2006 - Etman Distribusjon

Financial statement 2006
2006
Etman International ASA
24.5.2007
English version for information
purposes only.

Etman International AS
Organisation number 984 032 773
THE BOARD OF DIRECTORS REPORT FOR 2006
Operations and locations
The company’s business idea is participation and investment in other companies, and
manufacturing and trading of electrical products.
The company’s registered office is in Gamle Eigerøysvei 87, Egersund, while the production
of electrical products is located in Changzhou, China, by the subsidiary ETM Electrical Co.
Ltd. The distribution in Scandinavia is handled by the daughter companies Etman
Distribusjon AS in Egersund (100 %), Sepo AS in Trondheim (100 %), and Etmas AB in
Gnosjø, Sweden (100 %).
ETM Electrical Co. Ltd is further controlling Jerry Ltd. (100 %) in Shanghai. Jerry Ltd. is a
sales company for products manufactured at ETM Electrical Co. Ltd, and trading products.
ETM Electrical Co. Ltd. also controls De Wei System Integration Co. Ltd (100 %), who
distributes the company’s energy saving products in the Chinese market.
In March 2007 Etman International AS acquired 100 % of the company Sepo AS in
Trondheim. Sepo has for many years manufactured electrical boxes, temporary power support
units etc. for the Norwegian electrical market. The company has 12 employees, and will
forward serve the groups customers from Ålesund and further north in Norway.
The environment
The group activities have a marginal pollution effect on the external environment. The
production in China is ISO 14001 certified. The group does not have any specific
environmental program.
Organisation and work environment
The working environment in the company is regarded to be very good. Totally the company
has 330 employees working in the manufacturing and sales in China, 3 persons in the mother
company, 8 persons in Etman Distribusjon AS, one person in Etmas AB, and 12 persons in
Sepo AS. The company is continuously strengthening the organisation according to
requirement. Average number of employees during 2006 was 326 persons. In 2006 there have
not been any accidents or injuries of any substantial character.
The company has an objective being a working place with equality between the sexes. The
company has established a policy preventing discrimination of sexes.
At the end of 2006 the share of women working in the group was 80%. Within administration
the women share was approximately 50%, while within the development department mainly
men are employed. In the Board of Directors the women share is 33%, but this is expected to
increase to 40% within the end of May 2007. As of date the company has not initiated any
specific programs related to equality between the sexes.
1

Year end financial report
The market for the company’s products is judged satisfactorily both international and national
in China. The group expects that future growth will take place both in China and in
Scandinavia, through ETM Electrical Ltd, De Wei System Integration Co. Ltd, and in the
Norwegian subsidiaries respectively.
The year 2006 can be characterised as a year with high raw material prices like plastics and
copper, and the company has increased the sales prices to maintain margins.
At the end of 2006 the group’s short term debt was NOK 43 million, which is an increase of
NOK 5,4 million from the previous year. The main reason for the increase in short term debt
was the financing of land user rights in China. NOK 18 million of the short term debt is
related to the Chinese entities were bank loans are renewed on a yearly basis.
The equity at year end was NOK 36,7 million (42 %), the corresponding for 2005 was NOK
34,9 million (45 %).
The profit development in the company’s two main areas was in 2006 characterised by
decreasing margins. This was mainly due to increased raw material prices, which was not
fully compensated by increased prices in the market. This together with structural changes in
the daughter company in Egersund, were the main reason for the decrease in profit from 2005
to 2006.
The 2006 extent of R&D was insignificant, and was mainly related to specific customers (by
order).
Financial risk
The group is exposed to changes in currency rates as parts of the company’s revenues are in
foreign currency. The company has not entered any hedging contracts or other contracts to
reduce the currency risk and the corresponding operational market risk of the company. The
group is exposed towards foreign currency as it has investments in China.
The company is also exposed to changes in the interest level, as the company’s debt has a
floating interest. Changes in interest level may affect future investment possibilities.
Credit risk
The risk of the debtors’ financial ability to fulfill their obligations is regarded to be low,
because previous losses on debtors have been insignificant..
No arrangements on counterclaims or other financial instruments reducing the credit risk have
been entered.
Cash flow risk
The company regards the cash flow situation as adequate, and no measures changing the cash
flow risk has been made.
.
2

Cash situation
The parent company has a cash//bank balance of NOK 128 000, corresponding for the group
is NOK 8 490 000 as per 31.12.06. The net cash flow from operations for the group was NOK
– 272 000. Additionally NOK 16 833 000 is employed in investment activities, while net cash
flow from investment activities was NOK 9 203 000 mainly relating to changes in long term
debt and bank credit. Unused overdraft facilities as per 31.12.06 was approximately NOK 8
million, of which NOK 4 million was related to unused building loan.
Company prospects
The company is planning to apply for listing of the company shares at Oslo Axess the 3
quarter in 2007. The main reason being easier access to human and capital sources. The Board
sees this as an important element in order to be able to conduct the tasks, which is necessary
for the further development of the distribution network, and creating an attractive working
place.
Management remuneration policy
The main principle for the establishment of the remuneration packages for management is to
offer leading personnel competitive remuneration causing continuity in the management,
while the level at the same time reflecting an average of which is offered by comparable
companies. Note 11 is specifying the remuneration for leading personnel. The Board of
Directors plans to propose to the General Assembly in May 2007, a share option programme
for leading personnel. The program which will be proposed will comprise of 230 000 shares.
Corporate governance
The Board implies that good Corporate Governance creates growth and stable values till the
best for the owners, the employees, and other shareholders of the company. The Board is
working consciously in order to strengthen the company’s thrust within all shareholders based
on the Norwegian Recommended Corporate Governance law. In its work, the Board is aiming
especially at treating all owners equally, keep a competent level in the company’s leading
organs, independent auditors and that the company information releases always gives a
correct picture of the operational reality. The Board seeks to secure that the company at all
time has enough equity to fulfil the company’s strategy, goals and risks, besides that the
administration and leadership of the company is taken care of in a sound and professional
way.
In connection with the planned listing of the shares there has been initiated a work in order to
comply with all recommendations listed in the Norwegian Corporate Governance law. A full
statement for each point under this, including any deviations, will be distributed at the
company’s home pages.
Going concern
The Board of Directors and mamagement confirm that the financial statements has been
prepared on the assumption of going concern.
Yearly result and allocations
In 2006 the mother company showed a loss of NOK 218 000, while the corresponding for the
group was profit of NOK 2 073 000. Retained earnings for the parent company was NOK
585 000.
The Board proposes that the loss for the mother company is transferred to other equity.
3

In the opinion of the Board of Directors the presented financial result and balance including
the notes gives correct status of the activities and the company position yearend 2006.
Stavanger, 16. May 2007
Jian Gang Xu Tommy Fjelde
Chairman Board Member/ CEO
Xu Chen Alf Aarthun
Board member Board member
__________________ __________________
Jinghou Mou Marie Smith-Solbakken
Board member Board member
4

Etman International Group
Note 17 - Conversion NGAAP - IFRS
(Amounts in NOK 1000)
Notes to the accounts for 2006
The group has as from 01.01.2005 converted from Norwegian good accounting practice (NGAAP) to International Financial
Reporting Standards (IFRS), see accounting principles note.
A difference between previous accounts according to NGAAP and IFRS has been identified, as the classification of excess
values related to the purchase of Wolfram AS in 2004 (Now Etman Distribusjon AS).
According to NGAAP this excess value was totally allocated to goodwill. According to IFRS this is reclassified as value of
customers relationship. Deferred tax is calulated according to IFRS.
The effects of the conversion are shown in tables below
Profit and Loss 2005 NGAAP Change
IFRS
Total sales 90 786
Cost of goods sold 56 032
Salaries & social cost 9 347
Depreciation 4 972
Other operating costs 9 763
Total operating expenses 80 115
Result of operations 10 671
Financial expenses (1 100)
Profit before taxes 9 571
Taxes 2 655
Result of the year 6 916
(1) Related to deferred tax on depreciation of customers relationshi
-
-
-
-
(412)
412
90 786
56 032
9 347
4 972
9 763
80 115
10 671
(1 100)
9 571
(1) 2 243
Balance pr 31. december 2005 NGAAP Change
IFRS
Fixed assets
Intangible fixed assets
Deferred tax asset 415
Customer relations 0
Land rights 2 880
Goodwill 8 759
Total intangible assets 12 054
Tangible fixed assets
Total tangible fixed assets 14 843
Total fixed assets 26 897
Current assets
Inventory 12 966
Dedtors
Total Debtors 17 551
Bank, Deposits, cash 16 393
Total current assets 46 910
Total assets 73 807
(1) Excess value related to customers relationship
(2) reclassification of goodwill to customers relationshi
7 328
12 737 (1)
415
12 737
2 880
(8 759) (2) -
3 978
16 032
3 978
-
3 978
14 843
30 875
12 966
17 551
16 393
46 910
77 785

Etman International Group
Balance pr 31. december 2005
Equity
Paid in Capital
Total paid in capital 36 183
Retained earnings
Other Etquity (1 677)
Min. Interest -
Total Equity 34 506
Debt
Long term debt
Debt to financial institutions 1 500
Deferred tax -
Total long term debt 1 500
Short term debt
Trade creditors 16 886
Overdraft 12 723
Public duties 1 546
Tax payable 1 929
Other short term debt 4 717
Total short term debt 37 801
Total debt & Equity 73 806
(1) Result effect of change deferred taxes related to depreciation of customers relationsh
(2) Deferred tax telated to customers relationship
412
412
3 566
3 566
-
3 978
Notes to the accounts for 2006
36 183
(1) (1 266)
-
34 917
1 500
(2) 3 566
5 066
Balance pr 1. january 2005 NGAAP Change
IFRS
Fixed assets
Intangible fixed assets
Deferred tax asset 884
Customer relations -
Land rights 2 861
Goodwill 10 230
Total intangible assets 13 975
Tangible fixed assets
Total tangible fixed assets 12 538
Financial fixed assets
Aksjer og andeler 100
Total Financial fixed assets 100
Total fixed assets 26 613
Current assets
Inventory 9 582
Dedtors
Total Debtors 21 707
Bank, Deposits, cash 6 805
Total current assets 38 094
Total assets 64 707
(1) Excess value related to customers relationship
(2) reclassification of goodwill to customers relationshi
16 886
12 723
1 546
1 929
4 717
37 801
77 785
14 208 (1)
884
14 208
2 861
(10 230) (2) -
3 978
17 953
3 978
-
3 978
12 538
100
30 591
9 582
21 707
6 805
38 094
68 685

Etman International Group
Balance pr 1. januar 2005
Equity
Paid in Capital
Total paid in capital 35 494
Retained earnings
Other Equity (10 742)
Min. Interest -
Total Equity 24 752
Debt
Long term debt
Debt to financial institutions 2 317
Deferred tax (0)
Total long term debt 2 317
Short term debt
Trade creditors 13 737
Overdraft 7 031
Public duties 2 987
Tax payable -
Other short term debt 13 883
Total short term debt 37 638
Total debt & Equity 64 707
(1) Deferred tax telated to customers relationship
-
-
3 978
3 978
-
3 978
Notes to the accounts for 2006
35 494
(10 742)
-
24 752
2 317
(1) 3 978
6 295
Equity reconceliation NGAAP Change
IFRS
Equity pr 01.01.2005 24 752
Sales own shares 690
Min. Interests corrected 208
Currency deviations 1 940
Result of the year 6 916
Calculated Equity pr 31.12.2005 34 506
Actual Equity pr 31.12.2005 34 506
-
412
412
412
13 737
7 031
2 987
-
13 883
37 638
68 685
24 752
690
208
1 940
7 328
34 917
34 917