Haier Electronics Group Co Ltd-Annual Report (Apr-29-2005)

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Contents
Mission and Corporate Development
Corporate Information
Chairmans Letter
Directors and Senior Management
Financial Review
Report of the Directors
Report of the Auditors
Consolidated Profit and Loss Account
Consolidated Balance Sheet
Consolidated Statement of Changes in Equity
Consolidated Cash Flow Statement
Balance Sheet
Notes to Financial Statements
Summary Financial Information
Notice of Annual General Meeting
2
4
6
10
16
20
30
31
32
33
34
36
37
75
76
Our corporate mission is to become a global electronics-white goods giant, including:

- Becoming one of the leading brands of mobile handset products in China
and around the world; and
- Becoming a global top 3 white goods giants
The simplified corporate chart of the Groups principal operating subsidiaries as at 31 December 2004 was as
follows:
Haier Electronics Group Co., Ltd.
Mobile Handset
Business
100%
Pegasus Electronic
(Qingdao) Co., Ltd.
(Pegasus Electronic)
HAIER ELECTRONICS GROUP CO., LTD.
64.5%
Pegasus Telecom
(Qingdao) Co., Ltd.
(Pegasus Qingdao)
After the injection of washing machine business and the remaining 35.5% interest in Pegasus Qingdao not
already owned by the Group subsequent to the balance sheet date on 28 January 2005 (the Asset Injection),
as detailed in the Chairmans Letter below, the simplified corporate chart of the Groups principal operating
subsidiaries as at 22 April 2005, the date of the Report of Directors, is as follows:
Mobile Handset
Business
100%
Pegasus
Electronic
100%
Pegasus
Qingdao
Washing Machine
Business
60%
Foshan
Shunde
Haier
Electric
Co., Ltd.
93.44%
Qingdao
Haier
Washing
Machine
Co., Ltd.
80%
20%
Hefei Haier
Washing
Machine
Co., Ltd.
We have now completed the first stage of our transformation into a global electronics-white goods giant,
and as detailed in the Chairmans Letter below, we are exploring further asset injection opportunities from
our parent company, the Haier Group.
We are confident that we are on the right track towards attaining the goal of becoming a global
electronics-white goods giant.
Corporate Information
Company name
Registered office
Canons Court
22 Victoria Street
Board of Directors
Hamilton HM12
Executive Directors
Bermuda
YANG Mian Mian (Chairman)

WU Ke Song (Deputy Chairman)
Head office and principal place of business
CHAI Yong Sen
Units 6507-6508
LIANG Hai Shan
65/F., The Center
CAO Chun Hua
99 Queens Road Central
CUI Shao Hua
Hong Kong
SONG Chun Guang

Branch share registrar and
Independent Non-executive Directors
transfer office in Hong Kong
LAM Kin Kau, Mark
Tengis Limited
FUNG Hoi Wing, Henry
G/F Bank of East Asia Harbour View Centre
LAU Ho Wai, Lucas
56 Gloucester Road
WU Yinong
Wanchai
Hong Kong
Company Secretary
Yip Wai Ming
Telephone number
+852 2169 3338
Solicitors
Mallesons Stephen Jaques
Fax number
+852 2169 3938
Principal Banker
Nanyang Commercial Bank, Ltd.
Stock code
01169
Auditors
Ernst & Young Certified Public Accountants
Financial year end
December 31
Chairmans Letter
Chairmans Letter
OVERVIEW
The preceding year has been a year of significant changes to the Group. Despite keen competition in the
market, the Groups mobile handset business continued to build up both its market share as well as market
reputation, with a remarkable 89% increase in turnover from HK$1,665 million in 2003 to HK$3,153 million
in 2004. To enhance the revenue base of the Group and as a first step towards building up an integrated
electronics-white goods giant, on 5 March 2004, the Group entered into an agreement with Haier Group
Corporation and Qingdao Haier Investment and Development Co., Ltd. (together with their respective
subsidiaries, collectively, the Haier Group) to acquire from the Haier Group its washing machine business,
and the Group also announced its intention to exercise the call option to acquire from the Haier Group the
remaining 35.5% interest in Pegasus Telecom (Qingdao) Co., Ltd. (Pegasus Qingdao) not already owned by
the Group (collectively the Asset Injection). The Asset Injection was approved in a special general meeting
by the shareholders on 13 December 2004, and was completed subsequent to the balance sheet date on 28
January 2005. As the Asset Injection was mainly paid for by the issue of new shares to the Haier Group, the
Haier Group has thereby become the controlling shareholder of the Company and the name of the Company
was also changed from Haier-CCT Holdings Limited to Haier Electronics Group Co., Ltd. with effect from 31
January 2005.
GROUP RESULTS
For 2004, turnover was solely derived from the mobile handset business. Turnover rose substantially by 89%
to HK$3,153 million in 2004. The Group continued to strengthen its market position and increase its market
share. This was made possible by the launch of an extensive range of innovative mobile phones by our strong
R&D team, which introduced 24 new models in 2004, our experienced management team and the extensive
distribution channel of the Haier Group. Mirroring Haier Groups success achieved in the white goods and
electronics markets, with a short history of just 4 years, the Haier brand name has already been recognised
as a quality name in the mobile handset market with rapidly rising popularity among consumers.
The Group has seen a turnaround in its operating results. On the operating level, the Groups mobile handset
business has started to turn profitable in 2004. Earnings before interest, tax, depreciation and amortisation
(EBITDA) and operating profit before amortisation and impairment of goodwill amounted to HK$63.7
million and HK$29.6 million, respectively, for 2004, against negative figures of HK$6.9 million and HK$31.8
million, respectively, for 2003.
Net loss attributable to shareholders in 2004 substantially narrowed to HK$42.5 million, which was after
charging a non-cash amortisation of goodwill of HK$44.5 million (It should be noted that pursuant to Hong
Kong Financial Reporting Standard (HKFRS) 3 Business Combinations recently issued by the Hong Kong
Institute of Certified Public Accountants (HKICPA) which is effective for the year ending 31 December
2005 in respect of the Company, goodwill acquired in a business combination will no longer be subject to
amortisation, but will instead be subject to test for impairment periodically). The net loss in 2004 was 95%
lower than the net loss of HK$856.4 million in 2003, which figure was after charging an impairment of
goodwill of HK$732.2 million. The impairment was made in 2003 after considering the intense competition
Chairmans Letter
in the mobile handset market by the management. For 2004, although competition in the market place
further intensified, after considering the strengthening of Groups position in the market place over the past
year and in view of the positive responses of our new products in the market, the Board had determined that
there was no need to make further impairment in the carrying value of goodwill. We remain optimistic on
the long-term potential of the mobile handset market in China and on our ability in continuing to strengthen
our market position, and in ultimately becoming one of the leaders in the market.
OUTLOOK
Asset Injection
As mentioned in our circular to shareholders dated 18 November 2004 in connection with the Asset Injection
(the Circular), it is Haier Groups intention to turn the Company into its listed flagship, to list its white
goods business through the Company and to become a global top three white goods giants. As mentioned in
the Circular, assets considered to be injected into the Company include Haier Groups interest in Qingdao
Haier Co., Ltd. (a company with its A shares listed on the Shanghai Stock Exchange and engaged in the
manufacture and sale of air conditioners, refrigerators and other small home appliances), certain joint
ventures engaged in the front loading washing machine business (in contrast to the top loading washing
machine business acquired by the Group under the Asset Injection), and its other white goods businesses. At
present, the Group has not entered into any binding agreement in respect of further asset injections. The
Group is exploring these opportunities and will make public announcements on further developments in
accordance with the requirements of the Listing Rules.
Washing Machine Business
Although not included in our 2004 results, the washing machine business we acquired under the Asset
Injection subsequent to the balance sheet date has been performing very well. The market share of Haier
brand name in terms of sales revenue in domestic washing machine market in China continued to rise from
approximately 31% in 2003 to approximately 34% in 2004 according to China Market Monitor Co., Ltd. (a
market research company based in Beijing). A total of 43 new models were launched in 2004. These were
well accepted in the market and helped us to further strengthen our already dominant market position. We
are optimistic about the prospects of our washing machine business and the financial performance of this
business will be included in the 2005 first half interim results to be announced in the third quarter of this
year.
Chairmans Letter
Mobile Handset Business

Despite increased competition from foreign branded manufacturers especially since the last quarter of 2004,
we are optimistic about the future of the Groups mobile handset business. The Haier Group had in the past
faced fierce competition in the consolidation phase in many businesses but it then came out as a winner. We
are confident that the Group will be able to duplicate such success in Chinas mobile handset market. We
believe we can build on our supreme brand value, quality of product and after sale service, extensive
distribution channel and our strong R&D capability. We see steady and strong growth in the demand for
mobile handsets in China and we believe this will be the business offering strong growth to the Group in the
future. Over the past year, we offered an extensive range of new products such as phones with sophisticated
features like 260K TFT displays plus OLED color sub-display, extra long stand-by time (up to 18 days), picture
in picture function, incoming call and SMS fire walls, and we are also the first domestic manufacturer to
offer 1.3 mega pixel digital camera phone. These were well received by the market. In the coming year, we
will also place substantial effort in exploring the export markets to compliment our growth in the domestic
market and to capitalise on the renowned Haier brand name.
PROSPECTS
In the coming year, we will continue to strengthen our market position in our two main lines of business,
namely the mobile handset business and the newly added washing machine business. At the same time, we
will explore further asset injection opportunities from the Haier Group, subject to, among other things, the
satisfactory completion of due diligence on their financial and business operation, the negotiation of a
legally binding agreement and the receipt of all applicable governmental, regulatory and shareholders
approvals in Hong Kong and the PRC. We are confident that we are on the right track towards attaining the
goal of becoming a global electronicswhite goods giant.
APPRECIATION
Finally, I would like to take this opportunity to thank all my fellow directors and staff members for their
dedicated services, contributions and support during the year. In particular, I would like to extend my
appreciation to the outgoing board members, Mr. Mak Shiu Tong, Clement and Mr. Tam Ngai Hung, Terry,
who were nominated by our previous largest shareholder, CCT Telecom Holdings Limited, and who resigned
upon Haier Group becoming the controlling shareholder of the Company on completion of the Asset Injection
on 28 January 2005, for their most appreciated services in the past years.
Yang Mian Mian

Chairman
Hong Kong, 22 April 2005
Chairmans Letter
The Directors of the Company and senior management of the Group as at 22 April 2005, the date of the
Report of the Directors, are as follows:
Executive Directors
Ms. YANG Mian Mian**, aged 63, has served as Chairman and an Executive Director of the Company since
January 2005. Ms. Yang is currently the President of Haier Group Corporation (Haier Corp). Ms. Yang
graduated from Shandong Industrial Institute (now known as Shandong University), the Peoples Republic of
China (the PRC) in 1963 and has extensive experience in the household electrical appliance industry for
more than 20 years. Ms. Yang joined Qingdao Refrigerator General Factory (the predecessor of the Haier
Group) in 1984 and acted as vice leader of the factory and is in charge of the overall management of the
Haier Groups white goods business since 1984. Ms. Yangs experience also includes serving as Chairman and
an Executive Director of Qingdao Haier Co., Ltd. (a company listed on the Shanghai Stock Exchange (the A
Share Company)) starting from 2001 and 1993 respectively.
The term of office of Ms. Yang is 3 years commencing from 28 January 2005 and can be terminated by 3
months notice in writing and will be subject to retirement by rotation in accordance with the bye-laws of
the Company (Bye-laws). Ms. Yang is not entitled to any fixed remuneration but is entitled to payment of
discretionary bonus.
Save as disclosed above, Ms. Yang has no relationship with any directors, senior management or substantial
or controlling shareholders of the Company. Save as disclosed above, Ms. Yang did not hold any directorship
in any listed public companies in the last three years. As at the date of this report, Ms. Yang does not have
any interest in the shares and/or share options of the Company and its associated corporation (within the
meaning of Part XV of the Securities and Future Ordinance (Chapter 571 of the Laws of Hong Kong) (the
SFO)).
Mr. WU Ke Song**, aged 54, has served as Deputy Chairman and an Executive Director of the Company
since December 2001. Mr. Wu is currently a Vice Chairman of the Board of Directors of Haier Corp. Mr. Wu
graduated from Shandong Industrial Institute (now known as Shandong University), the PRC and has over 30
years of experience in the manufacture of household electrical appliances in China. Mr. Wu entered into the
home appliance business in 1974 and became the vice leader of Qingdao Refrigerator General Factory (the
predecessor of the Haier Group) in 1984.
There is no service contract entered into between Mr. Wu and the Company or any of its subsidiaries. The
proposed term of Mr. Wus appointment will be of 3 years commencing from date of his re-election until
conclusion of the annual general meeting of the Company in 2008 and will be subject to retirement by
rotation in accordance with the Bye-laws. Mr. Wu is not entitled to any fixed remuneration but is entitled to
payment of discretionary bonus.
10
Executive Directors (contd)

Save as disclosed above, Mr. Wu has no relationship with any directors, senior management or substantial or
controlling shareholders of the Company. Save as disclosed above, Mr. Wu did not hold any directorship in
any listed public companies in the last three years. As at the date of this report, Mr. Wu has a long position
in 89,000,000 share options of the Company exercisable during the a period from 19 November 2003 to 18
November 2007 and with a exercise price of HK$0.15 per share. No option has been exercised as at the date
of this report.
Mr. CHAI Yong Sen, aged 42, has served as an Executive Director of the Company since December 2001.
Mr. Chai graduated from Shanghai Mechanical Institute, the PRC in 1984. He also has a Masters degree in
management and is a senior engineer. Mr. Chai has over 20 years of experience in the manufacture of
household electrical appliances in China. Mr. Chai serves as the key management person for mobile handset
business of the Group since 2000 and is the General Manager of Pegasus Qingdao. Mr. Chai is also an
Executive Vice President of Haier Corp.
Mr. LIANG Hai Shan**, aged 38, has served as an Executive Director of the Company since December
2001. Mr. Liang is currently a Vice President of Haier Corp. Mr. Liang holds a Bachelors degree of industry
from the Xian Jiaotong University, the PRC, and has over 16 years of experience in the manufacture of
household electrical appliances in China and has extensive experience in raw materials procurement. Mr.
Liang was the General Manager of Qingdao Haier Airconditioner Co., Ltd and the head of Certification
Centre of Haier Group.
There is no service contract entered into between Mr. Liang and the Company or any of its subsidiaries. The
proposed term of Mr. Liangs appointment will be of 3 years commencing from date of his re-election until
conclusion of the annual general meeting of the Company in 2008 and will be subject to retirement by
rotation in accordance with the Bye-laws. Mr. Liang is not entitled to any fixed remuneration but is entitled
to payment of discretionary bonus.
Save as disclosed above, Mr. Liang has no relationship with any directors, senior management or substantial
or controlling shareholders of the Company. Save as disclosed above, Mr. Liang did not hold any directorship
in any listed public companies in the last three years. As at the date of this report, Mr. Liang has a long
position in 89,000,000 share options of the Company exercisable during the a period from 19 November
2003 to 18 November 2007 and with a exercise price of HK$0.15 per share. No option has been exercised as
at the date of this report.
11

Mr. CAO Chun Hua**, aged 36, has served as an Executive Director of the Company since January 2005.
Mr. Cao graduated from Hangzhou Electronic Industry College, the PRC with a Bachelors degree in 1991.
Mr. Cao joined Haier Corp in 1995 and has previously held a number of senior positions in several departments
of its washing machine division. He is currently the General Manager of the washing machine division of the
Group, responsible for the day-to-day management of the washing machine business. Mr. Cao is also a Vice
President of Haier Corp.
The term of office of Mr. Cao is 3 years commencing from 28 January 2005 and can be terminated by 3
months notice in writing and will be subject to retirement by rotation in accordance with the Bye-laws. Mr.
Cao is not entitled to any fixed remuneration but is entitled to payment of discretionary bonus.
Save as disclosed above, Mr. Cao has no relationship with any directors, senior management or substantial or
controlling shareholders of the Company. Save as disclosed above, Mr. Cao did not hold any directorship in
any listed public companies in the last three years. As at the date of this report, Mr. Cao does not have any
interest in the shares and/or share options of the Company and its associated corporation (within the
meaning of Part XV of the SFO).
Mr. CUI Shao Hua, aged 47, has served as an Executive Director of the Company since November 2002. Mr.
Cui graduated from Jilin Institute of Finance and Commerce, the PRC and is a senior accountant. He is a
Director and a Deputy Chairman of the A Share Company. He joined Haier Corp in 1993 and has served as
Secretary of the Board of Directors, Chief Accountant and Deputy General Manager of the A Share Company
Mr. Cui has over 20 years of experience in financial management and listed companies operations and
management.
Mr. SONG Chun Guang**, aged 41, has served as an Executive Director of the Company since January
2005. Mr. Song joined Haier Corp in June 1995 and is now a Deputy General Manager and Sales Director of
Pegasus Qingdao. Mr. Song graduated from Tianjin Industrial and Engineering College, the PRC with a
Bachelors degree of Engineering in 1988. Mr. Song has over 15 years of experience in the manufacture of
household electrical appliances in PRC and extensive experience in both the washing machine business and
the mobile handset business.
The term of office of Mr. Song is 3 years commencing from 28 January 2005 and can be terminated by 3
months notice in writing and will be subject to retirement by rotation in accordance with the Bye-laws. Mr.
Song is not entitled to any fixed remuneration but is entitled to payment of discretionary bonus.
12

Save as disclosed above, Mr. Song has no relationship with any directors, senior management or substantial
or controlling shareholders of the Company. Save as disclosed above, Mr. Song did not hold any directorship
in any listed public companies in the last three years. As at the date of this report, Mr. Song does not have
any interest in the shares and/or share options of the Company and its associated corporation (within the
meaning of Part XV of the SFO).
Independent Non-executive Directors
Mr. LAM Kin Kau, Mark, aged 50, has served as an Independent Non-executive Director and a member of
the audit committee of the Company since April 2000. Mr. Lam is a fellow of the Association of Chartered
Certified Accountants and a member of the Hong Kong Institute of Certified Public Accountants, the Institute
of Chartered Accountants in England and Wales and the Institute of Chartered Secretaries and Administrators.
Mr. Lam has been a practising accountant for over 20 years and is a director of various private companies.
Mr. FUNG Hoi Wing, Henry, aged 49, has served as an Independent Non-executive Director and a member
of the audit committee of the Company since April 2000. Mr. Fung is a Notary Public and Solicitor of Messrs.
Fung, Wong, Ng & Lam, Solicitors and Notaries of Hong Kong. Mr. Fung graduated from the University of
Hong Kong in 1976 with a degree in Social Sciences. Mr. Fung was admitted as a solicitor of the Supreme
Court of Hong Kong in 1981 and has been in private practice since then. In addition, Mr. Fung is also
admitted in England and Wales, the Australian Capital Territory and Singapore, and a China-Appointed
Attesting Officer.
Mr. LAU Ho Wai, Lucas**, aged 43, has served as an Independent Non-executive Director and a member of
the audit committee of the Company since September 2004. Mr. Lau is a practising Chartered Surveyor in
Hong Kong. He graduated from the University of Aberdeen (with a Bachelors degree of Land Economy) and
the University of Hong Kong (with a Masters degree of Urban Design). Mr. Lau is a member of The Royal
Institution of Chartered Surveyors and The Hong Kong Institute of Surveyors. He is also a Registered Professional
Surveyor in Hong Kong. He has over 14 years of professional experience in real estate field, and extensive
experience in the assets valuation.
There is no service contract entered into between Mr. Lau and the Company or any of its subsidiaries. The
proposed term of Mr. Laus appointment will not exceed 3 years commencing from the date of his re-election
until the conclusion of the annual general meeting of the Company in 2008 and will be subject to retirement
by rotation in accordance with the Bye-laws. Mr. Lau is entitled to a director fee of HK$20,000 per month.
The directors fee payable to Mr. Lau was fixed by the Board with reference to market conditions and his
duties and responsibilities with the Company.
13
Independent Non-executive Directors (contd)

Mr. Lau has no relationship with any directors, senior management or substantial or controlling shareholders
of the Company. Save as disclosed above, Mr. Lau did not hold any directorship in any listed public companies
in the last three years. As at the date of this report, Mr. Lau does not have any interest in the shares and/or
share options of the Company and its associated corporation (within the meaning of Part XV of SFO).
Mr. WU Yinong**, aged 42, has served as an Independent Non-executive Director and a member of the
audit committee of the Company since 28 January 2005. Mr. Wu has been in the investment banking
industry for more than 9 years. Prior to pursuing his development in investment banking, Mr. Wu held
various positions in the United States and the PRC. Mr. Wu graduated from Portland State University in the
United States of America with a MBA degree in 1994.
Mr. Wu has entered into an appointment agreement with the Company and is entitled to a director fee of
HK$20,000 per month. His appointment as an independent non-executive director of the Company is not for
a fixed term, but will be subject to retirement by rotation in accordance with the Bye-laws. The directors fee
payable to Mr. Wu was fixed by the Board with reference to market conditions and his duties and responsibilities
with the Company.
Mr. Wu has no relationship with any directors, senior management or substantial or controlling shareholders
of the Company. Save as disclosed above, Mr. Wu did not hold any directorship in any listed public companies
in the last three years. As at the date of this report, Mr. Wu does not have any interest in the shares and/or
share options of the Company and its associated corporation (within the meaning of Part XV of SFO).
14
Senior Management
Mr. YIP Wai Ming, aged 40, joined the Company as Chief Financial Officer in December 2004. Mr. Yip is
also the Company Secretary and Qualified Accountant of the Company. Mr. Yip has more than 17 years of
experience in finance and accounting, and had held senior positions in an international accounting firm, a
major European bank and listed companies in Hong Kong. Mr. Yip graduated from the University of Hong
Kong with a Bachelors degree in social sciences. He is an associate member of the Hong Kong Institute of
Certified Public Accountants, a fellow member of the Association of Chartered Certified Accountants and a
member of the Chinese Institute of Certified Public Accountants.
Mr. LEE Hoo Sau, aged 54, graduated from University of Singapore with a Bachelors degree. Mr. Lee joined
Pegasus Qingdao in 2003 and has previously held a number of senior positions in Motorola Group. He is now
the head of operations of Pegasus Qingdao.
Mr. GAO Zhen Qi, Carl, aged 39, graduated from Shanghai University of Technology, the PRC with a
Masters degree in system planning in 1990. Mr. Gao joined Pegasus Qingdao in 2003 and is currently a
director of production of Pegasus Qingdao, responsible for production management. Mr. Gao has previously
held several senior positions in Motorola Group.
Mr. SU Shi Chen, aged 39, graduated from Dalian University of Natural Science and Engineering, the PRC
with a Bachelors degree. Mr. Su joined Pegasus Qingdao in 2003 and has previously held a number of senior
positions in Motorola Group. He is now a director of quality of Pegasus Qingdao.
Mr. CHEN Lu Cheng, aged 35, graduated from College of Constructive Material in Shandong, the PRC with
a Bachelors degree in engineering in 1992. Mr. Chen joined Haier Corp in 1995 and has previously held a
number of senior positions in its washing machine division. He is currently responsible for production
management of Qingdao Haier Washing Machine Co., Ltd..
Mr. LU Pei Shi, aged 41, graduated from Shandong Agricultural and Mechanical College, the PRC with a
Bachelors degree in 1987. Mr. Lu joined Haier Corp in 1995 and has previously held senior positions in its
washing machine division. He is currently responsible for the research and development functions of the
Groups washing machine business.
**
Directors proposed to be re-elected by the shareholders at the forthcoming annual general meeting of the
Company.
15
Financial Review
FINANCIAL REVIEW
During the year, the entire revenue of the Group was derived from the telecom products business engaged in
the manufacture and sale of mobile handsets.
In 2004, the business environment for mobile handset business remained very competitive, especially since
the last quarter of 2004. Foreign branded manufacturers adopted a price reduction strategy which helped
them to take back some of the market share they lost in previous years from domestic branded manufacturers.
The over capacity and over supply situation continued, with inventories continued to build up especially
along the distribution channel.
Despite such unfavourable factors, the Group achieved remarkable results during the year. Turnover rose
substantially by 89% from HK$1,665 million in 2003 to HK$3,153 million in 2004. The Group continued to
increase its market share and strengthen its market position. Gross profit amounted to HK$63.1 million, up
substantially by 565% from 2003, with a gross profit margin of 2% against only 0.57% in 2003. This was
mainly due to the substantial reduction in stock provision by 67% from HK$55.5 million in 2003 to HK$18.4
million in 2004, as a result of our improved inventory control.
It should also be noted the gross profit margin is not comparable to other manufacturers. Pursuant to the
products distribution agreement made with Qingdao Haier Telecommunications Co., Ltd. (Haier Telecom, a
member of Haier Group), started from late 2002, most of the products are sold to Haier Telecom at costs of
raw materials (at market price) plus a processing fee, while Haier Telecom is responsible for all the selling and
marketing charges. Thus, the Group earns a lower gross profit margin than other manufacturers but does
not incur any selling and distribution expenses. The arrangement also reduced the business risks of the
Group as it is not responsible for the inventory ordered by Haier Telecom.
Administrative expenses increased by a modest 9.2%, despite the sharp rise in volume, as a result of
stringent cost control by the Group.
Net loss attributable to shareholders in 2004 amounted to HK$42.5 million, which was after charging a noncash amortisation of goodwill of HK$44.5 million (It should be noted that pursuant to HKFRS 3 Business
Combinations recently issued by HKICPA which is effective for the year ending 31 December 2005 in
respect of the Company, goodwill acquired in a business combination will no longer be subject to amortisation,
but will instead be subject to test for impairment periodically). The net loss in 2004 was 95% lower than the
net loss of HK$856.4 million in 2003, which figure was after charging an impairment of goodwill of
HK$732.2 million. The impairment was made in 2003 after considering the intense competition in the mobile
handset market by the management. For 2004, although competition in the market place intensified, after
considering the strengthening of Groups position in the market place over the past year and in view of the
positive responses of our new products in the market, the Board had determined that there was no need to
make further impairment in the carrying value of goodwill.
16
Financial Review
Despite a net loss being reported, on an operating level, the Groups mobile handset business has started to
turn profitable in 2004. EBITDA and operating profit before amortisation and impairment of goodwill for
2004 amounted to HK$63.7 million and HK$29.6 million, respectively, against negative figures of HK$6.9
million and HK$31.8 million, respectively, for 2003. The rise in volume, the reduction in stock provision, and
stringent cost control had turned the Group into a profit making position on the operating level. This
turnaround has once again proved the success of the Groups mobile handset business despite intense
competition in the market place.
Mainland China is the major market of the Group and accounted for 92% of the Groups turnover for the
year (2003: 82%). Due to the strong demand for the Groups products in the domestic PRC market, exports
dropped by 12% to HK$267 million in 2004. To diversify the Groups revenue base and to capitalise on the
renowned Haier brand name in the overseas markets, the Group intends to put additional efforts into
exploring overseas markets in 2005, especially in the Middle East, South Asia and Europe.
LIQUIDITY AND FINANCIAL RESOURCES
The Group has maintained a healthy financial and liquidity position with a current ratio of 117% at 31
December 2004 (2003: 117%). At 31 December 2004, the Group had a cash balance of HK$141 million
(2003: HK$267 million) and total bank and other loans of approximately HK$147 million (2003: HK$549
million). All of the borrowings of the Group were arranged on a short-term basis for the ordinary business of
the Group and were repayable within one year.
Net debt balance (borrowings less cash balance) amounted to HK$6 million as at 31 December 2004, down
substantially by 98% from HK$282 million as at 31 December 2003. This was largely due to the strong
operating performance of the Group during the year, resulting in net cash inflow from operating activities of
HK$376 million for the year ended 31 December 2004, against a net cash outflow from operating activities
of HK$316 million in 2003.
The large pool of cash, the low level of debt together with the strong cash flows from the operations,
provide the Group with substantial resources for its operations and business growth.
There is no material effect of seasonality on the Groups borrowing requirements.
The Group had contracted capital commitments amounting to HK$4.4 million as at 31 December 2004.
17
Financial Review
CAPITAL STRUCTURE AND GEARING RATIO

At 31 December 2004, the Group maintained a very low gearing ratio (total borrowings over shareholders
equity) of 12% (2003: 44%).
Bank and other loans of HK$147 million as at 31 December 2004 were borrowed by a subsidiary of the
Company for working capital purposes and are denominated in Renminbi, repayable within one year, and
bear interest at floating rates.
TREASURY POLICIES
The Group employs a conservative approach to cash management and risk controls. Most of the Groups
receipts and payments are in Renminbi and Hong Kong dollars. Cash is generally placed in short term
deposits denominated either in Renminbi or Hong Kong dollars. At 31 December 2004, most of the Groups
outstanding borrowings were denominated in Renminbi and were principally made on a floating rate basis.
Foreign currency risk is not significant as liabilities in Renminbi will be matched by the Groups earnings,
most of which are also denominated in Renminbi. The Group does not have any significant interest rate risk,
as the current interest rate in China stays at low level and is relatively stable. The Group does not have any
financial instruments for hedging purposes.
EMPLOYEES AND REMUNERATION POLICY
The total number of employees of the Group as at 31 December 2004 was 1,040, representing an increase of
8% as compared to last year end due to expansion in business. Total staff costs (including directors
remuneration) for the year ended 31 December 2004 amounted to HK$23.4 million (2003: HK$14.7 million).
The Group ensures that the remuneration packages for its employees are competitive and employees are
generally remunerated with a fixed monthly income, which is normally reviewed on an annual basis, plus
performance related bonuses. Employees are also provided with benefits including provident fund and medical
insurance. The Group maintains a share option scheme as an incentive to attract and retain talented employees.
At 31 December 2004, there were outstanding share options entitling the grantees to subscribe for
approximately 883.5 million new shares of the Company.
SIGNIFICANT INVESTMENT
The Group did not hold any significant investment at 31 December 2004.
18
Financial Review
MATERIAL ACQUISITION AND DISPOSAL OF SUBSIDIARIES AND ASSOCIATES

On 5 March 2004, the Group entered into a conditional agreement with the Haier Group to acquire from the
Haier Group its washing machine business for a consideration of Rmb1.1 billion (HK$1.035 billion) and the
Group also announced its intention to exercise a call option to acquire from the Haier Group the remaining
35.5% interest in Pegasus Qingdao for a consideration of HK$468.6 million (collectively the Asset Injection).
A circular in connection with the Asset Injection was issued to the shareholders of the Company on 18
November 2004. The Asset Injection was approved by the shareholders in a special general meeting on 13
December 2004 and was completed subsequent to the balance sheet date on 28 January 2005. Please refer
to the section headed Post Balance Sheet Events in note 34 to the financial statements below for further
details. Save as disclosed above, the Group did not have any material acquisition or disposal of subsidiaries
or associates during the year ended 31 December 2004.
CHARGE OF ASSETS
At 31 December 2004, bank deposits of approximately HK$16.8 million were pledged to secure general
banking facilities granted to a subsidiary of the Group.
CONTINGENT LIABILITIES
The Group did not have any significant contingent liabilities as at 31 December 2004.
19
The directors present their report and the audited financial statements of the Company and the Group for
the year ended 31 December 2004.
CHANGE OF COMPANY NAME
Pursuant to a special resolution passed at a special general meeting of the Company held on 13 December
2004 and approved by the Registrar of Companies in Bermuda, the name of the Company was changed from
Haier-CCT Holdings Limited to Haier Electronics Group Co., Ltd. with effect from 31 January 2005.
PRINCIPAL ACTIVITIES
The principal activity of the Company is investment holding. The principal activities of the subsidiaries
comprise the manufacture and sale of mobile phones and trading of raw materials. There were no significant
changes in the nature of the Groups principal activities during the year.
Subsequent to the year end, on 28 January 2005, the Group acquired the entire issued share capital of Haier
Holdings (BVI) Limited and Qingdao Haier Investment and Development Holdings (BVI) Limited (collectively
referred to as Haier BVI). The principal activities of Haier BVI and their subsidiaries are the manufacture
and sale of washing machines under the brand name of Haier.
RESULTS AND DIVIDENDS
The Groups loss for the year ended 31 December 2004 and the state of affairs of the Company and the
Group at that date are set out in the financial statements on pages 31 to 74.
The directors do not recommend the payment of any dividends in respect of the year.
SUMMARY FINANCIAL INFORMATION
A summary of the published results and assets, liabilities and minority interests of the Group for the last five
financial years/period, as extracted from the audited financial statements and reclassified as appropriate, is
set out on page 75. This summary does not form part of the audited financial statements.
FIXED ASSETS
Details of movements in the fixed assets of the Group during the year are set out in note 16 to the financial
statements.
SHARE CAPITAL, SHARE OPTIONS AND WARRANTS
Details of movements in the Companys share capital, share options and warrants during the year, together
with the reasons therefor, are set out in notes 28 and 29 to the financial statements.
20
PRE-EMPTIVE RIGHTS
There are no provisions for pre-emptive rights under the Companys bye-laws or the laws of Bermuda which
would oblige the Company to offer new shares on a pro rata basis to existing shareholders.
PURCHASE, REDEMPTION OR SALE OF LISTED SECURITIES OF THE COMPANY
Neither the Company, nor any of its subsidiaries had purchased, sold or redeemed any of the listed securities
of the Company during the year.
RESERVES
Details of movements in the reserves of the Company and the Group during the year are set out in note 30
to the financial statements and in the consolidated statement of changes in equity, respectively.
DISTRIBUTABLE RESERVES
At 31 December 2004, the Companys reserves available for distribution, calculated in accordance with the
provisions of the Companies Act 1981 of Bermuda (as amended), amounted to HK$120,691,000 (2003:
HK$165,118,000). In addition, the Companys share premium account, in the amount of HK$70,179,000
(2003: HK$70,174,000), may be distributed in the form of fully paid bonus shares.
MAJOR CUSTOMERS AND SUPPLIERS
The information in respect of the Groups sales and purchases attributable to the major customers and
suppliers, respectively, during the financial year is as follows:
Percentage of the Groups total
Sales
Purchases
2004
2003
2004
2003
The largest customer
87
72
Five largest customers in aggregate
98
99
The largest supplier
55
12
Five largest suppliers in aggregate
74
33
During the year, Haier Group Corporation (Haier) and Qingdao Haier Investment and Development Co.,
Ltd. (Haier Investment), substantial shareholders of the Company, had beneficial interest in one of the five
largest customers and one of the five largest suppliers of the Group, respectively.
Save as disclosed above, none of the directors or any of their associates or any shareholders of the Company
(which, to the best knowledge of the directors, own more than 5% of the Companys issued share capital)
had any beneficial interest in the Groups five largest customers or suppliers.
21
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
(appointed on 28 January 2005)
Wu Ke Song
Chai Yong Sen
Liang Hai Shan
Cao Chun Hua
Cui Shao Hua

Song Chun Guang
Mak Shiu Tong, Clement
(resigned on 28 January 2005)
Tam Ngai Hung, Terry
Man Wei Dong
Independent non-executive directors:

Lam Kin Kau, Mark
Fung Hoi Wing, Henry
Lau Ho Wai, Lucas
(appointed on 17 September 2004)
Wu Yinong
In accordance with the bye-laws of the Company, Yang Mian Mian, Wu Ke Song, Liang Hai Shan, Cao Chun
Hua, Song Chun Guang, Lau Ho Wai, Lucas, and Wu Yinong will retire and, being eligible, will offer
themselves for re-election at the forthcoming annual general meeting of the Company.
The independent non-executive directors of the Company are not appointed for any specific terms and are
subject to retirement by rotation and re-election at the annual general meetings of the Company in accordance
with the bye-laws of the Company.
The Company has received annual confirmations of independence from Lam Kin Kau, Mark, Fung Hoi Wing,
Henry, Lau Ho Wai, Lucas, and Wu Yinong, and still considers them to be independent as at the date of this
report.
DIRECTORS AND SENIOR MANAGEMENTS BIOGRAPHIES
Biographical details of the directors of the Company and the senior management of the Group are set out on
pages 10 to 15 of this annual report.
22
DIRECTORS SERVICE CONTRACTS

During the year, no director had a service contract with the Company which is not determinable by the
Company within one year without payment of compensation, other than statutory compensation.
The directors fees are subject to shareholders approval at general meetings. Other emoluments are determined
by the Companys board of directors with reference to directors duties, responsibilities and performance and
the results of the Group.
DIRECTORS INTERESTS IN CONTRACTS
No director had a material interest, either directly or indirectly, in any contract of significance to the business
of the Group to which the Company, or its holding company, or any of its subsidiaries or fellow subsidiaries
was a party during the year.
DIRECTORS INTERESTS IN SHARES AND UNDERLYING SHARES
At 31 December 2004, the interests of the directors in the share capital and underlying shares of the
Company or its associated corporations (within the meaning of Part XV of the Securities and Futures Ordinance
(Chapter 571 of the Laws of Hong Kong) (the SFO)), as recorded in the register required to be kept by the
Company pursuant to Section 352 of the SFO, or as otherwise notified to the Company and The Stock
Exchange of Hong Kong Limited (the Stock Exchange) pursuant to the Model Code for Securities Transactions
by Directors of Listed Issuers, were as follows:
Long positions in ordinary shares of the Company:
Number of shares held,
capacity and nature of interest
Name of director
Mak Shiu Tong, Clement (note)
Note:
Percentage of
Directly
Through
the Companys
beneficially
controlled
issued share
owned
corporation
Total
capital
107,219,667
107,219,667
1.08
10,000,000
10,000,000
0.10
10,000,000
107,219,667
117,219,667
1.18
The shares of the Company were held by Capital Winner Investments Limited and Capital Interest Limited (through
Mono Alto International Limited and CCT Industrial Holdings Limited), which are corporations controlled by Mak
Shiu Tong, Clement.
The interests of the directors in the share options of the Company are separately disclosed in note 29 to the
financial statements.
23
DIRECTORS INTERESTS IN SHARES AND UNDERLYING SHARES (contd)

Save as disclosed above, as at 31 December 2004, none of the directors had registered an interest or short
position in the shares, underlying shares or debentures of the Company or any of its associated corporations
that was required to be recorded pursuant to Section 352 of the SFO, or as otherwise notified to the
Company and the Stock Exchange pursuant to the Model Code for Securities Transactions by Directors of
Listed Issuers.
DIRECTORS RIGHTS TO ACQUIRE SHARES OR DEBENTURES
Save as disclosed in the share option scheme disclosures in note 29 to the financial statements, at no time
during the year were rights to acquire benefits by means of the acquisition of shares in or debentures of the
Company granted to any director of the Company or their respective spouse or minor children, or were any
such rights exercised by them; or was the Company, its holding company, or any of its 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.
SUBSTANTIAL SHAREHOLDERS INTERESTS IN SHARES AND UNDERLYING SHARES
At 31 December 2004, the following interests of 5% or more of the issued share capital of the Company
were recorded in the register of interests required to be kept by the Company pursuant to Section 336 of the
SFO:
Long positions in ordinary shares of the Company:
Approximate
percentage
Name of shareholder
Notes
Number of
of total
shares held
shareholding
(%)
CCT Telecom Holdings Limited
(1)
4,346,772,486
43.62
Soaring Profit Holdings Limited
(2)
4,346,772,486
43.62
Info-net International Corp.
899,000,000
9.02
Greatway International Corp.
880,172,486
8.83
Clear Access Agents Limited
810,000,000
8.13
Super Control Investments Limited
733,600,000
7.36
Invest Paradise Group Limited
700,000,000
7.03
Haier Group Corporation
(3)
2,983,000,000
29.94
Qingdao Haier Collective Asset Management Association
(4)
2,983,000,000
29.94
Qingdao Haier Investment and Development Co., Ltd.
(5)
2,983,000,000
29.94
Qingdao Haier International Trading Co., Ltd.
(6)
1,960,000,000
19.67
Haier (Hong Kong) Company Limited
(7)
1,960,000,000
19.67
1,960,000,000
19.67
Orient Rich (H.K.) Limited
24
SUBSTANTIAL SHAREHOLDERS INTERESTS IN SHARES AND UNDERLYING SHARES (contd)

Notes:
(1)
The interest disclosed comprises 4,346,772,486 shares indirectly owned by Soaring Profit Holdings Limited through
the subsidiaries as disclosed in note (2) below. Soaring Profit Holdings Limited is a wholly-owned subsidiary of CCT
Telecom Holdings Limited.
(2)
The interest disclosed comprises 899,000,000 shares held by Info-net International Corp., 880,172,486 shares held
by Greatway International Corp., 810,000,000 shares held by Clear Access Agents Limited, 733,600,000 shares
held by Super Control Investments Limited, 700,000,000 shares held by Invest Paradise Group Limited and
324,000,000 shares held by Full Elite Assets Limited. Info-net International Corp., Greatway International Corp.,
Clear Access Agents Limited, Super Control Investments Limited, Invest Paradise Group Limited and Full Elite
Assets Limited are wholly-owned subsidiaries of Soaring Profit Holdings Limited.
(3)
Haier Group Corporation is acting in concert with Qingdao Haier Investment and Development Co., Ltd. As
Qingdao Haier Investment and Development Co., Ltd. is holding 1,023,000,000 shares and is interested in
1,960,000,000 shares held by Orient Rich (H.K.) Limited as stated in notes (5), (6) and (7) below, Haier Group
Corporation is also taken to be interested in the 1,023,000,000 shares held by Qingdao Haier Investment and
Development Co., Ltd. and the 1,960,000,000 shares held by Orient Rich (H.K.) Limited.
(4)
Qingdao Haier Collective Asset Management Association is interested in 1,023,000,000 shares held by its non
wholly-owned subsidiary, namely, Qingdao Haier Investment and Development Co., Ltd. and 1,960,000,000 shares
held by Orient Rich (H.K.) Limited as stated in notes (5), (6) and (7) below.
(5)
Qingdao Haier Investment and Development Co., Ltd. is holding 1,023,000,000 shares and is interested in
1,960,000,000 shares held by Orient Rich (H.K.) Limited through its non wholly-owned subsidiary, namely Qingdao
Haier International Trading Co., Ltd. as stated in notes (6) and (7) below.
(6)
Qingdao Haier International Trading Co., Ltd. is interested in 1,960,000,000 shares held by Orient Rich (H.K.)
Limited through its non wholly-owned subsidiary, namely Haier (Hong Kong) Company Limited as stated in
note (7) below.
(7)
Haier (Hong Kong) Company Limited is interested in 1,960,000,000 shares held by Orient Rich (H.K.) Limited.
Orient Rich (H.K.) Limited is a non wholly-owned subsidiary of Haier (Hong Kong) Company Limited.
As at 31 December 2004, Qingdao Haier Group Holdings (BVI) Limited is interested in a long position in
4,026,706,667 shares and 1,444,444,444 shares under the convertible notes respectively pursuant to the
asset injection agreement as disclosed in note 34(i) to the financial statements.
As at 31 December 2004, Qingdao Haier Group Holdings (BVI) Limited was owned as to 50% by each of
Haier and Haier Investment. Accordingly, each of Haier and Haier Investment is deemed to be interested in
the interests of Qingdao Haier Group Holdings (BVI) Limited. Qingdao Haier Collective Asset Management
Association is also deemed to be interested in the same interest of Qingdao Haier Group Holdings (BVI)
Limited via Haier Investment.
Save as disclosed above, as at 31 December 2004, no other person, other than the directors or the chief
executive of the Company, whose interests are set out in the section Directors interests in shares and
underlying shares above, had registered an interest or short position in the shares or underlying shares of
the Company that was required to be recorded pursuant to Section 336 of the SFO.
25
CONNECTED TRANSACTIONS AND CONTINUING CONNECTED TRANSACTIONS

During the year, the Group had the following connected transactions with Haier, the subsidiaries of Haier,
and the subsidiaries of Haier Investment, certain details of which, disclosed in compliance with the requirements
of Chapter 14A of the Listing Rules, are set out below. Haier and Haier Investment are substantial shareholders
of the Company.
(a)
During the year, the Group had the following continuing connected transactions:
2004
2003
HK$000
HK$000
(i)
2,747,869
1,197,120
Purchases of materials
(ii)
1,786,847
81,388
Utility service fee expenses
(iii)
4,657
3,724
General security service fee expenses
(iii)
136
439
Human resources service fee expenses
(iii)
38
159
Notes
Sales of mobile phones
Legal consultancy service fee expenses
(iii)
64
Interest expenses
(iii)
3,442
3,346
Interest income
(iii)
143
73
Notes:
(i)
The sales of mobile phones were made in accordance with the terms and conditions set out in the products
distribution agreement entered into between Pegasus Telecom (Qingdao) Co., Ltd. (Pegasus Qingdao)
and Qingdao Haier Telecommunications Co., Ltd. on 10 January 2003.
The sales were determined based on the costs of materials plus a processing fee ranging from 5% to 40%
of the purchase price of the materials.
(ii)
The purchases of materials were made in accordance with the terms and conditions set out in the materials
procurement agreement entered into between Pegasus Qingdao, Qingdao Haier International Trading Co.,
Ltd. and Qingdao Haier Parts Procurement Co., Ltd. on 10 January 2003.
The purchases were determined based on the lower of the average market price or the consolidated and
the integrated tender and bidding price plus 2.6% commission.
(iii)
26
The utility service fee expenses, legal consultancy service fee expenses, human resources service fee expenses,
general security service fee expenses and interest expenses were charged by Qingdao Haier Energy Power
Co., Ltd. (Haier Energy), Qingdao Haier Intellectual Property Rights and Legal Services Centre (Haier
Legal), Qingdao Haier Human Resources Development Co., Ltd. (Haier Human Resources), Qingdao
Haier Security Services Co., Ltd. (Haier Security) and Haier Group Finance Co., Ltd. (Haier Finance),
respectively, in accordance with the terms and conditions set out in the service agreement (the Service
Agreement) entered into between Pegasus Qingdao, Haier Energy, Haier Legal, Haier Human Resources,
Haier Security and Haier Finance on 10 January 2003. The interest income was received from Haier Finance
in accordance with the terms and conditions set out in the Service Agreement.
CONNECTED TRANSACTIONS AND CONTINUING CONNECTED TRANSACTIONS (contd)

Notes: (contd)
(iii)
(contd)
Pursuant to the Service Agreement, the utility service fees, legal consultancy service fees, human resources
service fees and general security service fees were charged with reference to actual costs incurred. The
interests were determined with reference to the standard rates published by the Peoples Bank of China.
The average daily balance of the Groups loan from Haier Finance (plus interest) and deposits in Haier
Finance (plus interest) for each of the 12 months ended 31 December 2004 did not exceed RMB150 million
(equivalent to approximately HK$140 million) and RMB30 million (equivalent to approximately HK$28
million), respectively.
The above transactions were defined as Ongoing Connected Transactions in the circular to the
shareholders of the Company dated 17 March 2003 and were approved by the shareholders at a
special general meeting of the Company on 2 April 2003.
The Stock Exchange has granted conditional waivers to the Company from strict compliance with the
connected transactions requirements as set out in the Listing Rules for the two financial years ended
31 December 2004.
The independent non-executive directors of the Company have reviewed and confirmed that the
Ongoing Connected Transactions were:
(i)
less than the cap amounts which were set out in the relevant agreements;
(ii)
entered into in the usual and ordinary course of business of Pegasus Qingdao;
(iii)
conducted either on normal commercial terms; or if there are no sufficient comparable

transactions to judge whether they are on normal commercial terms, on terms that are fair and
reasonable so far as the shareholders are concerned; and
(iv)
entered into either in accordance with the terms of the agreements governing such transactions;
or if there are no such agreements, on terms that are no less favourable than terms available to
or from independent third parties.
(b)
On 22 June 2004, Haier provided a corporate guarantee of US$15,000,000 (equivalent to

HK$117,000,000) to the Bank of Communications, Qingdao Branch, as a security for banking facilities
granted to Pegasus Qingdao for the period from 22 June 2004 to 22 September 2004. The guarantee
was automatically released when the corresponding loan was repaid on 22 September 2004.
(c)
On 25 June 2004, Haier provided a corporate guarantee of RMB70,000,000 (equivalent to

HK$65,421,000) to Haier Finance as a security for banking facilities granted to Pegasus Qingdao for
the period from 25 June 2004 to 24 June 2005. As at 31 December 2004, the above banking facilities
were fully utilised.
27
SUFFICIENCY OF PUBLIC FLOAT

Based on information that is publicly available to the Company and within the knowledge of the directors, at
least 25% of the Companys total issued share capital was held by the public as at the date of this report,
being the latest practical date prior to the date of this report.
POST BALANCE SHEET EVENTS
Details of the significant post balance sheet events of the Group are set out in note 34 to the financial
statements.
CODE OF BEST PRACTICE
In the opinion of the directors, the Company complied with the Code of Best Practice (the Code) as set
out in Appendix 14 to the Listing Rules throughout the accounting period covered by the annual report,
except that the independent non-executive directors of the Company are not appointed for any specific
terms as required by Paragraph 7 of the Code, but are subject to retirement by rotation and re-election at
the annual general meetings of the Company in accordance with the bye-laws of the Company.
MODEL CODE FOR SECURITIES TRANSACTIONS
The Company has adopted the Model Code for Securities Transactions by Directors of Listed Issuers of the
Listing Rules (Model Code) as the Companys code of conduct for dealings in securities of the Company by
the directors. Based on specific enquiry of the Companys directors, the directors have complied with the
required standard set out in the Model Code, throughout the accounting period covered by the annual
report.
AUDIT COMMITTEE
Pursuant to Rule 3.21 of the Listing Rules, the Company has established an audit committee comprising the
four independent non-executive directors of the Company. A set of written terms of reference, which
describe the authorities and duties of the audit committee, was also adopted by the board.
The audit committee is answerable to the board and the principal duties of the audit committee include the
review and supervision of the financial reporting process and internal controls of the Company. The audit
committee had reviewed the audited consolidated financial statements of the Group for the year ended 31
December 2004.
28
AUDITORS
Ernst & Young retire and a resolution for their reappointment as auditors of the Company will be proposed at
the forthcoming annual general meeting of the Company.
ON BEHALF OF THE BOARD
Yang Mian Mian

Chairman
Hong Kong
22 April 2005
29
Report of the Auditors
TO THE MEMBERS
(Incorporated in Bermuda with limited liability)
We have audited the financial statements on pages 31 to 74 which have been prepared in accordance with
accounting principles generally accepted in Hong Kong.
RESPECTIVE RESPONSIBILITIES OF DIRECTORS AND AUDITORS
The Companys directors are responsible for the preparation of financial statements which give a true and
fair view. In preparing financial statements which give a true and fair view it is fundamental that appropriate
accounting policies are selected and applied consistently. It is our responsibility to form an independent
opinion, based on our audit, on those financial statements and to report our opinion solely to you, as a
body, in accordance with Section 90 of the Bermuda Companies Act 1981, and for no other purpose. We do
not assume responsibility towards or accept liability to any other person for the contents of this report.
BASIS OF OPINION
We conducted our audit in accordance with Statements of Auditing Standards issued by the Hong Kong
Institute of Certified Public Accountants. An audit includes an examination, on a test basis, of evidence
relevant to the amounts and disclosures in the financial statements. It also includes an assessment of the
significant estimates and judgements made by the directors in the preparation of the financial statements,
and of whether the accounting policies are appropriate to the Companys and the Groups circumstances,
consistently applied and adequately disclosed.
We planned and performed our audit so as to obtain all the information and explanations which we
considered necessary in order to provide us with sufficient evidence to give reasonable assurance as to
whether the financial statements are free from material misstatement. In forming our opinion we also
evaluated the overall adequacy of the presentation of information in the financial statements. We believe
that our audit provides a reasonable basis for our opinion.
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 2004 and of the loss and cash flows of the Group for the year then ended
and have been properly prepared in accordance with the disclosure requirements of the Hong Kong Companies
Ordinance.
Ernst & Young

Certified Public Accountants
Hong Kong
22 April 2005
30
Consolidated Profit and Loss Account

Year ended 31 December 2004
Notes
TURNOVER
Cost of sales
Gross profit
2004
2003
HK$000
HK$000
3,152,725
1,664,638
(3,089,666)
(1,655,156)
63,059
Other revenue
Administrative expenses
Other operating expenses
9,482
11,551
5,305
(43,988)
(40,280)
(987)
(6,325)
Profit/(loss) from operating activities before amortisation and

impairment of goodwill
Amortisation and impairment of goodwill
29,635
(31,818)
(44,542)
(815,087)
LOSS FROM OPERATING ACTIVITIES
(14,907)
(846,905)
Finance costs
(12,151)
(18,845)
(27,058)
(865,750)
LOSS BEFORE TAX

Tax
11
(4,328)
LOSS BEFORE MINORITY INTERESTS
(31,386)
Minority interests
(11,079)
1,653
(864,097)
7,733
NET LOSS FROM ORDINARY ACTIVITIES ATTRIBUTABLE

TO SHAREHOLDERS
12
DIVIDEND
13
LOSS PER SHARE
14
Basic
Diluted
(42,465)
(856,364)
0.43 cents
8.60 cents
N/A
N/A
31
Consolidated Balance Sheet

31 December 2004
Notes
2004
HK$000
2003
HK$000
16
17
18
27
426,739
3,922
697,825
7,818
388,136
4,503
742,367
8,624
1,136,304
1,143,630
385,039
463,907
59,003
16,773
140,573
341,128
523,929
63,826
1,079
266,894
1,065,295
1,196,856
741,186
825
22,690
147,044
445,655
109
24,560
548,928
911,745
1,019,252
153,550
177,604
1,289,854
1,321,234
86,659
75,580
1,203,195
1,245,654
996,403
206,792
996,402
249,252
1,203,195
1,245,654
NON-CURRENT ASSETS
Fixed assets
Intangible assets
Goodwill
Deferred tax assets
CURRENT ASSETS
Inventories
Trade and bills receivables
Prepayments, deposits and other receivables
Pledged deposits
Cash and cash equivalents
20
21
22
23
23
CURRENT LIABILITIES
Trade payables
Tax payable
Other payables and accruals
Interest-bearing bank and other loans, unsecured
24
25
26
NET CURRENT ASSETS

TOTAL ASSETS LESS CURRENT LIABILITIES
MINORITY INTERESTS
CAPITAL AND RESERVES

Issued capital
Reserves
Yang Mian Mian

Chairman
32
28
30(a)
Cui Shao Hua

Director
Consolidated Statement of Changes in Equity

Retained
Note
At 1 January 2003
Issued
Share
share
premium
Reserve
profits/
Contributed
funds
(accumulated
capital
account
surplus
(note (a))
losses)
Total
HK$000
HK$000
HK$000
HK$000
HK$000
HK$000
996,229
70,040
967,319
68,123
2,101,711
Exercise of share warrants
28
Exercise of share options
28
173
134
307
1,880
(1,880 )
(856,364 )
996,402
70,174
967,319
1,880
(790,121 )
2,065
(2,065 )
(42,465 )
Transfer from retained

profits
Net loss for the year
(856,364)
At 31 December 2003 and

at 1 January 2004
28
1,245,654
Transfer from retained

profits
At 31 December 2004
996,403
70,179*
967,319*
3,945*
(834,651)*
(42,465 )
1,203,195
Note:
(a)
In accordance with the relevant Peoples Republic of China (the PRC) laws and regulations applicable to Sinoforeign joint venture enterprises and wholly foreign-owned enterprises, certain subsidiaries of the Company in the
PRC are required to transfer a certain percentage of their net profit for the year to reserve funds. These funds are
non-distributable. For the purpose of determining the appropriations to these funds, the net profit is determined
in accordance with the applicable financial rules and regulations in the PRC.
These reserve accounts comprise the consolidated reserve of HK$206,792,000 (2003: HK$249,252,000) in the
consolidated balance sheet.
33

Notes
2004
2003
HK$000
HK$000
CASH FLOWS FROM OPERATING ACTIVITIES

Loss before tax
(27,058)
(865,750)
Adjustments for:
Finance costs
12,151
18,845
Interest income
(969)
Gain on disposal of fixed assets
(10)
Depreciation
33,509
23,723
Provision for obsolete and slow-moving inventories
18,430
55,544
Write off of fixed assets
987
5,197
Write off of intangible assets
1,128
Amortisation and impairment of goodwill
44,542
815,087
Amortisation of intangible assets
581
1,156
82,163
52,773
Operating profit before working capital changes

Increase in inventories
Decrease/(increase) in trade and bills receivables
Decrease/(increase) in prepayments, deposits and other receivables
Increase in trade payables
Decrease in other payables and accruals
Cash generated from/(used in) operations

Interest received
Hong Kong profits tax paid
PRC corporate income tax paid
Net cash inflow/(outflow) from operating activities
34
(2,157)
(62,341)
(89,821)
60,022
(394,315)
4,823
(42,934)
295,531
(1,870)
378,328
969
(2,806)
376,491
201,534
(42,172)
(314,935)
2,157
(959)
(1,826)
(315,563)

Notes
Net cash inflow/(outflow) from operating activities
2004
2003
HK$000
HK$000
376,491
(315,563)
(73,239)
(181,555)
CASH FLOWS FROM INVESTING ACTIVITIES

Purchases of fixed assets
Proceeds from disposal of fixed assets
150
Increase in pledged deposits
(15,694)
(1,079)
Net cash outflow from investing activities
(88,783)
(182,634)
CASH FLOWS FROM FINANCING ACTIVITIES

Proceeds from issue of shares upon exercise of
share options and warrants
28
307
Interest paid
(12,151)
(18,845)
New bank loans
181,495
443,178
(559,252)
(140,187)
(24,127)
105,750
Net cash inflow/(outflow) from financing activities
(414,029)
390,203
NET DECREASE IN CASH AND CASH EQUIVALENTS
Repayment of bank loans

Net additions/(repayment) of trust receipts
(126,321)
(107,994)
Cash and cash equivalents at beginning of year
266,894
374,888
CASH AND CASH EQUIVALENTS AT END OF YEAR
140,573
266,894
23
10,138
125,574
23
130,435
141,320
140,573
266,894
ANALYSIS OF BALANCES OF CASH AND CASH EQUIVALENTS

Non-pledged cash and bank balances
Non-pledged time deposits with original maturity of
less than three months when acquired
35
Balance Sheet
31 December 2004
2004
2003
HK$000
HK$000
19
1,051,471
1,082,805
Prepayments, deposits and other receivables
22
23,134
5,485
23
114,830
144,804
137,964
150,289
2,162
1,400
135,802
148,889
1,187,273
1,231,694
28
996,403
996,402
30(b)
190,870
235,292
1,187,273
1,231,694
Notes
NON-CURRENT ASSETS
Interests in subsidiaries
CURRENT ASSETS
CURRENT LIABILITIES
Other payables and accruals
25
NET CURRENT ASSETS
CAPITAL AND RESERVES

Issued capital
Reserves
Yang Mian Mian
Cui Shao Hua
Chairman
Director
36

31 December 2004
1.
CORPORATE INFORMATION
The registered office of Haier Electronics Group Co., Ltd. is located at Canons Court, 22 Victoria
Street, Hamilton HM12, Bermuda.
During the year, the principal activities of the Group comprised the manufacture and sale of mobile
phones and trading of raw materials.
Subsequent to the year end, on 28 January 2005, the Group acquired the entire issued share capital
of Haier Holdings (BVI) Limited and Qingdao Haier Investment and Development Holdings (BVI) Limited
(collectively referred to as Haier BVI). The principal activities of Haier BVI and their subsidiaries are
the manufacture and sale of washing machines under the brand name of Haier.
2.
CHANGE OF COMPANY NAME

Pursuant to a special resolution passed at a special general meeting of the Company held on 13
December 2004 and approved by the Registrar of Companies in Bermuda, the name of the Company
was changed from Haier-CCT Holdings Limited to Haier Electronics Group Co., Ltd. with effect from
31 January 2005.
3.
IMPACT OF RECENTLY ISSUED HONG KONG FINANCIAL REPORTING STANDARDS (HKFRS)

The Hong Kong Institute of Certified Public Accountants has issued a number of new Hong Kong
Financial Reporting Standards and Hong Kong Accounting Standards, herein collectively referred to as
the new HKFRSs, which are generally effective for accounting periods beginning on or after 1 January
2005. The Group has not early adopted these new HKFRSs in the financial statements for the year
ended 31 December 2004. The Group has already commenced an assessment of the impact of these
new HKFRSs but is not yet in a position to state whether these new HKFRSs would have a significant
impact on its results of operations and financial position.
4.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of preparation
These financial statements have been prepared in accordance with Hong Kong Financial Reporting
Standards (which also include Statements of Standard Accounting Practice and Interpretations) issued
by Hong Kong Institute of Certified Public Accountants, accounting principles generally accepted in
Hong Kong and the disclosure requirements of the Hong Kong Companies Ordinance. They have been
prepared under the historical cost convention.
37

31 December 2004
4.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (contd)

Basis of consolidation
The consolidated financial statements include the financial statements of the Company and its
subsidiaries for the year ended 31 December 2004. The results of subsidiaries acquired or disposed of
during the year are consolidated from or to their effective dates of acquisition or disposal, respectively.
All significant intercompany transactions and balances within the Group are eliminated on consolidation.
Minority interests represent the interests of outside shareholders in the results and net assets of the
Companys subsidiaries.
Subsidiaries
A subsidiary is a company whose financial and operating policies the Company controls, directly or
indirectly, so as to obtain benefits from its activities.
The results of subsidiaries are included in the Companys profit and loss account to the extent of
dividends received and receivable. The Companys interests in subsidiaries are stated at cost less any
impairment losses.
Goodwill
Goodwill arising on the acquisition of subsidiaries represents the excess of the cost of the acquisition
over the Groups share of the fair values of the identifiable assets and liabilities acquired as at the date
of acquisition.
Goodwill arising on acquisition is recognised in the consolidated balance sheet as an asset and
amortised on the straight-line basis over its estimated useful life of not exceeding 20 years.
On disposal of subsidiaries, the gain or loss on disposal is calculated by reference to the net assets at
the date of disposal, including the attributable amount of goodwill which remains unamortised and
any relevant reserves, as appropriate.
The carrying amount of goodwill is reviewed annually and written down for impairment when it is
considered necessary. A previously recognised impairment loss for goodwill is not reversed unless the
impairment loss was caused by a specific external event of an exceptional nature that was not
expected to recur, and subsequent external events have occurred which have reversed the effect of
that event.
38

31 December 2004
4.

Impairment of assets
An assessment is made at each balance sheet date of whether there is any indication of impairment of
any asset, or whether there is any indication that an impairment loss previously recognised for an
asset in prior years may no longer exist or may have decreased. If any such indication exists, the
assets recoverable amount is estimated. An assets recoverable amount is calculated as the higher of
the assets value in use and its net selling price.
An impairment loss is recognised only if the carrying amount of an asset exceeds its recoverable
amount. An impairment loss is charged to the profit and loss account in the period in which it arises.
A previously recognised impairment loss is reversed only if there has been a change in the estimates
used to determine the recoverable amount of an asset, however not to an amount higher than the
carrying amount that would have been determined (net of any depreciation/amortisation), had no
impairment loss been recognised for the asset in prior years. A reversal of an impairment loss is
credited to the profit and loss account in the period in which it arises.
Fixed assets and depreciation
Fixed assets, other than construction in progress, are stated at cost less accumulated depreciation and
any impairment losses. The cost of an asset comprises its purchase price and any directly attributable
costs of bringing the asset to its working condition and location for its intended use. Expenditure
incurred after fixed assets have been put into operation, such as repairs and maintenance, is normally
charged to the profit and loss account in the period in which it is incurred. In situations where it can
be clearly demonstrated that the expenditure has resulted in an increase in the future economic
benefits expected to be obtained from the use of the fixed asset, the expenditure is capitalised as an
additional cost of that asset.
Depreciation is calculated on the straight-line basis to write off the cost of each asset over its
estimated useful life. The principal annual rates used for this purpose are as follows:
Buildings
4.5%
Leasehold improvements
50%
Plant and machinery
9%
Tools, moulds and equipment
18%
Furniture, fixtures and office equipment
18% 20%
Motor vehicles
20%
The gain or loss on disposal or retirement of a fixed asset recognised in the profit and loss account is
the difference between the net sales proceeds and the carrying amount of the relevant asset.
39

31 December 2004
4.

Construction in progress
Construction in progress represents a building under construction and equipment pending installation.
It is stated at cost less any impairment losses, and is not depreciated. Cost comprises the direct costs
of construction. Construction in progress is reclassified to the appropriate category of the fixed assets
when completed and ready for use.
Intangible assets
Patents and licences
Purchased patents and licences are stated at cost less any impairment losses and are amortised on the
straight-line basis over their estimated useful lives of 10 years.
Research and development costs
All research costs are charged to the profit and loss account as incurred.
Expenditure incurred on projects to develop new products is capitalised and deferred only when the
projects are clearly defined; the expenditure is separately identifiable and can be measured reliably;
there is reasonable certainty that the projects are technically feasible; and the products have commercial
value. Product development expenditure which does not meet these criteria is expensed when incurred.
Operating leases
Leases where substantially all the rewards and risks of ownership of assets remain with the lessor are
accounted for as operating leases. Where the Group is the lessor, assets leased by the Group under
operating leases are included in non-current assets, and rentals receivable under the operating leases
are credited to the profit and loss account on the straight-line basis over the lease terms. Where the
Group is the lessee, rentals payable under the operating leases are charged to the profit and loss
account on the straight-line basis over the lease terms.
Inventories
Inventories are stated at the lower of cost and net realisable value. Cost is determined on the
weighted average basis and, in the case of work in progress and finished goods, comprises direct
materials, direct labour and an appropriate proportion of overheads. Net realisable value is based on
the estimated selling prices less any estimated costs to be incurred to completion and disposal.
40

31 December 2004
4.

Income tax
Income tax comprises current and deferred tax. Income tax is recognised in the profit and loss account
or in equity if it relates to items that are recognised in the same or a different period directly in equity.
Deferred tax is provided, using the liability method, on all temporary differences at the balance sheet
date between the tax bases of assets and liabilities and their carrying amounts for financial reporting
purposes.
Deferred tax liabilities are recognised for all taxable temporary differences:
except where the deferred tax liability arises from goodwill or the initial recognition of an asset
or liability in a transaction that is not a business combination and, at the time of the transaction,
affects neither the accounting profit nor taxable profit or loss; and
in respect of taxable temporary differences associated with investments in subsidiaries, except

where the timing of the reversal of the temporary differences can be controlled and it is
probable that the temporary differences will not reverse in the foreseeable future.
Deferred tax assets are recognised for all deductible temporary differences, carryforward of unused
tax assets and unused tax losses, to the extent that it is probable that taxable profit will be available
against which the deductible temporary differences, and the carryforward of unused tax assets and
unused tax losses can be utilised:
except where the deferred tax asset relating to the deductible temporary differences arises
from the initial recognition of an asset or liability in a transaction that is not a business
combination and, at the time of the transaction, affects neither the accounting profit nor
taxable profit or loss; and
in respect of deductible temporary differences associated with investments in subsidiaries,

deferred tax assets are only recognised to the extent that it is probable that the temporary
differences will reverse in the foreseeable future and taxable profit will be available against
which the temporary differences can be utilised.
The carrying amount of deferred tax assets is reviewed at each balance sheet date and reduced to the
extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of
the deferred tax asset to be utilised. Conversely, previously unrecognised deferred tax assets are
recognised to the extent that it is probable that sufficient taxable profit will be available to allow all or
part of the deferred tax asset to be utilised.
41

31 December 2004
4.

Income tax (contd)
Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the
period when the asset is realised or the liability is settled, based on tax rates (and tax laws) that have
been enacted or substantively enacted at the balance sheet date.
Employee benefits
Paid leave carried forward
The Group provides paid annual leave to its employees under their employment contracts on a
calendar year basis. Under certain circumstances, such leave which remains untaken as at the balance
sheet date is permitted to be carried forward and utilised by the respective employees in the following
year. An accrual is made at the balance sheet date for the expected future cost of such paid leave
earned during the year by the employees and carried forward.
Employment Ordinance long service payments
Certain of the Groups employees have completed the required number of years of service to the
Group in order to be eligible for long service payments under the Hong Kong Employment Ordinance
in the event of the termination of their employment. The Group is liable to make such payments in
the event that such a termination of employment meets the circumstances specified in the Employment
Ordinance.
Share option schemes
The Company operates two share option schemes for the purpose of providing incentives and rewards
to eligible participants who contribute to the success of the Groups operations. The financial impact
of share options granted under the share option schemes is not recorded in the Companys or the
Groups balance sheet until such time as the options are exercised, and no charge is recorded in the
profit and loss account or balance sheet for their cost. Upon exercise of the share options, the
resulting shares issued are recorded by the Company as additional share capital at the nominal value
of the shares, and the excess of the exercise price per share over the nominal value of the shares is
recorded by the Company in the share premium account. Options which are cancelled prior to their
exercise date, or which lapse, are deleted from the register of outstanding options.
42

31 December 2004
4.

Employee benefits (contd)
Pension schemes
The Group operates a defined contribution Mandatory Provident Fund retirement benefits scheme (the
MPF Scheme) under the Mandatory Provident Fund Schemes Ordinance, for those employees who
are eligible to participate in the MPF Scheme. Contributions are made based on a percentage of the
employees basic salaries and are charged to the profit and loss account as they become payable in
accordance with the rules of the MPF Scheme. The assets of the MPF Scheme are held separately from
those of the Group in an independently administrated fund. The Groups employer contributions vest
fully with the employees when contributed into the MPF Scheme, except for the Groups employer
voluntary contributions, which are refunded to the Group when the employee leaves employment
prior to the contributions vesting fully, in accordance with the rules of the MPF Scheme.
In addition to the MPF Scheme, the Group operates a separate defined contribution retirement benefits
scheme for those employees who were eligible to participate in this scheme. This scheme operates in
a similar way to the MPF Scheme, except that when an employee leaves this scheme before his/her
interest in the Groups employer contributions vest fully, the ongoing contributions payable by the
Group are reduced by the relevant amount of the forfeited employer contributions.
The employees of the Groups subsidiaries which operate in Mainland China are required to participate
in central pension scheme operated by the local municipal government. These subsidiaries are required
to contribute a certain percentage of its payroll costs to the central pension scheme. The contributions
are charged to the profit and loss account as they become payable in accordance with the rules of the
central pension scheme.
Foreign currencies
Foreign currency transactions are recorded at the applicable exchange rates ruling at the transaction
dates. Monetary assets and liabilities denominated in foreign currencies at the balance sheet date are
translated at the applicable exchange rates ruling at that date. Exchange differences are dealt with in
the profit and loss account.
On consolidation, the financial statements of overseas subsidiaries are translated into Hong Kong
dollars using the net investment method. The profit and loss accounts of overseas subsidiaries are
translated into Hong Kong dollars at the weighted average exchange rates for the year, and their
balance sheets are translated into Hong Kong dollars at the exchange rates ruling at the balance sheet
date. The resulting translation differences are included in the exchange fluctuation reserve.
For the purpose of the consolidated cash flow statement, the cash flows of overseas subsidiaries are
translated to Hong Kong dollars at the exchange rates ruling at the dates of the cash flows. Frequently
recurring cash flows of overseas subsidiaries which arise throughout the year are translated to Hong
Kong dollars at the weighted average exchange rates for the year.
43

31 December 2004
4.

For the purpose of the consolidated cash flow statement, cash and cash equivalents comprise cash on
hand and demand deposits, and short term highly liquid investments which are readily convertible into
known amounts of cash and which are subject to an insignificant risk of changes in value, and have a
short maturity of generally within three months when acquired, less bank overdrafts which are repayable
on demand and form an integral part of the Groups cash management.
For the purpose of the balance sheet, cash and cash equivalents comprise cash on hand and at banks,
including term deposits, which are not restricted as to use.
Government grants
Government grants are recognised at their fair value where there is reasonable assurance that the
grant will be received and all attaching conditions will be complied with. When the grant relates to an
expense item, it is recognised as income over the periods necessary to match the grant on a systematic
basis to costs that is intended to compensate. Where the grant relates to an asset, the fair value is
credited to a deferred income and is released to the profit and loss account over the expected useful
life of the relevant asset by equal annual instalments.
Revenue recognition
Revenue is recognised when it is probable that the economic benefits will flow to the Group and
when the revenue can be measured reliably, on the following bases:
(a)
from the sale of goods, when the significant risks and rewards of ownership have been transferred
to the buyer, provided that the Group maintains neither managerial involvement to the degree
usually associated with ownership, nor effective control over the goods sold;
(b)
rental income, on a time proportion basis over the lease terms; and
(c)
interest income, on a time proportion basis taking into account the principal outstanding and
the effective interest rate applicable.
44

31 December 2004
4.

Dividends
Final dividends proposed by the directors are classified as a separate allocation of retained profits
within the capital and reserves section of the balance sheet, until they have been approved by the
shareholders in a general meeting. When these dividends have been approved by the shareholders and
declared, they are recognised as a liability.
Interim dividends are simultaneously proposed and declared, because the Companys bye-laws grant
the directors the authority to declare interim dividends. Consequently, interim dividends are recognised
immediately as a liability when they are proposed and declared.
Related parties
Parties are considered to be related if one party has the ability, directly or indirectly, to control the
other party or exercise significant influence over the other party in making financial and operating
decisions. Parties are also considered to be related if they are subject to common control or common
significant influence. Related parties may be individuals or corporate entities.
5.
SEGMENT INFORMATION
Segment information is presented by way of two segment formats: (i) on a primary segment reporting
basis, by business segment; and (ii) on a secondary segment reporting basis, by geographical segment.
The Groups operating businesses are structured and managed separately according to the nature of
their operations and the products and services they provide. Each of the Groups business segments
represents a strategic business unit that offers products and services which are subject to risks and
returns that are different from those of the other business segments. Summary details of the business
segments are as follows:
(a)
the telecom products segment manufactures and sells mobile phones; and
(b)
the corporate and others segment includes general corporate income and expense items.
In determining the Groups geographical segments, revenues are attributed to the segments based on
the location of the customers, and assets are attributed to the segments based on the location of the
assets.
45

31 December 2004
5.
SEGMENT INFORMATION (contd)

(a)
Business segments
The following tables present revenue and loss and certain asset, liability and expenditure
information for the Groups business segments.
Telecom products
Corporate and others
Consolidated
2004
2003
2004
2003
2004
2003
HK$000
HK$000
HK$000
HK$000
HK$000
HK$000
3,152,725
1,664,638
3,152,725
1,664,638
9,206
3,148
1,376
10,582
3,148
3,161,931
1,667,786
1,376
3,163,307
1,667,786
Segment revenue:
Sales to external customers
Other revenue
Total revenue
Segment results
33,777
(25,666)
(5,111)
(8,309)
Interest income
28,666
969
(33,975)
2,157
Amortisation and impairment

of goodwill
(44,542)
(815,087)
Finance costs
(12,151)
(18,845)
Loss before tax
(27,058)
(865,750)
Tax
(44,542)
(815,087)
(4,328)
Loss before minority interests
(31,386)
Minority interests
(11,079)
1,653
(864,097)
7,733
Net loss from ordinary activities

attributable to shareholders
46
(42,465)
(856,364)

31 December 2004
5.

(a)
Business segments (contd)

Telecom products
Corporate and others
Consolidated
2004
2003
2004
2003
2004
2003
HK$000
HK$000
HK$000
HK$000
HK$000
HK$000
2,055,655
2,181,342
138,126
150,520
2,193,781
2,331,862
7,818
8,624
2,201,599
2,340,486
763,876
470,215
Unallocated liabilities
147,869
549,037
Total liabilities
911,745
1,019,252
Segment assets
Unallocated assets
Total assets
Segment liabilities
761,714
468,815
2,162
1,400
Other segment information:

Capital expenditure
73,239
194,176
73,239
194,176
Depreciation
33,434
23,648
75
75
33,509
23,723
Amortisation
45,123
84,017
45,123
84,017
Impairment of goodwill
732,226
732,226
Write off of fixed assets
987
5,197
987
5,197
1,128
1,128
18,430
55,544
18,430
55,544
Write off of intangible assets

Provision for obsolete and
slow-moving inventories
47

31 December 2004
5.

(b)
Geographical segments
The following table presents revenue information for the Groups geographical segments.
Mainland
Hong Kong
China
European Union
Unallocated
Consolidated
2004
2003
2004
2003
2004
2003
2004
2003
2004
2003
HK$000
HK$000
HK$000
HK$000
HK$000
HK$000
HK$000
HK$000
HK$000
HK$000
1,005 2,885,239 1,361,655
75,137
299,695
37,892
2,906
1,247 2,894,082 1,364,561
75,137
299,695
37,892
Segment revenue:
Sales to external
customers
154,457
Other revenue
Total revenue
1,739
156,196
242
8,843
2,283 3,152,725 1,664,638
10,582
3,148
2,283 3,163,307 1,667,786
No further geographical segment information is presented as over 90% of the Groups assets
are located in Mainland China.
6.
TURNOVER
Turnover represents the net invoiced value of goods sold, net of value-added tax and after allowances
for returns and trade discounts.
Revenue from the following activities has been included in turnover:
Group
Manufacture and sale of mobile phones

Trading of raw materials
48
2004
2003
HK$000
HK$000
3,143,385
1,664,471
9,340
167
3,152,725
1,664,638

31 December 2004
7.
LOSS FROM OPERATING ACTIVITIES

The Groups loss from operating activities is arrived at after charging/(crediting):
Notes
Cost of inventories sold
2004
2003
HK$000
HK$000
3,042,610
1,587,154
Depreciation
16
33,509
23,723
Amortisation of intangible assets*
17
581
1,156
28,045
11,302
Research and development costs*

Goodwill:
Amortisation for the year**
18
44,542
82,861
Impairment arising during the year**
18
732,226
44,542
815,087
2,100
1,400
20,090
11,909
3,308
2,774
23,398
14,683
713
1,373
25
2,301
738
3,674
18,430
55,544
987
5,197
1,128
Auditors remuneration
Staff costs (including directors remuneration note 9):
Wages and salaries
Net pension scheme contributions
Minimum lease payments under operating leases:

Land and buildings
Plant and machinery
Provision for obsolete and slow-moving inventories*

Write off of fixed assets***
16
Write off of intangible assets***
17
Foreign exchange losses/(gains), net

Gross rental income
Less: Outgoings
(133)
(1,137)
(1,137)
Government subsidies#
(4,963)
Gain on disposal of fixed assets
(474)
Net rental income
Interest income
2,428
(969)
(474)
(2,157)
(10)
49

31 December 2004
7.
8.
LOSS FROM OPERATING ACTIVITIES (contd)

*
The amortisation of intangible assets, research and development costs and provision for obsolete and slowmoving inventories for the year are included in Cost of sales on the face of the consolidated profit and
loss account.
**
The amortisation and impairment of goodwill for the year are disclosed on the face of the consolidated
profit and loss account.
***
The write off of fixed assets and write off of intangible assets for the year are included in Other operating
expenses on the face of the consolidated profit and loss account.
The subsidies were received from the relevant authorities of Qingdao Municipality as an encouragement
for export sales made by one of the Groups subsidiaries in Mainland China.
FINANCE COSTS
Group
Interest on bank and other loans wholly repayable within five years
9.
2004
2003
HK$000
HK$000
12,151
18,845
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) and Section 161 of the Companies
Ordinance, is as follows:
Group
2004
2003
HK$000
HK$000
Executive directors:
Fees
Other emoluments:
Salaries, allowances and benefits in kind
Performance related bonuses
Pension scheme contributions
540
300
Independent non-executive directors:

Fees
50

31 December 2004
9.
DIRECTORS REMUNERATION (contd)

The number of directors whose remuneration fell within the following band is as follows:
Number of directors
Nil HK$1,000,000
2004
2003
10
There was no arrangement under which a director waived or agreed to waive any remuneration during
the year.
10.
FIVE HIGHEST PAID EMPLOYEES

The five highest paid employees during the year did not include any director (2003: Nil), details of
whose remuneration are set out in note 9 above. Details of the remuneration of the five (2003: five)
non-director, highest paid employees for the year are as follows:
Group
Salaries, allowances and benefits in kind

Performance related bonuses
Pension scheme contributions
2004
2003
HK$000
HK$000
4,600
2,498
62
75
4,662
2,573
The number of non-director, highest paid employees whose remuneration fell within the following
bands is as follows:
Number of employees
2004
2003
Nil HK$1,000,000
HK$2,000,001 to HK$2,500,000
51

31 December 2004
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 (2003: Nil).
The Group has two subsidiaries established in the PRC as a Sino-foreign equity joint venture and a
wholly-foreign owned enterprise, respectively. These subsidiaries are entitled to preferential tax
treatments, including full exemption from PRC corporate income tax for two years starting from its
first profit-making year and a 50% reduction for the following three consecutive years.
2004
2003
HK$000
HK$000
1,130
5,382
1,935
Group:
Current Hong Kong:
Underprovision in prior years
Current Mainland China:
Charge for the year
Overprovision in prior years
Deferred (note 27)
Total tax charge/(credit) for the year
52
(1,860)
806
(4,718)
4,328
(1,653)

31 December 2004
11.
TAX (contd)
A reconciliation of the tax charge/(credit) applicable to profit/(loss) before tax using the statutory or
applicable rates for the locations in which the Company and its subsidiaries are domiciled to the tax
charge/(credit) at the effective tax rates, and a reconciliation of the statutory or applicable rates to the
effective tax rates, are as follows:
Group 2004
Mainland
Hong Kong
HK$000
Profit/(loss) before tax
China
%
(50,814)
Total
HK$000
23,756
HK$000
(27,058)
Tax at the statutory or

applicable tax rate
Expenses not deductible for tax
Overprovision in prior years
Tax losses not recognised
Tax exemption
(8,892)
17.5
5,702
24.0
(3,190)
11.8
7,639
(15.0)
1,923
8.1
9,562
(35.3)
(1,860)
(7.8)
(1,860)
2,827
11.8
4,080
(15.1)
1,253
(2.5)
6.9
(4,264)
(17.9)
(4,264)
15.7
4,328
18.2
4,328
(16.0)
Tax charge at the

Groups effective rate
Group 2003
Mainland
Hong Kong
HK$000
Loss before tax
China
%
(839,218)
HK$000
Total
%
(26,532)
HK$000
(865,750)
Tax at the statutory or

applicable tax rate
Income not subject to tax
Expenses not deductible for tax
(146,863)
17.5
(6,368)
24.0
(153,231)
17.7
(266)
(160)
0.6
(426)
0.1
143,047
(17.0)
5,680
(21.4)
148,727
(17.2)
Adjustments in respect of
current tax of previous periods
Tax losses not recognised
Tax exemption
1,130
(0.1)
1,130
(0.1)
4,082
(0.5)
4,082
(0.5)
(1,935)
7.3
(1,935)
0.2
(2,783)
10.5
(1,653)
0.2
Tax charge/(credit) at the

Groups effective rate
1,130
(0.1)
53

31 December 2004
12.
NET LOSS FROM ORDINARY ACTIVITIES ATTRIBUTABLE TO SHAREHOLDERS

The net loss from ordinary activities attributable to shareholders for the year ended 31 December
2004 dealt with in the financial statements of the Company, was HK$44,427,000 (2003:
HK$869,485,000) (note 30(b)).
13.
DIVIDEND
No dividend has been paid or declared by the Company during the year (2003: Nil).
14.
LOSS PER SHARE

The calculation of basic loss per share is based on the net loss attributable to shareholders for the year
of HK$42,465,000 (2003: HK$856,364,000), and the weighted average of 9,964,026,198
(2003: 9,963,179,734) ordinary shares in issue during the year.
Diluted loss per share amounts for the years ended 31 December 2004 and 2003 have not been
disclosed, as the share options and warrants outstanding during those years had an anti-dilutive effect
on the basic loss per share for those years.
15.
RELATED PARTY TRANSACTIONS

In addition to transactions and balances detailed in notes 16, 21, 22, 23, 24 and 26 to the financial
statements, the Group had the following material transactions with Haier Group Corporation (Haier),
Qingdao Haier Investment and Development Co., Ltd. (Haier Investment), and their subsidiaries.
Haier and Haier Investment are substantial shareholders of the Company. Haier and Haier Investment,
and their subsidiaries (hereinafter referred to as the affiliates of Haier) are companies that have
certain key management personnel in common with the Company.
(a)
During the year, the Group had the following material transactions with Haier and the affiliates
of Haier:
2004
2003
HK$000
HK$000
(i)
2,747,869
1,197,120
Purchases of materials
(ii)
1,786,847
81,388
Utility service fee expenses
(iii)
4,657
3,724
General security service fee expenses
(iii)
136
439
Human resources service fee expenses
(iii)
38
159
Notes
Sales of mobile phones
54
Legal consultancy service fee expenses
(iii)
64
Interest expenses
(iii)
3,442
3,346
Interest income
(iii)
143
73
Rental income
(iv)
1,137
474

31 December 2004
15.
RELATED PARTY TRANSACTIONS (contd)

Notes:
(i)
The sales of mobile phones were made in accordance with the terms and conditions set out in the
products distribution agreement entered into between Pegasus Telecom (Qingdao) Co., Ltd. (Pegasus
Qingdao) and Qingdao Haier Telecommunications Co., Ltd. on 10 January 2003.
The sales were determined based on the costs of materials plus a processing fee ranging from 5%
to 40% of the purchase price of the materials.
(ii)
The purchases of materials were made in accordance with the terms and conditions set out in the
materials procurement agreement entered into between Pegasus Qingdao, Qingdao Haier
International Trading Co., Ltd. and Qingdao Haier Parts Procurement Co., Ltd. on 10 January 2003.
The purchases were determined based on the lower of the average market price or the consolidated
and the integrated tender and bidding price plus 2.6% commission.
(iii)
The utility service fee expenses, legal consultancy service fee expenses, human resources service fee
expenses, general security service fee expenses and interest expenses were charged by Qingdao
Haier Energy Power Co., Ltd. (Haier Energy), Qingdao Haier Intellectual Property Rights and Legal
Services Centre (Haier Legal), Qingdao Haier Human Resources Development Co., Ltd. (Haier
Human Resources), Qingdao Haier Security Services Co., Ltd. (Haier Security) and Haier Group
Finance Co., Ltd. (Haier Finance), respectively, in accordance with the terms and conditions set
out in the service agreement (the Service Agreement) entered into between Pegasus Qingdao,
Haier Energy, Haier Legal, Haier Human Resources, Haier Security and Haier Finance on 10 January
2003. The interest income was received from Haier Finance in accordance with the terms and
conditions set out in the Service Agreement.
Pursuant to the Service Agreement, the utility service fees, legal consultancy service fees, human
resources service fees and general security service fees were charged with reference to actual costs
incurred. The interests were determined with reference to the standard rates published by the
Peoples Bank of China.
The average daily balance of the Groups loan from Haier Finance (plus interest) and deposits in
Haier Finance (plus interest) for each of the twelve months ended 31 December 2004 did not
exceed RMB150 million (equivalent to approximately HK$140 million) and RMB30 million (equivalent
to approximately HK$28 million), respectively.
(iv)
The monthly rental was calculated by reference to rentals of properties in the proximate locations
as quoted by the Companys directors.
The above transactions, except the rental income described in (iv) above, were defined as Ongoing
Connected Transactions in the circular to the shareholders of the Company dated 17 March 2003
and were approved by the shareholders at a special general meeting of the Company on 2 April 2003.
55

31 December 2004
15.
RELATED PARTY TRANSACTIONS (contd)

(b)
On 22 June 2004, Haier provided a corporate guarantee of US$15,000,000 (equivalent to

HK$117,000,000) to the Bank of Communications, Qingdao Branch, as a security for banking
facilities granted to Pegasus Qingdao for the period from 22 June 2004 to 22 September 2004.
The guarantee was automatically released when the corresponding loan was repaid on 22
September 2004.
(c)
On 25 June 2004, Haier provided a corporate guarantee of RMB70,000,000 (equivalent to

HK$65,421,000) to Haier Finance as a security for banking facilities granted to Pegasus Qingdao
for the period from 25 June 2004 to 24 June 2005. As at 31 December 2004, the above
banking facilities were fully utilised.
16.
FIXED ASSETS
Group
Furniture,
Leasehold
Tools,
fixtures
improve-
Plant and
moulds and
and office
Buildings
ments
machinery
equipment
equipment
vehicles
Motor Construction
in progress
Total
HK$000
HK$000
HK$000
HK$000
HK$000
HK$000
HK$000
HK$000
Cost:
At 1 January 2004
128,515
312
277,101
29,039
1,967
1,384
473
438,791
Additions
2,197
19,476
50,958
608
73,239
Disposals
(351 )
(351 )
Write off
(416 )
(1,967 )
(2,695 )
Transfers
891
130,712
296,577
80,472
1,033
190
508,984
At 1 January 2004
7,326
312
33,749
7,504
1,004
760
50,655
Provided during the year
33,509
At 31 December 2004
(312 )
(891 )
Accumulated depreciation:
5,831
20,181
6,828
392
277
Disposals
(211 )
(211 )
Write off
(1,396 )
(1,708 )
At 31 December 2004
(312 )
13,157
53,930
14,332
826
82,245
At 31 December 2004
117,555
242,647
66,140
207
190
426,739
At 31 December 2003
121,189
243,352
21,535
963
624
473
388,136
Net book value:
56

31 December 2004
16.
FIXED ASSETS (contd)

As at 31 December 2004, the land use rights of the two parcels of land occupied by the Group in
Mainland China were not acquired by and registered under the name of the respective subsidiaries of
the Company. As at 31 December 2004, the Group is in the process of negotiating with Haier for the
acquisition of these two parcels of land use right.
As at 31 December 2004, all of the Groups buildings, situated in Mainland China, do not have
building ownership certificates registered under the name of the respective subsidiaries of the Company.
On 3 February 2004, Haier issued an undertaking to the Company pursuant to which Haier agreed to
provide other suitable properties to the Group to ensure the continuing operations of the respective
subsidiaries of the Company and indemnify the Group for any moving cost/loss incurred, if, for any
reason, the respective subsidiaries were not able to continue using the buildings before the related
acquisition and registration procedures were completed.
In addition, on 1 June 2004, Haier issued another undertaking to the Company pursuant to which
Haier agreed to provide a further indemnity to the Group to bear any losses arising from the above
defective land use right and property title issues.
In the opinion of the directors, the Group is entitled to lawfully and validly occupy and use the
buildings for its daily operations, notwithstanding the fact that the related land use rights have not
been acquired by and registered under the name of the respective subsidiaries of the Company and
the application procedures for the building ownership certificates have not yet been completed.
57

31 December 2004
17.
INTANGIBLE ASSETS
Group
Patents and
licences
HK$000
Cost:
At 1 January and 31 December 2004
5,810
Accumulated amortisation:
At 1 January 2004
Amortisation provided during the year
At 31 December 2004
1,307
581
1,888
Net book value:
18.
At 31 December 2004
3,922
At 31 December 2003
4,503
GOODWILL
The amounts of the goodwill capitalised as an asset in the consolidated balance sheet, arising from
the acquisition of subsidiaries, are as follows:
Group
HK$000
Cost:
At 1 January and 31 December 2004
1,635,276
Accumulated amortisation and impairment (note):

At 1 January 2004
Amortisation provided during the year
At 31 December 2004
892,909
44,542
937,451
Net book value:
58
At 31 December 2004
697,825
At 31 December 2003
742,367

31 December 2004
18.
GOODWILL (contd)
Note: In 2003, due to intensifying competition and price reduction of mobile phones in the mobile
phone market, the Group had performed an assessment of the fair value of its interest in the
mobile phone operations acquired in prior years, including the related goodwill that had been
capitalised as an asset in the consolidated balance sheet as at 31 December 2003. As a result,
based on the estimated value in use of the mobile phone operations, the Group recognised an
impairment loss of approximately HK$732 million in the consolidated profit and loss account
for the year ended 31 December 2003.
19.
INTERESTS IN SUBSIDIARIES
Company
Unlisted shares, at cost

Due from subsidiaries
Due to a subsidiary
2004
2003
HK$000
HK$000
1,963,638
1,946,185
608
848
(8,747)
1,955,499
Provision for impairment
(904,028)
1,051,471
1,947,033
(864,228)
1,082,805
The amounts due from/to subsidiaries are unsecured, interest-free and are repayable on demand.
59

31 December 2004
19.
INTERESTS IN SUBSIDIARIES (contd)

Particulars of the principal subsidiaries are as follows:
Percentage of
Place of
establishment/
Name
operations
Pegasus Telecom (Qingdao)
PRC
Nominal value
equity directly
of registered
attributable to
capital
the Company
US$12,000,000
64.5
Principal activities
Manufacture
Co., Ltd.*
and sale of
mobile phones
Pegasus Electronic (Qingdao)
PRC
US$29,980,000
100
Manufacture
Co., Ltd.**
and sale of
mobile phones
Registered as a Sino-foreign equity joint venture enterprise under the PRC law.
**
Registered as a wholly-foreign owned enterprise under the PRC law.
The above table lists the subsidiaries of the Company which, in the opinion of the directors, principally
affected the results for the year or formed a substantial portion of the net assets of the Group. To give
details of other subsidiaries would, in the opinion of the directors, result in particulars of excessive
length.
20.
INVENTORIES
Group
2004
2003
HK$000
HK$000
Raw materials
206,025
257,916
Work in progress
113,466
36,670
65,548
46,542
385,039
341,128
Finished goods
The carrying amount of inventories carried at net realisable value included in the above balance was
approximately HK$135,705,000 (2003: HK$19,450,000) as at the balance sheet date.
60

31 December 2004
21.
TRADE AND BILLS RECEIVABLES

The Group normally allows an average credit period of 30 to 90 days to its trade customers. An aged
analysis of the trade and bills receivables as at the balance sheet date, based on invoice date and net
of provisions, is as follows:
Group
2004
2003
HK$000
Percentage
HK$000
Percentage
Within 1 month
294,282
63
482,056
92
1 to 2 months
114,605
25
35,744
2 to 3 months
8,108
2,888
Over 3 months
46,912
10
3,241
463,907
100
523,929
100
Included in the Groups trade and bills receivables are amounts due from the affiliates of Haier of
HK$311,864,000 (2003: HK$246,352,000), which are repayable on similar credit terms to those offered
to the major customers of the Group. Further details in respect of the sales to these related parties are
set out in note 15 to the financial statements.
22.
PREPAYMENTS, DEPOSITS AND OTHER RECEIVABLES

Group
Company
2004
2003
2004
2003
HK$000
HK$000
HK$000
HK$000
Prepayments
23,896
5,862
23,134
5,485
Deposits and other receivables
35,107
57,964
59,003
63,826
23,134
5,485
Included in other receivables are rental income receivable from the affiliates of Haier amounting to
HK$852,000 (2003: HK$474,000). The balances of these rental income receivables are unsecured,
interest-free and are repayable on demand. Further details of the rental income are set out in note 15
to the financial statements.
61

31 December 2004
23.
CASH AND CASH EQUIVALENTS AND PLEDGED DEPOSITS

Group
Company
2004
2003
2004
2003
HK$000
HK$000
HK$000
HK$000
26,911
126,653
1,168
3,484
130,435
141,320
113,662
141,320
157,346
267,973
114,830
144,804
114,830
144,804
Cash and bank balances

Time deposits
Less: Pledged deposits
(16,773)
140,573
(1,079)
266,894
At the balance sheet date, the cash and bank balances and time deposits of the Group denominated
in Renminbi (RMB) amounted to HK$42,148,000 (2003: HK$123,075,000). The RMB is not freely
convertible into other currencies, however, under the PRC Foreign Exchange Control Regulations and
Administration of Settlement, Sale and Payment of Foreign Exchange Regulations, the Group is permitted
to exchange RMB for other currencies through banks authorised to conduct foreign exchange business.
Included in the Groups cash and cash equivalents are deposits of approximately HK$2,876,000 (2003:
HK$19,995,000) placed with Haier Finance, a financial institution approved by the Peoples Bank of
China. The interest rate on these deposits was 0.72% per annum.
Further details of the interest income attributable to the deposits placed with Haier Finance are set
out in note 15 to the financial statements.
62

31 December 2004
24.
TRADE PAYABLES
An aged analysis of the trade payables as at the balance sheet date, based on invoice date, is as
follows:
Group
2004
Within 1 month
2003
HK$000
Percentage
HK$000
Percentage
274,371
37
363,792
82
1 to 2 months
66,313
47,343
10
2 to 3 months
91,457
12
8,688
Over 3 months
309,045
42
25,832
741,186
100
445,655
100
Included in the Groups trade payables are amounts due to the affiliates of Haier of HK$413,494,000
(2003: HK$4,174,000), which are repayable on similar credit terms to those offered by the major
suppliers of the Group. Further details of the purchases from these related parties are set out in note
15 to the financial statements.
25.
OTHER PAYABLES AND ACCRUALS

Group
Other payables
Accruals
Company
2004
2003
2004
2003
HK$000
HK$000
HK$000
HK$000
19,733
22,324
2,957
2,236
2,162
1,400
22,690
24,560
2,162
1,400
63

31 December 2004
26.
INTEREST-BEARING BANK AND OTHER LOANS, UNSECURED

Group
2004
2003
HK$000
HK$000
377,757
Other loan repayable within one year or on demand note
65,421
65,421
Trust receipts repayable within one year
81,623
105,750
147,044
548,928
Bank loans repayable within one year or on demand
Note:
The other loan was borrowed from Haier Finance, which is guaranteed by Haier, bears interest at a rate of
approximately 5% per annum and is repayable on 24 June 2005 (2003: 26 June 2004). Further details of the
interest expense attributable to the loan borrowed from Haier Finance are set out in note 15 to the financial
statements.
27.
DEFERRED TAX
The movement in deferred tax assets (representing the provision for obsolete and slow-moving
inventories) during the year is as follows:
Group
2004
HK$000
At 1 January 2004
Deferred tax charged to the profit and loss account during the year (note 11)
At 31 December 2004
8,624
(806)
7,818
Group
2003
HK$000
64
At 1 January 2003
3,906
Deferred tax credited to the profit and loss account during the year (note 11)
4,718
At 31 December 2003
8,624

31 December 2004
27.
DEFERRED TAX (contd)

The Group has tax losses arising in Hong Kong of HK$40,419,000 (2003: HK$36,075,000) that are
available indefinitely for offsetting against future taxable profits of the companies in which the losses
arose. Deferred tax assets have not been recognised in respect of these losses as they have arisen in
the Company and subsidiaries that have been loss-making for some time.
At 31 December 2004, there is no significant unrecognised deferred tax liability (2003: Nil) for taxes
that would be payable on the unremitted earnings of certain of the Groups subsidiaries as the Group
has no liability to additional tax should such amounts be remitted.
There are no income tax consequences attaching to the payment of dividends by the Company to its
shareholders.
28.
SHARE CAPITAL
Shares
2004
2003
HK$000
HK$000
3,000,000
2,000,000
996,403
996,402
Authorised:
30,000,000,000 (2003: 20,000,000,000) shares of HK$0.10 each
Issued and fully paid:

9,964,027,945 (2003: 9,964,016,574) shares of HK$0.10 each
Pursuant to an ordinary resolution passed at a special general meeting of the Company held on 13
December 2004, the authorised share capital of the Company was increased from HK$2,000,000,000
to HK$3,000,000,000 by the creation of 10,000,000,000 additional shares of the Company of
HK$0.10 each.
65

31 December 2004
28.
SHARE CAPITAL (contd)

A summary of the transactions involving the Companys share capital during the year is as follows:
Number of
shares in issue
At 1 January 2003
9,962,291,000
Issued
Share
capital
premium
Total
HK$000
HK$000
HK$000
996,229
70,040
1,066,269
574
1,725,000
173
134
307
9,964,016,574
996,402
70,174
1,066,576
11,371
9,964,027,945
996,403
70,179
1,066,582
Exercise of share options (note)

beginning of year
At 31 December 2004
Note:
Details of the Companys share option schemes and the share options issued under the schemes are included in
note 29 to the financial statements.
Warrants
On 22 February 2002, the Company made a bonus issue of warrants to the shareholders whose names
appeared on the register of members of the Company on 22 February 2002, on the basis of one unit
of warrant for every ten shares of HK$0.10 each in the share capital of the Company held on that
date. As a result, 893,876,600 units of warrants (the 2004 warrants) in the amount of
HK$464,815,832 were issued pursuant to the bonus issue. Each unit of warrant entitled the holder
thereof to subscribe to new ordinary shares of the Company at an initial subscription price of HK$0.52
per share, payable in cash and subject to adjustment, at any time between 26 February 2002 and 26
February 2004 (both dates inclusive).
During the year, 11,371 warrants were exercised for 11,371 shares at HK$0.52 per share. On 26
February 2004, all outstanding 2004 warrants expired and the subscription rights attaching to the
2004 warrants which had not been exercised by 26 February 2004 expired and lapsed.
66

31 December 2004
29.
SHARE OPTION SCHEMES

The share option scheme adopted by the Company on 24 November 1997 and subsequently amended
on 4 December 1997 (the Old Share Option Scheme) was terminated and a new share option
scheme (the New Share Option Scheme) was adopted by the Company on 28 February 2002 to
comply with the new amendments to the Listing Rules in respect of the share option schemes of a
listed company. As a result, the Company may no longer grant further options under the Old Share
Option Scheme. However, all options granted prior to the termination of the Old Share Option
Scheme will remain in full force and effect. Unless otherwise cancelled or amended, the New Share
Option Scheme will remain in force for 10 years from the date of adoption. As at 31 December 2004,
there were 3,000,000 and 880,500,000 share options outstanding under the Old Share Option Scheme
and the New Share Option Scheme, respectively.
The purpose of the New Share Option Scheme is to provide incentives and rewards to the eligible
participants who contribute to the success of the operations of the Group. Eligible participants of the
New Share Option Scheme include 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, at the sole discretion of the board of directors of the
Company (the Board), has contributed to the Group.
Pursuant to the New Share Option Scheme, the maximum number of shares in respect of which
options may be granted under the New Share Option Scheme is such number of shares, when
aggregated with shares subject to any other share option scheme(s) of the Company (which, for this
purpose, excludes the Old Share Option Scheme), must not exceed 10% of the issued share capital of
the Company as at the date of adoption of the New Share Option Scheme. The maximum number of
shares issuable upon exercise of the options granted under the New Share Option Scheme and any
other share option scheme(s) of the Company (including exercised, cancelled and outstanding options)
to each eligible participant in any 12-month period is limited to 1% of the shares of the Company in
issue as at the date of grant. Any further grant of share options in excess of this 1% limit shall be
subject to the issue of a circular by the Company (and if required, the holding company) and the
approval of the shareholders of the Company (and if required, the approval of the shareholders of the
holding company) at a general meeting.
67

31 December 2004
29.
SHARE OPTION SCHEMES (contd)

Share options granted to a director, chief executive or substantial shareholder of the Company, or to
any of their respective associates, are subject to the approval in advance by the independent nonexecutive directors of the Company (and if required, the independent non-executive directors of the
holding company), excluding the independent non-executive director(s) of the Company and the
holding company who is/are the grantee(s) of the options. In addition, any share option granted to a
substantial shareholder or an independent non-executive director of the Company, or to any of their
respective 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 shares of the Company as at the date of
grant) in excess of HK$5 million, within any 12-month period, are subject to the issue of a circular by
the Company (and if required, the holding company) and the approval of the shareholders of the
Company (and if required, the approval of the shareholders of the holding company) in advance at a
general meeting.
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 grantee. The exercise period of the share
options granted is determinable by the Board, and commences on a specified date and ends on a date
which is not later than 10 years from the date of grant of the share options or the expiry date of the
New Share Option Scheme, whichever is earlier.
The exercise price of the share options is determinable by the Board, but may not be less than the
highest of (i) the closing price of the shares of the Company as stated in the daily quotation sheet of
the Stock Exchange on the date of grant, which must be a trading day; (ii) the average closing price of
the shares of the Company as stated in the Stock Exchanges daily quotation sheets for the five
trading days immediately preceding the date of grant; and (iii) the nominal value of the shares of the
Company.
68

31 December 2004
29.

Details of the movement of share options under the Old Share Option Scheme during the year were as
follows:
Number of share options
Outstanding
Name or category
of participant
Date of
Lapsed/ Outstanding
as at
Granted
Exercised
1 January
during
during
2004
the year
the year
cancelled
grant of
Exercise
as at
share
Exercise
price per
during 31 December
options
period of
share
(note 1) share options
(note 2)
the year
2004
HK$
EMPLOYEES
In aggregate
3,000,000
3,000,000
13/7/2001
13/1/2002
0.190
12/7/2005*
Notes:
1.
The vesting period of the share options is from the date of grant until the commencement of the exercise
period.
2.
The exercise price of the share options is subject to adjustment(s) in the case of rights or bonus share
issues, or other similar changes in the share capital of the Company.
The date of expiry was extended for one year from the original date of expiry of 12 July 2003 to 12 July
2004 pursuant to the board resolution of the Company passed on 2 July 2003. It was further extended for
one year to 12 July 2005 pursuant to the board resolution of the Company passed on 8 July 2004.
69

31 December 2004
29.

Details of the movement of share options under the New Share Option Scheme during the year were
as follows:
Number of share options
Outstanding
as at
1 January
2004
Granted
during
the year
Exercised
during
the year
Wu Ke Song
89,000,000
89,000,000
Chai Yong Sen
89,000,000
89,000,000
Liang Hai Shan
89,000,000
89,000,000
Cui Shao Hua
89,000,000
89,000,000
Mak Shiu Tong, Clement 89,000,000
89,000,000
89,000,000
89,000,000
Man Wei Dong
89,000,000
89,000,000
623,000,000
623,000,000
Name or category
of participant
Lapsed/ Outstanding
cancelled
as at
during 31 December
the year
2004
Date of
grant of
share
Exercise
options
period of
(note 1) share options
Exercise
price per
share
(note 2)
HK$
EXECUTIVE DIRECTORS
19/11/2002 19/11/2003
18/11/2007
19/11/2002 19/11/2003
18/11/2007
19/11/2002 19/11/2003
18/11/2007
19/11/2002 19/11/2003
18/11/2007
16/8/2002 16/8/2003
15/8/2007
16/8/2002 16/8/2003
15/8/2007
19/11/2002 19/11/2003
18/11/2007
0.150
0.150
0.150
0.150
0.156
0.156
0.150
INDEPENDENT NON
EXECUTIVE DIRECTORS
Lam Kin Kau, Mark
5,000,000
5,000,000
16/8/2002
Fung Hoi Wing, Henry
5,000,000
5,000,000
16/8/2002
10,000,000
10,000,000
247,500,000
247,500,000
880,500,000
880,500,000
16/8/2003
15/8/2007
16/8/2003
15/8/2007
0.156
16/8/2003
15/8/2007
0.156
0.156
OTHER EMPLOYEES
In aggregate
70
16/8/2002

31 December 2004
29.

Notes:
1.
The vesting period of the share options is from the date of grant until the commencement of the exercise
period.
2.
The exercise price of the share options is subject to adjustment(s) in the case of rights or bonus share
issues, or other similar changes in the share capital of the Company.
At the balance sheet date, the Company had 3,000,000 and 880,500,000 share options outstanding
under the Old Share Option Scheme and the New Share Option Scheme, respectively, which represented
a total of approximately 8.87% of the Companys shares in issue as at that date. The exercise in full of
these remaining share options would, under the present capital structure of the Company, result in
the issue of 883,500,000 additional ordinary shares of the Company and additional share capital of
HK$88,350,000 and share premium of HK$46,908,000 (before issue expenses).
Subsequent to the balance sheet date, on 28 January 2005, a total of 89,000,000 share options
granted under the New Share Option Scheme lapsed upon resignation of a director on the same date.
In addition, on 8 March 2005, a total of 43,000,000 share options were exercised, resulting in the
issue of 43,000,000 additional ordinary shares of the Company and additional share capital of
HK$4,300,000 and share premium of HK$2,408,000 (before issue expenses).
30.
RESERVES
(a)
Group
The amounts of the Groups reserves and the movements therein for the current and the prior
years are presented in the consolidated statement of changes in equity on page 33 of the
financial statements.
The contributed surplus of the Group represents the difference between the nominal value of
the shares of the subsidiaries acquired over the nominal value of the Companys shares issued
in exchange therefor.
71

31 December 2004
30.
RESERVES (contd)
(b)
Company
Share
premium
Contributed
Accumulated
account
surplus
losses
Total
HK$000
HK$000
HK$000
HK$000
70,040
1,035,156
134
(869,485)
(869,485)
70,174
1,035,156
(870,038)
235,292
(44,427)
70,179
1,035,156
(914,465)
At 1 January 2003
Exercise of share options
(553)
1,104,643
134

beginning of the year
At 31 December 2004
5
(44,427)
190,870
The contributed surplus of the Company represents the excess of the fair values of the shares of the
subsidiaries acquired, over the nominal value of the Companys shares issued in exchange therefor.
Under the Companies Act 1981 of Bermuda (as amended), the contributed surplus is distributable to
shareholders in certain circumstances.
31.
CONTINGENT LIABILITIES
At the balance sheet date, neither the Group nor the Company had any significant contingent liabilities.
32.
OPERATING LEASE ARRANGEMENT

The Group leases part of its buildings (note 16 to the financial statements) under an operating lease
arrangement, with the lease negotiated for a term of 12 months.
At the balance sheet date, the Group had total future minimum lease receivables under the noncancellable operating lease with its tenants falling due as follows:
Group
Within one year
72
2004
2003
HK$000
HK$000
284
284

31 December 2004
33.
COMMITMENTS
In addition to the operating lease commitments detailed in note 32 above, the Group and the
Company had the following commitments at the balance sheet date:
Group
Company
2004
2003
2004
2003
HK$000
HK$000
HK$000
HK$000
4,432
17,441
140
14,153
31,606
4,432
17,581
14,153
31,606
Contracted, but not provided for:

Acquisition of fixed assets
Authorised, but not contracted for:
Acquisition of fixed assets
Contracted, but not provided for:
Capital contribution payable
to a wholly-owned subsidiary
in Mainland China
34.
POST BALANCE SHEET EVENTS

The Group had the following two post balance sheet events:
(i)
On 5 March 2004, the Company, Haier and Haier Investment entered into a conditional
agreement (the Asset Injection Agreement) pursuant to which the Company agreed to acquire
from Haier and Haier Investment the entire share capital of Haier BVI for an aggregate
consideration of RMB1,100 million (equivalent to approximately HK$1,035 million) (the Asset
Injection).
Under the terms of the Asset Injection Agreement, the consideration would be satisfied as
follows:
(a)
as to HK$724,807,200 by the issue of 4,026,706,667 new shares of the Company at a

price of HK$0.18 each;
(b)
as to HK$260,000,000 by the issue of convertible notes of the Company. The convertible

notes are convertible into the shares of the Company at the convertible price of HK$0.18
per share (subject to adjustments) at any time during the convertible period; and
(c)
as to the balance of HK$50,000,000 in cash.
The Asset Injection was completed on 28 January 2005.
73

31 December 2004
34.
POST BALANCE SHEET EVENTS (contd)

(ii)
On 28 January 2005, the Company exercised its call option to acquire the remaining 35.5%
interest in Pegasus Qingdao owned by Haier Investment for a consideration of HK$468,600,000,
satisfied by the issue of 2,343,000,000 new shares of the Company at a price of HK$0.20 each
(the Call Option Exercise).
Upon completion of the Asset Injection and the Call Option Exercise, Haier, Haier Investment and their
affiliates became the controlling shareholders of the Company, further details of which are set out in
the Companys announcement dated 28 January 2005.
35.
APPROVAL OF THE FINANCIAL STATEMENTS

The financial statements were approved and authorised for issue by the board of directors on 22 April
2005.
74
Summary Financial Information
A summary of the results and of the assets, liabilities and minority interests of the Group for the last five
financial years/period, as extracted from the published audited financial statements and reclassified as
appropriate, is set out below.
RESULTS
Period from
1 April 2000 to
Year ended 31 December
Turnover
Loss before tax

Tax
31 December
2004
2003
2002
2001
2000
HK$000
HK$000
HK$000
HK$000
HK$000
3,152,725
1,664,638
499,877
224,130
115,737
(27,058)
(4,328)
Loss before minority interests
(31,386)
Minority interests
(11,079)
(865,750)
1,653
(864,097)
7,733
(73,126)
832
(72,294)
6,032
(3,598)
(1,122,414)
(1,432)
(479)
(5,030)
(1,122,893)
Net loss from ordinary activities

attributable to shareholders
(42,465)
(856,364)
(66,262)
(5,030)
(1,122,893)
ASSETS, LIABILITIES AND MINORITY INTERESTS

31 December
Total assets
Total liabilities
Minority interests
Net assets
2004
2003
2002
2001
2000
HK$000
HK$000
HK$000
HK$000
HK$000
2,201,599
2,340,486
2,623,443
2,061,393
264,724
(911,745)
(1,019,252)
(438,419)
(86,659)
(75,580)
(83,313)
1,203,195
1,245,654
2,101,711
(204,993)
(27,276)
1,856,400
237,448
75
NOTICE IS HEREBY GIVEN that the annual general meeting (Meeting) of the shareholders of Haier
Electronics Group Co., Ltd. ( *) (the Company) will be held at Small Connaught
Room, 1/F., Mandarin Oriental Hotel, 5 Connaught Road Central, Hong Kong on Wednesday, 25 May 2005
at 3:00 p.m. for the following purposes:
AS ORDINARY BUSINESS
Ordinary Resolutions
1.
To receive and consider the audited Financial Statements and the Reports of the directors (Directors)
and auditors (Auditors) of the Company for the year ended 31 December 2004.
2.
To re-elect retiring Directors and to authorise the board of Directors (Board) to determine the
remuneration of the directors.
3.
To re-appoint Auditors and to authorise the Board to determine the remuneration of the auditors.
AS SPECIAL BUSINESS
Ordinary Resolutions
4.
To consider and, if thought fit, pass with or without amendments, the following resolution as an
ordinary resolution of the Company:
THAT subject to and conditional upon the Listing Committee of The Stock Exchange of Hong Kong
Limited (the Stock Exchange) granting the listing of, and permission to deal in, the shares of
HK$0.10 each in the share capital of the Company (Shares) to be issued pursuant to the exercise of
share options which may be granted under the New Scheme Limit (as defined below), the refreshment
of the scheme limit of the Companys share option scheme adopted on 28 February 2002 and all other
share option scheme(s) of the Company, up to 10 per cent. of the number of Shares in issue as at the
date of passing of this resolution (the New Scheme Limit) be and is hereby approved and any
Director, or any two Directors if affixation of the common seal of the Company is necessary, be and is/
are hereby authorised to do all such acts and execute all such documents to effect the New Scheme
Limit.
5.
THAT:
(a)
76
subject to paragraph (c) below, the exercise by the Directors during the Relevant Period (as
hereinafter defined) of all the powers of the Company to repurchase issued Shares subject to
and in accordance with all applicable laws and the requirements of the Rules Governing the
Listing of Securities on the Stock Exchange (Listing Rules) or of any other stock exchange as
amended from time to time and the manner of any such repurchase be and is hereby generally
and unconditionally approved;
(b)
the approval in paragraph (a) above shall be in addition to any other authorisation given to the
Directors and shall authorise the Directors on behalf of the Company during the Relevant
Period (as hereinafter defined) to procure the Company to repurchase its shares at a price
determined by the Directors;
(c)
the aggregate nominal amount of the shares of the Company which are authorised to be
repurchased by the Directors pursuant to the approval in paragraph (a) above shall not exceed
10 per cent. of the aggregate nominal amount of the share capital of the Company in issue as
at the date of passing of this resolution, and the said approval shall be limited accordingly; and
(d)
for the purposes of this resolution:

Relevant Period means the period from the passing of this resolution until whichever is the
earliest of:
6.
(i)
the conclusion of the next annual general meeting of the Company;
(ii)
the expiration of the period within which the next annual general meeting of the Company
is required by laws or the bye-laws of the Company (Bye-laws) to be held; or
(iii)
the date upon which the authority set out in this resolution is revoked or varied by way
of an ordinary resolution of the shareholders of the Company in general meeting.
THAT:
(a)
subject to paragraph (c) below, the exercise by the Directors during the Relevant Period (as
hereinafter defined) of all the powers of the Company to allot, issue and deal with additional
Shares and to make or grant offers, agreements, options and rights of exchange or conversion
which might require the exercise of such powers be and is hereby generally and unconditionally
approved;
(b)
the approval in paragraph (a) above shall be in addition to any other authorisation given to the
Directors and shall authorise the Directors on behalf of the Company during the Relevant
Period (as hereinafter defined) to make or grant offers, agreements, options and rights of
exchange or conversion which would or might require the exercise of such powers after the
end of the Relevant Period (as hereinafter defined);
(c)
the aggregate nominal amount of share capital allotted or agreed conditionally or unconditionally
to be allotted or issued (whether pursuant to an option or otherwise) by the Directors pursuant
to the approval granted in paragraph (a) above, otherwise than pursuant to (i) a Rights Issue (as
hereinafter defined); or (ii) the share option scheme of the Company approved by the Stock
Exchange; or (iii) any scrip dividend or similar arrangement providing for the allotment of
shares in lieu of the whole or part of a dividend on shares of the Company in accordance with
77
the Bye-laws from time to time, shall not exceed 20 per cent. of the aggregate nominal amount
of the issued share capital of the Company as at the date of passing of this resolution, and the
said approval shall be limited accordingly; and
(d)
for the purposes of this resolution:

Relevant Period shall have the same meaning as that ascribed to it under resolution no. 5 as
set out in the notice convening the Meeting; and
Rights Issue means an offer of shares open for a period fixed by the Directors to the holders
of shares of the Company on the register on a fixed record date in proportion to their then
holdings of such shares (subject to such exclusions or other arrangements as the Directors may
deem necessary or expedient in relation to fractional entitlements or having regard to any
restrictions or obligations under the laws of any relevant jurisdiction, or the requirements of
any recognised regulatory body or any stock exchange, in any territory outside Hong Kong).
7.
THAT conditional upon the passing of the resolutions nos. 5 and 6 as set out in the notice convening
the Meeting, the general mandate granted to the Directors to the resolution no. 6 as set out in the
notice convening the Meeting be and is hereby extended by the addition thereto of an amount
representing the aggregate nominal amount of share capital of the Company repurchased by the
Company under the authority granted pursuant to the resolution no. 5 as set out in the notice
convening the Meeting, provided that such amount shall not exceed 10 per cent. of the aggregate
nominal amount of the issued share capital of the Company as at the date of passing of this resolution
Special Resolutions
8.
To consider and, if thought fit, pass with or without amendments, the following resolution as a special
resolution of the Company:
THAT upon the passing of this resolution,
78
(a)
the amount standing to the credit of the share premium account of the Company as at 31
December 2004 amounting to HK$70,179,188 be and is hereby reduced and applied to set off
against an equivalent amount of the accumulated losses of the Company as at 31 December
2004;
(b)
an amount of HK$844,285,035 standing to the credit of the contributed surplus account of the
Company as at 31 December 2004 be and is hereby reduced and applied to set off against the
balance of the accumulated losses of the Company as at 31 December 2004 remaining after
the set-off referred to in (a) above in full;
(c)
the Directors be and are hereby authorised to do all acts and things which they may consider
appropriate, necessary or desirable to give effect to or to implement any of the foregoing.
9.
To consider and, if thought fit, pass the following resolution as a special resolution of the Company:
THAT the existing Bye-laws be and is hereby amended in the following manner:
(a)
by deleting the first sentence of Bye-Law 99, which reads:

At each annual general meeting one-third of the Directors for the time being, or if their
number is not three or a multiple of three, then the number nearest one-third, shall retire from
office by rotation save any Director holding office as Chairman or Managing Director.
and substituting therefor the following:
At each annual general meeting one-third of the Directors for the time being, or if their
number is not three or a multiple of three, then the number nearest one-third, shall retire from
office by rotation, providing that every Director (including those appointed for a specific term)
shall be subject to retirement by rotation at least once every three years
(b)
by deleting Bye-law 102(B) in its entirety, which reads:

The Board shall have power from time to time and at any time to appoint any person either to
fill a causal vacancy or as an addition to the Board but so that the number of Directors so
appointed shall not exceed the maximum number determined from time to time by the
shareholders in general meeting. Any Director so appointed shall hold office only until the next
following annual general meeting of the Company and shall then be eligible for re-election at
the meeting but shall not be taken into account in determining the Directors or the number of
the Directors who are to retire by rotation at such meeting.
and substituting therefor the following:
The Board shall have power from time to time and at any time to appoint any person either to
fill a causal vacancy or as an addition to the Board but so that the number of Directors so
appointed shall not exceed the maximum number determined from time to time by the
shareholders in general meeting. Any Director so appointed shall hold office only until the next
following general meeting (in the case of filling a causal vacancy on the Board) or the next
following annual general meeting (in the case of an addition to the Board) of the Company and
shall then be eligible for re-election at the meeting. The Directors subject to re-election under
this Bye-law shall be taken into account in calculating the total number of Directors for the
time being but shall not be taken into account in determining the Directors or the number of
the Directors who are to retire by rotation at such meeting.
By Order of the Board of
( *)
Yang Mian Mian
Chairman
Hong Kong, 25 April 2005
79
Notes:
1.
The register of members of the Company will be closed from Monday, 23 May 2005 to Wednesday, 25 May 2005
(both days inclusive) during which period no transfer of Share(s) will be effected. In order to determine the
entitlement to attend and vote at the Meeting, all transfer of Share(s), accompanied by the relevant Share
certificate(s) with the completed transfer form(s), must be lodged with the branch share registrar and transfer
office of the Company in Hong Kong, Tengis Limited at G/F., Bank of East Asia Harbour View Centre, 56 Gloucester
Road, Wanchai, Hong Kong for registration not later than 4:00 p.m. on Friday, 20 May 2005.
2.
Any shareholder entitled to attend and vote at the Meeting is entitled to appoint another person as his/her proxy
to attend and vote on his/her behalf in accordance with the bye-laws of the Company. A shareholder who is the
holder of two or more shares may appoint more than one proxy to attend on the same occasion. A proxy need not
be a shareholder of the Company.
3.
Where there are joint registered holders of any shares, any one of such persons may vote at any meeting, either
personally or by proxy, in respect of such shares as if he were solely entitled thereto; but if more than one of such
joint holders be present at any meeting personally or by proxy, that one of the said persons so present being the
most, or, as the case may be, the more senior shall alone be entitled to vote in respect of the relevant joint
holding and, for this purpose, seniority shall be determined by reference to the order in which the names of the
joint holders stand in the register in respect of the relevant joint holding.
4.
In order to be valid, a form of proxy in the prescribed form together with the power of attorney or other authority
(if any) under which it is signed, or a certified copy of such power or authority, must be lodged with the branch
share registrar and transfer office of the Company in Hong Kong, Tengis Limited at G/F., Bank of East Asia Harbour
View Centre, 56 Gloucester Road, Wanchai, Hong Kong not less than 48 hours before the time fixed for holding
the annual general meeting.
5.
With respect to the resolution set out in resolution no. 2 of this notice, Ms. Yang Mian Mian, Mr. Wu Ke Song,
Mr. Liang Hai Shan, Mr. Cao Chun Hua, Mr. Song Chun Guang, Mr. Lau Ho Wai, Lucas and Mr. Wu Yinong will
retire and, being eligible, offer themselves for re-election at the Meeting. Details of the above Directors will be set
out in the 2004 Annual Report of the Company.
6.
With respect to the resolution set out in resolution no. 4 of this notice, approval is being sought from the
shareholders for an approval to refresh the 10% general limit on grant of options under the share option scheme
adopted on 28 February 2002 and all other share option scheme(s) of the Company.
7.
With respect to the resolution set out in resolution no. 5 of this notice, approval is being sought from the
shareholders for a general mandate to be given to the directors to repurchase shares of the Company.
8.
An explanatory statement containing further information with respect to the resolution set out in resolution no. 5
of this notice will be sent to the shareholders together with the 2004 Annual Report of the Company.
9.
With respect to the resolutions set out in resolutions nos. 6 and 7 of this notice, approval is being sought from the
shareholders for general mandates to be given to the directors to allot, issue and deal with shares of the Company
in accordance with the Listing Rules.
As at the date of this notice, the executive Directors are Ms. Yang Mian Mian, Mr. Wu Ke Song, Mr. Chai
Yong Sen, Mr. Liang Hai Shan, Mr. Cao Chun Hua, Mr. Cui Shao Hua and Mr. Song Chun Guang and the
independent non-executive Directors of the Company are Mr. Lam Kin Kau, Mark, Mr. Fung Hoi Wing,
Henry, Mr. Lau Ho Wai, Lucas and Mr. Wu Yinong.
*
for identification purpose only
80

Haier Electronics Group Co Ltd-Annual Report (Apr-29-2005)

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Mission and Corporate Development

Our corporate mission is to become a global electronics-white goods giant, including:

Haier Electronics Group Co., Ltd.

HAIER ELECTRONICS GROUP CO., LTD.

Mission and Corporate Development

Haier Electronics Group Co., Ltd.

HAIER ELECTRONICS GROUP CO., LTD.

Haier Electronics Group Co., Ltd.

YANG Mian Mian (Chairman)

Head office and principal place of business

CHAI Yong Sen

LIANG Hai Shan

65/F., The Center

CAO Chun Hua

99 Queens Road Central

CUI Shao Hua

SONG Chun Guang

transfer office in Hong Kong

LAM Kin Kau, Mark

FUNG Hoi Wing, Henry

G/F Bank of East Asia Harbour View Centre

LAU Ho Wai, Lucas

HAIER ELECTRONICS GROUP CO., LTD.

HAIER ELECTRONICS GROUP CO., LTD.

HAIER ELECTRONICS GROUP CO., LTD.

HAIER ELECTRONICS GROUP CO., LTD.

Mobile Handset Business

Yang Mian Mian

HAIER ELECTRONICS GROUP CO., LTD.

HAIER ELECTRONICS GROUP CO., LTD.

Directors and Senior Management

HAIER ELECTRONICS GROUP CO., LTD.

Directors and Senior Management

Executive Directors (contd)

HAIER ELECTRONICS GROUP CO., LTD.

Directors and Senior Management

Executive Directors (contd)

HAIER ELECTRONICS GROUP CO., LTD.

Directors and Senior Management

Executive Directors (contd)

HAIER ELECTRONICS GROUP CO., LTD.

Directors and Senior Management

Independent Non-executive Directors (contd)

HAIER ELECTRONICS GROUP CO., LTD.

Directors and Senior Management

HAIER ELECTRONICS GROUP CO., LTD.

HAIER ELECTRONICS GROUP CO., LTD.

HAIER ELECTRONICS GROUP CO., LTD.

CAPITAL STRUCTURE AND GEARING RATIO

HAIER ELECTRONICS GROUP CO., LTD.

MATERIAL ACQUISITION AND DISPOSAL OF SUBSIDIARIES AND ASSOCIATES

HAIER ELECTRONICS GROUP CO., LTD.

Report of the Directors

HAIER ELECTRONICS GROUP CO., LTD.

Report of the Directors

The largest customer

Five largest customers in aggregate

The largest supplier

Five largest suppliers in aggregate