Medlive Technology Co., Ltd. — Capital/Financing Update 2007

Jul 27, 2007

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.

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

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

(Stock Code: 0921)

CONNECTED TRANSACTION ESTABLISHMENT OF JOINT VENTURE

The Board announces that on 27 July 2007, the Company entered into the JV Agreement with Hisense Export, Hisense Electrical and Natural Person(s) to establish the JV Company for the purpose of conducting export of electrical appliances to overseas markets. Pursuant to the JV Agreement, each of the Company, Hisense Export, Hisense Electrical and Natural Person(s) agreed to invest the sums of RMB3,800,000, RMB10,400,000, RMB3,800,000, and RMB2,000,000, respectively, in cash as capital contribution to the JV Company. The total registered share capital of the JV Company will be in the sum of RMB20,000,000. The JV Company will be owned as to 19% by the Company, 52% by Hisense Export, 19% by Hisense Electrical and 10% by Natural Person(s).

Hisense Air-conditioning is the substantial shareholder of the Company holding approximately 24.08% of the interest of the Company. Since Hisense Export is an indirect subsidiary of Hisense Group and 48.4% of the equity interest of Hisnese Electrical is owned by the Hisense Group, the transaction under the JV Agreement constitutes a connected transaction of the Company under the Listing Rules.

As each of the applicable percentage ratio (as defined in Rule 14.07 of the Listing Rules) is less than 2.5%, the JV Agreement is subject to the reporting and announcement requirements under Chapter 14A of the Listing Rules. However, under the request of the relevant regulatory authorities of A shares in the PRC, this transaction is subject to the approval by the Shareholders in the general meeting of the Company. Hisense Air-conditioning and its associates have to be abstained from voting in such general meeting. A circular containing, among other things, the details of the JV Agreement, together with a notice of the EGM will be dispatched by the Company to its Shareholders as soon as practicable. The Company will also disclose the relevant details in the next published annual report and accounts of the Company in accordance with the relevant requirements as set out in Rule 14A.45 of the Listing Rules.

The Board announces that on 27 July 2007, the Company entered into the JV Agreement with Hisense Export, Hisense Electrical and Natural Person(s) to establish the JV Company for the purpose of conducting export of electrical appliances to overseas markets.

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JV AGREEMENT

Date

27 July 2007

Parties to the JV Agreement

1. The Company

2. Hisense Export

3. Hisense Electrical

4. Natural Person(s)

Scope of Business of the JV Company

The JV Company will be incorporated under the laws of the PRC with limited liability and located in Qingdao City. It will be principally engaged in conducting import and export of goods and technology to overseas markets and provision of other services relating to joint venture, production cooperation and further possessing.

Capital Contribution

The total registered share capital of the JV Company will be RMB20,000,000, which is determined according to the respective parties’ estimate of the working capital of the JV Company. The total registered share capital of the JV Company is intended to be used as working capital of the JV Company. Pursuant to the JV Agreement, each of the Company, Hisense Export, Hisense Electrical and Natural Person(s) agreed to invest the sums of RMB3,800,000, RMB10,400,000, RMB3,800,000, and RMB2,000,000, respectively, in cash as capital contribution to JV Company. The JV Company will be owned as to 19% by the Company, 52% by Hisense Export, 19% by Hisense Electrical and 10% by Natural Person(s).

The capital contribution to the JV Company shall be made by the respective parties within 10 business days from the date when the JV Agreement becomes effective as set out below. The payment of such capital contribution by the Company will be satisfied by its internal resources.

Save as disclosed above, there are no other capital commitment, guarantees or indemnity which have to be provided by the Company and the joint venture parties pursuant to the JV Agreement.

The JV structure was determined as a result of arm’s length negotiations between the Company, Hisense Export, Hisense Electrical and the Natural Person(s). Since Hisense Export has the relevant experience, expertise and sales channel in overseas sales of electrical appliances, it was agreed that Hisense Export should have the largest shareholding in the JV Company. The main purpose of the Company to establish the JV Company is to facilitate its overseas sales and it does not intend to have control or active participation in the operation of the JV Company. Thus, the Company is satisfied with 19% of the equity interest in the JV Company and remains as a passive participant.

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Roles and Responsibilities of the JV Parties

The board of directors of the JV Company shall consist of seven directors. Each of the Company, Hisense Export and Hisense Electrical shall have the right to appoint two directors and the Natural Person(s) shall have the right to appoint one director. The chairman shall be appointed by Hisense Export.

The manager of the JV Company, who will be responsible for the day-to-day management of the Company, will be appointed by Hisense Export.

Upon the establishment of the JV Company, Hisense Electrical and the Company will be mainly responsible for the provision of electrical products to the JV Company for overseas sales, while Hisense Export will mainly be responsible for the provision of expertise and sales channel for overseas sales and the Natural Person(s) will mainly be responsible for the day-to-day management of the JV Company.

It is the current intention of the Company to sell products to the JV Company in the future. As such transactions will constitute connected transactions (as defined in the Listing Rules) of the Company, the Company will comply with the relevant requirements of the Listing Rules if and when such transactions take place.

Term of the JV Company

The term of the JV Company is 15 years from the date of issue of its business licence.

Profit Distribution

Profits of the JV Company will be shared among its shareholders in accordance with their respective holdings of registered capital in the JV Company.

Effective date of the JV Agreement

The JV Agreement will become effective upon obtaining the approval from the relevant authorities in the PRC.

Conditions Precedent

The JV Agreement is subject to the approval of the relevant authorities in the PRC according to the requirements under the laws and regulations of the PRC. There is no long stop day for fulfilling the conditions precedent under the JV Agreement.

Accounting Treatment of the JV Company

In accordance with PRC accounting standards, the JV Company and its revenues (if applicable) will be classified as long-term investment in the balance sheet and investment revenues in the financial statements of the Company, respectively.

In accordance with International Financial Reporting Standards, the JV Company and its revenues (if applicable) will be classified as an interest in an associate in the balance sheet and share of results of an associate in the financial statements of the Company, respectively.

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FUTURE PLAN OF THE COMPANY

In order to facilitate the development of the overseas sales market, the JV Company may, after its incorporation, establish other overseas companies in Hong Kong or other areas (the “Overseas Companies”) to conduct its overseas business. It is the current intention of the Group to sell OEM products (including refrigerators, freezers, air-conditioners, moulds and other raw materials) to the JV Company or the Overseas Company in the future so as to develop its overseas sales markets. Such proposed transactions are to be conducted on normal commercial terms and in the ordinary and usual course of business of the Group and will be on terms no less favourable to Company than terms available to or from independent third parties. The prices of the OEM products will be determined according to the principle of fairness and reasonableness with reference to the market price of the OEM products from time to time and the pricing policy of OEM products within the industry.

As such transactions will constitute connected transactions (as defined in the Listing Rules) of the Company, the Company will comply with the relevant requirements of the Listing Rules if and when such transactions take place.

After the establishment of the JV Company, the Company expects that its sales revenues will increase resulting from the sales channels of Hisense Export (including the air-conditioners markets in Russia and Argentina, and the air-conditioner and the refrigerators market in Africa) and the improvement in its own brand businesses (i.e., air-conditioner and refrigerator business under its own brand names in North America). In addition, the sales revenues of the Company is also expected to increase as a result of the improvement in other businesses of the Company, such as moulds and small household appliances.

EFFECT OF THE FUTURE PLAN ON THE INDEPENDENCE OF THE COMPANY

After the establishment of the JV Company, the Company will retain its international business department. The existing customers of the Company will still enter into contracts with the Company. The exporting scale and the preferential export policies entitled by the Company will not be affected. In addition, the Company will enter into agreement with the JV Company specifying that in case the JV Company experiences any operating risks which may affect the export businesses of the Company, the Company shall have the right to choose to conduct the exports on its own or through other co-operative parties.

Considering the difficulties and complexity in promoting the Company’s own brand businesses, it is expected that the growth of the Company’s own brand businesses will be lower than that of the OEM businesses of the Company. It is expected that there will be a continuous increase in the volume of the connected transactions between the Company and the JV Company. However, it is expected that the rate of increase in the connected transactions between the Company and the JV Company will be lower than that of the overall export sales of the Company.

Even though the JV Company will increase the overall sales revenues and sales scale of the Company, it is expected that the sales revenues to be derived by the Company from the JV Company, when comparing with the Company’s overall overseas sales revenues, will decrease over years. Therefore, the Company will not become dependent on the connected transactions to be conducted with the JV Company.

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On the other hand, the Company can promote its own brand businesses by making use of the original overseas sales platform of Hisense Export through the JV Company. The Company will also be able to keep abreast of the international market, to have a more direct involvement in such market and to compete with international brands globally. The Company’s global operation experiences will also be expanded with respect to the design and planning of products, the promotion and marketing of brands, the establishment of international logistics and distribution networks, the global after-sales service system. As a result, the Company’s internationalized operations will be strengthened, and the Company’s performance would be enhanced, which also motivates the progress of the internalization of the Company.

Based on the foregoing, the Company considers that the future connected transactions to be conducted with the JV Company will reduce the selling expenses of the Company incurred in its overseas sales and, thus benefiting the Company’s development of overseas markets without affecting its independence.

BALANCE OF INTEREST BETWEEN TWO OVERSEAS SALES CHANNELS

After setting up the JV Company, the Company will have two overseas sales channels – the overseas sales of its own brands (to be conducted through the connected transactions with the JV Company) and OEM sales (to be conducted through the Company’s own sales channels). The apparent conflicts of interests between the two overseas sales channels of the Company will be resolved by stepping up efforts in products planning, setting up target markets and promotion and marketing as set out below:

(i) Differentiating the Key Product Series and the Sales Channels

The Company’s own brand business will be positioned at the medium-high end products, which will be characterized by high quality and medium price range. The brand will be built up on the mediumend advanced products. The design of the key products has been registered as patents. The sales channel is directly connected to the retail markets, such as home appliances stores and large chain stores. The OEM business of the Company will focus on customized ODM products for high-end products. The design and the position of these products will be specially developed for high-end customers.

(ii) Differentiating Promotion and Marketing and Selling Points

The promotion and marketing of the Company’s own brand businesses will be different from that of OEM. The Company’s own brand businesses will be imaged as products of advanced technology and of high quality.

REASONS FOR AND BENEFITS FOR ENTERING INTO THE JV AGREEMENT

Hisense Electrical is principally engaged in the manufacturing and sale of various electrical appliances. Hisense Export is principally engaged in conducting export of electrical appliances to overseas markets. The Company is principally engaged in the manufacturing and sale of air-conditioners and refrigerators.

At present, the sale of air-conditioners and refrigerators to overseas markets by the Company is to a large extent limited to the provision of OEM production services to overseas production enterprises. The gross profit margin for conducting such OEM business is low and it is difficult for the Company to sell its products of its own brand to overseas market.

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Since Hisense Export has the expertise, experience and sales channels in overseas sale of electrical appliances, the establishment of the JV Company would provide a means for the Company to expand and develop its sales of air-conditioners and refrigerators in different new overseas markets at a relatively low marketing costs and thus increasing its sales volume and strengthening its reputation as a leading electrical appliances manufacturer. Meanwhile, the selling costs of the Company for conducting overseas sales can be shared with Hisense Electrical and Hisense Export and the risks for conducting overseas sales can be better controlled through the establishment of the JV Company.

In light of the above, the Directors (including the independent non-executive Directors) consider that the terms of the JV Agreement are fair and reasonable and in the interest of the Company and the shareholders as a whole.

INFORMATION RELATING TO THE COMPANY

The Company is principally engaged in the manufacture and sales of refrigerators and air-conditioners.

INFORMATION RELATING TO HISENSE ELECTRICAL

Hisense Electrical is principally engaged in the manufacturing and sale of various electrical appliances.

INFORMATION RELATING TO HISENSE EXPORT

Hisense Export is principally engaged in conducting export of electrical appliances to overseas markets.

INFORMATION RELATING TO THE NATURAL PERSON(S)

The Natural Person(s) will consist of 18 natural person(s) who are employees (excluding senior management) of the Company or Hisense Group or their subsidiaries. Six of them are employees of the Company and twelve of them are employees of Hisense Group or its subsidiaries. Upon the establishment of the JV Company, such employees of the Company will no longer work in the Company or its subsidiaries. The Natural Person(s) are third parties independent of the Company and its connected persons (as defined in the Listing Rules). The Natural Person(s) does not carry out any business activity.

CONNECTED TRANSACTION

Hisense Air-conditioning is the substantial shareholder of the Company holding approximately 24.08% of the interest of the Company. Since Hisense Export is an indirect subsidiary of Hisense Group (which is a connected person of the Company by virtue of it being an associate (as defined in the Listing Rules) of Hisense Air-conditioning) and 48.4% of the equity interest of Hisnese Electrical is owned by the Hisense Group, the transaction under the JV Agreement constitutes a connected transaction of the Company under the Listing Rules.

As each of the applicable percentage ratio (as defined in Rule 14.07 of the Listing Rules) is less than 2.5%, the JV Agreement is subject to the reporting and announcement requirements under Chapter 14A of the Listing Rules. However, under the request of the relevant regulatory authorities of A shares in the PRC, this transaction is subject to the approval by the Shareholders in the general meeting of the Company. Hisense Air-conditioning and its associates have to be abstained from voting in such general meeting. A circular containing, among other things, the details of the JV Agreement, together with a notice of the EGM will be dispatched by the Company to its Shareholders as soon as practicable. The Company will also disclose the relevant details in the next published annual report and accounts of the Company in accordance with the relevant requirements as set out in Rule 14A.45 of the Listing Rules.

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Based on the current corporate structure, the transactions between the Group and JV Company will constitute connected transactions which will be conducted in compliance with the applicable Listing Rules.

DEFINITIONS

In this announcement, the following expressions have the meanings set out below unless the context otherwise requires:

“A Shares”	domestic ordinary shares of the Company with a nominal value of RMB1.00
	each and are listed on the Shenzhen Stock Exchange
“Board”	the board of Directors
“Company”	Hisense Kelon Electrical Holdings Company Limited, a joint stock limited
	company incorporated in the PRC with limited liability and the H Shares
	and A Shares of which are listed on the main board of the Stock Exchange
	and Shenzhen Stock Exchange, respectively
“Director(s)”	the current director(s) of the Company
“EGM”	the extraordinary general meeting of the Company to be held to consider
	and approve, among other things, the JV Agreement
“Group”	the Company and subsidiaries of the Company
“H Shares”	overseas listed foreign shares of the Company with a nominal value of
	RMB1.00 each and are listed on the Stock Exchange
“Hisense Air-conditioning”	Qingdao Hisense Air-Conditioning Co., Ltd, a subsidiary of Hisense Group
“Hisense Electrical”	青島海信電器股份有限公司(Hisense Electric Co., Ltd), a joint stock
	limited company incorporated in the PRC, 48.4% of its interest is owned
	by Hisense Group
“Hisense Export”	海信進出口有限公司(Hisense Imp. & Exp. Co., Ltd), a limited company
	incorporated in the PRC, an indirect owned subsidiary of Hisense Group
“Hisense Group”	Hisense Group Company, a limited company incorporated in the PRC and
	is a State-owned enterprise
“HK$”	Hong Kong dollar(s), the lawful currency of Hong Kong
“Hong Kong”	the Hong Kong Special Administrative Region of the PRC
“JV Agreement”	the agreement dated 27 July 2007 entered into between the Company,
	Hisense Export, Hisense Electrical and Natural Person(s) to establish the
	JV Company
“JV Company”	青島海信國際營銷有限公司, a joint venture company to be established
	under the laws of the PRC

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“Listing Rules” Rules Governing the Listing of Securities on the Stock Exchange “Natural Person(s)” natural person(s) and will be third parties independent of the Company and its connected persons (as defined in the Listing Rules) “ODM” original design manufacturing, under which the manufacturer owns both the pattern and cosmetic design of the products which are sold under the brand name of the customer “OEM” original equipment manufacturing, a type of manufacturing under which products are manufactured, in whole or in part, in accordance with specifications of the customer and are marketed and sold under the brand name of customer “PRC” the People’s Republic of China “RMB” Renminbi yuan, the lawful currency of the PRC “Share(s)” share(s) of RMB1.00 each in the capital of the Company, comprising the A Shares and the H Shares “Shareholder(s)” holders of the Shares “Stock Exchange” The Stock Exchange of Hong Kong Limited “%” per cent

Trading in the H shares of the Company

At the request of the Company, trading in the H shares of the Company was suspended until further notice.

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

As at the date of this announcement, the Company’s directors are Mr. Tang Ye Guo, Mr. Yang Yun Duo, Mr. Wang Shi Lei, Ms. Yu Shu Min 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, 27 July 2007

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

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