Medlive Technology Co., Ltd. — Audit Report / Information 2006

Apr 27, 2007

GUANGDONG KELON ELECTRICAL HOLDINGS COMPANY LIMITED 廣東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: 0921)

Specific explanation of Shenzhen Dahua Tiancheng Certified Public Accountants on the use of funds by the controlling shareholders and related parties of Guangdong Kelon Electrical Holdings Company Limited

This announcement is made in accordance with Rule 13.09(2) of the Rules Governing the Listing of Securities on the Stock Exchange of Hong Kong Limited (the “Stock Exchange”).

Shen Hua (2007) Zhuan Shen Zi No. 149

To the Board of Directors of Guangdong Kelon Electrical Holdings Company Limited:

We have been appointed to carry out the audit of the balance sheet of Guangdong Kelon Electrical Holdings Company Limited (the “Company”) and the Group as at 31 December 2006 and the income statement and profit apportionment and the cash flow statement of the Company and the Group for the year in accordance with Independent Auditing Standards for Chinese Certificated Public Accountants and issued a qualified auditor’s report which included an explanatory paragraph, document number Shen Hua (2007) Gu Shen Zi No.030 on 20 April 2007.

According to the “Notice of Issues in Relation to the Regulation of Capital Exchange between Listed Companies and Related Parties and External Guarantees made by Listed Companies” (Zheng Jian Fa (2003) No 56) promulgated by the China Securities Regulatory Commission (the “CSRC”), as the registered accountants responsible for auditing the financial statements of the Company in 2006, have issued a specific explanation on the use of funds by the controlling shareholders and the related parties of the Company. Annex I of this specific explanation was issued pursuant to “Memorandum on the Requirements of Information Disclosure No.2 of 2006 (amended version): the Disclosure and Reporting Requirements of the Use of Extraordinary Capital and the Capital Exchange with Related Parties” issued by the Shenzhen Stock Exchange.

The Company is responsible for the preparation and the disclosure of the summary statements and is also responsible for ensuring its accuracy, legality and the completeness. We have reconciled the information provided in the summary statements with the accounting information reviewed in connection with our audit of the Company’s financial statements for the year ended 31 December 2006 and the relevant information as stated in the audited accounting reports, and have found no significant discrepancies. Save for the audit procedures on the related party transactions carried out in connection with our audit of the financial statements for the year ended 31 December 2006 we did not carry out additional audit procedures for the information provided in the summary statements.

The Company had a series of related party transactions and abnormal cash inflows and outflows with its former substantial shareholder, namely Guangdong Greencool Enterprise Development Co., Ltd and its related parties (collectively “Greencool Companies”), etc. from October 2001 to July 2005. During this period, the Greencool Companies, through Tianjin Lixin Trading Development Company Limited (天津立信商貿發展有限公司 ) and other third party companies, had a series of abnormal cash inflows and outflows with the Company. Such transactions and abnormal cash inflows and outflows and suspected misappropriation of funds are in the process of being investigated by relevant authorities. The investigation is still undergoing. Such issues involve the accounts receivable and accounts payable between the Company and the Greencool Companies and the above third party companies as at 31 December 2006. In order to accurately present the financial statement, the Company included the above dealings with the Greencool Companies and third parties into the master statements.

This report has been prepared in accordance with the requirements of CSRC (including its representative organisation) and Shenzhen Stock Exchange, and cannot be used for any other purpose. The certified public accountants and accounting firm who have prepared this report, shall not be responsible for any consequences arising from the inappropriate use of this report.

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Shenzhen Dahua Tiancheng Certified Public Accountants China Shenzhen 26 April 2007

Chinese Certified Public Accountant Hu Chun Yuan Chinese Certified Public Accountant Wu Jian Hui

Suspension of Trading in H Shares

At the request of the Company, trading in H Shares of the Company was suspended with effect from 10:00 a.m. on 16 June 2005 until further notice.

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

As at the date of this announcement, the Company’s executive directors are Mr. Tang Ye Guo, Mr. Yang Yun Duo, Mr. Wang Shi Lei, Ms. Yu Shu Min, Mr. Lin Lan and Mr. Xiao Jian Lin; and the Company’s independent nonexecutive directors are Mr. Zhang Sheng Ping, Mr. Lu Qing and Mr. Cheung Yui Kai, Warren.

Foshan City, Guangdong, the PRC, 26 April 2007

Annex I Summary of the use of Extraordinary Capital and the Capital Exchange of the other Related Party of the Company.

						Increase during
					Balance at the	the year 2006	Interest for	Repayment	Balance at
Non-operating					beginning of	(exclusive	the year	during the	the end of
Fund occupation	Names of related parties	Relationship		Account items	the year 2006	of interest)	2006 (if any)	year 2006	the year 2006	Reason	Nature
Former controlling	Guangdong Greencool	Former controlling		Other receivables	1,375.46	–	–	–	1,375.46	Joining fee	Non-operating use
shareholder and	Enterprise Development		shareholder
its subsidiaries	Company Limited
	Greencool Techology	Former subsidiary		Other receivables	3,300.00	–	–	–	3,300.00	Transfer	Non-operating use
	Environmental Protection		of the controlling
	Engineering (Shenzhen)		shareholder
	Co.,Ltd
	Greencool Techology	Former subsidiary		Other receivables	3,200.00	–	–	–	3,200.00	Transfer	Non-operating use
	Decelopment (Shenzhen)		of the controlling
	Co.,Ltd		shareholder
	Hainan Greencool	Former subsidiary		Other receivables	1,228.94	–	–	–	1,228.94	Prepayment	Non-operating use
	Environmental Protection		of the controlling
	Engineering Company		shareholder
	Limited
Sub-total	–	–		–	9,104.40	–	–	–	9,104.40	–	–
Controlling shareholder	Qingdao Hisense Air-	Controlling shareholder		–	–	–	–	–	–
and its subsidiaries	Conditioning Co., Ltd.
Sub-total	–	–		–	–	–	–	–	–
Total	–	–		–	9,104.40	–	–	–	9,104.40	–	–

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Other related partiesChengdu Xinxing ElectricalSubsidiaries of minorityOther receivablesand other subsidiariesAppliance Holdingsshareholders of fellowCompany LimitedsubsidiariesQingdao Hisense MarketingSubsidiaries of theReceivablesCompany Limitedsame Company,Other receivablesHisense NanjingSubsidiaries of thePrepaymentsame CompanyHisense ZhejiangSubsidiaries of minorityReceivablesshareholders of fellowsubsidiariesShunde Yunlong ConsultancyMinority shareholdersOther receivablesService Company Limitedof fellow subsidiariesSub-total–––Specified third parties*Hefei Weixi ElectricalSpecified third parties*Trade receivablesAppliance CompanyOther receivablesWuhan Changrong ElectricalSpecified third parties*Trade receivablesAppliance CompanyLimitedOther receivablesJiangxi Kesheng Industry andSpecified third parties*Other receivablesTrading Company LimitedZhongshan Dongyue Electrical Specified third parties*Other receivablesCompanyJinnan San Ai FuSpecified third parties*Other receivablesPetrochemical Co.,Ltd***Tianjin Xiangrun CommercialSpecified third parties*Other receivablesCo.,Ltd***Tianjin Lixin TradingSpecified third parties*Other receivablesDevelopment CompanyLimited***Jiangxi Keda PlasticSpecified third parties*Other receivablesTechnology CompanyLimitedZhuhai City LongjiaSpecified third parties*Other receivablesRefrigerant FacilitiesBeijing De Heng SolicitorsSpecified third parties*Other receivablesYangzhou EconomicSpecified third parties*Other receivablesDevelopment ZoneFinance Bureau**Shangqiu Bing Xiong Freezing Specified third parties*Other receivablesFacilities Company LimitedZhuhai DefaSpecified third parties*Other receivablesSub-total–––Total–––	3,400.0020,434.92–––468.5824,303.511,822.9646.522,046.042,000.002,746.271,267.8312,149.659,690.538,960.031,300.022,860.00400.004,000.005,803.002,140.0057,232.8590,640.76	–8,593.3910.3573.0559.03–8,735.82––––––––––––––––8,735.82	––––––––––––––––––––––––	–28,984.69–––16.0029,000.69–––––1,267.83–––––––––1,267.8330,268.52	3,400.00LoanNon-operating use43.62LoanNon-operating use10.3573.05Sales receipt59.03Sales receipt452.58Advancement Non-operating use4,038.63––1,822.96Sales receiptNon-operating use46.52Sales receipt2,046.04Sales receipt2,000.00Transfer2,746.27Prepayment–Materials fee12,149.65Prepayment9,690.53Prepayment8,960.03Prepayment1,300.02Transfer2,860.00Materials fee400.00Service fee4,000.00Land fee5,803.00Land andfacilities fee2,140.00Materials fee55,965.02––69,108.05––

* Note: Specified third party is the abbreviation of the abovementioned companies through which abnormal cashflow between the Greencool Companies controlled by the former beneficial controller and the Company were incurred.

** The payables of RMB 40 million to Yangzhou Economic Development Zone Finance Bureau is, indeed, an amount embezzled, not an amount used for acquiring a piece of land.

*** The actual purchase price of the refrigerants is substantially lower than the contract price, The balance of the amount, after deducting the actual price, was embezzled.

“Please also refer to the published version of this announcement in China Daily”

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