Medlive Technology Co., Ltd. - Capital/Financing Update 2019

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HISENSE HOME APPLIANCES GROUP CO., LTD. 海信家電集團股份有限公司

(A joint stock limited company incorporated in the People’s Republic of China with limited liability) (Stock Code: 00921)

ANNOUNCEMENT

(1) CONTINUING CONNECTED TRANSACTIONS; AND (2) CONTINUING CONNECTED TRANSACTIONS AND MAJOR TRANSACTION

The Company wishes to inform the Shareholders and investors that each of the Existing Business Co-operation Framework Agreement, the Existing Financial Services Agreement and the Existing Financial Business Framework Agreement will expire on 31 December 2019 and it is expected that the Group will continue to enter into transactions of a nature similar to the transactions under each of the agreements from time to time after their expiration. In view of the above and to modify the scope of the transactions between certain parties, on 5 November 2019, the Company entered into the Business Co-operation Framework Agreement, the Financial Services Agreement and the Financial Business Framework Agreement.

BUSINESS CO-OPERATION FRAMEWORK AGREEMENT

As at the date of this announcement, as (i) Hisense Group (through its indirect interest in the Company held by Hisense Air-conditioning and Hisense HK) is the controlling shareholder of the Company and (ii) each of Hisense International and Hisense Electric is a subsidiary of Hisense Group, Hisense Group, Hisense International, Hisense Electric and their respective subsidiaries are connected persons of the Company under the Hong Kong Listing Rules. Since Hisense Electric holds more than 30% of the issued shares of Hisense Marketing Management, Hisense Marketing Management is an associate of Hisense Electric and Hisense Marketing Management and its subsidiaries are also connected persons of the Company under the Hong Kong Listing Rules. As such, the transactions contemplated under the Business Co-operation Framework Agreement will constitute continuing connected transactions of the Company under the Hong Kong Listing Rules.

As the applicable percentage ratios for the transactions contemplated under the Business Cooperation Framework Agreement exceed 5% on an annual basis and the annual consideration exceeds HK$10,000,000, the Business Co-operation Framework Agreement, the transactions contemplated thereunder and the Caps in relation thereto are subject to the reporting, announcement, annual review and shareholders’ approval requirements under Chapter 14A of the Hong Kong Listing Rules.

FINANCIAL SERVICES AGREEMENT

As at the date of this announcement, as (i) Hisense Group (through its indirect interest in the Company held by Hisense Air-conditioning and Hisense HK) is the controlling shareholder of the Company and (ii) Hisense Finance is a subsidiary of Hisense Group, Hisense Finance is a connected person of the Company under the Hong Kong Listing Rules. As such, the transactions contemplated under the Financial Services Agreement will constitute continuing connected transactions of the Company under the Hong Kong Listing Rules.

As the applicable percentage ratios for the Caps in relation to the transactions for the provision of deposit services, loan and electronic bank acceptance bill services, draft discount services, settlement and sale of foreign exchange services and agency services such as settlement services for receipt and payment of funds by Hisense Finance to the Group contemplated under the Financial Services Agreement exceed 5%, the Financial Services Agreement, the transactions contemplated thereunder and the Caps in relation thereto are subject to the reporting, announcement, annual review and shareholders’ approval requirements under Chapter 14A of the Hong Kong Listing Rules.

The provision of deposit services to the Group under the Financial Services Agreement also constitutes the provision of financial assistance by the Group to Hisense Finance under Rule 14.04(1)(e) of the Hong Kong Listing Rules. Although certain applicable percentage ratios for the provision of such deposit services exceed 100%, the provision of financial assistance does not constitute an acquisition or a series of acquisitions of assets by the Company and hence the transaction does not fall into the classification of very substantial acquisition under Rule 14.06(5) of the Hong Kong Listing Rules. Instead, since the other applicable percentage ratios for the provision of such deposit services are more than 25% but less than 75%, the transaction will constitute a major transaction of the Company under Chapter 14 of the Hong Kong Listing Rules and is subject to the reporting, announcement and shareholders’ approval requirements thereunder.

FINANCIAL BUSINESS FRAMEWORK AGREEMENT

As at the date of this announcement, as (i) Hisense Group (through its indirect interest in the Company held by Hisense Air-conditioning and Hisense HK) is the controlling shareholder of the Company; and (ii) Hisense Financial Holdings is a subsidiary of Hisense Group, Hisense Financial Holdings is a connected person of the Company under the Hong Kong Listing Rules. As such, the transactions contemplated under the Financial Business Framework Agreement will constitute continuing connected transactions of the Company under the Hong Kong Listing Rules.

The transactions under the Financial Business Framework Agreement and the Financial Services Agreement will be aggregated under the Hong Kong Listing Rules. As the applicable percentage ratios as defined under Rule 14.07 of the Hong Kong Listing Rules in respect of the Financial Business Framework Agreement and the Financial Services Agreement on an aggregate basis exceed 5%, the Financial Business Framework Agreement, the transactions contemplated thereunder and the Caps in relation thereto are subject to the reporting, announcement, annual review and shareholders’ approval requirements under Chapter 14A of the Hong Kong Listing Rules.

GENERAL

A circular containing, inter alia, (i) further information on the Business Co-operation Framework Agreement, the Financial Services Agreement, the Financial Business Framework Agreement, the transactions contemplated thereunder and the Caps in relation thereto; (ii) the letter of advice from the independent financial adviser to the independent board committee and the Shareholders; and (iii) the recommendation from the independent board committee will be despatched to the Shareholders on or before 17 December 2019 in accordance with the Hong Kong Listing Rules. In view of the number of transactions contemplated under the Business Co-operation Framework Agreement, the Financial Services Agreement and the Financial Business Framework Agreement which are to be covered in the circular, it is expected that more time may be required by the Company to prepare the circular and for the independent financial adviser to review and advise on such transactions. Therefore, it is expected that the circular will be despatched beyond 15 business days after the publication of this announcement.

BACKGROUND

References are made to:

(i) the announcements of the Company dated 28 November 2017, 26 November 2018 and 21 June 2019 and the supplemental announcement of the Company dated 7 December 2018 in relation to, inter alia, the Existing Business Co-operation Framework Agreement, the Existing Financial Services Agreement and the Existing Financial Business Framework Agreement; and
(ii) the circulars of the Company dated 3 January 2018, 7 January 2019 and 14 August 2019 in relation to, inter alia, the Existing Business Co-operation Framework Agreement, the Existing Financial Services Agreement and the Existing Financial Business Framework Agreement.

PRESENTATION OF HISTORICAL FIGURES OF CONTINUING CONNECTED TRANSACTIONS IN THIS ANNOUNCEMENT

Reference is also made to the announcement of the Company dated 5 March 2019 and the circular of the Company dated 14 August 2019. On 5 March 2019, the Company and the Transferor entered into the Sale and Purchase Agreement, pursuant to which the Transferor agreed to sell, and the Company agreed to buy, 0.2% equity interest of Hisense Hitachi at a consideration of RMB25,000,000.

The Transfer of Target Equity Interest was approved by the Shareholders on 29 August 2019 at the 2019 second extraordinary general meeting of the Company. Completion of the Transfer of Target Equity Interest took place in September 2019, following which the Company holds 49.2% equity interests in Hisense Hitachi. The articles of association of Hisense Hitachi state that the board of directors of Hisense Hitachi shall consist of nine members, out of which the Company is entitled to appoint five members. As such, since September 2019, Hisense Hitachi becomes a subsidiary of the Company and the financial results of Hisense Hitachi are consolidated into that of the Group.

As Hisense Hitachi is now a member of the Group, since October 2019 and under each of the Business Co-operation Framework Agreement, the Financial Services Agreement and the Financial Business Framework Agreement, the transactions between Hisense Hitachi and Hisense Group, Hisense International, Hisense Electric, Hisense Marketing Management, Hisense Finance, Hisense Financial Holdings and/or their respective subsidiaries (the “ Connected Entities ”) have/will become continuing connected transactions between the Group and the Connected Entities.

In this announcement, historical figures of transactions conducted by the Group (including Hisense Hitachi) for the period commencing from 1 January 2019 to 30 September 2019 (the “ Historical Figures ”) are presented. The Company wishes to clarify that the transactions between Hisense Hitachi and the Connected Entities for the period commencing from 1 January 2019 to 30 September 2019, the transaction amounts of which are included in the Historical Figures, were not continuing connected transactions between the Group (excluding Hisense Hitachi) and the Connected Entities during such period. To facilitate Shareholders and investors in understanding the basis of and reasons for the proposed Caps (which have taken into account the continuing connected transactions which may be conducted by Hisense Hitachi), the Historical Figures represent the aggregate of the following actual transaction amounts between the Group (including Hisense Hitachi) and the relevant Connected Entities: (i) the amount of continuing connected transactions between the Group (excluding Hisense Hitachi) and the Connected Entities from 1 January 2019 to 30 September 2019; and (ii) the amount of transactions between Hisense Hitachi and the Connected Entities from 1 January 2019 to 30 September 2019 (which were not continuing connected transactions of the Group (excluding Hisense Hitachi)).

(A) CONTINUING CONNECTED TRANSACTIONS

BUSINESS CO-OPERATION FRAMEWORK AGREEMENT

Date: 5 November 2019 Parties: The Company; Hisense Group; Hisense International; Hisense Electric; and Hisense Marketing Management

Term:

The Business Co-operation Framework Agreement shall commence from 1 January 2020 or the date of approval of the Business Co-operation Framework Agreement by the Independent Shareholders at the EGM (whichever is the later) until 31 December 2020, which can be

terminated before its expiration by mutual agreement of the parties.

In the event of any exemption for connected transactions being withdrawn or revoked or becoming invalid and there is non-compliance with the relevant Hong Kong Listing Rules and/or Shenzhen Listing Rules in respect of connected transactions for any transactions contemplated under the Business Co-operation Framework Agreement, the performance of the Business Co-operation Framework Agreement in respect of such transactions shall be terminated. The Business Co-operation Framework Agreement will be terminated if all transactions contemplated thereunder have been terminated for the above reason.

Condition:

The Business Co-operation Framework Agreement and the transactions contemplated thereunder are subject to the approval of the Independent Shareholders at the EGM.

Subject matters:

The transactions contemplated under the Business Co-operation Framework Agreement will be conducted in the ordinary and usual course of business of the parties, on normal commercial terms and on terms not less favourable to the parties than terms available to or from (as appropriate) independent third parties. The Business Co-operation Framework Agreement does not restrict the rights of the parties (as the case may be) to sell or purchase products or services contemplated under the Business Co-operation Framework Agreement from any other purchasers or suppliers (as the case may be).

The relevant parties will enter into definitive contract(s) setting out specific terms including specifications of the products or services, quantity involved, pricing principles, quality standards and warranties, payment terms, terms of delivery, technological services and obligations in the event of default, but such terms shall be consistent with the principles and the terms of the Business Co-operation Framework Agreement.

Payment term(s) for the transactions contemplated under the Business Co-operation Framework Agreement shall be in accordance with the payment term(s) as stipulated in the definitive contract(s) to be signed by the relevant parties thereto.

The Company’s internal policy regarding continuing connected transactions:

The Company has established connected transaction management policy ( 關聯交易管理辦法 ) (the “ CT Management Policy ”) for the purpose of ensuring that connected transactions will be conducted in a fair, equal and public manner, on normal commercial terms and not prejudicial to the interests of the Company and its independent Shareholders.

According to the rules of the CT Management Policy, before a definitive transaction is conducted, the Company will compare the pricing of similar existing transactions with or quotations obtained from at least three randomly selected independent third parties. Commencement of the definitive transaction with the connected party/parties is conditional upon the Company’s assurance that the price of such continuing connected transaction, according to the principles of fairness and reasonableness, is no less favourable to the Group than those offered by independent third parties in order to ensure fairness of the price of the continuing connected transaction as well as the interests of the Company and the

independent Shareholders as a whole.

Following the requirements under the CT Management Policy, the operation departments of the Group will compare the terms of the proposed continuing connected transactions to those of the similar existing transactions with independent third parties or quotations offered by independent third parties (as the case may be) prior to the execution of the relevant orders or contracts. If the operation department of the relevant business sector is of the view that the terms of the proposed orders or contracts are less favourable to the Group than those with or offered by independent third parties, it will report to the senior management who will negotiate with the connected party on the terms of the relevant orders or contracts. If, after negotiation, the connected party cannot offer terms which are no less favourable to the Group than those with or offered by independent third parties, the Group will not execute the relevant orders or contracts.

The finance and securities department of the Company is responsible for the collection and summarisation of all information in relation to the continuing connected transactions from each operation department and will prepare a summary report regarding the conduct of the continuing connected transactions on a regular basis and make timely report to the senior management regarding the operating status of the continuing connected transactions of Group. It will also conduct a monthly review on the terms of the continuing connected transaction and compare such terms with those of the similar transactions with independent third parties. In addition, the Company conducts annual review on the execution of the continuing connected transactions of the Group.

The legal affairs department of the Company is responsible for reviewing and approving the Business Co-operation Framework Agreement and the new transaction agreements contemplated under the Business Co-operation Framework Agreement.

The transactions contemplated under the Business Co-operation Framework Agreement are in connection with the following aspects of business co-operation between the parties:

(1) Purchase of electrical appliances

Pursuant to the terms of the Business Co-operation Framework Agreement, the Group will purchase from Hisense Group, Hisense International, Hisense Electric and/or their respective subsidiaries on a non-exclusive basis electrical appliances as they may require from time to time.

Pricing:

Pricing for the purchase of electrical appliances is determined by commercial negotiation between the parties according to the principles of fairness and reasonableness with reference to the market price of similar electrical appliances offered by at least three independent third parties.

department which will check, compare and confirm the price of the product is not less favourable than the price offered by independent third parties (with the pricing information supplied by the operation department) and the head of the finance department will approve the terms of the relevant orders or contracts.

Historical figures:

The annual cap allocated to the purchase of electrical appliances by the Group from Hisense Group, Hisense International, Hisense Electric and/or their respective subsidiaries for the financial year ending 31 December 2019 as specified in the Existing Business Co-operation Framework Agreement is RMB279,170,000 (exclusive of VAT). For the nine months ended 30 September 2019, the aggregate transaction amount for the purchase of electrical appliances by the Group from Hisense Group, Hisense International, Hisense Electric and/or their respective subsidiaries amounted to approximately RMB3,750,000 (exclusive of VAT and unaudited) (of which RMB170,000 was for the purchases from Hisense Group and/or its subsidiaries, RMB3,580,000 was for the purchases from Hisense International and/or its subsidiaries and RMB nil was for the purchases from Hisense Electric and/or its subsidiaries).

Proposed Cap:

The transactions contemplated under the Business Co-operation Framework Agreement regarding the purchase of electrical appliances by the Group from Hisense Group, Hisense International, Hisense Electric and/or their respective subsidiaries for the financial year ending 31 December 2020 are subject to the Cap of RMB33,360,000 (exclusive of VAT), of which:

(i) RMB3,920,000 will be allocated to the purchase of electrical appliances from Hisense Group and/or its subsidiaries;
(ii) RMB28,950,000 will be allocated to the purchase of electrical appliances from Hisense International and/or its subsidiaries; and
(iii) RMB490,000 will be allocated to the purchase of electrical appliances from Hisense Electric and/or its subsidiaries.

The above Cap was determined with reference to (i) similar transactions between the Group and Hisense Group, Hisense International, Hisense Electric and/or their respective subsidiaries in the past (that is, the estimated annualised unaudited amount of the similar transactions for the year 2019); (ii) the projected increase in the level of sales scale of the Group for the year ending 31 December 2020; (iii) the anticipated percentage increase in the relevant purchase of the Group in 2020; and (iv) the Group’s plan of marketing and product promotion activities for the year 2020.

Reasons for and benefits of the purchase of electrical appliances:

The sales and overall image of the Group can be enhanced by purchasing electrical appliances from Hisense Group, Hisense International, Hisense Electric and/or its subsidiaries as gifts for the Group’s marketing and promotion activities which aim at boosting the sale of the Group’s electrical appliances. At the same time, the Company has appointed Hisense International to purchase, on its behalf, prototype of electrical appliances

such as refrigerators, air-conditioners, kitchen and bathroom appliances etc. from overseas markets for the purpose of conducting analysis and research, and to carry out product market research so as to increase the competitiveness of the Group’s products. Since the pricing for the purchase of electrical appliances will be determined with reference to the market price of similar electrical appliances, it will be more convenient to the Group in terms of time and costs to purchase certain electrical appliances through Hisense Group, Hisense International, Hisense Electric and/or their respective subsidiaries.

In light of the above, the Directors (excluding the independent non-executive Directors whose views will be given after taking into account the advice from the independent financial adviser) are of the view that the terms of the purchase of electrical appliances from Hisense Group, Hisense International, Hisense Electric and/or their respective subsidiaries under the Business Co-operation Framework Agreement and the Cap in relation thereto are fair and reasonable and in the interest of the Company and the Shareholders as a whole.

(2) Purchase of raw materials, parts and components

Pursuant to the terms of the Business Co-operation Framework Agreement, the Group will purchase from Hisense Group, Hisense Electric and/or their respective subsidiaries on a nonexclusive basis such quantities of raw materials, parts and components as they may require from time to time.

Pricing:

Pricing for the purchase of raw materials, parts and components is determined by commercial negotiation between the parties according to the principles of fairness and reasonableness with reference to the market price of similar raw materials, parts and components offered by at least three independent third parties.

The operation department of the relevant business sector of the Group will compare the terms of the proposed purchase (including pricing and other contractual terms taking into account factors such as the product quality and the stability in supply of the product) to those of the similar existing transactions with independent third parties or quotations offered by independent third parties (as the case may be) prior to the execution of the relevant orders or contracts. The operation department of the relevant business sector will report to the finance department which will check, compare and confirm the price of the product is not less favourable than the price offered to the Group by independent third parties (with the pricing information supplied by the operation department) and the head of the finance department will approve the terms of the relevant orders or contracts.

Historical figures:

The annual cap allocated to the purchase of raw materials, parts and components by the Group from Hisense Group, Hisense Electric and/or their respective subsidiaries for the financial year ending 31 December 2019 as specified in the Existing Business Co-operation Framework Agreement is RMB355,050,000 (exclusive of VAT). For the nine months ended 30 September 2019, the aggregate transaction amount for the purchase of raw materials, parts and components by the Group from Hisense Group, Hisense Electric and/or their respective subsidiaries amounted to approximately RMB180,230,000 (exclusive of VAT and unaudited) (of which RMB156,880,000 was for the purchases from Hisense Group and/or its subsidiaries and RMB23,350,000 was for the purchases from Hisense Electric and/or its

subsidiaries).

Proposed Cap:

The transactions contemplated under the Business Co-operation Framework Agreement regarding the purchase of raw materials, parts and components by the Group from Hisense Group, Hisense Electric and/or their respective subsidiaries for the financial year ending 31 December 2020 are subject to the Cap of RMB659,580,000 (exclusive of VAT), of which:

(i) RMB584,220,000 will be allocated to the purchase of raw materials, parts and components from Hisense Group and/or its subsidiaries; and
(ii) RMB75,360,000 will be allocated to the purchase of raw materials, parts and components from Hisense Electric and/or its subsidiaries.

The above Cap was determined with reference to (i) similar transactions between the Group and Hisense Group, Hisense Electric and/or their respective subsidiaries in the past (that is, the estimated annualised unaudited amount of the similar transactions for the year 2019); (ii) the projected increase in the level of sales scale of the Group for the year ending 31 December 2020; and (iii) the anticipated percentage increase in the relevant purchase of the Group in 2020.

Reasons for and benefits of the purchase of raw materials, parts and components:

With the gradual increase in intelligent electrical appliances, the usage of raw materials and spare parts of intelligent product also increases. The subsidiaries of Hisense Group have better ability in manufacturing those products with better quality and is beneficial to ensure the quality and performance of products. The Company is satisfied with the quality of raw materials, parts and components provided by Hisense Group and/or its subsidiaries from the previous course of dealings. Quality of the Group’s products is guaranteed by purchasing certain raw materials from Hisense Group and/or its subsidiaries, which, in turn, increases product competitiveness and boosts the sale of products.

The subsidiaries of the Group have the ability in manufacturing plastic parts or sheet metals (such as television backboard, television case and metal plate) required for the production of television products, and such business is carried out by means of raw material processing. The subsidiaries of the Group purchase raw materials of plastic parts or sheet metals for the manufacturing of television backboard and case products from Hisense Electric and/or its subsidiaries, which facilitates the development of the aforementioned business.

In light of the above, the Directors (excluding the independent non-executive Directors whose views will be given after taking into account the advice from the independent financial adviser) are of the view that the terms of the purchase of raw materials, parts and components from Hisense Group, Hisense Electric and/or their respective subsidiaries under the Business Co-operation Framework Agreement and the Cap in relation thereto are fair and reasonable and in the interest of the Company and the Shareholders as a whole.

(3) Provision of services

Pursuant to the terms of the Business Co-operation Framework Agreement, the Group will, on a non-exclusive basis, engage (i) Hisense Group and/or its subsidiaries for the provision

of material processing, installation and maintenance, distribution, property, medical, leasing, design, inspection, agency services, management consultancy, technical support and information system maintenance services as the Group may require from time to time; (ii) Hisense International and/or its subsidiaries for the provision of agency services and maintenance services as the Group may require from time to time; (iii) Hisense Marketing Management and/or its subsidiaries for the provision of agency services as the Group may require from time to time; and (iv) Hisense Electric and/or its subsidiaries for the provision of property and technical support services as the Group may require from time to time.

Pricing:

The fees payable by the Group for receiving the aforesaid services are determined by commercial negotiations according to the principles of fairness and reasonableness between the parties with reference to the market price for the provision of similar services offered by at least three independent third parties.

The operation department of the relevant business sector of the Group will compare the terms of the proposed services (including pricing and other contractual terms taking into account factors such as the service quality and the stability in provision of the service) to those of the similar existing transactions with independent third parties or quotations offered by independent third parties (as the case may be) prior to the execution of the relevant orders or contracts. The operation department of the relevant business sector will report to the finance department which will check, compare and confirm the service fees are not less favourable than the fees offered by independent third parties (with the pricing information supplied by the operation department) and the head of the finance department will approve the terms of the relevant orders or contracts.

Historical figures:

The annual cap allocated to the provision of services by Hisense Group, Hisense International, Hisense Marketing Management, Hisense Electric and/or their respective subsidiaries to the Group for the financial year ending 31 December 2019 as specified in the Existing Business Co-operation Framework Agreement is RMB868,340,000. For the nine months ended 30 September 2019, the aggregate transaction amount for the provision of services contemplated under the Business Co-operation Framework Agreement by Hisense Group, Hisense International, Hisense Marketing Management, Hisense Electric and/or their respective subsidiaries to the Group amounted to approximately RMB507,460,000 (unaudited) (of which RMB441,080,000 was for the provision of relevant services by Hisense Group and/or its subsidiaries, RMB2,810,000 was for the provision of relevant services by Hisense International and/or its subsidiaries, RMB52,110,000 was for the provision of relevant services by Hisense Marketing Management and/or its subsidiaries and RMB11,460,000 was for the provision of relevant services by Hisense Electric and/or its subsidiaries).

Proposed Cap:

The transactions contemplated under the Business Co-operation Framework Agreement regarding the provision of services by Hisense Group, Hisense International, Hisense Marketing Management, Hisense Electric and/or their respective subsidiaries to the Group for the financial year ending 31 December 2020 are subject to the Cap of

RMB1,017,960,000, of which:

(i) RMB782,600,000 will be allocated to the provision of material processing, installation and maintenance, distribution, property (including: (a) property leasing services mostly for office buildings; and (b) property management services in relation to office buildings and factories. Most of the aforementioned properties are located in the Guangdong Province and Shandong Province of the PRC), medical, leasing, design, inspection, agency services, management consultancy, technical support and information system maintenance services by Hisense Group and/or its subsidiaries;
(ii) RMB33,460,000 will be allocated to the provision of agency services and maintenance services by Hisense International and/or its subsidiaries;
(iii) RMB167,000,000 will be allocated to the provision of agency services by Hisense Marketing Management and/or its subsidiaries; and
(iv) RMB34,900,000 will be allocated to the provision of property and technical support services by Hisense Electric and/or its subsidiaries.

Proposed Caps Historical figures	(Unit: RMB) (Unit: RMB)	Basis of andreasons for determining the proposed Cap Proposed Cap Actual Cap for the Types of services Entities	for the financial year ending 31 December 2020 for the financial transaction financial year provided to the providing	year ending 31 amount for the ending 31 Group services	December 2020 nine months December 2019	ended 30	September 2019	(i) similar transactions between the Group and Hisense 144,770,000 97,480,000 142,990,000 Material Hisense Group	Group and/or its subsidiaries in the past; processing and/or its	(ii) the projected increase in the level of sales scale of services subsidiaries	the Group for the year 2020; and	(iii) the anticipated percentage increase in the relevant	purchase of the Group in 2020.	(i) similar transactions between the Group and Hisense 290,660,000 167,130,000 281,640,000 Installation and	Group and/or its subsidiaries in the past; maintenance	(ii) the projected increase in the level of sales scale of services	the Group for the year 2020; and	(iii) the high quality of installation and maintenances	services provided by Hisense Group and/or its	subsidiaries. The Group plans to appoint Hisense	Group and/or its subsidiaries to provide more	installation and maintenance services.	(i) the expected increase in charges for electricity and 43,980,000 25,330,000 34,380,000 Property services	water in 2020 in view of the increase in operating (including	revenue of the Group; property	(ii) in view of the increase in operating revenue of the management and	Group, in addition to the existing leases, the Group property leasing)	will procure leasing of new properties or expand the	size of leasing area to meet the increased leasing	needs; and	(iii) the expected increase in property service fees in	view of the increase in rental fees in the property	market in 2020.

		Basis of andreasons for determining the proposed Cap	for the financial year ending 31 December 2020					(i) similar transactions between the Group and Hisense	Group and/or its subsidiaries in the past; and	(ii) the projected increase in the level of sales scale of	the Group for the year 2020.	(i) similar transactions between the Group and Hisense	Group and/or its subsidiaries in the past; and	(ii) the projected increase in the level of sales scale of	(i) similar transactions between the Group and Hisense	Group and/or its subsidiaries in the past; and	(ii) the projected increase in the level of sales scale of	the Group for the year 2020.
Proposed Caps	(Unit: RMB)	Proposed Cap	for the financial	year ending 31	December 2020			106,130,000				21,230,000			175,830,000								782,600,000
		Actual	transaction	amount for the	nine months	ended 30	September 2019	60,870,000				14,930,000			75,340,000								441,080,000
Historical figures	(Unit: RMB)	Cap for the	financial year	ending 31	December 2019			68,710,000				17,620,000			105,140,000								650,480,000
		Types of services	provided to the	Group				Information	system	maintenance	services	Equipment	inspection	services	Distribution	medical, leasing,	design, agency	services,	management	consultancy and	technical support	services	Total
		Entities	providing	services

		Basis of andreasons for determining the proposed	Cap for the financial year ending 31 December 2020					(i) similar transactions between the Group and	Hisense Group and/or its subsidiaries in the past;	(ii) the projected increase in the level of sales scale of	the Group for the year 2020; and	(i) similar transactions between the Group and		According to the expected increase in the sales level of	online e-commerce and offline sale of the “Hisense smart	home product sets” business for the year 2020.
Proposed Caps	(Unit: RMB)	Proposed Cap	for the financial	year ending 31	December 2020			31,430,000				2,030,000	33,460,000	167,000,000					167,000,000
		Actual	transaction	amount for the	nine months	ended 30	September 2019	2,160,000				650,000	2,810,000	52,110,000					52,110,000
Historical figures	(Unit: RMB)	Cap for the	financial year	ending 31	December 2019			28,000,000				1,000,000	29,000,000	167,250,000					167,250,000
		Types of services	provided to the	Group				Maintenance	services			Agency services	Total	Agency services					Total
		Entities	providing	services				Hisense	International	and/or its	subsidiaries			Hisense	Marketing	Management	and/or its	subsidiaries

		Basis of andreasons for determining the proposed Cap	for the financial year ending 31 December 2020					(i) similar transactions between the Group and Hisense	Electric and/or its subsidiaries in the past;	(ii) in view of the increase in operating revenue of the	Group, in addition to the existing leases, the Group	will procure leasing of new properties or expand the	(i) similar transactions between the Group and Hisense	Electric and/or its subsidiaries in the past; and
Proposed Caps	(Unit: RMB)	Proposed Cap	for the financial	year ending 31	December 2020			24,870,000					10,030,000		34,900,000
		Actual	transaction	amount for the	nine months	ended 30	September 2019	10,450,000					11,010,000		21,460,000
Historical figures	(Unit: RMB)	Cap for the	financial year	ending 31	December 2019			16,690,000					4,920,000		21,610,000
		Types of services	provided to the	Group				Property services	(including	property	management and	property leasing)	Technical support	services	Total
		Entities	providing	services				Hisense	Electric and/or	its subsidiaries

Reasons for and benefits of the engagement of services:

The Company is satisfied with the quality of the services provided by Hisense Group, Hisense International, Hisense Marketing Management, Hisense Electric and/or their respective subsidiaries from the previous course of dealings and considers that Hisense Group, Hisense International, Hisense Marketing Management, Hisense Electric and/or their respective subsidiaries possess the expertise and experience for the provision of relevant services which can enable the Group to carry out its daily operation smoothly.

In response to the needs of customers and the market, Hisense Marketing Management is responsible for the integrated management and organisation of the online e-commerce and the offline sale of the “Hisense smart home product sets ( 海信智慧家庭成套產品) ” business of certain markets for the Group’s full-range electrical appliance products (mainly brown and white goods), which is conducive to enhancing the synergy and sharing effect of the Company’s full-range electrical appliance products, improve the Group’s operational efficiency and reduce expense ratio, which would improve the Group’s sales scale.

In light of the above, the Directors (excluding the independent non-executive Directors whose views will be given after taking into account the advice from the independent financial adviser) are of the view that the terms of the engagement of services of Hisense Group, Hisense International, Hisense Marketing Management, Hisense Electric and/or their respective subsidiaries under the Business Co-operation Framework Agreement and the Cap in relation thereto are fair and reasonable and in the interest of the Company and the Shareholders as a whole.

(4) Supply of electrical appliances

Pursuant to the terms of the Business Co-operation Framework Agreement, the Group will supply on a non-exclusive basis electrical appliances to Hisense Group, Hisense International, Hisense Marketing Management, Hisense Electric and/or their respective subsidiaries as they may require from time to time.

Pricing:

Pricing for the supply of electrical appliances is determined by commercial negotiation between the parties according to the principles of fairness and reasonableness with reference to the market price of similar electrical appliances offered by at least three independent third parties.

The operation department of the relevant business sector of the Group will compare the terms of the proposed supply of electrical appliances (including pricing and other contractual terms taking into account factors including the customers’ credit rating and the qualification of the customers such as their asset scale) to those of the similar existing transactions with independent third parties or the terms offered to independent third parties (as the case may be) prior to the execution of the relevant orders or contracts. The operation department of the relevant business sector will report to the finance department which will check, compare and confirm the price of the product is not less favourable than the price offered by independent third parties (with the pricing information supplied by the operation department) and the head of the finance department will approve the terms of the relevant orders or contracts.

Historical figures:

The annual cap allocated to the supply of electrical appliances by the Group to Hisense Group, Hisense International, Hisense Marketing Management, Hisense Electric and/or their respective subsidiaries for the financial year ending 31 December 2019 as specified in the Existing Business Co-operation Framework Agreement is RMB15,101,740,000 (exclusive of VAT). For the nine months ended 30 September 2019, the aggregate transaction amount for the supply of electrical appliances by the Group to Hisense Group, Hisense International, Hisense Marketing Management, Hisense Electric and/or their respective subsidiaries amounted to approximately RMB8,295,520,000 (exclusive of VAT and unaudited) (of which RMB136,210,000 was for the supply to Hisense Group and/or its subsidiaries, RMB7,923,160,000 was for the supply to Hisense International and/or its subsidiaries, RMB235,980,000 was for the supply to Hisense Marketing Management and/or its subsidiaries and RMB170,000 was for the supply to Hisense Electric and/or its subsidiaries).

Proposed Cap:

The transactions contemplated under the Business Co-operation Framework Agreement regarding the supply of electrical appliances by the Group to Hisense Group, Hisense International, Hisense Marketing Management, Hisense Electric and/or their respective subsidiaries for the financial year ending 31 December 2020 are subject to the Cap of RMB16,473,940,000 (exclusive of VAT), of which:

(i) RMB410,000,000 will be allocated to the supply of electrical appliances by the Group to Hisense Group and/or its subsidiaries;
(ii) RMB15,392,980,000 will be allocated to the supply of electrical appliances by the Group to Hisense International and/or its subsidiaries;
(iii) RMB670,000,000 will be allocated to the supply of electrical appliances by the Group to Hisense Marketing Management and/or its subsidiaries; and
(iv) RMB960,000 will be allocated to the supply of electrical appliances by the Group to Hisense Electric and/or its subsidiaries.

The above Cap was determined with reference to (i) similar transactions between the Group and Hisense Group, Hisense International, Hisense Marketing Management, Hisense Electric and/or their respective subsidiaries in the past; and (ii) the projected increase in the level of sales scale of the Group for the year 2020.

The above Cap was also determined with reference to the following expected increase in the relevant sales of the Group in 2020: according to the sales scale increment plan of the Group for the year 2020, the sales revenue of the Group is projected to increase by 25% year-on-year, of which (i) the sales revenue of the overseas market is expected to increase by 30% year-on-year and (ii) the expected sales revenue of approximately RMB670,000,000 to be generated via the sale plan of the “Hisense full-range electrical appliance products” which is integrated, managed and organised by Hisense Marketing Management. Therefore, for the year 2020, (i) the value of electrical appliances for export supplied by the Group to Hisense International and/or its subsidiaries is estimated to be approximately RMB15,392,980,000; and (ii) the value of electrical appliances supplied by

the Group to Hisense Marketing Management is estimated to be approximately RMB670,000,000.

Reasons for and benefits of the supply of electrical appliances:

The production and supply of electrical appliances by the Group to Hisense Group, Hisense International, Hisense Marketing Management, Hisense Electric and/or their respective subsidiaries can help to lower the production costs of the Group by lowering the fixed costs per unit of product incurred by the Group as a result of the increase in production level, which, in turn, enhance the market competitiveness of the Group’s products. At the same time, the Group can continue to develop overseas market and enhance brand competitiveness and awareness. Developing online platform and offline sale of the “Hisense smart home product sets” through Hisense Marketing Management benefits the creation of a synergetic effect, which can further increase the Group’s sales scale and boost the Group’s market share and income.

In light of the above, the Directors (excluding the independent non-executive Directors whose views will be given after taking into account the advice from the independent financial adviser) are of the view that the terms of the supply of electrical appliances to Hisense Group, Hisense International, Hisense Marketing Management, Hisense Electric and/or their respective subsidiaries under the Business Co-operation Framework Agreement and the Cap in relation thereto are fair and reasonable and in the interest of the Company and the Shareholders as a whole.

(5) Supply of moulds

Pursuant to the terms of the Business Co-operation Framework Agreement, the Group will supply on a non-exclusive basis moulds to Hisense Group, Hisense International, Hisense Electric and/or their respective subsidiaries as they may require from time to time.

Pricing:

In response to the invitations to tender from Hisense Group, Hisense International, Hisense Electric and/or their respective subsidiaries (which are also extended to various independent third parties) from time to time, the Group may submit such tenders or bids to supply the moulds for such products requested by Hisense Group, Hisense International, Hisense Electric and/or their respective subsidiaries in its/their invitation to tender. Pricing for the supply of moulds is determined by the open bidding process. The bidding price is determined on the basis of a reasonable cost plus reasonable profit margin. For determining reasonable costs, the Company will take into account fixed cost (e.g. depreciation of machinery), cost of raw material, and labour cost for the production of the moulds. The profit margin of the Group in such bidding price will not be lower than the profit margin of the Group in the bidding price for supply of similar and comparable moulds to independent third parties during the same period.

Historical figures:

The annual cap allocated to the supply of moulds by the Group to Hisense Group, Hisense International, Hisense Electric and/or their respective subsidiaries for the financial year ending 31 December 2019 as specified in the Existing Business Co-operation Framework Agreement is RMB228,320,000 (exclusive of VAT). For the nine months ended 30

September 2019, the aggregate transaction amount for the supply of moulds by the Group to Hisense Group, Hisense International, Hisense Electric and/or their respective subsidiaries amounted to approximately RMB79,170,000 (exclusive of VAT and unaudited) (of which RMB nil was for the supply to Hisense Group and/or its subsidiaries, RMB26,290,000 was for the supply to Hisense International and/or its subsidiaries and RMB52,880,000 was for the supply to Hisense Electric and/or its subsidiaries).

Proposed Cap:

The transactions contemplated under the Business Co-operation Framework Agreement regarding the supply of moulds by the Group to Hisense Group, Hisense International, Hisense Electric and/or their respective subsidiaries for the financial year ending 31 December 2020 are subject to the Cap of RMB263,140,000 (exclusive of VAT), of which:

(i) RMB6,000,000 will be allocated to the supply of moulds to Hisense Group and/or its subsidiaries;
(ii) RMB87,140,000 will be allocated to the supply of moulds to Hisense International and/or its subsidiaries; and
(iii) RMB170,000,000 will be allocated to the supply of moulds to Hisense Electric and/or its subsidiaries.

Reasons for and benefits of the supply of moulds:

The manufacture and sale of moulds have become important parts of the business of the Company’s subsidiaries, and the sale of moulds by the Group to Hisense Group, Hisense International, Hisense Electric and/or their respective subsidiaries can facilitate the expansion of the sales scale of the Group and increase the sales revenue of the Group. Acting as the supplier for moulds of the relevant subsidiaries of Hisense Group, Hisense International and Hisense Electric, the sale of moulds under the Business Co-operation Framework Agreement will facilitate the Group in maintaining an important existing relationship with these companies. By maintaining such relationship, the relevant subsidiaries of Hisense Group, Hisense International and Hisense Electric may continue to serve as stable customers of the Group in respect of the sale of moulds, thereby further expanding the sales of the Group and increasing the sales revenue of the Group.

In light of the above, the Directors (excluding the independent non-executive Directors whose views will be given after taking into account the advice from the independent financial adviser) are of the view that the terms of the supply of moulds to Hisense Group, Hisense International, Hisense Electric and/or their respective subsidiaries under the Business Co-operation Framework Agreement and the Cap in relation thereto are fair and reasonable and in the interest of the Company and the Shareholders as a whole.

(6) Supply of raw materials, parts and components

Pursuant to the terms of the Business Co-operation Framework Agreement, the Group will supply to Hisense Group, Hisense International, Hisense Electric and/or their respective subsidiaries on a non-exclusive basis such quantities of raw materials, parts and components as they may require from time to time.

Pricing:

Pricing for the supply of raw materials, parts and components is determined by commercial negotiation between the parties according to the principles of fairness and reasonableness with reference to the market price of similar raw materials, parts and components supplied by the Group to at least three independent third parties.

The operation department of the relevant business sector of the Group will compare the terms of the proposed supply of raw materials, parts and components (including pricing and other contractual terms taking into account factors including the customers’ credit rating and the qualification of the customers such as their asset scale) to those of the similar existing transactions with independent third parties or the terms offered to independent third parties (as the case may be) prior to the execution of the relevant orders or contracts. The operation department of the relevant business sector will report to the finance department which will check, compare and confirm the price of the product is not less favourable than the price of similar raw materials, parts and components supplied by the Group to independent third parties (with the pricing information supplied by the operation department) and the head of the finance department will approve the terms of the relevant orders or contracts.

Historical figures:

The annual cap allocated to the supply of raw materials, parts and components by the Group to Hisense Group, Hisense International, Hisense Electric and/or their respective subsidiaries for the financial year ending 31 December 2019 as specified in the Existing Business Co-operation Framework Agreement is RMB223,750,000 (exclusive of VAT). For the nine months ended 30 September 2019, the aggregate transaction amount for the supply of raw materials, parts and components by the Group to Hisense Group, Hisense International, Hisense Electric and/or their respective subsidiaries amounted to approximately RMB127,260,000 (exclusive of VAT and unaudited) (of which RMB62,170,000 was for the supply to Hisense Group and/or its subsidiaries, RMB56,290,000 was for the supply to Hisense International and/or its subsidiaries and RMB8,800,000 was for the supply to Hisense Electric and/or its subsidiaries).

Proposed Cap:

The transactions contemplated under the Business Co-operation Framework Agreement regarding the supply of raw materials, parts and components by the Group to Hisense Group, Hisense International, Hisense Electric and/or their respective subsidiaries for the financial year ending 31 December 2020 are subject to the Cap of RMB385,220,000 (exclusive of VAT), of which:

(i) RMB235,030,000 will be allocated to the supply of raw materials, parts and

components to Hisense Group and/or its subsidiaries;

(ii) RMB131,090,000 will be allocated to the supply of raw materials, parts and components to Hisense International and/or its subsidiaries; and
(iii) RMB19,100,000 will be allocated to the supply of raw materials, parts and components to Hisense Electric and/or its subsidiaries.

The above Cap was determined with reference to (i) similar transactions between the Group and Hisense Group, Hisense International, Hisense Electric and/or their respective subsidiaries in the past (that is, the estimated annualised unaudited amount of the similar transactions for the year 2019); (ii) the projected increase in the level of sales scale of the Group for the year 2020; and (iii) the anticipated percentage increase in the relevant purchase of the Group in 2020.

The above Cap was also determined with reference to the following expected increase in the relevant sales of the Group in 2020: the supply of raw materials, parts and components by the Group to Hisense International and/or its subsidiaries is a business incidental to the sale of products by the Group to Hisense International and/or its subsidiaries. According to the sales scale increment plan of the Group for the year 2020, the sales revenue of the overseas market is expected to increase by 30% year-on-year. Having also taken into account the increase in the quota of spare parts required by overseas customers and the expected increase in the revenue from the sale of spare parts, the upper limit for exporting raw materials, parts and components for the year 2020 is estimated to be approximately RMB131,090,000. The subsidiaries of the Group also sell raw materials, parts and components to Hisense Electric and/or its subsidiaries, which mainly include the parts and components of television backboard, television case and metal plate etc. produced by the Group for Hisense Electric and/or its subsidiaries.

Reasons for and benefits of the supply of raw materials, parts and components:

Hisense International has overseas sales channels and high quality customer resources. The supply of raw materials, parts and components of export products by the Group to Hisense International can satisfy the business needs of the Group’s export sales and expand the export sales scale of the Group. Further, the provision of raw materials, parts and components to Hisense Electric and its subsidiaries can increase the revenue of the Group.

The subsidiaries of Hisense Group have better ability in manufacturing raw materials (such as electric control boards and Wi-Fi modules) required for manufacturing electrical appliances products with better quality and is beneficial to ensure the quality and performance of the products. The Company is satisfied with the quality of raw materials, parts and components provided by Hisense Group and/or its subsidiaries. Quality of the Group’s products is guaranteed by purchasing certain raw materials from Hisense Group and/or its subsidiaries, which, in turn, increases product competitiveness and boosts the sale of products. Such businesses are carried out by means of raw material processing. The Group supplies Hisense Group and/or its subsidiaries with the raw materials such as electric control boards and Wi-Fi modules required for production, which facilitates the development of the aforementioned businesses.

In light of the above, the Directors (excluding the independent non-executive Directors whose views will be given after taking into account the advice from the independent

financial adviser) are of the view that the terms of the supply of raw materials, parts and components to Hisense Group, Hisense International, Hisense Electric and/or their respective subsidiaries under the Business Co-operation Framework Agreement and the Cap in relation thereto are fair and reasonable and in the interest of the Company and the Shareholders as a whole.

(7) Supply of equipment

Pursuant to the terms of the Business Co-operation Framework Agreement, the Group will supply to Hisense International and/or its subsidiaries on a non-exclusive basis such quantities of equipment as they may require from time to time.

Pricing:

Pricing for the supply of equipment is determined by commercial negotiation between the parties according to the principles of fairness and reasonableness with reference to the market price of similar equipment supplied by the Group to at least three independent third parties.

The operation department of the relevant business sector of the Group will compare the terms of the proposed supply of equipment (including pricing and other contractual terms taking into account factors including the customers’ credit rating and the qualification of the customers such as their asset scale) to those of the similar existing transactions with independent third parties or the terms offered to independent third parties (as the case may be) prior to the execution of the relevant orders or contracts. The operation department of the relevant business sector will report to the finance department which will check, compare and confirm the price of the product is not less favourable than the price of similar equipment supplied by the Group to independent third parties (with the pricing information supplied by the operation department) and the head of the finance department will approve the terms of the relevant orders or contracts.

Historical figures:

The annual cap allocated to the supply of equipment by the Group to Hisense International and/or its subsidiaries for the financial year ending 31 December 2019 as specified in the Existing Business Co-operation Framework Agreement is RMB12,500,000 (exclusive of VAT). For the nine months ended 30 September 2019, the aggregate transaction amount for the supply of equipment by the Group to Hisense International and/or their respective subsidiaries amounted to approximately RMB nil (exclusive of VAT and unaudited).

Proposed Cap:

The transactions contemplated under the Business Co-operation Framework Agreement regarding the supply of equipment by the Group to Hisense International and/or its subsidiaries for the financial year ending 31 December 2020 are subject to the Cap of RMB6,000,000 (exclusive of VAT).

The above Cap was determined with reference to (i) the projected increase in the level of sales scale of the Group for the year 2020; (ii) the expected year-on-year increase in the sales revenue of the overseas market in 2020 by 30%; and (iii) the anticipated demand for equipment purchase of the overseas customers in 2020.

Reasons for and benefits of the supply of equipment:

The supply of equipment by the Group to Hisense International and/or its subsidiaries will increase the Group’s revenue and satisfy the production needs of the oversea clients.

In light of the above, the Directors (excluding the independent non-executive Directors whose views will be given after taking into account the advice from the independent financial adviser) are of the view that the terms of the supply of equipment to Hisense International and/or its subsidiaries under the Business Co-operation Framework Agreement and the Cap in relation thereto are fair and reasonable and in the interest of the Company and the Shareholders as a whole.

(8) Provision of services by the Group

Pursuant to the terms of the Business Co-operation Framework Agreement, the Group will, on a non-exclusive basis, (i) provide processing services, property services and installation services to Hisense Group and/or its subsidiaries; (ii) provide design and property services to Hisense International and/or its subsidiaries; and (iii) provide processing services, property services and installation services to Hisense Electric and/or its subsidiaries.

Pricing:

The fees payable by Hisense Group, Hisense International, Hisense Electric and/or their respective subsidiaries for the aforesaid services are determined by commercial negotiations according to the principles of fairness and reasonableness between the parties with reference to the market price for the provision of similar services offered by the Group to at least three independent third parties.

The operation department of the relevant business sector of the Group will compare the terms of the proposed services (including pricing and other contractual terms taking into account factors including the customers’ credit rating and the qualification of the customers such as their asset scale) to those of the similar existing transactions with independent third parties or the terms offered to independent third parties (as the case may be) prior to the execution of the relevant orders or contracts. The operation department of the relevant business sector will report to the finance department which will check, compare and confirm the service fees are not less favourable than the fees of similar services offered by the Group to independent third parties (with the pricing information supplied by the operation department) and the head of the finance department will approve the terms of the relevant orders or contracts.

Historical figures:

The annual cap allocated to the provision of services by the Group to Hisense Group, Hisense International, Hisense Electric and/or its subsidiaries for the financial year ending 31 December 2019 as specified in the Existing Business Co-operation Framework Agreement is RMB47,910,000. For the nine months ended 30 September 2019, the aggregate transaction amount for the provision of services contemplated under the Business Co-operation Framework Agreement by the Group to Hisense Group, Hisense International, Hisense Electric and/or their respective subsidiaries amounted to approximately RMB15,350,000 (unaudited) (of which RMB10,370,000 was for the provision of relevant services by the Group to Hisense Group and/or its subsidiaries, RMB3,510,000 was for the

provision of relevant services by the Group to Hisense International and/or its subsidiaries and RMB1,470,000 was for the provision of relevant services by the Group to Hisense Electric and/or its subsidiaries).

Proposed Cap:

The transactions contemplated under the Business Co-operation Framework Agreement regarding the provision of services by the Group to Hisense Group, Hisense International, Hisense Electric and/or their respective subsidiaries for the financial year ending 31 December 2020 are subject to the Cap of RMB48,660,000, of which:

(i) RMB17,690,000 will be allocated to the provision of processing services, property services and installation services by the Group to Hisense Group and/or its subsidiaries;
(ii) RMB10,090,000 will be allocated to the provision of design and property services by the Group to Hisense International and/or its subsidiaries; and
(iii) RMB20,880,000 will be allocated to the provision of processing services, property services and installation services by the Group to Hisense Electric and/or its subsidiaries.

The above Cap was determined with reference to (i) similar transactions between the Group and Hisense Group, Hisense International, Hisense Electric and/or their respective subsidiaries in the past; (ii) the projected increase in the level of sales scale of the Group for the year 2020; and (iii) related business needs of Hisense Group, Hisense International, Hisense Electric and/or their respective subsidiaries for the year 2020.

The above Cap was also determined with reference to the following expected growth in the businesses of the Group in 2020: (i) property services in the sum of approximately RMB11,720,000 to be provided by the Group; (ii) design services in the sum of approximately RMB6,870,000 to be provided by the Group; (iii) processing services in the sum of approximately RMB13,680,000 to be provided by the Group; and (iv) installation services in the sum of approximately RMB3,840,000 to be provided by the Group.

Reasons for and benefits of the provision of services:

The provision of services to Hisense Group, Hisense International, Hisense Electric and/or their respective subsidiaries can improve the utilisation rate of the Group’s resources and increase the Group’s revenue.

In light of the above, the Directors (excluding the independent non-executive Directors whose views will be given after taking into account the advice from the independent financial adviser) are of the view that the terms of the provision of services to Hisense Group, Hisense International, Hisense Electric and/or their respective subsidiaries under the Business Co-operation Framework Agreement and the Cap in relation thereto are fair and reasonable and in the interest of the Company and the Shareholders as a whole.

(B) CONTINUING CONNECTED TRANSACTIONS AND MAJOR TRANSACTION

FINANCIAL SERVICES AGREEMENT

Date: 5 November 2019

Parties: The Company; and Hisense Finance

Term:

The term of the Financial Services Agreement shall commence from 1 January 2020 or the date of approval of the Financial Services Agreement by the Independent Shareholders at the EGM (whichever is later) until 31 December 2020, which can be terminated by either party if the other party is in default and such default is not remedied within a reasonable period.

Condition:

The Financial Services Agreement and the transactions contemplated thereunder are subject to the approval of the Independent Shareholders at the EGM.

Subject matters:

Pursuant to the terms of the Financial Services Agreement, the Group will engage Hisense Finance to provide a range of financial services within its scope of business, including without limitation, deposit services, loan and electronic bank acceptance bill services, draft discount services ( 票據貼現服務 ) and other businesses which may be carried on by Hisense Finance as approved by the regulatory authorities. Particulars of the services to be provided by Hisense Finance to the Group are as follows:

(i) deposit services;
(ii) loan and electronic bank acceptance bill ( 電子銀行承兌匯票 ) services;
(iii) draft discount services ( 票據貼現服務 );
(iv) settlement and sale of foreign exchange services ( 結售匯服務 ); and
(v) agency services such as settlement services for receipt and payment of funds ( 資金收支結算等代理類服務 ).

For the draft discount services which will be provided to the Group by Hisense Finance, the Group is entitled to present bank drafts to Hisense Finance for payment before the maturity date of the bank drafts. In return, Hisense Finance will charge discount interest ( 貼現利息 ) from the Group for “cashing” the bank drafts. After the Group has discounted the bank drafts with Hisense Finance, such bank drafts will belong to the latter which will have the right to present such bank drafts to the issuing banks for payment on their respective maturity dates.

The implementation of the provision of particular services contemplated under the Financial Services Agreement shall be subject to the definitive contract(s) to be entered into between the relevant parties within the scope of the Financial Services Agreement.

The Group may obtain financial services contemplated under the Financial Services Agreement from other financial institutions in addition to Hisense Finance, as it sees fit.

The Company’s internal policy regarding continuing connected transactions:

The Company has established the CT Management Policy to ensure that connected transactions will be conducted in a fair, equal and public manner, on normal commercial terms and not prejudicial to the interests of the Company and its independent Shareholders.

According to the CT Management Policy, before entering into a definitive transaction, the Company will compare the price of similar existing transactions with or quotations obtained from independent third parties. Commencement of the definitive transaction with the connected party/parties is subject to the Company’s assurance that the price of such continuing connected transaction, according to the principles of fairness and reasonableness, is no less favourable to the Group than those offered by independent third parties in order to ensure fairness of the price of the continuing connected transaction as well as the interests of the Company and the independent Shareholders as a whole.

Following the requirements under the CT Management Policy, the finance department of the Group will compare the interest rates on deposits and loans and the service fee for electronic bank acceptance bills offered by Hisense Finance to the Group to those offered by commercial banks in the PRC prior to the execution of the relevant transactions. For deposit services, the designated finance staff of the Group will review and compare the interest rates offered by Hisense Finance with the major commercial banks based on the nature and tenure of such deposits (e.g. the time deposits will be reviewed quarterly, the demand deposits will be reviewed monthly and the interest rates for loans will be reviewed regularly). For the purpose of ensuring the sufficiency of independent bank transactions that are subject to review, the finance staff will review the interest rates on deposits offered by the five major commercial banks in the PRC, namely, China Construction Bank, Industrial and Commercial Bank of China, Bank of China, Bank of Communications and Agricultural Bank of China. The Company would randomly select three banks out of the aforementioned five major banks to obtain their quotations of the interest rates on deposits. For electronic bank acceptance bill services, our finance staff will conduct a monthly review on the service fees charged by external commercial banks, and the Company would randomly select three banks out of the five aforementioned major banks to obtain quotations of service fees for issuing electronic bank acceptance bills to ensure that the service fees charged by Hisense Finance are not higher than those charged by commercial banks.

If the finance department is of the view that the interest rates on deposits and loan and the service fee for electronic bank acceptance bills offered by Hisense Finance to the Group are less favourable to the Group than those offered by commercial banks in the PRC, it will report to the senior management who will negotiate with Hisense Finance on the terms of the relevant transactions. If, after negotiation, Hisense Finance cannot offer terms which are no less favourable to the Group than those offered by commercial banks in the PRC, the Group will not execute the relevant transactions. The designated finance staff responsible for reviewing and comparing the interest rates mentioned above is not a member of the aforesaid senior management, and his duties are segregated from those of the senior management.

The finance and securities department of the Company is responsible for the collection and summarisation of all information in relation to the continuing connected transactions from the finance department and will prepare a summary report regarding the conduct of the continuing connected transactions on a regular basis and make timely report to the senior management regarding the operating status of the continuing connected transactions of Group. It will also conduct a monthly review on the terms of the continuing connected transaction and compare such terms with those of the similar transactions with independent third parties based on the information provided by the finance department. The scope of the review conducted by the finance department and the finance and securities department is the same so that the same information can be reviewed by personnel of different departments whose duties are segregated from each other. In addition, the Company conducts annual review on the execution of the continuing connected transactions of the Group.

The legal affairs department of the Company is responsible for reviewing and approving the Financial Services Agreement and the new transaction agreements contemplated under the Financial Services Agreement.

The Company and Hisense Finance periodically enter into deposit and loan agreements and electronic bank acceptance bill contracts pursuant to the Financial Services Agreement. The approval process of the relevant agreements and contracts is initiated by the finance department and the agreements and contracts can only be executed after the approval by the responsible finance officer in charge of a specific business operation. The finance and securities department will closely monitor the daily balances of the deposit service and the loan and electronic bank acceptance bill service so that the relevant annual caps are not exceeded and the risks involved are under control.

The transactions contemplated under the Financial Services Agreement are in connection with the following aspects of financial services between the parties:

(1) Deposit services

Pricing:

The interest rate payable for the Group’s deposits with Hisense Finance shall not be lower than the rate payable by normal commercial banks in the PRC for comparable deposits. The designated finance staff of the Group will review and compare the interest rates offered by Hisense Finance with the major commercial banks based on the nature and tenure of such deposits (e.g. the time deposits will be reviewed quarterly and the demand deposits will be reviewed monthly). For the purpose of ensuring the sufficiency of independent bank transactions that are subject to review, the finance staff will review the interest rates on deposits offered by the five major commercial banks in the PRC, namely, China Construction Bank, Industrial and Commercial Bank of China, Bank of China, Bank of Communications and Agricultural Bank of China. The Company would randomly select three banks out of the aforementioned five major banks to obtain their quotations of interest rates on deposits via conducting online and telephone enquiries.

Historical figures:

The maximum daily balance of the deposits which can be placed by the Group with Hisense Finance during the term of the Existing Financial Services Agreement is RMB16,000,000,000 (inclusive of interest). For the period commencing from 1 January

2019 to 30 September 2019, the maximum daily balance of the deposits placed by the Group with Hisense Finance amounted to approximately RMB11,100,000,000.

Proposed Cap:

The Company currently expects that the maximum daily closing balance of the deposits placed by the Group with Hisense Finance at any time during the term of the Financial Services Agreement shall not exceed the Cap of RMB16,800,000,000 (inclusive of interest) on any given day for the year ending 31 December 2020.

The above Cap was determined with reference to (i) the historical cashflow figures of the Group; (ii) the expected financial needs of cash of the Group after taking into account the business development plans on areas relating to research and development, investment, sales and supply of the Group, as a result of which the Group will utilise more deposit services in the coming years to take advantage of the more expedient and efficient service provision by Hisense Finance; and (iii) the level of growth in monetary funds attributable to the projected increase in the sales scale of the Group for the year 2020.

While the Group does not intend to deposit all its cash with Hisense Finance, a buffer in the maximum daily cash balance in the Group’s deposit account is required after taking into account: (i) deposit services required during the transition period between the expiry of wealth management products subscribed by the Group and the subscription of new wealth management products by the Group; and (ii) the requirement of temporary deposit of the proceeds of the loans proposed to be provided by Hisense Finance to the Group under the Financial Services Agreement.

The above Cap was also determined with reference to: as at 30 September 2019, the balance of monetary funds held by the Group was RMB10,850,000,000, and the balance of monetary funds from wealth management was RMB2,550,000,000 (the total amount of monetary funds held by the Group and from wealth management was thus RMB13,400,000,000). According to the sales scale increment plan of the Group for the year 2020, the sales revenue of the Group is projected to increase by 25% year-on-year. As such, it is anticipated that the highest daily cash balance held by the Group will correspondingly increase by 25% to approximately RMB16,800,000,000 (inclusive of interest) in 2020.

As discussed above, while the Group does not intend to deposit all its cash with Hisense Finance, taking into account the following, a buffer in the maximum daily cash balance of the deposits placed by the Group with Hisense Finance is required:

(i) although the Group intends to continue to allocate a substantial amount of its cash for subscription of entrusted wealth management products, deposit services are still required for cash involved in the transition period between the expiry of entrusted wealth management products and the subscription of new entrusted wealth management products. The expected amount of cash for subscription of entrusted wealth management products in the year 2020 is approximately RMB9,000,000,000; and
(ii) the Group will also borrow loans from Hisense Finance if the relevant terms are more favourable than those available from other financial institutions. As the loans to be provided by Hisense Finance to the Group under the Financial Services Agreement will first be transferred by Hisense Finance to the Group in its deposit account with

Hisense Finance for drawdown, the Group’s funding needs in terms of loans will also affect the Group’s deposit balances with Hisense Finance.

In view of the above, in order to satisfy the business needs, it is expected that the daily closing balance of deposit will not exceed RMB16,800,000,000 (inclusive of interest) in 2020.

(2) Loan and electronic bank acceptance bill services

Pricing:

The interest rate charged for the loans provided to the Group by Hisense Finance shall not be higher than the rate charged by normal commercial banks in the PRC for comparable loans. The designated finance staff of the Group will review and compare the interest rates for loan offered by Hisense Finance with the major commercial banks regularly. For the purpose of ensuring the sufficiency of independent bank transactions that are subject to review, the finance staff will review the interest rates for loan offered by the five major commercial banks in the PRC, namely, China Construction Bank, Industrial and Commercial Bank of China, Bank of China, Bank of Communications and Agricultural Bank of China. The Company would randomly select three banks out of the aforementioned five major banks to obtain their quotations of interest rate charged for loans via conducting online and telephone enquiries.

The service fees charged for the provision of electronic bank acceptance bill services by Hisense Finance for the Group shall not be higher than the standard service fees charged by normal commercial banks in the PRC for comparable services. The treasure department of the Group will conduct a monthly review on the service fees charged by external commercial banks, namely the five major commercial banks in the PRC, namely, China Construction Bank, Industrial and Commercial Bank of China, Bank of China, Bank of Communications and Agricultural Bank of China. The Company would randomly select three banks out of the aforementioned five major banks to obtain their quotations of service fees for issuing electronic bank acceptance bills via conducting online and telephone enquiries. The monthly review is conducted to ensure that the service fees charged by Hisense Finance are not higher than those charged by commercial banks.

Historical figures:

The maximum balance of loan and electronic bank acceptance bills which can be provided by Hisense Finance to the Group during the term of the Existing Financial Services Agreement is RMB11,500,000,000 (inclusive of interest and service fees). For the period commencing from 1 January 2019 to 30 September 2019, the maximum daily balance of the loans and electronic bank acceptance bills provided by Hisense Finance to the Group amounted to approximately RMB7,000,000,000.

Proposed Cap:

The Company currently expects that the maximum balance of loan and electronic bank acceptance bills provided by Hisense Finance for the Group during the term of the Financial Services Agreement shall not exceed the Cap of RMB11,500,000,000 (inclusive of interest and service fees) on any given day for the year ending 31 December 2020.

The above Cap was determined with reference to (i) similar transactions between the Group and Hisense Finance (that is, the estimated annualised unaudited amount of the similar transactions for the year 2019); (ii) the estimated ratio of payment by means of electronic bank acceptance bills by the Group for the year 2020; and (iii) the plan of the Group to obtain more loans and electronic bank acceptance bill services from Hisense Finance instead of from other financial institutions for the year ending 31 December 2020 since the terms for the provision of the loans and electronic bank acceptance bill services by Hisense Finance to the Group shall be no less favourable than those of other normal commercial banks and financial institutions and Hisense Finance has better knowledge of the background and financial status of the Group which will facilitate the loan and electronic bank acceptance bill services application process by the Group.

In 2020, the Group will further adjust payment terms, increase payment via electronic bank acceptance bills, reduce payments via cash and endorsement of bills receivable. On one hand, the Group can utilise the available capital more efficiently to obtain operational income and increase cash flow. On the other hand, the Group can reduce costs derived from endorsement of bills receivable. As such, it is expected that the Group will continue to use electronic bank acceptance bills services in the future. For the nine months ended 30 September 2019, the maximum daily balance of the loan and electronic bank acceptance bills amounted to approximately RMB7,000,000,000. It is expected that payment by means of electronic acceptance bills will increase from currently 38% to 48% in 2020; coupled with the estimated increase in the amount of purchase payment of 25% (which corresponds with the percentage increase of the expected sales revenue in 2020), the daily balance of loan and electronic bank acceptance bills are expected to be not exceeding RMB11,500,000,000 (inclusive of interests and service fees) in order to meet business needs.

(3) Draft discount services

Pricing:

The discount rate for the provision of draft discount services by Hisense Finance to the Group shall be determined on the basis of the rediscount rate ( 再貼現利率 ) quoted by The People’s Bank of China and with reference to market level and shall not be higher than the discount rate charged by normal commercial banks in the PRC providing such services to the Group.

Prior to the execution of the relevant contracts for the draft discount services, the Group’s staff will obtain and compare the quotations from Hisense Finance and the five major commercial banks in the PRC, namely, China Construction Bank, Industrial and Commercial Bank of China, Bank of China, Bank of Communications and Agricultural Bank of China. The Company would randomly select three banks out of the aforementioned five major banks to obtain their quotations of discount rate via conducting online and telephone enquiries.

Historical figures:

Under the Existing Financial Services Agreement, the annual discount interest payable by the Group to Hisense Finance for the provision of draft discount services shall not exceed RMB50,000,000 during the term of the Existing Financial Services Agreement. For the period commencing from 1 January 2019 to 30 September 2019, the total discount interest

paid by the Group to Hisense Finance for the provision of draft discount services amounted to approximately RMB600,000.

Proposed Cap:

The Company currently expects that the annual discount interest payable by the Group to Hisense Finance for the provision of draft discount services during the term of the Financial Services Agreement shall not exceed the Cap of RMB50,000,000 for the year ending 31 December 2020.

The above Cap was determined with reference to (i) the expected financial needs of the Group during the peak season for production for the year 2020; and (ii) the plan of the Group to use more draft discount services to be provided by Hisense Finance instead of from other financial institutions for the year ending 31 December 2020 since the terms for the provision of the draft discount services by Hisense Finance to the Group shall be no less favourable than those of other normal commercial banks and financial institutions and Hisense Finance has better knowledge of the background and financial status of the Group which will facilitate the draft discount application process by the Group.

On the basis of: (i) the expected increase in revenue and the projected capital expenditure in 2020; and (ii) the Group’s plan to enhance its management on its accounts receivables and inventory to expedite the capital turnover rate and reduce unused inventory and capital, it is estimated that the Company’s annual sum of money for procurement of draft discount services by the Group to Hisense Finance will be RMB2,000,000,000 in 2020 and the total discount interest payable by the Group to Hisense Finance for the provision of draft discount services will be RMB50,000,000 for the year ending 31 December 2020 taking into account the existing market interest level and the financing cycle of draft discount services.

(4) Settlement and sale of foreign exchange services

Pricing:

The level of services (including the level of exchange rates) for the settlement and sale of foreign exchange at Hisense Finance shall not be worse than the level of services (including the level of exchange rates) of normal commercial banks in the PRC providing such services to the Group.

Prior to the execution of the relevant contracts for the services for settlement and sale of foreign exchange, the Group’s staff will obtain and compare the quotations from Hisense Finance and five major commercial banks in the PRC, namely, China Construction Bank, Industrial and Commercial Bank of China, Bank of China, Bank of Communications and Agricultural Bank of China. The Company would randomly select three banks out of the aforementioned five major banks to obtain their quotations of service fees via conducting online and telephone enquiries.

Historical figures:

Under the Existing Financial Services Agreement, the annual amount settled or sold by Hisense Finance for the Group shall not exceed US$500,000,000 during the term of the Existing Financial Services Agreement. For the period commencing from 1 January 2019 to

30 September 2019, the amount settled or sold by Hisense Finance for the Group amounted to approximately US$42,220,000.

Proposed Cap:

The Company currently expects that the annual amount settled or sold by Hisense Finance for the Group shall not exceed the Cap of US$300,000,000 for the year ending 31 December 2020. The above Cap was determined with reference to: (i) the expected volume of export and the expected amount subject to settlement and sale of foreign exchange for the year ending 31 December 2020. For the full year of 2019, it is expected that foreign currency received by the Group from its export business would amount to approximately US$150,000,000, and payments to be made by the Group in foreign currency would amount to US$60,000,000 (the total amount of foreign currency received and paid by the Group would thus be US$210,000,000); and (ii) according to the sales scale increment plan of the Group for the year 2020, the sales revenue of the overseas market of the Group for the year 2020 is expected to increase by 30% year-on-year.

Taking into account of all of the above factors, it is estimated that the settlement and sale of foreign exchange services provided by Hisense Finance for 2020 will amount to approximately US$300,000,000.

(5) Agency services such as settlement services for receipt and payment of funds

Pricing:

Hisense Finance will provide agency services such as settlement services for receipt and payment of funds to the Group in accordance with its instructions. The charging standard for service fees chargeable for the provision of agency services such as settlements services for receipt and payment of funds by Hisense Finance for the Group shall not be higher than the charging standard for service fees for such services of normal commercial banks or similar agencies in the PRC during the corresponding period. Hisense Finance announces its scale of charges at the beginning of every year. Currently, the said scale of charges has been lower than those of the major commercial banks in the PRC. The treasure department of the Group conducts monthly review on the service fees charged by external commercial banks, namely the five major commercial banks in the PRC, namely, China Construction Bank, Industrial and Commercial Bank of China, Bank of China, Bank of Communications and Agricultural Bank of China. The Company would randomly select three banks out of the aforementioned five major banks to obtain their quotations of service fees via conducting online and telephone enquiries. These monthly reviews are conducted for the provision of agency services to ensure that the service fees charged by Hisense Finance are not higher than those charged by commercial banks. If the expected scale of charges of Hisense Finance is found to be more expensive than that of other major commercial banks, the Company will select the bank with cheaper charging rates.

Historical figures:

Under the Existing Financial Services Agreement, the annual amount of the service fees payable by the Group to Hisense Finance for the provision of agency services such as settlement services for receipt and payment of funds shall not exceed RMB3,000,000 during the term of the Existing Financial Services Agreement. For the period commencing from 1 January 2019 to 30 September 2019, the aggregate amount of the service fees payable by

the Group to Hisense Finance for the provision of agency services such as settlement services for receipt and payment of funds amounted to approximately RMB485,500.

Proposed Cap:

The Company currently expects that the annual amount of the service fees payable by the Group to Hisense Finance for the provision of agency services such as settlement services for receipt and payment of funds during the term of the Financial Services Agreement shall not exceed the Cap of RMB3,000,000 for the year ending 31 December 2020.

The above Cap was determined with reference to the historical expenses for agency services such as settlement services for receipt and payment of funds of the Group, taking into account the corresponding increase in agency services such as settlement services for receipt and payment of funds resulting from the increment in the scale of the Group’s revenue and the charging standard for service fees chargeable for the provision of agency services such as settlements services for receipt and payment of funds by Hisense Finance for the Group which shall not be higher than the charging standard for service fees for such services of normal commercial banks or similar agencies in the PRC.

Currently, the agency services such as settlement services for receipt and payment of funds provided by Hisense Finance to the Group is mainly transfer services and its standard service fees of RMB0.8 per transaction payable by the Group to Hisense Finance is significantly lower than the charging standard for service fees charged by normal commercial banks or similar agencies in the PRC during the same period which ranges from RMB5.5 to RMB200 per transaction. As the Company is unable to ensure that the service fees payable by the Group to Hisense Finance will remain to be lower than the charging standard for service fees for such services of normal commercial banks or similar agencies in the PRC, and taking into account the Group’s expected demand for transfer services in 2020 and the charging standard for service fees for such services of normal commercial banks or similar agencies in the PRC in 2019, it is estimated that the aggregate amount of the service fees payable by the Group to Hisense Finance for the provision of agency services will be RMB3,000,000.

Reasons for and benefits of the Financial Services Agreement:

The main reasons for the election by the Company to use Hisense Finance for the provision of the relevant financial services are as follows:

(i) the interest rates on deposits and loans and the service fee for electronic bank acceptance bills offered by Hisense Finance to the Group will be equal to or more favourable than those offered by commercial banks in the PRC;
(ii) the Group is expected to benefit from Hisense Finance’s better understanding of the operations of the Group which should allow more expedient and efficient service provision than those offered by PRC commercial banks; and
(iii) Hisense Finance is regulated by the CBRC and engages in the provision of financial services in compliance with the regulations and operation requirements issued by the relevant regulatory authorities. Its primary customers are companies within Hisense Group. In general, as the risks exposed to Hisense Finance are lesser than those exposed to the financial institutions with a broad and unrestricted customer base,

Hisense Finance is able to safeguard customers’ funds more effectively.

Despite the Company considers that the risk associated with placing deposits with Hisense Finance is minimal, the Group is still facing a risk that the Group may not be able to withdraw all of its deposits from Hisense Finance due to operational problems of Hisense Finance. However, the Company is of the view that such risk can be managed and monitored. On one hand, Hisense Finance will strictly adhere to the risk management guidelines to financial institutions issued by the CBRC and the asset-liability ratio, liquidity ratio and other regulatory indicators of Hisense Finance are in compliance with the relevant requirements of the Measures for the Administration of Finance Companies of Enterprise Group ( 企業集團財務公司管理辦法 ) issued by the CBRC. On the other hand, the Company has devised a risk management plan to prevent, timely control and resolve the risk involved in the Group’s deposit arrangement with Hisense Finance and ensure safety of its capital. To enhance risk assessment and management, during the period when cash is deposited with Hisense Finance, the Company will review the latest available financial reports of Hisense Finance, obtain and review the indicator data submitted by Hisense Finance to CBRC on a quarterly basis , assess the operational and financial risks of Hisense Finance, and regularly issue risk assessment reports to the Directors for their consideration and adoption of necessary measures to prevent the risks identified and ensure the safety and liquidity of the Company’s capital and to publish announcement timely. As the Company has been reviewing financial reports of Hisense Finance, conducting stress test on deposit periodically, assessing the operational and financial risks of Hisense Finance and regularly issuing risk assessment reports to the Directors during the period when cash is deposited with Hisense Finance pursuant to the Existing Financial Services Agreement and taking into consideration the information from the aforesaid review and comparing with the risk portfolio of other independent financial service providers, the Board considers that the risk profile of Hisense Finance, as a financial services provider to the Group, is not greater than that of the independent commercial banks in the PRC.

Further, while it is the intention of the Company to continue to use a significant part of its cash in the subscription of entrusted wealth management products, deposit services will still be needed for that part of the Company’s cash in the interim period between the expiry of an entrusted wealth management product and the subscription of a new entrusted wealth management product.

Given that (i) the interest rates on deposits offered by Hisense Finance to the Group will be equal to or more favourable than those offered by commercial banks in the PRC; and (ii) Hisense Finance is expected to provide more suitable and efficient service to the Group based on their better understanding of the operations of the Group, the Company prefers to conduct the deposit service under the Financial Services Agreement with Hisense Finance in order to maximise the benefits of the Shareholders, instead of conducting the deposit service under the Financial Services Agreement with commercial banks in the PRC to diversify risk. The transactions contemplated under the Financial Services Agreement are conducive to the reduction of financing expenses and the maintaining of a relatively stable scope of external financing by the Company. It would in turn strengthen the Company’s ability to avoid the risk arising from the change of national monetary policies and ensure that the Company will maintain a stable level of assets for daily operation. It would also further improve capital efficiency of the Company.

It was also set out in the Financial Services Agreement that the transactions contemplated thereunder will be conducted in the ordinary and usual course of business of the Company, on normal commercial terms and on terms not less favourable to the Company than terms available to or from (as appropriate) independent third parties.

The Board has considered the risks which may be involved in fully utilising the Caps and assessed the possibility of default for Hisense Finance by:

(i) reviewing the audited reports of Hisense Finance of the previous two financial years to ascertain the amount of its total assets and has found that its total assets has yearon-year increase and such reports are not qualified nor disclaimed by the auditors;
(ii) preparing 「關於在海信集團財務有限公司開展存款金融業務的風險評估報告」 (the “ Risk Assessment Reports ”) which has been published by the Company on the website of Shenzhen Stock Exchange dated 29 March 2016, 29 March 2017, 29 March 2018, 29 August 2018, 28 March 2019 and 22 August 2019 respectively and in which it was noted that Hisense Finance had complied with certain key regulatory requirements pursuant to the Measures for the Administration of Finance Companies of Enterprise Group ( 企業集團財務公司管理辦法 ) as at 31 December 2015, 31 December 2016, 31 December 2017, 30 September 2018, 31 December 2018 and 30 June 2019 and the Board has noted that Hisense Finance has been maintaining a relatively higher standard for the weighted average capital adequacy ratio and current ratio; and
(iii) reviewing the internal regulatory report submitted by Hisense Finance to the Company and the confirmation from Hisense Finance that there was no noncompliance events or deficiencies which resulted in suspension of business or administrative punishment.

Having considered the above findings and the fact that Hisense Finance is only allowed to provide financial services to the group companies of Hisense Group which Hisense Finance shall have better understanding on their financial positions and such focus of client base enables Hisense Finance to subject to lower default risk as compared to those commercial banks which with voluminous clients, the Directors are of the view that even with the full utilisation of the Caps, the Company will not be subject to undue default risk by Hisense Finance in light of its relatively sound financial positions and historical compliance with relevant regulatory requirements.

Having reviewed the historical sample deposit rates offered by Hisense Finance and other major commercial banks (for example, China Construction Bank, Industrial and Commercial Bank of China, Bank of China, Bank of Communications and Agricultural Bank of China), the Board has noted that the interest rates offered by Hisense Finance are not less favourable than those offered by major commercial banks for the deposit with the same type and tenure. Moreover, Hisense Finance may offer to the Group tailor-made beneficial loan mix that can specifically cater for the Group’s funding needs which may not be readily available from other commercial banks.

As quite a substantial amount of the Group’s cash and borrowings will be handled by Hisense Finance under the Financial Services Agreement, the Company has adopted risk

control measures to mitigate the risks involved by:

(i) periodically checking the deposit balance placed with Hisense Finance and reviewing the same by the designated finance staff of the Group;
(ii) requesting Hisense Finance to provide monthly deposit transaction record statements to the Group so that the Group can monitor the safety of deposits;
(iii) requesting the designated finance staff of the Group to ask for quotations and terms from other commercial banks for the deposits and electronic bank acceptance bill services that are comparable to the same provided by Hisense Finance in order to ensure that the terms offered by Hisense Finance are not less favourable than other commercial banks; and
(iv) regularly reviewing the financial statements of Hisense Finance to monitor its financial positions and if there is any extraordinary issues noted (such as the financial positions of Hisense Finance is severely deteriorated), the Group can easily switch to other commercial banks given the non-exclusivity of the Financial Services Agreement.

The Directors, having taken into consideration of the above matters, are of the view that the Group can be benefited from Hisense Finance’s better understanding of the operations of the Group which can provide more suitable and efficient service to the Group comparing with those offered by other commercial banks in the PRC and the risk control measures implemented by the Group are sufficient to mitigate the risks involved should the Group fully utilise the Caps.

In light of the above, the Directors (excluding the independent non-executive Directors whose views will be given after taking into account the advice from the independent financial adviser) are of the view that (i) the transactions contemplated under the Financial Services Agreement will be conducted in the ordinary and usual course of business of the Company, on normal commercial terms and on terms no less favourable to the Company than terms available to or from (as appropriate) independent third parties; and (ii) the terms of the Financial Services Agreement and the Caps in relation thereto are fair and reasonable and in the interest of the Company and the Shareholders as a whole.

PLEDGING AND OTHER SECURITY

Hisense Finance may require the Group to provide guarantee, security or pledge in respect of the loan services and the electronic bank acceptance bill services rendered, depending on the then circumstances and business needs.

Certain subsidiaries of the Group have provided charges in favour of Hisense Finance in respect of the provision of electronic bank acceptance bills provided by Hisense Finance to such subsidiaries of the Group. Pursuant to these charges, part of the bank acceptance bills held by the Group will be charged to Hisense Finance to form a portfolio of bank acceptance bills. The Group has opened a special account with Hisense Finance for depositing due and charged bank acceptance bills. The pledged amount is the value of the valid bank acceptance bills which have been deposited to form the pledge portfolio multiplied by the pledge rate determined by Hisense Finance pursuant to the relevant regulations set out by the relevant banking supervision department (which is currently

100%). The maximum balance of the bank acceptance bills which Hisense Finance may provide for the Group will then be not lower than such pledged amount from time to time. It is contemplated that if the Group is required to provide security or pledge to Hisense Finance in respect of the provision of electronic bank acceptance bill services, such security or pledge will be on similar terms with the pledge mentioned above.

As at the date of this announcement, the Group did not obtain any loan from Hisense Finance and therefore no guarantee, security or pledge in respect of loan services was provided by the Group to Hisense Finance. In the future, if the Group is required to obtain loan from Hisense Finance exceeding the credit limit, Hisense Finance may require the Group to provide guarantee, security or pledge in relation to the provision of loan services. In such circumstance, the Group will use bank acceptance bills as security and such security or pledge will be on similar terms with the pledge in respect of the electronic bank acceptance bill services mentioned above.

If the Group is required to provide security or pledge to Hisense Finance in respect of the provision of electronic bank acceptance bill services or loan services which will involve pledging or charging of any assets other than electronic bank acceptance bills or if the maximum balance of the electronic bank acceptance bills services or loans which Hisense Finance may provide for the Group up to is less than 100% of the pledge value for the bank acceptance bills which are deposited by the Group as security for such services or loans, the Company will re-comply with the applicable requirements under Chapter 14A of the Hong Kong Listing Rules.

FINANCIAL EFFECTS ON THE COMPANY FOR THE USE OF DEPOSIT SERVICES UNDER THE FINANCIAL SERVICES AGREEMENT

The use of deposit services allows the Group to receive interests for its deposits kept in financial institution at a rate that is no less favourable than the interest rates for deposits offered by other commercial banks in the PRC for similar deposits. However, the annual interest income only accounts for a small portion of its profits, assets and liabilities. Therefore, the Company expects that its use of deposit services under the Financial Services Agreement will not have any material impact towards the profit, assets and liabilities of the Company.

(C) CONTINUING CONNECTED TRANSACTIONS

FINANCIAL BUSINESS FRAMEWORK AGREEMENT

Date: 5 November 2019 Parties: The Company; and Hisense Financial Holdings

Term:

The term of the Financial Business Framework Agreement shall commence from 1 January 2020 or the date of approval of the Financial Business Framework Agreement by the Independent Shareholders at the EGM (whichever is later) until 31 December 2021, which can be terminated by either party if the other party is in default and such default is not

remedied within a reasonable period.

Condition:

The Financial Business Framework Agreement and the transactions contemplated thereunder are subject to the approval of the Independent Shareholders at the EGM.

Subject matters:

Pursuant to the terms of the Financial Business Framework Agreement, the Group will engage Hisense Financial Holdings and/or its subsidiaries to provide (i) a series of factoring services, including recourse commercial factoring and non-recourse commercial factoring, as may be required by the Group from time to time upon the terms and conditions of the Financial Business Framework Agreement; and (ii) finance leasing services, the particulars of which are set out as follows:

(i) direct leasing;
(ii) sale and leaseback;
(iii) leveraged leasing;
(iv) captive lease; and
(v) operating leasing.

The implementation of the provision of particular services contemplated under the Financial Business Framework Agreement shall be subject to the definitive contract(s) to be entered into between the Company and Hisense Financial Holdings and/or their respective subsidiaries within the scope of the Financial Business Framework Agreement.

The Company and Hisense Financial Holdings may authorise their respective subsidiaries to perform the Financial Business Framework Agreement and to enter into definitive business contract(s) within the scope of the Financial Business Framework Agreement.

The Financial Business Framework Agreement contains no provision which restricts the Company’s right to obtain commercial factoring services contemplated under the Financial Business Framework Agreement from third parties.

The Company’s internal control policies regarding continuing connected transactions:

In relation to the Financial Business Framework Agreement, the Company has adopted various internal control measures.

In order to ensure the amount of transactions contemplated under the Financial Business Framework Agreement will not exceed the proposed Caps, the Company will periodically monitor the daily closing balance of the recourse factoring services and finance leasing services and total transaction amount of the non-recourse factoring services. Furthermore, the Company will estimate the amount of transactions that may possibly be incurred in the coming months in respect of the recourse factoring services, non-recourse factoring services and finance leasing services under the Financial Business Framework Agreement.

The Company’s finance department will ask for quotations and terms from other providers of factoring services and finance leasing services that are comparable to the same provided by Hisense Financial Holdings or its relevant subsidiaries prior to the execution of the relevant transactions with Hisense Financial Holdings or its relevant subsidiaries in order to ensure that the terms offered by Hisense Financial Holdings or its relevant subsidiaries are not less favourable than those offered by other providers of factoring services and finance leasing services. If the finance department is of the view that the terms for factoring services and finance leasing services offered by Hisense Financial Holdings or its relevant subsidiaries to the Company are less favourable to the Group than those offered by other factoring service and finance leasing services providers, it will report to the senior management who will negotiate with Hisense Financial Holdings or its relevant subsidiaries on the terms of the relevant transactions. If, after negotiation, Hisense Financial Holdings or its relevant subsidiaries cannot offer terms which are no less favourable to the Company than those offered by other factoring service and finance leasing services providers, the Company will not execute the relevant transactions.

The legal affairs department of the Company is responsible for reviewing and approving the Financial Business Framework Agreement and the new transaction agreements contemplated under the Financial Business Framework Agreement.

(1) Provision of factoring services

Pricing:

The pricing of the factoring services provided by Hisense Financial Holdings and/or its relevant subsidiaries to the Group shall be determined on the basis of the loan interest rate quoted by The People’s Bank of China and with reference to market level and shall not be higher than the loan interest rate charged by normal commercial banks in the PRC providing such services to the Group. The transactions under Financial Business Framework Agreement are conducted in the course of normal business of the parties, on normal commercial terms and on terms no less favourable than those obtained from or provided by (as the case may be) independent third parties.

The Company’s finance department will ask for quotations and terms from at least three other providers of factoring services that are comparable to the same provided by Hisense Financial Holdings or its relevant subsidiaries prior to the execution of the relevant transactions with Hisense Financial Holdings or its relevant subsidiaries in order to ensure that the terms offered by Hisense Financial Holdings or its relevant subsidiaries are not less favourable than those offered by other providers of factoring services.

Historical figures:

The daily closing balance of the recourse factoring services at Hisense Financial Holdings or its relevant subsidiaries during the term of the Existing Financial Business Framework Agreement shall not exceed RMB800,000,000 (inclusive of interest). For the period from 1 January 2019 to 30 September 2019, the highest daily closing balance of the said services was approximately RMB nil (inclusive of interest).

The annual cap of the non-recourse factoring services at Hisense Financial Holdings or its subsidiaries during the term of the Financial Business Framework Agreement shall not exceed RMB400,000,000 (inclusive of interest). For the period from 1 January 2019 to 30 September 2019, the transaction amount of the non-recourse factoring services was approximately RMB nil (inclusive of interest).

Proposed Caps:

The daily closing balance of the recourse factoring services at Hisense Financial Holdings or its relevant subsidiaries during the term of the Financial Business Framework Agreement shall not exceed RMB800,000,000 (inclusive of interest).

The annual Cap for the non-recourse factoring services provided by Hisense Financial Holdings or its subsidiaries to the Group during the term of the Financial Business Framework Agreement shall not exceed RMB400,000,000 (inclusive of interest).

The Caps for each of the years ending 31 December 2020 and 2021 was determined with reference to (i) the projected scale of funds to be received from the settlement of the bills receivable of the Group for the year 2019; and (ii) the projected increase in the level of the scale of funds to be received from the settlement of the bills receivable of the Group in 2020 driven by the projected increase in the sales scale of the Group for the year 2020.

The basis on which the Company determines the Cap for recourse factoring services and non-recourse factoring services are as follows: for the full year of 2019, it is expected that the projected scale of funds to be received from the settlement of bills receivable of the Group would amount to approximately RMB20,000,000,000. According to the sales scale increment plan of the Group for the year 2020, the sales revenue of the Group is projected to increase by 25% year-on-year. As such, the scale of funds to be received from the settlement of bills receivable is expected to increase from approximately RMB20,000,000,000 to RMB25,000,000,000. As of September 2019, payment by way of endorsement of the bills receivable accounted for approximately 33%, and the remaining bills receivable are to be settled upon maturity. Take into account the Group’s funding needs during peak season for payments, the bills receivable to be used for financing purposes by the Group will account for approximately 20% of the aforementioned bills receivable to be settled upon maturity, i.e. the scale of bills receivable to be used for financing purposes would be approximately RMB3,300,000,000. Of this RMB3,300,000,000, financing of approximately RMB2,100,000,000 is expected to be obtained from discounting the bills receivable at Hisense Finance and financing of approximately RMB1,200,000,000 is expected to be obtained from factoring at Hisense Financial Holdings. Take into account the situation of the bills receivable of the Group for the year 2019 (such as the quality of the bills receivable and the credit rating of the issuing banks), the expected ratio of recourse factoring services to non-recourse factoring services is approximately 2:1. As such, it is expected that the daily closing balance of the recourse factoring services shall not exceed RMB800,000,000 and the annual Cap of the nonrecourse factoring services shall not exceed RMB400,000,000.

(2) Provision of finance leasing services

Pricing:

The pricing of the finance leasing services provided by Hisense Financial Holdings or its

subsidiaries to the Group shall be determined on the basis of the loan interest rate quoted by The People’s Bank of China and with reference to market level and shall not be higher than the loan interest rate charged by normal commercial banks in the PRC providing such services to the Group.

The Company’s finance department will ask for quotations and terms from at least three other providers of finance leasing services that are comparable to the same provided by Hisense Financial Holdings or its relevant subsidiaries prior to the execution of the relevant transactions with Hisense Financial Holdings or its relevant subsidiaries in order to ensure that the terms offered by Hisense Financial Holdings or its relevant subsidiaries are not less favourable than those offered by other providers of finance leasing services.

Historical figures:

The daily closing balance of the finance leasing services provided by Hisense Financial Holdings or its subsidiaries to the Group at Hisense Financial Holdings or its subsidiaries during the term of the Existing Financial Business Framework Agreement shall not exceed RMB300,000,000 (inclusive of interest). For the period from 1 January 2019 to 30 September 2019, the highest daily closing balance of the said services was approximately RMB nil (inclusive of interest).

Proposed Cap:

The proposed Cap is mainly based on the Group’s historical cash outflow on items such as purchasing fixed assets, etc. For the full year of 2019, it is expected that cash payment by the Group for purchasing fixed assets, intangible assets and other long-term assets will amount to approximately RMB500,000,000. It is expected that cash payment by the Group for purchasing fixed assets, intangible assets and other long-term assets in 2020 and 2021 would be of a similar amount when compared to 2019. In order to explore financing channels, it is expected that the Cap for commencing finance leasing services through Hisense Financial Holdings during the term of the Financial Business Framework Agreement on any given day would be RMB300,000,000 (inclusive of interest).

Reasons for and benefits of the Financial Business Framework Agreement:

The entering into of the Financial Business Framework Agreement will enable the Group to further increase the liquidity of its assets, to receive income from capital operation, and to increase the efficiency of capital operation. Factoring and finance leasing services provided by Hisense Financial Holdings or its subsidiaries can further revitalise the Group’s idle assets. The Group can in turn receive operating income and improve efficiency of the use of capital.

In light of the above, the Directors (excluding the independent non-executive Directors whose views will be given after taking into account the advice from the independent financial adviser) are of the view that the terms of the Financial Business Framework Agreement and the Caps in relation thereto are fair and reasonable and in the interest of the

Company and the Shareholders as a whole.

INFORMATION RELATING TO THE GROUP, HISENSE ELECTRIC, HISENSE GROUP, HISENSE MARKETING MANAGEMENT, HISENSE INTERNATIONAL, HISENSE FINANCE AND HISENSE FINANCIAL HOLDINGS

The Group is principally engaged in research and development, manufacturing and marketing of electrical products such as refrigerators, household air-conditioners, central air-conditioners, freezers, washing machines and kitchen appliances.

Hisense Electric was established on 17 April 1997 and has a registered capital of RMB1,308,481,222. Its legal representative is Mr. Liu Hong Xin and its registered address is at 218 Qian Wan Gang Road, Qingdao Economic and Technological Development Zone. The scope of business of Hisense Electric includes: the research and development, manufacture, sales, service, repair and recycling of television sets, flat panel display sets, mobile phones, electric refrigerators, electric freezers, washing machines, water heaters, microwave ovens, small household appliance products (such as dishwashers, electric irons, electric hair dryers, electric cookers), broadcasting appliances, electronic computers, communication products, mobile communication appliances, information technology products, household and commercial appliances and electronic products; non-standardised equipment processing, installation and after-sales services; self-operated import and export business (with its operation subject to the list of projects as approved by MOFTEC); production of terrestrial broadcasting receiver equipment for satellite televisions; leasing of houses, leasing of machinery and equipment, property management; general logistics. (For projects which require approval by law, commencement of business operations shall be subject to the obtaining of the approval from the relevant departments). The ultimate beneficial owner of Hisense Electric is State-owned Assets Supervision and Administration Commission of Qingdao Municipal Government( 青島市人民政府國有資產監督管理委員會 ).

Hisense Group was a wholly state-owned enterprise incorporated in August 1979 and has a registered capital of RMB806,170,000. Its legal representative is Mr. Zhou Houjian and its registered address is at No. 17 Donghai West Road, Shinan District, Qingdao City. The scope of business of Hisense Group includes: the entrusted operation of state-owned assets; the engagement in foreign investment with its own capital; the manufacture and sale of, and provision of service related to, television sets, refrigerators, freezers, washing machines, small household appliances, disc players, audio sets, broadcasting appliances, airconditioners, electronic computers, telephones, communication products, internet products and electronic products; the development of software and the provision of internet services; technology development and provision of consultation services; self-operated import and export business (with its operation subject to the list of projects as approved by MOFTEC); foreign economic and technical cooperation (with its operation subject to the list of projects as approved by MOFTEC); operation of property rights transaction and provision of brokerage and information services; provision of industrial travel agency services; provision of relevant business trainings; property management; leasing of tangible property, leasing of immovable property; catering management services; catering services; conference services and parking services (For projects which require approval by law, commencement of business operations shall be subject to the obtaining of the approval from the relevant departments). The ultimate beneficial owner of Hisense Group is State-owned Assets Supervision and Administration Commission of Qingdao Municipal Government ( 青島市人

民政府國有資產監督管理委員會 ).

Hisense Marketing Management was incorporated in July 2017 and has a registered capital of RMB100,000,000. Its legal representative is Mr. Cheng Kai Xun and its registered address is at No. 399, Songling Road, Laoshan District, Qingdao City, Shandong Province. The scope of business of Hisense Marketing Management includes: wholesale, retail, agency sales, after-sale service, warranty extension services for televisions, air conditioners, home appliances and components, electronic products, communication equipment, communication devices (excluding satellite antenna), sensing and control equipment, marketing planning, sales, construction and technical services for security and surveillance equipment, e-commerce technical service, internet information services, internet operation and promotion (commencement of business operations subject to the approval and issue of permits by communication authorities), exhibition display services, design, production, publication, agency of domestic advertisements, logistics design, supply chain management, road freight transport (commencement of business operations subject to the approval and issue of permits by transport management authorities). Hisense Marketing Management is 50% owned by the Company. The ultimate beneficial owner of Hisense Marketing Management is State-owned Assets Supervision and Administration Commission of Qingdao Municipal Government ( 青島市人民政府國有資產監督管理委員會 ).

Hisense International was incorporated in 2008 and has a registered capital of RMB30,000,000. Its legal representative is Mr. Lin Lan and its registered address is at 218 Qian Wan Gang Road, Qingdao Economic and Technological Development Zone. The scope of business of Hisense International includes: the operation and agent of import and export of goods, import and export of technology (not permitted to operate business prohibited by law and administrative regulations; if the operation of business is restricted by law and administrative regulations, operation of business is only allowed upon obtaining the necessary permit); planning of corporate marketing; carrying on sino-foreign joint venture and cooperative production business; and carrying on the business of “The Three-plus-one Trading-mix” (For projects which require approval by law, commencement of business operations shall be subject to the obtaining of the approval from the relevant departments); production and sale of remote controls, degaussing coils, electrical components, airconditioner components, etc. Hisense International is 12.67% owned by Hisense Electric and 12.67% owned by the Company. The ultimate beneficial owner of Hisense International is State-owned Assets Supervision and Administration Commission of Qingdao Municipal Government ( 青島市人民政府國有資產監督管理委員會 ).

Hisense Finance is a non-bank financial institution established with the approval from the CBRC and is regulated by the CBRC and other regulatory authorities in the PRC. Hisense Finance is not a banking company as defined in Rule 14A.88 of the Hong Kong Listing Rules. Hisense Finance was established in the PRC on 12 June 2008 and has a registered capital of RMB900,000,000. Hisense Finance is owned as to 39.45% by Qingdao Hisense Communications Co., Ltd. ( 青島海信通信有限公司 ), 26.92% by Hisense Air-conditioning, 25.24% by Hisense Group and 8.39% by Qingdao Hisense Electronic (Holdings) Company Limited ( 青島海信電子產業控股股份有限公司 ). The ultimate beneficial owner of Hisense Finance is State-owned Assets Supervision and Administration Commission of Qingdao Municipal Government ( 青島市人民政府國有資產監督管理委員會 ).

The business scope of Hisense Finance includes: providing financial and financing consultation services, credit appraisal and other relevant consultancy and agency services to member companies; assisting member companies in the receipt and payment of transaction proceeds; conducting approved insurance agency services; providing guarantees for member companies; handling of entrusted loans and entrusted investment among member companies; handling of draft acceptance and discount services for member companies; handling of intra-group transfer settlement and other related settlement between member companies and formulating settlement schemes; accepting deposit of member companies; arranging loan and finance leasing to member companies; engaging in lending and borrowing with business counterparts; underwriting corporate bonds for member companies; investing in securities other than investment in secondary markets for stocks; and providing consumer credit and buyer credit for products of member companies.

Hisense Financial Holdings is established in Qingdao City of the PRC with limited liability under the Company Law of the PRC. The Company holds 24% equity interest in Hisense Financial Holdings. The ultimate beneficial owner of Hisense Financial Holdings is Stateowned Assets Supervision and Administration Commission of Qingdao Municipal Government ( 青島市人民政府國有資產監督管理委員會 ).

The business scope of Hisense Financial Holdings includes: engaging in asset management, investment management, equity investment, equity investment management, venture capital investment, and venture capital investment management with its own capital, security business investment management, entrusted management of equity investment fund, technology investment and technology consultation in financial software, business management and consultation, business information consultation, commencement of debt investment, short-term financial investment, investment planning and consultation which targeted on the entity’s economic project within the approved regions (For projects which require approval by law, commencement of business operations shall be subject to the obtaining of the approval from the relevant departments). Hisense Commercial Factoring Co., Ltd* ( 青島海信商業保理有限公司 ), a company incorporated in the PRC with limited liability and a subsidiary of Hisense Financial Holdings, is principally engaged in the businesses of commercial factoring services and supply chain management consultation services.

IMPLICATIONS UNDER THE HONG KONG LISTING RULES

(A) Business Co-operation Framework Agreement

As the applicable percentage ratios for the transactions contemplated under the Business Co-operation Framework Agreement exceed 5% on an annual basis and the annual consideration exceeds HK$10,000,000, the Business Co-operation Framework Agreement, the transactions contemplated thereunder and the Caps in relation thereto are subject to the reporting, announcement, annual review and shareholders’ approval requirements under Chapter 14A of the Hong Kong Listing Rules.

In view of the interests of Hisense Group, Hisense International, Hisense Marketing Management and Hisense Electric in the Business Co-operation Framework Agreement, Hisense Group, Hisense International, Hisense Marketing Management and Hisense Electric and their respective associates will abstain from voting in relation to the resolution(s) to approve the Business Co-operation Framework Agreement, the transactions contemplated thereunder and the relevant Caps at the EGM. As such, Hisense Air-conditioning, which held 516,758,670 Shares (representing approximately 37.92% of the issued share capital of the Company) and Hisense HK, which held 124,452,000 Shares (representing approximately 9.13% of the issued share capital of the Company) as at the date of this announcement, will abstain from voting in relation to the relevant resolution(s) at the EGM. Each of Hisense Air-conditioning and Hisense HK controls or is entitled to exercise control the voting right in respect of their Shares.

(B) Financial Services Agreement

As at the date of this announcement, as (i) Hisense Group (through its indirect interest in the Company held by Hisense Air-conditioning and Hisense HK) is the controlling shareholder of the Company and (ii) Hisense Finance is a subsidiary of Hisense Group, Hisense Finance is a connected person of the Company under the Hong Kong Listing Rules. As such, the transactions contemplated under the Financial Services Agreement will constitute continuing connected transactions of the Company under the Hong Kong Listing Rules.

In view of the interests of Hisense Finance in the Financial Services Agreement, Hisense Finance and its associates will abstain from voting in relation to the resolution(s) to approve the Financial Services Agreement, the transactions contemplated thereunder and the relevant Caps at the EGM. As such, Hisense Air-conditioning, which held 516,758,670 Shares (representing approximately 37.92% of the issued share capital of the Company) and Hisense HK, which held 124,452,000 Shares (representing approximately 9.13% of the issued share capital of the Company) as at the date of this announcement, will abstain from voting in relation to the relevant resolution(s) at the EGM.

(C) Financial Business Framework Agreement

As at the date of this announcement, as (i) Hisense Group (through its indirect interest in the Company held by Hisense Air-conditioning and Hisense HK) is the controlling shareholder of the Company; and (ii) Hisense Financial Holdings is a subsidiary of Hisense Group, Hisense Financial Holdings is a connected person of the Company under the Hong Kong Listing Rules. As such, the transactions contemplated under the Financial Business Framework Agreement will constitute continuing connected transactions of the Company under the Hong Kong Listing Rules.

In view of the interests of Hisense Financial Holdings in the Company, Hisense Financial Holdings and its associates will abstain from voting in relation to the resolution(s) to approve the Financial Business Framework Agreement, the transactions contemplated thereunder and the relevant Caps at the EGM. As such, Hisense Air-conditioning, which held 516,758,670 Shares (representing approximately 37.92% of the issued share capital of the Company) and Hisense HK, which held 124,452,000 Shares (representing approximately 9.13% of the issued share capital of the Company) as at the date of this announcement, will abstain from voting in relation to the relevant resolution(s) at the EGM.

The Business Co-operation Framework Agreement, the Financial Services Agreement and the Financial Business Framework Agreement are not inter-conditional on each other.

GENERAL

Mr. Tang Ye Guo, Mr. Jia Shao Qian, Mr. Lin Lan and Mr. Dai Hui Zhong, being Directors, have abstained from voting on the relevant board resolution(s) for approving the Business Co-operation Framework Agreement, the Financial Services Agreement and the Financial Business Framework Agreement and the transactions contemplated thereunder in view of their interest therein as set out below:

(i) Mr. Tang Ye Guo, Mr. Jia Shao Qian, Mr. Lin Lan and Mr. Dai Hui Zhong are also directors or senior management of Hisense Group and/or some of its subsidiaries;
(ii) Mr. Lin Lan and Mr. Dai Hui Zhong are also directors of Hisense Electric and/or some of its subsidiaries;
(iii) Mr. Tang Ye Guo and Mr. Jia Shao Qian are also directors of Hisense Finance; and
(iv) Mr. Tang Ye Guo is also a director of Hisense Financial Holdings.

An independent financial adviser will be appointed to advise the independent board committee of the Company and the Shareholders regarding the Business Co-operation Framework Agreement, the Financial Services Agreement, the Financial Business Framework Agreement, the transactions contemplated thereunder and the Caps in relation thereto. An independent board committee of the Company will also be formed to advise the Shareholders on whether or not the Business Co-operation Framework Agreement, the Financial Services Agreement, the Financial Business Framework Agreement, the transactions contemplated thereunder and the Caps in relation thereto are in the interest of the Company and are fair and reasonable so far as the Independent Shareholders are concerned.

DEFINITIONS

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

“A Shares”	domestic ordinary shares of the Company with a
	nominal value of RMB1.00 each and are listed on the
	Shenzhen Stock Exchange
“associate(s)”	has the meaning ascribed to it under the Hong Kong
	Listing Rules
“Board”	the board of Directors
“Business Co-operation Framework Agreement”	the Business Co-operation Framework Agreement (業務合作框架協議) entered into between the Company,
	Hisense Group, Hisense International, Hisense
	Marketing Management and Hisense Electric dated 5
	November 2019 in relation to the sale and purchase of

electrical appliances, raw materials, parts and components, supply of moulds, equipment and the provision of various services

“Caps”

(A) the annual caps for the transactions contemplated under the Business Co-operation Framework Agreement for the year ending 31 December 2020, being (1) RMB33,360,000 in respect of the purchase of electrical appliances by the Group from Hisense Group, Hisense International, Hisense Electric and their respective subsidiaries under the Business Cooperation Framework Agreement; (2) RMB659,580,000 in respect of the purchase of raw materials, parts and components by the Group from Hisense Group, Hisense Electric and their respective subsidiaries under the Business Co-operation Framework Agreement; (3) RMB1,017,960,000 in respect of the provision of services by Hisense Group, Hisense International, Hisense Marketing Management, Hisense Electric and their respective subsidiaries to the Group under the Business Cooperation Framework Agreement; (4) RMB16,473,940,000 in respect of the supply of electrical appliances by the Group to Hisense Group, Hisense International, Hisense Marketing Management, Hisense Electric and their respective subsidiaries under the Business Co-operation Framework Agreement; (5) RMB263,140,000 in respect of the supply of moulds by the Group to Hisense Group, Hisense International, Hisense Electric and their respective subsidiaries under the Business Co-operation Framework Agreement; (6) RMB385,220,000 in respect of the supply of raw materials, parts and components by the Group to Hisense Group, Hisense International, Hisense Electric and their respective subsidiaries under the Business Co-operation Framework Agreement; (7) RMB6,000,000 in respect of the supply of equipment by the Group to Hisense International and its subsidiaries under the Business Co-operation Framework Agreement; and (8) RMB48,660,000 in respect of the provision of services by the Group to Hisense Group, Hisense International, Hisense Electric and their respective subsidiaries under the Business Co-operation Framework Agreement;

(B) the annual caps for the transactions contemplated under the Financial Services Agreement during the term of the Financial Services Agreement, being (1) RMB16,800,000,000 (inclusive of interest) in respect of the maximum daily balance of the deposits placed

by the Group with Hisense Finance under the Financial Services Agreement; (2) RMB11,500,000,000 (inclusive of interest and service fees) in respect of the maximum daily balance of loan and electronic bank acceptance bills provided by Hisense Finance for the Group under the Financial Services Agreement; (3) RMB50,000,000 in respect of the annual discount interest payable by the Group to Hisense Finance for the provision of draft discount services under the Financial Services Agreement; (4) US$300,000,000 in respect of the annual amount of foreign currency settled or sold by Hisense Finance for the Group under the Financial Services Agreement; and (5) RMB3,000,000 in respect of the maximum annual amount of service fees payable by the Group to Hisense Finance for the provision of agency services such as settlement services for receipt and payment of funds under the Financial Services Agreement; and

(C) the annual caps for the transactions contemplated under the Financial Business Framework Agreement during the term of the Financial Business Framework Agreement, being (1) RMB800,000,000 (inclusive of interest) in respect to the maximum daily closing balance of the recourse factoring services at Hisense Financial Holdings or its relevant subsidiaries during the term of the Financial Business Framework Agreement; (2) RMB400,000,000 (inclusive of interest) in respect of the maximum annual transaction amount of non-recourse factoring services at Hisense Financial Holdings or its subsidiaries during the term of the Financial Business Framework Agreement; and (3) RMB300,000,000 (inclusive of interest) in respect of the maximum daily closing balance of the finance leasing services provided by Hisense Financial Holdings or its subsidiaries to the Group at Hisense Financial Holdings or its subsidiaries during the term of the Financial Business Framework Agreement

“CBRC”

“Company”

中國銀行業監管管理委員會 (China Banking Regulatory Commission)

Hisense Home Appliances Group Co., Ltd. ( 海信家電

集團股份有限公司 ), a company incorporated in the PRC with limited liability, whose shares are listed on the main board of the Stock Exchange and the Shenzhen Stock Exchange

“connected person(s)”

“controlling shareholder(s)”

“Director(s)”

“EGM”

“Existing Business Co-operation Framework Agreement”

“Existing Financial Business Framework Agreement”

“Existing Financial Services Agreement”

has the meaning ascribed to it in the Hong Kong Listing Rules

director(s) of the Company

the first 2020 extraordinary general meeting of the Company to be held for, among other things, considering and, if thought fit, approving the Business Co-operation Framework Agreement, the Financial Services Agreement, the Financial Business Framework Agreement, the transactions contemplated thereunder and the Caps in relation thereto

the business co-operation framework agreement ( 業務合作框架協議 ) dated 26 November 2018 entered into between the Company, Hisense Group, Hisense Electric and Hisense Marketing Management in relation to the sale and purchase of home electrical appliances, raw materials, parts and components, supply of equipment and moulds, and the provision of various services, as supplemented by the supplemental agreement ( 業務合作框架協議之補充協議 ) dated 21 June 2019 entered into between the Company, Hisense Group and Hisense Electric

the financial business framework agreement ( 金融業務框架協議 ) dated 28 November 2017 entered into between the Company and Hisense Financial Holdings in connection with the provision of factoring services by Hisense Financial Holdings to the Group, as supplemented by the supplemental agreement ( 金融業務框架協議之補充協議 ) dated 26 November 2018 entered into between the Company and Hisense Financial Holdings

the financial services agreement ( 金融服務協議 ) dated 26 November 2018 entered into between the Company and Hisense Finance in relation to the provision of financial services by Hisense Finance to the Group, as supplemented by the supplemental agreement ( 金融服務協議之補充協議 ) dated 21 June 2019 entered into between the Company and Hisense Finance

“Financial Business Framework Agreement”
the financial business framework agreement ( 金融業務框架協議 ) entered into between the Company and Hisense Financial Holdings dated 5 November 2019 in connection with the provision of factoring services and finance leasing services by Hisense Financial Holdings to the Group
“Financial Services Agreement”
the financial service agreement ( 金融服務協議 ) entered into between the Company and Hisense Finance dated 5 November 2019 in connection with the provision of financial services by Hisense Finance to the Group
“Group” the Company and its subsidiaries
“H Shares”
overseas listed foreign shares of the Company with a nominal value of RMB1.00 each and are listed on the Stock Exchange
“Hisense Air-conditioning”
Qingdao Hisense Air-conditioning Company Limited* ( 青島海信空調有限公司 ), a company incorporated in the PRC with limited liability and indirectly controlled by Hisense Group, which holds approximately 37.92% of the issued shares of the Company as at the date of this announcement
“Hisense Electric”
Hisense Electric Co., Ltd. ( 青島海信電器股份有限公司 ), a company incorporated in the PRC with limited liability, whose shares are listed on the Shanghai Stock Exchange and is a subsidiary of Hisense Group
“Hisense Finance”
Hisense Finance Co., Ltd* ( 海信集團財務有限公司 ), a company incorporated in the PRC with limited liability and a subsidiary of Hisense Group
“Hisense Financial Holdings”
Hisense Financial Holdings Co., Ltd. ( 青島海信金融控股有限公司 ), a company incorporated in the PRC with limited liability and a subsidiary of Hisense Group
“Hisense Group”
Hisense Company Limited ( 海信集團有限公司 ), a company incorporated in the PRC with limited liability
“Hisense Hitachi”
Qingdao Hisense Hitachi Air-Conditioning Systems Co., Ltd. ( 青島海信日立空調系統有限公司 ), a company incorporated in the PRC with limited

liability and a subsidiary of the Company

“Hisense HK”
“Hisense International”
“Hisense Marketing Management”
“Hong Kong”
“Hong Kong Listing Rules”
“Independent Shareholders”
“MOFTEC”

Hisense (Hong Kong) Company Limited, a company incorporated in Hong Kong with limited liability and a subsidiary of Hisense Group, which holds approximately 9.13% of the issued shares of the Company as at the date of this announcement

Hisense International Co., Ltd. ( 青島海信國際營銷股份有限公司 ), a company incorporated in the PRC with limited liability and a subsidiary of Hisense Group

Hisense Marketing Management Co., Ltd. ( 海信營銷管理有限公司 ) (formerly known as Qingdao Hisense Commercial Trading Development Co., Ltd. ( 青島海信商貿發展有限公司 )), a company incorporated in the PRC with limited liability and owned as to 50% by the Company
the Hong Kong Special Administrative Region of the PRC

the Rules Governing the Listing of Securities on the Stock Exchange

(i) in respect of the Business Co-operation Framework Agreement, Shareholders other than Hisense Group, Hisense International, Hisense Marketing Management, Hisense Electric and their respective associates and other Shareholders which are required to abstain from voting in relation to the Business Co-operation Framework Agreement under the Shenzhen Listing Rules; (ii) in respect of the Financial Services Agreement, Shareholders other than Hisense Finance and its associates and other Shareholders which are required to abstain from voting in relation to the Financial Services Agreement under the Shenzhen Listing Rules; and (iii) in respect of the Financial Business Framework Agreement, Shareholders other than Hisense Financial Holdings and its associates and other Shareholders which are required to abstain from voting in relation to the Financial Business Framework Agreement under the Shenzhen Listing Rules

the Ministry of Foreign Trade and Economic Cooperation ( 對外貿易經濟合作部 ), now known as the Ministry of Commerce of the RPC ( 中華人民共和國商

務部 )

“PRC”

the People’s Republic of China

“Sale and Purchase Agreement” the sale and purchase agreement dated 5 March 2019 entered into between the Company as purchaser and the Transferor as vendor in relation to the Transfer of Target Equity Interest “Share(s)” share(s) of RMB1.00 each in the capital of the Company, comprising the A Shares and the H Shares

“Shareholder(s)” holder(s) of the Shares “Shenzhen Listing Rules” the Rules Governing the Listing of Stocks on the Shenzhen Stock Exchange ( 深圳証劵交易所上市規則 )

“Stock Exchange”

“Stock Exchange” The Stock Exchange of Hong Kong Limited “substantial shareholder” has the meaning ascribed to it under the Hong Kong Listing Rules

“Transfer of Target Equity the transfer of 0.2% equity interest in Hisense Hitachi Interest” from the Transferor to the Company pursuant to the Sale and Purchase Agreement

“Transferor” Unitecs Corporation ( 株式會社聯合貿易 ) “VAT” value-added tax “white goods” the general term by which white-coloured household electrical appliances are commonly known which include, but not limited to, air-conditioners, refrigerators, freezers, washing machines, other small electrical appliances and kitchen electric products “HK$” Hong Kong dollars, the lawful currency of Hong Kong “RMB” Renminbi, the lawful currency of the PRC “US$” United States dollars, the lawful currency of the United States of America “%” per cent.

English translations of names in Chinese or another language in this announcement which are marked with “*” are for identification purposes only.

By order of the Board Hisense Home Appliances Group Co., Ltd. Tang Ye Guo Chairman

Foshan City, Guangdong, the PRC, 6 November 2019

As at the date of this announcement, the Company’s executive directors are Mr. Tang Ye Guo, Mr. Jia Shao Qian, Mr. Lin Lan, Mr. Dai Hui Zhong, Mr. Fei Li Cheng and Mr. Wang Yun Li; and the Company’s independent non-executive directors are Mr. Ma Jin Quan, Mr. Zhong Geng Shen and Mr. Cheung Sai Kit.

AI assistant

Medlive Technology Co., Ltd. — Capital/Financing Update 2019

50436_rns_2019-11-05_fae67c46-05c5-427e-bfce-9abf380392b0.pdf

HISENSE HOME APPLIANCES GROUP CO., LTD. 海信家電集團股份有限公司

ANNOUNCEMENT

(1) CONTINUING CONNECTED TRANSACTIONS; AND (2) CONTINUING CONNECTED TRANSACTIONS AND MAJOR TRANSACTION

BUSINESS CO-OPERATION FRAMEWORK AGREEMENT

FINANCIAL SERVICES AGREEMENT

FINANCIAL BUSINESS FRAMEWORK AGREEMENT

GENERAL

BACKGROUND

PRESENTATION OF HISTORICAL FIGURES OF CONTINUING CONNECTED TRANSACTIONS IN THIS ANNOUNCEMENT

(A) CONTINUING CONNECTED TRANSACTIONS

BUSINESS CO-OPERATION FRAMEWORK AGREEMENT

Term:

Condition:

Subject matters:

The Company’s internal policy regarding continuing connected transactions:

independent Shareholders as a whole.

(1) Purchase of electrical appliances

Pricing:

Historical figures:

Proposed Cap:

Reasons for and benefits of the purchase of electrical appliances:

(2) Purchase of raw materials, parts and components

Pricing:

Historical figures:

Proposed Cap:

Reasons for and benefits of the purchase of raw materials, parts and components:

(3) Provision of services

Pricing:

Historical figures:

Proposed Cap:

Reasons for and benefits of the engagement of services:

(4) Supply of electrical appliances

Pricing:

Historical figures:

Proposed Cap:

Reasons for and benefits of the supply of electrical appliances:

(5) Supply of moulds

Pricing:

Historical figures:

Proposed Cap:

Reasons for and benefits of the supply of moulds:

(6) Supply of raw materials, parts and components

Pricing:

Historical figures:

Proposed Cap:

Reasons for and benefits of the supply of raw materials, parts and components:

(7) Supply of equipment

Pricing:

Historical figures:

Proposed Cap:

Reasons for and benefits of the supply of equipment:

(8) Provision of services by the Group

Pricing:

Historical figures:

Proposed Cap:

Reasons for and benefits of the provision of services:

(B) CONTINUING CONNECTED TRANSACTIONS AND MAJOR TRANSACTION

FINANCIAL SERVICES AGREEMENT

Term:

Condition:

Subject matters:

The Company’s internal policy regarding continuing connected transactions:

(1) Deposit services

Pricing:

Historical figures:

Proposed Cap:

(2) Loan and electronic bank acceptance bill services

Pricing:

Historical figures:

Proposed Cap:

(3) Draft discount services

Pricing:

Historical figures:

Proposed Cap:

(4) Settlement and sale of foreign exchange services

Pricing:

Historical figures:

Medlive Technology Co., Ltd. Capital/Financing Update 2019