APT Satellite Holdings Limited — Proxy Solicitation & Information Statement 2005

Mar 30, 2005

THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION

If you are in doubt as to any aspect of this circular or as to the action to be taken, you should consult your stockbroker or other registered dealer in securities, bank manager, solicitor, professional accountant or other professional advisor.

If you have sold or transferred all your shares in GOME Electrical Appliances Holding Limited, you should at once hand this circular and the accompanying form of proxy to the purchaser, transferee or to the bank, stockbroker or other agent through whom the sale or transfer was effected for transmission to the purchaser or transferee.

The Stock Exchange of Hong Kong Limited takes no responsibility for the contents of this circular, makes no representation as to its accuracy or completeness and expressly disclaims any liability whatsoever for any loss howsoever arising from or in reliance upon the whole or any part of the contents of this circular.

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GOME Electrical Appliances Holding Limited 國美電器控股有限公司[*]

(incorporated in Bermuda with limited liability)

(Stock Code: 493)

CONTINUING CONNECTED TRANSACTIONS

Independent financial advisor to the Independent Board Committee and the Independent Shareholders

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A letter from the Board is set out on pages 4 to 11 of this circular and a letter from the Independent Board Committee is set out on pages 12 to 13 of this circular. A letter from Platinum Securities Company Limited, the independent financial advisor to the Independent Board Committee and the Independent Shareholders, containing its advice to the Independent Board Committee and the Independent Shareholders is set out on pages 14 to 26 of this circular.

A notice convening the Special General Meeting to be held at Salon at the JW Marriott Ballroom of JW Marriott Hotel Hong Kong, Pacific Place, 88 Queensway, Hong Kong on 15 April 2005 at 11:00 a.m. (or so soon thereafter as the annual general meeting of the Company to be held at the same place and day shall have been concluded or adjourned) is set out on pages 31 to 32 of this circular. Whether or not you are able to attend the Special General Meeting, you are requested to complete and return the enclosed form of proxy in accordance with the instructions printed thereon to the office of the branch share registrar of the Company in Hong Kong, Abacus Share Registrars Limited at Ground Floor, Bank of East Asia Harbour View Centre, 56 Gloucester Road, Wanchai, Hong Kong, as soon as possible and in any event not less than 48 hours before the appointed time for holding the meeting or any adjournment thereof (as the case may be). Completion and return of the form of proxy will not preclude you from attending and voting in person at the meeting and any adjourned meeting (as the case may be) should you so wish.

30 March 2005

* for the purpose of identification only

CONTENTS

	Page
Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	1-3
Letter from the Board . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	4-11
Letter from the Independent Board Committee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	12-13
Letter from Platinum. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	14-26
Appendix – General Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	27-30
Notice of the Special General Meeting. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	31-32

• i -

DEFINITIONS

In this circular, the following expressions have the following meanings unless the context otherwise requires:

“associate” has the same meaning as given to it under the Listing Rules “Beijing GOME” 北京國美電器有限公司 (Beijing GOME Electrical Appliance Co., Ltd.), a company incorporated in the PRC with limited liability and a member of the Parent Group “Board” the board of Directors “Business Day” a day (excluding Saturday) on which banks are generally open for business in Hong Kong “Company” GOME Electrical Appliances Holding Limited, a company incorporated in Bermuda with limited liability, the shares of which are listed on the Main Board of the Stock Exchange

• “Continuing Connected Transactions” the transactions contemplated under the Master Purchase Agreement and the Master Supply Agreement

• “Directors” the directors of the Company “GOME Appliance” 國美電器有限公司 (GOME Appliance Company Limited), a Sinoforeign equity joint venture in which the Company has a 65% interest

• “Group” the Company and its subsidiaries (including GOME Appliance and Tianjin Logistics)

• “HK$” Hong Kong dollars, the lawful currency of Hong Kong “Hong Kong” the Hong Kong Special Administrative Region of the PRC “Independent Board Committee” the committee of the Directors comprising Mr. Sze Tsai Ping, Michael, Mr. Chan Yuk Sang and Mr. Chen Huai formed to advise the Independent Shareholders in respect of the Master Purchase Agreement, the Master Supply Agreement, the Continuing Connected Transactions and the Proposed Caps

• 1 -

DEFINITIONS

“Independent Shareholders”	the shareholders of the Company other than Mr. Wong and his
	associates
“Latest Practicable Date”	24 March 2005, being the latest practicable date prior to the
	printing of this circular for the purpose of ascertaining certain
	information contained herein
“Listing Rules”	the Rules Governing the Listing of Securities on the Stock
	Exchange
“Mr. Wong”	Mr. Wong Kwong Yu, the Chairman of the Company and a
	substantial shareholder of the Company
“Master Purchase Agreement”	the master agreement dated 17 March 2005 between GOME
	Appliance and Beijing GOME pursuant to which GOME Appliance
	agrees to purchase the Products from Beijing GOME from time to
	time
“Master Supply Agreement”	the master agreement dated 17 March 2005 between GOME
	Appliance and Beijing GOME pursuant to which GOME Appliance
	agrees to sell the Products to Beijing GOME from time to time
“Parent Group”	the group of companies wholly-owned by Mr. Wong that are
	engaged in the retail sale of the Products under “GOME Electrical
	Appliances” trademark, all of which do not form part of the Group
“Platinum”	Platinum Securities Company Limited, a licensed corporation under
	the SFO permitted to carry out types 1, 4, 6 and 9 regulated
	activities and the independent financial advisor to the Independent
	Board Committee and the Independent Shareholders in respect of
	the Master Purchase Agreement, the Master Supply Agreement,
	and the Proposed Caps in relation to the Continuing Connected
	Transactions
“PRC”	the People’s Republic of China
“Products”	electrical appliances and consumer electronic products
“Proposed Caps”	the proposed caps in respect of each of the Continuing Connected
	Transactions over the three financial years ending 31 December
	2007
“RMB”	Renminbi, the lawful currency of the PRC
“SFO”	Securities and Futures Ordinance (Chapter 571 of the Laws of
	Hong Kong)

• 2 -

DEFINITIONS

“Share(s)”	ordinary share(s) of HK$0.10 each in the share capital of the
	Company
“Shareholder(s)”	holder(s) of the Shares
“Special General Meeting”	the special general meeting of the Company to be convened for
	the Independent Shareholders to consider and, if thought fit,
	approve the Master Purchase Agreement, the Master Supply
	Agreement, the transactions contemplated under these agreements
	and the Proposed Caps or any adjournment thereof
“Stock Exchange”	The Stock Exchange of Hong Kong Limited
“substantial shareholder”	has the same meaning ascribed to it under the Listing Rules
“%”	per cent.

In this announcement, the exchange rate of HK$1.00 = RMB1.06 is used for illustrative purpose.

• 3 -

LETTER FROM THE BOARD

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GOME Electrical Appliances Holding Limited 國美電器控股有限公司[*]

(incorporated in Bermuda with limited liability)

(Stock Code: 493)

Executive Directors: WONG Kwong Yu (Chairman) DU Juan LAM Pang NG Kin Wah

Registered office: Canon’s Court 22 Victoria Street Hamilton HM12 Bermuda

Independent Non-executive Directors: SZE Tsai Ping, Michael CHAN Yuk Sang CHEN Huai

Principal place of business in Hong Kong: 6101, 61st Floor The Center 99 Queen’s Road Central Hong Kong

30 March 2005

To the Shareholders

Dear Sir or Madam,

CONTINUING CONNECTED TRANSACTIONS

INTRODUCTION

The Company announced on 17 March 2005 that GOME Appliance and Beijing GOME entered into (i) the Master Purchase Agreement pursuant to which GOME Appliance agreed to purchase the Products from Beijing GOME from time to time; and (ii) the Master Supply Agreement pursuant to which GOME Appliance agreed to sell the Products to Beijing GOME from time to time, for the three financial years ending 31 December 2007.

GOME Appliance is a subsidiary of the Company. Beijing GOME is a member of the Parent Group. The Parent Group is wholly owned by Mr. Wong who is a Director and a substantial shareholder of the Company holding, together with his associates, an approximately 65.55% interest in the Company. Accordingly, transactions contemplated under the Master Purchase Agreement and the Master Supply Agreement will constitute continuing connected transactions for the Company under the Listing Rules.

* for the purpose of identification only

• 4 -

LETTER FROM THE BOARD

The Independent Board Committee has been formed to advise the Independent Shareholders in relation to the terms of the Master Purchase Agreement, the Master Supply Agreement and the Proposed Caps.

Platinum has been appointed the independent financial advisor to advise the Independent Board Committee and the Independent Shareholders as to whether or not the terms of the Master Purchase Agreement, the Master Supply Agreement and the Proposed Caps are fair and reasonable and in the interest of the Company and its Shareholders as a whole.

The purpose of this circular is:

• (i) to provide the Shareholders with details of the Master Purchase Agreement, the Master Supply Agreement and the Proposed Caps;

• (ii) to set out the opinion of the independent financial advisor in respect of the terms of the Master Purchase Agreement, the Master Supply Agreement and the Proposed Caps;

• (iii) to set out the recommendation of the Independent Board Committee in respect of the terms of the Master Purchase Agreement, the Master Supply Agreement and the Proposed Caps; and

• (iv) to give notice of the Special General Meeting to consider and, if thought fit, to approve the terms of the Master Purchase Agreement, the Master Supply Agreement and the Proposed Caps in relation to the Continuing Connected Transactions.

Your attention is hereby drawn to pages 31 to 32 of this circular where you will find a notice of the Special General Meeting to be held on 15 April 2005.

CONTINUING CONNECTED TRANSACTIONS

(i) The Master Purchase Agreement

Date: 17 March 2005

Parties: GOME Appliance, a subsidiary of the Company

Beijing GOME, a member of the Parent Group which is wholly-owned by Mr. Wong

Subject: Pursuant to the Master Purchase Agreement, GOME Appliance will purchase the Products from Beijing GOME from time to time

Term: The Master Purchase Agreement has a term of three financial years ending 31 December 2007 and will be subject to the approval by the Independent Shareholders at the Special General Meeting

• 5 -

LETTER FROM THE BOARD

Price: The Products will be sold to GOME Appliance by Beijing GOME on an at-cost basis. In view that the sole purpose of the reciprocal arrangement under the Master Purchase Agreement and the Master Supply Agreement is to enhance the operational efficiency of the Group and the Parent Group, the Directors consider that the arrangement under the Master Purchase Agreement, including the price of the Products to be sold to GOME Appliance by Beijing GOME thereunder, is fair and in the interests of the Independent Shareholders. GOME Appliance will place orders with Beijing GOME pursuant to the Master Purchaser Agreement with reference to the prevailing market demands. The Directors confirm that the principle terms of purchases respectively obtained by Beijing GOME and GOME Appliance from the ultimate suppliers are the same.

• Proposed cap The Directors propose that the cap amounts of the transactions under the Master amounts: Purchase Agreement for each of the three financial years ending 31 December 2007 will not exceed HK$400 million (excluding value added tax), HK$500 million (excluding value added tax) and HK$550 million (excluding value added tax) respectively. The proposed cap amounts are determined after taking into consideration the estimated number of stores and the estimated proportion of sales of these stores to be involved in the transactions contemplated under the Master Purchase Agreement, the estimated growth in the PRC electrical appliances retail industry and the expected improvement in the geographical coverage of the delivery network of the suppliers of the Products during the period. The Company estimates that around 10% to 15% of the sales of its stores in certain second-tier cities will involve in the transactions contemplated under the Master Purchase Agreement. Based on the average annual sales per store of approximately HK$110 million for 2004 and an estimation of around 25 to 30 stores to be involved in the transactions contemplated under the Master Purchase Agreement for 2005, the proposed cap amount for 2005 is HK$400 million. Based on the compound annual growth rate in the number of stores for the Group in the past 3 years of approximately 45% and having considered the potential growth in the PRC electrical appliances retail industry and potential improvement in the geographical coverage of the delivery network of the suppliers of the Products, the proposed cap amounts for 2006 and 2007 are HK$500 million and HK$550 million respectively

Payment: Payments for the Products will be made 15 business days after receipt of the Products, which is identical to the payment term under the Master Supply Agreement

• 6 -

LETTER FROM THE BOARD

(ii) The Master Supply Agreement

Date: 17 March 2005 Parties: GOME Appliance, a subsidiary of the Company Beijing GOME, a member of the Parent Group which is wholly-owned by Mr. Wong Subject: Pursuant to the Master Supply Agreement, GOME Appliance will sell the Products to Beijing GOME from time to time Term: The Master Supply Agreement has a term of three financial years ending 31 December 2007 and will be subject to the approval by the Independent Shareholders at the Special General Meeting Price: The Products will be sold to Beijing GOME by GOME Appliance on an at-cost basis. In view that the sole purpose of the reciprocal arrangement under the Master Purchase Agreement and the Master Supply Agreement is to enhance the operational efficiency of the Group and the Parent Group, the Directors consider that the arrangement under the Master Supply Agreement, including the price of the Products to be sold to Beijing GOME by GOME Appliance thereunder, is fair and in the interests of the Independent Shareholders. The Directors confirm that the principle terms of purchases respectively obtained by Beijing GOME and GOME Appliance from the ultimate suppliers are the same

Proposed cap The Directors propose that the cap amounts of the transactions under the Master amounts: Supply Agreement for each of the three financial years ending 31 December 2007 will not exceed HK$400 million (excluding value added tax), HK$500 million (excluding value added tax) and HK$550 million (excluding value added tax) respectively. The proposed amounts are determined with reference to the expansion plan of the Parent Group provided by the Parent Group. The Company estimates that the number of stores and the proportion of sales attributable to these stores of the Parent Group to be involved in the transactions contemplated under the Master Supply Agreement for the three years ending 31 December 2007 would be similar to those of the Group, further details of which are set out in the sub-section headed “(i) The Master Purchase Agreement” above. Given that the Master Supply Agreement is a reciprocal arrangement of the Master Supply Agreement have been proposed to be the same as those of the Master Purchase Agreement, i.e. HK$400 million (excluding value added tax), HK$500 million (excluding value added tax) and HK$550 million (excluding value added tax) for each of the three years ending 31 December 2007 respectively.

Payment: Payments for the Products will be made 15 business days after receipt of the Product, which is identical to the payment term under the Master Purchase Agreement.

• 7 -

LETTER FROM THE BOARD

REASONS FOR THE CONTINUING CONNECTED TRANSACTIONS

The following chart shows the simplified holding structure of the Group and the Parent Group.

==> picture [366 x 184] intentionally omitted <==

----- Start of picture text -----

Mr. Wong and his
Public Shareholders
associates
65.55% 35.45%
the Company
100%
65%
Gome Appliance
35%
100%
the Parent Group Tianjin Logistics
----- End of picture text -----

In order to enhance the operational efficiency of the Group and the Parent Group, it is proposed under the Master Purchase Agreement and the Master Supply Agreement that the respective members of the Group and the Parent Group will make bulk purchases of the Products with some of their mutual suppliers. Such members will from time to time sell part of the purchased Products to members of the other group as principals on an at-cost basis. Under such arrangement, procurement of the Products by the Group and the Parent Group from certain suppliers can be better co-ordinated and transacted in a more efficient manner. In particular, continuous supply of the Products will be ensured as temporary shortage of stock of the Group can be avoided. Without such arrangement, ultimate costs of securing the Products for the Group and the Parent Group may increase particularly in cases where certain Products from local branches of suppliers may not be readily available. In view of the reciprocal arrangements under the Master Supply Agreement and the Master Purchase Agreement, the Directors are of the view that the Continuing Connected Transactions contemplated thereunder are on normal commercial terms.

GOME Appliance is a subsidiary of the Company. Beijing GOME is a member of the Parent Group. The Parent Group is owned by Mr. Wong who is a substantial shareholder of the Company holding, together with his associates, an approximately 65.55% interest in the Company. Accordingly, the transactions contemplated under the Master Purchase Agreement and the Master Supply Agreement will constitute continuing connected transactions for the Company under the Listing Rules.

The Continuing Connected Transactions are subject to reporting and announcement requirements under Rules 14A.45 to 14A.47 of the Listing Rules and the independent shareholders’ approval requirements under 14A.48 of the Listing Rules.

The amounts of the Proposed Caps for the transactions under the Master Purchase Agreement and the Master Supply Agreement are determined based on arm’s length negotiations between the parties with reference to, among others, the current expansion plan of the Group.

• 8 -

LETTER FROM THE BOARD

The Directors are of the view that so far as the Independent Shareholders are concerned, the Continuing Connected Transactions and the terms thereof have been negotiated on an arm’s length basis and on normal commercial terms between the parties and are fair and reasonable and in the interest of the Group and the shareholders of the Company as a whole.

The Company will seek the approval by the Independent Shareholders of the Master Purchase Agreement, the Master Supply Agreement and the Proposed Caps in relation to the Continuing Connected Transactions on the following conditions:

• (a) (1) The cap amounts of the transactions under the Master Purchase Agreement for each of the three financial years ending 31 December 2007 will not exceed HK$400 million, HK$500 million and HK$550 million respectively.

• (2) The cap amounts of the transactions under the Master Supply Agreement for each of the three financial years ending 31 December 2007 will not exceed HK$400 million, HK$500 million and HK$550 million respectively.

• (b) The Continuing Connected Transactions will be:

• (i) entered into in the usual and ordinary course of businesses of the Group;

• (ii) entered into in accordance with the terms of the Master Purchase Agreement or the Master Supply Agreement (as the case may be); and

• (iii) conducted on normal commercial terms or on terms that are no less favourable than terms available to or from independent third parties.

• (c) Brief details of the Continuing Connected Transactions will be disclosed in the Company’s next and each successive annual report together with a statement of opinion of the independent non-executive Directors in such manner as referred to in paragraph (d) below in accordance with Rule 14A.45 of the Listing Rules.

• (d) In compliance with Rule 14A.37 of the Listing Rules, the independent non-executive Directors will review annually the Continuing Connected Transactions, and confirm in the Company’s annual report and accounts for the year in question that such Continuing Connected Transactions under their review have been conducted in the manner as stated in paragraphs (a) and (b) above.

• (e) In compliance with Rule 14.38 of the Listing Rules, the auditors of the Company will provide a letter to the Board (a copy of which letter will be provided to the Stock Exchange at least 10 business days prior to the bulk printing of the annual report of the Company) in respect of each relevant financial year, during which the Continuing Connected Transactions have been conducted, stating that:

• (i) the Continuing Connected Transactions have been approved by the Directors;

• 9 -

LETTER FROM THE BOARD

• (ii) the Continuing Connected Transactions have been entered into in accordance with the terms of relevant agreements governing the transactions;

• (iii) the respective value of the Continuing Connected Transactions has not exceeded the respective Proposed Caps set out in paragraph (a) above; and

• (iv) the Continuing Connected Transactions have been entered into in accordance with the pricing policy of the Group, and where for whatever reasons, if the auditors of the Company decline to accept the engagement or are unable to provide the auditors’ letter, the Directors will contact the Listing Division of the Stock Exchange immediately.

• (f) The Company will comply with the applicable provisions of the Listing Rules governing connected transactions in the event that the total amount of the relevant Continuing Connected Transactions exceeds the Proposed Caps, or that there is any material amendment to the terms of the Master Purchase Agreement or the Master Supply Agreement.

GENERAL

The Group is principally engaged in the retailing of the Products in the PRC. Beijing GOME is principally engaged on the retailing of the Products in the PRC.

An independent board committee comprising the independent non-executive Directors has been formed to advise the Independent Shareholders on the terms of the Master Purchase Agreement, the Master Supply Agreement and the Proposed Caps and Platinum has been appointed as the independent financial advisor to advise the independent board committee of the Company and the Independent Shareholders on the same matters.

SPECIAL GENERAL MEETING

The notice convening the Special General Meeting to be held at Salon at the JW Marriott Ballroom of JW Marriott Hotel Hong Kong, Pacific Place, 88 Queensway, Hong Kong on 15 April 2005 at which ordinary resolution will be proposed to approve the Master Purchase Agreement, the Master Supply Agreement and the Proposed Caps in relation to the Continuing Connected Transactions is set out on pages 31 to 32 of this circular.

A form of proxy for use at the Special General Meeting is enclosed. Whether or not you are able to attend the meeting, you are requested to complete and return the form of proxy in accordance with the instructions printed thereon to the office of the branch share registrar of the Company in Hong Kong, Abacus Share Registrars Limited at Ground Floor, Bank of East Asia Harbour View Centre, 56 Gloucester Road, Wanchai, Hong Kong, as soon as possible and in any event not less than 48 hours before the time appointed for holding the meeting or any adjournment thereof (as the case may be). Completion and return of the form of proxy will not preclude you from attending and voting in person at the meeting and any adjourned meeting (as the case may be) should you so wish.

• 10 -

LETTER FROM THE BOARD

Pursuant to bye-law 70 of the bye-laws of the Company, a poll may be demanded by the chairman of the relevant meeting or by:

• (a) at least 3 Shareholders present in person (or in the case of member being a corporation, by its duly authorised representative) or by proxy for the time being entitled to vote at the meeting; or

• (b) any Shareholder or Shareholders present in person (or in the case of a member being a corporation, by its duly authorised representative) or by proxy and representing not less than one-tenth of the total voting rights of all the Shareholders having the right to vote at the meeting; or

• (c) any Shareholder or Shareholders present in person (or in the case of a member being a corporation, by its duly authorised representative) or by proxy and holding Shares conferring a right to vote at the meeting being Shares on which an aggregate sum has been paid up equal to not less than one-tenth of the total sum paid up on all Shares conferring that right.

The Continuing Connected Transactions are subject to the reporting, announcement and the Independent Shareholders’ approval requirements and the vote of the Independent Shareholders taken at the Special General Meeting will be taken by poll pursuant to the Listing Rules and Mr. Wong and its associates will abstain from voting at the Special General Meeting.

RECOMMENDATION

Your attention is drawn to the letter from the Independent Board Committee set out on pages 12 to 13 of this circular which contains its recommendation to the Independent Shareholders on the Master Purchase Agreement, the Master Supply Agreement and the Proposed Caps in relation to the Continuing Connected Transactions. Your attention is also drawn to the letter of advice received from Platinum which contains, amongst other matters, its advice to the Independent Board Committee and the Independent Shareholders in relation to the Master Purchase Agreement, the Master Supply Agreement and the Proposed Caps and the principal factors and reasons considered by it in concluding its advice. The letter from Platinum is set out on pages 14 to 26 of this circular.

Your attention is also drawn to the general information set out in the appendix of this circular.

Yours faithfully For and on behalf of GOME Electrical Appliances Holding Limited Ng Kin Wah Director

• 11 -

LETTER FROM THE INDEPENDENT BOARD COMMITTEE

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GOME Electrical Appliances Holding Limited 國美電器控股有限公司[*]

(incorporated in Bermuda with limited liability)

(Stock Code: 493)

Independent Non-executive Directors: SZE Tsai Ping, Michael CHAN Yuk Sang CHEN Huai

Registered office: Canon’s Court 22 Victoria Street Hamilton HM12 Bermuda

Principal place of business in Hong Kong: 6101, 61st Floor The Center 99 Queen’s Road Central Hong Kong

30 March 2005

To the Independent Shareholders

Dear Sir or Madam,

CONTINUING CONNECTED TRANSACTIONS

We refer to the circular of the Company to the Shareholders dated 30 March 2005 (the “ Circular ”), in which this letter forms a part. Unless the context requires otherwise, capitalized terms used in this letter will have the same meanings given to them in the section headed “Definitions” of the Circular.

We have been authorised by the Board to form the Independent Board Committee to advise the Independent Shareholders on whether the terms of the Master Purchase Agreement, the Master Supply Agreement and the Proposed Caps are fair and reasonable and in the interest of the Company and its Shareholders as a whole.

We wish to draw your attention to the letter of advice from Platinum as set out on pages 14 to 26 of the Circular and the letter from the Board set out on pages 4 to 11 of the Circular.

* for the purpose of identification only

• 12 -

LETTER FROM THE INDEPENDENT BOARD COMMITTEE

Having considered, among other matters, the factors and reasons considered by, and the opinion of Platinum as stated in its letter of advice, we consider that the terms of the Master Purchase Agreement, the Master Supply Agreement and the Proposed Caps are fair and reasonable and in the interest of the Company and its Shareholders as a whole and accordingly recommend the Independent Shareholders to vote in favour of the ordinary resolution in relation to the Master Purchase Agreement, the Master Supply Agreement and the Proposed Caps in relation to the Continuing Connected Transactions to be proposed at the Special General Meeting.

Yours faithfully, For and on behalf of

The Independent Board Committee of Gome Electrical Appliances Holding Ltd. SZE Tsai Ping, Michael CHAN Yuk Sang CHEN Huai

Independent non-executive Directors

• 13 -

LETTER FROM PLATINUM

The following is the text of the letter of advice from the independent financial advisor to the Independent Board Committee and the Independent Shareholders for the purpose of incorporation into this circular.

==> picture [160 x 80] intentionally omitted <==

30 March 2005

To the Independent Board Committee and Independent Shareholders

Dear Sirs,

CONTINUING CONNECTED TRANSACTIONS

INTRODUCTION

We refer to our engagement as the independent financial advisor to advise the Independent Board Committee and the Independent Shareholders in respect of the terms of the Master Purchase Agreement, the Master Supply Agreement and the Proposed Caps in relation to the Continuing Connected Transactions, details of which are set out in the letter from the Board as set out in the circular of the Company dated 30 March 2005 to the Shareholders (the “Circular”), of which this letter forms part. Terms used in this letter shall have the same meanings as defined in the Circular unless the context requires otherwise.

In our capacity as the independent financial advisor to the Independent Board Committee and the Independent Shareholders, our role is to give an independent opinion as to whether terms of the Master Purchase Agreement, the Master Supply Agreement and the Proposed Caps in relation to the Continuing Connected Transactions are entered into in the ordinary and usual course of business of the Company, on normal commercial terms, fair and reasonable and in the interest of the Company and its Shareholders as a whole.

In formulating our opinion, we have relied on the information and facts supplied to us by the Company. We have reviewed, among other things: (i) the Master Purchase Agreement; (ii) the Master Supply Agreement; (iii) the interim report of the Group for the six months ended 30 September 2004; and (iv) the results announcement of the Group for the nine months ended 31 December 2004. We have also discussed with the management of the Company about the expansion plans and prospects of the Group.

We have assumed that all information, facts, opinions and representations contained in the Circular are true, complete and accurate in all material respects and we have relied on the same. The Directors have confirmed that no material facts have been omitted from the information supplied to us. The Directors have confirmed that they take full responsibility for the contents of the Circular.

• 14 -

LETTER FROM PLATINUM

We have no reason to suspect that such information is inaccurate or that any material facts have been omitted or withheld from the information supplied or opinions expressed in the Circular. In line with normal practice, we have not, however, conducted a verification process of the information supplied to us, nor have we conducted any independent in-depth investigation into the business and affairs of the Company. We consider that we have reviewed sufficient information to enable us to reach an informed view and to provide a reasonable basis for our opinion regarding the terms of the Master Purchase Agreement, the Master Supply Agreement and the Proposed Caps in relation to the Continuing Connected Transactions.

PRINCIPAL FACTORS AND REASONS CONSIDERED

In formulating our opinion in relation to the Continuing Connected Transactions and giving our independent financial advice to the Independent Board Committee and the Independent Shareholders, we have considered the following principal factors:

A. Reasons for and benefits of entering into the Master Purchase Agreement, Master Supply Agreement (the “Agreements”) and the Continued Connected Transactions

1. Background of the key terms of the Agreements

The Company announced on 17 March 2005 that GOME Appliance and Beijing GOME entered into (i) the Master Purchase Agreement pursuant to which GOME Appliance agreed to purchase the Products from Beijing GOME from time to time; and (ii) the Master Supply Agreement pursuant to which GOME Appliance agreed to sell the Products to Beijing GOME from time to time, for the three financial years ending 31 December 2007. The Directors are of the view that in so far as the Independent Shareholders are concerned, the Continuing Connected Transactions and the terms thereof have been negotiated on an arm’s length basis and on normal commercial terms between the parties and are fair and reasonable and in the interest of the Company and its shareholders as a whole.

• 15 -

LETTER FROM PLATINUM

A summary of the Agreements is shown in Table 1 below:

Table 1: Summary of the key terms of the Agreements

	Master Purchase Agreement	Master Supply Agreement
Date	17 March 2005	17 March 2005
Parties	GOME Appliance, a subsidiary	GOME Appliance, a subsidiary
	of the Company	of the Company
	Beijing GOME, a member of	Beijing GOME, a member of
	the Parent Group	the Parent Group
Subject	Pursuant to the Master Purchase	Pursuant to the Master Supply
	Agreement, GOME Appliance	Agreement, GOME Appliance will
	will purchase the Products from	sell the Products to Beijing GOME
	Beijing GOME from time to time	from time to time
Term	Three financial years ending	Three financial years ending
	31 December 2007	31 December 2007
Price	The Products will be sold to	The Products will be sold to Beijing
	GOME Appliance by Beijing	GOME by GOME Appliance on an at-
	GOME on an at-cost basis	cost basis
Proposed	For the financial years ending	For the financial years ending
cap amounts	31 December:	31 December:
	2005 – HK$400 million	2005 – HK$400 million
	2006 – HK$500 million	2006 – HK$500 million
	2007 – HK$550 million	2007 – HK$550 million
	(all excluding value added tax)	(all excluding value added tax)
Payment	Payments for the Products will	Payments for the Products will be made
	be made 15 business days after	15 business days after receipt of the
	receipt of the Products	Products

GOME Appliance is a subsidiary of the Company. Beijing GOME is a member of the Parent Group. The Parent Group is wholly-owned by Mr. Wong who is a Director and substantial shareholder holding, together with his associates, approximately 65.55% interest in the Company. Accordingly, the Continuing Connected Transactions will constitute continuing connected transactions of the Company under the Listing Rules.

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LETTER FROM PLATINUM

2. Description of the relevant parties

• (i) The Company

The Company is a listed company on the Stock Exchange. The Group is principally engaged in the retailing of the Products in the PRC. As stated in the results announcement of the Group for the nine months ended 31 December 2004, over 90% of the Group’s revenue and results were derived from retailing of the Products during the period. The Group’s revenue generated from retailing of the Products was approximately HK$9.2 billion for the nine months ended 31 December 2004, of which, revenue from traditional white goods (including refrigerators, washing machines and air-conditioners), audio visual products and telecommunications products contributed to approximately 37%, 26%, and 15% respectively. The following chart illustrates the percentage contribution of each product category to the Group’s total revenue from the retailing of the Products for the twelve months ended 31 March 2004 and nine months ended 31 December 2004.

Table 2: Percentage contribution of each product category to the Group’s total revenue from the retailing of the Products

	Nine months	Twelve months
	ended 31 Dec 04	ended 31 Mar 04
	approximately	approximately
Product category	% of total revenue	% of total revenue
Audio visual	26%	31%
Refrigerators and washing machines	18%	17%
Air-conditioners	19%	15%
Telecommunications	15%	16%
Computers	4%	5%
Small electrical appliances	10%	11%
Digital	8%	5%
Total	100%	100%

Source: Results announcement of the Group for the nine months ended 31 December 2004

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LETTER FROM PLATINUM

(ii) GOME Appliance

GOME Appliance is a Sino-foreign equity joint venture established on 20 April 2004 under the laws of the PRC and is a subsidiary of the Company. GOME Appliance is engaged in the retailing of the Products in designated cities within the PRC. Ocean Town Int’l Inc., which is wholly-owned by the Company, holds approximately 65% of the issued share capital of GOME Appliance. As at 31 December 2004, GOME Appliance operated 144 outlets in 25 cities in the PRC. As stated in the results announcement of the Group for the nine months ended 31 December 2004, the Group plans to further extend its existing retail network by opening approximately 130 new outlets across the country, thus seeking to almost double its number of outlets by the end of 2005. As shown in Table 3 below, the number of the outlets of GOME Appliance has been growing significantly over the recent years.

Table 3: Number of outlets of GOME Appliance

		As at	31 December	31 December
	2001	2002	2003	2004	2005
	Actual	Actual	Actual	Actual	Expected
Number of outlets of the Group	32	47	79	144	274

Source: Circular of the Company dated 5 July 2004 and the results announcement of the Group for the nine months ended 31 December 2004

(iii) Beijing GOME

Beijing GOME is a company incorporated with limited liability under the laws of the PRC. It is a member of the Parent Group, which is owned by Mr. Wong who is a Director and substantial shareholder of the Company.

3. Overview of the retail industry of the Products in the PRC

According to the National Bureau of Statistics of China, the gross domestic product of the PRC (“PRC GDP”) recorded a year-on-year growth rate of approximately 9.1% and 9.5% respectively in 2003 and 2004. Urban population in the PRC recorded a year-on-year growth rate of approximately 4.3% and 3.6% respectively in 2003 and 2004. Disposable income per capita of urban households for PRC recorded a year-on-year growth rate of approximately 7.7% in 2004.

According to the National Bureau of Statistics of China, retail sales of consumer goods in the PRC quadrupled over a span of 10 years to 2003. In 2004, the total value of retail sales of consumer goods in the PRC amounted to approximately RMB5,395 billion, representing an increase of approximately 13.3% from 2003. In addition, the total value of retail sales of telecommunication products and home electrical appliances/audio visual products recorded a year-on-year growth rate of approximately 41.7% and 13.7% respectively in 2004. The market statistics and data stated above are summarized in Table 4 below:

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LETTER FROM PLATINUM

Table 4: Market statistics and data for PRC and its retail industry

Year-on-year growth rate GDP Urban population Disposable income per capita of urban households Retail sales of consumer goods Total value of retail sales of the telecommunication products Total value of retail sales of the home electrical appliances/audio visual products	2002 8.0% 4.5% 13.4% 8.8% 69.2% 14.6%	2003 9.1% 4.3% 9.0% 9.1% 70.9% 18.3%	2004 9.5% 3.6% 7.7% 13.3% 41.7% 13.7%

Source: National Bureau of Statistics of China

Based on the findings of the Ministry of Commerce of the PRC, in 2003, the Group and the Parent Group (collectively referred to as the “GOME Group”), was the largest home appliance retailer in the PRC. The top five home appliance retailers in the PRC are listed in Table 5 below:

Table 5: Top five home appliance chains in the PRC

Company Ranking name 1 The GOME Group 2 Suning 3 Sanlian 4 Yongle 5 Jiangsu Five Star Total	Turnover Year-on-year 2002 2003 growth (%) RMB billion 10.9 17.8 63.3 8.4 12.1 44.0 8.4 10.7 27.4 4.9 8.8 79.6 3.2 5.1 59.4 35.8 54.5 52.2	2002 Number of 109 84 132 32 76 433	Year-on-year 2003 growth (%) outlets 139 27.5 148 76.2 202 53.0 55 71.9 96 26.3 640 47.8	Year-on-year 2003 growth (%) outlets 139 27.5 148 76.2 202 53.0 55 71.9 96 26.3 640 47.8
				47.8

Source: Ministry of Commerce of the PRC

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LETTER FROM PLATINUM

In addition, according to the State Information Center, the retail industry in the PRC is expected to grow at a rate of approximately 8% to 10% during the years 2005 to 2010.

In light of the above, we note that the size of the retail industry of the Products in the PRC is significant and has been growing in recent years.

4. Long-term strategy of the Group

As stated in the results announcement of the Group for the nine months ended 31 December 2004, the Group is the largest retail chain operator of the Products in the PRC. Over 90% of the Group’s revenue and results are derived from the retailing of the Products and the Group carries its operations mainly in the PRC. According to the results announcement of the Group for the nine months ended 31 December 2004, the Group’s strategic objective is to consolidate its market leadership position and further develop its retail network throughout the country into an undisputed market leader by capitalizing on the Group’s competitive strengths. As a result, it is the Group’s firm intention to focus its management and financial resources on the retail sector.

The Directors believe that enlarging the Group’s market share, securing and further improving gross profit margin and operating income of the Group as well as implementing tight costs control measures are important to the development of the Group into an even stronger competitor. In particular, the Group will further streamline and improve its efficiency of its logistic function to reduce costs and facilitate better control on inventory management.

5. Potential benefits from the entering into the Agreements and the Continued Connected Transactions

As stated in the letter from the Board, the Agreements would enhance the operational efficiency of the Group. It is proposed under the Agreements that the respective members of the Group and the Parent Group will make bulk purchases of the Products with some of their mutual suppliers. Such members will from time to time sell part of the purchased Products to members of the other group as principals on an at-cost basis. Pursuant to the purchasing services agreement between the Group and the Parent Group dated 29 July 2004 (the “Purchasing Services Agreement”) as set out in the circular of the Company dated 5 July 2004, the Group and the Parent Group would be subject to the same terms for the purchases of the Products from various suppliers. As such, the at-cost basis under the Agreements will have no financial disadvantage for the Group and the Parent Group. For details of the Purchasing Services Agreement, please refer to the circular of the Company dated 5 July 2004. Under such arrangement, procurement of the Products by the Group and the Parent Group from certain suppliers can be better co-ordinated and transacted in a more efficient manner, in particular, continuous supply of the Products will be ensured as temporary shortage of stock of the Group can be avoided. Without such arrangement, ultimate costs of securing the Products for the Group and the Parent Group may increase particularly in cases where certain Products from local branches of suppliers may not be readily available. We are of the view that this is reasonable.

• 20 -

LETTER FROM PLATINUM

In light of the above, in particular:

• (i) the significant size and growth potential of the retail industry in the PRC;

• (ii) the significance of the retail business operations of the Group in the PRC;

• (iii) the long-term strategy of the Group for its retail business operations; and

• (iv) the potential benefits to the Group from the improvement of operational efficiency of the Group under the Agreements,

we concur with the Directors’ view that the Agreements and the Continuing Connected Transactions are entered into in the usual and ordinary course of the business of the Group.

B. Terms of the Agreements

1. Master Purchase Agreement

Under the Master Purchase Agreement, GOME Appliance will purchase the Products from Beijing GOME from time to time. We have reviewed the terms of the Master Purchase Agreement, in particular, the payments for the Products will be made 15 business days after receipt of the Products, which is identical to the payment term under the Master Supply Agreement. Based on our discussion with the Company’s management and we have also reviewed samples of the Company’s credit terms granted by other independent suppliers, we note that this payment term is within the normal range of payment terms offered by other suppliers to the Group. In addition, as stated in the circular of the Company dated 5 July 2004, most of the suppliers have granted credit terms which range from seven days to seven months. Therefore, we concur with the management of the Company that payment term of the Master Purchase Agreement is within the normal range of payment terms offered by other independent suppliers to the Group.

The Master Purchase Agreement has a term of three years ending 31 December 2007 and will be subject to the approval of the Independent Shareholders at the Special General Meeting. GOME Appliance will place orders with Beijing GOME pursuant to the Master Purchase Agreement with reference to the prevailing market demands. It is our understanding from the Directors that the principal terms of purchase respectively obtained by Beijing GOME and GOME Appliance from the ultimate suppliers are the same. Since the Products will be supplied to GOME Appliance on an at-cost basis, there would be no financial disadvantage to the Group, in terms of the purchasing cost of the Products for entering into the Master Purchase Agreement.

• 21 -

LETTER FROM PLATINUM

As stated in the letter from the Board, by entering into the Master Purchase Agreement, procurement of the Products by the Group and the Parent Group from certain suppliers can be better co-ordinated and transacted in a more efficient manner. Moreover, if such arrangement is not in place, ultimate costs of securing the Products for the Group and the Parent Group may increase particularly in cases where certain Products from local branches of suppliers may not be readily available. Therefore, through entering into the Master Purchase Agreement, the inventory and logistics management of outlets under both the Company and the Parent Group can be managed in a more efficient manner. Based on our discussions with the management of the Company, this would in turn enhance and expedite the operational efficiency of both the Group and the Parent Group.

2. Master Supply Agreement

As stated in the letter from the Board, under the Master Supply Agreement, GOME Appliance will sell the Products to Beijing GOME from time to time. We have reviewed the terms of the Master Purchase Agreement, in particular, the payments for the Products will be made 15 business days after receipt of the Products, which is identical to the payment term under the Master Purchase Agreement. Based on our discussion with the management of the Group, we understand that this payment term is within the normal range of payment terms offered by other suppliers to the Group. In addition, as stated in the circular of the Company dated 5 July 2004, most of the suppliers have granted credit terms which range from seven days to seven months. Therefore, we concur with the management of the Company that payment term of the Master Supply Agreement is within the normal range of payment terms offered by other suppliers to the Group.

The Master Supply Agreement has a term of three years ending 31 December 2007 and will be subject to the approval of the Independent Shareholders at the Special General Meeting. The Directors confirm that the principal terms of purchases respectively obtained by Beijing GOME and GOME Appliance from their ultimate suppliers are the same. Since the Products will be supplied to GOME Appliance on an at-cost basis, which is a reciprocal arrangement of the Master Purchase Agreement, there would be no financial disadvantage to the Group from entering into the Master Supply Agreement.

As stated in the letter from the Board, the Master Supply Agreement is a reciprocal arrangement of the Master Purchase Agreement under the same terms, moreover, by entering into the Master Supply Agreement, procurement of the Products by the Group and the Parent Group from certain suppliers can be better co-ordinated and transacted in a more efficient manner. Moreover, if such arrangement is not in place, ultimate costs of securing the Products for the Group and the Parent Group may increase particularly in cases where door-to-door delivery by the suppliers is not available or may only be obtained at a higher cost. Therefore, through entering into the Master Supply Agreement, the inventory and logistics management of outlets under both the Group and the Parent Group can be managed in a more efficient manner. Based on our discussions with management of the Company, this would in turn enhance and expedite the operational efficiency of both the Group and the Parent Group.

• 22 -

LETTER FROM PLATINUM

• In light of the above, in particular:

• (i) the payment terms for the Products under the Agreements is within the normal range of payment terms offered by other suppliers to the Group;

• (ii) the Master Supply Agreement is under the same terms of the Master Purchase Agreement;

• (iii) no financial disadvantage to the Group for entering into the Agreements;

• (iv) the potential increase of ultimate costs of securing the Products for the Group if the Agreements are not in place;

• (v) the potential enhancement on inventory management of the Group under the Agreements;

• (vi) the potential enhancement on logistic management of the Group under the Agreements; and

• (vii) the potential enhancement of overall operational efficiency of the Group under the Agreements,

we are of the view that the terms of the Agreements are on normal commercial terms, fair and reasonable and in the interest of the Company and its Shareholders as a whole.

• C. The Proposed Caps

1. The proposed caps of the Master Purchase Agreement

The Directors proposed that the cap amounts of the transactions under the Master Purchase Agreement for each of the three years ending 31 December 2007 to be HK$400 million (excluding value added tax), HK$500 million (excluding value added tax) and HK$550 million (excluding value added tax) respectively.

As stated in the letter from the Board, the proposed cap amounts are determined after taking into consideration the estimated number of outlets and the estimated proportion of sales of these outlets to be involved in the transactions contemplated under the Master Purchase Agreement, the estimated growth in the PRC electrical appliances retail industry and the expected improvement in the geographical coverage of the delivery network of the suppliers of the Products during the period. The Company estimates that around 10% to 15% of the sales of its outlets in certain second-tier cities will involve transactions contemplated under the Master Purchase Agreement. Based on the average annual sales per outlet of approximately HK$110 million for 2004 and an estimation of around 25 to 30 outlets to be involved in the transactions contemplated under the Master Purchase Agreement for 2005, the proposed cap amount for 2005 is HK$400 million. Based on the compound annual growth rate in the number of outlets for the Group in the past 3

• 23 -

LETTER FROM PLATINUM

years of approximately 45% and having considered the potential growth in the PRC electrical appliances retail industry and potential improvement in the geographical coverage of the delivery network of the suppliers of the Products, the proposed cap amounts for 2006 and 2007 are HK$500 million and HK$550 million respectively.

Based on information provided by the Company’s management, the Group derived revenue of approximately HK$11,931 million and the weighted average number of outlets in operations for the year ended 31 December 2004, the average revenue per outlet would amount to approximately HK$107 million for the year ended 31 December 2004, which is in line with the average annual sales per outlet of approximately HK$110 million for the year ended 31 December 2004 as stated in the letter from the Board.

As stated in the letter from the Board, around 10% to 15% of the sales of the 25 to 30 outlets will be involved in the transactions contemplated under the Master Purchase Agreement for 2005. Against this background, we note from a retail industry forecast report announced by the State Information Center on 7 November 2004 that the retail industry in the PRC is expected to grow at a rate of approximately 8% to 10% (i.e. 9% on average) during the years from 2005 to 2010. Therefore, the proposed cap amounts for the three years ending 31 December 2007 under the Master Purchase Agreement is illustrated in Table 6 below:

Table 6: Valuation of the caps of the Agreements

	For the nine	For the	For the
	months ended	year ended	year ended
	31 December 2005	31 December 2006	31 December 2007
	(note 2)
	HK$ million	HK$ million	HK$ million
Average annual sales per
outlet of previous year	107	117	127
Estimated average annual
growth rate_(note 1)_	9%	9%	9%
Average annual sales per
outlet of current year	117	127	138

Scenario (i): Maximum valuation based on 30 outlets and 15% of sales of such outlets to be involved in the transactions contemplated under the Agreements

==> picture [398 x 10] intentionally omitted <==

Scenario (ii): Minimum valuation based on 25 outlets and 10% of sales of such outlets to be involved in the transactions contemplated under the Agreements

Estimated	cap amounts	219	318	345
Proposed	cap amounts by the Company	400	500	550

Note 1: The estimated average annual growth rate of the retail industry in the PRC in respective years.

Note 2: As advised by the management of the Company, the proposed cap amount for 2005 represents the transactions for the remaining nine months of 2005.

• 24 -

LETTER FROM PLATINUM

As illustrated above, we note that the proposed caps of the transactions for 2005 under the Master Purchase Agreement will be near the high end of the range of approximately HK$219 million to HK$394 million, and the proposed caps of the transactions for 2006 and 2007 under the Master Purchase Agreement are within the range of approximately HK$318 million to HK$572 million and approximately HK$345 million to HK$621 million respectively. Therefore, we consider the caps proposed under the Master Purchase Agreement by the Company are reasonable.

As stated in the letter from the Board, the Company will comply with the applicable provisions of the Listing Rules governing connected transactions in the event that the total amount of the transaction under the Master Purchase Agreement exceed the proposed caps, or that there is any material amendment to the terms of the Master Purchase Agreement.

2. The proposed caps of the Master Supply Agreement

As stated in the letter from the Board, the proposed cap amounts of the transactions under the Master Supply Agreement for each of the three years ending 31 December 2007 are HK$400 million (excluding value added tax), HK$500 million (excluding value added tax) and HK$550 million (excluding value added tax) respectively.

As stated in the letter from the Board, the proposed cap amounts are determined with reference to the expansion plans of the Parent Group provided by the Parent Group. Based on our discussion with the management of the Company, the Company estimates that the number of outlets and the proportion of sales of these outlets of the Parent Group to be involved in the transactions contemplated under the Master Supply Agreement for the three years ending 31 December 2007 would be similar to those of the Group. Given that the Master Supply Agreement is a reciprocal arrangement of the Master Purchase Agreement, the cap amounts of the Master Supply Agreement have been proposed to be the same as those of the Master Purchase Agreement, i.e. HK$400 million (excluding value added tax), HK$500 million (excluding value added tax) and HK$550 million (excluding value added tax) for each of the three years ending 31 December 2007 respectively.

As illustrated in our evaluation of the proposed caps of the transactions under the Master Purchase Agreement in the section above, we note that:

• (i) the Master Supply Agreement is a reciprocal arrangement of the Master Purchase Agreement under the same terms;

• (ii) the cap amounts of the Master Supply Agreement have been proposed to be the same as those of the Master Purchase Agreement, i.e. the proposed caps of the transactions for the three years ending 31 December 2007 of HK$400 million, HK$500 million and HK550 million respectively under the Master Supply Agreement;

• 25 -

LETTER FROM PLATINUM

• (iii) as illustrated in Table 6 above, we note that the proposed caps of the transactions for 2005 under the Master Supply Agreement will be near the high end of the range of approximately HK$219 million to HK$394 million, and the proposed caps of the transactions for 2006 and 2007 under the Master Supply Agreement are within the range of approximately HK$318 million to HK$572 million and approximately HK$345 million to HK$621 million respectively.

Therefore, we consider the caps proposed under the Master Supply Agreement by the Company are reasonable.

As stated in the letter from the Board, the Company will comply with the applicable provisions of the Listing Rules governing connected transactions in the event that the total amount of the transactions under the Master Supply Agreement exceed the proposed cap amounts, or that there is any material amendment to the terms of the Master Supply Agreement.

In light of the above, we are of the view that the Proposed Caps in relation to the Continuing Connected Transactions are fair and reasonable and in the interest of the Company and its Shareholders as a whole.

RECOMMENDATION

Having considered the principal factors referred to above, we are of the view that the Master Purchase Agreement and the Master Supply Agreement in relation to the Continuing Connected Transactions are entered into in the ordinary and usual course of business of the Company and the terms of the Master Purchase Agreement, the Master Supply Agreement and the Proposed Caps in relation to the Continuing Connected Transactions, are fair and reasonable and in the interest of the Company and its Shareholders as a whole. Accordingly, we advise the Independent Board Committee to recommend to the Independent Shareholders to vote in favor of the ordinary resolution in relation to the Master Purchase Agreement, the Master Supply Agreement and the Proposed Caps in relation to the Continuing Connected Transactions to be proposed at the Special General Meeting. We also recommend the Independent Shareholders to vote in favor of the ordinary resolution in relation to the Master Purchase Agreement, the Master Supply Agreement and the Proposed Caps in relation to the Continuing Connected Transactions to be proposed at the Special General Meeting.

Yours faithfully, Yours faithfully, For and on behalf of For and on behalf of Platinum Securities Company Limited Platinum Securities Company Limited Liu Chee Ming Alvin Lai Managing Director Director

• 26 -

GENERAL INFORMATION

APPENDIX

1. RESPONSIBILITY STATEMENT

This circular includes particulars given in compliance with the Listing Rules for the purpose of giving information with regard to the Company. The Directors collectively and individually accept full responsibility for the accuracy of the information contained in this circular and confirm, having made all reasonable enquiries, that to the best of their knowledge and belief, there are no other facts not contained in this circular, the omission of which would make any statement herein misleading.

2. SHARE CAPITAL

As at the Latest Practicable Date, the authorised and issued share capital of the Company was as follows:

Authorised share capital 50,000,000,000 Shares of HK$0.1 each Issued and fully paid 1,642,447,585 Shares	HK$’000 5,000,000
	164,245

3. DISCLOSURE OF INTERESTS

(a) Disclosure of interests by the Directors

As at the Latest Practicable Date, the interests and short positions of the Directors and chief executive in the shares, underlying shares and debentures of the Company and its associated corporation (within the meaning of Part XV of the SFO) which (a) were required to be notified to the Company and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO (including interests and short positions which they are taken or deemed to have under such provisions of the SFO); or (b) were required, pursuant to Section 352 of the SFO, to be entered in the register referred to therein; or (c) were required, pursuant to the Model Code for Securities Transactions by Directors of Listed Issuers of the Listing Rules, to be notified to the Company and the Stock Exchange were as follows:

Long positions in underlying Shares of the Company

		Number of Shares	held
	Personal	Corporate		Percentage of
Name of Director	Interests	Interests	Total	shareholding
Wong Kwong Yu	900,087	1,075,714,998	1,076,615,085	65.55%
		(note)

note:

These Shares are held as to 889,677,604 shares by Shinning Crown Holdings Inc. and as to 186,037,394 shares by Shine Group Limited. Both companies are 100% beneficially owned by Mr. Wong.

• 27 -

GENERAL INFORMATION

APPENDIX

(b) Particulars of Directors’ Service Contracts

As at the Latest Practicable Date, no Director had a service contract with any member of the Group which is not determinable by the Company within one year without payment of compensation (other than statutory compensation).

(c) Save as disclosed above, as at the Latest Practicable Date:

• (i) none of the Directors and chief executive hold any interest or short position in the shares, underlying shares and debentures of the Company or any of its associated corporation (within the meaning of the SFO) notifiable to the Company and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO (including interests and short positions which they are taken or deemed to have under such provisions of the SFO) or which are required, pursuant to Section 352 of the SFO, to be entered in the register referred to therein, or which are required, pursuant to the Model Code for Securities Transactions by Directors of Listed Issuers of the Listing Rules, to be notified to the Company and the Stock Exchange;

• (ii) none of the Directors had any direct or indirect interest in any assets which have been, since the date to which the latest published audited accounts of the Group were made up, acquired or disposed of by, or leased to the Company or any of its subsidiaries, or are proposed to be acquired or disposed of by, or leased to, the Company or any of its subsidiaries; and

• (iii) none of the Directors is materially interested in any contract or arrangement entered into by the Company or any of its subsidiaries which contract or arrangement is subsisting at the date of this circular and which is significant in relation to the business of the Group.

(d) Directors’ interests in competing businesses

As at the Latest Practicable Date, the interests of the Director in the businesses (other than those businesses where the Directors were appointed as directors to represent the interests of the Company and/ or any member of the Group) which are considered to compete or are likely to compete, either directly or indirectly, with the businesses of the Group were as follows:

Name of Director

Description of Name of entity businesses of whose businesses the entity which are considered are considered to compete or to compete or likely to compete likely to compete Nature of interest with the business with the businesses of the Director of the Group of the Group in the entity

Wong Kwong Yu

the Parent Group

retailing of electrical controlling shareholder appliances and consumer electronic products

• 28 -

GENERAL INFORMATION

APPENDIX

Mr. Wong and the Company entered into a non-competition undertaking on 29 July 2004, pursuant to which Mr. Wong undertook to the Company that, among other things, he will not, and will procure that the Parent Group will not, engage in retail sales of electrical appliances and/or consumer electronic products in places where the Group had established any retail outlet for the sale of electrical appliances and consumer electronic products under “GOME Electrical Appliances” trade mark. Further details of the non-competition undertaking which have been set out in the circular of the Company dated 5 July 2004.

4. SUBSTANTIAL SHAREHOLDERS

Save as disclosed above, so far as was known to the Directors, there was no other person (other than the Directors or chief executive of the Company) who, as at the Latest Practicable Date, had an interest or short position in the Shares and underlying Shares which would fall to be disclosed to the Company under the provisions of Divisions 2 and 3 of Part XV of the SFO, or, who was, directly or indirectly, beneficially interested in 5% or more of the issued share capital of the Company.

As at the Latest Practicable Date, the Directors are not aware of any person who was, as at the Latest Practicable Date, directly or indirectly interested in 10% or more of the nominal value of any class of share capital carrying rights to vote in all circumstances at general meeting of any subsidiary (within the meaning of the Listing Rules) of the Group or in any options in respect of such capital.

5. LITIGATION

As at the Latest Practicable Date, neither the Company nor any of its subsidiaries was engaged in any litigation or arbitration of material importance and no litigation or claim of material importance is known to the Directors to be pending or threatened by or against the Company or any of its subsidiaries.

6. MATERIAL ADVERSE CHANGE

Save as disclosed in this circular, the Directors are not aware of any material adverse change in the financial or trading position of the Group since 31 December, 2004, the date to which the latest published audited accounts of the company were made up.

7. QUALIFICATION AND CONSENT OF EXPERT

Platinum has given and has not withdrawn its written consent to the issue of this circular with the inclusion of its letter and reference to its name in the form and context in which they appear.

The qualification of the expert who has provided its advice which is contained in this circular is set out as follows:

Name Qualification

Platinum A corporation deemed licensed to carry out type 1 (dealing in securities), type 4 (advising on securities), type 6 (advising on corporate finance) and type 9 (asset management) regulated activities under the SFO.

As at the Latest Practicable Date, Platinum is not interested in any Shares or shares in any member of the Group nor does it have any right or option (whether legally enforceable or not) to subscribe for or nominate persons to subscribe for any Shares or shares in any member of the Group.

• 29 -

GENERAL INFORMATION

APPENDIX

8. MISCELLANEOUS

• (a) The share registrar of the Company in Hong Kong is Abacus Share Registrars Limited located at Ground Floor, Bank of East Asia Harbour View Centre, 56 Gloucester Road, Wanchai, Hong Kong.

• (b) The English text of this circular will prevail over the Chinese text.

9. DOCUMENTS AVAILABLE FOR INSPECTION

Copies of the following documents will be available for inspection during business hours at the registered office of the Company from the date of this circular up to and including 15 April 2005:

• (a) the memorandum and bye-laws of the Company;

• (b) the annual reports of the Company for the two year/period ended 31 March 2004 and 31 December 2004 respectively.

• (c) the “Letter from the Independent Board Committee” as set out in this circular;

• (d) the “Letter from Platinum” as set out on in this circular;

• (e) the written consent from Platinum referred to in paragraph 7 of this Appendix;

• (f) the Master Purchase Agreement; and

• (g) the Master Supply Agreement.

• 30 -

NOTICE OF THE SPECIAL GENERAL MEETING

==> picture [73 x 42] intentionally omitted <==

GOME Electrical Appliances Holding Limited 國美電器控股有限公司[*]

(incorporated in Bermuda with limited liability)

(Stock Code: 493)

NOTICE IS HEREBY GIVEN that a special general meeting of the shareholders of GOME Electrical Appliances Holding Limited (the “ Company ”) will be held at Salon at the JW Marriott Ballroom of JW Marriott Hotel Hong Kong, Pacific Place, 88 Queensway, Hong Kong on 15 April 2005 at 11:00 a.m. (or so soon thereafter as the annual general meeting of the Company to be held at the same place and day shall have been concluded or adjourned) for the purpose of considering and, if thought fit, passing the following resolution as an ordinary resolution of the Company:

ORDINARY RESOLUTIONS

1. “ THAT

   • (a) the conditional agreement (the “ Master Purchase Agreement ”) dated 17 March 2005 entered into between GOME Electrical Appliances Holding Limited (“ GOME Appliance ”) and Beijing GOME Electrical Appliance Co., Ltd. (“ Beijing GOME ”), a copy of which is tabled at the meeting and marked “A” and initialled by the chairman of the meeting for identification purpose, pursuant to which GOME Appliance agreed to purchase electrical appliances and consumer electronic products (the “ Products ”) from Beijing GOME from time to time be and is hereby approved, ratified and confirmed;

   • (b) the cap amount in relation to the transactions under the Master Purchase Agreement for each of the three financial years ending 31 December 2007 of HK$400 million (excluding value added tax), HK$500 million (excluding value added tax) and HK$550 million (excluding value added tax) respectively be and is hereby approved; and

   • (c) any one director of the Company, or any two directors of the Company if affixation of the common seal is necessary, be and is/are hereby authorised for and on behalf of the Company to execute all such other documents, instruments and agreements and to do all such acts or things deemed by him/her to be incidental to, ancillary to or in connection with the matters contemplated in the Master Purchase Agreement.”

2. for the purpose of identification only

3. 31 -

NOTICE OF THE SPECIAL GENERAL MEETING

1. “ THAT

2. (a) the conditional agreement (the “ Master Supply Agreement ”) dated 17 March 2005 entered into between GOME Appliance and Beijing GOME, a copy of which is tabled at the meeting and marked “B” and initialled by the chairman of the meeting for identification purpose, pursuant to which GOME Appliance will sell the Products to Beijing GOME from time to time be and is hereby approved, ratified and confirmed;

3. (b) the cap amount in relation to the transactions under the Master Supply Agreement for each of the three financial years ending 31 December 2007 of HK$400 million (excluding value added tax), HK$500 million (excluding value added tax) and HK$550 million (excluding value added tax) respectively be and is hereby approved; and

4. (c) any one director of the Company, or any two directors of the Company if affixation of the common seal is necessary, be and is/are hereby authorised for and on behalf of the Company to execute all such other documents, instruments and agreements and to do all such acts or things deemed by him/her to be incidental to, ancillary to or in connection with the matters contemplated in the Master Supply Agreement.”

5. “ THAT the final dividend of 2.5 Hong Kong cents per share for the nine-month period ended 31 December 2004 proposed by the board of directors of the Company on 14 March 2005 be and is hereby approved.”

By Order of the Board

GOME Electrical Appliances Holding Limited Ng Kin Wah Director

Hong Kong, 30 March 2005

Principal place of business in Hong Kong:

6101, 61st Floor The Center 99 Queen’s Road Central Hong Kong

Notes:

1. A form of proxy for use at the meeting is enclosed herewith.

2. The instrument appointing a proxy shall be in writing under the hand of the appointor or of his/her attorney duly authorised in writing or, if the appointor is a corporation, either under its seal or under the hand of any officer, attorney or other person authorised to sign the same.

3. Any member entitled to attend and vote at the meeting is entitled to appoint one or more proxies to attend and, on a poll, vote instead of him/her. A proxy need not be a member of the Company.

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NOTICE OF THE SPECIAL GENERAL MEETING

1. In order to be valid, the form of proxy, together with the power of attorney or other authority (if any) under which it is signed, or a notarially certified copy of such power or authority, must be lodged at the office of the branch share registrar of the Company in Hong Kong, Abacus Share Registrars Limited, at Ground Floor, Bank of East Asia Harbour View Centre, 56 Gloucester Road, Wanchai, Hong Kong, not less than 48 hours before the time appointed for holding the meeting or any adjourned meeting thereof (as the case may be).

2. Completion and return of the form of proxy will not preclude members from attending and voting in person at the meeting or at any adjourned meeting thereof (as the case may be) should they so wish, and in such event, the form of proxy shall be deemed to be revoked.

3. Where there are joint registered holders of any share, any one of such joint holders may vote, either in person or by proxy, in respect of such share as if he/she was solely entitled thereto, but if more than one of such joint holders are present at the meeting, whether in person or by proxy, the joint registered holder present whose name stands first on the register of members in respect of the shares shall be accepted to the exclusion of the votes of the other joint registered holders.

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