Note 4.26 for details.




                                                           192