2020 Semi-Annual Report of Tsann Kuen (China) Enterprise Co., Ltd. TSANN KUEN (CHINA) ENTERPRISE CO., LTD. 2020 SEMI-ANNUAL REPORT (Unaudited) August 2020 1 2020 Semi-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 record, misleading statement or material omission. And they shall be jointly and severally liable for that. All directors attended the board session for reviewing this Report. Investors are kindly reminded to read the full text of this Report carefully and pay special attention to the risks mentioned in “X. Risks facing the Company and countermeasures” under “Section IV. Performance Discussion & Analysis”. The Company plans not to distribute cash dividends or bonus shares or turn capital reserve into share capital. Mr. Pan Zhirong, company principal, and Mr. Wu 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. English translation is for reference only. Should there be any discrepancy between the two versions, the Chinese version shall prevail. 2 2020 Semi-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 ................................................................................. 8 Section IV. Performance Discussion & Analysis ...................................................... 10 Section V. Significant Events ................................................................................... 22 Section VI. Change in Shares & Shareholders .......................................................... 33 Section VII. Preference Shares ................................................................................. 36 Section VIII. Directors, Supervisors & Senior Management Staff ............................ 36 Section IX. Corporate Bonds .................................................................................... 37 Section X. Financial Report...................................................................................... 37 Section XI. Documents Available for Reference ....................................................... 37 3 2020 Semi-Annual Report of Tsann Kuen (China) Enterprise Co., Ltd. Terms Term Refers to Contents Xiamen Tsann Kuen, TKC-B, Company, Refers to Tsann Kuen (China) Enterprise Co., Ltd. the Company, TKC Tsann Kuen Zhangzhou, TKL Refers to Tsann Kuen (Zhangzhou) Enterprise Co., Ltd. Tsann Kuen Shanghai, TKS Refers to Tsann Kuen China (Shanghai) Enterprise Co., Ltd. Tsann Kuen (Zhangzhou) South Port Electronics Enterprise Co., South Port Electronics, TKN Refers to Ltd. STD Refers to Shanghai Canxing Trading Co., Ltd. East Sino 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 TKW Refers to Xiamen Tsannkuen Property Services Co., Ltd. RMB Refers to RMB YUAN 4 2020 Semi-Annual Report of Tsann Kuen (China) Enterprise Co., Ltd. Section II. Company Profile & Financial Highlights I. Basic information about the Company Stock name TKC-B Stock code 200512 Stock exchange Shenzhen Stock Exchange Chinese name of the Company 厦门灿坤实业股份有限公司 Abbr. of the Chinese name of the Company 闽灿坤 English name of the TSANNKUEN(CHINA) ENTERPRISE CO. LTD Company Abbr. of the English name TKC of the Company Legal representative of the Pan Zhirong Company II. Contact information Board Secretary Securities Representative Name Sun Meimei Dong Yuanyuan TSANN KUEN Industrial Park, TSANN KUEN Industrial Park, Contact address Taiwanese Investment Zone, Zhangzhou, Taiwanese Investment Zone, Zhangzhou, Fujian Province, P.R.China Fujian Province, P.R.China Tel. 0596-6268161 0596-6268103 Fax 0596-6268104 0596-6268104 E-mail mm_sun@tkl.tsannkuen.com yy_dong@tkl.tsannkuen.com III. Other information 1. Ways to contact the Company Did any change occur to the registered address, office address and their postal codes, website address and email address of t he Company during the Reporting Period? □ Applicable √ Not applicable 2. About information disclosure and where this Report is placed Did any change occur to information disclosure media and where this Report is placed during the Reporting Period? □ Applicable √ Not applicable 5 2020 Semi-Annual Report of Tsann Kuen (China) Enterprise Co., Ltd. 3. Other relevant information Did any change occur to other relevant information during the Reporting Period? □ Applicable √ Not applicable IV. Accounting and financial highlights Whether the Company performed any retrospective adjustment to or restatement of its accounting data due to change of accounting policy, correction of accounting error, etc. □ Yes√ No Unit: RMB Yuan Same period of last Item Reporting Period YoY +/-(%) year Operating revenue 793,014,584.36 929,448,983.38 -14.68 Net profit attributable to shareholders of the Company 39,220,703.16 47,292,567.95 -17.07 Net profit attributable to shareholders of the Company 32,506,739.64 9,863,734.45 229.56 before extraordinary gains and losses Net cash flows from operating activities -28,011,876.14 4,167,209.43 -772.20 Basic EPS (RMB Yuan/share) 0.21 0.26 -19.23 Diluted EPS (RMB Yuan/share) 0.21 0.26 -19.23 Weighted average ROE (%) 5.10 7.02 -1.92 As at the end of the As at the end of last Item +/- (%) Reporting Period year Total assets 1,847,468,612.40 1,956,448,835.98 -5.57 Net assets attributable to shareholders of the Company 770,522,673.06 748,738,791.34 2.91 Total shares of the Company as at closure of the last trading day before the disclosure of this Report: 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: Fully diluted EPS based on the latest total shares (RMB Yuan/share) 0.21 V. 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 √ Not applicable No difference in the Reporting Period. 6 2020 Semi-Annual Report of Tsann Kuen (China) Enterprise Co., Ltd. 2. Differences of net profit and net assets disclosed in financial reports prepared under overseas and Chinese accounting standards □ Applicable √ Not applicable No difference in the Reporting Period. 3. Explain reasons for the differences between accounting data under domestic and overseas accounting standards □ Applicable √ Not applicable VI. Items and amounts of extraordinary gains and losses √ Applicable □ Not applicable Unit: RMB Yuan Item Amount Explanation Gains/losses on the disposal of non-current assets (including the offset 279,810.12 part of asset impairment 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 2,260,574.12 or amounts according to the country’s unified standards Capital occupation charges on non-financial enterprises that recorded into current gains and losses Gains due to that the investment costs for the Company to obtain subsidiaries, associates and joint ventures are lower than the enjoyable fair value of the identifiable net assets of the investees when making the investments Gain/loss on non-monetary asset swap Gain/loss on entrusting others with investments or asset management Asset impairment provisions due to acts of God such as natural disasters Gain/loss on debt restructuring Expenses for business reorganization, such as expenses for staffing, reorganization etc. Gain/loss on the part over the fair value due to transactions with distinctly unfair prices Current gains and losses of subsidies acquired from business combination under the same control as from period-begin to combination date Gain/loss on contingent events irrelevant to the Company’s normal business Gains and losses on change in fair value from financial assets held for Gains on sale of forward trading and financial liabilities held for trading, as well as investment exchange contracts, fair value income from disposal of financial assets held for trading and financial 6,172,798.04 changes and other current liabilities held for trading and financial assets available for sales except assets (wealth management for effective hedging related with normal businesses of the Company instruments) Reversal of provision for impairment that made impairment test independently 7 2020 Semi-Annual Report of Tsann Kuen (China) Enterprise Co., Ltd. Item Amount Explanation Gain/loss on loans obtained by entrusting others Gain/loss on change of the fair value of investing real estate of which the subsequent measurement is carried out adopting the fair value method Effect on current gains/losses when a one-off adjustment is made to current gains/losses according to requirements of taxation, accounting and other relevant laws and regulations Custody fee income when entrusted with operation Other non-operation income and expenses other than the above 2,582,737.79 Other gain/loss items that meet the definition of an extraordinary gain/loss Less: Income tax effects 1,898,569.93 Minority interests effects (after tax) 2,683,386.62 Total 6,713,963.52 Explain the reasons if the Company classifies an item as an extraordinary gain/loss according to the definition in the Explanatory Announcement No. 1 on Information Disclosure for Companies Offering Their Securities to the Public —Extraordinary Gains and Losses, or classifies any extraordinary gain/loss item mentioned in the said explanatory announcement as a recurrent gain/los s item □ Applicable √ Not applicable 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. II. Material changes in main assets 1. Material changes in main assets Main assets Material change Down 63.57% from the opening amount of the year, mainly because of smaller assessed Financial assets held for trading gains on forward forex contracts Up 467.98% from the opening amount of the year, mainly because of outstanding notes Notes receivable receivable 8 2020 Semi-Annual Report of Tsann Kuen (China) Enterprise Co., Ltd. Main assets Material change Accounts receivable No material change Advances to suppliers No material change Down 40.29% from the opening amount of the year, mainly because of decreased export Other receivables tax rebates in the current period Inventories No material change Other current assets No material change Equity assets No such assets Investment properties No material change Fixed assets No material change Down 74.31% from the opening amount of the year, mainly because of the check and Construction in progress acceptance of the rebuilt component plant of SCI in the current period Intangible assets No material change Long-term deferred charge No material change Deferred tax assets No material change Down 34.91% from the opening amount of the year, mainly because of the check and Other non-current assets acceptance in the current period of equipment that had been prepaid for 2. Main assets overseas √ Applicable □ Not applicable Unit: RMB Yuan Any major Operation Measures taken to In the Company’s Asset Nature Value Location Earnings impairment status protect asset safety net assets (%) risk or not SCI Investment 169,100,542.93 Indonesia Normal Periodic review -1,142,763.48 21.95 No Equity TKEI 19,327,528.11 Taiwan Normal Periodic review -34,300.74 2.51 No acquisition 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 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. In the reporting period, the Company obtained 25 patents in R&D, including 15 invention patents, 9 utility model 9 2020 Semi-Annual Report of Tsann Kuen (China) Enterprise Co., Ltd. patents and 1 design patent. There are also dozens of patents being applied for. These patents can help better protect the Company’s intellectual property rights, give play to its competitive edge in independent property rights, keep a leading position in technology and increase its core competitiveness. Section IV. Performance Discussion & Analysis I. Business review for the reporting period During the reporting period, American and European countries remained the primary countries we exported our home appliances to amid the turbulence caused by the COVID-19 pandemic, as well as the complex and changeable economic environment at home and abroad. And currently, global economic growth remains slow with the outbreak and spread of the pandemic overseas. Upon constant monitoring and assessment of the impact of the pandemic on the Company, we will make timely adjustments to various operating arrangements accordingly. Meanwhile, a variety of measures will be taken to increase revenue and reduce expenditure, with the objective of minimizing the negative impact of the pandemic on the Company. 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 For the reporting period, we achieved a net profit attributable to shareholders of the Company of RMB39.22 million, with the corresponding amount being RMB47.29 million in the same period of last year. The change was 10 2020 Semi-Annual Report of Tsann Kuen (China) Enterprise Co., Ltd. primarily driven by: (1) The net profit attributable to shareholders of the Company of RMB47.29 million in the same period of last year comprised the effect of RMB29.54 million of an extraordinary gain (the asset disposal gain in respect of the relocation of controlled sub-subsidiary TKS’s phase II plant carried out according to the government policy), with no comparable gain in the reporting period. (2) Stringent anti-pandemic measures were adopted in the reporting period. We have resumed work/production in a safe and orderly manner according to the overall arrangements of governments at all levels while ensuring the safety of our employees against the pandemic. This impacted our production and sales to some degree during the reporting period, bringing our main business revenue down by 14.68% year-on-year. We were more prudent in purchases to control stocks and cash outflow. A hierarchical management system based on customers’ credit lines was carried out in respect of overdue amounts, order taking and shipment, and their credit line insurance coverage was increased. In addition, negotiations to bring down procurement costs, expense control, workforce simplification were carried out. Meanwhile, asset impairment allowances were established upon assessment of net realizable value of inventories and impairments of fixed assets, and financial gains increased. 1. YoY changes in major financial data Unit: RMB Yuan Reporting Same period of last Item +/-% Main reasons for changes period year Operating revenue 793,014,584.36 929,448,983.38 -14.68 Operating costs 644,212,379.74 796,332,577.48 -19.10 Taxes and surcharges 5,631,036.08 5,679,950.02 -0.86 Decrease in operating revenue in Selling expenses 22,695,745.52 32,613,304.09 -30.41 the current period Administrative expenses 46,326,432.58 38,769,244.52 19.49 Increase in interest income and Financial costs -14,459,194.20 -2,740,414.93 -427.63 assessed exchange gains in the current period Decrease in assessed losses on Gains on fair value changes -1,707,089.00 -4,145,350.00 58.82 forward forex contracts in the current period Increase in allowances for doubtful Credit impairment losses -1,129,743.77 -89,003.08 -1,169.33 accounts receivable in the current period Increase in inventory valuation allowances and fixed asset Asset impairment losses -8,052,144.68 -1,830,352.79 -339.92 impairment allowances in the current period An assets disposal income of Assets disposal income 279,810.12 63,398,419.60 -99.56 RMB62.87 million from the 11 2020 Semi-Annual Report of Tsann Kuen (China) Enterprise Co., Ltd. Reporting Same period of last Item +/-% Main reasons for changes period year relocation of the phase II plant of TKS according to the government policy in the same period of last year Compensation for the relocation of the phase II plant of TKS according Non-operating income 2,794,509.46 26,181,811.37 -89.33 to the government policy in the same period of last year Transfer of unrecovered amounts to Non-operating expenses 211,771.67 20,502.70 932.90 this item in the current period Deferred income tax liabilities recognized on the assets disposal income from the relocation of the Income tax expenses 7,827,101.86 29,820,980.12 -73.75 phase II plant of TKS according to the government policy in the same period of last year R&D expenses 30,818,857.76 36,699,200.50 -16.02 Compensation for the relocation of the phase II plant of TKS according to the government policy in the Net profit 52,076,256.64 86,699,969.95 -39.94 same period of last year, with no comparable compensation in the current period Tax rebates decreased by RMB30.97 million in the current Net cash flows from operating activities -28,011,876.14 4,167,209.43 -772.20 period as compared to the same period of last year due to the pandemic An increase of RMB136 million in Net cash flows from investing activities -253,882,705.24 -150,107,116.07 -69.13 the outflow of restricted term deposits in the current period Increase in dividends paid and net Net cash flows from financing activities -24,094,067.00 -9,723,111.90 -147.80 borrowing inflow in the current period See the above explanations on Net increase in cash and cash -304,800,590.47 -157,057,583.56 -94.07 changes in operating, investing and equivalents financing activities Major changes to the profit structure or sources of the Company during the Reporting Period: □ Applicable √ Not applicable No such cases. 2. Breakdown of operating revenues (1)Breakdown of main business revenues Unit: RMB Yuan Reporting period Same period of last year Item +/-% In total operating In total operating Amount Amount revenues (%) revenues (%) Total operating 793,014,584.36 100.00 929,448,983.38 100.00 -14.68 revenues By segments Small home appliance 793,014,584.36 100.00 929,448,983.38 100.00 -14.68 manufacturing By products 12 2020 Semi-Annual Report of Tsann Kuen (China) Enterprise Co., Ltd. Reporting period Same period of last year Item +/-% In total operating In total operating Amount Amount revenues (%) revenues (%) Cooking utensils 500,877,565.26 63.16 557,292,464.28 59.96 -10.12 Everyday home 184,127,407.97 23.22 200,821,213.92 21.61 -8.31 appliances Tea and coffee 61,420,124.34 7.75 126,054,808.02 13.56 -51.28 makers Other 46,589,486.79 5.87 45,280,497.16 4.87 2.89 Total 793,014,584.36 100.00 929,448,983.38 100.00 -14.68 By areas Americas 356,754,688.62 44.99 389,942,699.15 41.95 -8.51 Europe 188,723,058.75 23.80 265,055,223.83 28.52 -28.80 Asia 210,674,347.81 26.56 228,917,037.15 24.63 -7.97 Australia 28,906,788.68 3.65 38,523,514.39 4.15 -24.96 Africa 7,955,700.50 1.00 7,010,508.86 0.75 13.48 Total 793,014,584.36 100.00 929,448,983.38 100.00 -14.68 (2) Segments, products or areas contributing over 10% of operating revenues or profit √ Applicable □ Inapplicable Unit: RMB Yuan Operating Gross profit Cost of sales: revenue: +/-% margin: +/-% Operating Gross profit +/-% from the Item Cost of sales from the same from the same revenue margin (%) same period of period of last period of last last year year year By segments Small home appliance 793,014,584.36 644,212,379.74 18.76 -14.68 -19.10 4.44 manufacturing Total 793,014,584.36 644,212,379.74 18.76 -14.68 -19.10 4.44 By products Cooking utensils 500,877,565.26 420,064,627.39 16.13 -10.12 -14.65 4.45 Everyday home 184,127,407.97 155,260,103.89 15.68 -8.31 -13.35 4.90 appliances Tea and coffee 61,420,124.34 49,375,486.17 19.61 -51.28 -52.53 2.12 makers Other 46,589,486.79 19,512,162.29 58.12 2.89 -6.91 4.41 Total 793,014,584.36 644,212,379.74 18.76 -14.68 -19.10 4.44 13 2020 Semi-Annual Report of Tsann Kuen (China) Enterprise Co., Ltd. Operating Gross profit Cost of sales: revenue: +/-% margin: +/-% Operating Gross profit +/-% from the Item Cost of sales from the same from the same revenue margin (%) same period of period of last period of last last year year year By areas Americas 356,754,688.62 299,305,059.17 16.10 -8.51 -11.72 3.05 Europe 188,723,058.75 154,324,305.81 18.23 -28.80 -32.48 4.46 Asia 210,674,347.81 161,471,019.54 23.36 -7.97 -15.86 7.19 Australia 28,906,788.68 22,885,334.91 20.83 -24.96 -26.83 2.02 Africa 7,955,700.50 6,226,660.31 21.73 13.48 11.88 1.12 Total 793,014,584.36 644,212,379.74 18.76 -14.68 -19.10 4.44 III. Analysis of non-core business √ Applicable □ Not applicable Unit: RMB Yuan Ratio to the Recurring Items Amount total profits Notes of the causes or not amount (%) Other income 2,260,574.12 3.77 Government subsidy in relation to production and operation No Investment Income from settled forward forex contracts and wealth 7,879,887.04 13.15 No income management instruments Gains on fair -1,707,089.00 -2.85 Assessed losses on unsettled forward forex contracts No value changes Credit -1,129,743.77 -1.89 Increase in allowances for doubtful accounts receivable No impairment losses Asset impairment Increase in inventory valuation allowances and fixed asset -8,052,144.68 -13.44 No losses impairment allowances Assets disposal 279,810.12 0.47 Income from disposal of fixed assets No income Non-operating 2,794,509.46 4.67 Transfer of long-term advances from customers to this item No income Non-operating 211,771.67 0.35 Transfer of long-term unrecovered amounts to this item No expenses 14 2020 Semi-Annual Report of Tsann Kuen (China) Enterprise Co., Ltd. IV. Assets and liabilities 1. Significant changes in asset composition Unit: RMB Yuan At end of Reporting Period At end of same period of last year Change As a in As a Item percent percent Reason for any significant change percentag age of age Amount e of total Amount total (%) assets assets (%) (%) Withdrawal of investments in wealth Monetary funds 591,354,074.68 32.01 419,946,354.54 22.50 9.51 management products upon maturity in the current period Outstanding notes receivable in the current Notes receivable 1,559,385.90 0.08 50,000.00 0.00 0.08 period Accounts 302,087,312.15 16.35 295,096,383.76 15.81 0.54 receivable Advances to Advances to aluminu m ingots supplier at 2,268,109.33 0.12 6,233,274.10 0.33 -0.21 suppliers the end of the same period of last year Inventories 175,072,301.31 9.48 234,449,594.86 12.56 -3.08 Investment 22,321,513.39 1.21 24,272,428.54 1.30 -0.09 properties Fixed assets 181,817,396.06 9.84 186,656,542.39 10.00 -0.16 Check and acceptance of the rebuilt Construction in 750,571.75 0.04 2,020,699.59 0.11 -0.07 component plant of SCI in the current progress period Other Check and acceptance in the current period non-current 654,852.22 0.04 4,277,003.16 0.23 -0.19 of equipment that had been prepaid for assets Short-term 28,331,283.48 1.53 10,449,572.62 0.56 0.97 Increase in borrowings in the current period borrowings Increase in trade acceptance bills at the end Notes payable 1,319,784.49 0.07 24,540,396.01 1.32 -1.25 of the same period of last year Contract Reclassification of financial statement line 8,137,507.11 0.44 Not applicable 0.44 liab ilit ies items due to change in accounting policy Taxes and fees Increase in corporate income tax provisions 13,367,293.66 0.72 9,893,046.00 0.53 0.19 payable in the current period 2. Assets and liabilities measured at fair value √ Applicable □ Not applicable Unit: RMB Yuan Profit/loss on Cumulative Impairment fair value fair value provided in Opening Purchased in this Sold in this Closing Item changes in this changes this balance Reporting Period Reporting Period balance Reporting charged to Reporting Period equity Period Financial assets 1. Financial assets at fair value through profit/loss 0.00 0.00 0.00 0.00 0.00 0.00 0.00 (excluding derivative financial assets) 2. Derivative financial 3,620,689.00 -2,301,689.00 0.00 0.00 277,440,500.00 261,624,089.00 1,319,000.00 assets 15 2020 Semi-Annual Report of Tsann Kuen (China) Enterprise Co., Ltd. Profit/loss on Cumulative Impairment fair value fair value provided in Opening Purchased in this Sold in this Closing Item changes in this changes this balance Reporting Period Reporting Period balance Reporting charged to Reporting Period equity Period 3. Available-for-sale 0.00 0.00 0.00 0.00 0.00 0.00 0.00 financial assets 4. Investments in other 0.00 0.00 0.00 0.00 0.00 0.00 0.00 equity instruments Subtotal of financial assets 3,620,689.00 -2,301,689.00 0.00 0.00 277,440,500.00 261,624,089.00 1,319,000.00 Investment properties 0.00 0.00 0.00 0.00 0.00 0.00 0.00 Biological assets held for 0.00 0.00 0.00 0.00 0.00 0.00 0.00 production Others 0.00 0.00 0.00 0.00 0.00 0.00 0.00 Total of the above 3,620,689.00 -2,301,689.00 0.00 0.00 277,440,500.00 261,624,089.00 1,319,000.00 Financial liabilities 638,800.00 -594,600.00 0.00 0.00 90,569,600.00 180,885,700.00 44,200.00 Did any significant changes occur to the measurement attributes of the Company’s main assets in the Reporting Period? □ Yes √ No 3. Restricted asset rights as of the end of this Reporting Period √ Applicable □ Not applicable There was a difference of RMB256,531,463.17 between the closing amount of cash and cash equivalents of RMB334,822,611.51 in the consolidated cash flow statement and the closing amount of monetary funds of RMB591,354,074.68 in the consolidated balance sheet, because the amount of RMB6,775,024.51 in pledge for loan that did not meet the definition of cash and cash equivalents and the term deposits held in financial institutions for interest income were excluded from the closing amount of cash and cash equivalents in the cash flow statement. V. Investments made 1. Total investments made √ Applicable □ Not applicable Unit: RMB Yuan Investments made in Reporting Investments made in same period of +/-% Period last year 0.00 1,500,000.00 -100.00 2. Significant equity investments made in this Reporting Period □ Applicable √ Not applicable 3. Significant non-equity investments ongoing in this Reporting Period □ Applicable √ Not applicable 16 2020 Semi-Annual Report of Tsann Kuen (China) Enterprise Co., Ltd. 4. Financial assets measured at fair value □ Applicable √ Not applicable 5. Financial investments (1) Securities investments □ Applicable √ Not applicable (2) Investment in derivative financial instruments √ Applicable □ Not applicable 17 2020 Semi-Annual Report of Tsann Kuen (China) Enterprise Co., Ltd. Unit: RMB’0,000 Ratio of Type of Investment Investment investment investment amount at Pursed in this Sold in th is Amount amount amount at the end Actual Related-party Initial Operating in Co mmencement Termination the reporting reporting provided at the end of the period to profit/loss Relation transaction investment party derivative date date beginning of period period for of the the Co mpany's net for the or not amount financial the period impairment period asset at the end of period instruments the period (%) Forward 30 June Bank Non-related No 71,980.94 1 January 2020 35,179.93 36,801.01 44,250.98 27,729.96 35.99 -36.76 forex 2020 Total 71,980.94 35,179.93 36,801.01 44,250.98 27,729.96 35.99 -36.76 Source of investment funds Self-owned funds Lawsuits N/A Disclosure date of the announcement about the board’s 12 March 2013 consent for the investment Disclosure date of the announcement about the general 18 May 2013 meet ing’s consent for the investment 1. Analysis on risks fro m holding of derivative products: gains or losses from difference between contracted exchange rate an d market exchange rate on value date. 2. Control measures: (1) Principle: The purpose of the financial derivative operation is to avoid risks. The Co mpany shall not conduct transactional operation for other purposes than risk avoidance. The Co mpany shall not conduct complex derivative trading above the actual operation needs and shall not speculate in derivative trading with h edging as an excuse. The overall contractual amount for risk avoidance of the Co mpany shall not exceed the summation of the net risk expos ure of the existing assets and liabilities and the net risk exposure of assets and liabilities arising fro m the operation of the Co mpany in the co ming year. Risk analysis and risk control measures for positions held in (2) Staff requirements: Personnel taking part in the investment shall all fu lly understand the risks of derivative investment and strictly execute the business operation and derivatives in this reporting period (including but not risk management mechanisms fo r derivative investment. limited to market risk, liquidity risk, credit risk, operational (3) Operation standardization: Before making a derivative investment, the Co mpany shall rationally equip itself with professional personnel for investment risk, legal risk, etc.) decision-making, business operation, risk control, etc. It shall also inquire and compare among various markets and products. Besides, it shall strictly control the va riety 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 executiv e authorized by the Board of Directors. And a derivative investment report shall be sent to the Board of Directors an nually. The Co mpany 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 inve stment amount. (6) Audit system: The audit department audits derivative product trading periodically and submits audit reports to relevant units. (1) Gains on delivered derivatives in the Reporting Period were RMB1.3395 million, and assessed losses on those undelivered were RM B1.7071 million, among wh ich Changes in market price or fair value of derivatives invested assessed gains of RMB2.9819 million on undelivered forward forex contracts last year were reversed. in this reporting period (specific methods used and relevant (2) The former contracted bank provided monthly sheets of estimated exchange rates for the undue contracted forward exchanges on the last trading day of the month. assumption and parameter settings shall be disclosed for (3) The profit and loss from fair value changes of the derivative was confirmed according to the difference between the contracted amount undue by the month*the analysis of fair value of derivatives) estimated exchange rate and the currency amount when bought in. Significant changes in the Co mpany’s accounting policies and specific accounting princip les for derivatives in this No significant changes reporting period as compared to the prior period Special opin ions expressed by independent directors The Co mpany has carried out a strict internal assessment for the financial derivative business and has established a corresponding supervision mechanism. We are of the concerning the Company’s derivatives investment and risk opinion that the financial derivative business conducted by the Company is fairly necessary in its routine operation and is in co mpliance with relevant laws and regulations, control with the risks controllable. 18 2020 Semi-Annual Report of Tsann Kuen (China) Enterprise Co., Ltd. VI. Sale of major assets and equity interests 1. Sale of major assets □ Applicable √ Not applicable 2. Sale of major equity interests □ Applicable √ Not applicable VII. Main controlled and joint stock companies Main subsidiaries and joint stock companies Unit: RMB Yuan Relationship with Main business scope Registered Operating Co mpany name Total assets Net assets Operating profit Net profit the Co mpany capital revenues USD160 TKL Subsidiary Small ho me appliance manufacturing 1,879,878,887.94 1,305,193,909.22 715,492,117.08 48,946,321.63 45,608,044.19 million TKS Sub-subsidiary Small ho me appliance manufacturing USD40 million 283,052,875.55 230,639,707.14 475,388.40 4,365,351.52 3,251,209.60 SCI Sub-subsidiary Small ho me appliance manufacturing USD35 million 169,100,542.93 113,303,210.09 83,292,609.62 -1,142,003.65 -1,142,763.48 NTD300 milli TKEI Sub-subsidiary Industrial design 19,327,528.11 16,051,505.25 5,077,370.67 -120,724.57 -34,300.74 on Subsidiaries obtained or disposed in this Reporting Period √ Applicable □ Not applicable Tsann Kuen (Zhangzhou) Investment Co., Ltd. was de-registered in April 2020. VIII. Structured bodies controlled by the Company □ Applicable √ Not applicable 19 2020 Semi-Annual Report of Tsann Kuen (China) Enterprise Co., Ltd. IX. Predict the operating results of January-September 2020 Warning of possible loss or considerable YoY change of the accumulated net profit made during the period-begin to the end of the next Reporting Period according to prediction, as well as explanations on the reasons: □ Applicable √ Not applicable X. Risks facing the Company and countermeasures 1. International The global economy remains depressed in 2020. Exports face severe hardship due to the COVID-19 pandemic. Certain regions in Americas and Europe have reduced or suspended certain imports from China, trying to stop the continuing pandemic. This results in a negative impact on China’s exports. Also, quarantine, transportation, warehousing and other costs and expenses in respect of exports increase due to the pandemic. However, as people spend more time at home in the pandemic, they have increasing demand for kitchen and other home appliances, which is good news for our operating revenue in the second half of the current year. Influenced by the continuing 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 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 pandemic, 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, foreign trade of China will face, without doubt, a more complicated environment and more serious conflicts in 2020. 2. Domestic Domestically, in order to contain the spread of the pandemic, there was a short period of time when our factories were in a production halt, with no goods to supply. However, as the pandemic is gradually under control domestically, work/production resumption proceeds in an orderly manner nationwide. Recovery is also seen in the manufacturing sector, which is good news for the second half of the year. Meanwhile, the pandemic has given birth to new business forms and opportunities such as the “stay-at-home” economy, disinfection and healthcare, and cloud living based on the Internet of Things. These are new opportunities for the small domestic appliance industry. 20 2020 Semi-Annual Report of Tsann Kuen (China) Enterprise Co., Ltd. 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 minimum wage standard, decrease of labor supply, the seasonal human resource demand of surrounding enterprises and global warning have resulted in increase of labor costs of the Company year by year. In response, the Company continues to improve the working conditions for employees by offering air conditioning in assembly workshops as part of its efforts to reduce the employee turnover rate. Meanwhile, performance-orientated retention policy has been adopted to enhance retention rate of the employees. 21 2020 Semi-Annual Report of Tsann Kuen (China) Enterprise Co., Ltd. Section V. Significant Events I. List of the Annual Meeting of Shareholders and Special Meeting of Shareholders held during the Reporting Period 1. List of Meeting of Shareholders during the Reporting Period Time Type Participation ratio Date of meeting Date of disclosure Disclosure index The 2019 Annual Annual Meeting 44.88% 24 April 2020 25 April 2020 www.cninfo.com.cn Meeting of of Shareholders Shareholders 2. Preferred shareholders with the restoration of voting rights made a request for the Special Meeting of Shareholders □ Applicable √ Inapplicable II. Pre-plan for profit allocation and turning capital reserve into share capital for the reporting period □ Applicable √ Inapplicable The Company planned not to distribute cash dividend and bonus share, and not to convert capital reserves into share capital in half year. III. Commitments of the Company’s actual controller, shareholders, related parties and acquirer, as well as the Company and other commitme nt makers, fulfilled in this reporting period or ongoing at the period-end √ Applicable □ Inapplicable Time of Commitment Commitmen Period of Commitment Contents making Fulfillment maker t type commitment commitment 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 FILLMAN Commitmen Based on the confidence on 28 The Other commitments made Long-term INVESTMENT t on the continuous and stable December Company’s to minority shareholders S LIMITED effective shareholdin development of the Company, 2012 stocks 22 2020 Semi-Annual Report of Tsann Kuen (China) Enterprise Co., Ltd. Time of Commitment Commitmen Period of Commitment Contents making Fulfillment maker t type commitment commitment g increase it committed to increase the resumed shareholding if the trading on Company’s stock price lower 31 Dec. than HKD2.40 per share after 2012, but the implementation of the the shares contraction and trading Company’s resumption, and it would stock price increase no more than 2% hasn’t met shares (i.e. 3.7078 million the shares) of the total shares condition issued by the Company within (closing one year since the date of price was initial shareholding increase. lower than If the plan on increasing HKD2.40) holding 2% shares of the total for shares is completed within 12 shareholdin months, and the stock price g increase has also reached the target since the price, it will perform relevant date of approval procedures, and trading propose to CSRC on resumption, continuous implementation of FILLMAN shareholding increase by Investment exemption of offering. Limited hasn’t implemente d the shareholdin g increase plan. 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. IX. Engagement and disengagement of CPAs firm Whether the semi-annual financial report has been audited □ Yes √ No The semi-annual financial report of the Company has not been audited The Company held the 5th meeting of the Board of Directors of 2020 on 4 August 2020 and approved the Proposal on Changing the CPAs Firm. The Company intended to engage RSM China (Special General Partnership) as the auditor of the Company for internal control and financial report of 2020 and submitted the said proposal to the 1 st Extraordinary General Meeting of 2020 for review. V. Notes for “non-standard audit report” of CPAs firm during the Reporting Period by board of directors and supervisory board □ Applicable √ Inapplicable 23 2020 Semi-Annual Report of Tsann Kuen (China) Enterprise Co., Ltd. VI. Notes for the related information of “non-standard audit reports” last year by board of directors □ Applicable √ Inapplicable VII. Bankruptcy and restructuring □ Applicable √ Inapplicable VIII. Litigations and arbitrations Significant litigations and arbitrations □ Applicable √ Inapplicable Other lawsuits √ Applicable □ Inapplicable Unit: RMB’0,000 Lawsuit Trial results Situation of Whether amount and execution of Disclo Disclo Basic situation of form into (RMB Process of lawsuit (arbitration) influences judgment of sure sure lawsuit (arbitration) estimated Ten of lawsuit lawsuit date index liabilities thousand) (arbitration) (arbitration) Tsann Kuen China (Zhangzhou) The case of the Enterprise Co., Ltd. filed a plaint at controlling Kobe District Court on 9 May 2014; the subsidiary Tsann judgment of first instance that the claim Kuen China of Tsann Kuen China (Zhangzhou) (Zhangzhou) Enterprise Co., Ltd. was rejected was Had no 1,770.26 No No No No Enterprise Co., Ltd. received on 1 April 2019. An appeal result sued Japan UCC was instituted within the statutory Ueshima Coffee period. Up to now, the appeal letter of Co., Ltd. (contract UCC has been received and the time of disputes) the first oral argument in the second trial is 6 September 2019. Zhangzhou The contract Intermediate disputes case of the People’s Court controlling put on record the subsidiary Tsann Defendants case and consent Kuen China of Sanda to the application (Zhangzhou) and of enforcement on Enterprise Co., Ltd Receive the judgment of second Lianyuan 21 January 2019; 333.00 No No No sued Sanda Electric instance on 11 December 2018 applied a the execution Machinery Co., retrial. money of RMB Ltd. and Boluo 1,771,541.08 was County Lianyuan received from Industrial Zhangzhou Technology Co., Intermediate Ltd. People’s Court on 21 March 2019. Guangzhou Intellectual Property Court opened the court session for the second The patent time on 29 May 2019; infringement case Guangzhou Intellectual Property Court Had no of the Company 50.00 No made the judgment of first instance on No No No result sued Ningbo Kaibo 31 October 2019; Group Co., Ltd Ningbo Kaibo Group Co., Ltd. lodged an appeal with the Supreme Court on 6 December 2019; 24 2020 Semi-Annual Report of Tsann Kuen (China) Enterprise Co., Ltd. Lawsuit Trial results Situation of Whether amount and execution of Disclo Disclo Basic situation of form into (RMB Process of lawsuit (arbitration) influences judgment of sure sure lawsuit (arbitration) estimated Ten of lawsuit lawsuit date index liabilities thousand) (arbitration) (arbitration) The Supreme Court opened the court session for the first time on 10 June 2020. On 12 December 2018, the court judged The patent that the case should be transferred to infringement cases Shenzhen Intermediate People’s Court of the controlling for filing; subsidiary Tsann Shenzhen Intermediate People’s Court Kuen China opened the court session for the first (Zhangzhou) time on 25 April 2019; Enterprise Co., Ltd. Shenzhen Intermediate People’s Court sued Zhejiang made the judgment of first instance on Had no Tmall Network Co., 50.00 No No No No 7 August 2019; result Ltd., Shenzhen Shenzhen Zhengxiang Electrical ZhengXiang Industrial Co., Ltd. lodged an appeal Electrical Industrial with the Supreme Court on 29 August Co., Ltd and 2019; Shenzhen Aierde Shenzhen Aierde Household Household Furnishings Co., Ltd. lodged an appeal Furnishings Co., with the Supreme Court on 3 September Ltd. 2019. The patent infringement case Registered at Guangzhou Intellectual of the Company Property Court on 26 March 2020; Had no sued Zhe jiang 50.00 No Guangzhou Intellectual Property Court No No No result Oubeijia opened the court session for the first Kitchenware Co., time on 23 June 2020. Ltd. The patent infringement cases of the controlling subsidiary Tsann Registered at Guangzhou Intellectual Kuen China Property Court on 7 April 2020; (Zhangzhou) Guangzhou Intellectual Property Court Enterprise Co., Ltd. Had no 50.00 No opened the court session for the first No No No sued Zhongshan result time on 30 June 2020. Carmate Electrical Appliances Co., Ltd. and Shenzhen Wande Electrical Appliances Co., Ltd. IX. Doubts from Media □ Applicable √ Inapplicable X. Punishme nts and rectifications □ Applicable √ Inapplicable No such cases in the Reporting Period. 25 2020 Semi-Annual Report of Tsann Kuen (China) Enterprise Co., Ltd. XI. Credit conditions of the Company as well as its controlling shareholder and actual controller □ Applicable √ Inapplicable XII. Imple mentation of any equity incentive plan, employee stock ownership plan or other incentive measures for employees □ Applicable √ Inapplicable 26 2020 Semi-Annual Report of Tsann Kuen (China) Enterprise Co., Ltd. XIII. Significant related-party transactions 1. Related-party transactions relevant to routine operation √ Applicable □ Inapplicable Unit: RMB’0,000 Pricing Type of Settlement principl Whether the Proportion in method of Content of the e of the Trans Transacti Approved exceede Similar related-pa same kind of the Disclosure Disclosur Related party Relationship related-party related- action on transaction d the market rty transactions related-part date e index transaction party price amount quota approve price transactio (%) y transacti d quota n transaction on Purchase Company directly of controlled by Thermaster Electronic commodit Purchase of raw actual controller 1,404.96 2.75% 3,849.30 (Xiamen) Ltd. ies from parts and their close the related family members party Purchase of Under the control Tsann Kuen Enterprise commodit Purchase of raw Based of the same actual 0.26 0.00% 1.20 Co., Ltd. ies from parts on the controller the related market party price Purchase and both Settled of parties according to Under the control 17 March www.cnin Gold Mining Chain commodit Purchase of raw abide N/A No the contract N/A of the same actual 0.02 0.00% 1.20 2020 fo.com.cn Co., Ltd. ies from parts by the signed by controller the related fair and both parties party reasona Purchase ble of principl Ultimate Star Comgistic Capital commodit Purchase of raw e controlling 0.02 0.00% 1.20 Co., Ltd. ies from parts company the related party Sales of Ultimate commodit Sales of parts Star Comgistic Capital controlling ies to the and finished 290.10 0.37% 1,387.20 Co., Ltd. company related products party 27 2020 Semi-Annual Report of Tsann Kuen (China) Enterprise Co., Ltd. Pricing Type of Settlement principl Whether the Proportion in method of Content of the e of the Trans Transacti Approved exceede Similar related-pa same kind of the Disclosure Disclosur Related party Relationship related-party related- action on transaction d the market rty transactions related-part date e index transaction party price amount quota approve price transactio (%) y transacti d quota n transaction on Total 1,695.36 5,240.10 Details of large amount of sales returns N/A As for the prediction on the total amount of routine related-party transactions to be occurred in the reporting period by relevant types, the actual N/A performance in the reporting period Reason for significant difference between the transaction price and the market N/A price 2. Related-party transactions regarding purchase or sales of assets or equity interests □ Applicable √ Inapplicable 3. Related-party transitions regarding joint investments □ Applicable √ Inapplicable 28 2020 Semi-Annual Report of Tsann Kuen (China) Enterprise Co., Ltd. 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 XIV. Occupation of the Company’s funds for non-operating purposes by the controlling shareholder and its related parties □ Applicable √ Inapplicable XV. Significant contracts and execution 1. Entrustment, contracting and leasing (1) Entrustment □ Applicable √ Inapplicable (2) Contracting □ Applicable √ Inapplicable (3) Leasing □ Applicable √ Inapplicable 2. Significant guarantees √ Applicable □ Inapplicable (1) Guarantees 29 2020 Semi-Annual Report of Tsann Kuen (China) Enterprise Co., Ltd. Unit: RMB’0,000 Guarantees between subsidiaries Disclosure Actual date of the occurrence Actual Due Guarantee Guaranteed guarantee Line of Type of Term of date (date of guarantee or for a related party line guarantee guarantee guarantee agreement amount not party or not announceme signing) nt 2019/8/7 2020/3/10 PT.STAR COMGISTIC 2020/3/17 6,404.81 2020/3/27 591.51 Pledged 1 year No No INDONESIA 2020/6/24 2020/7/8 Total actual guarantee Total guarantee line for amount for subsidiaries subsidiaries approved during 6,404.81 591.51 during this Reporting this Reporting Period (C1) Period (C2) Total actual guarantee Total approved guarantee line balance for subsidiaries at for subsidiaries at the end of 6,404.81 591.51 the end of this Reporting this Reporting Period (C3) Period (C4) Total guarantee amount (total of the above-mentioned three kinds of guarantees) Total guarantee line approved Total actual guarantee during this Reporting Period 6,404.81 amount during this 591.51 (C1) Reporting Period (C2) Total approved guarantee line at Total actual guarantee the end of this Reporting Period 6,404.81 balance at the end of this 591.51 (C3) Reporting Period (C4) Proportion of the total actual guarantee amount (C4) in net 0.77% assets of the Company Of which: Amount of guarantees provided for shareholders, the actual controller and their related 0 parties (D) Amount of debt guarantees provided directly or indirectly for entities with a liability-to-asset 0 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 3. Entrusted cash management √ Applicable □ Inapplicable Unit: RMB’0,000 Type Resource of funds Amount incurred Undue balance Amount overdue Bank financial product Self-owned fund 54,000.00 48,000.00 0.00 Total 54,000.00 48,000.00 0.00 30 2020 Semi-Annual Report of Tsann Kuen (China) Enterprise Co., Ltd. Particular information of high-risk entrusted asset management with individual significant amount or low security, poor liquidity and non breakeven √ Applicable □ Inapplicable Unit: RMB’0,000 Actual Amou Whether Break- Amount recovery nt Whether there is Overview Typ Res even Annual of actual of withdr go wealth of the e of Type of ourc Use Name of the floatin yield for Estimate profits or profits awn through managemen item and the the Amount e of Initial date Ended Date of trustee g referenc profit losses in or losses impair stator t the related trust product fund fund procee e reporting in ment procedu entrustment index for ee s ds period reportin provis res plan in inquiring g period ion future or not Break-e Bank of ven Communica 18 June 15 January floating 5,000.00 4.30% 124.29 124.29 tion-Putian 2019 2020 proceed Branch s China Everbright 9 April 9 April Break-e 5,000.00 3.90% 195.00 195.00 Bank-Xiame 2019 2020 ven Recover n Branch fixed ed upon China proceed maturity Everbright s 5,000.00 7 May 2019 7 May 2020 3.80% 190.00 190.00 Bank-Xiame Payme n Branch nt of Stru Subject to CHINA Self- interes ctur the future MINSHEN Ban own t and www.cnin 18 January 17 January al N/A Yes market yield G k 4,500.00 ed princi 4.10% 183.99 183.99 fo.com.cn 2019 2020 depo and fund BANK-Xia fund pal at sit condition men Branch maturi Xiamen ty 30 August 29 August International Break-e 5,000.00 4.00% 202.78 2019 2020 Bank ven Chiyu floating 11 10 Banking-Fu proceed 15,000.00 December December 4.35% 661.56 zhou Branch s 2019 2020 Undue Chiyu 9 January 8 January Banking-Fu 5,000.00 4.35% 220.52 2020 2021 zhou Branch Xiamen 19 13 May International 5,000.00 November 3.70% 92.50 2020 Bank 2020 31 2020 Semi-Annual Report of Tsann Kuen (China) Enterprise Co., Ltd. Actual Amou Whether Break- Amount recovery nt Whether there is Overview Typ Res even Annual of actual of withdr go wealth of the e of Type of ourc Use Name of the floatin yield for Estimate profits or profits awn through managemen item and the the Amount e of Initial date Ended Date of trustee g referenc profit losses in or losses impair stator t the related trust product fund fund procee e reporting in ment procedu entrustment index for ee s ds period reportin provis res plan in inquiring g period ion future or not Xiamen 12 August 11 August International 9,500.00 4.10% 394.91 2019 2020 Bank Xiamen 10 March 10 March International 8,500.00 4.00% 344.72 2020 2021 Bank Total 67,500.00 2,610.27 693.28 32 2020 Semi-Annual Report of Tsann Kuen (China) Enterprise Co., Ltd. 4. Other significant contracts □ Applicable √ Inapplicable XVI. Social responsibilities 1. Significant environmental protection □ Applicable √ Inapplicable 2. Targeted measures taken to help people lift themselves out of poverty □ Applicable √ Inapplicable XVII. Other significant events √ Applicable □ Inapplicable Currently, considering the outbreak of the epidemic abroad and a tendency to spread, the Company will keep an close eye on and evaluate the influence of the epidemic, timely adjust all operating arrangements and take various measures to increase income and reduce expenditure, so as to lower the negative effects of the epidemic on the Company. XVIII. Significant events of subsidiaries □ Applicable √ Inapplicable Section VI. Change in Shares & Shareholders I. Changes in shares 1. Changes in shares Unit: share Before Increase/decrease (+/-) After Increase Bonu Percenta New from Subtot Percentag Number s Other Number ge (%) issues capital al e (%) shares reserve 1. Restricted shares 0 0.00% 0 0 0 0 0 0 0.00% 1.1 Shares held by state 1.2 Shares held by state-owned corporations 33 2020 Semi-Annual Report of Tsann Kuen (China) Enterprise Co., Ltd. Before Increase/decrease (+/-) After Increase Bonu Percenta New from Subtot Percentag Number s Other Number ge (%) issues capital al e (%) shares reserve 1.3 Shares held by other domestic investors Among which: Shares held by domestic corporations Shares held by domestic individuals 1.4 Shares held by foreign investors Among which: Shares held by foreign corporations Shares held by foreign individuals 2. Unrestricted shares 185,391,680 100.00% 0 0 0 0 0 185,391,680 100.00% 2.1 RMB ordinary shares 2.2 Domestically 185,391,680 100.00% 0 0 0 0 0 185,391,680 100.00% listed foreign shares 2.3 Foreign capital stocks listed abroad 2.4 Other 3. 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 Change in share capital’s impacts on basic EPS and diluted EPS in recent year and recent issue, and net assets per share attributed to equity shareholder and financial index etc. □ Applicable √ Inapplicable Other contents was necessary to the company or the securities regulators required to be disclosed □ Applicable √ Inapplicable 2. Changes in restricted shares □ Applicable √ Inapplicable 34 2020 Semi-Annual Report of Tsann Kuen (China) Enterprise Co., Ltd. II. Issuance and listing of securities □ Applicable √ Inapplicable III. Total numbe r of shareholders and their shareholdings Unit: share Total number of preference shareholders Total number of common shareholders at 15,759 with resumed voting rights at the 0 the period-end period-end Greater than 5% or top 10 common shareholders Total Number Pledged or frozen Number of common Increase/decreas of shares Nature of Shareholding unrestricted Name of shareholder shares held e during the restricted Status shareholder percentage common Number of at the reporting period common of shares shares period-end shares shares FORDCHEE Foreign DEVELOPMENT 29.10% 53,940,530 Unchanged 0 53,940,530 0 corporation LIMITED EUPA INDUSTRY Foreign 13.09% 24,268,840 Unchanged 0 24,268,840 0 CORPORATION LIMITED corporation GUOTAI JUNAN Foreign SECURITIES(HONGKON 5.00% 9,265,899 145,717 0 9,265,899 0 corporation G) LIMITED FILLMAN Foreign 2.49% 4,621,596 Unchanged 0 4,621,596 0 INVESTMENTS LIMITED corporation SHENWAN HONGYUAN Foreign SECURITIES (H.K.) 1.09% 2,016,752 Unchanged 0 2,016,752 0 corporation LIMITED Domestic CHEN YONGQUAN 1.03% 1,900,776 Unchanged 0 1,900,776 0 individual Foreign CHEN YONGQING 0.87% 1,607,178 45,929 0 1,607,178 0 individual Foreign CHEN LIJUAN 0.76% 1,401,134 Unchanged 0 1,401,134 0 individual Domestic DING XIAOLUN 0.66% 1,223,400 49,900 0 1,223,400 0 individual Domestic XU QIANMING 0.34% 623,759 5,500 0 623,759 0 individual Strategic investor or general corporation becoming a top ten shareholder due to None placing of new shares The first, the second and the fourth shareholders are the Company’s corporate controlling shareholders. It is unknown whether the other public shareholders are Related or acting-in-concert parties among related parties or acting-in-concert parties as prescribed in the Administrative the shareholders above Methods for Disclosure of the Shareholding Changes of the Listed Company’s Shareholders. Top ten unrestricted common shareholders Number of unrestricted Type of shares Name of shareholder common shares held at Type Number the 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 9,265,899 Domestically listed foreign share 9,265,899 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 1,607,178 Domestically listed foreign share 1,607,178 CHEN LIJUAN 1,401,134 Domestically listed foreign share 1,401,134 35 2020 Semi-Annual Report of Tsann Kuen (China) Enterprise Co., Ltd. DINGG XIAOLUN 1,223,400 Domestically listed foreign share 1,223,400 XU QIANMING 623,759 Domestically listed foreign share 623,759 Explanation on associated relationship The first, the second and the fourth shareholders are the Company’s corporate or/and persons acting in concert among the controlling shareholders. It is unknown whether the other shareholders of public top ten unrestricted common shareholders shares are related parties or acting-in-concert parties as prescribed in the and between the top ten unrestricted Administrative Methods for Disclosure of the Shareholding Changes of the Listed common shareholders and the top ten Company’s Shareholders. common shareholders Explanation on the top 10 common shareholders participating in the margin N/A trading business Did any of the top ten common shareholders or the top ten unrestricted common shareholders of the Company conduct any promissory repo during the Reporting Period? □ Yes √ No No such cases in the Reporting Period. IV. Change of the controlling shareholder or the actual controller Change of the controlling shareholder during this reporting period □ Applicable √ Inapplicable No such cases in this reporting period. Change of the actual controller during this reporting period □ Applicable √ Inapplicable No such cases in this reporting period. 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 There was no change in shareholding of directors, supervisors and senior management staffs, for the specific information please refer to the 2019 Annual Report. 36 2020 Semi-Annual Report of Tsann Kuen (China) Enterprise Co., Ltd. II. Changes in directors, supervisors and executive officers √ Applicable □ Inapplicable Name Office title Type of change Date Reason He Zongyuan Director Left 28 February 2020 Personal reasons Supervisory Xu Xiaowan Board Left 24 April 2020 Personal reasons chairman Left for expiration Left for expiration of his Xu Degeng Director 24 April 2020 of his term term Section IX. 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 X. Financial Report I. Auditor’s Report Whether the semi-annual report has been audited? □Yes √No The semi-annual report of the Company has not been audited. 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 Section XI. Documents Available for Reference 1. This 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 37 2020 Semi-Annual Report of Tsann Kuen (China) Enterprise Co., Ltd. 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. 4 August 2020 38 2020 Semi-Annual Report of Tsann Kuen (China) Enterprise Co., Ltd. 1. Consolidated balance sheet Prepared by: TSANN KUEN (CHINA) ENTERPRISE CO., LTD. Currency: CNY Item Note 30 June 2020 31 December 2019 Current assets: Monetary funds 6.1 591,354,074.68 639,623,201.98 Settlement reserve Interbank loans granted Held-for-trading financial assets 6.2 1,319,000.00 3,620,689.00 Derivative financial assets Notes receivable 6.3 1,559,385.90 274,548.00 Accounts receivable 6.4 302,087,312.15 285,995,412.05 Accounts receivable financing Accounts paid in advance 6.5 2,268,109.33 3,112,312.06 Premiums receivable Reinsurance receivables Receivable reinsurance contract reserve Other accounts receivable 6.6 17,477,176.51 29,271,999.53 Of which: Interest receivable Dividends receivable Financial assets purchased under resale agreements Inventories 6.7 175,072,301.31 222,155,587.38 Contractual assets Assets held for sale Non-current assets due within one year Other current assets 6.8 494,809,476.00 501,139,597.55 Total current assets 1,585,946,835.88 1,685,193,347.55 Non-current assets: Loans and advances to customers Investments in debt obligations Investments in other debt obligations Long-term accounts receivable Long-term equity investments Investments in other equity instruments 6.9 40,000.00 40,000.00 Other non-current financial assets Investment property 6.10 22,321,513.39 22,991,059.81 Fixed assets 6.11 181,817,396.06 185,749,835.56 Construction in progress 6.12 750,571.75 2,921,901.51 Productive living assets Oil-gas assets Use rights assets Intangible assets 6.13 29,557,004.67 30,733,280.24 R&D expense Goodwill Long-term deferred expenses 6.14 7,654,594.99 7,225,915.80 Deferred income tax assets 6.15 18,725,843.44 20,587,480.85 Other non-current assets 6.16 654,852.22 1,006,014.66 Total non-current assets 261,521,776.52 271,255,488.43 Total assets 1,847,468,612.40 1,956,448,835.98 39 2020 Semi-Annual Report of Tsann Kuen (China) Enterprise Co., Ltd. (Continued) Item Note 30 June 2020 31 December 2019 Current liabilities: Short-term borrowings 6.17 28,331,283.48 Borrowings from the central bank Interbank loans obtained Held-for-trading financial liabilities 6.18 44,200.00 638,800.00 Derivative financial liabilities Notes payable 6.19 1,319,784.49 16,429,247.30 Accounts payable 6.20 464,538,790.03 594,978,594.45 Accounts received in advance 6.21 4,439,418.57 13,294,285.78 Contractual liabilities 6.22 8,137,507.11 Financial assets sold under repurchase agreements Customer deposits and interbank deposits Payables for acting trading of securities Payables for acting underwriting of securities Payroll payable 6.23 41,761,501.70 46,433,996.56 Taxes and fares payable 6.24 13,367,293.66 19,660,673.84 Other accounts payable 6.25 60,679,281.36 48,482,744.38 Of which: Interest payable Dividends payable Handling charges and commissions payable Reinsurance premiums payable Liabilities held for sale Non-current liabilities due within one year Other current liabilities Total current liabilities 622,619,060.40 739,918,342.31 Non-current liabilities: Insurance contract reserves Long-term borrowings Bonds payable Of which: Preference shares Perpetual bonds Lease liabilities Long-term accounts payable Long-term payroll payable 6.26 473,513.70 425,896.17 Estimated liabilities Deferred income Deferred income tax liabilities 6.15 48,495,463.60 48,835,721.94 Other non-current liabilities Total non-current liabilities 48,968,977.30 49,261,618.11 Total liabilities 671,588,037.70 789,179,960.42 Owners’ equity: Share capital 6.27 185,391,680.00 185,391,680.00 Other equity instruments Of which: Preference shares Perpetual bonds Capital reserves 6.28 296,808,965.79 296,808,965.79 Less: Treasury stock Other composite income 6.29 8,617,096.57 7,514,750.01 Special reserves Surplus reserves 6.30 40,499,488.55 40,499,488.55 Provisions for general risks 40 2020 Semi-Annual Report of Tsann Kuen (China) Enterprise Co., Ltd. Item Note 30 June 2020 31 December 2019 Retained profit 6.31 239,205,442.15 218,523,906.99 Total equity attributable to owners of the 770,522,673.06 748,738,791.34 Company Minority interests 405,357,901.64 418,530,084.22 Total owners’ equity 1,175,880,574.70 1,167,268,875.56 Total liabilities and owners’ equity 1,847,468,612.40 1,956,448,835.98 Legal Representative: Pan Zhirong Person in Charge of Accounting Work: Wu Jianhua Person in Charge of Financial Department: Wu Jianhua 41 2020 Semi-Annual Report of Tsann Kuen (China) Enterprise Co., Ltd. 2. Balance sheet of the Company Prepared by: TSANN KUEN (CHINA) ENTERPRISE CO., LTD. Currency: CNY Item Note 30 June 2020 31 December 2019 Current assets: Monetary funds 4,026,848.82 7,624,622.27 Held-for-trading financial assets Derivative financial assets Notes receivable 1,559,385.90 274,548.00 Accounts receivable 14.1 8,599,138.59 5,867,958.20 Accounts receivable financing Accounts paid in advance 91,291.77 96,278.32 Other accounts receivable 14.2 2,042,327.50 2,622,732.62 Of which: Interest receivable Dividends receivable Inventories 2,447,038.17 4,155,837.12 Contractual assets Assets held for sale Non-current assets due within one year Other current assets Total current assets 18,766,030.75 20,641,976.53 Non-current assets: Investments in debt obligations Investments in other debt obligations Long-term accounts receivable Long-term equity investments 14.3 923,414,701.56 923,414,701.56 Investments in other equity instruments 40,000.00 40,000.00 Other non-current financial assets Investment property 26,367,819.81 27,532,926.93 Fixed assets 798,131.30 963,505.93 Construction in progress 355,339.84 Productive living assets Oil-gas assets Use rights assets Intangible assets 2,249.99 R&D expense Goodwill Long-term deferred expenses 528,208.82 590,108.66 Deferred income tax assets 5,179,675.27 6,125,040.53 Other non-current assets Total non-current assets 956,328,536.76 959,023,873.44 Total assets 975,094,567.51 979,665,849.97 42 2020 Semi-Annual Report of Tsann Kuen (China) Enterprise Co., Ltd. (Continued) Item Note 30 June 2020 31 December 2019 Current liabilities: Short-term borrowings Held-for-trading financial liabilities Derivative financial liabilities Notes payable Accounts payable 43,615,334.56 40,632,779.54 Accounts received in advance 1,826,178.67 Contractual liabilities 2,031,704.77 Payroll payable 4,387,028.01 7,403,395.56 Taxes and fares payable 1,204,884.82 1,255,578.53 Other accounts payable 168,271,147.33 238,315,460.56 Of which: Interest payable Dividends payable Liabilities held for sale Non-current liabilities due within one year Other current liabilities Total current liabilities 219,510,099.49 289,433,392.86 Non-current liabilities: Long-term borrowings Bonds payable Of which: Preference shares Perpetual bonds Lease liabilities Long-term accounts payable Long-term payroll payable Estimated liabilities Deferred income Deferred income tax liabilities Other non-current liabilities Total non-current liabilities Total liabilities 219,510,099.49 289,433,392.86 Owners’ equity: Share capital 185,391,680.00 185,391,680.00 Other equity instruments Of which: Preference shares Perpetual bonds Capital reserves 271,490,289.82 271,490,289.82 Less: Treasury stock Other composite income Special reserves Surplus reserves 40,499,488.55 40,499,488.55 Retained profit 258,203,009.65 192,850,998.74 Total owners’ equity 755,584,468.02 690,232,457.11 Total liabilities and owners’ equity 975,094,567.51 979,665,849.97 Legal Representative: Pan Zhirong Person in Charge of Accounting Work: Wu Jianhua Person in Charge of Financial Department: Wu Jianhua 43 2020 Semi-Annual Report of Tsann Kuen (China) Enterprise Co., Ltd. 3. Consolidated income statement Prepared by: TSANN KUEN (CHINA) ENTERPRISE CO., LTD. Currency: CNY Same period of Item Note Reporting period last year 1. Operating revenues 793,014,584.36 929,448,983.38 Including: Sales revenue 6.32 793,014,584.36 929,448,983.38 Interest income Premium income Handling charge and commission income 2. Total operating costs 735,225,257.48 907,353,861.68 Including: Cost of sales 6.32 644,212,379.74 796,332,577.48 Interest expense Handling charge and commission expense Surrenders Net claims paid Net amount provided as policy reserve Expenditure on policy dividends Reinsurance premium expense Taxes and surtaxes 6.33 5,631,036.08 5,679,950.02 Selling expenses 6.34 22,695,745.52 32,613,304.09 Administrative expenses 6.35 46,326,432.58 38,769,244.52 R&D expenses 6.36 30,818,857.76 36,699,200.50 Finance costs 6.37 -14,459,194.20 -2,740,414.93 Of which: Interest expenses 151,742.56 431,740.73 Interest revenue 12,388,999.10 4,370,937.15 Add: other income 6.38 2,260,574.12 2,617,767.00 Profit/loss on investment (“-” means loss) 6.39 7,879,887.04 8,313,038.97 Including: Share of profit in associates and joint ventures Income from the derecognition of financial assets at amortized cost Foreign exchange gain (“-” means loss) Net gain on exposure hedges (“-” means loss) Profit/loss on fair value changes (“-” means loss) 6.40 -1,707,089.00 -4,145,350.00 Credit impairment loss (“-” means loss) 6.41 -1,129,743.77 -89,003.08 Asset impairment loss (“-” means loss) 6.42 -8,052,144.68 -1,830,352.79 Income arising from disposal of assets (“-” means loss) 6.43 279,810.12 63,398,419.60 3. Operating profit (“-” means loss) 57,320,620.71 90,359,641.40 Add: Non-operating revenue 6.44 2,794,509.46 26,181,811.37 Less: Non-operating expense 6.45 211,771.67 20,502.70 4. Total profit (“-” means loss) 59,903,358.50 116,520,950.07 Less: Corporate income tax 6.46 7,827,101.86 29,820,980.12 5. Net profit (“-” means loss) 52,076,256.64 86,699,969.95 44 2020 Semi-Annual Report of Tsann Kuen (China) Enterprise Co., Ltd. Same period of Item Note Reporting period last year 5.1 Classified by operating continuity 5.1.1 Net profit from going concern (“-” means net loss) 52,076,256.64 86,699,969.95 5.1.2 Net profit from discontinued operations (“-” means net loss) 5.2 Classified by ownership 5.2.1 Net profit attributable to owners of the Company 39,220,703.16 47,292,567.95 5.2.2 Minority shareholders’ income 12,855,553.48 39,407,402.00 6. After-tax net amount of other composite income 6.47 1,469,795.41 199,440.37 After-tax net amount of other composite income 1,102,346.56 149,580.28 attributable to owners of the Company 6.1 Other composite income that will not be reclassified -8,394.48 to profit or loss 6.1.1 Changes caused by remeasurements on defined -8,394.48 benefit pension schemes 6.1.2 Share of other comprehensive income of investees that will not be reclassified to profit or loss under equity method 6.1.3 Changes in the fair value of investments in other equity instruments 6.1.4 Changes in the fair value of the company’s credit risks 6.1.5 Other 6.2 Other composite income that will be reclassified to 1,110,741.04 149,580.28 profit or loss 6.2.1 Share of other comprehensive income of investees that will be reclassified to profit or loss under equity method 6.2.2 Changes in the fair value of investments in other debt obligations 6.2.3 Other comprehensive income arising from the reclassification of financial assets 6.2.4 Allowance for credit impairments in investments in other debt obligations 6.2.5 Reserve for cash flow hedges 6.2.6 Differences arising from the translation of 1,110,741.04 149,580.28 foreign currency-denominated financial statements 6.2.7 Other After-tax net amount of other composite income 367,448.85 49,860.09 attributable to minority shareholders 7. Total composite income 53,546,052.05 86,899,410.32 Attributable to owners of the Company 40,323,049.72 47,442,148.23 Attributable to minority shareholders 13,223,002.33 39,457,262.09 8. Earnings per share 8.1 Basic earnings per share 0.21 0.26 8.2 Diluted earnings per share 0.21 0.26 Where business mergers under the same control occurred in the Reporting Period, net profit achieved by the merged parties before the business mergers was CNY 0.00, with the corresponding amount for the same period of last year being CNY 0.00. Legal Representative: Pan Zhirong Person in Charge of Accounting Work: Wu Jianhua Person in Charge of Financial Department: Wu Jianhua 45 2020 Semi-Annual Report of Tsann Kuen (China) Enterprise Co., Ltd. 4. Income statement of the Company Prepared by: TSANN KUEN (CHINA) ENTERPRISE CO., LTD. Currency: CNY Same period of Item Note Reporting period last year 1. Operating revenues 14.4 39,381,607.56 37,149,218.41 Less: Operating costs 14.4 29,743,243.90 31,012,503.76 Taxes and surtaxes 1,161,564.08 916,698.27 Selling expenses 1,462,192.36 2,375,066.13 Administrative expenses 1,845,878.74 2,894,602.95 R&D expenses Finance costs -23,503.87 -38,149.46 Of which: Interest expenses Interest revenue 88,362.30 84,577.68 Add: other income 70,439.12 Profit/loss on investment (“-” means loss) 14.5 79,185,554.77 25,443,358.87 Including: Share of profit in associates and joint ventures Income from the derecognition of financial assets at amortized cost (“-” means loss) Net gain on exposure hedges (“-” means loss) Profit/loss on fair value changes (“-” means loss) Credit impairment loss (“-” means loss) 219,385.70 -27,910.56 Asset impairment loss (“-” means loss) 53,233.39 -1,819,781.83 Income arising from disposal of assets (“-” means loss) 2. Operating profit (“-” means loss) 84,720,845.33 23,584,163.24 Add: Non-operating revenue 115,698.84 362,268.59 Less: Non-operating expense 3. Total profit (“-” means loss) 84,836,544.17 23,946,431.83 Less: Corporate income tax 945,365.26 -536,646.45 4. Net profit (“-” means loss) 83,891,178.91 24,483,078.28 4.1 Net profit from going concern (“-” means net loss) 83,891,178.91 24,483,078.28 4.2 Net profit from discontinued operation (“-” means net loss) 5. After-tax net amount of other composite income 5.1 Other composite income that will not be reclassified to profit or loss 5.1.1 Changes caused by remeasurements on defined benefit pension schemes 5.1.2 Share of other comprehensive income of investees that will not be reclassified to profit or loss under equity method 5.1.3 Changes in the fair value of investments in other equity instruments 5.1.4 Changes in the fair value of the company’s credit risks 5.1.5 Other 5.2 Other composite income that will be reclassified to profit or loss 5.2.1 Share of other comprehensive income of investees that will be reclassified to profit or loss under equity method 5.2.2 Changes in the fair value of investments in other debt obligations 5.2.3 Other comprehensive income arising from the reclassification of financial assets 46 2020 Semi-Annual Report of Tsann Kuen (China) Enterprise Co., Ltd. Same period of Item Note Reporting period last year 5.2.4 Allowance for credit impairments in investments in other debt obligations 5.2.5 Reserve for cash flow hedges 5.2.6 Differences arising from the translation of foreign currency-denominated financial statements 5.2.7 Other 6. Total composite income 83,891,178.91 24,483,078.28 Legal Representative: Pan Zhirong Person in Charge of Accounting Work: Wu Jianhua Person in Charge of Financial Department: Wu Jianhua 47 2020 Semi-Annual Report of Tsann Kuen (China) Enterprise Co., Ltd. 5. Consolidated cash flow statement Prepared by: TSANN KUEN (CHINA) ENTERPRISE CO., LTD. Currency: CNY Same period of last Item Note Reporting period year 1. Operating cash flow: Cash received from sale of commodities and rendering 760,032,384.25 910,416,818.85 of service Net increase in money deposits from customers and inter-bank placements Net increase in loans from the Central Bank Net increase in funds borrowed from other financial institutions Cash received from premium of original insurance contracts Net cash received from reinsurance business Net increase in deposits of policy holders and investment fund Cash received from interest, handling charges and commissions Net increase in loans from banks and other financial institutions Net increase in funds in repurchase business Net proceeds from acting trading of securities Tax refunds received 57,320,585.80 88,288,251.27 Other operating cash received 6.48 (1) 36,017,760.78 55,614,951.61 Subtotal of operating cash inflow 853,370,730.83 1,054,320,021.73 Cash paid for goods and services 670,039,827.72 807,860,269.08 Net increase in loans and advances to customers Net increase in funds deposited in the Central Bank and inter-bank placements Cash for paying claims of original insurance contracts Net increase in interbank loans granted Cash for paying interest, handling charges and commissions Cash for paying policy dividends Cash paid to and for employees 123,559,701.92 141,016,204.69 Taxes and fares paid 22,265,046.50 11,725,429.89 Other cash payment relating to operating activities 6.48 (2) 65,518,030.83 89,550,908.64 Subtotal of operating cash outflow 881,382,606.97 1,050,152,812.30 Net operating cash flow -28,011,876.14 4,167,209.43 2. Investment cash flow: Cash received from retraction of investments 216,993,732.02 242,197,004.77 Cash received from return on investments 11,383,180.62 4,614,149.35 Net cash received from disposal of fixed assets, 53,012.94 67,204,817.83 intangible assets and other long-term assets Net cash received from disposal of subsidiaries or other business units Other cash received relating to investment activities 6.48 (3) 240,268,714.80 92,427,273.64 48 2020 Semi-Annual Report of Tsann Kuen (China) Enterprise Co., Ltd. Same period of last Item Note Reporting period year Subtotal of investment cash inflow 468,698,640.38 406,443,245.59 Cash paid to acquire fixed assets, intangible assets and 27,331,748.41 35,149,944.63 other long-term assets Cash paid for investment 205,224,443.75 314,533,270.69 Net increase in pledged loans Net cash paid to acquire subsidiaries and other business units Other cash payments relating to investment activities 6.48 (4) 490,025,153.46 206,867,146.34 Subtotal of investment cash outflow 722,581,345.62 556,550,361.66 Net investment cash flow -253,882,705.24 -150,107,116.07 3. Financing cash flow: Cash received from capital contributions Including: Cash received from minority shareholder investments by subsidiaries Cash received as borrowings 54,522,840.00 18,814,040.00 Other financing cash received 6.48 (5) 7,000,000.00 Subtotal of financing cash inflow 54,522,840.00 25,814,040.00 Repayment of borrowings 26,769,860.00 19,397,105.19 Cash paid for interest expenses and distribution of 45,072,022.49 16,140,046.71 dividends or profit Including: dividends or profit paid by subsidiaries to 26,395,184.92 8,481,119.62 minority shareholders Other cash payments relating to financing activities 6.48 (6) 6,775,024.51 Sub-total of financing cash outflow 78,616,907.00 35,537,151.90 Net financing cash flow -24,094,067.00 -9,723,111.90 4. Effect of foreign exchange rate changes on cash and 1,188,057.91 -1,394,565.02 cash equivalents 5. Net increase in cash and cash equivalents -304,800,590.47 -157,057,583.56 Add: Opening balance of cash and cash equivalents 639,623,201.98 448,492,295.47 6. Closing balance of cash and cash equivalents 334,822,611.51 291,434,711.91 Legal Representative: Pan Zhirong Person in Charge of Accounting Work: Wu Jianhua Person in Charge of Financial Department: Wu Jianhua 49 2020 Semi-Annual Report of Tsann Kuen (China) Enterprise Co., Ltd. 6. Cash flow statement of the Company Prepared by: TSANN KUEN (CHINA) ENTERPRISE CO., LTD. Currency: CNY Same period of last Item Note Reporting period year 1. Operating cash flow: Cash received from sale of commodities and rendering 12,939,282.22 30,544,622.02 of service Tax refunds received Other operating cash received 28,295,141.08 22,188,848.35 Subtotal of operating cash inflow 41,234,423.30 52,733,470.37 Cash paid for goods and services 9,585,274.32 33,069,029.79 Cash paid to and for employees 970,120.74 1,557,848.56 Taxes and fares paid 4,249,252.46 2,665,636.52 Other operating cash payments 90,604,336.94 32,590,375.24 Subtotal of operating cash outflow 105,408,984.46 69,882,890.11 Net operating cash flow -64,174,561.16 -17,149,419.74 2. Investment cash flow: Cash received from retraction of investments Cash received from return on investments 79,185,554.77 25,443,358.87 Net cash received from disposal of fixed assets, intangible assets and other long-term assets Net cash received from disposal of subsidiaries or other business units Other cash received relating to investment activities Subtotal of investment cash inflow 79,185,554.77 25,443,358.87 Cash paid to acquire fixed assets, intangible assets and 54,985.00 62,500.00 other long-term assets Cash paid for investment 1,500,000.00 Net cash paid to acquire subsidiaries and other business units Other investment cash payments Subtotal of investment cash outflow 54,985.00 1,562,500.00 Net investment cash flow 79,130,569.77 23,880,858.87 3. Financing cash flow: Cash received from capital contributions Cash received as borrowings Other financing cash received Subtotal of financing cash inflow Repayment of borrowings Cash paid for interest expenses and distribution of 18,539,168.00 7,415,667.20 dividends or profit Other cash payments relating to financing activities Sub-total of financing cash outflow 18,539,168.00 7,415,667.20 Net financing cash flow -18,539,168.00 -7,415,667.20 4. Effect of foreign exchange rate changes on cash and -14,614.06 -36,019.88 cash equivalents 5. Net increase in cash and cash equivalents -3,597,773.45 -720,247.95 Add: Opening balance of cash and cash equivalents 7,624,622.27 6,985,345.44 6. Closing balance of cash and cash equivalents 4,026,848.82 6,265,097.49 Legal Representative: Pan Zhirong Person in Charge of Accounting Work: Wu Jianhua Person in Charge of Financial Department: Wu Jianhua 50 2020 Semi-Annual Report of Tsann Kuen (China) Enterprise Co., Ltd. 7. Consolidated statement of changes in shareholders’ equity Prepared by: TSANN KUEN (CHINA) ENTERPRISE CO., LTD. Currency: CNY Reporting period Equity attributable to owners of the Company Item Other equity instruments Less: Specif Gener Minority Total owners’ Other Prefer Perpet treasu ic Surplus al risk interests equity Share capital Oth Capital reserve comprehensiv Retained profit Subtotal red ual ry reserv reserve reserv Other er e incomes shares bonds stock e e Balance brought 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 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 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 Changes for the period (decrease presented by "-" 1,102,346.56 20,681,535.16 21,783,881.72 -13,172,182.58 8,611,699.14 prefix) 1. Total comprehensive income 1,102,346.56 39,220,703.16 40,323,049.72 13,223,002.33 53,546,052.05 2. Changes in owners' 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 -18,539,168.00 -18,539,168.00 -26,395,184.92 -44,934,352.92 a. Recognition of surplus reserves b. Recognition of provision for general risks c. Distribution to shareholders -18,539,168.00 -18,539,168.00 -26,395,184.92 -44,934,352.92 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 0.01 0.01 Balance carried forward 185,391,680.00 296,808,965.79 8,617,096.57 40,499,488.55 239,205,442.15 770,522,673.06 405,357,901.64 1,175,880,574.70 51 2020 Semi-Annual Report of Tsann Kuen (China) Enterprise Co., Ltd. (Continued) Same period of last year Equity attributable to owners of the Company Item Minority Total owners’ Other equity instruments Less: Other General Specific Surplus interests equity Share capital Preferred Perpetual Capital reserve treasury comprehensive risk Retained profit Subtotal Other reserve reserve Other shares bonds stock incomes reserve 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 9,597.14 -33,871.83 839,695.41 815,420.72 384,712.99 1,200,133.71 Correction of prior period errors Business combination under common control Others Balance as at 1 January 185,391,680.00 296,808,965.79 5,933,729.81 37,770,482.76 123,712,246.71 649,617,105.07 367,981,904.42 1,017,599,009.49 Changes for the period (decrease presented by 149,580.28 39,876,900.75 40,026,481.03 30,976,142.47 71,002,623.50 "-" prefix) 1. Total comprehensive income 149,580.28 47,292,567.95 47,442,148.23 39,457,262.09 86,899,410.32 2. Changes in owners' 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 -7,415,667.20 -7,415,667.20 -8,481,119.62 -15,896,786.82 a. Recognition of surplus reserves b. Recognition of provision for general risks c. Distribution to shareholders -7,415,667.20 -7,415,667.20 -8,481,119.62 -15,896,786.82 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 6,083,310.09 37,770,482.76 163,589,147.46 689,643,586.10 398,958,046.89 1,088,601,632.99 Legal Representative: Pan Zhirong Person in Charge of Accounting Work: Wu Jianhua Person in Charge of Financial Department: Wu Jianhua 52 2020 Semi-Annual Report of Tsann Kuen (China) Enterprise Co., Ltd. 8. Statement of changes in shareholders’ equity of the Company Prepared by: TSANN KUEN (CHINA) ENTERPRISE CO., LTD. Currency: CNY Reporting period Item Other equity instruments Less: Other Specific Surplus Share capital Preferred Perpetual Capital reserve treasury comprehensive Retained profit Other Total owners’ equity Other reserve reserve shares bonds stock incomes Balance brought forward 185,391,680.00 271,490,289.82 40,499,488.55 192,850,998.74 690,232,457.11 Add: Changes of accounting policies Correction of prior period errors Others Balance as at 1 January 185,391,680.00 271,490,289.82 40,499,488.55 192,850,998.74 690,232,457.11 Changes for the period (decrease presented by "-" 65,352,010.91 65,352,010.91 prefix) 1. Total comprehensive income 83,891,178.91 83,891,178.91 2. Changes in owners' 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 -18,539,168.00 -18,539,168.00 a. Recognition of surplus reserves b. Distribution to shareholders -18,539,168.00 -18,539,168.00 c. 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 40,499,488.55 258,203,009.65 755,584,468.02 53 2020 Semi-Annual Report of Tsann Kuen (China) Enterprise Co., Ltd. (Continued) Same period of last year Other equity instruments Other Item Less: compreh Specific Share capital Preferred Perpetua Capital reserve treasury Surplus reserve Retained profit Other Total owners’ equity Other ensive reserve shares l bonds stock incomes 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 -33,871.83 -304,846.43 -338,718.26 Correction of prior period errors Others Balance as at 1 January 185,391,680.00 271,490,289.82 37,770,482.76 175,705,613.85 670,358,066.43 Changes for the period (decrease presented by "-" prefix) 17,067,411.08 17,067,411.08 1. Total comprehensive income 24,483,078.28 24,483,078.28 2. Changes in owners' 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 -7,415,667.20 -7,415,667.20 a. Recognition of surplus reserves b. Distribution to shareholders -7,415,667.20 -7,415,667.20 c. 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 37,770,482.76 192,773,024.93 687,425,477.51 Legal Representative: Pan Zhirong Person in Charge of Accounting Work: Wu Jianhua Person in Charge of Financial Department: Wu Jianhua 54 2020 Semi-Annual Report of Tsann Kuen (China) Enterprise Co., Ltd. Tsann Kuen (China) Enterprise Co., Ltd. Notes to the Financial Statements for H1 2020 (All amounts are expressed, unless otherwise stated, in Renminbi (CNY).) Note 1: Company Profile Tsann Kuen (China) Enterprise Co., Ltd. (hereafter “the Company or TKC”) was established in the People’s Republic of China (“the PRC”) in 1988 as a wholly owned foreign investment enterprise, the Company named in 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 30 June 2020, 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 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 55 2020 Semi-Annual Report of Tsann Kuen (China) Enterprise Co., Ltd. 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 30 June 2020, 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 4 August 2020. 10 subsidiaries were included in the scope of consolidation as of 30 June 2020, please see Note 8 “The equity in other main entities” for details. 1 subsidiary is excluded from the consolidation scope in 2020. Please see Note 7 “Change in the scope of consolidation” for details. 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) on 15 February 2006, and revised Accounting Standards (order 42 of the Ministry of Finance) and Compilation Rules for Information Disclosure by Companies Offering 56 2020 Semi-Annual Report of Tsann Kuen (China) Enterprise Co., Ltd. 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 30 June 2020. 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 4.24 “Revenue recognition principle and measurement method” for the description. For description of significant accounting judgments and estimates made by management, see Note 4.29 “Significant accounting judgments and 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. 57 2020 Semi-Annual Report of Tsann Kuen (China) Enterprise Co., Ltd. 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 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, 58 2020 Semi-Annual Report of Tsann Kuen (China) Enterprise Co., Ltd. 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 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. 59 2020 Semi-Annual Report of Tsann Kuen (China) Enterprise Co., Ltd. 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 Article 51 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 4.14 “long-term investment” accounting treatment, if it does not belong to the “package deal” to distinguish the individual financial statements and the consolidated financial statements related to the accounting treatment: In the individual financial statements, the total value of the book value of the acquiree's equity investment before the acquisition date and the cost of new investment at the acquisition date, as the initial cost of the investment, the acquiree's equity investment before the acquisition date involved in other comprehensive income, in the disposal of the investment will be in other comprehensive income associated with the use of infrastructure and the acquiree directly related to the disposal of assets or liabilities of the same accounting treatment (that is, except in accordance with the equity method of accounting in the defined benefit plan acquiree is remeasured net changes in net assets or liabilities other than in the corresponding share of the lead, and the rest into the current investment income). In the combination financial statements, the equity interest in the acquiree previously held before the acquisition date re-assessed at the fair value at the acquisition date, with any difference between its fair value and its carrying amount is recorded as investment income. The previously-held equity interest in the acquiree involved in other comprehensive income and other comprehensive income associated with the purchase of the foundation should be used party directly related to the disposal 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 60 2020 Semi-Annual Report of Tsann Kuen (China) Enterprise Co., Ltd. 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. 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 o f 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 61 2020 Semi-Annual Report of Tsann Kuen (China) Enterprise Co., Ltd. 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 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 4.14 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:①these 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; ④a 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 4.14.2.4)) and “due to the disposal of certain equity investments or 62 2020 Semi-Annual Report of Tsann Kuen (China) Enterprise Co., Ltd. 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 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, ②hedging 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, ③available-for-trade is recorded into profit or loss except for amortized cost. Non-monetary foreign currency items measured at historical cost shall still be translated at the spot exchange rate prevailing on the transaction date, and the amount denominated in the functional currency is not changed. Non-monetary foreign currency items measured at fair value are translated at the spot exchange rate prevailing at the date when the fair values are 63 2020 Semi-Annual Report of Tsann Kuen (China) Enterprise Co., Ltd. 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 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. At the disposal of part of the equity investment or other causes lower hold percentage 64 2020 Semi-Annual Report of Tsann Kuen (China) Enterprise Co., Ltd. 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 cur rency 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 instrume nts 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 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 65 2020 Semi-Annual Report of Tsann Kuen (China) Enterprise Co., Ltd. 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 significantl y 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 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 66 2020 Semi-Annual Report of Tsann Kuen (China) Enterprise Co., Ltd. subsequently measured at fair value and changes in fair value are recognised in profit or loss except for hedge accounting. A financial liability 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, other 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 cha nges) 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. 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 wi th 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 67 2020 Semi-Annual Report of Tsann Kuen (China) Enterprise Co., Ltd. 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 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. 68 2020 Semi-Annual Report of Tsann Kuen (China) Enterprise Co., Ltd. 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 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 Impairme nt 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 69 2020 Semi-Annual Report of Tsann Kuen (China) Enterprise Co., Ltd. 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. 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 amount 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 For notes receivable, the Company measures the loss impairme nt in accordance with the 70 2020 Semi-Annual Report of Tsann Kuen (China) Enterprise Co., Ltd. amount equivalent to the expected credit loss in the whole duration. They are classified into different groups based on their credit risk characteristics: 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 Commercial acceptance bill the "accounts receivable" combination. 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 signi ficant 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 groups 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 Related parties be 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 groups 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 Related parties be received) 4.10 Inventories 71 2020 Semi-Annual Report of Tsann Kuen (China) Enterprise Co., Ltd. 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 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 deter mined 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 realizabl e 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. 72 2020 Semi-Annual Report of Tsann Kuen (China) Enterprise Co., Ltd. 4.11. Contract assets and contract liabilities The Company presents contract assets or contract liabilities on the balance sheet according to the relationship between the fulfillment of its contract performance obligations and its customers’ payment. Considerations that the Company has the right to collect for commodities transferred or services provided to customers (and such right depends on other factors than time lapses) are presented as contract assets. Obligations to be fulfilled by the Company of transferring commodities or providing services to customers, as the Company has received or should receive customers’ considerations, are presented as contract liabilities. Refer to Note 4.11 for the detail on the Company’s method of recognizing the expected credit loss of contract assets and accounting treatment method. Contract assets and contract liabilities are presented separately on the balance sheet, and in a net amount if they are under the same contract. If the net amount is the debit balance, it will be presented in “contract assets” or “other non-current assets” according to its liquidity; if it is the credit balance, it will be presented in “contract liabilities” or “other non-current liabilities” according to its liquidity. Contract assets and contract liabilities that are under different contracts cannot offset each other. 4.12 Contract costs To be applicable from 1 January 2020 Contract costs comprise contract performance cost and contract acquisition cost. The cost incurred by the Company from performing a contract is recognized into an asset as contract performance cost when it meets the following conditions: a. This cost directly relates to an existing contract or a contract expected to be acquired. It consists of direct labor, direct materials, manufacture costs (or similar costs), costs specified to be borne by the customer and other costs incurred from this contract solely. b. This cost has increased the Company’s sources that are used to fulfill its contract performance obligations in the future. c. This cost is expected to be recovered. An incremental cost that is incurred by the Company for acquiring a contract and expected to be recovered is recognized into an asset as contract acquisition cost. Assets related to contract costs are amortized on the same basis for recognizing the revenue from commodities or services related to such assets. However, for contract acquisition costs with an amortization period of less than one year, the Company recognize them into current profit/loss at their occurrence. When the carrying value of an asset related to contract costs is higher than the difference 73 2020 Semi-Annual Report of Tsann Kuen (China) Enterprise Co., Ltd. between the following two items, the Company will withdraw impairment provision for the exceeded part, recognize it as asset impairment loss and further consider whether to withdraw expected liabilities relating to the contract with losses: a. Residual consideration expected to be gained from transferring commodities and services related to this asset; b. Costs expected to be incurred from transferring such commodities or services. When the aforementioned asset impairment provision is reversed later, the carrying value of the asset after the reversal should not exceed its carrying value on the reversal date under the assumption of no withdrawal of impairment provision. For a contract performance cost recognized as an asset, if its amortization period is less than one year or one normal operating cycle at the initial recognition, it will be presented in “inventory”; if its amortization period exceeds one year or one normal operating cycle at the initial recognition, it will be presented in “other non-current assets”. For a contract acquisition cost recognized as an asset, if its amortization period is less than one year or one normal operating cycle at the initial recognition, it will be presented in “other current assets”; if its amortization period exceeds one year or one normal operating cycle at the initial recognition, it will be presented in “other non-current assets”. 4.13 Non-current Assets Held for Sale and Discontinue d Operations 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 whe n the carrying amount is higher than the fair value less costs to sell, and allowance for 74 2020 Semi-Annual Report of Tsann Kuen (China) Enterprise Co., Ltd. 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 di sposal 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. 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. 4.14 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. 4.14.1 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 75 2020 Semi-Annual Report of Tsann Kuen (China) Enterprise Co., Ltd. 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 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. 76 2020 Semi-Annual Report of Tsann Kuen (China) Enterprise Co., Ltd. All expenses incurred directly associated with the acquisition by the acquirer, including expenditure of audit, legal services, valuation and consultancy and other administrative expenses, are recognised in profit or loss for the period during which the acquisition occurs. Long-term equity investments acquired not through business combination are measured at cost on initial recognition. Depending on the way of acquisition, the cost of acquisition can be the total cash paid, the fair value of equity instrument issued, the contract price, the fair value or book value of the assets given away in the case of non-monetary asset exchange, or the fair value of the relevant long-term equity investments. The cost of acquisition of a long-term equity investment acquired not through business combination also includes all directly associated expenses, applicable taxes and fees, and other necessary expenses. The cost of a long-term equity investment, which enables the Company has significant influence or joint control over the acquiree which is achieved through additional investment, is measured as the fair value determined in accordance with CAS 22 - Financial Instruments: Recognition and Measurement plus the cost of additional investment. 4.14.2 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 77 2020 Semi-Annual Report of Tsann Kuen (China) Enterprise Co., Ltd. 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 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 boo k 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 78 2020 Semi-Annual Report of Tsann Kuen (China) Enterprise Co., Ltd. The difference between newly increased equity investment due to acquisition of minority interests and portion of net asset cumulatively calculated from the acquisition date is adjusted as capital reserve. If the capital reserve is not sufficient to absorb the difference, the excess are adjusted against returned earnings. 4) Disposal of long-term equity investment 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 measurement principles applicable to financial instruments in the 79 2020 Semi-Annual Report of Tsann Kuen (China) Enterprise Co., Ltd. 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 j oint 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. 4.15 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, 80 2020 Semi-Annual Report of Tsann Kuen (China) Enterprise Co., Ltd. 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 4.21 “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. 4.16 Fixed assets 4.16.1 The conditions of recognition Fixed assets refer to the tangible assets that are held for the sake of producing commodities, rendering labor service, renting or business management and their useful life is in excess of one fiscal year. Fixed assets only in the economic benefits associated with it will flow to the company and the cost can be measured reliably only are confirmed. Fixed assets are stated at cost and considering the expected costs of abandoning the initial measurement. 4.16.2 The method for depreciation Fixed assets are stated at cost and consider the impact of expected costs of abandoning the 81 2020 Semi-Annual Report of Tsann Kuen (China) Enterprise Co., Ltd. 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: Estimated Depreciation Expected Category residual Depreciation(%) method useful life value(%) 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、 Straight-line 0.00 5-6 16.67-20.00 modules 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. 4.16.3 Measurement and recognition of fixed assets impairment Impairment and provisions of fixed assets are disclosed on Note 4.21 “Impairment of long-term assets”. 4.16.4 Fixed Assets under finance leases A finance lease is a lease that transfers in substance all the risks and rewards incident to ownership of an asset. Title may or may not eventually be transferred. Fixed assets that are held under finance leases shall be depreciated by applying the same policy as that for the fixed assets owned by the Company. If it can be reasonably determined that the ownership of the leased assets can be obtained at the end of the lease period, the leased assets are depreciated over their useful lives; otherwise, the leased assets are depreciated over the shorter of the lease terms and the useful lives of the leased assets. 4.16.5 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 82 2020 Semi-Annual Report of Tsann Kuen (China) Enterprise Co., Ltd. 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. 4.17 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 4.21 “Impairment of long-term assets”. 4.18 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 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 83 2020 Semi-Annual Report of Tsann Kuen (China) Enterprise Co., Ltd. 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. 4.19 Intangible assets 4.19.1 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 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. 4.19.2 Research and development cost 84 2020 Semi-Annual Report of Tsann Kuen (China) Enterprise Co., Ltd. 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 t he 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. 4.19.3 Impairment of intangible assets Impairment and provisions of intangible assets are disclosed on Note 4.21 “Impairment of long-term assets”. 4.20 Long-term deferred expenditure An item long-term deferred expenses is an expense which has been incurred and which has a beneficial period (a period during which an expense is expected to bring economic benefits to an entity) which is longer than one year and which includes at least part of the reporting period during which the expense was incurred and subsequent reporting periods. An item of long-term deferred 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. 4.21 Impairme nt 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 85 2020 Semi-Annual Report of Tsann Kuen (China) Enterprise Co., Ltd. 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 val ue of expected future cash flows from an asset or asset Group, the management shall estimate the expected future cash flows from the asset or asset Group and choose a suitable discount rate in order to calculate the present value of those cash flows. Provision for asset impairment is calculated and determined on the individual basis. If the recoverable of individual asset is hard to estimate, the recoverable amount can be determined by the asset Group where subject asset belongs. Asset Group is the smallest set of assets that can have cash flow in independently. The Company determines whether goodwill is impaired at least on an annual basis. This requires an estimation of the present value of the future expected cash flows from the asset Groups or sets of asset Groups to which the goodwill is allocated. Estimating the present value requires the Company to make an estimate of the expected future cash flows from the asset Groups or sets of asset Groups and also choose a suitable discount rate in order to calculate the present value of those cash flows. Once the loss from above asset impairment is recognised, the recoverable part cannot be reserved in the subsequent periods. 4.22 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. 86 2020 Semi-Annual Report of Tsann Kuen (China) Enterprise Co., Ltd. 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 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. 4.23 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 87 2020 Semi-Annual Report of Tsann Kuen (China) Enterprise Co., Ltd. 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. 4.24 Revenue recognition principle and measure ment method 4.24.1 General principle Revenue is the total inflow of economic interests formed by the Company in its routine activities that increase shareholders’ equity and are irrelevant to the capital contributed by the shareholders. The Company recognizes revenue when it has fulfilled its performance obligations in a contract, namely, when the customer acquires the control over related commodities. The acquisition of the control over related commodities means that the customer is able to control the use of the commodities and gain almost all economic interests therefrom. When a contract contains two or more performance obligations, the Company on the contract commencement date apportions the transaction price to each individual performance obligation in the relative proportion of the individual price of commodities or services committed under each individual performance obligation, and measures the revenue according to the transaction price apportioned to each individual performance obligation. Transaction price is the amount of consideration that the Company expects to have the right to collect for transferring commodities or services to a customer, excluding payments collected on behalf of a third party. When determining a contract transaction price, if there is a variable consideration, the Company will determine the best estimate of the variable consideration by the expected value or the most possible amount, and recognize it into the transaction price in an amount probably without significant reversal that does not exceed the total recognized revenue as at the time when related uncertainties are removed. If the contract contains any significant financing component, the Company will determine the transaction price according to the amount payable by cash instantly at the time when the customer acquires the control over the commodities. The difference between the transaction price and the contract consideration is amortized in the effective interest method during the contract period. If the interval between the transfer of the control and the customer’s 88 2020 Semi-Annual Report of Tsann Kuen (China) Enterprise Co., Ltd. payment is less than one year, the Company will not take into consideration the financing component therein. When meeting one of the following conditions, it will be classified as fulfillment of performance obligations in a time period. Otherwise, it will be classified as fulfillment of performance obligations at a time point: 1) The customer gains and consumes the economic interests from the Company’s contract performance instantly when the Company performs the contract; 2) The customer is able to control commodities in progress during the Company’s contract performance; 3) The commodities produced from the Company’s contract performance can be used for irreplaceable purposes, and the Company has the right to collect payments for the contract performances cumulatively completed to date during the entire contract period. For a contract performance obligation fulfilled in a time period, the Company recognizes the revenue according to the progress towards contract completion in that period, except when the progress cannot be reasonably determined. The Company identifies the progress of service provision in the input method (or the output method). When the progress cannot be identified reasonably, for costs incurred to the Company that are expected to be compensated, the revenue will be recognized according to the cost amount that has occurred, till the progress can be reasonably determined. For a contract performance obligation fulfilled at a time point, the Company recognizes the revenue at the time point when the customer acquires the control over related commodities. When judging whether a customer has acquired the control over commodities or services, the Company will consider the following signs: 1) The Company is entitled to the current right of collecting payment in respect of suc h commodities or services, namely, the customer has the current obligation of making payment in respect of such commodities; 2) The Company has transferred the legal ownership of such commodities to the customer, namely, the customer has owned the legal ownership of such commodities; 3) The Company has transferred the physical commodities to the customer, namely, the customer has owned such commodities physically; 4) The Company has transferred to the customer major risks and remunerations in respect of the ownership of such commodities, namely, the customer has acquired major risks and remunerations in respect of the ownership of such commodities; 5) The customer has accepted such commodities. Terms of sales return 89 2020 Semi-Annual Report of Tsann Kuen (China) Enterprise Co., Ltd. For sales attached with the terms of sales return, the Company recognizes the revenue by the consideration amount that it has the right to receive from its transfer of commodities to the customer when the customer acquires the control over such commodities, and recognizes the amount of expected sales return as an estimated liability. At the same time, the Company deducts the expected cost of taking back the commodities, that is, the return cost receivable, from the carrying value of such commodities at the transfer, and recognizes it as an asset. The Company deducts the net amount carry-over cost of the aforementioned asset cost according to the carrying value of the transferred commodities at the transfer. On each balance sheet date, the Company re-estimates the return of future sales and re-measures the aforementioned assets and liabilities. Obligation of quality assurance The Company provides quality assurance for the commodities it sells and the projects it constructs pursuant to contracts and laws. For guarantee-based quality assurance that assures customers of its compliance with established standards for the commodities it sells, the Company performs accounting treatment according to Accounting Standards for Business Enterprises No. 13—Contingencies. For service-based quality assurance in which the Company provides a separate service, other than its assurance to customers of its compliance with established standards for the commodities it sells, the Company treats it as an individual contract performance obligation. In this case, the Company apportions a partial transaction price to service-based quality assurance in the relative proportion of the individual prices for providing commodities and service-based quality assurance, and recognizes the revenue when the customer acquires the control over the services. In assessing whether a separate service has been provided in quality assurance other than its assurance to customers of its compliance with established standards for the commodities it sells, the Company considers factors such as whether the quality assurance is a statutory requirement, the quality assurance period and the nature of the tasks committed by the Company. Key person in charge and agent When acquiring the control over traded commodities from a third party and transferring it to a customer, the Company has the right to independently determine the price of the traded commodities. It means that the Company is able to control such commodities before transferring them to the customer, and thus, it is the key person in charge and recognizes the revenue by the total amount of consideration it has received or should receive. Otherwise, the Company is considered as an agent and recognizes the revenue by the amount of commissions or surcharges it expects to have the right to charge. Such an amount should be 90 2020 Semi-Annual Report of Tsann Kuen (China) Enterprise Co., Ltd. determined by the net amount from the total amount of consideration already or to be received deducting payments to be made to other related parties, or by the specified amount or proportion of commissions. 4.24.2 Specific methods The Company recognizes revenue in the following specific methods: 1) Commodity sale contracts When a commodity sale contract between the Company and a customer contains a contract performance obligation of transferred commodities, it is classified as fulfillment of contract performance obligation at a time point. Recognition of the revenue from domestic sale of products should satisfy the following conditions: The Company has delivered the products to the customer and the customer has accepted them; the Company has received payment for the goods or obtained the receipt voucher with highly possible inflow of related economic interests; major risks and remunerations in respect of the ownership of the commodities have been transferred; the legal ownership of the commodities has been transferred; Recognition of the revenue from export of products should satisfy the following conditions: After loading the products to a ship pursuant to the contract and completing the customs declaration procedures for export, the Company has received payment for the goods or obtained the receipt voucher with highly possible inflow of related economic interests; major risks and remunerations in respect of the ownership of the commodities have been transferred; the legal ownership of the commodities has been transferred. 2) Service provision contracts With regard to a contract performance obligation under a service contract between the Company and a customer, because the customer gains and consumes the economic interests brought by the Company’s contract performance instantly when the Company performs the contract, the Company treats it as a contract performance obligation in a time period and recognizes it through even apportionment during the service period. 4.25 Governme nt 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 91 2020 Semi-Annual Report of Tsann Kuen (China) Enterprise Co., Ltd. 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 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 92 2020 Semi-Annual Report of Tsann Kuen (China) Enterprise Co., Ltd. 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 separate, 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 retur ned, 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. 4.26 Deferred tax assets and deferred tax liabilities 4.26.1 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 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. 4.26.2 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. 93 2020 Semi-Annual Report of Tsann Kuen (China) Enterprise Co., Ltd. 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 futur e, or it is not probable to obtain taxable income which can be used for the deduction of the temporary difference in the future. Except mentioned above, the Company 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. 4.26.3 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. 94 2020 Semi-Annual Report of Tsann Kuen (China) Enterprise Co., Ltd. 4.26.4 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, the Company shall present net value after the offset of deferred income tax asset and deferred income tax liability. 4.27 Leases A finance lease is a lease that transfers in substance all the risks and rewar ds 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. 4.27.1 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. 4.27.2 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. 4.27.3 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 95 2020 Semi-Annual Report of Tsann Kuen (China) Enterprise Co., Ltd. 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. 4.27.4 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. 4.28 Significant changes in accounting policies and accounting estimates 4.28.1 Changes of accounting policies On 5 July 2017, the Ministry of Finance issued the Accounting Standards for Business Enterprises No.14-Revenue (Revised in 2017) (Accounting [2017] No. 22) (hereafter referred to as the “New Revenue Guidelines”), and domestic listed companies are required to implement it from 1 January 2020. The Company implements it on 1 January 2020 and adjusts relevant contents of accounting policies. See Note 4.24 “Revenue recognition principle and measurement method” for details. Requirements of the New Revenue Guidelines for adjusting the cumulative influence for implementing this standard: The amounts of retained earnings and other relevant items in the financial statement as at the beginning of the year of initial implementation (that is 1 January 2020) should be adjusted, and the information during the comparable period should not be adjusted. When implementing the New Revenue Guidelines, the Company only makes 96 2020 Semi-Annual Report of Tsann Kuen (China) Enterprise Co., Ltd. adjustment to the cumulative influence of contracts yet to be completed on the date of initial implementation. Adjustments to related items of the financial statements at the beginning of the first execution year of the New Revenue Guidelines Consolidated balance sheet Currency: CNY Item 31 December 2019 1 January 2020 Adjusted Current assets Advances to suppliers 3,112,312.06 3,112,312.06 Contract assets Inapplicable Total current assets 1,685,193,347.55 1,685,193,347.55 Current liabilities Advances from 13,294,285.78 2,269,846.97 -11,024,438.81 customers Contract liabilities Inapplicable 11,024,438.81 11,024,438.81 Total current liabilities 739,918,342.31 739,918,342.31 0.00 Balance sheet of the Company Currency: CNY Item 31 December 2019 1 January 2020 Adjusted Current assets Advances to suppliers 96,278.32 96,278.32 Contract assets Inapplicable Total current assets 20,641,976.53 20,641,976.53 Current liabilities Advances from 1,826,178.67 -1,826,178.67 customers Contract liabilities Inapplicable 1,826,178.67 1,826,178.67 Total current liabilities 289,433,392.86 289,433,392.86 0.00 On 10 December 2019, the Ministry of Finance issued the Interpretation of the Accounting Standards for Business Enterprises No.13. The Company implements this interpretation since 1 January 2020 without any retroactive adjustment to previous years. 4.28.2 Change of accounting estimates No change of accounting estimates need to be disclosed for the current period. 4.29 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 a nd assumptions are based on historical experiences of the Company’s management as well as other factors 97 2020 Semi-Annual Report of Tsann Kuen (China) Enterprise Co., Ltd. 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 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: 4.29.1 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. 4.29.2 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. 4.29.3 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 98 2020 Semi-Annual Report of Tsann Kuen (China) Enterprise Co., Ltd. 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. 4.29.4 The fair value of financial instruments For a financial instrument which has no active market, the Company establishes fair value by using various valuation methods, including of discounted cash flow analysis model. The Company needs to estimate future cash flow, credit risk, volatility and relationship during the valuation and choose appropriate discount rate. Such assumptions have uncertainties and their changes shall have impact on the fair value of financial instruments. 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. 4.29.5 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 99 2020 Semi-Annual Report of Tsann Kuen (China) Enterprise Co., Ltd. made. 4.29.6 Depreciation and amortization Investment property, fixed assets and intangible assets are depreciated and amortized using the straight-line method over their useful lives after taking into account residual value. The useful lives are regularly reviewed to determine the depreciation and a mortization 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. 4.29.7 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. 4.29.8 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 o f the current period during the final determination. 4.29.9 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. 4.29.10 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. In these matters has been the 100 2020 Semi-Annual Report of Tsann Kuen (China) Enterprise Co., Ltd. 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. 4.29.11 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 Value added tax output tax, and use the balance after deduct the 3、5、6、9、10、13、16 deductible input tax to pay the VAT Urban maintenance Sum of VAT payable, consumption duty payable and and construction business tax payable for the reporting period, and 7 surcharge exempt and deductible tax Sum of VAT payable, consumption duty payable and Education business tax payable for the reporting period, and 3 surcharge exempt and deductible tax Sum of VAT payable, consumption duty payable and Local education business tax payable for the reporting period, and 2 surcharge exempt and deductible tax Corporate income Taxable profits 25 tax 101 2020 Semi-Annual Report of Tsann Kuen (China) Enterprise Co., Ltd. 5.2 Taxes and surcharges applicable to the primary subsidiaries 5.2.1 TsannKuen (Zhangzhou) Enterprise Co., Ltd. (hereafter, TKL) Taxes and Tax rate% Tax base surcharges According to the revenues from sales to calculate the Value added tax output tax, and use the balance after deduct the 0、5、6、9、10、13、16 deductible input tax to pay the VAT Urban maintenance Sum of VAT payable, consumption duty payable and and construction business tax payable for the reporting period, and 5 surcharge exempt and deductible tax Sum of VAT payable, consumption duty payable and Education surcharge business tax payable for the reporting period, and 3 exempt and deductible tax Sum of VAT payable, consumption duty payable and Local education business tax payable for the reporting period, and 2 surcharge exempt and deductible tax Corporate income Taxable profits 15 tax 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 Tax rate% Tax base surcharges According to the revenues from sales to calculate the Value added tax output tax, and use the balance after deduct the 5、9、10、13、16 deductible input tax to pay the VAT Urban maintenance Sum of VAT payable, consumption duty payable and and construction business tax payable for the reporting period, and 1 surcharge exempt and deductible tax Sum of VAT payable, consumption duty payable and Education surcharge business tax payable for the reporting period, and 3 exempt and deductible tax Sum of VAT payable, consumption duty payable and Local education business tax payable for the reporting period, and 2 surcharge exempt and deductible tax Corporate income Taxable profits 25 tax 102 2020 Semi-Annual Report of Tsann Kuen (China) Enterprise Co., Ltd. 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 Value added tax output tax, and use the balance after deduct the 5 deductible input tax to pay the VAT Corporate income Taxable profits 20 tax 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 Value added tax output tax, and use the balance after deduct the 10 deductible input tax to pay the VAT Corporate income Taxable profits 25 tax 103 2020 Semi-Annual Report of Tsann Kuen (China) Enterprise Co., Ltd. VI. Notes to significant elements of consolidated financial statements Unless otherwise stated, the meaning of “period-beginning” in the following notes is “January 1 2020”, and “period-end” refers to “June 30 2020”, “current period” refers to “January to June 2020”, and “prior period” refers to “January to June 2019” respectively. 1. Monetary funds Item Balance as of 30/6/2020 Balance as of 1/1/2020 Cash on hand 961,400.21 926,966.65 Bank deposits 583,617,649.96 638,696,235.33 Other monetary funds 6,775,024.51 0.00 Total 591,354,074.68 639,623,201.98 Including: The total amount of deposit abroad 22,544,747.98 32,960,640.75 2. Financial assets held for trading (1) Category Balance as of 30/6/2 Balance as of Item 020 1/1/2020 Financial assets measured at fair value through profit 1,319,000.00 3,620,689.00 or loss Of which: Derivative financial assets 1,319,000.00 3,620,689.00 Total 1,319,000.00 3,620,689.00 (2) Other notes The derivative financial asset is forward foreign exchange contract signed with financial institutions. 3. Notes receivable Item Balance as of 30/6/2020 Balance as of 1/1/2020 Bank acceptance 1,559,385.90 274,548.00 Total 1,559,385.90 274,548.00 4. Accounts receivable (1) Disclosure by age Age Balance as of 30/6/2020 Within 1 year 306,461,297.14 104 2020 Semi-Annual Report of Tsann Kuen (China) Enterprise Co., Ltd. Age Balance as of 30/6/2020 Including: 1-90 days 291,711,626.72 91-180 days 14,711,031.85 181-270 days 38,638.57 271-365 days 0.00 1- 2 years 0.00 2- 3 years 1,167,970.78 Over 3 years 5,000.00 Including: 3-4 years 0.00 4-5 years 5,000.00 Over 5 years 0.00 Subtotal 307,634,267.92 Less: Allowance for bad debt 5,546,955.77 Total 302,087,312.15 (2) Listed by method for measurement of allowance for bad debt Balance as of 30/6/2020 Carrying amount Allowance for bad debt Item % of % of Book value Amount Amount total total Accounts receivable of individually assessment 0.00 0.00 0.00 0.00 0.00 for impairment Accounts receivable of assessment for 307,634,267.92 100.00 5,546,955.77 1.80 302,087,312.15 impairment by portfolio Including: Portfolio by 305,471,409.87 99.30 5,546,955.77 1.82 299,924,454.10 age Portfolio by 2,162,858.05 0.70 0.00 0.00 2,162,858.05 related parties Total 307,634,267.92 100.00 5,546,955.77 1.80 302,087,312.15 105 2020 Semi-Annual Report of Tsann Kuen (China) Enterprise Co., Ltd. (Continued) Balance as of 1/1/2020 Carrying amount Allowance for bad debt Item % of % of Book value Amount Amount total total Accounts receivable of individually assessment 0.00 0.00 0.00 0.00 0.00 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 293,206,700.42 99.23 9,475,087.59 3.23 283,731,612.83 age Portfolio by 2,263,799.22 0.77 0.00 0.00 2,263,799.22 related parties Total 295,470,499.64 100.00 9,475,087.59 3.21 285,995,412.05 ① Portfolio by related parties Balance as of 30/6/2020 Accounts receivable Reasons for Carrying amount Allowance for bad debt % of total measurement Due from related 2,162,858.05 0.00 0.00 parties Total 2,162,858.05 0.00 0.00 ② Accounts receivable using age for measurement of allowance for bad debt Balance as of 30/6/2020 Accounts Rate of expected credit loss for the receivable Carrying amount Allowance for bad debt whole duration (%) Current 287,350,944.53 1,800,749.12 0.63 1-30 days past 8,791,224.73 395,605.12 4.50 due 31-60 days past 6,055,767.51 1,211,153.50 20.00 due 106 2020 Semi-Annual Report of Tsann Kuen (China) Enterprise Co., Ltd. Balance as of 30/6/2020 Accounts Rate of expected credit loss for the receivable Carrying amount Allowance for bad debt whole duration (%) 61-90 days past 2,061,863.75 927,838.69 45.00 due Over 90 days past 1,211,609.35 1,211,609.35 100.00 due Total 305,471,409.87 5,546,955.77 1.82 (3) Allowance for bad debt Current period movement Balance as of Balance as of Item Recovery or Used or written 1/1/2020 Recognition Others 30/6/2020 reversal off Accounts receivable of assessment for 9,475,087.59 1,605,037.86 166,404.50 5,382,627.78 -15,862.60 5,546,955.77 impairment by portfolio Total 9,475,087.59 1,605,037.86 166,404.50 5,382,627.78 -15,862.60 5,546,955.77 (4) Accounts receivable written off during the reporting period Item Written off amount Sporadic accounts receivable written off 5,382,627.78 Including: Significant accounts receivable written off Nature of Result from Written off Reasons for Written off Company name accounts related amount written off procedure receivable transaction Easy Bread Company Cannot be Loan 2,535,822.80 Yes No AG recovered Philips (China) Loan Cannot be 1,839,039.94 Yes No Investment Co., Ltd. recovered BLACK & DECKER Cannot be Loan 677,562.68 Yes No GLOBAL HO recovered Loan Cannot be American Bright 329,692.36 Yes No recovered Total 5,382,117.78 107 2020 Semi-Annual Report of Tsann Kuen (China) Enterprise Co., Ltd. (5) Details of top five accounts receivable The total amount of top five accounts receivables summarized by debtors as at the end of current period is CNY 207,255,065.57, accounting for 67.37% of the total accounts receivable at the period-end, the total corresponding allowance for bad debts is CNY 959,207.20. 5. Advances to suppliers (1) Disclosure by age Balance as of 30/6/2020 Balance as of 1/1/2020 Item Amount % of total Amount % of total Within 1 year 2,221,389.33 97.94 3,083,417.46 99.07 1- 2 years 46,720.00 2.06 28,894.60 0.93 Total 2,268,109.33 100.00 3,112,312.06 100.00 (2) Details of top five advance to suppliers The total amount of top five advance to suppliers as at the end of current period is CNY 986,124.02, accounting for 43.48% of the total advance to suppliers. 6. Other receivables Item Balance as of 30/6/2020 Balance as of 1/1/2020 Interests receivable 0.00 0.00 Dividends receivable 0.00 0.00 Other receivables 17,477,176.51 29,271,999.53 Total 17,477,176.51 29,271,999.53 (1) Interests receivable Item Balance as of 30/6/2020 Balance as of 1/1/2020 Interest income of fixed deposit 0.00 0.00 Total 0.00 0.00 (2) Other receivables ① Disclosure by age 108 2020 Semi-Annual Report of Tsann Kuen (China) Enterprise Co., Ltd. Age Balance as of 30/6/2020 Within 1 year 16,057,820.10 Including: 1-90 days 15,764,461.03 91-180 days 137,853.95 181-270days 23,361.42 271-365 days 132,143.70 1 to 2 years 444,323.65 2 to 3 years 60,100.00 Over 3 years 1,278,504.24 Including: 3-4 years 37,011.00 4-5 years 5,677.00 Over 5 years 1,235,816.24 Subtotal 17,840,747.99 Less: Allowance for bad debt 363,571.48 Total 17,477,176.51 ② Disclosure by nature Nature Balance as of 30/6/2020 Balance as of 1/1/2020 Deposit 1,293,457.14 1,420,512.67 Export tax refund 8,000,000.00 17,500,000.00 Due from related parties 210,822.77 206,827.94 Other current account 8,336,468.08 12,060,268.46 Subtotal 17,840,747.99 31,187,609.07 Less: Allowance for bad debt 363,571.48 1,915,609.54 Total 17,477,176.51 29,271,999.53 109 2020 Semi-Annual Report of Tsann Kuen (China) Enterprise Co., Ltd. ③ Recognition of allowance for bad debt Stage 1 Stage 2 Stage 3 Expected credit Expected credit loss Expected credit loss for the whole Allowance for bad debt for the whole Total loss for the next duration(Credit duration(no credit 12 months impairment has impairment) occurred) Closing balance as of 677,461.07 0.00 1,243,148.47 1,915,609.54 1/1/2020 Carrying amount of other receivables in current period on 1/1/2020 Turn to stage 2 Turn to stage 3 Turn back to stage 2 Turn back to stage 1 Allowance Reversal 308,889.59 308,889.59 Used Written off 1,243,148.47 1,243,148.47 Other movements 0.00 0.00 0.00 0.00 Closing balance as of 363,571.48 0.00 0.00 363,571.48 30/6/2020 ④ Recognition of allowance for bad debt Current period movement Balance as at Balance as Item 1/1/2020 Recogn Recovery or Used or written at 30/6/2020 Others ition reversal off Other receivables of assessment for 1,915,609.54 0.00 308,889.59 1,243,148.47 0.00 363,571.48 impairment by portfolio Total 1,915,609.54 0.00 308,889.59 1,243,148.47 0.00 363,571.48 110 2020 Semi-Annual Report of Tsann Kuen (China) Enterprise Co., Ltd. ⑤ Details of top five other receivables Allowanc Carrying amount e for bad Debtors Nature Age % of total as of 30/6/2020 debt as of 30/6/2020 Zhangzhou Longchi Development zone State Export tax 8,000,000.00 1-90 days 44.84 Administration of refund Taxation Xiamen Laideshun Rent fee, Logistics Co., Ltd. electricity and 1,044,455.00 1-90 days 5.85 Zhangzhou Branch water bill China Export & Credit Insurance Corporation Deposit Over 1 648,450.00 3.63 year Fujian Branch State Grid Fujian Longhai Power Supply Electricity bill 595,834.80 1-90 days 3.34 Co., Ltd. Zhangzhou Xincheng Electricity and 593,878.41 1-90 days 3.33 Metal Products Co., Ltd. water bill Total 10,882,618.21 60.99 0.00 ⑥ Other receivables with actual verification during the reporting period Item Amount Other receivables with actual verification 1,243,148.47 Including: Significant other receivables with actual verification Nature of Result from Written off Reasons for Written off Company name accounts related amount written off procedure receivable transaction Shanghai Rent fee, Tanghai Cannot be electricity and 1,238,148.47 Yes No Investment Co., recovered water bill Ltd. Laox (Nangjing) Quality Commerce Co. , guarantee Cannot be 5,000.00 Yes No Ltd. deposit recovered Total 1,243,148.47 111 2020 Semi-Annual Report of Tsann Kuen (China) Enterprise Co., Ltd. 7. Inventories (1) Disclosure by classification Balance as of 30/6/2020 Carrying amount Item Impairment before Book value allowance impairment allowance Raw material 84,272,440.67 19,099,824.52 65,172,616.15 Work in progress 12,256,403.96 12,256,403.96 Consigned processing material 12,413,697.39 12,413,697.39 Self-manufactured semi-finished goods 17,030,461.78 1,770,861.39 15,259,600.39 Finished goods 78,001,576.88 12,194,525.10 65,807,051.78 Low-value consumables 733,928.84 733,928.84 Materials in transit 3,429,002.80 0.00 3,429,002.80 Total 208,137,512.32 33,065,211.01 175,072,301.31 (Continued) Balance as of 1/1/2020 Item Carrying amount before Impairment allowance Book value impairment 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 Consigned processing material 0.00 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 0.00 1,557,620.47 Total 258,963,844.41 36,808,257.03 222,155,587.38 112 2020 Semi-Annual Report of Tsann Kuen (China) Enterprise Co., Ltd. (2) Impairment allowance for inventories Decrease in Reporting Increase in Reporting period period Impact Balance as of Impact of of Balance as of Item 1/1/2020 changes in Recovered or changes 30/6/2020 Accrual exchange Written off in rates exchang e rates Raw 18,759,173.06 4,315,892.00 31,226.11 4,006,466.65 19,099,824.52 material Self-manu factured 1,770,861.39 1,770,861.39 semi-finis hed goods Finished 16,278,222.58 1,721,467.61 9,372.50 5,814,537.59 0.00 12,194,525.10 goods Total 36,808,257.03 6,037,359.61 40,598.61 9,821,004.24 0.00 33,065,211.01 8. Other current assets Item Balance as of 30/6/2020 Balance as of 1/1/2020 Input tax to be deducted 6,201,717.15 8,473,290.63 Financial products 488,607,758.85 492,665,278.14 Prepaid income tax 0.00 1,028.78 Total 494,809,476.00 501,139,597.55 Note: Financial products are mainly bank financial products purchased by the company using idle funds. 9. Other investments in equity instrume nts Item Balance as of 30/6/2020 Balance as of 1/1/2020 Non-trading investments in equity instruments 40,000.00 40,000.00 Total 40,000.00 40,000.00 113 2020 Semi-Annual Report of Tsann Kuen (China) Enterprise Co., Ltd. 10. Investment property (1) Investment property measured using the historical cost convention Construction in Item Houses and buildings Land use rights Total progress 1. Cost: 1.1 Balance as of 1/1//2020 65,957,471.88 29,260,577.51 0.00 95,218,049.39 1.2 Increased in reporting period 0.00 0.00 0.00 0.00 1.2.1 Purchase 0.00 0.00 0.00 0.00 1.2.2 Transfer 0.00 0.00 0.00 0.00 1.2.3 Increased due to merger 0.00 0.00 0.00 0.00 1.3 Decreased in reporting period 0.00 0.00 0.00 0.00 1.3.1 Disposal 0.00 0.00 0.00 0.00 1.3.2 Other transferred out 0.00 0.00 0.00 0.00 1.4 Balance as of 30/6/2020 65,957,471.88 29,260,577.51 0.00 95,218,049.39 2. Accumulated depreciation and accumulated amortization 2.1 Balance as of 1/1//2020 57,324,796.04 14,902,193.54 0.00 72,226,989.58 2.2 Increased in reporting period 358,490.52 311,055.90 0.00 669,546.42 2.2.1 Accrual or amortization 358,490.52 311,055.90 0.00 669,546.42 2.2.2 Transferred from fixed assets 0.00 0.00 0.00 0.00 2.3 Decreased in reporting period 0.00 0.00 0.00 0.00 2.3.1 Disposal 0.00 0.00 0.00 0.00 2.3.2 Other transferred out 0.00 0.00 0.00 0.00 2.4 Balance as of 30/6/2020 57,683,286.56 15,213,249.44 0.00 72,896,536.00 3. Provision for impairment 3.1 Balance as of 1/1//2020 0.00 0.00 0.00 0.00 114 2020 Semi-Annual Report of Tsann Kuen (China) Enterprise Co., Ltd. Construction in Item Houses and buildings Land use rights Total progress 3.2 Increased in reporting period 0.00 0.00 0.00 0.00 3.2.1 Accrual 0.00 0.00 0.00 0.00 3.3 Decreased in reporting period 0.00 0.00 0.00 0.00 3.3.1 Disposal 0.00 0.00 0.00 0.00 3.3.2 Other transferred out 0.00 0.00 0.00 0.00 3.4 Balance as of 30/6/2020 0.00 0.00 0.00 0.00 4. Carrying amount 4.1 Carrying amount as at 30/6/2020 8,274,185.32 14,047,328.07 0.00 22,321,513.39 4.2 Carrying amount as at 1/1//2020 8,632,675.84 14,358,383.97 0.00 22,991,059.81 (2) Investment property with pending ownership registration Item Carrying amount Reason for pending Lvyuan three country villa 645,985.38 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 Estate Development Co., Ltd. in year 1999, and there has no land expropriation. Shanghai Lvsheng Real Estate 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. 115 2020 Semi-Annual Report of Tsann Kuen (China) Enterprise Co., Ltd. 11. Fixed assets Item Balance as of 30/6/2020 Balance as of 1/1/2020 Fixed assets 181,817,396.06 185,749,835.56 Disposal of fixed assets 0.00 0.00 Total 181,817,396.06 185,749,835.56 (1) Fixed assets General information Improvement Houses and Electronic device, Item Machineries Vehicles expense of leased Total buildings modules and others fixed assets 1.Cost 1.1 Balance as of 1/1/2020 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 1.2 Increase in reporting 2,746,767.24 3,328,992.45 16,806,271.30 143,352.59 165,734.84 23,191,118.42 period 1.2.1 Purchase 110,241.24 2,786,120.44 16,229,747.45 185,279.39 0.00 19,311,388.52 1.2.2 Transferred from 2,120,822.41 0.00 80,000.00 0.00 0.00 2,200,822.41 construction in progress 1.2.3 Transferred from 0.00 0.00 0.00 0.00 0.00 0.00 investment property 1.2.4 Impact of changes in 515,703.59 542,872.01 496,523.85 -41,926.80 165,734.84 1,678,907.49 exchange rates 1.2.5 Other 0.00 0.00 0.00 0.00 0.00 0.00 116 2020 Semi-Annual Report of Tsann Kuen (China) Enterprise Co., Ltd. Improvement Houses and Electronic device, Item Machineries Vehicles expense of leased Total buildings modules and others fixed assets 1.3 Decreased in Reporting 0.00 1,080,829.73 6,171,220.05 604,888.07 546,189.69 8,403,127.54 period 1.3.1 Disposal or scrap 0.00 1,080,829.73 6,171,220.05 604,888.07 546,189.69 8,403,127.54 1.3.2 Transferred to 0.00 0.00 0.00 0.00 0.00 0.00 investment property 1.4 Balance as of 100,584,516.19 163,066,425.19 875,270,222.56 19,897,533.88 62,772,919.89 1,221,591,617.71 30/6/2020 2. Accumulated Depreciation 2.1 Balance as of 1/1/2020 56,135,847.95 88,242,479.42 762,782,818.05 15,949,665.74 60,940,122.92 984,050,934.08 2.2 Increased in reporting 2,036,961.84 4,369,573.47 18,129,890.43 550,745.46 369,881.13 25,457,052.33 period 2.2.1 Accrual 1,862,985.17 4,077,746.29 17,805,858.43 566,623.79 244,593.30 24,557,806.98 2.2.2 Transferred from 0.00 0.00 0.00 0.00 0.00 0.00 investment property 2.2.3 Impact of changes in 173,976.67 291,827.18 324,032.00 -15,878.33 125,287.83 899,245.35 exchange rates 2.3 Decreased in reporting 0.00 1,206,784.03 6,271,140.30 472,516.00 546,189.69 8,496,630.02 period 2.3.1 Disposal or scrap 0.00 1,206,784.03 6,271,140.30 472,516.00 546,189.69 8,496,630.02 117 2020 Semi-Annual Report of Tsann Kuen (China) Enterprise Co., Ltd. Improvement Houses and Electronic device, Item Machineries Vehicles expense of leased Total buildings modules and others fixed assets 2.3.2 Transferred to 0.00 0.00 0.00 0.00 0.00 0.00 investment property 2.4 Balance as of 58,172,809.79 91,405,268.86 774,641,568.18 16,027,895.20 60,763,814.36 1,001,011,356.39 30/6/2020 3. Impairment allowance 3.1Balance as at 1/1/2020 0.00 19,788,593.71 17,000,323.15 175,668.04 38,272.29 37,002,857.19 3.2 Increased in reporting 0.00 354,505.24 1,723,032.53 -2,695.90 161.37 2,075,003.24 period 3.2.1 Accrual 0.00 309,305.99 1,705,479.08 0.00 0.00 2,014,785.07 3.2.2 Impact of changes in 0.00 45,199.25 17,553.45 -2,695.90 161.37 60,218.17 exchange rates 3.3 Decreased in Reporting 0.00 51,558.49 94,444.30 168,992.38 0.00 314,995.17 period 3.3.1 Disposal or scrap 0.00 51,558.49 94,444.30 168,992.38 0.00 314,995.17 3.4 Balance as of 0.00 20,091,540.46 18,628,911.38 3,979.76 38,433.66 38,762,865.26 30/6/2020 4. Carrying amount 4.1 Carrying amount as of 42,411,706.40 51,569,615.87 81,999,743.00 3,865,658.92 1,970,671.87 181,817,396.06 30/6/2020 4.2 Carrying amount as of 41,701,901.00 52,787,189.34 84,852,030.11 4,233,735.58 2,174,979.53 185,749,835.56 1/1/2019 118 2020 Semi-Annual Report of Tsann Kuen (China) Enterprise Co., Ltd. ① Temporarily idle fixed assets Accumulated . Impairment Carrying Item Cost Depreciation allowance amount Machineries 42,778,344.90 26,020,615.52 16,752,185.13 5,544.25 Electronic device, modules 167,961,260.86 157,912,131.39 9,946,054.30 103,075.17 and others Vehicles 69,304.00 69,304.00 0.00 0.00 Improvement expense of 999,659.75 972,277.87 27,381.88 0.00 fixed assets Total 211,808,569.51 184,974,328.78 26,725,621.31 108,619.42 ② Fixed assets with pending ownership registration Items Carrying amount Reason for pending Qingying garden 134,731.76 In process Lvyuan three country villa 193,795.61 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 Estate Development Co., Ltd. in year 1999, and there has no land expropriation. Shanghai Lvsheng Real Estate 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. (2) Disposal of fixed assets None 12. Construction in progress Carrying amounts as of Carrying amounts as of Item 30/6/2020 1/1/2020 Construction in progress 750,571.75 2,921,901.51 Material holds for construction of fixed 0.00 0.00 assets Total 750,571.75 2,921,901.51 (1) Construction in progress 119 2020 Semi-Annual Report of Tsann Kuen (China) Enterprise Co., Ltd. Carrying amounts as of 30/6/2020 Carrying amounts as of 1/1/2020 Item Carrying Impairm Net carrying Carrying Impairm Net carrying amounts ent amounts amounts ent amounts Sporadic 750,571.75 750,571.75 2,921,901.51 2,921,901.51 project Total 750,571.75 0.00 750,571.75 2,921,901.51 0.00 2,921,901.51 (2) Material holds for construction of fixed assets None 13. Intangible assets Item Land rights Software Total 1. Cost: 1.1 Balance as of 1/1/2020 19,408,932.00 44,260,587.99 63,669,519.99 1.2 Increased in reporting period 2,421,758.35 2,421,758.35 1.2.1 Purchase 2,398,086.32 2,398,086.32 1.2.2 Impact of changes in exchange rates 23,672.03 23,672.03 1.3 Decreased in reporting period 21,362.63 21,362.63 1.3.1 Disposal 0.00 1.3.2 Impact of changes in exchange rates 21,362.63 21,362.63 1.4 Balance as of 30/6/2020 19,387,569.37 46,682,346.34 66,069,915.71 2. Accumulated amortization 2.1 Balance as of 1/1/2020 4,370,243.37 28,565,996.38 32,936,239.75 2.2 Increased in reporting period 366,598.18 3,219,439.89 3,586,038.07 2.2.1 Accrual 366,597.88 3,196,076.44 3,562,674.32 2.2.2 Impact of changes in exchange rates 0.30 23,363.45 23,363.75 2.3 Decreased in reporting period 9,366.78 9,366.78 2.3.1 Disposal 0.00 0.00 2.3.2 Impact of changes in exchange rates 9,366.78 9,366.78 2.4 Balance as of 30/6/2020 4,727,474.77 31,785,436.27 36,512,911.04 3. Impairment 3.1 Balance as of 1/1/2020 3.2 Increased in reporting period 120 2020 Semi-Annual Report of Tsann Kuen (China) Enterprise Co., Ltd. 3.2.1 Accrual 3.2.2 Impact of changes in exchange rates 3.3 Decreased in reporting period 3.3.1 Disposal 3.3.2 Impact of changes in exchange rates 3.4 Balance as of 30/6/2020 4. Carrying amount 4.1 Carrying amount of at 30/6/2020 14,660,094.60 14,896,910.07 29,557,004.67 4.2 Carrying amount of at 1/1/2020 15,038,688.63 15,694,591.61 30,733,280.24 14. Long-term deferred charge Other Increase Amortization Carrying decrease Carrying during the for the Item amounts as of during the amounts as of reporting reporting 1/1/2020 reporting 30/6/2020 period period period Houses and buildings renovation 7,063,252.81 1,794,091.27 1,333,928.88 7,523,415.20 expenses Wall projects of 3 162,662.99 0.00 31,483.20 0.00 131,179.79 phases Total 7,225,915.80 1,794,091.27 1,365,412.08 0.00 7,654,594.99 15. Deferred tax assets and deferred tax liabilities (1) Deferred tax assets Carrying amounts as of 30/6/2020 Carrying amounts as of 1/1/2020 Item Deductible temporary Deferred Deductible Deferred tax difference tax assets temporary difference assets Impairment 57,618,864.72 9,034,685.87 59,473,136.87 9,463,194.19 allowance Credit impairment 5,339,415.57 927,719.42 9,094,485.90 1,512,918.53 provision Unrealized profits from 377,181.36 94,295.34 569,182.52 142,295.63 intragroup 121 2020 Semi-Annual Report of Tsann Kuen (China) Enterprise Co., Ltd. transactions Accrued 9,580,165.81 1,570,665.28 11,382,495.34 1,882,789.81 expenses Payroll liability 474,617.79 94,923.56 416,881.95 83,376.40 Undistributed 14,195,664.70 6,996,923.97 29,628,345.15 7,407,086.29 deficit Financial liabilities held 44,200.00 6,630.00 638,800.00 95,820.00 for trading Total 87,630,109.95 18,725,843.44 111,203,327.73 20,587,480.85 (2) Deferred tax liabilities Carrying amounts as of 30/6/2020 Carrying amounts as of 1/1/2020 Item Taxable temporary Deferred tax Taxable temporary Deferred tax difference assets difference assets Policy relocation 193,170,474.36 48,292,618.59 193,170,474.36 48,292,618.59 Financial assets 1,319,000.00 197,850.00 3,620,689.00 543,103.35 held for trading Others 24,974.92 4,995.01 0.00 0.00 Total 194,514,449.28 48,495,463.60 196,791,163.36 48,835,721.94 (3) Details of unrecognized deferred tax assets Item Carrying amounts as of 30/6/2020 Carrying amounts as of 1/1/2020 Impairment allowance for assets 14,209,211.55 14,337,977.35 Credit impairment provision 571,111.68 2,296,211.23 Accrued expenses 30,282,022.84 14,687,122.47 Payroll liability 2,247,041.28 9,201,884.77 Undistributed deficit 111,410,452.59 139,107,798.31 Total 158,719,839.94 179,630,994.13 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 recogni zed as deductible temporary differences and recoverable losses. (4) The deductible losses of unrecogni zed deferred tax assets shall be matured in the 122 2020 Semi-Annual Report of Tsann Kuen (China) Enterprise Co., Ltd. following years Year Carrying amounts as of 30/6/2020 Carrying amounts as of 1/1/2020 Note 2020 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 14,787,979.81 14,787,979.81 2025-2029 34,138,445.52 51,494,213.24 Total 111,410,452.59 139,107,798.31 Note: The annual loss of Tsannkuen Edge Intelligence Co., Ltd. continued to make up for a maximum period of 10 years. 16. Other non-current assets Carrying amounts as of 30/6/2020 Carrying amounts as of 1/1/2020 Item Carrying Impair Net carrying Carrying Impair Net carrying amounts ment amounts amounts ment amounts Prepaid mold 5,025.64 5,025.64 148,718.90 148,718.90 fee Prepaid 649,826.58 0.00 649,826.58 857,295.76 0.00 857,295.76 facilities etc. Total 654,852.22 0.00 654,852.22 1,006,014.66 0.00 1,006,014.66 17. Short-term loan Item Carrying amounts as of 30/6/2020 Carrying amounts as of 1/1/2020 Credit loan 28,318,000.00 0.00 Interest payables 13,283.48 0.00 Total 28,331,283.48 0.00 18. Financial liabilities held for trading (1) Classification Carrying amounts as of Carrying amounts as of Item 30/6/2020 1/1/2020 Financial liabilities held for trading 44,200.00 638,800.00 123 2020 Semi-Annual Report of Tsann Kuen (China) Enterprise Co., Ltd. Including: Derivative financial 44,200.00 638,800.00 liabilities Total 44,200.00 638,800.00 (2) Other explanation The derivative financial liabilities are forward exchange settlement / sale contracts signed by the company and financial institutions. 19. Notes payable Item Carrying amounts as of 30/6/2020 Carrying amounts as of 1/1/2020 Bank acceptance 1,319,784.49 4,110,230.08 Commercial acceptance 0.00 12,319,017.22 Total 1,319,784.49 16,429,247.30 Note: There are no expired notes payable that have not been paid as at the period-end. 20. Accounts payable (1) Accounts payable Item Carrying amounts as of 30/6/2020 Carrying amounts as of 1/1/2020 Within 1 year 460,578,922.90 590,887,361.06 Over 1 year 3,959,867.13 4,091,233.39 Total 464,538,790.03 594,978,594.45 (2) Details of significant accounts payable remaining unsettled for more than one year Carrying amounts as of Reason(s) for Item 30/6/2020 unsettlement Ningbo Chaochao Electrical Equipment Co., 500,237.01 Quality disputes Ltd. 21. Advances from customers (1) Disclosure by classification Item Carrying amounts as of 30/6/2020 Carrying amounts as of 1/1/2020 Within 1 year 2,472,888.95 1,993,344.94 Over 1 year 1,966,529.62 276,502.03 Total 4,439,418.57 2,269,846.97 124 2020 Semi-Annual Report of Tsann Kuen (China) Enterprise Co., Ltd. 22. Contract liability Item Carrying amounts as of 30/6/2020 Carrying amounts as of 1/1/2020 Within 1 year 5,864,724.86 5,824,401.67 Over 1 year 2,272,782.25 5,200,037.14 Total 8,137,507.11 11,024,438.81 23. Employee benefits payable (1) Disclosure by classification Carrying Carrying amount Increase in Decrease in Item amount as of as of 1/1/2020 reporting period reporting period 30/6/2020 1.Short-term employee 44,690,289.82 110,063,416.42 117,106,324.59 37,647,381.65 benefits 2.Post-employment 732,580.74 2,892,470.46 3,200,831.15 424,220.05 benefits 3.Termination benefits 1,011,126.00 10,287,815.00 7,609,041.00 3,689,900.00 4.Other benefits due 0.00 0.00 0.00 0.00 within one year Total 46,433,996.56 123,243,701.88 127,916,196.74 41,761,501.70 (1) Disclosure by classification of short-term employee benefits Carrying Carrying amount Increase in Decrease in Item amount as of as of 1/1/2020 reporting period reporting period 30/6/2020 1. Wages, salaries and 32,203,389.25 98,379,836.60 107,832,374.26 22,750,851.59 subsidies 2. Employee welfare 0.00 5,365,539.46 2,325,915.60 3,039,623.86 3. Social insurance: 1,133,495.04 3,299,056.77 3,885,524.48 547,027.33 Including: Medical 844,888.44 2,646,201.14 2,961,820.33 529,269.25 insurance Employment injury 261,846.25 475,931.25 737,156.31 621.19 insurance Maternity insurance 26,760.35 176,924.38 186,547.84 17,136.89 4.Housing provident fund 9,207,793.77 2,708,239.08 2,573,145.58 9,342,887.27 5.Labour union fee and 0.00 126,429.18 126,429.18 0.00 employee 125 2020 Semi-Annual Report of Tsann Kuen (China) Enterprise Co., Ltd. education fee 6. Short-term paid 2,145,611.76 184,315.33 362,935.49 1,966,991.60 absences 7.Other short-term 0.00 0.00 0.00 0.00 employee benefits Total 44,690,289.82 110,063,416.42 117,106,324.59 37,647,381.65 (3) Disclosure by defined contribution plan Carrying amount as Increase in Decrease in Carrying amount as Item of 1/1/2020 reporting period reporting period of 30/6/2020 1. Basic pension 732,157.74 2,822,545.03 3,130,464.42 424,238.35 2.Unemployment 423.00 69,925.43 70,366.73 -18.30 insurance 3. Annuity 0.00 0.00 0.00 0.00 payment Total 732,580.74 2,892,470.46 3,200,831.15 424,220.05 Note: The Company participates in 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. 24. Taxes payable Carrying amount as of Carrying amount as of Item 30/6/2020 1/1/2020 Corporate income tax 10,203,587.50 16,326,545.55 Value added tax 697,451.00 348,837.48 Personal income tax 792,006.66 927,844.25 Education surcharge 579,250.98 745,436.58 Urban maintenance and construction 564,005.32 731,213.68 surcharge Others 530,992.20 580,796.30 Total 13,367,293.66 19,660,673.84 126 2020 Semi-Annual Report of Tsann Kuen (China) Enterprise Co., Ltd. 25. Other payables Item Carrying amount as of 30/6/2020 Carrying amount as of 1/1/2020 Interest payables 0.00 0.00 Dividends payable 0.00 0.00 Other payables 60,679,281.36 48,482,744.38 Total 60,679,281.36 48,482,744.38 (1) Interest payables Carrying amount as of Carrying amount as of Item 30/6/2020 1/1/2020 Interest payables for short-term 0.00 0.00 loan Total 0.00 0.00 (2) Other payables ① Detail for other payables Item Carrying amount as of 30/6/2020 Carrying amount as of 1/1/2020 Within 1 year 50,274,412.84 38,467,673.13 Over 1 year 10,404,868.52 10,015,071.25 Total 60,679,281.36 48,482,744.38 ② Details of significant other payables remaining unsettled for more than one year Item Carrying amount as of 30/6/2020 Reason(s) for unsettlement Deposit 9,172,694.00 Total 9,172,694.00 26. Long-term e mployee benefits payable (1) Disclosure by classification Carrying amount as of Carrying amount as of Item 30/6/2020 1/1/2020 1. Post-employment benefits-net liabilities of 473,513.70 425,896.17 defined benefit plans Total 473,513.70 425,896.17 127 2020 Semi-Annual Report of Tsann Kuen (China) Enterprise Co., Ltd. (2) Movement of defined benefit plan Carrying amount as of Carrying amount as of Item 30/6/2020 1/1/2020 1. Balance as of 1/1/2020 425,896.17 361,923.23 2. Defined benefit cost recognized in profit or loss 110,157.32 80,874.55 in the current period 3. Defined benefit cost recognized in other -13,990.74 comprehensive income 4. Other movements -62,539.79 -2,910.87 4.1 Consideration payment at the time of settlement 4.2 Benefit paid -75,429.06 -18,199.35 4.3 Others 12,889.27 15,288.48 5. Balance as of 30/6/2020 473,513.70 425,896.17 27. Share capital Movements during the current reporting period (+,-) Carrying Conversi Carrying Item amount as of Share Bonus on amount as of Others Subtotal 1/1/2020 issue issue from 30/6/2020 reserves Total amount of floating 185,391,680.00 0.00 0.00 0.00 0.00 0.00 185,391,680.00 shares 28. Capital reserves Carrying amount as Increase in Decrease in Carrying amount as Item of 1/1/2020 Reporting period Reporting period of 30/6/2020 Share 210,045,659.80 210,045,659.80 premium Other capital 86,763,305.99 86,763,305.99 reserves Total 296,808,965.79 0.00 0.00 296,808,965.79 128 2020 Semi-Annual Report of Tsann Kuen (China) Enterprise Co., Ltd. 29. Other comprehensive income Reporting period Less: previously Less: previously Carrying After tax After tax Carrying Amount for recognized in other recognized in other Item amount as of Less: Inco me attributable to attributable to amount as of the year comprehensive income comprehensive income 1/1/2020 tax expense the parent minority 30/ 6/2020 before tax transferred into profit transferred into retained company shareholders or loss earnings 1. Other co mprehensive income not re-classifiable to profit -38,643.22 -13,431.17 0.00 0.00 -2,238.53 -8,394.48 -2,798.16 -47,037.70 or loss in subsequent periods Including: Movements fro m re-measurement of net -38,643.22 -13,431.17 -2,238.53 -8,394.48 -2,798.16 -47,037.70 liab ilit ies (assets) of defined benefit p lan The share of other comprehensive income that cannot be reclassified into profit or loss under the equity method 2. Other co mprehensive inco me re-classifiable to pro fit o r 7,553,393.23 1,480,988.05 0.00 0.00 0.00 1,110,741.04 370,247.01 8,664,134.27 loss in Including: The share of other comprehensive income that can be reclassified into profit or loss under the equity method Gain or loss on changes in fair value of available-for-sale financial assets Gain or loss on held-to-maturity investment reclassified as available -for-sale financial assets Effective gain o r loss on cash flow hedge Foreign exchange difference on translation of financial 7,553,393.23 1,480,988.05 0.00 0.00 0.00 1,110,741.04 370,247.01 8,664,134.27 Statements Total 7,514,750.01 1,467,556.88 0.00 0.00 -2,238.53 1,102,346.56 367,448.85 8,617,096.57 129 2020 Semi-Annual Report of Tsann Kuen (China) Enterprise Co., Ltd. 30. Surplus reserves Carrying amount as Increase in Decrease in Carrying amount as Item of 1/1/2020 Reporting period Reporting period of 30/6/2020 Statutory 40,499,488.55 0.00 0.00 40,499,488.55 surplus reserve Total 40,499,488.55 0.00 0.00 40,499,488.55 Note: According to the provisions of the Company Law and the Articles of Association of the Company to accrue statutory surplus reserve of 10% of net profit, and no longer to accrue the statutory surplus reserve has reached more than 50% of the registered capital of the company. After the Company has accrued the statutory surplus reserve, the Company can accrue any surplus reserve fund. Upon approval, the discretionary surplus reserve fund may be used to cover future losses or increase in share capital. 31. Retained earnings Same period of Item Reporting period last year Pre-adjustment balance brought forward 218,523,906.99 122,872,551.30 Total adjustment to retained earnings at the period-beginning (+, -) 0.00 839,695.41 Retained earnings at the period-beginning after adjustment 218,523,906.99 123,712,246.71 Add: Net profit attributable to shareholders of the parent 39,220,703.16 47,292,567.95 Less: Appropriation to statutory surplus reserve 0.00 0.00 Appropriation to discretionary surplus reserve 0.00 0.00 General reserve 0.00 0.00 Ordinary dividends declared 18,539,168.00 7,415,667.20 Bonus issue 0.00 0.00 Closing retained earnings 239,205,442.15 163,589,147.46 32. Operating revenues and costs (1) General information Reporting period Same period of last year Item Revenues Costs Revenues Costs Principal operating activities 757,335,293.08 629,443,740.55 894,953,908.40 780,300,389.90 Other operating activities 35,679,291.28 14,768,639.19 34,495,074.98 16,032,187.58 Total 793,014,584.36 644,212,379.74 929,448,983.38 796,332,577.48 130 2020 Semi-Annual Report of Tsann Kuen (China) Enterprise Co., Ltd. (2) Revenues from principal operating activities by business Reporting period Same period of last year Industry Operating Operating Operating costs Operating costs revenues revenues Household appliances 757,335,293.08 629,443,740.55 894,953,908.40 780,300,389.90 industry Total 757,335,293.08 629,443,740.55 894,953,908.40 780,300,389.90 (3) Revenues from principal operating activities by products Reporting period Same period of last year Products Operating revenues Operating costs Operating revenues Operating costs Catering and cooking 500,877,565.26 420,064,627.39 557,292,464.28 492,182,551.87 Home helper 184,127,407.97 155,260,103.89 200,821,213.92 179,178,952.34 Tea/Coffee makers 61,420,124.34 49,375,486.17 126,054,808.02 104,010,181.13 Others 10,910,195.51 4,743,523.10 10,785,422.18 4,928,704.56 Total 757,335,293.08 629,443,740.55 894,953,908.40 780,300,389.90 (4) Revenues from principal operating activities by regions Reporting period Same period of last year Area Operating revenues Operating costs Operating revenues Operating costs Australia 28,906,788.68 22,885,334.91 38,523,514.39 31,277,519.69 Africa 7,955,700.50 6,226,660.31 7,010,508.86 5,565,327.52 America 356,754,688.62 299,305,059.17 389,942,699.15 339,045,613.58 Europe 188,723,058.75 154,324,305.81 265,055,223.83 228,545,258.16 Asia 174,995,056.53 146,702,380.35 194,421,962.17 175,866,670.95 Total 757,335,293.08 629,443,740.55 894,953,908.40 780,300,389.90 (5) Details of operating revenues from top five clients Total amount of operating revenues from top five % to the total operating Period revenues clients Reporting period 455,395,408.00 57.43 Same period of last 456,034,003.59 49.06 year 131 2020 Semi-Annual Report of Tsann Kuen (China) Enterprise Co., Ltd. 33. Business tax and surcharges Item Reporting period Same period of last year Urban maintenance and construction tax 2,137,451.88 2,225,075.52 Education surcharge 2,096,333.38 2,189,434.17 Property tax 819,140.23 626,643.29 Land holding tax 195,373.38 205,619.86 Stamp duty 369,698.25 432,898.16 Others 13,038.96 279.02 Total 5,631,036.08 5,679,950.02 Note: The recognition criteria for taxes and surcharges refer to Note V “Taxation”. 34. Sales expenses Item Reporting period Same period of last year Export expanses 11,010,454.87 14,051,231.69 Employee remunerations 6,507,450.80 8,580,413.26 Claims experiment expenses 2,140,389.33 5,247,967.81 Sales commission and after sales service fees 1,388,868.34 1,539,728.58 Rental expenses 230,514.71 199,523.99 Travel expenses 280,735.87 1,196,187.09 Advertisements charges and sales promotion 631,856.12 1,066,521.60 Administrative expenses 78,301.91 91,939.32 Transportation charges 78,416.80 150,645.04 Others 348,756.77 489,145.71 Total 22,695,745.52 32,613,304.09 35. General and administrative expenses Item Reporting period Same period of last year Employee remunerations 26,155,163.04 16,306,722.89 Depreciation and amortization of assets 3,656,458.29 4,128,173.27 Rental expenses 6,307,423.07 5,614,824.57 Insurance expenses 1,169,009.36 1,124,034.83 Administrative expenses 663,709.80 699,955.44 132 2020 Semi-Annual Report of Tsann Kuen (China) Enterprise Co., Ltd. Item Reporting period Same period of last year Travel expenses 1,362,500.23 1,862,203.63 Consultant fees 1,788,301.33 2,301,131.21 Maintenance expenses 1,763,412.45 2,941,621.47 Others 3,460,455.01 3,790,577.21 Total 46,326,432.58 38,769,244.52 36. Research and development expenses Item Reporting period Same period of last year Employee remunerations 18,255,109.89 22,780,501.64 Text expenses 3,053,587.41 3,584,206.48 Depreciation and amortization of assets 3,979,176.22 3,197,870.02 Certification expenses 1,227,419.06 1,678,876.83 Rental expenses 849,333.70 1,336,501.82 Patent expenses 1,503,219.91 1,349,210.14 Travel expenses 215,272.89 880,299.74 Maintenance expenses 264,882.64 462,359.89 Consultant fees 404,256.48 194,608.92 Others 1,066,599.56 1,234,765.02 Total 30,818,857.76 36,699,200.50 37. Financial costs Item Reporting period Same period of last year Interest expenses 151,742.56 431,740.73 Less: Interest income 12,388,999.10 4,370,937.15 Exchange gain or loss -2,810,752.26 606,201.37 Bank charges 588,814.60 592,580.12 Total -14,459,194.20 -2,740,414.93 133 2020 Semi-Annual Report of Tsann Kuen (China) Enterprise Co., Ltd. 38. Other income Reporting Same period of last Item period year Export credit insurance subsidies 436,989.00 672,767.00 Patent subsidies 100,000.00 0.00 Technology innovation subsidies 0.00 100,000.00 Exhibition subsidies 37,000.00 0.00 Employment stabilization subsidies 134,445.12 0.00 Equipment investment subsidy of technological transformation 0.00 820,200.00 of enterprises Enterprise R&D investment subsidies 1,552,140.00 1,024,800.00 Total 2,260,574.12 2,617,767.00 39. Investment income Item Reporting period Same period of last year Investment income from disposal of financial assets 1,339,489.00 4,324,100.00 held for trading Investment income from financial products 6,540,398.04 3,988,938.97 Total 7,879,887.04 8,313,038.97 40. Gain from changes in fair value Reporting Same period of last Source of fair value change period year Financial assets held for trading -2,301,689.00 -742,250.00 Including: Gain from changes in fair value of Derivative -2,301,689.00 -742,250.00 financial assets Financial liabilities held for trading 594,600.00 -3,403,100.00 Total -1,707,089.00 -4,145,350.00 41. Losses on credit impairme nt Item Reporting period Same period of last year Bad debt losses of accounts receivable -1,438,633.36 137,197.24 Bad debt losses of other receivables 308,889.59 -226,200.32 Total -1,129,743.77 -89,003.08 134 2020 Semi-Annual Report of Tsann Kuen (China) Enterprise Co., Ltd. 42. Losses on assets impairme nt Item Reporting period Same period of last year Inventory impairment losses -6,037,359.61 -1,819,781.83 Impairment losses on fixed assets -2,014,785.07 -10,570.96 Total -8,052,144.68 -1,830,352.79 43. Income from asset disposal Included in reporting Same period of last Item Reporting period period non-recurring year profit and loss Income from fixed asset disposal 279,810.12 63,398,419.60 279,810.12 Total 279,810.12 63,398,419.60 279,810.12 44. Non-operating income Included in reporting Same period of last Item Reporting period period non-recurring year profit and loss Government grants (see the following table for detail: Details for 21,162,176.00 government grants) Others 2,794,509.46 5,019,635.37 2,794,509.46 Total 2,794,509.46 26,181,811.37 2,794,509.46 Details of government grants which are recognized into profit or loss during Reporting period Reporting period Same period of last year Write Related with Government Recognized into Recognized Write off Recognized into Recognized off cost assets/inco assistance non-operating into other cost and non-operating into other and me income income expense income income expense Government Related with relocation 21,162,176.00 income compensation Related with Others 0.00 2,260,574.12 0.00 0.00 2,617,767.00 0.00 income Total 0.00 2,260,574.12 0.00 21,162,176.00 2,617,767.00 0.00 135 2020 Semi-Annual Report of Tsann Kuen (China) Enterprise Co., Ltd. 45. Non-operating expenses Included in Reporting period Item Reporting period Same period of last year non-recurring profit and loss Loss on scrapping of non-current assets 216.93 15,056.57 216.93 Including: Fixed assets 216.93 15,056.57 216.93 Intangible assets 0.00 0.00 0.00 External donations 0.00 1,283.20 0.00 Fines 0.00 4,162.92 0.00 Others 211,554.74 0.01 211,554.74 Total 211,771.67 20,502.70 211,771.67 46. Income tax expenses (1) General information Reporting Same period of last Item period year Current income tax calculated in accordance with relevant tax 6,305,722.79 9,076,498.48 law Deferred tax 1,521,379.07 20,744,481.64 Total 7,827,101.86 29,820,980.12 (2) Reconciliation of account profit and income tax expenses Item Reporting period Profit before tax 59,903,358.50 Income tax computed in accordance with the applicable tax rate 8,428,492.30 Impact of differing tax rates applicable to subsidiaries -7,332,687.87 Impact of adjustment for prior period tax expenses -1,306,289.59 Impact of non-taxable income 0.00 Impact of non-deductible costs, expenses and losses 131,796.54 Impact of utilization of prior period deductible temporary differences or deductable 0.00 136 2020 Semi-Annual Report of Tsann Kuen (China) Enterprise Co., Ltd. Item Reporting period losses for which no deferred tax asset has been recognized Impact of current period deductible temporary differences or deductable losses for 10,047,895.35 which no deferred tax asset has been recognized Changes in balance of same period of last year deferred tax asset/liabilities due to tax 0.00 rate adjustment Impact of additional deduction for R&D expenses -2,142,104.87 Income tax expenses 7,827,101.86 47. Other comprehensive income Please see Note VI-29 for details. 48. Notes to the statement of cash flows (1) Other cash received relating to operating activities Item Reporting period Same period of last year Government grants 2,260,574.12 23,779,943.00 Interests income 1,244,863.72 2,281,606.28 Rent income 28,367,596.27 23,793,654.59 Funds in current account and others 4,144,726.67 5,759,747.74 Total 36,017,760.78 55,614,951.61 (2) Other cash payments relating to operating activities Reporting Same period of last Item period year Penalties and donations paid 0.00 5,465.68 Bank charges paid by cash 588,814.60 732,318.67 Sales expenses and general and administrative expenses paid by 60,358,993.42 78,237,467.17 cash Current accounts and others 4,570,222.81 10,575,657.12 Total 65,518,030.83 89,550,908.64 137 2020 Semi-Annual Report of Tsann Kuen (China) Enterprise Co., Ltd. (3) Other cash received relating to investing activities Same period of Item Reporting period last year To recover the maturity time deposits that for purpose to earn 240,268,714.80 92,427,273.64 interest income in financial institutions Total 240,268,714.80 92,427,273.64 (4) Other cash payments relating to investing activities Same period of Item Reporting period last year Deposits in financial institutions for the purpose of earning 490,025,153.46 206,867,146.34 interest income Total 490,025,153.46 206,867,146.34 (5) Other cash received relating to financing activities Item Reporting period Same period of last year Security deposit of pledged loan 0.00 7,000,000.00 Total 0.00 7,000,000.00 (6) Other cash payments relating to financing activities Item Reporting period Same period of last year Security deposit of pledged loan 6,775,024.51 0.00 Total 6,775,024.51 0.00 49. Supple mentary information to the statement of cash flows (1) Supplementary information to the statement of cash flows Item Reporting period Same period of last year ① Reconciliation of cash flows from operating activities to net profit: Net profit 52,076,256.64 86,699,969.95 Add: Loss on asset impairment 8,052,144.68 1,830,352.79 Losses on credit impairment 1,129,743.77 89,003.08 Depreciation of fixed assets, oil and gas assets, biological assets held for production 25,227,353.40 22,621,962.91 Amortization of intangible assets 3,562,674.32 2,855,251.16 Amortization of long-term deferred expenditure 1,365,412.08 1,297,911.46 Loss on disposal of fixed assets, intangible assets and other long-term assets -279,810.12 -63,398,419.60 138 2020 Semi-Annual Report of Tsann Kuen (China) Enterprise Co., Ltd. Item Reporting period Same period of last year (gain presented by "-" prefix) Loss on scrap of fixed assets (gain presented by "-" prefix) 216.93 15,056.57 Loss on fair value changes (gain presented by "-" prefix) 1,707,089.00 4,145,350.00 Financial costs (gain presented by "-" prefix) -4,562,969.14 -183,999.42 Investment loss (gain presented by "-" prefix) -7,879,887.04 -8,313,038.97 Decrease of deferred tax assets (increase presented by "-" prefix) 1,861,637.41 -152,309.22 Increase of deferred tax liabilities (increase presented by "-" prefix) -340,258.34 20,896,790.86 Decrease of inventories (increase presented by "-" prefix) 50,826,332.09 6,995,781.81 Decrease of operating receivables (increase presented by "-" prefix) -23,651,070.40 -10,395,326.14 Increase of operating payables (decrease presented by "-" prefix) -137,106,741.42 -60,837,127.81 Others 0.00 0.00 Net cash flows generated from operating activities -28,011,876.14 4,167,209.43 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 equivalents as of 30/6/2020 334,822,611.51 291,434,711.91 Less: Cash equivalents as of 1/1/2020 639,623,201.98 448,492,295.47 Add: Cash equivalents as of 30/6/2020 Less: Cash equivalents as of 1/1/2020 Net increase of cash and cash equivalents -304,800,590.47 -157,057,583.56 (2) Composition of cash and cash equivalents Item Reporting period Same period of last year ①Cash 334,822,611.51 291,434,711.91 Including: Cash at hand 961,400.21 851,894.37 Demand bank deposit 333,861,211.30 290,582,817.54 Demand other monetary funds 0.00 0.00 Demand deposit in the Central Bank 0.00 0.00 Deposit in peer firms 0.00 0.00 Loan to peer firms 0.00 0.00 139 2020 Semi-Annual Report of Tsann Kuen (China) Enterprise Co., Ltd. Item Reporting period Same period of last year ②Cash equivalents 0.00 0.00 Including: Debt instrument matured within three 0.00 0.00 months ③Cash and cash equivalents as of 30/6/2020 334,822,611.51 291,434,711.91 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 30 June 2020, the amount of cash and cash equivalents of statement of cash flows was CNY 334,822,611.51, the balance of monetary fund of balance sheet was CNY 591,354,074.68, and the difference was CNY 256,531,463.17, of which the pledge loan guarantee of CNY 6,775,024.51 was deducted from the ending amount of cash and cash equivalents of statement of cash flows due to not meet the cash and cash equivalent standard, and the rest was time deposit in financial institutions for the purpose of earning interest income. 50. Foreign currency monetary items (1) Foreign currency monetary items Original amount as at Foreign exchange Translated amount as at Items 30/6/2020 rate 30/6/2020 Monetary funds Including: USD 27,849,335.53 7.079500 197,159,370.89 JPY 32,054,212.42 0.065808 2,109,423.62 IDR 1,985,988,094.02 0.000492 976,907.55 EUR 24,827.14 7.961000 197,648.86 GBP 9,519.73 8.714400 82,958.73 HKD 328,536.76 0.913440 300,098.62 HUF 81,016.00 0.022338 1,809.74 NTD 35,510,310.00 0.238775 8,478,974.27 Total 209,307,192.28 Short-term loan Including: USD 4,000,000.00 7.079500 28,318,000.00 Total 28,318,000.00 140 2020 Semi-Annual Report of Tsann Kuen (China) Enterprise Co., Ltd. Original amount as at Foreign exchange Translated amount as at Items 30/6/2020 rate 30/6/2020 Accounts receivable Including: USD 41,083,779.87 7.079500 290,852,619.60 IDR 348,806,560.00 0.000492 171,577.95 EUR 429.40 7.961 3,418.45 JPY 63,373,225.00 0.065808 4,170,465.19 Total 295,198,081.19 Accounts payable Including: USD 8,288,666.17 7.079500 58,679,612.15 EUR 10,172.32 7.961 80,981.84 HKD 593,326.35 0.91344 541,968.01 JPY 38,673,647.43 0.065808 2,545,035.39 IDR 1,465,282,731.71 0.000492 720,772.58 Total 62,568,369.97 Other receivables Including: JPY 1,204,851.16 0.065808 79,288.85 USD 28,904.63 7.079500 204,630.33 IDR 1,521,400,894.00 0.000492 748,377.10 NTD 214,514.00 0.238775 51,220.58 Total 1,083,516.86 Other payables Including: HKD 33,434.23 0.91344 30,540.16 JPY 370,800.00 0.065808 24,401.61 USD 215,611.54 7.079500 1,526,421.90 IDR 2,159,095,446.43 0.000492 1,062,059.05 Total 2,643,422.72 (2) Description of overseas operating entities The Company’s holding sub-subsidiary company Pt. Star Comgistic Indonesia locates at West Java province in Indonesia, due to Pt. Star Comgistic Indonesia is mostly settled in US 141 2020 Semi-Annual Report of Tsann Kuen (China) Enterprise Co., Ltd. dollars by usual purchases and sales, so that it adopts the US dollar as its functional currency. The Company’s holding sub-subsidiary 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-subsidiary 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-subsidiary company East Sino Development Limited locates at Hong Kong, due to East Sino Development Limited is mostly settled in HKD by usual purchases and sales, so that it adopts the HKD as its functional currency. The Company’s holding sub-subsidiary company Orient Star Investments Limited locates at Hong Kong, 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. 51. Governme nt grants (1) General information Amount recorded in current Category Amount Disclosure profit and loss Patent subsidies 100,000.00 Other income 100,000.00 Exhibition subsidies 37,000.00 Other income 37,000.00 Employment stabilization 134,445.12 Other income 134,445.12 subsidies Export credit insurance subsidies 436,989.00 Other income 436,989.00 Subsidies for enterprise research 1,552,140.00 Other income 1,552,140.00 input (2) Return of government grants: None VII. Change of consolidated scope 1. Business combination involving entities under common control: None 2. Business combination involving entities not under common control: None 3. Other reasons for change of consolidated scope The cancellation of Tsann Kuen (Zhangzhou) Investment Co., Ltd. has been completed in April 2020. 142 2020 Semi-Annual Report of Tsann Kuen (China) Enterprise Co., Ltd. VIII. The equity in other main entities 1. The equity in subsidiaries (1) The construction of the company Holding proportion Place Place of Nature (%) Subsidiaries of Acquired method operation of business registration 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 Enterprise Co., Ltd. (TKS) electronic under common appliance control Manufacture TsannKuen (Zhangzhou) South home Acquired through Port Electronics Enterprise Co., Zhangzhou Zhangzhou 56.25 75.00 electronic establishment Ltd. (TKN) appliance Sales of Shanghai Canxing Trading Acquired through Shanghai Shanghai home 56.25 100.00 Co.,Ltd (STD) establishment electronic Xiamen Tsannkuen Property Property Acquired through Xiamen Xiamen 100.00 100.00 Services Co., Ltd. (TKW) service establishment Acquired through business East Sino Development Hong Hong Trading, 75.00 100.00 combination Limited. (East Sino) Kong Kong investment under common control Acquired through Manufacture business Pt.Star Comgistic Indonesia home Indonesia Indonesia 75.00 100.00 combination (SCI) electronic under common appliance control Pt.Star Comgistic Property Real estate Acquired through Development Indonesia Indonesia Indonesia 75.00 100.00 development establishment (“SCPDI”) 143 2020 Semi-Annual Report of Tsann Kuen (China) Enterprise Co., Ltd. Holding proportion Place Place of Nature (%) Subsidiaries of Acquired method operation of business registration Directly Indirectly Acquired through business Orient Star Investments Hong Hong Trading, 75.00 100.00 combination Limited (OSI) Kong Kong investment under uncommon control Acquired through business Tsannkuen Edge Intelligence Industrial Taiwan Taiwan 75.00 100.00 combination Co., Ltd. (TKEI) design under common control (2) Important non-wholly-owned subsidiary Holding Dividends proportion of Profit and loss attributable Total amount of attributable to Subsidiaries minority to minority equity during minority equity minority shareholders reporting period at the period-end shareholders (%) TKL 25.00 11,402,011.05 26,395,184.92 326,298,477.31 TKS 53.125 1,727,205.10 122,527,344.42 SCI 25.00 -285,690.87 28,325,802.52 TKEI 25.00 -8,575.18 4,012,876.35 (3) The main financial information of important non-wholly-owned subsidiary Balance as of 30/6/2020 Subsidiaries Non-current Current Non-current Current assets Total Total assets liabilities liabilities TKL 1,411,097,415.23 468,781,472.71 1,879,878,887.94 574,487,128.72 197,850.00 574,684,978.72 TKS 271,400,137.75 11,652,737.80 283,052,875.55 4,120,549.82 48,292,618.59 52,413,168.41 SCI 92,928,517.80 76,172,025.15 169,100,542.93 55,797,332.84 55,797,332.84 144 2020 Semi-Annual Report of Tsann Kuen (China) Enterprise Co., Ltd. Subsidiaries Balance as of 30/6/2020 TKEI 16,369,478.52 2,958,049.59 19,327,528.11 2,797,514.07 478,508.67 3,276,022.73 (Continued) Balance as of 1/1/2020 Subsidiaries Non-current Current Non-current Current assets Total Total assets liabilities 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 (Continued) Reporting period Cash flow Total amount of Subsidiaries relating to Revenues Net profit comprehensive operating income activities TKL 715,492,117.08 45,608,044.19 40,240,655.81 TKS 475,388.40 3,251,209.60 3,537,815.91 SCI 83,292,609.62 -1,142,763.48 -6,414,480.36 TKEI 5,077,370.67 -34,300.74 -900,971.02 (Continued) Same period of last year Total amount Cash flow relating Subsidiaries of Revenues Net profit to operating comprehensive activities income TKL 884,551,699.73 37,058,705.83 2,673,162.45 TKS 537,628.52 62,334,333.43 20,108,849.49 SCI 42,766,092.00 -10,665,886.45 -783,976.44 TKEI 4,062,649.39 -991,957.28 -921,407.08 145 2020 Semi-Annual Report of Tsann Kuen (China) Enterprise Co., Ltd. IX. The risk associated with financial instrume nts The main financial instruments of the Company including equity investments, investment in debt obligations, loans, accounts receivable, accounts payable and etc., please see Note VI for detail of related items. The risk associated with financial instruments, and risk management policies which the company uses to reduce these risks as described below. The management of the Company manages and supervises the risks to ensure that the risks can be controlled within a limited range. The Company analyzes the rationality of risk variables and possible impacts of possible changes on current gain and loss or shareholders’ equity through sensitivity analysis. All risk variables rarely can change in isolation, and the correlation between variables has great influence on the ultimate amount generated from the change of some risk variable. Thus, the following is done on the assumption that each variable changes in isolation. (I) The targets and policies of risks management The target of risks management is to obtain the proper balance between the risks and benefits, to reduce the negative impact that caused by the risk of the Company to the lowest level, and to maximize the benefits of shareholders and other equity investors. Based on the targets of risk management, the basic strategy of the Company’s risk management is to identify and analyze the risks which are faced by the Co mpany, establish suitable risk tolerance baseline and precede the risk management, and supervise a variety of risks timely and reliably, and control the risk within a limited range. 1. Market risk (1) Foreign exchange risk 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, JPY, 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. The Company purchases forward contract of foreign currency to reduce the foreign exchange exposure generated from foreign currency assets, of which the contracts shall be based on the amount of foreign currency assets. 2. Credit risk That could cause the Company’s maximum credit risk of financial losses mainly from the 146 2020 Semi-Annual Report of Tsann Kuen (China) Enterprise Co., Ltd. losses of financial assets, which are resulted by the other party of contract fails to fulfill the obligations and the financial guarantee undertaken by the Company, as at June 30 2020, including: The carrying amount of financial asseets recognized in consolidated balance sheet; in terms of financial instruments measured by fair value, the book value reflects the risk exposure but not the biggest exposure. The biggest exposure will be changed with the change of 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 recognized fully provision for bad debts for the money cannot be recovered. So that the Company’s management believes the Company’s credit risk has been greatly reduced. The Company’s circulating funds deposited in banks which with high credit ratings, so that the lower credit risk of circulating funds. (1) Age analysis of financial assets overdue without impairment No financial asset overdue without impairment. (2) Analysis of financial assets that have occurred individual impairment No financial assets that have occurred individual impairment. 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. X. Disclosure of fair value 1. Period-end fair value of assets & liabilities that are measured by fair value Fair value as of 30/6/2020 First level Second level Third level Item measurement measurement measurement of Total of fair value of fair value fair value 1. Continuous measurement of fair value 1.1 Financial assets held for trading 147 2020 Semi-Annual Report of Tsann Kuen (China) Enterprise Co., Ltd. Fair value as of 30/6/2020 First level Second level Third level Item measurement measurement measurement of Total of fair value of fair value fair value 1.1.1 Financial assets at fair value 1,319,000.00 1,319,000.00 through current profit and loss 1.1.1.1 Liabilities investment 1.1.1.2 Equity investment 1.1.1.3 Derivative financial assets 1,319,000.00 1,319,000.00 1.2 Other investments in equity instruments 1.3 Other non-current financial assets Total amount of asset that is 1,319,000.00 1,319,000.00 continually measured by fair value 1.4 Financial liabilities held for trading 1.4.1 Financial liabilities at fair value 44,200.00 44,200.00 through current profit and loss Including: Tradable bonds Derivative financial 44,200.00 44,200.00 liabilities Others Total amount of liabilities that is 44,200.00 44,200.00 continually measured by fair value 2. The basis for determining the market price of continuous and non-continuous fair value measure ment items of the first level Unadjusted quotations obtained on active markets from the same assets or liabilities on the balance sheet date. XI. Related parties and related party transaction 1. Details of the parent 148 2020 Semi-Annual Report of Tsann Kuen (China) Enterprise Co., Ltd. Shareholding in Voting right in Place of Parents Nature of business Registered capital the Company the Company registration (%) (%) Manufacture and STAR COMGISTIC Taiwan sales electrical NTD 3 billion 42.90 44.68 CAPITAL CO.,LTD. equipment Note: The ultimate controlling party of the Company is STAR COMGISTIC CAPITAL CO., LTD. 2. Subsidiaries See Note VIII-1 “The equity in subsidiaries”. 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 Ultimate holding company have equity Co., Ltd. TsannKuen Enterprise Co., Ltd. Same actual controller Gold Mine Chain Enterprise Co., Ltd Same actual controller Canxing International Travel Service Co., Ltd Same ultimate holding company 4. Transactions with related parties (1) Transactions through purchase or sell goods and accept or supply services ① The situation of purchases goods or accepts services Whether Content Reporting Approval trade Same period of Related parties exceed trade of transaction period credit last year credit or not Thermaster Purchase of Electronic 14,049,564.67 38,493,000.00 No 16,615,879.99 goods (Xiamen) Ltd. TsannKuen Purchase of Enterprise Co., 2,630.42 12,000.00 No 659.33 goods Ltd. Gold Mine Purchase of Chain Enterprise 210.75 12,000.00 No 644.30 goods Co., Ltd. 149 2020 Semi-Annual Report of Tsann Kuen (China) Enterprise Co., Ltd. Whether Content Reporting Approval trade Same period of Related parties exceed trade of transaction period credit last year credit or not STAR COMGISTIC Purchase of 223.21 12,000.00 No 4,518.01 CAPITAL CO., goods LTD. Total 14,052,629.05 16,621,701.63 The situation of sells goods or rendering services Content Related parties Reporting period Same period of last year of transaction STAR COMGISTIC CAPITAL CO., LTD. Sale of goods 2,901,040.95 5,915,611.17 Total 2,901,040.95 5,915,611.17 (2) Lease between related parties ① The Company is as the lessor Lease rental Lease rental recognized in Lessee Classification recognized in current prior period period Xiamen Wuhuama Restaurant Management Co., Ltd. Property 21,588.89 21,960.00 Total 21,588.89 21,960.00 ② The Company is as the lessee Lease rental Lease rental Lessor Classification recognized in recognized in prior current period period STAR COMGISTIC CAPITAL CO., LTD. Property 592,801.84 552,564.86 Total 592,801.84 552,564.86 (3) Assets transfer, debt restructuring between related parties Content of Same period of last Related parties Reporting period transaction year Sale of fixed STAR COMGISTIC CAPITAL CO., LTD. 0.00 7,103.88 assets Total 0.00 7,103.88 150 2020 Semi-Annual Report of Tsann Kuen (China) Enterprise Co., Ltd. (4) Remunerations of key management personals Currency: Ten thousand yuan Item Reporting period Same period of last year Remunerations of key management 154.55 131.77 personals (5) Other transactions with related parties Same period of Content of Related parties Reporting period transaction last year Canxing International Travel Service Co., Ltd. Accept service 18,072.06 155,794.48 Gold Mine Chain Enterprise Co., Ltd. Provide service 26,795.39 20,814.40 Total 44,867.45 176,608.88 5. The balance of payables and receivables among related parties (1) Receivables owed by related parties Carrying amount as of 30/6/2020 Carrying amount as of 1/1/2020 Carrying amount Allowance Carrying Allowance Related party for bad amount for bad debt debt Accounts receivable: STAR COMGISTIC CAPITAL 2,162,858.05 2,263,799.22 CO., LTD. Total 2,162,858.05 2,263,799.22 Other receivables: STAR COMGISTIC CAPITAL 210,822.77 206,827.94 CO., LTD. Total 210,822.77 206,827.94 (2) Payables owed to related parties Carrying amount as of 30/6/2020 Carrying Related party amount as of 1/1/2020 Accounts payable: Thermaster Electronic (Xiamen) Ltd. 8,809,623.12 7,317,114.51 Total 8,809,623.12 7,317,114.51 Advances from customers Xiamen Wuhuama Restaurant Management Co., Ltd. 0.00 19,731.63 Total 0.00 19,731.63 151 2020 Semi-Annual Report of Tsann Kuen (China) Enterprise Co., Ltd. Carrying amount as of 30/6/2020 Carrying Related party amount as of 1/1/2020 Other payables: Xiamen Wuhuama Restaurant Management Co., Ltd. 0.00 27,056.60 STAR COMGISTIC CAPITAL CO., LTD. 0.00 117,215.44 Canxing International Travel Service Co., Ltd. 0.00 27,990.96 Total 0.00 172,263.00 XII. Commitme nts and contingencies 1. Important commitme nts (1) Operating lease commitments Irrevocable lease contracts under performance and their financial effects as at the period-end. Carrying amount as of Carrying amount as of 1/1/2020 Related party 30/6/2020 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 112,771.00 112,771.00 Total 123,685.00 123,685.00 (2) Other commitments None 2. Contingencies No significant contingencies need to be disclosed as of June 30 2020. XIII. Post reporting date events 1. Evaluation of impact of Coronavirus disease (COVID-19) For the outbreak and spread of COVID-19 epidemic overseas, the Company will continue to focus and evaluate the impact of epidemic, adjust every operation arrangement timely, ta ke various measures and increase income and reduce expenditure so as to reduce the negative influence of COVID-19 epidemic. XIV. Notes to the main elements of the separate financial statement of the Company 152 2020 Semi-Annual Report of Tsann Kuen (China) Enterprise Co., Ltd. 1. Accounts receivable (1) Disclosure by age Age Balance as of 30/6/2020 Within 1 year 8,689,949.59 Including: 1-90 days 7,559,443.72 91-180 days 1,130,505.87 181-270days 271-365 days 1 to 2 years 2 to 3 years 1,157,970.78 Over 3 years 5,000.00 Including: 3-4 years 4-5 years 5,000.00 Over 5 years Subtotal 9,852,920.37 Less: Allowance for bad debt 1,253,781.78 Total 8,599,138.59 (2) Disclosure by method for measurement of allowance for bad debt Balance as of 30/6/2020 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 impairment by 9,852,920.37 100.00 1,253,781.78 12.72 8,599,138.59 portfolio Including: Portfolio by age 9,844,498.97 99.91 1,253,781.78 12.74 8,590,717.19 Portfolio by related parties 8,421.40 0.09 8,421.40 Total 9,852,920.37 100.00 1,253,781.78 12.72 8,599,138.59 153 2020 Semi-Annual Report of Tsann Kuen (China) Enterprise Co., Ltd. (Continued) Balance as of 1/1/2020 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 impairment 7,288,144.48 100.00 1,420,186.28 19.49 5,867,958.20 by portfolio Including: Portfolio by age 7,175,859.42 98.46 1,420,186.28 19.79 5,755,673.14 Portfolio by related 112,285.06 1.54 112,285.06 parties Total 7,288,144.48 100.00 1,420,186.28 19.49 5,867,958.20 ① Portfolio by related parties Balance as of 30/6/2020 Allowance Accounts receivable Reasons for Carrying amount for bad % of total measurement debt Due from related parties 8,421.40 Total 8,421.40 ② Accounts receivable using age for measurement of allowance for bad debt Balance as of 30/6/2020 Item Carrying amount Allowance for bad debt % Current 7,874,647.43 39,373.24 0.50 1-30 days past due 709,279.95 31,917.60 4.50 31-60 days past due 97,600.81 19,520.16 20.00 61-90 days past due 45.00 Over 90 days past due 1,162,970.78 1,162,970.78 100.00 Total 9,844,498.97 1,253,781.78 12.74 154 2020 Semi-Annual Report of Tsann Kuen (China) Enterprise Co., Ltd. (3) Allowance for bad debt Current period movement Balance as of Recognition Recovery or Used or Others Balance as Item 1/1/2020 reversal written of 30/6/2020 off Accounts receivable of assessment for 1,420,186.28 166,404.50 1,253,781.78 impairment by portfolio Total 1,420,186.28 0.00 166,404.50 0.00 0.00 1,253,781.78 (4) Details of top five accounts receivable The total amount of top five accounts receivables summarized by debtors as at the period-end is CNY 9,694,955.04, accounting for 98.40% of the total accounts receivable as at the period-end, the total corresponding allowance for bad debts is CNY 1,248,059.06. 2. Other receivables Item Balance as of 30/6/2020 Balance as of 1/1/2020 Interests receivable Dividend receivable Other receivables 2,042,327.50 2,622,732.62 Total 2,042,327.50 2,622,732.62 (1) Interests receivable None (2) Dividend receivable None (3) Other receivables ① Disclosure by age Age Balance as of 30/6/2020 Within 1 year 1,933,216.40 Including: 1-90 days 1,924,327.35 91-180 days 8,889.05 181-270days 0.00 271-365 days 0.00 1 to 2 years 5,300.00 155 2020 Semi-Annual Report of Tsann Kuen (China) Enterprise Co., Ltd. Age Balance as of 30/6/2020 2 to 3 years 55,800.00 Over 3 years 62,300.00 Including: 3-4 years 2,300.00 4-5 years Over 5 years 60,000.00 Subtotal 2,056,616.40 Less: Allowance for bad debt 14,288.90 Total 2,042,327.50 ② Disclosure by nature Item Balance as of 30/6/2020 Balance as of 1/1/2020 Deposit 110,000.00 214,400.00 Due from related parties 1,691,330.37 1,800,844.03 Other current account 255,286.03 674,758.69 Subtotal 2,056,616.40 2,690,002.72 Less: Allowance for bad debt 14,288.90 67,270.10 Total 2,042,327.50 2,622,732.62 ③ Recognition of allowance for bad debt Stage 1 Stage 2 Stage 3 Expected credit Expected credit loss Expected credit loss for Allowance for bad debt loss for the next 12 for the whole the whole duration Total months duration (no credit (credit impairment has impairment) occurred) Closing balance as of 67,270.10 67,270.10 1/1/2020 Carrying amount of other receivables in current period on 1/1/2020 Turn to stage 2 Turn to stage 3 Turn back to stage 2 Turn back to stage 1 Recognition Reversal 52,981.20 52,981.20 156 2020 Semi-Annual Report of Tsann Kuen (China) Enterprise Co., Ltd. Stage 1 Stage 2 Stage 3 Expected credit Expected credit loss Expected credit loss for Allowance for bad debt loss for the next 12 for the whole the whole duration Total months duration (no credit (credit impairment has impairment) occurred) Used Written off Other movements Closing balance as of 14,288.90 14,288.90 30/6/2020 ④ Recognition of allowance for bad debt Current period movement Balance as Balance as Item at at Recognition Recovery or Used or Others 1/1/2020 30/6/2020 reversal written off Accounts receivable of assessment for 67,270.10 52,981.20 14,288.90 impairment by portfolio Total 67,270.10 52,981.20 14,288.90 ⑤ Details of top five other receivables Carrying Allowance amount for bad Debtors Nature Age % of total as of debt as of 30/6/2020 30/6/2020 Current TKL 1,691,330.37 1-90 days 82.24 account HARRIS BRICKEN MCVAY Legal cost 52,902.00 1-90 days 2.57 SLIWOSKI,LLP Alipay Deposit 50,000.00 Over 1 year 2.43 Xiamen Tsannkuen Flagship Deposit 50,000.00 Over 1 year 2.43 Store Alipay People’s Court of Haicang Legal cost 29,635.00 1-90 days 1.44 District, Xiamen, Fujian Total 1,873,867.37 91.11 157 2020 Semi-Annual Report of Tsann Kuen (China) Enterprise Co., Ltd. 3. Long-term equity investments (1) Classification of long-term equity investments Balance as of 30/ 6/2020 Balance as of 1/1/ 2020 Item Carrying Provision for Carrying Provision for Book value Book value amount impairment amount impairment Investment in 923,414,701.56 923,414,701.56 923,414,701.56 923,414,701.56 subsidiaries Investment in associates and joint ventures Total 923,414,701.56 923,414,701.56 923,414,701.56 923,414,701.56 (2) Investment in subsidiaries Balance as Provision of Decrease for Increase in Carrying 30/6/2020 Balance as at in impairment Investee current amount of 1/1/2020 current accrued in period as of 30/6/2020 provision period current for period impairment TsannKuen (Zhangzhou) 921,914,701.56 921,914,701.56 Enterprise Co., Ltd. Xiamen Tsannkuen Property 1,500,000.00 1,500,000.00 Services Co., Ltd. Total 923,414,701.56 923,414,701.56 158 2020 Semi-Annual Report of Tsann Kuen (China) Enterprise Co., Ltd. 4. Operating revenues and costs Reporting period Same period of last year Item Revenues Costs Revenues Costs Principal operating 14,652,175.88 12,982,449.80 15,952,167.75 14,703,450.93 activities Other operating 24,729,431.68 16,760,794.10 21,197,050.66 16,309,052.83 activities Total 39,381,607.56 29,743,243.90 37,149,218.41 31,012,503.76 5. Investment income Item Reporting period Same period of last year Investment income from disposal of long-term equity investments Long-term equity investment income 79,185,554.77 25,443,358.87 calculated by cost method Total 79,185,554.77 25,443,358.87 XV. Supple mentary information 1. Extraordinary gains or losses for current period Supplemental information Total amount Explanation Gains or losses arising from disposal of non-current assets 279,810.12 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 2,260,574.12 Company’s operations and 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 159 2020 Semi-Annual Report of Tsann Kuen (China) Enterprise Co., Ltd. Supplemental information Total amount Explanation current reporting period to the combination dates. Gains or losses arising from contingent events not associated with the Company’s operating activities Mainly investment income Gains or losses arising from changes in the fair values of financial from sale of forward assets and liabilities held for trading, and investment income from foreign exchange contracts, disposal of financial assets and liabilities held for trading and 6,172,798.04 gains on changes of fair available-for-sale financial assets, excluding effective hedging value and income of instruments associated with the Company’s operating activities financial products and other current assets Recovery of impairment allowance for receivables subject to individual assessment for impairment Gains or losses arising from entrusted borrowings Gains or losses arising from changes in the fair values of investment property measured at fair value Impact of one-off adjustment required by tax laws, accounting standards and relevant regulations on the profit or loss for the current reporting period Revenue arising from entrusted operation Other non-operating revenue and non-operating expenses not listed 2,582,737.79 above Other gains or losses satisfying the definition of extraordinary gains or losses Less: Effect of corporate income tax 1,898,569.93 Less: Net amount attributable to minority interests (after tax) 2,683,386.62 Total 6,713,963.52 Note: The Company recognized 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). 2. Yield Rate of Net Assets and Earnings Per Share Weighted average Earnings Per Share (Yuan per Profits for the reporting period yield rate of net share) assets% Basic EPS Diluted EPS Net profits attributable to ordinary shareholders 5.10 0.21 0.21 Net profits attributable to ordinary shareholders 4.25 0.18 0.18 (excl. extraordinary gains or losses) 160