Medlive Technology Co., Ltd. — Annual Report 2013

Mar 27, 2014

Hong Kong Exchanges and Clearing Limited and The Stock Exchange of Hong Kong Limited take no responsibility for the contents of this announcement, make no representation as to its accuracy or completeness and expressly disclaim any liability whatsoever for any loss howsoever arising from or in reliance upon the whole or any part of the contents of this announcement.

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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)

ANNOUNCEMENT OF RESULTS FOR THE YEAR ENDED 31 DECEMBER 2013

All members (the “Directors”) of the board of directors (the “Board”) of Hisense Kelon Electrical Holdings Company Limited (the “Company” or “Hisense Kelon”) announce the annual audited results of the Company and its subsidiaries (collectively the “Group” or “Kelon”) for the year ended 31 December 2013 (the “Reporting Period”) together with the 2012 comparative figures, prepared in accordance with China Accounting Standards for Business Enterprises (“China Accounting Standards”). The following financial information is prepared in accordance with China Accounting Standards:

FINANCIAL INFORMATION (Unless otherwise specified, all amounts are denominated in RMB) Consolidated Balance Sheet

Consolidated Balance Sheet
Item	Note	31 December 2013	31 December 2012
Assets
Current assets
Cash at bank and on hand		473,787,177.54	516,065,467.96
Financial assets held-for-trading		67,115,019.35	10,678,293.47
Notes receivable		2,160,801,733.50	1,558,766,192.61
Accounts receivable	5	1,644,771,822.27	1,455,882,205.49
Prepayments		352,903,571.02	304,301,601.58
Others receivables		546,337,496.66	342,722,165.14
Inventories		2,496,359,854.46	1,738,441,110.15
Other current assets		5,306,649.45	3,309,064.74
Total current assets		7,747,383,324.25	5,930,166,101.14
Non-current assets
Long-term equity investments		997,500,673.77	751,925,728.90
Investment properties		33,946,307.75	36,446,602.09
Fixed assets		2,368,500,692.73	1,909,832,448.93
Construction in progress		253,977,558.18	68,344,253.58

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Disposal of fixed assets
Intangible assets		521,782,817.81	495,496,878.49
Long-term prepaid expenses		5,001,055.07	827,939.58
Deferred tax assets		36,616,861.02	7,294,688.02
Total non-current assets		4,217,325,966.33	3,270,168,539.59
Total assets		11,964,709,290.58	9,200,334,640.73
Liabilities and shareholders’ equity
Current liabilities
Short-term borrowings		191,681,513.02	30,309,453.94
Financial liabilities held-for-trading		4,645.00	164,231.22
Notes payable		1,391,098,638.68	1,432,852,210.08
Account payable	6	3,480,510,368.16	2,335,425,936.47
Advances from customers		907,031,506.85	837,065,771.59
Employee remunerations payable		236,343,013.69	223,662,684.56
Taxes payable		-156,766,531.00	-48,994,818.36
Interests payable			202,930.49
Dividends payable		9,002,067.02	2,067.02
Other payables		1,731,259,054.40	1,581,294,492.81
Other current liabilities		574,037,292.42	566,406,795.92
Total current liabilities		8,364,201,568.24	6,958,391,755.74
Non-current liabilities
Provisions		361,158,229.87	311,862,482.54
Other non-current liabilities		56,011,769.90	56,872,390.49
Total non-current liabilities		417,169,999.77	368,734,873.03
Total liabilities		8,781,371,568.01	7,327,126,628.77
Shareholders’ equity
Share capital		1,354,054,750.00	1,354,054,750.00
Capital reserve		2,099,105,600.77	2,101,650,386.96
Surplus reserves		145,189,526.48	145,189,526.48
Retained profits		-860,386,951.24	-2,099,392,002.85
Difference on translation of foreign currency financial statements		10,768,154.82	10,539,505.90
Total equity attributable to shareholders of the Company		2,748,731,080.83	1,512,042,166.49
Minority interests		434,606,641.74	361,165,845.47
Total shareholders’ equity		3,183,337,722.57	1,873,208,011.96
Total liabilities and shareholders’ equity		11,964,709,290.58	9,200,334,640.73

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Consolidated Income Statement
Item	Note	2013	2012
Operating revenue	7	24,360,021,308.47	18,958,915,310.09
Operating costs	7	19,039,837,900.27	15,034,033,516.68
Business taxes and surcharges		99,639,534.69	105,218,703.08
Selling and distribution expenses		3,678,122,171.15	2,731,894,401.50
General and administrative expenses		814,452,637.11	640,893,526.75
Financial expenses	8	-27,474,387.27	38,999,591.86
Impairment losses on assets		-66,379,836.60	40,896,674.83
Gain from changes in fair value		56,596,312.10	-16,637,512.22
Investment gain	9	347,025,064.55	335,254,433.67
Including: Share of profit of associates and joint ventures		299,785,829.53	190,097,006.83
Operating profits		1,225,444,665.77	685,595,816.84
Non-operating income		114,840,364.46	64,651,884.85
Non-operating expenses		17,536,717.20	7,393,693.62
Including: Losses on disposal of non-current assets		11,713,968.79	2,711,055.26
Total profits		1,322,748,313.03	742,854,008.07
Less: Income tax expenses	10	53,618,940.95	10,548,434.72
Net profits		1,269,129,372.08	732,305,573.35
Net profits of consolidated parties prior to consolidation
Net profit attributable to shareholders of the parent		1,239,005,051.61	717,764,680.40
Profit and loss of minority interests		30,124,320.47	14,540,892.95
Earnings per share
Basic earnings per share	13	0.92	0.53
Diluted earnings per share	13	0.92	0.53
Other comprehensive income		-3,817,685.27	-15,494,563.24
(1) Items to be reclassified into profit and loss in subsequent accounting periods upon satisfaction of required conditions		481,112.87	104,911.35
(2) items not to be reclassified into profit and loss in subsequent accounting periods		-4,298,798.14	-15,599,474.59
Total comprehensive income		1,265,311,686.81	716,811,010.11
Total comprehensive income attributable to shareholders of the parent		1,235,187,366.34	702,270,117.16
Total comprehensive income attributable to minorityinterests		30,124,320.47	14,540,892.95

Note:

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1.General information

Hisense Kelon Electrical Holdings Company Limited (the “Company”) is a joint stock limited company incorporated in the People’s Republic of China (the “PRC”) on 16 December 1992. The Company’s overseas listed public shares (the “H Shares”) were listed on The Stock Exchange of Hong Kong Limited on 23 July 1996, whereas the Company’s domestic shares (the “A Shares”) were listed on the Shenzhen Stock Exchange on 13 July 1999.

On 29 January 2007, a share reform scheme (the “Reform of Non-tradable Shares Scheme”) was set up for converting the Company’s non-freely transferable domestic legal person shares into freely transferable A shares (“Transferable Shares”) and the scheme was approved and completed in the A shares general meeting , and further approved by Ministry of Commerce PRC on 22 March 2007.

On 31 August 2009, the Company constituted a major asset reorganization and entered into conditional sale and purchase agreement regarding the acquisition of the white goods assets and business (the “White Goods Business”) of Hisense Air-Conditioning(the “Acquisition”). The Acquisition was approved by the CSRC (PRC’s China Securities Regulatory Commission) on 23 March 2010. On 10 June 2010, the Company allotted and issued 362,048,187 A shares to Hisense Air-Conditioning for the Acquisition.

On 18 June 2013, 612,316,909 restricted A shares of the Company held by Hisense Air-Conditioning were no longer subject to selling moratorium and were listed for trading.

As at 31 December 2013, Hisense Air-Conditioning held 612,316,909 shares, representing 45.22% of the Company’s total issued share capital and continued to be the immediate controlling shareholder.

In the opinion of the directors of the Company, as at 31 December 2013, Hisense Company Limited (“Hisense Group”), a state-owned enterprise incorporated in the PRC, is regarded as the ultimate controlling shareholder.

The English names by which some of the companies are referred to in these financial statements represent management’s best efforts in translating their Chinese names as no English names have been registered for these companies. The Group, comprising the Company and its subsidiaries, is principally engaged in the manufacture and sale of refrigerators and air-conditioners.

The address of the registered office and principal place of business of the Company is No. 8 Ronggang Road, Ronggui, Shunde, Foshan, the PRC.

2.Basis of preparation

These financial statements were prepared in accordance with the Accounting Standards for Business Enterprises issued by the Ministry of Finance (and the Accounting Standards for Business Enterprises and amendments issued by the Ministry of Finance in 2014 were early adopted in these financial statements. Please refer to note 3 for details.), and the disclosure requirements under the Preparation Convention of Information Disclosure by Companies Offering Securities to the Public No. 15 — General Provisions on Financial Reporting (revised 2010) issued by the China Securities Regulatory Commission.

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The Company is listed in both Mainland and Hong Kong stock exchange, apart from the relevant regulations mentioned above, the financial statements also comply with applicable disclosure provisions of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited and the disclosure requirements of the Hong Kong Companies Ordinance.

3.Significant changes in accounting policies

The Company has early adopted “Accounting Standards for Business Enterprises No. 9 – Employee Benefits” (Revised), “Accounting Standards for Business Enterprises No. 30 - Presentation of Financial Statements” (Revised), “Accounting Standards for Business Enterprises No. 39 – Fair Value Measurement”, “Accounting Standards for Business Enterprises No. 40 – Joint Arrangements” and “Accounting Standards for Business Enterprises No. 33 – Consolidated Financial Statements” (Revised) issued by the Ministry of Finance in January and February 2014.

“Accounting Standards for Business Enterprises No. 9 – Employee Benefits” (Revised)

Pursuant to “Accounting Standards for Business Enterprises No. 9 – Employee Benefits” (Revised), retirement benefit plan are classified as defined contribution scheme and defined benefit scheme. Defined contribution scheme refers to a retirement benefit plan in which the enterprises make fixed contributions to an independent fund and are no longer subject to further payment obligations; while the defined benefit scheme refers to a retirement benefit plan other than the defined contribution scheme. During the accounting period in which an employee provides service, the amount payable calculated under defined contribution scheme shall be recognized as a liability and recorded in profit and loss of the current period or in assets. In respect of the defined benefit scheme, the enterprise shall use the projected unit credit method and make appropriate actuarial assumptions to measure the obligations arising from the defined benefit scheme, attribute the welfare obligations calculated using the formula stipulated by the defined benefit scheme to the service period of the employee, and record the obligation in the current profit and loss, whereas changes arising from the re-measurement of the net liabilities or net assets of the defined benefit scheme shall be included in the other comprehensive income. Moreover, the standard also regulates the short-term salary and other long-term employee benefits provided by enterprises to employees. The management of the Company is of the opinion that the adoption of the standard had no material effect on the financial statements of the Company.

“Accounting Standards for Business Enterprises No. 30 - Presentation of Financial Statements” (Revised)

“Accounting Standards for Business Enterprises No. 30 - Presentation of Financial Statements” (Revised) further regulates the presentation of financial statements. In addition, the standard requires other comprehensive income classified into the following two categories in the income statement: (1) items that will not be subsequently re-classified into profit and loss; (2) items that may be subsequently re-classified into profit and loss upon satisfaction of specified conditions. The Company has applied the above amendments and presented the financial statements as required.

“Accounting Standards for Business Enterprises No. 39 – Fair Value Measurement”

“Accounting Standards for Business Enterprises No. 39 – Fair Value Measurement” establishes the sole guidance for the measurement of fair value and the disclosure of fair value measurement. The standard defines fair value, which refers to the price receivable upon the sale of an asset or the price payable upon the transfer of a liability in an orderly transaction between market participants on the date of measurement. The standard also stipulates more extensive requirements for the disclosure of fair value measurement. Apart from this, the adoption of the standards had no material effect on the recognition and measurement of financial statement items. The adoption of the standard has resulted in more extensive disclosure of fair value information in the financial statements of the Group for

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the year.

“Accounting Standards for Business Enterprises No. 40 – Joint Arrangements”

“Accounting Standards for Business Enterprises No. 40 – Joint Arrangements” regulates the classification and accounting treatment of a joint arrangement jointly controlled by two or more parties. Joint arrangements are classified into joint operations and joint ventures based on the structure, legal form, contractual terms agreed by the parties to the relevant arrangement and other facts and circumstances of the relevant arrangement. Joint operation refers to a joint arrangement in which the joint parties are entitled to the relevant assets of the arrangement and bear the relevant liabilities of the arrangement. Joint venture refers to a joint arrangement in which the joint parties are only entitled to the rights of net assets of the arrangement.

Joint venture and joint operation differ in both initial recognition and subsequent accounting treatment. Investment in a joint venture is accounted for under the equity method. Interest in a joint operation is accounted for by recognition based on share in the assets (including the share in any jointly owned assets), liabilities (including the share in any jointly accrued liabilities), revenues (including the share in the revenues generated from the joint operation) and expenses (including the share in any jointly accrued expenses). Each of the joint parties accounts for the assets and liabilities, revenues, costs and expenses in respect of its interests in the joint operation in accordance with the appropriate standards. The management of the Company is of the opinion that the adoption of the standard had no material effect on the financial statements of the Company.

“Accounting Standards for Business Enterprises No. 33 – Consolidated Financial Statements” (Revised)

Pursuant to the “Accounting Standards for Business Enterprises No. 33 – Consolidated Financial Statements” (Revised), the scope of consolidation of the consolidated financial statements shall be recognized on the basis of control. The standard has provided three essential elements of control: (a) the power over the investee; (b) share of or entitlement to the risk exposure of variable returns or the rights of reward of variable returns; and (c) the ability to affect the amount of returns by using its power. The amendment has included extensive guidance on complicated scenarios. The management of the Company is of the opinion that the adoption of the standard had no material effect on the financial statements of the Company.

The management of the Company is of the opinion that the adoption of the above standards had no material effect on the financial statements of the Company. These financial statements has been presented and made disclosures in accordance with the above standards.

On 17 January 2014, the Ministry of Finance issued “Accounting Standards for Business Enterprises Interpretation No. 6”, which had become effective since the date of issue. The management of the Company is of the opinion that the effectiveness of this Interpretation had no material effect on the financial position and operating results of the Group.

4.Segment information

The Group manages its business by divisions which are organized by a mixture of both business lines and geography. The information is reported internally to the Group’s most senior executive management for the purpose of resource allocation and performance assessment, the Group has identified the following three reportable segments: refrigerators, air-conditioners, and others (including freezers, product components and other electrical household appliances).

• (1) Segment information as at and for the year is as follows:

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Amount for current period	Refrigerators	Air- conditioners	Others	Elimination	Total
1. Revenue from external sales	10,105,981,743.41	9,233,763,216.95	2,847,180,532.62		22,186,925,492.98
2. Revenue from inter-segment sales			986,201,863.65	-986,201,863.65
3. Gain from investment in associates andjoint ventures	7,327,202.43	292,575,261.82	-116,634.72		299,785,829.53
4. Depreciation and amortization	187,816,298.50	114,091,722.01	65,455,461.33		367,363,481.84
5. Gain from changes in fair value	22,331,893.23	24,405,843.08	9,858,575.79		56,596,312.10
6. Impairment losses on assets	-14,412,159.44	21,567,802.50	-73,535,479.66		-66,379,836.60
7. Total profit (Total loss)	598,789,713.17	411,949,532.53	359,045,200.99	-47,036,133.66	1,322,748,313.03
8. Income tax expenses	42,041,043.57	-5,394,304.31	16,972,201.69		53,618,940.95
9. Net profit (Net loss)	556,748,669.60	417,343,836.83	342,072,999.31	-47,036,133.66	1,269,129,372.08
10. Total assets	10,024,044,060.50	7,872,553,097.96	4,453,651,074.56	-10,385,538,942.44	11,964,709,290.580
11. Total liabilities	6,459,760,244.08	6,114,821,210.11	3,118,068,803.20	-6,911,278,689.38	8,781,371,568.01
12. Additions to other non-current assets other than long-term equity investments	555,647,102.81	107,704,846.59	38,230,532.47		701,582,481.87

Segment information as at and for last year is as follows:

Amount for last period	Refrigerators	Air- conditioners	Others	Elimination	Total
1. Revenue from external sales	8,461,166,469.00	6,665,134,751.43	2,227,475,462.28		17,353,776,682.71
2. Revenue from inter-segment sales			676,793,128.22	-676,793,128.22
3. Gain from investment in associates andjoint ventures	10,065,089.89	180,174,917.89	-143,000.95		190,097,006.83
4. Depreciation and amortization	157,257,659.98	123,199,415.13	97,296,471.46		377,753,546.57
5. Gain from changes in fair value	-18,877,582.57	-10,481,249.64	12,721,319.99		-16,637,512.22
6. Impairment losses on assets	12,541,870.92	18,180,374.60	10,174,429.31		40,896,674.83
7. Totalprofit (Total loss)	383,535,395.57	211,840,410.68	180,114,227.65	-32,636,025.83	742,854,008.07
8. Income tax expenses	815,401.83	1,333,698.10	8,399,334.79		10,548,434.72
9. Netprofit(Net loss)	382,719,993.75	210,506,712.58	171,714,892.85	-32,636,025.83	732,305,573.35
10. Total assets	7,811,010,733.14	5,171,832,963.97	3,474,332,492.51	-7,256,841,548.89	9,200,334,640.73
11. Total liabilities	5,040,013,259.72	4,029,079,030.52	2,440,086,482.12	-4,182,052,143.59	7,327,126,628.77
12. Additons to other non-current assets other than long-term equity investments	3,719,865.79	-52,778,720.84	-22,180,836.57		-71,239,691.62

(2)Geographic information

(2)Geographic information
Category	2013	2012
Revenue from domestic customers	15,623,701,445.80	11,534,718,459.71
Revenues from overseas customers	6,563,224,047.18	5,819,058,223.00
Total	22,186,925,492.98	17,353,776,682.71
Domestic non-current assets	3,812,999,561.22	2,853,489,324.27
Overseas non-current assets	404,326,405.11	416,679,215.32
Total	4,217,325,966.33	3,270,168,539.59

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The Company is mainly operated in Mainland China, where the majority of non-current assets of the Company are held，therefore further detailed regional information is not required to be presented.

5.Accounts receivable

• (1) On 13 December 2006, the share transfer transaction on the Company between the preceding immediate controlling shareholder, Guangdong Greencool Enterprise Development Company Limited (“Greencool Enterprise”), which is owned by the Company’s former chairman, Mr. Gu Chu Jun (“Mr. Gu”), and Hisense Air-Conditioning was completed. Upon completion, Mr. Gu, Greencool Enterprise and its affiliates and companies suspected to be connected with Mr. Gu were no longer connected with the Group. Accordingly, no related party disclosures were made in respect of Greencool Enterprise and its affiliates and companies suspected to be connected with Mr. Gu for the year. Details of accounts receivable, including the balances with Greencool Enterprise and its affiliates and companies suspected to be connected with Mr. Gu (“Greencool Companies”), are disclosed as follows:

Company name	31 December 2013	31 December 2013	31 December 2012	31 December 2012
	Ending Balance	Provision for bad debts	Ending Balance	Provision for bad debts
Hefei Weixi Electrical Appliance Co., Ltd. (“HefeiWeixi”)	18,229,589.24	7,805,094.62	18,229,589.24	7,805,094.62
Wuhan Changrong	20,460,394.04	14,921,847.02	20,460,394.04	14,921,847.02
Total	38,689,983.28	22,726,941.64	38,689,983.28	22,726,941.64

• (2) Normal credit term of 60 days is granted to customers. The Group allows a credit term of not exceeding one year for large and well-established customers. Sales are usually settled by cash on delivery for small and new customers. Accounts receivable are non-interest bearing.

The aging of accounts receivable is analyzed as follows (excluding the above Greencool Companies):

Item	31 December 2013	31 December 2012
Within three months	1,603,973,518.09	1,432,725,055.88
Over three months but within six months	25,252,208.41	1,612,142.13
Over six months but within one year	4,216,549.94	11,486,360.10
Over one year	150,626,963.20	161,579,416.05
Total	1,784,069,239.64	1,607,402,974.16
Less: provision for bad debts	155,260,459.01	167,483,810.31
	1,628,808,780.63	1,439,919,163.85

6.Accounts payable

The aging of accounts payable is analyzed as follows:

Item	31 December 2013	31 December 2012
Within one year	3,291,382,468.75	2,197,488,131.14
Over one year	189,127,899.41	137,937,805.33
Total	3,480,510,368.16	2,335,425,936.47

7.Operating revenue and costs

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Item	2013	2012
Revenue from principal operations	22,186,925,492.98	17,353,776,682.71
Revenue from other operations	2,173,095,815.49	1,605,138,627.38
Total	24,360,021,308.47	18,958,915,310.09
Item	2013	2012
Cost of principal operations	17,092,033,966.98	3,562,752,511.56
Cost of other operations	1,947,803,933.29	1,471,281,005.12
Total	19,039,837,900.27	15,034,033,516.68

8.Financial expenses

8.Financial expenses
Item	2013	2012
Interest expenses	572,549.35	29,818,343.17
Less: interest income	3,164,480.55	3,051,399.68
Discounted notes	1,552,073.11	12,359,540.38
Gain/(Loss) on Foreign Exchange	28,783,994.95	8,723,293.92
Others	-55,218,524.13	- 8,850,185.93
Total	-27,474,387.27	38,999,591.86

9.Investment gain

(1) Particulars of investment gain

Item	2013	2012
Gain from long-term equity investment by the cost method	4,750,000.00	3,800,000.00
Gain from long-term equity investment by the equity method	299,785,829.53	190,097,006.83
Gain from disposal of long-term equity investment	23,335,449.54	98,395,591.58
Gain from disposal of financial assets held-for-trading	19,153,785.48	42,961,835.26
Total	347,025,064.55	335,254,433.67

(2) Gain from long-term equity investment by the cost method

Investee	2013	2012
Qingdao Hisense International Marketing Co,.Ltd.	4,750,000.00	3,800,000.00
Total	4,750,000.00	3,800,000.00

(3) Gain from long-term equity investment by the equity method

Investee	2013	2012
Huayi Compressor	6,029,708.70	6,634,219.63
Hisense-Whirlpool	1,297,493.73	3,430,870.26
Attend Logistics Co,. Ltd.	-116,634.72	-143,000.95
Hisense Hitachi	292,575,261.82	180,174,917.89
Total	299,785,829.53	190,097,006.83

10.Income tax expenses

2013

2012

Item

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Current income tax expenses	82,941,113.95	14,219,306.52
Including: PRC enterprise income tax	74,776,381.83	12,561,887.81
Hong Kong profits tax	8,164,732.12	1,657,418.71
Deferred tax expenses	-29,322,173.00	-3,670,871.80
Total	53,618,940.95	10,548,434.72

The reconciliation from income tax calculated based on the applicable tax rates and total profits to the income tax expenses is as follows:

Item	2013	2012
Total profits	1,322,748,313.03	742,854,008.07
Income tax expenses calculated at statutory (or applicable) tax rates	330,687,078.27	185,713,502.02
Tax effects of different tax rates applicable to certain subsidiaries	-67,654,153.12	-6,761,202.70
Adjustments of prior year income tax in the current year	168,511.73	-168,593.35
Gain/(Loss) attributable to joint ventures and associates	-74,946,457.38	-47,524,251.69
Non-taxable income	-38,947,457.51	-8,007,318.42
Non-deductible expenses		4,329,272.07
Utilization of tax loss of previous periods	-108,348,834.68	-140,901,199.46
Unused tax loss not recognized as deferred tax assets	12,660,253.64	23,868,226.25
Others
Income tax expenses	53,618,940.95	10,548,434.72

Certain subsidiaries have been recognised as “high technology” companies and are entitled to a preferential tax rate of 15% (2012: 15%).

Hong Kong Profits Tax is calculated at 16.5% (2012: 16.5%) of the estimated assessable profits.

Except as disclosed above, the Company and other group entities, which were established and operated in the PRC, are subject to EIT at a standard rate of 25% (2012: 25%).

11.Net current assets

11.Net current assets
Item	31 December 2013	31 December 2012
Current assets (Consolidated)	7,747,383,324.25	5,930,166,101.14
Less：Current liabilities (Consolidated)	8,364,201,568.24	6,958,391,755.74
Net current assets (Consolidated)	-616,818,243.99	-1,028,225,654.60
Current assets (the Company)	6,511,109,633.34	4,730,456,072.49
Less：Current liabilities (the Company)	7,247,032,125.40	5,672,829,625.08
Net Current assets (the Company)	-735,922,492.06	-942,373,552.59

12.Total assets less current liabilities

12.Total assets less current liabilities
Item	31 December 2013	31 December 2012
Total assets (Consolidated)	11,964,709,290.58	9,200,334,640.73
Less：Current liabilities (Consolidated)	8,364,201,568.24	6,958,391,755.74
Total assets less current liabilities (Consolidated)	3,600,507,722.34	2,241,942,884.99
Total assets (the Company)	10,451,187,516.52	8,278,917,143.79

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Less：Current liabilities (the Company)	7,247,032,125.40	5,672,829,625.08
Total assets less current liabilities (the Company)	3,204,155,391.12	2,606,087,518.71

13.Earnings per share

(a)Basic earnings per share

The calculation of basic earnings per share is based on the consolidated net profit attributable to ordinary shareholders of the Company divided by the weighted average number of ordinary shares outstanding:

Item	2013	2012
Consolidated net profit attributable to ordinary shareholders ofthe parent	1,239,005,051.61	717,764,680.40
Weighted average number of issued ordinary shares of the Company	1,354,054,750	1,354,054,750
Basic earnings per share	0.92	0.53

(b)Diluted earnings per share

The calculation of diluted earnings per share is based on the consolidated net profit attributable to ordinary shareholders of the parent adjusted for dilutive potential ordinary shares divided by the adjusted weighted average number of ordinary shares of the Company. For the years ended 31 December 2013 and 2012, there were no dilutive potential ordinary shares, and therefore the diluted earnings per share were same as the basic earnings per share.

(c)Dividends

No dividend was paid or proposed for 2013, and no reserve fund was transferred into capital (2012: Nil).

MANAGEMENT DISCUSSION AND ANALYSIS

Ⅰ.INDUSTRY OVERVIEW

During the Reporting Period, the domestic home appliances industry showed a trend of overall stable growth, with swifter growth in both the refrigerator and air-conditioner sectors as stimulated by the energy saving subsidy policies over the first half of the year. Following the withdrawal of the energy saving subsidy policies in the second half of the year, the magnitude of growth of the refrigerator business decreased considerably, whereas the air-conditioner sector continually retained a stronger trend of growth. The export market was influenced by the sluggish demand from overseas markets and recorded lackluster performance. According to the statistics from China Market Monitor Company Limited (CMM) and the Customs Department, the retail volume of the domestic refrigerator market in 2013 observed a year-to-year growth of 7.66%, and that of the domestic air-conditioner market grew by 14.92% year-to-year, while the export volume of the refrigerator and freezer products marked a year-to-year growth of 6.92%, and that of the air-conditioner products increased by 0.86% year-to-year. Under the implementation of the new efficiency standards and the popularization of household intelligence, the trend of intelligentization and high-end oriented development of home appliances stepped further into the limelight.

Ⅱ.ANALYSIS OF THE COMPANY’S OPERATION

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Overall Situation

During the Reporting Period, the Company strictly adhered to the operating strategies of “building product advantages, reforming marketing model, enhancing system efficiency, exploring the international markets and ensuring scale and efficiency” and successfully achieved steady increases in the operating scale and efficiency. The Company recorded operating revenue of RMB 24,360 million, representing a year-to-year increase of 28.49%, net profit attributable to equity holders of the listed company of RMB1,239 million and earnings per share of RMB0.92; net profits after deducting non-recurring profit and loss of RMB1,078 million, representing a year-to-year increase of 80.50%. The main operating revenue of the Company sustained stable and steady growth, of which the revenue from the refrigerator business accounting for 45.55%, representing a year-to-year growth of 19.44%; revenue from the air-conditioner business accounting for 41.62%, representing a year-to-year growth of 38.54%; the domestic sales business recorded a main operating revenue of RMB15,624 million, representing a year-to-year growth of 35.45%, whereas the export sales business recorded a main operating revenue of RMB6,563 million, representing a year-to-year growth of 12.79%.

During the Reporting Period, the Company actively utilized its capital, improved capital efficiency, and substantially improved finance costs. At the same time, the debt-to-asset ratio of the Company decreased by 6.25 percentage points. The Company’s financial position was further improved.

Technology orientation

During the Reporting Period, the refrigerator products of the Company strived to realize comprehensive upgrades in the areas of energy saving, food preservation technologies and user experience through staying on the strategic development track of “intelligentization” and building on foundation of “energy saving and food preservation”, its core technological directions. The second generation of the Hisense Bauna series intelligent refrigerators was launched by the Company, for which in the foundation of the continuation of food management, health management and internet of things service functions, the connection of refrigerator with the internet has been accomplished and at the same time, the food information management function has been enhanced to further improve the user experience. The second generation of Hisense Bauna series intelligent refrigerators was awarded the “First Prize of the Ninth Session of China Household Appliances Product Innovation Award” at the International Funkausstellung (IFA) held in Germany. Moreover, the Company has maintained its advantages in energy saving and food preservation technologies. During the Reporting Period, the Company launched a top-grade energy saving three-door refrigerator product of which the daily power consumption is oly 0.28k Wh, setting a historical low for three-door refrigerator. In September 2013, Ronshen refrigerators once again won the title of the only recommended energy saving refrigerator product from International Energy Conservation Environmental Protection Association. In respect of food preservation technologies, the second generation of Ronshen i feel series new refrigerator products integrate the design of multiple vent and 360-degree centrifugal fans, along with the exclusive nano mist food preservation technology and were honored with the “Summit of High-end Refrigerator Award of the Refrigerator Industry of China in 2013” and the “Best Quality Award of the Refrigerator Industry of China in 2013” at the Sixth Annual Conference of Chinese Refrigerator Industry.

During the Reporting Period, the air-conditioner products of the Company also focused on “energy saving, health and intelligentization” while fully utilizing the core technology of inverter air-conditioning to market the internet air-conditioner products that realized long-distance intelligent control of air-conditioners. Capitalizing on the original innovative technology in intelligentization, Hisense Apple Pie A8-89 Intelligent Supreme Series wall-mounted

Page 12 of 47

air-conditioners and cabinet air-conditioners were awarded the China Household Electrical Appliance Air-conditioner Product Prize at the China Appliance World Expo, which is well-known as the “wind vane of household electrical appliances in China”. Besides the abovementioned innovative technology in intelligentization, technical upgrades in high efficiency and energy saving remained the foundation for the Company in the research and development of air-conditioner products. Hisense Air-Conditioner has cooperated with Emerson Electric in the research and development of the “jet inverter scroll enthalpy” (VVI) technology successfully, which enable air-conditioners to sustain and forcibly increase the heat performance by 45% and to attain forceful heating even in a cold environment of minus 20 degrees. At the 2013-2014 China Refrigerator Industry Summit co-organized by the State Information Center and the State Grid, the two major brands Hisense Air-Conditioner and Kelon Air-Conditioner won three industry grand prizes, namely the “Outstanding Industry Contribution Award”, the “Industry Quality Benchmark Award” and the “Ten Years High Efficiency Benchmark Award”; whereas Hisense Apple Pie A8 series 89 luxury amethyst ultra-slim inverter wall-mounted air-conditioner and Kelon air-conditioners “Jiangnan Wind series” VV ultra-slim inverter wall-mounted air-conditioner were awarded the “Star of Quality of Refrigerator of Year 2013 ” and “Star of Energy-Saving of Refrigerator of Year 2013” respectively.

During the Reporting Period, the Company has applied for 525 patents in total, including 152 invention patents and 166 appearance patents. In November 2013, Hisense “Apple Pie A8” series ultra-slim air-conditioners obtained the “Outlook Design Gold Award in China” at the Fifteenth Patent Competition in China, being the only product to receive “Outlook Design Gold Award in China” of the Patent Competition in China in the home appliance industry this year.

Refrigerator and freezer business

During the Reporting Period, the Company actively sought to enhance its product structure through further enriching the portfolio of high-end products such as French-door, multi-door refrigerators in order to increase the competitiveness of refrigerator and freezer products. According to the statistics of CMM, the retail market share of the French-style refrigerators in 2013 was 6.86 percentage points higher than in 2012.With innovations and upgrades in technology and functions, enhancements in product competitiveness, and improvements in product quality standards, the refrigerator and freezer business of the Company achieved stable growth. According to the statistics of CMM, the Company’s refrigerators acclaimed a retail market share of 17.60%, securing the second position in the industry and representing an increase of 1.26 percentage points as compared to 2012. As to the layout of production capacity, the refrigerator production base in Shandong commenced production smoothly in the fourth quarter of 2013, which further enhanced the production layout of production bases for refrigerator and freezers of the Company.

Air-conditioner business

During the Reporting Period, the air-conditioner business of the Company continued to reinforce the efforts in product research and development and improving product quality management, while persisting in increasing the competitiveness of the products through technological innovation and upgrade, enhancements in function and appearance, as well as improvements in quality. The Company launched a series of high quality artistic and intelligent products epitomized by the “Apple Pie A8 flagship new product – 89 artistic series of cabinet air-conditioners and wall-mounted air-conditioners” to effectively improve the image in the end market and stimulate product sales. According to the statistics of CMM, air-conditioners under the two brands “Hisense” and “Kelon” recorded year-to-year growth of 54.32% and 24.83% respectively in retail sales in 2013, significantly outperforming the overall level of increase of the air-conditioner industry, and

Page 13 of 47

the retail market share of the air-conditioner of the Company increased by 1.54 percentage points as compared to 2012. In respect of export, the Company persisted in the path of exploring the international market and expanding the scale of exports. According to the statistics of the Customs Department, the Company recorded a year-to-year growth of 10.33% in the export volume of air-conditioner products of the Company in 2013, significantly surpassing the 0.86% growth of the industry. At the same time, the gross profit margin of air-conditioner products recorded a increase of 2.1 percentage points and the profitability of the air-conditioner segment continued to increase under the implementation of informatization and other efficiency enhancing measures, as well as unitization and other cost reducing efforts.

Ⅲ. ANALYSIS TO PRINCIPAL FINANCIALS DURING THE REPORTING PERIOD

( Ⅰ ) MAJOR ACCOUNTING DATA AND FINANCIAL INDICATORS

Did the Company make retrospective adjustment to or restatement of the accounting data of prior years due to changes in accounting policies and correction of accounting errors? □Yes √No

			Increase
			or
			decrease
Item	2013	2012	as	2011
			compare
			d to last
			year (%)
Operatingrevenue (RMB)	24,360,021,308.47	18,958,915,310.09	28.49	18,488,663,163.12
Net profits attributable to shareholders of listed	1,239,005,051.61	717,764,680.40
			72.62	227,015,126.87
company (RMB)
Net profits after deducting non-recurring profit
and loss attributable to shareholders of listed	1,077,904,382.91	597,180,784.22	80.50	196,373,292.36
company (RMB)
Net cash flow from operating activities (RMB)	218,798,349.53	1,098,192,778.13	-80.08	366,265,192.49
Basic earnings per share (RMB/share)	0.92	0.53	73.58	0.17
Diluted earnings per share (RMB/share)	0.92	0.53	73.58	0.17
Weighted average rate of return on net assets
	58.16	61.95	-3.79	33.72
(%)
			Increase
			or
			decrease
			as
Items	31 December 2013	31 December 2012		31 December 2011
			compare
			d to end
			of last
			year (%)
Total assets (RMB)	11,964,709,290.58	9,200,334,640.73	30.05	7,635,439,578.36
Net assets attributable to shareholders of listed	2,748,731,080.83	1,512,042,166.49
			81.79	805,123,597.33
company (RMB)

( Ⅱ ) NON-RECURRING PROFIT AND LOSS ITEMS AND AMOUNTS

Unit: RMB

	Amount of	Amount of	Amount of	Descripti
Item
	2013	2012	2011	on
Profits or losses from disposal of non-current assets
(including the part written off for provision for	23,631,537.09	97,537,681.25	16,528,938.47
impairment on assets)
Government grants recognized in the profits or losses
	82,700,643.38	23,057,674.18	21,704,167.78
(excluding government grants closely related to the

Page 14 of 47

Company’s business and are received with fixed
amounts or with fixed percentage based on unified
standards promulgated by government)
Corporate restructuring costs (e.g. staff relocation costs
	-52,492,777.86	0.00	0.00
and costs during the course of integration)
Reversal of provision for impairment loss of account
	89,950,024.68	0.00	0.00
receivables subject to separate impairment testing
Other non-operating income and expenses other than the
	14,306,916.33	3,348,427.38	-3,467,732.46
aforementioneditems
Less:Effect of income tax	4,249,768.03	2,187,048.64	1,948,610.72
Effect of minority interests (after tax)	-7,254,093.11	1,172,837.99	2,174,928.56
Total	161,100,668.70	120,583,896.18	30,641,834.51	--

( Ⅲ ) ANALYSIS OF PRINCIPAL BUSINESS

1. Income

Is the Company’s income from sales of goods larger than its income from provision of services? √Yes □No

				Increase or decrease as
	Item (ten thousand			compared to
Industry Category		2013	2012
	units / sets)			corresponding period
				last year (%)
Home appliances	Sales volume	1,566	1,264	23.89
manufacturing	Production volume	1,605	1,283	25.10
industry	Inventoryvolume	152	113	34.51

2. Costs

Unit: RMB ten thousand

		2013	2013	2012	2012	Increase or
						decrease as
						compared to
Industry			Weight to		Weight to
	Item					corresponding
Category		Amount	operating costs	Amount	operating costs
						period last year
			(%)		(%)
						(%)
Home	Raw materials	1,542,152.64	90.23	1,245,834.25	91.86	-1.63
appliances	Staff wages	51,646.53	3.02	36,017.61	2.66	0.36
manufacturing	Depreciation	28,402.07	1.66	23,805.38	1.76	-0.10
industry

3. Expense

Unit: RMB ten thousand

Expense Item	2013	2012	Increase or decrease as compared to corresponding period last year (%)	Reason for the changes
Sales expense	367,812.22	273,189.44	34.64	Mainly due to increase in scale of sales and intensification of market investment by the Company during the Reporting Period
Management expense	81,445.26	64,089.35	27.08	No significant change
Finance expense	-2,747.44	3,899.96	N/A	Mainlydue to increase

Page 15 of 47

				in the Company’s efficiency and active capital utilization during the Reporting Period
Income tax expense	5,361.89	1,054.84	408.31	Mainly due to increase in companies’ total amount of profit

4.Cash Flow

Unit: RMB ten thousand

			Increase or
			decrease as
			compared to
Item	2013	2012
			corresponding
			period last year
			(%)
Sub-total of cash inflows from operating	1,456,341.79	1,043,373.56	39.58
activities
Sub-total of cash outflows from operating	1,434,461.96	933,554.28
			53.66
activities
	21,879.83	109,819.28
Net cash flows from operating activities			-80.08
Sub-total of cash inflows from investing	9,315.94	12,326.66
			-24.42
activities
Sub-total of cash outflows from investing	56,571.70	16,323.81
			246.56
activities
Net cash flows from investing activities	-47,255.76	-3,997.15	1,082.24
Sub-total of cash inflows from financing	47,399.58	176,720.64
			-73.18
activities
Sub-total of cash outflows from financing	26,043.63	270,858.12
			-90.38
activities
Net cash flows from financing activities	21,355.95	-94,137.48	-122.69
Netincreaseincashand cashequivalents	-4,067.42	11,684.65	-134.81

(1) Net cash flows from operating activities decreased by 80.08% year-to-year, mainly due to increase in proportion of cash payment by the Company to obtain gains on cash discount during the Reporting Period, and increase of notes receivable at the end of the Reporting Period;

(2) Net cash flows from investing activities decreased year-to-year, mainly due to increase of investment in fixed assets during the Reporting Period;

(3) Net cash flows from financing activities increased year-to-year, mainly due to increase in net factoring accounts receivable during the Reporting Period.

5. Research and development expenses

During the Reporting Period, the Company continued to increase investment in research and development and improve the efficiency of research and development, the Company focused on the upgrade and innovation of its “energy-saving technology” and “intelligent technology”. Through launching research and development projects on refrigerator products such as “Low Density Low Conductivity Foaming Technology”, “Research on VIP Applications” and research and development projects on air-conditioner products such as “Air-conditioner Using PLC (Power Line Carrier) Technology for Two-point Connection and Communication”, “Research and Development

Page 16 of 47

of Ultra High Temperature Operated Inverter Air-Conditioning Technology”, “Research and Application of Pipe Group Heat Exchanger for Air-Conditioner” , “Development and Application of Low Noise High Efficiency Technology for Outdoor New Body Case of Air-Conditioner”, “Development and Application of New Air Purification Key Technology”, the Company strived to improve the performance of energy saving and level of intelligentization of its products in order to enhance its products’ market competitiveness and the Company’s core competitiveness, which would provide strong technological support for the Company’s industrial advancement.

( Ⅳ ) DESCRIPTION OF PRINCIPAL BUSINESS SEGMENTS

Unit: RMB ten thousand

				Increase or	Increase or
				decrease in	decrease in
				revenue from	costs of	Increase or
				principal	principal	decrease in gross
	Revenue from		Gross
		Costs of		operating	operating	profit margin as
	principal operating		profit
Item		principal operating		businesses	businesses	compared to
	businesses		margin
		businesses		as compared	as compared	corresponding
			(%)
				to	to	period last year
				corresponding	correspondi	(%)
				period last	ng period
				year (%)	last year (%)
By industry
Home appliances
manufacturing	2,218,692.55	1,709,203.40	22.96	27.85	26.02	1.11
industry
By product
Refrigerators	1,010,598.17	771,931.61	23.62	19.44	19.34	0.07
Air-conditioners	923,376.32	717,207.82	22.33	38.54	34.89	2.11
Others	284,718.05	220,063.97	22.71	27.82	23.81	2.51
Total	2,218,692.55	1,709,203.40	22.96	27.85	26.02	1.11
By region
Mainland	1,562,370.14	1,124,431.00	28.03	35.45	34.71	0.40
Overseas	656,322.40	584,772.40	10.90	12.79	12.12	0.53
Total	2,218,692.55	1,709,203.40	22.96	27.85	26.02	1.11

( Ⅴ ) ANALYSIS OF ASSETS AND LIABILITIES POSITION

1. Significant changes in asset items

Unit: RMB ten thousand

	31 December 2013	31 December 2013	31 December 2012	31 December 2012
	Amount	Percenta
					Increase or
		ge to		Percentage
Item					decrease in	Explanation of significant changes
		total	Amount	to total
					weight (%)
		assets		assets (%)
		(%)
Cash at bank and on	47,378.72
		3.96	51,606.55	5.61	-1.65	No significant change
hand
	6,711.50		1,067.83			Mainly due to increase in the
Financial assets
						exchange rate for undue forward
held for		0.56		0.12	0.44
						contracts as at the end of the
trading
						Reporting Period
	216,080.17		155,876.62			Mainly due to increase in
Notes receivable		18.06		16.94	1.12
						receivables as at the end ofthe

Page 17 of 47

						Reporting Period and at the same
						time decrease in notes receivable
						endorsed because of the
						Company’s promotion of
						electronic bill payment
Accounts receivable	164,477.18	13.75	145,588.22	15.82	-2.07	No significant change
	54,633.75					Mainly due to increase in
Other receivables		4.57	34,272.22	3.73	0.84	subsidies receivable as at the end
						of the Reporting Period
	249,635.99					Mainly due to increase in planned
Inventories		20.86	173,844.11	18.90	1.96	reserve of products as at the end
						of the Reporting Period
Investment	3,394.63
		0.28	3,644.66	0.40	-0.12	No significant change
properties
	99,750.07					Mainly due to larger increase in
						the net profits of Hisense Hitachi,
Long-term equity
		8.34	75,192.57	8.17	0.17	a joint venture, in the current
investments
						period as compared to the last
						period
Fixed assets	236,850.07	19.80	190,983.24	20.76	-0.96	No significant change
	25,397.76					Mainly due to increase in
Construction in
		2.12	6,834.43	0.74	1.38	investment by Shandong
progress
						Refrigerator, a subsidiary
	3,661.69		729.47			Mainly due to increase in the
						subsidiaries which satisfy deferred
Deferred profit tax						profit tax assets provision as the
		0.31		0.08	0.23
assets						respective subsidiaries were
						making profits as at the end of the
						Reporting Period

2. Significant changes in liability items

Unit: RMB ten thousand

	2013	2013	2012	2012	Increase or
		Percentage		Percentage	decrease	Explanation of significant
Item
	Amount	to total	Amount	to total	in weight	changes
		assets (%)		assets (%)	(%)
	19,168.15		3,030.95			Mainly due to increase in
Short-term						factoring accounts receivable as
		1.60		0.33	1.27
borrowings						at the end of the Reporting
						Period
	348,051.04		233,542.59			Mainly due to increase in
						planned reserve of products as
Accounts payable		29.09		25.38	3.71
						at the end of the Reporting
						Period
	-15,676.65	-1.31	-4,899.48			Mainly due to increase in the
Taxes payable				-0.53	-0.78
						input value-added tax

(VI) ASSETS AND LIABILITIES MEASURED AT FAIR VALUE

Unit: RMB ten thousand

Items	Amount at the beginning of the period	Gain or loss from change in fair value during the period	Accumulated changes in fair value accounted in equity	Impairme nt provided during the period	Amount purchased during the period	Amount sold during the period	Amount at the end of the period

Page 18 of 47

Financial assets
1. Financial assets measured at fair value where changes in fair value are accounted for as gain or loss of the period (excluding derivative financial assets)
2. Derivative financial assets	1,067.83	5,643.67	5,643.67				6,711.50
3. Financial assets available for sale
Subtotal of financial assets	1,067.83	5,643.67	5,643.67				6,711.50
Real estate for investment
Productive biological assets
Others
Total	1,067.83	5,643.67	5,643.67				6,711.50
Financial liabilities	-16.42	15.96	15.96				-0.46

(VII) CORE COMPETITIVENESS ANALYSIS

1.Technological advantages

The Company adheres to its operating philosophy of “technology orientation” and centers on “energy-saving by inverter technology” and “green and environmental friendliness” as the core to build its core competitiveness through continual innovations in technologies and products. The Company has top-notch research and development institutions including State-level enterprise technology center, enterprise post-doctoral scientific research station, State-recognized laboratory, and Guangdong Provincial Key Research and Development Center of Engineering Science, and an industry-leading research and development team with thousands of technical personnels. The Company is always committed to enhance its self-directed innovation capacity, strives to enhance the performance and level of intelligentization of its products, in order to improve its core competitiveness and its products’ market competitiveness and provide strong technical support for the Company’s industrial advancement.

2.Brand advantages

The three brand names used in the refrigerator and air-conditioner products of the Company, namely “Hisense”, “Ronshen” and “Kelon”, are Chinese Well-known Marks with good brand reputation

Page 19 of 47

and market base. Among these brands, the market share of “Hisense” invertor air-conditioners had ranked first in China for thirteen consecutive years, while the market share of “Ronshen” refrigerators had ranked first in China for eleven years. “High technology and high quality” reflects the Company’s core brand value. At the same time, the Company gradually accelerates the progress of internationalization, and continues to promote the internationalization of its own brands.

( Ⅷ ) Major subsidiaries and companies in which the Company has equity interest

							Operating	Operating
			Major	Register	Total assets	Net assets			Net profits
Name of	Company						revenue	profit
		Industry	product or	ed	(RMB ten	(RMB ten			(RMB ten
company	type						(RMB ten	(RMB ten
			service	capital	thousand)	thousand)			thousand)
							thousand)	thousand)
			Productio
	A company in		n and sale
	which the	Home	of
Hisense				US$46
	Company has	appliances	commerci		233,277.98	136,738.44	354,070.04	71,342.53	60,821.59
Hitachi				million
	equity interest	industry	al
			air-conditi
			oners

Ⅳ .OUTLOOK

Looking ahead into 2014, unfavorable factors such as continual structural adjustments of the domestic macroeconomy amidst weak growth momentum, intensified fluctuation of exchange rates, continued increase of labour cost, and general sluggish economic growth in international emerging markets will exert increasing pressure on the operation of the Company. However, under the background of strategic deployment for the nation’s all-round in-depth reform, economic transition and upgrade, new urbanization policies, reform of the income distribution system and other measures in China will further motivate the citizen’s consumption, whereas the popularization of the household intelligence will accelerate the consumption upgrade and product replacement within the white goods industry. On the other hand, economic recovery in developed countries in Europe and the United States will invigorate the demand from export trading, bringing advantageous opportunities to the development of the Company.

In 2014, the Company will rigidly uphold the operating strategies of“building product advantages, improving service quality, reforming marketing model, enhancing system efficiency and securing scale and efficiency” to proactively respond to the operating pressure, ride on the opportunities of industry and sector upgrades, as well as technology and product innovations in order to achieve steady increase in its scale, performance and market share through implementation of the following:

1. to focus on the objective of “meeting the consumer demand” to continue improvements in product competitiveness and establish product advantages. Spearheading the core technologies towards energy saving, health and intelligentization, to maintain the leading position of the products’ core competitiveness, enhance the product sophistication, strengthen improvements of product quality through continual technological innovations. To adhere to the strategy of developing high-end products, increase the input for research and development of high-end products, enrich the portfolio of high-end products, and step up the marketing of high-end products.

2. to take “customer satisfaction” as the ultimate goal and zero complaint as the direction in the efforts of enhancing the product and service quality, accelerating improvements in service level; to introduce NPS (net promoter score) management and set up NPS controlling system to achieve improvements for the entire process from product planning, design, manufacture, quality control,

Page 20 of 47

logistics, sales to services in order to increase the net promoter score of the products. To enhance the service network, devise the service standards, establish service network platform and closed circuit management for service information, realize value-adding for information and expedite the speed of service information processing.

1. to reform the sales model and increase the sales capability. To capitalize on the opportunities from the swift growth of the emerging channel of ecommerce through enhancing the professional operation of the ecommerce channels, fortifying the cooperation and exchange with ecommerce channels; to continue driving for the construction of channels for the third and fourth grade markets, enhance the marketing capability and turnaround, with the objective of increase the single-shop productivity while increasing the number of networks; to expand the scale of commercial direct sales business and boost the exploration for new customers, in particular international customers.

2. to continue development of efficiency enhancement measures. To continue promoting technique enhancement and automation projects, reinforce product standardization and unitization efforts, commence the informatization management system, streamline the processes and organization structure, and to enhance the entire system efficiency.

3. to implement strict capital and expenses management and to accelerate capital flow.

FINAL DIVIDEND

The Group recorded net profit attributable to shareholders of the listed company of RMB 1,239 million for the year ended 31 December 2013. The Board resolved not to pay any dividend for the year ended 31 December 2013 and not to capitalize any reserve funds (no dividend was paid by the Group for the year ended 31 December 2012).

LIQUIDITY AND SOURCES OF FUNDS

For the year ended 31 December 2013, net cash generated from operating activities of the Group amounted to approximately RMB 219 million (2012: net cash generated from operating activities amounted to approximately RMB 1,098 million).

As at 31 December 2013, the Group had bank deposits and cash (including pledged bank balances) amounting to approximately RMB 474 million (2012: RMB 516 million), and bank loans amounting to approximately RMB192 million (2012: RMB30 million).

Total capital expenditures of the Group for the year ended 31 December 2013 amounted to approximately RMB 566 million (2012: RMB 163 million).

HUMAN RESOURCES AND EMPLOYEES’ REMUNERATION

As at 31 December 2013, the Group had approximately 33,090 employees, mainly comprising 4,617 technical staff, 14,784 sales representatives, 474 financial staff, 1,053 administrative staff and 12,162 production staff. The Group had 5 employees with a doctorate degree, 258 with a master’s degree and 3,449 with a bachelor’s degree. For the year ended 31 December 2013, the Group’s staff payroll amounted to RMB2,137 million (corresponding period in 2012 amounting to RMB1,541 million).

EMPLOYEES’ TRAINING AND REMUNERATION POLICY

Employees and people are the basis for corporate development. Leveraging on the platform provided by Hisense College, the Company has established a three-level training system, a well-rounded curriculum system and a training regulation system and actively promoted the

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building up of teacher resources internally and externally, so as to effectively support the development of the Company's management and technical personnel and achieve value-added human resources. Every year, the Company will formulate education and training programmes for the employees based on the annual operational strategy and human resources development needs.

The Company has provided 3,346 courses in total during the Reporting Period, and the number of participants reached 173,426. The courses are mainly of enterprise management type, craftsmanship and quality type, corporate culture type, manufacturing type, or technology research and development type, etc., covering employees at different levels, ranging from ground level staff responsible for work such as front-line production and marketing to senior management.

The Company adopts a position-based remuneration policy for its staff. Staff remuneration is determined by reference to the relative importance of and responsibility assumed by the position and other performance factors.

CHARGE ON THE GROUP’S ASSETS

As at 31 December 2013, the Group’s property, plant and equipment (including leasehold land held for own use), investment properties and trade receivables of approximately RMB 192 million (31 December 2012: RMB423 million) were pledged as security for the Group’s borrowings.

EXPOSURE TO EXCHANGE RATE FLUCTUATION AND ANY RELATED HEDGE

Since part of the purchase and the majority of the overseas sales of the Group during the Reporting Period were denominated in foreign currency, the Group is exposed to certain risk of exchange rate fluctuation. The Group has used financial instruments such as import/export documentary bills and forward contracts for exchange rate hedging purpose.

PUBLIC FLOAT

The Directors confirm that as at 27 March 2014, based on publicly available information and to the best of their knowledge, 25% or above of the total issued share capital of the Company are held by the public. Therefore, the public float of the Company satisfies the requirement stipulated under the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (the “Hong Kong Listing Rules”).

AUDIT COMMITTEE

The eighth session of the audit committee of the Company has reviewed the final results of the Group for the year ended 31 December 2013.

CAPITAL EXPENDITURE

The Group expects that the capital expenditure for 2014 will be approximately RMB 211 million. The Group has sufficient funds to meet the funding requirement for capital expenditure plans and daily operations.

TRUST DEPOSITS

As at 31 December 2013, the Group did not have any trust deposits with any financial institutions in the PRC. All of the Group’s deposits have been deposited in commercial banks and other financial institution in the PRC and Hong Kong.

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LIQUIDITY, FINANCIAL RESOURCES AND CAPITAL STRUCTURE

As at 31 December 2013, the Group did not have any long-term bank borrowings and its cash and cash equivalents amounted to RMB 474 million (2012: RMB 514 million), of which more than RMB 328 million are denominated in Renminbi.

As at 31 December 2013, the Group’s current liabilities amounted to RMB8,364 million, non-current liabilities amounted to RMB417 million, and shareholders’ equity attributable to the shareholders of the Company amounted to RMB2,749 million. Details of the Group’s capital structure are set out in the financial statements which will be contained in the annual report of the Company.

GEARING RATIO

As at 31 December 2013, the Group’s gearing ratio (calculated according to the formula: total liabilities /total assets）was 73.39% (2012: 79.64%).

INDEPENDENCE OF THE INDEPENDENT NON-EXECUTIVE DIRECTORS

The eighth session of the Board has received a written confirmation from each of the independent non-executive Directors in respect of their independence in accordance with the requirements provided under Rule 3.13 of the Hong Kong Listing Rules. The Company considers that all the independent non-executive Directors of the eighth session of the Board meet the relevant requirements under Rule 3.13 of the Hong Kong Listing Rules and considers them to be independent.

SERVICE CONTRACTS OF DIRECTORS AND SUPERVISORS

None of the Directors and the supervisors of the Company have a service contract with any member of the Group which is not determinable by the Group within one year without payment of compensation (other than statutory compensation).

DIRECTORS’ AND SUPERVISORS’ INTERESTS IN CONTRACTS

The Directors of the eighth session of the Board and the supervisors of the Company do not and did not directly or indirectly hold any material interests in any contract of significance of the Company or its subsidiaries subsisting during or at the end of the year 2013.

REVIEW OF CONTINUING CONNECTED TRANSACTIONS BY INDEPENDENT NON-EXECUTIVE DIRECTORS

The independent non-executive Directors of the eighth session of the Board have reviewed the continuing connected transactions of the Group for the year 2013, and confirmed that these transactions were conducted in the ordinary course of business of the Group in accordance with the relevant agreements governing them and on normal commercial terms which were fair and reasonable and in the interest of the shareholders of the Company as a whole.

REVIEW OF CONTINUING CONNECTED TRANSACTIONS BY AUDITORS

After auditing the continuing connected transactions of the Group, the auditors of the Company confirmed that the relevant continuing connected transactions of the Group have been approved by the Board, were carried out in accordance with the Company’s pricing policies pursuant to the terms of the agreements of the relevant transactions, and have not exceeded the caps disclosed in the previous announcements.

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MODEL CODE FOR SECURITIES TRANSACTIONS BY DIRECTORS

The Company has adopted the Model Code for Securities Transactions by Directors of Listed Issuers (“Model Code”) as set out in the Hong Kong Listing Rules as its code for securities transaction by Directors. After having made specific enquiries to the Directors, all Directors of the Board confirmed that they had acted in full compliance with the Model Code during their term of office.

SHARE CAPITAL STRUCTURE

As at 31 December 2013, the share capital structure of the Company was as follows:

Class of shares	Number of shares	Percentage to the total issued share capital
H shares	459,589,808	33.94%
A shares	894,464,942	66.06%
Total	1,354,054,750	100.00%

TOP TEN SHAREHOLDERS

As at 31 December 2013, there were 29,115 shareholders of the Company (the “Shareholders”) in total, of which the top ten Shareholders were as follows:

				Percentage
			Percentage	to the
			to the total	relevant	No. of shares
	Nature of	No. of shares	issued	class of	held subject
Name of Shareholder
	Shareholder	held	shares of	issued	to trading
			the	shares of	moratorium
			Company	the
				Company
Qingdao Hisense Air-conditioning CompanyLimited	State-owned legal person	612,316,909	45.22%	68.46%	0
HKSCC Nominees LimitedNote 1	Foreign legal person	458,988,058	33.90%	99.87%	0
China Huarong Asset Management Corporation	State-owned legalperson	30,000,000	2.22%	3.35%	0
China Construction Bank – Yinhua Prosperity ThemeEquityFund	Other	10,302,800	0.76%	1.15%	0
Zhang Shaowu	Domestic naturalperson	6,365,400	0.47%	0.71%	0
Industrial and Commercial Bank of China - CCB Principal Selected Growth Stock-Based Securities InvestmentFund	Other	4,500,000	0.33%	0.50%	0
Agricultural Bank of China – Fullgoal Tianrui	Other	4,111,380	0.30%	0.46%	0

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Strong Area Selected Mixed Open Securities InvestmentFund
Zhong Juan Wei	Domestic naturalperson	3,550,000	0.26%	0.40%	0
China Construction Bank - China AMC Dividend Mixed Open-End Securities Investment Fund	Other	3,534,085	0.26%	0.40%	0
Industrial and Commercial Bank of China – Guangfa Jurui Stock-Based Securities Investment Fund	Other	3,086,644	0.23%	0.35%	0

Notes:

1. The shares held by HKSCC Nominees Limited are held on behalf of a number of its account participants, among which, Hisense (Hong Kong) Company Limited, a party acting in concert with the controlling shareholder of the Company, is the holder of 54 million H shares in total at the end of the Reporting Period, representing 3.99% of the total number of shares of the Company.

2. At the end of the day falling 5 trading days prior to the date of disclosure of the annual report for A shares on 28 March 2014 , there were 30,370 shareholders of the Company in total.

SHAREHOLDINGS OF THE TOP TEN SHAREHOLDERS OF TRADABLE SHARES

Name of Shareholders	Number of tradable shares held	Class of shares
Qingdao Hisense Air-conditioning Company Limited	612,316,909	RMB ordinary shares
HKSCC Nominees Limited	458,988,058	Overseas listed foreignshares
China Huarong Asset Management Corporation	30,000,000	RMB ordinary shares
China Construction Bank – Yinhua Prosperity Theme EquityFund	10,302,800	RMB ordinary shares
Zhang Shaowu	6,365,400	RMB ordinary shares
Industrial and Commercial Bank of China - CCB Principal Selected Growth Stock-Based Securities Investment Fund	4,500,000	RMB ordinary shares
Agricultural Bank of China – Fullgoal Tianrui Strong Area Selected Mixed Open Securities Investment Fund	4,111,380	RMB ordinary shares
Zhong Juan Wei	3,550,000	RMB ordinary shares
China Construction Bank - China AMC Dividend Mixed Open-End SecuritiesInvestmentFund	3,534,085	RMB ordinary shares
Industrial and Commercial Bank of China – Guangfa Jurui Stock-Based Securities Investment Fund	3,086,644	RMB ordinary shares

Note : The Company is not aware whether any of the top ten holders of tradable shares is connected with each other or any of them is a party acting in concert with any of the other

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nine shareholders within the meaning of 《上市公司收購管理辦法》 (Administrative Measures for the Takeover of Listed Companies).

INTERESTS AND SHORT POSITIONS OF SUBSTANTIAL SHAREHOLDERS IN THE SHARES AND UNDERLYING SHARES

So far as is known to the Directors, supervisors and the chief executive of the Company, as at 31 December 2013, the following persons (other than the Directors, supervisors and the chief executive of the Company) had interests or short positions in the shares or underlying shares of the Company which would fall to be disclosed to the Company under the provisions of Divisions 2 and 3 of Part XV of the Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong) (“SFO”), or which were recorded in the register required to be kept under section 336 of the SFO, or as otherwise notified to the Company and The Stock Exchange of Hong Kong Limited (the “Hong Kong Stock Exchange”):

Long position or short position in the shares of the Company

Name of shareholder	Capacity	Type of shares	Number of shares held	Percentage of the respective type of shares	Percentage of the total number of shares in issue
Qingdao Hisense Air-conditioning Company Limited Note1	Beneficial owner	A shares	612,316,909(L)	68.46%	45.22%
Qingdao Hisense Electric Holdings Company Limited Note 1	Interest of controlled corporation	A shares	612,316,909(L)	68.46%	45.22%
Hisense Company Limited Note 1	Interest of controlled corporation	A shares	612,316,909(L)	68.46%	45.22%
Hisense (Hong Kong) Company Limited_Note 1_	Beneficial owner	H shares	54,000,000(L)	11.75%	3.99%
Qingdao Hisense Electric Holdings Company Limited Note 1	Interest of controlled corporation	H shares	54,000,000(L)	11.75%	3.99%
Hisense Company Limited Note 1	Interest of controlled corporation	H shares	54,000,000(L)	11.75%	3.99%
Prime Capital Management Company Limited_Note 2_	Investment manager	H shares	41,484,000(L)	9.02%	3.06%
Morgan Stanley Note 3	Interest of controlled corporation	H shares	25,101,579(L) 9,592,586(S)	5.46% 2.08%	1.85% 0.71%

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The letter “L” denotes a long position in the shares and the letter “S” denotes a short position in the shares.

Note:

1. Qingdao Hisense Air-conditioning Company Limited is a company directly owned as to 93.33% and indirectly owned as to 6.67% by Qingdao Hisense Electric Holdings Company Limited, whereas Hisense (Hong Kong) Company Limited is a company directly owned as to 100% by Qingdao Hisense Electric Holdings Company Limited. Qingdao Hisense Electric Holdings Company Limited is in turn owned as to 32.36% by Hisense Company Limited. By virtue of the SFO, Qingdao Hisense Electric Holdings Company Limited and Hisense Company Limited were deemed to be interested in the same parcel of A shares of which Qingdao Hisense Air-conditioning Company Limited was interested and in the same parcel of H shares of which Hisense (Hong Kong) Company Limited was interested ；

2. Prime Capital Management Company Limited was interested in a total of 41,484,000 H shares in the capacity of an investment manager by virtue of the SFO.

3. Morgan Stanley was interested in these H shares by virtue of the SFO, in which Morgan Stanley & Co. International plc was interested in the long position of 17,472,998 H shares and the short position of 9,249,586 H shares, Mitsubishi UFJ Morgan Stanley Securities Co., Ltd. was interested in the long position of 7,041,000 H shares, Morgan Stanley Equity Financing Limited was interested in the long position of 398,093 H shares, Morgan Stanley & Co. LLC was interested in the long position of 189,488 H shares and the short position of 189,000 H shares and Morgan Stanley Capital Services LLC was interested in the short position of 154,000 H shares.

Save as disclosed above, as at 31 December 2013, in so far as the Directors, supervisors and chief executive of the Company are aware, there was no other interest and/or short position held by any person in the shares and underlying shares of the Company which were recorded in the register required to be kept by the Company pursuant to section 336 of the SFO.

PARTICULARS OF THE CONTROLLING SHAREHOLDERS OF THE COMPANY

• (a) Qingdao Hisense Air-Conditioning Company Limited, the controlling shareholder of the Company, was incorporated on 17 November 1995. Its registered address is Changsha Road, Hi-tech Industrial Zone, Qingdao, the PRC and the legal representative is Mr. Tang Ye Guo and its registered capital is RMB674.79 million. Its business scope is the development and manufacture of air-conditioning products and injection moulds and the provision of after-sale repairing services for its products (Permit/licence shall be obtained for the operation of the businesses above if they fall into the requirements of licensure).

• (b) The beneficial controller of the Company is Hisense Company Limited, which was incorporated in August 1979 with its registered address at No. 17 Donghai West Road, Shinan, Qingdao. Mr. Zhou Houjian is the legal representative of Hisense Company Limited and its registered capital is RMB806.17 million. The scope of business includes: the entrusted operation of state-owned assets; the manufacture and sales of TV sets, refrigerators, freezers, washing machines, small household appliances, disc players, audio sets, broadcasting appliances, air-conditioners, electronic computers, telephones, communication products, internet products and electronic products and the provision of related services; the development of software and the provision of internet services; the technological development and the provision of consultation services; the self-operated import and export business (with its operation subject to the list of projects as approved by the MOFTEC); the foreign economic and technical cooperation (with its operation subject to the list of projects as approved by the MOFTEC); operation of property rights transaction and provision of brokerage and information services; provision of industrial travel agency services; provision of relevant business trainings, property management, leasing of tangible property and leasing of immovable property (Permit/licence shall be obtained for the

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operation of the businesses above if they fall into the requirements of licensure).

• (c) The ultimate beneficial controller of the Company is the State-owned Assets Supervision and Administration Commission of Qingdao Municipal People’s Government.

• (d) Relationship between the Company and its beneficial controllers:

==> picture [458 x 198] intentionally omitted <==

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

State-owned Assets Supervision and Administration Commission of
Qingdao Municipal People’s Government
100%
Hisense Company Limited
32.36% 100%
Hisense (Hong Kong)
Qingdao Hisense Electric Holdings Company Limited Company Limited
100%
Qingdao Hisense Air-Conditioning Company Limited
45.22% 3.99%
Hisense Kelon Electrical Holdings Company Limited
----- End of picture text -----

• (e) During the Reporting Period, there was no change in the controlling shareholders of the Company.

INTERESTS OF DIRECTORS, SUPERVISORS AND CHIEF EXECUTIVES IN THE SHARES, UNDERLYING SHARES AND DEBENTURES

As at 31 December 2013, save as disclosed in sub-section “Movements of the share options during the Reporting Period” under the section headed “Summary on adoption of first share option incentive scheme and the grant thereunder” below, none of the members of the Board, supervisors and the chief executive of the Company held any interests or short positions in any shares, underlying shares and debentures of the Company and any of its associated corporations (within the meaning of Part XV of the SFO), as recorded in the register required to be maintained by the Group pursuant to section 352 of the SFO or as otherwise notified to the Company and the Hong Kong Stock Exchange pursuant to the Model Code.

MAJOR CUSTOMERS AND SUPPLIERS

During the year ended 31 December 2013, the aggregate amount of the Group’s purchases from the top five suppliers was RMB2,983 million, representing 17.46% of the total purchase amount of the Group for the year and the aggregate sales amount to the top five customers was RMB6,352 million, representing 28.64% of the total sales amount of the Group for the year. As at 31 December 2013, none of the Directors, their associates or Shareholders who, to the knowledge of the Directors, held more than 5% of the shares in the Company, had any interest in the above suppliers or customers.

PURCHASE, SALE OR REDEMPTION OF SHARES

During the Reporting Period, neither the Company nor any of its subsidiaries has purchased, sold or redeemed any of the Company’s listed securities.

AUDITOR

On 26 June 2013, as considered and approved at the shareholders’ general meeting, the Company

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agreed to re-appoint Crowe Horwath China Certified Public Accountants (LLP) as the auditor of the Company for the financial year of 2013, and the Board was authorized to fix their remuneration. On 1 July 2013, the name of Crowe Horwath China Certified Public Accountants (LLP) was changed to “Ruihua Certified Public Accountants”.

PRE-EMPTIVE RIGHTS

There is no provision for pre-emptive rights under the Articles of Association of the Company or the relevant PRC laws.

TAXATION

Pursuant to the relevant tax regulations, the Company is required to withhold and pay corporate income tax at the rate of 10% when distributing dividends to non-resident enterprise shareholders whose names appear on the H- share register of members.

SUMMARY ON ADOPTION OF FIRST SHARE OPTION INCENTIVE SCHEME AND THE GRANT THEREUNDER

(1) Purpose of the Scheme

The first share option incentive scheme (the “Scheme”) was adopted by the Company on 1 August 2011. The Scheme is formulated to further refine the management structure of the Company, provide long-term rewards and retention incentives for the senior and mid-level management, key technical, sales and management personnel of the Company, fully motivate their pro-activeness and creativity, closely correlate their interests with the long term development of the Company, and allow sustainable development of the Company.

The participants include the directors of the Company (exclusive of the independent directors and external directors who are not officers of Hisense Group and its subsidiaries (other than the Company and its subsidiaries), senior management (including president, vice president, financial controller, secretary to the Board, company secretary and other officers which are regarded as senior management under the Articles of Association) of the Company, mid-level management staff of the Company and its subsidiaries, and such key technical personnel of the Company and its subsidiaries as determined by the Board.

(2) Movements of the share options during the Reporting Period

No.	Name	Position	Outstan ding share options as at 1 January 2013 (ten thousan d shares)	Number of share options exercised or cancelled during the Reporting Period (ten thousand shares)	Number of share options lapsed during the Reportin g Period (ten thousand shares)	Outstandin g share options as at 31 December 2013 (ten thousand shares)	As a percentage of the total share capital	As a percenta ge of share capital of the same class (A shares)	Number of share options exercisable (ten thousand shares)
1	Tang Ye Guo	Chairman	126	-	-	126	0.093%	0.141%	41.58
2	Xiao Jian Lin	Director, President	82.8	-	-	82.8	0.061%	0.093%	27.324
3	Jia Shao Qian	Vice-President	82.8	-	-	82.8	0.061%	0.093%	27.324
4	Ren Li Ren	Former Director	72	-	-	72	0.053%	0.080%	23.76
5	Zhang Yu Qing	Former Vice-President	82.8	-	-	82.8	0.061%	0.093%	27.324

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6	Wang Yun Li	Former Vice-President	82.8	-	-	82.8	0.061%	0.093%	27.324
7	Gan Yong He	Former Director	18.1	-	-	18.1	0.013%	0.020%	5.973
8	Zhang Jian Jun	Supervisor	5.6	-	5.6 （Note2）	0	0	0	0
9	Mid level management staff and key personnel		1398.1	-	461.2	936.9	0.69%	1.047%	309.177
	Total		1951	-	466.8	1484.2	1.096%	1.659%	489.786

Notes:

1. All share options available for issue under the Scheme have been granted.

• 2、 As Mr. Zhang Jian Jun served as a supervisor of the Company, he is no longer an eligible participant and the 56,000 share options held by Mr. Zhang lapsed.

Unless approved by the general meeting, the aggregate number of underlying shares which may be acquired by any participant through the Scheme or other effective share option incentive schemes of the Company (if any) at any time shall not exceed 1% of the Company’s total share capital of the same class, and the maximum entitlement which may be granted to a participant (including exercised, cancelled and outstanding share options) within any 12-month period shall not exceed 1% of the Company’s total share capital of the same class.

(3) The grant date of the share options

The grant date of the share options is 31 August 2011.

(4) Validity period of the share options

The validity period of the share options under the grant shall be a term of 5 years commencing from the grant date.

(5) Exercise Arrangement

The exercise of the share options under the grant is subject to a restriction period of 2 years, during which period the rights are not exercisable.

Subject to the fulfillment of the exercise conditions, the share options under the grant can be exercised in batches after the expiry of the 2-year period from the grant date according to the following exercise arrangement:

• i. 33% of the share options granted to each participant shall become exercisable on the trading day immediately after the second anniversary of the grant date (2 September 2013) until the trading day falling on the fifth anniversary of the grant date (31 August 2016);

• ii. another 33% of the share options granted to each participant shall become exercisable on the trading day immediately after the third anniversary of the grant date (1 September 2014) until the trading day falling on the fifth anniversary of the grant date (31 August 2016); and

• iii. the remaining 34% of the share options granted to each participant shall become exercisable on the trading day immediately after the fourth anniversary of the grant date (1 September 2015) until the trading day falling on the fifth anniversary of the grant date (31 August 2016).

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Where the participant is a director or member of the senior management, share options of not less than 20% of the total share options granted to such participant can only be exercised after the participant has reached a pass grade or above in the performance appraisal for his/her employment (or office).

In addition, during the validity period of the share options, the maximum gain which the participants can obtain from the share option incentives shall not exceed 40% of their remuneration level (inclusive of the gain from the share option incentives) when the share options were granted. In the event that the gain from the share option incentive exceeds the above proportion, share options which have not been exercised will not be exercised.

(6) Determination method of exercise price

The exercise price of the grant is the higher of the following two prices: (i) the closing price of the A shares on the last trading day immediately preceding the date of the announcement of the summary of the Scheme (that is, 29 November 2010), which was RMB7.65 per share; and (ii) the average closing price of the A shares during the last 30 trading days immediately preceding the date of announcement of the summary of the Scheme, which was RMB7.37 per share. Therefore, the exercise price is RMB7.65 per share.

(7) Effect of the Company’s share option incentive scheme on the financial position for the Reporting Period

In accordance with the requirements of the First Share Option Incentive Scheme of Hisense Kelon Electrical Holdings Company Limited (Revised Draft), the Company has elected to use the Black-Scholes option pricing model to calculate the fair value of the share options granted under the Scheme. According to the calculation by such pricing model, the Company recognized an expense of RMB1.5015 million in total in relation to this share option incentive scheme.

PARTICULARS OF MATERIAL CONNECTED TRANSACTIONS OF THE COMPANY DURING THE REPORTING PERIOD

(I) On 6 December 2012, the Company entered into the Compressors Purchase Framework Agreement, the Compressors Purchase and Supply Framework Agreement, the Business Co-operation Framework Agreement, the Export Agency Framework Agreement, the Property Services Framework Agreement, Business Framework Agreement 1, Business Framework Agreement 2 and the Purchase Financing Agency Framework Agreement with Embraco, Huayi Compressor, Hisense Group, Hisense Electric, Beijing Snowflake Group, Hisense Marketing, Hisense Hitachi, Hisense–Whirlpool and Hisense Hong Kong respectively.

Embraco is held as to 30.82% by Beijing Snowflake Group, a substantial shareholder which holds 45% of the equity interests in Beijing Refrigerator (being a non-wholly owned subsidiary of the Company) and therefore Embraco and Beijing Snowflake Group are connected persons of the Company according to the Hong Kong Listing Rules.

Huayi Compressor is a substantial shareholder holding 29.95% of Ronshen Plastic and 29.89% of Kelon Mould (both being non-wholly owned subsidiaries of the Company) and therefore Huayi Compressor is a connected person of the Company according to the Hong Kong Listing Rules.

Hisense Air-conditioning is a connected person of the Company by virtue of being a substantial shareholder of the Company, holding 45.22% of the issued shares of the Company and Hisense Hong Kong holds 3.99% of the issued shares of the Company. As Hisense Group indirectly owns 47.90% of Hisense Air-conditioning and Hisense Hong Kong and Hisense Electric is owned as to

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40.43% (then owned as to 41.25% as at the date of the agreement) by Hisense Group, Hisense Group, Hisense Electric and their respective subsidiaries (including without limitation Hisense Marketing and its subsidiaries) are connected persons of the Company according to the Hong Kong Listing Rules. As certain directors of the Company are also senior management of Hisense Hitachi and Hisense–Whirlpool, Hisense Hitachi and Hisense–Whirlpool are connected persons of the Company according to the Rules Governing the Listing of Stocks on the Shenzhen Stock Exchange.

Details of the Compressors Purchase Framework Agreement with Embraco, the Compressors Purchase and Supply Framework Agreement with Huayi Compressor, the Business Co-operation Framework Agreement with Hisense Group and Hisense Electric, t he Export Agency Framework Agreement with Hisense Marketing, the Property Services Framework Agreement with Beijing Snowflake Group, Business Framework Agreement 1 with Hisense Hitachi and Business Framework Agreement 2 with Hisense-Whirlpool can be found in the announcement and the circular published on the website of the Hong Kong Stock Exchange (http://www.hkex.com.hk) on 6 December 2012 and 4 January 2013 respectively.

As Hisense Group is the beneficial controller of both Hisense Hong Kong and the Company, Hisense Hong Kong is a connected person of the Company under the Rules Governing the Listing of Stocks on the Shenzhen Stock Exchange. Hisense Hong Kong is also a connected person of the Company pursuant to Chapter 14A of the Hong Kong Listing Rules. Since the financial assistance arrangement under the Purchase Financing Agency Framework Agreement would be for the benefit of the Company on normal commercial terms where no security over the assets of the Company was to be granted in respect of the financial assistance, such arrangement was exempt from the reporting, announcement and independent shareholders’ approval requirements pursuant to the Hong Kong Listing Rules. Details of the Purchase Financing Agency Framework Agreement can be found in the announcement published on the website of the Hong Kong Stock Exchange (http://www.hkex.com.hk) on 6 December 2012.

The above transactions (other than the Business Framework Agreement 1 with Hisense Hitachi and the Business Framework Agreement 2 with Hisense-Whirlpool) constitute continuing connected transactions under Chapter 14A of the Hong Kong Listing Rules. The Company confirmed that it had complied with the disclosure requirements in accordance with Chapter 14A of the Hong Kong Listing Rules for the relevant connected transactions (other than the Purchase Financing Agency Framework Agreement which is exempt from the reporting, announcement and independent shareholders’ approval requirements pursuant to the Hong Kong Listing Rules). Specific information of the Compressors Purchase Framework Agreement, the Compressors Purchase and Supply Framework Agreement, the Business Co-operation Framework Agreement, t he Export Agency Framework Agreement and the Property Services Framework Agreement is set out as follows:

1. The Compressors Purchase Framework Agreement with Embraco

The Group is engaged in the manufacture of home electrical appliances, including but not limited to refrigerators and freezers, which requires compressors as a component for its products. After considering a range of factors including the quality, the price and the compatibility of the compressors manufactured by Embraco and/or its subsidiaries with the current facilities used by and the refrigerators and freezers manufactured by the Group as well as the level of services provided by Embraco and/or its subsidiaries, the Group considers that Embraco and/or its subsidiaries are in a good position to supply compressors to the Group. In addition, the Group can have bigger bargaining power by carrying out bulk purchase of compressors from Embraco and/or its subsidiaries, thus reducing purchase costs and increasing product competitiveness. As such, the

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Company entered into the Compressors Purchase Framework Agreement with Embraco, the principal terms of which are as follows:

• (1) The Compressors Purchase Framework Agreement shall commence from 1 January 2013 to 31 December 2013, which can be terminated before its expiration by mutual agreement of the parties.

• (2) Pricing for the purchase of compressors will be the market price of compressors which will be confirmed by commercial negotiation between the parties according to the principles of fairness and reasonableness from time to time. Such transactions will be conducted in the ordinary and usual course of business of the parties, on normal commercial terms and on terms not less favourable to the parties than terms available to or from (as appropriate) independent third parties.

• (3) Payment term(s) for the purchase of compressors shall be in accordance with the payment term(s) as stipulated in the definitive contract(s) to be signed by the relevant parties thereto.

• (4) The transactions contemplated under the Compressors Purchase Framework Agreement are subject to the annual cap of RMB106,840,000 (exclusive of value-added tax).

==> picture [47 x 46] intentionally omitted <==

2. The Compressors Purchase and Supply Framework Agreement with Huayi Compressor

The Group is engaged in the manufacture of home electrical appliances, including but not limited to refrigerators and freezers, which requires compressors as a component for its products. After considering a range of factors including the quality, the price and the compatibility of the compressors manufactured by Huayi Compressor and/or its subsidiaries with the current facilities used by and the refrigerators and freezers manufactured by the Group as well as the level of services provided by Huayi Compressor and/or its subsidiaries, the Company considers that Huayi Compressor and/or its subsidiaries are in a good position to supply compressors to the Group. In addition, the Group can have bigger bargaining power by carrying out bulk purchase of compressors from Huayi Compressor and/or its subsidiaries, thus reducing purchase costs and increasing product competitiveness. As such, the Company entered into the Compressors Purchase and Supply Framework Agreement with Huayi Compressor, the principal terms of which are as follows:

• (1) The Compressors Purchase and Supply Framework Agreement shall commence from the date of approval of the Compressors Purchase and Supply Framework Agreement by the independent shareholders (that is, 25 January 2013) until 31 December 2013, which can be terminated before its expiration by mutual agreement of the parties.

• (2) Pricing for the purchase of compressors will be the market price of compressors which will be confirmed by commercial negotiation between the parties according to the principles of fairness and reasonableness from time to time. Such transactions will be conducted in the ordinary and usual course of business of the parties, on normal commercial terms and on terms not less favourable to the parties than terms available to or from (as appropriate) independent third parties.

• (3) Payment term(s) for the transactions contemplated under the Compressors Purchase and Supply Framework Agreement shall be in accordance with the payment term(s) as stipulated in the definitive contract(s) to be signed by the relevant parties thereto.

• (4) The transactions contemplated under the Compressors Purchase and Supply Framework Agreement are subject to the annual cap of RMB1,180,000,000 (exclusive of value-added tax).

Page 33 of 47

3. The Business Co-operation Framework Agreement with Hisense Group and Hisense Electric

On the one hand, the supply of home electrical appliances and raw materials by the Group to Hisense Group, Hisense Electric and/or their respective subsidiaries can help to lower the production costs of the Group as a result of the increase in production level, which in turn enhance the market competitiveness of the Group’s products. At the same time, the Group can continue to develop overseas market and enhance brand competitiveness and awareness. The Group can also increase market share by selling products through the online platform of Hisense Group and Hisense Electric which reduces the product circulation links. Provision of services to Hisense Group and/or its subsidiaries will increase the income of the Group. On the other hand, taking into account the product quality, prices and services provided by Hisense Group, Hisense Electric and/or their respective subsidiaries, purchases of home electrical appliances, equipment, raw materials and parts and components from Hisense Group, Hisense Electric and/or their respective subsidiaries and engagement of their services can meet the manufacture needs of the Company and the development of related business, and can also help reduce costs at the same time. As such, the Company entered into the Business Co-operation Framework Agreement with Hisense Group and Hisense Electric, the principal terms of which are as follows:

• (1) The Business Co-operation Framework Agreement shall commence from the date of approval of the Business Co-operation Framework Agreement by the independent shareholders (that is, 25 January 2013) until 31 December 2013, which can be terminated before its expiration by mutual agreement of the parties.

• (2) Pricing for the purchase of home electrical appliances between the Company on the one hand and Hisense Group and Hisense Electric on the other hand is determined by commercial negotiation between the parties according to the principles of fairness and reasonableness mainly with reference to the market price of similar home electrical appliances from time to time. Pricing for the purchase of raw materials, equipments, parts and components between the Company on the one hand and Hisense Group and Hisense Electric on the other hand is determined by commercial negotiation between the parties according to the principles of fairness and reasonableness. Pricing for the supply of moulds by the Company to Hisense Group and Hisense Electric is the market price determined by the open bidding process. Pricing for the provision of services between the Company on the one hand and Hisense Group and Hisense Electric on the other hand is determined by commercial negotiations according to the principles of fairness and reasonableness between the parties with reference to the market price for the provision of similar services in the industry.

• (3) Payment term(s) for the transactions between the Company on the one hand and Hisense Group and Hisense Electric on the other hand shall be in accordance with the payment term(s) as stipulated in the definitive contract(s) to be signed by the relevant parties thereto.

• (4) The annual caps under the Business Co-operation Framework Agreement are shown in the table below:

Unit: RMB (ten thousand) (exclusive value-added tax)

	Types of connected transaction s	Division by products or services	Connected person	Annual cap

Page 34 of 47

Types of connected transaction s	Division by products or services	Connected person	Annual cap
Sale of products and materials	Sale of home electrical appliances products by the Group	Hisense Group	288,867
		Hisense Electric	30
	Sale of equipment by the Group	Hisense Group	855
	Sale of moulds by the Group	Hisense Group	27,137
		Hisense Electric	8,718
	Sale of raw materials, parts and components by the Group	Hisense Group	2,191
		Hisense Electric	444
Provision of services	Provision of loading and unloading, design, equipment rental and property services by the Group	Hisense Group	690
Purchase of products and materials	Purchase of home electrical appliances products by the Group	Hisense Group	60
		Hisense Electric	150
	Purchase of raw materials, parts and components by the Group	Hisense Group	2,349
		Hisense Electric	3,034
	Purchase of equipment by the Group	Hisense Group	855
Receipt of services	Receipt of material processing, installation and maintenance, property, medical, leasing, design, inspection, agency services for import and export, property construction, management consultancy, technical support and information system maintenance by the Group	Hisense Group	10,611
	Receipt of material processing, property and product design services by the Group	Hisense Electric	1,873

4. The Export Agency Framework Agreement with Hisense Marketing

Hisense Marketing has over 10 years’ experience in overseas operations, professional expertise and mature market networks and channels in overseas market. By engaging the export agency services of Hisense Marketing, which provides professional management services to the Group for its international market expansion, the Group can largely reduce the costs which would be committed for running the operation by itself, and utilize the available resources on the research and development and the quality warranties for the products to be exported, which will be beneficial to the Group in enhancing the stable development of its export business. As such, the Company entered into the Export Agency Framework Agreement with Hisense Marketing, the principal terms

Page 35 of 47

of which are as follows:

(1)The Export Agency Framework Agreement shall commence from the date of approval of the Export Agency Framework Agreement by the independent shareholders (that is, 25 January 2013) until 31 December 2013, which can be terminated before its expiration by mutual agreement of the parties.

(2) The fees payable by the Group for the provision of the agency services for export for the white goods of the Group is calculated by multiplying the Group’s revenue from export of the relevant type of products (which shall be the final amount of revenue for sales by the Group to third party customers in RMB) with an export agency fee percentage. Taking into consideration the audited rate of the charges actually incurred by Hisense Marketing and/or its subsidiaries for providing agency services for export to the Group for the period from March 2011 to June 2012, the rate of the charges actually incurred during the first half of 2012 (being 7.24%) shall be used as the base percentage and the corresponding profit margin for export agency services payable by the Group to Hisense Marketing and/or its subsidiaries shall be determined according to the growth rate of the revenue from export subject to the export agency services in 2013, pursuant to which the export agency fee percentage during the term of the Export Agency Framework Agreement shall also be determined as provided in the table below.

The rate of revenue growth from export subject to the export agency services	Corresponding profit margin for export agency services	Corresponding export agency fee percentage
Below 0%	0%	7.24%
0-5% (inclusive of 5%)	0.5%	7.74%
5-10% (inclusive of 10%)	0.8%	8.04%
10-15% (inclusive of 15%)	1%	8.24%
Above15%	1.1%	8.34%

Note: The rate of revenue growth from export subject to the export agency services = (the Group’s audited revenue from export subject to the export agency services in 2013 - the Group’s audited revenue from export subject to the export agency services in 2012) / the Group’s audited revenue from export subject to the export agency services in 2012.

(3) The fees for the provision of the aforesaid services will be calculated on a monthly basis and the relevant members of the Group should pay the monthly fee for the preceding month by way of telegraphic transfer or bills.

(4) The transactions contemplated under the Export Agency Framework Agreement are subject to the cap of RMB280,000,000.

5. The Property Services Framework Agreement with Beijing Snowflake Group

Beijing Snowflake Group and its relevant subsidiaries possess the expertise and experience for the provision of property services which can enable the Company to carry out its daily operation smoothly. In addition, by leveraging on the price advantages for the provision of property services by Beijing Snowflake Group and its relevant subsidiaries, the Group is able to reduce its costs. As such, the Company entered into the Property Services Framework Agreement with Beijing Snowflake Group, the principal terms of which are as follows:

• (1) The term of the Property Services Framework Agreement shall commence from 1 January 2013 to 31 December 2013, which can be terminated before its expiration by mutual agreement of the parties.

Page 36 of 47

• (2) The fees payable by the Group for the provision of property services by Beijing Snowflake Group and/or its subsidiaries is determined by commercial negotiation between the parties according to the principles of fairness and reasonableness with reference to the market price for the provision of similar services from time to time. Such transactions will be conducted in the ordinary and usual course of business of the parties, on normal commercial terms and on terms not less favorable to the parties than terms available to or from (as appropriate) independent third parties.

• (3) The fees for the provision of such services will be calculated on a monthly or quarterly basis and payment for such monthly or quarterly fee should be made by telegraphic transfer or bills by the relevant members of the Group.

• (4) The transactions contemplated under the Property Services Framework Agreement are subject to the annual cap of RMB32,000,000.

(II) During the Reporting Period, certain connected transactions in relation to ordinary operation have been entered into, details of which are as follows:

				Connected	Percentage of
	Type of	Particulars of	Pricing principle of	transaction	total amount of
Connected parties	connected	connected	connected	amount	similar
	transaction	transaction	transaction	(RMB ten	transactions
				thousand)	(%)
					3.44
Hisense -Whirlpool		Finished goods
	Purchase		Agreed price	65,476.97
					0.00
Hisense Electric		Finished goods
	Purchase		Agreed price	40.91
					0.00
Hisense Group		Finished goods
	Purchase		Agreed price	16.74
					4.16
Huayi Compressor		Materials	Agreed price
	Purchase			79,287.61
					0.29
Embraco		Materials	Agreed price
	Purchase			5,540.86
					0.03
Hisense -Whirlpool		Materials
	Purchase		Agreed price	641.50
					0.04
Hisense Hitachi		Materials
	Purchase		Agreed price	765.89
					0.06
Hisense Group		Materials
	Purchase		Agreed price	1,229.71
					0.11
Hisense Electric		Materials
	Purchase		Agreed price	2,104.53
		Moulds and			0.00
Hisense Group
	Purchase	equipment	Agreed price	4.41
	Receipt of	Receipt of			1.65
Hisense Group
	services	services	Agreed price	31,400.84
					0.10
Snowflake	Receipt of	Receipt of	Agreed price
	i	i		1,846.45
	servces	servces
	Receipt of	Receipt of			0.05
Hisense Electric			Agreed price
	services	services		903.78
		Purchase			0.76
Hisense Hong Kong	Purchase
		financing agency	Agreed price	14,523.14
					0.00
Hisense Electric	Sale	Finished goods	Agreed price
				10.26
Hisense -Whirlpool	Sale	Finishedgoods	Agreedprice

Page 37 of 47

				14.63	0.00
					0.29
Hisense Hitachi	Sale	Finished goods
			Agreed price	7,089.97
					10.80
Hisense Group	Sale	Finished goods	Market price
				263,087.28
					0.09
Hisense -Whirlpool		Materials	Agreed price
	Sale			2,152.85
					0.04
Hisense Group	Sale	Materials	Agreed price
				865.01
					0.01
Hisense Hitachi		Materials
	Sale		Agreed price	139.09
					0.02
Hisense Electric	Sale	Materials	Agreed price
				417.58
		Moulds and			0.75
Hisense Group	Sale		Market price
		equipment		18,237.43
					0.00
Hisense Hitachi		Moulds	Market price
	Sale			11.88
		Moulds and			0.03
Hisense -Whirlpool			Market price
	Sale	equipment		713.96
					0.30
Hisense Electric	Sale	Moulds	Market price
				7,233.07
	Provision of	Provision of			0.01
Hisense -Whirlpool			Agreed price
	services	services		271.09
	Provision of	Provision of			0.01
Hisense Group			Agreed price
	services	services		245.56

As at 31 December 2013, the Company and its subsidiaries had the balance of deposit of RMB318,093,800 and interest income received of RMB2,087,900, the actual balance of loan of RMB0, balance of electronic bank acceptance bill of RMB1,093,009,200, interest payment for discounted notes of RMB225,500 and the handling fee for opening accounts for electronic bank acceptance bill of RMB1,454,800 with Hisense Finance.

(III) During the Reporting Period, the Company and its connected persons (within the meaning under Chapter 14A of the Hong Kong Listing Rules) have entered into the following agreements, involving transactions between the Group and the relevant connected persons after the Reporting Period:

No.	Agreement	Counterparty to the agreement	Particulars of connected transactions	Annual cap
1	Business Co-operation Framework Agreement dated 21 November 2013	Hisense Group and Hisense Electric	Purchase of home electrical appliances by the Group	RMB1,110,000
			Purchase of equipment by the Group	RMB4,000,000
			Purchase of raw materials, parts and components by the Group	RMB67,980,000
			Receipt of services by the Group	RMB130,120,000
			Receipt of agency services for export of white goods products by the Group	RMB366,830,000
			Supply of home electrical appliances by the Group	RMB3,039,800,000
			Supply of equipment by the Group	RMB8,560,000

Page 38 of 47

			Supply of moulds by the Group	RMB349,680,000
			Supply of raw materials, parts and components by the Group	RMB29,050,000
			Provision of services by the Group	RMB6,870,000
2	Financial Services Agreement dated 21 November 2013	Hisense Finance	Receipt of deposit services，loan and electronic bank acceptance bill services (電子銀行承兌匯票), draft discount services (票據貼現服務), settlement and sale of foreign exchange services (結售匯服務) and agency services such as settlement services for receipt and payment of funds (資金收支結算 等代理類服務)	Deposit services: RMB800,000,000 (inclusive of interest); loan and electronic bank acceptance bill services: RMB2,200,000,000 (inclusive of interest and service charges); draft discount services: RMB50,000,000; settlement and sale of foreign exchange services: US$500,000,000; agency services such as settlement services for receipt and payment of funds: RMB5,000,000
3	Purchase Financing Agency Framework Agreement dated 21 November 2013	Hisense Hong Kong	Receipt of financing agency services by the Group to purchase imported raw materials and components	US$36,000,000

The term of the Business Co-operation Framework Agreement and the Purchase Financing Agency Framework Agreement commences from the date of approval of such agreements by the independent shareholders (that is, 10 January 2014) until 31 December 2014, whereas the term of the Financial Services Agreement commences from the date of approval of the Financial Services Agreement by the independent shareholders (that is, 10 January 2014) until 31 December 2015. The relationship between the Group on one hand and Hisense Group, Hisense Electric, Hisense Finance and Hisense Hong Kong on the other hand has been disclosed above. Details of the agreements can be found in the announcement and the circular published on the website of the Hong Kong Stock Exchange (http://www.hkex.com.hk) on 21 November 2013 and 18 December 2013 respectively.

CODE ON CORPORATE GOVERNANCE PRACTICES

To the best knowledge and information of the Company, during the Reporting Period, the Company has complied with the code provisions in the Corporate Governance Code as set out in Appendix 14 to the Hong Kong Listing Rules.

Page 39 of 47

PUBLICATION OF ANNUAL REPORT ON THE INTERNET WEBSITES OF THE HONG KONG STOCK EXCHANGE AND THE COMPANY

All information about the annual report as required by Appendix 16 to the Hong Kong Listing Rules will be published on the Hong Kong Stock Exchange’s website (http://www.hkex.com.hk) and the Company’s website (http://www.kelon.com) in due course.

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

Foshan City, Guangdong, the PRC, 27 March 2014

As at the date of this announcement, the Company’s directors are Mr. Tang Ye Guo, Ms. Yu Shu Min, Mr. Lin Lan and Mr. Xiao Jian Lin; and the Company’s independent non-executive directors are Mr. Xu Xiang Yi, Mr. Wang Xin Yu and Mr. Wang Ai Guo.

NOTE: SUPPLEMENTARY INFORMATION AS REQUIRED BY THE HONG KONG STOCK EXCHANGE IN RELATION TO THE COMPANY’S A SHARE ANNUAL RESULTS ANNOUNCEMENT

Ⅰ .PARTICULARS OF THE REMUNERATION OF, DIRECTORS, SUPERVISORS AND SENIOR MANAGEMENT OF THE COMPANY

						Actual
					Total
						remuneration
					remuneration
						received at the
					received from
Name	Position	Gender	Age	Term of Office		end of the
					the Company
						Reporting
					(RMB ten
						Period (RMB
					thousand)
						ten thousand)
TangYe Guo	Chairman	Male	51	2012.06.26-2015.06.25	99.92	99.92
Yu Shu Min	Director	Female	62	2012.06.26-2015.06.25	-	-
Lin Lan	Director	Male	56	2012.06.26-2015.06.25	-	-
Xiao Jian Lin	Director			2012.06.26-2015.06.25	-	-
		Male	46
	President			2014.03.27-2015.06.25
Ren Li Ren	Former Director			2012.06.26-2014.03.26	88.59	88.59
		Male	49
	Former President			2012.06.26-2014.03.26
Gan Yong He	Former Director			2012.06.26-2014.03.26	139.69	139.69
	Former Vice	Male	46
				2012.06.26-2014.03.26
	President
	Independent				9.00	9.00
Xu Xiang Yi	non-executive	Male	58	2012.06.26-2015.06.25
	Director
Wang Ai Guo	Independent				9.00	9.00
	non-executive	Male	49	2012.06.26-2015.06.25
	Director
Wang Xin Yu	Independent				24.00	24.00
	non-executive	Male	43	2012.06.26-2015.06.25
	Director
	Chairman of				-	-
Liu Zhen Shun	Supervisory	Male	44	2014.01.10-2015.06.25
	Committee
Gao Yu Ling	Supervisor	Female	33	2014.01.10-2015.06.25	-	-
ZhangJian Jun	Employee	Male	40	2012.06.26-2015.06.25	33.77	33.77

Page 40 of 47

	Representative
	Supervisor
Jia ShaoQian	Vice President	Male	41	2012.06.26-2015.06.25	63.97	63.97
Tian Ye	Vice President	Male	39	2013.05.17-2015.06.25	128.44	128.44
Zhang Yu Qing	Former Vice				99.61	99.61
		Male	50	2012.06.26-2014.03.26
	President
Wang Yun Li	Former Vice				118.51	118.51
		Male	40	2012.06.26-2014.03.26
	President
	Person in charge of				94.67	94.67
Li Jun		Female	39	2012.08.15-2015.06.25
	finance
	Secretary to the				34.25	34.25
		Male	37	2012.06.26-2015.06.25
Xia Feng	Board
					15.93	15.93
	Company Secretary	Female	46	2012.06.26-2015.06.25
Wong Tak Fong
	Former Chairman of				-	-
Guo Qing Cun	Supervisory	Male	60	2012.06.26-2014.01.09
	Committee
Liu JiangYan	Former Supervisor	Female	38	2012.08.15-2014.01.09	-	-

Ⅱ. The decision-making procedures and basis of determination of the remuneration of the Directors, supervisors and senior management are as follows:

• the remuneration of the Directors of the Company is determined based on suggestions made to the Board by the remuneration and appraisal committee of the Board on the basis of the duties of the Directors and the remuneration level of other listed companies in the same industry, and is subject to consideration and approval by the Board and the shareholders at general meetings;

• the remuneration of the supervisors is determined based on suggestions made by the supervisory committee on the basis of the duties of the supervisors and the remuneration level of other listed companies in the same industry and is subject to consideration and approval by the Board and the shareholders at general meetings;

• the remuneration and appraisal committee of the Board makes remuneration suggestion to the Board based on the senior management’s experience, responsibilities undertaken for operation under his/ her management, risk, pressure and his/ her contribution to the Company, which is determined and approved by the Board. The final remuneration received by the senior management is also linked with his/her annual performance review.

The Company determines and pays the remuneration of the Directors, supervisors and senior management in accordance with the above requirements and procedures.

Ⅲ . MATERIAL LITIGATIONS AND ARBITRATIONS OF THE COMPANY v Applicable □ Not Applicable

		Wheth
	Amount	er a		Results	Execution
	involved	liabilit		and effects	of the
General status of the	(RMB	y is		of the	judgment of
			Progress of the litigation (arbitration)
litigation (arbitration)	ten	expecte		litigation	the
	thousand	d to be		(arbitratio	litigation
	)	incurre		n)	(arbitration)
		d
A series of related party			On 28 March 2013, the Company received a notice of	Effect of	As at today,
transactions and unusual			execution from the Foshan Intermediate Court in	the cases	4 cases
cash flows occurred	72541.44	No	relation to the certain matters concerning the	involving	involving
between the Greencool			resumption of execution of the cases involving the	Greencool	Greencool
Companies and the			Greencool Companies, the Foshan Intermediate	Companie	Companies

Page 41 of 47

Company during the period Court would start the execution procedures of such s cases on remain in from October 2001 to July cases in accordance with the “Notice issued by the the net the process 2005. In addition, during Supreme People’s Court on the resumption of profits of the period, the Greencool execution procedures against the Greencool attributabl execution. Companies, through Companies in accordance with the law” and e to certain specific third party distribute the relevant assets on a pro-rata basis. On shareholde companies such as Tianjin 13 June 2013, Yangzhou Refrigerator received from rs of the Lixin Commercial Trading the Intermediate People’s Court of Yangzhou City, Company Development Company Jiangsu Province the total sum of RMB75,770,000 was Limited, were involved in recovered from execution of the related cases of approxima a series of unusual cash Yangzhou Refrigerator against Yangzhou Greencool tely flow with the Company. Venture Capital Company Limited. On 27 August RMB100, The Company has 2013, the Company and its subsidiaries in which it 000,000. instituted proceedings holds a controlling equity interest, Guangdong against the Greencool Air-Conditioner and Kelon Fittings received from the Companies for such Foshan Intermediate Court the sum of transactions and unusual RMB310,675,400 from the execution of the cases cash flows as well as the involving Greencool Companies. On 23 December suspected fund 2013, the Company received from the Foshan embezzlements. Intermediate Court the execution judgment of (2008) Fo Zhong Fa Zhi Zi No. 853, (2009) Fo Zhong Fa Zhi Zi Nos. 113, 114, 115, 237, 238, 259, 502, 995 and 996, which provides the conclusion of the execution procedure of the 10 abovementioned cases in accordance with the law.

Ⅳ . SHAREHOLDINGS IN OTHER LISTED COMPANIES HELD BY THE COMPANY

Stock code		Initial investment	Shareholdin g percentage in the company	Carrying amount at the end of the period (RMB ten	Profit and loss for the Reporting Period (RMB ten thousand)	Changes in ownership interests for the Reporting Period (RMB ten thousand)
	Stock	cost (RMB
	abbreviation	ten
		thousand)
			（%）	thousand)
000404	Huayi Compressor	2,417.14	3.74	7,566.37	602.97	628.22

During the Reporting Period, Huayi Compressor conducted a targeted issuance of additional shares. As a result, the shareholding percentage held by the Company was diluted, and an investment income from disposal of equity investment of RMB23.3354 million was recognized.

Ⅴ .ACQUISITION AND DISPOSAL OF SUBSIDIARIES DURING THE REPORTING PERIOD

√ Applicable □ Not applicable

	Means of
	acquisition and
Purpose for acquisition and disposal	disposal of	Effect on the overall
of subsidiaries during the Reporting	subsidiaries	production and
Period	during the	results
	Reporting
	Period
		For the benefits of
Separate incorporation of		the independent
	Newly set up
refrigerator marketing company		audit, appraisal and
		incentive of the

Page 42 of 47

refrigerator business line of the Company. For the benefits of the independent Qingdao Hisense audit, appraisal and Separate incorporation of Air-Conditioner Marketing Newly set up incentive of the air-conditioner marketing company Holdings Limited air-conditioner business line of the Company.

Ⅵ . PARTICULARS OF GUARANTEES

Unit: RMB ten thousand

External guarantee given by the Company (excluding guarantees for its subsidiaries)	External guarantee given by the Company (excluding guarantees for its subsidiaries)	External guarantee given by the Company (excluding guarantees for its subsidiaries)	External guarantee given by the Company (excluding guarantees for its subsidiaries)	External guarantee given by the Company (excluding guarantees for its subsidiaries)	External guarantee given by the Company (excluding guarantees for its subsidiaries)	External guarantee given by the Company (excluding guarantees for its subsidiaries)	External guarantee given by the Company (excluding guarantees for its subsidiaries)	External guarantee given by the Company (excluding guarantees for its subsidiaries)	External guarantee given by the Company (excluding guarantees for its subsidiaries)	External guarantee given by the Company (excluding guarantees for its subsidiaries)	External guarantee given by the Company (excluding guarantees for its subsidiaries)	External guarantee given by the Company (excluding guarantees for its subsidiaries)	External guarantee given by the Company (excluding guarantees for its subsidiaries)	External guarantee given by the Company (excluding guarantees for its subsidiaries)	External guarantee given by the Company (excluding guarantees for its subsidiaries)	External guarantee given by the Company (excluding guarantees for its subsidiaries)
The guaranteed party		Date of		Limit on		Actual		Actual		Type of		Period of	Complete		Whether
		disclosure		guaranteed		effective date		guaranteed		guarantee		guarantee	d	or not	the
		of relevant		amount		(date of		amount							guarante
		announce				agreement)									e is given
		ment in													for any
		relation to													connecte
		the limit on													d party
		the
		guaranteed
		amount
Nil		—		—		—		—		—		—		—	—
Total limit on the amount of external								Actual amount of external
guarantees approved during the Reporting								guarantees during the
				12,000										0
Period (A1)								Reporting Period (A2)
Total limit on the amount of external								Total balance of actual amount
guarantees which has been approved at								of external guarantees at the
				12,000										0
the end of the Reporting Period (A3)								end of the Reporting Period
								(A4)
			Guarantees given by the Company for its subsidiaries
The guaranteed	Date of		Guarante		Actual effective		Actual		Type of		Period of guarantee			Comple		Wheth
party	disclosure of		ed		date (date of		guarantee		guarantee					ted or		er the
	relevant		amount		agreement)		d amount							not		guaran
	announcemen															tee is
	t in relation															given
	to the limit on															for any
	the															connec
	guaranteed															ted
	amount															party
	30 November
									Joint liability
Guangdong
	2011		90,000		2012.11.21		19.89		guarantee;		2012.11.21-2013.01.30			Yes	No
Refrigerator
									mortgage
Guangdong	30 November								Joint liability
			90,000		2013.03.13		19.89				2013.03.13-2014.01.31			No	No
Refrigerator	2011								guarantee
	30 November
Guangdong									Joint liability					No
			90,000		2012.10.10		25.02				2012.10.10-2014.02.02				No
Refrigerator	2011								guarantee
	30 November
Guangdong									Joint liability
			90,000		2012.11.15		28.56				2012.11.15-2013.05.21			Yes	No
Refrigerator	2011								guarantee
Guangdong	30 November								Joint liability
			30,000		2012.10.12		38.46				2012.10.12-2013.08.30			Yes	No
Air-conditioner	2011								guarantee
Guangdong Air-conditioner	30 November		30,000		2012.10.31		1862.34		Joint liability guarantee		2012.10.31-2013.11.08			Yes	No

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	2011
Guangdong Air-conditioner	30 November 2011	30,000		2013.11.29	39.08		Joint liability guarantee	2013.11.29-2014.08.30		No	No
Guangdong Air-conditioner	30 November 2011	30,000		2013.11.26	160.00		Joint liability guarantee	2013.11.26-2014.04.08		No	No
Guangdong Air-conditioner	30 November 2011	30,000		2012.08.21	11279.6 1		Joint liability guarantee	2012.08.21-2013.09.26		Yes	No
Guangdong Air-conditioner	30 November 2011	30,000		2012.11.27	2228.70		Joint liability guarantee	2012.11.27-2014.02.23		No	No
							Joint liability
	30 November
Kelon Fittings		5,000		2012.10.15	98.55		guarantee;	2012.10.15-2013.08.30		Yes	No
	2011
							mortgage
	30 November									No	No
							Joint liability
Kelon Fittings		5,000		2013.12.20	130.41			2013.12.20-2014.08.30
	2011						guarantee
	30 November
							Joint liability
Guangdong Freezer	2011	5,000		2013.04.02	115.77		guarantee;	2013.04.02-2013.06.21		Yes	No
							mortgage
Yangzhou	30 November						Joint liability
		10,000		2010.07.23	1209.21			2010.07.23-2013.12.16		Yes	No
Refrigerator	2011						guarantee
Yangzhou	30 November						Joint liability			No	No
		10,000		2013.05.14	267.49			2013.05.14-2014.02.05
Refrigerator	2011						guarantee
Total limit on the amount of					Actual amount of
guarantees for subsidiaries approved					guarantees for subsidiaries
		198,000						17,522.98
during the Reporting Period (B1)					during the Reporting
					Period(B2)
Total limit on the amount of
					Total balance of actual
guarantees for subsidiaries which
					amount of guarantees for
has been approved at the end of the		198,000						2,870.59
					subsidiaries at the end of
Reporting Period (B3)
					the Reporting Period (B4)
Total guaranteed amount of the Company (being the sum of the previous two major items)
Total limit on the amount of guarantees
						Actual amount of guarantees
approved during the Reporting Period
			210,000			during the Reporting Period			17,522.98
(A1+B1)
						(A2+B2)
Total limit on the amount of guarantees						Total balance of actual amount
which has been approved at the end of the						of guarantees at the end of the
			210,000						2,870.59
Reporting Period (A3+B3)						Reporting Period (A4+B4)
Proportion of actual amount of guarantees (being A4+B4) to the net
						1. 04%
assets of the Company
Including:
Guaranteed amount provided for shareholders, beneficial controlling						0
parties and their connectedparties(C)
Guaranteed amount provided directly or indirectly for the guaranteed						2558.19
partywithgearingratio over 70%(D)
Totalguaranteed amount over 50% of the net asset (E)						0
Sum of the above threeguarantees (C+D+E)						2558.19
Statement on possibility to assume joint liabilities for guarantees which
						Nil
have not expired
Description ofprovision of externalguarantee in violation ofprescribed						Nil

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procedures

Ⅶ . DERIVATIVES INVESTMENT

Unit: RMB (in ten thousand)

Name of	Conne	Whether	Type of	Initial	Effective	Expiry Date	Investment at	Amou	Investment at	Proporti	Actual
operators of	ction	or not a	derivatives	investment of	Date		the beginning	nt of	the end of the	on of	amount of
derivatives		connecte	investment	derivatives			of the period	provisi	period	investme	profit and
investment		d		investment				on for		nt to the	loss
		transacti						impair		net asset	during the
		on						ment		of the	Reporting
								(if		Compan	Period
								any)		y at the
										end of
										the
										Reportin
										g Period
										(%)
			Forward
			foreign		1January	31 Decem
Bank	No	No		199,816.46			199,816.46		278,543.31	101. 34	7,575.01
			exchange		2013	ber 2013
			contracts
Source of derivatives investment funding				Export tradepayment
Litigation involved(if applicable)				Not applicable
Date of the announcement disclosing the				29 March 2013
approval of derivatives investment by the
Board (if any)
Date of the announcement disclosing the				27 June 2013
approval of derivatives investment
during shareholders’ meetings (if any)
				The derivatives business of the Company mainly represents the forward foreign
				exchange contracts used to avoid the risk of foreign exchange fluctuations related to the
				overseas sales receivables. The Company determines a reasonable range of foreign
Risk analysis of positions in derivatives
				exchange rates to achieve the hedging purpose.
during the Reporting Period and
explanations of risk control measures				The Company has formulated the “Management Measures for the Foreign Exchange
(including but not limited to market risk,				Capital Business” and “the Internal Control System for Forward Foreign Exchange
liquidity risk, credit risk, operation risk,				Capital Transactions”. The measures specifically regulate the basic principles, operation
legal risk etc.)				rules, risk control measures and internal controls that shall be followed when engaging
				in the business of foreign exchange derivatives. In respect of actual business
				management, the Company manages the derivatives business before, during and after
				the operation based on the management measures for the derivatives business.
				The assessment of the fair value of the derivatives carried out by the Company mainly
Changes in market price or product fair				represents the outstanding foreign exchange forward contracts entered into by the
value of invested derivatives during the				Company and banks, which are recognized as transactional financial assets or liabilities
Reporting Period, where specific				based on the difference between the quotation of the outstanding foreign exchange
methods and relevant assumptions and				forward contracts and the forward exchange rate as at the end of the period. During the
parameters used shall be disclosed in the				Reporting Period, the Company recognized a gain on change in fair value of the
analysis of derivatives’ fair value				derivatives of RMB56,596,300, investment gain amounted to RMB19,153,800,
				resultingin a totalprofits or losses of RMB75,750,100.
Explanations of any significant changes
in the Company’s accounting policies
				During the Reporting Period, there were no material changes in the accounting policy
and specific accounting and auditing
				and specific accounting and auditing principles for the Company’s derivatives business
principles on derivatives between the
				as compared to last reporting period.
Reporting Period and the last reporting
period

The derivatives business of the Company mainly represents the forward foreign exchange contracts used to avoid the risk of foreign exchange fluctuations related to the overseas sales receivables. The Company determines a reasonable range of foreign exchange rates to achieve the hedging purpose.

The Company has formulated the “Management Measures for the Foreign Exchange Capital Business” and “the Internal Control System for Forward Foreign Exchange Capital Transactions”. The measures specifically regulate the basic principles, operation rules, risk control measures and internal controls that shall be followed when engaging in the business of foreign exchange derivatives. In respect of actual business management, the Company manages the derivatives business before, during and after the operation based on the management measures for the derivatives business.

The assessment of the fair value of the derivatives carried out by the Company mainly Changes in market price or product fair represents the outstanding foreign exchange forward contracts entered into by the value of invested derivatives during the Company and banks, which are recognized as transactional financial assets or liabilities Reporting Period, where specific based on the difference between the quotation of the outstanding foreign exchange methods and relevant assumptions and forward contracts and the forward exchange rate as at the end of the period. During the parameters used shall be disclosed in the Reporting Period, the Company recognized a gain on change in fair value of the analysis of derivatives’ fair value derivatives of RMB56,596,300, investment gain amounted to RMB19,153,800, resulting in a total profits or losses of RMB75,750,100.

Explanations of any significant changes in the Company’s accounting policies During the Reporting Period, there were no material changes in the accounting policy and specific accounting and auditing and specific accounting and auditing principles for the Company’s derivatives business principles on derivatives between the as compared to last reporting period. Reporting Period and the last reporting period

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Opinion of independent directors: Commencement of foreign exchange derivatives business by the Company was beneficial to the Company in the prevention of exchange rate fluctuation risks. The Company has devised the Internal Control System for Forward Foreign Exchange Capital Transactions to strengthen internal control and enhance the management of foreign exchange risks by the Company, and the targeted risk control measures adopted were practicable.

Specific opinions of independent Directors on the derivatives investment and risk control of the Company

Ⅷ . DESCRIPTION OF CHANGES IN SCOPE OF CONSOLIDATION AS COMPARED TO FINANCIAL REPORT LAST YEAR

Newly consolidated subsidiaries:

• (1) Refrigerator marketing company: During the Reporting Period, newly established Refrigerator Marketing Company was included in the scope of consolidation.

• (2)Air-conditioner marketing company: During the Reporting Period, newly established Air-Conditioner Marketing Company was included in the scope of consolidation.

• (3) Hisense Home Appliance (Europe) Research &Development Center GmbH（“Hisense Europe Research”):During the Reporting Period, newly established Hisense Europe Research was included in the scope of consolidation.

This announcement is published in both English and Chinese. If there is any conflict between the English and the Chinese versions, the Chinese version shall prevail.

DEFINITIONS

In the announcement, unless the context requires otherwise, the following terms or expressions shall have the following meanings:

“Company”, “the Company”	Hisense Kelon Electrical Holdings Company Limited
“Hisense Air-Conditioning”	Qingdao Hisense Air-Conditioning Company Limited
“Hisense Electric”	Hisense Electric Co., Ltd.
“Hisense Group”	Hisense Company Limited
“Hisense Hitachi”	Qingdao Hisense Hitachi Air-Conditioning Systems Co., Ltd.
“Hisense-Whirlpool”	Hisense-Whirlpool (Zhejiang) Electric Appliances Co., Ltd.
“Hisense Finance”	Hisense Finance Company Limited
“Embraco”	Beijing Embraco Snowflake Compressor Co., Ltd.
“Snowflake”	Beijing Snowflake Electrical Appliance Group Corporation
“Hisense Marketing”	Qingdao Hisense International Marketing Holdings Co., Ltd.
“Beijing Refrigerator”	Hisense (Beijing) Electric Company Limited
“Shandong Refrigerator”	Hisense (Shandong) Refrigerator Company Limited
“Hisense Hong Kong”	Hisense (Hong Kong) Company Limited
“Guangdong Greencool”	Guangdong Greencool Enterprise Development Company Limited
“Greencool Companies”	Guangdong Greencool and other related parties

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“Guangdong Refrigerator ”	Hisense Ronshen (Guangdong) Refrigerator Co., Ltd.
“Guangdong Air-Conditioner”	Guangdong Kelon Air-Conditioner Co., Ltd.
“Kelon Fittings”	Guangdong Kelon Fittings Co., Ltd.
“Guangdong Freezer”	Hisense Ronshen (Guangdong) Freezer Co., Ltd.
“Yangzhou Refrigerator”	Hisense Ronshen (Yangzhou) Refrigerator Co., Ltd.
“Kelon Mould”	Guangdong Kelon Mould Company Limited
“Ronshen Plastic”	Foshan Shunde District Ronshen Plastic Co., Ltd.
“Huayi Compressor”	Huayi Compressor Company Limited
“Foshan Intermediate Court”	Intermediate People’s Court of Foshan City
“RMB”	Renminbi
“Hong Kong Stock Exchange”	The Stock Exchange of Hong Kong Limited

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