THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION

If you are in any doubt about this circular, you should obtain independent professional advice.

If you have sold or transferred all your shares in HISENSE KELON ELECTRICAL HOLDINGS COMPANY LIMITED , you should at once hand this circular to the purchaser or transferee or to the bank, licensed securities dealer 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.

==> picture [404 x 41] intentionally omitted <==

HISENSE KELON ELECTRICAL HOLDINGS COMPANY LIMITED 海信科龍電器股份有限公司 (a joint stock limited company incorporated in the People’s Republic of China with limited liability) (Stock Code: 00921)

CONTINUING CONNECTED TRANSACTIONS

Independent Financial Advisor to the Independent Board Committee and the Independent Shareholders

==> picture [100 x 46] intentionally omitted <==

A letter from the Board is set out from pages 3 to 9 of this circular.

A supplemental notice convening the AGM of the Company to be held at 25 June 2008 at 9:30 a.m. at the conference room of the Company’s head office, Shunde District, Foshan City, Guangdong Province, the PRC is set out on pages 35 to 36 of this circular.

Supplemental form of proxies for use at the AGM are enclosed with this circular. If you are not able to attend the meeting in person, you are requested to complete and return the enclosed proxy form in accordance with the instructions printed thereon and lodge the same with the Company’s Branch Share Registrar in Hong Kong, Hong Kong Registrars Limited of Rooms 1712-1716, 17/F, Hopewell Centre, 183 Queen’s Road East, Wanchai, Hong Kong, not less than 24 hours before the time fixed for holding the AGM or any adjournment thereof. Completion and delivery of the form of proxy will not preclude you from attending and voting at the meeting or any adjournment thereof if you so wish.

6 June 2008

CONTENTS

	Page
Definitions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	1
Letter from the Board. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	3
Letter from the Independent Board Committee. . . . . . . . . . . . . . . . . . . . . . . . . . . .	10
Letter from Access Capital. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	11
Appendix I — General Information. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	28
Supplemental and Further Notice of AGM. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	35

— i —

DEFINITIONS

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

“AGM”	The annual general meeting of the Company to be held on 25
	June 2008 to consider and approve, among other things, the
	JV Agreement and the transaction contemplated thereunder
“A Shares”	domestic ordinary shares of the Company with a nominal
	value of RMB1.00 each and are listed on the Shenzhen Stock
	Exchange
“Access Capital”	Access Capital Limited, a corporation licensed under the SFO
	for carrying 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,
	being the independent financial adviser to the Independent
	Board Committee and the Independent Shareholders in respect
	of the Overseas Sales Framework Agreement
“Associate”	has the meaning ascribed to it in the Listing Rules
“Board”	the board of Directors
“Company”	Hisense Kelon Electrical Holdings Company Limited, a
	company incorporated in the PRC with limited liability and
	listed on the main board of the Stock Exchange and Shenzhen
	Stock Exchange
“Director(s)”	the director(s) of the Company
“H Shares”	overseas listed foreign shares of the Company with a nominal
	value of RMB1.00 each and are listed on the Stock Exchange
“Hisense Air-conditioning”	Qingdao Hisense Air-Conditioning Co., Ltd (青島海信空調
	有限公司), a subsidiary of Hisense Group and a substantial
	shareholder of the Company
“Hisense Group”	Hisense Group Company, a limited company incorporated in
	the PRC
“Hisense International”	Qingdao Hisense International Marketing Company Limited
	(青島海信國際營銷有限公司), a subsidiary of Hisense Group

— 1 —

DEFINITIONS

“Independent Board an independent board committee of the Company comprising Committee” all the independent non-executive Directors namely Mr. Zhang Sheng Ping, Mr. Lu Qing and Mr. Cheung Yui Kai, Warren
“Independent Shareholders” Shareholders other than those who are required under the Listing Rules to abstain from voting on the resolution to be proposed at the AGM to approve the Overseas Sales Framework Agreement and the transactions contemplated thereunder
“Independent Third Parties” Third parties independent of and not connected with the Company and its connected persons, as defined in the Listing Rules, of the Company
“Latest Practicable Date” 4 June 2008, being the latest practicable date prior to the printing of this circular for ascertaining certain information in this circular
“Listing Rules” Rules Governing the Listing of Securities on the Stock Exchange
“Overseas Sales Framework the agreement (海外銷售框架協議) entered into between Agreement” the Company and Hisense International dated 22 May 2008 in relation to the sale of household electrical appliances to Hisense International.
“PRC” the People’s Republic of China
“RMB” Renminbi yuan, the lawful currency of the PRC
“Share(s)” share(s) of RMB1.00 each in the capital of the Company, comprising the A Shares and the H Shares
“Shareholder(s)” holders of the Shares
“Stock Exchange” The Stock Exchange of Hong Kong Limited
“subsidiary” or has the meaning defined in section 2B of the Companies “subsidiaries” Ordinance (Cap.32 of the Laws of Hong Kong)
“%” per cent.

— 2 —

LETTER FROM THE BOARD

==> picture [404 x 41] intentionally omitted <==

HISENSE KELON ELECTRICAL HOLDINGS COMPANY LIMITED 海信科龍電器股份有限公司

(a joint stock limited company incorporated in the People’s Republic of China with limited liability)

(Stock Code: 00921)

Directors:

Mr. Tang Ye Guo Mr. Wang Shi Lei Ms. Yu Shu Min Mr. Lin Lan Ms. Liu Chun Xin Mr. Zhang Ming

Registered Office: No. 8 Ronggang Road Ronggui Street Shunde District Foshan City Guangdong Province China

Independent non-executive Directors:

Mr. Zhang Sheng Ping Mr. Lu Qing Mr. Cheung Yui Kai, Warren

Principal place of business in Hong Kong: Room 3104-06 Singga Commercial Centre No. 148 Connaught Road West Hong Kong

6 June 2008

To the Shareholders

Dear Sir or Madam,

CONTINUING CONNECTED TRANSACTIONS

INTRODUCTION

The Board announces that on 22 May 2008, the Company entered into the Overseas Sales Framework Agreement with Hisense International for a term of one year ending on 31 December 2008 in relation to the sale of household electrical appliances to Hisense International.

— 3 —

LETTER FROM THE BOARD

Framework Agreement constitute continuing connected transactions of the Company under the Listing Rules and should be aggregated for the purpose of Rules 14A.25 to 14A.27 of the Listing Rules. Given that the applicable percentage ratios (other than the profit ratio) for the aggregated amount of the transactions contemplated under the Overseas Sales Framework Agreement is more than 2.5%, the continuing connected transactions under the Overseas Sales Framework Agreement are subject to reporting, announcement and Independent Shareholders’ approval requirements under Rule 14A.35 of the Listing Rules.

The purpose of this circular is to provide you with details of the Overseas Sales Framework Agreement, to set out the recommendation of the Independent Board Committee and to set out the letter of advice from Access Capital to the Independent Board Committee and the Independent Shareholders in respect of the terms of the Overseas Sales Framework Agreement.

OVERSEAS SALES FRAMEWORK AGREEMENT

Date

22 May 2008

PARTIES

(i) The Company; and
(ii) Hisense International.

Term

The Overseas Sales Framework Agreement is valid for a term of one year commencing from 1 January 2008 to 31 December 2008, which can be terminated before its expiration by mutual agreement of the parties.

Conditions

The Overseas Sales Framework Agreement and the continuing connected transactions contemplated thereunder are subject to the approval of the Independent Shareholders at the general meeting of the Company and other relevant requirements under the Listing Rules and the listing rules of the Shenzhen Stock Exchange.

— 4 —

LETTER FROM THE BOARD

The transactions under the Overseas Sales Framework Agreement are in the ordinary and usual course of business of the Company and are in connection with the sale of household electrical appliances by the Company to Hisense International, particulars of which are set out as follows:

Pursuant to the Overseas Sales Framework Agreement, the Company has agreed to manufacture and sell to Hisense International on a non-exclusive basis such quantities of household electrical appliances, including refrigerators, air-conditioners, freezers, heaters and other small household electrical appliances, as Hisense International may require from time to time for sales to its overseas customers.

The parties has also agreed to enter into individual sale and supply order to set out the specific terms (including the quantity, price, quality standards and terms of delivery) of each sale, which shall be consistent with the principles and terms of the Overseas Sales Framework Agreement. Such transactions will be conducted in the ordinary and usual course of business of the Company, on normal commercial terms and on terms not less favourable to the Company than terms available to or from (as appropriate) Independent Third Parties.

Under the Overseas Sales Framework Agreement, Hisense International has the right to purchase household electrical appliances from suppliers other than the Company from time to time according to its own needs, while the Company is also free to sell its household electrical appliances to any other third parties.

Pricing

the production cost of the Company/(1 – (the gross profit margin of the Company for that particular product in 2007))

and will be comparable to the price offered to independent third parties of the Company.

Payment Term

Payment for the purchase of household electrical appliances should be made by telegraphic transfer or bank notes by Hisense International within 60 days from delivery of the products.

— 5 —

LETTER FROM THE BOARD

Reasons for and benefits of the sales of household electrical appliances

The Company is principally engaged in the manufacture and sales of refrigerators and airconditioners and other white goods business within the PRC. The sales of household electrical appliances to Hisense International allow the Company to access the international sales channels of Hisense International in a cost efficient manner so as to expand its overseas markets and customer base, lower its transportation and promotional expenses, promote the brands of the Company, globalize its sales networks and improve its profit margins.

In light of the above, the Directors are of the view that the terms of the sales of household electrical appliances under the Overseas Sales Framework Agreement are fair and reasonable and in the interests of the Company and the Shareholders as a whole.

Historical Figures

The Company did not conduct any similar transactions with Hisense International prior to the Latest Practicable Date.

Maximum Annual Cap

The transactions contemplated by the Overseas Sales Framework Agreement for the year ending 31 December 2008 regarding the sales of household electrical appliances are subject to the annual caps set out below:

Household electrical appliances

refrigerators air-conditioners freezers other small household electrical appliances, including heaters Total	RMB 129,000,000 247,500,000 16,000,000 14,000,000
	406,500,000

The above annual caps were determined with reference to (i) the projected total sales of the household electrical appliances in the overseas market based on the sales of household electrical appliances such as air-conditioners and refrigerators in the overseas market in the previous years; (ii) the projected market share of the sales of air-conditioners and refrigerators through the sales channels of Hisense in the overseas market taking into account its sales of household electrical appliances such as air-conditioners and refrigerators in the overseas market in the previous years; (iii) the estimated sales of the products in the regions to be developed by Hisense International on Company’s behalf (mainly those regions which

— 6 —

LETTER FROM THE BOARD

are not already covered by the existing sales network of the Company) and in the newly emerging markets based on the sales in the overseas market as mentioned above; and (iv) the estimated sales of self-brand products by the Company in the overseas market based on the projected sales in the overseas market as mentioned in (i) above and the current overseas market conditions.

INFORMATION RELATING TO THE COMPANY

The Company is principally engaged in the manufacture and sales of refrigerators and airconditioners.

INFORMATION ON HISENSE INTERNATIONAL

Hisense International was incorporated in the PRC in January 2008 with limited liability. It has a registered capital of RMB20,000,000. It is principally engaged in conducting import and export of goods and technology to overseas markets and provision of other services relating to joint venture, production cooperation and further possessing.

LISTING RULES IMPLICATIONS

As at the Latest Practicable Date, Hisense Air-conditioning is a substantial shareholder of the Company, holding approximately 23.15% of the issued shares of the Company. Hisense International, a subsidiary of Hisense Group which is the controlling shareholder of Hisense Air-conditioning, is an Associate of Hisense Air-Conditioning and therefore, a connected person of the Company. As such, the transactions contemplated under the Overseas Sales Framework Agreement constitute continuing connected transactions of the Company under the Listing Rules and should be aggregated for the purpose of Rules 14A.25 to 14A.27 of the Listing Rules. Given that the applicable percentage ratios (other than the profit ratio) for the aggregated amount of the transactions contemplated under the Overseas Sales Framework Agreement is more than 2.5%, the continuing connected transactions under the Overseas Sales Framework Agreement are subject to reporting, announcement and Independent Shareholders’ approval requirements under Rule 14A.35 of the Listing Rules.

AGM

A supplemental notice of the AGM to be held at 9:30 a.m. on 25 June 2008 at the conference room of the Company’s head office, Shunde District, Foshan City, Guangdong Province, the PRC, at which relevant resolution will be proposed to approve, among other things, the Overseas Sales Framework Agreement and the transactions contemplated thereunder.

Pursuant to Rule 13.39(4) of the Listing Rules, the votes of Independent Shareholders taken at the AGM for the approval of the Overseas Sales Framework Agreement and the transactions contemplated thereunder must be taken on poll.

— 7 —

LETTER FROM THE BOARD

Since Hisense Air-Conditioning is a Shareholder of the Company holding 23.15% of the issued share capital of the Company, it and its Associates have to be abstained from voting in relation to the approval of the Overseas Sales Framework Agreement and the transactions contemplated thereunder.

Supplemental form of proxy for use at the AGM is enclosed with this circular. Whether or not you are able to attend the AGM, you are requested to complete the accompanying form of proxy in accordance with the instructions printed thereon and return the same to the Company’s branch share registrar and transfer office for H Shares, Hong Kong Registrars Limited at Rooms 1712–1716, 17th floor, Hopewell Centre, 183 Queen’s Road East, Wanchai, Hong Kong, as soon as possible and in any event not less than 24 hours before the time appointed for the holding of the AGM or any adjournment thereof. Completion and return of the form of proxy shall not preclude you from attending and voting in person at the AGM or any adjourned meeting should you so desire.

In accordance with article 8.28 of the articles of association of the Company, a poll may be demanded in any general meeting of the Company by:

(A) the chairman of the meeting; or
(B) at least two Shareholders with voting rights or their representative; or
(C) individual or a group of Shareholders (including their representatives) holding 10% or more of the voting rights present in that general meeting.

RECOMMENDATION

Your attention is drawn to the advice of the Independent Board Committee set out in its letter on page 10 of this circular which contains its recommendation to the Independent Shareholders on the terms of the Overseas Sales Framework Agreement.

Your attention is also drawn to the letter of advice from Access Capital, which are set out on pages 11 to 27 in this circular, to the Independent Board Committee and the Independent Shareholders in respect of the terms of and the annual caps for the continuing connected transactions contemplated under the Overseas Sales Framework Agreement.

ADDITIONAL INFORMATION

Your attention is drawn to the general information of the Group as well as other information contained in the appendices to this circular before considering whether to vote for or against the resolution to be proposed at the AGM for approving the Overseas Sales Framework as set out in the supplemental notice of the AGM.

— 8 —

LETTER FROM THE BOARD

TRADING IN THE H SHARES OF THE COMPANY

At the request of the Company, trading in the H Shares of the Company was suspended from 28 April 2005 to 10 May 2005, and has remained suspended since 10:00 a.m. on 16 June 2005, initially following various press releases regarding the investigation by the China Securities and Regulatory Commission on Greencool Technology Holdings Limited in connection with the possible misappropriation of funds of the Company. Greencool Technology Holdings Limited was then an indirect shareholder of the Company controlled by Mr. Gu Chu Jun, who was the then executive director and chairman of the Company and the controlling shareholder of Guangdong Greencool Enterprise Development Company Limited, the then single largest shareholder of the Company.

The Company has reviewed the relevant documents in relation to the suspension of trading of the H Shares, the events leading to such suspension and the actions taken by the Company and has submitted a resumption proposal to the Stock Exchange for review. The Company received a letter from the Stock Exchange dated 5 June 2008 agreeing that trading in the H shares of the Company be allowed to resume subject to the fulfilment of the conditions as set out in its letter to the satisfaction of the Stock Exchange prior to the resumption of trading in the H shares of the Company. Please refer to the announcement of the Company dated 6 June 2008 for details of such conditions.

Yours faithfully,

By Order of the Board of

Hisense Kelon Electrical Holdings Company Limited Tang Ye Guo Chairman

— 9 —

LETTER FROM THE INDEPENDENT BOARD COMMITTEE

==> picture [404 x 41] intentionally omitted <==

HISENSE KELON ELECTRICAL HOLDINGS COMPANY LIMITED 海信科龍電器股份有限公司

(a joint stock limited company incorporated in the People’s Republic of China with limited liability)

(Stock Code: 00921)

6 June 2008

To the Independent Shareholders

Dear Sir or Madam,

CONTINUING CONNECTED TRANSACTIONS

We refer to the circular issued by the Company to Shareholders dated 6 June 2008 (the “Circular”) of which this letter forms part. Terms defined in this Circular shall have the same meanings in this letter unless the context otherwise requires.

Under the Listing Rules, the entering into of the Overseas Sales Framework Agreement constitutes continuing connected transactions for the Company and is thus subject to the approval of the Independent Shareholders at the AGM.

We have been appointed by the Board to consider the terms of the Overseas Sales Framework Agreement and to advise the Independent Shareholders in connection with the Overseas Sales Framework Agreement as to whether, in our opinion, its terms and its annual cap are fair and reasonable so far as the Independent Shareholders are concerned. Access Capital has been appointed as the independent financial adviser to advise us in this respect.

We wish to draw your attention to the letter from the Board and the letter from Access Capital as set out in this Circular. Having considered the principal factors and reasons considered by, and the advice of Access Capital as set out in its letter of advice, we consider that the Overseas Sales Framework Agreement are on normal commercial terms and in the interest of the Company and the Shareholders as a whole.

We also consider that the Overseas Sales Framework Agreement and its annual cap is fair and reasonable so far as the Independent Shareholders are concerned.

Accordingly, we recommend the independent shareholders to vote in favour of the ordinary resolution to approve the Overseas Sales Framework Agreement at the AGM.

Yours faithfully,

For and on behalf of the Independent Board Committee

Zhang Sheng Ping Lu Qing Cheung Yui Kai, Warren

Independent non-executive Directors Hisense Kelon Electrical Holdings Company Limited

— 10 —

LETTER FROM ACCESS CAPITAL

Set out below is the text of the letter of advice from Access Capital Limited to the Independent Board Committee and the Independent Shareholders prepared for inclusion in this Circular.

==> picture [100 x 46] intentionally omitted <==

Suite 606, 6th Floor Bank of America Tower 12 Harcourt Road Central Hong Kong

6 June 2008

To the Independent Board Committee and

the Independent Shareholders of

Hisense Kelon Electrical Holdings Company Limited

Dear Sirs,

CONTINUING CONNECTED TRANSACTIONS

INTRODUCTION

We refer to our appointment as the independent financial adviser to the Independent Board Committee and the Independent Shareholders in respect of the Overseas Sales Framework Agreement, details of which are set out in the circular to the Shareholders dated 6 June 2008 (the “Circular”), of which this letter forms part. This letter contains our advice to the Independent Board Committee and the Independent Shareholders in respect of the Overseas Sales Framework Agreement. Unless otherwise stated, terms defined in the Circular have the same meanings in this letter.

On 22 May 2008, the Board announced that the Company entered into the Overseas Sales Framework Agreement with Hisense International for a term of one year ending on 31 December 2008 in relation to the sale of household electrical appliances to Hisense International. As at the date of the Overseas Sales Framework Agreement and the Latest Practicable Date, Hisense Air-conditioning, being a substantial shareholder of the Company holding approximately 23.15% interest in the Company, is a connected person of the Company under the Listing Rules. As Hisense Air-conditioning is a non-wholly owned subsidiary of Hisense Group, Hisense Group and its subsidiaries are Associates of Hisense Air-conditioning and each of them is regarded as a connected person of the Company under the Listing Rules. Hisense International, being a subsidiary of Hisense Group, is therefore a connected person of the Company and the transactions contemplated under the Oversea Sales Framework Agreement constitute continuing connected transactions of the Company under

— 11 —

LETTER FROM ACCESS CAPITAL

Chapter 14A of the Listing Rules (the “Continuing Connected Transactions”). Since the relevant percentage ratios as represented by the aggregate estimated amount of the Continuing Connected Transactions for the year ending 31 December 2008 exceed 2.5% and the annual consideration is more than HK$10,000,000, the Continuing Connected Transactions are subject to the reporting, announcement and independent shareholders’ approval requirements in accordance with Rule 14A.35 of the Listing Rules.

The Independent Board Committee, comprising all the independent non-executive Directors, has been formed to advise the Independent Shareholders as to whether the Continuing Connected Transactions are in the interests of the Company and the Shareholders as a whole, and the terms of the Overseas Sales Framework Agreement including the proposed annual caps are fair and reasonable. As the independent financial adviser to the Independent Board Committee and the Independent Shareholders, our role is to give an independent opinion to the Independent Board Committee and the Independent Shareholders as to (i) whether or not the Continuing Connected Transactions are in the interests of the Company and the Shareholders as a whole; (ii) whether or not the terms of the Overseas Sales Framework Agreement, including the maximum value of the transactions contemplated thereunder, are fair and reasonable; and (iii) how the Independent Shareholders should vote in respect of the resolutions to approve the Overseas Sales Framework Agreement and the transactions contemplated thereunder at the relevant general meeting of the Company.

Apart from the normal advisory fee payable to us in connection with our appointment as the independent financial adviser to the Independent Board Committee and the Independent Shareholders, no arrangement exists whereby we shall receive any other fees or benefits from the Company. We are independent of the Company for the purposes of Rule 13.84 of the Listing Rules.

BASIS OF OUR OPINION

In formulating our advice, we have relied solely on the statements, information, opinions and representations contained in the Circular and the information and representations provided to us by the Company and/or the Directors. We have assumed that all such statements, information, opinions and representations contained or referred to in the Circular or otherwise provided or made or given by the Company and/or its senior management staff and/or the Directors and for which it is/they are solely responsible were true and accurate and valid at the time they were made and given and continue to be true and valid as at the date of the Circular. We have assumed that all the opinions and representations made or provided by the Directors and/or the senior management staff of the Company contained in the Circular have been reasonably made after due and careful enquiry. We have also sought and obtained confirmation from the Company and/or its senior management staff and/or the Directors that no material facts have been omitted from the information provided and referred to in the Circular.

— 12 —

LETTER FROM ACCESS CAPITAL

We consider that we have reviewed all information and documents which are made available to us to enable us to reach an informed view and to justify our reliance on the information provided so as to provide a reasonable basis for our advice. We have no reason to doubt the truth, accuracy and completeness of the statements, information, opinions and representations provided to us by the Company and/or its senior management staff and/or the Directors and their respective advisers or to believe that material information has been withheld or omitted from the information provided to us or referred to in the aforesaid documents. We have not, however, carried out any independent verification of the information provided, nor have we conducted any independent investigation into the business and affairs of the Group.

PRINCIPAL FACTORS CONSIDERED

In formulating our opinion regarding the Continuing Connected Transactions, we have taken into consideration the following principal factors:

I. Background information and reasons for the Overseas Sales Framework Agreement

1. Information on the Group

The Company was incorporated in the PRC on 16 December 1992 and, together with its subsidiaries, is principally engaged in the manufacture and sale of refrigerators and air-conditioners. As stated in the Company’s annual report for the year ended 31 December 2007 (the “2007 Annual Report”), the Group’s operations were carried out in the PRC and almost all of the production facilities of the Group were located in the PRC. For the year ended 31 December 2007, approximately 61.0% of the Group’s turnover was derived from the PRC market (including Hong Kong) with the rest derived from European, American and other overseas markets.

— 13 —

LETTER FROM ACCESS CAPITAL

Set out below is a summary of the Group’s operating results and financial position for each of the three years ended 31 December 2007 as extracted from its annual reports:

Turnover
— Sales of refrigerators
— Sales of air-
conditioners
— Sales of freezers
— Sales of product
components
Gross profit
Other income and gains
Distribution costs
Administrative expenses
Other operating expenses
(Loss)/profit from
operations
(Loss)/profit for the year

For the year ended 31 December
2005
2006
2007
RMB’000
RMB’000
RMB’000
(Audited and
restated)
(Audited and
restated)
(Audited)
2,542,839
3,327,896
4,324,808
3,600,489
2,533,360
3,214,875
261,113
231,972
324,821
573,931
471,029
455,456
6,978,372
6,564,257
8,319,960
160,598
1,089,472
1,377,171
73,328
409,305
570,905
(1,517,946)
(869,207)
(1,126,269)
(1,495,596)
(390,978)
(397,500)
(815,931)
(56,815)
(133,500)
(3,595,520)
181,777
290,807
(3,790,636)
49,249
203,657

— 14 —

LETTER FROM ACCESS CAPITAL

		As at 31 December
	2005	2006	2007
	RMB’000	RMB’000	RMB’000
	(Audited and	(Audited and	(Unaudited)
	restated)	restated)
Non-current assets	2,547,460	2,237,643	1,990,117
Non-current assets held
for sale	—	—	20,369
Current assets	2,935,939	2,430,901	2,404,085
Current liabilities	(6,252,654)	(5,382,881)	(5,044,345)
Non-current liabilities	(30,818)	(13,594)	—
Net current liabilities	(3,316,715)	(2,951,980)	(2,640,260)
Total net liabilities	(800,073)	(727,931)	(629,774)

We have noted from the Company’s annual report for 2005 (the “2005 Annual Report”) that the Company’s auditors, BDO McCabe Lo Limited, (the “Auditors”) had expressed a qualified opinion on the financial statements of the Company for the year ended 31 December 2005 arising from the limitation of audit scope. In particular, the Auditors opined that the financial statements give a true and fair view of the state of affairs of the Group as at 31 December 2005 except for any adjustments that might be required with respect to the limitation in audit scope on the consolidated financial statements of a subsidiary of the Company, the carrying amount of the property, plant and equipment and revaluation reserve, the opening balance of inventories, the validity and recoverability of unreconciled receivables and the validity and completeness of unreconciled payables, the existence and recoverability of a receivable arising from the sale of an interest in leasehold land under operating lease, the validity, the appropriateness of the impairment amount and the recoverability of the receivables due from the previous controlling shareholder of the Company (namely Guangdong Greencool Enterprise Development Company Limited (“Greencool Enterprise”)) and its affiliates, all material related party transactions and the appropriateness, completeness and accuracy of the prior year restatements. Because of the significance of the possible effects of the limitation in scope in respect of reliable evidence outside the control of the Directors on the aforesaid matters, the Auditors were unable to form an opinion as to whether the financial statements give a true and fair view of the Group’s loss and cash flows for the year ended 31 December 2005.

— 15 —

LETTER FROM ACCESS CAPITAL

As noted from the 2005 Annual Report, the substantial net loss of approximately RMB3,790.6 million was mainly due to (i) concurrent recognition of substantial bad debts, substantial accrued expenses, defective inventories, excessive nonperforming investments, idle assets, economic disputes and potential losses arising from the previous management of the Company during the year; (ii) the suspension in nearly all of the Group’s production activities during the period from May to September 2005 (which is the peak season for the production and sale of refrigerators and air-conditioners in the financial year) as a result of the adverse impact on the confidence of the financial institutions, suppliers and customers on the Company caused by the incident of the investigation by the China Securities and Regulatory Commission (the “CSRC”) on the Group for alleged breaches of the securities laws and regulations in the PRC since 5 April 2005 as a result of the formal investigation by the PRC’s Public Security Bureau in connection with economic crimes suspected to be committed by Mr. Gu Chu Jun (“Mr. Gu”), a former executive Director and a former vice president and other former senior management officers responsible for the finance of the Group; and (iii) lower gross profit margin due to the sales of older models by the Group as it could not manufacture or introduce new product models to the market during the suspension in production activities.

We have noted from the Company’s annual report for 2006 (the “2006 Annual Report”) that the Auditors had also expressed a qualified opinion on the financial statements of the Company and its subsidiaries for the year ended 31 December 2006 arising from limitation of audit scope. In particular, due to the limitation of information available on and the irregularity of a series of activities/transactions entered into by Greencool Enterprise, its affiliates and/or companies suspected to be connected with Mr. Gu during the period from October 2001 to July 2005 including but not limited to unauthorised use of the Group’s funds, fictitious sales of goods and scrap materials, unreasonable prepayments and purchases of raw materials and property, plant and equipment at unreasonable quantities and prices, the Auditors were unable to satisfy themselves concerning the validity of the aforesaid transactions and the appropriateness of the accumulated impairment and the recoverability of the carrying amounts of the receivables and payables due from/to the suspected companies at approximately RMB286 million (net of an accumulated impairment loss of RMB364 million) and RMB132 million, respectively, as at 31 December 2006. Any adjustments found to be necessary would affect the net liabilities of the Group as at 31 December 2006 and the profit for the year then ended. Except for the effects of such adjustments (if any), the Auditors opined that the financial statements give a true and fair view of the state of the Group’s affairs as at 31 December 2006 and of its profit and cash flows for the year then ended.

— 16 —

LETTER FROM ACCESS CAPITAL

For the year ended 31 December 2006, the Group recorded an audited turnover of approximately RMB6,564.3 million (representing a slight decrease of approximately 6% from the turnover of approximately RMB6,978.4 million for the preceding year) and a net profit of approximately RMB49.2 million. As compared to the substantial amount of the net loss of approximately RMB3,790.6 million for the year 2005, the positive financial results for the year 2006 represents a significant turnaround of the Group’s financial performance. As explained in the 2006 Annual Report, such turnaround was mainly due to the fact that (i) the costs and expenses incurred by the Company were significantly lower than the preceding year as a result of the gradual implementation and adoption of various costs control measures during 2006 and the substantial improvement in gross profit margin; (ii) the Company received subsidies for technological upgrade and innovation in the sum of RMB70 million during the year; and (iii) there were revenues from the disposal of idle assets by the Company. As set out in the 2006 Annual Report that despite the adverse impact of the incident of investigation as briefly discussed above, the Group was able to improve gradually its production and sales activities with the profit margin of products and the liquidity of assets being further enhanced during 2006.

As for the year ended 31 December 2007, due to the limitation of information available on and the irregularity of a series of activities/transactions entered into by Greencool Enterprise, its affiliates and/or companies suspected to be connected with Mr. Gu during the period from October 2001 to July 2005 and the validity of the aforesaid transactions and the appropriateness of the accumulated impairment and the recoverability of the carrying amounts of the receivables and payables due from/to the suspected companies as mentioned in the 2006 Annual Report, the Auditors had also expressed a qualified opinion on the financial statements of the Company and its subsidiaries for the year ended 31 December 2007 arising from limitation of audit scope.

For the year ended 31 December 2007, the Group recorded an audited turnover of approximately RMB8,320.0 million, representing an increase of approximately 26.7% from the preceding year’s turnover of approximately RMB6,564.3 million. For the same period, the Group recorded a net profit of approximately RMB203.7 million, which represents a significant improvement over the net profit of approximately RMB49.2 million for the financial year 2006. As explained in the 2007 Annual Report and further advised by the Company, while 2007 had been a challenging year for PRC home appliance manufacturers there were significant increase in the prices of energy and raw materials around the world; worsening of financing environment under stringent domestic credit and increased financing costs; continued rapid appreciation of RMB; and increased costs of sea freight and non-tariff barriers, the improvement in the Group’s profitability was mainly attributable to the overall growth of the PRC economy and the industry, increase in idle assets disposal and revitalised revenues, as well as to the operation quality enhancement measures adopted by the Company during the year.

— 17 —

LETTER FROM ACCESS CAPITAL

Nevertheless, as set out in the 2007 Annual Report, despite the considerable improvement as compared to the previous years, the growth of the revenues for the Group’s air-conditioner business was still below the planned objectives and economies of scale was not achieved. In addition, as the Company aimed at enhancing its brand image and reputation, it had significantly increased the advertising and brand promotion expenses during the year, which resulting in the increase in sales expense exceeded the increase in revenues. Some production bases of the Group were still out of production and in a state of sustained loss due to the prolonged suspension in the past. In summary, the Company is generally still in a recovery stage. As a number of historical problems have brought numerous difficulties to the Company, the Company still failed to achieve its targets during the financial year 2007.

As at 31 December 2007, the Group had audited current assets of approximately RMB2,404.1 million and audited current liabilities of approximately RMB5,044.3 million, representing net current liabilities of approximately RMB2,640.3 million. As at 31 December 2007, the Group had outstanding short-term bank loans of approximately RMB1,312.0 million of which approximately RMB18.0 million were overdue as at 31 December 2007. As advised by the Company, the Group was in the process of negotiating with certain banks to restructure the amounts due to them and the Company’s management confirmed that most of the Group’s bankers have expressed their intention to reschedule the overdue bank borrowings and/or renew/grant the credit facilities to the Group. As at 31 December 2007, the audited total net liabilities of the Group amounted to approximately RMB629.8 million.

For further details of the Auditors’ opinion on the Company’s financial statements and its financial position for the recent years, Shareholders are advised to read the respective annual reports.

2. Information on Hisense Group

As noted in the Circular, Hisense Group is the ultimate holding company of Hisense International. Based on the information available from the website of Hisense Group, Hisense Group is one of the major electronic companies in the PRC. Hisense Group is headquartered in Qingdao, the PRC and has operational presence in every major continent and sells its products to more than 100 countries worldwide. Its major product lines include televisions, digital video disc players, stereos, set-top boxes, mobile phones, air-conditioning systems and refrigerators. In addition, we note that Hisense Electric Co., Ltd. (“Hisense Electric”), of which Hisense Group was beneficially interested in approximately 48.4% of the issued share capital as at the Latest Practicable Date, has been listed on the Shanghai Stock Exchange of the PRC since 1997. The following financial results of Hisense Electric for each of the three years ended 31 December 2005, 2006 and 2007 are extracted from its 2007 annual report.

— 18 —

LETTER FROM ACCESS CAPITAL

	For the year ended 31 December	For the year ended 31 December	For the year ended 31 December
	2005	2006	2007
	RMB’000	RMB’000	RMB’000
	(Audited)	(Audited)	(Audited)
Turnover	11,799,673	13,775,240	14,838,636
Net profit attributable to
equity holders	102,401	130,554	203,835
Net assets as at year end	2,480,111	2,659,814	2,811,752

As indicated above, Hisense Electric reported an average annual compound growth of approximately 12.1% and 41.1% for its turnover and net profit, respectively, from 2005 to 2007. As stated in its latest annual report for the year ended 31 December 2007, the turnover of Hisense Electric mainly represented sales of televisions and refrigerators and over 80% of its turnover was generated from domestic sales in the PRC. As at 31 December 2007, Hisense Electric had audited net assets of approximately RMB2,811.8 million. In view of the favourable historical financial performance of Hisense Electric for the past few years and its strong financial position as at 31 December 2007, we consider that it has demonstrated a good track record and is one of the major electronic companies in the PRC.

3. Reasons for the Continuing Connected Transactions

As set out in the Letter from the Board, the Continuing Connected Transactions, i.e. the sales of household electrical appliances to Hisense International, will allow the Company to access the international sales channels of Hisense International in a cost efficient manner so as to expand its overseas markets and customer base, lower its transportation and promotional expenses, promote the brands of the Company, globalise its sales networks and improve its profit margins. As further advised by the Board, through the proposed utilisation of the international sales channels of Hisense International, the company will be able to save not only the setup costs which would otherwise be incurred if it decides to build up its own sales networks for certain overseas markets, but also the operating costs in connection with the after-sales services for the relevant products in such markets. As a result, the Company will be able to maintain the cost competitiveness of its products and yet be able to expand its overseas sales. Accordingly, the Directors are of the view that the Continuing Connected Transactions are in the interests of the Company and the Shareholders as a whole.

— 19 —

LETTER FROM ACCESS CAPITAL

For the year 2007, approximately 39.0% of the Group’s turnover was derived from the overseas markets, as compared to approximately 30.5% in 2006. As set out in the 2007 Annual Report, with respect to the outlook of its overseas business in 2008 and given the expectation that the competition on the global household appliances market would intensify in 2008 in light of the continuing increase in the prices of energy and raw materials around the world, the Company will further enhance the structure of export products, expand the export channels, increase the proportion of high-end products, continue to consolidate the advantages of cooperation with international major brand and customers, create long-term strategic partnerships, continue to increase the scale of export, improve the profitability of export sales and facilitate the process of internationalisation.

As further advised by the Board, similar to the majority of the manufacturers of household appliances in the PRC, sales of the Group to the overseas markets have usually been conducted on an Original-Equipment-Manufacturer (“OEM”) basis and the relevant products are not under any brand names of the Company. In light of the expected intense competition in the global household appliances market and the increase in the prices of raw materials and energy, the Directors are of the view that the existing competitiveness of the PRC manufacturers in terms of low cost of production may not be sustainable in the future; and that reliance on OEM as the traditional mode for overseas sales is unlikely to assist the Company in expanding its overseas markets. The Directors consider that in order to compete globally, it is important for the Company to promote its own brand names beyond the domestic market. Under the Overseas Sales Framework Agreement, the Company will be able to sell through the sales channels of Hisense International in the overseas markets the household appliances under its own brand names. Accordingly, the Continuing Connected Transactions will be able to assist the Company in promoting its own brand names internationally and therefore enhance its competitiveness beyond the domestic level.

Furthermore, as discussed in the section headed “Information on the Group” above, the CSRC’s investigation on the Company for alleged breaches of the securities laws and regulations in the PRC as announced in May 2005 had adversely affected the confidence of the financial institutions, suppliers and customers on the Company. The Group had also experienced difficulties in renewal and origination of banking facilities and the lack of working capital significantly disturbed the Group’s relationship with its suppliers and sales agents. As a result, the Group missed the peak season for production and sales of refrigerators and air-conditioners in the financial year 2005 and recorded a significant loss. For the financial years 2006 and 2007, the Group had been able to improve gradually its production and sales activities with overall profitable results recorded for the relevant periods. Nevertheless, as noted in the 2007 Annual Report, while the Group had managed to improve its revenues and

— 20 —

LETTER FROM ACCESS CAPITAL

operational effectiveness in light of the favourable growth of the PRC economy as well as the household appliances industry, the Company is generally still in a recovery stage and the Company still failed to achieve its targets during the year as a result of a number the historical problems.

In view of the substantial interest of Hisense Group in the Company, we consider it commercially reasonable and sensible for Hisense Group to assist the Group in rebuilding its market position which has been adversely affected by the CSRC’s investigation. Hisense Group, together with its subsidiaries, is currently one of the major electronic companies in the PRC and has demonstrated a good track record in the household appliances business. Through the Overseas Sales Framework Agreement, the Group may be able to increase its sales to the overseas markets, which is currently one of the business objectives of the Company as expanding its export channels and increasing the scale of its exports. As mentioned above, the Continuing Connected Transactions will be able to assist the Company in promoting its own brand names internationally. In addition, the Continuing Connected Transactions, when take place, will be recognised by the Company as its sales and the overall revenue of the Group will therefore be increased as a result of such transactions. Based on the nature of the transactions to be contemplated under the Overseas Sales Framework Agreement and the benefits expected to be brought by such transactions as discussed above, we consider that the Continuing Connected Transactions will be conducted in the ordinary and usual course of business of the Company and we concur with the view of the Company that the Continuing Connected Transactions are the interests of the Company and the Shareholders as a whole.

II. Terms of the Overseas Sales Framework Agreement

Pursuant to the Overseas Sales Framework Agreement, which is valid for a term of one year commencing from 1 January 2008 to 31 December 2008 and can be terminated before its expiration by mutual agreement of the parties, the Company has agreed to manufacture and sell to Hisense International on a non-exclusive basis such quantities of household electrical appliances, including refrigerators, air-conditioners, freezers, heaters and other small household electrical appliances as Hisense International may require from time to time for sale to its overseas customers. The parties has also agreed to enter into individual sale and supply order to set out the specific terms (including the quantity, price, quality standards and terms of delivery) of each sale, which shall be consistent with the principles and terms of the Overseas Sales Framework Agreement. Such transactions will be conducted in the ordinary and usual course of business of the Company, on normal commercial terms and on terms not less favourable to the Company than terms available to or from (as appropriate) Independent Third Parties. Payment for the purchase of household electrical appliances should be made by telegraphic transfer or bank notes by Hisense International within 60 days from delivery of the products.

— 21 —

LETTER FROM ACCESS CAPITAL

The prices for the household electrical appliances are determined principally by arm’s length commercial negotiations according to the principles of fairness and reasonableness between the parties with reference to the market price of the relevant household electrical appliances from time to time and the profit margins of the Company’s overseas sales in the past. In particular, the price of each individual household electrical appliance to be sold by the Company to Hisense International will be equal to the production cost of the Company as divided by (1 – (the gross profit margin of the Company for that particular product in 2007)), and such price will be comparable to the price offered to Independent Third Parties. The Overseas Sales Framework Agreement will not restrict Hisense International from purchasing household electrical appliances from other suppliers, nor will it restrict the Company from selling its household electrical appliances to any other third parties.

We have discussed with the management of the Company about the pricing formula in connection with the gross profit margin on the sales of the relevant products and reviewed such average gross profit margin for 2007. In effect, the presence of the pricing formula will ensue that the return to the Company for the Continuing Connected Transactions will not be less than the return on the sales of the similar products to the Independent Third Parties in 2007, which we consider to be fair and reasonable. In summary, on the basis that (i) the sale and supply of the relevant household appliances by the Company to Hisense International, when take place, will be recognised by the Company as its sales, so the Continuing Connected Transactions will increase the revenue and profitability of the Group as well as utilise its resources so as to facilitate the Group to resume normal business operations; (ii) such sales will be conducted in the ordinary and usual course of business of the Company and on terms not less favourable to the Company than terms available to or from (as appropriate) Independent Third Parties; (iii) the gross profit margin for such sales will not be lower than that in 2007, so the return to the Company for the Continuing Connected Transactions will not be less than the return on those sales of the similar products to the Independent Third Parties in 2007; and (iv) the unit sale prices of the relevant household appliances will be comparable to the prices offered to Independent Third Parties, we are of the view that the terms of the Overseas Sales Framework Agreement are in the interests of the Company and the Shareholders as a whole, on normal commercial terms and fair and reasonable.

— 22 —

LETTER FROM ACCESS CAPITAL

III. Rationale for determining the maximum value of the transactions contemplated under the Overseas Sales Framework Agreement

Pursuant to Rule 14A.35(2) of the Listing Rules, the transactions contemplated under the Overseas Sales Framework Agreement during the year commencing from 1 January 2008 to 31 December 2008 will be subject to an annual cap for the financial year ending 31 December 2008 of the Company. The proposed maximum aggregate values, or “caps”, of the transactions contemplated under the Overseas Sales Framework Agreement for the year ending 31 December 2008:-

	Proposed annual caps for
	the year ending
	31 December 2008
	(RMB)
Maximum aggregate value of sale and supply of
refrigerators:	129,000,000
Maximum aggregate value of sale and supply of air-
conditioners:	247,500,000
Maximum aggregate value of sale and supply of freezers:	16,000,000
Maximum aggregate value of sale and supply of other small
household electrical appliances, including heaters:	14,000,000
Total	406,500,000

The Company has advised that it did not conduct any similar transactions with Hisense International in the past and that the Continuing Connected Transactions have not been commenced as at the Latest Practicable Date. The above annual caps were determined with reference to (i) the projected total sales of the household electrical appliances in the overseas markets based on the sales of household electrical appliances such as air-conditioners and refrigerators in the overseas markets in the previous years; (ii) the projected market share of the sales of air-conditioners and refrigerators through the sales channels of Hisense Group in the overseas markets taking into account its sales of household electrical appliances such as air-conditioners and refrigerators in the overseas markets in the previous years; (iii) the estimated sales of the products in the regions to be developed by Hisense International on behalf of the Company (mainly those regions which are not already covered by the existing sales network of the Company) and in the newly emerging markets based on the sales in the overseas market as mentioned above; and (iv) the estimated sales of self-brand products by the Company in the overseas market based on the projected sales in the overseas market as mentioned in (i) above and the current overseas market conditions.

— 23 —

LETTER FROM ACCESS CAPITAL

As regards the fairness and reasonableness of the proposed annual caps under the Overseas Sales Framework Agreement, we have discussed with the management of the Company about the underlying assumptions, their basis as well as the projection of the relevant variables such as market share and product market price and we are of the view that such assumptions and basis are fair and reasonable. As set out above, the proposed annual caps under the Overseas Sales Framework Agreement for the year ending 2008 are based on, among other things, the estimation of sales by Hisense International in the overseas markets. It should be noted that like any sales estimation exercises involving forecasts of future events, market share and product market prices cannot be projected with complete accuracy and may be subject to external factors that are beyond the control of the Company or Hisense International. We have attempted, but are unable, to identify any independent information which may be relevant to the evaluation of such assumptions and basis. Nevertheless, given the non-exclusive arrangement under the Overseas Sales Framework Agreement and the expected increase in both the revenue and earnings of the Group as a result of the Continuing Connected Transactions, we do not consider the lack of such independent information to be a significant factor in our evaluation of the fairness and reasonableness of the proposed annual caps.

On the other hand, for the purpose of ensuring the accuracy of the computation of the above annual caps, we have also carried out a review on the relevant worksheets for calculation of the relevant annual caps including the review on the quantities and the unit prices of the subject items. Based on the result of our review, we are satisfied that the calculation of the proposed annual caps has been conducted on a fair and reasonable basis. In addition, we have analysed, where available, the historical sales value of the Group for similar products in 2007 as to see whether or not the proposed annual caps for 2008 are excessive. The following table sets out the respective percentage as represented by the proposed annual caps under the Overseas Sales Framework Agreement over the aggregate sales value of the similar products by the Group for the year ended 31 December 2007.

— 24 —

LETTER FROM ACCESS CAPITAL

			Percentage
			represented by
			the proposed
			annual caps
			over
	Aggregate	Propose annual	the aggregate
	value	caps under	value
	for the	the Overseas	of the sales
	year ended	Sales	transactions of
	31 December	Framework	the Group for
	2007	Agreement	2007
	(in RMB’000)	(in RMB’000)
— Sales of refrigerators	4,324,808	129,000	3.0%
— Sales of air-conditioners	3,214,875	247,500	7.7%
— Sales of freezers	324,821	16,000	4.9%

As set out in the above table, the proposed annual caps for the sales of refrigerators, air-conditioners and freezers represent only about 3.0%, 7.7% and 4.9%, respectively, of the aggregate sales value of the similar products by the Group for the year ended 31 December 2007. On this basis, we do not consider such proposed annual caps under the Overseas Sales Framework Agreement to be excessive. While the proposed annual caps under the Overseas Sales Framework Agreement for the year ending 2008 depend to significant extent on the estimation of sales by Hisense International in the overseas markets, it should be noted that (i) the proposed transactions contemplated under the Overseas Sales Framework Agreement will continue to be conducted in the ordinary and usual course of business of the Company and on normal commercial terms and on terms not less favourable to the Company than terms available to or from (as appropriate) Independent Third Parties; (ii) it is generally in the interest of the Company to maximise the value of the sales to Hisense International under the Overseas Sales Framework Agreement so as to increase the Company’s revenue; and (iii) the non-exclusive arrangement under the Overseas Sales Framework Agreement provides the Company with the flexibility without any commitment on the actual transaction values. Accordingly, we are of the view that the entering into of the Overseas Sales Framework Agreement is in the interests of the Company and the Shareholders as a whole and the proposed annual caps under the Overseas Sales Framework Agreement have been arrived at on a fair and reasonable basis.

— 25 —

LETTER FROM ACCESS CAPITAL

IV. Conditions of the annual caps under the Overseas Sales Framework Agreement

There are certain conditions of the annual cap pursuant to the Listing Rules, in particular, the restriction of the value of the transactions contemplated under the Overseas Sales Framework Agreement by way of the annual cap for relevant financial year ending 31 December 2008 and the annual review by the independent nonexecutive Directors of the terms of such transactions and the relevant annual caps not being exceeded, details of which must be included in the Company’s subsequent published annual reports and accounts. Also, pursuant to the Listing Rules, each year the auditors of the Company must provide a letter to the Board confirming, among other things, that the transactions contemplated under the Overseas Sales Framework Agreement are conducted in accordance with their terms and that the relevant annual caps not being exceeded. In addition, pursuant to the Listing Rules, the Company shall publish an announcement if it knows or has reason to believe that the independent nonexecutive Directors and/or its auditors will not be able to confirm the terms of such transactions or the relevant annual caps not being exceeded. We are of the view that there are appropriate measures in place to govern the conduct of the transactions to be contemplated under the Overseas Sales Framework Agreement and safeguard the interests of the Independent Shareholders.

RECOMMENDATION

In formulating our recommendation to the Independent Board Committee and the Independent Shareholders, we have considered the above principal factors and reasons, in particular, the following:-

(i) The financial and trading positions of the Group have been hampered following the severe disruption to its operations as a result of the CSRC’s investigation, details of which are set out in the section headed “Background information and reasons for the Overseas Sales Framework Agreement”.
(ii) The transactions contemplated under the Overseas Sales Framework Agreement will increase the sales of the Group, so it is in the interest of the Company to enter into the Overseas Sales Framework Agreement.
(iii) The terms (including the quantity, price, quality standards and terms of delivery) of the formal orders entered into by the Group pursuant to the Overseas Sales Framework Agreement will be consistent with the principles and terms of the Overseas Sales Framework Agreement, and the proposed transactions contemplated under the Overseas Sales Framework Agreement will be conducted in the ordinary and usual course of business of the Company, on normal commercial terms and on terms not less favourable to the Company than terms available to or from (as appropriate) Independent Third Parties. In addition, all the transactions contemplated under the Overseas Sales

— 26 —

LETTER FROM ACCESS CAPITAL

Framework Agreement are to be conducted on a non-exclusive basis, so the Overseas Sales Framework Agreement will not restrict the Company from engaging in the similar transactions with other parties.

(iv) The value of, and the basis for determining, the annual caps under the Overseas Sales Framework Agreement are fair and reasonable, details of which are set out in the section headed “Rationale for determining the maximum value of the transactions contemplated under the Overseas Sales Framework Agreement”.

Based on the above, we are of the opinion that the Overseas Sales Framework Agreement and the transactions contemplated thereunder are in the interests of the Company and the Shareholders as a whole, in the ordinary and usual course of business of the Company and on normal commercial terms. We are also of the opinion that the terms of the Overseas Sales Framework Agreement, including the proposed annual caps, are in the interests of the Company and the Shareholders as a whole, on normal commercial terms and fair and reasonable. Accordingly, we would advise the Independent Board Committee and the Independent Shareholders that the Independent Shareholders should vote in favour of the ordinary resolution to approve the Overseas Sales Framework Agreement and the transactions contemplated thereunder at the relevant general meeting of the Company.

Yours faithfully, For and on behalf of Access Capital Limited Alexander Tai Principal Director

— 27 —

GENERAL INFORMATION

APPENDIX I

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. All the Directors jointly and severally accept full responsibility for the accuracy of information contained in this circular and confirm, having made all reasonable enquiries, that to the best of their knowledge, opinions expressed in this circular have been arrived at after due and careful consideration and there are no other facts not contained in this circular, the omission of which would make any statement in this circular misleading.

2. DISCLOSURE OF INTERESTS

Directors, supervisors and chief executive of the Company

As at the Latest Practicable Date, none of the Directors, supervisors and chief executive of the Company had interests and short positions in the Shares, underlying Shares and/ or debentures (as the case may be) of the Company or any its associated corporations (within the meaning of the SFO) which 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 any such Director or chief executive is taken or deemed to have under such provisions of the SFO) or which were required to be entered into the register required to be kept by the Company under section 352 of the SFO or which were otherwise required to be notified to the Company and the Stock Exchange pursuant to the Model Code for Securities Transactions by Directors of Listed Issuers in the Listing Rules.

As at the Latest Practicable Date, none of the Directors or supervisors of the Company had any interest, direct or indirect, in any asset which have been since 31 December 2007, being the date to which the latest published audited financial statements of the Group were made up, acquired or disposed of by or leased to any member of the Group or are proposed to be acquired or disposed of by or leased to any member of the Group.

As at the Latest Practicable Date, none of the Directors or supervisors of the Company was materially interested in any contract or arrangement entered into by any member of the Group since 31 December 2007, being the date to which the latest published audited financial statements of the Company were made up, and which was significant in relation to the business

of the Group.

— 28 —

GENERAL INFORMATION

APPENDIX I

Interests of Substantial Shareholders

Interests in the Company

As at the Latest Practicable Date, so far as the Directors are aware, each of the following persons, not being a Director, supervisor or chief executive of the Company, had an interest in the Shares which falls to be disclosed to the Company and the Stock Exchange under the provisions of Division 2 and 3 of Part XV of the SFO:

			Proportion
			to the
			Relevant	Proportion
		Number	class of	to the total
		of issued	issued share	issued share
	Class of	ordinary	capital of the	capital of the
Name	Shares	shares held	Company	Company
Hisense Air-conditioning	A shares	229,633,059	76.98%	23.15%
Shunde Economic	A shares	68,666,667	23.02%	6.92%
Consultancy Company
The Hong Kong &	H Shares	92,845,829	20.20%	9.36%
Shanghai Banking
Corporation Limited
Shenyin Wanguo	H Shares	55,097, 000	11.99%	5.55%
Securities (H.K.)
Limited
Bank of China (Hong	H Shares	48,819,000	10.62%	4.92%
Kong) Limited
Guotai Junan Securities	H Shares	40,920,000	8.90%	4.12%
(Hong Kong) Limited
First Shanghai Securities	H Shares	25,860,000	5.63%	2.61%
Limited

— 29 —

GENERAL INFORMATION

APPENDIX I

Interests in other members of the Group

As at Latest Practicable Date, so far as the Directors are aware, the following persons, not being a Director, supervisor or chief executive of the Company, was 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 meetings of any other members of the Group:

		Percentage
		shareholding of
		shareholders in
	Shareholders holding 10% or more in	other members
Other members of Group	other members of the Group	of the Group
Guangdong Kelon Air-	Weishi Investments Company Limited	40%
Conditioner Co., Ltd
Guangdong Kelon Mould Co., Ltd	Hua Yi Compressor Company Limited	29.89%
Foshan City Shunde District	Hua Yi Compressor Company Limited	29.95%
Rongsheng Plastic Co., Ltd
Guangdong Huaao Electrical	Foshan City Shunde District Yun Long	30%
Electronics Co., Ltd.	Enquiry Service Company Limited
Hisense Ronshen (Yingkou)	Yingkou Yingleng (Group) Bankruptcy	14.74%
Refrigerator Co., Ltd.	Liquidation Team
Xi’an Kelon Cooling Co., Ltd.	Xi’an Gaoke (Group) Company Limited	29.05%
Jiangxi Kelon Combine Electrical	Jiangxi Fadasi Domestic Electrical	45%
Appliances Co., Ltd.	Appliances Company Limited
	(江西發達思家電有限公司）
Hua Yi Compressor Company	Sichuan Changhong Electric Holdings	29.92%
Limited	co., ltd
	A-share public shareholders	49.05%
Chongqing Kelon Rongsheng	Chongqing Shang She Group	24%
Refrigerator Sales Co., Ltd.
	Chongqing Huaqing Commerce Company	24%
	Chongqing Department Building	24%

— 30 —

GENERAL INFORMATION

APPENDIX I

		Percentage
		shareholding of
		shareholders in
	Shareholders holding 10% or more in	other members
Other members of Group	other members of the Group	of the Group
Guangzhou Antaida Logistic Co.,	Guangzhou Zhongyuan International	30%
Ltd.	Freight Forwarding Company Limited
	China Far Ocean Network Company	25%
	Limited
	Wuxi Small Swan Holdings Company	20%
	Limited
Wuhu Yingjia Electrical	Heavenly King Incorporated	20%
Machinery Co., Ltd.
Sichuan Rongsheng Kelon	Xu Wei Ru	24%
Refrigerator Sales Co., Ltd.
Beijing Hengsheng Xin Chuang	Foshan City Shunde District Yun Long	11%
Technology Company	Enquiry Service Company Limited
Guangdong Kelon Weili Electrical	Zhongshan City Fusha Town Shunchang	20%
Appliances Company Limited	Industry Limited Company
	(中山市阜沙鎮順暢工業有限公司)

Save as disclosed above, as at the Latest Practicable Date and so far as is known to the Directors or chief executive of the Company, there was no other person (other than a Director, supervisor or chief executive of the Company or a member of the Group), who had an interest or short position in the Shares or 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, interested in 10% or more of the nominal value of any class of share capital carrying rights to vote in all circumstances at general meetings of any other member of the Group.

3. SERVICE AGREEMENTS

As at the Latest Practicable Date, none of the Directors, proposed directors, supervisors or proposed supervisors of the Company had any existing or proposed service contract with any member of the Group (excluding contracts expiring or determinable by the Company within one year without payment of compensation (other than statutory compensation).

— 31 —

GENERAL INFORMATION

APPENDIX I

4. COMPETING BUSINESS

As at the Latest Practicable Date, the following directors of the Company or their respective associates have interests in the following businesses which are considered to compete or are likely to compete, either directly or indirectly, with the businesses of the Group other than those businesses where the Directors were appointed as directors to represent the interests of the Company and/or the Group pursuant to the Listing Rules:

Description of
Name of entity business of the which business entity which is is considered to considered to compete or likely compete or likely compete with the to compete with Nature of interest business of the the business of the of the Director in
Name of Director Kelon Group Kelon Group the entity Mr. Tang Ye Guo Hisense Group or Production of airDirector its Subsidiaries conditioning/ electrical products
Ms. Yu Shu Min Hisense Group or Production of airDirector and/ its Subsidiaries conditioning/ or senior electrical products management
Mr. Wang Shi Lei Hisense Group or Production of airDirector and/ its Subsidiaries conditioning/ or senior electrical products management
Mr. Lin Lan Hisense Group or Production of airDirector and/ its Subsidiaries conditioning/ or senior electrical products management
Ms. Liu Chun Xin The Subsidiaries of Sales and marketing Director Hisense Group of electrical products
Mr. Zhang Ming The Subsidiaries of Production of airDirector Hisense Group conditioning/ electrical products

— 32 —

GENERAL INFORMATION

APPENDIX I

As at the Latest Practicable Date, save as disclosed above, none of the directors of the Company or their respective associates has interests in the businesses which compete or are likely to compete, either directly or indirectly, with the businesses of the Group.

5. NO MATERIAL ADVERSE CHANGE

At the Latest Practicable Date, none of the Directors was aware of any material adverse change in the financial or trading position of the Group since 31 December 2007 (being the date to which the latest published audited financial statements of the Group were made up).

6. EXPERT

(a) The following sets out the qualifications of the expert which has given its opinion or advice as contained in this circular:

Name

Qualifications

Access Capital

a corporation licensed under the SFO to conduct types 1 (dealing in securities), 4 (advising on securities), 6 (advising on corporate finance) and 9 (asset management) regulated activities under the SFO
(b) Access Capital does not have any shareholding, direct or indirect, in any member of the Group or any right (whether legally enforceable or not) to subscribe for or to nominate persons to subscribe for securities in any member of the Group.
(c) Access Capital does not have any interest, direct or indirect, in any assets which have been acquired or disposed of by or leased to any member of the Group, or which are proposed to be acquired or disposed of by or leased to any member of the Group since 31 December 2007, the date to which the latest published audited financial statements of the Company were made up.
(d) Access Capital Finance has given and has not withdrawn its written consent to the issue of this circular with the inclusion of its letter and references to its name in the form and context in which they are included.
(e) The letter and recommendation given by Access Capital are given as of the date of this circular for incorporation herein.

— 33 —

GENERAL INFORMATION

APPENDIX I

DOCUMENTS AVAILABLE FOR INSPECTION

Copies of the following documents are available for inspection at the principal place of business in Hong Kong of the Company at Room 3104-06, Singga Commercial Centre, No. 148 Connaught Road West, Hong Kong during normal business hours from the date of this circular up and including 23 June 2008:

(a) the letter from Access Capital; and
(b) the Overseas Sales Framework Agreement.

— 34 —

SUPPLEMENTAL AND FURTHER NOTICE OF AGM

==> picture [404 x 41] intentionally omitted <==

HISENSE KELON ELECTRICAL HOLDINGS COMPANY LIMITED 海信科龍電器股份有限公司

(a joint stock limited company incorporated in the People’s Republic of China with limited liability)

(Stock Code: 00921)

SUPPLEMENTAL AND FURTHER NOTICE OF ANNUAL GENERAL MEETING

Hisense Kelon Electrical Holdings Company Limited (the “Company”) received a written request from Qingdao Hisense Air-Conditioning Co., Ltd, the single largest shareholder of the Company which holds 229,633,059 domestic shares of the Company, being approximately 23.15% of the total issued shares capital of the Company, on 6 June 2008 requesting that an additional resolution (specified as ordinary resolution 7 below) to be tabled before the forthcoming annual general meeting (the “AGM”) of the Company to be held on 25 June 2008 for shareholders’ consideration and approval.

SUPPLEMENTAL NOTICE IS HEREBY GIVEN that the AGM of the Company will be held as originally scheduled at the conference room of the Company’s head office, Shunde District, Foshan City, Guangdong Province, the People’s Republic of China (the “PRC”) on 25 June 2008 at 9:30 a.m. to review and, if thought fit, pass the following resolution in addition to the resolutions set out in the previous notice of the AGM dated 24 April 2008:

ORDINARY RESOLUTION

(7) To consider and approve the Overseas Sales Framework Agreement dated 22 May 2008 entered into between the Company and Qingdao Hisense International Marketing Company Limited and the continuing connected transactions contemplated thereunder.

Pursuant to article 8.12 of the articles of association of the Company, where the number of voting shares represented by the shareholders who intend to attend a general meeting does not exceed half of the Company’s total number of voting shares, the Company shall further notify its shareholders about the agenda, date and venue of the general meeting by publishing an announcement. As notified, the Company will hold the general meeting at the time originally scheduled. Apart from adding the above-mentioned proposed resolution in the agenda, the date and venue of the AGM and all other matters relating to the AGM will remain the same as disclosed in the notice of AGM dated 24 April 2008. (Please refer to the announcement dated 24 April 2008 published on the websites (http://www.hkex.com.hk and www.kelon.com) of The Stock Exchange of Hong Kong Limited and the Company respectively.)

— 35 —

SUPPLEMENTAL AND FURTHER NOTICE OF AGM

TRADING IN THE H SHARES OF THE COMPANY

By order of the Board of Hisense Kelon Electrical Holdings Company Limited Tang Ye Guo Chairman

As at the date of this announcement, the Company’s directors are Mr. Tang Ye Guo, Mr. Wang Shi Lei, Ms. Yu Shu Min, Mr. Lin Lan, Ms. Liu Chun Xin and Mr. Zhang Ming; and the Company’s independent non-executive directors are Mr. Zhang Sheng Ping, Mr. Lu Qing and Mr. Cheung Yui Kai, Warren.

Foshan City, Guangdong, the PRC, 6 June 2008

— 36 —

AI assistant

Medlive Technology Co., Ltd. — AGM Information 2008

50436_rns_2008-06-06_7b3e5268-d598-4647-9629-337343679ba6.pdf

CONTINUING CONNECTED TRANSACTIONS

DEFINITIONS

HISENSE KELON ELECTRICAL HOLDINGS COMPANY LIMITED 海信科龍電器股份有限公司

CONTINUING CONNECTED TRANSACTIONS

INTRODUCTION

OVERSEAS SALES FRAMEWORK AGREEMENT

Date

PARTIES

Term

Conditions

Pricing

Payment Term

Reasons for and benefits of the sales of household electrical appliances

Historical Figures

Maximum Annual Cap

Household electrical appliances

INFORMATION RELATING TO THE COMPANY

INFORMATION ON HISENSE INTERNATIONAL

LISTING RULES IMPLICATIONS

AGM

RECOMMENDATION

ADDITIONAL INFORMATION

TRADING IN THE H SHARES OF THE COMPANY

Yours faithfully,

HISENSE KELON ELECTRICAL HOLDINGS COMPANY LIMITED 海信科龍電器股份有限公司

CONTINUING CONNECTED TRANSACTIONS

CONTINUING CONNECTED TRANSACTIONS

INTRODUCTION

BASIS OF OUR OPINION

PRINCIPAL FACTORS CONSIDERED

I. Background information and reasons for the Overseas Sales Framework Agreement

1. Information on the Group

2. Information on Hisense Group

3. Reasons for the Continuing Connected Transactions

II. Terms of the Overseas Sales Framework Agreement

III. Rationale for determining the maximum value of the transactions contemplated under the Overseas Sales Framework Agreement

IV. Conditions of the annual caps under the Overseas Sales Framework Agreement

RECOMMENDATION

1. RESPONSIBILITY STATEMENT

2. DISCLOSURE OF INTERESTS

Directors, supervisors and chief executive of the Company

Interests of Substantial Shareholders

Interests in the Company

Interests in other members of the Group

3. SERVICE AGREEMENTS

4. COMPETING BUSINESS

5. NO MATERIAL ADVERSE CHANGE

6. EXPERT

Name

Qualifications

DOCUMENTS AVAILABLE FOR INSPECTION

HISENSE KELON ELECTRICAL HOLDINGS COMPANY LIMITED 海信科龍電器股份有限公司

SUPPLEMENTAL AND FURTHER NOTICE OF ANNUAL GENERAL MEETING

ORDINARY RESOLUTION

TRADING IN THE H SHARES OF THE COMPANY

More from Medlive Technology Co., Ltd.

Medlive Technology Co., Ltd. AGM Information 2008