• Haier is the world’s 4th largest whitegoods manufacturer • one of China’s Top 100 electronics and IT companies • has 240 subsidiary companies and 30 design centers • has both plants and trading companies and more than 50,000 employees throughout the world • specializes in technology research, manufacture, trading and financial services • 2005 global revenue was RMB103.9 billion (USD12.8 billion)

• Haier Group 2005 global revenue was RMB103.9 billion (

USD12.8 billion

).

• Qingdao Haier of , is listed on the Shanghai Stock exchange. A consolidated settlement targets only 10 listed companies. In 2004, it had sales

USD1.847 billion

. The price per share was around 5.17 yuan (8.2 yuan=$1). • Haier Elec , is listed on the Hong Kong Stock market,. In 2004, it had sales of HK$3,153 million HK, about

USD0.406 billion

. (HK$7.76 = $1) Each share is only worse HK$0.43.

1985 When 76 refrigerators were destroyed for poor quality, the quality awareness of employees was awakened

The Brand Building Period 1990 Qingdao General Refrigerator Plant received the National Quality Management Award and the UL (US) certification in the same year

Diversification and Globalization December 20th, 1991 Incorporation of Qingdao-Haier Group and press release 1992 ISO 9001 certification

January 31st, 2004, Exciting news was announced by World Brand Lab, World Executive Weekly and www.cec.globalsources.com

. Haier was historically selected as the first and only Chinese brand among the World's 100 Most Influential Brands

Haier Building Today

• experienced success in the last twenty years •

In 1993,

Haier brand was officially recognized as a famous brand and in 2005 valued at RMB70.2 billion • Since 2002

,

Haier has consecutively been ranked first among China’s most valuable brands for the manufacture of 15 products, including refrigerators, air conditioners, washing machines, televisions, water heaters, personal computers, mobile phones and kitchen integrations

Haier Industrial Park

Haier (Heifei) Industrial Park

• Haier was

ranked first of China’s Top 10 Global Brands

by the China State Bureau of Quality and Technical Supervision (CSBTS) for refrigerators and washing machines • On August 30, 2005, Haier was

ranked 1st of China’s Top 10

Global Brands by the Financial Times

• China • Japan • Korea • Middle East • Pakistan • Europe

Haier Branches

• Italy • Russia • Spain • UK • Australia • New Zealand • America

Haier America

Haier America, founded in 1999, is the U.S. Sales & Marketing division of the international Haier Group.

Haier America has invested $15+ million in its US Headquarters with a purchase of the Landmark

Haier Building

in New York City. This location houses the corporate offices, showrooms and research & development labs.

Comparing Corporate Scale of Haier, GE, Other Companies ($million) Sales Haier 2004 1,847 GE 2004 Samsung 2004 152,866 778,584 Sharp 2005 23,960 Net Profits Total Assets 44 16,819 10,345 724 890 750,507 66,160 22,500

Social Contribution

• Haier Group, led by Zhang Ruimin, has been public-spirited and devoted its energy to public good for over 20 years following the motto of "Sincere Forever".

• Haier supports

Project Hope, Sports Projects, Philanthropy, Environmental Protection, and Others

• Group has donated RMB 250 million to social education, disaster relief and help-the-poor programs.

• By exploring and satisfying the needs of various customers, Haier has made itself an internationally recognized brand. Haier is also a responsible tax payer. The sum of its tax payments has added up to 13.6 billion yuan • Haier has more than 50,000 employees and creates another 175,000 work opportunities directly

57 Primary Schools Funded by Haier under Project Hope 1995(1 school) 2001(15 schools) 2002(11 schools) 2003(10 schools) 2004(10 schools) 2005(10 schools)

Gross Rate

Exchange rate: HK$7.76 =$1, 8.2 Yuan =$1

Year 2001 2002 2003 HK$000 HK $000 HK$000 2004 HK$000 Sales Gross Rate of Sales Cost of Sales Percent of Cost of Sales 224,130 499,877 1,664,638 3,152,725 123% 233% 94% 89.39% 1,655,156 3,089,666 98%

The Assumptions

• The growth rate was 25.9% in 2004. I use 25% for next 2 years, and 10 % after that. • The cost of the sales will be 80%- 85%.

• The administrative expenses will grow 8% each year • Sales tax (4328+1653)/sales=.2% is relatively low. I assume it will 40% each year

Year

Income Statements

Sales Gross Rate of Sales Cost of Sales Percent of Cost of Sales Gross Profit Other Revenue Administrative Expenses Other Operating Costs EBTIDA Amortization Taxes Financial Cost Minority Interest Net Income 2001 HK$'000 224,130 2002 HK$'000 499,877 123% 2003 HK$'000 1,664,638 233% 1,655,156 0.9443

9,482 5,305 14,787 40,280 6,325 46,605 -31,818 815,087 -1,653 18,845 7,733 -856,364 2004 HK$'000 3,152,725 89.39% 3,089,666 0.9800

63,059 11,551 74,610 43,988 987 44,975 29,635 44,542 4,328 12,151 11,079 -42,465

year sales cost of sales Gross profit other revenue Administrative Expenses other operating expanses EBIT financial cost minority interests Tax 40% NOPAT Capex FCF

Free Cash Flow

2004 3,152,725 3,089,666 63,059 11,551 2005 3,940,906 3,349,770 591,136 14,439 2006 4,926,133 4,187,213 738,920 18,048 2007 5,418,746 4,334,997 1,083,749 19,853 2008 5,960,621 4,768,497 1,192,124 21,839 2009 6,556,683 5,245,346 1,311,337 24,022 74,610 43,988 987 29,635 12,151 11,079 4,328 2,077 1,039 1,039 605,575 756,968 1,103,603 1,213,963 1,335,359 47,507 51,308 55,412 59,845 64,633 1066 557,002 18,227 11,744 222,801 315,975 157,987 157,987 1151 704,510 27,340 12,448 281,804 395,366 197,683 197,683 1243 1,046,947 30,074 13,195 418,779 598,094 59,809 538,285 1343 1,152,775 1450 1,269,276 33,081 13,987 461,110 658,584 65,858 592,725 36,389 14,826 507,710 725,176 72,518 652,659

Haier Stock is Undervalued

FCF PV FCF@WACC Sum of PV of FCFF 5 years Continue Value PV Continue Value 1,039 674 157,987 102,607 197,683 128,388 538,285 349,597 592,725 384,954 652,659 423,878 1,389,424 1,442,097 166,637 Book Value of Equity Book Value of Debt 1,289,845 911,745 2,201,590 0.144

ROD Reinvestment Rate cost of net debit cost of equity WACC Continue Growth Rate Enterprise value Value of equity Value per share 99,000,000 shares 1.359

0.095

0.150

0.54

0.06

1,556,061 644,316 6.51