Medlive Technology Co., Ltd. — Capital/Financing Update 2006

Dec 20, 2006

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)

ANNOUNCEMENT ON SHARE REFORM

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

The Company is authorised and entrusted by Hisense Air-Conditioning, the holder of non-freely transferable shares of the Company, to announce details of the arrangement of the share reform proposal proposed by Hisense Air-Conditioning, to Holders of Listed A Shares in exchange for the consent of the Holders of Listed A Shares for the conversion of all the non-freely Transferable shares held by the Holders of Non-freely Transferable Shares into listed shares. Hisense AirConditioning proposed, on the basis of the total number of existing listed A shares of the Company, that all Holders of Non-freely Transferable Shares allocate one listed share to each Holders of Listed A Shares for every 10 listed shares held by such Holders of Listed A Shares.

After the implementation of the share reform scheme, the percentage of shareholding and the number of shares held by the Holders of Listed A Shares and Holders of Non-freely Transferable Shares will be changed, however, the total issued share capital of the Company will remain unchanged.

Apart from the implementation of the consideration arrangement, Hisense AirConditioning, the controlling shareholder of the Company will, with the support from its controlling shareholder, namely Hisense Group, conduct an assets restructuring in the Company through subscription of shares of the Company and injection of the relevant assets (or shareholding) of the White Goods business of Hisense Group into the Company, with an aim to ultimately improve the asset quality of the Company, to enhance the competitiveness of its core business as well as to improve the profitability of the Company.

The consideration arrangement and the assets restructuring will be implemented in different stages.

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Hisense Air-Conditioning has undertaken that, if the above-mentioned assets restructuring fails to be completed as scheduled or the operating results of Kelon Electrical fail to meet the target after the assets restructuring, it will deliver additional shares to (i) all the Holders of Listed A Shares not subject to trading moratorium and whose names appear on the shares register on the date for registration of the additional delivering shares; and (ii) those directors, supervisors and senior management of the Company who hold listed A Shares.

The share reform scheme of the Company was proposed by Hisense AirConditioning, a holder of non-freely Transferable shares of the Company. As at the date of this announcement, both SEC and Dong Heng Development have not explicitly given their consent to participate in the share reform scheme. In order to enable the share reform to be implemented smoothly, Hisense Air-Conditioning agreed to pay in advance, on behalf of SEC and Dong Heng Development, the amount of shares payable by SEC and Dong Heng Development under the consideration arrangement. Thereafter, if the shares held by SEC and Dong Heng Development are listed, they should repay Hisense Air-Conditioning the shares prepaid by Hisense Air-Conditioning on behalf of them or seek approval from Hisense Air-Conditioning instead. The Holders of Non-freely Transferable Shares have no intention to propose similar arrangement and proposals to holders of H shares of the Company. The above share reform scheme may be revised subject to the discussion results between the Holders of Non-freely Transferable Shares and Holders of Listed A Shares. The Company will make further announcements when necessary.

Pursuant to the relevant rules and regulations of the People’s Republic of China (“PRC”), which include “Certain Opinions on Further Reform, Opening Up and Stable Development of the Capital Market (Guo-Fa [2004] No.3)” (關於推進資本市場改革開放和穩 定發展的若干意見（國發 [2004] 3號）) issued by the State Council of the PRC, “Guiding Opinions on Share Reform of Listed Companies” (關於上市公司股權分 置改革的指導意見 ) jointly issued by CSRC, State-owned Assets Supervision and Administration Commission of the State Council, Ministry of Finance, People’s Bank of China and the Ministry of Commerce, “Measures for the Administration of the Share Reform of Listed Companies (Zheng-Jian-Fa [2005] No.86)” (上市公司股權分置改 革管理辦法（證監發 [2005]86號）) issued by CSRC and “Guidelines on the Practice and Operation of the Share Reform Proposals of Listed Companies” (《上市公司股權 分置改革業務操作指引》) jointly issued by the Shanghai Stock Exchange, the Shenzhen Stock Exchange and China Securities Depository and Clearing Corporation Limited, the Board, as entrusted by Hisense Air-Conditioning, the Holder of Non-freely Transferable Shares, is pleased to announce that notice of Relevant Shareholders’ Meeting to be held on 29 January, 2007 for the purpose of seeking approval from Holders of Listed A Shares and holders of domestic shares regarding the share reform scheme proposed by Hisense Air-Conditioning, the Holder of Non-freely Transferable Shares, was distributed to the Holders of Listed A Shares and Holders of Non-freely Transferable Shares of the Company on 19 December, 2006.

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The following is a summary of the share reform scheme, details of which and all relevant documents as required to be disclosed by relevant rules and regulations are available at www.cninfo.com.cn.

Share Reform Proposal

The share reform was proposed by Hisense Air-Conditioning (a holder of non-freely Transferable shares of the Company, which holds 262,212,194 shares of the Company representing 26.43% of the total share capital and 77.60% of the non-freely Transferable shares). SEC and Dong Heng Development (the Holders of Non-freely Transferable Shares of the Company) holds 68,666,667 shares and 7,036,894 shares of the company respectively. As at the date of this announcement, both SEC and Dong Heng Development have not explicitly given their consent to participate in the share reform scheme. In order to enable the share reform to be implemented smoothly, Hisense Air-Conditioning agreed to pay in advance, on behalf of SEC and Dong Heng Development, the amounts payable by SEC and Dong Heng Development under the consideration arrangement. Thereafter, if the shares held by SEC and Dong Heng Development are listed, they should repay Hisense Air-Conditioning the shares prepaid by Hisense Air-Conditioning on behalf of them or seek approval from Hisense Air-Conditioning instead.

On the basis of the existing listed A shares of the Company, Hisense Air-Conditioning agreed to offer one share for every 10 listed shares to the Holders of Listed A Share to implement the consideration arrangement. The total number of the shares under this consideration arrangement is 19,450,100. All non-freely transferable shares held by the Holders of Non-freely Transferable Shares will be entitled to listing and trading on the relevant stock exchange on the first trading day immediately following completion of the share reform scheme.

Apart from the implementation of the consideration arrangement, Hisense AirConditioning, the controlling shareholder of the Company will, with the support from its controlling shareholder, namely Hisense Group, conduct an assets restructuring in the Company through subscription of shares of the Company and injection of the relevant assets (or shareholding) of the White Goods business of Hisense Group into the Company, with an aim to ultimately improve the asset quality of the Company, to enhance the competitiveness of the core business as well as to improve the profitability of the Company.

The consideration arrangement and the assets restructuring will be implemented in different stages. The Company will disclose details regarding the assets restructuring in accordance with the Rules Governing the Listing of Securities on the Stock Exchange of Hong Kong Limited and the Rules Governing the Listing of Stocks on Shenzhen Stock Exchange.

Hisense Air-Conditioning has undertaken that, if the above assets restructuring fails to be completed as scheduled or the operating results of Kelon Electrical fail to meet the target after the assets restructuring, it will deliver additional shares to (i) all the Holders of Listed A Shares not subject to trading moratorium and whose names appear on the shares register on the date for registration of the additional delivering shares; and (ii) those directors, supervisors and senior management of the Company who hold listed A Shares.

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All costs incurred in relation to the share reform proposal shall be borne by the Holders of Non-freely Transferable Shares.

The Holders of Non-freely Transferable Shares have no intention to propose similar arrangement and proposals to holders of H shares of the Company.

UNDERTAKINGS BY HOLDERS OF NON-FREELY TRANSFERABLE SHARES

1. Statutory undertakings by Holders of Non-freely Transferable Shares

Hisense Air-Conditioning, the holder of non-freely transferable shares of the Company undertakes that:

• (1) The non-freely transferable shares originally held by them will not be listed for trading or otherwise transferred within twelve months from the date of the implementation of the share reform scheme.

• (2) Upon expiry of the above-mentioned period of undertaking, any sale of such shares shall not exceed 5% of the issued share capital of Kelon Electrical within twelve months and shall not exceed 10% of total issued share capital of Kelon Electrical within twenty-four months.

• (3) In the event that the number of A shares sold through the Stock Exchange reaches 1% of the total issued shares of the Company, an announcement shall be made within two business days from the date on which such sale occurs but shares can still be sold during the announcement period.

2. Special undertakings by the controlling shareholder – Restructuring and additional donated share undertaking

Hisense Air-Conditioning, the controlling shareholder of the Company undertakes that:

Upon the completion of the consideration arrangement under the share reform of Kelon Electrical, it will commence the asset restructuring of Kelon Electrical by injecting the related assets of the White Goods business of Hisense Group into Kelon Electrical in exchange for shares of Kelon Electrical, which will be strengthened as the core enterprise of Hisense Group’s White Goods business and will strive to be one of the most competitive enterprises in the industry, both domestically and internationally.

The White Goods business of Hisense Group intended to be injected under this asset restructuring includes:

• (1) The manufacturing business of air-conditioners and its assets, namely the current business and assets of Qingdao Hisense Air-Conditioning Company Limited (including 海信空調平度工廠 (Hisense Air-Conditioning Ping Du Plant) and 51% shareholdings in 海信（浙江）空調有限公司 (Hisense (Zhejiang) Air-conditioning Company Limited held by Hisense AirConditioning);

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• (2) The manufacturing business of refrigerators and its assets, namely the 55% shareholdings in 海信（北京）電器有限公司 (Hisense (Beijing) Electrical Appliances Company Limited) (including the 60% shareholdings in 海信

• （南京）電器有限公司 (Hisense (Nanjing) Electrical Appliances Company Limited) held by 海信（北京）電器有限公司 (Hisense (Beijing) Electrical Appliances Company Limited)) held by Qingdao Hisense Electrical Appliances Company Limited, the subsidiary of Hisense Group;

• (3) The marketing business and sales channels of Hisense Group’s domestic appliance, namely the marketing business and sales channels for refrigerators and air-conditioners of Qingdao Hisense Marketing Company Limited, the subsidiary of Hisense Group.

If the said assets restructuring fails to be completed as scheduled or the operating results of Kelon Electrical after the assets restructuring still fail to meet the target, it will give additional shares to all the Holders of Listed A Shares and its directors, supervisors and senior management who held the listed A shares of the Company without any sales restriction and whose names appear in the shares register on the day for registration of the additionally issued shares.

• The trigger conditions for additional donated shares:

• A: Within 12 months commencing from the date of the A share of Kelon Electrical resuming trading on Shenzhen Stock Exchange after the completion of consideration arrangement made to Holders of Listed A Shares by Holders of Non-freely Transferable Shares of Kelon Electrical, the assets restructuring process regarding the injection of the related assets (or shareholdings) of the White Goods business of Hisense Group into Kelon Electrical has not completed.

The criteria to recognize the completion of assets restructuring process is: the completion of all transfer registration (including asset, shareholding, credit and debts) procedures for injection of the related assets (or shareholdings) of the White Goods business of Hisense Group into Kelon Electrical.

• B: The earnings per share of Kelon Electrical is lower than 0.08 Yuan in the next accounting year (the year of 200E) after the completion of the said assets restructuring of Kelon Electrical made by Qingdao Hisense AirConditioning Company Limited.

The net profit of Kelon Electrical in the accounting year of 200E shall be determined on the auditing result pursuant to the accounting standards and Rules of Accounting for Enterprise applicable for domestic enterprises at that time.

• C: In the accounting year of 200E, Kelon Electrical is issued with an annual auditing report without “standard unqualified opinion”.

• D: Kelon Electrical did not issue the year 200E annual report within the period prescribed by Shenzhen Stock Exchange.

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Whenever one of the afore-mentioned A, B, C and D conditions occurs (which the earliest shall be applicable), Qingdao Hisense Air-Conditioning Company Limited shall donate additional share once, and this undertaking shall be terminated upon the completion of this additional donated share.

• The number of additional donated share: 9,725,050 A shares of Kelon Electrical, equivalent to 0.5 additional donated share per 10 shares on the basis of the total listed A shares of 194,501,000 shares of the Company prior to the implementation of the share reform scheme. In the event that the Company ever donate shares, transfer to share capital or reduce its shares during this period, the number of donated share shall, on the basis of 9,725,050 shares, be increased or decreased in the same proportion.

• Timing for additional donated share: If condition A or D for additional donated share is triggered, the Board will implement the additional donated share undertaking of the undertaker within 20 working days commencing from the date when the condition for additional donated share is triggered; if condition B or C for additional donated share is triggered, the Board will implement the additional donated share undertaking of the undertaker within 20 working days after the issue of the annual report for the accounting year of 200E.

• The receivers of the additional donated shares: Upon the conditions for additional donated share being triggered, all the Holders of Listed A Shares and its directors, supervisors and senior management who held the listed A shares of the Company without sales condition and whose names appear in the shares register on the day for registration of the additionally issued shares.

• The guarantee implementation for the additional donated share undertaking: Qingdao Hisense Air-Conditioning Company Limited undertakes that: upon the implementation of the share reform scheme of the Company, it will apply for the temporary custody of the portion of additional donated share, namely 9,725,050 shares in Shenzhen branch of the China Securities Depository & Clearing Corporation till the issue of the Company’s annual report for the year of 200E and the expiration of the undertaking.

3. Special undertakings by the controlling shareholder – advance undertakings

Undertakings by Hisense Air-Conditioning, the Company’s controlling shareholder:

As SEC and Dong Heng Development, both being the holders of the Company’s non-freely transferable shares, did not explicitly express that they would involve in the share reform, Hisense Air-Conditioning will advance the number of shares under the consideration arrangement offered by SEC and Dong Heng Development for their participation in the share reform, i.e. 3,952,386 shares and 405,037 shares respectively. Subsequently, they should repay the shares advanced by Hisense AirConditioning or obtain its consent if the shares held by SEC and Dong Heng Development become listed.

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4. Declaration of the Controlling Shareholder

The controlling shareholder Hisense Air-Conditioning declares that it will faithfully perform its undertaking and assume relevant legal responsibilities. Hisense AirConditioning will not transfer any shares of the Company held by it unless the transferee agrees to and is capable of assuming such responsibilities pursuant to the undertakings. Holders of Non-freely Transferable Shares guarantee to indemnify other Holders of Listed Shares against losses incurred as a result of its nonperformance or incomplete performance of its undertakings.

Potential Risks that May Arise During the Share Reform and Proposed Plans to Address Such Risks

• (1) Risks of shares of consideration arrangement offered being subject to pledge or being frozen

Up to the date of this announcement, the shares of Holders of Non-freely Transferable Shares to which the consideration arrangement relates are not subject to any disputes in ownership, pledge nor are frozen. But such shares maybe subject to any pledge or frozen as there is an interval to the date of implementation of the share reform scheme.

In the event that the consideration arrangement fails to be implemented as a result of the shares of the Company held by Holders of Non-freely Transferable Shares being subject to any pledge or frozen, and such pledge or frozen shares are not resolved prior to the implementation of the share reform scheme, even after Holders of Non-freely Transferable Shares have been urged by the Company to do so, the share reform scheme will lapse.

• (2) Risks of failure to obtain approval at the Relevant Shareholders’ Meeting of the Company

The implementation of the share reform scheme of the Company is subject to obtaining more than two-thirds of the shareholders’ votes at the Relevant Shareholders’ Meeting and obtaining more than two-thirds of the votes of the holders of A shares voting at the Relevant Shareholders’ Meeting. There is a possibility that such approval is not obtained at the Relevant Shareholders’ Meeting.

In the event that the Share reform scheme is not approved at the Relevant Shareholders’ Meeting, Holders of Non-freely Transferable Shares plan, where appropriate, to furnish a new share reform proposal in accordance with relevant circumstances in a month.

• (3) Risks of volatility in share prices

Due to uncertainty of stock prices, the share reform scheme may result in volatility in share prices and may affect the interests of the holders of the Company’s listed shares.

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For the purpose of both immediate and long term interests of all the shareholders, the Company will urge Hisense Air-Conditioning to perform its undertakings and discharge timely disclosure obligations, which will be beneficial to the development and market stability of the Company.

Opinions of the Sponsor and the PRC Legal Advisers

Shenyin & Wanguo Securities Co. Ltd (“Shenyin & Wanguo”), the sponsor of the Company in connection with the share reform, considers that: under the premises that the relevant information and explanation provided by the company and the Holders of Non-freely Transferable Shares of Kelon Electrical are true, accurate and complete and that the relevant undertakings could be materialized, the share reform scheme of Kelon Electrical is in compliance with the provisions of “Certain Opinions on the Further Reform, Liquidity and Stable Development of the Capital Market” (Guo Fa [2004] No.3 ) issued by the State Council of the PRC, the “Guidelines on Share Reform of Listed Companies” jointly issued by the CSRC, State-owned Assets Supervision and Administration Commission of the State Council, the Ministry of Finance, the People’s Bank of China and the Ministry of Commerce, the “Provisions on Management of the Share Reform of Listed Companies” issued by the CSRC and other relevant requirements of relevant laws and regulations; and the share reform scheme reflects the principles of openness, fairness, equity, truthfulness, honesty and willingness. The compensation of arrangement offered by the Holders of Non-freely Transferable Shares in exchange for the conversion of the non-freely transferable shares of Kelon Electrical into listed shares comprehensively considers the protection of the interests of the holders of A shares, the implementation of which is in line with relevant regulations. Shenyin & Wanguo is willing to recommend Kelon Electrical to carry out the share reform.

Tang Law Group, the PRC legal advisor to the share reform considers that, the share reform of the Company is in compliance with the requirements of laws and administrative regulations such as the Company Law, the Securities Law, Provisional Guidelines on Issue and Trading of Shares, and “Certain Opinions on Further Reform, Opening up and Stable Development of Capital Markets” promulgated by the State Council, as well as regulative documents such as “Guiding Opinions on the Share Reform of Listed Companies”, the “Measures for the Administration of the Share Reform of Listed Companies”, “Notice on Certain Issues Regarding Management of the State-owned Shares Involved in the Share Reform Scheme of Listed Companies”, “Guidelines on the Practice and Operation of the Share Reform Proposals of Listed Companies”, and performed necessary legal procedures at the present stage. The implementation of the share reform of the Company is still subject to the approval at Relevant Shareholders’ Meeting of A shares market.

Timetable of Relevant Shareholders’ Meeting of A shares market

• (1) Date for share registration of Relevant Shareholders’ Meeting of A shares market: 19 January, 2007

• (2) Date for convening of the Relevant Shareholders’ Meeting of A shares market: 29 January, 2007

• (3) Date for voting on-line of Relevant Shareholders’ Meeting of A shares market: 25 January, 2007 to 29 January, 2007

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Suspension and Resumption of A shares Trading

• (1) An application has been made by the Board for suspension of trading of the Company’s listed A shares effective on 11 December, 2006, and relevant documents including the Statement of Share Reform were published on 19 December, 2006. Trading of the listed A shares will be resumed no later than 4 January, 2007, and the period from 20 December, 2006 to 29 December, 2006 will be open for communications between the shareholders.

• (2) Announcement in respect of the communications and co-ordinations between Holders of Non-freely Transferable Shares and listed A shares and agreed reform solutions will be published by the Board on 29 December, 2006, and application will be made for resumption of trading of the Company’s listed A shares on the next trading day of the announcement.

• (3) If the Board failed to announce the agreed reform solutions before 29 December, 2006, an announcement in respect of cancellation of the forthcoming Relevant Shareholders’ Meeting of A shares market will be published by the Company and application will be made for the resumption of trading of the Company’s listed A shares on the next trading day from the date of the announcement (other than the delay approved by the Shenzhen Stock Exchange following the application in special circumstances).

• (4) Application will be made by the Board for suspension of trading of the Company’s listed A shares effective from the next trading day to the date for share registration of Relevant Shareholders’ Meeting of A shares market up to the closing date of procedures required by the share reform.

Definitions

In this announcement, the following terms and expressions shall have the meanings set out below unless otherwise indicated in the context:

“the Company”, “Company” Guangdong Kelon Electrical Holdings Company Limited or “Kelon Electrical” (廣東科龍電器股份有限公司 ) “Hisense Air-Conditioning” Qingdao Hisense Air-Conditioning Company Limited (青島海信空調有限公司 ) “Hisense Group” Hisense Group Company Limited (海信集團有限公 司 )

“SEC” Shunde Economic Consultancy Company (順德市經 濟諮詢公司 )

“Dong Heng Development” Shunde Dong Heng Development Company (佛山市 順德區東恆發展有限公司 )

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“White Goods”

A general term in domestic appliances industry, including small light color domestic appliances, such as refrigerator, air-conditioner, washer, etc.

• “Holders of Non-freely Shareholders who hold shares of the Company not listed Transferable Shares” on the stock exchange before the implementation of this Scheme

• “Holders of Listed A Shares” Holders of the Company’s ordinary shares denominated in Renminbi, one of the relevant shares holders in this share reform

• “Holders of Listed Shares” Holders of the Company’s listed shares, including holders of listed A Shares and H Shares

• “Relevant Shareholders’ The relevant shareholders’ meeting of Kelon Electrical Meeting” in respect of the share reform scheme

• “Board” The board of directors of Guangdong Kelon Electrical Holdings Company Limited

• “CSRC” China Securities Regulatory Commission “CSDCC” China Securities Depository and Clearing Corporation Limited, Shenzhen Branch

• “Yuan” Renminbi yuan

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 pending the release of an announcement in relation to price sensitive information. Subject to the publication of a further announcement in relation to, amongst others, the financial, production and trading position of the Company, and the satisfaction by the Stock Exchange of the adequacy of the internal control measures of the Company, trading in H shares of the Company will remain suspended until further notice.

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

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

Foshan City, Guangdong, the PRC, 19 December, 2006

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

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