Medlive Technology Co., Ltd. — Capital/Financing Update 2008

May 28, 2008

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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: 00921)

ANNOUNCEMENT ON RESOLUTIONS PASSED AT THE 12TH MEETING OF 2008 OF THE SIXTH BOARD OF DIRECTORS

AND INFORMATION OF THE TARGET GROUP

This announcement is made pursuant to Rule 13.09(1) of the Rules Governing the Listing of Securities on the Stock Exchange of Hong Kong Limited (the “Listing Rules”).

A. RESOLUTIONS PASSED AT THE 12TH MEETING OF 2008 OF THE SIXTH BOARD OF DIRECTORS

The sixth board of directors (the “Board”) of Hisense Kelon Electrical Holdings Company Limited (the “Company”) convened its 12th meeting of 2008 (the “Meeting”) by way of written resolutions on 19 May 2008. Out of the 9 directors who should attend the Meeting, 9 directors attended, and the connected directors, Mr. Tang Ye Guo, Mr. Wang Shi Lei, Ms. Yu Shu Min, Mr. Lin Lan, Ms. Liu Chun Xin and Mr. Zhang Ming, abstained from voting on the resolutions as set out below. The convening of and the voting at the Meeting were in compliance with the requirements of the Company Law, the articles of association of the Company and other related laws, regulations and governing documents and the resolutions are valid. After careful consideration by the attending directors, the following resolutions were passed at the meeting:

I. The supplemental agreement of the “Agreement of Acquisition of the white goods assets of Qingdao Hisense Air-Conditioning Company Limited with New Shares (A Shares) by Hisense Kelon Electrical Holdings Company Limited” was

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passed with 3 affirmative votes, 0 dissenting votes and 0 abstaining votes, to terminate the “Agreement of Acquisition of the white goods assets of Qingdao Hisense Air-Conditioning Company Limited with New Shares (A Shares) by Hisense Kelon Electrical Holdings Company Limited” dated 28 December 2007 entered into between the Company and Qingdao Hisense Air-Conditioning Company Limited (“Qingdao Hisense”) ;

II. The “Framework Agreement of Acquisition of the White Goods Assets of Qingdao Hisense Air-Conditioning Company Limited with New Shares (A Shares) by Hisense Kelon Electrical Holdings Company Limited” was passed with 3 affirmative votes, 0 dissenting votes and 0 abstaining votes; and

III. The “Proposal of Acquisition of Assets through Issue of New Shares (A Shares) by Hisense Kelon Electrical Holdings Company Limited to Selected Entities and Connected Transaction” was passed with 3 affirmative votes, 0 dissenting votes and 0 abstaining votes.

Relevant information in connection with the above resolutions (which contains certain information required under Standards on the Content and Form of Information Disclosure by Companies with Publicly Offered Securities No. 26 - Application Documentation Regarding Reorganization of Material Assets of Listed Companies (公开发行证券的公司信息披露内容与格式准则第 26 号上市公司重大资产重组申 请文件)) is set out as follows:

(I) PROSPOSAL FOR THIS TRANSACTION

1. Summary of the transaction

The Company proposes to purchase the white goods assets of Qingdao Hisense, the substantial shareholder of the Company, including the manufacture and marketing of refrigerators and air-conditioners by way of private issuance of the A-shares of the Company in order to improve the quality of the Company’s assets, enhance its profitability and sustainable development.

2. Subject matter of the transaction

It includes 100% equity interests in Hisense (Shandong) Air-conditioning Company Limited (“Hisense Shandong”), 51% equity interests in Hisense Zhejiang Air-conditioning Company Limited (“Hisense Zhejiang”), 55% equity interests in Hisense (Beijing) Electric Company Limited (“Hisense Beijing”), and assets of Qingdao Hisense Marketing Company Limited (“Hisense Marketing”) for sales and

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marketing of the white goods products (“Hisense Marketing Business”)(together the “Target Group”) held by Qingdao Hisense.

3. Proposed price of the transaction

The proposed price of the Target Group shall not exceed RMB1,600 million. The final price shall be determined by the Company and Qingdao Hisense after arm’s length negotiation and taking into account various factors and with reference to the valuation of the Target Group by an asset valuer possessing securities business qualifications. These factors include but are not limited to: the financial and business positions and prospects of the Target Group, transactions of similar companies on the market, and the interests of the shareholders of both A shares and H shares.

4. Payment method

In respect of the consideration for the acquisition of the Target Group, the Company intends to issue up to 280,220,000 (inclusive) domestic-listed Renminbi ordinary shares (A shares) of RMB1 each (“Consideration Shares”) to Qingdao Hisense.

5. Issue price

The issue price of RMB5.71 per Consideration Share which was determined with reference to the arithmetic average of the weighted average trading price of the A shares of the Company for the 20 trading days immediately preceding the date of this announcement.

6. Lock-up period arrangements

Qingdao Hisense has undertaken that the new A shares of the Company received for this private issue should not be transferred within 36 months from the date of registration of the shares under its name. The Company’s shares originally held by it and the Consideration Shares should be re-locked up for 36 months from the date of registration of the shares under its name and should not be transferred.

7. Listing arrangements

The Consideration Shares shall be listed on the Shenzhen Stock Exchange.

8. The transaction constitutes a connected transaction

Qingdao Hisense holds 23.15% of the shares of the Company and is the substantial shareholder of the Company. This acquisition of the white goods assets (including refrigerators, air-conditioners and marketing business) of Qingdao Hisense by way of private issuance of A shares to Qingdao Hisense by the Company constitutes a

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connected transaction.

9. Matters for Submission and Approval Involved in this Transaction

(1) The valuation of the Target Group shall be filed with the Tsingdao State-owned Assets Supervision and Administrative Committee.

(2) Pursuant to the requirements of the “Management Method on Significant Assets Reorganization of Listing Companies” of the China Securities Regulatory Commission (Order No. 53 of CSRC), this transaction is subject to approval by the China Securities Regulatory Commission. Upon completion of this private issue, the equity interests held by Qingdao Hisense will exceed 30% of the total share capital of the Company, which will trigger the takeover obligation. Pursuant to the requirements under item 3 of paragraph 1 of Article 62 of the “Management Method on Acquisitions of Listed Companies” and other related requirements, this transaction is exempted from making a general offer subject to the approval by the China Securities Regulatory Commission.

(3) Pursuant to the Code on Takeovers and Mergers of the Securities and Futures Commission of Hong Kong, the issue of shares for assets acquisition may trigger a takeover obligation for Qingdao Hisense and parties acting in concert with it. Should a formal agreement is entered into by the Company and Qingdao Hisense and an obligation to make a mandatory offer is triggered, Qingdao Hisense and parties acting in concert with it shall obtain from the Securities and Futures Commission of Hong Kong a whitewash waiver from the mandatory general offer obligation for Qingdao Hisense and parties acting in concert with it pursuant to the Code on Takeovers and Mergers.

(4) This issue of shares for assets acquisition by the Company is subject to the approval by the Ministry of Commerce of the PRC.

(II) TARGET GROUP INVOLVED IN THIS TRANSACTION

1. The Target Group of this transaction do not involve submission and approval of matters including registration, environmental protection, industry admittance, use of land, planning, and construction.

2. Qingdao Hisense legally possesses 100% equity interests in Hisense Shandong, 51% equity interests in Hisense Zhejiang, 55% equity interests in Hisense Beijing. These equity interests are free from charges and other third party rights or other

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contracts or agreements restricting transfer, and are not subject to restrictions of transfer such as closing down, freezing and custody. Also, there do not exist situations of overrated contribution or situations that affect the legal sustainability of the enterprises.

1. The white goods marketing assets are currently legally owned by Qingdao Hisense Marketing, a wholly-owned subsidiary of Qingdao Hisense. Qingdao Hisense has agreed to acquire the white goods marketing assets of Qingdao Hisense Marketing upon entering into the formal agreement of this transaction and directly transact with the Company. The right of those assets are legally owned and do not exist restrictions of transfer under the laws, regulations and other requirements. Also, there do not exist situations that damage the interests of third parties.

2. Among the Target Group proposed to be acquired, 8 refrigerator patents in use by Hisense Beijing, 27 air-conditioner patents and 74 air-conditioner software copyrights in use by Hisense (Shandong) have not completed the procedures of registration. Qingdao Hisense has undertaken to register the abovementioned intellectual property rights under the corresponding asset-owning units before the convening of general meeting by the Company to approve this acquisition by way of issue of new shares. The abovementioned intellectual property rights shall be used at nil consideration by Hisense Shandong and Hisense Beijing until completion of registration under the name of the asset-owning units.

This transaction will be beneficial to the integrity of the assets of the listed company, and to the independence of the listed company in respect of its staff, purchasing, production, sale, intellectual property rights and other aspects.

(III) SUMMARY OF THE FRAMEWORK AGREEMENT OF THIS TRANSACTION

The Company and Qingdao Hisense signed the “Framework Agreement of Acquisition of the White Goods Assets of Qingdao Hisense Air-Conditioning Company Limited with New Shares (A Shares) by Hisense Kelon Electrical Holdings Company Limited” with conditions precedent on 19 May 2008, pursuant to which the Company and Qingdao Hisense will use their best endeavours to negotiate and enter into a formal agreement in relation to the acquisition of the Target Group. Save as the aforementioned, the Company has no other legal obligation under this framework agreement. The acquisition may or may not proceed. The Company will make further announcement in accordance with the requirements of the Listing Rules and

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Code on Takeovers and Mergers (if applicable) upon any formal agreement being reached and entered into.

Some of the major principles of the framework agreement are as follows:

1. Target Group

The Target Group of which the Company agreed to acquire and Qingdao Hisense agreed to sell are the interests in air conditioners, refrigerators and assets in relation to marketing legally owned by Qingdao Hisense. Details of such assets are as follows:

• (1) Interests in air-conditioners -

• 100% equity interests in Hisense Shandong

• 51% equity interests in Hisense Zhejiang

• －

• (2) Interests in refrigerators 55% equity interests in Hisense Beijing

• －

• (3) Assets in relation to marketing the Hisense Marketing Business

2. Basis of pricing and consideration

(1) Basis of pricing

The basis of pricing of these Target Group to be acquired by the Company by way of new shares were determined after arm’s length negotiation after taking into account various factors including, but not limited to, the financial and business positions and prospects of the Target Group, transactions of similar companies in the market, the valuation of the Target Group by asset valuer possessing securities business qualifications and the interests of the shareholders of both A shares and H shares.

In this regard, both parties are required to audit and assess the subject matters contemplated under this transaction in accordance with the relevant requirements of China Securities Regulatory Commission, Shenzhen Stock Exchange, the Securities and Futures Commission of Hong Kong and the Stock Exchange of Hong Kong. Both parties shall determine the consideration of this transaction based on such audit and assessment and the abovementioned basis, and shall sign a formal agreement to formally determine the consideration as the consideration of this transaction.

(2) The range of consideration

Both parties agreed that the consideration of the Target Group would not exceed RMB1,600 million.

Both parties agreed that if the audited net book value of the Target Group on the completion date is lower than the audited pro forma net assets value on the transaction benchmark date, Qingdao Hisense shall make up the difference in cash. On the

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contrary, the Company does not need to pay the excess amount to Qingdao Hisense in cash. The accounting principles adopted in the audit is the accounting principles generally accepted in the PRC.

The calculation of the difference is: the audited net book value of the Target Group － on the completion date the audited pro forma net book value of the Target Group on the transaction benchmark date.

(3) Transaction Benchmark Date

Both parties agreed that the benchmark date for determining the assets value of the Target Group would be 30 April 2008.

3. Payment method

The consideration to be paid by the Company for purchasing the Target Group will be satisfied by the allotment and issuance of not more than 280,220,000 A shares of the Company of RMB1 each to Qingdao Hisense. The issue price was determined with reference to the arithmetic average of the weighted average trading price of the A shares of the Company for the 20 trading days immediately preceding to the Company’s suspension of trading of A shares on 14 May 2008, being RMB5.71 per Consideration Share.

4. Conditions precedent

The transaction is conditional upon the approvals by the board of the Company, general meeting, class meeting of both A shares and H shares, China Securities Regulatory Commission and the Ministry of Commerce of the PRC.

5. Lock-up period

Qingdao Hisense agreed that the new A shares of the Company received for this private issue should not be transferred within 36 months from the date of registration of the shares under its name. The Company’s shares originally held by it and the Consideration Shares should be re-locked up for 36 months from the date of registration of the shares under its name and should not be transferred.

6. Transitional period

(1) Both parties agreed that during the transitional period (from the benchmark date mentioned above to the completion of the transfer of Target Group to the Company), the revenue generated from the Target Group would be attributable to the Company, while the losses would be borne by Qingdao Hisense.

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(2) Both parties agreed that during the transitional period, Qingdao Hisense shall still operate and manage the Target Group on normal terms. Qingdao Hisense shall maintain the reputation and operation of the Target Group to be free from adverse effects during the transitional period.

(IV) EFFECTS OF THIS TRANSACTION ON THE COMPANY

1. Beneficial for the elimination of competition between the Company, Qingdao Hisense and its ultimate controller Hisense Group

Upon completion of this reorganization, the high quality white goods assets owned by Qingdao Hisense and its ultimate controller Hisense Group would all be injected to the Company. To a certain extent, the white goods assets of Hisense Group would be entirely listed. After the reorganization, the entire white goods businesses of Hisense Group including air conditioners and refrigerators would be operated under the group of the Company. The white goods assets of Hisense Group will be injected into the Company and Hisense Group will not own any white goods assets. The other businesses of Hisense Group (multimedia business such as televisions, communications business and real estate businesses) would not be competing with the Company and would not have common core business and assets with the Company. Of which, the core business of multimedia business such as televisions of the listed company Hisense Electric Co. Ltd. under the Hisense Group would be substantially different from the white goods businesses such as refrigerators and air conditioner of the Company in terms of State’s industry category and management, product upstream supply chain, product production methods, product technologies, product services and other major categories. This reorganization involves injection of the refrigerator business to the Company by Hisense Electric Co., Ltd. which would fundamentally eliminate the competition between Qingdao Hisense and Hisense Group and the Company.

At the same time, both Qingdao Hisense and its ultimate controller Hisense Group have undertaken not to participate or engage in any air conditioner, refrigerator and other businesses which is same as or similar to that of the Company upon completion of this reorganization, in order to avoid competition with the Company in the future.

2. Beneficial for the elimination of the large amount of connected transactions between the Company and Qingdao Hisense and its ultimate controller Hisense Group

Given the current situation of the Company, a large part of the sourcing, sales and

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other production and operation activities of the Company was made through the sourcing system and marketing channels of Qingdao Hisense, which has led to a large amount of connected transactions between the Company and Qingdao Hisense.

Upon completion of this reorganization, the injection of the white goods assets of Qingdao Hisense into the Company would significantly reduce the amount of existing connected transactions. Of which, connected transactions between in connection of sourcing for white goods businesses would be fundamentally eliminated; connected transactions in connection of reinforcing the advantages of regional production capacity coverage and mutual licensed processing would be entirely eliminated; as to connected transactions in connection to the marketing of white goods, this reorganization would separate Qingdao Hisense Marketing from the domestic marketing channels and assets of the white goods and inject it to the Company. Upon completion of the separation and injection, apart from the Company, there would be no other companies or assets engaged in the domestic marketing business of white goods under the Hisense Group, and the original domestic marketing channels and assets of the Hisense Group and the original marketing channels and assets of the Company would be restructured to form a new marketing system which would be independent from the multimedia marketing channels and the domestic marketing channels of other products of the Hisense Group (which Hisense Electric Co., Ltd. would belong to). As a result, upon completion of this reorganization, connected transactions between Hisense Group and the Company in connection to the domestic marketing business would be entirely eliminated.

In respect of international marketing, given that the Company only has a single OEM business in the area of international marketing without any resources or channels for self-branded exports, in an effort to explore new markets and new clients for its self-branded export business and in accordance to the development plans of the Company, it was approved on the Company’s general meeting that starting from the end of 2007, the Company would cooperate with Hisense Group in its self-branded export business to borrow the long-established self-branded international marketing platform of Hisense Group to cover for the short fall due to the lack of self-branded channel and resources, with the objective to expand the international market and further increase its scale of operation. As such, upon completion of this reorganization, there would still be a certain amount of connected transactions between Hisense Group and the Company in respect of international marketing.

Upon completion of this reorganization, the Company would stringently regulate the unavoidable connected transactions with Qingdao Hisense and its associates, determine the considerations of which on the fair, open and just principles, and timely

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observe the information disclosure responsibilities. At the same time, Qingdao Hisense and its ultimate controller Hisense Group have both undertaken to further regulate and minimize future unavoidable connected transactions that might be entered into with the Company in the future.

3. Beneficial for solving the risk of continuing operation faced by the Company, and enhancing the Company’s asset quality, profitability and sustainable development

Since the takeover of the Company by Qingdao Hisense, the Company has started to free itself from the risk of liquidation after 2 years’ efforts under the support of Qingdao Hisense, but its capacity of continuing operation is still relatively fragile with relative weaknesses in asset quality, profitability and sustainable development.

Through this significant asset reorganization, Qingdao Hisense would inject its entire quality white goods assets into the Company, which not only would effectively solve the risk of continuing operation faced by the Company, but also augment the pragmatic operation of its core businesses, enhance its asset quality and profitability, and promote the Company’s sustainable development, in line with the interests of the Company and all the shareholders.

(V) PRIOR RECOGNITION AND INDEPENDENT OPINION OF THE INDEPENDENT NON-EXECUTIVE DIRECTORS ON THIS TRANSACTION

The independent non-executive directors of the Company have seriously reviewed the “Proposal of Acquisition of Assets through Issue of New Shares (A Shares) by Hisense Kelon Electrical Holdings Company Limited to Selected Entities and Connected Transaction” and the related information before agreeing to the submission of the proposal to the Board of the Company for consideration.

Pursuant to the related laws, regulations of the PRC, the related requirements of the China Securities Regulatory Commission and the requirements of the Articles of Association of the Company, the independent non-executive directors of the Company issue the following opinions on this proposed transaction:

1. This proposed transaction not only can effectively resolve the concern of ongoing operation of the Company, it will also strengthen the principal businesses of the Company, enhance its asset quality and profitability, improve the sustainability of the Company, and therefore is in the interests of the Company and all shareholders as a whole;

2. While the board of directors of the Company was considering the related

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resolutions, the connected Directors have all abstained from voting. This is in accordance with the relevant provisions of laws, regulations and the memorandum of association of the Company; and

1. The independent non-executive directors agree to the arrangements of the Board in respect of the acquisition of assets through issue of new shares (A shares) by the Company to the substantial shareholder, Qingdao Hisense and the connected transaction.

B. INFORMATION OF THE TARGET GROUP

1. Hisense Shandong

a. Basic Information

Name: Hisense Shandong

Address: Qingdao Pingdu Nanzhen Resident Hisense Road No.1 Authorized Representative: Wang Zhi Lei

Registered Capital: RMB 500,000,000

Corporate Nature: Single person company with limited liability

Scope of Business: Research and development, manufacture and sale of air-conditioning products and plastic injection moulds and provision of after-sales services for products

Term of Operation: 8 November 2007 to 7 November 2017

b. History

On 8 November 2007, Qingdao Hisense established Hisense Shandong in cash of RMB 150 million by way of foreign investment. On 27 November 2007, Qingdao Hisense increased the registered capital of Hisense Shandong to RMB500 million through the injection of all operating assets of Pingdu Plant including all land, plants and machinery and equipment. Upon completion of the capital increase, Qingdao Hisense and Hisense Shandong entered into a debt transfer agreement, pursuant to which Qingdao Hisense transferred its operating assets (including liabilities) in relation to the production and sale of air-conditioners to Hisense Shandong. The parties also entered into a debt transfer agreement with a third party. As such, Hisense Shandong has taken over all businesses of air-conditioner production and sales.

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c. Shareholding Structure

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Qingdao Hisense
100%
Hisense Shandong
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d. Major Financial Information

Pro Forma Combined Financial Information of Hisense Shandong for the three years ended 31 December 2007 based on the PRC accounting standards

	31 December 2007 (RMB)	31 December 2006 (RMB)	31 December 2005 (RMB)
Total assets	901,549,747.21	906,421,077.42	1,069,521,855.70
Total liabilities	409,491,239.35	505,339,241.99	719,051,029.18
Shareholders’ interest	492,058,507.85	401,081,835.43	350,470,826.52
	2007	2006	2005
Operating income	2,829,759,711.43	2,480,726,863.52	3,187,437,814.60
Operating profit	49,963,198.97	67,272,802.43	34,419,847.21
Profit	86,735,720.19	81,444,300.54	52,938,333.07
Net profit	58,112,932.53	51,653,137.33	48,588,195.17

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(Note: The 2007 figures are unaudited)

e. There is no fraudulent capital contribution in Hisense Shandong nor other circumstances affecting the its legal existence.

2. Hisense Zhejiang

a. Basic Information

Name: Hisense Zhejiang

Address: Changxing County Economic and Technology Development Zone, north of Central Avenue

Authorized Representative: Wang Shi Lei

Registered Capital: RMB 110,000, 000

Corporate Nature: Company with limited liability (foreign funded enterprises)

Scope of Business: Production of air-conditioners and manufacture and sale of other household appliances, provision of related technical services, and import and export of goods and technologies.

Term of operation: 22 April 2005 to 21 April 2020

b. History

On 8 April 2005, Qingdao Hisense and Zhejiang Xianke Electrical Appliance Manufacturing (“Zhejiang Xianke”) jointly established Hisense (Zhejiang) as a joint venture company with a registered capital of RMB 110,000,000. Qingdao Hisense contributed a total of RMB 56,100,000, of which RMB 34,100,000 was made in cash and RMB 22,000,000 by injecting the intangible assets, representing 51% of the registered capital of Hisense Zhejiang; and Zhejiang Xianke made its contribution of RMB 53,900,000 in specie, including land, plants and equipments and machinery, representing 49% of the registered capital of Hisense Zhejiang.

c. Shareholding Structure

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Qingdao Hisense Zhejiang Xianke
51% 49%
Hisense Zhejiang
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d. Major Financial Information

Major Financial Information of Hisense Zhejiang for the three years ended 31 December 2007 based on the PRC accounting standards

	31 December 2007	31 December 2006	31 December 2005
	(RMB)	(RMB)	(RMB)
Total assets	257,207,324.07	173,392,569.32	113,627,678.41
Total liabilities	153,159,026.16	78,939,753.14	9,471,417.39
Shareholders’
	104,048,297.91	94,452,816.18	104,156,261.02
interest
	2007	2006	2005
Operating income	690,812,561.72	267,557,234.81	111,069,305.78
Operating profit	6,827,389.62	-9,950,259.48	-5,841,433.21
Profit	10,180,610.55	-9,703,444.84	-5,843,738.98
Net profit	9,595,481.73	-9,703,444.84	-5,843,738.98

(Note: The 2007 figures are unaudited)

e. Details of consent of the other shareholder on equity transfer and waiver of first

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right of refusal

During the negotiation of the proposal for acquisition of the Target Group, Zhejiang Xianke, the other shareholder of Hisense Zhejiang, has not yet offered its written consent to Qingdao Hisense’s transfer of its equity interest in Hisense Zhejiang to the Company and the waiver of the first right of refusal.

f. There is no fraudulent capital contribution in Hisense Zhejiang nor other circumstances affecting the its legal existence.

3. Hisense Beijing

a. Basic Information

Name: Hisense Beijing

Address: Beijing Daxing District Qingyuan Road No.36

Authorized Representative: Su Yu Tao

Registered Capital: RMB85,710,000

Corporate Nature: Company with limited liability

Scope of Business: Manufacture and sale of refrigerator products and other household appliances; operation of the export business of self-produced products and technologies of the enterprise and other member enterprises; import business of the raw materials, machinery and facilities, equipment and apparatuses, parts and technologies required for the production processes of the enterprise and its member enterprises (except goods and technologies operated by enterprises specified by the government or prohibited for import and export ); operation of raw materials processing and compensation trade.

• b. History

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On 18 May 2002, Hisense Group and Beijing Xuehua Group Company Limited (北京 雪花集團有限公司) (“Xuehua Group”) jointly established Hisense Beijing as a joint venture company with a registered capital of RMB 85,710,000. Hisense Group contributed a total of RMB 47,140,500, including cash and intangible assets, representing 55% of the registered capital of Hisense Beijing; and Xuehua Group made its contribution of RMB 38,561,600 in specie, including land and equipment, representing 45% of the registered capital of Hisense Beijing.

On 12 September 2002, Hisense Group transferred all of its 55% equity interest in Hisense Beijing to Hisense Electric.

On 12 October 2007, the transfer of the 55% equity interest in Hisense Beijing to Qingdao Hisense was approved at the shareholders’ general meeting of Hisense Electric.

c. Shareholding Structure

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Qingdao Hisense Xuehua Group
55% 45%
Hisense Beijing
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• d. Major Financial Information

Major Financial Information of Hisense Beijing for the three years ended 31

December 2007 based on the PRC accounting standards

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	31 December	31 December	31 December
	2007	2006	2005
	(RMB)	(RMB)	(RMB)
Total assets	566,465,059.92	412,504,342.70	424,023,128.72
Total liabilities	378,092,912.58	221,165,080.56	272,046,297.12
Shareholders’
	188,372,147.34	191,339,262.14	151,976,831.60
interest
	2007	2006	2005
Operating
	1,716,163,585.05	1,406,966,015.64	1,032,490,227.84
income
Operating profit	31,078,214.40	23,390,810.61	19,659,284.84
Profit	38,489,169.71	26,867,709.23	23,716,485.99
Net profit	25,852,688.23	20,117,830.54	22,074,553.66

(Note : The 2007 figures are unaudited)

• e. Details of consent of the other shareholder on equity transfer and waiver of first right of refusal

During the negotiation of the proposal for acquisition of the Target Group, Xuehua Group, the other shareholder of Hisense Beijing, has not yet offered its written consent to Qingdao Hisense’s transfer of its equity interest in Hisense Beijing to the Company and the waiver of the first right of refusal.

• f. There is no fraudulent capital contribution in Hisense Beijing nor other circumstances affecting the its legal existence.

4. Hisense Nanjing

• a. Basic Information

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Name: Hisense (Nanjing) Electric Company Limited

Authorized Representative: Su Yu Tao

Registered Capital: RMB 128,691,500

Scope of Business: Research and development, manufacture, sale and marketing of chlorine-free freezing products. Import and export business for self-operation and agency business of various goods and technologies (except goods and technologies operated by enterprises specified by the State or prohibited for import and export).

b. History

Hisense Nanjing was established by Hisense Beijing and Nanjing Suning High-Tech Industrial Park Co., Ltd. (“Nanjing Suning”) on 18 November 2004 as a joint venture company with a registered capital of RMB 80,580,000, of which Hisense Beijing contributed the monetary assets of RMB 36,260,000 and the non-patent technologies of RMB 12,090,000, representing 60% of the registered capital of Hisense Nanjing; and Nanjing Suning made its contribution of RMB 32,230,000 through the injection of land use rights, representing 40% of the registered capital of Hisense Nanjing.

On 21 October 2005, Nanjing Yilaite High-tech Industrial Park Co., Ltd. (南京伊莱特 高新科技工业园有限责任公司) (Nanjing Suning was renamed as “Nanjing Yilaite High-tech Industrial Park Co., Ltd.” on 1 August 2005, hereinunder referred to as “Nanjing Yilaite” ) entered into the Equity Transfer Agreement with Nanjing Aipulaisi Hi-tech Co., Ltd. (“Nanjing Aipulaisi”) , pursuant to which Nanjing Yilaite transferred its 40% equity interest in Hisense Nanjing to Nanjing Aipulaisi at a consideration of RMB 9,500,000. Such company has completed the procedure for the change of the industrial and commercial registration on 9 November 2005.

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On 20 August 2006, Hisense Beijing and Nanjing Aipulaisi entered into the “Hisense (Nanjing) Electric Company Limited Phase 2 Capital Injection Agreement”, pursuant to which, Hisense Beijing made an additional capital contribution to Hisense Nanjing in cash of RMB 21,650,200 and with intangible assets of RMB 7,216,700; and Nanjing Aipulaisi made its contribution of RMB 19,246,700 by injecting machinery and equipment. Upon completion of the capital increase, the registered capital of Hisense Nanjing increased to RMB 128,691,500 and the shareholding proportion between the shareholders remained unchanged.

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c. Shareholding Structure

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Hisense Beijing Nanjing Aipulaisi
60% 40%
Hisense Nanjing
----- End of picture text -----

d. Major Financial Information

Major Financial Information of Hisense Nanjing for the three years ended 31 December 2007 based on the PRC accounting standards

	31 December	31 December	31 December
	2007	2006	2005
	(RMB)	(RMB)	(RMB)
Total assets	334,025,376.49	262,984,998.72	220,012,446.84
Total liabilities	187,435,357.64	126,782,836.64	137,117,613.84
Shareholders’
	146,590,018.85	136,202,162.08	82,894,833.00
interest
	2007	2006	2005
Operating
	782,458,280.94	557,925,096.88	218,875,261.33
income
Operating profit	21,031,166.19	8,274,361.55	4,094,906.12
Profit	22,567,994.88	7,596,983.00	3,956,765.33
Net profit	14,977,856.77	5,195,829.08	2,314,833.00

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(Note : The 2007 figures are unaudited)

e. Details of Consent of the Other Shareholder on Equity Transfer and Waiver of First Right of Refusal

Upon completion of the acquisition of the Target Group, the Company will hold 55% equity interest in Hisense Beijing, and thus indirectly hold 60% equity interest in Hisense Nanjing. The Company is not required to obtain the approval from the other shareholder of Hisense Nanjing for the waiver of the first right of refusal.

f. There is no fraudulent capital contribution in Hisense Nanjing nor other circumstances affecting the its legal existence.

5. Hisense Marketing Business

The marketing businesses of Hisense is mainly operated by Hisense Marketing. The Hisense marketing assets proposed to be acquired in the transaction include White Goods household appliances assets. At present, Hisense Marketing has over 56 marketing branches and over 10,000 sales points nationwide with high sales capacity.

a. Basic Information of Hisense Marketing

Name: Hisense Marketing

Address: Hisense Information Industrial Park, No. 18 Unity Road, Qingdao Economic and Technological Development Zone

Authorized Representative: Yang Yun Duo

Registered Capital: RMB 30,000,000

Corporate Nature: Limited liability company

Scope of Business: Production and sale of household appliances, electronic products and communication products; development of technologies; and provision of related services. (the operation of the businesses mentioned above are subject to the relevant

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approvals)

Date of Incorporation: 21 July 2003

b. History

On 11 July 2003, Hisense Marketing was jointly established by Hisense Electric and a natural person Mr. Yang Yun Duo with a registered capital of RMB 5,000,000, of which Hisense Electric contributed RMB 4,500,000 in cash, representing 90% of the total capital contribution and Mr. Yang Yun Duo contributed RMB 500,000 in cash, representing 10% of the total capital contribution.

In November 2003, Hisense Marketing increased the registered capital of Hisense Marketing to RMB 30,000,000 by way of capital injection and share capital enlargement, under which Hisense Electric injected an additional capital of RMB 16,450,000, representing 71.5% of the registered capital of Hisense Marketing upon completion of the capital increase; and 43 senior operation and management staff including Shi Yong Chang jointly contributed RMB 8,050,000, representing 28.5% of the registered capital of Hisense Marketing upon completion of the capital increase.

On 30 September 2007, all shareholders of Hisense Marketing transferred a 100% equity interest in Hisense Marketing to Qingdao Hisense. Thereafter, Hisense Marketing has become a wholly-owned subsidiary of Qingdao Hisense.

c. Major Financial Information

Major Financial Information of the white good business of Hisense Marketing for the three years ended 31 December 2007 based on the PRC accounting standards

31	December	31	December	31	December
	2007		2006		2005

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	(RMB)	(RMB)	(RMB)
Total assets	1,127,290,012.19	1,203,794,454.82	1,110,810,858.79
Total liabilities	1,188,975,751.12	1,282,683,835.56	1,187,589,279.79
Shareholders’
	-61,685,738.93	-78,889,380.74	-76,778,421.00
interest
	2007	2006	2005
Operating
	4,035,721,992.27	4,063,766,091.63	3,383,893,011.40
income
Operating profit	-3,227,658.01	-13,170,537.98	88,953,569.11
Profit	17,515,015.06	-1,874,188.08	94,982,249.06
Net profit	17,203,641.81	-2,110,959.74	65,612,438.69

(Note : The 2007 figures are unaudited)

6. Pro Forma Combined Financial Information of the Target Assets

The pro forma combined financial information of the Target Group for the last three years prepared based on the PRC accounting standards is set out in the table below:

	31 December	31 December	31 December
	2007	2006	2005
	(RMB’000)	(RMB’000)	(RMB’000)
Total assets 2,322,671.1 2,214,980.5 2,275,264.6
Total liabilities 1,661,029.8 1,648,937.1 1,786,858.7
Equity attributable to the owners of the parent 493,640.3 403,694.4 350,742.9

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company
Total
shareholders’			661,641.2	566,043.4	488,405.9
equity
			2007	2006	2005
Operating			5,540,846.6	4,924,837.2	4,672,692.4
income
Operating	profit		65,430.3	67,021.3	116,261.8
Net profit			91,553.9	59,435.1	109,502.0
Net	profit
attributable		to
the owners		of	71,923.3	53,993.7	101,922.6
the	parent
company

(Note : the 2007 figures are unaudited)

1. Valuation of the Target Group

The Company has engaged an asset valuer possessing securities business qualifications to valuate the Target Group and the related valuation work is in the process.

The proposed price of the Target Group shall not exceed RMB1,600 million which shall be determined by the Company and Qingdao Hisense after arm’s length negotiation and with reference to the valuation of the Target Group and other factors include but are not limited to the financial and business positions and prospects of the Target Group, transactions of similar companies on the market, and the interests of the shareholders of both A shares and H shares.

1. Future Profitability of the Target Group

The Hisense white goods assets proposed to be acquired have a sound profitability. In

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2008, the growth of the overall production and sales of the Hisense white goods assets is expected to be over 20%, and the proportion of high-end products with high profitability is expected to continues to increase. The proportions of high-end products with high profitability such as air-conditioners and refrigerators are over 40% and 25% respectively. The high-end products such as air-conditioners continue to stay in a leading position in the PRC. It is expected that the results of Hisense white goods will keep a sound growth as compared with the year of 2007.

Upon the reorganization, the operating scale of refrigerators and air-conditioners businesses of the Company will substantially increase with exerting the advantages of its scale of operation and industrial competitiveness. As a result, the overall profitability of the Company will be further enhanced.

Trading in the H Shares of the Company

At the request of the Company, trading in the H Shares of the Company was suspended from 28 April 2005 to 10 May 2005, and has remained suspended since 10:00 a.m. on 16 June 2005, initially following various press releases regarding the investigation by the China Securities and Regulatory Commission on Greencool Technology Holdings Limited in connection with the possible misappropriation of funds of the Company. Greencool Technology Holdings Limited was then an indirect shareholder of the Company controlled by Mr. Gu Chu Jun, who was the then executive director and chairman of the Company and the controlling shareholder of Guangdong Greencool Enterprise Development Company Limited, the then single largest shareholder of the Company.

The Company has reviewed the relevant documents in relation to the suspension of H Shares, the events leading to such suspension and the actions taken by the Company and has submitted a resumption proposal to the Stock Exchange for review. The Company is currently providing further information regarding its resumption proposal to the Stock Exchange for its consideration.

By order of the Board of

Hisense Kelon Electrical Holdings Company

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Limited Tang Ye Guo Chairman

Foshan City, Guangdong, the PRC, 28 May 2008

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

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