Haier 2007 Annual Report Download

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Table of contents

  • Page 1

  • Page 2
    ... Profile and Recent Development 2 Simplified Corporate Structure 3 Corporate Information 4 Chairman's Letter 8 Financial Review 16 Corporate Governance Report 22 Report of the Directors 36 Independent Auditors' Report 53 Consolidated Income Statement 55 Consolidated Balance Sheet...

  • Page 3
    ...(the "Company"), a subsidiary of Haier Group, is listed on the Main Board of The Stock Exchange of Hong Kong Limited. The Company and its subsidiaries (the "Group") are principally engaged in the research, development, production and sale of washing machines and water heaters under the brand name of...

  • Page 4
    ... Corporate Structure Haier Electronics Group Co., Ltd. Washing Machine Business Water Heater Business Top Loading Washing Machine Business Front Loading Washing Machine Business Qingdao Haier Washing Machine Co., Ltd. Haier Indesit (Qingdao) Washing Machine Co. Ltd. Wuhan Haier Water Heater...

  • Page 5
    .... 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. WU Yinong Mr. YU Hon To, David Dr. LIU Xiao Feng Principal Board Committees Haier Electronics Group Co., Ltd. Annual Report 2007...

  • Page 6
    ... 0880 +852 2169 0880 Stock Code The Stock Exchange of Hong Kong Limited: 01169 01169 Websites www.haier-elec.com.hk www.haier-elec.com.hk Investor Relations Contact CCG Elite Investor Relations Limited Room 1308, 13/F., 9 Queen's Road Central Central, Hong Kong Telephone Number : (852) 3183 0299...

  • Page 7
    Haier Electronics Group Co., Ltd. Annual Report 2007 6 Thoughtful Technology

  • Page 8
    Haier Electronics Group Co., Ltd. Annual Report 2007 7

  • Page 9
    ... in 2007. The completion of the acquisition of the front loading washing machine and water heater businesses from the Company's controlling shareholders, Haier Group Corporation and Qingdao Haier Investment and Development Co., Ltd together with their subsidiaries ( collectively the "Haier Group...

  • Page 10
    .... Annual Report 2007 10% 9 30% Appreciation I would like to take this oppor tunity to thank all my fellow directors and staff for their dedicated services, contributions and support during the year. By Order of the Board of Haier Electronics Group Co., Ltd. Yang Mian Mian Chairman Hong Kong, 24...

  • Page 11
    ... the white goods business Haier Electronics Group Co., Ltd. Annual Report 2007 66 A 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...

  • Page 12
    ... number of senior positions in the Electrothermal Appliance Department of the Haier Group. Mr. Sun is also a director of certain subsidiaries of the Group. He has over 14 years of extensive experience in water heater business. 37 A Haier Electronics Group Co., Ltd. Annual Report 2007 39 50 member...

  • Page 13
    ... experience in corporate finance. Mr. Yu is a founder and a director of MCL Capital Limited (previously known as Management Capital Limited), which specialises in direct investment and financial advisory activities, and also sits on the boards of several listed companies in Hong Kong. D r. Liu X iao...

  • Page 14
    ... of Material Engineering. He joined the Haier Group in 1996 and has held a number of senior positions in the water heater division. He is currently a director of Electrothermal Appliance Department. 33 44 38 Haier Electronics Group Co., Ltd. Annual Report 2007 43 Accountants and a member of the...

  • Page 15
    Haier Electronics Group Co., Ltd. Annual Report 2007 14 Financial Review

  • Page 16
    Financial Review Global Brand Haier Electronics Group Co., Ltd. Annual Report 2007 15

  • Page 17
    Financial Review Business Review Washing Machine Business T he G roup's wa s hing mac hine b u s ine s s c o mp r i s e s the manufacture and sale of top loading and front loading washing machines, which together accounted for approximately 81% of total revenue for 2007 (2006: 81.9%). The Group ...

  • Page 18
    ... consumer products. Looking forward, the Directors are confident that the washing machine business will continue to perform satisfactorily in the years ahead. Water Heater Business The water heater business, which accounted for approximately 19% of Group revenue in 2007 ( 2006: 18.1%), also posted...

  • Page 19
    Financial Review The Group produces three types of water heaters, namely, electrical water heaters, gas water heaters and solar power water heaters. Electrical water heaters and gas water heaters are currently the predominant types of water heaters sold in the PRC while the market share of solar ...

  • Page 20
    ... 2007 (2006: HK$252 million), all being contracted capital commitments, which were mainly related to purchase of machinery for the expansion in Haier Electronics Group Co., Ltd. Annual Report 2007 211,000,000 18,000,000 252,000,000 production capacity of the Group's businesses. Capital Structure...

  • Page 21
    ... of front loading washing machines and water heaters with effect from 1 Januar y 2007 upon completion of the abovementioned acquisition of these businesses in December 2006. The Group ensures that the remuneration packages for its employees are competitive and employees are generally remunerated...

  • Page 22
    ...in the manufacture and sale of front loading washing machines, from Indesit Group, for an aggregate consideration of â,¬14,310,000 (approximately HK $162,977,0 0 0 ) . The acquisition was completed in December 2007. 30% 14,310,000 162,977,000 Haier Electronics Group Co., Ltd. Annual Report 2007 21

  • Page 23
    ... 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 24
    ... of the Listing Rules, approving transactions in which connected person(s) (as defined in the Listing Rules) of the Group is/are considered having a material conflict of interests. 6. 5. 4. 2. 3. 1. Haier Electronics Group Co., Ltd. Annual Report 2007 between the Board and the Management (including...

  • Page 25
    ... Bermuda, the Bye-laws of the Company, the Listing Rules and/or the Hong Kong Codes on Takeovers Haier Electronics Group Co., Ltd. Annual Report 2007 1. and Mergers and Share Repurchases; 2. formulating and implementing policies for business activities, internal controls and administration of the...

  • Page 26
    Corporate Governance Report Board of Directors (Cont'd) Chairman and Chief Executive Officer ("CEO") (Cont'd) Under the Code Provision E.1.2, the chairman of the board should attend the annual general meeting. The Chairman of the Board did not attend the 2007 annual general meeting of the Company ...

  • Page 27
    ... requirements. Haier Electronics Group Co., Ltd. Annual Report 2007 In order to ensure that their duties can be properly discharged, the Directors are entitled to seek advice from independent professional advisers whenever deemed necessary by them at the Company's expense. Board Meetings During...

  • Page 28
    ... Song Chun Guang** INEDs: Mr. Lam Kin Kau, Mark*** Mr. Fung Hoi Wing, Henry*** Mr. Wu Yinong Mr. Yu Hon To, David**** Dr. Liu Xiao Feng**** appointed on 8 March 2007 resigned on 15 February 2007 resigned on 21 June 2007 appointed on 21 June 2007 Haier Electronics Group Co., Ltd. Annual Report 2007...

  • Page 29
    ... at Haier Electronics Group Co., Ltd. Annual Report 2007 the Board Meetings that they were unable to attend. In addition, draft and final versions of the Board Minutes will be sent to all Directors for their comments and records. Model Code for Securities Transactions by Directors The Company has...

  • Page 30
    ...principles and practices adopted by the Group and to discuss internal controls and financial reporting matters including the review of 2006 annual results and 2007 interim results of the Group. 100% Haier Electronics Group Co., Ltd. Annual Report 2007 The Company Secretary also acts as secretary of...

  • Page 31
    ...te n d a n c e o f members of the Audit Committee during the year ended 31 December 2007: No. of Audit Committee Meetings attended/held INEDs: Haier Electronics Group Co., Ltd. Annual Report 2007 (1) Mr. Lam Kin Kau, Mark* Mr. Fung Hoi Wing, Henry* Mr. Wu Yinong Mr. Yu Hon To, David** Dr. Liu Xiao...

  • Page 32
    ...* Mr. Wu Yinong Mr. Yu Hon To, David** Dr. Liu Xiao Feng** * ** resigned on 21 June 2007 appointed on 21 June 2007 Haier Electronics Group Co., Ltd. Annual Report 2007 (2) 0/2 1/2 * * ** ** * ** 1/1 1/1 2/2 1/1 1/1 31 Nomination of Directors The Board has not established a nomination committee...

  • Page 33
    ...Insurance Haier Electronics Group Co., Ltd. Annual Report 2007 The Group has arranged appropriate directors' and officers' liability insurance to indemnify the Directors and senior staff of the Group for their potential liabilities incurred by them in discharging their duties. The Group reviews the...

  • Page 34
    ... of Group's internal control systems and risk management procedures in its major business and operational processes. The Company has established an internal control review plan to cover its major internal control systems covering areas including operational control, financial control and...

  • Page 35
    Haier Electronics Group Co., Ltd. Annual Report 2007 34 Life Style

  • Page 36
    Haier Electronics Group Co., Ltd. Annual Report 2007 35

  • Page 37
    ... financial statements of the Company and the Group for the year ended 31 December 2007. Principal Activities The principal activity of the Company is investment holding. The principal activities of the subsidiaries comprise the manufacture and sale of washing machines and water heaters. There...

  • Page 38
    ... 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 two and five of the Group's five largest customers and suppliers...

  • Page 39
    ... share capital) had any beneficial interest in the Group's five largest customers or suppliers. 5% Directors The directors of the Company during the year were: Executive directors: Yang Mian Mian Haier Electronics Group Co., Ltd. Annual Report 2007 Wu Ke Song Liang Hai Shan Cao Chun Hua Cui Shao...

  • Page 40
    ... Model Code for Securities Transactions by Directors of Listed Issuers as set out in Appendix 10 to the Rules Governing the Listing of Securities in The Stock Exchange of Hong Kong Limited (the "Listing Rules"). 10 352 XV Haier Electronics Group Co., Ltd. Annual Report 2007 Directors' Remuneration...

  • Page 41
    ... such rights exercised by them; or was the Company, or any of its holding companies, subsidiaries or fellow subsidiaries a party to any arrangement to enable the directors of the Company to acquire such rights in any other body corporate. Haier Electronics Group Co., Ltd. Annual Report 2007 32 40

  • Page 42
    ... of the Company's share capital Haier Electronics Group Co., Ltd. Annual Report 2007 336 5% Name of shareholder Qingdao Haier Collective Asset Management Association ("Haier Collective Asset Management") Haier Corp 2 1,459,042,593 78.47 1 1,459,042,593 78.47 Haier Investment 3 1,459,042...

  • Page 43
    ... of the Directors Substantial Shareholders' Interests in Shares and Underlying Shares (Cont'd) Short positions in the underlying Shares: Number of underlying Shares Note Name of shareholder Deutsche Bank Long positions in the underlying Shares: Haier Electronics Group Co., Ltd. Annual Report 2007...

  • Page 44
    ... 0 0 Shares held by Haier Investment and 82,650,000 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. 3. H a i e r I nve...

  • Page 45
    ... 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 directors of Haier BVI. . BVI 94,444,444 BVI Save as disclosed above, as at 31 December 2007, no...

  • Page 46
    Report of the Directors C o n n e c te d Tr a n s a c t i o n s a n d C o n t i n u i n g Connected Transactions (Cont'd) (b) On 4 September 2007, Haier Washing Machines H o l d i n g s ( BV I ) L i m i te d ( " H a i e r W M BV I " ) , a n indirect wholly-owned subsidiary of the Company, as ...

  • Page 47
    ... Haier Corp, Haier Investment, their subsidiaries and associates (collectively referred to as "Haier Affiliates"): Haier Electronics Group Co., Ltd. Annual Report 2007 (c) Group 2007 Notes HK$'000 2006 HK$'000 Export sales of washing machines Domestic sales of washing machines and water heaters...

  • Page 48
    ... Directors C o n n e c te d Tr a n s a c t i o n s a n d C o n t i n u i n g Connected Transactions (Cont'd) (c) (Cont'd) Notes: (i) The export sales of washing machines were made to Haier Ele ctrical A ppliances Co., Ltd. ( "Haier Electrical" ), a subsidiar y of Haier Investment, at selling prices...

  • Page 49
    ... outstanding inventories of washing machines and water heaters owned by subsidiaries of Haier Investment at 31 December 2006. (x) (c) (xi) (xi) 0.8% Haier Electronics Group Co., Ltd. Annual Report 2007 (xii) (xii) 2% (xiii) The sales of gift products were made at selling prices no less than...

  • Page 50
    ... Haier Affiliates: Group 2007 Notes HK$'000 Haier Electronics Group Co., Ltd. Annual Report 2007 (c) Export sales of washing machines Export sales of water heaters Purchases of raw materials Printing and packaging fee expenses Mould charges Utility service fee expenses Logistics charges Promotion...

  • Page 51
    ... by independent third parties. (xx) The promotion fee expenses were charged at 1.2% of the domestic sales of washing machines and water heaters. (xvi) (c) (xvii) (xviii) Haier Electronics Group Co., Ltd. Annual Report 2007 (xix) (xx) 1.2% (xxi) The other service fee expenses were determined...

  • Page 52
    ... of the Company as a whole. (d) As at the balance sheet date, Haier Corp provided corporate guarantees up to RMB201,000,000 (2006: RMB156,800,000 ) (equivalent to HK$ 214,973,000 (2006: HK$153,726,000)) to Haier Group Finance Co., Ltd. ("Haier Finance"), a subsidiary of Haier Corp and a financial...

  • Page 53
    ...a re solution for their re appointment as auditors of the Company will be proposed Haier Electronics Group Co., Ltd. Annual Report 2007 a t t h e fo r t h c o m i n g a n n u a l g e n e r a l m e e ti n g of t h e Company. On Behalf of the Board Yang Mian Mian Chairman Hong Kong 24 April 2008 52

  • Page 54
    ... of the Hong Kong Companies Ordinance. This responsibility includes designing, implementing and maintaining internal control relevant to the preparation and the true and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error; selecting and...

  • Page 55
    .... Annual Report 2007 Opinion In our opinion, the financial statements give a true and fair view of the state of affairs of the Company and of the Group as at 31 December 2007 and of the Group's profit and cash flows for the year then ended in accordance with Hong Kong Financial Reporting Standards...

  • Page 56
    ... continuing operations Diluted - For profit for the year - For profit for the year from continuing operations 13 - 14 9.29 HK cents 14.36 HK cents 9.29 HK cents 8.70 HK cents 9.22 HK cents 13.93 HK cents 9.22 HK cents 8.59 HK cents Haier Electronics Group Co., Ltd. Annual Report 2007 55

  • Page 57
    ... Sheet 31 December 2007 2007 Notes HK$'000 2006 HK$'000 NON-CURRENT ASSETS Property, plant and equipment Prepaid land premiums...49,506 - 886,971 700,030 75,661 1,734 34,681 5,169 817,275 Haier Electronics Group Co., Ltd. Annual Report 2007 21 22 23 24 658,534 1,347,026 178,255 - 595,426 2,779,...

  • Page 58
    ...Equity component of convertible notes Reserves 31 1,248,210 22,094 1,212,960 22,094 (590,935) 644,119 154,448 798,567 Haier Electronics Group Co., Ltd. Annual Report 2007 33(a) (422,904) 847,400 Minority interests Total equity 94,724 942,124 Yang Mian Mian Chairman Cui Shao Hua Director 57

  • Page 59
    ...,765) - 162,305 - (260,166) - 53,691 64,388 644,119 64,388 154,448 12,079 798,567 76,467 1,094,159 - - - - - 30,281 - - - 87,902 - 96,908 - (394,657) - 32,322 34,711 946,915 34,711 162,507 6,273 1,109,422 40,984 Haier Electronics Group Co., Ltd. Annual Report 2007 - - - - - - - - 262,349...

  • Page 60
    ... Cash generated from operations Interest received Mainland China corporate income tax paid Net cash inflow from operating activities 5,169 (455,690) 272,382 (75,951) (177,972) 145,588 18,394 11,288 173,070 10,121 (40,058) 143,133 316,600 Haier Electronics Group Co., Ltd. Annual Report 2007 CASH...

  • Page 61
    ... disposal of items of property, plant and equipment Disposal of investments Contribution from holding companies Acquisition of minority interests Disposal of subsidiaries Decrease in pledged deposits Decrease/(increase) in time deposits with original maturity of more than three months when acquired...

  • Page 62
    ... 2007 2007 Notes HK$'000 2006 HK$'000 NON-CURRENT ASSETS Interests in subsidiaries ...subsidiaries Convertible notes 19 2,143,636 1,982,920 23 24 999 143,403 144,402 346 66,021 66,367 Haier Electronics Group Co., Ltd. Annual Report 2007... 33(b) Yang Mian Mian Chairman Cui Shao Hua Director

  • Page 63
    ... to Financial Statements 31 December 2007 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 Street, Hamilton HM11, Bermuda. During the year, the Group was...

  • Page 64
    ... of HK$ 900 million (the "Asset Transfer"). The subsidiaries of Haier SPV are principally engaged in the manufacture and sale of washing machines and water heaters. Haier SPV and its subsidiaries are collectively referred to as the "Haier SPV Group". As the Company and Haier SPV Group were...

  • Page 65
    ... 31 December 2007 2.2 Impact of New and Revised Hong Kong Financial Reporting Standards The Group has adopted the following new and revised HKFRSs for the first time for the current year's financial statements. Except for in certain cases, giving rise to new and revised accounting policies and...

  • Page 66
    Notes to Financial Statements 31 December 2007 2.2 Impact of New and Revised Hong Kong Financial Reporting Standards (Cont'd) (b) Amendment to HK AS 1 Presentation of Financial Statements - Capital Disclosures This amendment requires the Group to make disclosures that enable users of the financial ...

  • Page 67
    ... Financial Statements 5 HKFRS 2 - Group and Treasury Share Transactions 2 Service Concession Arrangements 4 12 Customer Loyalty Programmes 3 13 HKAS 19 - The Limit on a Defined Benefit Asset, Minimum Funding Requirements and their Interaction 4 5 HK(IFRIC)-Int 11 2 11 2 4 HK(IFRIC)-Int 12 HK...

  • Page 68
    ..., such a change will have no impact on goodwill, nor will it give rise to a gain or loss. Furthermore, the amended standard changes the accounting for losses incurred by the subsidiary as well as the loss of control of a subsidiary. 27 2 Haier Electronics Group Co., Ltd. Annual Report 2007 67 3

  • Page 69
    ... the purposes of allocating resources to the segments Haier Electronics Group Co., Ltd. Annual Report 2007 2.3 3 27 8 14 and assessing their performance. The standard also requires the disclosures of information about the products and services provided by the segments, the geographical areas in...

  • Page 70
    Notes to Financial Statements 31 December 2007 2.3 Impact of Issued But Not Yet Effective Hong Kong Financial Reporting Standards (Cont'd) HK( IFRIC ) -Int 11 requires arrangements whereby an employee is granted rights to the Group's equity instruments, to be accounted for as an equity-settled ...

  • Page 71
    ... to Financial Statements 31 December 2007 2.3 Impact of Issued But Not Yet Effective Hong Kong Financial Reporting Standards (Cont'd) HK(IFRIC)-Int 14 addresses how to assess the limit under HKAS 19 Employee Benefits, on the amount of a refund or a reduction in future contributions in relation to...

  • Page 72
    ... Group holds, directly or indirectly, less than 20% of the joint venture's registered capital and has neither joint control of, nor is in a position to exercise significant influence over, the joint venture. 2.4 (a) (b) (c) 20% (d) 20% 39 Haier Electronics Group Co., Ltd. Annual Report 2007...

  • Page 73
    ..., unless the asset does not generate cash inflows that are largely Haier Electronics Group Co., Ltd. Annual Report 2007 2.4 independent of those from other assets or groups of assets, in which case the recoverable amount is determined for the cash-generating unit to which the asset belongs. An...

  • Page 74
    ... to in (d) or (e); or (g) the party is a post-employment benefit plan for the benefit of the employees of the Group, or of any entity that is a related party of the Group. 2.4 (a) (i) (ii) (iii) (b) (c) (d) Haier Electronics Group Co., Ltd. Annual Report 2007 (e) (a) (d) (f) (d) (e) 73 (g)

  • Page 75
    ... The cost of an item of proper ty, plant and equipment comprises its purchase price and any directly attributable costs Haier Electronics Group Co., Ltd. Annual Report 2007 2.4 5 of bringing the asset to its working condition and location for its intended use. Expenditure incurred after items of...

  • Page 76
    ... there is an indication that the intangible asset may be impaired. The amortisation period and the amortisation method for an intangible asset with a finite useful life are reviewed at least at each balance sheet date. 2.4 Haier Electronics Group Co., Ltd. Annual Report 2007 75

  • Page 77
    ...o sts a re c ha rg e d to the inc o me statement as incurred. Haier Electronics Group Co., Ltd. Annual Report 2007 2.4 10 Expenditure incurred on projects to develop new products is capitalised and deferred only when the Group can demonstrate the technical feasibility of completing the intangible...

  • Page 78
    Notes to Financial Statements 31 December 2007 2.4 S u m m a r y o f S i g n i f i c a n t A c c o u n t i n g Policies (Cont'd) Investments and other financial assets Financial assets in the scope of HK AS 39 are classified as financial assets at fair value through profit or loss, loans and ...

  • Page 79
    ... recognised in the income statement does not include any dividends on these financial assets, which are recognised in accordance Haier Electronics Group Co., Ltd. Annual Report 2007 2.4 with the policies set out for "Revenue recognition" below. Loans and receivables Loans and receivables are non...

  • Page 80
    ..., such securities are stated at cost less any impairment losses. Fair value The fair value of investments that are actively traded in organised financial markets is determined by reference to quoted market bid prices at the close of business at the balance sheet date. For investments where there is...

  • Page 81
    Notes to Financial Statements 31 December 2007 2.4 S u m m a r y o f S i g n i f i c a n t A c c o u n t i n g Policies (Cont'd) Impairment of financial assets The Group assesses at each balance sheet date whether there is any objective evidence that a financial asset or a group of financial assets...

  • Page 82
    ... "prolonged" requires judgement. In addition, the Group evaluates other factors, such as the share price volatility. Impairment losses on equity instruments classified as available for sale are not reversed through the income statement. 2.4 Haier Electronics Group Co., Ltd. Annual Report 2007 81

  • Page 83
    ... a ) h a s tr a n s fe r re d s u b s t a nti a ll y a ll the r i s ks and rewards of the asset, or (b) has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset. 2.4 • Haier Electronics Group Co., Ltd. Annual Report 2007...

  • Page 84
    ... when the instruments are first recognised. Derecognition of financial liabilities A financial liability is derecognised when the o b l i g at i o n u n d e r t h e l i a b i l i t y i s d i s c h a r g e d o r cancelled or expires. 2.4 Haier Electronics Group Co., Ltd. Annual Report 2007 83

  • Page 85
    ..., such an exchange or modification is treated as a derecognition of the original liability and the recognition of a new liability, and the difference between the respective carrying amounts is recognised in the income statement. Inventories Haier Electronics Group Co., Ltd. Annual Report 2007...

  • Page 86
    ...time is included in finance costs in the income statement. Provisions for installation ser vices and product warranties granted by the Group on certain products are recognised based on sales volume and past experience of the level of installation ser vices rendered, repairs or returns, discounted to...

  • Page 87
    Notes to Financial Statements 31 December 2007 2.4 S u m m a r y o f S i g n i f i c a n t A c c o u n t i n g Policies (Cont'd) Income tax (Cont'd) • in respect of taxable temporar y differences associated with investments in subsidiaries, associates and interests in joint ventures, where the ...

  • Page 88
    ... through the expected life of the financial instrument to the net carrying amount of the financial asset; and dividend income, when the shareholders' right to receive payment has been established. 2.4 (a) (b) (b) (c) (c) (d) (d) Haier Electronics Group Co., Ltd. Annual Report 2007 87

  • Page 89
    ... MPF Scheme. Contributions are made based on a percentage of the employees' basic salaries and are charged to the income statement as they become payable in accordance with the rules of Haier Electronics Group Co., Ltd. Annual Report 2007 2.4 the MPF Scheme. The assets of the MPF Scheme are held...

  • Page 90
    ... are translated using the exchange rates at the dates of the initial transactions. Non-monetary items measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value was determined. 2.4 Haier Electronics Group Co., Ltd. Annual Report 2007 89

  • Page 91
    ... balance sheet date, and their income statements are translated into Hong Kong dollars at the weighted average exchange rates for the year. The resulting exchange differences are included in the exchange fluctuation reserve. On Haier Electronics Group Co., Ltd. Annual Report 2007 2.4 disposal of...

  • Page 92
    ... the most signif ic a nt ef fe c t on the amounts recognised in the financial statements: Operating lease commitments - Group as lessor The Group has entered into commercial property leases on its proper ty por tfolio. The Group has determined that it retains all the significant risks and rewards of...

  • Page 93
    .... If the portions could not be sold separately, the property is 3. Haier Electronics Group Co., Ltd. Annual Report 2007 an investment property only if an insignificant portion is held for use in the production or supply of goods or services or for administrative purposes. Judgement is made on an...

  • Page 94
    ... to industry cycles. The depreciation charge will increase where the useful lives are less than the previously estimated useful lives, or it will write off or write down obsolete or non-strategic assets that have been abandoned or sold. 3. Haier Electronics Group Co., Ltd. Annual Report 2007 93

  • Page 95
    ...% 90% Haier Electronics Group Co., Ltd. Annual Report 2007 The Group's operating businesses are structured and managed separately according to the nature of their operations and the products and services they provide. Each of the Group's business segments represents a strategic business unit that...

  • Page 96
    ... and expenditure information for the Group's business segments for the years ended 31 December 2007 and 2006. Continuing operations Washing machine business 2007 HK$'000 2006 HK$'000 Water heater business 2007 HK$'000 2006 HK$'000 Corporate and others 2007 HK$'000 2006 HK$'000 4. Discontinued...

  • Page 97
    Notes to Financial Statements 31 December 2007 4. Segment Information (Cont'd) Business segments Continuing operations Washing machine business 2007 HK$'000 2006 HK$'000 Water heater business 2007 HK$'000 2006 HK$'000 Corporate and others 2007 HK$'000 2006 HK$'000 4. Discontinued operation ...

  • Page 98
    ... development of washing machines and water heaters and cer tain tax refunds received from a relevant authority of the Wuhan Municipality. The compensation received from suppliers in the prior year included a compensation of approximately HK $ 9,078,0 0 0 received from Qingdao Haier Parts Procurement...

  • Page 99
    ...# 2007 Notes HK$'000 2006 HK$'000 Haier Electronics Group Co., Ltd. Annual Report 2007 Cost of inventories sold Depreciation Recognition of prepaid land premiums Amortisation of intangible assets* Research and development costs* Auditors' remuneration Employee benefits expense (including directors...

  • Page 100
    Notes to Financial Statements 31 December 2007 7. Finance Costs Group 7. 2007 HK$'000 2006 HK$'000 Continuing operations: Interest on borrowings wholly...capitalised 11,039 3,650 7,459 - 11,109 - 11,109 Haier Electronics Group Co., Ltd. Annual Report 2007 28 26 7,679 6,748 25,466 (1,398) 24,068 ...

  • Page 101
    ... Limited (the "Listing Rules") and Section 161 of the Hong Kong Companies Ordinance, is as follows: Group 8. 161 2007 HK$'000 2006 HK$'000 Haier Electronics Group Co., Ltd. Annual Report 2007 Fees Other emoluments: Salaries, allowances and benefits in kind Performance related bonuses Employee...

  • Page 102
    ... as directors of the Company on 21 June 2007. Mr. Lau Ho Wai, Lucas, resigned as a director of the Company on 28 July 2006. ** ** *** *** There were no other emoluments payable to the independent non-executive directors during the Haier Electronics Group Co., Ltd. Annual Report 2007 year...

  • Page 103
    ..., allowances and benefits Fees in kind Performance related bonuses Employee share option benefits Pension scheme contributions Total remuneration HK$'000 HK$'000 HK$'000 HK$'000 HK$'000 HK$'000 2007 Haier Electronics Group Co., Ltd. Annual Report 2007 Yang Mian Mian Wu Ke Song Liang Hai Shan...

  • Page 104
    ...: Group 9. 8 2007 HK$'000 2006 HK$'000 Haier Electronics Group Co., Ltd. Annual Report 2007 Salaries, allowances and benefits in kind Performance related bonuses Employee share option benefits Pension scheme contributions 3,189 - - 46 3,235 4,682 - 409 37 5,128 The number of non-director...

  • Page 105
    ... Statements 31 December 2007 10. 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 (2006: Nil). Tax on profits assessable elsewhere in the PRC have been calculated at the applicable PRC corporate...

  • Page 106
    ... the Company and its subsidiaries are domiciled to the tax expense at the effective tax rates, and a reconciliation of the applicable rates (i.e., the statutory tax rates) to the effective tax rates, are as follows: Group - 2007 Hong Kong HK$'000 % % 10. Mainland China HK$'000 % % Total HK$'000...

  • Page 107
    Notes to Financial Statements 31 December 2007 10. Tax (Cont'd) Group - 2006 Hong Kong HK$'000 % % 10. Mainland China HK$'000 % % HK$'000 Total % % Profit before tax (including profit from a discontinued operation) Tax at the statutory tax rate Income not subject to tax Expenses not deductible ...

  • Page 108
    ... 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 completed on 27 June 2006. 12. (BVI) BVI 411,000,000 BVI 5.2 BVI Haier Electronics Group Co., Ltd. Annual Report 2007 107

  • Page 109
    ... Statements 31 December 2007 12. Discontinued Operation (Cont'd) T he re s ults of Pe g a s u s Q ing dao a nd Pe g a s u s Electronic are presented below: 12. For the year ended 31 December 2007 From 1 January to 27 June 2006 HK$'000 Haier Electronics Group Co., Ltd. Annual Report 2007 HK...

  • Page 110
    ...Qingdao and Pegasus Electronic are as follows: For the year ended 31 December 2007 From 1 January to 27 June 2006 HK$'000 HK$'000 Operating activities Investing activities Financing activities Net cash inflow - - - - 54,774 (135) (45,991) 8,648 Haier Electronics Group Co., Ltd. Annual Report...

  • Page 111
    ... to Equity Holders of the Parent Haier Electronics Group Co., Ltd. Annual Report 2007 14. The calculation of basic earnings per share amounts is based on the profit for the year attributable to ordinary equity holders of the parent, and the weighted average number of ordinar y shares in issue...

  • Page 112
    ...Haier Electronics Group Co., Ltd. Annual Report 2007 Interest on convertible notes (note 7) Profit attributable to ordinary equity holders of the parent...of dilution - weighted average number of ordinary shares (as adjusted to reflect the consolidation of the Company's ordinary shares during the year...

  • Page 113
    ...in these financial statements, the Group had the following material transactions with related parties during the year. (a) O n 15 J u n e 20 07, Q i n g d a o Ec o n o my a n d Technology Development Zone Haier Water Heater Co., Ltd., an indirect wholly-owned subsidiar y of the Company, entered into...

  • Page 114
    Notes to Financial Statements 31 December 2007 15. Related Party Transactions (Cont'd ) (b) On 4 September 2007, Haier Washing Machines H o l d i n g s ( BV I ) L i m i te d ( " H a i e r WM BV I " ) , an indirect wholly-owned subsidiar y of the Company, as purchaser entered into equity transfer ...

  • Page 115
    ... Haier Investment, their subsidiaries and associates (collectively referred to as "Haier Affiliates"): Haier Electronics Group Co., Ltd. Annual Report 2007 15. (c) Group 2007 Notes HK$'000 2006 HK$'000 Export sales of washing machines Domestic sales of washing machines and water heaters Purchases...

  • Page 116
    Notes to Financial Statements 31 December 2007 15. Related Party Transactions (Cont'd ) (c) (Cont'd ) Notes: (i) The export sales of washing machines were made to Haier Electrical Appliances Co., Ltd. ( " H a i e r El e c t r i c a l " ) , a s u b s i d i a r y of H a i e r I nve s tm e nt, a t s e...

  • Page 117
    ... inventories of washing machines and water heaters owned by subsidia rie s of Haie r Inve stme nt at 31 December 2006. 15. (c) (x) (xi) 0.8% (xii) Haier Electronics Group Co., Ltd. Annual Report 2007 (xii) 2% (xiii) The sales of gift products were made at selling prices no less than...

  • Page 118
    ... transactions with Haier Affiliates: Group 15. (c) 2007 Notes HK$'000 2006 HK$'000 Haier Electronics Group Co., Ltd. Annual Report 2007 Sales of washing machines Sales of water heaters Purchases of raw materials Printing and packaging fee expenses Mould charges Utility service fee expenses...

  • Page 119
    Notes to Financial Statements 31 December 2007 15. Related Party Transactions (Cont'd ) (c) Notes: (Cont'd ) (xv) The sales of water heaters for the year ended 31 December 2007 represented export sales made to Haier Electrical at selling prices representing d i f fe r e n c e s b e t we e n t h e s...

  • Page 120
    ...to certain subsidiaries of the Group. (d) 201,000,000 156,800,000 153,726,000 Haier Electronics Group Co., Ltd. Annual Report 2007 214,973,000 (e) Compensation of key management personnel of the Group: (e) 2007 HK$'000 2006 HK$'000 Short term employee benefits Post-employment benefits Share...

  • Page 121
    ... December 2007 16. Property, Plant and Equipment Group 16. Tools, furniture and fixtures Buildings Plant and machinery Motor Construction vehicles in progress Total HK$'000 HK$'000 HK$'000 HK$'000 HK$'000 HK$'000 31 December 2007 Haier Electronics Group Co., Ltd. Annual Report 2007 At...

  • Page 122
    Notes to Financial Statements 31 December 2007 16. Property, Plant and Equipment (Cont'd ) 16. Tools, furniture and fixtures Buildings Plant and machinery Motor Construction vehicles in progress Total HK$'000 HK$'000 HK$'000 HK$'000 HK$'000 HK$'000 31 December 2006 At 1 January 2006: ...

  • Page 123
    ... to provide other suitable properties to the Group to ensure the continuing operations of certain subsidiaries of Haier Electronics Group Co., Ltd. Annual Report 2007 16. 267,009,000 219,008,000 the Company operating in Qingdao and Wuhan and indemnify the Group against any losses arising from the...

  • Page 124
    ...whi c h a p p r ox i m ate l y H K $14,9 9 5,0 0 0 ( 20 0 6 : HK$10,516,000) was indemnified by Haier Corp as at 31 December 2007. Details of the undertakings granted by Haier Corp to the Company in relation to such title issue are set out in note 16 to the financial statements. 16 14,995,000 10,516...

  • Page 125
    Notes to Financial Statements 31 December 2007 18. Intangible Assets Group 18. Patents and licences HK$'000 31 December 2007 At 1 January 2007: Cost Accumulated amortisation Net carrying amount Haier Electronics Group Co., Ltd. Annual Report 2007 2,428 (694) 1,734 Cost at 1 January 2007, net of...

  • Page 126
    ... to Financial Statements 31 December 2007 19. Interests in Subsidiaries Company 19. 2007 HK$'000 2006 HK$'000 Unlisted investments, at cost Due from subsidiaries 1,982,417 163,575 2,145,992 1,982,417 503 1,982,920 - 1,982,920 Haier Electronics Group Co., Ltd. Annual Report 2007 Impairment...

  • Page 127
    ... subsidiaries are as follows: 19. Percentage of Place of registration and Name operations Nominal value of registered capital equity directly attributable to the Company Principal activities Direct Indirect Haier Electronics Group Co., Ltd. Annual Report 2007 Qingdao Haier Washing Machine...

  • Page 128
    ... Development Zone Haier Water Heater Co., Ltd. *** *** Wuhan Haier Water Heater Co., Ltd. *** *** Chongqing Haier Water Heater Co., Ltd. ** ** * PRC/ Mainland China USD24,000,000 24,000,000 - 100 Manufacture and sale of washing machines Haier Electronics Group Co., Ltd. Annual Report 2007...

  • Page 129
    ... of the subsidiaries of the Company. Under the Haier Electronics Group Co., Ltd. Annual Report 2007 20. 29 29 220,000,000 199,000,000 17,000,000 SPV 17,000,000 216,000,000 203,000,000 sponsorship agreement, Haier Group and /or its affiliates are permitted to use the official logo of the Games for...

  • Page 130
    Notes to Financial Statements 31 December 2007 21. Inventories Group 21. 2007 HK$'000 2006 HK$'000 Raw materials Work in progress Finished goods 34,399 556 623,579 658,534 15,907 11,668 180,495 208,070 Haier Electronics Group Co., Ltd. Annual Report 2007 129

  • Page 131
    ... the trade receivables as at the balance sheet date, based on the invoice date and net of provisions, and the balance of the bills receivable are as follows: Haier Electronics Group Co., Ltd. Annual Report 2007 22. 90 Group 2007 HK$'000 2006 HK$'000 Trade receivables: Within 1 month 1 to 2 months...

  • Page 132
    ... history of default. Receivables that were past due but not impaired relate to a number of independent customers that have a good track record with the Group. Based on past experience, the directors of the Company are of the opinion that no provision for impairment is necessary in respect of these...

  • Page 133
    Notes to Financial Statements 31 December 2007 23. P r e p a y m e n t s , D e p o s i t s a n d O t h e r Receivables 23. Group Company 2006 HK$'000 2007 HK$'000 2006 HK$'000 2007 HK$'000 Prepayments Deposits Other receivables Haier Electronics Group Co., Ltd. Annual Report 2007 51,069 304 126...

  • Page 134
    Notes to Financial Statements 31 December 2007 24. Cash and Cash Equivalents 24. Group 2007 HK$'000 2006 HK$'000 Company 2007 HK$'000 2006 HK$'000 Cash and bank balance Time deposits Cash and cash 470,754 124,672 350,685 276,117 18,731 124,672 17,904 48,117 At the balance sheet date, the ...

  • Page 135
    ... due to Haier Affiliates amounting to HK$1,008,252,000 (2006: HK$749,449,000 ), which are repayable on similar credit terms to those offered by other similar suppliers of the Group. Fur ther details of the purchases from these related parties are set out in note 15 to the financial statements. 15...

  • Page 136
    ...168,695 17,650 186,345 Haier Electronics Group Co., Ltd. Annual Report 2007 Included in the Group's other payables and accruals are amounts due to Haier Affiliates and directors of the Company and certain subsidiaries amounting to HK $ 374,720,0 0 0 a nd HK $16,9 3 6,0 0 0 ( 20 0 6 : H K $ 261, 23...

  • Page 137
    ... Financial Statements 31 December 2007 27. Interest-bearing Borrowings Group 2007 Effective Interest rate % Year of maturity 27. 2006 Effective interest rate HK$'000 % Year of maturity HK$'000 Current Convertible notes Haier Electronics Group Co., Ltd. Annual Report 2007 (note 28) Other loans...

  • Page 138
    ... Company 2007 HK$'000 2006 HK$'000 Borrowings repayable: Within one year or on demand In the second year In the third to fifth years, inclusive 126,417 384,317 78,800 298,465 - 169,344 - 161,665 231,376 26,524 58,000 161,665 169,344 - - 161,665 Haier Electronics Group Co., Ltd. Annual Report 2007...

  • Page 139
    ... between 2009 and 2011. Further details of the interest expenses attributable to the loans borrowed from Haier Finance are set out in note 15 to the financial statements. Except for the convertible notes, all borrowings of Haier Electronics Group Co., Ltd. Annual Report 2007 27. 6.57% 7.20...

  • Page 140
    ... component of the convertible notes of approximately HK$22 million. 28. 4.75 226,210,000 33,790,000 7,679,000 7,459,000 170,000,000 170,000,000 170,000,000 94,444,444 9,000,000 22,000,000 183,000,000 Haier Electronics Group Co., Ltd. Annual Report 2007 c o nve r t i b l e n o te s i n to...

  • Page 141
    ...on washing machines and water heaters, under which faulty products are repaired or replaced. The amount of the provision for the warranties is estimated based on sales volumes and past experience of the level of installation services rendered, repairs and returns. The estimation basis is reviewed on...

  • Page 142
    ... tax liabilities 2007 Note HK$'000 2006 HK$'000 At 1 January Deferred tax charged/(credited) to the income statement during the year Exchange realignment At 31 December 10 7,465 - (7,656) 191 - 7,465 - 7,465 The Group has tax losses arising in Hong Kong of HK $ 36,098,000 ( 2006 : HK $ 34,523...

  • Page 143
    ... are no income tax consequences attaching to the payment of dividends by the Company to its shareholders. 30. 31. Issued Equity Haier Electronics Group Co., Ltd. Annual Report 2007 31. Issued equity HK$'000 Group At 1 January 2006 Conversion of convertible notes Exercise of share options At 31...

  • Page 144
    ... (2006: 30,000,000,000) 30,000,000,000 shares of HK$0.1 each 30,000,000,000 0.1 Issued and fully paid: 1,859,323,461 (2006: 18,365,734,612) shares of HK$0.1 each 18,365,734,612 0.1 185,932 1,836,573 1,859,323,461 3,000,000 3,000,000 Haier Electronics Group Co., Ltd. Annual Report 2007 143

  • Page 145
    ...financial statements. Pursuant to a special resolution passed at a special general meeting of the Company held on 7 March 2007, the Company reduced the nominal value of each of its issued shares from HK$0.10 to HK... 65,509 53,292 Haier Electronics Group Co., Ltd. Annual Report 2007 i 345,000,000 ...

  • Page 146
    ...any employee, executive or officer of the Group (including executive and non-executive directors of the Company) and any supplier, consultant, agent, adviser, shareholder, customer, partner, business associate who, in the sole discretion of the board of directors of the Company ( the "Board" ) , has...

  • Page 147
    ...- exe c u t i ve director of the Company, or to any of their respective Haier Electronics Group Co., Ltd. Annual Report 2007 32. 0.1% 5,000,000 associates, in excess of 0.1% of the shares of the Company in issue as at the date of grant or with an aggregate value (based on the closing price of the...

  • Page 148
    ...) (4,000,000) - - 16/8/2002 16/8/2003-15/8/2007 1.56 2.55 2.50 * Adjusted to take into account the share consolidation * Haier Electronics Group Co., Ltd. Annual Report 2007 Price of the Company's shares (note 3)* 3 * Immediately before the At exercise exercise date of date options 147

  • Page 149
    ...Granted during the year Exercised during the year Date of grant of Exercise period share options of share options Exercise price of share options (note 2) 2 HK$ HK$ HK$ HK$ Haier Electronics Group Co., Ltd. Annual Report 2007 Executive directors Wu Ke Song Chai Yong Sen (note 4 ) 62,000,000...

  • Page 150
    ...of the Company's shares disclosed as at the date of grant of the share options is the Stock Exchange closing price on the trading day immediately prior to the date of grant of the options. T h e p r i c e o f t h e C o m p a ny 's s h a r e s d i s c l o s e d immediately before the exercise date of...

  • Page 151
    ...0.01 1,657,866,000 1,196,370,000 Haier Electronics Group Co., Ltd. Annual Report 2007 (b) Company Share premium account (b) Retained Share profits/ option (accumulated reserve losses) Contributed surplus Total Notes HK$'000 HK$'000 HK$'000 HK$'000 HK$'000 150 At 1 January 2006 Issue of...

  • Page 152
    ...Financial Statements 31 December 2007 34. Disposal of Subsidiaries 34. 2007 Notes HK$'000 2006 HK$'000 Net assets disposed of: Property, plant and equipment...,674 - - - - 105,047 94 38,534 (738,611) Haier Electronics Group Co., Ltd. Annual Report 2007 16 18 - - - - 370,042 3,138 171,527 438,676

  • Page 153
    ... equivalents disposed of Haier Electronics Group Co., Ltd. Annual Report 2007 - - - (38,534) Net outflow of cash and cash equivalents in respect of the disposal of subsidiaries - (38,534) 35. Contingent Liabilities At the balance sheet date, neither the Group nor the Company had any significant...

  • Page 154
    ... Group 2007 HK$'000 2006 HK$'000 Authorised, but not contracted for: Property, plant and equipment Contracted, but not provided for: Property, plant and equipment 18,328 18,328 82,467 251,765 - 169,298 Haier Electronics Group Co., Ltd. Annual Report 2007 At the balance sheet date, the Company did...

  • Page 155
    ... The carrying amounts of loans and receivables and financial liabilities at amortised cost of the Group at the balance sheet date are as follows: Financial assets 38. Loans and receivables 2007 HK$'000 Haier Electronics Group Co., Ltd. Annual Report 2007 2006 HK$'000 Trade and bills receivables...

  • Page 156
    ... Financial Statements 31 December 2007 38. Financial Instruments by category (Cont'd) The carrying amounts of loans and receivables and financial liabilities at amortised cost of the Company at the balance sheet date are as follows: Financial assets 38. Loans and receivables 2007 HK$'000 2006 HK...

  • Page 157
    ... be undertaken. Haier Electronics Group Co., Ltd. Annual Report 2007 39. The main risks arising from the Group's financial instruments are interest rate risk, foreign currency risk, credit risk and liquidity risk. The board review and agrees policies for managing each of these risks and they are...

  • Page 158
    Notes to Financial Statements 31 December 2007 39. Financial Risk Management Objectives and Policies (Cont'd) Interest rate risk The Group's exposure to the risk of changes in market interest rates relates primarily to the Group's borrowings with floating interest rates. The Group does not use ...

  • Page 159
    Notes to Financial Statements 31 December 2007 39. Financial Risk Management Objectives and Policies (Cont'd) Foreign currency risk The Group has transactional currency exposures. Such exposures mainly arise from sales or purchases by the Group's operating units operating in Mainland China in ...

  • Page 160
    ... of bank loans and other borrowings. It is the Group's policy to renew its loan agreements with Haier Finance or major local banks in Mainland China upon the maturity of the Group's short term bank loans and other borrowings. 39. 94% 25% 22 Haier Electronics Group Co., Ltd. Annual Report 2007...

  • Page 161
    ... as at the balance sheet date, based on the contracted undiscounted payments, is as follows: 2007 39. Within one year or on demand Haier Electronics Group Co., Ltd. Annual Report 2007 Beyond one year or no fixed terms of repayment Total HK$'000 HK$'000 HK$'000 Trade and bills payables...

  • Page 162
    ... to Financial Statements 31 December 2007 39. Financial Risk Management Objectives and Policies (Cont'd) Liquidity risk (Cont'd) The maturity profile of the Company's financial liabilities as at the balance sheet date, based on the contracted undiscounted payments, is as follows: 39. 2007 Beyond...

  • Page 163
    ...s in e conomic conditions. To maintain or adjust the capital structure, the Group may adjust the Haier Electronics Group Co., Ltd. Annual Report 2007 39. dividend payment to shareholders, return capital to shareholders or issue new shares. The Group is not subject to any externally imposed capital...

  • Page 164
    ... of which are set-out in note 28 to the financial statements. 40. 170,000,000 28 41. Approval of the Financial Statements The financial statements were approved and authorised for issue by the board of directors on 24 April 2008. 41. Haier Electronics Group Co., Ltd. Annual Report 2007 163

  • Page 165
    ...financial statements and reclassified as appropriate, is set out below. Year ended 31 December 2007 HK$'000 2006 HK$'000 2005 HK$'000 2004 HK$'000 2003 HK$'000 RESULTS Haier Electronics Group Co., Ltd. Annual Report 2007... to: Equity holders of the parent Minority interests 225,697 183,786...

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