Medlive Technology Co., Ltd. - Capital/Financing Update 2009

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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 9TH MEETING OF 2009 OF THE SIXTH BOARD OF DIRECTORS

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 “Stock Exchange”).

A. RESOLUTIONS PASSED AT THE 9TH MEETING OF 2009 OF THE SIXTH BOARD OF DIRECTORS

The sixth board of directors (the “Board”) of Hisense Kelon Electrical Holdings Company Limited (hereinafter referred to as “Hisense Kelon” or the “Company”) convened its 9th meeting of 2009 (the “Meeting”) by way of written resolutions on 8 May 2009. Out of the 9 directors who should attend the Meeting, 9 directors attended. The connected directors, namely Mr. Tang Ye Guo, Mr. Zhou Xiao Tian, Ms. Yu Shu Min, Mr. Lin Lan, Ms. Liu Chun Xin and Mr. Zhang Ming, abstained from voting on the resolutions set out below. The convening of and the voting at the Meeting were in compliance with the relevant requirements of the Company Law of the People’s Republic of China (the “PRC”) and the Articles of Association of the Company. The following resolutions were passed at the Meeting after careful consideration by the non-connected directors who attended the Meeting:

I. The “Resolution on Prudent Judgment of the Board of Hisense Kelon Electrical Holdings Company Limited Regarding Compliance of the Substantial Asset

Reorganization of the Company with the Requirements of Article 4 of the ‘Provisions on Certain Issues Concerning Regulating the Substantial Asset Reorganizations of Listed Companies’” was considered and passed with 3 affirmative votes, 0 dissenting vote and 0 abstaining vote;

Pursuant to the “Administrative Measures for the Substantial Asset Reorganizations of Listed Companies” (CSRC Order No. 53) and the “Provisions on Certain Issues Concerning Regulating the Substantial Asset Reorganizations of Listed Companies” of the China Securities Regulatory Commission, the Board of the Company made the following judgment on this substantial asset reorganization on a prudential basis with reference to the relevant regulatory opinions:

(I) For the relevant approvals including registration, environmental protection, industry admittance, use of land, planning, and construction required for the subject assets in this transaction, the relevant approval documents had been obtained from the relevant authorities before the announcement on the resolutions considered and passed at the first meeting of the Board for this transaction. For the relevant approvals and filings required for the acts of this transaction, the Company completed the filings and the application for such approvals in accordance with the relevant procedures for filings and approvals and made the relevant special notes regarding the risks so approved.

(II) The assets proposed to be acquired through the issue of shares (A shares) by the Company to selected entities are not subject to any material dispute over ownerships or potential dispute, and are free from any restrictions or prohibitions on transfer.

(III) The assets proposed to be acquired are beneficial for enhancing the completeness of the Company’s assets (including obtaining intangible assets such as trademark rights, patents, non-patent know-how, mining rights and franchises required for production and operation), and for the maintenance of independence of the Company in terms of staff, procurement, production, sale and intellectual property rights.

(IV) This transaction is beneficial for the Company to improve its financial position and strengthen its continued profitability, enhance its principal businesses, enhance its risk management ability, increase its independence, reduce the number of connected transactions and avoid business competition.

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

III. The “Proposal of Acquisition of Assets through Issue of Shares (A Shares) by Hisense Kelon Electrical Holdings Company Limited to Selected Entities and Connected Transaction” was considered and passed with 3 affirmative votes, 0 dissenting vote and 0 abstaining vote. The major content of the proposal is as follows:

I. PROPOSALS FOR THIS TRANSACTION

(I) Summary of private issue

The Company proposes to acquire the white goods assets of Qingdao Hisense Air-conditioning Company Limited (“Qingdao Hisense”), the largest shareholder of the Company, including the manufacture and marketing of refrigerators and air-conditioners, by way of private issue of shares (A shares) in order to improve the quality of the Company’s assets, enhance its profitability and capacity for sustainable development.

(II) Basis of pricing for assets proposed to be acquired by way of private issue

The assets proposed to be acquired include 100% equity interests in Hisense (Shandong) Air-conditioning Company Limited (“Hisense Shandong”), 51% equity interests in Hisense (Zhejiang) Air-condition Company Limited (“Hisense Zhejiang”), 55% equity interests in Hisense (Beijing) Electric Company Limited (“Hisense Beijing”), 49% equity interests in Qingdao Hisense Hitachi Air-conditioning Systems Company Limited (“Hisense Hitachi”), 78.7% equity interests in Qingdao Hisense Mould Company Limited (“Hisense Mould”) and the assets for the sales and marketing of white goods of Qingdao Hisense Marketing Company Limited (“Hisense Marketing”) held by Qingdao Hisense.

The final consideration of the subject assets shall be determined through arm’s length negotiations between the Company and Qingdao Hisense according to the market principle after taking into account various factors, including but not limited to: the transactions of comparable companies in the market, the valuation of subject assets prepared by an asset valuer which is licensed to carry out securities business and filed with the PRC state-owned assets supervision and administration department or the

relevant authority and the interests of the holders of both A shares and H shares of the Company.

(III) Pricing benchmark date, basis of pricing and issue price of private issue shares

The pricing benchmark date of this share issue is the date of this announcement on the relevant resolutions considered and passed at the Meeting of the Board.

Pursuant to the relevant requirements of the “Administrative Measures for the Substantial Asset Reorganizations of Listed Companies” (“Reorganization Measures”) issued by the China Securities Regulatory Commission, the issue price of shares issued by listed companies shall not be less than the average trading price of the A shares of the Company for the 20 trading days immediately preceding the date of this announcement on resolutions of the Board in respect of the issue of shares for the asset acquisition. The formula for the calculation of the average trading price is: Total transaction amount of the A shares of the Company for the 20 trading days immediately preceding the date of the announcement on resolutions of the Board/ Total trading volume of the A shares of the Company for the 20 trading days immediately preceding the date of the announcement on resolutions of the Board.

Accordingly, the price of the Company’s A shares which forms the subject of this private issue is determined as the average trading price of the A shares of the Company for the 20 trading days immediately preceding the pricing benchmark date referred to above, i.e. RMB3.42 per share. Upon occurrence of ex-rights/ ex-dividend events such as dividend distribution, bonus share issue, and capitalization from capital reserve by the Company during the period between the pricing benchmark date of this private issue and the issue date, corresponding adjustments shall be made to the issue price and the number of shares to be issued in accordance with the relevant requirements of the Shenzhen Stock Exchange.

(IV) Number of private issue shares

The number of shares under this issue is determined by the Board of the Company as authorized by the shareholders at the general meeting of the Company based on the actual circumstances. In respect of the subject assets proposed to be acquired, the Company intends to issue a total of not more than 365,500,000 A shares of RMB1 each to Qingdao Hisense.

(V) Lock-up period arrangement

The A shares to be issued privately to Qingdao Hisense shall not be traded or transferred within 36 months from the date of transfer of the shares to its name. After such period, the A shares shall be traded or transferred in accordance with the relevant requirements of the China Securities Regulatory Commission and the Shenzhen Stock Exchange. The Company’s shares originally held by Qingdao Hisense and the shares subscribed under this issue shall be re-locked up for 36 months from the date on which the shares are registered under its name and shall not be transferred.

(VI) Listing arrangement

The A shares to be issued in this transaction shall be listed and traded on the Shenzhen Stock Exchange upon expiry of the lock-up period referred to above.

II. THIS TRANSACTION CONSTITUTES A SUBSTANTIAL ASSET REORGANIZATION AND A CONNECTED TRANSACTION

Pursuant to the relevant requirements of the Reorganization Measures and the Shenzhen Stock Exchange, as this transaction involving the private issue of shares (A shares) by the Company to Qingdao Hisense for the acquisition of its white goods assets constitutes a substantial asset reorganization of listed companies in accordance with the requirements of the China Securities Regulatory Commission, it is subject to the approval from shareholders at the general meeting and the class meetings of the Company, and the approval of the China Securities Regulatory Commission.

Qingdao Hisense currently holds 25.22% of the shares in the total issued share capital of the Company, and is the largest shareholder of the Company. As this transaction involves the private issue of shares (A shares) by the Company to Qingdao Hisense for the acquisition of its white goods assets, including the manufacture and marketing of refrigerators and air-conditioners, this transaction constitutes a connected transaction.

III. THIS TRANSACTION WILL NOT CHANGE THE CONTROL OF THE COMPANY ACCORDING TO RELEVANT LAWS AND REGULATIONS OF THE PRC

Before this transaction, Qingdao Hisense holds 250,173,722 A shares of the Company, representing 25.22% of the total issued share capital of the Company, and is the largest shareholder of the Company. After this transaction, the shareholding of Qingdao Hisense in the Company will increase to up to 45.35%. This transaction will not change the control of the Company according to relevant laws and regulations of the PRC.

IV. APPROVAL PROCEDURES REQUIRED TO BE COMPLETED FOR THIS TRANSACTION

(I) This transaction shall be approved by the PRC state-owned assets supervision and administration department or the relevant authority. The valuation report of the subject assets shall be filed with the PRC state-owned assets supervision and administration department or the relevant authority;

(II) The resolution on this transaction shall be considered and passed at the general meeting of the Company, and the obligation of Qingdao Hisense to acquire the shares of the Company by way of an offer shall be resolved to be waived;

(III) This transaction involving the private issue of shares by the Company for the acquisition of the assets shall be approved by the Ministry of Commerce of the PRC;

(IV) A whitewash waiver for the mandatory general offer made by Qingdao Hisense to the Company shall be granted by the Securities and Futures Commission of Hong Kong, failing which this transaction shall not proceed, and such condition shall not be waived by the parties;

(V) This transaction shall be approved, and the obligation of Qingdao Hisense to acquire the shares of the Company by way of an offer shall be waived, by the China Securities Regulatory Commission.

V. MAJOR CONTENT OF THE FRAMEWORK AGREEMENT OF THIS TRANSACTION

The Company and Qingdao Hisense have entered into the “Framework Agreement for Acquisition of the White Goods Assets of Qingdao Hisense Air-conditioning Company Limited through Issue of New Shares (A Shares) by Hisense Kelon Electrical Holdings Company Limited” setting out the parties’ intention to further

negotiate and enter into a formal agreement in relation to the acquisition of the subject assets. Neither the Company nor Qingdao Hisense has any legal obligations under the Framework Agreement. The Company will make further announcement in accordance with the relevant requirements upon conclusion and signing of the formal agreement. Investors should note that the major content of the Framework Agreement includes:

(I) Subject assets

Hisense Kelon agreed to purchase, and Qingdao Hisense agreed to sell, the subject assets, which include the interests in air-conditioners, interests in refrigerators, interests in moulds and the assets for sales and marketing legally owned by Qingdao Hisense. Details of the subject assets are as follows:

Interests in air-conditioners
(1) 100% equity interests in Hisense Shandong;
(2) 51% equity interests in Hisense Zhejiang;

(3) 49% equity interests in Hisense Hitachi proposed to be acquired by Qingdao Hisense;

Qingdao Hisense shall complete the acquisition of 49% equity interests in Hisense Hitachi before the signing of the formal agreement for this transaction.

Interests in refrigerators

55% equity interests in Hisense Beijing (Hisense Beijing holds 60% equity interests in Hisense (Nanjing) Electric Company Limited (“Hisense Nanjing”)).

Interests in moulds – 78.7% equity interests in Hisense Mould proposed to be acquired by Qingdao Hisense

Qingdao Hisense shall complete the acquisition of 78.7% equity interests in Hisense Mould before the signing of the formal agreement for this transaction.

Assets for sales and marketing – operating assets owned by Hisense Marketing proposed to be acquired by Qingdao Hisense (including liabilities)

Qingdao Hisense shall sign the formal agreement to acquire the assets for the sales and marketing of white goods from Hisense Marketing at the time of signing the formal agreement regarding this transaction, and shall complete the delivery of such assets directly to Hisense Kelon.

(II) Basis of pricing and consideration

1. Basis of pricing

The basis of pricing of this transaction shall be determined through negotiations between both parties according to the market principle after taking into account various factors including, but not limited to, the financial and business positions and development prospects of the subject assets, transactions of comparable companies in the market, the valuation prepared by a valuer which is licensed to carry out securities business and the interests of the holders of both A shares and H shares of the Company.

In this regard, both parties shall engage auditor to conduct the audit and valuer to conduct the valuation of the subject assets involved in this transaction in accordance with the relevant requirements of the China Securities Regulatory Commission and the Shenzhen Stock Exchange, the Securities and Futures Commission of Hong Kong and the Stock Exchange. Both parties shall determine the consideration of this transaction based on the results of the audit and valuation and the abovementioned basis of pricing, and shall sign the formal agreement in relation to the determination of such consideration.

2. Range of consideration

Both parties agreed that the consideration of the subject assets proposed to be acquired shall not exceed RMB1,250,000,000.

Both parties agreed that if the audited net book asset value of the subject assets on the completion date is lower than the audited pro forma net asset value on the transaction benchmark date, Qingdao Hisense shall make up the shortfall in cash. On the contrary, Hisense Kelon is not required to pay the excess amount in cash to Qingdao Hisense. The accounting principles adopted in the audit are the accounting principles generally accepted in the PRC.

The formula for the calculation of the shortfall is: Shortfall = the audited net book asset value of the subject assets on the completion date – the audited pro forma net book asset value of the subject assets on the transaction benchmark date.

3. Transaction benchmark date

Both parties agreed to determine through negotiations the benchmark date for the determination of the value of the subject assets to be acquired.

(III) Payment of consideration

The consideration to be paid by Hisense Kelon for its acquisition of the subject assets shall be satisfied by the issue of not more than 365,500,000 A shares of RMB1 each to Qingdao Hisense. The issue price is the average trading price of the A shares of Hisense Kelon for the 20 trading days immediately preceding the suspension of trading of its shares on 9 April 2009, being RMB3.42 per share.

(IV) Conditions precedent

This transaction is conditional upon the entering into of the formal agreement by both parties and the approvals from the Board of Hisense Kelon, the holders of A shares and H shares at the general meeting and the class meetings of the Company, the China Securities Regulatory Commission and the Ministry of Commerce of the PRC.

(V) Lock-up period of shares

Qingdao Hisense agreed that the new shares of Hisense Kelon to be obtained under this private issue shall not be transferred within 36 months from the date of transfer of the shares to its name and that the shares of Hisense Kelon originally held by Qingdao Hisense shall be re-locked up for 36 months from the date on which the shares are registered under its name and shall not be transferred.

(VI) Transitional period

Both parties agreed that, during the transitional period (from the benchmark date to the completion of the transfer of subject assets to Hisense Kelon), the revenue generated from the subject assets shall be attributable to Hisense Kelon, while the losses shall be borne by Qingdao Hisense.

Both parties agreed that, during the transitional period, Qingdao Hisense shall continue to operate and manage the subject assets as usual. Qingdao Hisense shall maintain the goodwill and operation of the subject assets to be free from any adverse effect during the transitional period.

(VII) Obligations after signing the formal agreement for this transaction and arrangements upon completion

1. Obligations of both parties after signing the formal agreement for this transaction

(1) As this transaction constitutes a substantial asset reorganization of listed companies in accordance with the requirements of the China Securities Regulatory Commission and a notifiable connected transaction in accordance with the requirements of the Stock Exchange, and triggers the obligation to make an offer as required by the China Securities Regulatory Commission and the Securities and Futures Commission of Hong Kong, both parties are required to complete the relevant approval procedures in accordance with the relevant requirements, to obtain the approvals, for this transaction from the relevant authorities, and perform their obligations of information disclosure on a timely basis.

(2) Qingdao Hisense shall be responsible for the filing of the valuation report of state-owned assets required for this transaction.

2. Arrangements upon completion

Both parties agreed that the completion of the sale and purchase of the interests in air-conditioners, interests in refrigerators and interests in moulds shall take place at the relevant administrations for industry and commerce at the places where the relevant companies are situated, while the completion of the sale and purchase of the sales and marketing assets shall take place simultaneously at the venue mutually agreed. Upon completion of the sale and purchase of the sales and marketing assets, Qingdao Hisense shall guarantee that the businesses, staff and clients relating to the sales and marketing assets shall be taken over by Hisense Kelon along with the transfer of the sales and marketing assets, and guarantee to procure the successful amendments to or re-entering into the relevant contracts. Hisense Kelon undertook that by accepting the transfer of the relevant staff relating to the sales and marketing assets under this agreement, it shall assume in full all the rights and obligations of Hisense Marketing under such employment contracts.

(VIII) Representations and undertakings of Qingdao Hisense regarding the subject assets in this transaction

Save as disclosed, Qingdao Hisense warrants that it legally owns the subject assets, and has the complete and valid title and disposal rights of the subject assets when signing the formal agreement. The subject assets are free from any guarantee, security or any other rights of any third party, protected from the exercise of recourse by any third party, and could be legally transferred to Hisense Kelon.
Hisense Shandong, Hisense Zhejiang and Hisense Beijing are companies established and legally existing under the laws of the PRC as independent legal persons with limited liability. Qingdao Hisense had paid up the required registered capital of Hisense Shandong, Hisense Zhejiang and Hisense Beijing without any need for additional or supplemental payment.
The sales and marketing assets are assets legally owned by Hisense Marketing, a wholly-owned subsidiary of Qingdao Hisense. Qingdao Hisense shall obtain the ownership for the sales and marketing assets in accordance with the laws. The ownership of the assets is legal and free from any legal, administrative regulations and other regulatory restrictions on their transfer, and no third party’s interests have been prejudiced.
After the completion of the acquisition of 78.7% equity interests in Hisense Mould and 49% equity interests in Hisense Hitachi by Qingdao Hisense, Qingdao Hisense has paid up the required registered capital of Hisense Mould and Hisense Hitachi without any need for additional or supplemental payment. Such equity interests are not pledged to any third party or attached with any other rights, protected from the exercise of recourse by third party, and can be legally transferred to Hisense Kelon.

V. BASIC INFORMATION OF ASSETS PROPOSED TO BE ACQUIRED

(I) Basic information of assets proposed to be acquired

The Company proposes to acquire the white goods assets, including the manufacture and marketing of refrigerators and air-conditioners, of Qingdao Hisense, details are as follows:

No.	Name of assets proposed to be acquired	Registered capital (RMB’0000)	Type of assets
1	100% equity interests in Hisense Shandong	50,000	Air-conditioning assets
2	51% equity interests in Hisense Zhejiang	11,000	Air-conditioning assets
3	55% equity interests in Hisense Beijing	8,571	Refrigerator assets
4	49% equity interests in Hisense Hitachi	1,210 (US$’0000)	Air-conditioning assets
5	78.70% equity interests in Hisense Mould	2,764.2015	Mould assets
6	Assets for sales and marketing of whitegoods of Hisense Marketing	――	Assets for sales and marketing

Note: The assets proposed to be acquired include 60% equity interests in Hisense Nanjing held by Hisense Beijing.

1. 100% equity interests in Hisense Shandong

1.1. Basic information

Name: Hisense (Shandong) Air-conditioning Company Limited

Address: 1 Hisense Road, Nancun Town, Pingdu, Qingdao

Legal representative: Wang Shi Lei

Registered capital: RMB500,000,000

Corporate nature: Single person company with limited liability (sole corporation)

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

Term of operation: 8 November 2007 to 7 November 2017

1.2. History

On 8 November 2007, Qingdao Hisense established Hisense Shandong in cash of RMB150,000,000 by way of foreign investment. On 27 November 2007, Qingdao Hisense increased the registered capital of Hisense Shandong to RMB500,000,000 through the injection of all of the 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 creditor’s right and debt transfer agreement, pursuant to which Qingdao Hisense transferred its operating assets (including liabilities) in relation to the manufacture and sale of air-conditioners to Hisense Shandong. Both parties also entered into a creditor’s right and debt transfer agreement with a third party. As such, Hisense Shandong has taken over all of the businesses of manufacture and sale of air-conditioners of Qingdao Hisense.

1.3. Shareholding structure

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Qingdao Hisense
100%
Hisense Shandong
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1.4. Operating status

Hisense Shandong was established in November 2007, and took over all of the production business and operations originally owned by Qingdao Hisense. It is principally engaged in the manufacture and sale of household air-conditioners, and the provision of relevant technical services and training. It strives to become a specialized manufacturer and service provider in household air-conditioners with advanced technology and leading production capacity. Hisense Shandong has the biggest and the most advanced production base of inverter air-conditioners in the PRC at present, with an annual production capacity of over 3,000,000 sets. Hisense Shandong achieved a production capacity of air-conditioners of 930,000 sets in 2008.

1.5. Major financial information (based on PRC accounting standards)

Unit: RMB

31 December 2008 31 December 2007 31 December 2006

Items

Total assets	673,844,058.62	873,301,168.54	906,421,077.42
Total liabilities	177,362,845.82	364,951,704.55	505,339,241.99
Total equity	496,481,212.80	508,349,463.99	401,081,835.43
Items	2008	2007	2006
Operating income	1,947,487,071.20	2,829,743,041.55	2,480,726,863.52
Profit from operations	-31,945,303.20	68,651,025.30	67,272,802.43
Profit before income tax	-11,868,251.19	96,941,743.10	81,444,300.54
Profit for the year	-11,868,251.19	64,687,832.06	51,653,137.33

Note: 1. The figures are unaudited

Hisense Shandong was established in November 2007. The financial information for 2006 is the financial information of the original Pingdu Plant of Qingdao Hisense. The financial information for 2007 includes the financial information of Pingdu Plant from January to October, and the financial information of Hisense Shandong in November and December after the injection of operating assets of Pingdu Plant of Qingdao Hisense.

1.6. Status of ownership

The 100% equity interests in Hisense Shandong held by Qingdao Hisense are free from restrictions on transfer such as pledge and freeze order.

1.7. Pre-assessment

The pre-assessment of the 100% equity interests in Hisense Shandong is proposed to be conducted primarily with the cost approach. The appraised book value of the 100% equity interests in Hisense Shandong amounted to RMB537,890,800, and its pre-assessed value based on the cost approach is RMB710,000,000, representing an increase in valuation of 32%.

The increase in valuation of Hisense Shandong is primarily due to the appreciation of buildings and equipment, and the recognition of expenses in moulds-in-use and the recovery of the capitalization of patented technologies with the certificate of patent. The appreciation of buildings and equipment is resulted from the earlier construction and acquisition time with lower cost, as well as the significant increase in costs of labor and materials and machinery utilization fees in recent years, thus resulting in the increase in valuation. Although such book value was adjusted when Hisense Shandong was established in 2007, the degree of adjustment was minimal and there

was no significant change in the original book value. As such, this valuation posted a larger increase.

2. 51% equity interests in Hisense Zhejiang

2.1. Basic information

Name: Hisense (Zhejiang) Air-condition Company Limited

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

Legal representative: Wang Shi Lei

Registered capital: RMB110,000,000

Corporate nature: Company with limited liability (foreign invested enterprise)

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

2.2. History

On 8 April 2005, Qingdao Hisense and Zhejiang Xianke Electrical Appliance Manufacturing Co., Ltd. (“Zhejiang Xianke”) jointly established Hisense Zhejiang as a joint venture company with a registered capital of RMB110,000,000. Qingdao Hisense contributed a total of RMB56,100,000, of which RMB34,100,000 was in cash and RMB22,000,000 was by injection of intangible assets, representing 51% of the registered capital of Hisense Zhejiang; and Zhejiang Xianke made its contribution of RMB53,900,000 in specie, including land, plants and equipment and machinery, representing 49% of the registered capital of Hisense Zhejiang.

On 25 March 2009, Zhejiang Xianke entered into an equity transfer agreement with Changxing Jingwei Construction Development Co., Ltd. (“Changxing Jingwei”),

pursuant to which it was agreed that 49% equity interests in Hisense Zhejiang shall be transferred to Changxing Jingwei at a price of RMB148,000,000, and that 31 March 2009 shall be the settlement date for the shareholders’ interests of both parties. The procedure for the change of the industrial and commercial registration for the above equity transfer has been completed.

2.3. Shareholding structure

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Qingdao Hisense Changxing Jingwei
51% 49%
Hisense Zhejiang
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2.4. Operating status

Hisense Zhejiang is principally engaged in the manufacture of household air-conditioners and the related products. It has equipment such as advanced automatic helium leakage detectors, and is well-equipped with an advanced integrated production and inspection line, a quality assurance system established according to the international quality assurance standards and a sound management system. It is the second largest inverter air-conditioner production base equipped with advanced technology next to Hisense Shandong in the PRC. Through continuous expansion, the production capacity of Hisense Zhejiang will increase to 2,000,000 sets of inverter air-conditioners.

Hisense Zhejiang achieved a production capacity of air-conditioners of 464,100 sets and 475,600 sets in 2007 and 2008 respectively.

2.5. Major financial information (based on PRC accounting standards)

Unit: RMB

Items	31 December 2008	31 December 2007	31 December 2006
Total assets	180,149,571.71	257,263,319.29	173,392,569.32
Total liabilities	80,276,612.48	152,549,328.11	78,939,753.14
Total equity	99,872,959.23	104,713,991.18	94,452,816.18
Items	2008	2007	2006

Operating income	693,022,251.54	690,771,653.34	267,557,234.81
Profit from operations	-9,228,112.25	7,929,787.46	-9,950,259.48
Profit before income tax	-4,789,248.95	11,283,008.39	-9,703,444.84
Profit for the year	-4,841,031.95	10,261,175.00	-9,703,444.84

Note: The figures are unaudited

2.6. Status of ownership

The 51% equity interests in Hisense Zhejiang held by Qingdao Hisense are free from restrictions on transfer such as pledge and freeze order.

2.7. Details of consent of the other shareholders on the equity transfer and the waiver of first right of refusal

Changxing Jingwei has issued the “Consent to Waiver of First Right of Refusal”, consenting to the transfer of equity interests in Hisense Zhejiang to Hisense Kelon by Qingdao Hisense and the waiver of its first right of refusal.

2.8. Pre-assessment

The pre-assessment of the 51% equity interests in Hisense Zhejiang is proposed to be conducted primarily with the cost approach. The appraised book value of the 51% equity interests in Hisense Zhejiang amounted to RMB52,235,600, and its pre-assessed value based on the cost approach is RMB100,000,000, representing an increase in valuation of 91.44%.

The increase in valuation of Hisense Zhejiang is primarily due to the appreciation of buildings, equipment and land. The appreciation of buildings, equipment and land is resulted from the earlier construction and acquisition time with lower cost, as well as the significant increase in prices of land, costs of labor and materials and machinery utilization fees in recent years, which resulted in the increase in valuation.

3. 55% equity interests in Hisense Beijing

3.1. Basic information

Name: Hisense (Beijing) Electric Company Limited

Address: 36 Qingyuan Road, Daxing District, Beijing

Legal representative: Zhou Xiao Tian

Registered capital: RMB85,710,000

Corporate nature: Company with limited liability (foreign invested enterprise)

Scope of business: Manufacture of refrigerator products and other household electrical appliances; sale of self-produced products; import and export of goods and technologies and provision of import and export agency services.

Term of operation: 13 June 2002 to 12 June 2012

3.2. History

On 18 May 2002, Hisense Group Holdings Company Limited (“Hisense Group”) and Beijing Xuehua Electric Appliance Group Corp. (“Xuehua Group”) jointly established Hisense Beijing as a joint venture company with a registered capital of RMB85,710,000. Hisense Group contributed a total of RMB47,140,500, including intangible assets amounting to RMB17,140,500 and cash, representing 55% of the registered capital of Hisense Beijing; and Xuehua Group made its contribution of RMB38,561,600 in specie, including land and equipment, representing 45% of the registered capital of Hisense Beijing.

On 12 September 2002, Hisense Group transferred its 55% equity interests in Hisense Beijing to Qingdao Hisense Electric Co., Ltd. (“Hisense Electric”) at a consideration of RMB47,140,500.

On 12 October 2007, Qingdao Hisense and Hisense Electric entered into an agreement which was approved at the general meeting of Hisense Electric, pursuant to which Hisense Electric transferred its 55% equity interests in Hisense Beijing to Qingdao Hisense at a consideration of RMB47,140,500.

3.3. Shareholding structure

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Qingdao Hisense Xuehua Group
55% 45%
Hisense Beijing
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3.4. Operating status

Hisense Beijing is principally engaged in the research and development, manufacture and sale of refrigerators. With its internationally leading patented technologies in vector inverter, digital preservation and optimized control in multi-cycle refrigeration system for refrigerators, Hisense Beijing has launched over 100 product models in 7 major series, mainly including vector refrigerators and super energy-saving refrigerators. Its products are exported to the regions such as Europe, America, South Africa and Southeast Asia.

In 2007, Hisense Beijing achieved a production capacity of refrigerators of 791,200 units, and recorded a turnover of RMB859,000,000. In 2008, Hisense Beijing achieved a production capacity of refrigerators of 790,400 units, and recorded a turnover of RMB882,000,000.

3.5. Major financial information (based on PRC accounting standards)

Unit: RMB

Items	31 December 2008	31 December 2007	31 December 2006
Total assets	630,550,218.35	580,461,927.98	412,504,342.70
Total liabilities	420,653,313.36	373,327,206.10	221,165,080.56
Equity attributable to equity holders of the parent company	146,385,066.79	145,462,659.10	136,858,397.31
Items	2008	2007	2006
Operating income	1,752,895,749.74	1,664,810,863.21	1,406,966,015.64
Profit from operations	3,383,231.30	47,135,864.57	23,390,810.61
Profit before income tax	9,803,635.08	54,546,819.87	26,867,709.23
Profit attributable to equity holders of the company	922,407.69	35,588,064.82	18,039,498.91

Note: The figures are unaudited

3.6. Status of ownership

The 55% equity interests in Hisense Beijing held by Qingdao Hisense are free from restrictions on transfer such as pledge and freeze order.

3.7. Details of consent of the other shareholders on the equity transfer and the waiver of first right of refusal

Xuehua Group has issued the “Declaration of Consent to Waiver of First Right of Refusal”, consenting to the transfer of 55% equity interests in Hisense Beijing to Hisense Kelon by Qingdao Hisense and the waiver of its first right of refusal.

3.8. Pre-assessment

The pre-assessment of the 55% equity interests in Hisense Beijing is proposed to be conducted primarily with the cost approach. The appraised book value of the 55% equity interests in Hisense Beijing amounted to RMB82,544,200, and its pre-assessed value based on the cost approach is RMB164,000,000, representing an increase in valuation of 98.68%.

The increase in valuation of Hisense Beijing is primarily due to the appreciation of long-term equity investment, the appreciation of land and equipment, and the recognition of expenses in moulds-in-use and the capitalization of intangible assets (patented technologies). The long-term equity investment refers to the increase in the valuation of investment in Hisense Nanjing. The increase in valuation of Hisense Nanjing is attributable to the appreciation of land, buildings and equipment, which is mainly resulted from the earlier acquisition time with lower cost of book value. This increase in valuation is more substantial.

4. Basic information of 60% equity interests in Hisense Nanjing held by Hisense Beijing

4.1. Basic information of Hisense Nanjing

Name: Hisense (Nanjing) Electric Company Limited

Address: 19 Heng Fei Road, Nanjing Economic and Technology Development Zone

Legal representative: Zhou Xiao Tian

Registered capital: RMB128,691,500

Corporate nature: Company with limited liability

Scope of business: Research and development, manufacture and sale of fluorine-free refrigeration products and other home electrical appliances. Import and export of various goods and technologies self-manufactured and distributed (except goods and technologies under operation restriction or prohibited for import and export by the State).

Term of operation: 12 January 2005 to 10 January 2020

4.2. History of Hisense Nanjing

Hisense Nanjing was jointly 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 RMB80,580,000. Hisense Beijing made a contribution in cash of RMB36,260,000 and by way of non-patent technologies of RMB12,090,000, representing 60% of the registered capital of Hisense Nanjing; and Nanjing Suning made a contribution of RMB32,230,000 in land use rights, representing 40% of the registered capital of Hisense Nanjing.

On 1 August 2005, Nanjing Suning was renamed as “Nanjing Yilaite High-tech Industrial Park Co., Ltd.” (“Nanjing Yilaite”). On 21 October 2005, Nanjing Yilaite entered into an equity transfer agreement with Nanjing Aipulaisi Hi-tech Co., Ltd. (“Nanjing Aipulaisi”), pursuant to which Nanjing Yilaite transferred its 40% equity interests in Hisense Nanjing to Nanjing Aipulaisi at a consideration of RMB9,500,000. Nanjing Yilaite completed the procedure for the change of the industrial and commercial registration for this equity transfer on 9 November 2005.

On 20 August 2006, Hisense Beijing and Nanjing Aipulaisi entered into the “Hisense (Nanjing) Electric Company Limited Capital Increase Phase 2 Agreement”, pursuant to which Hisense Beijing made an additional capital contribution to Hisense Nanjing in cash of RMB21,650,200 and in intangible assets of RMB7,216,700; and Nanjing Aipulaisi made a contribution of RMB19,246,700 in machinery and equipment. Upon completion of this capital increase, the registered capital of Hisense Nanjing increased

to RMB128,691,500 and the proportion of shareholdings of both shareholders remained unchanged.

4.3. Shareholding structure of Hisense Nanjing

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----- Start of picture text -----

Qingdao Hisense
55%
Hisense Beijing Nanjing Aipulaisi
60% 40%
Hisense Nanjing
----- End of picture text -----

Note: The shareholding structure of Hisense Nanjing will not be affected by this transaction.

4.4. Operating status

Hisense Nanjing is principally engaged in the manufacture, operation and sale of refrigerators. Hisense Nanjing currently has two production lines of refrigerators with an annual production capacity of 1,000,000 units. From 2005 to 2008, the annual production capacity of refrigerators of Hisense Nanjing was 220,000 units, 520,000 units, 720,000 units and 700,000 units respectively. In the first quarter of 2009, the accumulated production of fluorine-free refrigeration refrigerators of Hisense Nanjing was 184,000 units, with a sales income of RMB198,000,000.

4.5. Major financial information (based on PRC accounting standards)

Unit: RMB

Items	31 December 2008	31 December 2007	31 December 2006
Total assets	392,700,092.52	334,022,244.38	262,984,998.72
Total liabilities	227,139,060.65	179,842,087.42	126,782,836.64
Total equity	165,561,031.87	154,180,156.96	136,202,162.08
Items	2008	2007	2006
Operating income	818,826,724.86	782,458,280.94	557,925,096.88

Profit from operations	15,962,123.37	21,031,166.19	8,274,361.55
Profit before income tax	15,307,721.23	22,567,994.88	7,596,983.00
Profit for the year	11,380,874.91	22,567,994.88	5,195,829.08

Note: The figures are unaudited

5. 49% equity interests in Hisense Hitachi

5.1. Basic information

Name: Qingdao Hisense Hitachi Air-conditioning Systems Company Limited

Address: 218 Qian Wan Gang Road, Qingdao Economic and Technological Development Zone

Legal representative: Taniguchi Koichi

Registered capital: US$12,100,000

Share capital: US$12,100,000

Corporate nature: Sino-foreign joint venture enterprise

Scope of business: Research and development and manufacture of commercial air-conditioning systems, sale of self-produced products and provision of after-sale services. (The relevant permits for operation will be required if any of the business activities mentioned above is subject to approvals and permits)

Term of operation: 8 January 2003 to 8 January 2053

5.2. History

In January 2003, Hisense Hitachi was established as a sino-foreign joint venture enterprise by a co-investment of Hisense Group, Hitachi Air Conditioning Systems Co., Ltd. (“Hitachi Air Conditioning”), Taiwan Hitachi Co., Ltd. (“Taiwan Hitachi”） and Union Trading Co., Ltd. (“Union Trading”) with a registered capital of US$12,100,000. Hisense Group contributed US$5,929,000 (accounting for 49.00% of the registered capital); Hitachi Air Conditioning contributed US$3,509,000 (accounting for 29.00% of the registered capital); Taiwan Hitachi contributed

US$2,420,000 (accounting for 20.00% of the registered capital); and Union Trading contributed US$242,000 (accounting for 2.00% of the registered capital). Hisense Group and Hitachi Air Conditioning have common control over Hisense Hitachi.

5.3. Shareholding structure

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----- Start of picture text -----

Taiwan Hisense Hitachi Air Union
Hitachi Group Conditioning Trading
20% 49% 29% 2%
Hisense Hitachi
----- End of picture text -----

Note: On 8 May 2009, Hisense Group and Qingdao Hisense entered into an equity transfer agreement for the transfer of 49% equity interests in Hisense Hitachi to Qingdao Hisense. Pursuant to the equity transfer agreement entered into between Hisense Group and Qingdao Hisense, the consideration for this transfer of equity interests shall be subject to the assessment results filed with the state-owned assets supervision and administration department. Currently, the assessment is still underway. It is estimated that the consideration for transfer will not exceed RMB196,000,000.

5.4. Operating status

Hisense Hitachi is principally engaged in the research and development, manufacture and sale of household and commercial-use central air-conditioning system units. Its household and commercial-use air-conditioning unit products are equipped with state of the art technologies for inverter VRF air-conditioning systems, and situate in a leading position among the industry in terms of outstanding performance and high quality. Hisense Hitachi is the largest production base for inverter VRF air-conditioners of Hitachi Air Conditioning outside Japan. It also represents the application of the latest results of the research and development of Hitachi Air Conditioning in the PRC.

The production base of Hisense Hitachi located at Hisense Information Technology Park has a site area of 100,000 square metres, and is equipped with

internationally-advanced manufacturing facilities and well-equipped laboratories. Hisense Hitachi has built a product system based mainly on inverter VRF air-conditioning systems to satisfy the needs of both commercial and household users. Its products are widely used in different settings, such as offices, guest houses, apartments, villas, shops and restaurants. Since the commencement of production, Hisense Hitachi has recorded stable growth in its business income. In 2008, Hisense Hitachi achieved operating income of RMB867,000,000, representing a year-on-year growth of 16.6%. Its market share is among the top two in the industry.

Hisense Hitachi is principally engaged in the production of central VRF systems (i.e. household and commercial-use central air-conditioners) with the capacity ranging from 8P to 40P. Traditionally, family-use air-conditioners refer to the air-conditioners with the capacity ranging from 1P to 5P for use of families, and general commercial-use air-conditioners refer to the non-family-use air-conditioners with the capacity ranging from 3P to 5P. With the development of the air-conditioning technology, both family-use and general commercial-use air-conditioners are equipped with higher capacity, thus beginning to compete with the household and commercial-use central air-conditioners in certain aspects. On the other hand, household and commercial-use central air-conditioners in smaller size are also developed so as to satisfy the various needs of customers, in particular for luxury-residential units and villas. Therefore, household and commercial-use central air-conditioners are competing with family-use and general commercial-use air-conditioners to a certain extent.

Accordingly, as noted from the above analysis of development trend, business competition may exist between Hisense Hitachi and other companies which manufacture air-conditioners under Qingdao Hisense. To avoid the business competition between Hisense Hitachi and Hisense Kelon in the future, Hisense Group proposes to transfer Hisense Hitachi to Hisense Kelon through this reorganization.

5.5. Major financial information (based on PRC accounting standards)

Unit: RMB

Items	31 December 2008	31 December 2007	31 December 2006
Total assets	391,057,045.14	332,057,965.44	289,336,645.37
Total liabilities	173,954,793.39	194,158,831.68	217,481,902.07
Total equity	217,102,251.75	137,899,133.76	71,854,743.30
Items	2008	2007	2006

Operating income	867,223,533.88	743,663,589.89	547,824,757.79
Profit from operations	99,938,304.80	64,402,130.27	26,931,324.86
Profit before income tax	99,578,304.17	66,044,390.46	28,345,478.59
Profit for the year	89,203,117.99	66,044,390.46	28,345,478.59

Note: The figures are unaudited

5.6. Status of ownership

The 49% equity interests in Hisense Hitachi proposed to be transferred are free from restrictions on transfer such as pledge and freeze order.

5.7. Details of consent of the other shareholders on the equity transfer and the waiver of first right of refusal

On 24 April 2009, Taiwan Hitachi, Hitachi Air Conditioning and Union Trading issued the “Consent to Waiver of First Right of Refusal” respectively, consenting to the transfer of equity interests in Hisense Hitachi to Qingdao Hisense from Hisense Group and subsequently to Hisense Kelon and the waiver of their first right of refusal.

5.8. Pre-assessment

The pre-assessment of the 49% equity interests in Hisense Hitachi is proposed to be conducted primarily with the cost approach. The appraised book value of the 49% equity interests in Hisense Hitachi amounted to RMB116,305,300, and its pre-assessed value based on the cost approach is RMB206,000,000, representing an increase in valuation of 76.95%.

The increase in valuation of Hisense Hitachi is primarily due to the appreciation of land, buildings and equipment, and the recognition of expenses in moulds-in-use and the capitalization of intangible assets (patented technologies). The appreciation of land, equipment and buildings is resulted from the earlier acquisition time with lower cost of book value. The appreciation of equipment is also resulted from the shorter depreciable period of the equipment than its economic life used for the purposes of valuation.

6. 78.7% equity interests in Hisense Mould

6.1. Basic information

Name: Qingdao Hisense Mould Company Limited

Address: North New Industry Zone, Qingdao Economic and Technological Development Zone (Shang'ma Town, Chengyang District)

Legal representative: Ma Ming Tai

Registered capital: RMB27,642,000

Corporate nature: Company with limited liability

Scope of business: General operations: design and manufacture of moulds; machine processing; design and manufacture of jigs; wholesaling, retailing and “four-agency” business; mould materials, standard components, parts, jigs and measuring tools, CAD/CAM system products, automatic office system and related consumables; plastic injection, painting/brushing and processing; development, design, sale and system integration of intelligent instruments and meters and opto-mechatronic equipments; import and export of self-manufactured goods and technologies.

Date of incorporation: 28 September 1996

6.2. History

On 28 September 1996, Qingdao Hisense Electric Company and Qingdao Hisense Optical Co., Ltd. (“Hisense Optical”) jointly invested in the establishment of Hisense Mould. Qingdao Hisense Electric Company made a contribution of RMB21,472,562 in specie, including buildings, structures and machinery and equipment, representing 98.7% of the registered capital; Hisense Optical made a contribution of RMB282,000 in specie, including machinery and equipment, representing 1.3% of the registered capital.

In December 1996, Qingdao Hisense Electric Company was renamed Qingdao Hisense Group Company, and was renamed Hisense Group Company in April 1998. On 28 December 2000, Hisense Group Company was restructured as Hisense Group Company Limited, and still held 98.7% equity interests in Hisense Mould.

On 5 September 2005, Hisense Mould convened a general meeting for consideration of capital increase by way of increasing the number of shares. Pursuant to the

“Approval in relation to the Increase in Registered Capital of Qingdao Hisense Mould Company Limited” (Qing Guo Zi Chan Quan [2005] No. 85) of Qingdao State-owned Assets Supervision and Administration Commission (“Qingdao SASAC”), it was unanimously approved that 47 persons (including Wang Pei Song, an individual shareholder) should make contribution of RMB7,470,000 to be converted into a share capital of RMB5,887,453 at a premium ratio of 1:1.2688. They hold an aggregate of 21.3% equity interests in Hisense Mould after the capital increase.

After the capital increase, the shareholders and shareholding structure of Hisense Mould are as follows:

Unit: RMB

Name of Shareholder	Contribution	Shareholding	Form of
	Amount	Percentage	Contribution
	(RMB)
Hisense Group	21,472,562	77.68%	Contribution in
			specie
Hisense Optical	282,000	1.02%	Contribution in
			specie
47 natural person	5,887,453	21.30%	Contribution in
shareholders including Liu			cash
Dian Wei
Total	27,642,015	100%	—

On 29 July 2006, the natural person shareholders Fang Xian Long and Dai Hui Zhong entered into an equity transfer agreement, pursuant to which it was agreed that Fang Xian Long shall transfer the capital contribution in an amount of RMB157,629 in Hisense Mould (accounting for 0.57% of the registered capital of Hisense Mould) to Dai Hui Zhong at a price of RMB200,000. On the same day, the natural person shareholders Xie Feng and Zhao Bing Bing entered into an equity transfer agreement, pursuant to which it was agreed that Xie Feng shall transfer the capital contribution in an amount of RMB39,407 in Hisense Mould (accounting for 0.14% of the registered capital of Hisense Mould) to Zhao Bing Bing at a price of RMB50,000.

On 16 April 2009, the natural person shareholders Dong Zhuang Zhi and Yao Shu Lin entered into an equity transfer agreement, pursuant to which it was agreed that Dong Zhuang Zhi shall transfer the capital contribution in an amount of RMB39,407 in Hisense Mould (accounting for 0.14% of the registered capital of Hisense Mould) to

Yao Shu Lin at a price of RMB50,000.

On 16 April 2009, the natural person shareholders Ma Feng and Ji Jian entered into an equity transfer agreement, pursuant to which it was agreed that Ma Feng shall transfer the capital contribution in an amount of RMB118,222 in Hisense Mould (accounting for 0.43% of the registered capital of Hisense Mould) to Ji Jian at a price of RMB150,000.

6.3. Shareholding structure

The shareholders and shareholding structure of Hisense Mould are as follows:

Name of Shareholder	Capacity	Contribution Amount (RMB’0000)	Shareholding Percentage	Form of Contribution
Hisense Group Holdings CompanyLimited	Legal person	2147.2562	77.68%	Contribution in specie
Qingdao Hisense Optical Co., Ltd.	Legal person	28.2	1.02%	Contribution in specie
Wang Pei Song, Yu Xin Shi (47persons in total)	Natural person	588.7453	21.30%	Contribution in cash
Total		2764.2015	100%

Note: On 8 May 2009, Hisense Group and Hisense Optical entered into an equity transfer agreement with Qingdao Hisense, pursuant to which Hisense Group and Hisense Optical shall transfer 77.68% and 1.02% equity interests in Hisense Mould to Qingdao Hisense respectively. After the completion of the equity transfer, Qingdao Hisense would hold 78.7% equity interests in Hisense Mould in aggregate. Pursuant to the equity transfer agreements entered into between Hisense Group and Hisense Optical and Qingdao Hisense, the consideration for the transfer of equity interests shall be subject to the assessment results filed with the state-owned assets supervision and administration department. Currently, the assessment is still underway. It is estimated that the consideration for transfer of the 77.68% equity interests held by Hisense Group will not exceed RMB147,000,000, while the consideration for transfer of the 1.02% equity interests held by Hisense Optical will not exceed RMB2,000,000.

6.4. Operating status

Hisense Mould was established in 1996. After more than 10 years of development,

Hisense Mould has become one of the most specialized large-scale suppliers of plastic injection mould for household appliances in the PRC. Hisense Mould carries out its businesses in the industry of mould and injection, moulding, painting/brushing and processing and the related services. Hisense Mould utilizes CAD/CAM/CAE technologies to proactively promote the research and development and manufacture of plastic injection and painting/brushing mould products with moulding machines of high-precision, high-quality and high-efficiency. The principal businesses of Hisense Mould include design of industrial products, as well as the design, processing, manufacture and plastic injection of moulds. It possesses an annual processing and production capacity of approximately 500 sets of large plastic injection moulds up to 60 tones, and approximately 200 sets of precision moulds.

Currently, Hisense Mould possesses a production and processing capacity of RMB200,000,000 to RMB250,000,000. In 2007, Hisense Mould recorded an annual sales income of RMB140,000,000, and was chosen by China Die & Mould Industry Association as the Top 50 Enterprises in China’s Die & Mould Industry. In 2008, Hisense Mould recorded a turnover of RMB130,000,000.

A relatively large number of the routine connected transactions exist between Hisense Mould, Hisense Kelon and the subject assets proposed to be injected. In 2008, the amount of the connected transactions between Hisense Kelon and Hisense Mould was approximately RMB3,000,000. In addition, Hisense Shandong, Hisense Beijing and Hisense Nanjing entered into a large number of routine connected transactions with Hisense Mould for the purchase of products or goods, with an annual transaction amount of approximately RMB45,000,000. Accordingly, Hisense Group proposes to transfer the 78.7% equity interests in Hisense Mould to Qingdao Hisense through the internal reorganization of its white goods. Such equity interests shall then be transferred by Qingdao Hisense with the other subject assets of this transaction to Hisense Kelon, to avoid new connected transactions between Hisense Group and its connected companies after the reorganization of the Company.

6.5. Major financial information (based on PRC accounting standards)

Unit: RMB

Items	31 December 2008	31 December 2007	31 December 2006
Total assets	241,464,066.00	276,784,662.75	251,812,612.18
Total liabilities	106,688,281.21	147,575,507.64	158,931,029.40

Equity attributable to equity holders of the company	134,436,083.29	127,421,592.97	92,881,582.78
Items	2008	2007	2006
Operating income	382,626,231.55	620,018,618.82	690,249,331.30
Profit from operations	1,151,520.73	40,078,306.32	41,922,827.50
Profit before income tax	17,514,879.01	55,138,342.13	47,834,948.83
Profit attributable to equity holders of the company	12,542,893.26	47,532,874.48	43,886,220.93

Note: The figures are unaudited.

6.6. Status of ownership

The 78.7% equity interests in Hisense Mould proposed to be transferred are free from restrictions on transfer such as pledge and freeze order.

6.7. Details of consent of the other shareholders on the equity transfer and the waiver of first right of refusal

On 28 April 2009, 47 natural person shareholders including Wang Pei Song and Yu Xin Shi (holding 21.3% equity interests in Hisense Mould in aggregate), Hisense Group and Hisense Optical issued the “Consent to Waiver of First Right of Refusal” respectively, consenting to the transfer of equity interests in Hisense Mould to Qingdao Hisense from Hisense Group and Hisense Optical and subsequently to Hisense Kelon and the waiver of their first right of refusal.

6.8. Pre-assessment

The pre-assessment of the 78.7% equity interests in Hisense Mould is proposed to be conducted primarily with the cost approach. The appraised book value of the 78.7% equity interests in Hisense Mould amounted to RMB107,985,000, and its pre-assessed value based on the cost approach is RMB150,000,000, representing an increase in valuation of 39.20%.

The increase in valuation of Hisense Mould is primarily due to the appreciation of

inventories, buildings, equipment and land, and the recognition of expenses in the capitalization of patented technologies with certificate of patent expensed. The increase in valuation of equipment is resulted from the earlier acquisition time of certain equipment with a shorter depreciable life than its economic life used for the purposes of valuation. The increase in valuation of buildings and land is resulted from the lower acquisition costs under the preferential government policies on building construction and land acquisition.

7. Assets for sales and marketing of white goods of Hisense Marketing

The assets for sales and marketing of white goods proposed to be acquired mainly include the assets (including liabilities) for sales and marketing of white goods of Hisense Marketing. Currently, Hisense Marketing is equipped with a strong sales capacity with over 56 marketing branches and more than 10,000 sales points in the PRC.

7.1. Basic information of Hisense Marketing

Name: Qingdao Hisense Marketing Company Limited

Address: Hisense Information Industrial Park, 18 Tuan Jie Road, Qingdao Economic and Technological Development Zone

Legal representative: Shi Yong Chang

Registered capital: RMB30,000,000

Corporate nature: Company with limited liability

Scope of business: Manufacture, sale and technological development of household appliances, electronic products, communication products and provision of the related services. (The relevant permits for operation will be required if any of the business activities mentioned above is subject to approvals and permits)

Date of incorporation: 21 July 2003

7.2. History of Hisense Marketing

On 21 July 2003, Hisense Marketing was jointly established by Qingdao Hisense Electronic (Holding) Company Limited (“Hisense Electronic”) and Yang Yun Duo, with a registered capital of RMB5,000,000. Hisense Electronic made a capital contribution of RMB4,500,000 in cash, representing 90% of the registered capital and Yang Yun Duo made a capital contribution of RMB500,000 in cash, representing 10% of the registered capital.

On 19 November 2003, Hisense Marketing increased its registered capital to RMB 30,000,000 by way of capital injection and share capital increase. In particular, Hisense Electronic made an additional capital contribution 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 made a natural person contribution of 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 of the shareholders of Hisense Marketing transferred 100% equity interests in Hisense Marketing to Qingdao Hisense. Thereafter, Hisense Marketing became a wholly-owned subsidiary of Qingdao Hisense.

7.3. Shareholding structure

==> picture [198 x 127] intentionally omitted <==

----- Start of picture text -----

Qingdao Hisense
100%
Hisense Marketing
Assets for sales and marketing of white goods
----- End of picture text -----

7.4. Operating status

Hisense Marketing was originally a company under Hisense Group, primarily engaged in the sale of air-conditioners, refrigerators, small household electric appliances, televisions, cellular phones and other products and the provision of services. Since its establishment, Hisense Marketing underwent several changes of its businesses (see the chart below) in accordance with the unified planning of Hisense

Group. At the beginning of its establishment, Hisense Marketing was only engaged in the businesses in relation to air-conditioners, refrigerators and small household electric appliances; in or around 2004, Hisense Marketing commenced its business of the sale of televisions; in June 2006, Hisense Marketing changed its scope of business and discontinued the business of the sale of televisions; in 2006 and 2007, Hisense Marketing successively downsized its business of the sale of cellular phones. At present, Hisense Marketing is principally engaged in the sale of white goods.

==> picture [287 x 151] intentionally omitted <==

----- Start of picture text -----

Cellular phones
Televisions
Air-conditioners Refrigerators Small household appliances
July 2003 June 2005 June 2006 December 2008
----- End of picture text -----

In 2007, Hisense Marketing recorded a turnover of RMB3,915,000,000, of which income from the business of air-conditioners was RMB2,173,000,000, and income from the business of refrigerators was RMB1,640,000,000. In 2008, Hisense Marketing recorded a turnover of RMB3,489,000,000, of which income from the business of air-conditioners was RMB1,701,000,000, and income from the business of refrigerators was RMB1,661,000,000. (The figures are unaudited)

Hisense Marketing incurred certain assets and liabilities which are not disposed during its sale of cellular phones and televisions. Accordingly, this reorganization only proposes to acquire the assets for sales and marketing of white goods owned by Hisense Marketing and the corresponding liabilities, but not Hisense Marketing, to avoid the assets and liabilities incurred in the sale of cellular phones and televisions of Hisense Marketing to be transferred to Hisense Kelon.

7.5. Financial information of the assets for sales and marketing of white goods (Pro forma, based on PRC accounting standards)

(1) Major financial conditions

Unit: RMB

Items	31 December 2008	31 December 2007	31 December 2006
Total assets	868,741,547.89	1,079,097,952.45	1,203,794,454.82
Total liabilities	1,004,277,730.02	1,169,947,731.27	1,282,683,835.56
Total equity	-135,536,182.13	-90,849,778.82	-78,889,380.74

Items	2008	2007	2006
Operating income	3,587,368,429.71	4,085,228,969.08	4,063,766,091.63
Profit from operations	-68,614,252.11	-31,194,628.40	-13,170,537.98
Profit before income tax	-44,545,426.35	-11,649,024.83	-1,874,188.08
Profit for the year	-44,716,191.48	-11,960,398.08	-2,110,959.74

Note: The figures are unaudited.

(2) Major Details of Assets and Liabilities of Hisense Marketing related to white good business as at the end of 2008

Unit: RMB’0000

Items	31 December 2008	Items	31 December 2008
Bank balances and cash	5,576	Bills payables	19,098
Bills receivables	1,534	Trade payables	42,409
Trade receivables	16,706	Receipts in advance	17,237
Other receivables	28,610	Other payables	7,183
Prepayments	1,806	Tax payables	1,102
Inventories	31,702	Accruals	4,955
Other assets	941	Accrued liabilities	8,444

Note: The above figures are unaudited and may be different from the final audited results.

In particular:

Trade receivables: mainly comprises receivables from large scale electrical appliances chain stores and channel distributors generated from the sale of refrigerators and air-conditioners produced by assets proposed to be transferred under

this reorganization (mainly Hisense Shandong, Hisense Beijing, and Hisense Nanjing);

Inventories: mainly comprises refrigerator finished goods from Hisense and air-conditioner finished goods from Hisense, the remaining is maintenance parts used by Hisense white goods;

As the operations of Hisense Marketing mainly rely on the branches in different regions, the receivables and inventories are also mainly dispersed in the branches;

Trade payables: mainly comprises trade payables resulted from the purchase of refrigerator products from Hisense Beijing and Hisense Nanjing and the purchase of air-conditioner products from Hisense Shandong;

Other payables and accruals: represents mainly the payables such as the outstanding adverting fee, logistics fee and installation fee;

Accrued liabilities: represents mainly the provision for maintenance and repair;

Other receivables: represents mainly the funds which should be owned by the assets for sales and marketing of white goods under the separation plan during the sales and marketing of white goods and non-white goods assets for sales and marketing by Hisense Marketing, but were utilized by non-white goods assets. Hisense Group has undertaken to solve the above problem before the announcement of this formal reorganization proposal.

7.6. Description on the related issues of assets for sales and marketing of white goods

（1）The Liabilities and staff of White Goods Sales and Marketing Assets will be contributed to the Listed Company

Since January 2007, the financial department of Hisense Marketing could already conduct separate audit on white goods products and non-white goods products. Except income tax and tax payable, the assets and liabilities, income, costs and expenses of the products can be separated clearly. Such separation aims at facilitating the injection of assets and staff of Hisense Marketing related to white goods. Regarding the liabilities related to the white goods business, since they are directly resulted from white goods business and have strong connection with white goods sales business in the prior periods (such as payables and provision for maintenance and repair etc), the relevant liabilities will also be injected into the Company. Besides, since this pre-assessment on the assets for sales and marketing of white goods is also

calculated on a “net assets” basis, the liabilities attached to the assets for sales and marketing of white goods should be consolidated into the Company.

Hisense Marketing has gradually reduced and discontinued the operation of non-white goods business since mid-2006. Separation was also conducted on non-white goods business and management personnel gradually. Current staff totally understand they are responsible for the white goods business, or the few staff who deal with the historical problems left by non-white goods assets for sales and marketing business. Staff for white goods sales and marketing business will be injected to the Company with the assets after the completion of reorganization.

(2) Reasons for the negative net assets of the assets for sales and marketing of white goods

At the early stage of the establishment of Hisense Marketing, large investment was put in order to expand into the market, leading to a larger loss in initial period, for example, the net assets of white goods business at the end of 2004 was RMB-140,000,000. The operating environment was improved during 2005 to 2007, however, consumer’s demand was low due to the financial crisis in 2008. In order to further expand the market, Hisense Marketing invested large amount of marketing expenses in the second half of 2008, especially preliminary expenses such as advertisement fee, exhibition booth production and venue fee. The input of such expenses resulted in certain lag effects, but it would establish a sound brand foundation for future market sales. It is believed that with the recovery of the global economic condition in 2009, Hisense Marketing will record returns in the coming years.

(3) The necessity of injecting the assets for sales and marketing of white goods into the listed Company

① The assets for sales and marketing of white goods of Hisense Marketing are mainly responsible for the sales of air-conditioners and refrigerators manufactured by Hisense Shandong, Hisense Beijing and Hisense Nanjing. The injection of assets for sales and marketing of white goods of Hisense Marketing into the listed Company can help to ensure the unity and completeness of the injected assets;

② The assets for sales and marketing of white goods of Hisense Marketing have a strong complement to the original sales and marketing system of Hisense Kelon. From the perspective of regional distribution, the major subsidiaries of Hisense

Marketing are distributed among major cities in the north region and the whole nation, while the sales and marketing points of Hisense Kelon are located at the south and middle and small cities of the PRC. From the perspective of sales and marketing channel, the sales of Hisense Marketing mainly rely on large scale chain stores and channel distributors, while the sales of Hisense Kelon mainly rely on local agents. After the injection of the assets for sales and marketing of white goods of Hisense Marketing into the listed Company, the sales points of Hisense Kelon will be substantially enlarged and its sales channel will be enriched.

7.7. Status of ownership

The assets for sales and marketing of white goods of Hisense Marketing proposed to be transferred are free from restrictions on transfer such as pledge, security and freeze order. As at the date of this announcement, Hisense Shandong and Hisense Beijing, the creditors of Hisense Marketing, have respectively issued letters consenting to the transfer of the assets for sales and marketing of white goods to Qingdao Hisense. Both creditors hold a total claim amount of RMB585,084,592.37 (trade payables and bills payables), representing 58% of the total liabilities of Hisense Marketing (based on the unaudited financial information of Hisense Marketing as at 31 December 2008). Currently, Hisense Marketing is actively negotiating with the other major creditors regarding the transfer of the assets for sales and marketing of white goods.

7.8. Pre-assessment

The pre-assessment of the Hisense white goods assets for sales and marketing is proposed to be conducted primarily with the cost approach. The appraised book value of the Hisense white goods assets for sales and marketing amounted to RMB-121,000,000, and its pre-assessed value based on the cost approach is RMB-80,000,000, representing an increase in valuation of RMB41,000,000.

Operation of the white goods sales and marketing business of Hisense Marketing incurs substantial expenditures on the production of exhibition booths and sample machines. Although the above expenditures have been included in the expenses or amortized and do not have any book value, such assets are still in use and fall within a benefit period. An valuation increase is resulted from the assessment of the interests over the income period.

The above estimated valuation is only a rough evaluation made by the Company based on the current financial and assets condition. The effective value shall be valued (especially the assets with increase in valuation) by a qualified valuer based on the

actual market value and subject to the final valuation results .

(II) Information of estimated value and future profitability analysis of the assets proposed to be acquired

1. Pro forma combined financial information of the subject assets (based on PRC accounting standards)

Unit: RMB

Items	31 December 2008	31 December 2007	31 December 2006
Total assets	2,269,479,930.96	2,571,919,244.17	2,502,001,929.29
Total liabilities	1,426,570,732.39	1,743,063,044.95	1,807,868,109.77
Equity attributable to equity holders of the company	636,115,847.14	621,487,722.72	512,001,018.84
Items	2008	2007	2006
Operating income	5,449,590,699.26	6,155,656,422.66	5,615,086,486.39
Profit from operations	-32,780,147.77	140,750,162.39	122,833,444.08
Profit before income tax	38,581,451.90	214,410,695.80	157,937,126.68
Profit attributable to equity holders of the company	23,878,977.52	123,092,248.23	102,421,401.99

Note: The figures are unaudited

2. Evaluation of the subject assets

The Company has engaged an asset valuer which is licensed to carry out securities business to evaluate the subject assets and such evaluation is still underway. The price of the subject assets to be acquired shall be determined upon arm’s length negotiations between the Company and Qingdao Hisense with reference to the valuation of the subject assets, and after taking into account the financial and business conditions and development prospects of the subject assets, transactions of comparable companies in the market, the interests of the holders of A shares and H shares of the Company and other factors, and shall not exceed RMB1,250,000,000.

The pre-assessment of the subject assets of this transaction is summarized as follows:

Unit: RMB’0000

Subject assets	Carrying value of the subject assets	Pre-assessed value of the subject assets	Increase in pre-assessed value	Rate of increase
100% equity interests in Hisense Shandong	53,789.08	71,000.00	17,210.92	32.00%
51% equity interests in Hisense Zhejiang	5,223.56	10,000.00	4,776.44	91.44%
55% equity interests in Hisense Beijing	8,254.42	16,400.00	8,145.58	98.68%
49% equity interests in Hisense Hitachi	11,630.53	20,600.00	8,969.47	76.95%
78.7% equity interests in Hisense Mould	10,798.50	15,000.00	4,201.50	39.20%
Hisense white goods assets for sales and marketing	-12,100.00	-8,000.00	4,100.00	—
Total	77,596.09	125,000.00	47,403.91	61.09%

From the above table, the pre-assessed value of the subject assets for this transaction increases RMB474,039,100 in aggregate, representing a rate of increase of 61.09%. The increase in valuation is primarily due to the appreciation of land, buildings, machinery and equipment of the subject assets. Specific reasons for the appreciation are as follows:

1. Increase in valuation of land

The land of Hisense Hitachi was acquired in 2003 at a cost of RMB36,000/ acreage. Currently, the market value of the land ranges from RMB210,000 to RMB250,000/ acreage. the land of Hisense Mould was acquired in 2006. Under the preferential policy of Qingdao Economic and Technological Development Zone, the land acquisition cost was RMB67,000/ acreage. Currently, the market value of the land ranges from RMB180,000 to RMB200,000/ acreage. In addition, the lands of Hisense Shandong, Hisense Beijing, Hisense Zhejiang and Hisense Nanjing were acquired in 1997, 2006, 2007 and 2003 respectively, and enjoyed different preferential policies. Time cost and the availability of special preferential policies contribute to the different appreciation of the above lands.

2. Increase in valuation of buildings

The buildings of the subject assets of this transaction are production workshops, offices and production facilities. Pre-assessment is conducted with the replacement cost approach. The buildings of Hisense Shandong were built in 1997, those for

Hisense Hitachi and Hisense Zhejiang were built in 2003, while those for Hisense Mould and Hisense Nanjing were built in 2006-2007. From the completion of construction of the above buildings to the time of this pre-assessment, the construction costs of the buildings have increased at different levels. For example, fixed labor costs were around RMB20, and are RMB40 at present; for construction materials, steel prices were around RMB3,000, and are RMB4,000-5,000 at present; cement costs were around RMB300/ tonne, and are RMB400-600/ tonne at present. In addition, other costs have increased at different levels, resulting in the increase in valuation of the above buildings.

3. Increase in valuation of equipment

Most of the equipment of the subject assets for this transaction were acquired during the construction of plants. With the increase in labor costs and material prices in recent years, the current equipment acquisition price also increases. In addition, the depreciable life of equipment generally ranges from 8 to 20 years, and the economic life for the purposes of valuation ranges from 10 to 25 years. Therefore, appreciation was recorded in this pre-assessment of equipment.

In the research and development of the patented technologies by the research and development department of the subject assets for this transaction, the costs incurred are included in administration costs at the same time. The pre-assessment of the patented technologies-in-use is conducted with the replacement cost method. For the moulds-in-use in production, site-use fees and advertising fees amortized or expensed, this assessment is quantified in accordance with the requirements of assets appraisal practice over the remaining income period of each asset.

In conclusion, the land, buildings, equipment and the assessment capitalization of patented technologies expensed contribute to the increase in the pre-assessment of the subject assets for this transaction.

3. Information of future profitability of the subject assets

The Hisense white goods assets proposed to be acquired have a strong potential for future profitability. In 2007, the operating income from Hisense white goods assets business amounted to RMB6,156,000,000 in aggregate, and net profit attributable to the holders of the parent company amounted to RMB123,000,000; in 2008, in view that the Hisense white goods business suffered the challenges arising from the global

financial turmoil and the impacts of the shrinkage in domestic demand, the operating income amounted to RMB5,450,000,000, posting a reduction as compared to that in 2007. Nevertheless, Hisense air-conditioner business continued to maintain its leading position in the PRC market in terms of high-end products such as invert air-conditioners. After the completion of this reorganization, the scale of operation for the air-conditioner and refrigerator business of the Company will be expanded substantially, enabling it to enhance economies of scales and strengthen its competitiveness in the industry, which will in turn further enhance the overall profitability of the Company.

(III) Other information about the subject matter of the transaction

1. Internal reorganization of Hisense white goods assets

Of the Hisense white goods assets proposed to be acquired, 49% equity interests in Hisense Hitachi is currently directly held by Hisense Group, 78.7% equity interests in Hisense Mould is currently directly held by Hisense Group and Hisense Optical. Hisense Group is a state-owned assets operated company with 100% interests held by the Qingdao SASAC. Hisense Group proposes to implement internal reorganization in respect of its white goods assets before this transaction, whereby its 77.68% equity interests in Hisense Mould and 49% equity interests in Hisense Hitachi shall be transferred to Qingdao Hisense; Hisense Optical shall also transfer its 1.02% equity interests in Hisense Mould to Qingdao Hisense; whereas Hisense Marketing (a wholly-owned subsidiary of Qingdao Hisense) shall transfer its assets for sales and marketing of white goods to Qingdao Hisense for direct holding.

Through this internal reorganization, Hisense Group can further centralize the equity assets of Hisense Hitachi and Hisense Mould and the Hisense white goods assets for sales and marketing to be held by Qingdao Hisense, so as to establish a clearer shareholding and management structure for Hisense Group’s white goods business segment. The internal reorganization is also beneficial for the further rationalization of the corporate governance structure of Hisense Kelon after assets injection.

Upon completion of the abovementioned internal reorganization, Qingdao Hisense will directly hold all the subject assets of this transaction, and will be the only seller of the assets to be acquired through this private issue of the shares by Hisense Kelon. On 4 May 2009, the Qingdao SASAC approved the overall proposal on the reorganization of Hisense Group white goods assets in principle. On 8 May 2009,

Hisense Group agreed to transfer its 49% equity interests in Hisense Hitachi to Qingdao Hisense. On 8 May 2009, Hisense Group and Hisense Optical agreed to transfer their respective 77.68% and 1.02% equity interests in Hisense Mould to Qingdao Hisense. The procedure for the change of the industrial and commercial registration for the above equity transfers will be completed before the date of the second meeting of the Board for this reorganization of the Company. On 29 April 2009, Hisense Marketing also issued a letter of undertaking to Qingdao Hisense in relation to the abovementioned disposal of assets for the sales and marketing of white goods, and shall deliver the abovementioned assets for sales and marketing of white goods directly to the Company upon implementation of this reorganization by Hisense Kelon.

2. Right to use the “Hisense” trademark

On 8 November 2007, the owner of the “Hisense” trademark, Hisense Electronic, entered into a “Trademark Licensing Contract” with Hisense Shandong, Hisense Zhejiang, Hisense Beijing and Hisense Nanjing respectively (the “Original Contract”), pursuant to which it was agreed that the defaulting party rendering the contract unenforceable shall bear the default liability payable and the corresponding economic loss.

To provide further support to the business development of Hisense Kelon after this transaction, Hisense Electronic has agreed to amend the terms of the licensing fees under the Original Contract. On 18 May 2008, it entered into a “Supplementary Contract to the Trademark Licensing Contract” with Hisense Shandong, Hisense Zhejiang, Hisense Beijing and Hisense Nanjing respectively, pursuant to which Hisense Shandong, Hisense Zhejiang, Hisense Beijing and Hisense Nanjing shall be permitted to use the trademark under the contract for an indefinite term at nil consideration. Apart from the change of the terms of the licensing fees from subject to consideration to use for an indefinite term at nil consideration as provided in the Supplementary Contract, other terms of the Original Contract continue to be valid.

VII. EFFECTS OF THIS TRANSACTION ON THE COMPANY

(I) Effects of this transaction on the principal businesses of the Company

Upon completion of this reorganization, all of the quality white goods assets owned by Qingdao Hisense and its ultimate controller Hisense Group will be transferred to

Hisense Kelon. To a certain extent, the white goods assets of Hisense Group will be entirely listed. After the reorganization, the entire white goods business of Hisense Group including air-conditioners and refrigerators will be operated by Hisense Kelon. All of the white goods assets of Hisense Group will be transferred to Hisense Kelon so that the business competition among Qingdao Hisense, Hisense Group and Hisense Kelon will be eliminated completely. Also, this transaction will substantially reduce the connected transactions between Hisense Kelon and Qingdao Hisense and its connected parties.

Through this transfer of the quality white goods assets from Qingdao Hisense, Hisense Kelon will further strengthen the operation of its principal businesses, significantly enhance its asset quality and profitability, and promote its sustainable development, which are in the interests of the Company and all of its shareholders.

(II) Effects of this transaction on the profitability of the Company

Items	Before this transaction	After this transaction	Changes
Total equity(’0000 shares)	99,201	135,750	36,550
Net assets (RMB’0000)	-99,144	-35,533	63,612
Net profit attributable to the holders of the parent company(RMB’0000)	-22,670	-20,282	2,388
Return on net assets	—	—	—
Net assets per share (RMB/share)	-1.00	-0.26	0.74
Earningsper share	-0.23	-0.15	0.08

Note: The financial information before the transaction is based on the 2008 audited financial report of the Company, and the financial information after the transaction represents the pro forma financial information (unaudited) of the Company in 2008 assuming this transaction was completed on 1 January 2008.

As shown by the information in the above table, after this transaction, the net assets of Hisense Kelon will increase from RMB-991,440,000 before the transaction to RMB-355,330,000; net assets per share will increase by RMB0.74/share; net profit attributable to the holders of the parent company will increase by RMB23,880,000 as compared to RMB-226,700,000 before the transaction, corresponding to an increase in earnings per share of RMB0.08 per share. In conclusion, this transaction will benefit the

improvement of the assets quality of the Company, enhance its profitability, and promote its sustainable development.

(III) Effects of this transaction on the shareholding structure of the Company

Assuming that the consideration for the subject assets under the transaction does not exceed RMB1,250,000,000, and a total of not more than 365,500,000 A shares under this private issue will be offered at a price of RMB3.42 per share, the shareholding structure of the Company before and after this transaction will be as follows:

Name of shareholders	Number of shares held as at 31 December 2008 (number of shares)	Shareholding percentage	Nature of share capital	Number of shares held after this transaction (number of shares)	Shareholding percentage
Qingdao Hisense Air- conditioning Company Limited	250,173,722	25.22%	Restricted A shares	615,670,798	45.35%
The Hongkong and Shanghai Banking Corporation Limited	98,587,029	9.94%	Circulating H shares	Not applicable	Not applicable
China Huarong Asset Management Corp.	63,923,804	6.44%	Restricted A shares	Not applicable	Not applicable
Shenyin Wanguo Securities (H.K.) Limited	55,107,000	5.56%	Circulating H shares	Not applicable	Not applicable
…	…	…	…	…	…
Total	992,006,563	100%		1,357,503,639	100%

(IV) Effects of this transaction on the business competition and connected transactions of the Company

Beneficial for the elimination of business competition between the Company,

Qingdao Hisense and its ultimate controller Hisense Group

Through this transaction, all of the white goods assets of Hisense Group will be transferred to Hisense Kelon. The other businesses of Hisense Group (i.e. multimedia business such as televisions, communications business and real estate business) are not competing with the businesses of Hisense Kelon and there will be no overlapping of the principal businesses and assets of Hisense Group and Hisense Kelon. In this regard, the core multimedia business such as televisions of Hisense Electric, a listed company under Hisense Group, will be substantially differentiated from the white goods businesses such as refrigerators and air-conditioners of Hisense Kelon in terms of the State’s industry category and management, product upstream supply chain, product production methods, product technologies, product services and other major aspects. This reorganization will fundamentally eliminate the business competition between Qingdao Hisense and Hisense Group and Hisense Kelon. At the same time, both Qingdao Hisense and its ultimate controller Hisense Group have undertaken not to engage in any air-conditioner, refrigerator and other businesses which is the same as or similar to that of Hisense Kelon upon completion of this reorganization, in order to avoid business competition with Hisense Kelon in the future.

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

Before this reorganization, a large amount of connected transactions were entered into between Hisense Kelon, Qingdao Hisense and Hisense Group and its connected parties in relation to the procurement and sale of goods and products and the provision of services. Upon completion of this reorganization, the injection of the entire white goods assets of Hisense Group into Hisense Kelon would significantly reduce the amount of existing connected transactions between the Company and Hisense Group and its connected parties. As a result, the connected transactions in connection with sourcing for white goods business will be fundamentally eliminated; the connected transactions for the purposes of reinforcing the advantage of regional production capacity coverage and the mutual ODM products will be entirely eliminated; as to the connected transactions in connection with the marketing of white goods, through the transfer of the entire assets for sales and marketing of white goods owned by Qingdao Hisense to Hisense Kelon, the domestic marketing channels and assets originally under Hisense Group and the marketing channels and assets originally under Hisense Kelon will be restructured to form a new marketing system which will continue to be

completely independent from the multimedia marketing channels (owned by Hisense Electric) and the domestic marketing channels for other products of Hisense Group. As a result, upon completion of this reorganization, connected transactions between Hisense Group and Hisense Kelon in connection with the domestic marketing business will be entirely eliminated.

In respect of the international marketing, Hisense Kelon only has a single OEM business in the scope of international marketing but has no resources or channels for its self-branded exporting business. In order to explore new markets and new clients for its self-branded exporting business and in accordance with the development plans of the Company, it was approved at the Company’s general meeting that commencing from the end of 2007, Hisense Kelon would cooperate with Hisense Group to develop its self-branded exporting business by leveraging on the well-established international marketing platform of Hisense Group to meet the deficiencies due to the lack of self-branded channels and resources, with an aim to expand the international market and further increase its scale of operation. As such, upon completion of this reorganization, there will remain a certain amount of connected transactions between Hisense Group and Hisense Kelon in respect of international marketing.

As to the small amount of connected transactions between the Company and Hisense Group and its connected parties in connection with procurement, provision of services and other areas that will continue to exist after this reorganization, Hisense Kelon will determine the considerations according to the principles of equality, openness and fairness, strictly regulate the aforesaid connected transactions with Hisense Group and its connected parties, and discharge its obligation of information disclosure on a timely basis. At the same time, Qingdao Hisense (the controlling shareholder of the Company according to relevant laws and regulations of the PRC) and its ultimate controller Hisense Group have both undertaken to further regulate and minimize the connected transactions that might be entered into with Hisense Kelon in the future.

(V) Fund and asset embezzlement by its substantial shareholder and its related parties and the guarantees provided by the Company for its substantial shareholder and its related parties after this transaction

Before this transaction, a series of connected transactions and unusual cash flows occurred between the Company and Guangdong Greencool Enterprise Development Company Limited, the former substantial shareholder of the Company, and its related parties (the “Greencool Companies”), or through its third party companies, from 2001

to 2005. Such transactions and unusual cash flows as well as the suspected fund embezzlements have been formally investigated by the relevant authorities. As at 31 December 2008, the balance of amounts due from the Greencool Companies and the abovementioned specified third party companies amounted to RMB651,000,000. The Company made a provision for bad debts of RMB365,000,000 in respect of this matter.

In view of the abovementioned situation, Guangdong Dahua Delu Certified Public Accountants, the auditor of the Company’s annual report, considered that they were “unable to adopt appropriate audit procedures to obtain sufficient and appropriate audit evidence to ascertain whether or not the estimated provision for bad debts based on such amount and the assessment and calculation of the receivables are reasonable”, and issued a qualified auditor’s report for the Company’s 2008 financial statements.

In relation to the qualified opinion, the Board of the Company is of the view that it involves the historical problem caused by the embezzlements of the Company’s assets by Guangdong Greencool Enterprise Development Company Limited, the former substantial shareholder of the Company, and its related parties. The full recoverability of the funds embezzled will not affect the current normal production and operation of the Company.

The Company has estimated, based on the information about the cases available at present, the recoverable amount of the amounts due from the Greencool Companies and the specified third party companies. The bases of the estimate include: the information regarding the properties of the Greencool Companies sealed and frozen by the court as applied by the Company, and the preliminary analysis report on the aforesaid fund embezzlements prepared by the lawyer of the Company appointed for this case. As analyzed by the lawyer of this case, the properties of the Greencool Companies available for settlement amounted to approximately RMB1,000,000,000, and the total claim amount against the Greencool Companies by the creditors to the court amounted to approximately RMB2,400,000,000. The amount claimed by the Company for fund embezzlements by the Greencool Companies amounted to RMB791,000,000. The Company is seeking to have the debts settled based on the proportion of properties available for settlement to debts of the Greencool Companies. Based on the estimated settlement proportion, and taking into consideration that the case is still in progress, the court has not yet acknowledged the claim amount of the debts by the Company. The Board of the Company estimated the recoverable amount of the debts and made a provision for bad debts of RMB365,000,000.

The Board of the Company considers that the provision for bad debts is an accounting estimate. The accounting method applied to such receivables is not in breach of the relevant requirements regarding the accounting system for business enterprises. Although the relevant court has made the judgments of first instance in favour of the Company on seventeen cases in respect of the litigations initiated by the Company against the Greencool Companies and its specified third party cases (the judgments for thirteen cases have become effective), the court has not determined the appropriation arrangement for the properties sealed in the abovementioned cases. The Company is unable to ascertain the accurate recovery rate of the abovementioned debts. After the determination of the abovementioned debt settlement proportion, the Company will, based on the confirmed recoverable proportion, adjust retrospectively the 2005 balance sheet and income statement, and adjust the relevant items in the balance sheet as at 31 December 2006, 31 December 2007 and 31 December 2008. However, this will not affect the current profit and loss of the Company for the coming years.

In relation to the reasonableness of the above retrospective adjustments, Guangdong Dahua Delu Certified Public Accountants issued a detailed explanation that “pursuant to the requirement of ‘Accounting Standards for Business Enterprises No. 28 – Accounting policies, changes in Accounting Estimates and Errors”, ‘errors in previous period usually include the effects of calculation mistakes, mistakes in applying accounting policies, oversights or misinterpretations of facts and fraud’. We are of the opinion that, after the determination of the debt settlement proportion for the above items with qualified opinion, Hisense Kelon is able to confirm that the difference between the recoverable amount and the amounts calculated based on the carrying value is an accounting error in the previous period. The reason is that due to the external reasons such as the fraud of former management of Hisense Kelon, the Company determined the recoverable amount based on its estimation and provided for bad debt without clear and reliable evidence. Accordingly, the calculation on the provision for bad debt was based on judgement, in which calculation error may exist. Article 12 provides that: enterprise should adopt the retrospective restatement method to correct any material errors of the prior period, unless it is impracticable to recognize the amount of cumulative effect of the prior period. The term ‘retrospective restatement’ refers to a method whereby, when a prior period error is discovered, the relevant items of the financial statements are corrected as if the prior period error had never occurred. In the event that the actual amount recovered is consistent with or less than the carrying amount, no retrospective adjustment shall be made.”

In conclusion, the qualified opinion for 2008 auditor’s report of the Company involves issues caused by the Company’s historical problems and will not be eliminated by this substantial asset reorganization. However, the qualified opinion will not affect the normal production and operation of the Company nor the current profit and loss of the Company for the coming years.

Apart from the aforesaid and save for the normal transactions between the Company’s existing substantial shareholder Qingdao Hisense and the Company, there was no further fund embezzlement and illegal guarantee issues as at the date of this announcement.

(VI) Effects of this transaction on the corporate governance structure of the Company

Before this transaction, the Company has already complied with the related laws and regulations to clearly define its assets and establish a regulated governance structure for a legal entity and an independent corporate management system, in order to achieve business independence, assets independence, financial independence, organizational independence and staff independence.

After this transaction, the shareholding of Qingdao Hisense in the Company will be further increased. The Company will continue to actively procure its controlling shareholder to exercise its rights and discharge its duties and responsibilities as a capital contributor and perform its fiduciary duties to the Company and other shareholders pursuant to the Company Law of the PRC, the Securities Law of the PRC, Guidelines for the Internal Control of Listed Companies of the Shenzhen Stock Exchange and other requirements, and shall not directly or indirectly interfere with the decision-making and operating activities of the Company nor seek additional interests by making use of its controlling position, with the objective of protecting the legal interests of other shareholders.

In addition to the elimination of the competition between the Company and Qingdao Hisense, a substantial reduction of connected transactions between the Company and Qingdao Hisense and its connected parties, further strengthening of the foundation of the principal business of the Company and significant enhancement of its asset quality and profitability, this transaction will further improve the corporate governance structure of the Company.

(VII) Prior approval and independent opinions from independent non-executive directors in respect of this transaction

The independent non-executive directors of the Company have carefully 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 provided by the Board of the Company and agreed to submit the proposal to the Board of the Company for consideration.

Pursuant to the relevant requirements of the “Guidance Opinion on the Establishment of the Independent Director System in Listed Companies”, the “Rules Governing Listing of Stocks on Shenzhen Stock Exchange” and the Articles of Association of the Company, the independent non-executive directors of the Company rendered the following independent opinions with a serious, prudent and responsible attitude and on the basis of independent judgments after a due review of the relevant materials of this proposal of substantial assets reorganization and careful analysis:

This issue of A shares for the acquisition of assets by the Company constitutes both a substantial assets reorganization and a connected transaction. When the Board considered the relevant resolutions, all connected directors abstained from voting, and the procedures for convening the meeting of the Board and voting at the meeting were in compliance with the relevant requirements of the laws and regulations and the Articles of Association of the Company.
The implementation of this transaction will be beneficial to mitigate the financial and operational risks of the Company, strengthen the financial position of the Company and enhance its continued profitability, and reinforce the Company’s core competitiveness, which will in turn facilitate the long-term development of the Company. All of these are in the interests of all shareholders of the Company.
The proposal for this reorganization and the relevant agreements to be concluded are in compliance with the requirements of the Company Law of the PRC, the Securities Law of the PRC, the Reorganization Measures, the “Administrative Measures for the Issue of Securities by Listed Companies” and other relevant laws and regulations and regulatory documents promulgated by the China Securities Regulatory Commission. As such, the proposals for this reorganization are feasible.
The final value of the subject assets of this transaction shall be based on the results of valuation issued by the valuer. The procedures for the selection and

engagement of the valuer and the auditor are in compliance with the relevant requirements, and no actions have been taken that prejudice the interests of the Company and its shareholders, in particular the interests of the minority shareholders.

Based on the foregoing, the independent non-executive directors of the Company agreed upon the arrangements of the Board in respect of the proposal on the acquisition of assets through issue of shares (A shares) by the Company to Qingdao Hisense, the controlling shareholder of the Company according to relevant laws and regulations of the PRC, and the connected transaction.

B. RESUMPTION OF TRADING

At the request of the Company, trading in the H shares (stock code: 00921, stock abbreviation: Hisense Kelon) and A shares (stock code: 000921, stock abbreviation: ST 科龍) of the Company on the Stock Exchange and the Shenzhen Stock Exchange was suspended from 9:30 a.m. on 9 April 2009 respectively, pending the release of this announcement. The Company has applied to the Stock Exchange and the Shenzhen Stock Exchange for resumption of trading in the H shares and A shares of the Company respectively with effect from 9:30 a.m. on 11 May 2009.

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. Zhou Xiao Tian, 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.

The directors of the Company jointly and severally accept full responsibility for the accuracy of the information contained in this announcement and confirm, having made all reasonable enquiries, that to the best of their knowledge, opinions expressed in this announcement have been arrived at after due and careful consideration and there are no other facts not contained in this announcement, the omission of which would make any statement in this announcement misleading.

Foshan City, Guangdong, the PRC, 8 May 2009.

AI assistant

Medlive Technology Co., Ltd. — Capital/Financing Update 2009

50436_rns_2009-05-10_4c15eb63-3991-405b-b94c-0103adf1f2aa.pdf

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

ANNOUNCEMENT ON RESOLUTIONS PASSED AT THE 9TH MEETING OF 2009 OF THE SIXTH BOARD OF DIRECTORS

A. RESOLUTIONS PASSED AT THE 9TH MEETING OF 2009 OF THE SIXTH BOARD OF DIRECTORS

I. PROPOSALS FOR THIS TRANSACTION

(IV) Number of private issue shares

(V) Lock-up period arrangement

(VI) Listing arrangement

II. THIS TRANSACTION CONSTITUTES A SUBSTANTIAL ASSET REORGANIZATION AND A CONNECTED TRANSACTION

III. THIS TRANSACTION WILL NOT CHANGE THE CONTROL OF THE COMPANY ACCORDING TO RELEVANT LAWS AND REGULATIONS OF THE PRC

IV. APPROVAL PROCEDURES REQUIRED TO BE COMPLETED FOR THIS TRANSACTION

V. MAJOR CONTENT OF THE FRAMEWORK AGREEMENT OF THIS TRANSACTION

(I) Subject assets

(II) Basis of pricing and consideration

1. Basis of pricing

2. Range of consideration

3. Transaction benchmark date

(III) Payment of consideration

(IV) Conditions precedent

(V) Lock-up period of shares

(VI) Transitional period

1. Obligations of both parties after signing the formal agreement for this transaction

2. Arrangements upon completion

V. BASIC INFORMATION OF ASSETS PROPOSED TO BE ACQUIRED

(I) Basic information of assets proposed to be acquired

1. 100% equity interests in Hisense Shandong

1.1. Basic information

1.2. History

1.3. Shareholding structure

1.4. Operating status

1.5. Major financial information (based on PRC accounting standards)

1.6. Status of ownership

1.7. Pre-assessment

2. 51% equity interests in Hisense Zhejiang

2.1. Basic information

2.2. History

2.3. Shareholding structure

2.4. Operating status

2.5. Major financial information (based on PRC accounting standards)

2.6. Status of ownership

2.8. Pre-assessment

3. 55% equity interests in Hisense Beijing

3.1. Basic information

3.2. History

3.3. Shareholding structure

3.4. Operating status

3.5. Major financial information (based on PRC accounting standards)

3.6. Status of ownership

3.8. Pre-assessment

4. Basic information of 60% equity interests in Hisense Nanjing held by Hisense Beijing

4.1. Basic information of Hisense Nanjing

4.2. History of Hisense Nanjing

4.3. Shareholding structure of Hisense Nanjing

4.4. Operating status

4.5. Major financial information (based on PRC accounting standards)

5. 49% equity interests in Hisense Hitachi

5.1. Basic information

5.2. History

5.3. Shareholding structure

5.4. Operating status

5.5. Major financial information (based on PRC accounting standards)

5.6. Status of ownership

5.8. Pre-assessment

6. 78.7% equity interests in Hisense Mould

6.1. Basic information

6.2. History

6.3. Shareholding structure

6.4. Operating status

6.5. Major financial information (based on PRC accounting standards)

6.6. Status of ownership

6.8. Pre-assessment

7. Assets for sales and marketing of white goods of Hisense Marketing

7.1. Basic information of Hisense Marketing

7.3. Shareholding structure

7.4. Operating status

In particular:

7.7. Status of ownership

7.8. Pre-assessment

Medlive Technology Co., Ltd. Capital/Financing Update 2009