Medlive Technology Co., Ltd. — Interim / Quarterly Report 2004

Aug 23, 2004

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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)

(Stock Code: 921)

2004 INTERIM RESULTS ANNOUNCEMENT

The Board of Directors (“Board”) of Guangdong Kelon Electrical Holdings Company Limited (the “Company”) is pleased to announce the unaudited consolidated interim financial statements of the Company and its subsidiaries (the “Group”) for the six months ended 30 June 2004 (the “Period”), together with the unaudited comparative figures for the corresponding period in 2003 or the audited comparative figures as at 31 December 2003. The consolidated interim financial statements have not been audited but have been reviewed by the Audit Committee of the Company and the Auditors.

CONDENSED CONSOLIDATED INCOME STATEMENT

For the six months ended 30 June 2004 (Prepared under International Financial Reporting Standards)

Notes Turnover 3 Cost of sales Gross profit Other operating income Distribution costs Administrative expenses Other operating expenses Profit from operations Finance costs Share of results of associates Profit before taxation 4 Taxation 5 Profit after taxation Minority interests Net profit for the period Dividends 6 Basic earnings per share 7	For the six months ended 30 June 2004 2003 RMB’000 RMB’000 (Unaudited) (Unaudited) 4,931,016 3,315,066 (3,903,005) (2,510,141) 1,028,011 804,925 45,926 35,420 (631,919) (467,012) (192,162) (143,231) (9,094) (7,332) 240,762 222,770 (73,540) (60,546) (12,338) (12,675) 154,884 149,549 (4,945) (6,026) 149,939 143,523 8,124 (1,291) 158,063 142,232 – – RMB0.16 RMB0.14

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CONDENSED CONSOLIDATED BALANCE SHEET

At 30 June 2004

(Prepared under International Financial Reporting Standards)

Notes Non-current assets Property, plant and equipment 8 Interests in associates Amount due from a related company Intangible assets 8 Other assets Goodwill Negative goodwill Current assets Inventories Trade and other receivables 9 Taxation recoverable Pledged bank deposits Bank balances and cash Current liabilities Trade and other payables 10 Trade deposits from customers Warranty provision Taxation payable Bank borrowings – amount due within one year Net current assets Capital and reserves Share capital 11 Reserves Shareholders’ equity Minority interests Non-current liabilities Bank borrowings – amount due after one year Pension liabilities Other payables	30.6.2004 RMB’000 (Unaudited) 2,557,506 201,934 34,000 852,405 19,368 28,995 (79,031) 3,615,177 2,299,021 2,490,170 – 1,691,003 1,378,326 7,858,520 5,122,851 277,088 96,856 2,668 2,221,260 7,720,723 137,797 3,752,974 992,007 1,972,391 2,964,398 315,126 406,432 55,454 11,564 473,450 3,752,974	31.12.2003 RMB’000 (Audited) 2,407,234 220,165 34,000 768,631 21,579 30,779 (81,426) 3,400,962 1,945,618 2,046,841 172 1,393,134 726,905 6,112,670 4,046,265 456,523 89,557 4,894 1,264,418 5,861,657 251,013 3,651,975 992,007 1,818,859 2,810,866 233,976 544,354 54,143 8,636 607,133 3,651,975

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CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY For the six months ended 30 June 2004

(Prepared under International Financial Reporting Standards)

At 1 January 2003 Utilisation of the Company’s reserves to make up for the Company’s accumulated losses Share of reserves of an associate Net profit for the year Exchange differences on translation of financial statements of operations outside Mainland China and gains not recognised in the consolidated income statement At 1 January 2004 Net profit for the period Exchange differences on translation of financial statements of operations outside Mainland China and losses not recognised in the condensed consolidated income statement At 30 June 2004 At 1 January 2003 Utilisation of the Company’s reserves to make up for the Company’s accumulated losses Share of reserves of an associate Net profit for the period At 30 June 2003	Share capital RMB’000 992,007 – – – –	Share Statutory Capital premium reserves reserve RMB’000 RMB’000 RMB’000 2,160,621 343,743 1,773 (965,024) (229,162) – – – 27,562 – – – – – – 1,195,597 114,581 29,335 – – – – – – 1,195,597 114,581 29,335 2,160,621 343,743 1,773 (965,024) (229,162) – – – 27,135 – – – 1,195,597 114,581 28,908	Share Statutory Capital premium reserves reserve RMB’000 RMB’000 RMB’000 2,160,621 343,743 1,773 (965,024) (229,162) – – – 27,562 – – – – – – 1,195,597 114,581 29,335 – – – – – – 1,195,597 114,581 29,335 2,160,621 343,743 1,773 (965,024) (229,162) – – – 27,135 – – – 1,195,597 114,581 28,908	Share Statutory Capital premium reserves reserve RMB’000 RMB’000 RMB’000 2,160,621 343,743 1,773 (965,024) (229,162) – – – 27,562 – – – – – – 1,195,597 114,581 29,335 – – – – – – 1,195,597 114,581 29,335 2,160,621 343,743 1,773 (965,024) (229,162) – – – 27,135 – – – 1,195,597 114,581 28,908	Revaluation reserve RMB’000 373,570 – – – –	Accumulated Translation (losses) reserve profits Total RMB’000 RMB’000 RMB’000 884 (1,282,530) 2,590,068 – 1,194,186 – – – 27,562 – 191,170 191,170 2,066 – 2,066 2,950 102,826 2,810,866 – 158,063 158,063 (4,531) – (4,531) (1,581) 260,889 2,964,398 884 (1,282,530) 2,590,068 – 1,194,186 – – – 27,135 – 142,232 142,232 884 53,888 2,759,435	Accumulated Translation (losses) reserve profits Total RMB’000 RMB’000 RMB’000 884 (1,282,530) 2,590,068 – 1,194,186 – – – 27,562 – 191,170 191,170 2,066 – 2,066 2,950 102,826 2,810,866 – 158,063 158,063 (4,531) – (4,531) (1,581) 260,889 2,964,398 884 (1,282,530) 2,590,068 – 1,194,186 – – – 27,135 – 142,232 142,232 884 53,888 2,759,435
	992,007 – –	1,195,597 – –	114,581 – –	29,335 – –	373,570 – –
	992,007	1,195,597	114,581	29,335	373,570
	992,007 – – –				373,570 – – –	884 – – –
	992,007	1,195,597	114,581	28,908	373,570	884	53,888

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CONDENSED CONSOLIDATED CASH FLOW STATEMENT For the six months ended 30 June 2004

(Prepared under International Financial Reporting Standards)

Net cash from operating activities Net cash used in investing activities Net cash from financing activities Net increase in cash and cash equivalents Cash and cash equivalents at beginning of the period Effect of foreign exchange rate changes Cash and cash equivalents at end of the period	For the six months ended 30 June 2004 2003 RMB’000 RMB’000 (Unaudited) (Unaudited) 419,338 305,566 (496,469) (513,159) 728,920 323,880 651,789 116,287 726,905 686,638 (368) – 1,378,326 802,925

NOTES TO THE CONDENSED FINANCIAL STATEMENTS

For the six months ended 30 June 2004

1. GENERAL

Guangdong Kelon Electrical Holdings Company Limited (the “Company”) was established in the People’s Republic of China (the “PRC”) on 16 December 1992. Its H shares were listed on The Stock Exchange of Hong Kong Limited on 23 July 1996 and its A shares were listed on the Shenzhen Stock Exchange on 13 July 1999.

The Group is principally engaged in the manufacture and sale of refrigerators and air-conditioners.

The condensed financial statements have been prepared in accordance with International Accounting Standard 34 “Interim financial reporting” and with the applicable disclosure requirements of Appendix 16 to the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited.

2. ACCOUNTING POLICIES

The condensed financial statements have been prepared under the historical cost convention, except for the revaluation of certain property, plant and equipment. The accounting policies adopted are consistent with those followed in the preparation of the Group’s annual financial statements for the year ended 31 December 2003.

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3. SEGMENT INFORMATION

The Group is principally engaged in the manufacture and sale of refrigerators and air-conditioners. Analysis of financial information by business segment is as follows:

For the six months ended 30 June 2004 Air- Product Refrigerators conditioners Freezers components Elimination RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 TURNOVER External sales 1,919,998 2,688,304 149,920 172,794 – Inter-segment sales – – – 743,722 (743,722) Total revenue 1,919,998 2,688,304 149,920 916,516 (743,722) Inter-segment sales are charged at prevailing market rates. RESULT Segment result 125,569 95,175 19,176 6,843 – Unallocated corporate expenses Profit from operations Finance costs Share of results of associates (4,804) (6,726) (375) (433) – Profit before taxation Taxation Profit after taxation For the six months ended 30 June 2003 Air- Product Refrigerators conditioners Freezers components Elimination RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 TURNOVER External sales 1,445,221 1,641,370 139,311 89,164 – Inter-segment sales – – – 391,288 (391,288) Total revenue 1,445,221 1,641,370 139,311 480,452 (391,288) Inter-segment sales are charged at prevailing market rates. RESULT Segment result 110,914 100,337 10,814 10,297 – Unallocated corporate expenses Profit from operations Finance costs Share of results of associates (5,526) (6,276) (533) (340) – Profit before taxation Taxation Profit after taxation

Consolidated RMB’000 4,931,016 – 4,931,016 246,763 (6,001) 240,762 (73,540) (12,338) 154,884 (4,945) 149,939 Consolidated RMB’000 3,315,066 – 3,315,066 232,362 (9,592) 222,770 (60,546) (12,675) 149,549 (6,026) 143,523

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The following table provides an analysis of the Group’s turnover by geographical market, irrespective of the origin of the goods/services:

The PRC Mainland China Hong Kong Europe America Others	Turnover by geographical market For the six months ended 30 June 2004 2003 RMB’000 RMB’000 2,818,527 2,464,916 17,745 42,167 2,836,272 2,507,083 795,563 471,833 662,477 145,546 636,704 190,604 4,931,016 3,315,066	Turnover by geographical market For the six months ended 30 June 2004 2003 RMB’000 RMB’000 2,818,527 2,464,916 17,745 42,167 2,836,272 2,507,083 795,563 471,833 662,477 145,546 636,704 190,604 4,931,016 3,315,066
		2,507,083 471,833 145,546 190,604
		3,315,066

The Group’s operations are carried out in the PRC and almost all of the production facilities of the Group are located in the PRC.

4. PROFIT BEFORE TAXATION

Profit before taxation in the condensed consolidated income statement was determined after charging (crediting) the following items:

Amortisation of intangible assets_(note a) Amortisation of goodwill of associates(note b) Amortisation of goodwill of subsidiaries(note a) Depreciation Interest expense Interest income Release of negative goodwill to income(note a)_	For the six months ended 30 June 2004 2003 RMB’000 RMB’000 28,107 – 6,867 6,867 1,784 2,194 192,100 166,539 73,540 60,546 (13,997) (8,537) (2,395) (2,395)

Notes:

(a) The amount is included in administrative expenses.

(b) The amount is included in share of results of associates.

5.

TAXATION

The amount consists of: PRC enterprise income tax (“EIT”) The Company and its subsidiaries Associates	For the six months ended 30 June 2004 2003 RMB’000 RMB’000 4,344 5,934 601 92 4,945 6,026	For the six months ended 30 June 2004 2003 RMB’000 RMB’000 4,344 5,934 601 92 4,945 6,026
		6,026

The Company and its subsidiaries provide for taxation on the basis of its statutory profit for financial reporting purposes, adjusted for income and expense items which are not assessable or deductible for income tax purposes after considering all available tax benefits.

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6.

The Company was incorporated in Shunde, Guangdong Province and, pursuant to “Income Tax Law of the PRC for Enterprises with Foreign Investment and Foreign Enterprises” (“Income Tax Law”), is normally subject to EIT at a rate of 24%, which is applicable to enterprises located in coastal open economic zone. Together with the local enterprise income tax rate of 3%, the aggregate EIT rate is 27%. In June 2003, the Company is classified as a high new technology enterprise and is subject to an EIT of 15%. Together with the local enterprise income tax rate of 3%, the aggregate EIT rate is 18%.

The Company’s subsidiaries, Guangdong Kelon Refrigerator Ltd., Guangdong Kelon Refrigerator Co., Ltd., Guangdong Kelon Air-Conditioner Co., Ltd., Hangzhou Kelon Electrical Co., Ltd., Guangdong Kelon Fittings Co., Ltd., Shunde Rongsheng Plastic Products Co., Ltd. and Yingkou Kelon Refrigerator Co., Ltd., established in coastal open economic zone, are subject to an EIT rate of 24%. Together with 3% of the local enterprise income tax, the aggregate EIT rate is 27%. Pursuant to Income Tax Law, they are entitled to preferential tax treatment, with full exemption from income tax for two years starting from the first profitable year of operations, after offsetting all tax losses brought forward from the previous years (for a maximum period of five years), followed by a 50% reduction in tax rate for the next three years.

The Company’s subsidiaries, Chengdu Kelon Refrigerator Co., Ltd. and Jiangxi Kelon Industrial Development Co., Ltd. are subjected to an EIT rate of 30%. Together with 3% of the local enterprise income tax, the aggregate EIT rate is 33%. Pursuant to Income Tax Law, they are also entitled to preferential tax treatment, with full exemption from income tax for two years starting from the first profitable year of operations, after offsetting all tax losses brought forward from the previous years (for a maximum period of five years), followed by a 50% reduction in tax rate for the next three years.

DIVIDENDS

The directors do not recommend the payment of an interim dividend for the six months ended 30 June 2004. No interim dividend was declared for the same period last year.

7. BASIC EARNINGS PER SHARE

The calculation of basic earnings per share was based on the unaudited consolidated net profit of RMB158,063,000 for the six months ended 30 June 2004 (six months ended 30 June 2003: RMB142,232,000) divided by 992,006,563 shares (2003: 992,006,563 shares) outstanding during the period.

No diluted earnings per share have been presented as there were no dilutive potential ordinary shares in issue in both periods.

8. ADDITIONS TO PROPERTY, PLANT AND EQUIPMENT AND INTANGIBLE ASSETS

During the period, the Group spent RMB154,424,000 (2003: RMB140,950,000) on the acquisition of property, plant and equipment.

During the period, the Group spent RMB100,919,000 (2003: nil) on the acquisition of the land use rights in the PRC.

9. TRADE AND OTHER RECEIVABLES

Trade receivables – third parties Notes receivable – third parties Other receivables – third parties Amounts due from related companies	30.6.2004 RMB’000 1,237,547 669,259 583,364 – 2,490,170	31.12.2003 RMB’000 726,736 734,878 566,227 19,000
		2,046,841

Sales are usually settled by cash on delivery for small and new customers. The Group allows a credit period of one year for large and well established customers.

At the reporting date, all trade receivables were aged less than one year.

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10. TRADE AND OTHER PAYABLES

11. SHARE CAPITAL

Trade payables – third parties Notes payable – third parties Other payables – third parties Amounts due to related companies	30.6.2004 RMB’000 1,747,030 2,603,606 660,973 111,242 5,122,851	31.12.2003 RMB’000 1,370,152 1,896,092 704,505 75,516
		4,046,265

At the reporting date, all of the Group’s trade payables were aged less than one year.

There were no movements in the issued capital of the Company in the interim reporting period.

12. FAIR VALUE OF FINANCIAL INSTRUMENTS

The carrying amount of the Group’s cash and bank deposits, short-term borrowings and other current financial assets and liabilities approximate their fair value due to the short-term maturity of these instruments.

The carrying amount of the long-term bank loans approximate the fair value of these loans.

13. RELATED PARTY TRANSACTIONS

The following is a summary of significant transactions carried out in the ordinary course of business between the Group and related parties for the six months ended 30 June 2004 and the respective balances with the related companies as of 30 June 2004:

I. Transactions with related companies

	For the six months	For the six months
	ended 30 June
	2004		2003
	RMB’000	RMB’000
Sale of goods/raw materials to:
– Chengdu Xinxing Electrical Appliance Holdings
Company Limited (“Chengdu Xinxing”)(note a(i))	14,086		–
– Chongqing Kelon Rongsheng Refrigerator Sales
Co., Ltd. (“Chongqing Rongsheng”)(note a(ii))	32,739		49,329
Purchase of goods/raw materials from:
– Huayi Compressor Holdings Company Limited
(“Huayi”)_(note a(iii))_and its subsidiaries	125,583		–
– Chengdu Xinxing_(note a(i))_	22,775		20,689
– Shanghai Yilian Electric Business Limited
(“Shanghai Yilian”)(note a(iv))	3,171		–
– Chengdu Engine (Group) Company Limited
(“Chengdu Engine”)(note a(i))	2,756		–
Loan guarantee provided by:
– Greencool Enterprise Development
Company Limited (“Greencool Enterprise”)
(note a(v))	300,000	385,000
Other transactions:
– Interest charged to Chengdu Xinxing_(note a(i))_	993		993
– Logistic management fee paid to
Guangzhou Antaida Logistic Co. Ltd.
(“Guangzhou Antaida”)(note a(vi))	3,846		2,687

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II. Balances due from/to related companies

Balances due from related companies Amount due within one year: –江西發達思家電有限公司 (“Jiangxi Fadasi”) (note a(vii)) Amount due after one year: – Chengdu Xinxing_(note a(i)) Balances due to related companies – Huayi(note a(iii)) – Chengdu Xinxing(note a(i)) – Chongqing Rongsheng(note a(ii)) –西安高科（集團）公司(note a(viii)) – Hainan Greencool Environmental Protection Engineering Co., Ltd. (“Hainan Greencool”) (note a(ix))_ – Others	30.6.2004 RMB’000 – 34,000 34,000 94,219 2,883 10,684 2,649 – 807 111,242	31.12.2003 RMB’000 19,000 34,000
		53,000
		73,938 116 – – 26 1,436
		75,516

Notes:

(a) Transactions with related parties are summarised as follows:

• (i) The Company made prepayments amounting to an aggregate of RMB34,000,000 indirectly through its subsidiary, Chengdu Kelon Refrigerator Co., Ltd. (“Chengdu Kelon”), to Chengdu Xinxing, which is an associate of Chengdu Engine, the minority investor of Chengdu Kelon. As consideration of such prepayment, Chengdu Xinxing agreed to repay Chengdu Kelon by supplying an agreed number of refrigeration parts together with interest payments at an annual rate of approximately 9%. The prepayment was guaranteed by Chengdu Engine and Chengdu Kelon has the right to deduct from any dividends payable to Chengdu Engine the outstanding amount of any payments (in whatever form) due from Chengdu Xinxing directly or indirectly to the Company.

• (ii) Chongqing Rongsheng is an associate of the Group.

• (iii) Huayi is an associate of the Group.

• (iv) Shanghai Yilian is an associate of the Group.

• (v) Greencool Enterprise is the single largest shareholder of the Company.

• (vi) Guangzhou Antaida is an associate of the Group. The Group and Guangzhou Antaida entered into a logistic service agreement, pursuant to which Guangzhou Antaida provides transportation service to the Group. A 4% service fee is charged on delivery and discharge of goods.

• (vii) During the year ended 31 December 2003, the Group entered into an agrement with Jiangxi Fadasi to establish a company, 江西科龍康拜恩電器有限公司 (“Jiangxi Combine”), to engage in the manufacturing and sale of refrigerators, air-conditioners and other household appliances. Jiangxi Combine is now owned as to 55% by the Group and 45% by Jiangxi Fadasi. As at 31 December 2003, Jiangxi Fadasi owed the Group RMB19 million. The maximum amount outstanding during the period is RMB19 million (during the year ended 31 December 2003: RMB19 million). The amount was settled during the period.

• (viii) 西安高科（集團）公司 is a minority investor of a subsidiary of the Company.

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• (ix) During the year ended 31 December 2003, the Group collected the agency entering fees and the receivables on sales of CFC-free refrigerants on behalf of Hainan Greencool from 1,050 authorised engineering units of Hainan Greencool. In return, Hainan Greencool paid a handling fee of RMB1,575,000 to the Group in this regard. As at 31 December 2003, RMB26,000 was refundable to Hainan Greencool. There was no such arrangement during the six months ended 30 June 2004. Hainan Greencool is a whollyowned subsidiary of Greencool Technology Holdings Limited. Mr. Gu Chu Jun, the Chairman of the Company, has an equity interest in Greencool Technology Holdings Limited.

• (x) Licence agreement on the use of trademark

Under a licence agreement (“Licence Agreement”) dated 3 April 2003 entered into between the Company and Greencool Refrigerant (China) Co., Ltd. (“Greencool China”), Greencool China granted to the Company an exclusive right to use the trademark “Combine” for no consideration (a) as registered in the PRC and Hong Kong; and/or (b) as may from time to time be registered and/or in respect of which applications for registration may be made with the trademarks registry of any other territory by Greencool China; and/or (c) all “Combine” trademark registrations as may be assigned to Greencool China from time to time on freezers, refrigerators and other similar or related products and such other products as may be requested by the Company from time to time which are not objected by Greencool China, on a worldwide basis, for a term equivalent to the period of validity of the relevant registration. With the prior written consent of the Company, Greencool China may use and allow third party to use such trademarks on production other than the types of products covered by the Licence Agreement. At present, the Group has been using the trademark of “Combine” on the refrigerators products and air-conditioners products under the Licence Agreement. Mr. Gu Chu Jun, the Chairman of the Company, has an equity interest in Greencool China.

(b) Pricing of the related party transactions

The pricing of the transactions set out in (a) above was determined with reference to comparable market prices and/or with reference to the term of the relevant agreements.

(c) Terms of the related party balances

Save as the balance due from Chengdu Xinxing, all related party balances are unsecured, noninterest bearing and repayable on demand.

14. CAPITAL COMMITMENTS

Capital expenditure for acquisition of property, plant and equipment contracted for but not provided in the condensed financial statements	30.6.2004 RMB’000 141,450	31.12.2003 RMB’000 105,210

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15. ACQUISITION OF SUBSIDIARY

In March 2004, the Group acquired a non-wholly owned subsidiary for cash consideration of RMB70,620,000. This transaction has been accounted for using the purchase method of accounting.

The effect of the acquisition is summarised as follows:

Net assets acquired Cash consideration Net cash outflow arising on acquisition Cash consideration Bank balances and cash acquired	RMB’000 70,620 70,620 (70,620) 30,423 (40,197)

The subsidiary acquired did not make any significant contribution to the results of the Group during the period.

16. DIFFERENCES BETWEEN INTERNATIONAL FINANCIAL REPORTING STANDARDS AND PRC ACCOUNTING STANDARDS AND REGULATIONS AS APPLICABLE TO THE GROUP

The condensed consolidated balance sheet of the Group prepared under International Financial Reporting Standards (“IFRS”) and that prepared under PRC accounting standards and regulations have the following major differences:

Net assets as per condensed financial statements prepared under IFRS Adjustment on property, plant and equipment revaluation and related depreciation Others Net assets as per financial statements prepared under PRC accounting standards and regulations	30.6.2004 RMB’000 2,964,398 (1,006) 126 2,963,518	31.12.2003 RMB’000 2,810,866 (2,135) – 2,808,731

The condensed consolidated income statement of the Group prepared under IFRS and that prepared under PRC accounting standards and regulations have the following major differences:

Net profit for the period as per condensed financial statements prepared under IFRS Adjustment on property, plant and equipment revaluation and related depreciation Net profit for the period as per financial statements prepared under PRC accounting standards and regulations	For the six months ended 30 June 2004 2003 RMB’000 RMB’000 158,063 142,232 1,129 2,374 159,192 144,606

There are differences in other items in the condensed financial statements due to differences in classification between IFRS and PRC accounting standards and regulations.

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REVIEW CONCLUSION OF INDEPENDENT REVIEW REPORT

On the basis of review by Deloitte Touche Tohmatsu which does not constitute an audit, Deloitte Touche Tohmatsu are not aware of any material modifications that should be made to the interim financial report for the six months ended 30 June 2004.

INTERIM DIVIDENDS

At a meeting of the Board held on 20 August 2004, the Board resolved not to declare any interim dividend for the six months ended 30 June 2004. No interim dividends were distributed for the corresponding period last year.

MANAGEMENT DISCUSSION AND ANALYSIS

A. Financial Review

Kelon’s relentless efforts in 2002 and 2003 to develop its business appeared to be bearing fruit in 2004. The Group’s operations have been growing rapidly in the first half of 2004. The management believes 2004 will be a tremendously successful year for the Group.

During the Period, the Group recorded strong growth in turnover, reaching approximately RMB4,931 million, representing a surge of approximately 48.7% over the same period in 2003. It is equivalent to approximately 79.9% of the annual turnover last year. Net profit attributable to shareholders amounted to RMB158 million, representing an increase of approximately 11.1% as compared with that of the corresponding period in 2003. Basic earnings per share were approximately RMB0.16.

To support the rapid growth of the Group, the Board of Director does not recommend payment of an interim dividend (2003: nil).

B. Business Review

Overall Results

In 2002 and 2003, the Group focused its efforts on optimizing its overall internal management, implementing internationalized production management model to enhance its production efficiencies, adopting strict control on costs, as well as reorganizing and expanding its sales network and sales team. These efforts together with the consistent enhancement of the core competitiveness of its products have propelled the Group into its high growth period.

As for its business distribution, during the Period, the revenue generated from refrigerator business and air-conditioner business accounted for approximately 39.0% and 54.5% respectively of the Group’s total turnover, while the remaining 6.5% of the total revenue came from freezer and small home appliance businesses.

During the Period, the export sales of Kelon grew rapidly, and became the main growth driver of the Group’s income. As for domestic sales, boasting the advantage of economies of scale, the Group aggressively implemented its multi-branding strategy in the past year and successfully expanded its market share. It launched the “Combine” refrigerators and airconditioners in 2003. The series, targeting the low-end consumer market, successfully enlarged the Group’s market share and built for it a solid foundation for securing continuous profit.

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Export Business – Maintains Strong Growth

During the Period, with cost, quality and technological advantages, the Group’s OEM products continued to attract procurement from international home appliance brands. The income from export business in the first half of 2004 increased a significant 148.5% as compared with the corresponding period in 2003. Its contribution to the overall turnover of the Group surged to 42.8% from 25.6% in the corresponding period in the previous year. As for regional distribution, the European market accounted for 37.7% of the income from the Group’s export business while the American market accounted for 31.4%.

The sales revenue from exporting refrigerators and air-conditioners accounted for 38.4% and 54.2% of the total export income respectively, while the remaining 7.4% of the export income came from the sales of freezers and small home appliances.

Refrigerator Business – Favorable Growth

Refrigerator business saw outstanding results in the first half of 2004, with revenue increased approximately 32.9% compared with the corresponding period in 2003. The Group launched its “Combine” series in 2003 to capture the low-end market, successfully expanded its market coverage and brought favorable profits to the Group.

According to a research on sales of refrigerators in China in 2003 conducted by National Bureau of Statistics of China, the total shares of “Kelon” and “Ronshen”, targeting the highto mid-end markets respectively, topped the market for the tenth time after leading for nine consecutive years from 1991 to 1999. Launched in 2003, the “Combine” refrigerator series recorded outstanding sales performance, with aggregate market share way ahead of its competitors in China’s refrigerator market.

Air-conditioner Business – Persistently Competitive Market

During the Period, the overall revenue from air-conditioner business increased by approximately 63.8% as compared with the corresponding period in 2003. The Group implemented its multibranding strategy to strengthen its market coverage and further consolidate its position in airconditioner industry. In terms of market share, competitors were losing more and more ground to Kelon. However, since competition in the air-conditioner market remained extremely intense, the rate of growth in profit still fell behind that of sales.

High Technology Products – Remain Leading Position

Kelon is committed to developing world leading high technology products. It has directed substantial resources into developing core technologies, in particular those in relation to environmental protection and energy saving. Capitalizing on its enhanced core technologies, the Group has been producing world leading environmentally friendly products, which are expected to revolutionize the market for environmentally friendly domestic appliances in China.

Third Generation Foaming Agent for Refrigerator – Successfully Developed

Kelon pioneered the research and development of HFC-245fa, the third generation foaming agent for refrigerators, and led the market in its application. In June this year, HFC-245fa received professional accreditation from an expert committee comprising representatives from the State Administration of Environmental Protection, Department of Science and Technology of Guangdong Province, Guangdong Environmental Protection Bureau, the China Household Electrical Appliance Association and China Association of Refrigeration.

HFC-245fa has good heat insulating capability, hence can reduce the energy consumption of a refrigerator by about 10%. More importantly, this foaming agent is not damaging to the ozone layer. With such favorable environmentally friendly quality, it is currently the best refrigerator foaming agent in the world.

13

“United Nations Energy Saving Grand Prix” – Sales Champion

According to the research on the best selling energy saving refrigerators in China in the first five months of 2004 conducted by Market Economy Research Centre of State Council Development Research Center and the Beijing GuNeng Market Research Center, the Group’s Ronshen BCD-209S refrigerator, which was named the “United Nations Energy Saving Grand Prix” in 2003, was the top seller in China’s energy saving refrigerators market with a 10.5% share.

“Shuang Xiao Wang” Air-Conditioner – Breaks World Record in Cooling Efficiencies

In April 2002, applying the highly efficient digital air-conditioning technology it successfully developed, Kelon launched the first generation “Shuang Xiao Wang” with cooling efficiency reaching 3.8 and heating efficiency reaching 4.2. Since then, the Group had made numerous breakthroughs with the latest being the fourth generation “Shuang Xiao Wang” air-conditioner KFR-22GW, with cooling efficiency reaching 6.65. The achievement made during the Period broke the world energy efficiency record.

Capacity Reaching Controlling Market Position

After several acquisitions of additional production lines, the Group has effectively enhanced its production capacity and assumed controlling position in the market in terms of refrigerator output. As for the production of air-conditioners, in order to support its fast business growth, the Group plans to build new production plants and set up its own production lines instead of acquiring production lines as the former is more cost effective.

Cost Advantage

In the past two years, through streamlining its procurement system, optimizing product and cooling efficiency system designs, and further strengthening organizational structure, the Group has achieved high cost control level surpassing those of its peers. With the relief of price pressure and possibly downward price adjustment of steel, the major raw material in the manufacture of refrigerators and air-conditioners, the Group has been able to maintain costs at a satisfactory level.

During the Period, with economies of scale leverage, Kelon and its sister company, Hefei Meiling Co., Ltd., cooperated in the aspects of procurement, R&D, sales and marketing, and servicing network, benefiting from the complementary effects and sharing of resources. Both significantly raised their bargaining power and profit levels, as well as lowered their costs.

C. Prospects

As a result of Kelon’s efforts in the past two years to adjust its internal structure and adopt an internationalized management model, the Group saw great enhancement in its competitiveness. The Group’s leadership in the domestic appliance market has never been so strong as it is now. Concurrently, by implementing at full strength its international development strategies, the Group looks forward to entering a new and fast growing period in the next few years starting from 2004.

Considering that many regions in China are facing the growing problem of power shortages, environmental protection and energy saving has become the dominant requirements for domestic appliances in China. This trend is conducive to the development of the Group, which is already a leader of environmental protection in the domestic appliance industry.

While we are confident of the export business retaining strong growth in 2004, the Group is also expecting its competitiveness and profitability to elevate as a result of the continuous success of its multi-branding strategy which accounted for its capturing of the high-, midand low-end markets.

14

Although the market prices of refrigerators declined in 2004, the industry consolidated and competition was brought back to a manageable level with little room for further drop in price. Hence, the Group has strong confidence in the future development of its refrigerator business.

As for its air-conditioner business, in spite of the price war in 2004 which resulted in the revenue growth falling behind growth in sales, boasting the most effective cost control capability in the market helped by its multi-branding strategy, the Group’s air-conditioner products have assumed greater control over the market. The Group believes as the market consolidates, its air-conditioner business will perform favorably.

The Group will strive to grasp all opportunities to expand its business during the fast growing period in the next few years. It is committed to becoming a leading international domestic refrigeration appliance manufacturer and bringing fruitful returns to shareholders.

D. Significant Events

Mr. Gu Chu Jun, Chairman of Kelon, through his controlled company, Greencool Enterprise Development Company Limited (“Greencool Enterprise”), entered into an agreement to purchase 57,436,439 Legal Person Shares of the Company from Foshan Shunde Xinhong Enterprise Company Limited on 10 June, 2004. This share transaction of 5.79% interest of the Company was made at a consideration of RMB 1.70 per share. Upon completion of the transaction, the stakes in the Group held by its single largest shareholder, Greencool Enterprise, will increase from 20.64% to 26.43%.

SOURCES OF WORKING FUNDS AND CAPITAL

The Group’s net cash inflow from operating activities for the six months ended 30 June 2004 amounted to RMB419,338,000.

As at 30 June 2004, the Group had bank balances and cash on hand totaling approximately RMB1,378,326,000 and bank loan balances of approximately RMB2,627,692,000.

The Company’s total capital expenditure for the six months ended 30 June 2004 amounted to RMB496,469,000.

As at 30 June 2004, the net proceeds from the Group’s initial public offering and subsequent placement of H shares and public offer of A shares have been applied as the Group’s capital expenditure and working capital.

As at 30 June 2004, the gearing ratio of the Group was 88.6%.

TRUST DEPOSITS

As at 30 June 2004, the Company did not have any trust deposits with any financial institution in the PRC. All of the Company’s deposits have been placed with commercial banks in the PRC and Hong Kong and the Company has not encountered any difficulty in withdrawing the deposits.

UNIFIED INCOME TAX AND LOCAL TAX BENEFIT

The Company is subject to an income tax rate of 18% since June 2003.

HUMAN RESOURCES AND EMPLOYEES’ REMUNERATION

As at 30 June 2004, the Group had approximately 24,900 employees, comprising 1,030 technicians, 6,600 marketing staff (promotion staff included), 450 financial staff, 1,030 administrative staff, and 15,760 production staff (seasonal staff included). Among the Group’s employees, there are 18 doctorate graduates, 408 master graduates and 2,858 university graduates, 797 employees with official titles of middle rank or above. Besides, the Group has 75 retired staff. For the half year ended 30 June 2004, the Group’s staff payroll amounted to RMB219,218,016 (corresponding period in 2003: RMB84,191,154).

15

CHARGE ON THE GROUP’S ASSETS

As at 30 June 2004, the Group’s properties, plant and equipment with a value of approximately RMB381,983,000 (31 December 2003: RMB1,067,711,000) were pledged as security for the Group’s bank borrowings.

EXPOSURE TO FLUCTUATIONS IN EXCHANGE RATES AND ANY RELATED HEDGES

As most of the sales and purchases of the Group were denominated in Renminbi, the Group had no significant exposure to exchange rate fluctuations. No financial instruments were used by the Group for hedging exchange rate risk.

CONTINGENT LIABILITIES

As at 30 June 2004, the Group had no material contingent liabilities.

SHARE CAPITAL STRUCTURE

As at 30 June 2004, there was no change in the share capital structure of the Company and the structure was as follows:

structure was as follows:
Domestic shares H shares A shares Total	Number of Shares 337,915,755 459,589,808 194,501,000 992,006,563	Percentage of total issued share capital 34.06% 46.33% 19.61%
		100.00%

16

As at 30 June 2004, there were 66,132 shareholders in total, of which the top ten/substantial shareholders were as follows:

						Nature
	Increase/	Shareholdings			Number of	of Shares
	decrease	at the end	Proportion to	Share class	shares	(domestic or
Names of	during	of the	total share	(listed or	pledged	foreign
Shareholders	the Period	period	capital (%)	unlisted)	or frozen	shareholders)
Greencool Enterprise Development	0	204,775,755	20.64%	Unlisted	0	Domestic
Company Limited						legal person
						shares
The Hongkong and Shanghai	+38,987,237	148,511,596	14.97%	Listed	Unknown	H shares
Banking Corporation Ltd.
Shunde Economic Consultancy	0	68,666,667	6.92%	Unlisted	0	Domestic
Company						legal person
						shares
Standard Chartered Bank (HK) Ltd	+31,665,000	60,991,000	6.15%	Listed	Unknown	H shares
Foshan Shunde Xinhong	0	57,436,439	5.79%	Unlisted	0	Domestic
Enterprise Company Limited						legal person
						shares
Guotai Junan Securities	-8,099,000	37,010,000	3.73%	Listed	unknown	H shares
(Hong Kong) Limited
First Shanghai Securities	+110,000	27,109,000	2.73%	Listed	unknown	H shares
Limited
Shenyin Wanguo Securities	-10,149,000	23,735,000	2.39%	Listed	unknown	H shares
(H.K.) Limited
Citibank N.A.	-5,378,200	17,916,484	1.81%	Listed	unknown	H shares
Liu Chong Hing Bank	+6,000,000	16,000,000	1.61%	Listed	unknown	H shares
Limited

Descriptions:

• (1) Except those held by the legal person shareholders, all of the shares held by the above top ten shareholders has not been pledged or under freezing orders during the Period. The Company does not know whether any shares held by the other shareholders have been pledged or under freezing orders during the Period.

• (2) Among the top ten shareholders, none of the legal person shareholders is connected with any of the others or is a party acting in concert with any of the others as defined in Administrative Measures for Information Disclosure of the Shareholders of Listed Companies (上市公司股東持股變動信息管理辦法 ). Furthermore, the Company does not know whether any shareholders is connected with any of the others or is a party acting in concert with any of the others as defined in Administrative Measures for Information Disclosure of the Shareholders of Listed Companies.

17

• (3) Foshan Shunde Xinhong Enterprise Company Limited (“Xinhong Enterprise”), a legal person shareholder who holds 5% of issued shares of the Company, entered into a “Legal Person Share Transfer Agreement” with Greencool Enterprise Development Company Limited (“Greencool Enterprise”), the Company’s single substantial shareholder on 10 June 2004. Xinhong Enterprise transferred 57,436,439 legal person shares of the Company held by it. Further information has been disclosed in the “中國證券報 ” and “證券時報 ” both dated 11 June 2004. The Company has not received any document and share transfer confirmation letter from China Securities Depository & Clearing Corporation Limited Shenzhen Branch as yet.

• (4) The name of the Company’s single substantial shareholder which was previously known as “順德市格林柯爾企業發展有限公司 ” has been changed to “廣東格林柯爾企業 發展有限公司 ” on 20 April 2004 because of the change in plotting of administrative zone of Shunde.

SHAREHOLDINGS OF THE TOP TEN SHAREHOLDERS

	Number of	Class (A,
Name of Shareholders	listed shares at	B, H share
(full name)	the end of the period	or others)
The Hongkong and Shanghai
Banking Corporation Ltd.	148,511,596	H shares
Standard Chartered Bank (HK) Ltd	60,991,000	H shares
Guotai Junan Securities
(Hong Kong) Limited	37,010,000	H shares
First Shanghai Securities Limited	27,109,000	H shares
Shenyin Wanguo Securities (H.K.) Limited	23,735,000	H shares
Citibank N.A.	17,916,484	H shares
Liu Chong Hing Bank Limited	16,000,000	H shares
Dah Sing Bank Limited	15,000,000	H shares
哈爾濱哈里投資股份有限公司	14,789,903	A shares
Deutsche Securities Asia Ltd.	11,147,200	H shares

Description: The Company does not know whether any one of the top ten shareholders is connected with any one of the other nine nor any one of them is a party acting in concert with any one of the other nine as defined in Administrative Measures for Information Disclosure of the Shareholders of Listed Companies.

INTERESTS OF DIRECTORS, SUPERVISORS AND CHIEF EXECUTIVES

As at 30 June 2004, the interests or short positions (including interests or short positions which they are deemed or taken to have under the relevant provisions of the Securities and Futures Ordinance) of the directors, supervisors and chief executive of the Company in the shares, underlying shares or debentures of the Company and its associated corporations (within the meaning of Part XV of the Securities and Futures Ordinance) as recorded in the register required to be kept by the Company under Section 352 of the Securities and Futures Ordinance were as follow:

Name	Position	Type of interest	Number of Shares
Gu Chu Jun_(i)_	Director	Corporate	262,212,194 Legal
			Person Shares
Gu Chu Jun_(ii)_	Director	Corporate	3,830,000 H Shares
He Si	Supervisor	Personal/Family	50,000 A Shares

18

Notes:

• (i) Greencool Enterprise Development Company Limited owns 204,775,755 legal person shares in the Company, representing approximately 20.64% of the existing issued share capital of the Company. Mr. Gu Chu Jun owns 60% of the total investment in Greencool Enterprise Development Company Limited. On 10 June, 2004, Greencool Enterprise Development Company Limited entered into a conditional agreement to purchase 57,436,439 Legal Person Shares of the Company from Foshan Shunde Xinhong Enterprise Company Limited. For the purpose of the Securities and Futures Ordinance, Mr. Gu Chu Jun is interested in such shares through his shareholdings in Greencool Enterprise Development Company Limited. As at 30 June, 2004, this transaction has not been completed.

• (ii) Mr. Gu Chu Jun is the substantial shareholder of Greencool Technology Holdings Limited (a company listed on the Hong Kong Stock Exchange Growth Enterprise Market) and owns approximately 62.5% of its share interests. Two subsidiaries of Greencool Technology Holdings Limited held 3,830,000 H Shares of the Company, representing approximately 0.39% of the issued share capital of the Company.

Save as disclosed above, as of 30 June 2004, the Company was not aware of any interests or short positions (including interests or short positions which they are deemed or taken to have under the relevant provisions of the Securities and Futures Ordinance) held by the directors, supervisors and chief executive of the Company which are required, pursuant to the provisions of Divisions 7 and 8 of Part XV of the Securities and Futures Ordinance or pursuant to the Model Code for Securities Transactions by Directors of Listed Companies, to be notified to the Company and the Stock Exchange.

PURCHASE, SALE AND REDEMPTION OF SHARES

During the Period, neither the Company nor any of its subsidiaries purchased, sold or redeemed any securities of the Company or its subsidiaries.

AUDIT COMMITTEE

The Company established the Audit Committee on 16 August 2002. The principal duties of the Audit Committee include the review and supervision of the Group’s financial reporting process and internal controls. The Audit Committee comprises three independent non-executive directors, Mr. Chan Pei Cheong, Andy, Mr. Li Kung Man and Mr. Xu Xiao Lu. The Audit Committee has reviewed and approved both the interim results announcement and the results report.

CODE OF BEST PRACTICE

The Director are not aware of any information that would reasonably indicate that the Company is not, or was not, for any part of the Period, in compliance with the Code of Best Practice as set out in Appendix 14 to the Listing Rules.

PUBLICATION OF DETAILED RESULTS ANNOUNCEMENT ON THE STOCK EXCHANGE OF HONG KONG LIMITED’S WEBSITE

A detailed results announcement containing all the information in respect of the Company required by paragraphs 46(1) to 46(6) of Appendix 16 of the Listing Rules will be published on The Stock Exchange of Hong Kong Limited’s website in due course.

19

DOCUMENT AVAILABLE FOR INSPECTION AND ADDRESS FOR INSPECTION TO DOCUMENT

The original 2004 interim report signed by the chairman is available for inspection at the following address:

The Secretariat of the Board Guangdong Kelon Electrical Holdings Company Limited No. 8 Ronggang Road, Ronggui Street Shunde, Foshan Guangdong Province China

By Order of the Board Gu Chu Jun Chairman

Shunde District, Foshan City, 20 August 2004

As at the date of this announcement, the Company’s executive directors are Mr. Gu Chu Jun, Mr. Liu Cong Meng, Mr. Li Zhen Hua, Mr. Yan You Song, Mr. Zhang Hong and Mr. Fang Zhi Guo; and the independent non-executive directors are Mr. Chan Pei Cheong, Andy, Mr. Li Kung Man and Mr. Xu Xiao Lu.

SUPPLEMENTARY INFORMATION AS REQUIRED BY THE STOCK EXCHANGE OF HONG KONG LIMITED IN RELATION TO THE COMPANY’S A SHARE INTERIM RESULTS ANNOUNCEMENT

(1) PRINCIPAL FINANCIAL OPERATIONS DURING THE PERIOD

1. Principal Financial Statistics and Indicators

			Change of the
			amounts at the
			end of the current
			Period
	(Unit:	RMB)	as compared
	As at	As at	with the
the	end of current	the last year	beginning of
	Period	end	the year (%)
Current assets	7,785,325,751	6,033,869,860	29.03%
Current liabilities	7,649,354,318	5,779,561,003	32.35%
Total assets	11,404,839,090	9,432,791,214	20.91%
Shareholders’ equity
(excluding minority
interests)	2,963,518,393	2,808,730,941	5.51%
Net assets per share	2.9874	2.8314	5.65%
Adjusted net assets per share	2.8252	2.6439	7.20%

20

			Change of the
			amounts of the
			current Period as
	(Unit:	RMB)	compared with
		Corresponding	corresponding
		period	period
	Period (Jan-June)	last year	last year (%)
Net profit	159,192,418	144,606,105	10.09%
Net profit deducted by
extraordinary items	155,840,621	146,455,095	6.41%
Earnings per share	0.1604	0.1457	10.09%
Return on net assets	5.37%	5.26%	0.11%
Net cash flow from
operating activities	526,158,872	334,133,780	57.47%

The calculation formula for the key financial indicators are as follows:

• =

• Earnings per share net profit/weighted average number of ordinary shares outstanding for the period Return on net assets = net profit/shareholders’ equity as at the end of the period x 100% =

• Net assets per share shareholders’ equity as at the end of the period/number of ordinary shares issued as at the end of the period

• =

• Adjusted net assets (shareholders’ equity as at the end of the period – per share accounts receivable with aging over 3 years – deferred expenditures – long term deferred expenditures)/number of ordinary shares outstanding as at the end of the period

• Net cash flow from = Net cash flow from operating activities/number of ordinary shares outstanding operating activities as at the end of the period per share

2. Difference on Net Profit Calculated in Accordance with the International Financial Reporting Standards (“IFRS”) and PRC Accounting Standards and Regulations (“PRC GAAP”)

	(Unit: ’000 RMB)
	Net profit during
	the Period
Reported in accordance with IFRS	158,063
Reported in accordance with PRC GAAP	159,192
Difference	(1,129)

21

3. Appendix to profit and loss account

	Return rate of	Return rate of	Return	Return
	net assets (%)		per share (RMB)
	Fully	Weighted	Fully	Weighted
	diluted	average	diluted	average
Profit derived from
principal operations	34.69	35.59	1.04	1.04
Operating profit	5.74	5.89	0.17	0.17
Net profit	5.37	5.51	0.16	0.16
Net profit less of
extraordinary items	5.26	5.40	0.16	0.16

• (2) DETAILS OF NEW APPOINTMENT AND RESIGNATION OF THE DIRECTORS, SUPERVISORS AND SENIOR MANAGEMENT OF THE COMPANY DURING THE PERIOD

There was no new appointment and resignation of the Directors, Supervisors and Senior Management of the Company during the Period.

• (3) SHAREHOLDINGS OF THE DIRECTORS, SUPERVISORS AND SENIOR MANAGEMENT OF THE COMPANY HAD NOT BEEN CHANGED DURING THE PERIOD

• (4) ANALYSIS OF FINANCIAL POSITION AND OPERATION RESULTS DURING THE PERIOD

	Unit:RMB	Unit:RMB
	30 June	31 December	Increase/
Items	2004	2003	Decrease
			(%)
Bank balances and cash	3,069,328,829	2,120,038,297	44.78%
Accounts receivable	1,237,547,446	731,120,036	69.27%
Subsidy receivables	60,640,782	187,704,983	-67.69%
Short-term loans	1,815,626,723	858,900,000	111.39%
Notes payable	2,636,174,952	1,938,635,005	35.98%
Accounts payable	1,811,562,539	1,401,689,440	29.24%
Advance from customers	277,087,969	456,523,479	-39.30%
	Jan-June,	Jan-June,	Increase/
Items	2004	2003	Decrease
			(%)
Revenue from
principal operations	4,931,016,244	3,315,066,447	48.75%

Descriptions:

1. The increase in bank balances and cash was attributable to the increase in pledged deposits and sales.

2. The increase in accounts receivable was attributable to the increase in sales.

3. The decrease in subsidy receivables was due to offsetting the export tax receivables in prior years.

4. The increase in short-term loans was attributable to the increase in sales and adjusted discounted notes payable.

22

1. The increase in notes payable and accounts payable were resulted from the increase in extended payments during the peak season and payment of goods by notes payable.

2. The decrease in advance from customers was due to the settlement of goods by customers with prepayments made in prior periods.

3. The increase in sales was attributable to the expansion of product sales.

1. Analysis of revenue from principal operations by geographic segment

(Unit: RMB)

(Unit: RMB)
		Increase/decrease (%)
		in revenue from
		principal operations
		as compared
	Revenue from	to corresponding
Operation indicators	principal operations	period last year
Domestic market	2,818,526,872	14.35%
Overseas market	2,112,489,372	148.48%
Total	4,931,016,244	48.75%

2. Analysis of the Company’s income and profit from principal operations by industry/ product

(Unit: RMB)

						Change in	Change in
						revenue	cost of	Change in
						from principal	principal	gross profit
						operations as	operations	margin
						compared	as compared	as compared
			Revenue			to	to	to
			from	Cost of	**Gross **	**corresponding **	**corresponding **	corresponding
			principal	principal	profit	period last	period last	period last
By product		operations		operations	margin (%)	year (%)	year (%)	year (%)
Refrigerators	1,919,997,521			1,468,621,312	23.51%	32.85%	43.59%	-5.72%
Air Conditioners	2,688,303,308			2,168,823,167	19.32%	63.78%	67.46%	-1.77%
Freezers		149,920,103		112,822,390	24.74%	7.62%	-1.36%	6.85%
Others		172,795,312		152,619,203	11.68%	93.79%	102.34%	-3.73%
Attributable to:
Related party transactions					32,740,000
Principal policy of related
party transactions					On market prices

(5) INVESTMENTS OF THE COMPANY DURING THE PERIOD

1. During the Period, there was no application of raised funds nor was there an application of raised funds in the previous period that continued through to the Period.

2. Progress on and revenue from significant investments made by the Company without raising funds.

3. (1) As at the end of the Period, the second phase project of Hangzhou Kelon Electric Co. Ltd. (杭州科龍電器有限公司 ) was under construction and expected to commence operation by the end of 2004;

23

• (2) As at the end of the Period, Kaifeng Kelon Air-conditioners Co. Ltd. (開封科 龍空調有限責任公司 ) commenced production of the two heat exchangers for its air-conditioners, i.e. the evaporator（蒸發器）and the condenser (冷凝 器 ), while whole air-conditioner production was on test stage;

• (3) As at the end of the Period, the ice-making machine project of Shangqiu Kelon Electric Co. Ltd. (商丘科龍電器有限公司 ) commenced formal operation and the second phase expansion project was in progress;

• (4) As at the end of the Period, the construction work of Zhuhai Kelon Development Co. Ltd. (珠海科龍實業發展有限公司 ) (“Zhuhai Kelon”), a subsidiary set up by the Company through an investment on December 2003, was still in progress and expected to commence operation in the first half of the coming year.

• (5) As at the end of the Period, the first phase infrastructure project of 揚州科龍 電器有限公司 was almost complete with production equipments in the process of installation.

(6) OTHER SIGNIFICANT EVENTS

1. Company Governance

The Company has been continuing to optimize its corporate governance structure, to establish a modern corporate system and to regulate the operation of the Company by strictly complying with the requirements of the Company Law, the Securities Law and the relevant laws and regulations stipulated by the CSRC. During the Period, the Company has amended its Articles of Association pursuant to the requirements of the CSRC in order to improve the relevant provisions of external guarantees. The Company has also improved the Resolution Rules for the General Meeting and the Resolution Rules for the Board of Directors.

2. The Company did not make any profit appropriation for the interim period of 2004 and did not make any reserve fund transferring to increase the share capital.

3. During the Period, the Company was not involved in any material litigation and arbitration events in 2004.

4. During the Period, the Company acquired 71% equity interests of 西安高科遠東制 冷有限責任公司 (Xi’an Hi-Tech Far East Refrigerating Co. Ltd.) and changed its registered name to 西安科龍有限公司 「西安科龍」( ) Xi’an Kelon Co. Ltd. (“Xi’an Kelon”). Some of the new compressor lines of Xi’an Kelon commenced production during the period. It is expected that the relocation of the original production lines will be completed at the end of 2004.

5. During the Period, the Company’s subsidiaries purchased raw materials of approximately RMB126,000,000 from an associated company, Huayi at market prices. The amount represented less than 3% of total purchase.

6. There were no assets of other companies being assigned, underwritten or leased by the Company during the Period, or occurred prior to the period and continued to be subsisting at the date of this report that were material to the Company.

24

7. The following are the material guarantees given during the Period, or given prior to the period and continued to be subsisting at the date of this report:–

							Whether	Whether	the
							guarantee is
		Secured						given
	Date	amount			Performance		to a	related
	(Day of	(RMB ten				complete		party
Secured Objects	Agreement)	thousand)	Guarantee type	Guarantee period		or not	(Y or N)
Guangdong Kelon	2003-7-10	6,000.00	Joint and several	2003-7-10	2004-7-10	N			N
Refrigerator Ltd.			liabilities
Guangdong Kelon	2004-5-20	3,652.00	Joint and several	2004-5-20	2004-8-25	N			N
Refrigerator Ltd.			liabilities
Guangdong Kelon	2004-6-7	7,627.70	Joint and several	2004-6-7	2004-9-5	N			N
Refrigerator Ltd.			liabilities
Chengdu Kelon	2004-3-10	700.00	Joint and several	2004-3-10	2004-9-10	N			N
Refrigerator Ltd.			liabilities
Chengdu Kelon	2004-3-15	700.00	Joint and several	2004-3-15	2004-9-15	N			N
Refrigerator Ltd.			liabilities
Guangdong Kelon	2004-3-19	5,000.00	Joint and several	2004-3-19	2004-9-19	N			N
Refrigerator Ltd.			liabilities
Guangdong Kelon	2004-3-24	4,500.00	Joint and several	2004-3-24	2004-9-24	N			N
Refrigerator Ltd.			liabilities
Guangdong Kelon	2004-6-25	2,490.00	Joint and several	2004-6-25	2004-9-24	N			N
Refrigerator Ltd.			liabilities
YingKou Kelon	2004-3-25	3,000.00	Joint and several	2004-3-25	2004-9-25	N			N
Refrigerator Ltd.			liabilities
Guangdong Keon	2003-10-9	5,000.00	Joint and several	2003-10-9	2004-10-9	N			N
Air-Conditioner			liabilities
Co., Ltd.
Jiangxi Kelon	2004-4-15	80.90	Joint and several	2004-4-15	2004-10-15	N			N
Industrial			liabilities
Development
Co., Ltd.
Jiangxi Kelon	2004-4-19	119.60	Joint and several	2004-4-19	2004-10-19	N			N
Industrial			liabilities
Development
Co., Ltd.
Guangdong Kelon	2004-6-25	2,988.00	Joint and several	2004-6-25	2004-10-24	N			N
Refrigerator Ltd.			liabilities
Jiangxi Kelon	2004-4-27	2,098.79	Joint and several	2004-4-27	2004-10-27	N			N
Industrial			liabilities
Development
Co., Ltd.
Jiangxi Kelon	2004-5-24	5,492.00	Joint and several	2004-5-24	2004-11-24	N			N
Industrial			liabilities
Development
Co., Ltd.
Jiangxi Kelon	2004-5-28	73.55	Joint and several	2004-5-28	2004-11-28	N			N
Industrial			liabilities
Development
Co., Ltd.

25

Jiangxi Kelon	2004-6-21	89.24	Joint and several	2004-6-21	2004-12-21	N	N
Industrial			liabilities
Development
Co., Ltd.
Jiangxi Kelon	2004-6-28	335.00	Joint and several	2004-6-28	2004-12-28	N	N
Industrial			liabilities
Development
Co., Ltd.
Guangdong Kelon	2004-1-20	5,000.00	Joint and several	2004-1-20	2005-1-20	N	N
Refrigerator Ltd.			liabilities
Chengdu Kelon	2004-3-10	600.00	Joint and several	2004-3-10	2005-3-10	N	N
Refrigerator Ltd.			liabilities
Chengdu Kelon	2004-3-15	600.00	Joint and several	2004-3-15	2005-3-15	N	N
Refrigerator Ltd.			liabilities
Guangdong Kelon	2004-3-18	8,300.00	Joint and several	2004-3-18	2005-3-17	N	N
Refrigerator Ltd.			liabilities
Yingkou Kelon	2004-3-24	3,000.00	Joint and several	2004-3-24	2005-3-23	N	N
Refrigerator			liabilities
Co., Ltd.
Chengdu Kelon	2004-4-22	400.00	Joint and several	2004-4-22	2005-4-22	N	N
Refrigerator Ltd.			liabilities
Chengdu Kelon	2004-4-30	1,000.00	Joint and several	2004-4-30	2005-4-30	N	N
Refrigerator Ltd.			liabilities
民豐特種紙股份	2001-12-01	2,000.00	Joint and several	2001-12-20	2004-11-25	N	N
有限公司			liabilities
民豐特種紙股份	2004-03-01	1,500.00	Joint and several	2004-03-05	2005-03-04	N	N
有限公司			liabilities
民豐特種紙股份	2004-06-01	827.00	Joint and several	2004-06-25	2004-09-23	N	N
有限公司			liabilities
中寶科控投資股份	2004-04-01	2,500.00	Joint and several	2004-04-16	2005-04-15	N	N
有限公司			liabilities
中寶科控投資股份	2004-03-01	500.00	Joint and several	2004-03-26	2005-03-23	N	N
有限公司			liabilities
浙江嘉欣絲綢股份	2004-01-01	350.00	Joint and several	2004-01-07	2005-01-05	N	N
有限公司			liabilities
浙江嘉欣絲綢股份	2004-06-01	650.00	Joint and several	2004-06-24	2005-06-10	N	N
有限公司			liabilities
浙江嘉欣絲綢股份	2003-10-01	1,000.00	Joint and several	2003-10-23	2004-10-22	N	N
有限公司			liabilities
浙江嘉欣絲綢股份	2003-11-01	1,000.00	Joint and several	2003-11-06	2004-11-05	N	N
有限公司			liabilities
Total amount of guarantees incurred							1,262.11
Total balance of guarantees							1,262.11
Including balance of related party guarantees							0
Total amount of non performance guarantees							0
Proportion of total guarantees to net		assets of the Company					23.66%
Total amount of guarantees given to		subsidiaries by	listing company				68,846.78

Note: The guarantees in favor of 民豐特種紙股份有限公司，中寶科控投資股份有限公 司 and浙江嘉欣絲綢股份有限公司 were given by 加西貝拉壓縮機股份有限公司 , a subsidiary of 華意壓縮機股份有限公司 which in turn is an associated company owned as to 22.725% by the Company.

8. No material cash assets management was assigned by the Company during the Period or occurred prior to the period and continued to be subsisting at the date of this report.

26

9. During the Period, neither the Company nor shareholders who held more than 5% of the shares of the Company had given any undertakings which might materially affect the operating results and financial position of the Company nor did any of such occurred prior to the period and continued to be subsisting at the date of this report.

10.

• During the Period, the Company did not change the auditor.

11. During the Period, neither the Company nor the board and directors of the Company was subject to any investigation, or administrative penalty, or notice of criticism by the CSRC, or subject to penalty by other administrative departments or public censure by any stock exchange. The directors and the relevant management personnel of the Company were not subject to by any legal enforcement.

12. Specific explanation on the use of funds by the Controlling Shareholders and its subsidiaries

subsidiaries
	Name of
	related			Accounting	Period-end
Use of fund	parties	Relationship	Amount	category	balance	Remarks
Assigned loan	Nil	Nil	Nil	Nil	Nil	Nil
Assigned investments by
related parties	Nil	Nil	Nil	Nil	Nil	Nil
Issue of commercial bills of
acceptance with no
substantial transactions	Nil	Nil	Nil	Nil	Nil	Nil
Repayment of loans	Nil	Nil	Nil	Nil	Nil	Nil
Others (such as advances)	Nil	Nil	Nil	Nil	Nil	Nil

13. Specific independent opinions by independent directors on the Company’s accumulated and current external guarantees and anti-law guarantees

In accordance with the regulations and requirements of the “Notice Concerning the Regulation on the Flow of Funds between Listed Companies and their Connected Parties and the Provision of Security by Listed Companies to external Parties” (Zhengjian 2003 No.56) issued by the China Securities Regulatory Commission, we, with bona fides, have carried out due diligence and careful investigation on the security provided by the Company to external parties, details of which are reported as follows:

• (1) As at 30 June 2004, the Company has accumulated external guarantees of RMB688,467,800 which were all provided to its controlling subsidiaries. The Company has not provided any security to its shareholders, subsidiaries of shareholders, affiliates of shareholders, other connected parties holding less than 50% shares of the Company, any non-legal entities and individuals;

• (2) The accumulated and current external security of the Company amounted to RMB12,621,100. The total accumulated external security of RMB55,538,600 was provided in favour of Jiaxipera, the subsidiaries of Huayi Compressor Holding Company Limited in which the Company holds a 22.725% equity interest. Therefore, the external security of the Company amounted to RMB12,621,100.

• (3) The “Articles of Association” has been amended by Guangdong Kelon Electrical Holdings Company Limited in accordance with the requirements of CSRC 2003 No.56 document and has been passed by special resolution during the 2003 annual general meeting. We believe Guangdong Kelon Electrical Holdings Company Limited has complied with the relevant requirements stipulated by CSRC 2003 No.56 document with the risks associated with external guarantees being effectively controlled and investors interests safeguarded.

27

Independent non-executive directors: Mr. Chan Pei Cheong, Andy, Mr. Li Kung Man, Mr. Xu Xiao Lu.

(7) PRINCIPLE FINANCIAL STATEMENTS FOR A-SHARE

BALANCE SHEET

(Prepared in accordance with PRC GAAP) At 30 June 2004

(Denominated in RMB)

Assets Current Assets: Bank balances and cash Notes receivable Accounts receivable Other receivables Prepayments Subsidy receivables Inventories Deferred expenditures Total current assets Long-term investments Long-term equity investments Fixed Assets: Fixed assets, cost Less: Accumulated depreciation Fixed assets, net asset value Less: Provision for impairment loss of fixed assets Fixed assets, net value Construction in progress Total fixed assets Intangible Assets and Other Assets: Intangible assets Long-term deferred expenditure Long-term receivables due after one year Total intangible assets and other assets Total assets	Group 30 June 2004 (Unaudited) 3,069,328,829 669,259,122 1,237,547,446 302,640,143 141,881,045 60,640,782 2,299,020,331 5,008,053 7,785,325,751 160,053,812 3,960,912,530 1,943,163,948 2,017,748,582 61,388,103 1,956,360,479 153,474,594 2,109,835,073 1,159,719,323 155,905,131 34,000,000 1,349,624,454 11,404,839,090	Company 30 June 2004 (Unaudited) 1,776,880,243 539,251,617 129,036,398 1,998,833,328 18,488,933 – 1,008,180,164 2,975,716 5,473,646,399 1,888,390,442 1,421,169,269 621,946,858 799,222,411 – 799,222,411 41,653,512 840,875,923 920,762,517 33,873,545 – 954,636,062 9,157,548,826	Group 31 December 2003 (Audited) 2,120,038,297 734,877,589 731,120,036 133,664,884 165,879,789 187,704,983 1,945,617,637 14,966,645 6,033,869,860 172,383,399 3,694,855,619 1,802,715,334 1,892,140,285 61,471,947 1,830,668,338 117,845,210 1,948,513,548 1,073,068,727 170,955,680 34,000,000 1,278,024,407 9,432,791,214	Company 31 December 2003 (Audited) 1,595,877,944 548,232,619 261,438,092 1,652,631,976 20,599,915 – 961,962,539 13,870,001
				5,054,613,086
				1,458,354,550
				1,427,389,640 584,404,702
				842,984,938 –
				842,984,938 33,015,098
				876,000,036
				953,917,703 43,368,194 –
				997,285,897
				8,386,253,569

28

Liabilities and Shareholders’ Equity

Current Liabilities: Short-term loans Notes payable Accounts payable Advance from customers Accrued payroll Staff welfare payable Taxes payables Payable to others Other payables Accruals Provision for liabilities Long-term liabilities due within one year Total current liabilities Long-term liabilities: Long-term loans Long-term payable Accrued liabilities of investee enterprise Total long-term liabilities Total liabilities Minority Interests Shareholders’ Equity: Share capital Capital reserve Revenue reserve	1,815,626,723 2,636,174,952 1,811,562,539 277,087,969 28,096,579 2,539,240 30,425,583 1,599,286 275,831,539 267,920,967 96,856,037 405,632,904 7,649,354,318 406,432,332 67,017,922 – 473,450,254 8,122,804,572 318,516,125 992,006,563 1,516,862,082 114,580,901	788,766,000 2,389,190,195 720,051,043 109,799,462 6,530,854 – 39,370,625 106,932 380,596,298 201,787,859 96,856,037 400,000,000 5,133,055,305 360,000,000 60,286,383 222,289,880 642,576,263 5,775,631,568 – 992,006,563 1,906,669,964 114,580,901	858,900,000 1,938,635,005 1,401,689,440 456,523,479 28,064,768 220,777 (32,821,459) 5,833,042 406,206,061 221,235,587 89,556,581 405,517,722 5,779,561,003 544,353,852 62,778,960 – 607,132,812 6,386,693,815 237,366,458 992,006,563 1,516,787,706 114,580,901	310,000,000 1,940,688,655 365,938,682 414,162,842 9,858,676 – (48,587,455) 230,783 649,808,149 191,113,522 89,556,581 400,000,000 4,322,770,435 525,000,000 57,986,314 335,383,123 918,369,437 5,241,139,872 – 992,006,563 1,840,635,588 114,580,901
Including: Statutory common welfare fund	114,580,901	114,580,901	114,580,901	114,580,901
Unappropriated profits Exchange differences on translation of financial statements in foreign currencies Total shareholders’ equity Total liabilities and shareholders’ equity	343,628,613 (3,559,766) 2,963,518,393 11,404,839,090	368,659,830 – 3,381,917,258 9,157,548,826	184,436,195 919,576 2,808,730,941 9,432,791,214	197,890,645 – 3,145,113,697 8,386,253,569

29

STATEMENTS OF INCOME AND PROFIT APPROPRIATION

(Prepared in accordance with PRC GAAP) For the six months ended 30 June 2004 (Unit: RMB)

1. Revenue from principal operations Less: Cost of sales Sales tax 2. Profit from principal operations Add: Other operating profit (loss) Less: Distribution costs Administrative expenses Financial Expenses 3. Operating profit (loss) Add: Investment (loss) profit Subsidy income Non-operating income Less: Non-operating expenses 4. Total profit Less: Income Tax Minority interests 5. Net profit for the period Add: Accumulated losses, beginning of the period Add: Utilisation of statutory common reserve to make up losses Utilisation of capital reserve to make up losses 6. Profit available for appropriation (accumulated profit) Less: Appropriations to statutory common reserve surplus Appropriations to statutory common welfare fund	January- June, 2004 Group RMB (Unaudited) 4,931,016,244 3,902,886,072 119,267	January- June, 2004 Company RMB (Unaudited) 3,520,432,541 3,011,955,737 67,520	January- June, 2003 Group RMB (Unaudited) 3,315,066,447 2,507,767,367 246,603
	1,028,010,905 23,215,762 631,918,686 177,969,598 71,261,917
			151,831,193 5,934,088 1,291,000
	159,192,418 184,436,195 – –	170,769,185 197,890,645 – –
	343,628,613 – –	368,659,830 – –	126,862,052 – –

30

7. Profit available for appropriations to shareholders (accumulated profit) Less: Appropriations to discretionary reserve Dividends on ordinary shares 8. Unappropriated profits at the end of the period	January- June, 2004 Group RMB (Unaudited) 343,628,613 – –	January- June, 2004 Company RMB (Unaudited) 368,659,830 – –	January- June, 2003 Group RMB (Unaudited) 126,862,052 – –	January- June, 2003 Company RMB (Unaudited) 133,790,035 – –
	343,628,613	368,659,830	126,862,052	133,790,035

31

CASH FLOW STATEMENTS

(Prepared in accordance with PRC GAAP) For the six months ended 30 June 2004

I. Cash flows from operating activities: Cash received from sale of goods and rendering of services Other cash received related to operating activities Sub-total of cash inflows Cash paid for purchases of goods and services Cash paid to and on behalf of employees Tax paid Other cash paid related to operating activities Sub-total of cash outflows Net cash flows from operating activities II. Cash flows from investing activities: Net cash received from disposals of investment Net cash received from disposals of fixed assets, intangible assets and other long-term assets Other cash received related to investing activities Sub-total of cash inflows Cash paid for acquisition of fixed assets, intangible assets and other long-term assets Cash paid for acquisition of investments Other cash paid relating to investing activities Sub-total of cash outflows Net cash flows from investing activities	January- June, 2004 Group RMB (Unaudited) 4,941,111,112 10,996,660 4,952,107,772 3,641,830,796 206,626,033 94,226,792 483,265,279 4,425,948,900 526,158,872 2,968,000 1,422,093 13,996,921 18,387,014 424,968,911 – 297,869,871 722,838,782 (704,451,768)	January- June, 2004 Company RMB (Unaudited) 3,821,892,998 5,640,991 3,827,533,989 3,202,377,371 79,735,878 65,475,936 369,578,949 3,717,168,134 110,365,855 – 1,193,527 12,216,984 13,410,511 17,682,030 206,432,597 227,399,167 451,513,794 (438,103,283)	January- June, 2003 Group RMB (Unaudited) 3,263,357,958 28,888,308 3,292,246,266 2,426,390,916 213,901,174 39,767,214 278,053,182 2,958,112,486 334,133,780 – 10,611,877 – 10,611,877 113,034,347 11,000,000 369,222,378 493,256,725 (482,644,848)	January- June, 2003 Company RMB (Unaudited) 2,478,701,340 11,099,675 2,489,801,015 1,917,309,407 85,637,720 28,408,063 77,363,279 2,108,718,469 381,082,546 – 8,230,434 – 8,230,434 12,744,123 35,000,000 335,602,720 383,346,843 (375,116,409)

32

III. Cash flows from financing activities: Contribution by minority shareholder arising from acquisition of a subsidiary Cash received from borrowings Sub-total of cash inflows Cash paid for repayment of borrowings Cash paid for distribution of dividends, profit or interest expenses Sub-total of cash outflows Net cash flows from financing activities IV. Effect of foreign exchange rate changes on cash V. Net increase (decrease) in cash and cash equivalents	51,720,000 2,071,426,557 2,123,146,557 1,252,506,174 40,926,826 1,293,433,000 829,713,557 – 651,420,661	– 1,093,766,000 1,093,766,000 780,000,000 32,425,440 812,425,440 281,340,560 – (46,396,868)	– 1,174,700,000 1,174,700,000 850,818,968 59,082,971 909,901,939 264,798,061 – 116,286,993	– 325,000,000 325,000,000 324,300,000 27,307,131 351,607,131 (26,607,131) – (20,640,994)

33

Supplemental Information

January- June, 2004 Group RMB (Unaudited) 1. Reconciliation of net profit to net cash flows from operating activities: Net profit 159,192,418 Add: Minority interests (8,124,592) Provision for impairment loss of assets (7,249,321) Depreciation of fixed assets 160,402,453 Amortisation of intangible assets 42,159,244 Amortisation of long-term expenditures 64,447,916 Decrease in deferred expenditure (less: increase) 9,958,592 Increase in accruals 46,685,380 Loss from disposal of fixed assets, intangible assets and other long-term assets 1,603,980 Financial expenses 22,888,414 Investment loss (less: gains) 12,333,282 Increase in inventories (346,480,398) Increase in operating receivables (458,407,395) Increase in operating payables 826,748,899 Net cash flows from operating activities 526,158,872 2. Net increase (decrease) in cash and cash equivalents: Cash and cash equivalents at the end of the period 1,378,325,337 Less: Cash and cash equivalents at the beginning of the period 726,904,676 Net increase (decrease) in cash and cash equivalents 651,420,661	January- June, 2004 Company RMB (Unaudited) 170,769,185 – (7,165,477) 46,942,128 33,185,186 13,354,538 10,894,285 10,674,337 780,599 20,208,455 (259,617,148) (39,295,330) (202,464,494) 312,099,591 110,365,855 284,915,386 331,312,254 (46,396,868)	January- June, 2003 Group RMB (Unaudited) 144,606,105 1,291,000 (49,283,542) 109,782,501 5,745,841 51,128,245 (4,884,128) 49,356,351 43,823,154 58,518,953 12,783,202 (324,868,992) (1,036,162,821) 1,272,297,911 334,133,780 802,925,133 686,638,140 116,286,993	January- June, 2003 Company RMB (Unaudited) 133,790,035 – (52,499,389) 31,861,157 3,754,605 11,918,239 1,158,621 14,480,746 595,756 30,219,421 (168,476,327) (53,937,628) (478,800,825) 907,018,135 381,082,546 335,587,025 356,228,019 (20,640,994)

34

STATEMENT OF ASSETS IMPAIRMENT (Prepared in accordance with PRC GAAP) For the six months ended 30 June 2004 (Unit: RMB)

			The	Group
		At	Additions for	Written back	At
		1 January 2004	the period	for the period	30 June 2004
1.	Provision for
	doubtful accounts	152,368,641	–	243,182	152,125,459
	Including:
	Accounts receivable	149,578,016	–	243,182	149,334,834
	Other receivables	2,790,625	–	–	2,790,625
2.	Provision for impairment
	of inventories	103,919,716	–	6,922,295	96,997,421
	Including:
	Finished goods	65,286,425	–	6,922,295	58,364,130
	Work-in-progress	172,000	–	–	172,000
	Raw materials	38,461,291	–	–	38,461,291
3.	Provision for impairment
	of fixed assets	61,471,947	–	83,844	61,388,103
	Including:
	Buildings	51,789,255	–	83,844	51,705,411
	Machinery and equipment	9,673,692	–	–	9,673,692
	Electronic equipment, fixtures
	and furniture	9,000	–	–	9,000
4.	Provision for impairment
	of intangible assets	5,734,199	–	–	5,734,199
	Including:
	Land use rights	5,214,752	–	–	5,214,752
	Software systems	519,447	–	–	519,447
5.	Provision for impairment
	in value of long-term
	investments	79,038,525	–	–	79,038,525
	Including:
	Long-term equity
	investments	79,038,525	–	–	79,038,525
	Long-term investments
	in bonds	–	–	–	–

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

35