Haier 2006 Annual Report Download

Download and view the complete annual report

Please find the complete 2006 Haier annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 149

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106
  • 107
  • 108
  • 109
  • 110
  • 111
  • 112
  • 113
  • 114
  • 115
  • 116
  • 117
  • 118
  • 119
  • 120
  • 121
  • 122
  • 123
  • 124
  • 125
  • 126
  • 127
  • 128
  • 129
  • 130
  • 131
  • 132
  • 133
  • 134
  • 135
  • 136
  • 137
  • 138
  • 139
  • 140
  • 141
  • 142
  • 143
  • 144
  • 145
  • 146
  • 147
  • 148
  • 149

Table of contents

  • Page 1

  • Page 2
    Haier Electronics Group Co., Ltd. Annual Report 2006 Table of Contents Corporate Profile and Recent Development Simplified Corporate Structure Corporate Information Chairman's Letter Directors and Senior Management Financial Review Corporate Governance Report Report of the Directors Independent ...

  • Page 3
    Haier Electronics Group Co., Ltd. Annual Report 2006 Corporate Profile and Recent Development CORPORATE PROFILE Haier Electronics Group Co., Ltd. (Stock code: 1169) ("the "Company"), a subsidiary of Haier Group, is listed on the Main Board of The Stock Exchange of Hong Kong Limited. The Company and...

  • Page 4
    ...Annual Report 2006 SIMPLIFIED CORPORATE STRUCTURE Washing Machine Business Water Heater Business Top Loading Washing Machine Business Front Loading Washing Machine Business 100% Qingdao Economy and Technology Development Zone Haier Water Heater Co., Ltd. 93.44% Qingdao Haier Washing Machine...

  • Page 5
    Haier Electronics Group Co., Ltd. Annual Report 2006 Corporate Information BOARD OF DIRECTORS Executive Directors Ms. YANG Mian Mian (Chairman) Mr. WU Ke Song (Deputy Chairman) Mr. LIANG Hai Shan Mr. CAO Chun Hua Mr. CUI Shao Hua Mr. SUN Jing Yan Independent Non-executive Directors Mr. LAM Kin Kau,...

  • Page 6
    ...STOCK CODE The Stock Exchange of Hong Kong Limited: 01169 01169 WEBSITES www.haier-elec.com.hk www.irasia.com/listco/hk/haier/index.htm www.haier-elec.com.hk www.irasia.com/listco/hk/haier/index.htm INVESTOR RELATIONS CONTACT CCG Elite Investor Relations Limited Room 1308, 13/F., 9 Queen's Road...

  • Page 7
    Haier Electronics Group Co., Ltd. Annual Report 2006 6

  • Page 8
    Haier Electronics Group Co., Ltd. Annual Report 2006 7

  • Page 9
    ... white goods player. Apart from completing the disposal of the mobile handset business to its parent company, the Haier Group, for a total consideration of approximately HK$420 million in June 2006, the Company has also acquired from the Haier Group the front loading washing machine and water heater...

  • Page 10
    ... HK$5,541 million in 2005. The Group continues to maintain leading positions in the washing machine and water heater markets in the PRC, with respective market share of approximately 31.3% and 20.4% in 2006 according to China Market Monitor (a market research company based in the PRC). Gross profit...

  • Page 11
    ... to take this opportunity to thank all my fellow directors and staff for their dedicated services and contributions, as well as our shareholders for their continuing support during the year. By Order of the Board of Haier Electronics Group Co., Ltd. Yang Mian Mian Chairman Hong Kong, 23 April 2007...

  • Page 12
    ... white goods business since 1984. She is currently the president of Haier Group Corporation ("Haier Corp") and the chairman of Qingdao Haier Co., Ltd. (a company listed on the Shanghai Stock Exchange (the "A-Share Company")). Ms. Yang is also a director of certain subsidiaries of the Group. In 2006...

  • Page 13
    .... Lam is also an independent nonexecutive director of Tradeeasy Holdings Limited, a company listed on the Growth Enterprise Market (GEM) of the Stock Exchange. He is a fellow of the Association of Chartered Certified Accountants and a member of the Hong Kong Institute of Certified Public Accountants...

  • Page 14
    ... since held a number of senior positions in the washing machine business of the Haier Group. He is currently responsible for the research and development function of the washing machine business of the Group. He is a member of the Washing Machine Sub-committee of the International Electrotechnical...

  • Page 15
    Haier Electronics Group Co., Ltd. Annual Report 2006 14

  • Page 16
    Haier Electronics Group Co., Ltd. Annual Report 2006 15

  • Page 17
    .... Annual Report 2006 Financial Review WASHING MACHINE BUSINESS The Group's washing machine business comprises the manufacture and sale of top loading and front loading washing machines, which together accounted for approximately 81.9% of the Group's total revenue for 2006 (2005: 80.8%). The Group...

  • Page 18
    .... Annual Report 2006 Financial Review targeting at the higher end of the market with higher average selling price. With increasing urbanization, rising income and improving living standards among the PRC citizens, we are seeing significant growth potential for our front loading washing machines. To...

  • Page 19
    Haier Electronics Group Co., Ltd. Annual Report 2006 Financial Review follow its "safety-based products" philosophy in the design of water heater products and continue to lead the industry in safety technologies. The Directors are confident that the water heater business will continue to provide ...

  • Page 20
    ... S P O S A L O F SUBSIDIARIES AND ASSOCIATES Please refer to notes 13 and 37 to the combined annual financial statements below for details of disposal of the mobile handset business and acquisition of the front loading washing machine and water heater businesses respectively during the year. 13 37...

  • Page 21
    ... Hong Kong Limited (the "Stock Exchange") except for certain deviations as described below. This report describes the Company's corporate governance practices, explains its applications of and deviations from the CG Code, together with considered reasons for such deviations. 14 BOARD OF DIRECTORS...

  • Page 22
    Haier Electronics Group Co., Ltd. Annual Report 2006 Corporate Governance Report BOARD OF DIRECTORS (Cont'd) Delegation by the Board The Directors are collectively responsible for setting the Group's strategies, providing leadership and guidance to put them into effect, reviewing and monitoring the...

  • Page 23
    Haier Electronics Group Co., Ltd. Annual Report 2006 Corporate Governance Report BOARD OF DIRECTORS (Cont'd) Delegation by the Board (Cont'd) The Management is principally responsible for: 1. exercising all such other powers and perform all such other acts as may be exercised and performed by the ...

  • Page 24
    ... Group Co., Ltd. Annual Report 2006 Corporate Governance Report BOARD OF DIRECTORS (Cont'd) Chairman and Chief Executive Officer ("CEO") Under the Code Provision A.2.1, the roles of chairman and CEO should be separate and should not be performed by the same individual. Currently, the Company...

  • Page 25
    Haier Electronics Group Co., Ltd. Annual Report 2006 Corporate Governance Report BOARD OF DIRECTORS (Cont'd) Supply of and access to information Newly appointed Directors will receive induction packages containing the duties and responsibilities of directors under the Listing Rules and other ...

  • Page 26
    ...Annual Report 2006 Corporate Governance Report BOARD OF DIRECTORS (Cont'd) Board Meetings (Cont'd) The following table shows the attendance of the Directors at the Board Meetings during the year ended 31 December 2006: No. of the Board Meetings attended/held Executive Directors: Ms. Yang Mian Mian...

  • Page 27
    ... are to ensure the objectivity and credibility of financial reporting, to make recommendation to the Board on the appointment, reappointment and removal of the Group's external auditors and review of the Company's financial controls, internal control and risk management systems. 10 (1) 20 26

  • Page 28
    ... an attendance rate of 100% to review the management and accounting principles and practices adopted by the Group and to discuss internal controls and financial reporting matters including the review of 2005 annual results and 2006 interim results of the Group. Each member of the Audit Committee has...

  • Page 29
    ... assessment of the Group's development and prospects in all corporate communications, including but not limited to annual and interim reports, any price-sensitive announcements and financial disclosures required under the Listing Rules, any reports to regulators as well as to information required to...

  • Page 30
    Haier Electronics Group Co., Ltd. Annual Report 2006 Corporate Governance Report INTERNAL CONTROL AND RISK MANAGEMENT The Group is committed to implementing effective internal controls and risk management procedures to identify and manage the risks that may be faced by the Group, as well as to ...

  • Page 31
    Haier Electronics Group Co., Ltd. Annual Report 2006 30

  • Page 32
    Haier Electronics Group Co., Ltd. Annual Report 2006 31

  • Page 33
    ... of the Company is investment holding. During the year, the Group continued to be engaged in the manufacture and sale of washing machines. However, the Group discontinued its business of the manufacture and sale of mobile handsets by disposing of its entire interest in Pegasus Telecom (Qingdao) Co...

  • Page 34
    ... the year, Haier Group Corporation ("Haier Corp") and Qingdao Haier Investment and Development Co., Ltd. ("Haier Investment") (collectively the "Haier Group"), the substantial shareholders of the Company, had beneficial interests in four of the five largest suppliers of the Group. Save as disclosed...

  • Page 35
    Haier Electronics Group Co., Ltd. Annual Report 2006 Report of the Directors DIRECTORS The directors of the Company during the year and up to the date of this report were as follows: Executive directors: Yang Mian Mian Wu Ke Song Liang Hai Shan Cao Chun Hua Cui Shao Hua Sun Jing Yan Chai Yong Sen ...

  • Page 36
    Haier Electronics Group Co., Ltd. Annual Report 2006 Report of the Directors DIRECTORS' BIOGRAPHIES AND SENIOR MANAGEMENT'S Biographical details of the directors of the Company and the senior management of the Group are set out on pages 11 to 13 of this annual report. 11 13 DIRECTORS' SERVICE ...

  • Page 37
    ...Shares the Company's 336 5% Notes Name of shareholder Qingdao Haier Collective Asset Management Association ("Haier Collective Asset Management") Haier Corp Haier Investment Deutsche Bank Aktiengesellschaft ("Deutsche Bank") Qingdao Haier Group Holdings (BVI) Limited ("Haier BVI") Haier Electrical...

  • Page 38
    ... and 826,500,000 Shares held by a non-wholly-owned subsidiary of Haier Investment. Ms. Yang Mian Mian, Mr. Wu Ke Song and Mr. Liang Hai Shan, the executive directors of the Company, are also the members of the management committee of Haier Corp. 1. (i) 3,366,000,000 BVI 5 BVI BVI (ii) 826,500...

  • Page 39
    ...the convertible notes as part of the consideration pursuant to an agreement dated 5 March 2004 entered into between Haier Corp, Haier Investment and the Company respectively. Ms. Yang Mian Mian and Mr. Wu Ke Song, the executive directors of the Company, are also the directors of Haier BVI. 4. 12,645...

  • Page 40
    ... Co., Ltd. Annual Report 2006 Report of the Directors CONNECTED TRANSACTIONS AND CONTINUING CONNECTED TRANSACTIONS (a) During the year, the Group disposed of its entire interest in Pegasus Qingdao and Pegasus Electronic to Haier BVI at a consideration aggregating approximately HK$411 million. In...

  • Page 41
    ... year, the Company's subsidiary, Pegasus Qingdao, had the following continuing connected transactions with Haier Corp, Haier Investment, their subsidiaries and associates (collectively referred to as "Haier Affiliates"): Group 2006 2005 HK$'000 (c) Notes HK$'000 Sales of mobile handset products...

  • Page 42
    ... Group Co., Ltd. Annual Report 2006 Report of the Directors CONNECTED TRANSACTIONS AND CONTINUING CONNECTED TRANSACTIONS (Cont'd) (c) (Cont'd) During the year, the Company's subsidiaries, Qingdao Haier Washing Machine Co., Ltd., Qingdao Jiaonan Haier Washing Machine Co., Ltd., Hefei Haier Washing...

  • Page 43
    Haier Electronics Group Co., Ltd. Annual Report 2006 Report of the Directors CONNECTED TRANSACTIONS AND CONTINUING CONNECTED TRANSACTIONS (Cont'd) (c) (Cont'd) Notes: (Cont'd) (vii) The purchases of materials were charged based on the lower of the average market price or the consolidated and ...

  • Page 44
    ... HK$67,307,000) to Haier Group Finance Co., Ltd. ("Haier Finance"), a subsidiary of Haier Corp and a financial institution approved by the People's Bank of China, as a security for banking facilities granted to Pegasus Qingdao for the period from 25 June 2005 to 24 June 2006. Pegasus Qingdao...

  • Page 45
    ... a corporate guarantee of RMB30,000,000 (equivalent to approximately HK$28,846,000) to Haier Finance as a security for banking facilities granted to Qingdao Jiaonan Haier Washing Machine Co., Ltd. for the period from 30 December 2005 to 29 December 2006. Qingdao Jiaonan Haier Washing Machine Co...

  • Page 46
    ... statements in accordance with Hong Kong Financial Reporting Standards issued by the Hong Kong Institute of Certified Public Accountants and the disclosure requirements of the Hong Kong Companies Ordinance. This responsibility includes designing, implementing and maintaining internal control...

  • Page 47
    Haier Electronics Group Co., Ltd. Annual Report 2006 Independent Auditors' Report AUDITORS' RESPONSIBILITY (Cont'd) An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditors' ...

  • Page 48
    ... Group Co., Ltd. Annual Report 2006 Combined Income Statement (Year ended 31 December 2006) 2006 2005 HK$'000 (Restated) Notes HK$'000 CONTINUING OPERATIONS REVENUE Cost of sales Gross profit Other income and gains Selling and distribution costs Administrative expenses Other expenses Finance...

  • Page 49
    Haier Electronics Group Co., Ltd. Annual Report 2006 Combined Balance Sheet (31 December 2006) 2006 2005 HK$'000 (Restated) Notes HK$'000 NON-CURRENT ASSETS Property, plant and equipment Prepaid land premiums Intangible assets Deferred tax assets Investments Long term prepayments Total non-...

  • Page 50
    Haier Electronics Group Co., Ltd. Annual Report 2006 Combined Balance Sheet (31 December 2006) 2006 2005 HK$'000 (Restated) Notes HK$'000 EQUITY Equity attributable to equity holders of the parent Issued equity Equity component of convertible notes Reserves 34 36(a) 1,212,960 22,094 (590,935...

  • Page 51
    Haier Electronics Group Co., Ltd. Annual Report 2006 Combined Statement of Changes in Equity (Year ended 31 December 2006) Attributable to equity holders of the parent Equity component Issued of convertible equity notes Share option reserve Merger reserve Retained profits/ Reserve (accumulated ...

  • Page 52
    Haier Electronics Group Co., Ltd. Annual Report 2006 Combined Statement of Changes in Equity (Year ended 31 December 2006) Attributable to equity holders of the parent Equity component Issued of convertible equity notes Share option reserve Merger reserve Retained profits/ Reserve (accumulated ...

  • Page 53
    ... Electronics Group Co., Ltd. Annual Report 2006 Combined Cash Flow Statement (Year ended 31 December 2006) 2006 2005 HK$'000 (Restated) Notes HK$'000 CASH FLOWS FROM OPERATING ACTIVITIES Profit/(loss) before tax: From continuing operations From a discontinued operation Adjustments for: Finance...

  • Page 54
    Haier Electronics Group Co., Ltd. Annual Report 2006 Combined Cash Flow Statement (Year ended 31 December 2006) 2006 2005 HK$'000 (Restated) Notes HK$'000 Net cash inflow from operating activities CASH FLOWS FROM INVESTING ACTIVITIES Purchases of items of property, plant and equipment ...

  • Page 55
    Haier Electronics Group Co., Ltd. Annual Report 2006 Balance Sheet (31 December 2006) 2006 2005 HK$'000 Notes HK$'000 NON-CURRENT ASSETS Interests in subsidiaries CURRENT ASSETS ... (242,178) 1,616,488 1,667,073 30,281 (480,177) 1,217,177 Yang Mian Mian Cui Shao Hua Chairman Director 54

  • Page 56
    Haier Electronics Group Co., Ltd. Annual Report 2006 Notes to Financial Statements (31 December 2006) 1. CORPORATE INFORMATION Haier Electronics Group Co., Ltd. is a limited liability company incorporated in Bermuda. The registered office of the Company is located at Clarendon House, 2 Church ...

  • Page 57
    Haier Electronics Group Co., Ltd. Annual Report 2006 Notes to Financial Statements (31 December 2006) 2. BUSINESS COMBINATIONS INVOLVING ENTITIES UNDER COMMON CONTROLS AND BASIS OF PRESENTATION (Cont'd) (ii) issue of 1,000 million ordinary shares of the Company at HK$0.24 each; (iii) o ff s e t t...

  • Page 58
    Haier Electronics Group Co., Ltd. Annual Report 2006 Notes to Financial Statements (31 December 2006) 2. BUSINESS COMBINATIONS INVOLVING ENTITIES UNDER COMMON CONTROLS AND BASIS OF PRESENTATION (Cont'd) The operating results previously reported by the Group for the year ended 31 December 2005 ...

  • Page 59
    Haier Electronics Group Co., Ltd. Annual Report 2006 Notes to Financial Statements (31 December 2006) 2. BUSINESS COMBINATIONS INVOLVING ENTITIES UNDER COMMON CONTROLS AND BASIS OF PRESENTATION (Cont'd) The financial position previously reported by the Group at 31 December 2005 has been restated ...

  • Page 60
    ...Group Co., Ltd. Annual Report 2006 Notes to Financial Statements (31 December 2006) 3.1 BASIS OF PREPARATION (Cont'd) Basis of consolidation (Cont'd) Minority interests represent the interests of outside shareholders not held by the Group in the results and net assets of the Company's subsidiaries...

  • Page 61
    Haier Electronics Group Co., Ltd. Annual Report 2006 Notes to Financial Statements (31 December 2006) 3.2 IMPACT OF NEW AND REVISED HONG KONG FINANCIAL REPORTING STANDARDS (Cont'd) (b) HKAS 39 Financial Instruments: Recognition and Measurement 3.2 (b) 39 (i) Amendment for financial guarantee ...

  • Page 62
    Haier Electronics Group Co., Ltd. Annual Report 2006 Notes to Financial Statements (31 December 2006) 3.2 IMPACT OF NEW AND REVISED HONG KONG FINANCIAL REPORTING STANDARDS (Cont'd) (c) HK(IFRIC)-Int 4 Determining whether an Arrangement contains a Lease The Group has adopted this interpretation as ...

  • Page 63
    Haier Electronics Group Co., Ltd. Annual Report 2006 Notes to Financial Statements (31 December 2006) 3.3 IMPACT OF ISSUED BUT NOT YET EFFECTIVE HONG KONG FINANCIAL REPORTING STANDARDS (Cont'd) HKFRS 7 shall be applied for annual periods beginning on or after 1 January 2007. The standard requires ...

  • Page 64
    Haier Electronics Group Co., Ltd. Annual Report 2006 Notes to Financial Statements (31 December 2006) 3.4 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Subsidiaries A subsidiary is an entity whose financial and operating policies the Company controls, directly or indirectly, so as to obtain benefits ...

  • Page 65
    Haier Electronics Group Co., Ltd. Annual Report 2006 Notes to Financial Statements (31 December 2006) 3.4 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont'd) Goodwill Goodwill arising on the acquisition of subsidiaries represents the excess of the cost of the business combination over the Group's ...

  • Page 66
    Haier Electronics Group Co., Ltd. Annual Report 2006 Notes to Financial Statements (31 December 2006) 3.4 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont'd) Goodwill (Cont'd) Where goodwill forms part of a cash-generating unit (group of cash-generating units) and part of the operation within that...

  • Page 67
    Haier Electronics Group Co., Ltd. Annual Report 2006 Notes to Financial Statements (31 December 2006) 3.4 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont'd) Impairment of non-financial assets other than goodwill 3.4 (Cont'd) An assessment is made at each reporting date as to whether there is ...

  • Page 68
    Haier Electronics Group Co., Ltd. Annual Report 2006 Notes to Financial Statements (31 December 2006) 3.4 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont'd) Property, plant and equipment and depreciation Property, plant and equipment, other than construction in progress, are stated at cost less ...

  • Page 69
    Haier Electronics Group Co., Ltd. Annual Report 2006 Notes to Financial Statements (31 December 2006) 3.4 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont'd) Property, plant and equipment and depreciation (Cont'd) An item of property... useful life are reviewed at least at each balance sheet date. ...

  • Page 70
    Haier Electronics Group Co., Ltd. Annual Report 2006 Notes to Financial Statements (31 December 2006) 3.4 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont'd) Intangible assets (other than goodwill) (Cont'd) 3.4 Research and development costs (Cont'd) Deferred development costs are stated at cost...

  • Page 71
    Haier Electronics Group Co., Ltd. Annual Report 2006 Notes to Financial Statements (31 December 2006) 3.4 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont'd) Investments and other financial assets (Cont'd) All regular way purchases and sales of financial assets are recognised on the trade date, ...

  • Page 72
    Haier Electronics Group Co., Ltd. Annual Report 2006 Notes to Financial Statements (31 December 2006) 3.4 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont'd) Investments and other financial assets (Cont'd) 3.4 Available-for-sale financial assets (Cont'd) When the fair value of unlisted equity ...

  • Page 73
    Haier Electronics Group Co., Ltd. Annual Report 2006 Notes to Financial Statements (31 December 2006) 3.4 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont'd) Impairment of financial assets (Cont'd) Assets carried at amortised cost (Cont'd) The Group first assesses whether objective evidence of ...

  • Page 74
    Haier Electronics Group Co., Ltd. Annual Report 2006 Notes to Financial Statements (31 December 2006) 3.4 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont'd) Derecognition of financial assets A financial asset (or, where applicable, a part of a financial asset or part of a group of similar ...

  • Page 75
    Haier Electronics Group Co., Ltd. Annual Report 2006 Notes to Financial Statements (31 December 2006) 3.4 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont'd) Financial liabilities at amortised cost (including interestbearing loans and borrowings) Financial liabilities including trade and other ...

  • Page 76
    ... is included in finance costs in the income statement. Provisions for installation services and product warranties granted by the Group on certain products are recognised based on sales volume and past experience of the level of installation services rendered, repairs or returns, discounted to their...

  • Page 77
    Haier Electronics Group Co., Ltd. Annual Report 2006 Notes to Financial Statements (31 December 2006) 3.4 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont'd) Income tax Income tax comprises current and deferred tax. Income tax is recognised in the income statement, or in equity if it relates to ...

  • Page 78
    Haier Electronics Group Co., Ltd. Annual Report 2006 Notes to Financial Statements (31 December 2006) 3.4 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont'd) Income tax (Cont'd) • in respect of deductible temporary differences associated with investments in subsidiaries, deferred tax assets are ...

  • Page 79
    Haier Electronics Group Co., Ltd. Annual Report 2006 Notes to Financial Statements (31 December 2006) 3.4 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont'd) Revenue recognition Revenue is recognised when it is probable that the economic benefits will flow to the Group and when the revenue can be ...

  • Page 80
    Haier Electronics Group Co., Ltd. Annual Report 2006 Notes to Financial Statements (31 December 2006) 3.4 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont'd) Employee benefits (Cont'd) Share-based payment transactions (Cont'd) The cost of equity-settled transactions is recognised, together with a ...

  • Page 81
    Haier Electronics Group Co., Ltd. Annual Report 2006 Notes to Financial Statements (31 December 2006) 3.4 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont'd) Employee benefits (Cont'd) Share-based payment transactions (Cont'd) The Group has adopted the transitional provisions of HKFRS 2 in respect...

  • Page 82
    ... China subsidiaries are currencies other than the Hong Kong dollar. As at the balance sheet date, the assets and liabilities of these entities are translated into the presentation currency of the Company at exchange rates ruling at the balance sheet date and, their income statements are translated...

  • Page 83
    ... Ltd. Annual Report 2006 Notes to Financial Statements (31 December 2006) 3.4 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont'd) Foreign currencies (Cont'd) For the purpose of the consolidated cash flow statement, the cash flows of Mainland China subsidiaries are translated into Hong Kong dollars...

  • Page 84
    Haier Electronics Group Co., Ltd. Annual Report 2006 Notes to Financial Statements (31 December 2006) 4. SIGNIFICANT ACCOUNTING JUDGEMENTS AND ESTIMATES (Cont'd) Judgements (Cont'd) 4. Classification between investment properties and owneroccupied properties (Cont'd) Judgement is made on an ...

  • Page 85
    Haier Electronics Group Co., Ltd. Annual Report 2006 Notes to Financial Statements (31 December 2006) 4. SIGNIFICANT ACCOUNTING JUDGEMENTS AND ESTIMATES (Cont'd) Estimation uncertainty (Cont'd) Product warranty and installation provisions Product warranty and installation provisions are made ...

  • Page 86
    ... washing machine business segment manufactures and sells washing machines; (b) the water heater business segment manufactures and sells water heaters; (c) the mobile handset business segment manufactures and sells mobile phones and it was discontinued during the year (note 13); and (d) the corporate...

  • Page 87
    ...Washing machine business Water heater business Corporate and others Eliminations Total Mobile handset business Combined 2006 2005 2006 2005 2006 2005 2006 2005 2006 2005 2006 2005 2006 2005 HK$'000 HK$'000 HK$'000 HK$'000 HK$'000 HK$'000 HK$'000 HK$'000 HK$'000 HK$'000 HK...

  • Page 88
    ... Financial Statements (31 December 2006) 5. SEGMENT INFORMATION (Cont'd) Business segments (Cont'd) Continuing operations Washing machine business 2006 HK$'000 2005 HK$'000 (Restated) Water heater business 2006 HK$'000 2005 HK$'000 (Restated) 5. Discontinued operation Mobile handset business 2005...

  • Page 89
    ... value of goods sold, net of value-added tax and after allowances for returns and trade discounts. An analysis of revenue, other income and gains is as follow: Group 6. 2006 HK$'000 2005 HK$'000 (Restated) Revenue Continuing operations: Sale of washing machines Sale of water heaters 5,650,895...

  • Page 90
    Haier Electronics Group Co., Ltd. Annual Report 2006 Notes to Financial Statements (31 December 2006) 7. PROFIT BEFORE TAX The Group's profit before tax is arrived at after charging/ (crediting) #: 7. # 2006 2005 HK$'000 (Restated) Notes HK$'000 Cost of inventories sold Depreciation ...

  • Page 91
    Haier Electronics Group Co., Ltd. Annual Report 2006 Notes to Financial Statements (31 December 2006) 7. PROFIT BEFORE TAX (Cont'd) * The amortisation of intangible assets, research and development costs and provision for obsolete and slowmoving inventories for the year are included in "Cost of ...

  • Page 92
    Haier Electronics Group Co., Ltd. Annual Report 2006 Notes to Financial Statements (31 December 2006) 9. DIRECTORS' REMUNERATION Directors' remuneration for the year, disclosed pursuant to the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (the "Listing Rules...

  • Page 93
    Haier Electronics Group Co., Ltd. Annual Report 2006 Notes to Financial Statements (31 December 2006) 9. DIRECTORS' REMUNERATION (Cont'd) (b) Executive directors: Salaries, allowances and benefits in kind 9. (b) Performance related bonuses Employee share option benefits Pension scheme ...

  • Page 94
    Haier Electronics Group Co., Ltd. Annual Report 2006 Notes to Financial Statements (31 December 2006) 10. FIVE HIGHEST PAID EMPLOYEES The five highest paid employees during the year included one director (2005: Nil), details of whose remuneration are set out in note 9 above. Details of the ...

  • Page 95
    ... Report 2006 Notes to Financial Statements (31 December 2006) 11. TAX No provision for Hong Kong profits tax has been made as the Group did not generate any assessable profits arising in Hong Kong during the year (2005: Nil). Tax on profits assessable elsewhere in the People's Republic of China...

  • Page 96
    Haier Electronics Group Co., Ltd. Annual Report 2006 Notes to Financial Statements (31 December 2006) 11. TAX (Cont'd) A reconciliation of the tax charge applicable to profit/loss before tax using the statutory or applicable rates for the jurisdictions in which the Company and its subsidiaries are...

  • Page 97
    Haier Electronics Group Co., Ltd. Annual Report 2006 Notes to Financial Statements (31 December 2006) 11. TAX (Cont'd) Group - 2005 Hong Kong HK$'000 % 11. Mainland China HK$'000 (Restated) % Total HK$'000 (Restated) % Profit/(loss) before tax (including loss from a discontinued operation) Tax ...

  • Page 98
    ... of the Company and a subsidiary of Haier Corp. Pegasus Qingdao and Pegasus Electronic are principally engaged in the manufacture and sale of mobile handsets. The above transaction was approved by the independent shareholders of the Company at a special general meeting held on 15 June 2006 and was...

  • Page 99
    Haier Electronics Group Co., Ltd. Annual Report 2006 Notes to Financial Statements (31 December 2006) 13. DISCONTINUED OPERATION (Cont'd) The calculations of basic and diluted earnings/(loss) per share amounts for the discontinued operation are based on: 13. 2006 2005 Earnings/(loss) Profit/(...

  • Page 100
    ...Ltd. Annual Report 2006 Notes to Financial Statements (31 December 2006) 14. DIVIDENDS No dividend has been paid or declared by the Company during the year (2005: Nil). The dividend disclosed for the years ended 31 December 2006 and 2005 represented dividend declared by the Group's subsidiaries to...

  • Page 101
    Haier Electronics Group Co., Ltd. Annual Report 2006 Notes to Financial Statements (31 December 2006) 15. EARNINGS/(LOSS) PER SHARE ATTRIBUTABLE TO EQUITY HOLDERS OF THE PARENT (Cont'd) 15. 2006 HK$ 2005 HK$ (Restated) Earnings/(loss) Profit/(loss) attributable to ordinary equity holders of ...

  • Page 102
    ... with Haier Group and their subsidiaries and associates (collectively referred to as "Haier Affiliates"). Haier Affiliates are companies that have certain key management personnel in common with the Company. 16. (a) (i) Group 2006 2005 HK$'000 Notes HK$'000 Sales of mobile handset products...

  • Page 103
    Haier Electronics Group Co., Ltd. Annual Report 2006 Notes to Financial Statements (31 December 2006) 16. RELATED PARTY TRANSACTIONS (Cont'd) (a) (ii) The Company's subsidiaries, Qingdao Haier Washing Machine Co., Ltd., Qingdao Jiaonan Haier Washing Machine Co., Ltd., Hefei Haier Washing Machine ...

  • Page 104
    ... Electronics Group Co., Ltd. Annual Report 2006 Notes to Financial Statements (31 December 2006) 16. RELATED PARTY TRANSACTIONS (Cont'd) (a) (ii) 16. (a) (ii) (Cont'd) Notes: (Cont'd) (vii) The sales of washing machines on or after 28 January 2005 were made to Haier Electrical at selling prices...

  • Page 105
    ... Group Co., Ltd. Annual Report 2006 Notes to Financial Statements (31 December 2006) 16. RELATED PARTY TRANSACTIONS (Cont'd) (a) (ii) 16. (a) (ii) (Cont'd) Notes: (Cont'd) (xvi) Trademark license fee expenses were charged at a rate of 0.8% of certain sales made by Qingdao Haier Washing Machine...

  • Page 106
    Haier Electronics Group Co., Ltd. Annual Report 2006 Notes to Financial Statements (31 December 2006) 16. RELATED PARTY TRANSACTIONS (Cont'd) (a) (iii) 16. (a) (ii) (Cont'd) Notes: (Cont'd) (xviii) The sales of water heaters comprised domestic sales made to subsidiaries of Haier Investment and ...

  • Page 107
    Haier Electronics Group Co., Ltd. Annual Report 2006 Notes to Financial Statements (31 December 2006) 16. RELATED PARTY TRANSACTIONS (Cont'd) (b) (i) On 25 June 2005, Haier Corp provided a corporate guarantee of RMB70,000,000 (equivalent to approximately HK$67,308,000) to Haier Group Finance Co., ...

  • Page 108
    ... corporate guarantees aggregating RMB123,000,000 (equivalent to approximately HK$118,269,000) to Haier Finance as securities for banking facilities granted to Haier Indesit (Qingdao) Washing Machine Co., Ltd., Qingdao Economy and Technology Development Zone Haier Water Heater Co., Ltd. and Haier...

  • Page 109
    ...Haier Corp provided corporate guarantees aggregating RMB98,800,000 (equivalent to HK$96,863,000) to Haier Finance as securities for banking facilities granted to Chongqing Haier Washing Machine Co., Ltd. and Chongqing Haier Water Heater Co., Ltd. for the periods from 16 August 2006 to 15 August 2011...

  • Page 110
    Haier Electronics Group Co., Ltd. Annual Report 2006 Notes to Financial Statements (31 December 2006) 17. PROPERTY, PLANT AND EQUIPMENT Group 17. Tools, furniture and fixtures Buildings Plant and machinery Motor vehicles Construction in progress Total HK$'000 HK$'000 HK$'000 HK$'000 HK...

  • Page 111
    Haier Electronics Group Co., Ltd. Annual Report 2006 Notes to Financial Statements (31 December 2006) 17. PROPERTY, PLANT AND EQUIPMENT (Cont'd) Group 17. Tools, furniture and fixtures Buildings Plant and machinery Motor vehicles Construction in progress Total HK$'000 HK$'000 HK$'000 HK...

  • Page 112
    Haier Electronics Group Co., Ltd. Annual Report 2006 Notes to Financial Statements (31 December 2006) 17. PROPERTY, PLANT AND EQUIPMENT (Cont'd) As at 31 December 2006, certain of the Group's buildings with an aggregate net book value of approximately HK$219,008,000 (2005: HK$346,648,000 (as ...

  • Page 113
    Haier Electronics Group Co., Ltd. Annual Report 2006 Notes to Financial Statements (31 December 2006) 18. PREPAID LAND PREMIUMS (Cont'd) All leasehold land of the Group is under medium term leases and is situated in Mainland China. As at 31 December 2006, certain parcels of the Group's land with ...

  • Page 114
    Haier Electronics Group Co., Ltd. Annual Report 2006 Notes to Financial Statements (31 December 2006) 19. INTANGIBLE ASSETS (Cont'd) Group 19. Patents and licenses HK$'000 31 December 2005 (as restated) At 1 January 2005: Cost Accumulated amortisation Net carrying amount Cost at 1 January 2005, ...

  • Page 115
    ... rate in Mainland China. Senior management estimated the budgeted gross profit margin based on past performance and their expectations for market development. The discount rate used was before tax and reflected specific risks relating to the mobile handset business cash-generating unit. For the year...

  • Page 116
    Haier Electronics Group Co., Ltd. Annual Report 2006 Notes to Financial Statements (31 December 2006) 21. INTERESTS IN SUBSIDIARIES Company 21. 2006 HK$'000 2005 HK$'000 Unlisted shares, at cost Due from subsidiaries Due to subsidiaries 1,982,417 503 (84,789) 1,898,131 3,517,747 2,360 (8,894) ...

  • Page 117
    ... Financial Statements (31 December 2006) 21. INTERESTS IN SUBSIDIARIES (Cont'd) Place of registration and operations Nominal value of registered capital 21. Percentage of equity directly attributable to the Company Name Direct Indirect Principal activities Qingdao Jiaonan Haier Washing Machine...

  • Page 118
    Haier Electronics Group Co., Ltd. Annual Report 2006 Notes to Financial Statements (31 December 2006) 21. INTERESTS IN SUBSIDIARIES (Cont'd) Place of registration and operations Nominal value of registered capital 21. Percentage of equity directly attributable to the Company Name Direct Indirect...

  • Page 119
    ... Group Co., Ltd. Annual Report 2006 Notes to Financial Statements (31 December 2006) 22. INVESTMENTS Group 22. 2006 HK$'000 2005 HK$'000 (Restated) Unlisted equity investments, at cost Unlisted equity investments comprised a 25%-owned associate and a 60%-owned subsidiary of Haier SPV Group...

  • Page 120
    Haier Electronics Group Co., Ltd. Annual Report 2006 Notes to Financial Statements (31 December 2006) 23. LONG TERM PREPAYMENTS (Cont'd) Group 23. 2006 HK$'000 2005 HK$'000 (Restated) Carrying amount at end of year Current portion included in prepayments, deposits and other receivables Non-...

  • Page 121
    ... Group Co., Ltd. Annual Report 2006 Notes to Financial Statements (31 December 2006) 25. TRADE AND BILLS RECEIVABLES (Cont'd) An aged analysis of the trade receivables as at the balance sheet date, based on the invoice date and net of provisions, is as follows: 25. 2006 HK$'000 2005 HK...

  • Page 122
    Haier Electronics Group Co., Ltd. Annual Report 2006 Notes to Financial Statements (31 December 2006) 26. P R E PAY M E N T S , RECEIVABLES DEPOSITS AND OTHER Group 2006 HK$'000 26. Company 2005 HK$'000 (Restated) 2006 HK$'000 2005 HK$'000 Prepayments Deposits and other receivables 64,298 37...

  • Page 123
    ... Group Co., Ltd. Annual Report 2006 Notes to Financial Statements (31 December 2006) 27. CASH AND CASH EQUIVALENTS AND PLEDGED DEPOSITS (Cont'd) At the balance sheet date, the cash and bank balances and time deposits of the Group denominated in Renminbi ("RMB") amounted to HK$560,760,000 (2005: HK...

  • Page 124
    Haier Electronics Group Co., Ltd. Annual Report 2006 Notes to Financial Statements (31 December 2006) 28. TRADE AND BILLS PAYABLES An aged analysis of the trade payables as at the balance sheet date, based on the invoice date, is as follows: 28. 2006 HK$'000 2005 HK$'000 (Restated) Trade ...

  • Page 125
    Haier Electronics Group Co., Ltd. Annual Report 2006 Notes to Financial Statements (31 December 2006) 29. OTHER PAYABLES AND ACCRUALS (Cont'd) Included in the Group's other payables and accruals are amounts due to Haier Affiliates amounting to HK$261,232,000 (2005: HK$130,463,000 (as restated)). ...

  • Page 126
    Haier Electronics Group Co., Ltd. Annual Report 2006 Notes to Financial Statements (31 December 2006) 30. I N T E R E S T- B E A R I N G BORROWINGS (Cont'd) Company BANK AND OTHER 30. 2006 Effective interest rate (%) (%) Effective interest rate (%) (%) 2005 Maturity HK$'000 Maturity HK$'...

  • Page 127
    ... 16 150,000,000 200,000,000 31. CONVERTIBLE NOTES On 28 January 2005, the Company issued convertible notes with an aggregate principal amount of HK$260 million to a subsidiary of Haier Group, Qingdao Haier Group Holdings (BVI) Ltd. The convertible notes have a three-year term and are non-interest...

  • Page 128
    ... Group Co., Ltd. Annual Report 2006 Notes to Financial Statements (31 December 2006) 31. CONVERTIBLE NOTES (Cont'd) During the year, convertible notes with a face value of HK$63,000,000 (2005: HK$27,000,000) were converted into 350,000,000 (2005: 150,000,000) ordinary shares of the Company...

  • Page 129
    Haier Electronics Group Co., Ltd. Annual Report 2006 Notes to Financial Statements (31 December 2006) 32. PROVISIONS Group 32. Product warranties and installation 2006 HK$'000 2005 HK$'000 (Restated) At 1 January (as restated) Additional provision Amounts utilised during the year Exchange ...

  • Page 130
    ...to the income statement during the year in respect of continuing operations Exchange realignment At 31 December The Group has tax losses arising in Hong Kong of HK$34,523,000 (2005: HK$35,702,000) that are available indefinitely for offsetting against future taxable profits of the companies in which...

  • Page 131
    ... Annual Report 2006 Notes to Financial Statements (31 December 2006) 33. DEFERRED TAX (Cont'd) At 31 December 2006, there is no significant unrecognised deferred tax liability (2005: Nil) for taxes that would be payable on the unremitted earnings of certain of the Group's subsidiaries as the Group...

  • Page 132
    Haier Electronics Group Co., Ltd. Annual Report 2006 Notes to Financial Statements (31 December 2006) 34. ISSUED EQUITY (Cont'd) Company 34. 2006 HK$'000 2005 HK$'000 Authorised: 30,000,000,000 (2005: 30,000,000,000) shares of HK$0.10 each 30,000,000,000 30,000,000,000 0.10 Issued and fully paid...

  • Page 133
    Haier Electronics Group Co., Ltd. Annual Report 2006 Notes to Financial Statements (31 December 2006) 34. ISSUED EQUITY (Cont'd) # Pursuant to a special resolution passed at an annual general meeting of the Company held on 25 May 2005, the Company carried out the following capital reorganisation: ...

  • Page 134
    Haier Electronics Group Co., Ltd. Annual Report 2006 Notes to Financial Statements (31 December 2006) 35. SHARE OPTION SCHEME (Cont'd) The maximum number of shares in respect of which options may be granted under the Share Option Scheme is such number of shares, when aggregated with shares subject...

  • Page 135
    Haier Electronics Group Co., Ltd. Annual Report 2006 Notes to Financial Statements (31 December 2006) 35. SHARE OPTION SCHEME (Cont'd) The offer of a grant of share options may be accepted within 28 days from the date of the offer, upon payment of a nominal consideration of HK$1 in total by the ...

  • Page 136
    Haier Electronics Group Co., Ltd. Annual Report 2006 Notes to Financial Statements (31 December 2006) 35. SHARE OPTION SCHEME (Cont'd) Details of the movements of share options under the Share Option Scheme during the year were as follows: 35. Number of share options Outstanding as at 1 January ...

  • Page 137
    Haier Electronics Group Co., Ltd. Annual Report 2006 Notes to Financial Statements (31 December 2006) 35. SHARE OPTION SCHEMES (Cont'd) Notes: 1. The vesting period of the share options is from the date of grant until the commencement of the exercisable period. The exercise price of the share ...

  • Page 138
    ... Group Co., Ltd. Annual Report 2006 Notes to Financial Statements (31 December 2006) 35. SHARE OPTION SCHEMES (Cont'd) The 345,000,000 share options exercised during the year resulted in the issue of 345,000,000 (2005:187,000,000) ordinary shares of the Company and new share capital of HK...

  • Page 139
    Haier Electronics Group Co., Ltd. Annual Report 2006 Notes to Financial Statements (31 December 2006) 36. RESERVES (a) Group The amounts of the Group's reserves and the movements therein for the current and prior years are presented in the combined statement of changes in equity on pages 50 and 51...

  • Page 140
    ... Electronics Group Co., Ltd. Annual Report 2006 Notes to Financial Statements (31 December 2006) 36. RESERVES (Cont'd) (b) Company Share premium account 36. (b) Contributed surplus HK$'000 Share option Accumulated reserve losses HK$'000 HK$'000 Total HK$'000 Notes HK$'000 At 1 January 2005 70...

  • Page 141
    Haier Electronics Group Co., Ltd. Annual Report 2006 Notes to Financial Statements (31 December 2006) 37. BUSINESS COMBINATION On 28 January 2005, the Company acquired from Haier Group its entire 100% interest in Haier Holdings (BVI) Limited and Qingdao Haier Investment and Development Holdings (...

  • Page 142
    Haier Electronics Group Co., Ltd. Annual Report 2006 Notes to Financial Statements (31 December 2006) 37. BUSINESS COMBINATION (Cont'd) The fair values of the identifiable assets and liabilities of the Former Group as at the date of acquisition, which have no significant differences from their ...

  • Page 143
    ... Group Co., Ltd. Annual Report 2006 Notes to Financial Statements (31 December 2006) 37. BUSINESS COMBINATION (Cont'd) Since its acquisition, the Former Group had no contribution to the Group's revenue and contributed HK$114,687,000 to the Group's combined loss for the year ended 31 December 2005...

  • Page 144
    Haier Electronics Group Co., Ltd. Annual Report 2006 Notes to Financial Statements (31 December 2006) 38. DISPOSAL OF SUBSIDIARIES (Cont'd) An analysis of the net outflow of cash and cash equivalents in respect of the disposal of subsidiaries is as follows: 38. 2006 HK$'000 2005 HK$'000 Cash ...

  • Page 145
    Haier Electronics Group Co., Ltd. Annual Report 2006 Notes to Financial Statements (31 December 2006) 40. OPERATING LEASE ARRANGEMENTS (Cont'd) (b) As lessee The Group leases certain properties under operating lease arrangements. Leases for the properties are negotiated for terms ranging from one ...

  • Page 146
    ... Ltd. Annual Report 2006 Notes to Financial Statements (31 December 2006) 42. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES The Group's principal financial instruments comprise convertible notes, other interest-bearing loans and cash and short term deposits. The main purpose of these financial...

  • Page 147
    Haier Electronics Group Co., Ltd. Annual Report 2006 Notes to Financial Statements (31 December 2006) 42. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (Cont'd) Credit risk (Cont'd) The credit risk of the Group's other financial assets, which comprise cash and cash equivalents, arises from ...

  • Page 148
    Haier Electronics Group Co., Ltd. Annual Report 2006 Notes to Financial Statements (31 December 2006) 44. COMPARATIVE AMOUNTS As further explained in note 2 to the financial statements, due to the application of merger accounting for common control combinations during the current year, the ...

  • Page 149
    ...Annual Report 2006 Summary Financial Information A summary of the results and of the assets, liabilities and minority interests of the Group, as extracted from the published audited financial statements and reclassified as appropriate, is set out below. Year ended 31 December 2006 HK$'000 2005 HK...