闽灿坤Ｂ(200512)2008年年度报告（英文版）

TSANN KUEN (CHINA) ENTERPRISE CO., LTD. Annual Report 2008 (Prepared under PRC GAAP) CONTENTS I. COMPANY PROFILE.........................................................................................................................................3 II. SUMMARY OF FINANCIAL HIGHLIGHTS AND BUSINESS HIGHLIGHTS ........................................4 (I). PROFIT REALIZED AS OF THE YEAR 2008 ...........................................................................................................4 (II). MAJOR ACCOUNTING DATA AND FINANCIAL INDEXES.......................................................................................6 (III). FULLY DILUTED AND WEIGHTED AVERAGE EQUITY ON RETURN AND EPS .......................................................6 (IV). STATEMENT ON CHANGES OF SHAREHOLDERS’ EQUITY IN THE REPORT PERIOD...............................................7 III. CHANGES IN SHARE CAPITAL AND PARTICULARS ABOUT SHAREHOLDERS ...........................8 (I). CHANGES OF SHARES ........................................................................................................................................8 (II). INTRODUCTION ABOUT ISSUING AND LISTING OF SHARES:................................................................................8 (III). BRIEF INTRODUCTION OF SHAREHOLDERS ......................................................................................................9 (IV). BRIEF INTRODUCTION ABOUT THE CONTROLLING SHAREHOLDERS OF THE COMPANY ..................................10 (V). DESCRIPTION OF THE ACTUAL CONTROLLER ..................................................................................................10 IV. DIRECTORS, SUPERVISORS, SENIOR EXECUTIVES AND EMPLOYEES .......................................12 (I). DIRECTORS, SUPERVISORS AND SENIOR EXECUTIVES .....................................................................................12 (II). INTRODUCTION OF EMPLOYEES......................................................................................................................15 V. CORPORATE GOVERNANCE STRUCTURE.............................................................................................16 (I) CORPORATE GOVERNANCE ...............................................................................................................................16 (II). PERFORMANCE OF INDEPENDENT DIRECTORS ...............................................................................................18 (III). THE COMPANY WAS SEPARATED FROM THE CONTROLLING SHAREHOLDER IN BUSINESS, PERSONNEL, ASSETS, ORGANIZATION AND FINANCING. ...........................................................................................................................19 (IV). ESTABLISHMENT AND PERFECTING OF INTERNAL CONTROL OF THE COMPANY .............................................19 (V) THE PERFORMANCE APPRAISAL AND INCENTIVE MECHANISM OF SENIOR MANAGEMENT ...............................20 VI. BRIEF FOR SHAREHOLDERS’ GENERAL MEETING ..........................................................................20 VII. REPORT OF THE BOARD OF DIRECTORS ...........................................................................................20 (I) OPERATION RETROSPECT OF THE COMPANY IN THE REPORT PERIOD .................................................................20 (II) OUTLOOK OF THE COMPANY...........................................................................................................................25 (III) DEVELOPMENT TREND OF THE INDUSTRY AND OUTLOOK OF THE MARKET .....................................................26 (IV) CAPITAL EXPENDITURE PLAN .......................................................................................................................26 (V) THE MAIN RISK FACTORS OF DEVELOPMENT IN THE FUTURE ...........................................................................26 (VI) INVESTMENT OF THE COMPANY ....................................................................................................................27 (VII) THE ROUTINE WORK OF THE BOARD OF DIRECTORS ....................................................................................27 VIII. REPORT OF SUPERVISORY COMMITTEE..........................................................................................32 1 (I) PARTICULARS OF THE MEETING OF SUPERVISORY COMMITTEE ........................................................................32 (II) INDEPENDENT OPINION ISSUED BY SUPERVISORY COMMITTEE .......................................................................32 IX. SIGNIFICANT EVENTS................................................................................................................................33 (I) SIGNIFICANT LITIGATION OR ARBITRATION.......................................................................................................33 (II) SHAREHOLDING OF OTHER LISTED COMPANIES ...............................................................................................33 (III) SIGNIFICANT PURCHASE OR DISPOSAL OF ASSETS AND ACQUISITION OR MERGE DURING THE REPORT PERIOD 33 (IV) SIGNIFICANT RELATED TRANSACTION ...........................................................................................................34 (V) SIGNIFICANT GUARANTEE ..............................................................................................................................35 (VI) EXECUTION OF THE COMMITTED EVENTS BY THE SHAREHOLDERS HOLDING MORE THAN 5% OF SHARES OF THE COMPANY ......................................................................................................................................................36 (VII) PROPOSAL ON REENGAGEMENT OF REANDA CERTIFIED PUBLIC ACCOUNTANTS ..........................................37 (VIII) RECEPTION OF INVESTIGATION AND INTERVIEW OF THE COMPANY IN THE REPORT PERIOD. ........................37 (IX) OTHERS .........................................................................................................................................................38 X. FINANCIAL REPORT (ACCOMPANYING)................................................................................................38 (I) AUDIT REPORT .................................................................................................................................................38 (II) FINANCIAL STATEMENT ...................................................................................................................................38 XI. DOCUMENT AVAILABLE FOR REFERENCE .........................................................................................38 2 Important Notes The Board of Directors, Supervisory Committee, and Directors, Supervisors as well as Senior Management Staff of TSANN KUEN (CHINA) ENTERPRISE CO., LTD. (hereinafter referred to as the Company) warrant that this report does not contain any false or misleading statements or omit any material facts and all information set forth herein are true, accurate and complete. None of the Directors, Supervisors and Senior Management Staff has ever declared that he (she) was uncertain of or had any objection to the truthfulness, accuracy and integrity of the annual report. All members of the Board of Directors attended the Board meetings. Reanda Certified Public Accountants produced a standard unqualified auditors’ report for the Company. Mr. Jian Derong, Chairman of the Board, and Mr. Chen Zongyi, Accounting Manager, jointly guaranteed that the financial statements in this annual report are true and complete. I. Company Profile 1. Name of the Company( Chinese): 厦门灿坤实业股份有限公司 Name of the Company (English): TSANN KUEN (CHINA) ENTERPRISE CO., LTD. Company’s Name (Abbreviation): TKC 2. Legal Representative: Jian Derong 3. Secretary to the Board: Luo Qingxing Contact Address: TSANN KUEN Industrial Park, Longchi Development Zone, Zhangzhou, Fujian Telephone: 0596-6268103 Fax. 0596-6268104 E-mail: allenlo@tkl.tsannkuen.com 4. Securities Affairs Representative: Sun Meimei Contact Address: TSANN KUEN Industrial Park, Longchi Development Zone, Zhangzhou, Fujian Telephone: 0596-6268161 Fax. 0596-6268104 E-mail: mm---_sun@tkl.tsannkuen.com 5. Registered Address No.88 Xinglong Road, Huli Industry Zone, Xiamen, P.R. 3 China Post Code of Registered Address 361006 Office Address TSANN KUEN Industrial Park, Longchi Development Zone, Zhangzhou, Fujian Post Code of Office Address 363107 Website www.tsannkuen.com E-mail allenlo@tkl.tsannkuen.com 6. Newspaper for Information Disclosure Domestic Overseas Website for Disclosing the Annual Report www.cninfo.com.cn Place where the Annual Report is Prepared and TSANN KUEN Industrial Park, Longchi Development Placed Zone, Zhangzhou, Fujian 7. Stock Exchange Listed with Shenzhen Stock Exchange Short Form of the stock Min Tsann Kuen B Stock Codes 200512 8. Initial Registration Date and Place On 1 Jan. 1988 in Xiamen Registration Number of Business License 350200400001420 Organization Code 61200217-0 Registration number of taxation NTWZi350206612002170 Certified Public Accountants Engaged by the Reanda Certified Public Accountants Co., Ltd. Company Auditor’s Office Address Rm. 2008, Eastern Block, 1st Floor, 2000 Zhubang, No. 100 Balizhuangxili, Chaoyang District, Beijing, P.R. China II. Summary of Financial Highlights and Business Highlights (I). Profit realized as of the year 2008 Unit: RMB’000 No. Item Amount 1 Operating profit 37,328 2 Total profit 57,551 3 Net profit attributable to listed company’s shareholders 42,536 Net profit attributable to listed company’s shareholders after 4 17,596 deducting non-recurring gains and losses 5 Net cash flow from operating activities 333,456 4 1. Items of non-recurring gains and losses and amount Unit: RMB’000 Items of non-recurring gains and losses Amount Net profit 55,922 Add: gains and losses from disposal of non-current assets, including the part that withdrawn (8,082) reserve for impairment of assets were offset Gains and losses from change in fair value of tradable financial assets and tradable financial liabilities and investment income from disposal of tradable financial assets, tradable financial (12,329) liabilities and available-for-sale financial assets except for effective hedging business related to normal operation business of the Company Government subsidy measured into current gains and losses, while closely related with the business of the Company, excluding the fixed-amount or fixed-proportion government subsidy (1,150) enjoyed according to the certain standard Other non-operating income and expense beside for the above-mentioned each items (8,524) Subtotal (30,086) Less: influence on enterprise income tax 125 Less: net profit attributable to minority shareholders after deducting non-recurring gains and 8,116 losses Net profit attributable to shareholder of parent company after deducting non-recurring gains and 17,596 losses 2. Explanation on difference of net profit under IFRS and PRC GAAP This financial statement was prepared under PRC GAAP, which was different from that under IFRS. As at Dec. 31, 2008, the net profits attributable to the listed companies’ shareholders in statutory financial report was RMB 42,536,000, as well as the net assets of RMB 343,777,000. Both net profit and net assets after deducting the shareholders’ equity should be adjusted, as pursuant to IFRS, as follow: RMB’000 Net profit as of Net assets ended Item the year 2008 Dec. 31, 2008 Net profits attributable to listed company’s shareholders 42,536 343,777 pursuant to PRC GAAP Adjustment pursuant to IFRS Adjustment to property, plant and equipment which acquired (2,223) 3,487 before 1994 at swap rates Adjustment of assets revaluation reserves 272 (1,962) Subtotal (1,951) 1,525 Net profits attributable to listed companies’ shareholders 40,585 345,302 pursuant to IFRS 5 (II). Major accounting data and financial indexes 2008 Special case/ Year Unit 2008 2007 2006 2007 1 Operating income RMB’ 000 4,043,631 4,905,280 6,139,926 (17.57%) 2 Total profit RMB’ 000 57,551 98,203 (1,118,701) (41.40%) Net profit attributable to listed company’s 3 RMB’ 000 42,536 67,120 (825,303) (36.63%) shareholders Net profit attributable to listed company’s 4 shareholders after deducting RMB’ 000 17,596 30,839 (820,232) (42.94%) non-recurring gains and losses 5 Total assets RMB’ 000 2,236,370 2,908,175 3,702,727 (23.10%) Shareholders’ equity (except minority 6 RMB’ 000 343,777 303,181 222,128 13.39% interests) Net cash flow arising from operating 7 RMB’ 000 333,456 493,184 47,391 (32.39%) activities Net cash flow per share arising from 8 RMB Yuan 0.2998 0.4434 0.0426 (32.39%) operating activities Net assets per share attributable to listed 9 RMB Yuan 0.3091 0.2726 0.1997 13.39% company’s shareholders 10 Net assets per share after adjustment RMB Yuan 0.3083 0.2716 0.1968 13.50% 11 Basic earnings per share RMB Yuan 0.0382 0.0603 (0.7419) (36.65%) Earnings per share after deducting 12 RMB Yuan 0.0158 0.0277 (0.7374) (42.96%) non-recurring gains and losses Diluted 12.37% 22.14% (371.54%) -9.77% 13 Return on net assets Weighted 13.15% 25.55% (132.82%) -12.40% (III). Fully diluted and weighted average equity on return and EPS Return on equity（%） EPS ( RMB Yuan) Profit in the report period Weighted Weighted Fully diluted Fully diluted average average Net profit attributable to Company’s 12.37% 13.15% 0.0382 0.0382 shareholders holding ordinary share Net profit attributable to Company’s shareholders holding ordinary share after 5.12% 5.44% 0.0158 0.0158 deducting non-recurring gains and losses 6 (IV). Statement on changes of shareholders’ equity in the report period (Unit: RMB’ 000) Equity attributable to parent company Minority Shareholders’ Items Difference Share Capital Surplus Retained interests equity from foreign capital reserve reserve profit exchange I. Balance at the end of previous year 1,112,350 126,727 (935,643) (253) 321,152 624,333 plus(I): changes of accounting policies (II)Correction of errors in prior years II. Balance at the beginning of the year 1,112,350 126,727 (935,643) (253) 321,152 624,333 III. Changes in equity in the year (the (1,653) 42,536 (287) 16,266 56,862 decrease is listed beginning with “-”) (I)Net profit for the year 42,536 13,386 55,922 (II)Gain and loss directly accrued to (1,653) 2,829 1,176 equity 1. Net amount of fair value changes of (115) (115) available-for-sale financial assets 2. Net amount of fair value changes in cash flow arbitrage tools 3. Income tax effect accrued to equity items 4. Others (1,538) 2,829 1,292 Subtotal (1) and (2) (1,653) 0 42,536 16,216 57,099 (III) Capital investment by the 0 50 50 shareholders 1. Capital investment by shareholders in 50 50 the year 2. Amount calculated into equity paid in shares 3. Other (IV)Profit distribution in the year 1. Withdrawal of surplus reserve 2. Withdrawal of general risk reserve 3. Distribution to shareholders 4. Other (V) Internal settlement and transfer of shareholders’ equity 1. Transfer of capital reserve to capital 2. Transfer of surplus reserve to capital 3. Surplus reserve makes up for the loss 4. Others (VI) Exchange difference of foreign (287) (287) currency financial statements translation IV. Balance at the end of this period 1,112,350 125,074 (893,107) (540) 337,418 681,195 7 III. Changes in Share Capital and Particulars about Shareholders (I). Changes of shares Unit: share Prior to the change Increase/decrease of this change (+,-) Subsequent to the change Capitalization Issuance of Bonus Quality Proportion of public Other Subtotal Quality Proportion new share Share reserve I. Unlisted circulation shares 1. Sponsors’ shares Including: Shares held by the state Share held by domestic corporation Share held by foreign corporation Other 2. Raised corporation’s shares 3. Employees’ shares 4. Preference shares or others II. Listed circulation 1,112,350,077 100% 1,112,350,077 100% shares 1. RMB ordinary shares 2. Domestically listed 1,112,350,077 100% 1,112,350,077 100% foreign shares 3. Overseas listed foreign shares 4. Others III. Total Share 1,112,350,077 100% 1,112,350,077 100% (II). Introduction about issuing and listing of shares: As approved by China Securities Regulatory Commission with the Notice on Approval of the Unlisted Foreign Shares of the Company for Listing and Circulating (ZJGS Zi [2006] No. 266 document), the unlisted foreign shares of the Company totaling to 700,476,830 shares (accounting for 62.97% of total share capital) were conversed into tradable B shares on 29 Nov. 2006. Furthermore, the said shares could be listed for trade in B Shares Market of Shenzhen Stock Exchange since 29 Nov. 2007. For details, please refer to the Public Notice on Listing and Circulating of Unlisted Foreign Shares published in Securities Times, Ta Kung Pao (HK) and http://www.cninfo.com.cn on 27 Nov. 2007. 8 (III). Brief introduction of shareholders 1. Number of the shareholders: The total number of the Company’s shareholders by the end of the reporting period was 28,107. 2. Shares held by the top ten shareholders: Quality of Proportion Quality of Attribute of Quality of shares No. Name of shareholder in total non-tradable shareholder shares held pledged or share shares held frozen 1 FORDCHEE DEVELOPMENT LIMITED Foreign corporation 29.19% 324,685,968 0 0 2 EUPA INDUSTRY CORPORATION LIMITED Foreign corporation 16.35% 181,855,147 0 0 3 FILLMAN INVESTMENTS LIMITED Foreign corporation 14.59% 162,342,984 0 0 4 TIMMERTON CO INC Foreign corporation 1.30% 14,505,644 0 Unknown 5 CHEN YONG QUAN Domestic natural person 0.68% 7,596,456 0 Unknown 6 CHEN YONG QING Domestic natural person 0.52% 5,771,089 0 Unknown 6 CHEN LI JUAN Foreign natural person 0.51% 5,693,846 0 Unknown CORE PACIFIC-YAMAICHI 8 Foreign corporation 0.45% 4,961,674 0 Unknown INTERNATIONAL (H.K.) LIMITED 9 HE JIAN XIONG Domestic natural person 0.40% 4,439,551 0 Unknown 10 CAI SHU HUI Foreign natural person 0.39% 4,294,433 0 0 2. Shares held by top ten tradable shareholders: No Name of shareholder Number of tradable shares held Type of Share 1 FORDCHEE DEVELOPMENT LIMITED 324,685,968 B share 2 EUPA INDUSTRY CORPORATION LIMITED 181,855,147 B share 3 FILLMAN INVESTMENTS LIMITED 162,342,984 B share 4 TIMMERTON CO INC 14,505,644 B share 5 CHEN YONG QUAN 7,596,456 B share 6 CHEN YONG QING 5,771,089 B share 7 CHEN LI JUAN 5,693,846 B share 8 CORE PACIFIC-YAMAICHI INTERNATIONAL (H.K.) 4,961,674 B share LIMITED 9 HE JIAN XIONG 4,439,551 B share 10 TSAI SHU HUI 4,294,433 B share The top three shareholders are the controlling shareholders. Tsai Shuhui is a director of TSANN KUEN (Taiwan) ENTERPRISE CO. LTD., the actual controller of the Company. Explanation on related relationship The Company was not aware that whether there were any related relationships between and action-in-concert among above other shareholders holding tradable shares and whether or not the other shareholders mentioned shareholders holding tradable shares belonged to the action-in-concert people specified in The Regulations for Information Disclosure on the Change of Shares Held by the Shareholders of the Listed Companies. 9 (IV). Brief introduction about the controlling shareholders of the Company Legal Registered Name of shareholder Founding day Business scope Pledged Representative capital FORDCHEE DEVELOPMENT LTD Yan Junjie 3 Jan. 1990 Investment HKD 10,000 Naught EUPA INDUSTRY CORPORATION LTD Yan Junjie 21 Jul. 1989 Investment HKD 100,000 Naught FILLMAN INVESTMENTS LTD Yan Junjie 21 Jul. 1992 Investment HKD 10,000 Naught Note: controlling shareholder of the above-mentioned companies is TSANN KUEN (Taiwan) ENTERPRISE CO., LTD. (V). Description of the actual controller 1. Name of the actual controller: TSANN KUEN (Taiwan) ENTERPRISE CO. LTD 2. Legal representative: Zhuang Xing 3. Foundation day: 2 Nov. 1978 4. Major business and products: processing, manufacturing and sale of small household appliances and its raw material, as well as equipments; and retail in electrical appliances and department store 5. Registered capital: NTD 3,209,978,410 6. Equity structure: Ordinary share 10 shareholders FILLMAN Investment 7. The property right and controlling relationship between the Company and the actual Other Chase Manhattan Bank, Fidelity Investment Trust Fidelity hosting the Pacific Basin Fund Limited Investment accounts 1.19% Citigroup hosted one drive 99.96% 14.59% 5.00% Taiwan fund investment accounts Tsai Yuan Featured Partner Yuan 1.43% 1.35% HSBC Taiwan Opportunities Tsann Kuen (China) Enterprise Co., Ltd. Tsann Kuen (Taiwan) Enterprise Co., Ltd. Fund trustee account 12.50% Tsai Yuan SINO Global Development Standard Chartered Bank Fidelity FORDCHEE Development Song 66.22% 29.19% 100% Bailee 3.05% 33.70% 1.53% 16.25% Limited Tsann Kuen Investment Co., Ltd. Wu Tsann 28.75% Kuen Tsai Shuhui 11 16.25% 4.99% Wu Tsann Kuen Yuanzhong 1.97% Tsai 21.25% HSBC Saudi Capital hosted saint 99.98% 16.35% master limited partnership fund Corporation Limited accounts EUPA Industry controller are as follows: 1.05% Hua Nan Commercial Bank by Tsann Shuhui Kuen Enterprise Trust property Tsai 0.86% accounts HSBC hosted Guan tong Chinese Investment Fund Ltd. households IV. Directors, Supervisors, Senior Executives and Employees (I). Directors, Supervisors and Senior Executives 1. Basic information Total payment Equit Drawing drawn y payment from Number Number of from the incent the of shares shares held Reason for Company ive in shareholding Name Position Sex Age Office term held at the at the change in the the companies or year-begin year-end reporting report other related period ing parties or not (RMB’00 period (Yes/No) 00) Electing as Chairman of the Chairman Jian 24 May 2008- Board at of the Male 47 0 0 29.39 No No Derong 23 May 2011 expiration of Board office terms on 24 May 2008 Zhuang 24 May 2008- Continuing to Director Male 54 0 0 3.60 No Yes Xing 23 May 2011 serve as the post Tang at expiration of Director 24 May 2008- Qiongsh Male 46 0 0 office terms on 24 23.46 No No GM 23 May 2011 an May 2008 Chen 24 May 2008- Director Male 47 0 0 2.10 No Ye Yanjun 23 May 2011 Electing as Lu Independent 24 May 2008- Male 62 0 0 independent 6.00 No No Jianxin director 23 May 2011 directors at Xu Independent 24 May 2008- Male 68 0 0 expiration of 6.00 No No Rentang director 23 May 2011 office terms on 24 Ge Independent 24 May 2008- May 2008 Xiaopin Female 46 0 0 7.50 No No director 23 May 2011 g Zhou Continuing to 24 May 2008- Zhongg Supervisor Male 53 0 0 serve as the post 7.33 No No 23 May 2011 eng at expiration of Diao 24 May 2008- office terms on 24 Supervisor Male 54 0 0 10.00 No No Weiren 23 May 2011 May 2008 Tsai 1 Mar. 2008- Supervisor Male 44 0 0 23.38 No No Shuren 23 May 2011 Luo Secretary of Since Qingxin Male 54 0 0 Naught 21.38 No No the Board 7 Jan. 2003 g Chen Accounting Since Male 32 0 0 11.43 No No Zongyi Manager 17 Jul. 2008 Total 0 0 0 0 151.57 12 2. Status of Directors and Supervisors in employment in the shareholding companies Position in Drawing payment or subsidy from Name Name of shareholding company shareholding Office term the shareholding company(Yes/No) company Zhuang TSANN KUEN (Taiwan) Chairman of the 18 Jun. 2006 Yes Xing ENTERPRISE CO., LTD. Board 16 Jun. 2009 Chen TSANN KUEN (Taiwan) 29 Apr. 2008- Director Yes Yanjun ENTERPRISE CO., LTD. 16 Jun. 2009 3. Main working experience of present Directors, Supervisors and Senior Executives and their posts in other units except shareholding companies Main working experience of present Directors, Supervisors and Senior Executives and their posts in other units except shareholding Name Position companies 1.2008.05.24- Now TSANN KUEN (CHINA) ENTERPEISE CO.LTD. Chairman of the Board Chairman of 2.2006.12.09-2008.05.23 TSANN KUEN (CHINA) ENTERPEISE CO.LTD. General Manager Jian Derong the Board 3.2006.10-2006.12.08 TSANN KUEN (ZHANGZHOU) ENTERPEISE CO. LTD. Deputy GM 4.1998.01-2006.10 TSANN KUEN JAPAN CORPORATION CEO (Deputy GM) 1.2006.06- Now TSANN KUEN (Taiwan) ENTERPRISE CO. LTD Chairman of the Board Zhuang Xing Director 2.2003.05.-2006.06 TSANN KUEN (Taiwan) ENTERPRISE CO. LTD Executive Director 3.2001.03-2003.04 TSANN KUEN (Taiwan) ENTERPRISE CO. LTD General Manager of circulation division 2008.05- Now TSANN KUEN (CHINA) ENTERPEISE CO.LTD. General Manager 2008.01-2008.05 TSANN KUEN (ZHANGZHOU) ENTERPEISE CO. LTD. Manager-in-training of Purchase Dept. 2007.09-2008.01 TSANN KUEN (ZHANGZHOU) ENTERPEISE CO. LTD. Deputy GM of Purchase Dept. Tang Director 2005.01-2007.09 Taiwan Tsann Kuen 3C / 2C Assistant Manager of Household Appliance Qiongshan GM Dept 2003.08-2004.12 China 3C Assistant Manager of Operating, Purchasing and Membership Marketing 2008.01-Now TSANN KUEN (Taiwan) ENTERPRISE CO. LTD General Manager of Financial Dept 2005.05-2007.12 HOLA Vice Chairman of the Board, chief strategy officer Chen Yanjun Director 2004.04-2005.04 TSANN KUEN Group CFO and spokesperson 2004.02-2004.04 HOLA Deputy GM of Business and Marketing Development Center 2003.03-2004.02 HOLA CFO and spokesperson of Group 2004-2008 Midwave Group Ltd. General Manager Independent Xu Rentang 2003-2004 Steri Development General Manager Director 2001-2002 Supresoft Inc CFO Independent 2006.11- Now The Listed Company Association of Xiamen President Lu Jianxin Director 2002.02-2006.10 Xiamen Securities Regulatory Bureau of CSRC Chief of the Bureau Independent 2007.03- Now Fujian Shu Lun Pan Mindu Certified Public Accountant Deputy Director Accountant Ge Xiaoping Director 2001.11-2007.03 Xiamen Andexin Certified Public Accountants Chairman of the Board, director Accountant Zhou 2002.10- Now SINGAPORE HUADIANTONG GROUP Chairman of the Board Supervisor Zhonggeng Diao Weiren Supervisor 1998.04- Now CAPITAL INTERNATIONAL HOLDINGS CO., LTD Chief Representative of Shanghai 13 Representative Office 2007.09- Now TSANN KUEN (CHINA) ENTERPEISE CO.LTD. Assistant Manager of R&D Dept. Tsai Shuren Supervisor 1999.09-2007.08 TSANN KUEN (CHINA) ENTERPEISE CO.LTD. Manager of R&D Dept. Luo Secretary of 2003.01- Now TSANN KUEN (CHINA) ENTERPEISE CO.LTD. Secretary of the Board Qingxing the Board 2008.10-Now TSANN KUEN (CHINA) ENTERPEISE CO.LTD. Manager of Accounting Dept. 2008.03-2008.09 TSANN KUEN (CHINA) ENTERPEISE CO.LTD. Deputy Manager of Accounting Dept. Accounting Chen Zongyi 2007.11-2008.02 AURORA Taiwan Accounting Officer Manager 2006.09-2007.08 TSANN KUEN (Taiwan) ENTERPRISE CO. LTD Accounting Section Chief 2002.10-2006.08 KPMG Taiwan Deputy Manager of Auditing Dept. 4. The annual remuneration of Directors, Supervisors and Senior Management Staffs 01. The decision-making procedure and identifiable basis of remuneration to Directors, Supervisors and Senior Management Staffs: According to the Articles of Association of the Company, the remuneration paid to the Directors and Supervisors were decided by the shareholders’ general meeting, while the remuneration paid to other Senior Management Staffs were decided by the Board of Directors. The remuneration for the directors, supervisors and senior management staffs is determined by the market level and Personnel Management Regulations of the Company. 02. Annual remuneration (salary, bonus, allowance, etc.) to the present Directors, Supervisors and Senior Management Staffs Unit: RMB’0000 Name Position Total annual remuneration Jian Derong Chairman of the Board 29.39 Zhuang Xing Director 3.60 Chen Yanjun Director 2.10 Tang Qiongshan Director General Manager 23.46 Xu Rentang Independent Director 6.00 Lu Jianxin Independent Director 6.00 Ge Xiaoping Independent Director 7.50 Zhou Zhonggeng Supervisor 7.33 Diao Weiren Supervisor 10.00 Tsai Shuren Supervisor 23.38 Luo Qingxing Secretary of the Board 21.38 Chen Zongyi Accounting Manager 11.43 Total 151.57 Remuneration for Independent Director Travel charge, traffic fee and telecommunication for/during the Meeting was paid according to the Company’s regulations Directors or Supervisors who did not draw the remuneration and subsidy from Naught the Company 03. All directors and supervisors received the remuneration from the Company. 04. Changes in directors, supervisors and senior management staffs: On 31 Dec. 2007, due to dismission of Mr. Wang Caiwang, the former Employee Representative Supervisor, therefore, the Company held the staff and workers' congress to elect Mr. Tsai Shuren as Employee Representative Supervisor of the 6th Board of Supervisors on 1 Mar. 2008. For details, please refer to Public Notice on Electing Employee Representative 14 Supervisor of the 6th Board of Supervisors published in Securities Times and Hong Kong Ta Kung Pao on 4 Mar. 2008. At the Annual Shareholders’ General Meeting 2007 held on 24 May 2008, the proposal on reelection of members of the 5th Board of Directors and the 5th Board of Supervisors at the expiration of office term was examined and approved. Tsai Yuansong, the former Chairman of the Board, as well as all Wei Junxian, He Jinghua and Xiao Fengxiong, the former Independent Director, left off their respective positions. The 6th Board of Directors is consist of Jian Derong, Zhuang Xing, Tang Qiongshan, Chen Yanjun, Lu Jianxin (Independent Director), Xu Rentang (Independent Director) and Ge Xiaoping (Independent Director). Both Zhou Zhonggeng and Diao Weiren, the former shareholder representative supervisor of the 5th Board of Supervisors continued to hold shareholder representative supervisor of the 6th Board of Supervisors. For details, please refer to the Public Notice on Resolutions of the Annual Shareholders’ General Meeting 2007 published in Securities Times and Hong Kong Ta Kung Pao on 27 May 2008. At the 3rd Meeting of the Board for the Year 2008 held on 24 May 2008, Jian Derong was elected as Chairman of the 6th Board of Directors. For the purpose of corporate governance, Jian Derong filed an application to the Board of Directors to resign from the original post of General Manager after he was engaged as Chairman of the Board, furthermore, the Board of Directors appointed Tang Qiongshan as General Manager of the Company. For details please refer to Public Notice on Resolutions of the 3rd Meeting of the Board for the Year 2008 published in Securities Times and Hong Kong Ta Kung Pao on 27 May 2008. On 30 May 2008, Mr. Tsai Qingyu, the former Accounting Director of the Company submitted his resignation to the Board of Directors and left off his post due to personal professional career plan. For details please refer to Public Notice on Dimission of Accounting Director Tsai Qingyu published in Securities Times and Hong Kong Ta Kung Pao on 31 May 2008. The Company held the 4th Meeting of the Board for the Year 2008 on 17 Jul. 2008, Mr. Chen Zongyi took the place of Tsai Qingyu as Accounting Director. For details please refer to Public Notice on Resolutions of the 4th Meeting of the Board for the Year 2008 published in Securities Times and Hong Kong Ta Kung Pao on 19 Jul. 2008. (II). Introduction of employees Education Number of person Classification of person Number of person Doctor 0 Salesmen 250 Master 9 Financial Staff 128 Bachelor 419 Technicians 1,103 Academy 564 Administrators 1,313 Middle academy 232 Workers 8,449 Technical school 1,260 Senior middle school 1,398 Junior middle school 2,595 Elementary school 4,766 Total 11,243 Total 11,243 15 V. Corporate governance structure (I) Corporate governance In accordance with the requirements of Notice on the Matters concerning Carrying out a Special Campaign to Strengthen the Corporate Governance of Listed Companies (ZJGSZ [2007] No. 28) from China Securities Regulatory Commission, Notice on Carrying out a Special Campaign to Strengthen the Corporate Governance of Listed Companies (XZJF [2007] No.108) from Xiamen Securities Regulatory Bureau, Notice on Carrying out a Special Campaign to Strengthen the Corporate Governance of Listed Companies issued by Shenzhen Stock Exchange issued in April, 2007; Notice on Further Implement of a Special Campaign to Strengthen the Corporate Governance in 2008 (SSBH [2008] No.116) from China Securities Regulatory Commission and Notice of China Securities Regulatory Commission ([2008] No.27), Notice on Carrying out a Special Campaign to Deepen Corporate Governance (XZJF[2008] No.252) by Xiamen Bureau of CSRC, the important related situation of the special campaign of the operate governance in 2008 and 2007 was as follows: I. About the special campaign of corporate governance in 2008: According to rectification items within the specified time in the Rectification Report on Corporate Governance disclosed in 2007, the Company should revise Articles of Association in 2008 and identify establishment of relevant special committees of the Board of Directors in Articles of Association, including Audit Committee and Remuneration & Appraisal Committee. Specific process was as follows: 1. In Mar. 2008, Articles of Association was revised, in which confirmed the content of special committees of the Board of Directors, which were Audit Committee and Remuneration & Appraisal Committee. Meanwhile, formulated Rules for Audit Committee and Rules for Remuneration & Appraisal Committee, which were reviewed and approved in the 1st Meeting of the Board of Directors on Mar. 29, 2008 and disclosed then. 2. The Annual Shareholders’ General Meeting was held on May. 24, 2008, in which resolutions on revision of Articles of Association and term-change of the Board were approved. The 3rd Meeting of the Board of Directors 2008 was held on the same day, in which reviewed and established special committees of the Board of Directors, including Audit Committee and Remuneration & Appraisal Committee. By then, the Company had completed all the rectification events in report on self-check on Corporate Governance and rectification of the Company. 3. Since its establishment, the Board’s special committees had been operating in a standard way according to rules of the special committees. The Company held 4 meetings of Audit Committee and 2 meetings of Remuneration & Appraisal Committee by the end of 2008. II. About the important situation concerning a special campaign of corporate governance since fulfillment in 2007: 1. On 30 April. 2007, the Leading Group of the special campaign of corporate governance was founded, leaded by Cai Yuansong, former chairman of the Board. 2. On 15 May. 2007, the Plan and Timetable for the Special Campaign of Corporate Governance was prepared and submitted to Xiamen Bureau of CSRC. 3. Perfect and strictly carry out the internal management system: In accordance with the related provisions stipulated in China Securities Regulatory Commission and the Shenzhen Stock Exchange, the Company supplemented and perfected the relevant internal control system. The Company held the 4th Meeting of the Board of Directors 2007 on Jun.29, 2007, reviewed and approved resolution on internal control system of the 16 Company. For details please refer to Public Notice on Resolution of the 4th Meeting of the Board of Directors 2007, which was published Securities Times, Hong Kong Ta Kung Pao on Jun. 30, 2007, as well as internal control system on http://www.cninfo.com.cn. Besides, the Company established ten circulations system: production circulation, procurement and pay circulation, sales and receivable circulation, financing circulation, salary circulation, investment circulation, fixed asset circulation, R&D circulation, electronic computer circulation and managerial control. Company continually perfected the internal control, based on which, the Auditing Department had deeply carried out the auditing work on the implement of the Company’s internal control system since the second half of 2007 and begun to report regularly to the directors of the Board of Directors, supervisors present and the senior executives. Meanwhile, the quantification scoring mechanism was formed, basing on the items of the auditing, and would be executed from 2008. The scoring results would be linked up with the performance assessment of the department section chiefs and thereby intensified the implement departments to put more emphasis to duly perform the internal control. 4. The Company held the 3rd Extraordinary Meeting of the Board of Directors 2007 on Aug. 23, 2008, reviewed and approved Self-check Report on Corporate Governance and Rectification Plan For details please refer to public notice published in Securities Times, Hong Kong Ta Kung Pao on Aug. 24, 2007, as well as Self-check Report on Corporate Governance of Listed Companies on http://www.cninfo.com.cn. 5. On 9 Oct. 2007, leaders of the supervision department of Xiamen Bureau of CSRC visited personally and inspected the Company; On 19 Oct. 2007, the Comprehensive Appraisals Opinions and Rectification Notice on the Corporate Governance of Tsann Kuen China (Xiamen) Enterprise Co., Ltd (XZJF[2007] No.306) was issued, aiming at the Company, in which the corporate governance structure, the three parties decision-making system and internal control of the Company was fully approved. At the same time the deficiencies were also pointed out and specific rectification request was given. 6. The Company carried out relevant rectification according to the Self-check Report and Rectification Plan of Corporate Governance and rectification notice of the Xiamen Bureau of CSRC. The Company held the 6th Meeting of the Board of Directors 2007 on Oct. 27, 2007, reviewed and approved Rectification Report on the Special Campaign to Strengthen the Corporate Governance, which was disclosed on http://www.cninfo.com.cn dated Nov. 13, 2007 after being submitted to Xiamen Bureau of CSRC for approval. 7. On May 24, 2008, right after the office term change of the Board, the special committees of the Board of Directors was established: Audit Committee and Remuneration & Appraisal Committee, which were operated in a standard way in the light of the related rules. 8. Improve level of financial management and internal auditing: In respect of the improvement of financial management, besides the strengthening of the internal control, the report on important issues and the control on information delivery, the Company also arranged conversaziones between the auditing accountants and the Independent Directors and the external shareholder supervisors in 2007, and invited accountants to attend the regular report of the Board of Directors and deliberate, and talk about the Company’s present situation and problems; continued to invite accountants to communicate with Independent Directors depending on the situation in the future and maintained interactive communication with the accountants in business to ensure the timely improvement of problems and deficiencies. In respect of the improvement of the internal auditing, the auditing department send specific 17 person to follow up the verification of the standard operation of the financial work, including transaction of derivative financial product, endorsement, loan fund, significant investment, related transaction and acquisition and disposal of assets. The auditing results were feedbacked in time to the departments verified，the Board of Directors and senior executives. To the deficiencies, the financial departments were required to correct and improve, thereby increased and guaranteed the truth of the financial information and proctected effectively the interests of the medium and small shareholders of the listed companies. The Company will continue to carry out strictly in the right of requirements of the Company Law, Securities Law and related documents on the standard corporate governance of the listed companies, perfect the corporate governance structure and make efforts to strengthen the establishment of modern enterprise system in order to improve the corporate governance. (II). Performance of Independent Directors In the report period, the independent directors of the 5th and the 6th Board of Directors fully performed their duty. They attended the meetings of the Company’s Board of Directors on time, concerned the operation of the Company, financial situation and corporate legal person management structure, communicated with auditors and accountants through conversaziones to learn the problems existing and situation of the Company, and requested the management staff to rectify and deal with them in time. The Independent Directors expressed the independent opinions in terms of the appointment and dismissal of Directors and Senior Executives, the fund operation between the Company and the related parties, external guarantee, related transaction. They also gave reasonable proposals at the Board meetings, which had a positive effect on the scientific and objective decision made by the Board of Directors and played an important role to safeguard the legal rights and interests of medium- and small shareholders. 1. Particulars about independent director attending the Board meeting Name Times should Personal Commission Absence Note attend the presence presence (time) meeting (time) (time) th Wei Junxian (5 ) 3 3 0 0 Leave off due to expiry on May 24, 2008 th He Jinghua (5 ) 3 3 0 0 Leave off due to expiry on May 24, 2008 th Xiao Fengxiong (5 ) 3 3 0 0 Leave off due to expiry on May 24, 2008 th Xu Rentang (6 ) 6 6 0 0 Term change and take term on May 24, 2008 th Lu Jianxin (6 ) 6 6 0 0 Term change and take term on May 24, 2008 th Ge Xiaoping (6 ) 6 6 0 0 Term change and take term on May 24, 2008 2. There was no objection proposed by Independent Directors in the report period. 18 (III). The Company was separated from the controlling shareholder in business, personnel, assets, organization and financing. 1. In aspect of business: The Company was gradually independent from the controlling shareholder in the respect of business, set up absolute and integrated business system and self-operation capability, which made the Company become an independent corporation facing the market. 2. In aspect of personnel: 01. The Company was absolutely independent in labor, personnel and salary management. The Company’s office place and production & operation place was separated from the controlling shareholder without mix operation or handling official affairs jointly. 02. There was no intervention on decision-making of engagement or dismissal of personnel by controlling shareholder of the Company. 3. In aspect of assets: The Company separated assets from the controlling shareholder, operated respectively and independently. The Company owned independent production system, auxiliary production system and accessories system. Intangible assets as industrial property right, trademarks and other non-patent technology were independently owned by the Company. 4. In respect of financing: 01. The Company had independent financial department and accounting department, and established a set of independent and integrated accounting system and financial management system. 02. The Company independently made financial decision; there was no situation that the controlling shareholder intervened in the use of the Company’s capital. 03. The Company opened independent bank accounts, there was no situation that the Company deposited capital into the bank accounts of the principal shareholder or financial company controlled by other related parties or accounts of settlement center. 04. The Company paid the tax independently according to law. (IV). Establishment and Perfecting of internal control of the Company For detailed please refer to Self-evaluation Report on Internal Control of the Company on http://www.cninfo.com.cn disclosed by the Company today. Opinions of the Independent Directors on self-evaluation report on the internal control of the Company 2008: In accordance with requirement of Circular on Properly Handling the 2008 Annual Report of Listed Companies of the Shenzhen Stock Exchange, as the Independent Directors of Tsann Kuen China (Xiamen) Enterprise Co., Ltd (hereinafter referred to as “the Company”), we carefully read Self-evaluation Report on Internal Control of the Company submitted by the Board of Directors, communicated with the management and the administrative Department, referred to administrative system of the Company, and expressed the following opinion based on position of independent judgment: 19 1. The internal control system of the company corresponded to the regulations of the country and requirements of the China securities regulatory ministry and also fit the current actual situation of production of the Company. 2. The internal control measures of the company played a good role in all processes and aspects of enterprise management. 3. Self-evaluation Report on Internal Control of the Company objectively reflected actual situation of internal control of the Company, roundly summarized internal control and identified goal for the strengthening of the internal control. 4. Self-evaluation Report on Internal Control of the Company accorded with the actual situation of the Company. Independent director: Xu Rentang, Lu Jianxin, Ge Xiaoping mar. 7, 2009 (V) The performance appraisal and incentive mechanism of Senior Management The Company appraised the performance of Senior Management according to the relevant guideline and standard, of which the results were recorded into personal file and combined with personal treatment and engagement. VI. Brief for Shareholders’ General Meeting Particulars about the Annual Shareholders’ General Meeting and Extraordinary Shareholders’ General Meeting held in the report period: 1. Annual Shareholders’ General Meeting Shareholders’ General Meeting of the Company was held on May 24, 2008; Resolutions in the Shareholders’ General Meeting were published in Securities Times and Hong Kong Ta Kung Pao on May 27, 2008. 2. Extraordinary Shareholders’ General Meeting The 1st Extraordinary Shareholders’ General Meeting of the Company 2008 was held on Feb. 23, 2008, and resolutions in the meeting were published in Securities Times and Hong Kong Ta Kung Pao on Feb. 26, 2008. The 2nd Extraordinary Shareholders’ General Meeting of the Company 2008 was held on Jun. 28, 2008, and resolutions in the meeting were published in Securities Times and Hong Kong Ta Kung Pao on Jul. 1, 2008. VII. Report of the Board of Directors (I) Operation retrospect of the Company in the report period The Company realized the revenue of RMB 4043 million in 2008, down 17.57% year-on-year; operating cost was RMB 3692 million, down 18.32% year-on-year, which mainly because the Company conducted the management and control on the net profit from order, optimized sales structure of high & medium products and was influenced by the international financial crisis in the 4th quarter of 2008. 20 The Company realized net profit totaling RMB 43 million in current year, and the debt ratio was declined from 78.53% at the end of 2007 to 69.54% at the end of 2008. In 2008, the Company perfected the internal management mechanism and the comparative advantage, strengthened the correspond between production and marketing, shortened the delivery of the raw material, reduced the inventories, activated the capital operation, improved the reform on the operating mode and management mechanism. Moreover, the Company improved the quality of the products and its delivery and realized the stability of benefit and the optimization of the financial structure in the condition that the international economic environment took a sudden turn and became worse rapidly. Besides reformation of the aforesaid operation model and management mechanism, the Company brought accessories factory in Tsann Kuen Industrial park in order to focus on core professional advantage of self research & development, design and sales. Therefore, the more professional accessories factories supply material in the park to cooperated with less cost and better quality, promoted market competition, reduced occupation of fixed assets and improved turnover of total assets, which guaranteed the future operation of the Company would be stable and continuous. 1. The major business scope and its operational situation A. Classifying according to the industry and product Industry Product Main business income Main business profit Home assistant 1,472,189 67,565 Manufacturing mall Gourmet cooking 1,933,214 217,982 home appliances Tea/coffee 546,209 28,623 Other 35,968 4,264 Total 3,987,580 318,434 B. Classifying according to the geographical location Area Main business income Main business profit America 1,884,780 177,806 Europe 921,531 56,905 Other 1,181,269 83,722 Total 3,987,580 318,434 C. The products whose sales income exceeded 10% of the major operational income Unit: RMB’000 Product Proportion Main business income Cost of sales Gross profit ratio Home assistant 36.92% 1,472,189 1,404,624 4.59% Gourmet cooking 48.48% 1,933,214 1,715,232 11.28% Tea/coffee 13.70% 546,209 517,586 5.24% Other 0.90% 35,968 31,704 11.87% Total 100.00% 3,987,580 3,669,146 7.99% 21 2. Chief customers and suppliers 01. The sum of purchasing amount from the top five suppliers is RMB 629,108,000 taking up 24.90% of the company’s total purchasing amount in the year. 02. The sum of sales amount to the top five customers is RMB 2,201,077,000, taking up 55.20% of the company’s total sales amount in the year. 3. During the report period, the assets and expense have the change by a big margin compared with the same period of the last year. Unit: RMB’000 Increase/de Item Note Year 2007 Year 2008 Main Reason for changes crease (%) Influence on Long-term foreign exchange was measured into Transaction monetary assets Transaction IX (II) - 23,027.90 (100.00%) after implementing New Accounting Standard monetary assets in 2007, which has been matured up to the reporting period. Accountants Prepayment for material and rent of workshop IX (V) 8,910.80 25,351.21 (64.85%) prepayment of last year has been settled. The equity of Shanhai Jiubai Co., Ltd held, which didn’t have the control, joint control or Financial assets significant effect, was attributable to financial available for IX (VIII) 109.77 250.39 (56.16%) assets available for sale. The difference sale between the fair value and book value measured into the public reserve. Construction in The construction in progress was transferred to IX (XIII) 3,424.34 25,681.37 (86.67%) progress fixed assets after been finished and approved. Short-term IX (XIX) - 298,447.79 (100.00%) The borrowing was mature and has been repaid. borrowings Non-current liabilities due - 100,000.00 (100.00%) The borrowing was mature and has been repaid. within one year Borrowed USD 5 million from Bank of East Asia (Xiamen) as long-term borrowings, the contract agreed to return principal RMB 38.5 Long-term million when matured. The interest rate was IX (XXVI) 68,346.00 111,546.00 (38.73%) borrowings confirmed basing on 10% lower of benchmark interest rate promulgated by People’s Bank of China, and due date is 8 Jan. 2010; The loan was returned in advance in this period. Deferred income IX There was no derivative financial merchandise 636.43 5,796.52 (89.02%) tax liabilities (XXVIII) at the end of 2008. Interest expense due to return borrowings Financial IX 3,165.13 58,019.18 (94.54%) decreased RMB 35,840,000 year-on-year, and expense (XXXIV) influenced of exchange gains or losses. Non-operating IX Influence of disposal of circulation industry and 36,950.61 57,862.80 (36.14%) income (XXXVIII) liquidation of incomes in the previous year. Non-operating IX 16,727.81 4,585.44 264.80% Loss from assets disposal and donation expense expense (XXXIX) 22 4. The operational situations and the achievements of the companies which are under TKC’s control or in which TKC holds a share. 01. Tsann Kuen China (Shanghai) Enterprise Ltd A. Business Type: Manufacturing B. Major Products and Services: Production of household appliances, electronic, light industry products, modern office equipments and their related modules, various kinds of computers and their related facilities or spare parts. Development of computer software, IC packing and testing; sale of their own products (the exporting of which will not be restricted by the requirements of license and quota; referred permitted business operated by license.) C. Registered Capital: USD 40,000,000 D. Assets Scale: RMB 107,700,000 E. Net Assets: RMB 106,810,000 F. Net Profit: RMB -5,200,000 02. Tsann Kuen Xiamen Technology Co., Ltd A. Business Type: Manufacturing B. Major Products and Services: Producing and marketing network service products like internet server, router and other digital communication devices, network multi-media PC products and their assemblies, related software. Designing, researching, developing and producing sophisticated pressing modules, model normalizers and the like. Engaged in manufacturing and marketing various kinds of computers and peripheral equipments & parts. Engaged in inorganic non-metallic materials and products (Quartz glass and artificial crystal), glasses, pottery & ceramics, high-class fire proof materials used in fiberglass furnace, further processing technology of flat glasses and manufacturing equipment. C. Registered Capital: USD 0 D. Assets Scale: RMB 0 E. Net Assets: RMB 0 F. Net Profit: RMB 0 G. Disposal of subsidiary company in this year: Tsann Kuen Xiamen Technology Co., Ltd was closed on 10 Sep. 2008, Liquidation Announcement was published in Xiamen Daily on 10 Sep. 2008 and liquidation was declared to over by the Board of Directors on 18 Dec. 2008. Notice on Deregistration of State Tax, Notice on Deregistration of Local Tax and Cancellation Notice in Industry and Commerce Administration respectively on 28 Nov. 2008, 18 Sep. 2008 and 30 Dec. 2008, and the residual assets would be distributed according to investment proportion. There was no influence on general production, operation and achievement. H. Operation achievements have a big change compared with the same period of the last year: None 03. Tsann Kuen Zhangzhou Enterprise Co. Ltd A. Business Type: Manufacturing B. Major Products and Services: Development, production and sale of small household electrical appliances, new kind of electronic appliances and parts (such as electrical kits, sensors and sensitive transmitters), light industrial products, modern office supplies; 23 designing and producing the molds related to the above products. Processing and manufacturing nonferrous metal composed materials, new-typed alloy materials, marketing self-made products and semi-manufactured products, processing supplied materials and processing with supplied materials or given samples & assembling supplied components. (Excluding those products restricted by the government or those whose import or export quota is under license administration. Wholesale of various kinds of small house appliance (When involved in those projects which need to be examined and approved first, the company carries out its operation and production only within the range and within the valid period set in the license.) C. Registered capital: USD 160,000,000 D. Assets Scale: RMB 2,386,290,000 E. Net Assets: RMB 1,160,490,000 F. Net Profit: RMB 55,510,000 G. The influence of net profit exceeded 10%: Main business income: RMB 3,968,580,000 Main business Cost: RMB 3,642,420,000 04. Tsann Kuen (Zhangzhou) South Port Electronics Enterprise Co., Ltd A. Business Type: Manufacturing B. Major Products and Services: Development, production and sale of small household electrical appliances, new kind of electronic appliances and parts (such as electrical kits, sensors and sensitive transmitters), light industrial products, modern office supplies; designing and producing the molds related to the above products. (Excluding those products restricted by the government or those whose import or export quota is under license administration.) (When involved in those projects which need to be examined and approved first according to the laws and regulations, the company will do its business only after it has obtained the license). C. Registered capital: RMB 5,000,000 D. Assets Scale: RMB 34,710,000 E. Net Assets: RMB 11,300,000 F. Net Profit: RMB 2,780,000 05. Tsann Kuen (Zhangzhou) Vocational Technical Institute A. Business Type: Education and training B. Business Scope: Secondary Vocational Education C. Registered capital: RMB 500,000 D. Assets Scale: RMB 5,620,000 E. Net Assets: RMB 90,000 F. Net Profit: RMB 170,000 24 06. Eupa (Hong Kong) Corporation Ltd A. Business type: Comprehensive B. Business Scope: trade order, agent stocking, research and development of small household appliance, investment, market investigation C. Registered capital: USD 2,900,000 D. Assets Scale: RMB 5,660,000 E. Net Assets: RMB 5,620,000 F. Net Profit: RMB -3,100,000 07. Shanghai Canxing Commerce & Trade Co., Ltd A． Business type: Sales of household electrical appliances B． Business Scope: Importing, Wholesaling, retail and its follow-up service of household appliances, computer sets and their attachments, communication materials, motor and electric equipments, office supplies and the related attachments (including kitchen facilities). Self-operating and acting as an agent of various kinds of merchandise and import & export of technology. (When involved in those projects which need to administrative permission, the company will do its business only after it has obtained the license). C． Registered capital: RMB 5,000,000 D．Assets Scale: RMB 17,390,000 E． Net Assets: RMB 5,360,000 F． Net Profit: RMB 360,000 (II) Outlook of the Company The Company reformed in operation system and strategy of manufacturing and marketing in 2007 and 2008, which gained obvious performance and will be carried out in the future year. Meanwhile, the Company strengthened three centers for strategy due to financial crisis: 1) Devoting mind to main operation: The Company focused on core professional advantage of self research & development, design and sales, continuously advanced cluster of fitting factory, brought in accessories factory to supply material, reduced cost and disposed non-core professional fittings factories and assets without cost-benefit. 2) Improvement of operation management The Company would strengthen management team and the integration with production, marketing and Research &Development, shorten development time to advance quality and delivery date of products; in aspect of marketing, the Company would establish relationship of strategic partner with customers and share international raw materials and risk of fluctuation of exchange rate. 3) Exploitation of new market Consumption index of occident market dropped due to influence of financial crisis. The Company exploited new customers and increased sales income by new products and exploitation of new market. 25 In the report period, the international economic environment took a sudden turn and became worse rapidly, economic difficulties increased obviously with influence on international financial crisis. Faced to the complicated and changeful economic environment and influenced by various disadvantageous factors, the Company will continuously insist on the aforesaid strategic aim, lead innovation of technology and products, promote capability of global manufacture and marketing, insist on self management, strengthen integration of production & purchase, research & development, strength the inner control system and form leading advantage of research & development design and cost of marketing system. It forecasted that the goal of operation income was USD 480 million in 2009. (III) Development trend of the industry and outlook of the market A. Scalization and Serialization of intelligent small environment protection household appliance Along with standard of the international market environment was trending strictly, the country adopted a series of energy efficiency standards and popularized the products of saving energy through a series of important measures of price reform, tax system etc. The producer was not only be saving energy and environmental protection in raw materials, but also in research and development of technology, which optimize the industry chain of environment protection household appliances from manufacture, products to service, scalize and serialize the industry chain. B. High-ended identity of small household appliance It is obviously that price is open and profit is low in middle-low class products of small house appliance. More enterprises will realize profit with high-end products and realize quantity with medium and low products. In general, the small household appliance in future should keep its advantages of intelligence, safety, multifunction, saving energy and environmental protection, which was controlled easily. (IV) Capital Expenditure Plan According to the development strategy, the Company will dive into high-technology field such as new energy, high efficiency and environmental protection house appliance. It forecasted the fund needed for improvement of production capacity of the aforesaid filed is RMB 37 million in 2009. (V) The main risk factors of development in the future With the depression of global economy, pressure of export of household appliance industry will be the first to be affected. But the Company strengthened capacity to resist against risk by adjustment of export rebate rate in the 4th quarter and policy of sales of household appliance in rural area, which activated purchase capacity of purchase, enlarged rural consumption and balanced disadvantage influence brought by financial crisis. 26 The policy of loan was tight at the beginning of 2008, and became easy since the 4th quarter. However, Sparing Loan of the bank still existed in actual operation in consideration of risk. The Company brought accessories factories to supply material in the park to cooperated with less cost and better quality by new products development and exploitation of new market, which promoted general competitive power of market, reduced occupation of fixed assets, improved turnover of total assets, optimized payment procedure, exerted function of self financing, reduced dependent on bank, enlarge domestic market, balanced disadvantage influence on export to occident market due to financial crisis, and guarantee stable and continuous development of the future operation of the Company. (VI) Investment of the Company 1. Particulars about raised funds usage in the report period 01. Apart from the 40,000,000 shares of outbound funds raised in 1993, TKC has not raised funds since 1994. And there was no case of the utilization of the raised funds being extended till after 1998. 02. The plan to issue additional 50 million B-shares and to use the fund raised from that was passed in the Shareholders’ Meeting 1999, and on July 7, 2000 the application for issuing B-shares was approved by CSRC. After that, the related application documents were sent to CSRC for approval after they had been passed in the shareholders’ meeting held on the date of June 2, 2001, but till now no feedback of them has been received. 2. Utilization state of non-raised funds in the report period: none (VII) The routine work of the Board of Directors 1. Particulars about the meeting of the Board of the Director and resolutions in the report period: 01. The 1st extraordinary meeting of the Board of the Directors was held on 31 Jan. 2008, and the resolution of the meeting was published in Securities Times and Ta Kung Pao (HK) on 2 Feb. 2008. 02. The 1st meeting of the Board of the Directors was held on 29 Mar. 2008, and the resolution of the meeting was published in Securities Times and Ta Kung Pao (HK) on 1 Apr. 2008. 03. The 2nd meeting of the Board of the Directors was held on 19 Apr. 2008, and the resolution of the meeting was published in Securities Times and Ta Kung Pao (HK) on 22 Apr. 2008. 04. The 3rd meeting of the Board of the Directors was held on 24 May 2008, and the resolution of the meeting was published in Securities Times and Ta Kung Pao (HK) on 27 May 2008. 05. The 2nd extraordinary meeting of the Board of the Directors was held on 6 Jun. 2008, and the resolution of the meeting was published in Securities Times and Ta Kung Pao (HK) on 11 Jun. 2008. 06. The 4th meeting of the Board of the Directors was held on 17 Jul. 2008, and the resolution of the meeting was published in Securities Times and Ta Kung Pao (HK) on 19 Jul. 27 07. The 5th meeting of the Board of the Directors was held on 23 Aug. 2008, reviewed and approved Interim Report 2008 and Summary of Interim Report 2008. 08. The 6th meeting of the Board of the Directors was held on 25 Oct. 2008, reviewed and approved The Third Quarterly Report 2008 and summary of the report. 09. The 7th meeting of the Board of the Directors was held on 18 Dec. 2008, and the resolution of the meeting was published in Securities Times and Ta Kung Pao (HK) on 20 Dec. 2008. 2. Execution on resolutions of Shareholders’ General Meeting by the Board of Directors (including execution of items authorized by Shareholders’ General Meeting, profit distribution plan and capitalization of public reserve plan in the report period, fulfillment of plan on allotment of shares and new shares offering). 01. The Company gained in 2007, but the profit amount used to retrieve loss of the previous year, therefore, there was no profit distribution. There were no allotment of shares or offering new share in the report period. 02. Revised Articles of the Association The Company revised Articles of the Association last year in order to strengthen corporate governance and accord with require of Reconciliation Report on Strengthening a Special Campaign of Corporate Governance and set up Special Committee of the Board of Directors . The Company ensured that the content corresponds with laws, regulations and articles, and it was finished in accordance with regulations 03. Loss retrieval On 24 May 2008, the Company held Shareholders’ General Meeting 2007, on which reviewed and approved the retrieval plan on the Company loss in previous year, provided in the 1st meeting of Board of Directors 2008. According to the resolution of Shareholders’ General Meeting, the Company has fulfilled the loss retrieval plan. 3. Report on performance of the Audit Committee of the Board of Directors: 01. The Company set up the Audit Committee on the 4th Meeting of the Board of Directors held on 24 May 2008, which confirmed members of the 1st Audit Committee were: independent director Ge Xiaoping, independent director Lu Jianxin and director Chen Yanjun, and elected independent director Ge Xiaoping as the convener of the 1st Audit Committee. 02. All members participated in and guided financial work actively and perfected Rules for the Implementation of the Audit Committee since its setting up. The Audit Committee examined audit work of the Company in 2008 roundly, and the main performances in this year were: (1) Supervision of audit of certified public accountants: The Audit Committee communicated with certified public accountants on scheme for audit of Annual Report 2008 for the first time on 25 Oct. 2008, and came to a consensus on arrangement of audit of Annual Report 2008. owing to the Company decided to disclose annual report in advance, the Audit Committee communicated with certified public accountants on audit scheme again on 6 Feb. 2009 and came to consensus. On the communication meeting, the Audit Committee required certified public accountants to issue audit report on time according to schedule and communicate with the Audit Committee and Accounting Department to resolve any problems in progress of audit and ensured the audit finished successfully. Certified public accountants admitted the memo of the two communications and signed up. The annual audit came to end on 12 Feb. 2008, and the Audit Committee communicated with certified public 28 accountants for the third time; certified public accountants agreed to issue audit report as scheduled. Certified public accountants showed recognition and activity in the three communication meetings and finished related work according to plan on audit of annual report. The audit committee didn’t send supervision letter in view of Reanda Certified Public Accountants carrying on the work strictly according to audit plan. (2) Opinion on Financial report of the Audit Committee A. We have checked and approved the financial statement for the first time submitted by Accounting Department of the Company on 4 Jan. 2009, including balance sheet as at 12 Dec. 2008, income statement, statement of changes in equity and cash flow statement for the year then ended. According to Enterprises Accounting Standards of China issued by Ministry of Finance and relevant regulations on financial system of the Company, we focused on authenticity and completeness of accounting information, whether the preparation of financial statement strictly accorded with regulations. We never found there was fateful abnormity in un-audit financial report 2008, nor capital occupation with reason of non-operation by major shareholders and subsidiary companies, nor guarantee violating regulations or abnormal related transaction after we inquired related financial officer and managements, consulted meeting minutes of shareholders, supervisory committee, the Board of Directors, relevant committees, relevant accounting book and vouchers. We agreed to submit the statement to Reanda Certified Public Accountants engaged by the Company for audit. B. Opinion on reviewing and approved financial report after primary opinion issued by certified public accountants: We have audited financial statement submitted by Accounting Department on 20 Feb. 2009, which was issued primary opinion by certified public accountants, including balance sheet as at 12 Dec. 2008, income statement, statement of changes in equity and cash flow statement for the year then ended. According to Enterprises Accounting Standards of China issued by Ministry of Finance and relevant regulations on financial system of the Company, we focused on authenticity and completeness of accounting information, whether the preparation of financial statement strictly accorded with regulations and addendum items after balance sheet date. After communication on primary audit opinion with certified public accountants and supplementary consulting relevant account book and vouchers, we considered that: agree to keep the audit opinion for the first time and consider that the Company handle addendum items after balance sheet date strictly according to new enterprise accounting standards, financial statement was prepared according to new enterprise accounting standards and relevant financial regulation, the certified public accountants conduct their audit in accordance with independent auditing standards, the audited financial statement fairly reflected operation results and financial status of the Company in 2008 in all material respects. (3) Summary Report on Reanda Certified Public Accountants engaging in audit of the Company in this year We have audited Preplan on Audit of 2008 and Plan on Audit of 2008 submitted by Accounting Department respectively on 25 Oct. 2008 and 6 Feb. 2009, fully communicated with person in charge of audit of Reanda Certified Public Accountants on the aforesaid work plan and came to consensus. We considered that the plan was detailed and identified responsibility, which would ensure the successful completeness of audit of 2008. Auditor from Reanda Certified Public Accountants audited financial statement 2008 thrice in 29 accordance with audit plan: (a). on preliminary audit on interim report in August, they arranged 8 persons and worked for 40 days; (b). on preliminary audit on financial statement from January to October, they arranged 8 persons and worked for 38 days; (c). on annual audit, they arranged 8 persons and worked for 22 days. They worked for audit of 2008 totaled more than 100 days. Person in charge of the project communicated with the Audit Committee and the Company continuously and fully on accounting work discovered in audit and need to be perfected, which made both parties deeply realized particulars about operation, financial management and application and implementation of new enterprise accounting standards and supplied more mature judgment for the fair audit conclusion issued by certified public accountants. During audit period, all members of the Audit Committee show great concern on problems discovered in progress of audit and communicated on the following points by phone and interview: a. Whether all the transactions recorded, whether the transaction was true and whether the information was integrated; b. Whether the financial statement prepared in accordance with requirements of new enterprise accounting standards and securities regulatory administration and regulations stipulated in financial system; c. Whether the annual check actualized successfully, the check conclusion whether fully reflected quality of assets; d. Particulars about abidance of laws, provisions, other external requirements and policy, prescription of managements and internal requirements; e. Whether the internal accounting control system of the Company was perfect; f. Whether every department worked in certified public accountants to get sufficient and appropriate evidence. The certified public accountants actively affirmed the above questions and issued audit report with standard unqualified opinion on 7 Mar. 2009. We considered that certifies public accountants carried out audit strictly in accordance with regulations stipulated in Independent Auditing Criterion for CPA, audit time was enough, scheme of auditor was reasonable and they are capable, the financial statement fully reflected financial status as of 31 Dec. 2008 and operation results and cash flow in 2008, the audit conclusion accorded with actual situation of the Company. (4) Resolution on reengagement certified public accountants in 2009 The 1st Meeting of the Audit Committee 2009 was held on 7 Mar. 2009, and three members attended the meeting. All members unanimously approved the following resolutions: a. Self-evaluation report on internal control 2008 b. Annual report 2008 and summary of the report c. Final finance account 2008 d. Resolution on profit retain 2008 e. Resolution on forecast of ordinary related transaction in 2009 f. Summary report on Reanda Certified Public Accountants engaging in audit of the Company in this year 30 g. Proposal on reengagement Reanda Certified Public Accountants as audit unit of the Company 2009 in view of it being audit unit of the Company from 2006 to 2008 and the spirit of capability, diligence and duteous showed in audit work of 2008 h. Payment for audit 2009 to Reanda Certified Public Accountants The above resolution should submit to the 1st Meeting of the Board of Directors 2009 for approval. In general, the Audit Committee was responsible, abide by professional principle of independent, external and fair and completed all works entrusted by the Board of Directors. 4. Performance report of Remuneration & Appraisal Committee of the Board of Directors: (1) The Company set up Remuneration & Appraisal Committee on the 4th Meeting of the Board of Directors 2008 on 24 May 2008, on which confirmed members of the 1st Remuneration & Appraisal Committee were independent director Lu Jianxin, independent director Xu Rentang, chairman of the Board Jian Derong and elected independent director Lu Jianxin as the convener of the 1st Remuneration & Appraisal Committee. (2) Jian Derong, Lu Jianxin, Xu Rentang, members of Remuneration & Appraisal Committee, heard report on production operating and progress of significant events of the Company in 2008 by General Manger Tang Qiongshan, Accounting Manager Chen Zongyi as the Chairman of the Board and independent directors on 12 Feb, 2009. Meanwhile, they participated in communication meeting on annual report audit between the Audit Committee and certified public accountants, carefully heard report from certified public accountants, and deeply knew the operating achievements of the Company in 2008. (3) Remuneration & Appraisal Committee verified remuneration of directors, supervisors and senior managements disclosed in Annual Report 2008 after carefully checked production and operating achievements actually realized in 2008, and issued written verification opinion, which considered that remuneration of directors, supervisors and senior managements accorded with relevant resolution on the Shareholders’ Meeting and the Meeting of the Board of Directors and relevant remuneration management system, remuneration of directors, supervisors and senior managements disclosed in Annual Report 2008 strictly carried out the remuneration management system and performance appraisal measure, and the remuneration of directors, supervisors and senior managements disclosed in Annual Report 2008 was authentic, reasonable and integrated. 5.The Preplan of profit distribution or capitalization of capital public reserve for the year 2008 made by the Board of Directors （1）Particulars about the bonus distribution of the Company over the past three years Net profit attributable to Ratio in net profit attributable to Amount of cash bonus owners of parent company Year owners of parent company under (tax included) under the consolidated the consolidated statement statement 2007 0 67,119,750.63 0 2006 0 (825,302,803.72) 0 2005 0 (396,770,218.80) 0 31 （2）The Company did not appropriate profit distribution preplan in cash though the Company achieved the profit in the report period Reasons for not appropriating profit distribution preplan in cash Purpose and using plan of retained though the Company achieved the profit in the report period profit At the beginning of the report period, the loss the Company needs to make up was RMB -935,643,358.89. During the reporting period, The profit realized in 2008 was used the Company achieved profit of RMB 42,536,200.29, which would be to cover losses over the past years used to cover losses over the past years without profit distribution. VIII. Report of Supervisory Committee (I) Particulars of the Meeting of Supervisory Committee 1. The 1st Meeting of Supervisory Committee 2008 was held on 29 Mar. 2008, on which considered and approved the following resolutions: Proposal 1: work report of supervisory committee 2007; Proposal 2: Annual Report 2007 and summary of annual report; Proposal 3: Self-evaluation report on internal control of the Company 2007 Proposal 4: Resolution on forecast of ordinary related transaction in 2008 2. The 2nd Meeting of Supervisory Committee 2008 was held on 19 Apr. 2008, on which considered and approved the following resolutions: Proposal 1: Resolution on Casting back and Adjusting data of financial statement of the 1st Quarterly Report 2007 Proposal 2: the 1st quarterly report 2008 and summary of quarterly report; Proposal 3: Resolution on nomination of Candidate of supervisor of shareholder representative of the 6th Supervisory Committee. 3. The 3rd Meeting of Supervisory Committee 2008 was held on 24 May 2008, on which elected Mr. Zhou Zhonggeng as Chairman of the 6th Supervisory Committee 4. The 4th Meeting of Supervisory Committee 2008 was held on 23 Aug. 2008, on which approved the Interim Report 2008 and summary of interim report 5. The 5th Meeting of Supervisory Committee 2008 was held on 15Oct. 2008, on which approved the Third Quarterly Report 2008 and summary of report (II) Independent opinion issued by Supervisory Committee After monitoring and considering on the whole operation 2008, the Supervisory Committee issued independent opinion as follows: 1. Operation particulars of the Company in accordance with laws: the deciding procedure accords with laws. The Company has set up prefect internal controlling system, and Directors, GMs of the Company have violated neither law, regulation, article of the associations nor company benefit, when they execute task of the Company; 2. Particulars of financial checking of the Company: the financial report of the Company actually reflects the financial status and operation results of the Company; 3. The Company have not raised fund from capital market since the first listing in 1993; 4. Prices of assets purchase and assets sale transaction in the Company are reasonable. There are neither exist low-down transactions nor damage part shareholders’ equity or assets of the 32 Company; 5. The associated transactions of the Company are fair, which can not damage the benefits of the Company and shareholders. IX. Significant Events (I) Significant litigation or arbitration There was no significant litigation or arbitration in the report period (II) Shareholding of other listed companies Unit: RMB Proportio Change of Securi Initial Book value at Profit & loss Subject of Resour Name of n of owner’ s ties investment the end of in the report accounting ce of securities shareholdi equity in the code amount report period period calculation share ng report period Corpor 60083 Shanghai Financial assets 30,700.00 0.01 109,771.20 (115,305.12) ation 8 Jiubai available for sale share Total 30,700.00 109,771.20 0.00 (115,305.12) (III) Significant purchase or disposal of assets and acquisition or merge during the report period 1. Assets purchase Eupa (Hong Kong) Corporation Ltd leased this property as office from Tsann Kuen HK when it founded, but now due to requirement of operation scope, the Board decided to purchase this property and carport. After purchase, it can ensured steady operation and to decreased the rent (Based on current rent, payment for purchasing house was equal with 16 years’ rent), this property have a certain appreciation of space because it was located in a busy commercial area. Because Eupa (Hong Kong) Corporation Ltd was the whole-owned subsidiaries of the Company, the Company paid it with full amount and believed that this transaction accorded the requirement of Eupa Industry Corporation Ltd., its following appreciation also might bring positive gains for the Company. For details please refer to Public Notice on Related Transactions that Wholly-owned Subsidiary Eupa (Hong Kong) Corporation Ltd Purchased Assets of Tsann Kuen HK which was published on Securities Times and HK Ta Kung Pao on 2 Feb. 2008. 2. Assets sale The Company disposed part property in order to revitalize immovable property; this transaction would not harm the rights and interests of medium and small shareholders due to adopt the fair price in the markets; There was no any relationship between the Company and transferred parties. In order to take advantage of professional score of self-research & development, design and sales, Tsann Kuen Zhangzhou Enterprise Co. Ltd, share controlling subsidiary of the Company, decreased proportion of self-manufacture, brought accessory factories to Tsann Industrial Park, which supplied more professional accessories in the park, reduced cost, therefore, improved the 33 general market competition of Tsaan; reduced occupation of fixed assets, promoted turnover of total assets and ensured stable and continuous development of operation of the Company. Object of the transaction neither were related parties, trading price based on net value of assts and referred to price of same or similar kind of equipment. The final transaction price of transaction object were higher than book value after negotiation, which never damaged equity of minority shareholders; there was no influence on continuity of business or stability of management. For details please refer to Public Notice on Sales of Parts Operation Assets of Accessory Factory of Share Controlling Subsidiary Zhangzhou Tsann Kuen and Public Notice on Explanation on Progress of Sales of Parts Operation Assets of Accessory Factory of Share Controlling Subsidiary Zhangzhou Tsann Kuen and New Assets for Sale, which was published on Securities Times, HK Ta Kung Pao and http:// www.coinfo.com.cn respectively on 29 Jul. 2008 and 21 Jan. 2009. (IV) Significant related transaction 1. Related transaction in the report period 01. Related transaction on assets acquisition Unit: HKD’0000 Original Net book Related Contents of book Appraisal Trading Settlement Pricing principle value of parties transactions value of value price method assets assets Entrusted HK LCH Paid at TSANN B2, 14F, Chaiwan (Asia-Pacific) Surveyors once when KUEN Industrial Centre, 20 Ltd. to assess; the trading 356 228 435 420 finishing HONG Lee Chung St., price referred to assessment the KONG LTD Chaiwan, H.K. and market price transaction For details please refer to Public Notice on Related Transaction that Wholly-owned Subsidiary Eupa HK Purchased Assets of Tsann Kuen HK which was published on Securities Times and HK Ta Kung Pao on 2 Feb. 2008. 02. Please refer to notes of accounting statement for other related transactions 2. All transactions were priced according to Pricing Agreement for Related Companies’ Transaction, which has been approved by Xiamen Tax Bureau. It is follow principle of fair transaction. 3. Way of payment abided by contracts signed by both parties. 4. Explanation on necessity and persistence of related transactions: enhance efficiency of upright integration in the group, develop unified purchase, reach cost cutting intension and enhance its market share through advantage grasping global countries of related enterprises. 5. Related transaction due to joint investment of the Company and related party: none 6. Occupation and repayment of non-operating capital by controlling shareholder and related party. 34 (V) Significant guarantee Unit: RMB’0000 External guarantee from the Company (excluding the guarantee for subsidiaries） Date of transaction Amount for Type of Duration of Executed For the related Guarantee party (date of signature) guarantee guarantee guarantee or not party or not Total guarantee amount in the report period None Total guarantee balance at the end of the report None period Guarantee for the subsidiaries of the Company Total guarantee amount for the subsidiaries in 160,198.70 the report period Total guarantee balance for the subsidiaries at 31,450.75 the end of the report period Total guarantee amount of the Company（including the guarantee for the subsidiaries） Total guarantee amount 31,450.75 The proportion of the total guarantee amount in 91.49% the net asset of the Company Including: Guarantee amount offered to shareholders, actual None controllers and related parties Guarantee amount for debt offered to the guarantee party whose asset-liability ratio was None over 70% directly or indirectly Part of the amount of the total guarantee over 14,261.92 50% Total guarantee for the above 14,261.92 Explanation on joint liability of liquidation due None to immature guarantee Special Explanation and Independent Opinion on Significant Guarantee of Year 2008 from independent directors According to Notice of CSRC Concerning Some Issue on Regulating the Funds Between Listed Companies and Associated Parties and Listed Companies’ Provision of Guaranty to Other Parties (ZJF [2003] No.56), Circular of CSRC and CBRC on Regulating the External Guaranties Provided by Listed Companies (ZJF [2005] No.120) and “Explanation of CSRC on Execution Concerning ZJF [2005] No.120 Text (SSBH [2006] No.25). As the independent directors of TSANN KUEN (XIAMEN) ENTERPRISE CO. LTD, we have seriously and thoroughly checked situation of external guarantee and expressed the independent opinions on the related issues as follows: Special explanation from independent directors: In 2008, the listed company guaranteed RMB 1,601,987,000 for holding subsidiary company namely Zhangzhou Tsann Kuen Enterprise Co., Ltd with guarantee balance of RMB 314,507,500. There was no other external guarantee of the Company and holding subsidiaries in the report period. 35 Opinion from Independent Directors: Although the Company supplied guarantee to absolute holding subsidiary company, and the holding subsidiary company supplied guarantee to listed company. The listed company and the holding subsidiary company should abide by Notice of CSRC Concerning Some Issue on Regulating the Funds Between Listed Companies and Associated Parties and Listed Companies’ Provision of Guaranty to Other Parties (ZJF [2003] No.56) which required the guaranteed parties continue to adopt practical and efficient measures to gradually decrease the guarantee amount and the contingent liabilities risk. If the guarantee to outside parties happened later, the Company and the holding subsidiary company should strictly abide by Circular of CSRC and CBRC on Regulating the External Guaranties Provided by Listed Companies(ZJF [2005] No.120) and “Explanation of CSRC on Execution Concerning ZJF [2005] No.120 Text (SSBH [2006] No.25) and implement necessary procedures. Besides, the Company and the holding subsidiary company who supplied the guarantee would focus on feasible planning to protect shareholders’ equity in case of financial difficulty occurred. Any material information which impact financial structure will be disclosed on time to protect the minority interests of shareholders. Independent director: Xu Rentang, Lu Jianxin, Ge Xiaoping Feb. 19, 2009 (VI) Execution of the committed events by the shareholders holding more than 5% of shares of the Company ,EUPA INDUSTRY CORPORATION LIMITED (hereinafter referred to as “Hong Kong EUPA”), the shareholder of the Company, gradually decreased part of the held shares of the Company since Apr. 2007, and the gains from disposal of shares mentioned in Simple Equity Changes Report respectively disclosed on Oct. 10, 2007 and Dec. 6, 2007 would be used to support the operating capital of the Company. Owing to the business main body of the Company transferring to Zhangzhou Tsann Kuen Enterprise Co., Ltd, the subsidiary of the Company, part of the capital on disposal of shares of Hong Kong EUPA was used to support the working capital of Zhangzhou Tsann Kuen. According to the resolutions on increasing capital of Zhangzhou Tsann Kuen decided by the Company and three major corporate shareholders in mar. 2007, Hong Kong EUPA should increase capital of USD 12 million as the sum on disposal of shares for increase capital was settle off in Jun. 2007. Based on the business demand, Zhangzhou Tsann Kuen borrowed USD 25 million from Hong Kong EUPA as external debt. By the application of the Company, on Jan. 16, 2008, State Administration of Foreign Exchange authorized the Company could borrow the summation of the accumulated medium-term and long-term external debts and the short-term debts which did not exceed USD 60 million. On Feb. 23, 2008, the Company held the 1st Extraordinary Shareholders’ Meeting of the Company 2008, in which approved the Company borrowed USD 60 million from Hong Kong EUPA and other two shareholders with credit line being no more than USD 60 million. 36 By Apr. 2008, Hong Kong EUPA had lent USD 33 million to the Company, since then EUPA never lent. By 31 Dec. 2008, the Company returned USD 10 million to Hong Kong EUPA, and balance of external debt from Hong Kong EUPA was USD 23 million at present. Hong Kong EUPA had never sold stock of the Company from Mar. 2008 up to the present. (VII) Proposal on reengagement of Reanda Certified Public Accountants The Company planned to engage Reanda Certified Public Accountants which qualify for related business in securities and futures to audit the accounting statements and supply other related consultant services with term of one year. Reanda Certified Public Accountants had served for the Company for 3 years. (VIII) Reception of investigation and interview of the Company in the report period. In the report period, according to Guidelines on Fair Information Disclosure of Listed Companies, the Company and the persons charged with the information disclosure strictly followed the principle of fair information disclosure, didn’t conduct treatment difference policy, neither did they disclose important information of the Company which didn’t publish to any particular object privately by choice in the process of investigation and visit acceptance. The details were as follows: Reception Major discussion content and the Reception time Reception way Reception object place information provided by the Company Jan. 14 - Telephone Mr. Zhang Operation status of the Company Jan. 25 - Telephone Mr. Wang Operation status of the Company Jan. 25 - Telephone Mr. Luo Operation status of the Company Feb. 28 - Telephone Miss Chen Operation status of the Company Mar. 5 - Telephone Mr. Chen Operation status of the Company Mar. 11 - Telephone Miss Lin Operation status of the Company Mar. 18 - Telephone Mr. Wang Operation status of the Company Mar. 25 - Telephone Mr. Zhang Operation status of the Company Apr. 7 - Telephone Miss Liu Operation status of the Company Apr. 10 - Telephone Miss Li Operation status of the Company Apr. 18 - Telephone Mr. Lin Operation status of the Company May 7 - Telephone Mr. Cai Operation status of the Company May 8 - Telephone Mr. Zhou Operation status of the Company Jun. 2 - Telephone Miss Li Operation status of the Company Jun. 19 - Telephone Mr. Zhu Operation status of the Company Jun. 26 - Telephone Mr. Huang Operation status of the Company Jul. 8 - Telephone Mr. Wang Operation status of the Company Jul. 21 - Telephone Miss Zhang Operation status of the Company Jul. 30 - Telephone Mr. Li Operation status of the Company Aug. 8 - Telephone Mr. Gao Operation status of the Company Aug. 25 - Telephone Miss Liu Operation status of the Company Sep. 2 - Telephone Mr. Liu Operation status of the Company 37 Reception Major discussion content and the Reception time Reception way Reception object place information provided by the Company Sep. 17 - Telephone Mr. Li Operation status of the Company Sep. 22 - Telephone Mr. Zhang Operation status of the Company Oct. 16 - Telephone Mr. Liu Operation status of the Company Nov. 7 - Telephone Mr. Chen Operation status of the Company Nov. 20 - Telephone Miss Chen Operation status of the Company Dec. 5 - Telephone Mr. Zhou Operation status of the Company Dec. 20 - Telephone Mr. Li Operation status of the Company (IX) Others X. Financial Report (accompanying) (I) Audit Report (II) Financial statement 1. Balance sheet 2. Income and income distribution statement 3. Cash flow statement 4. Statement of Change in Owners’ Equity 5. Notes to the Financial Statements XI. Document Available for Reference (I) The Financial statements with signatures and seals of the legal representative, person in charge of accounting work, person in charge of accounting organization. (II) Originals of audit report with the seal of the certified public accountants and the seal and signature of CPA. (III) All the company’s documents and announcement originals that were publicly disclosed during the report period on the newspapers nominated by CSRC. (IV) Articles of Association (V) Location of documents: in secretariats of the Board TSANN KUEN (CHINA) ENTERPRISE CO., LTD The chairman of the Board: Jian Derong Mar. 7, 2009 38 Auditors' Report REANDA SHEN ZI [2009] No.1076 To the Shareholders of Tsann Kuen (China) Enterprise Co., Ltd. We have audited the accompanying financial statements of Tsann Kuen (China) Enterprise Co., Ltd. and its subsidiaries (“the Group”), which comprise the consolidated balance sheet as at December 31, 2007, and the consolidated income statement, the consolidated statement of changes in equity and the consolidated cash flow statement for the year then ended, and a summary of significant accounting policies and other explanatory notes. Management’s Responsibility for the Financial Statements The Company’s management is responsible for the preparation of these financial statements in accordance with the Enterprises Accounting Standards of China. This responsibility includes: (1) designing, implementing and maintaining internal control relevant to the preparation of financial statements that are free from material misstatement, whether due to fraud or error; (2) selecting and applying appropriate accounting policies; (3) making accounting estimates that are reasonable in the circumstances. Auditor’s Responsibility Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with the Chinese Certified Public Accountants' Auditing Standards. These standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amount and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. 39 Opinion In our opinion, the financial statements have been prepared in accordance with the requirements of the Enterprises Accounting Standards promulgated by the People’s Republic of China, and present fairly, in all material respects, the financial position of the Group as at December 31, 2008, and the results of its operations and its cash flows for the year then ended. Reanda Certified Public Accountants Co., Ltd. Certified Public Accountant: sun yi bin Certified Public Accountant: lin wan qiang Beijing,China March 7, 2009 40 Tsann Kuen (China) Enterprise Co., Ltd Consolidated Balance Sheet December 31, 2008 Monetary unit : ( RMB) Yuan 2008-12-31 2007-12-31 Assets Notes Consolidation Parent Company Consolidation Parent Company Current Assets: Monetary Funds Ⅸ、1 416,506,274.82 4,939,594.77 534,372,308.53 3,722,741.66 Tradable financial assets Ⅸ、2 23,027,900.00 Notes receivables Ⅸ、3 5,823,544.00 4,079,513.79 Account receivables Ⅸ、4 397,162,581.71 36,375.82 544,576,211.91 1,506,738.07 Advances to suppliers Ⅸ、5 8,910,798.94 25,351,206.51 224,990.92 Interest receivables Dividends receivable Other receivables Ⅸ、6 28,986,324.35 12,104,980.52 26,437,847.73 5,317,960.10 Inventories Ⅸ、7 451,226,252.40 590,418,844.42 1,944,901.69 Non-current assets due within one year Other current assets Total current assets 1,308,615,776.22 17,080,951.11 1,748,263,832.89 12,717,332.44 Non-current assets: Available-for-sale financial assets Ⅸ、8 109,771.20 109,771.20 250,387.20 250,387.20 Held-to-maturity investments Long-term account receivables Ⅸ、9 68,487,888.93 48,423,277.60 Long-term equity investments Ⅸ、10 40,000.00 1,000,105,478.85 40,000.00 1,241,305,427.93 Investment properties Ⅸ、11 37,454,887.11 43,714,625.57 38,903,259.18 61,802,384.26 Fixed assets Ⅸ、12 764,092,618.51 26,967,210.64 987,472,865.85 44,930,291.78 Construction in progress Ⅸ、13 3,424,340.41 25,681,366.95 668,101.76 Construction materials Liquidation of fixed assets Production biology assets Oil and gas assets Intangible assets Ⅸ、14 30,593,459.40 16,643,800.55 28,959,042.71 17,806,724.11 Development expenses Goodwill Long-term deferred assets Ⅸ、15 872,772.88 155,458.15 1,106,304.88 184,158.19 Deferred income tax assets Ⅸ、16 22,678,901.17 29,075,079.69 Other non-current assets Total non-current assets 927,754,639.61 1,087,696,344.96 1,159,911,584.06 1,366,947,475.23 Total assets 2,236,370,415.83 1,104,777,296.07 2,908,175,416.95 1,379,664,807.67 41 Tsann Kuen (China) Enterprise Co., Ltd Consolidated Balance Sheet (continue) December 31, 2008 Monetary unit : ( RMB) Yuan 2008-12-31 2007-12-31 Liabilities and Shareholders' equity Note Consolidation Parent Company Consolidation Parent Company Current liabilities: Short-term loans Ⅸ、19 298,447,793.84 Tradable financial liabilities Notes payables Ⅸ、20 177,596,760.89 208,213,645.04 Account payables Ⅸ、21 754,405,955.98 142,211.99 1,015,910,774.84 1,858,895.35 Advances from customers Ⅸ、22 21,452,230.01 12,829,641.81 1,732,158.90 Payroll payables Ⅸ、23 48,805,639.01 111,791.55 55,159,209.28 659,338.19 Tax payable Ⅸ、24 44,278,598.83 69,208,975.75 75,560,687.14 82,051,719.46 Interest payables Dividend payables Other account payables Ⅸ、25 396,253,973.13 627,777,161.60 351,954,805.23 685,302,920.31 Non-current liabilities due within one year 100,000,000.00 Other current liabilities Total current liabilities 1,442,793,157.85 697,240,140.89 2,118,076,557.18 771,605,032.21 Non-current liabilities: Long-term borrowings Ⅸ、26 68,346,000.00 111,546,000.00 Bond payable Long-term account payable Deferred incomes Ⅸ、27 43,400,202.15 48,423,277.60 Accrued liabilities Deferred income tax liabilities Ⅸ、28 636,428.64 14,232.82 5,796,518.70 39,543.70 Other non-current liabilities Total non-current liabilities 112,382,630.79 14,232.82 165,765,796.30 39,543.70 Total liabilities 1,555,175,788.64 697,254,373.71 2,283,842,353.48 771,644,575.91 Shareholders' equity: Share capital Ⅸ、29 1,112,350,077.00 1,112,350,077.00 1,112,350,077.00 1,112,350,077.00 Capital reserve Ⅸ、30 125,073,743.50 123,550,019.78 126,726,569.01 123,665,324.90 Less: inventory shares Surplus reserve Retained earnings Ⅸ、31 (893,107,158.60) (828,377,174.42) (935,643,358.89) (627,995,170.14) Exchange difference of foreign currency financial statements (539,902.93) (252,565.30) translation Equity attributable to the holders of parent company 343,776,758.97 407,522,922.36 303,180,721.82 608,020,231.76 Minority interests 337,417,868.22 321,152,341.65 Total shareholders’ equity 681,194,627.19 407,522,922.36 624,333,063.47 608,020,231.76 Total liabilities and shareholders’ equity 2,236,370,415.83 1,104,777,296.07 2,908,175,416.95 1,379,664,807.67 42 Tsann Kuen (China) Enterprise Co., Ltd Consolidated Income Statement For the year ended December 31, 2008 Monetary unit : ( RMB) Yuan 2008 2007 Item Note consolidation parent company consolidation parent company 1. Total operating income Ⅸ、32 4,043,631,270.32 14,648,939.35 4,905,280,098.87 79,906,446.75 Less: Operating cost Ⅸ、32 3,691,668,347.52 15,160,832.23 4,519,939,158.30 80,029,428.46 Business taxes and surtax Ⅸ、33 3,957,265.39 635,201.05 5,941,958.19 3,127,445.39 Selling expenses 115,074,726.80 154,703,616.04 Administrative expenses 156,849,327.36 9,237,468.07 112,190,734.84 4,033,947.87 Financial costs Ⅸ、34 3,165,132.88 (4,590,956.64) 58,019,181.22 4,155,592.77 Impairment loss of assets Ⅸ、35 45,451,147.60 136,425,699.45 32,442,668.95 (187,313.47) Add: gains from the fair value changes (The loss Ⅸ、36 (23,027,900.00) 23,027,900.00 is listed beginning with “-“) Investment income (The loss is listed beginning Ⅸ、37 32,890,904.12 (70,747,992.43) (145,427.25) (185,048.02) with “-“) Including: the investment income from associated and joint ventures enterprises II. Operating profit 37,328,326.89 (212,967,297.24) 44,925,254.08 (11,437,702.29) Add: non-operating income Ⅸ、38 36,950,606.84 13,403,440.99 57,862,795.35 12,514,986.02 Less: non-operating expense Ⅸ、39 16,727,807.69 818,148.03 4,585,439.79 592,972.91 Including: loss from disposal of non-current assets 4,979,524.13 2,496,385.60 III. Total profits (The loss is listed beginning 57,551,126.04 (200,382,004.28) 98,202,609.64 484,310.82 with “-“) Less: income tax expense Ⅸ、40 1,628,720.24 0.00 8,434,786.45 IV. Net profits (the net loss is listed beginning 55,922,405.80 (200,382,004.28) 89,767,823.19 484,310.82 with “-”) Net profits attributable to equity holders of the parent company Minority interests 42,536,200.29 (200,382,004.28) 67,119,750.63 484,310.82 V. Earnings per share 13,386,205.51 22,648,072.56 1. Basic earnings per share 0.04 0.06 2. Diluted earnings per share 0.04 0.06 43 Tsann Kuen (China) Enterprise Co., Ltd Consolidated Cash Flow Statement For the year ended December 31, 2008 Monetary unit : ( RMB) Yuan 2008 2007 Items Note consolidation parent company consolidation parent company I. Cash flows from operating activities: Cash received from sales of goods or rendering of 4,208,413,204.33 6,276,472.17 5,230,967,440.49 92,401,405.30 services Tax refund 131,644,442.71 2,387,353.97 105,291,606.29 Cash received related to other operating activities Ⅸ、42 136,189,084.05 145,701,318.50 29,688,529.75 259,273,635.13 Subtotal of cash inflow from operating activities 4,476,246,731.09 154,365,144.64 5,365,947,576.53 351,675,040.43 Cash paid for sales of goods and received services 3,408,214,851.72 2,852,939.88 3,988,211,322.19 31,744,981.07 Cash paid to and on behalf of employees 435,962,569.24 745,692.66 458,669,263.70 16,868,775.33 Tax payments 24,176,163.46 8,920,520.67 48,111,109.74 3,987,135.36 Cash paid to other operating activities Ⅸ、43 274,436,732.06 38,453,232.36 377,771,883.92 4,111,846.94 Subtotal of Cash outflow from operating activities 4,142,790,316.48 50,972,385.57 4,872,763,579.55 56,712,738.70 Net cash flow arising from operating activities 333,456,414.61 103,392,759.07 493,183,996.98 294,962,301.73 II. Cash flow from investment activities: Cash received from investments 39,611,023.00 88,726.88 381,182.17 Cash dividends received from investment 35,356,944.00 39,620.77 Net cash received from disposal of fixed assets, 23,093,861.81 9,637,071.77 83,534,523.30 159,219,843.79 intangible assets and other long-term assets Net cash received from disposal of subsidiaries an 1,460,922.79 1,460,922.79 other business units Cash received related to other investing activities Subtotal of cash inflow from investing activities 59,911,728.60 50,709,017.56 83,662,870.95 159,601,025.96 Cash paid to acquire and construct fixed assets, 57,739,584.68 108,423.00 92,526,704.92 404,507.96 intangible assets and other long-term assets Cash paid to acquire investments 3,473,600.00 680,685,036.91 Net cash paid to acquire subsidiaries and other business units Cash paid related to other investing activities Subtotal of Cash outflow from investing activities 57,739,584.68 3,582,023.00 92,526,704.92 681,089,544.87 Net cash flow arising from investing activities 2,172,143.92 47,126,994.56 (8,863,833.97) (521,488,518.91) III. Cash flow from financing activities: Cash received from investments 50,000.00 230,208,000.00 Including: subsidiaries received cash investment from 50,000.00 230,208,000.00 minority shareholders Cash received from loans 569,489,150.83 Cash received related to other financing activities 273,384,000.00 273,384,000.00 418,828,000.00 Subtotal of cash inflow from financing activities 273,434,000.00 273,384,000.00 799,697,150.83 418,828,000.00 Repayment of loans or debts 576,950,393.84 1,192,088,589.54 276,278,300.00 Cash paid for dividends, profits, or interests 22,354,169.51 3,300,147.85 59,049,574.02 5,777,324.60 Including: subsidiaries paid to minority shareholders with cash dividends and profits Cash paid related to other financing activities 418,828,000.00 Subtotal of cash outflow from financing activities 599,304,563.35 422,128,147.85 1,251,138,163.56 282,055,624.60 Net cash flow arising from finacing activities (325,870,563.35) (148,744,147.85) (451,441,012.73) 136,772,375.40 IV. Effects on cash and cash equivalents for the change (4,400,782.18) (558,752.67) (7,593,177.87) (136,340.63) of foreign exchange rates V. Net increase in cash and cash equivalents 5,357,213.00 1,216,853.11 25,285,972.41 (89,890,182.41) Add: beginning balance of cash and cash 393,919,333.68 3,722,741.66 368,633,361.27 93,612,924.07 equivalents VI .Ending balance of cash and cash equivalents VII、47 399,276,546.68 4,939,594.77 393,919,333.68 3,722,741.66 44 Tsann Kuen (China) Enterprise Co., Ltd Consolidated Statement of Changes in Equity For the year ended December 31, 2008 For Year 2008 Equity attributable to the holders of parent company Items minus: Capital Retained Share capital Capital reserve Inventory surplus earnings shares I. Balance at the end of previous year 1,112,350,077.00 126,726,569.01 (935,643,358.8 plus(I) Changes of accounting policies (II) Correction of errors in prior years II. Balance at the beginning of the year 1,112,350,077.00 126,726,569.01 (935,643,358.8 III. Changes in equity in the year (the decrease is listed (1,652,825.51) 42,536,200.2 beginning with “-”) (I)Net profit for the year 42,536,200.2 (II)Gain and loss directly accrued to equity (1,652,825.51) 1. Net amount of fair value changes of available-for-sale (115,305.12) financial assets 2. Net amount of fair value changes in cash flow arbitrage tools 3. Income tax effect accrued to equity items 4. Others (1,537,520.39) Sub-total of above (I) and (II) (1,652,825.51) 42,536,200.2 (III) Capital investment by the shareholders 1.Capital investment by shareholders in the year 2. Amount calculated into equity paid in shares 3. Others (IV)Profit distribution in the year 1. Withdrawal of surplus reserve 2. Withdrawal of normal risk provisions 3. Distribution to shareholders 4. Others (V) Internal settlement and transfer of shareholders' equity 1. Transfer of capital reserve to capital 2. Transfer of surplus reserve to capital 3. Surplus reserve makes up for the loss 4. Others （ⅵ）Exchange differences of foreign currency statement IV. Balance at the end of this period 1,112,350,077.00 125,073,743.50 (893,107,158.6 45 Tsann Kuen (China) Enterprise Co., Ltd Consolidated Statement of Changes in Equity For the year ended December 31, 2008 For Year 2007 Equity attributable to the holders of parent company Items minus: Share capital Capital reserve Inventory Capital surplus Retained earnings shares I. Balance at the end of previous year 1,112,350,077.00 129,607,618.04 49,420,175.68 -1,088,428,018.46 plus(I) Changes of accounting policies 57,399.34 19,051,484.21 (II) Correction of errors in prior years II. Balance at the beginning of the year 1,112,350,077.00 129,665,017.38 49,420,175.68 -1,069,376,534.25 III. Changes in equity in the year (the -2,938,448.37 -49,420,175.68 133,733,175.36 decrease is listed beginning with “-”) (I)Net profit for the year 67,119,750.63 (II)Gain and loss directly accrued to equity -2,938,448.37 17,193,249.05 1. Net amount of fair value changes of 122,744.16 available-for-sale financial assets 2. Net amount of fair value changes in cash flow arbitrage tools 3. Income tax effect accrued to equity items 4. Others -3,061,192.53 17,193,249.05 Sub-total of above (I) and (II) -2,938,448.37 84,312,999.68 (III) Capital investment by the shareholders 1.Capital investment by shareholders in the year 2. Amount calculated into equity paid in shares 3. Others (IV)Profit distribution in the year 1. Withdrawal of surplus reserve 2. Withdrawal of normal risk provisions 3. Distribution to shareholders 4. Others (V) Internal settlement and transfer of -49,420,175.68 49,420,175.68 shareholders' equity 1. Transfer of capital reserve to capital 2. Transfer of surplus reserve to capital 3. Surplus reserve makes up for the loss -49,420,175.68 49,420,175.68 4. Others （ⅵ）Exchange differences of foreign currency statement IV. Balance at the end of this period 1,112,350,077.00 126,726,569.01 -935,643,358.89 46 Tsann Kuen (China) Enterprise Co., Ltd Consolidated Statement of Changes in Equity for Parent Company For the year ended December 31, 2008 For Year 2008 Items minus: Share capital Capital reserve Inventory shares I. Balance at the end of previous year 1,112,350,077.00 123,665,324.90 plus(I) Changes of accounting policies (II) Correction of errors in prior years II. Balance at the beginning of the year 1,112,350,077.00 123,665,324.90 III. Changes in equity in the year (the decrease is listed beginning with (115,305.12) “-”) (I)Net profit for the year (II)Gain and loss directly accrued to equity (115,305.12) 1. Net amount of fair value changes of available-for-sale financial assets (115,305.12) 2. Net amount of fair value changes in cash flow arbitrage tools 3. Income tax effect accrued to equity items 4. Others Sub-total of above (I) and (II) (115,305.12) (III) Capital investment by the shareholders 1.Capital investment by shareholders in the year 2. Amount calculated into equity paid in shares 3. Others (IV)Profit distribution in the year 1. Withdrawal of surplus reserve 2. Withdrawal of normal risk provisions 3. Distribution to shareholders 4. Others (V) Internal settlement and transfer of shareholders' equity 1. Transfer of capital reserve to capital 2. Transfer of surplus reserve to capital 3. Surplus reserve makes up for the loss 4. Others IV. Balance at the end of this period 1,112,350,077.00 123,550,019.78 47 Tsann Kuen (China) Enterprise Co., Ltd Consolidated Statement of Changes in Equity for Parent Company For the year ended December 31, 2008 For Year 200 Items minus: Share capital Capital reserve Inventory Capi shares I. Balance at the end of previous year 1,112,350,077.00 129,607,618.04 49, plus(I) Changes of accounting policies (6,065,037.30) (II) Correction of errors in prior years II. Balance at the beginning of the year 1,112,350,077.00 123,542,580.74 49, III. Changes in equity in the year (the decrease is listed beginning with “-”) 122,744.16 (49,4 (I)Net profit for the year (II)Gain and loss directly accrued to equity 122,744.16 1. Net amount of fair value changes of available-for-sale financial assets 122,744.16 2. Net amount of fair value changes in cash flow arbitrage tools 3. Income tax effect accrued to equity items 4. Others Sub-total of above (I) and (II) 122,744.16 (III) Capital investment by the shareholders 1.Capital investment by shareholders in the year 2. Amount calculated into equity paid in shares 3. Others (IV)Profit distribution in the year 1. Withdrawal of surplus reserve 2. Withdrawal of normal risk provisions 3. Distribution to shareholders 4. Others (V) Internal settlement and transfer of shareholders' equity (49,4 1. Transfer of capital reserve to capital 2. Transfer of surplus reserve to capital 3. Surplus reserve makes up for the loss (49,4 4. Others IV. Balance at the end of this period 1,112,350,077.00 123,665,324.90 48 Tsann Kuen (China) Enterprise Co. Ltd Notes to Financial Statements For the year of 2008 （All amounts are expressed in RMB yuan unless otherwise stated） I. General 1、Company’s history Tsann Kuen (China) Enterprise Co., Ltd. (“the Company or TKC”) was established in the People’s Republic of China (“the PRC”) in 1988 under the name of Tsann Kuen China (Xiamen) Ltd. as a wholly owned foreign investment enterprise. On 16 February 1993, with the approval of the Ministry of Foreign Trade and Economic Co-operation, the Company was reorganized into a joint stock company limited by shares and was renamed as Tsann Kuen (China) Enterprise Co., Ltd. In June 1993, the Company issued 40,000,000 new shares pursuant to an international placing and public offer and these new shares (“B shares”) were then listed on the Shenzhen Stock Exchange on 30 June 1993. Until 31 December 2008, company’s share capital is RMB 1,112,350,077, B shares among the total shares issued on the Shenzhen Stock Exchange. Follow The Ministry of commerce of the People’s Republic of China approved （The NO. [2005]3107号《商 务部关于原则同意厦门灿坤实业股份有限公司发起人股上市流通的批复》）, On December 6, 2006, the Group received [2006] No.266 file 《关于核准厦门灿坤实业股份有限公司非上市外资股上市流通的通 知》from China Securities Regulatory Commission. China Securities Regulatory Commission agreed 700,476,830 unlisted shares (62.97% paid in capital of the Group) hold by three shareholders, EUPA (Hong Kong) Limited, Fordchee Development Limited and Fillman Investment Limited to transfer into B shares. One year after November 29, 2006 these B shares could be listed and exercised on Shenzhen Stock Exchange. 2、The industry The company operates within the electrical machinery and equipment manufacturing industry. 3、Scope of business Company approved business scope: the main business is to develop, produce and sell household appliances, electronics, light industrial products, modern office supplies. Those subsidiary’s main business is to produce household appliances, electronics, light industrial products, sell products by wholesale, distribution appliances, communication equipment, electrical equipment, office equipment, computer accessories, general merchandise and food; Design, produce and sell Precision (Punching) Die, Precision Mold Cavity, and Model Standard Unit, engaged in the research and development of those products. 4、Main changes The company has no major changes within reporting period. 49 II. Basis for preparation The company and its subsidiaries maintain their accounting record and prepare their statutory financial statement base on the assumption of going concern, accordance to transaction and item’s substance and economic reality, and according to the New Enterprise Accounting Standard issued by the Ministry of Finance on 15 February 2006, and also accordance to those Accounting policy and Accounting estimate that described in part four of this FS notes. III. Declaration of Compliance with the Enterprise Accounting Standards The Company’s financial statements prepared follow the requirements of the Enterprise Accounting Standards promulgated by the Ministry of Finance; fairly and completely present the financial position, operation result and cash flows, and other relevant information of the company. IV. Summary of Significant accounting policies and accounting estimates and methods of consolidation (1) Accounting Year The company employs a period of calendar days from January 1 to December 31 each year as accounting year. (2) Presentation currency The Company’s presentation currency is Renminbi (“RMB”). (3) Record-keeping basis and measurement characters The company is to use accrual basis as record-keeping basis for accounting recognition, measurement and reporting. The Company commonly measures accounting factors by historical cost method; if the determined accounting factor amount can be obtained or reliably measured, then replacement cost, net realizable value, net value and fair value method may be employed for some individual accounting factors. During the reporting period, with the fair value measurement and the changes are included in the current profits and losses of the financial assets and financial liabilities, available for sale financial assets and financial derivatives in the fair value measurement; Those inventories and fixed assets are measured by present value of purchase price, when purchasing payment is delayed beyond the normal credit conditions of inventories, fixed assets to the current value of the purchase price measurement; The inventory with impairment loss is measured by net realizable value, and other assets with impairment loss are measured by recoverable amount(which is higher of fair value or present value).Other financial statements items are measured by historical cost. 50 By using historical cost method, assets are accounted for on the basis of cash or cash equivalents paid, or fair value of the considerations paid when are acquired. The liabilities are accounted for on the basis of amount actually received or asset amount for performing current obligations, or contract amount for performing the current obligations, or expected cash or cash equivalent amount paid to repay the debts in daily activities. There is no change in measure characters of financial statement items during the reporting period. (4) Standard of cash equivalents The cash equivalents is that cash equivalents of the company include investment with short term (it usually expires within three months from the purchase date), highly liquidity, easy to convert into known amount of cash, and low-risk of changes in value. (5) Foreign currency transactions The company’s foreign currency transactions are translated into presentation currency at spot exchange rates (Usually refers to the middle rate of the exchange price quotation that announced by the People's bank of China) prevailing on the day in which the transactions take place. On balance sheet date, those foreign currency items to use in such currencies are translated at the rates prevailing on the balance sheet date. The exchange gains and losses arising on the exchange are included in profit and loss for the year. With historical cost measurement of foreign currency non-monetary items, the transaction is translated at the spot exchange rate, without changing its presentation currency amount. In the fair value measurement of foreign currency non-monetary items, translated at the spot exchange rate at that day when the fair value can be determined, the difference between amount after convert into presentation currency and the original presentation currency amount, as the changes in the fair value, in the current profits and losses. (6)Financial Instruments: Recognition and Measurement 1 Confirmation of financial instruments When the Company became party to a contract of financial instruments, related financial assets or financial liabilities are recognized. 2 Classification of financial assets and financial liabilities The Company in accordance with the investment purpose and economic substance of the ownership of financial assets are divided into four category, which is fair value through profit or loss; Held-to-maturity investments; Loans and receivables; Available-for-sale financial assets. According to the economic substance those financial liabilities are divided into fair value through profit or loss and others. 1) Financial assets or financial liabilities at fair value through profit or loss: including held for trading 51 financial assets or financial liabilities and designated by the company as at fair value through profit or loss. A financial asset or financial liability is classified as held for trading if it is: (i) Acquired or incurred principally for the purpose of selling or repurchasing it in the near term; (ii) Part of a portfolio of identified financial instruments that are managed together and for which there is evidence of a recent actual pattern of short-term profit-taking; or (iii) A derivative (except for a derivative that is a designated and effective hedging instrument, a derivative of financial guarantee contract, a derivative that settle by equity instrument, which the price of instrument could not be quoted in active market and the fair value could not measure reasonably). A financial asset or financial liability is classified as designated if it is: (i) The designation can be eliminated or significantly reduced the inconsistent situation or relate profit and loss cause by different measurement basis of financial assets and financial liabilities; (ii) Company risk management or investment strategy has been enshrined in a formal written document that the financial assets portfolio, the financial liabilities portfolio, or the financial assets and financial liabilities portfolio are management in fair value-based and evaluation and report to key management person. 2) Held-to-maturity investments: are non-derivative financial assets with fixed or determinable payments and fixed maturity that company has the positive intention and ability to hold to maturity. Mainly include the company's management has a clear intention and ability to hold to maturity of fixed-rate bonds, floating-rate corporate bonds. 3) Receivables: are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. Receivables of the Company mainly refer to the Company's sales of goods or rendering of services to form the accounts receivable and other receivables. 4) Available-for-sale financial assets: are those non-derivative financial assets that are designated as available for sale at initial recognized, or those asset are not measured in fair value based and through to profit and loss (a) loans and receivables, (b) held-to-maturity investments ,(c) financial assets. 5) Other financial liabilities: financial liabilities not divided into measurement in fair value base and through into profit and loss account. 3、Measurement of financial assets and financial liabilities When a financial asset or financial liability is recognized initially, the company shall measure it at its fair value. For financial assets or financial liabilities at fair value through profit or loss, transaction costs that are directly attributable to current profit and loss; for other types of financial assets or financial liabilities, transaction costs related to the amount included in the initial confirmation. 52 Subsequent measurement of financial assets and financial liabilities: 1) Financial assets or financial liabilities at fair value through profit or loss measured at its fair value, at balance sheet date, the changes of fair value are accounted for profit and loss in current period. 2) Held-to-maturity investments, which shall be measured at amortized cost using the effective interest method, its termination confirmation, impairment or amortization profit or loss included in the profit and loss account. 3) Loans and receivables, which shall be measured at amortized cost using the effective interest method, its termination confirmation, impairment or amortization profit or loss included in the profit and loss account. 4) Available-for-sale financial assets, are measured with fair value, any changes of fair value of available-for-sale financial assets at the end of period are accounted for capital reserve (other capital reserve). Disposal of available-for-sale financial assets, the difference between consideration received and the book value of financial assets including into investment income; at the same time, turn out the original cumulative amount of corresponding part within the equity, included into investment profit. The impairment losses and Exchange differences of foreign monetary financial assets including into current profit and loss. Interest received and cash dividends received during the period held are recognized as investment income. 5) Other financial liabilities, measured at amortized cost using the effective interest method. Its termination confirmation, impairment or amortization profit or loss included in the profit and loss account. The financial guarantee contract is not belong to financial liabilities designated by the company as at fair value through profit or loss, as well as the loan commitment is not belong to financial liabilities designated by the company as at fair value through profit or loss and below-market rate, After initial recognition, measured higher of：1、amount confirmed by ；Initial recognition amount minus the balance of the accumulated amortization refer to . 6）Fair value：It’s the amount for which an asset could be exchanged or a liability settled, between knowledgeable, willing parties in an arm’s length transaction. In a fair deal, the transaction should the two sides are continuing operations enterprises, do not intend to carry out the liquidation, a major reduction in scale of operation, or under adverse conditions is still trading. The existence of an active market of financial assets or financial liabilities, the quotation within the active market should be used to determine its fair value. If there is no active market, company should adopt valuation techniques to determine the fair value. 7) The amortized cost of a financial asset or financial liability： it’s the amount at which the financial asset or financial liability is measured at initial recognition minus principal repayments, plus or minus the cumulative amortization using the effective interest method of any difference between that initial amount and the maturity amount, and minus any reduction (directly or through the use of an allowance account) 53 for impairment or unrecoverable. 8）The effective interest method: It’s a method of using effective interest calculating the amortized cost of a financial asset or a financial liability (or group of financial assets or financial liabilities) and of allocating the interest income or interest expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash payments or receipts through the expected life of the financial instrument or, when appropriate, a shorter period to the net carrying amount of the financial asset or financial liability. Then calculating the effective interest rate, company shall estimate cash flows considering all contractual terms of the financial instrument (for example, prepayment, call and similar options) but shall not consider future credit losses. 4、Transfers and derecognize of financial assets (1) Derecognize financial asset if, and only if, meets one of the following three conditions: 1) the contractual rights to the cash flows from the financial basset expire; 2) the financial assets have been transferred, and the ownership of financial assets of almost all the risks and rewards transfer to other party; 3) The financial assets have been transferred, but the company neither retains the ownership of financial assets of almost all the risks and rewards, nor gives up control of the financial assets. (2) When derecognize condition of entire transferred assets has been satisfied, the differences between the amounts of following two items shall be accounted for profits and losses of current period. 1) The book value of transferred financial assets; 2) The sum of consideration received from the transfer, and the accumulative amount of the changes of the fair value originally recorded in the shareholders’ equities (in the event that the financial asset involved in the transfer is a financial asset available-for-sale) (3) If the transfer of partial financial assets satisfies the conditions of derecognize the entire book value of the transferred financial asset shall, between the portion whose derecognize and the recognized portion (under such circumstance, the service asset retained shall be deemed as a portion of financial asset whose derecognize), be apportioned according to their respective relative fair value, and the difference between the amounts of the following two items shall be accounted for the profits and losses of the current period . 1) The portion book value derecognized; 2) The sum of consideration of the portion whose derecognize and the portion of accumulative amount of the changes in the fair value originally recorded in the shareholders’ equity which is corresponding to the portion whose derecognized ( in the event that the financial assets involved in the transfer is a financial assets available-for-sale). 54 (4) If the Company fails to satisfy the conditions of derecognize for transferred financial assets, it shall continue to recognize the entire financial assets to be transferred and shall recognize the consideration it receives as a financial liability. 5、Impairment of financial assets The Company assesses the financial assets that carry at fair value, and those financial assets which changes of fair value are recognized in profit and loss accounts at the balance sheet date. If there is objective evidence that the one or several financial assets are impaired, the Company shall determine the amount of any impairment loss. (1) Accounts receivable At the end of the period, those individual accounts receivable and individual other receivable make up more than 10% (include 10%) is considered as individual significant amounts, One by one to carry out impairment test, if there is objective evidence that the accounts receivable have been impaired, the impairment loss shall be recognized based on the difference of the book values higher than the present value of future cash flows. At the end of the period, for those individual accounts receivable with not significant amounts, if there is objective evidence that the accounts receivable have been impaired, recognize impairment loss alone. For other individual the amount of non-significant receivables, classification primarily on the basis of account age, and those accounts receivable’s account age more than one year will be classified as non-significant in amount but in accordance with the characteristics of credit risk portfolio, the risk of the portfolio is high, others classified as other non-significant receivables. For those account receivables classified as non-significant in amount but in accordance with the characteristics of credit risk portfolio, the risk of the portfolio is high, as well as other individual non-significant receivable accounts that not impaired after impairment test, these account receivables will carry out age analysis by the company and consider the debtor’s actual business situation and cash flow to determine the recoverable amount of receivables, a reasonable estimate of bad debts. On the basis of the actual loss rate of receivable accounts, with same or similar credit risk characteristics of accounts receivable package in previous year, the Company also considers current situation and determine the percentage of bad debt provision. age Percentage 1-90days 0 91-180days 10 181-270days 30 271-360days 50 Over 360 days 100 Account receivable between the company and related party do not calculate bad debt provision. 55 (2) Held-to-maturity investment At the balance sheet date, if there is objective evidence that the investment have been impaired calculate and recognize the impairment loss, based on the difference between the asset’s carrying amount and the present value of future cash flows. The measurement of impairment loss of held-to-maturity investment, please refer to impairment loss treatment of accounts receivable. (3) Available-for-sale financial assets At the balance sheet date, the Company will test and analyze the impairment situation of the available-for-sale financial assets, and analyze whether the fair value of the financial assets continued to decline. If there is objective evidence that available-for-sale financial assets have significant depreciated, or after considering various relevant factors, this downward tendency is deemed as not temporary, the impairment loss shall be recognized, record into current profit and loss. When recognize the impairment loss, the previously recognized impairment loss within the fair value of equity shall be reversed, record into current profit and loss. In a subsequent period, objective evidence that fair value has increased to exist, and relevant the matters that after original impairment loss recognized, the previously recognized impairment loss shall be reversed. However, for those investments that no active market as well as whose fair value cannot be measured accurately, or those derivative financial assets that should be linked with the equity instruments and settlement must through pay the equity instruments, as well as does not have control, joint control or significant influence, there is no active market and fair value measurement is not reliable , all of those type of long-term equity investment, whose impairment loss occurred, cannot be reversed. （4）Inventory: Recognition and Measurement 1、Inventory of the Company refers to enterprises in the day-to-day activities of the holder for the sale of finished goods or merchandise, product that in the production process, and materials consumed in the production process or provision of services. Inventories category: materials in transit, raw materials, work-in-process, finished goods, and low-value consumable supplies. 2、Inventories stock physical count system：perpetual inventory method. 3、 Valuation methods of inventories input and output：Inventories are calculated at actual costs when acquire. Inventories costs include purchasing costs, processing costs and other costs. The issue of inventories is calculated by the weighted average method. The company's inventories costs adopt planned cost in the day-to-day accounting, over carrying the cost differences at the ending period, and adjust planned cost to actual cost. 4、 Low-value consumable products amortization method ：The low–value consumable supplies are amortized at one time. 5、 Impairment loss of inventories At the balance sheet date, the evaluation criteria should base on the lower value between costs and net realizable value. When net realizable values are lower than costs, provision for impairment loss of 56 inventories shall be made. Under normal circumstances, the Company provision impairment loss in according to individual inventory items, for large quantity and low-unit-price inventories, provision for impairment loss of inventories shall be made based on the category of inventories; for those inventories that relating to the same product line that have similar purposes or end uses, are produced and marketed in the same geographical area, and cannot be practicably evaluated separately from other items in that product line, their impairment loss provision shall be consolidated. When the circumstances that previously caused inventories to be written down below cost no longer exist or when there is clear evidence of an increase in net realizable value because of changed economic circumstances, the amount of the write-down is reversed (i.e. the reversal is limited to the amount of the original write-down) so that the new carrying amount is the lower of the cost and the revised net realizable value. The amount reversed recording into current profit and loss. Estimates of net realizable value: Those stocks used for directly sale, for example: finished goods、 merchandise and materials used for sale etc., the net realizable value is referred to the estimated selling price minus the estimated selling expenses and related tax and fees in normal operating process. Those stocks need to process; the net realizable value is referred to the estimated selling price minus the estimated finished cost and estimated selling expenses and related tax and fees in normal operating process; the net realizable value of the quantity of inventory held to satisfy firm sales or service contracts is based on the contract price. If the sales contracts are for less than the inventory quantities held, the net realisable value of the excess is based on general selling prices. (5) Long-term Equity Investment Long-term equity investment including the equity investments held by the company, who can able to exercise control, joint control or significant influence to the invested entity, or the company do not have control, joint control or significant influence on the invested entity, and there is no active market quotation, the fair value measurement should not reliable. 6.Initial measurement The Company separates the following two cases of long-term equity investment in the initial measurement: (1) Long-term equity investment obtained through business combinations: 1) For obtaining subsidiary under common control, the consideration cost can be cash payment, non-monetary assets transfer or taking over the subsidiary’s liability. Under this situation, the initial investment cost is carrying amount of shareholder’s equity of the subsidiary on the merger date. The difference between the carrying amount of the net assets obtained and initial investment cost of long-term equity investment shall be adjusted to capital reserve. If the capital reserve is not sufficient to absorb the difference, any excess shall be adjusted against retained earnings. In the case of company issues equity securities as the consideration, the initial investment cost is carrying amount of shareholder’s equity of the subsidiary on the merger date. If the book value amount of the issued shares is deemed as the capital, the difference between the carrying amount of the issued shares and initial investment cost of long-term equity 57 investment shall be adjusted to capital reserve. If the capital reserve is not sufficient to absorb the difference, any excess shall be adjusted against retained earnings All direct expenses related to the merger, including the auditor fee, evaluation expense, legal service expense, etc will be accrued to the current profit and loss. 2) For obtaining subsidiary not under common control, the cost of long-term equity investment is fair value of assets paid or liabilities undertaken by the Company. Where the cost of a business combination exceeds the acquirer’s interest in the fair value of the bargainor’s identifiable net assets, the difference shall be recognized as goodwill, Where the cost of combination is less than the acquirer’s interest in the fair value of the bargainor’s identifiable net assets, after reassessment, the difference shall be recognized in profit or loss for the current period (non-operating income). The costs directly related to business combinations shall be included in the cost of business combinations (except issuing expenses of bonds and equity instruments). (2) Other types of long-term equity investment, accordance with the following principles to determine their initial investment costs: 1) Long-term equity investment, which is acquired by cash consideration, the actual cash payment amount will be deemed as the initial investment cost. The initial investment cost includes the direct expenses related to the long-term equity investment, taxes and other necessary expenses. But if the actual payment contains cash dividend that has not been received but has been announced, that should be accounted separately. 2) Long-term equity investment, which is acquired by issuing equity securities, the fair value of the issued equity will be deemed as the initial investment cost. 3) For the long-term equity investment made by the investors, the values agreed in the investment contracts or agreements will be deemed as the initial investment cost, except that the contracts or agreements provide that the values are not fair. 4) Long-term equity investment is acquired by exchange of non-monetary assets, if this transaction has commercial substance or the fair values of exchange assets can be reliably measured, the fair values of these assets and relevant taxes will be deemed as the initial investment cost; the difference between the fair values of the assets and book values will be record into the current profit and loss; if the non-currency asset exchange does not satisfy these two conditions mention above, the book values of the assets and relevant taxes will be deemed as the initial investment cost. 5) Long-term equity investment, which is acquired by the debt restructuring, the fair values of the obtained equities will be deemed as the initial investment cost; the difference between the initial investment cost and book values of credit will be record into the current profit and loss. 7.Subsequent Measurement The cost method is employed to calculate the long-term equity investment of subsidiaries and will be adjusted in accordance with the equity method in the preparation of the consolidated financial statements. The company uses cost method for the following conditions: a long-term equity investment where the 58 investing enterprise does not have joint control or significant influence over the investee, the investment is not quoted in an active market and its fair value can’t be reliably measured. When an investing enterprise can exercise joint control or significant influence over the investee, a long-term equity investment cost shall be treated as a recovery of initial investment cost. 1) When using cost method, cash dividends or profit distributions declared by the investee shall be recognized as investment income in the current period. However, investment income recognized by the investing enterprise shall be limited to the amount distributed to it out of accumulated net profits of the investee arising after the investment was made. Any cash dividends or distributions received in excess of this amount shall be treated as a recovery of initial investment cost. 2) When using equity method, after the investing enterprise has acquired a long-term equity investment, it shall recognize its share of net profits or losses made by the investee as investment income or losses, and adjust the carrying amount of the investment accordingly. Base on the investee’s book value of net profit, if the investee used inconsistent accounting policies with the company, the company shall adjust the net profits by the balances of the depreciation or amortization of the investee’s fixed assets and intangible assets measured by fair value on the investment acquired date, as well as adjust the net profits by the balance of the impairment losses of investee’s assets measured by fair value on the investment acquired date. Set off the internal transaction profit and loss between the company and the joint enterprises or the jointly-run enterprises, and then recognize the investment profit or loss on this basis. The internal transaction profit and loss between the company and the joint enterprises or the jointly-run enterprises, refer to the , belong to asset impairment loss is recognized in full. If an investor’s share of losses of an associate equals or exceeds its interest in the associate, the investor discontinues recognizing its share of further losses, after the investor’s interest is reduced to zero, additional losses are provided for, and a liability is recognized, only to the extent that the investor has incurred legal or constructive obligations or made payments on behalf of the associate; If the associate subsequently reports profits, the investor resumes recognizing its share of those profits only after its share of the profits equals the share of losses not recognized, restore long-term investment interests, and in the book value of the long-term equity investment. (9) Investment property: Recognition and Measurement 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. Property investment is measured by cost model, according to its expected useful life and net residual rate on buildings and land-use right to calculate depreciation or amortization. The company’s expected useful life, net residual rate and annual depreciation rate of investment property as follow: 59 Expected useful Annual depreciation Categories Expected residual rate10% life(years) (amortization) rate % Building 10 20 4.50 Land 0 20、40、50 5.00、2.50、2.00 The balance sheet date, there are indications that the investment property has impairment, refer 10. Recognize and Measurement of Fixed Asset 1. Fixed asset are tangible asset that have characteristic simultaneity ①Are held for use in production or supply of goods or services, for rental to others, or for administrative purpose; ②Have useful lives more than one accounting year. 2.Fixed assets shall be recognized if they meet the following conditions: (a) The economic benefits related to fixed asset probably flows to the enterprise; (b) The cost of fixed asset may be reliably measured. The expenses relate meet above condition to fixed asset would be capitalized in the cost of asset, if not, it would be recognize as expense in profit and loss account of that period. 3.Fixed assets shall be initially measured at cost. Asset acquire through financial lease would be measured in the lower of its fair value at the date of lease begin or the present value of the minimum lease payment, and depreciate according to the depreciation accounting policy. 4.The category and depreciation method of fixed assets Straight-line method is in used to calculate the depreciation of fixed assets (including finance leased fixed assets). The estimated useful lives, expected residual value and annual depreciation rate of various types fixed assets are listed as follows: Category Residual value rate % Estimated useful life (years) Annual depreciation Rate % Buildings 10 20 4.50 and structures Machineries Furniture and 0 11-18 5.56-9.09 equipments, electronic device and 0 6 16.67 modules Vehicles 0 6 16.67 Maintenance expense 0 the shorter lease term and beneficial lives of leased fixed assets 60 5. Fixed asset would be treats as idle asset because of lack of working hours (except season reason) or nature disaster cause the asset unused for 6 months. The idle asset is depreciated as the same with other fixed asset that in the similar characteristic. 6. If there is evidence provide that the value of fixed asset are decreased on each balance sheet date, the method of provision for the decrease value would according the method of this notes in No.14 impairment of assets. 11. Construction in progress 1. The construction project should meets the condition of inflow of future economic benefit, the cost could be measured reliable simultaneity. The cost would be measured in the project is substantially ready for its intend use 2. Construction in progress is transferred to fixed assets when the project is substantially ready for its intended use. The project is in condition of ready for used but not transact in the final account would be transferred to fixed assets in its estimate value, and adjust the value after transact in the final account, but would not adjust depreciated value that have been depreciated. 3. If there is evidence provide that the value of project are decreased on each balance sheet date, the method of provision for the decrease value would according the method of this notes in No.14 impairment of assets. 12. Recognize and measurement of intangible asset 1. Intangible asset are recognize initially at cost. 2. Period of intangible asset that could bring future economic benefit inflow to company could determined reasonably according to the judgment according to reason of contract right or other legal right, condition in same industry, history experience, and demonstrate of expert would be recognize as finite useful years asset. Otherwise, the asset would be recognize as infinite useful years asset. 3. To estimate the life of finite useful years asset would consider factor of: z The life cycle of the asset to produce product, and the information of similar asset; z The development of craftwork and technology, and the estimate of future development trend z The demand condition in market of the product produced by the asset; z The estimate action would be taken by competitor or potential competitor; z The expense expects to maintain the asset to bring future economic benefit and the ability of the company to pay for it. z The relate law restriction on control period of the asset or other similar restriction such as franchise, lease period. z Relation with other asset holds by company. 4. The intangible asset with finite useful years should be amortization on a systematic and rational basic according its economic benefit achievement plan. A straight line method would be used if the plan could 61 not define. Intangible asset with infinite useful years would not amortize, but would conduct impairment test every year. 5. Conduct test to ability of the asset to bring future economic benefit on balance sheet date, and make provision for impairment of intangible asset according to method describe in Notes 14. 6. Internal organizational research expenses are accounted through profit and loss in current period; development costs which are recognized as intangible assets shall satisfy the following conditions: It is technical feasible for use or sales upon the completion of the intangible assets; it is intended for use or sales upon the completion of the intangible assets; the manner to provide that expect future economic benefits that are attributable the intangible assets including a market is exist for the asset or product of the asset or provide evidence of serviceable if asset are inside used; the entity should have enough technology, financial and other resources to support the completion of development, and have ability to use or sale the intangible assets; the cost of intangible asset can be measured reliably. 13. Long-term deferred expenses The Long-term deferred expenses are defined as those expense in this year but should be allocated in flowing years. The amount transfer to the account are the amount actual paid, and allocate equally in project period. 14. Impairment of Asset 1 An impairment test should be conduct to Goodwill whether impairment evidence has been provided. The entity should check the carrying amounts of fixed assets, construction in process, intangible assets, investment properties and long term equity investment that measure in cost, and make judgment if any indication of impairment loss for those assets exists. If there is objective indication that the asset is impaired, recoverable amount of the asset shall be estimated base on the higher value between fair value less disposal expense and present value of estimated future cash flow. When the recoverable amount of the asset is less than its carrying amount, the differences are recognized as impairment loss. Recoverable amount shall be estimated for the individual asset .If it is not possible to estimate the recoverable amount of the individual asset, the entity shall determine the recoverable amount of the asset group to which the individual asset belongs. The entity determines asset group base on the cash flow which generate from the asset group is independent with other asset or other asset group. 2 Assets may be impaired when the following indication exists 1. During the period, an asset’s market valve has declined significantly more than would be expected as a result of the passage of time or normal use. 2. Significant changes with adverse effect on the entity have taken place during the period, or will take place in near future, in the technology, market, economic or legal environment in which the entity 62 operates or in the market to which an asset is dedicated. 3. Market interest rate or other market rates on investment return have been increased during the period, and those increases are likely to affect the discount rate that are used in calculation of present value of future cash flows, resulting material decrease of recoverable amount of assets. 4. There is indication that an asset is obsolete, outdated or physically damaged. 5. There is indication that an asset is idle, and the entity plans to discontinue the usage of an asset, or plans to disposal of an asset before the previous expected date. 6. Information of internal report of the entity indicates that the economic performance of an asset is lower than expectation, net cash flow the asset created or realized operating profits (or losses) are far below (or higher) than expected amount. 3 Recognize of Asset group The entity determines asset group base on the cash flow which generate from the asset group is independent with other asset or other asset group. Meanwhile, the entity should consider the method of administration, production and operation activities, and held-for-use assets or disposal decision. Once the asset group is determined, it shall keep consistence in each accounting period. Several assets would be recognize as asset group accord with condition mention above if product (or other output) produce by those assets have an activity market whether part or all of the products (or other out) are provide interior. If cash flow of the asset group is affected by internal transaction price, the cash flow should be estimated in the best estimate amount in the light of a fair shake. The goodwill reflected in the consolidated financial statement shall not include the goodwill of subsidiary attributable to minority interests; However, for relative group asset, the goodwill attributable to minority interests shall be included, and the entity shall adjust the book values of the asset group, and compare the adjusted value with its receivable amounts, then to determine whether the asset group (including the goodwill ) is impaired. If aforesaid asset group is impaired, the entity will deduct the share of minority interests proportionately from the loss, and then determine the impaired loss of goodwill attributable to parent company. 4 Impairment loss would not reverse once determined whether value of asset increase in future period. 15. Employment Benefit 1. Employment benefit Mainly include salary, bonus, allowance, employee welfares, society insurance, housing accumulation fund, employee education fee and other payment to acquire service provide by employee. The companies recognizes employment benefit as liability when employee is providing service during account period, and capitalize it in the cost of asset or treat as expense according to beneficiary. Compensation because of release employee from labor contract would transfer to current profit and loss account. 63 2. Dismiss compensation Dismiss compensation means compensate to employee because of release labor relation by the company. Compensation includes release before the end of contract and without agreement with employee; encourage employee unconstraint accept cut down; the internal retirement plan implement by the company. (1) The principal to recognize dismiss compensation i. The company has establish a formal release plan or announce an proposal to unconstraint accept cut down, and is going to conduct. ii. The plan or proposal could not withdraw by the company unilateral. (2) Measurement method of compensation i. To the plan that employee could not refused, accrued payroll according to the plan. ii. To the proposal of unconstraint accept cut down, accrued payroll according to the proposal on a predict number of employee would accept the proposal. (3) Measurement standard of compensation i. To the plan or proposal implement by stages, recognize accrued liability that produced by the plan or proposal in that stage and reckon in administration fee of the period. ii. For the internal retirement plan, recognize accrued liability equal to amount that the company would pay salary and society insurance to employee from the date of stop provide service to the date of normal retirement date according to the plan, and reckon in administration fee of current period. 16.Recognize and measurement of shares-based payment The types of shares-based payment of the company are: cash-settle, equity-settle. 1. Cash-settle The measurement of cash-settle is according with the fair value of liability undertake by the company, which is calculated base on the company’s share or other equity instrument. The value of cash-settle shares-based payment that could exercise immediately after award would be reckoned to relate cost or expense, and increase liability corresponds to it. On each balance sheet date, a best estimated of situation of exercise cash-settle right that with waiting-period should be undertaken, and reckon cost or expense and increase liability which is on the base of service award by the company, according to the fair value of company’s liability. 2. Equity-settle The measurement is base on the fair value of the equity instrument. The value of equity-settle payment that could be exercised immediately after award would be reckoned in relates cost and expense and capital reserves. On each balance sheet date, a best estimated of amount of exercise equity-settle should be undertaken, and reckon in cost or expense and capital reserves which is on the base of service award by the company, 64 according to the fair value of company’s liability. 17. Accrued liabilities 1. Recognize 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: A. This obligation is current obligation of the company; and, B. The performance of this obligation will probably cause economic benefits outflow of the company; and, C. The amount of this obligation can be reliably measured. Loss contracts and restructuring obligations of the company meet the above conditions shall be recognized as accrued liabilities. 2. Measurement of accrued liabilities Accrued liabilities would be measured initial according to the optimum evaluation of outflow of economic benefit if the company perform relate obligation that consider risk, incertitude, time value of currency of contingency factor. Discount future cash flow to present value to determine the optimum evaluation if the time value of currency has great impact. On balance sheet date, check the carry amount of accrued liabilities, and make adjustment to carry amount to reflect the optimum evaluation. The increase amount in carry amount of accrued liabilities cause by time process would be determined as interest fee. 3. Optimum evaluation of accrued liabilities If the necessary payments have scopes, the optimum evaluation shall be determined based on the average amount between the upper and lower limit amount of scope ; if the necessary payments do not have such scopes, then the optimum evaluation shall be determined in the following method: (a) If the contingent event is involved in an individual project, the optimum evaluation amount will be determined base on the most possible amount; (b)If the contingent event is involved more than one project, the optimum evaluation amount shall be determined base on possible amount and occurrence probability. In case of all or part of payments about the confirmed liquidation liabilities are expected to be compensated by the third parties or other parties, and the compensation amounts are surely received, then such amounts shall be separately recognized. The confirmed compensation amounts shall not exceed book values of confirmed liabilities. 18. Revenue recognition A. Sale of goods Revenue from the sale of goods shall be recognized when all of the following conditions are satisfied: a. the entity has transferred the significant risks and reward ownership of goods to the buyer; b. the entity retains neither continuing managerial involvement to the degree usually associated with 65 ownership nor effective control over goods sold c. the amount of revenue can be measured reliably; d. relate economic benefit is probably inflow to the enterprise; e. the associated costs incurred or to be incurred can be measured reliably. B. Rendering of services 1. The entity recognize revenue from rendering of service when come out of rendering of service can be measured reliably at balance sheet date, and adopt percentage of completion method in recognition of revenue. The method depends on schedule of complete to determined revenue and expense. The outcome of service could be measure reliably must meet flow condition; a) the amount of revenue can be measured reliably; b) relate economic benefit is probably inflow to the enterprise; c) the complete of schedule could be determined reliably; d) the associated costs incurred or to be incurred can be measured reliably; 2. When the outcome of rendering of service cannot be measured reliably at balance sheet date, revenue shall be recognized to the extent of costs incurred that are expected to be recoverable if compensation are predict to be award; to those cost that without compensation in predict, through to profit and loss account without recognize revenue. C Transfer of asset use right When the economic benefits related to the transaction are probably will flow into enterprise and the amounts can be reliably measured, the entity shall recognize them as income from the transfer of asset use right under following situations: (a) The amount of interest income is determined by the capital usage period and actual interest rate. (b) The amount of royalties is determined by the period and method of charging as stipulated in the relevant contract or agreement. 19.Government grants Government grants shall be recognized at fair value on the conditions that the entity can receive the grant and comply with the condition attached to the grant. Government grant will initial measure in amount received if the grant is currency-asset, if not, the grant will measure either in its fair value when the fair value could be obtained or nominal amount. A government grant related to an asset shall be recognized as deferred income, and evenly amortized to profit and loss over the useful lives of the related asset. Unamortized amount would be recognized in profit and loss account when the asset is sale, convey, scrap, derogation before its employee life. For government grant related to income, if the grant is a compensation for related expenses or losses to be incurred in subsequent periods, the grant shall be recognized as deferred income, and recognized in profit and loss over the periods in which the related cost are recognized. 66 20. Capitalization of borrowing costs A. Recognition of capitalization of borrowing costs Borrowing costs that are direct attributable to construction, purchase and production of assets and comply with capitalization conditions, shall be capitalized and accounted to costs of relate assets; otherwise, borrowing costs shall be recognized as expenses when incurred and accounted through in profit and loss in current period. Assets which comply with the capitalization conditions refer those assets such as fixed assets, investment properties and inventories etc that require a long time of construction and production activities before being intended for use or for sales B Capitalization period The capitalization of borrowing costs shall satisfy the following conditions: 1. The capital expenditures have been incurred; and, 2. The borrowing costs have been incurred; and, 3. Activities relating to acquisition, construction or production that are necessary to make the assets being intended for use or sales have been launched. 4. Capitalization of borrowing costs shall be suspended during periods in which acquisition, construction or production of assets is interrupted abnormally, and is interrupted for a continuous period of three months. Capitalization of borrowing costs also shall be suspended when the acquisition, construction or production of assets are prepared for intended use or sales. C. Measurement of capitalized borrowing costs During the capitalization period, the amount of interest to be capitalized for each accounting period shall be determined as following: - for a specific purpose borrowing, the amount of interest to be capitalized shall be the actual interest expenses incurred for the period less temporary deposit interests or investment income; the amount of assistant expense for a specific purpose would be capitalized that before the acquisition, construction or production of asset are prepared for intended use or sales, the amount after would be reckoned in current profit and loss account; - Where funds are borrowed under general purpose, the entity shall determine the amount of interest to be capitalized by applying capitalization rate to weighted average of the excess amount between cumulative expenditures on the asset and the amount of specific-purpose borrowings. The capitalization rate shall be weighted average of the interest rates applicable to the general-purpose borrowings; the assistant expense for the general purpose borrowing would be reckoned in current profit and loss account; - During the capitalization period, interest to capitalized would not exceed total amount of interest of relate 67 borrowing in every financial year; exchange margin of foreign currency borrowing and interest would capitalized in capitalization period. 21.Income taxes The company uses deferred income tax liability method in calculation of income taxes. According the deductible temporary differences between carry amount of asset and liability and its tax base, apply tax rate to determine deferred income tax asset or liability according the predict period of recover asset or discharge liability. A. Deferred income tax assets Deferred income tax assets shall be recognized according to deductible temporary differences to the extent that is probable that tax profits will be available against which the deductible temporary differences can be utilized, but deferred income tax asset arise from initial recognize of asset and liabilities in transaction that have character listed below would not recognized: 1) The transaction is not business combination; 2) at the time of the transaction, it affects neither accounting profit nor taxable profit (or deductible loss) For deductable temporary differences associated with investment in subsidiaries, associates, and interests in jointly controlled enterprises, recognize as deferred income tax asset if the temporary difference could be reverse in the foreseeable future and it is probably award the tax profit to again the difference. B. Deferred income tax liabilities Deferred tax liabilities shall be recognized for all taxable temporary differences, except to the extent that the deferred tax liabilities arise from: a) the initial recognition of goodwill; b) the transaction is not a business combination, at the time of the transaction, it affects neither accounting profit nor taxable profit (or deductible loss) For temporary differences associated with investment in subsidiaries, associates, and interests in jointly controlled enterprises, the investing enterprise is able to control the timing of the reversal of the temporary difference, and it is probable that the temporary difference will not reverse in the foreseeable future. On balance sheet date, check the carry amount of deferred tax asset; decrease the carry amount if it is not probably to obtain enough tax profit to again the difference in the foreseeable future, and set-of the decrease amount when probably to obtain enough tax profit. 22. Basis of Consolidation A. Consolidation Scope The consolidated financial statements prepared are in accordance with the No. 33 Enterprise Accounting 68 Standards – Consolidated Financial Statement issued in February, 2006. The consolidated financial statements incorporate the financial statements of the Company and enterprises controlled by the Company (“its subsidiaries”). Control is achieved where the Company has the power to govern the financial and operating policies of an investee enterprise so as to obtain benefits from its activities. If there is evidence provide that the invested company is not control by invest company, the invested company would not in consolidation scope. B. Bought and sale the share of subsidiaries The date of acquire or disposal the right of share of subsidiaries is recognized at the effect date of transfer material risk or reward. The consolidation profit and loss statement and cash flow statement has include the result of management and cash flow of subsidiaries(not in the same control) before disposal or after acquire the share; for the subsidiaries in the same control from business combination, the management result and cash flow has been included in consolidation profit and loss account and cash flow statement from begin of current period to consolidation date and disclose in statement individual, the compare amount in consolidation statement has been adjust correspond to it. If parent company acquires new equity of subsidiaries, on the date of work out consolidation statement, adjust shareholder reserve according to margin between the values of long-term equity investment and proportion of net asset of subsidiaries, adjust retain earning if the reserve is not enough to offset. C. Where necessary, adjustments are made to the financial statements of subsidiaries to bring the accounting policies used into line with those used by other members of the Group. D. Consolidation method All significant intercompany transaction and balances between group enterprises are eliminated on consolidation. The minority interest would disclose in consolidation statement. Decrease minority interest if minorities afford to the loss of the subsidiaries that allocate to minorities, otherwise, the company would bear the loss of exceed. V Change in accounting policies, accounting estimates and correct previous accounting period errors: There are no changes in accounting estimates and no accounting errors in accounting period of 2008. 69 VI Taxation 9.4.1 The type of tax and tax rate for the company are list below: Tax type Tax base Rate% VAT Sale of product and raw material 17 Business Tax Business turnover 5 VAT payable, business tax, consumer tax, Tax that Education Surcharge 1 shall not be exempt from tax allowance and deduction Corporation Tax Taxable profit 18 According to《Notice about Implementation of Preferential Policies of the on Transition of Enterprise Income Tax 》[No.39（2007 of State Council]issued by The State Council on Dec 16 2007 and《Notice of the Ministry of Finance and State Administration of Taxation about Implementation of Preferential Policies of the State Council on Transition of Enterprise Income Tax》[No. 21 [2008] of the Ministry of Finance] issued by the ministry on Feb 23 2008, the income tax rate for the company on 2008 is 18%, and 20% on 2009,22% on 2010,24% on 2011. B The tax type and tax rate for primary subsidiaries 1 Tsann Kuen (ZhangZhou) Enterprise Ltd(TKL) Tax type Tax base Rate % VAT Sale of product and raw material 17 Business Tax Business turnover 5 VAT payable, business tax, consumer Education Surcharge tax、Tax that shall not be exempt from tax 1 allowance and deduction Corporation Tax Taxable profit 15 TKL was cognizance as high technology enterprise by the Fujian Province High Technology Enterprise Cognizance Group (No. 8[2009] Ming Ke Gao), according to the tax law, the corporation tax rate is 15%. 2 Tsann Kuen (Zhangzhou) South Port Electronics Enterprise Co., Ltd. (TKN) Tax type Tax base Rate % VAT Sale of product and raw material 0、17 Business Tax Business turnover 5 VAT payable, business tax, consumer Education Surcharge tax、Tax shall not be exempt from tax 1 allowance and deduction Corporation Tax Taxable profit 12.5 Tsann Kuen (Zhangzhou) South Port Electronics Enterprise Co., Ltd is a production enterprise which is located at Zhangzhou Fujian, the enterprise income tax is levied at 25% of taxable income. According to Income tax rules and regulations for foreign investment enterprises and foreign-owned enterprises, the Company is exempted from income tax from the first to the second accounting period, and is levied at 12.5% 70 from the third to the fifth accounting period since the Company is profitable. The Company’s first profitable year is in the year of 2005. 3 Tsann Kuen (ShangHai) Enterprise Ltd(TKS) Tax type Tax base Rate % VAT Sale of product and raw material 17 Business Tax Business turnover 5 VAT payable, business tax, consumer tax、Tax shall not be Education Surcharge 1 exempt from tax allowance and deduction Corporation Tax Taxable profit 25 4 Shanghai Canxing Trading Co.Ltd Tax type Tax base Rate % VAT Sale of product and raw material 17 Business Tax Business turnover 5 Urban construction tax VAT payable, business tax, consumer tax 1 VAT payable、Tax shall not be exempt from tax allowance and Education Surcharge 3 deduction Corporation Tax Taxable profit 25 5 The Company’s subsidiary EUPA (Hong Kong) Co., Ltd is registered in Hongkong Special Administrative Zone, and income tax rate for the company is 17.5% in 2007,16.5% in 2008 VII Enterprise consolidation and consolation statement scope 7.1 Information of subsidiaries in consolidation scope Registration NO Company name Nature of business Business scope location Manufacture home electronic Manufacture and sales of small home electronic appliance, Tsann Kuen (ShangHai) Enterprise 1 ShangHai appliance electronic device, light-industrial product, and modern furniture Ltd(TKS) and relative modules Manufacture home Development, production and sales of small home electronic Tsann Kuen (ZhangZhou) Enterprise 2 ZhangZhou electronic appliance appliance, new style of electronic device, light-industrial product, Ltd(TKL) (Note1) and modern furniture and relative modules Tsann Kuen (Zhangzhou) South Port Manufacture home Development and production of small home electronic appliance, 3 Electronics Enterprise Co., Ltd. ZhangZhou electronic appliance new style of electronic device, light-industrial product, and modern (TKN) furniture Trading, purchase, small home appliance research, investment, 4 Eupa (Hong Kong) Ltd(EUPA) HongKong synthesize market research Tsann Kuen (Zhangzhou) Profession Secondary vocational education 5 Zhangzhou Profession education and Technology College (College) Import, wholesale, retail, and after service of home electronic appliance, computer and its fitting equipment, communication Shanghai Canxing Trading equipments, mechanical and electronic equipments,office 6 ShangHai Sale of home electronic Co.Ltd(Canxing) equipments and releate complete product(include kitchen equipments);Import or export products or technology by independence or act as agency. 71 The monetary unit is ten thousand unless otherwise stated NO Company name Registered capital Actual investment amount Holding proportion Voting rights proportion 1 TKS USD4,000 USD2,500 62.50% 62.50% 2 TKL USD2,000 USD1378.83 75% 75% 3 TKN RMB500 RMB375 75% 75% 4 EUPA USD290 USD90 100% 100% 5 College RMB50 RMB50 75% 75% 6 Canxing RMB500 RMB495 74.25% 74.25% 7.2 Change in consolidation scope Withdrawal of registration of subsidiaries during report period Direct holding Company name Indirect holding proportion% Withdrawal date proportion% Tsann Kuen (China) Technology Co., Ltd. 75 4.16 Dec.2008 (TKK) Tsann Kuen (China) Technology Co., Ltd. (TKK) has been completed company liquidation, and withdrew of industrial and commercial registration, and tax registration during the reporting period, and are not included in the financial statements consolidation scope, however, the incomes and expenses, and profits are included in consolidated income statement before liquidation. After liquidation, the net asset to be allocated are 4,876,928.33, which TKC could be allocated 3,657,696.25, EUPA could be allocated 202,880.22, and GOOD LAKERS LIMITED could be allocated 1,016,351.86. 2.New Subsidiary during report period Company name Direct holding proportion% Indirect holding proportion% Registration date Canxing 74.25 2008.4.17 Cangxing was established by the subsidiary TKN and Shanghai Tongji Development District Ltd(Tongji) by monetary fund in 17 Apr 2008, the registration capital are RMB 5,000,000.00, which TKN hold 99% of shares and Tongji hold 1% of shares. 7.3 There is no subsidiary obtained by under same control consolidation enterprise. 72 VIII There is no joint-venture enterprise or associate enterprise IX Main item in Consolidation Statement 9.1 Monetary fund Ending Balance Beginning Balance Items Original Exchange Presentation Original Exchange Presentation currency rate currency currency rate currency Cash on hand CNY 0.00 0.00 243,387.23 0.00 0.00 507,345.61 HKD 1,907.91 0.8819 1,682.59 1,296.05 0.9364 1,213.62 USD 19,891.04 6.8346 135,947.30 31,118.94 7.3046 227,311.41 JPY 1,470,508.90 0.07565 111,244.00 176,185.00 0.06406 11,286.41 EUR 27,054.48 9.6590 261,319.22 26,343.28 10.6669 281,001.13 Subtotal 753,580.34 1,028,158.18 Cash in bank CNY 0.00 0.00 127,576,436.82 0.00 0.00 83,202,412.99 HKD 1,509,697.21 0.8819 1,331,401.97 5,363,995.55 0.9364 5,022,845.43 USD 28,084,570.81 6.8346 191,946,807.65 15,845,889.68 7.3046 115,747,885.76 JPY 177,565,874.00 0.07565 13,432,858.41 98,656,586.57 0.06406 6,319,940.94 EUR 129,292.85 9.6590 1,248,839.64 105,403.83 10.6669 1,124,332.11 Subtotal 335,536,344.49 211,417,417.23 Other Monetary fund CNY 0.00 0.00 77,191,317.54 0.00 0.00 147,425,992.77 HKD 32,010.25 0.8819 28,229.84 15,000.00 0.9364 14,046.00 USD 438,475.20 6.8346 2,996,802.61 23,387,277.52 7.3046 170,834,707.37 EUR 0.00 0.00 0.00 342,366.29 10.6669 3,651,986.98 Subtotal 80,216,349.99 321,926,733.12 Total 416,506,274.82 534,372,308.53 9.1.1 Other monetary fund including bank acceptance notes, commercial acceptance notes and deposits for issuance of letter of credit. 9.1.2 The ending balance of monetary fund is decreased of 22.06% compare with begin balance is due to return borrowing fund to bank. 9.2 Tradable financial asset Items Fair value in year end Fair value in year begin Derivative financial assets 0.00 23,027,900.00 Total 0.00 23,027,900.00 The derivative financial asset is contract of forward foreign exchange and long-term potential growth sign by TKL with Bank of China, China Construction Bank, China Merchants Bank maturity delivery complete. 73 9.3 Notes Receivable Items Carry amount in year end Carry amount in year begin bank acceptance notes-no pledge 5,823,544.00 4,079,513.79 Total 5,823,544.00 4,079,513.79 1.The amount is increased 42.75% is caused by payment of sales is settle by notes is increased. 2.No notes that no reach to convert date are endorse transfer of to other company up to Dec 31 2008. 9.4 Account Receivable 9.4.1 Account Receivable Ending Balance Beginning Balance Item Balance propor Bad debit Net value Balance propor Bad debit Net value tion% provision tion% provision Individual transaction with significant 161,545,803.31 35.73 12,904,956.35 148,640,846.96 202,156,611.19 33.49 2,698,827.28 199,457,783.91 amount Individual transaction with not so significant 41,258,039.77 9.12 41,258,039.77 0.00 115,025.06 0.02 115,025.06 0.00 amount but significant recoverable risk Other transaction with 249,342,672.13 55.15 820,937.38 248,521,734.75 401,297,138.18 66.49 56,178,710.18 345,118,428.00 no significant amount Total 452,146,515.21 100.00 54,983,933.50 397,162,581.71 603,568,774.43 100.00 58,992,562.52 544,576,211.91 9.4.2 Age Analysis Ending Balance Beginning Balance Age Balance proporti Bad debit Net value Balance proport Bad debit Net value on% provision ion% provision Within 1 year 397,638,202.33 87.94 508,820.53 397,129,381.80 548,598,796.51 90.89 12,095,904.05 536,502,892.46 1-2 years 13,376,232.29 2.96 13,346,444.36 29,787.93 54,680,498.08 9.06 46,607,178.63 8,073,319.45 2-3 years 41,132,080.59 9.10 41,128,668.61 3,411.98 174,454.78 0.03 174,454.78 0.00 Above 3 years 0.00 0.00 0.00 0.00 115,025.06 0.02 115,025.06 0.00 Total 452,146,515.21 100.00 54,983,933.50 397,162,581.71 603,568,774.43 100.00 58,992,562.52 544,576,211.91 9.4.3 The company write off third parties account receivable for 11,856,932.68,the detail as followed: Debtor Amount Nature Reason Relate parties(Y/N) OMNI SOURCE 61,629.60 Sales quality badness fine；Aged N DISTRIBUIDOR AMELPRYS.A.DEC.V. 64,055.98 Sales quality badness fine；Aged N Electrolux Home Products Corporation N.V 93,974.63 Sales quality badness fine；Aged N Aerogaz(S)Pte.Ltd. 97,013.84 Sales quality badness fine；Aged N SANYOELECTRICCO。，LTD 106,085.24 Sales quality badness fine；Aged N 东芝 THTCORPORATION 158,812.65 Sales quality badness fine；Aged N Electrolux South Africa(Pty)Ltd. 203,233.37 Sales quality badness fine；Aged N Societed’ Emboutissagede Bourgogne 240,867.38 Sales quality badness fine；Aged N ((法国)勃艮第冲压制品公司) 74 东 芝 THA 秦 野 工 场 (TOSHIBA HOME 466,675.82 Sales quality badness fine；Aged N APPLIANCES CORPORATION) JARDEN CONSUMER SOLUTIONS 470,356.93 Sales quality badness fine；Aged N Applica Consumer Products Inc 1,700,905.09 Sales quality badness fine N Walmart stores Inc 1,894,526.71 Sales quality badness fine N DAIKIALUMIN 5,287,684.07 Sales quality badness fine N 9.4.3 The amount due from shareholder who own 5% or more than 5% of voting right as followed: Name Carry amount of Ending Balance Carry amount of Beginning Balance Tsann Kuen Enterprise Co., Ltd 27,157,898.62 24,748,124.18 9..4.5. Total amount of top five account receivable is 245,768,967.10, representing 54.36% of account receivables balance. Ending balance Beginning Balance Age Amount proportion% Amount proportion% Within 1 year 232,873,277.00 94.75 299,985,642.76 99.76 1-2years 12,895,690.10 5.25 712,761.01 0.24 Total 245,768,967.10 100.00 300,698,403.77 100.00 9.4.6Other explanation 9.4.6.1. Individual transaction with significant amount: Individual amount which represents more than 10% (includes 10%) of ending balance of account receivable shall be treated as Individual transaction with significant amount. 9.4.6.2. Individual transaction with not so significant amount but significant recoverable risk which represents any individual transaction with no so significant amount, but the age is more than 1 years, those transaction are treated as Individual transaction with not so significant amount but significant recoverable risk. 9.4.6.3. Other transactions with no significant amount represent any transaction except set forth in 9.5 Advance to suppliers 9.5.1 Aged analysis Age Ending balance proportion% Beginning Balance proportion% Within 1 year 5,915,476.53 66.39 25,275,510.79 99.70 1-2years 2,995,322.41 33.61 75,695.72 0.30 Total 8,910,798.94 100.00 25,351,206.51 100.00 9.5.2 Age over one year is advance for purchase material. 9.5.3 The ending balance is decreased of 64.85% compare with the beginning balance is caused by partial 75 advance for material and factory rental are settle. 9.5.4 Total amount of top five advance to supplier is 6,626,545.71, representing 74.37% of ending balance. 9.5.5 Up to 31 Dec 2008, there is no amount due from shareholder who own 5% or over 5%of voting shares. 9.6 Other receivable 9.6.1. Other receivable Item Ending balance Beginning Balance Amount Proporti Bad debit Net value Amount Proport Bad debit Net value on% provision ion% provision Individual transaction with significant amount 9,284,077.19 27.16 0.00 9,284,077.19 22,533,004.97 76.69 0.00 22,533,004.97 Individual transaction with not so significant amount but significant recoverable risk 3,403,176.27 9.96 3,403,176.27 0.00 0.00 0.00 0.00 0.00 Other transaction with no significant amount 21,495,669.25 62.88 1,793,422.09 19,702,247.16 6,849,156.25 23.31 2,944,313.49 3,904,842.76 Total 34,182,922.71 100.00 5,196,598.36 28,986,324.35 29,382,161.22 100.00 2,944,313.49 26,437,847.73 9.6.2. Breakdown of individual account receivable with significant amount Debtor amount age proportion content Export tax refund State tax authority of Zhang Zhou city 9,284,077.19 1 month 0.00 receivable 9.6.3. Age analysis Ending Balance Beginning Balance Age Balance proporti Bad debit Net value Balance proporti Bad debit Net value on% provision on% provision Within 1 year 30,779,746.44 90.04 1,793,422.09 28,986,324.35 25,552,665.07 86.97 387,049.58 25,165,615.49 1-2 years 2,386,574.47 6.98 2,386,574.47 0.00 3,369,756.77 11.47 2,125,713.50 1,244,043.27 2-3years 572,898.96 1.68 572,898.96 0.00 459,739.38 1.56 431,550.41 28,188.97 Above 3 years 443,702.84 1.30 443,702.84 0.00 0.00 0.00 0.00 0.00 Total 34,182,922.71 100.00 5,196,598.36 28,986,324.35 29,382,161.22 100.00 2,944,313.49 26,437,847.73 9.6.4. Up to 31 Dec 2008, here is no amount due from shareholder who own 5% or over 5%of voting shares. 76 9.6.5. The total amount of top five other receivable is 16,289,445.63, represent 47.65% of ending balance Name Amount Nature Age Proportion% Export tax refund State tax authority of Zhang Zhou city 9,284,077.19 receivable Within 1 years 56.99 Dong Du Custom of People Republic of China 2,409,462.20 Security Deposit Within 1 years 14.79 People’s Court of Xiamen City HuLi District 1,908,990.00 Security Deposit Within 1 years 11.72 Receivable of Ni YiLian 1,700,000.00 transfer property 1-2 年内 10.44 SEB Asia Ltd 986,916.24 Certification fee Within 1 years 6.06 Total 16,289,445.63 100.00 9.6.6. Other explanation Individual transaction with significant amount: Individual amount which represents more than 10%( includes 10%) of ending balance of account receivable shall be treated as Individual transaction with significant amount. Individual transaction with not so significant amount but significant recoverable risk which represents any individual transaction with no so significant amount, but the age is more than 1 years, those transaction are treated as Individual transaction with not so significant amount but significant recoverable risk. Other transactions with no significant amount represent any transaction except set forth above 9.7 Inventory 9.7.1 Inventories Ending Balance Begin Balance Items Provision for Net Value Provision for Net Value Amount Amount impairment impairment Material 190,355,952.68 6,624,807.61 183,731,145.07 231,284,305.21 13,199,679.57 218,084,625.64 Product in process 91,693,725.66 0.00 91,693,725.66 153,566,031.87 6,751,835.44 146,814,196.43 Product 169,764,797.46 2,505,969.67 167,258,827.79 158,056,069.46 4,479,303.13 153,576,766.33 Material in transit 8,542,553.88 0.00 8,542,553.88 71,943,256.02 0.00 71,943,256.02 Total 460,357,029.68 9,130,777.28 451,226,252.40 614,849,662.56 24,430,818.14 590,418,844.42 77 9.7.2 Provision for Impairment Proportion of reversal in its Items Beginning Balance provision Reversal Write off Ending Balance ending balance of similar item Material 13,199,679.57 6,624,807.61 3,203,291.41 9,996,388.16 6,624,807.61 1.68 Product in process 6,751,835.44 0.00 403,318.64 6,348,516.80 0.00 0.44 Product 4,479,303.13 2,505,969.67 0.00 4,479,303.13 2,505,969.67 0.00 Total 24,430,818.14 9,130,777.28 3,606,610.05 20,824,208.09 9,130,777.28 9.7.3 A decrease of 25.13% of Ending balance compare with beginning balance is caused by revise corporation strategy that affect by the Financial Crisis. 9.7.4 The impairment loss provision for inventories is made base on the difference of the lower net recoverable value into cash and book value on December 31, 2008. Net recoverable value into cash refers estimated sale price less estimated selling expense and related taxes expense. The decrease of impairment loss of inventories is due to low balance of inventories at report date. 9.8 Available-for-Sale Financial Asset Items Year End Fair Value Year Begin Fair value Available-for-Sale investment 109,771.20 250,387.20 Total 109,771.20 250,387.20 The investment are share of Shanghai Join Buy Co. Ltd hold by the enterprise that the share have no control and significant influence on the LTD. The difference between the carry amount and fair value of investment would be recognized in capital reserves after tax deductible. 9.9 Long-term Receivable Ending Balance Beginning Balance Items Amount Provision Net Value Amount Provision Net Value Receivable 69,991,126.07 1,503,237.14 68,487,888.93 48,423,277.60 0.00 48,423,277.60 Total 69,991,126.07 1,503,237.14 68,487,888.93 48,423,277.60 0.00 48,423,277.60 1 The receivable is an installment receives by the company for transfer of asset. 2 The nature of amount of receivable 41,261,421.60 is transfer trading asset and business opportunity form TKL to Shanghai Sigma Metals, Inc, detail are listed in No.2 of 13of this notes 78 9.10 Long-term equity investment 9.10.1 Long-term equity investment and impairment loss provision： 2008-12-31 2007-12-31 Item Impairment Impairment loss Investment Investment cost loss provision Carrying value Investment cost provision cost Total long-term equity investment 40,000.00 0.00 40,000.00 40,000.00 0.00 40,000.00 Investment in other enterprise 40,000.00 0.00 40,000.00 40,000.00 0.00 40,000.00 9.10.2 Long-term equity investment measured by cost method： Initial Balance on Increment Decrement Balance on Investee Investment cost 2007-12-31 2008-12-31 Xiamen Foreign Investment Enterprise Association 40,000.00 40,000.00 0.00 0.00 40,000.00 Total 40,000.00 40,000.00 0.00 0.00 40,000.00 9.11 Investment Property 9.11.1Subsequent measurement by cost model Balance on Increment Decrement Balance on Items 2007-12-31 2008-12-31 （1）Total costs 65,694,635.34 2,571,813.30 732,243.70 67,534,204.94 ①Buildings and structures 65,694,635.34 2,571,813.30 732,243.70 67,534,204.94 ②Land use right 0.00 0.00 0.00 0.00 （ 2 ） Total accumulated depreciation and accumulated 26,791,376.16 3,527,627.11 239,685.44 30,079,317.83 amortization: ①Buildings and structures 26,791,376.16 3,527,627.11 239,685.44 30,079,317.83 ②Land use right 0.00 0.00 0.00 0.00 （3）Total accumulated impairment loss provision: 0.00 0.00 0.00 0.00 ①Buildings and structures 0.00 0.00 0.00 0.00 ②Land use right 0.00 0.00 0.00 0.00 （4）Total carrying value 38,903,259.18 0.00 0.00 37,454,887.11 ①Buildings and structures 38,903,259.18 0.00 0.00 37,454,887.11 0.00 0.00 0.00 ②Land use right 0.00 According to review, recoverable amount of investment properties is not lower than year ending balance; there is no impairment loss provision for property investment 79 9.12 Fixed assets and accumulated depreciation 9.12.1 Balance of fixed assets and accumulated depreciation Items Balance on 2007-12-31 Increment Decrement Balance on 2008-12-31 （1）Total costs 3,163,583,382.34 96,237,958.59 359,944,710.80 2,899,876,630.13 Buildings and structures 150,149,294.95 3,855,241.60 17,982,734.94 136,021,801.61 Machineries 903,841,380.80 7,432,591.84 101,531,138.59 809,742,834.05 Furniture, equipments, Modules and others 1,991,057,692.81 81,239,028.07 231,980,877.49 1,840,315,843.39 Vehicles 61,687,739.94 71,925.98 7,216,608.68 54,543,057.24 Capitalized maintenance expenses for Fixed asset 56,847,273.84 3,639,171.10 1,233,351.10 59,253,093.84 （2）Total Accumulated depreciation: 2,121,378,446.38 232,874,104.85 280,837,193.26 2,073,415,357.97 Buildings and structures 59,703,376.94 13,394,030.10 9,378,594.62 63,718,812.42 Machineries 442,822,777.75 66,096,227.68 93,294,292.45 415,624,712.98 Furniture, equipments, Modules and others 1,561,989,252.46 142,844,495.71 171,122,374.62 1,533,711,373.55 Vehicles 46,100,268.18 4,979,861.15 6,887,037.55 44,193,091.78 Capitalized maintenance expenses for Fixed asset 10,762,771.05 5,559,490.21 154,894.02 16,167,367.24 （3）Total accumulated impairment loss provision: 54,732,070.11 27,579,192.03 19,942,608.49 62,368,653.65 Buildings and structures 0.00 0.00 0.00 0.00 Machineries 4,724,884.93 21,999,991.63 6,099,009.17 20,625,867.39 Furniture, equipments, Modules and others 49,177,756.77 5,450,710.94 13,773,737.38 40,854,730.33 Vehicles 22,565.39 93,816.39 50,061.94 66,319.84 Capitalized maintenance expenses for Fixed asset 806,863.02 34,673.07 19,800.00 821,736.09 （4）Total carrying value 987,472,865.85 0.00 0.00 764,092,618.51 Buildings and structures 90,445,918.01 0.00 0.00 72,302,989.19 Machineries 456,293,718.12 0.00 0.00 373,492,253.68 Furniture, equipments, Modules and others 379,890,683.58 0.00 0.00 265,749,739.51 Vehicles 15,564,906.37 0.00 0.00 10,283,645.62 Capitalized maintenance expenses for Fixed asset 45,277,639.77 0.00 0.00 42,263,990.51 9.12.2 The increase of fixed assets impairment loss provision RMB 27,579,192.03, that is mainly due to provision for the impairment of idle assets by the subsidiary (TKL); The decrease of fixed asset impairment loss provision of 19,942,608.49 is mainly due to reverse fixed assets impairment loss that belong to those fixed assets sold to satellite factories. The provision for impairment loss is calculate according to judgment of Internal produce, Technology, Equipment management department and external assessment result of asset. 9.12.3 The amount of fixed assets that are transferred from Construction in progress in the year is RMB 37,510,307.25. 9.12.4 The total accumulated impairment loss includes 232,874,104.85 provided in this year. 80 9.12.5 Details of idle assets： Accumulated impairment loss Estimated date for Items Cost Net value depreciation Provision usage Fixed assets： Machineries 63,978,536.73 18,080,560.54 15,610,658.60 30,287,317.59 October 2009 Furniture, equipments, 3,897,944.41 948,634.55 2,365,568.16 583,741.70 August 2009 Modules and others Vehicles 584,363.49 211,402.80 17,960.69 355,000.00 October 2009 Capitalized maintenance 313,000.00 59,299.93 14,873.07 238,827.00 August 2009 expenses for Fixed asset Total 68,773,844.63 19,299,897.82 18,009,060.52 31,464,886.29 9.12.6 Details of purpose to dispose fixed assets: Accumulated impairment loss Predicted Items Cost depreciation Provision Net value disposal date Machineries 50,336,366.98 24,354,593.14 88,339.73 25,893,434.11 April 2009 Furniture, equipments, Modules and others 24,726,916.84 21,290,718.29 2,733,202.24 702,996.31 April 2009 Vehicles 219,212.38 184,387.98 0.00 34,824.40 April 2009 Capitalized maintenance expenses for Fixed asset 58,600.00 14,776.57 0.00 43,823.43 April 2009 Total 75,341,096.20 45,844,475.98 2,821,541.97 26,675,078.25 9.12.7 The Company has no finance leased fixed asset. 9.12.8 Details of fixed assets leasing out by operating lease Item impairment loss Net value Cost Accumulated depreciation Provision Machines and Equipments 7,166,874.88 2,834,577.84 13,037.20 4,319,259.84 Machines and equipments are leasing to satellite factory Xiamen Chaoda industry Ltd, the leasing period are 18 month, and in end in Jan 2010. 9.12.9 Fixed assets which have not completed the process of property right certificate. Item Accumulated impairment loss Net value Cost depreciation Provision Reason Buildings and structures 1,957,670.50 176,190.96 0.00 1,781,479.54 Being processed 81 9.12.10 Details of pledged fixed assets： Items Accumulated impairment loss Net value Reason Cost depreciation Provision Buildings and Pledged for loans、bank draft、 55,413,995.96 25,406,636.10 0.00 30,007,359.86 structures 、L/C、guarantee Machineries 252,465,702.93 115,094,199.68 3,274,126.82 134,097,376.43 Export credit guarantee Furniture, equipments, 525,534,382.32 307,119,700.77 19,049,890.48 199,364,791.07 Export credit guarantee Modules and others Total 833,414,081.21 447,620,536.55 22,324,017.30 363,469,527.36 9.13 Construction in progress 9.13.1 Details of construction in progress Balance on Transfer to Balance on Project name Increment Other decrement 2007-12-31 Fixed assets 2008-12-31 Device Installation 6,408,523.96 4,569,447.98 10,919,341.94 0.00 58,630.00 Module-in-process 16,243,952.99 9,727,397.28 22,906,237.59 97,818.00 2,967,294.68 Decoration 3,028,890.00 1,054,253.45 3,684,727.72 0.00 398,415.73 Total 25,681,366.95 15,351,098.71 37,510,307.25 97,818.00 3,424,340.41 Details of construction in progress（continued） interest capitalization Project input in construction in Sources of funding Project name Budget over its progress at the ending budget % period Device Installation 0.00 4,596,739.28 Self-owned capital 99.41 Module-in-process 0.00 10,069,854.96 Self-owned capital 96.60 Decoration 0.00 1,003,895.40 Self-owned capital 105.02 Total 0.00 15,670,489.64 9.13.2 Impairment loss provision for Construction in progress Balance on Balance on Project name Increment Decrement 2007-12-31 2008-12-31 Module-in-process 678,896.16 668,101.76 1,346,997.92 0.00 Total 678,896.16 668,101.76 1,346,997.92 0.00 9.13.3 The other construction in progress decreased RMB 97,818.00, is mainly due to transfer out and clean-up the costs of the unsuccessful development module. Impairment loss increased RMB 668,101.76 in this year that is mainly due to those modules cannot used because physical damage; the impairment loss of construction in progress decreased RMB 1,346,997.92, because transfer out those modules that cannot use because physical damage. 82 9.13.4 The net value decreased 87.01% in this year，mainly due to transfer to fixed assets. 9.14 Intangible assets and accumulated amortization 9.14.1 Intangible assets Items Balance on Balance on Increment Decrement 2007-12-31 2008-12-31 （1）Total cost 40,135,828.70 5,030,090.10 0.00 45,165,918.80 Land use right 29,560,727.51 0.00 0.00 29,560,727.51 Software 10,575,101.19 5,030,090.10 0.00 15,605,191.29 （ 2 ） Total Accumulated 11,176,785.99 3,395,673.41 0.00 14,572,459.40 depreciation Land use right 7,242,898.81 915,384.44 0.00 8,158,283.25 Software 3,933,887.18 2,480,288.97 0.00 6,414,176.15 （ 3 ） Total accumulated 0.00 0.00 0.00 0.00 impairment loss provision Land use right 0.00 0.00 0.00 0.00 Software 0.00 0.00 0.00 0.00 （4）Total carrying value 28,959,042.71 0.00 0.00 30,593,459.40 Land use right 22,317,828.70 0.00 0.00 21,402,444.26 Software 6,641,214.01 0.00 0.00 9,191,015.14 9.14.2 There is no impairment loss provision for intangible assets upon the Company’s management review that recoverable amount is not lower than yearend balance amount. 9.14.3 Details of pledged intangible assets: Item Impairment Accumulated Cost Loss Carrying Reason amortization provision value Pledged for loans、bankdraft、L/C、 0.00 Land use right 20,700,092.85 6,554,468.60 14,145,624.25 guarantee Total 20,700,092.85 6,554,468.60 0.00 14,145,624.25 9.14.4 During this year, company’s total expenditures used for research and development projects are RMB 65,316,705.97, recording into current profit and loss. 9.15 Long-term deferred expense Items Balance on 2008-12-31 Balance on 2007-12-31 Telecommunications 155,458.15 184,158.19 engineering SUN computer servicer fees 341,666.73 441,666.69 Internet charges 375,648.00 480,480.00 Total 872,772.88 1,106,304.88 83 9.16 Deferred income tax assets 9.16.1 Recognition of deferred income tax assets Items Deductible temporary difference Deferred income tax Balance on Balance on Balance on 2008-12-31 Balance on 2007-12-31 2008-12-31 2007-12-31 Impairment loss of 48,765,101.41 0.00 7,314,765.21 0.00 fixed assets Bad debts 158,583.32 281,027.50 19,822.92 35,128.44 Accrued Expense 177,192.43 0.00 44,298.11 0.00 Provision for 982,411.95 1,830,357.53 122,801.49 228,794.69 Inventory Loss relief 101,066,374.38 115,790,262.28 15,177,213.44 28,811,156.56 Total 151,149,663.49 117,901,647.31 22,678,901.17 29,075,079.69 Except the Company’s subsidiaries TKL, TKN, Eupa (Hongkong) Co.Ltd, TKS, the parent company and other subsidiaries do not have sufficient deducting taxable income in the foreseeable future, that can be reverse the deductible temporary difference recognized before. 9.17 Impairment provision for assets Balance on Decrement Balance on Items Increment 2007-12-31 Reversal Wirtten-off 2008-12-31 61,936,876.01 12,428,324.12 748,637.54 11,932,793.59 61,683,769.00 Bad debts provision Inventories impairment 24,430,818.14 9,130,777.28 3,606,610.05 20,824,208.09 9,130,777.28 loss provision Fixed asset impairment 54,732,070.11 27,579,192.03 0.00 19,942,608.49 62,368,653.65 loss provision Construction in progress 678,896.16 668,101.76 0.00 1,346,997.92 0.00 impairment loss provision 141,778,660.42 49,806,395.19 4,355,247.59 54,046,608.09 133,183,199.93 Total 9.18 Restricted assets Items Balance on 2007-12-31 Increment Decrement Balance on 2008-12-31 1、Pledged assets: 340,789,251.62 377,615,151.61 340,789,251.62 377,615,151.61 Buildings and 59,498,169.32 30,007,359.86 59,498,169.32 30,007,359.86 structures Machineries 121,618,905.85 134,097,376.43 121,618,905.85 134,097,376.43 Furniture, equipments, Modules 152,320,261.69 199,364,791.07 152,320,261.69 199,364,791.07 and others Land use right 7,351,914.76 14,145,624.25 7,351,914.76 14,145,624.25 2、Other causes of asset 80,216,349.99 ownership restrictions 321,926,733.12 803,410,403.87 1,045,120,787.00 Other monetary fund 321,926,733.12 803,410,403.87 1,045,120,787.00 80,216,349.99 Total 662,715,984.74 1,181,025,555.48 1,385,910,038.62 457,831,501.60 84 The reason for restricted assets: the Company used its land use right (which carrying value of RMB 14,145,624.25) and buildings (the cost is RMB 55,413,995.96, accumulated depreciation is RMB 25,406,636.10, and carrying value of RMB 30,007,359.86) located in No.88 Xinglong road, as pledges of , that sign with China Construction Bank by TKL for comprehensive credit business . The maximum guarantee amount for the borrowing is RMB 108,000,000, and the guarantee will expire on September 10, 2009. TKL used its machineries and modules (book value is RMB 778,000,085.25, accumulated depreciation of RMB 422,213,900.45, impairment loss provision of RMB 22,324,017.30, and carrying value 333,462,167.50), as pledges, to obtain trade finance facilities from Societe Generale Bank. The maximum guarantee amount for the borrowing is RMB 200,000,000.00, and the guarantee will expire on November 3, 2009. Other monetary fund as margin deposits of the company, used to issuance of bank acceptance draft, commercial acceptance bill, and letter of credit. 9.19 Short-term loan 9.19.1Category of short-term loan Type Balance on 2008-12-31 Balance on 2007-12-31 Guaranteed bank 0.00 173,447,793.84 loan Pledge bank loan 0.00 125,000,000.00 Total 0.00 298,447,793.84 9.19.2 The short-term loan decreased 100%, because repaid all bank borrowings in this year. 9.20 Notes payable Items Balance on 2008-12-31 Balance on 2007-12-31 Bank acceptance notes 104,065,444.40 133,157,437.91 Trade acceptance notes 73,531,316.49 75,056,207.13 Total 177,596,760.89 208,213,645.04 9.20.1 The ending balance of note payable shall be due in from January to June 2009. 9.20.2 There is no amount due to shareholders who own 5% or more than 5% voting rights until December 31, 2008. 85 9.21 Accounts payable 9.21.1 Age analysis Age Balance on 2008-12-31 Balance on 2007-12-31 Within 1 year 750,391,401.61 1,009,535,555.08 Above 1 year 4,014,554.37 6,375,219.76 Total 754,405,955.98 1,015,910,774.84 9.21.2 The balance of accounts payable, which is significant and age is more than one year: Repayment after Company name amount in arear Age Reasons the balance sheet date Payment for goods ULKAS.P.A 516,795.62 1-2year 0.00 -temporary unsettled Yangzhou Porite technological Payment for goods Co.,Ltd 453,092.40 1-2year 0.00 -temporary unsettled 扬州保来得科技实业有限公司 Daxing Wire and cable Co.,Ltd Payment for goods 277,335.06 1-2year 0.00 大兴电线电缆股份有限公司 -temporary unsettled Xiamen Bozhi Trading Co.,Ltd Payment for goods 253,080.00 1-2year 110,224.60 厦门博智贸易有限公司 -temporary unsettled Xiamen Huayuanfa Paper Payment for goods investment Co.,Ltd 241,301.33 1-2year 0.00 -temporary unsettled 厦门华源发纸业投资有限公司 Total 1,741,604.41 110,224.60 9.21.3 The amount due to shareholders who own 5% or more than 5% voting right is as followed: Name of Shareholders amount in arear Age Proportion % Nature Tsann Kuen Enterprise Co. Payment for goods Ltd 13,633,806.27 Within one year 1.81 unsettled 9.22 Advanced from customers 9.22.1 Age analysis Age Balance on 2008-12-31 Balance on 2007-12-31 Within 1 year 20,285,350.06 12,829,641.81 Above 1 year 1,166,879.95 0.00 Total 21,452,230.01 12,829,641.81 9.22.2 The balance of advance from customers, which is significant and age is more than one year: Company name Balance Age Reasons NIKAI 123,637.91 1-2year Payment for good -temporary unsettled Monodor 120,821.73 1-2year Payment for goods-temporary unsettled SALTON 86,500.00 1-2year Payment for goods-temporary unsettled ConairCorporation 81,940.91 1-2year Payment for goods-temporary unsettled ULTRACOMB 56,727.18 1-2year Payment for goods-temporary unsettled Total 469,627.73 86 9.22.3 There is no amount due to shareholders who own 5% or more than 5% voting rights until December 31, 2008. 9.22.4 The balance of advance from customers increased 67.21% in this year, main due to those Payment for goods temporary unsettled. 9.23 Payroll payables Items Balance on Increment Pay out Balance on 2008-12-31 2007-12-31 1、Salary, bonus and allowance 41,946,139.89 383,034,132.56 394,650,654.02 30,329,618.43 2、Employee welfare 0.00 13,155,168.74 13,155,168.74 0.00 3、Social insurance 6,341,713.01 24,433,145.73 19,660,862.31 11,113,996.43 Including：1）Medical insurance 329,475.66 6,588,617.19 6,337,445.32 580,647.53 2）Basic retirement insurance 5,264,345.25 14,537,812.86 10,646,178.94 9,155,979.17 3）Annuity fee 0.00 0.00 0.00 0.00 4）Unemployment insurance 691,416.20 562,631.53 352,811.85 901,235.88 5） Injury insurance 56,475.90 1,998,651.14 1,714,929.44 340,197.60 6）Pregnancy insurance 0.00 745,433.01 609,496.76 135,936.25 4、Housing accumulation fund 6,853,956.38 6,557,734.96 6,185,467.19 7,226,224.15 5、Labour union fee and employee education fee 0.00 605,077.14 605,077.14 0.00 6、Non-monetary welfare 0.00 0.00 0.00 0.00 7、Redemption for termination of labor contract 0.00 1,999,590.94 1,867,590.94 132,000.00 8、Others 17,400.00 121,450.00 135,050.00 3,800.00 Including：share payment by cash 0.00 0.00 0.00 0.00 Total 55,159,209.28 429,906,300.07 436,259,870.34 48,805,639.01 9.24 Tax payable Types Balance on 2008-12-31 Balance on 2007-12-31 Business Tax 1,105,750.68 6,590,657.35 Income Tax -4,438,943.55 -4,631,523.70 VAT 26,021,612.62 48,803,684.07 Personal Income Tax 304,432.16 601,733.26 Education fee 159,778.99 77,514.33 Withholding Income Tax 0.00 632,945.96 Others 21,125,967.93 23,485,675.87 Total 44,278,598.83 75,560,687.14 87 9.25 Other account payables 9.25.1 Age analysis Age Balance on 2008-12-31 Balance on 2007-12-31 Within 1 year 395,710,661.53 302,540,475.15 Above 1 year 543,311.60 49,414,330.08 Total 396,253,973.13 351,954,805.23 9.25.2 The balance of other account payables, which is significant and age is more than one year: Repayment after the balance Company name amount in arrear Age Reasons sheet date Xiamen Rongxiangsheng Modules Co.,Ltd 厦门市荣兴盛模具有限公司 197,460.00 Above 3years Deposit 0.00 Xiamen Rongfei Industry &Trade Co., Ltd 厦门市荣飞工贸有限公司 23,925.00 Above 3years Deposit 0.00 Total 221,385.00 9.25.3 The amount due to shareholders who own 5% or more than 5% voting right is as followed: Name of Shareholders amount in arear Age Proportion % Reasons Tsann Kuen Enterprise Co. Ltd 17,482,751.86 Within one year 4.41 Not to maturity EUPA (Hong Kong) Limited 157,195,800.00 Within one year 39.67 Not to maturity Fordchee Development Limited 82,015,200.00 Within one year 20.70 Not to maturity Fillman Investment Limited 34,173,000.00 Within one year 8.62 Not to maturity Total 290,866,751.86 73.40 9.26 Long-term Loans 9.26.1 Types of long-term loans: Balance on 2008-12-31 Balance on 2007-12-31 Creditors Currency Types Presentation Presentation Original Currency Original Currency Currency Currency The Bank of East Asia, RMB Guaranteed loan 0.00 0.00 38,500,000.00 38,500,000.00 Xiamen branch The Bank of East Asia, USD Guaranteed loan 10,000,000.00 68,346,000.00 10,000,000.00 73,046,000.00 Xiamen branch 68,346,000.00 111,546,000.00 Total 9.26.2 The loans are guaranteed by the irrevocable standby letter of guarantee issued by The Bank of East Asia, Macau branch, which applied by Tsann Kuen Enterprise Co., Ltd, the beneficiary is The Bank of East Asia, Xiamen branch, and with condition of the guarantee amount shall not lower than loan amount. 9.26.3 The long-term borrowing for USD5, 000,000 is from the Bank of East Asia, Xiamen branch, and 88 Company shall repay principal for RMB38, 500,000 in agreement with contract when the loan matures, and the designated interest rate is 10% below the normal interest rate announced by the People’s Bank of China. In this year, repayment to advance, compensation (RMB 385,000.00) was paid according to the principal amount of 1.00%. 9.26.4 The borrowing for USD10, 000,000 is from the Bank of East Asia, Xiamen branch, and the designated interest rate is 0.6% above LIBOR 3M. 9.27 Deferred Income Item Balance on 008-12-31 Balance on 2007-12-31 Deferred income of transfer of assets by installment plan 43,400,202.15 48,423,277.60 Total 43,400,202.15 48,423,277.60 The deferred income refers to the unrealized contract between TKL and Shanghai Sigma Metals, Inc which TKL transferred its assets and business opportunities (RMB 41,261,421.60) to Shanghai Sigma Metals, Inc. Please refer to note 13 (2) for details. 9.28 Deferred Income Tax Liabilities Item Taxable temporary difference Deferred income tax liabilities Balance on Balance on Balance on Balance on 2008-12-31 2007-12-31 2008-12-31 2007-12-31 held for trading financial assets 0.00 23,027,900.00 0.00 5,756,975.00 available-for-sale financial assets 79,071.20 219,687.20 14,232.82 39,543.70 Unrealized exchange gains and losses 4,147,972.14 0.00 622,195.82 0.00 Total 4,227,043.34 23,247,587.20 636,428.64 5,796,518.70 89 9.29 Share Capital Chang in current year（+、－） Unit：share Items Balance on 2007-12-31 Allotment of Bonus Transfer reserve Others Subtotal Balance on 2008-12-31 shares shares into shares 1、Unlisted shares （1）Sponsor shares 0.00 0.00 0.00 0.00 0.00 0.00 0.00 Including： 0.00 0.00 0.00 0.00 0.00 0.00 0.00 shares held by states 0.00 0.00 0.00 0.00 0.00 0.00 0.00 Shares held by state-owned legal persons 0.00 0.00 0.00 0.00 0.00 0.00 0.00 Shares held by overseas legal persons 0.00 0.00 0.00 0.00 0.00 0.00 0.00 Others 0.00 0.00 0.00 0.00 0.00 0.00 0.00 （2）Raising shares 0.00 0.00 0.00 0.00 0.00 0.00 0.00 （3）staff shares 0.00 0.00 0.00 0.00 0.00 0.00 0.00 （4）preference shares or others 0.00 0.00 0.00 0.00 0.00 0.00 0.00 Including：Allotment of shares 0.00 0.00 0.00 0.00 0.00 0.00 0.00 Total Unlisted shares 0.00 0.00 0.00 0.00 0.00 0.00 0.00 2、Listed shares Domestically listed foreign shares 1,112,350,077.00 0.00 0.00 0.00 0.00 0.00 1,112,350,077.00 Including：Executives shares 0.00 0.00 0.00 0.00 0.00 0.00 0.00 Total Listed shares 1,112,350,077.00 0.00 0.00 0.00 0.00 0.00 1,112,350,077.00 3、restricted Listed shares 0.00 0.00 0.00 0.00 0.00 0.00 0.00 4、Total shares 1,112,350,077.00 0.00 0.00 0.00 0.00 0.00 1,112,350,077.00 The aforesaid listed shares are listed with face value RMB each. There is no change of total shares during the report period. 9.30 Capital Reserves Balance on Increment Decrement Balance on Items 2007-12-31 2008-12-31 Share premium 62,019,360.00 0.00 0.00 62,019,360.00 Other capital reserves 64,707,209.01 0.00 1,652,825.51 63,054,383.50 Total 126,726,569.01 0.00 1,652,825.51 125,073,743.50 The decrement in capital reserve is due to dissolution of subsidiary Tsann Kuen Xiamen Technology Co., Ltd, as well as changes in fair value of available-for-sale financial assets for the year. 90 9.31 Retained Earnings Items For Year 2008 For Year 2007 Balance at the beginning of the year of 2008 -935,643,358.89 -1,069,376,534.25 Add：This year transfer-in net profit 42,536,200.29 67,119,750.63 Other transfer-in 0.00 66,613,424.73 Less：Withdrawal of statuary surplus reserve 0.00 0.00 Withdrawal of employees’ reward and welfare fund 0.00 0.00 Withdrawal of reserve fund 0.00 0.00 Withdrawal of Enterprise development fund 0.00 0.00 Reimbursement of investment 0.00 0.00 Less: dividends payable for preference shares 0.00 0.00 Withdrawal of surplus reserves 0.00 0.00 Dividends payable for ordinary shares 0.00 0.00 Dividends for ordinary shares transfer into capital 0.00 0.00 Balance at the end of the year of 2008 -893,107,158.60 -935,643,358.89 9.32 Operating Revenues and Operating Costs 9.32.1 Operating Revenues Items For Year 2008 For Year 2007 Income from main operation 3,987,579,664.08 4,786,260,605.41 Other operating incomes 56,051,606.24 119,019,493.46 Total 4,043,631,270.32 4,905,280,098.87 9.32.2 Operating Costs Items For Year 2008 For Year 2007 Operating Costs 3,669,146,153.68 4,455,877,220.95 Other operating Costs 22,522,193.84 64,061,937.35 Total 3,691,668,347.52 4,519,939,158.30 91 9.32.3 Segment report from main operation incomes, main operation costs and gross profits: For Year 2008 For Year 2007 Segment Operating Income Operating Cost Operating Income Operating Cost Operating Income Operating Cost Main business Catering and Cooking 1,933,213,780.61 1,715,231,812.23 217,981,968.38 2,298,604,398.26 2,071,121,019.03 227,483,379.23 Home best help 1,472,189,053.75 1,404,624,282.31 67,564,771.44 1,740,592,046.12 1,676,994,927.38 63,597,118.74 Tea/Coffee 546,209,365.64 517,586,146.48 28,623,219.16 684,131,897.98 647,504,589.25 36,627,308.73 Other 35,967,464.08 31,703,912.66 4,263,551.42 62,932,263.05 60,256,685.29 2,675,577.76 Subtotal 3,987,579,664.08 3,669,146,153.68 318,433,510.40 4,786,260,605.41 4,455,877,220.95 330,383,384.46 Other business Material sales 349,735.45 201,206.84 148,528.61 49,310,557.98 52,596,691.50 -3,286,133.52 Leftover material sales 27,856,561.54 0.00 27,856,561.54 53,448,985.91 0.00 53,448,985.91 Rental income 17,168,763.31 15,422,817.91 1,745,945.40 7,778,138.41 3,955,104.05 3,823,034.36 Education income 4,116,815.02 4,135,527.60 -18,712.58 2,704,797.66 2,968,193.72 -263,396.06 Consultant fee 2,900,773.57 2,762,641.49 138,132.08 3,555,572.31 3,386,259.34 169,312.97 Other 3,658,957.35 0.00 3,658,957.35 2,221,441.19 1,155,688.74 1,065,752.45 Subtotal 56,051,606.24 22,522,193.84 33,529,412.40 119,019,493.46 64,061,937.35 54,957,556.11 Total 4,043,631,270.32 3,691,668,347.52 351,962,922.80 4,905,280,098.87 4,519,939,158.30 385,340,940.57 9.32.4 Operating revenues from top five clients For Year 2008 For Year 2007 Client name Proportion to total Proportion to total Sales Sales sales sales Total sales from top five clients 2,201,077,366.63 55.20 2,063,133,850.08 43.11 9.33 Business tax and surtax Items Tax rate For Year 2008 For Year 2007 Business tax 5% 1,674,880.85 3,563,737.76 Education fee 1%、3% 2,268,625.95 2,371,459.16 Others 13,758.59 6,761.27 Total 3,957,265.39 5,941,958.19 The accounting principle for tax calculation refers to note 6. 92 9.34 Finance Costs Items For Year 2008 For Year 2007 Interest expense 22,354,169.51 58,194,081.04 Less: Interest Income 7,786,873.68 5,481,423.10 Exchange gain (or loss) -20,329,875.25 -6,265,122.44 Bank charges 8,927,712.30 11,571,645.72 Total 3,165,132.88 58,019,181.22 The financial cost is decrease of 94.54% compare with previous year, which is cause by decrease of return bank loan and exchange gain from relate parities. 9.35 Impairment loss of Assets Items For Year 2008 For Year 2007 Bad debts 11,679,686.58 12,921,125.73 Inventories impairment loss 5,524,167.23 17,173,374.48 Fixed assets impairment loss 27,579,192.03 1,669,272.58 Construction in progress impairment loss 668,101.76 678,896.16 Total 45,451,147.60 32,442,668.95 9.36 Gain from changes in fair values Source of Gain from changes in fair values For Year 2008 For Year 2007 Held for trading financial assets -23,027,900.00 23,027,900.00 Including: Derivative financial assets -23,027,900.00 23,027,900.00 9.37 Investment income Source of investment income For Year 2008 For Year 2007 Held for trading financial assets 35,356,944.00 0.00 Gains from disposal of investment in subsidiaries -2,466,039.88 -185,048.02 Gains from held-to-maturity investment 0.00 39,620.77 Total 32,890,904.12 -145,427.25 93 9.38 Non-operating income 9.38.1 Details of non-operating income: Items For Year 2008 For Year 2007 Gains from disposal of non-current assets 17,176,721.56 10,652,870.23 Including: Gains from disposal of fixed assets 17,176,721.56 10,652,870.23 Income from penalties 498,162.78 71,344.00 Income from indemnities 915,206.89 1,704,982.09 Government grants 1,150,439.00 6,199,439.52 Donation income 700,000.00 0.00 Liquidation income 12,463,434.91 35,836,426.80 Unable to pay the overdue accounts payable 2,527,323.58 0.00 Others 1,519,318.12 3,397,732.71 Total 36,950,606.84 57,862,795.35 9.38.2 Government Grants Items For Year 2008 For Year 2007 Approval Documents Approval organ Pursuant to rewards for advocation of important Export rewards 0.00 1,197,718.00 Finance Bureau of Fujian Province export enterprises in 2006 Encouragement funds for technique 0.00 1,525,000.00 Zhangjingmaofazhan[2006]263 Finance Bureau of Longhai City innovation program Export insurance subsidy 0.00 1,216,441.00 Minwaijingmaojicai[2007]11 Finance Bureau of Fujian Province Memorandum regarding to TsannKuen Group Finance section, Development Committee of Subsidy for difference of income tax rate 0.00 2,080,280.52 investment in Zhangzhou Longchi,Zhangzhou Report from proposed technology projects of Technology 0.00 120,000.00 Accounting Center of Zhangzhou City Zhangzhou city Subsidy for sewage control online 0.00 60,000.00 Zhanghuankong(2006)35 Accounting Center of Zhangzhou City program International market development funds 500,000.00 0.00 Mincaiwai[2008]36 Finance Bureau of Fujian Province Special funds for patent 179,000.00 0.00 Yuancaijiao(2006)22 Intellectual property Bureau of Xiamen Structure funds for high-tech product 200,000.00 0.00 Mincaiwai[2007]72 Finance Bureau of Fujian Province import and export Zhangcaijiao【2008】7 号；Zhangcai（she）zhi【2007】 Part-time study/ Functional identification 90,000.00 0.00 Education Bureau/Labour Bureau of Longhai City 11 Science and technology plan projects Zhangzhou Construct CNC processing base 48,000.00 0.00 Accounting Center of Zhangzhou City city Technology bouns income 20,000.00 0.00 Longkeyu〔2007〕6、Longcaijiao〔2007〕151 Science and technology Bureau of Longhai City Special funds for export commodity tax 113,439.00 0.00 Finance Bureau of Longhai City refund Total 1,150,439.00 6,199,439.52 94 9.39 Non-operating expenses Items For Year 2008 For Year 2007 Loss on disposal of non-current assets 4,979,524.13 2,496,385.60 Include: Loss on disposal of fixed assets 4,979,524.13 2,496,385.60 Losses on scraped fixed assets 1,274,113.73 864,779.55 Losses from physical count of fixed assets 375,178.46 0.00 Unrecoverable payment of return goods 6,040,278.13 0.00 Fines 37,736.77 174,330.03 Donation 3,730,000.00 77,000.00 Other 290,976.47 972,944.61 Total 16,727,807.69 4,585,439.79 9.40 Income Tax Expense Items Current Year Amount Previous Year Amount Income Tax for current year 442,284.75 550,072.26 Deferred Income Tax Expense 1,186,435.49 7,884,714.19 Total 1,628,720.24 8,434,786.45 9.41 Net Profit after deduction of the non-operating profit and loss Items Amount Net profit 55,922,405.80 add:(1) Gain from disposal of non-current asset, including the partial of provision -8,081,865.36 (2)Tax return or allowance that approval by ultra-vires department or without official document, or contingency. 0.00 (3)The government grant reckon in current profit and loss account except grant relate to the business of company closely -1,150,439.00 and grant with fixed standard rate or quantity that consistent with national policies and regulation (4) Fee from fund that occupier by non-financial corporation 0.00 (5) Investment gain when the cost of investment to obtain subsidiaries, joint venture is lower than the fair value of subsidiaries, joint venture’s net asset that should belong to the company’s proportion. 0.00 (6)Profit or loss on exchange of non-monetary asset 0.00 (7)Profit or loss from investment commission or asset management commission 0.00 (8) Provision for asset because force majeure such as nature disaster 0.00 (9)Profit or loss from debit restructure. 0.00 (10) Enterprise reorganization fee, such as employee arrangement, integrate fee. 0.00 (11) Profit or loss from trading that unfair trading price exceed fair value 0.00 (12) Net profit or loss from consolidate subsidiaries that under same control from year beginning to consolidation date 0.00 (13) Profit or loss from contingency items that not relate to trading business of the company. 0.00 (14) Profit or loss from change in fair value of transaction financial asset or liabilities and gain from disposal of transaction -12,329,044.00 financial asset or liabilities and available-for-sale financial asset, except hedge that relate to trading business of the company (15)Reversal of bad debit provision for receivable 0.00 (16) Profit or loss from commission of external loan 0.00 (17) Gain from change in fair value of investment property 0.00 (18) Affection caused by adjustment to current profit and loss account according request by law or regulation of tax or accountant. 0.00 (19) Custodian fee 0.00 (20) Other income or expense except item mention above -8,524,454.91 95 Items Amount (21) Other item correspond to non-operating profit and loss 0.00 Subtotal -30,085,803.27 minus： Amount of tax of non-operation profit and loss 124,500.00 Net Profit after deduct non-operating profit 25,712,102.53 minus： Minority interest after deduct non-operation profit 8,115,912.11 Retaining Earning for shareholders of parent company 17,596,190.42 9.42 Cash received relate to other operating activities Items Amount of current year Amount of previous year Government Grant 1,150,439.00 6,199,439.52 Interest Income 7,786,873.68 5,481,423.10 Rental 0.00 7,778,138.41 Security Deposit of Notes 123,223,246.71 0.00 Donation of cash 700,000.00 0.00 Fund in current account and other 3,328,524.66 10,229,528.72 Total 136,189,084.05 29,688,529.75 9.43 Cash paid relate to other operating activities Items Amount of current year Amount of previous year Penalties and donation 3,767,736.77 251,330.03 Bank commission charge 8,927,712.30 11,571,645.72 Cash paid in Sales expense and administration expense 183,039,502.59 225,495,933.32 Security Deposit for notes 0.00 140,452,974.85 Cash in Current account 78,325,881.89 0.00 Others 375,898.51 0.00 Total 274,436,732.06 377,771,883.92 9.44 Supplemental information for cash flow statement 1 Adjusting net profit to cash flow from operating Amount of current year Amount of previous year activities： Net profit 55,922,405.80 89,767,823.19 Add：Impairment loss provision of assets 45,451,147.60 32,442,668.95 Depreciation of fixed assets 、 oil and gas assets and 236,162,046.52 309,909,798.99 production biological assets Amortization of intangible assets 3,395,673.41 2,254,624.62 Amortization of Long-term deferred expenses 233,532.04 213,009.59 Loss on disposal of fixed assets、intangible assets and other -11,822,018.97 -8,156,484.63 long-term deferred assets（Loss/Gain +/－） Loss from written off assets（Loss/Gain +/－） 1,274,113.73 864,779.55 Loss of fair value fluctuation on assets（Loss/Gain +/－） 23,027,900.00 -23,027,900.00 Financial cost（Loss/Gain +/－） 2,024,294.26 51,928,958.60 Loss on investment（Loss/Gain +/－） -32,890,904.12 145,427.25 Decrease of deferred income tax assets（Decrease/Increase 6,396,178.52 2,127,739.19 96 1 Adjusting net profit to cash flow from operating Amount of current year Amount of previous year activities： +/-） Decrease of deferred income tax liabilities -5,160,090.06 5,756,975.00 (Increase/Decrease +/-) Decrease of inventories（Decrease/Increase +/-） 154,492,632.88 364,618,517.14 Decrease of operating receivables (Decrease/Increase +/-) 291,702,977.80 323,234,614.89 Increase of operating payables(Increase/Decrease +/-) -436,753,474.80 -657,099,155.23 Others 0.00 -1,797,400.12 Net cash flows arising from operating activities 333,456,414.61 493,183,996.98 2.Significant investment and financing activities that without cash flows Debts transfer to capital 0.00 0.00 Convertible corporate bond due within 1 year 0.00 0.00 Finance leased fixed assets 0.00 0.00 3.Net increase (decrease) of cash and cash equivalents： Ending balance of cash 399,276,546.68 393,919,333.68 Less: Beginning balance of cash 393,919,333.68 368,633,361.27 Add : Ending balance of cash equivalents 0.00 0.00 Less: Beginning balance of cash equivalents 0.00 0.00 Net increase of cash and cash equivalents 5,357,213.00 25,285,972.41 9.45 Cash and cash equivalent Items Amount for current year Amount for previous year 1、Cash Including: Cash on hand 753,580.34 1,028,158.18 unrestricted bank deposit 335,536,344.49 211,417,417.23 unrestricted other monetary funds 62,986,621.85 181,473,758.27 deposit in central bank 0.00 0.00 Placement in other banks or financial institutions 0.00 0.00 Due to other banks or financial institutions 0.00 0.00 2、Cash equivalents 0.00 0.00 Including: Bond investment within three month 0.00 0.00 3、Ending balance of cash and cash equivalents 399,276,546.68 393,919,333.68 Including: Restricted cash or cash equivalent of the parent 62,986,621.85 181,473,758.27 company or subsidiaries in the Group 97 X Notes to financial statements for parent company (1) Account receivable 1.1 Detail of Account Receivable Ending Balance Beginning Balance Amount proporti Provision Net value Amount proportion Provision Net value Items on% for bad % for bad debit debit Individual transaction with 36,375.82 100 0.00 36,375.82 1,340,059.60 88.94 0.00 1,340,059.60 significant amount Individual transaction with not so significant 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 amount but significant recoverable risk Other transaction with no significant 0.00 0.00 0.00 0.00 166,678.47 11.06 0.00 166,678.47 amount Total 36,375.82 100.00 0.00 36,375.82 1,506,738.07 100.00 0.00 1,506,738.07 1.2 Age Analysis Ending Balance Beginning Balance Age Amount proportion% Provision for Net value Amount proportion% Provision for bad Net value bad debit debit Within 1 year 36,375.82 100.00 0.00 36,375.82 1,506,738.07 100.00 0.00 1,506,738.07 1-2 years 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 2-3 years 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 Total 36,375.82 100.00 0.00 36,375.82 1,506,738.07 100.00 0.00 1,506,738.07 1.3 Up to 31 Dec 2008, no amount due from shareholder who own 5% or more than 5% of voting right. 1.4 The total amount of top five account receivable is 36,375.82, represent 100% of the receivable, and. Ending Balance Beginning Balance Age Amount proportion% Provision for Net value Amount proportion% Provision for Net value bad debit bad debit Within 1 year 36,375.82 100.00 0.00 36,375.82 1,506,738.07 100.00 0.00 1,506,738.07 1-2 years 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 2-3 years 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 Total 36,375.82 100.00 0.00 36,375.82 1,506,738.07 100.00 0.00 1,506,738.07 98 (2) Other account receivable 2.1 Detail of other account receivable Ending Balance Beginning Balance Items Amount proporti Provision for Net value Amount proporti Provision for Net value on% bad debit on% bad debit Individual transaction with significant amount 3,608,990.00 24.73 2,272,697 1,336,293.00 0.00 0.00 0.00 0.00 Individual transaction with not so significant amount but significant recoverable risk 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 Other transaction with no significant amount 10,983,335.66 75.27 214,648.14 10,768,687.52 5,472,616.59 100.00 154,656.49 5,317,960.10 Total 14,592,325.66 100.00 2,487,345.14 12,104,980.52 5,472,616.59 100.00 154,656.49 5,317,960.10 2.2 Bad debit provision for significant amount amount Provision Reason Name proportion% Ni Yi Lian 1,700,000.00 100.00 Provision according to accounting policies, non-specific risk People’s Court of Xiamen City HuLi Section 1,908,990.00 30.00 Provision according to accounting policies, non-specific risk Total 3,608,990.00 2.3 Age analysis Ending Balance Beginning Balance Age Amount proportion% Provision for Net value Amount proportion% Provision for Net value bad debit bad debit Within 1 year 12,685,555.66 86.93 580,575.14 12,104,980.52 5,410,268.72 99.89 92,308.62 5,317,960.10 1-2 years 1,906,770.00 13.07 1,906,770.00 0.00 9,818.90 0.02 9,818.90 0.00 2-3years 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 Above 3 years 0.00 0.00 0.00 0.00 52,528.97 0.09 52,528.97 0.00 Total 14,592,325.66 100.00 2,487,345.14 12,104,980.52 5,472,616.59 100.00 154,656.49 5,317,960.10 2.4 Up to Dec 31 2008, no amount due from shareholder who own 5% or more than 5%voting right. 2.5 The total amount of top five other account receivable is 4,233,501.79, represent29.01% of other account receivable. Name Amount Nature Age Proportion% Xia Men Shou Chuang Jun He Patent Firm Ltd 479,511.78 3.29 Patent expense Within 1 year Receivable of transfer Ni Yi Lian 1,700,000.00 11.65 of property 1-2 years People’s Court of Xiamen City HuLi Section 1,908,990.00 Security Deposit Within 1 year 13.08 Total 4,088,501.78 28.02 99 (3) Long-term Equity Investment 3.1 Long-term equity investment and provision for impairment loss Ending Balance Beginning Balance Items Carry amount provision Net amount Carry amount provision Net amount Long-term equity investment 1,130,752,021.76 130,646,542.91 1,000,105,478.85 1,241,305,427.93 0.00 1,241,305,427.93 Investment in 1,130,712,021.76 130,646,542.91 1,000,065,478.85 1,241,265,427.93 0.00 1,241,265,427.93 subsidiary Investment in associate 0.00 0.00 0.00 0.00 0.00 0.00 company Investment in joint venture 0.00 0.00 0.00 0.00 0.00 0.00 Investment to other 40,000.00 0.00 40,000.00 40,000.00 0.00 40,000.00 enterprise 3.2 Long-term equity investment measured by cost method Initial investment beginning carry amount Increment Decrement Ending Carry amount Investees 1 subsidiaries TKS 194,545,872.18 194,545,872.18 194,545,872.18 0.00 0.00 TKK 114,027,006.17 114,027,006.17 114,027,006.17 0.00 0.00 TKL 921,914,701.56 921,914,701.56 921,914,701.56 0.00 0.00 TKN 3,750,000.00 3,750,000.00 3,750,000.00 0.00 0.00 EUPA(Hong Kong) 10,503,848.02 7,027,848.02 3,473,600.00 10,501,448.02 Subtotal 1,244,741,427.93 1,241,265,427.93 3,473,600.00 114,027,006.17 1,130,712,021.76 2 other enterprise Xiamen foreign investment 40,000.00 40,000.00 0.00 0.00 40,000.00 enterprises association Subtotal 40,000.00 40,000.00 0.00 0.00 40,000.00 Total 1,244,781,427.93 1,241,305,427.93 3,473,600.00 114,027,006.17 1,130,752,021.76 3.3 Impairment loss provision of long-term investment Investees Investees provision Decrement Ending Carry amount TKS 0.00 130,646,542.91 0.00 130,646,542.91 Total 0.00 130,646,542.91 0.00 130,646,542.91 Note: Detail of provision for impairment loss is in No 2 of fifteen of these notes. (4) Operating income and operating cost 4.1 Operating income Items Amount of current year Amount of previous year Operating income 2,274,532.79 13,322,730.82 Other operating income 12,374,406.56 66,583,715.93 Total 14,648,939.35 79,906,446.75 100 4.2 Operating cost Items Amount of current year Amount of previous year Operating cost 3,826,773.55 15,029,609.98 Other operating cost 11,334,058.68 64,999,818.48 Total 15,160,832.23 80,029,428.46 4.3 List according to product category or business Amount of current year Amount of previous year Category Other operating Other operating Other operating Other operating Other operating Other operating income cost profit income cost profit Disposal of leftover material 0.00 0.00 0.00 250,062.06 0.00 250,062.06 Rental 9,353,752.99 8,571,417.19 782,335.80 39,019,922.47 38,994,455.07 25,467.40 Consultation fee 2,900,773.57 2,762,641.49 138,132.08 27,313,731.40 26,005,363.41 1,308,367.99 Other 119,880.00 0.00 119,880.00 0.00 0.00 0.00 Total 12,374,406.56 11,334,058.68 1,040,347.88 66,583,715.93 64,999,818.48 1,583,897.45 sales from top five clients Current year Previous year Client Sales Proportion % Sales Proportion % Total sales from top five clients 2,274,532.79 100 13,322,730.82 100 4.5 Business tax and surtax Items Ending Balance Beginning Balance Business tax 612,922.04 3,096,480.58 Education Surcharge 22,279.01 30,964.81 Total 635,201.05 3,127,445.39 4.6 Investment Income Item Amount of current year Amount of previous year Gains/losses from disposal of investment n subsidiaries -70,747,992.43 -185,048.02 Total -70,747,992.43 -185,048.02 XI Related party and related party transactions (1) Confirmation related parties The Company has control, jointly control or significant influence on the other party, or is under same party’s control, jointly control or significant influence with other company, is deemed as related parties. 101 (2) The relationship of related parties 2.1 Related party with controllable relationship Registration Operating Relation of with Legal Name Registration number Nature address business the company representative 北市商一字第 Controlled party Corp. ZhuangXing Tsann Kuen Enterprise Co.,Ltd Taiwan Manufacture 00408469-10 号 Information of other subsidiaries are shown in note 7 2.2 The registered capital and changes the related parties with controllable relationship (NT＄) Name Carry amount in Incremental Decrement Carry amount of Ending Balance Beginning Balance Tsann Kuen Enterprise Co.,Ltd 2,466,343,220 743,635,190 0.00 3,209,978,410 2.3 Changes in share capitals and particulars about related party with controllable relationship Name Carry amount in proportio Incremental Decreme Carry amount of proport Beginning Balance n% nt Ending Balance ion% Tsann Kuen Enterprise 581,683,581 52.29 280,108,945 0.00 861,792,526 50.26 Co.,Ltd Tsann Kuen Enterpise Co., Ltd holds the Company’s shares by holding the Company’s subsidiaries of EUPA (Hongkong) Industry Co., Ltd, Fordchee (Hongkong) CO., Ltd and Hongkong Fillman investment Co.,Ltd 2.4 The related party with uncontrollable relationship Relate Party Organization code Relation ship Fordchee (Hongkong) CO., Ltd 14676920-000-01-09-A Shareholder Hongkong Fillman investment Co.,Ltd 16269694-000-07-08-4 Shareholder EUPA (Hongkong) Industry Co., Ltd 12959659-000-07-6 Shareholder Tsann Kuen(USA) Co., Ltd Under the same control of the holding compan Tsann Kuen(Japan) Co., Ltd 0105-01-021064 Under the same control of the holding compan Tsann Kuen (Hongkong) Co.,Ltd 11911137-000-05-07-3 Key management and closed family members’ direct control company Xiamen Shengming Electronic Co., Ltd 61201968-5 Key management and closed family members’ direct control company 102 (3) Related party transactions 3.1 Sales of accessories and finished products Current year amount Previous year amount Relate Parties Proportion to Proportion to amount similar amount similar transaction% transaction% Tsann Kuen(Japan) Co., Ltd 269,542,904.57 6.76 221,302,078.99 4.57 Tsann Kuen Enterprise Co.,Ltd 86,442,454.69 2.17 120,329,439.65 2.48 Xiamen Shengming Electronic Co., Ltd 58,146.70 0.00 42,577.51 0.00 Total 356,043,505.96 8.93 341,674,096.15 7.05 The price of transaction between the Company and related parties is based on the price in contract signed by both parties. 3.2 Purchase of raw materials, spare parts and machine accessories Current year amount Previous year amount Relate Parties Proportion to Proportion to amount amount similar transaction% similar transaction% Tsann Kuen Enterprise Co.,Ltd 92,186,758.64 3.37 270,950,133.27 9.53 Xiamen Shengming Electronic Co., Ltd 74,956,809.98 2.74 96,668,577.92 3.40 Tsann Kuen(Japan) Co., Ltd 45,093,996.50 1.65 41,369,607.07 1.46 Total 212,237,565.12 7.76 408,988,318.26 14.39 The purchase price are the cost of material, spare parts and ,machine accessories between and related parties except Xianmen Shengming Electronic Co., Ltd, the price are based on the price in contract signed by both parties. 3.3 Purchase of modules, machineries and building 3.3.1 Purchase of modules, machineries Current year amount Previous year amount Relate Parties Proportion to Proportion to amount similar amount similar transaction% transaction% Tsann Kuen Enterprise Co.,Ltd 14,558,001.10 14.60 7,511,265.19 3.66 Total 14,558,001.10 14.60 7,511,265.19 3.66 103 3.3.2 Purchase of building Current year amount Previous year amount Relate Parties Proportion to similar Proportion to similar amount amount transaction% transaction% Tsann Kuen (Hongkong) Co.,Ltd 3,703,980.00 100.00 0.00 0.00 Total 3,703,980.00 100.00 0.00 0.00 The Company purchases asset from related parties at its book value 3.4 Internal borrowings Current year amount Previous year amount Proporti Proporti Proportion Proportion Amount on to on to Interest Relate parties to similar Amount to similar during the Ending balance similar Ending balance similar rate% transaction during the year transaction year transacti transacti % % on% on% Borrowing Fordchee (Hongkong) CO., Ltd 150,481,600.00 12.70 82,015,200.00 30.00 0.00 0.00 0.00 0.00 LIBOR Hongkong Fillman investment Co.,Ltd 34,173,000.00 2.89 34,173,000.00 12.50 0.00 0.00 0.00 0.00 LIBOR EUPA (Hongkong) 32.86 Industry Co., Ltd 271,744,250.00 22.94 157,195,800.00 57.50 146,092,000.00 12.80 146,092,000.00 0.5 Total 456,398,850.00 38.53 273,384,000.00 100.00 146,092,000.00 12.80 146,092,000.00 32.86 3.5 Tsann Kuen Enterprise Co., Ltd provide guarantee to the long-term loan of 68,346,000.00 to TKC’s subsidiaries TKL. 3.6 Other transactions Current year amount Previous year amount Proportion to Proportion to Related party Content Amount similar Amount similar transaction% transaction % Payment Technical knowledge support Tsann Kuen Enterprise Co.,Ltd fee(note1) 20,059,077.35 100.00 61,328,437.01 100.00 Pay for sales agency in Hong Tsann Kuen (Hongkong) Co., Ltd Kong area(Note2) 0.00 0.00 1,800,459.44 9.48 Pay for after sales service in Tsann Kuen (USA) Co., Ltd America area(note3) 3,667,266.01 14.69 4,615,173.26 17.54 Tsann Kuen Enterprise Co.,Ltd Agency fee on purchase(note4) 3,089,224.93 100.00 17,192,586.32 90.52 Relative to product quality Tsann Kuen (Japan) Co., Ltd expenses（note 5） 13,386,160.34 53.62 12,633,853.04 48.00 Tsann Kuen Enterprise Co.,Ltd consulting fees (note6) 3,233,289.96 100.00 4,931,687.91 14.97 Total 43,435,018.59 102,502,196.98 Income Xiamen Shengming Electronic Co., Ltd consulting fees(note 7) 2,900,773.57 100.00 3,555,572.31 10.80 Total 2,900,773.57 100.00 3,555,572.31 10.80 104 Note 1: The Company and its subsidiaries measure technical knowledge support fees base on proportionate monthly excess accumulated sales of net amount of licensed products. Note 2: The Company and its subsidiaries entrust related parties as sales agencies, and require them as representative of the Company and its subsidiaries when sign contracts with clients, and collect sale receivables. Since the Company and its subsidiaries bear all the risks of these sales contracts, therefore, they recognize those sales as sales incomes in their books. Agency fees (including service charges) recognize base on 107% on the actual selling expenses incurred by the agencies. Note 3: Tsann Kuen (USA) Co., Ltd provides after sales services in America area for the Company and its subsidiaries’ sales in American area, the company and its subsidiaries pay for those after sales service base on 102% of the actual expense incurred. Note 4: The Company and its subsidiaries entrust Tsann Kuen Enterprise Co., Ltd to purchase raw material, modules and machineries. The procurement agency fees (including service charges) are calculated base on 110% of the actual procurement expense incurred by the agencies. Note 5: It refers to relative product quality expenses for those sales from TKL to TKJ. Note 6: Tsann Kuen Enterprise Co., Ltd provided professional consultant service for the company and its subsidiaries related to the worldwide prochuase activities. The company and its subsidiaries pay for the consultant fees base on 105% of the actual related expenses incurred. Note 7: The Company assists Xiamen Shengming Electronic Co., Ltd for its management, the consulting fees from Xiamen Shengming Electronic Co., Ltd are calculated base on 105% of actual expenses incurred from the assistance of management. Note 8: The Company signed contract with State tax authorities of Xiamen city, Zhangzhou city, Shanghai city, regarding the above-mentioned prcing arrangement for technical knowledge, sales agencies fee, and after sales service fees and procurement agencies fees. (4) The balance of payables and receivables among related parties. Yearend balance Year begin balance Related party Amount Proportion% Amount Proportion% Account receivables Tsann Kuen (Japan) Co., Ltd 61,813,298.98 13.67 82,088,215.58 13.60 Xiamen Shengming Electronic Co., Ltd 34,784.20 0.01 19,611.98 0.00 Tsann Kuen Enterprise Co.,Ltd 27,157,898.62 6.01 24,748,124.18 4.10 Total 89,005,981.80 19.69 106,855,951.74 17.70 Accountant Payable Xiamen Shengming Electronic Co., Ltd 411,418.86 0.05 288,127.87 0.03 Tsann Kuen Enterprise Co.,Ltd 13,633,806.27 1.81 97,917,949.73 9.64 Tsann Kuen (Japan) Co., Ltd 1,242,838.44 0.16 41,369,607.07 4.07 Total 15,288,063.57 2.02 139,575,684.67 13.74 Other accountant payable Tsann Kuen (USA) Co., Ltd 423,167.88 0.11 1,279,924.37 0.36 Tsann Kuen (Japan) Co., Ltd 1,980,480.74 0.50 12,657,297.45 3.60 Xiamen Shengming Electronic Co., Ltd 49,515.15 0.01 104,941.52 0.03 EUPA (Hongkong) Industry Co., Ltd 157,195,800.00 39.67 146,092,000.00 41.51 105 Fordchee (Hongkong) CO., Ltd 82,015,200.00 20.70 0.00 0.00 Hongkong Fillman investment Co.,Ltd 34,173,000.00 8.62 0.00 0.00 Tsann Kuen Enterprise Co.,Ltd 17,482,751.86 4.41 81,989,597.03 23.30 Total 293,319,915.63 74.02 242,123,760.37 68.80 Yearend balance Year begin balance Relate parties Amount Proportion% Amount Proportion% Advance to supplier Xiamen Shengming Electronic Co., Ltd 1,468,866.52 16.48 16,355,988.15 64.52 Tsann Kuen Enterprise Co.,Ltd 0.00 0.00 3,581,017.04 14.12 Total 1,468,866.52 16.48 19,937,005.19 78.64 Advance from customers Xiamen Shengming Electronic Co., Ltd 193.02 0.01 74,304.83 0.58 Total 193.02 0.01 74,304.83 0.58 XII Contingency The subsidiaries of the company TKL has signed an purchase contract of material, spare parts and machine accessories with satellite factories such as Xiamen Jun Yuan Steel Ltd, Xiamen He Xing Package & Print Ltd and the annual purchase amount is set in 372,880 thousand. The purchase amount should be conducted of actual period of this year are 137, 261.7 thousand (actual period/12*the annual amount), the actual purchase amount for this year are 58,563.3 thousand. Because of financial crisis, the actual annual purchase amount could not reach to the amount set in the contract, which will cause TKL to compensate to the factories according to a proportion of margin of actual purchase amount and amount set in contract. Up to the balance sheet date, TKL might pay compensation of 559 thousand. A consultion between TKL and the factories is taking to decrease the contract amount to the similar level of TKL’s purchase amount to avoid the compensation on the annual date of implement the contract. XIII Commitment 13.1 Leased commitment Up to balance sheet date, the irrevocable operating lease contracts signed with third parties as followed Year Ending Balance Year Beginning Balance Items RMB’000 RMB’000 Minimum lease payment of irrevocable operating leases House lease 1st year after balance sheet date 40,000 40,000 2nd year after balance sheet date 40,000 40,000 3rd year after balance sheet date 40,000 40,000 Years after 1,640,000 1,680,000 Total 1,760,000 1,800,000 13.2 The Company’s subsidiary TKL signed agreements pursuant to Co-operation frame agreement and Transfer of Operating Assets and Material Supplies agreement with SHANGHAI SIGMA METAL,INC(“SIGMA” as below), the content of the agreements are shown as followed: TKL transfers its operating assets and business opportunities to SIGMA with total transaction amount of 100,000,000. SIGMA shall be TKL’s main aluminum material supplier, and adjust settlement price below 106 some amount or rate as negotiated by both parties for each ton. According to the transfer of operating assets agreement, SIGMA shall pay 38,000,000 to TKL as its initial payment, and the rest of 62,000,000 shall be deducted from the charges of aluminum material work in process by monthly. TKL promises SIGMA to purchase aluminum material every year effective in three years from the date of the agreements signed, with purchase quantities shall not less than 70% of the company’s total demands. After three years, if TKL’s purchase orders are no enough to deduct the balance of the transaction, then TKL shall agree to extent the agreement until the balance can be offset fully. If TKL terminates responsibility by itself, the SIGMA will not need to pay the rest of outstanding balance. If SIGMA terminates its responsibility, then SIGMA shall have to pay off the rest of outstanding balance at one time. Until December 31, 2008, 7,161,856.00 was received from SIGMA, there is outstanding balance for 41,261,421.60, and accounting for as long-term receivable and deferred income. XIV Non-adjusting events after balance sheet date The company has invested 5,000,000 to establish a single proprietorship Xiamen Canxing International travel agency Ltd on Feb 17 2009, the registration code of license of the business corporation is 350200100015927, the trading scope are: inbound tourism business, national tourism business. Trading period are limited from Feb 17 2009 to Feb 16 2059. TKL mortgage its machines and equipment and modules, which booked value at 778,000,085.25,accumulate depreciation at 422,213,900.45, provision for impairment of loss at 22,324,017.30, and net value at 333,462,167.50, to Bank of Societe Generale(Zhangzhou) to guarantee a trading finance. The upper limit ARE 200,000,000 and contract will be terminated in Nov 3 2009. Dual to terminated advance, the asset list above are release from mortgage in Feb 25 2009. Up to Balance sheet date, there is no other non-adjusting event after balance sheet date needs to be disclosed. 107 XV Other significant events 15.1 The details of guarantee during report period for the Company and its subsidiaries. (all amounts are stated in ten thousand RMB) Transaction date(date of Guaranteed Guaranteed Type of Grantee Bank Term Range agreement amount balance guarantee signed) The Agriculture Bank of Guarantee for implicative Within one years effective from TKL 2008-1-22 2,600 0 Short-term loan China(Xiamen) responsibility assuming the liabilities Short-term loan, The Construction Bank Guarantee for implicative Within one years effective from TKL 2008-8-28 43,480 6,256 bank acceptance, of China(Xiamen) responsibility assuming the liabilities trade financing Bank of Guarantee for implicative Within one years effective from TKL 2008-3-5 17,000 3,542 rade financing China(Zhangzhou responsibility assuming the liabilities Bangkok Bank Public Guarantee for implicative Within one years effective from TKL 2008-1-11 10,142 3,389 trade financing Company Ltd(Xiamen responsibility assuming the liabilities Short-term loan, Societe Guarantee for implicative Within one years effective from TKL 2008-9-27 34,830 2,899 bank acceptance, Generale(Zhangzhou) responsibility assuming the liabilities trade financing The Construction Bank Guarantee for implicative Within one years effective from TKL 2008-8-22 27,775 5,056 trade financing of China(Zhangzhou responsibility assuming the liabilities Shanghai First Sino Guarantee for implicative Within one years effective from TKL 2008-8-13 6,773 0 trade financing Bank responsibility assuming the liabilities 厦 门 光 大 银 行 China Guarantee for implicative Within one years effective from TKL Everbright Bank Xiamen 2008-6-23 10,950 4,943 trade financing responsibility assuming the liabilities Branch Industrial and Guarantee for Within one years effective from TKL Commercial of 2008-10-22 6,649 5,366 implicative trade financing assuming the liabilities China(ZhanZhou) responsibility Total amount the company guarantee its subsidiaries during the reporting 160,199 period Total balance the company guarantee its subsidiaries at the end of the period 31,451 15.2 The subsidiaries of the company TKS’ production operation has been bogged down because of financial crisis, the probably to resume in thinness, therefore a provision for impairment loss on long-term equity investment on TKS is taken according to the book loss of TKS in Nov 2008, and the amount is 130,646,542.91. The item would decrease the net profit of parent company for 130,646,542.91, but would not affect the consolidation net profit. 108 XVI Supplement Information 16.1 Yield Rate of Net Assets and Earnings Per Share Earnings Per Share(Yuan per Yield Rate of Net Assets% share) Profit in the report period Diluted Weighted Basic earning earning per Full dilution average per share share Net profit attributable to 42,536,200.29 12.37 13.15 0.04 0.04 ordinary shareholders Net profit attributable to the ordinary shareholders after 17,596,190.42 5.12 5.44 0.02 0.02 deduction of non-operating profit and loss The index above is calculate according to No 9 of Disclosure standard of Public companies-calculate and disclosure of yield rate of net asset and earnings per share(revise in 2007) 16.2 Calculation： 16.2.1 Basic Earnings Per Share: Current year amount Previous year amount After deduction of After deduction of Items Calculation amount non-operating profit amount non-operating profit and loss and loss Net current year’s profit attributable to ordinary （1） 42,536,200.29 17,596,190.42 67,119,750.63 30,838,517.88 shareholders outstanding capital stock （2） 1,112,350,077.00 1,112,350,077.00 1,112,350,077.00 1,112,350,077.00 in year begin Incremental weighting （3） 0.00 0.00 0.00 0.00 average number for the year Decrement weighting （4） 0.00 0.00 0.00 0.00 average number for the year weighted average ordinary （5）=（2） 1,112,350,077.00 1,112,350,077.00 1,112,350,077.00 1,112,350,077.00 shares issued out +（3）-（4） （6）=（1） Basic Earning Per Shares 0.04 0.02 0.06 0.03 ÷（5） 109 16.2.2 Diluted Earnings Per Shares Current year amount Previous year amount After deduction of After deduction of Items Calculation amount non-operating profit amount non-operating profit and loss and loss Net current year’s profit attributable to ordinary （1） 42,536,200.29 17,596,190.42 67,119,750.63 30,838,517.88 shareholders potential dilution in Dividend and interest that （2） 0.00 0.00 0.00 0.00 recognized as expense convert expense for potential （3） 0.00 0.00 0.00 0.00 dilution ordinary share Tax rate （4） 18.00% 18.00% 15.00% 15.00% adjusted net current profit (5)=(1)+[(2)-( attributed ordinary 42,536,200.29 17,596,190.42 67,119,750.63 30,838,517.88 3)]×[1-(4)] shareholder weighted average number to （6） 1,112,350,077.00 1,112,350,077.00 1,112,350,077.00 1,112,350,077.00 calculate EPS weight average number of potential dilution share （7） 0.00 0.00 0.00 0.00 convert into ordinary share Weight average number to (8)=(6)+(7) 1,112,350,077.00 1,112,350,077.00 1,112,350,077.00 1,112,350,077.00 calculate dilution EPs Dilution EPS (9)=(5)÷(8) 0.04 0.02 0.06 0.03 XVII Approval of financial statements This financial statement are approved and authorized for issuance by the Board of Directors on March 7 2009. Tsann Kuen (China) Enterprise Co., Ltd Page 3 to 78 of financial statement and the Notes are signature by: Legal Representative: jian derong Person in charge of accounting work: chen zongyi Person in charge of accounting department: chen zongyi 110