Medlive Technology Co., Ltd. — Board/Management Information 2002

Nov 14, 2002

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

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)

ANNOUNCEMENT ON RESOLUTIONS OF THE BOARD OF DIRECTORS TOGETHER WITH THE NOTICE OF THE 2002 EXTRAORDINARY GENERAL MEETING

This announcement is made in accordance with paragraph 2(2) of the Listing Agreement.

A meeting of the board of directors (the “Board”) of Guangdong Kelon Electrical Holdings Company Limited (the “Company”) was held by way of written resolutions on 11 November 2002. The meeting was attended by eight out of the nine directors and was held in accordance with the Company Law of the People’s Republic of China and the Company’s articles of association. The following matters were discussed at the meeting:

1. The resignation of Mr. Chen Wen Hui as independent non-executive director of the Company due to personal reasons was considered and approved. Such resignation shall not take effect until the day upon which the appointment of the new independent non-executive director has been approved by the shareholders of the Company at the extraordinary general meeting of the Company (the “EGM”);

2. The nomination of Mr. Li Kung Man for appointment as independent non-executive director of the Company was considered and approved and such nomination shall be put forward for approval by the shareholders of the Company at the EGM;

3. The proposed amendments to the Company’s articles of association (see Attachment 1 for details) were considered and approved and such amendments shall only take effect after obtaining the approval of the shareholders of the Company at the EGM;

4. The proposal to use the Company’s statutory common reserve and capital reserve to make up for the Company’s accumulated losses (see Attachment 2 for details) was considered and approved and such proposal shall only take effect after obtaining the approval of the shareholders of the Company at the EGM; and

5. The resolution to convene the EGM at the Meeting Room of the Company’s headquarters in the PRC on 29 December 2002 was approved.

Notice of Extraordinary General Meeting

NOTICE IS HEREBY GIVEN that the Board of the Company has decided to hold the EGM at 9:00 am on 29 December 2002, at the Meeting Room, No. 8 Ronggang Road, Ronggui, Shunde, Guangdong Province, the PRC, to consider and if thought fit, pass the following resolutions:

1. “That the appointment of Mr. Li Kung Man as an independent non-executive director of the Company which is to take effect immediately upon the close of this meeting, be and is hereby approved.”

2. “That the appointment of Mr. Bai Yun Feng as a supervisor of the Company be and is hereby approved.”

3. “That the amendments to the Company’s articles of association be and are hereby approved.”

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1. “That the proposal to use the Company’s statutory common reserve and capital reserve to make up for the Company’s accumulated losses be and is hereby approved.”

By the order of the Board of Guangdong Kelon Electrical Holdings Company Limited Gu Chu Jun Chairman

Shunde, the PRC, 11 November 2002

Notes:

1. Holders of the Company’s shares whose names appear on the register of members of the Company as at the close of business on 6 December 2002 are entitled to attend the EGM or any adjournment thereof if they complete and return the attendance confirmation slip for receipt by the Company on or before 9 December 2002. Please refer to the attendance confirmation slip for details.

2. A shareholder entitled to attend and vote at the EGM may appoint a proxy or proxies (no matter whether he/ she is a shareholder of the Company) to attend and vote in his/her stead. Each shareholder (or his/her proxy or proxies) shall be entitled to one vote for each share held. The completion and deposit of a form of proxy will not preclude any shareholder from attending and voting at the EGM or any adjournment thereof.

3. Shareholders must appoint a proxy or proxies in writing. Such instrument should be signed by the person appointing the proxy or proxies or his/her duly authorized attorney. If the form of proxy is signed by an attorney, the document appointing the attorney must be certified by a notary public. To be valid, a notarially certified power of attorney or other authority (if any) and the form of proxy must be received by the Secretary’s Office 24 hours prior to the commencement of the EGM. A form of proxy for use at the EGM will be dispatched to each of the shareholders in due course.

4. The EGM is expected to last half a day. Shareholders attending the EGM are responsible for their own transportation and accommodation expenses.

5. The address of the Secretary’s Office:

Secretary’s Office of the Board of Directors of Guangdong Kelon Electrical Holdings Company Limited No. 8 Ronggang Road, Ronggui, Shunde, Guangdong Province, the PRC Tel: (0765) 8362570 Fax: (0765) 8361055 Contact persons: Zhong Liang, Yu Wan Li

Attachment 1:

Proposed Amendments to Articles of Association

Guangdong Kelon Electrical Holdings Company Limited (the “Company”) proposes to amend its articles of association in accordance with the relevant rules and regulations of “The Guidelines on the Articles of Association of Listed Companies” and “The Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited” and taking into account the Company’s own needs.

This proposal requires the approval of the shareholders of the Company at the 2002 extraordinary general meeting.

The amendments to the Company’s original articles of association (“Original Articles”) are as follows:

• 1 The phrase “, “Guidelines on the Articles of Association of Listed Companies” (hereinafter referred to as “the Guidelines”)” be inserted in Original Article 1.1 straight after the phrase “the “Mandatory Provisions for the Articles of Association of Companies Seeking a Listing Outside the People’s Republic of China” (hereinafter referred to as “the Mandatory Provisions”)”.

• 2 Certain contents of Original Article 1.2 be amended as follows:

“Registered Address of the Company: No.8 Ronggang Road, Ronggui, Shunde, Guangdong Province, PRC

Telephone No. : (0765) 836 2570

Facsimile: (0765) 836 1055”

• 3 A new paragraph be added to Original Article 1.4 as the second paragraph: “The Company has complied with the Company Law and the relevant requirements, and has completed the reregistration procedures.”.

• 4 The business licence number as referred to in Original Article 1.5 be amended to “Qi Gu Yue Zong Zi Di 003092 Hao（企股粵總字第 003092 號）”.

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• 5 The sentence : “All assets of the Company are divided into equal shares.” be inserted in Original Article 1.7 in front of the sentence “The shareholders of the Company are liable to the Company to the extent of the shares held by them.”.

• 6 The phrase: “Provided that the relevant PRC laws and administrative regulations are complied with,” be inserted in Original Article 1.13 in front of the phrase “The Company shall have the right to raise funds or loans,”.

• 7 New Article 1.14 be added to Chapter 1: “Other senior managerial officers referred to herein shall mean Secretary to the Board of Directors, Chief Financial Officer and Deputy General Manager of the Company.”.

• 8 The first sentence of Original Article 2.1 be amended to: “The business objects of the Company are: To utilise the social resources and capital within and outside China to develop the production of refrigerators, air conditioners and other domestic electrical appliances;”.

• 9 The business scope of the Company as referred to in the first paragraph of Original Article 2.2 be amended to: “Development and manufacture of refrigerators and other domestic electrical appliances, sales of products inside and outside China and provision of after sales services, transportation of its own products.”

• 10 The sentence: “The ordinary shares issued by the Company shall include domestic capital shares and foreign capital shares.” be inserted in Original Article 3.1 after the sentence “The Company shall provide for ordinary shares at all times.”.

• 11 Original Article 3.2 be amended to:

“Shares of the Company are in the form of share certificates. Shares issued by the Company shall have a par value of RMB1.00 each.

Shares of the Company are issued on an open, fair and impartial basis and are entitled to equal rights and dividends.”

• 12 A new paragraph be added to Original Article 3.4 as the second paragraph:

“The Company’s domestic shares are kept under the custody of Shenzhen Branch, China Securities Depository & Clearing Company Limited.”

• 13 Original Article 3.5 be amended to: “As approved by the securities supervisory authorities of the State Council and the relevant authorities, the Company has 992,006,563 ordinary shares in issue, out of which: 337,915,755 shares are domestic legal person shares, representing 34.06% of the total share capital of the Company; 459,589,808 shares are overseas listed foreign capital shares, representing 46.33% of the total share capital of the Company; and 194,501,000 shares are domestic listed domestic capital shares, representing 19.61% of the total share capital of the Company.”

• 14 New Articles 3.11 to 3.13 be added to Chapter 3 as follows:

• “Article 3.11 The Company shall not accept any shares of the Company to be the subject of a pledge.

• Article 3.12 Directors, supervisors, managers and other senior managerial officers are required to report to the Company his/her interests in the shares of the Company on a regular basis during his/her employment. Transfer of any Shares held by them is not allowed during his/her employment or any time within 6 months after his/her termination of employment.

• Article 3.13 In the event that a holder of domestic shares of the Company who is interested in 5% or more of the shares of the Company with voting rights, sells the shares of the Company held by him/her within 6 months after his/ her purchase of the same, or acquires the shares within 6 months after disposal of the shares held by him/her, all profits made on such transactions shall belong to the Company.

The above stipulation shall apply to directors, supervisors, managers and other senior managerial officers of a legal person who owns domestic shares of the Company that represent 5% or more of the shares of the Company with voting rights.”

15 New Article 6.6 be added to Chapter 6: “In respect of the holders of domestic shares, the Company shall keep a register of shareholders in accordance with the evidence provided by the share registrar. The Company shall enter into a share custody agreement with its registrar and make regular enquiries on the information of its major shareholders and the shareholding

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changes (including pledge of shares) of its major shareholders, so as to obtain timely understanding of the Company’s shareholding structure.”

• 16 Original Articles 6.6 to 6.15 be renumbered as New Articles 6.7 to 6.16 accordingly.

• 17 New Article 6.17 be added to Chapter 6: “Shares of the Company may be transferred, given away, inherited and pledged in accordance with the relevant laws, administrative regulations and the provisions of these Articles of Association.”

• 18 New Articles 7.3 to 7.4 be added to Chapter 7 as follows:

• “Article 7.3 Shareholders who intend to inspect or obtain the information or data described above shall provide the Company with written documents evidencing the class and number of shares held by them, and after verifying the identity of the shareholders, the Company shall provide the same to the shareholders as required.

• Article 7.4 In the event that any resolution approved by any Shareholders’ General Meeting or board meeting violates any laws or administrative regulations or infringes any shareholders’ legal rights, shareholders are entitled to initiate legal proceedings with a court of competent jurisdiction to stop such violations and infringements.

  • In the event that any director, supervisor or manager, who in the execution of his/her duty, violates any laws or administrative regulations or these Articles of Association and causes damage to the Company, he/she shall be responsible for compensating the Company. Shareholders are entitled to request the Company to initiate legal proceedings for compensation.”

• 19 Original Article 7.3 be renumbered as New Article 7.5 and a new paragraph be inserted as the third paragraph: “In respect of any person who holds direct or indirect interests in shares of the Company, the Company shall not exercise any power to freeze or in any other way prejudice the rights appertinent to the shares held by such person on the basis that he/she has not disclosed his/her interest to the Company.”

• 20 Original Article 7.4 be renumbered as New Article 7.6 accordingly.

• 21 New Article 7.7 be added to Chapter 7: “In addition to the provisions set out in Article 7.6, the controlling shareholder shall comply with the following:

• (1) the controlling shareholder shall ensure the independence of the Company’s personnel, assets and finance and shall not interfere with the Company’s financial and accounting activities. The controlling shareholder and its subordinate units shall not engage in businesses which are the same or similar to those carried out by the Company. The controlling shareholder shall take effective measures to avoid business competition;

• (2) the controlling shareholder shall support the Company to carry out profound reform in its labour system, personnel system and allocation system, to adopt modified operational management mechanism, and to establish various effective incentive systems under which a managerial post is open for application and an officer on that post is exposed to upgrade or downgrade, and under which staff are employed or sacked on their own merits and income allocation is subject to change;

• (3) the controlling shareholder shall have the fiduciary duty to the Company and other shareholders and shall strictly abide by the laws in exercising his rights as a capital contributor. The controlling shareholder shall not prejudice the interest of the Company and other shareholders by way of asset reorganization or otherwise and it shall not obtain additional benefits through its special position;

• (4) the controlling shareholder shall not execute any approval procedure in relation to the appointment of members of the Board of Directors or appointment of personnel by Shareholders’ General Meeting, or bypass shareholders’ general meeting and Board of Directors in employing/dismissing any senior managerial officer of the Company;

• (5) any material decision of the Company shall be made by Shareholders’ General Meeting and the Board of Directors; the controlling shareholder shall not interfere with, directly or indirectly, the Company’s decision making and its production/operation activities, thereby prejudicing the interest of the Company and other shareholders.”

• 22 Original Article 7.5 be renumbered as New Article 7.8 and the first sentence “The controlling shareholder referred to in Article 7.4 of these Articles of Association means a person who meets one of the following conditions:” be amended to: “The controlling shareholder referred

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to in Article 7.6 and Article 7.7 of these Articles of Association means a person who meets one of the following conditions:”

Further, a new paragraph be added to New Article 7.8 as the second paragraph: “The expression “acting in concert” referred to herein means two or more persons who, pursuant to an agreement (no matter oral or written), co-operate to obtain or consolidate control of the Company through the acquisition by any of them of voting rights of the Company.”

• 23 New Article 7.9 be added to Chapter 7: “Connected transactions between any connected person (as defined in the listing rules of the stock exchanges on which the shares of the Company are listed) and the Company shall follow the principles set out below:

• (1) any connected transaction between the Company and a connected person shall be made in a written agreement. The agreement shall be executed on principles of fairness, voluntariness, equality and for a value. The contents of the agreement shall be clear and specific. The Company shall make timely and full disclosure on such matters as the conclusion, alteration, termination and performance of the agreement as required by the relevant requirements;

• (2) the Company shall take effective measures to prevent its connected persons from interfering with the operations of the Company and damaging the Company’s benefits by way of monopolizing its purchase and sales channels. Connected transactions shall be made on normal commercial principles and the prices or charges must be comparable to those charged by independent third parties in the market. The Company shall fully disclose the basis of price determination for all connected transactions;

• (3) the Company shall take effective measures to prevent its connected persons from utilising or transferring the Company’s funds, assets or other resources in whatever manner, and shall not provide any guarantee for any of its connected persons.”

• 24 New Provision (14) be added to the powers to be exercised by Shareholders’ General Meeting as referred to in Original Article 8.2:

• “(14) to examine and approve any investments and asset disposal actions which meet any one of the following standards:

  • (a) more than 50% of the Company’s total asset value as set out in its latest audited financial statements;

  • (b) more than 50% of the Company’s net asset value as set out in its latest audited financial statements;

  • (c) more than 50% of the Company’s net profit or absolute loss value as set out in its audited financial statements of previous year;

  • (d) any other investments and asset disposal actions which are required by laws and regulations to be examined by Shareholders’ General Meeting or which a Shareholders’ General Meeting considers it necessary to examine.”

Original Provision (14) be renumbered as Provision (15) accordingly and a new paragraph be added to Original Article 8.2 as the second paragraph: “The Board of Directors shall make decision in respect of any investments and asset disposal actions which do not meet the standards set out in Provision (14) in this Article. However, the provisions set out in Article 10.16 of these Articles of Association shall apply to the disposal of fixed assets.”

• 25 New Articles 8.5 to 8.7 be added to Chapter 8 as follows:

• “Article 8.5 At any Shareholders’ General Meeting, shareholders who individually or jointly hold 5% or more of the Company’s issued shares with voting rights shall be entitled to put forward a new motion to the Company.

• Article 8.6 Shareholders’ General Meeting shall consider and resolve on any specific motion. Any motion put forward to Shareholders’ General Meeting shall meet the following conditions:

  • (1) its contents do not conflict with any laws, regulations or any provisions of these Articles of Association, and are within the Company’s scope of operation and within the authority of Shareholders’ General Meeting;

  • (2) it contains a clear topic and concrete subject for consideration;

  • (3) it is submitted or delivered to the Board of Directors in writing.

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Article 8.7 The Board of Directors shall act in the best interests of the Company and its shareholders and comply with the provisions set out in Article 8.6 of these Articles of Association in examining motions put forward to Shareholders’ General Meeting.”

• 26 Original Articles 8.5 to 8.7 be renumbered as New Articles 8.8 to 8.10 accordingly.

• 27 Original Article 8.8 be renumbered as New Article 8.11 and new Provisions (8) and (10) be added to New Article 8.11:

• “(8) The date on which those shareholders whose names appear on the share register are entitled to attend Shareholders’ General Meeting;

• (10) Name of contact person and contact methods for matters relating to the meeting.”

Original Provision (8) be renumbered as Provision (9) accordingly.

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• Original Articles 8.9 to 8.11 be renumbered as New Articles 8.12 to 8.14 accordingly.

• 29 Original Article 8.12 be renumbered as New Article 8.15 and a new paragraph be added as the second paragraph: “The instrument for appointing a proxy to attend the Shareholders’ General Meeting shall contain the following:

• (1) Name of the proxy;

• (2) Whether the proxy possesses voting rights;

• (3) Instructions to vote “for”, “against” or “abstain”, respectively on each of the resolutions set out in the agenda for the Shareholders’ General Meeting;

• (4) Whether the proxy possesses voting rights in relation to any resolution that may be added to the agenda of the Shareholders’ General Meeting, and, if so, the specific instructions of voting;

• (5) Date of issue and valid period of the proxy form;

• (6) Appointor’s signature (or seal); if the appointor is a legal person, the proxy form shall be affixed with the seal of such legal person;

• (7) The proxy form shall specify: if no specific instruction is given by the shareholder, whether or not the proxy may vote at his discretion.”

• 30 Original Articles 8.13 be renumbered as New Article 8.16 accordingly.

• 31 Original Article 8.14 be renumbered as New Article 8.17 and its last sentence “Such instrument of proxy shall specify that in the absence of instruction from the shareholder, the proxy may vote in such a way as he thinks fit.” be deleted.

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• Original Article 8.15 be renumbered as New Article 8.18 accordingly.

• 33 New Article 8.19 be added to Chapter 8: “The Company shall prepare a signature book for those who attend the meeting. The signature book shall record the name of the person (or name of company), I.D. number, address, number of shares with voting rights being held or represented and the name of the person who is the proxy (or name of company), etc.”

• 34 Original Articles 8.16 to 8.17 be renumbered as New Articles 8.20 to 8.21.

• 35 New Article 8.22 be added to Chapter 8: “When a connected transaction is being considered for approval at a Shareholders’ General Meeting, any shareholder who is involved in the connected transaction shall abstain from voting and the voting rights held by such shareholder shall not be counted towards the total number of shares with voting rights that are present at the Shareholders’ General Meeting. The announcement on the resolutions of the Shareholders’ General Meeting shall fully disclose the results of the voting by shareholders who are not connected with the transaction. Under exceptional circumstances where a connected shareholder is unable to abstain from voting, the Company, after obtaining the consent from the relevant authorities, may carry on the voting in accordance with normal procedures, and details of this shall be disclosed in the announcement on the resolutions of the Shareholders’ General Meeting.”

• 36 Original Articles 8.18 to 8.21 be renumbered as New Articles 8.23 to 8.26 accordingly.

• 37 New Article 8.27 be added to Chapter 8: “The vote count for each resolution shall be carried out by at least two shareholder representatives and one Supervisor, and the voting results shall be announced by such persons at the meeting.”

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• 38 Original Articles 8.22 to 8.28 be renumbered as New Articles 8.28 to 8.34 accordingly.

• 39 New Articles 8.35 to 8.37 be added to Chapter 8 as follows:

• “Article 8.35 Except for matters involving the Company’s trade secrets which shall not be disclosed at the Shareholders’ General Meeting, the Board of Directors and Supervisory Committee shall provide responses or explanations to the enquiries and suggestions raised by the shareholders.

Article 8.36 Minutes shall be kept for the Shareholders’ General Meeting. The minutes shall record the following:

  - (1) the number of shares with voting rights present at the Shareholders’ General Meeting, and the percentage of such shares in the Company’s total number of shares;

  - (2) the numbers of shares with voting rights held respectively by the shareholders of domestic listed shares (including their proxies) and foreign investment shares (including their proxies) who attend the Shareholders’ General Meeting, and the respective percentages of such shareholdings to the company’s total number of shares;

  - (3) the date and venue of the Shareholders’ General Meeting;

  - (4) the name of the Chairman and the agenda of the Shareholders’ General Meeting;

  - (5) the main points of the speech made by each speaker in relation to each resolution;

  - (6) the voting results for each resolution (in recording the voting results, the details of the voting made by the shareholders of domestic listed shares and foreign investment shares respectively shall also be included);

  - (7) the enquiries and suggestions raised by the shareholders and the responses and explanations given by the Board of Directors and Supervisory Committee;

  - (8) other matters which are required by these Articles of Association and the Shareholders’ General Meeting to be included in the minutes.

• Article 8.37 The minutes of the Shareholders’ General Meeting shall be signed by the directors and the person taking the minutes who have attended the Shareholders’ General Meeting and such minutes shall be kept on the Company’s file by the secretary to the Board of Directors for a period of ten years.”

• 40 Original Article 8.29 be renumbered as New Article 8.38 accordingly.

• 41 The reference to “Article 7.5 of these Articles of Association” in Provision (1) of the second paragraph of Original Article 9.4 be amended to “Article 7.9 of these Articles of Association”.

• 42 The phrase “the Securities Committee of the State Council” as referred to in Provision (2) of the second paragraph of Original Article 9.8 be amended to: “the securities supervisory and management authorities of the State Council”.

• 43 The heading of Original Chapter 10 be amended to: “Directors and Board of Directors” and New Articles 10.1 to 10.13 be added as “Section 1 Directors” of Chapter 10 as follows:

• “Article 10.1 The Company’s directors shall be natural persons and directors are not required to hold any shares of the Company.

• Article 10.2 A director shall be elected or replaced by the Shareholders’ General Meeting and his/her period of office shall be three years. A director shall be eligible for re-election and re-appointment upon expiration of his/her period of office. Directors shall not be dismissed by the Shareholders’ General Meeting without reasons before the expiration of his/her period of office.

A director’s period of office shall commence on the date when the relevant resolution is passed at the Shareholders’ General Meeting and terminate upon expiration of the period of office of the existing Board of Directors.

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Any directors may be dismissed by the Shareholders’ General Meeting by way of ordinary resolution in accordance with the relevant laws and administrative regulations (but without prejudice to any claim for damages under any contract) before the expiration of his/her period of office.

Article 10.3 Both the Board of Directors and Supervisory Committee may propose to the Shareholders’ General Meeting for nomination or replacement of the Company’s directors.

Shareholders who individually or jointly hold more than 5% of the total number of the Company’s issued shares with voting rights may propose to the Shareholders’ General Meeting for replacement of the Company’s directors. When nominating directors, the maximum number of nominations which a shareholder may make shall be determined on the basis that holding of 5% of the total number of issued shares with voting rights may nominate one director (any balance below 5% will not be counted).

The written notice showing the intention to nominate directors and the acceptance of the nomination from the nominated directors shall be delivered to the Board of Directors of the Company no later than seven days prior to the date of the Shareholders’ General Meeting. The requirements of these Articles of Association shall apply to the resolutions on nomination of and replacement of directors.

Article 10.4 The Board of Directors of the Company shall disclose the details about the nominated directors in the notice of meeting before the date of the Shareholders’ General Meeting to ensure that shareholders have enough knowledge about the nominees when they cast their votes.

A nominated director shall make an undertaking in writing prior to the Shareholders’ General Meeting to the effect that he/she has accepted the nomination, and confirms that the information about him/her as disclosed to the public is true and complete and promises that he/she will duly perform the responsibilities as directors if he/she is elected a director of the Company.

• Article 10.5 A director shall actively participate in the relevant training to understand the rights, obligations and responsibilities as a director, to learn the relevant laws and regulations and to grasp the required knowledge of a director.

• Article 10.6 A director shall not, in his/her own name, act on behalf of the Company or the Board of Directors without the permission under the Articles of Association or made by the Board of Directors. When a director is acting in his own name and any third party may reasonably think that the director is acting on behalf of the Company or the Board of Directors, such director shall make prior clarifications of his/her position and capacity.

• Article 10.7 A director shall attend meetings of the Board of Directors with a serious and responsible manner and shall expressly give his/her opinion on all discussion items. Any director who is unable to attend the meeting in person may appoint another director in writing to vote in accordance with his/her instructions and the appointor shall assume independent legal liability.

• Any director who is unable to attend two consecutive meetings in person and who fails to appoint another director to attend such meetings shall be deemed to be incapable of performing his/her duties and the Board of Directors shall propose to the Shareholders’ General Meeting to remove his/her directorship.

• Article 10.8 A director may resign prior to the expiration of his/her period of office and a written report for resignation shall be submitted to the Board of Directors.

• Article 10.9 If a director’s resignation results in the number of directors in the Board of Directors falling below the minimum number prescribed by law or stipulated by these Article of Association, the resignation report of such director shall not take effect until his/her successor director is appointed to fill the vacancy. The remaining directors shall convene an Extraordinary Shareholders’ General Meeting as soon as possible to elect a director to fill the vacancy. The new director will hold his/her office until the expiration of the period of office of the existing Board of Directors. Before the Shareholders’ General

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Meeting has resolved on the election of a new director, the powers of the resigning director and the remaining Board of Directors shall be subject to reasonable restrictions.

For any vacancy in the Board of Directors of the Company which arises out of a reason other than a director’s resignation, the Board of the Directors may appoint another person to temporarily fill the vacancy and exercise the powers of a director until a new director is elected at the Shareholders’ General Meeting. The period of office of the new director is subject to the requirements of the first paragraph of this Article.

• Article 10.10

Any director who resigns without authorization before the expiration of his/her period of office shall be liable to compensate the Company for any loss that arises from his/her resignation.

• Article 10.11 The Company may take out liability insurance for a director after obtaining approval at the Shareholders’ General Meeting, except those liabilities arising from a director’s violation of the laws and regulations and the provisions of the Articles of Association of the Company.

• Article 10.12 The provisions relating to the director’s obligations as specified in this Section are applicable to supervisors, managers and other senior managerial officers of the Company.

• Article 10.13 Managers, financial controller, marketing department head and secretary to the Board of Directors of the Company shall not assume any offices other than directors in any companies owned by the controlling shareholder. Any member of the controlling shareholder’s senior management who also acts as the Company’s director shall ensure that he/she can devote enough time and effort to his/her duties in the Company.”

• 44 Original Article 10.1 be renumbered as New Article 10.14 and be amended to: “The Company shall establish the Board of the Directors which shall be accountable to the Shareholders’ General Meeting and report its work thereto. The Board of Directors shall comprise not less than eight and not more than ten directors, (the specific number of directors shall be approved by a resolution adopted at a Shareholders’ General Meeting) of which there shall be at least five executive directors who shall be responsible for dealing with the daily affairs designated by the Company, and at least two independent non-executive directors who shall not be responsible for the daily affairs. The Board of Directors shall have one Chairman.”

A new paragraph be added to New Article 10.14 as the second paragraph:” The Chairman of the Board of Directors shall be a director of the Company and he shall be elected and removed by a simple majority of all directors. The period of office of the Chairman shall be three years and he shall be eligible for re-election and re-appointment.”

• 45 Original Articles 10.2 to 10.3 be deleted.

• 46 Original Article 10.4 be renumbered as New Article 10.15 and new Provisions (16), (17) and (18) be added as follows:

• “(16) to manage the disclosure of the Company’s information;

• (17) to propose to the Shareholders’ General Meeting to appoint or change the Company’s accountant who carries out audit on the Company’s accounts;

• (18) to receive the work reports by the Company’s managers and to examine their work;”

Original Provision (16) be renumbered as Provision (19) accordingly.

• 47 Original Article 10.5 be renumbered as New Article 10.16 accordingly.

• 48 Original Article 10.6 be renumbered as New Article 10.17 and original Provisions (3) and (4) be amended to:

• “(3) to sign the Company’s share certificates, debentures and other marketable securities;

• (4) to sign important documents of the Board of Directors, material contracts of the Company and other documents requiring signature of the legal representative of the Company, or produce power of attorney entrusting his/her representative to sign the aforesaid documents;”

New Provisions (5) and (6) be added:

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• “(5) to exercise the power of the legal representative;

• (6) in the event of force majeure such as natural disasters, to exercise special power to deal with the Company’s affairs in order to comply with laws and regulations and for the benefit of the Company, and to report to the Board of Directors and Shareholders’ General Meeting thereafter;”

Original Provision (5) be renumbered as Provision (7) accordingly and the second paragraph be amended to: “If the Chairman of the Board of Directors shall be unable to perform his duties, he may designate other directors of the Company to perform the same on his behalf.”

• 49 New Article 10.18 be added to Chapter 10: “The Board of Directors shall operate independently. There shall not be any superior/subordinate relationship between the controlling shareholder and/or its functional departments and the Board of Directors. The controlling shareholder and its subordinate entities shall not give any plans or instructions relevant to operations of the Company to the Board of Directors and their subordinate entities or in any other way influence the independence of the operations and management of the Company.”

• 50 New Articles 10.14 to 10.18 after the above amendments shall be part of Section 2 of Chapter 10: “Formation and Duties of the Board of Directors”.

• 51 Original Article 10.7 be renumbered as New Article 10.19 and be amended to: “The Board of Directors should hold meetings at least twice every year which shall be convened by the Chairman of the Board of Directors and a written notice of meeting shall be given to all directors 10 days prior to the meeting.”

• 52 New Articles 10.20 to 10.21 be added to Chapter 10 as follows:

• “Article 10.20 In any of the following circumstances, the Chairman of the Board of Directors shall convene an extraordinary meeting of the Board of Directors within three working days:

  • (1) the Chairman of the Board of Directors deems it necessary;

  • (2) it is proposed by more than one-third of the directors of the Company;

  • (3) it is proposed by the Supervisory Committee; or

  • (4) it is proposed by General Manager.

A written notice for an extraordinary meeting of the Board of Directors shall be given to all directors at least ten days prior to the meeting.

In the event of the above paragraphs (2), (3) or (4) of this Article, and if the Chairman of the Board of Directors is unable to fulfil his/her obligations, he/she shall designate another director of the Company to convene, on his/ her behalf, the extraordinary meeting of the Board of Directors. Should the Chairman of the Board of Directors, without any reason, fail to fulfil his/ her obligations and has not designated a person to perform in his/her stead, the extraordinary meeting can be convened by a director elected by more than one half of all directors.

• Article 10.21 A notice convening a meeting of the Board of Directors shall include:

  • (1) date and place of the meeting;

  • (2) duration of the meeting;

  • (3) agenda of the meeting; and

  • (4) the date of issuance of the notice of meeting.”

• 53 Original Article 10.8 be renumbered as New Article 10.22 accordingly.

• 54 New Article 10.23 be added to Chapter 10 as follows:

• “Article 10.23 A resolution for an extraordinary meeting of the Board of Directors may be finalized by way of voting through facsimile and confirmed by the directors attending the meeting, provided that the pre-requisite that the directors have sufficiently expressed their opinions at the extraordinary meeting of the Board of Directors is preserved.

The Board of Directors may resolve matters by way of written resolution in lieu of the convening of a meeting of the Board of Directors, provided that

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the draft of such proposed resolution shall be served on each director by hand, mail or facsimile. If the relevant draft of the proposed resolution has been given to all directors and the number of directors who has signed on the same document or in counterparts has reached the necessary number of directors required to approve the resolution, and the signed draft(s) have been delivered to the secretary to the Board of Directors by the aforesaid means, such resolution shall be deemed as a resolution of the Board of Directors, and the Board of Directors shall not need to convene a further meeting.”

• 55 Original Articles 10.9 to 10.12 be renumbered as New Articles 10.24 to 10.27 accordingly. Original Article 10.13 be deleted. Original Articles 10.14 to 10.15 be renumbered as New Articles 10.28 to 10.29 accordingly.

• 56 Original Article 10.16 be renumbered as New Article 10.30 and be amended to: “The Board of Directors shall cause the decisions of the matters discussed at the meeting to be recorded on the minutes thereof. The directors present at the meeting and the person recording the minutes shall sign on such minutes. Directors attending the meeting have the right to require the record of the minutes to include the explanation of their speech made at the meeting of the Board of Directors. The minutes of the meeting of the Board of Directors shall be kept by the secretary to the Board of Directors for a period of ten years.”

• 57 New Articles 10.31 to 10.32 be added to Chapter 10 as follows:

• “Article 10.31 The record of minutes of the meeting of the Board of Directors shall include the following:

  • (1) the place, date and the name of the convenor of the meeting;

  • (2) the names of directors attending the meeting and the names of the representatives nominated by such directors to attend the meeting on their behalf;

  • (3) the agenda of the meeting;

  • (4) the main points of directors’ speeches;

  • (5) the manner of voting and the result of voting on each resolution (the voting result shall record the numbers of votes for and against the proposed resolution and number abstaining from voting).

• Article 10.32 Directors are responsible for the resolution at meetings of the Board of Directors. If a resolution of the Board of Directors contravenes the laws, administrative regulations or these Articles of Association resulting in the Company sustaining substantial losses, the directors involved in passing such resolutions shall be liable to indemnify the Company provided that if a director can prove that objection has been made during the resolution thereof and the same has been entered into the minutes of meeting, such director may be discharged from responsibility.”

• 58 New Articles 10.19 to 10.32 after the above amendments shall be part of Section 3 of Chapter 10: “Rules and Regulations Governing Meetings of the Board of Directors”.

• 59 New Articles 10.33 to 10.35 be added to Chapter 10 as part of “Section 4 Independent Directors” and New Articles 10.36 to 10.42 be added as part of “Section 5 Ad Hoc Committees of the Board of Directors” as follows:

• “Section 4 Independent Directors

• Article 10.33 The Company shall appoint independent directors according to its need.

The following persons shall not be appointed to act as independent directors:

• (1) any employee of the Company or its subsidiaries and that employee’s immediate relatives and principal associate. (“immediate relatives” include spouse, parents and children and “principal associates” include brothers, sisters, parents-in-law, sons/daughters-in-law, the spouses of brothers and sisters and the brothers and sisters of the spouses)

• (2) any natural person shareholder, directly or indirectly, holds 1% or more of the issued shares in the Company or is one of the ten largest shareholders of the Company and their respective immediate relatives;

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• (3) any employee or its immediate relatives who, directly or indirectly, holds 5% or more of the issued shares in the Company or is one of the five largest shareholders of the Company;

• (4) any person who falls within any of the above three categories over the course of the most recent year;

• (5) any person who provides financial, legal or consultancy services to the Company or its subsidiaries.

Article 10.34 Each term of office of an independent director shall be the same as those of other directors and may be renewed if such independent director is reelected when his/her term expires, provided that the period of the term of office under re-appointment does not exceed 6 years.

The Board of Directors shall propose to the Shareholders’ General Meeting to dismiss any independent director who fails to attend the board meetings in person for three consecutive occasions. An independent director shall not be dismissed without reason before expiry of his term of office. The Company shall disclose such dismissal as a special matter before the expiry of the independent director’s term of office. If the independent director believes that his/her dismissal by the Company is based on improper reasons, he/she may make a statement to the public.

Article 10.35 The independent directors have the following special powers and duties:

• (1) any connected transaction the aggregate consideration of which exceeds RMB 3 million or 5% of the latest audited net asset value of the Company shall first be approved by the independent directors before being submitted to the Board of Directors for discussion;

• (2) before independent directors make a decision, they may appoint intermediary organisation to issue an independent financial report as a basis for their decision;

• (3) propose to the Board of Directors to appoint or remove the accountants;

• (4) propose to the Board of Directors to convene Shareholders’ Extraordinary General Meetings;

• (5) independently appoint an external auditing firm or consultancy firm;

• (6) publicly approach the Shareholders to gather their votes before the Shareholders’ General Meeting is convened.

• Section 5 Ad Hoc Committees of the Board of Directors

Article 10.36 In accordance with resolutions passed at the Shareholders’ General Meeting, the Board of Directors may set up ad hoc committees such as strategy committee, audit committee, nomination committee, remuneration and assessment committee, etc. All members of ad hoc committees shall comprise of directors. The majority members of audit committee, nomination committee, and remuneration and assessment committee shall comprise of independent directors and an independent director shall convene such meetings. At least one independent director of the audit committee shall be a professional accountant.

Article 10.37 The strategy committee is mainly responsible for studying on the long-term development strategy and major investment decisions of the Company and to put forward the proposals in relation thereto.

Article 10.38 The main duties of the audit committee shall be as follows:

• (1) propose to appoint or change the external auditor;

• (2) supervise the Company’s internal audit system and its implementation;

• (3) responsible for the communication between internal auditor and external auditor;

• (4) examine and verify the financial information of the Company and its disclosures;

• (5) examine the internal control system of the Company.

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Article 10.39 The main duties of the nomination committee shall be as follows:

  - (1) study the standard and procedure for the selection of the directors and managers and put forward suggestions;

  - (2) search for qualified candidates for the role of directors and managers;

  - (3) examine the candidates for directorship and managerial position and put forward suggestions.

• Article 10.40 The main duties of the remuneration and assessment committee shall be as follows:

  • (1) study the standard for assessment of directors and managers, to conduct the assessment and put forward suggestions;

  • (2) study and examine the remuneration policy and plan for the directors and managers.

• Article 10.41 The ad hoc committees may appoint intermediary organisation to provide professional advice. The relevant expenses shall be borne by the Company.

• Article 10.42 The ad hoc committees are accountable to the Board of Directors. Each of their proposals shall be submitted to the Board of Directors for examination and approval.”

• 60 New Provision (5) be added to “the principal duties of the secretary responsible for PRC affairs” as referred to in Original Article 11.2 as follows:

• “(5) responsible for the disclosure of information on the Company’s activities to the PRC stock exchange; to ensure the timeliness, accuracy, lawfulness, correctness and completeness of the disclosure of the Company’s information.”

• 61 The first paragraph of Original Article 11.3 be amended to: “The Secretary to the Board of Directors of the Company shall be a natural person who shall have the necessary professional expertise and experience. The Secretary to the Board of Directors shall be nominated by the Chairman of the Board of Directors and be appointed or dismissed by the Board of Directors.”

• 62 The first paragraph of Original Article 11.4 be amended to: “Directors or other senior managerial officers (excluding the supervisors) of the Company may at the same time act as the Secretary to the Board of Directors of the Company. The accountant of the accountant’s firm or the lawyer of the law firm engaged by the Company shall not at the same time act as the Secretary to the Board of Directors.”

• 63 New Article 11.5 be added to Chapter 11: “The qualification and responsibility of secretary to the Board of Directors shall also comply with the provisions relating to requirements of secretary of the Board of Directors under the listing rules of the stock exchanges on which the shares of the Company are listed.”

• 64 A new paragraph be added to Original Article 12.1 as the second paragraph: “Directors may also be appointed as general manager, deputy general manager or other senior management staff provided however that the number of directors so appointed shall not exceed half of the total number of the Company’s directors.”

• 65 New Article 12.2 be added to Chapter 12: “The Company shall not appoint a person as general manager of the Company in any of the circumstances specified in section 57 and 58 of the Companies Law and or if the person is designated by the China Securities Regulatory Commission to be a person who may not enter into the market and such designation has not been discharged.”

• 66 New Article 12.3 be added to Chapter 12: “The term of office of the general manager and the deputy general manager shall be three years respectively and renewable by re-election.”

• 67 Original Article 12.2 be renumbered as New Article 12.4 and Provisions (2) and (6) be amended and New Provisions (8) and (9) be added as follows:

• “(2) to organize the implementation of the resolution of the Board of Directors and the Company’s annual business and investment plans;

• (6) to propose to the Board of Directors the appointment or dismissal of deputy general manager or financial controller;

• (8) to draw up the plan for the employees’ salaries, benefits, rewards and penalties and decisions on appointment and dismissal of employees;

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(9) to propose the holding of extraordinary meetings of the Board of Directors;

Original Provision (8) be renumbered as Provision (10) accordingly.

• 68 New Articles 12.5 to 12.8 be added to Chapter 12 as follows:

• “Article 12.5 The general manager shall, in accordance with the requirements of the Board of Directors or the Supervisory Committee, report to the Board of Directors or the Supervisory Committee regarding the execution of major contracts, the implementation, application of funds and profit and loss circumstances. The general manger shall ensure the truthfulness of such reports.

• Article 12.6 Before drawing up the plans for matters such as the Company’s employees’ salaries, benefits, production safety and labour, labour insurance, dismissal (or lay-off) and matters of immediate concern to the employees, the general manager should first listen to the views of the trade union and employees’ representative union.

• Article 12.7 The general manager shall draw up the detailed rules and regulations regarding the general manager’s work which shall be implemented after the rules and regulations have been reported to and approved by the Board of Directors.

• Article 12.8 The general manager’s detailed rules and regulations shall include the following:

  • (1) the requirements for the holding of general manager’s meeting, the procedures and the participants of the meeting;

  • (2) the specific responsibilities and division of work of the general manager, deputy general manager and other senior management.

  • (3) application of the Company’s funds and assets, limitation of the authority for execution of material contracts and the system for reporting to the Board of Directors and Supervisory Committee.

  • (4) such other matters considered necessary by the Board of Directors.”

• 69 Original Articles 12.3 to 12.4 be renumbered as New Articles 12.9 to 12.10 accordingly.

• 70 The reference to “Article 7.4 of these Articles of Association” in Original Article 14.8 be amended to “Article 7.6 of these Articles of Association”.

• 71 The reference to “Article 7.5 of these Articles of Association” in Provision (2) of the first paragraph of Original Article 14.18 be amended to “Article 7.8 of these Articles of Association”.

• 72 The meaning of “Registered Address of the Company” as referred to in Original Article 25.3 be amended to: “means the legal address of the Company located at No. 8 Ronggang Road, Ronggui, Shunde, Guangdong Province, PRC.”

Guangdong Kelon Electrical Holdings Company Limited 11 November 2002

Attachment 2:

Proposal to use the Company’s statutory common reserve and capital reserve to make up for the Company’s accumulated losses

In order to increase the flexibility in carrying out the Company’s future profit allocation, the Company is required to make up for losses in previous years pursuant to the relevant state regulations.

As shown in the Company’s audited report for 2001, the unallocated profit of the Company for the year ended 31 December 2001 was RMB–1,380,906,800, while its statutory common reserve was RMB229,161,802 and the Company’s capital reserve was RMB2,451,222,837, of which RMB2,433,526,092 was share premium and RMB17,696,745 was assets received as donation. The Company intends to use RMB229,161,802 out of the statutory common reserve and RMB1,151,744,998 out of the capital reserve (share premium) to make up for the accumulated losses. The unallocated profit of the Company after such transfer will be zero.

Guangdong Kelon Electrical Holdings Company Limited 11 November 2002

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Brief Particulars of the Proposed New Independent Non-executive Director:

Mr. Li Kung Man, aged 45, holds a higher diploma issued by Hong Kong Polytechnic. He is a fellow member of The Chartered Association of Certified Accountants, United Kingdom and a member of the Hong Kong Society of Accountants. He was the executive director of Mindun Group and Sunfore Group previously and he has extensive work experience in the fields of trading, manufacturing and properties development. He was also engaged in accounting and auditing work with China Light & Power Co. Ltd. and PricewaterhouseCoopers.

Mr. Li is currently a director of CS Corporation, Raycom Holdings Limited and China Trade International Holdings Ltd, etc. Mr. Li is a well-experienced accountant. He has served in renowned international accounting firms and enterprises for over twenty years and he has a thorough understanding of financial management of companies (including China’s business environment).

Declaration by the Nominator of the Independent Non-executive Director of Guangdong Kelon Electrical Holdings Company Limited

The Board of Directors of Guangdong Kelon Electrical Holdings Company Limited (the “Company”), the nominator, hereby makes an express declaration in respect of the nomination of Li Kung Man for appointment as an independent non-executive director of the fourth Board of Directors of the Company. There does not exist any relationship between the nominee and the Company which may affect the independence of the nominee. We declare as follows:

This nomination is made after obtaining sufficient understanding of the profession, academic qualification, job title, detailed work history and all part-time job status of the nominee. The nominee has agreed in writing to be proposed as a candidate for appointment as an independent non-executive director of the fourth Board of Directors of the Company (attached: the declaration by the candidate). The nominator considers that the nominee:

• I. possesses the qualifications to be the director of a listed company in accordance with the laws, administrative rules and regulations and other relevant provisions;

• II. satisfies the employment requirements as stipulated in the articles of association of the Company;

• III. fulfils the requirement of independence imposed by the “Guidance on the Establishment of Independent Directorship System of Listed Companies” issued by the China Securities Regulatory Commission:

• the nominee, his immediate relatives and his principal associates do not hold any office in the Company or its subsidiaries;

• neither the nominee nor any of his immediate relatives is a shareholder who directly or indirectly holds 1% or more of the issued shares of the Company, nor is he/she one of the ten largest shareholders of the Company;

• neither the nominee nor any of his immediate relatives holds any office in any entity which directly or indirectly holds 5% or more of the issued shares of the Company, nor does he/she hold any office in the five largest shareholders of the Company;

• the nominee satisfies the three aforesaid conditions throughout the course of the most recent year;

• the nominee is not a person who provides financial, legal, management consulting and technical consulting services, etc. to the Company or its subsidiaries.

• IV. the nominee does not concurrently hold independent directorships in more than five listed companies, including the Company.

We, the nominator, confirm that the above declaration is true, complete and accurate in all respects and does not contain any false or misleading statement. We, the nominator, fully understand the consequences of making false declarations.

The Board of Directors of Guangdong Kelon Electrical Holdings Company Limited The nominator

Shunde, 11 November 2002

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Declaration by the Proposed New Independent Non-executive Director of Guangdong Kelon Electrical Holdings Company Limited

The declarant, Li Kung Man, as a candidate for appointment as an independent non-executive director of the Board of Directors of Guangdong Kelon Electrical Holdings Company Limited (the “Company”), hereby declare that I warrant that there will not exist any relationship between myself and the Company during the period in which I serve as an independent non-executive director of the Company which may affect my independence. I delcare as follows:

• I. I, my immediate relatives and my principal associates do not hold any office in the Company or its subsidiaries;

• II. neither I nor any of my immediate relatives directly or indirectly hold 1% or more of the issued shares of the Company,

• III. neither I nor any of my immediate relatives is one of the ten largest shareholders of the Company;

• IV. neither I nor any of my immediate relatives holds any office in any entity which directly or indirectly holds 5% or more of the issued shares of the Company;

• V. neither I nor any of my immediate relatives holds any office in the five largest shareholders of the Company;

• VI. I satisfy the five aforesaid conditions throughout the course of the most recent year;

• VII. I have not provided financial, legal, management consulting and technical consulting services, etc. to the Company or its subsidiaries;

• VIII. I have not received other additional and undisclosed benefit from the Company and its substantial shareholders or organizations and personnel who have an interest in the Company;

• IX. I satisfy the employment requirements as stipulated in the articles of association of the Company.

Moreover, I do not concurrently hold independent directorships in more than five listed companies, including the Company.

I fully understand the responsibility of an independent non-executive director and confirm that the above declaration is true, complete and accurate in all respects and does not contain any false or misleading statement. I fully understand the consequences of making false declarations. The China Securities Regulatory Commission (“CSRC”) may confirm my employment qualification and independence in accordance with this declaration. During the period of my service as an independent non-executive director, I will comply with the requirements of the rules, regulations and notices issued by CSRC, ensuring that I will have sufficient time and energy to perform my duty and make independent judgment without being affected by the substantial shareholders, actual controller or other entities or individuals who have an interest in the Company.

Li Kung Man The Declarant

Shunde, 11 November 2002

“Please also refer to the published version of this announcement in the South China Morning Post”

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