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

Jun 29, 2007

THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION

If you are in any doubt as to any aspect of this circular or as to the action to be taken, you should consult a licensed securities dealer, bank manager, solicitor, professional accountant or other professional adviser.

If you have sold or transferred all your shares in HISENSE KELON ELECTRICAL HOLDINGS COMPANY LIMITED , you should at once hand this circular to the purchaser or transferee or to the bank, licensed securities dealer or other agent through whom the sale or transfer was effected for transmission to the purchaser or transferee.

The Stock Exchange of Hong Kong Limited takes no responsibility for the contents of this circular, 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 circular.

HISENSE KELON ELECTRICAL HOLDINGS COMPANY LIMITED

(A joint stock limited company incorporated in the People’s Republic of China with limited liability) (Stock Code: 0921)

DISCLOSEABLE TRANSACTION

29 June 2007

CONTENTS

	Page
Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	1
Letter from the Board . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	3
Appendix – General information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	8

– i –

DEFINITIONS

In this circular, unless the context otherwise requires, the following expressions have the following meanings:

“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
	company incorporated in the PRC with limited liability
	and listed on the main board of the Stock Exchange and
	Shenzhen Stock Exchange
“Debt”	The Debt comprises (i) the principal amount of the debt
	owed by Jiegao Investments to the Company in the sum
	of RMB168,855,132.63; (ii) the interest incidental
	thereto, which is approximately RMB23,640,000 as at 13
	June 2007 (which is calculated for the period from 31
	December 2004 to 13 June 2007) ; and (iii) the litigation
	fees in the sum of RMB921,365.48. Please refer to the
	section headed “INFORMATION OF THE DEBT” for
	details
“Debt Transfer Agreement”	The debt transfer agreement dated 31 May 2007 entered
	between the Company and the Purchaser to transfer the
	Company’s rights to the Debt and its rights under the
	Settlement Agreement
“H Shares”	Overseas listed foreign shares of the Company with a
	nominal value of RMB1.00 each and are listed on the
	Stock Exchange
“Hong Kong”	The Hong Kong Special Administrative Region of the
	PRC
“Jiegao Investments”	(Foshan Shunde Jiegao
	Investments Company Limited)
“Jiegao Land”	A piece of land owned by Jiegao Investments and located
	at the east of Wai Huan Lu, Rong Gui, Shunde District,
	Foshan City with a site area of 254,629.69 sq.m.

– 1 –

DEFINITIONS

“Latest Practicable Date”	26 June 2007, being the latest practicable date prior to the
	printing of this circular for ascertaining certain
	information in this circular
“Listing Rules”	Rules Governing the Listing of Securities on the Stock
	Exchange
“PRC”	The People’s Republic of China
“Purchaser”	(Foshan Shunde
	Shunyun Investments Company Limited), a company
	incorporated in the PRC on 23 October 2003
“RMB”	Renminbi yuan, the lawful currency of the PRC
“Settlement Agreement”	The settlement agreement dated 18 April 2007 entered
	between the Company, Ronggui Rural Credit Cooperative
	of Shunde and Jiegao Investments regarding the
	settlement arrangement for the debts owed by Jiegao
	Investments to the Company and Ronggui Rural Credit
	Cooperative of Shunde, details of which are set out in the
	announcement of the Company dated 19 April 2007
“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
“Subsidiary” or “Subsidiaries”	Has the meaning defined in sections 2 and 2B of the
	Companies Ordinance (Cap. 32 of the Laws of Hong
	Kong)
“%”	Per cent.

– 2 –

LETTER FROM THE BOARD

HISENSE KELON ELECTRICAL HOLDINGS COMPANY LIMITED

(A joint stock limited company incorporated in the People’s Republic of China with limited liability) (Stock Code: 0921)

Executive Directors: Registered office: Mr. Tang Ye Guo No. 8 Ronggang Road Mr. Yang Yun Duo Ronggui Street Mr. Wang Shi Lei Shunde District Ms. Yu Shu Min Foshan City Mr. Lin Lan Guangdong Province China Independent non-executive Directors: Mr. Zhang Sheng Ping Principal place of business in Hong Kong: Mr. Lu Qing Room 2502-2505, Harbour Centre Mr. Cheung Yui Kai, Warren 25 Harbour Road Wanchai Hong Kong 29 June 2007

To the Shareholders

Dear Sir or Madam,

DISCLOSEABLE TRANSACTION

INTRODUCTION

The Board is pleased to announce that on 31 May 2007, the Company entered into the Debt Transfer Agreement with the Purchaser to transfer the Company’s rights to the Debt and its rights under the Settlement Agreement for a consideration of RMB142,000,000.

Since the consideration ratio of the debt transfer is more than 5% but less than 25 % and each of the other applicable percentage ratios as defined in Chapter 14 of the Listing Rules is less than 25%, the debt transfer constitutes a discloseable transaction of the Company which is subject to the notification and announcement requirements in accordance with the Listing Rules.

The purpose of this circular is to provide you with details of the Debt Transfer Agreement and other information under the Listing Rules.

– 3 –

LETTER FROM THE BOARD

Date

31 May 2007

Parties

• (1) The Company; and

• (2) The Purchaser.

To the best of the Directors’ knowledge, information and belief having made all reasonable enquiries, the Purchaser and the ultimate beneficial owner of the Purchaser are third parties independent of the Company and connected parties (as defined in the Listing Rules) of the Company.

Subject of Transfer

Pursuant to the Debt Transfer Agreement, the Company has agreed to transfer its rights to the Debt and its rights under the Settlement Agreement to the Purchaser. As a result of the transfer, the Company will not have any rights under the Settlement Agreement.

Consideration

The consideration for the debt transfer is RMB142,000,000 and is payable by the Purchaser within two working days by way of cash from the date of signing the Debt Transfer Agreement. The Company has received the total sum of the consideration from the Purchaser on 30 May 2007.

On 29 December 2004, the Company entered into the state-owned land use right transfer agreement with Jiegao Investments, a third party independent of the Company and its connected persons (as defined in the Listing Rules), for the transfer of the land use right of a state-owned piece of land which was owned by the Company for a consideration of RMB168,855,132.63, which was repayable by Jiegao Investments in one lump-sum to the Company before 31 December 2004. Both parties have completed the transfer procedures of such land pursuant to the state-owned land use right transfer agreement. However, no payment of the transfer price for the transfer of the such land has been made by Jiegao Investments pursuant to such land use right transfer agreement. The Company has initiated litigation against Jiegao Investments for repayment of such outstanding debt. On 26 December 2006, the Higher People’s Court of Guangdong Province of the PRC made a judgment in favour of the Company. Under the judgment, Jiegao Investment has to repay the Company (i) the principal amount of the debt owed by Jiegao Investments to the Company in the sum of RMB168,855,132.63; (ii) the interest incidental thereto, (which is calculated for the period from 31 December 2004 to the date of the repayment of the debt, in accordance with the interest rate for loan with one year maturity of the People’s Bank of China); and (iii) the litigation fees in the sum of RMB921,365.48 which is incurred by the Company to claim for the repayment of the debt owed by Jiegao Investments which will have to be repaid by Jiegao Investments under PRC laws and regulations.

– 4 –

LETTER FROM THE BOARD

As disclosed in the announcement of the Company dated 19 April 2007, the Company entered into the legally binding Settlement Agreement on 18 April 2007 with Jiegao Investments and Ronggui Rural Credit Cooperative of Shunde, which is a financial institution in the PRC and is a third party independent of the Company and its connected persons (as defined in the Listing Rules), in order to set out the agreed settlement arrangement of the Debt (particulars of which are set out in the subsequent section of this circular). Pursuant to the Settlement Agreement, Jiegao Investments agreed to dispose of the land use right of a piece of the Jiegao Land, with reference to the market price of the land use right of the land located within the same area with a site area of 200 mu disposed by the Company in earlier time. The proceeds from such land disposal will be shared equally by the Company and Ronggui Rural Credit Cooperative of Shunde for the settlement of the Debt and the debts owed to Ronggui Rural Credit Cooperative of Shunde by Jiegao Investments. Under the Settlement Agreement, Jiegao Investments will only pay half of the sales proceeds of the disposal of the Jiegao Land to the Company for the settlement of the Debt.

With reference to the market price of the land use right of the land located within the same area with a site area of 200 mu disposed by the Company, the Company estimates that the sale price of the Jiegao Land will be approximately RMB243,000,000. As such, the Company will be able to share the approximate sum of less than RMB121,000,000 after payment of the relevant taxes pursuant to the Settlement Agreement.

The consideration was determined after arm’s length negotiation between the parties after the Company has taken into account the potential sum, i.e. RMB121,000,000, receivable under the Settlement Agreement as set out in the afore-mentioned paragraph and the uncertainty of the timing regarding when such sum is recoverable.

It is the current intention of the Company to use all of the net proceeds from the debt transfer, i.e. about RMB142,000,000, as its operation capital and for the repayment of its bank loans. The actual proportion for the application of which as loans repayment or operation capital will depend on the future business development of the Company.

Major Terms

• (1) It is agreed by the Company and the Purchaser that in the event that any of the party suffers any loss or damage as a result of the breaches of any of the representation, warranty, undertaking or other terms in the Debt Transfer Agreement by the other party, such party shall compensate the other party for the full amount of such loss or damage.

• (2) The debt transfer is without a recourse under the Debt Transfer Agreement.

– 5 –

LETTER FROM THE BOARD

INFORMATION OF THE DEBT

In view of the judgment dated 26 December 2006 made by the Higher People’s Court of Guangdong Province of the PRC (which is set out in the previous section of this circular), the Debt under the Debt Transfer Agreement comprises (i) the principal amount of the debt owed by Jiegao Investments to the Company in the sum of RMB168,855,132.63; (ii) the interest incidental thereto, which is approximately RMB23,640,000 as at 13 June 2007 (which is calculated for the period from 31 December 2004 to 13 June 2007, in accordance with the interest rate for loan with one year maturity of the People’s Bank of China); and (iii) the litigation fees in the sum of RMB921,365.48 which is incurred by the Company to claim for the repayment of the debt owed by Jiegao Investments which will have to be repaid by Jiegao Investments under PRC laws and regulations.

Taking into account the afore-mentioned, the aggregate amount of the Debt will be approximately 193,416,498.11.

The Debt is treated as receivables in the gross sum of RMB168,855,132.63 in the audited accounts of the Company for the years ended 31 December 2005 and 31 December 2006, respectively.

Provision in the sum of RMB84,427,566.32 was made to the Debts in the audited accounts of the Company for the years ended 31 December 2005 and 31 December 2006. Such amount of the provision was provided for individually based on the Company’s assessment of the financial situation of Jiegao Investments.

The audited net book value of the Debt (after taking into account the provision) is therefore in the sum of RMB84,427,566.32 in the audited accounts of the Company as at 31 December 2005 and 31 December 2006. No net profit was incurred by the Debt for the for the years ended 31 December 2005 and 31 December 2006, respectively.

After comparing the consideration for the debt transfer with the audited net book value of the Debt as at 31 December 2006, the Company is expected to obtain a gain of approximately RMB57,000,000 for the debt transfer for the year ended 31 December 2007.

FINANCIAL IMPACTS ON THE GROUP

Assets and Liabilities

The debt transfer under the Debt Transfer Agreement will increase the assets of the Company by the amount of RMB57,000,000 and will pose no effect on the liability of the Company.

Earnings

It is estimated by the Company that gain and earnings in the sum of RMB57,000,000 will be obtained by the Company for the year ended 31 December 2007 as a result of the debt transfer.

– 6 –

LETTER FROM THE BOARD

REASONS FOR AND BENEFITS OF THE DEBT TRANSFER AGREEMENT

As disclosed in the previous section headed “Consideration”, since the consideration under the Debt Transfer Agreement is more than RMB121,000,000 and the debt transfer can accelerate the debt collection process and provide further immediate operating capital to the Company to support its production activities for the imminent peak production and sales season and in view of the static development of the disposal of the Jiegao Land in which the concrete disposal date cannot be assessed, the Directors (including the independent non-executive Directors) consider that the debt transfer is beneficial to the Company and the Shareholders as a whole and the terms and conditions in the Debt Transfer Agreement are fair and reasonable.

INFORMATION RELATING TO THE COMPANY

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

INFORMATION RELATING TO THE PURCHASER

The Purchaser was incorporated in the PRC on 23 October 2003 and is principally engaged in conducting investment to the industrial district of Shunde.

DISCLOSEABLE TRANSACTION

Since the consideration ratio of the debt transfer under the Debt Transfer Agreement is more than 5% but less than 25 % and each of the other applicable percentage ratios as defined in Chapter 14 of the Listing Rules is less than 25%, the debt transfer constitutes a discloseable transaction of the Company which is subject to the notification and announcement requirements in accordance with the Listing Rules.

SUSPENSION OF TRADING IN THE H SHARES

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

ADDITIONAL INFORMATION

Your attention is also drawn to the general information as set out in the Appendix of this circular.

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

– 7 –

GENERAL INFORMATION

APPENDIX

1. RESPONSIBILITY STATEMENT

This circular includes particulars given in compliance with the Listing Rules for the purpose of giving information with regard to the Company. The Directors collectively and individually accept full responsibility for the accuracy of the information contained in this circular and confirm, having made all reasonable enquiries that to the best of their knowledge and belief, there are no other facts the omission of which would make any statement in this circular misleading.

2. DISCLOSURE OF INTERESTS

Directors, supervisors and chief executive of the Company

As at the Latest Practicable Date, none of the Directors, supervisors and chief executive of the Company had interests and short positions in the Shares, underlying Shares and/or debentures (as the case may be) of the Company or any its associated corporations (within the meaning of the SFO) which were required to be notified to the Company and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO (including interests and short positions which any such Director or chief executive is taken or deemed to have under such provisions of the SFO) or which were required to be entered into the register required to be kept by the Company under section 352 of the SFO or which were otherwise required to be notified to the Company and the Stock Exchange pursuant to the Model Code for Securities Transactions by Directors of Listed Issuers in the Listing Rules.

As at the Latest Practicable Date, none of the Directors or supervisors of the Company had any interest, direct or indirect, in any asset which have been since 31 December 2006, being the date to which the latest published audited financial statements of the Group were made up, acquired or disposed of by or leased to any member of the Group or are proposed to be acquired or disposed of by or leased to any member of the Group.

As at the Latest Practicable Date, none of the Directors or supervisors of the Company was materially interested in any contract or arrangement entered into by any member of the Group since 31 December 2006, being the date to which the latest published audited financial statements of the Company were made up, and which was significant in relation to the business of the Group.

– 8 –

GENERAL INFORMATION

APPENDIX

Interests of Substantial Shareholders

Interests in the Company

As at the Latest Practicable Date, so far as the Directors are aware, each of the following persons, not being a Director, supervisor or chief executive of the Company, had an interest in the Shares which falls to be disclosed to the Company and the Stock Exchange under the provisions of Division 2 and 3 of Part XV of the SFO:

			Proportion
			to the
			relevant	Proportion
			class of	to the total
		Number of	issued	issued
		issued	share	share
		ordinary	capital of	capital of
	Class of	shares	the	the
Name	Shares	held	Company	Company
Hisense Air-conditioning	Domestic	238,872,074	70.68%	24.08%
	legal
	person
	shares
Shunde Economic	Domestic	68,666,667	20.32%	6.92%
Consultancy Company	legal
	person
	shares
Shenyin Wanguo Securities	H Shares	55,091,000	11.99%	5.55%
(H.K.) Limited
The Hong Kong & Shanghai	H Shares	51,343,925	11.17%	5.18%
Banking Corporation
Limited
Bank of China (Hong Kong)	H Shares	49,073,000	10.68%	4.95%
Limited
Guotai Junan Securities	H Shares	40,920,000	8.90%	4.12%
(Hong Kong) Limited
HSBC Nominees (Hong	H Shares	40,106,904	8.73%	4.04%
Kong) Limited
First Shanghai Securities	H Shares	25,860,000	5.63%	2.61%
Limited

– 9 –

GENERAL INFORMATION

APPENDIX

Interests in other members of the Group

As at Latest Practicable Date, so far as the Directors are aware, the following persons, not being a Director, supervisor or chief executive of the Company, was directly or indirectly interested in 10% or more of the nominal value of any class of share capital carrying rights to vote in all circumstances at general meetings of any other members of the Group:

		Percentage
		shareholding of
		shareholders
	Shareholders holding 10%	in other
	or more in other members	members of
Other members of the Group	of the Group	the Group
Hisense Kelon (Guangdong)	Weishi Investments	40%
Air-Conditioner Co., Ltd	Company Limited
Guangdong Kelon Mould Co., Ltd	Hua Yi Compressor	30%
	Company Limited
Foshan Shunde Rongsheng Plastic	Hua Yi Compressor	30%
Products Co., Ltd	Company Limited
Guangdong Huaao Electrical	Foshan City Shunde District	30%
Electronics Co., Ltd.	Yun Long Enquiry
	Service Company Limited
Hisense Ronshen (Yingkou)	Yingkou Yingleng (Group)	14.74%
Refrigerator Co., Ltd.	Bankruptcy Liquidation
	Team
Hangzhou Kelon Electrical Company	Hangzhou Xiling Group	30%
Limited	Company Limited
Xi’an Kelon Cooling Co., Ltd.	Xi’an Gaoke (Group)	29.05%
	Company Limited
Jiangxi Kelon Combine Electrical	Jiangxi Fadasi Domestic	45%
Appliances Co., Ltd.	Electrical Appliances
	Company Limited
Kaifeng Kelon Air-Conditioner Co.,	Kaifeng Economic	30%
Ltd.	Technique Development
	(Group) Company

– 10 –

GENERAL INFORMATION

APPENDIX

		Percentage
		shareholding of
		shareholders
	Shareholders holding 10%	in other
	or more in other members	members of
Other members of the Group	of the Group	the Group
Hua Yi Compressor Company	Huayi Electrical Appliances	32.69%
Limited	Company Limited
	A-share public shareholders	49.04%
Chongqing Kelon Rongsheng	Chongqing Shang She	24%
Refrigerator Sales Co., Ltd.	Group
	Chongqing Huaqing	24%
	Commerce Company
	Chongqing Department	24%
	Building
Guangzhou Antaida Logistic Co.,	Guangzhou Zhongyuan	30%
Ltd.	International Freight
	Forwarding Company
	Limited
	China Far Ocean Network	25%
	Company Limited
	Wuxi Small Swan Holdings	20%
	Company Limited
Wuhu Yingjia Electrical Machinery	Heavenly King Incorporated	20%
Co., Ltd
Sichuan Rongsheng Kelon	Xu Wei Ru	24%
Refrigerator Sales Co., Ltd.
Beijing Hengsheng Xin Chuang	Foshan City Shunde District	11%
Technology Company	Yun Long Enquiry
	Service Company Limited
Guangdong Kelon Weili Electrical	Zhongshan City Buisha	20%
Appliances Company Limited	Province Shunzhun
	Limited Company

– 11 –

GENERAL INFORMATION

APPENDIX

Save as disclosed above, as at the Latest Practicable Date, there was no other person (other than a Director, supervisor or chief executive of the Company or a member of the Group), who had an interest or short position in the Shares or underlying Shares which would fall to be disclosed to the Company under the provisions of Divisions 2 and 3 of Part XV of the SFO, or who was, directly or indirectly, interested in 10% or more of the nominal value of any class of share capital carrying rights to vote in all circumstances at general meetings of any other member of the Group.

3. SERVICE AGREEMENTS

As at the Latest Practicable Date, none of the Directors, proposed directors, supervisors or proposed supervisors of the Company had any existing or proposed service contract with any member of the Group (excluding contracts expiring or determinable by the Company within one year without payment of compensation (other than statutory compensation).

4. MATERIAL CHANGES

The Directors are not aware of any material adverse change in the financial or trading position of the Group since 31 December 2006, being the date to which the latest published audited financial statements of the Group were made up.

5. COMPETING INTEREST

As at the Latest Practicable Date, the following directors of the Company or their respective associates have interests in the following businesses which are considered to compete or are likely to compete, either directly or indirectly, with the businesses of the Group other than those businesses where the Directors were appointed as directors to represent the interests of the Company and/or the Group pursuant to the Listing Rules:

Name of Director

Description of Name of entity business of the which business is entity which is considered to considered to compete or likely compete or likely Nature of compete with the to compete with interest of the business of the the business of Director in the Group the Group entity

Mr. Tang Ye Guo

The Subsidiaries Production of airDirector of Hisense conditioning/ Group electrical products

– 12 –

GENERAL INFORMATION

APPENDIX

• Description of

• Name of entity business of the which business is entity which is considered to considered to compete or likely compete or likely Nature of compete with the to compete with interest of the business of the the business of Director in the

• Name of Director Group the Group entity Ms. Yu Shu Min The Subsidiaries Production of airDirector and/or of Hisense conditioning/ senior Group electrical management products

• Mr. Yang Yung Duo Hisense Group Production of airSenior conditioning/ Management electrical products

• Mr. Wang Shi Lei Hisense Group Production of airSenior conditioning/ Management electrical products

• Mr. Lin Lan Hisense Group Production of airSenior conditioning/ Management electrical products

As at the Latest Practicable Date, save as disclosed above, none of the directors of the Company or their respective associates has interests in the businesses which compete or are likely to compete, either directly or indirectly, with the businesses of the Group.

– 13 –

GENERAL INFORMATION

APPENDIX

6. LITIGATION

As at the Latest Practicable Date, so far as the Directors are aware, the following litigation or claims of material importance are pending or threatened against the Company and its subsidiaries:

No.	Name of case	Plaintiff	Claim Amount	Particulars	Status
			(RMB)
1.	Claims against the	Zhejiang	19,853,000	The plaintiff alleged that it	The Company is
	Company initiated by	Hangxiao		had undertaken the	undergoing the
	Zhejiang Hangzhou			construction works of the	litigation process
	Xiu Ganggou			Company’s plain	in the
	Holdings Company			warehouse factories No. 1	intermediate
	Limited (“Zhejiang			and No. 2 pursuant to a	people’s court in
	Hangxiao”) in relation			construction contract with	Foshan City, the
	to a construction			the Company and the	PRC.
	contract			Company defaulted in
				payment of RMB1,193,000
				in construction fees. The
				plaintiff sued the Company
				for payment of
				RMB1,193,000 in
				construction fees and
				RMB17,660,000 in default
				penalties and the cost of
				legal proceedings. The
				proceedings was resumed
				in March 2007 in the
				intermediate court of
				Foshan, the construction
				fees were revised as
				RBM1,170,000 by
				Hangxiao.

– 14 –

GENERAL INFORMATION

APPENDIX

No.	Name of case	Plaintiff	Claim Amount	Particulars	Status
			(RMB)
2.	Claims against Jiangxi	China	69,550,000	China Construction Bank	The higher
	Kelon and the	Construction		Corporation Nanchang	people’s court in
	Company initiated by	Bank		Changbei Branch applied	Jiangxi has
	China Construction	Corporation		to the court for pre-trial	adjourned to
	Bank Corporation	Nanchang		security order on the basis	proceed with the
	Nanchang Changbei	Changbei Branch		of dispute over the loan	case.
	Branch in relation to			contract and guarantee
	the loan contract and			contract. On 5 August, the
	guarantee contract			High Court of Jiangxi
				Province ordered to freeze
				Jiangxi Kelon’s 80%
				shareholdings in Shangqiu
				Kelon. During the freezing
				period, such shareholdings
				shall not be pledged or
				transferred without the
				court’s prior consent. After
				various negotiation
				between the parties,
				Jiangxi Kelon has repaid
				approximately
				RMB70,450,000 to the
				Plaintiff.
3.	Claims against Jiangxi	Henan Province	27,160,000	The plaintiff applied for a	Settlement
	Kelon and Kaifeng	Kaifeng		pre-trial security order	agreement has
	Kelon Air-Conditioner	Economic		from the court to seize	already been
	Co., Ltd. (“Kaifeng	Technology		properties worth of	reached by the
	Kelon”) by Kaifeng	Development		RMB18,000,000 of Jiangxi	parties and the
	Economic Technology	(Group)		Kelon and Kaifeng Kelon.	relevant
	Development (Group)	Company		The equipment, factory	procedures are
	Company in relation			and the land use right of	being proceeded.
	to joint venture			Kaifeng Kelon in the sum
	contract			of RMB9,160,000 were
				seized by the court.

– 15 –

GENERAL INFORMATION

APPENDIX

No.	Name of case	Plaintiff		Claim Amount	Particulars	Status
				(RMB)
4.	Claims initiated by	Can	US$13,750,719.19		The plaintiff alleged that it	The district
	CNA/MC Appliance	International			had entered into a contract	court in the
	Corporation against	Inc./MC			with the defendant on 29	States has
	the Company and	Appliance			December 2003 to	adjourned to
	Kelon International	Corporation			purchase 108,108 units of	proceed with the
	Incorporation				MCBR1000W	case. The
					refrigerators, that the	litigation process
					defendant failed to perform	is expected to be
					its obligations as set out in	long.
					the contract on a timely
					basis and that the goods
					delivered were defective.
5.	Claim initiated against	Jilin Commercial		18,057,915	The plaintiff sued for	The intermediate
	the Company and Jilin	Bank (Jiangbei			repayment of principal of	people’s court in
	Kelon Electrical	Branch)			loan and interest.	Jilin has
	Company Limited by					adjourned to
	Jilin Commercial					proceed with the
	Bank					case.
6.	Claim initiated against	Ronshen		89,184,085.06	The plaintiff claimed	The case is
	Xi’an Kelon by	Refrigerator			against the Defendant for	being proceeded
	Ronshen Refrigerator				repayment of payment and	in the
					litigation fees. On 13 June	intermediate
					2007, the intermediate	Court of Foshan.
					court of Foshan made an
					order of freezing the bank
					deposit of Xi’an Kelon
					amounting to
					RMB89,000,000 or sealing
					up and and destraining its
					assets of such equivalent
					amount and set the trial
					date of this case to be 16
					July 2007.

7. MISCELLANEOUS

• (1) The company secretary and qualified accountant of the Company is Mr. Dai Zu Mian. Mr. Dai is a member of the Association of Chartered Certified Accountants in the United Kingdom and is a certified public accountant in the PRC.

• (2) The English text of this circular shall prevail over its Chinese text.

– 16 –