Medlive Technology Co., Ltd. — Management Reports 2005

Dec 30, 2005

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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: 0921)

THE REPORT TO THE SHAREHOLDERS FROM THE BOARD OF DIRECTORS OF

GUANGDONG KELON ELECTRICAL HOLDINGS COMPANY LIMITED IN RELATION TO THE ACQUISITION BY QINGDAO HISENSE AIR-CONDITIONING COMPANY LIMITED

This announcement is made pursuant to Rule 13.09(2) of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited.

Name of Listed Company (Chinese): 廣東科龍電器股份有限公司 Name of Listed Company (English): GUANGDONG KELON ELECTRICAL HOLDINGS CO., LTD. Address of Listed Company: No.8 Ronggang Road, Ronggui Street, Shunde District, Foshan City, Guangdong Province, the People’s Republic of China (the “PRC”) Contact person: 鍾亮 (Zhong Liang) Tel: 0757-28362570 Name of Acquirer: 青島海信空調有限公司 (Qingdao Hisense AirConditioning Company Limited) Address of Acquirer: 中國青島市高科技工業園長沙路 (Changsha Road, Hi-tech Zone, Qingdao, the PRC) Contact person: 王東波 (Wang Dong Bo) Tel: 0532-83397178 Name of Independent Financial Adviser: 廣發證券股份有限公司 (GF Securities Co., Ltd.) Address of Independent Financial Adviser: 廣東省廣州市天河北路 183號大都會廣場 38樓 (38/F, Metro Plaza, 183, North Tianhe Road, Guangzhou, Guangdong Province, the PRC) Contact persons: 敖小敏 (Ao Xiao Min), 林小舟 (Lin Xiao Zhou) Tel: 020–87555888 Date of Signing of this Report: 29 December 2005

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STATEMENT OF THE BOARD

• (1) As Mr. Gu Chu Jun, Mr. Yan You Song and Mr. Zhang Hong, the executive directors of the Company, have been formally investigated by the PRC police department and are subject to procedures adopted by the PRC police department in connection with criminal offences for alleged economic crime, the above three directors are unable to confirm the truthfulness, accuracy and completeness of the content of this Report;

• (2) Except for Mr. Gu Chu Jun, Mr. Yan You Song and Mr. Zhang Hong, the remaining directors of the Company confirm that this Report contains no false representation, misleading statement or material omission, and they are willing to assume responsibility, severally and jointly, for the truthfulness, accuracy and completeness of the content of this Report;

• (3) Except for Mr. Gu Chu Jun, Mr. Yan You Song and Mr. Zhang Hong, the remaining directors of the Company have performed their obligations of good faith and given their opinions carefully, objectively and in the interests of the Company and its shareholders as a whole;

• (4) None of the directors of the Company is interested in the Acquisition, or if any is interested, the relevant directors have abstained from voting.

Section 1 Definitions

Unless otherwise specified, the following terms used in this Report have the following meanings:

“Hisense Air-Conditioner”, “Acquirer” 青島海信空調有限公司 (Qingdao Hisense AirConditioning Company Limited)

“Hisense Group” 海信集團有限公司 (Hisense Group Company)

“Qingdao Hisense Electric” 青島海信電子產業控股股份有限公司 (Qingdao Hisense Electronics Company Limited)

“Guangdong Greencool” 廣東格林柯爾企業發展有限公司 (Guangdong Greencool Enterprise Development Company Limited)

“Kelon Electrical”, “Company” 廣東科龍電器股份有限公司 (Guangdong Kelon Electrical Holdings Company Limited), a company listed on The Stock Exchange of Hong Kong Limited (stock code: 0921) and the Shenzhen Stock Exchange (stock code: 000921)

“Board”

the board of directors of the Company

“Acquisition”, “Equity Transfer” the transfer to Hisense Air-Conditioner of 262,212,194 domestic legal person shares (representing 26.43% of the total issued share capital) of the Company held by Guangdong Greencool

“Equity Transfer Agreement” “The Agreement between Guangdong Greencool Enterprise Development Company Limited and Qingdao Hisense Air-Conditioning Company Limited relating to the Transfer of the Shares of Guangdong Kelon Electrical Holdings Company Limited” entered into between Guangdong Greencool and Hisense Air-Conditioner on 9 September 2005

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“Supplemental Agreement”

“The Supplemental Agreement to “The Agreement between Guangdong Greencool Enterprise Development Company Limited and Qingdao Hisense AirConditioning Company Limited relating to the Transfer of the Shares of Guangdong Kelon Electrical Holdings Company Limited”” entered into between Guangdong Greencool and Hisense Air-Conditioner on 28 September 2005

“Report” The Report to the Shareholders from the Board of Directors of Guangdong Kelon Electrical Holdings Company Limited in relation to the Acquisition by Qingdao Hisense Air-Conditioning Company Limited “CSRC” the China Securities Regulatory Commission “Yuan” Renminbi (RMB) “Associate” has the meaning ascribed to it in the Rules Governing Listing of Stocks on Shenzhen Stock Exchange

Section 2 Basic Information of the Company

I. Basic information of the Company

Company Name: Guangdong Kelon Electrical Holdings Company Limited Places of Listing: Shenzhen Stock Exchange, The Stock Exchange of Hong Kong Limited Abbreviated Stock Name: Kelon Electrical (Shenzhen), Guangdong Kelon (Hong Kong) Stock Codes: 000921 (Shenzhen), 0921 (Hong Kong) Registered Address of the Company: No. 8 Ronggang Road, Ronggui Street, Shunde District, Foshan City, Guangdong Province, the PRC Principal Office of the Company: No. 8 Ronggang Road, Ronggui Street, Shunde District, Foshan City, Guangdong Province, the PRC Post code: 528303 Tel: 0757-28362570 Contact person: 鍾亮 (Zhong Liang)

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II. Principal business of the Company and development in the past three years

• (1) Principal business

The Company is principally engaged in the development and manufacture of electrical home appliances, including refrigerators, air conditioners, freezers and washing machines, and their components, as well as the domestic and overseas sales of such products and the provision of after-sales services for such products.

• (2) Development of the principal business in the past three years

As a result of the Company’s development over the past three years, the Company has established a solid position in the domestic air conditioners and refrigerators market. The Company has repeatedly reported record high sales revenue for the manufacture of air conditioners and refrigerators on an OEM basis for world famous home appliances enterprises, large-scale home appliances chain stores and supermarkets. These have proved that the products of the Company enjoy competitive advantages in terms of technology, price and quality.

In 2004, the Company’s profitability was seriously affected and it recorded a loss due to intense market competition, surging price in raw materials and a reduction in export tax refund rate. During the first half of 2005, Mr. Gu Chu Jun, the former chairman of the Company, was suspected of having committed economic crime. As a result, the Company has been under investigation by the CSRC since 5 April 2005. This has directly affected the confidence of financial institutions, suppliers and distributors in the Company, causing the Company to face major difficulties in seeking banking facilities and credit. The tight cash flow which resulted had successive impacts on the provision of goods from the Company’s suppliers and the Company’s cooperation with its distributors, and directly caused the suspension of a large part of the Company’s production of refrigerators and air conditioners from May to August 2005. The normal production and operation of the Company was seriously affected, and as a result, the Company recorded a loss during the first three quarters of the year.

• (3) Principal financial indicators for the past three years and as at the end of the third quarter of 2005

Table 1 Financial statistics as at the end of the third quarter of 2005 and in the past three years (Unit: 10,000 Yuan)

past three years (Unit:	10,000 Yuan)
	Third quarter
Item	of 2005	2004	2003	2002
Total assets	781,604.77	1,136,139.36	950,144.12	765,653.93
Net assets	135,282.89	280,315.68	280,873.09	257,500.08
Revenue from
principal operations	510,232.49	843,640.34	616,811.00	487,825.70
Net profit	-130,080.97	-6,416.02	20,218.02	10,127.70
Return on net assets	-96.15%	-2.29%	7.20%	3.93%
Gearing ratio	78.84%	72.38%	67.94%	63.47%

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Note:

1. The figures in the table above represent those at the end of each year (or period), whereby the financial report as at the end of the third quarter of 2005 is unaudited. All the figures in the financial reports are set out in the respective annual reports or quarterly reports of the Company.

2. The names of the newspapers in which the third quarter report of 2005 and annual reports for the past three years of the Company were published and their respective publication dates are as follows:

The third quarter report of 2005 was published on 31 October 2005 in “China Securities Journal”, “Securities Times”, “Hong Kong Commercial Daily” and “China Daily”;

The annual report of 2004 was published on 30 April 2005 in “China Securities Journal” and “Securities Times” and on 29 April 2005 in “Hong Kong Commercial Daily” and “China Daily”;

The annual report of 2003 was published on 20 April 2004 in “China Securities Journal”, “Securities Times”, “Economic Journal” and “China Daily”;

The annual report of 2002 was published on 4 April 2003 in “China Securities Journal”, “Securities Times”, “Economic Journal”, “Ta Kung Pao” and “China Daily”.

• (4) Material changes before the Acquisition

As at the date of signing of the Equity Transfer Agreement, there are no material changes in the assets, business and staff of the Company as compared with those disclosed in the 2005 interim report.

III The Company’s share capital

• (1) Total issued share capital and share capital structure

Table 2 Share capital structure of the Company

Nature of Shares	Number (10,000 shares)	Proportion (%)
Unlisted transferable shares	33,791.58	34.06
Listed A Shares	19,450.10	19.61
Listed H Shares	45,958.98	46.33
Total (Total share capital)	99,200.66	100

• (2) Shares of the Company held or controlled by the Acquirer

Prior to the Acquisition, Hisense Air-Conditioner did not hold or control any of the shares of the Company.

Upon completion of the Acquisition, Hisense Air-Conditioner will hold 262,212,194 legal person shares of the Company (representing 26.43% of the Company’s total issued share capital), and will become the single largest shareholder of the Company. Hisense Group indirectly holds 93% equity interests of Hisense Air-Conditioner through Qingdao Hisense Electric and will therefore become the Company’s beneficial controller.

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(3) Top ten shareholders and their shareholdings of the Company prior to completion of the Acquisition

Table 3 Top ten shareholders and their shareholdings of the Company prior to completion of the Acquisition (as at 30 September 2005)

				Number of
		Proportion		Shares Held
No.	Shareholder Name		**(%) **	(10,000 shares)	Class of Shares
1	Guangdong Greencool Enterprise		26.43	26,221.22	Domestic legal
	Development Company Limited				person shares
2	Shunde Economic Consultancy Company		6.92	6,866.67	Domestic legal
					person shares
3	The Hong Kong and Shanghai Banking
	Corporation Ltd.		5.03	4,993.79	H shares
4	Bank of China (Hong Kong) Ltd.		4.96	4,923.20	H shares
5	Guotai Junan Securities (Hong Kong) Limited		4.13	4,096.50	H shares
6	HSBC Nominees (Hong Kong) Limited		4.04	4,010.69	H shares
7	First Shanghai Securities Limited		2.61	2,587.80	H shares
8	Hang Seng Securities Limited		2.04	2,023.50	H shares
9	Shenyin Wanguo Securities (H.K.) Limited		2.01	1,995.10	H shares
10	Liu Chong Hing Bank Limited		1.61	1,600.00	H shares

• (4) Shares of Hisense Air-Conditioner held or controlled by the Company

As at the date of the announcement of this Report, the Company does not hold or control any share interests in Hisense Air-Conditioner.

Section 3 Conflict of Interests

I. The association between the Acquirer and the directors, supervisors and senior management of the Company

Upon completion of the Acquisition, Hisense Air-Conditioner will hold 262,212,194 legal person shares of the Company (representing 26.43% of the Company’s total issued share capital) and will become the single largest shareholder of the Company. Other than acting as directors, the Company’s President Mr. Tang Ye Guo, and Vice Presidents Mr. Xiao Jian Lin, Mr. Su Yu Tao and Mr. Shi Yong Chang do not hold any other positions in Hisense AirConditioner or its associates.

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II. Shareholdings and employment relationship between the Acquirer and the directors, supervisors and senior management of the Company

As at the date of the announcement of the report relating to the Acquisition prepared by Hisense Air-Conditioner (the “Acquisition Report”), none of the directors, supervisors or senior management of the Company is interested in any shares of Hisense Air-Conditioner. Apart from Mr. Tang Ye Guo, Mr. Xiao Jian Lin, Mr. Su Yu Tao and Mr. Shi Yong Chang, none of the other directors, supervisors, or senior management of the Company or their respective relatives holds any position in Hisense Air-Conditioner or its associated enterprises.

III. Conflict of interests in the Acquisition of the directors, supervisors and senior management of the Company

None of the directors, supervisors or senior management of the Company is interested in the Acquisition or has entered into any commercial contracts with the Acquirer. The Acquirer also has no intention to make any compensation to or enter into any other similar arrangements with the directors, supervisors and senior management of the Company in relation to their proposed replacement.

IV. Shareholdings in the Company of the directors, supervisors and senior management of the Company and their respective immediate family members

As at the date of the announcement of the Acquisition Report, the 50,000 A shares held by Ms. He Si, a supervisor of the Company, have been frozen.

As at the date of the announcement of the Acquisition Report, the particulars of the number of shares of the Company held by Mr. Gu Chu Jun, the former chairman of the Company, are as follows:

1. The following chart illustrates the legal person shares of the Company held by Mr. Gu Chu Jun:

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Mr. Gu Chu Jun
60%
GCT Investment Company Limited
100%
Greencool Refrigerant (China) Company Limited
60% 40%
Guangdong Greencool Enterprise Development Company Limited
26.43%
Guangdong Kelon Electrical Holdings Company Limited
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1. Particulars of H shares of the Company held by Mr. Gu Chu Jun

Mr. Gu Chu Jun is the controlling shareholder of Greencool Technology Holdings Limited, a company listed on the Hong Kong Stock Exchange Growth Enterprise Market, holding approximately 63.6% of the share capital of Greencool Technology Holdings Limited. Two subsidiaries of Greencool Technology Holdings Limited are together interested in 3,830,000 H shares of the Company, representing approximately 0.39% of the issued share capital of the Company.

Save for the persons disclosed above, none of the other directors, supervisors or senior management of the Company or their respective immediate family members holds any shares of the Company as at the date of the announcement of the Acquisition Report. In the six months immediately preceding the date hereof, none of the directors, supervisors or senior management of the Company or their respective immediate family members is involved in any trading of the Company’s shares.

V. Other relevant information

• (1) None of the directors of the Company has any arrangement through which he/she will be compensated for his/her loss of office or other relevant losses as a result of the Acquisition.

• (2) None of the directors of the Company has entered into any contract or arrangement with any other party which is conditional on the completion of the Acquisition.

• (3) None of the directors of the Company has any material personal interests in any material contracts entered into by Hisense Air-Conditioner.

• (4) None of the directors of the Company or their associates has entered into any material contracts or arrangements with Hisense Air-Conditioner (including its shareholders, share controllers and parties acting in concert with any of them) or its directors, supervisors and senior management (or persons-in-charge) nor is there any conflict of interest between them.

Section 4 Recommendation of the Directors

I. Recommendation of the Board

1. The Board has obtained the following financial information on Hisense Air-Conditioner, the Acquirer, from Hisense: Hisense Air-Conditioner has a registered capital of RMB674,790,000, and its authorised representative is Tang Ye Guo. As of 30 September 2005, its unaudited total assets was RMB2,082,150,000 and its shareholders’ equity was RMB1,127,490,000. Hisense Air-Conditioner is a non-listed company. Its authorised representative Mr. Tang Ye Guo, who was engaged as the president of the Company on 16 September 2005, signed the Supplemental Agreement on behalf of Hisense AirConditioner with Guangdong Greencool on 28 September 2005. Abiding by the principle to act in the interests of the shareholders as a whole, the Board will, to their best efforts, conduct necessary investigation on the financial information, the intention of the Acquisition and the follow-up plan of the Acquirer. The results of such investigation will be published separately.

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1. Given that Mr. Gu Chu Jun, the former Chairman of the Company, was arrested for being suspected of having committed economic crimes and the police department is conducting a formal investigation on him, the Board has engaged KPMG to investigate the material cash flows incurred during the period commencing from 1 October 2001 to 31 July 2005. Our aim is to investigate whether Mr. Gu Chu Jun and his associated companies (including but not limited to Guangdong Greencool) have embezzled the Company’s interests and the possible effects on the outstanding liabilities of the Company. The nature of the effects on the liabilities of the Company and the specific amounts thereof can only be known after the investigation results are issued by the police department and effective judgment is given by the judicial authority. Preliminary findings of the Board indicate that Gu Chu Jun and his associated companies had embezzled the Company’s assets by multiple means. The Board is therefore taking necessary legal actions against Gu Chu Jun and his associated companies for compensation. The Board will make a further announcement after the investigation results are confirmed and finalised.

2. Guangdong Greencool, currently the single largest shareholder of the Company, entered into the Equity Transfer Agreement and the Supplemental Agreement with Hisense AirConditioner on 9 September 2005 and 28 September 2005 respectively. As at the date of this Report, the Equity Transfer and debt restructuring are still under way and is yet to reach any resolutions. The Board will procure both parties involved in the equity transfer to put priority on the protection of the Company’s interests in the course of the equity transfer in accordance with the relevant laws.

3. The Board is of the opinion that since Hisense Air-Conditioner is a subsidiary of Hisense Group, which is a state holding enterprise of Qingdao City, if Hisense AirConditioner and other subsidiaries of Hisense Group can strictly implement the Equity Transfer Agreement to properly protect the interests of the Company, the equity transfer will be beneficial to the Company’s long term developments.

II. Independent opinions of the independent non-executive directors on the Acquisition

Given that Mr. Gu Chu Jun, the former Chairman of the Company, was arrested for being suspected of having committed economic crimes and the police department is conducting a formal investigation on him, the Board has engaged KPMG to investigate the material cash flows incurred during the period commencing from 1 October 2001 to 31 July 2005. Our aim is to investigate whether Mr. Gu Chu Jun and his associated companies (including but not limited to Guangdong Greencool) have embezzled the Company’s interests and the possible effects on the outstanding liabilities of the Company. The nature of the effects on the liabilities of the Company and the specific amounts thereof can only be known after the investigation results are issued by the police department and effective judgment is given by the judicial authority. Preliminary findings of the Board indicate that Gu Chu Jun and his associated companies had embezzled the Company’s assets by multiple means. The Board is therefore taking necessary legal actions against Gu Chu Jun and his associated companies for compensation. The Board will make a further announcement after the investigation results are confirmed and finalised.

In respect of the Acquisition, the independent non-executive directors of the Company are of the opinion that: no connection has been found between the funds for the Acquisition and the Company or its associates; and that the method determining the price of the Acquisition is reasonable. Meanwhile, the independent non-executive directors of the Company are of the opinion that the Company should procure both parties involved in the equity transfer to put in priority the protection of the Company’s interests in the course of the equity transfer in accordance with the relevant laws. On this basis, the equity transfer is beneficial to the stability and long-term development of the Company, as well as the protection of the interests of the minority shareholders of the Company.

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Section 5 Opinions of the Independent Financial Adviser

I. Statement of no-relationship between the independent financial adviser and the Acquisition

The independent financial adviser confirms that it is not connected in any way with any of the parties involved in the Acquisition, and its opinion on the Acquisition is given independently.

II. Opinions of the independent financial adviser

The independent financial adviser is of the opinions that:

1. It is fair and reasonable to determine the price of the Equity Transfer based on the Company’s net asset value audited and determined on the determination date by an auditor jointly appointed by both parties to the Equity Transfer.

2. Upon completion of the Acquisition, the single largest shareholder and beneficial controller of the Company will change. The Acquisition will not have any impact on the Company’s continuous operation and its independence in the management of the Company’s staff, assets, finance, organisation and business. The Acquisition will help to relieve the Company of its liquidity strain and release the Company from its present dilemma to resume normal operations, business credit and commercial relationship, maintaining the Company’s operation and development strategies, and enhancing its position in the industry. The Acquisition is also beneficial to the Company’s sustainable development.

III. Statement of the independent financial adviser of its holding or trading of the shares of the Company or the Acquirer in the past six months

GF Securities Co., Ltd., the independent financial adviser of the Company in respect of the Acquisition, did not hold or trade in the shares of the Company or the Acquirer, either as principal or through other persons, in the six months immediately preceding the date hereof.

Section 6 Material Contracts and Transactions

I. Material contracts affecting the Acquisition entered into by the Company and its associates within 24 months prior to the Acquisition

In order to overcome its difficulties and resume normal operations, the Company entered into a sales agency agreement (the “Sales Agency Agreement”) and a supplemental agreement with Qingdao Hisense Marketing Company Limited (an associated party of Hisense Air-Conditioner) on 16 September 2005 and 26 September 2005 respectively, pursuant to which Qingdao Hisense Marketing Company Limited will act as the sales agent of the Company’s domestic sales products by way of distribution within the entire domestic market in the PRC and to assist the Company to explore the domestic market during the transitional period (i.e. the period ending 31 March 2006). Qingdao Hisense Marketing Company Limited will make a prepayment not exceeding RMB600 million in aggregate as the payment for the products purchased from the Company. It is agreed that the Company is not required to repay any of the prepayments during the term of the Sales Agency Agreement. Qingdao Hisense Marketing Company Limited will charge the Company a utilisation fee for such prepayment based on the actual time of utilisation of such funds. The prices offered to Qingdao Hisense Marketing Company Limited by the Company for the distributed products should be same as those offered to other distributors for the sales of such products, which will be determined by the Company and its distributors. The Company is responsible for

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approving and paying all the sales expenses, while Qingdao Hisense Marketing Company Limited will charge an agency fee of 1% of the total amount of the sales proceeds of goods, payable quarterly, and will not charge any other expenses nor bear any sales expenses. The Company’s existing sales mechanism remains intact, and products promotion to end-merchants and all marketing activities are still conducted through the Company’s existing mechanism. Such agreements have been approved by the Board, but are pending the approval of the shareholders of the Company.

II. Apart from the information disclosed in the Report, none of the following matters which have significant impact on the Acquisition has occurred to the Company or its associates within 24 months prior to the Acquisition

• (1) Actions taken by the Company to conduct assets restructuring or other material assets disposals or investments;

• (2) Any third party’s proposal to acquire the Company’s shares by way of an offer or otherwise, or the Company’s proposal to acquire the shares of other companies;

• (3) Any other current negotiation relating to the acquisition of the Company.

Section 7 Miscellaneous

As at the date of signing of this Report, apart from the information disclosed above in accordance with the relevant regulations, there is no other information of the Company which is required to be disclosed and the omission of which would render any contents of this Report misleading, nor any other information that may have significant influence on the decision-making of the Company’s shareholders, nor any other information that must be disclosed as required by the CSRC or the Shenzhen Stock Exchange.

Statement of the Board

The Board has performed its obligation of good faith and taken prudent and reasonable measures to perform due diligence on all the information relating to this Report. The Board confirms that there is no false representation, misleading statement or material omission herein, and is willing to take responsibility, severally and jointly, for the truthfulness, accuracy and completeness of the contents of this Report.

Directors: Liu Cong Meng, Li Zhen Hua, Fang Zhi Guo, Chan Pei Cheong, Andy, Li Kung Man, Xu Xiao Lu

29 December 2005

Statement of the Independent Non-Executive Directors

We, the independent non-executive directors of the Company, hereby confirm that none of the directors on the Board is interested in the Acquisition, and that they have performed their obligations of good faith in presenting their opinions to the shareholders of the Company in the interests of the Company and its shareholders as a whole, and such opinions are prudent and objective.

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

29 December 2005

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Statement of the Independent Financial Adviser

We, and the organisation which we represent, hereby confirm that we have performed our obligations of due diligence, and that we have thoroughly analysed the conditions of the Acquisition and produced a report according to the procedure as set out in the code of practice of our industry.

We, and the organisation which we represent, confirm the truthfulness, accuracy and completeness of the contents of this Report, and are legally responsible for such confirmation.

GF Securities Co., Ltd.

Legal Representative or Authorised Representative: 敖小敏 (Ao Xiao Min)、林小舟 (Lin Xiao Zhou)

29 December 2005

Section 8 Documents Available for Inspection

• I. Documents available for inspection

• Articles of Association of the Company;

• Opinions of the independent non-executive directors of the Company on the Acquisition;

• The Equity Transfer Agreement and the Supplemental Agreement;

• Announcement of the Company relating to the Equity Transfer;

• The Acquisition Report;

• Announcement of the Company relating to the Supplemental Agreement;

• Sales Agency Agreement and its supplemental agreement entered into between the Company and Qingdao Hisense Marketing Company Limited.

II. Address for document inspection

Company name: Guangdong Kelon Electrical Holdings Co., Ltd.

Contact person: Zhong Liang

Tel: 0757-28362570

Address: No.8 Ronggang Road, Ronggui Street, Shunde District, Foshan City, Guangdong Province, the PRC

Post code: 528303

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III. Website for Document Inspection

http//www.cninfo.com.cn

By order of the Board of Guangdong Kelon Electrical Holdings Company Limited Liu Cong Meng Vice Chairman

29 December 2005

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.

As disclosed in the Company’s previous announcements, Mr. Gu, Mr. Yan and Mr. Zhang Hong had been formally arrested by the Foshan City Police. None of them can be contacted as at the date hereof. As such, Mr. Gu, Mr. Yan and Mr. Zhang Hong do not accept responsibility for the contents of this announcement.

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

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