Medlive Technology Co., Ltd. — Interim / Quarterly Report 2003

Apr 25, 2003

The Stock Exchange of Hong Kong Limited takes no responsibility for the contents of this announcement, makes no representation as to its accuracy or completeness and expressly disclaims any liability whatsoever for any loss howsoever arising from or in reliance upon the whole or any part of the contents of this announcement.

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GUANGDONG KELON ELECTRICAL HOLDINGS COMPANY LIMITED 廣東科龍電器股份有限公司

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

ANNOUNCEMENT ON RESULTS FOR THE FIRST QUARTER ENDED 31 MARCH 2003

This announcement is made in accordance with paragraph 2(2) of the Listing Agreement.

1. IMPORTANT

• 1.1 The board of directors (the “Board”) of Guangdong Kelon Electrical Holdings Company Limited (the “Company”) warrants that the information in this report is not false, not misleading and does not contain any material omission. The Board is jointly and severally responsible for the truthfulness and completeness of the contents of this report.

• 1.2 Ms. Yu Xiaoyang, director of the Company, was unable to attend the Board meeting due to personal reason.

• 1.3 These quarterly results of the Company for the three months ended 31 March 2003 (the “Reporting Period”) are prepared in accordance with the relevant PRC accounting principles and have not been audited.

• 1.4 Section 4 of the Company’s first quarterly report is not included in this announcement but may be accessed on the following website: http:// www.cninfo.com.cn .

2. COMPANY INFORMATION

• 2.1 Company Profile

Stock	Abbreviation	ST Kelon	ST Kelon
Stock	Code	000921
		Secretary of the Board				Representative of securities related affairs
Name		Liu Cong Meng (acting at the same				Zhong Liang
			time as Executive Vice President)
		Gary Li Chi Sing
Correspondence Address		No. 8, Ronggang Road, Ronggui, Shunde,				No. 8, Ronggang Road, Ronggui, Shunde,
			Guangdong Province, the PRC			Guangdong Province, the PRC
Telephone		0765–8362570				0765–8362570
Fax		0765–8361055				0765–8361055
Email		sec@kelon.com				sec@kelon.com
Financial Information
2.2.1	Major Accounting Data		and Financial Indices (Unit: RMB)
				End of		End of	Change over
				Reporting Period		Last Year	End of Last Year (%)
	Total assets			8,797,988,022		7,656,539,329	14.91
	Shareholders’ equity
	(excluding minority
	interests)			2,609,000,086		2,575,000,833	1.32
	Net assets per share			2.63		2.60	1.15
	Adjusted net assets
	per share			2.61		2.39	9.32
							Change over
						Beginning of Year	Corresponding
						to End of	Period
				Reporting Period		Reporting Period	of Last Year (%)
	Net cash flow
	from operating activities			32,129,407		32,129,407	–
	Earnings per share			0.034		0.034	211.33
	Return on net assets			1.29%		1.29%	186.73
	Net return on net assets
	after extraordinary
	profit and loss			1.40%		1.40%	258.89
					Unit:	RMB
	Extraordinary profit and loss items				Amount
	Non-operating income				683,335
	Non-operating expense				-373,856
	Amortization of change		in equity investment		-3,300,000
	Interest received from related parties					0
	Total				-2,990,521

2.2 Financial Information

1

2.2.2 Income Statement

						Unit: RMB
			January to March 2003		January to March 2002
			The Group	The Company	The Group	The Comany
	Item		(Unaudited)	(Unaudited)	(Unaudited)	(Unaudited)
1.	Income from principal
	operations		1,022,746,561	702,708,142	854,682,111	699,397,199
	Less:	Costs incurred by
		principal operations	751,443,589	516,289,742	607,191,231	489,187,329
		Taxation and surcharges
		on principal operations	146,661	91,207	38,202	38,203
2.	Profit from principal operations		271,156,311	186,327,193	247,452,678	210,171,667
	Add:	Profit/(loss) from other
		operations	6,026,840	-1,294,543	5,047,396	660,874
	Less:	Operating expenses	154,856,364	132,895,769	153,640,512	140,451,734
		Administrative expenses	65,416,677	10,065,730	69,291,566	14,309,397
		Financial expenses	24,127,180	11,980,352	19,807,024	18,343,869
3.	Operating profit		32,782,930	30,090,799	9,760,972	37,727,541
	Add:	Investment income	-171,538	3,603,459	-182,368	-26,823,092
		Subsidy income	0	0	0	0
		Non-operating income	683,335	200,973	2,216,277	56,687
	Less:	Non-operating expenses	373,856	335,437	313,412	181,628
	Add:	Prior year adjustment on
		profit/(loss)	0	0	0	0
4.	Total profit		32,920,871	33,559,794	11,481,469	10,779,508
	Add:	Profit/(loss) attributable to
		minority shareholders	987,726	0	-701,961	0
	Less:	Income tax	348,803	0	0	0
5.	Net profit		33,559,794	33,559,794	10,779,508	10,779,508

3. As at the end of the Reporting Period, there were 77,314 shareholders in total.

3. MANAGEMENT DISCUSSION AND ANALYSIS

• 3.1 Brief analysis of the Company’s operations during the Reporting Period

During the Reporting Period, the Company faced intense competition in the domestic appliances market and the Company’s management closely monitored developments in the market and continued to adopt appropriate operating concepts and directions in accordance with market trends. As a result, the Company still managed to attain satisfactory results for the Reporting Period and recorded an overall net profit of RMB33,560,000. Compared with the corresponding period in 2002, the Company’s sales revenue for refrigerators and airconditioners increased by 19.7%. Growth in export sales was particularly strong. The Company’s total export sales revenue increased by 38.3% as compared with the previous year.

During the Reporting Period, the Company continued to adopt the operating concept of “Technologically Led and Profitability Driven”. In the high-end refrigerator and air-conditioner markets, the Company launched a series of selectable temperature zone refrigerators with industry-leading triple and quadruple cycling technologies under the Rongsheng and Kelon brands respectively. At the air-conditioner front, the line of high-efficiency air-conditioners, particularly the “Deluxe Shuang Xiao Wang”, has laid a strong foundation for the Company’s marked performance in the high-end market during the Reporting Period. Further, the successful launch of the “Combine” product series has complemented the Company’s market coverage, laying a foundation for the Company to become one of the leading international electrical appliance manufacturers.

3.1.1 Principal business or products representing 10% or more of the income from principal operations or total profit from principal operations

operations
				Unit: RMB’000
		Income from	Cost of	Gross
Product		principal operations	principal operations	profit margin (%)
Refrigerators		487,730	354,140	27.39
Air-Conditioners		419,590	301,980	28.03
Others		115,430	95,320	17.42
Including:	Related party
	transaction	0	0	0
Total		1,022,750	751,440	26.53

• 3.1.2 Seasonal or cyclical characteristics of the Company’s operations Applicable Not Applicable

• The sales of the major products of the Company such as refrigerators and air-conditioners are subject to seasonal fluctuation. The Reporting Period was amid the low season for the sales of such products.

• 3.1.3 Profit structure for the Reporting Period (Material changes in the proportion of total profit attributable to profit from principal operations, profit from other operations, costs for the period, investment income, subsidy income and net non-operating income as compared with that of 2002 and the explanation thereof)

• Applicable Not Applicable

2

Unit: RMB’000

	January to March 2003	January to March 2003	January to	December 2002
					Change in
		Proportion		Proportion	proportion
		of total		of total	of total
Item	Amount	profit (%)	Amount	profit (%)	profit (%)
Total profit	32,920	0	103,920	0.00
Profit from principal operations	271,160	823.69	1,025,450	986.77	-16.53
Profit from other operations	6,030	18.32	16,610	15.98	14.60
Costs for the period	244,410	742.44	926,940	891.97	-16.76
Investment income	-170	-0.52	-17,070	-16.43	-96.86
Subsidy income		0.00	20	0.02
	-170
Net Non-operating income	310	0.94	5,850	5.63	-83.27

1. The decrease in the proportions of total profit attributable to profit from principal operations and net non-operating income was due to an increase in total profit resulting from a rise in sales revenue, which has caused a dercase in the corresponding proportion of total profit attributable to profit from principal operations.

2. The decrease in the proportion of total profit attributable to investment income was due to the Company’s acquisition of equity interests in certain associated companies.

3. 3.1.4 Material changes in the profitability (gross profit margin) of principal operations as compared with that of 2002 and explanation thereof

Applicable Not Applicable

The gross profit margin of the Company’s principal operations for the Reporting Period was 26.53%, as compared with 21.03% for the previous reporting period. The significant increase in profitability (gross profit margin) was primarily attributable to a strong growth in the Company’s export sales and sales of new products in the Reporting Period, leading to an increase in the overall gross profit margin of the Company.

  - 3.2 Analysis and illustration of significant events and their implications and resolutions

     - Applicable Not Applicable

  - 3.3 Changes in accounting policies, estimates and scope of consolidation and major accounting errors and the explanation thereof Applicable Not Applicable

  - 3.4 Explanation of the Board and the Supervisory Committee in relation to  any “non-standard opinion” arising from audit

     - Applicable Not Applicable

  - 3.5 Loss forecast or alert of significant change in the accumulated net profit for the period from beginning of the year to the end of the next reporting period as compared with the corresponding period in the previous year and the explanation thereof

     - Applicable Not Applicable

  - 3.6 On-going adjustments by the Company on the published annual business plans or budget

     - Applicable Not Applicable

4. FINANCIAL REPORT

• 4.1 Statement of Income and Profit Appropriation

Prepared by: Guangdong Kelon Electrical Holdings Company Limited For the period from January to March 2003

Unit: RMB

			January to March 2003	January to March 2003	January to March 2002	January to March 2002
			The Group	The Company	The Group	The Company
			(Unaudited)	(Unaudited)	(Unaudited)	(Unaudited)
1.	Income from principal operations		1,022,746,561	702,708,142	854,682,111	699,397,199
	Less:	Costs incurred by principal operations	751,443,589	516,289,742	623,026,423	489,187,329
		Taxation and surcharges on principal
		operations	146,661	91,207	38,202	38,203
2.	Profit	from principal operations	271,156,311	186,327,193	231,617,486	210,171,667
	Add:	Profit/(loss) from other operations	6,026,840	(1,294,543)	5,047,396	660,874
	Less:	Operating expenses	154,856,364	132,895,769	153,640,512	140,451,734
		Administrative expenses	65,416,677	10,065,730	53,456,374	14,309,397
		Financial expenses	24,127,180	11,980,352	19,807,024	18,343,869
3.	Operating profit		32,782,930	30,090,799	9,760,972	37,727,541
	Add:	Investment income	(171,538)	3,603,459	(182,368)	(26,823,092)
		Subsidy income	–	–	–	–
		Non-operating income	683,335	200,973	2,216,277	56,687
	Less:	Non-operating expenses	373,856	335,437	313,412	181,628
	Add:	Prior year adjustment on profit/(loss)	–	–	–	–
4.	Total profit		32,920,871	33,559,794	11,481,469	10,779,508
	Add:	Profit/(loss) attributable to minority
		shareholders	987,726	–	(701,961)	–
	Less:	Income tax	348,803	–	–	–
5.	Net profit		33,559,794	33,559,794	10,779,508	10,779,508
	Add:	(Accumulated losses) retained earnings
		at beginning of the Period	(1,211,930,161)	(1,194,186,108)	(1,380,906,800)	(1,380,906,800)
6.	Profit	available for appropriation	(1,178,370,367)	(1,160,626,314)	(1,370,127,292)	(1,370,127,292)
	Less:	Statutory common reserve fund	–	–	–	–
		Statutory common welfare fund	–	–	–	–
		Staff welfare and bonus fund	–	–	–	–
		Reserve fund	–	–	–	–
		Enterprise expansion fund	–	–	–	–
		Return of profits	–	–	–	–

3

7. Profit available for distribution (1,178,370,367) (1,160,626,314) (1,370,127,292) (1,370,127,292) Less: Dividends on preferential shares – – – – – – – – Discretionary reserve – – – – Dividends on ordinary shares – – – – Dividends transferred to share capital 8. Retained profit (1,178,370,367) (1,160,626,314) (1,370,127,292) (1,370,127,292) Person in charge of the Company: Gu Chujun Person in charge of financial matters: Gary Li Chi Sing Table prepared by: [Yan Guoru] (晏果如 ) 4.2 Balance Sheet

Prepared by Guangdong Kelon Electrical Holdings Company Limited and its subsidiaries Unit: RMB

		January to March 2003	January to March 2003	January to March 2002	January to March 2002
		The Group	The Company	The Group	The Company
Item		(Unaudited)	(Unaudited)	(Unaudited)	(Unaudited)
Assets
1.	Current Assets
	Bank balances and cash	1,424,193,546	1,020,136,178	1,417,085,462	1,065,118,299
	Short-term investment	–	–	–	–
	Notes receivable	1,075,568,979	787,063,423	622,627,806	613,597,439
	Dividends receivable	–	–	–	–
	Interests receivable	–	–	–	–
	Accounts receivable	407,137,906	218,294,030	381,535,897	275,661,469
	Prepayments	141,326,422	39,686,426	89,011,737	36,549,630
	Subsidies receivable	–	–	–	–
	Other receivables	1,334,326,627	2,695,445,703	1,222,868,831	2,107,281,156
	Inventories	1,677,799,548	983,778,543	1,123,325,956	679,131,994
	Deferred expenditures	14,417,634	5,327,986	6,411,749	5,135,474
	Long-term investment in securities
	due within one year	–	–	–	–
	Other current assets	970	970	970	970
	Total current assets	6,074,771,632	5,749,733,259	4,862,868,408	4,782,476,431
2.	Long-term investments
	Long-term equity investments	186,543,511	1,255,034,010	198,173,987	1,223,334,010
	Long-term investments in debt securities	–	–	–	–
	Total long-term investments	186,543,511	1,255,034,010	198,173,987	1,223,334,010
3.	Fixed Assets
	Fixed assets, cost	3,646,619,158	1,420,284,489	3,635,836,132	1,420,958,597
	Less: Accumulated depreciation	1,646,017,835	524,987,131	1,586,467,593	509,851,837
	Fixed assets, net of depreciation	2,000,601,323	895,297,358	2,049,368,539	911,106,760
	_Less:_Provision for impairment loss of
	fixed assets	61,375,205	–	61,375,205	–
	Fixed assets, net	1,939,226,118	895,297,358	1,987,993,334	911,106,760
	Disposal of fixed assets	–	–	–	–
	Project materials	–	–	–	–
	Construction-in-progress	2,436,254	8,562,116	11,323,062	7,550,688
	Total fixed assets	1,941,662,372	903,859,474	1,999,316,396	918,657,448
4.	Intangible assets and deferred assets
	Intangible assets	306,789,612	196,480,586	313,881,774	198,209,350
	Long-term deferred expenditures	202,617,987	61,863,161	196,695,856	66,644,180
	Long-term receivables due after one year	85,602,908	51,602,908	85,602,908	51,602,908
	Other long-term assets	–	–	–	–
	Total intangible and deferred assets	595,010,507	309,946,655	596,180,538	316,456,438
5.	Deferred tax
	Deferred tax assets	–	–	–	–
	Total assets	8,797,988,022	8,218,573,398	7,656,539,329	7,240,924,327
		January to March 2003		January to March 2002
		The Group	The Company	The Group	The Company
Item		(Unaudited)	(Unaudited)	(Unaudited)	(Unaudited)
Total	liabilities and shareholders’ equity
1.	Current liabilities
	Short-term borrowings	1,019,526,725	440,000,000	960,164,036	400,000,000
	Notes payable	1,399,935,251	1,511,979,025	942,591,729	1,075,014,036
	Accounts payable	976,064,480	843,548,872	739,184,874	652,568,689
	Advances from customers	678,185,529	607,482,786	337,665,921	300,245,037
	Other amounts repayable	630,001,775	523,901,576	616,737,987	519,065,990
	Accrued payroll	52,854,112	29,976,475	44,211,152	30,370,421
	Staff welfare payable	3,558,281	1,135,059	3,986,906	1,489,938
	Taxes payable	62,306,954	82,333,091	39,849,854	62,552,141
	Dividends payable	52,409	–	52,409	–
	Other payables	2,067,487	1,217,074	2,944,393	2,029,317
	Accruals	190,103,726	152,063,264	211,076,574	185,670,788
	Provision for liabilities	99,227,504	99,227,504	105,031,134	105,031,134
	Long-term liabilities due within one year	65,233,515	60,000,000	65,233,515	60,000,000
	Other current liabilities	–	–	–	–
	Total liabilities	5,179,117,748	4,352,864,726	4,068,730,484	3,394,037,491
2.	Long-term liabilities
	Long-term borrowings	714,766,571	690,000,000	714,766,571	690,000,000
	Debentures	–	–	–	–
	Long-term payables	73,872,030	66,759,313	75,822,128	70,126,659
	Payable for special purposes	–	–	–	–
	Accrued liabilities of investee entities	–	482,205,220	–	494,015,291
	Other long-term liabilities	–	–	–	–
	Total long-term liabilities	788,638,601	1,238,964,533	790,588,699	1,254,141,950

4

	3.	Deferred tax
		Deferred tax liabilities	–	–	–	–
		Total liabilities	5,967,756,349	5,591,829,259	4,859,319,183	4,648,179,441
	4.	Minority interests	221,231,587	–	222,219,313	–
	5.	Shareholders’ equity
		Share capital	992,006,563	992,006,563	992,006,563	992,006,563
		Capital reserve	2,452,995,887	2,452,995,887	2,452,995,887	2,452,995,887
		Revenue reserve	343,742,703	343,742,703	343,742,703	343,742,703
		Including: Statutory common welfare
		fund	114,580,901	114,580,901	114,580,901	114,580,901
		Retained profit	(1,178,370,367)	(1,160,626,314)	(1,211,930,161)	(1,194,186,108)
		Exchange difference	(1,374,700)	(1,374,700)	(1,814,159)	(1,814,159)
		Total shareholders’ equity	2,609,000,086	2,626,744,139	2,575,000,833	2,592,744,886
		Total liabilities and shareholders’
		equity	8,797,988,022	8,218,573,398	7,656,539,329	7,240,924,327
	Person in charge of the Company:		Gu Chujun
	Person in charge of financial matters:		Gary Li Chi Sing
	Table prepared by:		[Yan Guoru] (晏果如)
4.3	Cash flow statement
	Prepared by: Guangdong Kelon Electrical Holdings Company Limited and its subsidiaries
	For the period from January to March 2003
	Unit: RMB

Cash flow statement Prepared by: Guangdong Kelon Electrical Holdings Company Limited and its subsidiaries For the period from January to March 2003 Unit: RMB
	January to	March 2003
	The Group	The Company
	(Unaudited)	(Unaudited)
Cash flow from operating activities
Cash received from sale of goods or rendering of services	1,065,113,445	722,905,313
Refund of taxes and levies	1,566,330	1,607
Cash received from other operating activities	3,159,611	2,459,947
Sub-total of cash inflow	1,069,839,386	725,366,867
Cash paid for purchasing of goods and services	886,014,657	633,092,905
Cash paid for and on behalf of employees	89,125,655	42,551,734
Taxes and levies paid	22,666,764	4,667,616
Cash paid for other operating activities	39,902,903	113,607,474
Sub-total of cash outflow	1,037,709,979	793,919,729
Net cash flow from operating activities	32,129,407	-68,552,862
Cash flow from investing activities	–	–
Cash received from disposal of investments	–	–
Cash received from investment income	–	–
Net cash received from disposal of fixed assets, intangible assets
and other long-term assets	130,258	500
Cash received from other investing activities	–	–
Sub-total of cash inflow	130,258	500
Cash paid for acquisition of fixed assets, intangible assets and
other long-term assets	59,214,401	4,449,357
Cash paid for investments	–	–
Cash paid for other investing activities	–	–
Sub-total of cash outflow	59,214,401	4,449,357
Net cash flow from investing activities	-59,084,143	-4,448,857
Cash flow from financing activities	–	–
Proceeds from equity financing	–	–
Proceeds from borrowings	256,460,000	140,000,000
Cash received from other financing activities	–	–
Sub-total of cash inflow	256,460,000	140,000,000
Repayment of borrowings	454,039,178	350,356,670
Cash paid for distribution of dividends or profits or servicing of interest	24,127,180	11,980,352
Cash paid for other financing activities	–	–
Sub-total of cash outflow	478,166,358	362,337,022
Net cash flow from financing activities	-221,706,358	-222,337,022
Effect of changes in foreign exchange	–	–
Net increase of cash and cash equivalents	-248,661,094	-295,338,741
Reconciliation of net profit to cash flow from operating activities
Net profit	33,559,794	33,559,794
Add: Provision for impairment loss of assets	-12,656,264	-12,373,015
Depreciation of fixed assets	59,550,242	15,135,294
Amortization of intangible assets	5,945,521	303,878
Amortization of long-term deferred expenditures	44,536,807	7,111,709
Decrease (less: increase) in deferred expenditures	-8,005,885	-192,512
Increase (less: decrease) in accruals	-20,972,848	-33,607,524
Loss (less: gain) on disposal of fixed assets, intangible assets and
other long-term assets	-79,811	–
Loss on retirement of fixed assets	–	–
Finance costs	24,127,180	11,980,352
Loss (less: gain) on investments	171,538	-3,603,459
Deferred tax liabilities (less: assets)	–	–
Decrease (less: increase) in inventories	-554,473,592	-304,646,549
Decrease (les: increase) in trade receivables	-249,481,370	-397,025,341
Increase (less: decrease) in trade payables	710,895,821	614,804,511
Profit/(loss) attributable to minority shareholders	-987,726	–
Net cash flow from operating activities	32,129,407	-68,552,862
Investments and financing activities which do not involve cash settlement	–	–
Net increase in cash and cash equivalents:
Balance of cash and cash equivalents at end of Period	437,977,046	60,889,278
Less: Balance of cash and cash equivalent	686,638,140	356,228,019

5

Net increase in cash and cash equivalents Person in charge of the Company: Person in charge of financial matters: Table prepared by:

-295,338,741

-248,661,094

Gu Chujun Gary Li Chi Sing [Yan Guoru] (晏果如 )

By the order of the Board Guangdong Kelon Electrical Holdings Company Limited Gu Chu Jun Chairman

Shunde, the PRC, 25 April 2003

ANNOUNCEMENT ON THE RESOLUTIONS OF THE MEETING OF THE BOARD OF DIRECTORS OF GUANGDONG KELON ELECTRICAL HOLDINGS COMPANY LIMITED

A meeting of the board of directors of Guangdong Kelon Electrical Holdings Company Limited (the “Company”) was held on 25 April 2003 at the Company’s head office. The meeting was attended by eight out of the nine directors and Ms. Yu Xiaoyang, independent non-executive director, was unable to attend the meeting due to personal reason. The meeting was held in accordance with the Company Law of the People’s Republic of China and the Articles of Association of the Company. The following resolutions were considered and approved at the meeting:

1. That the first quarterly report of the Company for the three months ended 31 March 2003 be adopted; and

2. That the proposal to re-appoint the Company’s auditors as put forward by the Supervisory Committee of the Company be approved. The Supervisory Committee of the Company put forward the following proposal to the board of directors of the Company on 25 April 2003 in accordance with the requirements of the Articles of Association of the Company and the “Standard Guidance on Annual General Meetings of Listed Companies” (as revised in 2000): since the engagement of the Company’s auditors for the 2002 financial year has expired, the Supervisory Committee proposed that the Company re-appoints Deloitte Touche Tohmatsu (德勤‧ 關黃陳方會計師行 )and Deloitte Touche Tohmatsu （德 勤華永會計師事務所）as the Company’s auditors in Hong Kong and the People’s Republic of China respectively, for the financial year ended 31 December 2003. This proposal requires the approval of the board of directors and will only be effective after the board of directors has put it forward to the shareholders in general meeting and it has been approved by the shareholders.

By the order of the Board of Guangdong Kelon Electrical Holdings Company Limited Gu Chu Jun Chairman

Shunde, the PRC, 25 April 2003

ANNOUNCEMENT ON THE RESOLUTIONS OF THE MEETING OF THE SUPERVISORY COMMITTEE OF GUANGDONG KELON ELECTRICAL HOLDINGS COMPANY LIMITED

A meeting of the Supervisory Committee of Guangdong Kelon Electrical Holdings Company Limited (the “Company”) was held on 25 April 2003 at the Company’s head office. The meeting was attended by all three supervisors and was held in accordance with the Company Law of the People’s Republic of China and the Articles of Association of the Company. The following resolutions were considered and approved:

1. That the first quarterly report of the Company for the three months ended 31 March 2003 be adopted; and

2. That the proposal to re-appoint the Company’s auditors be put forward to the board of directors of the Company. According to the requirements of the Articles of Association of the Company and the “Standard Guidance on Annual General Meetings of Listed Companies” (as revised in 2000), this proposal requires the approval of the board of directors and will only be effective after being approved by the shareholders in general meeting.

Supervisory Committee of Guangdong Kelon Electrical Holdings Company Limited

Shunde, the PRC, 25 April 2003

Set out below are the relevant declarations in relation to the proposed change of independent non-executive director as referred to in the Notice of 2002 Annual General Meeting issued by Guangdong Kelon Electrical Holdings Company Limited on 31 March 2003:

DECLARATION BY THE NOMINATOR OF THE INDEPENDENT NON-EXECUTIVE DIRECTOR OF GUANGDONG KELON ELECTRICAL HOLDINGS COMPANY LIMITED

The board of directors of Guangdong Kelon Electrical Holdings Company Limited, the nominator, hereby makes an express declaration in respect of the nomination of Mr. Xu Xiaolu as an independent non-executive director of the fourth board of directors of Guangdong Kelon Electrical Holdings Company Limited. There does not exist any relationship between the nominee and Guangdong Kelon Electrical Holdings Company Limited which may affect the independence of the nominee. The declaration is as follows:

This nomination is made after obtaining sufficient understanding of the profession, academic qualification, job title, detailed work history and all parttime job status of the nominee. The nominee has agreed in writing to be proposed as a candidate for appointment as an independent non-executive director of the fourth board of directors of Guangdong Kelon Electrical Holdings Company Limited. (see the declaration by the candidate set out below). The nominator considers that the nominee:

• I. possesses the qualifications to be the director of a listed company in accordance with the laws, administrative rules and regulations and other relevant provisions;

• II. satisfies the appointment requirements as stipulated in the articles of association of Guangdong Kelon Electrical Holdings Company Limited;

• III. fulfils the requirement of independence imposed by the “Guidance on the Establishment of Independent Directorship System of Listed Companies” issued by the China Securities Regulatory Commission:

• the nominee, his immediate relatives and his principal associates do not hold any office in Guangdong Kelon Electrical Holdings Company Limited or any of its subsidiaries;

• neither the nominee nor any of his immediate relatives is a shareholder of such listed company who directly or indirectly holds 1% or more of the issued shares of such listed company, nor is he one of the ten largest shareholders of such listed company;

• neither the nominee nor any of his immediate relatives holds any office in any entity which directly or indirectly holds 5% or more of the issued shares of such listed company, nor does he hold any office in the five largest shareholders of such listed company;

• the nominee satisfies the three aforesaid conditions throughout the course of the most recent year; and

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1. the nominee is not a person who provides financial, legal, management consulting and technical consulting services, etc to such listed company or its subsidiaries.

2. IV. the nominee does not concurrently hold independent directorships in more than five listed companies, including Guangdong Kelon Electrical Holdings Company Limited.

We, the nominator, confirm that the above declaration is true, complete and accurate in all respects and does not contain any false or misleading statement. We, the nominator, fully understand the consequences of making false declarations.

The board of directors of Guangdong Kelon Electrical Holdings Company Limited The nominator

Shunde, the PRC, 25 April 2003

DECLARATION BY THE PROPOSED NEW INDEPENDENT NON-EXECUTIVE DIRECTOR OF GUANGDONG KELON ELECTRICAL HOLDINGS COMPANY LIMITED

The declarant, Xu Xiaolu, being a candidate for appointment as an independent non-executive director of the fourth board of directors of Guangdong Kelon Electrical Holdings Company Limited, hereby declare that I warrant that there will not exist any relationship between myself and Guangdong Kelon Electrical Holdings Company Limited during the period in which I serve as an independent non-executive director of such company which may affect my independence. I declare as follows:

• I. I, my immediate relatives and my principal associates do not hold any office in such company or any of its subsidiaries;

• II. neither I nor any of my immediate relatives directly or indirectly hold 1% or more of the issued shares of such company;

• III. neither I nor any of my immediate relatives is one of the ten largest shareholders of such company;

• IV. neither I nor any of my immediate relatives hold any office in any entity which directly or indirectly holds 5% or more of the issued shares of such company;

• V. neither I nor any of my immediate relatives hold any office in the five largest shareholders of such company;

• VI. I satisfy the five aforesaid conditions throughout the course of the most recent year;

• VII. I have not provided financial, legal, management consulting and technical consulting services, etc. to such company or any of its subsidiaries;

• VIII. I have not received other additional and undisclosed benefits from such listed company and its substantial shareholders or other organisations and officers that have an interest in such company; and

IX. I satisfy the appointment requirements as stipulated in the articles of association of such company.

Moreover, I do not concurrently hold independent directorships in more than five listed companies, including Guangdong Kelon Electrical Holdings Company Limited.

I fully understand the responsibility of an independent non-executive director and confirm that the above declaration is true, complete and accurate in all respects, and does not contain any false or misleading statements. I fully understand the consequences of making false declarations. The China Securities Regulatory Commission may confirm my eligibility of appointment and independence in accordance with this declaration. During the period of my service as an independent non-executive director, I will comply with the requirements of the rules, regulations and notices issued by the China Securities Regulatory Commission, ensuring that I will have sufficient time and energy to perform my duties and make independent judgment without being affected by the substantial shareholders, actual controlling parties or other entities or individuals that have an interest in the company.

Xu Xiaolu

The Declarant

Shunde, the PRC, 25 April 2003

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

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