1. 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)

2. Haier Group 2005 global revenue was RMB103.9 billion (USD12.8 billion). Qingdao Haier, is listed on the Shanghai Stock exchange. A consolidated settlement targets only 10 listed companies. In 2004, it had sales of 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.

3. 1985 When 76 refrigerators were destroyed for poor quality, the quality awareness of employees was awakened

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

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

6. 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 www.cec.globalsources.com

7. 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

8. Haier Industrial Park

9. Haier (Heifei) Industrial Park

10. 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

11. Haier Branches China Japan Korea Middle East Pakistan Europe Italy Russia Spain UK Australia New Zealand America

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

13. 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. Haier Building

14. Comparing Corporate Scale of Haier, GE, Other Companies ($million) Haier 2004 GE 2004 Samsung 2004 Sharp 2005 Sales1,847152,866778,58423,960 Net Profits 4416,81910,345724 Total Assets 890750,50766,16022,500

16. 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

17. 57 Primary Schools Funded by Haier under Project Hope 1995(1 school) 1995(1 school) 2001(15 schools) 2001(15 schools) 2002(11 schools) 2002(11 schools) 2003(10 schools) 2003(10 schools) 2004(10 schools) 2004(10 schools) 2005(10 schools) 2005(10 schools)

18. Gross Rate Exchange rate: HK$7.76 =$1, 8.2 Yuan =$1 Year2001200220032004 HK$000 Sales 224,130499,8771,664,6383,152,725 Gross Rate of Sales 123%233%89.39% Cost of Sales 1,655,1563,089,666 Percent of Cost of Sales 94%98%

19. 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

20. Income Statements Year2001200220032004 HK$'000 Sales224,130499,8771,664,6383,152,725 Gross Rate of Sales 123% 233%89.39% Cost of Sales1,655,1563,089,666 Percent of Cost of Sales0.94430.9800 Gross Profit9,48263,059 Other Revenue5,30511,551 14,78774,610 Administrative Expenses40,28043,988 Other Operating Costs6,325987 46,60544,975 EBTIDA-31,81829,635 Amortization815,08744,542 Taxes-1,6534,328 Financial Cost18,84512,151 Minority Interest7,73311,079 Net Income-856,364-42,465

21. Free Cash Flow year200420052006200720082009 sales3,152,7253,940,9064,926,1335,418,7465,960,6216,556,683 cost of sales3,089,6663,349,7704,187,2134,334,9974,768,4975,245,346 Gross profit63,059591,136738,9201,083,7491,192,1241,311,337 other revenue11,55114,43918,04819,85321,83924,022 74,610605,575756,9681,103,6031,213,9631,335,359 Administrative Expenses43,98847,50751,30855,41259,84564,633 other operating expanses98710661151124313431450 EBIT29,635557,002704,5101,046,9471,152,7751,269,276 financial cost12,15118,22727,34030,07433,08136,389 minority interests11,07911,74412,44813,19513,98714,826 Tax 40%4,328222,801281,804418,779461,110507,710 NOPAT2,077315,975395,366598,094658,584725,176 Capex1,039157,987197,68359,80965,85872,518 FCF1,039157,987197,683538,285592,725652,659

22. Haier Stock is Undervalued FCF1,039157,987197,683538,285592,725652,659 PV FCF@WACC 674102,607128,388349,597384,954423,878 Sum of PV of FCFF 5 years 1,389,424 Continue Value 1,442,097 PV Continue Value 166,637 Book Value of Equity 1,289,845 Book Value of Debt 911,745 2,201,590 ROD0.144 Reinvestment Rate 1.359 cost of net debit 0.095 cost of equity 0.150 WACC0.54 Continue Growth Rate 0.06 Enterprise value 1,556,061 Value of equity 644,316 Value per share 99,000,000 shares 6.51