Medlive Technology Co., Ltd. — Proxy Solicitation & Information Statement 2002

Dec 18, 2002

THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION

If you are in any doubt about this circular or as to the action to be taken, you should consult your stockbroker, bank manager, solicitor, professional accountant or other professional adviser.

If you have sold or transferred all your shares in Guangdong Kelon Electrical Holdings Company Limited, you should at once hand this circular to the purchaser or transferee or to the bank, stockbroker or other agent through whom the sale or transfer was effected for transmission to the purchaser or transferee.

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

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)

DISCLOSEABLE TRANSACTION

12 December 2002

CONTENTS

		Page
Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .		1
Letter from the Board
Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .		4
Debt arrangement between GKG and the Company . . . . . . . . . . . . . . . . . . . . . . . . .		5
Benefits	. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	10
General	. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	11
Appendix I	– Trademark Valuation Report by Vigers Hong Kong Ltd. . . . . . .	12
Appendix II	– Trademark Valuation Report by Zhuhai City Zhengdaxin
	Certified Public & Property Appraisable. . . . . . . . . . . . . . . . . . .	19
Appendix III	– Land Valuation Report by Vigers Hong Kong Ltd. . . . . . . . . . . . .	24
Appendix IV	– Land Valuation Report by Guangdong Cai Xing
	Asset Valuation Company Limited. . . . . . . . . . . . . . . . . . . . . . . . .	30
Appendix V	– General Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	33

– i –

DEFINITIONS

In this circular, the following expressions shall have the following meanings unless the context otherwise requires:

• “associate”

• shall have the meaning ascribed to it by the Listing Rules

• “Board”

the board of Directors

• “Company”

• 廣東科龍電器股份有限公司 (Guangdong Kelon Electrical Holdings Company Limited), a joint stock company incorporated in the PRC with limited liability whose H shares are listed on the Hong Kong Stock Exchange and whose A shares are listed on the Shenzhen Stock Exchange

• “Debt Settlement Agreement”

• a debt settlement agreement dated 21 November 2002 entered into between GKG and the Company in relation to the settlement of the Outstanding Debt

• “Debt Transfer Arrangement”

• the repayment of RMB348,000,000 (approximately HK$328,301,887) by Greencool Enterprise Development Company Limited on behalf of GKG, as a settlement of the consideration for its acquisition from GKG of a 20.64% interest in the Company

• “Directors” the directors of the Company

• “Employee Union”

employee union of the Company

• “Expert”

• the professional valuers who have prepared the valuation reports contained in this circular

• “GKG”

• 廣東科龍（容聲）集團有限公司 (Guangdong Kelon (Rongsheng) Group Company Limited), a company which is not connected with the directors, chief executive or substantial shareholders of the Company or any of its subsidiaries or their respective associates and owned by the government of the Ronggui Prefecture. GKG was the former single largest shareholder of the Company but ceased to hold any shares in the Company since 16 May 2002

• “Greencool”

• 順德市格林柯爾企業發展有限公司 (Greencool Enterprise Development Company Limited)

• “Group”

the Company and its subsidiaries

• “HK$”

Hong Kong dollars, the lawful currency of Hong Kong

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DEFINITIONS

• “Hong Kong”

• “Hong Kong Stock Exchange”

• “Jia Ke”

• “Land”

• “Land Development Centre”

• “Land Use Right Transfer Agreement”

• “Latest Practicable Date”

• “Listing Rules”

• “Outstanding Debt”

• “PRC”

• “Relevant Parties”

• “RMB”

• “Rongqiang”

• the Hong Kong Special Administrative Region of the PRC

The Stock Exchange of Hong Kong Limited

• 順德市嘉科電子有限公司 (Shunde Jia Ke Electronics Company Limited), all of whose shares are directly or indirectly owned by the Company

• a parcel of residential land located at Wai Huan Road, Ronggui District, Shunde City, Guangdong Province, the PRC with a total area of 399,614 square metres

• 順德市容桂區土地發展中心 , a legal enterprise established in the PRC and owned by the government of the Ronggui Prefecture

• an agreement for the transfer of land use right dated 21 November 2002 entered into between Land Development Centre and the Company in relation to the transfer of the land use right in respect of the Land

• 12 December 2002, being the latest practicable date prior to the printing of this circular for ascertaining certain information contained herein

• Rules Governing the Listing of Securities on the Hong Kong Stock Exchange

• RMB907,833,725 (approximately HK$856,446,910), the debt currently owed by GKG to the Company, of which RMB857,397,093 (approximately HK$808,865,182) is the principal and RMB50,436,632 (approximately HK$47,581,728) is interest

Peoples’ Republic of China

• Land Development Centre, the Employee Union and Rongqiang (as the case may be)

Renminbi, the lawful currency of the PRC

• 順德市容桂區容強投資控股有限公司(Shunde Ronggui Rongqiang Investment Holdings Company Limited), an investment management company owned by the government of the Ronggui Prefecture

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DEFINITIONS

“SDI Ordinance”

Securities (Disclosure of Interests) Ordinance (Chapter 396 of the Laws of Hong Kong)

• “Service Companies”

順德市華傲電子有限公司 (Shunde Huaao Electronics Company Limited), 順德市科龍廣告有限公司 (Shunde Kelon Advertising Company Limited), 順德市萬高進 出口有限公司 (Shunde Wangao Import and Export Company Limited) and 順德市科龍家電有限公司 (Shunde Kelon Electrical Appliance Company Limited)

• “Supplemental Agreement No. 1” an agreement for the settlement of the transfer fee for the land use right and the settlement of debt (No. 1) dated 21 November 2002 entered into amongst the Company, Land Development Centre and GKG in relation to the payment of the transfer fee for the land use right in respect of the Land and the settlement of debt

• “Supplemental Agreement No. 2” an agreement for the settlement of the transfer fee for the land use right and the settlement of debt (No. 2) dated 21 November 2002 entered into amongst the Company, Land Development Centre, the Employee Union and Rongqiang in relation to the payment of the transfer fee for the land use right in respect of the Land and the settlement of debt

• “Trademark Licence Termination Agreement”

• an agreement for the termination of the trademark licence agreement dated 21 November 2002 entered into between GKG and the Company in relation to the termination of the trademark licence agreement dated 6 July 1996

• “Trademark Transfer Agreement”

• an agreement for the transfer of the “科龍、容聲、容 升 ” trademarks dated 21 November 2002 entered into between GKG and the Company in relation to the transfer of the Trademarks by GKG to the Company

• “Trademarks”

• the “科龍、容聲、容升 ” trademarks (including words and logos) currently registered under GKG’s name within and outside the PRC and referred to in the Trademark Transfer Agreement

• “2002 Licence Agreement”

• an exclusive licence agreement entered into between GKG and Guangdong Rongsheng Electrical Holdings Company Limited on 23 January 2002

In this circular, the exchange rate of HK$1.00 = RMB1.06 has been used, where applicable, for purposes of illustration only and does not constitute any representation that any amounts have been, could have been or may be exchanged.

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LETTER FROM THE BOARD

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)

Executive Directors: Gu Chu Jun Liu Cong Meng Yan You Song Zhang Hong Fang Zhi Guo Li Zhen Hua

Independent Non-executive Directors: Chan Pei Chong, Andy Yu Xiaoyang Chen Man Fai

Registered office in the PRC: No. 8 Ronggang Road Ronggui, Shunde Guangdong Province People’s Republic of China

Place of business in Hong Kong: Room 2502–05 Harbour Centre 25 Harbour Road Wanchai Hong Kong

12 December 2002

To the shareholders of the Company,

Dear Sir or Madam,

DISCLOSEABLE TRANSACTION

INTRODUCTION

The Board announced on 25 November 2002 that in order to enable GKG to settle the Outstanding Debt, the Company entered into the following agreements with GKG and/or the Relevant Parties:

• 1 Debt Settlement Agreement;

• 2 Trademark Transfer Agreement;

• 3 Trademark Licence Termination Agreement;

• 4 Land Use Right Transfer Agreement;

• 5 Supplemental Agreement No. 1; and

• 6 Supplemental Agreement No. 2.

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LETTER FROM THE BOARD

The transactions under the above agreements constitute a discloseable transaction under Chapter 14 of the Listing Rules. The purpose of this circular is to give you further information in relation to the above agreements.

DEBT ARRANGEMENT BETWEEN GKG AND THE COMPANY

Reference is made to the Company’s announcement dated 13 March 2002. The amount of debt owed by GKG to the Company was originally RMB1,260,477,325 (approximately HK$1,189,129,551). After completion of the Debt Transfer Arrangement on 25 April 2002, the amount of debt owed by GKG to the Company was reduced by RMB348,000,000 (approximately HK$328,301,887) to RMB912,477,325 (approximately HK$860,827,665). Subsequently, GKG also used the consideration for the acquisition of the Service Companies by the Company’s subsidiary, Jia Ke, to settle part of the debt owed by GKG to the Company in the sum of RMB4,643,600 (approximately HK$4,380,755). As a result, the amount owed by GKG to the Company was reduced to RMB907,833,725 (approximately HK$856,446,910), of which RMB857,397,093 (approximately HK$808,865,182) was the principal owed by GKG to the Company and RMB50,436,632 (approximately HK$47,581,728) was interest.

After negotiations between the Company and GKG, both parties entered into the following agreements and once the transactions under such agreements have been completed, the Outstanding Debt will be completely settled.

GKG was the former single largest shareholder of the Company but ceased to hold any shares in the Company since 16 May 2002. GKG is not connected with any of the directors, chief executive or substantial shareholders of the Company or any of its subsidiaries or their respective associates and is wholly owned by the government of the Ronggui Prefecture.

1. Debt Settlement Agreement

Date: 21 November 2002 Parties: GKG The Company

Principal terms:

1. GKG shall transfer the Trademarks to the Company, and the transfer fee, RMB644,000,000 (approximately HK$607,547,170), shall be used to settle part of the Outstanding Debt.

2. GKG shall ensure that Land Development Centre will transfer to the Company the land use right in respect of the Land and an amount of RMB213,397,093 (approximately HK$201,318,012) out of the transfer fee shall be used by Land Development Centre to repay, on behalf of GKG, part of the Outstanding Debt.

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LETTER FROM THE BOARD

1. The Company agreed that after completion of the transfers of the Trademarks and the land use right, it will waive the interest amount in the sum of RMB50,436,632 (approximately HK$47,581,728). (Since such interest was not a cash income, it was never recorded as income in the Company’s accounts in accordance with PRC accounting principles. As a result, the waiver of such interest would not have any impact on the Company’s profits.)

The Outstanding Debt will be completely settled after the transactions described in (1) to (3) above have been completed and the Company will make a further announcement upon such completion. Each of GKG and Land Development Centre is ultimately wholly owned by the government of the Ronggui Prefecture.

2. Trademark Transfer Agreement

Date: 21 November 2002

Parties: Transferor: GKG Transferee: The Company

Principal terms:

1. The trademarks being transferred: All “科龍、容聲、容升” trademarks (including words and logos) which are registered under GKG’s name within and outside the PRC.

2. The transfer shall be a permanent transfer of the Trademarks.

3. Treatment of two trademark licence agreements entered into by GKG before the execution of the Trademark Transfer Agreement:

4. (a) the trademark licence agreement entered into between the Company and GKG on 6 July 1996, pursuant to which the Company has an exclusive right to use the Trademarks in relation to refrigerators, air-conditioners or other similar products for no licence fee during the period when the Trademarks are validly registered, will be terminated; and

5. (b) in respect of the Trademarks in categories 7, 9, 11, 18 (Trademark Registration No. 1594110, 613709, 707886, 583760, 208209, 707885, 613707) for products other than refrigerators and air-conditioners, GKG entered into the 2002 Licence Agreement with Guangdong Rongsheng Electrical Holdings Company Limited on 23 January 2002, pursuant to which Guangdong Rongsheng Electrical Holdings Company Limited has a right to use such trademarks for no licence fee during the period when the Trademarks are validly registered. The Company and GKG confirm (and

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LETTER FROM THE BOARD

Guangdong Rongsheng Electrical Holdings Company Limited has given a written confirmation) that from the date on which the Company becomes the registered owner of the Trademarks, the Company will become the licensor under the 2002 Licence Agreement and the Company will be entitled to all the rights of GKG and will assume all the obligations of GKG under the 2002 Licence Agreement.

The obligations of GKG under the 2002 Licence Agreement include, among others:

• (1) making application for registration of various types of electrical appliances specified thereunder, including electric water kettle, grill and humidifier; and

• (2) at the request of Guangdong Rongsheng Electrical Holdings Company Limited, making further registrations in respect of its newly developed products.

The rights of GKG under the 2002 Licence Agreement, include, among others, to receive from Guangdong Rongsheng Electrical Holdings Company Limited RMB30,000 (approximately HK$28,302) per year being fees for the management of the trademarks.

1. Trademark transfer procedures: GKG shall assist the Company to commence the application procedures to the State Trademark Registry and other trademark registries outside the PRC for a transfer of the Trademarks within 3 working days after execution of the Trademark Transfer Agreement.

2. Upon the Company becoming the registered owner of the Trademarks, the Company shall be entitled to use the Trademarks in any specified products and services within the specified areas and product categories covered by the Trademarks.

3. The Company agreed that GKG may continue to use “Guangdong Kelon (Rongsheng) Group Company Limited” as its name after execution of the Trademark Transfer Agreement. However, GKG and/or any of its related companies shall not use the Trademarks in any business or non-business activities from the date of execution of the Trademark Transfer Agreement.

Transfer fee:

The transfer fee for the transfer of the Trademarks is RMB644,000,000 (approximately HK$607,547,170). The Company will pay the transfer fee by setting it off against part of the Outstanding Debt.

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LETTER FROM THE BOARD

The transfer fee was determined on the basis of the valuation reports prepared by independent and qualified valuers, Vigers Hong Kong Ltd. and Zhuhai City Zhengdaxin Certified Public Property & Appraisable (for details, please see Appendices I and II) and after negotiations between the parties on an arm’s length basis.

The trademarks transferred under the Trademark Transfer Agreement include all the trademarks which are currently used by the Company in its products and registered in GKG’s name.

The Company considers that with the undertaking of GKG not to use the Trademarks in any business or non-business activities, the interests of the Company will not be prejudiced even though GKG’s name contains “Kelon” and “Rongsheng”.

3. Trademark Licence Termination Agreement

Date: 21 November 2002

Parties: GKG The Company

Principal terms:

The Company and GKG agreed to terminate the trademark licence agreement entered into between GKG and the Company on 6 July 1996 in respect of the trademarks “Kelon科龍 ” and “Rongsheng容聲 ” (i) as registered in the PRC and Hong Kong, and/ or (ii) 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 GKG and/or (iii) all “Kelon科龍 ” and “Rongsheng容聲 ” trademark registrations as may be assigned to GKG 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 to by GKG, on a worldwide basis. The effective date of such termination shall be the date upon which the Trademarks are transferred to the Company in accordance with the Trademark Transfer Agreement.

4. Land Use Right Transfer Agreement

Date: 21 November 2002

Parties: Transferor: Land Development Centre Transferee: the Company

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LETTER FROM THE BOARD

The land use right to be transferred:

The Company agreed to purchase from Land Development Centre the land use right in respect of the Land. The Land is a parcel of residential land located at Wai Huan Road, Ronggui District, Shunde City, Guangdong Province, the PRC with a total area of 399,614 square metres.

Transfer fee:

The transfer fee was determined on the basis of the valuation reports prepared by independent and qualified valuers, Vigers Hong Kong Ltd. and Guangdong Cai Xing Asset Valuation Company Limited (for details, please see Appendices III and IV) and the unit price is RMB663.14 (approximately HK$625.60) per square metre. The total transfer fee is RMB265,000,000 (approximately HK$250,000,000). The payment method and timing are determined in the Supplemental Agreement No. 1 and Supplemental Agreement No. 2. The valuations were prepared on the basis that the total area of the Land was 400,002 square metres. However, the area of the Land after a land survey is clarified to be 399,614 square metres.

Land use right certificate:

Land Development Centre agreed to ensure that the Company will obtain a legally enforceable land use right certificate in the Company’s name issued by the relevant land administration authority in accordance with the PRC law within 20 working days after execution of the Land Use Right Transfer Agreement.

The Company expects that certain fee/tax payments (which are currently estimated not to be of a material amount) will have to be made by the Company upon the acquisition of the land use right in respect of the Land.

5. Supplemental Agreement No. 1

Date: 21 November 2002 Parties: The Company Land Development Centre GKG

Principal terms:

1. This agreement shall be supplemental to the Land Use Right Transfer Agreement.

2. Land Development Centre agreed to use RMB213,397,093 (approximately HK$201,318,012) out of the transfer fee for the land use right in respect of the Land which is payable by the Company under the Land Use Right Transfer Agreement in repaying, on behalf of GKG, part of the Outstanding Debt.

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LETTER FROM THE BOARD

6. Supplemental Agreement No. 2

Date: 21 November 2002

Parties: the Company Land Development Centre the Employee Union

Rongqiang, an investment company ultimately wholly owned by the government of the Ronggui Prefecture.

Principal terms:

1. This agreement shall be supplemental to the Land Use Right Transfer Agreement.

2. The Company and the Employee Union confirmed that as at 21 November 2002, the Employee Union owed to the Company an amount of RMB51,602,907 (approximately HK$48,681,988), being the outstanding balance of the loan previously provided by the Company to the Employee Union. Rongqiang and the Employee Union confirmed that as at 21 November 2002, Rongqiang owed an amount of RMB51,602,907 (approximately HK$48,681,988) to the Employee Union.

3. Pursuant to this agreement, Land Development Centre agreed to use the outstanding balance of the transfer fee for the land use right in respect of the Land payable by the Company under the Land Use Right Transfer Agreement in the sum of RMB51,602,907 (approximately HK$48,681,988) to repay, on behalf of Rongqiang, to the Employee Union the debt owed by Rongqiang to the Employee union.

4. The debt owed by the Employee Union to the Company shall be settled against the transfer fee payable by the Company to Land Development Centre for the land use right in respect of the Land.

BENEFITS

The Company negotiated with GKG on the settlement of the Outstanding Debt for more than 9 months and understood that the Debt Settlement Agreement, comprising the transfer of the Trademarks by GKG and the transfer of the land use right in respect of the Land by Land Development Centre, was the only proposal available to GKG to settle the Outstanding Debt. In the circumstances, the Board is of the view that the consideration and/or terms of the Debt Settlement Agreement, including waiving the interest in the amount of RMB50,436,632 (approximately HK$47,581,728), the Trademark Transfer Agreement, the Trademark Licence Termination Agreement, the Land Use Right Transfer Agreement, the Supplemental Agreement No. 1 and the Supplemental Agreement No. 2 are fair and reasonable, will enable GKG to completely settle the Outstanding Debt and are in the best interests of the Company as a whole.

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LETTER FROM THE BOARD

Since the Company made a provision for bad debts in the sum of RMB172,409,033 (approximately HK$162,650,031) in the 2001 financial year in respect of the debt owed by GKG to the Company, the treatment of such provision for bad debts as a result of the debt settlement arrangement may have an impact on the Company’s 2002 financial results. The Company is seeking instructions from the relevant departments regarding the treatment of the provision for bad debts and will make a separate announcement as soon as the results are available.

GENERAL

The transactions under the above agreements constitute a discloseable transaction under Chapter 14 of the Listing Rules.

Your attention is drawn to the further information set out in the appendices to this circular.

Yours faithfully

By order of the Board

Guangdong Kelon Electrical Holdings Company Limited Liu Cong Meng Vice Chairman

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TRADEMARK VALUATION REPORT BY VIGERS HONG KONG LTD.

APPENDIX I

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The Directors

Guangdong Kelon Electrical Holdings Company Limited No. 8 Ronggang Road Ronggui Shunde City Guangdong Province The PRC

15 November 2002

Dear Sirs/Madams,

“KELON”, “RONSHEN” TRADEMARK VALUATION REPORT

In accordance with the instruction from Guangdong Kelon Electrical Holdings Company Limited (“The Company”), we have carried out a valuation on a 100% interest in two trademarks (collectively the “Trademarks”) as at 31 August 2002 (the “Valuation Date”). The Trademarks, including Kelon (“KELON”) and Ronshen (“RONSHEN”), are currently held by Guangdong Kelon (Rongsheng) Group Company Limited (“GKRG”). This letter summarises the principal conclusions of our valuation. We understand this valuation will be used by the Company for the purpose of acquisition.

COMPANY BACKGROUND

Incorporated in Shunde, the PRC, the Company is one of the leading domestic manufacturers of cooling appliances in the PRC. Headquartered in Shunde City, Guangdong Province of the PRC, the Company commenced its production of refrigerators in 1984 with its H Shares listed in the Stock Exchange of Hong Kong in 1996 and its A Shares in Shenzhen Stock Exchange in 1999. As disclosed by the Company, it was elected by World Economic Forum as one of the Top 100 Emerging Market Companies in 1999.

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TRADEMARK VALUATION REPORT BY VIGERS HONG KONG LTD.

APPENDIX I

The Company principally engages in the manufacturing and sales of refrigerators and air-conditioners in the PRC and overseas markets. As well, it engages in the research and development of related technologies. Refrigerators of the Company are sold under the brand names of KELON and RONSHEN while its air-conditioners are marketed under the brand names of KELON and HUABAO.

At the end of 2001, GKRG, the former single largest shareholder of the Company, had sold its 20.64% equity interest in the Company to a privately owned hi-tech enterprise called Shunde Greencool Enterprise Development Limited (“Greencool”) through a transfer of legal person shares, thus making Greencool the single largest shareholder of the Company since then.

THE TRADEMARKS

Trademarks, trade names, service marks, and logos are considered as intangible assets and marketing-related intellectual properties, which are protected by various laws and statutes in a vast majority of countries today.

In general, a licensor would allow a licensee to use a specific intellectual property based on a pre-agreed profit-sharing arrangement in terms of a percentage of net profit or gross revenue. A benchmark is usually set and measured based on the indicators that can reflect the financial and operating performance of the business such as percentage of costs saving, dollar amount per unit sold or dollar amount per unit produced. The pre-agreed rates are normally defined as Royalty Rate.

In terms of market exposure and awards received, we believe KELON and RONSHEN are in the category of well-known brands in the PRC. As indicated in the “PRC Urban Household Appliances Market Survey 2000”, refrigerators under the brand name RONSHEN came first in 4 areas, namely “Most Frequently Mentioned Products”, “ Most Recognized Brand”, “Market Share” and “Expected Purchase Rate”. As well, both the RONSHEN refrigerators and the KELON air-conditioners were elected as China’s Branded Products in 2001. In the contest of “The Best After-Sales Service of Domestic Appliance Brands Ranked by Consumers across the Country”, KELON ranked amongst the top 25 brands while RONSHEN was elected as one of the top ten brands.

We are aware that the trademarks KELON and RONSHEN now belonged to GKRG but the Company still owns the exclusive rights to use the Trademarks as per the agreement signed by both parties. Besides, there is a letter of intention signed among the Company, GKRG and順德市容桂區土地發展中心 on 30 October 2002 indicating that GKRG agrees to transfer the titles of the Trademarks to the Company at the consideration to be determined.

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TRADEMARK VALUATION REPORT BY VIGERS HONG KONG LTD.

APPENDIX I

BASIS AND METHODOLOGY OF VALUATION

Our valuation has been carried out on a fair market value basis. Fair market value is defined as the estimated amount for which an asset should be exchanged on the date of valuation between a willing buyer and a willing seller in an arm’s-length transaction after proper marketing wherein the parties had each acted knowledgeably, prudently and without compulsion.

The values of the Trademarks were developed through the combined application of Relief From Royalty Approach and Income Approach. The Relief From Royalty Approach is based on the rationale that the value of an intangible asset can be measured by how much the owner of the intangible asset would pay in royalties if he/she did not own the intangible asset and had to license it from a third party. Conversely, this approach may also quantify the amount of income that the owner would generate by licensing the intangible asset to others.

The Income Approach deals with the technique known as the Discounted Cash Flow Method that discounts the future economic benefits of the intangible assets into a present market value. This method eliminates the discrepancy in the time value of money by using a discount rate to reflect all business risks including systematic and unsystematic risks in relation to a business.

In applying the Relief From Royalty Approach, we have adopted the Profit Apportionment Approach to determine an appropriate royalty rate that is required for splitting or sharing anticipated profit “pool” between the owner and the user of the intangible asset. A common rule of thumb is referred to as the “25% rule”, however, the percentage may be variable depending upon the business nature and other influential factors.

In applying the Discounted Cashflow Method, we have determined an appropriate discount rate for the assets under review. The cost of equity explaining the systematic risks was developed through the Capital Asset Pricing Model (“CAPM”) whereas the unsystematic risk including size risk, lack of marketability and specific risk of the business were also taken into account by making appropriate adjustments in the determination of the discount rate of the business.

Our valuation requires consideration of all relevant factors affecting the operations of the business and its ability to generate future investment returns. The factors considered in the valuation included, but were not limited to, the followings:

• the business nature of the enterprise;

• the economic outlook in general and the specific economic environment related to the enterprise;

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TRADEMARK VALUATION REPORT BY VIGERS HONG KONG LTD.

APPENDIX I

• historical operating results of the enterprise;

• the financial and business risk of the enterprise related to the continuity of income and the projected future results; and

• competitive advantages and disadvantages of the enterprise and the related industries.

As part of our analysis, we are furnished with information prepared by the Company that includes the audited financial statements for three years ended 31 December 2001, unaudited financial information for eight months ended 31 August 2002, related operational information and documents regarding the subject businesses and the Trademarks.

We have also conducted personal interviews with senior staff of the Company and have relied to a considerable extent on the accuracy of such information in arriving at our opinion of value.

We have reviewed the information required, which is considered sufficient for the issue of the valuation report of the type in question and we believe no material factor has been intentionally omitted or withheld from the given information in order to reach an informed view.

Assumptions considered to have significant sensitivity effects in this valuation were evaluated and validated in order to provide a more accurate and reasonable basis for arriving at our assessed value. Based on our experience in valuing businesses of similar nature, we consider the assumptions made in this valuation report to be reasonable.

Our major assumptions are listed as follows:

• We have assumed the accuracy of all financial and operating information (audited and unaudited) provided by the Company.

• We have assumed there will be no material adverse change in the political, legal, fiscal or economic condition in the PRC and other regions in which the enterprise carries on its business;

• Currency exchange rates will not differ materially from their current rates;

• The enterprise will retain its key management, competent personnel and technical staff to support its ongoing operation;

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TRADEMARK VALUATION REPORT BY VIGERS HONG KONG LTD.

APPENDIX I

• Market trend and conditions for the domestic refrigerating and air-conditioning industries in the PRC as well as the export situation will not deviate significantly from the economic forecasts in general;

• We have estimated the future cashflow up to year 2007;

• We have estimated the intangible values of KELON and RONSHEN only in terms of their related refrigerating and air conditioning businesses;

• Only the revenue from both domestic sales (the PRC) and export sales of KELON and the revenue from domestic sales of RONSHEN are considered in our model;

• Based on our understanding on the market situation of refrigerating industry in the PRC, we believe the worst time for the industry had gone and the sharpest decline (22.5%) in average unit price was witnessed in 2001. Therefore it is unlikely that a price slump triggered by the price war like that in 2001 will be repeated again for the next few years. Instead, we have assumed a rather stable unit price with very mild decline for domestic refrigerators of KELON and RONSHEN over the valuation period;

• For air conditioners, we assume the overall decline in the average unit price will be much greater than that of refrigerators. For KELON domestic air conditioners, its average unit price is expected to decrease from RMB2,416 in 2002 to RMB1,970 in 2007. For KELON air conditioners for export, the price is assumed to decrease from RMB1,892 in 2002 to RMB1,597 in 2007;

• We have only considered a collection of operating income and related expenses such as direct costs, management costs and taxes. We have not made provision for non-operating cash flow items such as interest income, exchange rate gain/ loss, etc. in the valuation model;

• For the operation of refrigerators, we expect to see a gradual recovery in the cost of goods sold (COGS) back to the previous level of 73% of total revenue in 2000 given the improved financial performance in the first 8 months of 2002, which is possibly resulted from more competent management, better procurement systems and effective cost control measures;

• Though similar improvement in COGS is expected in the air-conditioning operation in 2002 based on the financial information of the Company, we forecast the COGS will increase from 69.8% of total revenue in 2002 to 72% in 2006 and thereafter due to more stiff competition in the industry;

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TRADEMARK VALUATION REPORT BY VIGERS HONG KONG LTD.

APPENDIX I

• We have assumed the persistency of the management’s cost-controlling strategy such that the advertising and promotion costs are expected to maintain at around 5% to 7% of total revenue in 2002 and thereafter. R&D expense is assumed to maintain at a stable level of 0.3% to 0.4% of total revenue while salary expense is assumed to decrease slightly from 5% of revenue in 2002 to 4.3% in 2007;

• Income tax rates are assumed to be 27% in the PRC;

• For KELON, the royalty rates for profit split is set at 15%, which is found to be reasonable for the general manufacturing industry. Revenue splits are estimated at 1.2% and 1.5% for the period from 2002 to 2007 and the period after 2007 respectively;

• For RONSHEN, the royalty rates for profit split is also set at 15% while the revenue split is estimated at 0.9% throughout the valuation period. We believe those figures used in this assumption are appropriate for companies holding assets or operations similar to the businesses under concern; and

• The weighted average cost of capital (WACC) for both businesses is estimated at 11.3% while the terminal PE will be 12 times net earnings at 2007. Long-term growth rate is expected to be 3%. We believe those figures used in this assumption are appropriate for companies holding assets or operations similar to the businesses under concern.

OPINION OF VALUE

Based on our aforesaid investigation, analysis and valuation methodology employed, it is our opinion that as of the Valuation Date, the fair market value of the Trademarks is reasonably stated by the amount of RMB664 million (RENMINBI SIX HUNDRED AND SIXTY FOUR MILLION ONLY) , in which the fair market value of KELON is reasonably stated by the amount of RMB474 million (RENMINBI FOUR HUNDRED AND SEVENTY FOUR MILLION ONLY) and the fair market value of RONSHEN is reasonably stated by the amount of RMB190 million (RENMINBI ONE HUNDRED AND NINTY MILLION ONLY) .

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TRADEMARK VALUATION REPORT BY VIGERS HONG KONG LTD.

APPENDIX I

The opinion of value is based on generally accepted appraisal procedures and practices that rely extensively on the use of numerous assumptions and the consideration of many uncertainties, not all of which can be easily quantified or ascertained. We have not investigated the title to or any liabilities against the Trademarks valued. We hereby certify that we have neither present nor prospective interests in the Company or value reported.

Yours faithfully, For and on behalf of

VIGERS HONG KONG LIMITED

Raymond K.K. Ho (MRICS AHKIS) Edwin K.F. Chan MBA (Finance) Registered Professional Surveyor Senior Manager Director Valuation Department Valuation Department

This document is written in English and Chinese. In the event of discrepancy, the English version shall prevail.

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TRADEMARK VALUATION REPORT BY ZHUHAI CITY ZHENGDAXIN CERTIFIED PUBLIC PROPERTY & APPRAISABLE

APPENDIX II

SUMMARY OF VALUATION REPORT

Important

The following is a summary of the Asset Valuation Report Zhu Zheng Ping Bao Zi (2002) No. 273. If you want to have a full understanding of the valuation, you should read the full text of the asset valuation report carefully. Reading this summary on its own may lead to the misunderstanding of the valuation conclusion.

Principal : Guangdong Kelon Electrical Holdings Co. Ltd. Scope and subject of valuation : “KELON” trademark and “RONSHEN” trademark. Purpose of valuation : To provide a reference for the Principal to understand the value of the subject. Valuation date : 31 August 2002 Basis of valuation : Value of income basis

The valuation report is prepared in accordance with the country’s current laws and regulations relating to asset valuation, adhering to the principles of independence, objectivity and fairness. Subject to the prerequisites and assumptions included in the valuation report, the report gives an assessment of the value of the asset as confirmed in the “Agreement for Asset Valuation Work”.

The “Income Approach” is adopted in this asset valuation.

Conclusion of the valuation set : (RMB) out below Value of the asset : Five Hundred Ninety Eight Million only (RMB598,000,000) Comprising of : Title of the “KELON” trademark accounts for RMB428 million (RMB428,000,000);

Title of the “RONSHEN” trademark accounts for RMB170 million (RMB170,000,000).

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TRADEMARK VALUATION REPORT BY ZHUHAI CITY ZHENGDAXIN CERTIFIED PUBLIC PROPERTY & APPRAISABLE

APPENDIX II

Period which the valuation : Half a year from the valuation date, i.e. the period from Conclusion is applicable 31 August 2002 to 27 February 2003. PRC Registered Asset Valuer : Ou Fuqiu (歐福秋 ) PRC Registered Asset Valuer : Zhou Li (周麗 ) Legal Representative of Valuer : Zhao Bingwei (趙炳偉 ) 珠海市正大新資產評估事務所有限公司 (Zhuhai City Zhengdaxin Certified Public Property & Appraisable)

16 November 2002

Further explanation by Zhuhai City Zhengdaxin Certified Public Property & Appraisable (珠海市正大新資產評估事務所有限公司 ) (the “Valuer”):

In valuing the “KELON” and “RONSHEN” trademarks, the Valuer adopted the present value income approach:

I. Reasons for the adoption of the present value income approach in the valuation of assets

The present value income approach is a term referring to the various methods used in valuing the asset by assessing the present value of the asset’s expected future income flow. The approach follows the principle of getting the capital from the income, which adopts the capitalization and discounting methods and such other methods in determining and assessing the value of the assets. The income approach uses various methods such as return on investment and discounted income basis and evaluates the value of the asset on the basis of its expected capacity and profitability. By assessing the value of the asset based on its expected income, it is more likely to be accepted by the relevant parties.

From the economic perspective, the trademark can ultimately bring additional income to the enterprise. From a legal perspective, the protection of the trademark also means the protection of the rights of the enterprise to receive such income through ownership of the trademark.

The value of trademark rights is determined by the potential profitability of the trademarks. The greater the potential benefits, the higher the value of the trademark is and vice versa.

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TRADEMARK VALUATION REPORT BY ZHUHAI CITY ZHENGDAXIN CERTIFIED PUBLIC PROPERTY & APPRAISABLE

APPENDIX II

Therefore, the Valuer has adopted the present value income approach as the valuation methodology for the “KELON” and “RONSHEN” trademarks.

II. Explanatory statement relating to the reasonableness of the assumptions for the valuation

1. Explanatory statement relating to the reasonableness of the discount rate:

For this intangible asset valuation, the applicable asset-income ratio used in the valuation of the trademarks is calculated by adding the risk-free rate of return to the rate of return after having taken into account the risks which includes the operational risks, financial risks and industry risks rate of return.

After having carried out a consolidated analysis, the discount rate used in the valuation, calculated by adding the risk-free rate of return to the rate of return having taken into account the risks, is 9%.

1. The valuation of trademarks:

2. Value of asset : Five Hundred Ninety Eight Million only (RMB598,000,000)

3. Comprising : Title of the “KELON” trademark accounts for RMB428 million (RMB428,000,000);

Title of the “RONSHEN” trademark accounts for RMB170 million (RMB170,000,000).

1. The following table shows the sales volume and the future market growth rate:

Guangdong Kelon Electrical Holdings Company Limited’s forecast of the income of home appliance business for 2002–2006

			Unit:	Ten Thousand Yuan
Year			Growth rate	Income from sales
2002	to	2003	5%	482,046
2003	to	2004	5%	506,148
2004	to	2005	5%	531,455
2005	to	2006	5%	558,028

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TRADEMARK VALUATION REPORT BY ZHUHAI CITY ZHENGDAXIN CERTIFIED PUBLIC PROPERTY & APPRAISABLE

APPENDIX II

1. Explanatory statement relating to the reasonableness of the above parameters:

2. (1) The valuation is conducted under the assumption that the company is a going concern and is able to generate value. If this assumption changes, the value will inevitably change. We are not responsible for any changes of assets and the value of assets on or before the valuation date.

3. (2) There are no significant changes in the national macroeconomic policies and the general market conditions during the period between the valuation date and the publication of this report. However, we are not able to forecast the effect of the changes in policies and market conditions on the valuation after the publication of this report.

4. (3) The valuers have looked into the sources of information considered in the valuation and where possible, have examined them as well. We have been provided with the information necessary for us to carry out our assessment and we believe such information is reliable and appropriate. We have not conducted any financial audit and data verification and we have not identified any material misrepresentation or fraud during our course of assessment. As such, we are not able to report that the asset subject to valuation is free from any encumbrances or any other contingent liabilities.

5. (4) This valuation conclusion is based on the assumption that the title of “KELON” and “RONSHEN” trademarks vest completely with the Company and the registration of trademarks will not be affected by the extension period. Such valuation only reflects the value of the assets subject to valuation under the circumstance of having the complete right of transfer, and has made no allowance for any costs, including any taxes payable, that may be incurred in the course of disposal of such assets. In determining the value, we have not taken into account any effect of potential charges, guarantees and any costs and taxes which the Company may be liable for which may have an impact on the value of the assets and the valuation conclusion.

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TRADEMARK VALUATION REPORT BY ZHUHAI CITY ZHENGDAXIN CERTIFIED PUBLIC PROPERTY & APPRAISABLE

APPENDIX II

• (5) This valuation is being conducted under the instruction of the Company for the assessment of the intangible assets attached to designated tangible assets. The aim of this valuation is to provide for the Company’s reference an opinion on the present value of the intangible assets. Therefore, this valuation of intangible assets is dependent on their being part of the tangible assets and may not be separated from the tangible assets.

Zhuhai City Zhengdaxin Certified Public Property & Appraisable 珠海市正大新資產評估事務所有限公司

4 December 2002

This is an English translation of the Asset Valuation Report. In the event of discrepancy, the Chinese version shall prevail.

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LAND VALUATION REPORT BY VIGERS HONG KONG LTD.

APPENDIX III

==> picture [47 x 146] intentionally omitted <==

The Directors

Guangdong Kelon Electrical Holdings Company Limited No. 8 Ronggang Road

Ronggui Shunde City Guangdong Province The PRC

15 November 2002

A parcel of land located at Wai Huan Road, Ronggui District, Shunde City, Guangdong Province, The PRC

Dear Sirs,

In accordance with instructions of Guangdong Kelon Electrical Holdings Company Limited (the “Company”), we have to value the above property interests of Ronggui Qu Tu Di Fa Zhan Zhong Xin (容桂區土地發展中心 ) in the PRC. We confirm that we have carried out an inspection, made relevant enquiries and obtained such further information as we consider necessary for the purpose of providing you with our opinion of the open market value of such property interests as at 30 October 2002.

Our valuation of the interests in property is our opinion of the open market value which we would define as intended to mean – “the best price at which the sale of an interest in property would have been completed unconditionally for cash consideration on the date of valuation assuming:

• (a) a willing seller;

• (b) that, prior to the date of valuation, there had been a reasonable period (having regard to the nature of the property and the state of the market) for the proper marketing of the interest, for the agreement of price and terms and for the completion of the sale;

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LAND VALUATION REPORT BY VIGERS HONG KONG LTD.

APPENDIX III

• (c) that the state of the market, level of values and other circumstances were, on any earlier assumed date of exchange of contracts, the same as on the date of valuation;

• (d) that no account is taken of any additional bid by a special purchaser with a special interest; and

• (e) that both parties to the transaction had acted knowledgeably, prudently and without compulsion.”

Our valuations have been made on the assumption that the owners sell the relevant properties on the open market without the benefit of deferred terms contracts, leasebacks, joint ventures, management agreements or any similar arrangements which would serve to increase the values of such interests. In addition, no forced sale situation in any manner is assumed in our valuation.

We have valued the property interests on the basis that the property will be developed and completed in accordance with the Group’s latest development plan provided to us. We have assumed that approvals for the proposals have been obtained. In arriving at our opinion of value, we have valued it by the Direct Comparison Approach by making reference to comparable transactions in the locality and have also taken into account the construction costs that will be expended to complete the development to reflect the quality of the completed development. In forming our opinion of value of the property, we have also valued it by Direct Comparison Approach by making reference to the comparable site transactions and land prices as available in the relevant market.

We have not provided with extracts from title documents relating to such property interest. We have not, however, searched the original documents to verify ownership or to verify existence of any lease amendment which do not appear on the copies handed to us. All documents and leases have been used for reference only. Dimensions, measurements and areas included in the valuation certificates are based on information contained in copies of documents provided to us and are therefore only approximations.

In undertaking our valuation of the property we have relied on the legal opinion provided by the Group’s PRC legal adviser (the “PRC Legal Opinion”) regarding the title to and the Group’s proposed interest in the property.

We have inspected the property. However, we have not carried out a structural survey. We are therefore unable to report whether any such parts of the property interests are free from decay, damage by insects or any other structural defects. However, in the course of our inspection, we have not discovered any serious defects.

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LAND VALUATION REPORT BY VIGERS HONG KONG LTD.

APPENDIX III

We have relied to a very considerable extent on the information provided by the Group and have accepted advice given to us on such matters as planning approvals, statutory notices, easements, tenure, particulars of occupancy, lettings, development plans, construction costs estimates, site and floor areas, the identification of those properties in which the Group has valid interests and all other relevant matters.

We have had no reason to doubt the truth and accuracy of the information provided to us by the Group. We were also advised by the Group that no material factors have been omitted from the information supplied. We consider that we have been provided with sufficient information to reach an informed view, and have no reason to suspect that any material information has been withheld.

No allowance has been made in our valuations for any charges, mortgages or amounts owing on the properties nor for any expenses or taxation which may be incurred in effecting a sale. Unless otherwise stated, it is assumed that the properties are free from encumbrances, restrictions and outgoings of an onerous nature which could affect its value.

Unless otherwise stated, all money amounts stated are in Renminbi. The exchange rate used in valuing the property interests in the PRC on 15 November 2002 was HK$1=RMB1.06. There has been no significant fluctuation in exchange rate between that date and the date of this letter.

We enclose herewith our valuation certificate.

Yours faithfully, For and on behalf of VIGERS HONG KONG LTD.

Raymond Ho Kai Kwong

Registered Professional Surveyor

MRICS, AHKIS

Director & Department Head Valuation Department

Note: Raymond K.K. Ho, Chartered Surveyor, MRICS, AHKIS has extensive experience in undertaking valuations of properties in Hong Kong, Macau and the PRC and has over nine years’ experience in the valuation of properties in the PRC.

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LAND VALUATION REPORT BY VIGERS HONG KONG LTD.

APPENDIX III

VALUATION CERTIFICATE

Property

Description and Tenure

Particulars of occupancy

Capital value in existing state as at 30 October 2002

A parcel of land located at Wai Huan Road Ronggui District Shunde City Guangdong Province The PRC

The property comprises a parcel of land with a total site area of approximately 400,002 sq.m. The details of the site area are showed as follows:

Description Dry Land : Pond : Stream/River : Residential Land : Total :	Site Area 338,371 sq.m. 38,080 sq.m. 22,015 sq.m. 1,536 sq.m.
	400,002 sq.m.

The property at present is a vacant land

RMB265,000,000 (equivalent to HK$250,000,000)

The property is planned to be developed into a residential development with approximately gross floor area as follows:

		Approximate
Use	Gross Floor Area
Apartment
(Phase I)	:	500,000 sq.m.
Apartment
(Phase II)	:	500,000 sq.m.
Apartment
(Phase III)	:	500,000 sq.m.
Apartment
(Phase IV)	:	500,000 sq.m.
Total	:	2,000,000 sq.m.

Notes:

1. According to a Notary Document dated 28 August 2002, issued by 順德市規劃國土局 , the land use rights of the land with a site area of approximately 400,002 sq.m. for residential use have been granted to 容桂區 土地發展中心 .

2. The Notary Document also stated that the application of the State-owned Land Use Rights Certification is under process and all fees and expenses of the application will be payable by 容桂區土地發展中心 .

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LAND VALUATION REPORT BY VIGERS HONG KONG LTD.

APPENDIX III

1. According to the legal document (Document No: 征 (用 )地補償協議書 ) dated 8 August 2002, 容桂區規劃 建設辦事處 (Party A) will pay the relocation and compensation fee of RMB29,187,200 to 容桂區高黎股 份合作社 (Party B). Several government taxes and fees of RMB78,213,319 will be settled by Party A after the completion of the compulsory acquisition of the subject land. All government taxes and relocation and compensation fees are summarized as follows:

征地補償總額		RMB29,187,200
土地補償費	RMB13,376,160
安置補助費	RMB15,246,360
青苗補償費	RMB564,680
政府有關稅費		RMB78,213,319
征地管理費	RMB612,931
耕地佔用稅	RMB3,200,016
道路建設附加費	RMB12,000,060
耕地開發費	RMB6,000,030
土地出讓金	RMB8,400,042
基礎設施配套費	RMB48,000,240

1. In the course of our valuation of the property, we have assumed that the relocation and compensation fees and all government taxes of RMB107,400,519 will be fully paid by 容桂區規劃建設辦事處 to 容桂區高 黎股份合作社 and the Government pursuant to the legal document.

2. According to the planning instrument 廣東省標准－居住小區技術規范 (Document No: DBJ15-11-94) dated 1 May 1994, issued by 廣東省建設委員會 and a Notary Document dated 29 October 2002, issued by 順德市容桂區辦事處規劃建設辦公室 ， the details of the planning of the property are shown as follows:

Items

Plot Ratio	5
Number of Floor	20
Total Gross Floor Area	2,000,010 sq.m.
Density/Coverage	25%
Category	Class III
Use	Residential

1. According to a letter of intention entered between容桂區土地發展中心 (Party A) and 廣東科龍電器股 份有限公司 (Guangdong Kelon Electrical Holdings Co., Ltd.) (Party B) dated 30 October 2002, Party A agreed to sell the property to Party B. Party B agreed to purchase the subject property. The letter stated that Party A will settle all expense before the State-owned Land Use Certificate is issued. Party B will pay the cost of land formation and other service installation (including, electricity, gas and water supply).

2. The PRC legal opinion states that:

3. (i) According to a Notary Document dated 12 November 2002, issued by 順德市容桂區辦事處 , 容桂 區土地發展中心 has a right to be granted the land use right of the subject property.

4. (ii) According to a Notary Document dated 23 July 2002, issued by 順德市容桂區規劃建設辦公室 , the original use of the subject land was designed for agricultural use. According to an Agreement dated 19 July 2002 (Document No. 順府辦覆 [2002] 92號－關於同意調整容桂區外環路以東地 塊使用功能的批覆 )， The use of the subject property has been changed to commercial and residential use.

5. (iii) According to a Notary Document dated 28 August 2002, issued by 順德市規劃國土局 , the Stateowned Land Uses Certificate is under process.

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LAND VALUATION REPORT BY VIGERS HONG KONG LTD.

APPENDIX III

• (iv) According to a Notary Document dated 14 November 2002, issued by 順德市規劃國土局 , 容桂區 土地發展中心 has been granted the land use right of the subject property with a total site area of approximately 399,614 sq.m.. Therefore, 容桂區土地發展中心 has a legal right to transfer the subject property to Guangdong Kelon Electrical Holdings Company Limited.

• In the course of our valuation, we have made the following assumptions:

• (i) Guangdong Kelon Electrical Holdings Company Limited will be in possession of a proper legal title to the property and will be entitled to transfer the property with the residual term of its land use rights at no extra land premium or other onerous payment payable to the government.

• (ii) All consents, approvals and licences from relevant government authorities for development of the property will be granted without any onerous conditions or undue delay.

• (iii) The proposed development scale of the property provided by the Company is in compliance with the relevant planning regulations and will approved by the relevant government authorities.

• (iv) The property can be freely transferred in the open market to both local and overseas purchasers, upon the land premium of the property has been fully settled.

• (v) The cost of the land formation is estimated at about RMB100 per sq.m. Therefore, the total cost of the land formation is approximately RMB40,000,000, which will be borne by Guangdong Kelon Electrical Holdings Company Limited.

• (vi) According to the Regulation of the PRC State Owned Land Use Right Transfer and Grant, we have made an assumption that the subject land will be granted a land use term of 70 years for residential use, 40 years for commercial and entertainment use and 50 years for composite use.

This document is written in English and Chinese. In the event of discrepancy, the English version shall prevail.

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LAND VALUATION REPORT BY GUANGDONG CAI XING ASSET VALUATION COMPANY LIMITED

APPENDIX IV

LAND VALUATION REPORT

1. Name of the subject of valuation

Valuation of the value of the 400,002 sq.m. residential development land of Shunde City, Ronggui Qu Tu Di Fa Zhan Zhong Xin, Gaoli Residential Committee land (the “Land”).

2. Appointer of Valuer

Guangdong Kelon Electrical Holdings Company Limited

3. Purpose of valuation

To assist the Appointer to understand the value of the land use rights of the 400,002 sq.m of Ronggui Qu Gaoli Residential Committee residential development land owned by the Shunde City Ronggui Tu Di Fa Zhan Zhong Xin by providing evidence of the market value of the land for reference.

4. Valuation date

30 September 2002

5. Valuation period

9 November 2002 to 16 November 2002.

6. Definition of Land Value

Based on the information provided by the Appointer and the site inspection carried out by the Valuers, the value of the Land under valuation represents the value of the Statedowned land use right on 30 September 2002 (as the Valuation Date) and assuming that all the following 8 designated land valuation conditions are met:

(i)	the method in obtaining	:	by transfer;
	the Land
(ii)	the usable period of the Land	:	70 years;
(iii)	the actual use of the Land	:	residential use;
(iv)	the established use for	:	residential use;
	valuation purpose

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LAND VALUATION REPORT BY GUANGDONG CAI XING ASSET VALUATION COMPANY LIMITED

APPENDIX IV

• (v) the actual development : uncultivated land; stage of the Land

• (vi) the evaluated development : “5 available facilities「五通」” for the area stage of the Land outside the Land delineated in red, and “unlevelled site” for the area inside the Land delineated in red.

The expression “5 available facilities「五通」” mentioned above means the area outside the Land delineated in red is available in 5 urban infrastructural facilities, namely road access, fresh water, sewerage, power supply and communication.

• (vii) the conditions of use : the Land permitted for use in accordance with the following planning conditions:

Gross area: 400,002 sq.m. Plot ratio: 3

• (viii) all procedures in respect of the title of Land are already completed and it is free from any encumbrance.

7. Conclusion

As appointed by Guangdong Kelon Electrical Holdings Company Limited to carry out the valuation of the Ronggui Qu Gaoli Residential Committee residential development land owned by the Ronggui Tu Di Fa Zhan Zhong Xin with a gross area of 400,002 sq.m. located in the Ronggui Qu, Shunde City on 30 September 2002 (as the Valuation Date), and assuming that the use of the Land is for residential use, the usable period of the Land is 70 years and the evaluated development stage of the Land being is “available with 5 infrastructural facilities” (i.e. road access, fresh water, sewerage, power supply and communication) for the area outside the Land delineated in red and “unlevelled site” for the area inside the Land delineated in red, we value the land use right as RMB Two Hundred and Forty Million (RMB240,000,000).

Unit value of the Land : RMB599 per sq.m. (for details please refer to “Schedule of Land Valuation Results”）

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LAND VALUATION REPORT BY GUANGDONG CAI XING ASSET VALUATION COMPANY LIMITED

APPENDIX IV

8. Land Valuers’ Signatures

	Land Valuer
Name	Registration Number
Gu Wen Shu	94190010	signed
（古文樞）
Ye Bo Jian	98190085	signed
（葉伯健）

9. Land Valuation Organisation (Corporate Seal)

Guangdong Cai Xing Asset Valuation Company Limited (廣東財興資產評估有限公司 )

On behalf of Land Valuation Organisation Liang Hong (梁洪 )

16 November 2002

This is an English translation of the Asset Valuation Report. In the event of discrepancy, the Chinese version shall prevail.

– 32 –

GENERAL INFORMATION

APPENDIX V

1. RESPONSIBILITY STATEMENT

This circular includes particulars given in compliance with the Listing Rules for the purpose of giving information with regard to the Company. The Directors (except for Mr. Chen Man Fai who tendered a resignation letter which would be effective pending the appointment of a new independent non-executive director of the Company on 29 December 2002 in the Company’s extraordinary general meeting) collectively and individually accept full responsibility for the accuracy of the information contained in this circular and confirm, having made all reasonable enquiries, that to the best of their knowledge and belief there are no other facts the omission of which would make any statement herein misleading.

2. DISCLOSURE OF INTERESTS

Directors’ and supervisors’ interests in securities

As at the Latest Practicable Date, save as disclosed below, none of the Directors, supervisors nor the chief executive of the Company had any interests in the equity or debt securities of the Company nor any of its associated corporations (within the meaning of the SDI Ordinance) which had to be notified to the Company and the Hong Kong Stock Exchange pursuant to Section 28 of the SDI Ordinance (including interests which they were deemed or taken to have under section 31 of, or Part I of the Schedule to, the SDI Ordinance) or which are required, pursuant to section 29 of the SDI Ordinance, to be entered in the register referred to therein or which were required, pursuant to the Model Code for Securities Transactions by Directors of Listed Companies in the Listing Rules, to be notified to the Company and the Hong Kong Stock Exchange.

Director/
Supervisor	Position	Type of interest	Number of shares
Gu Chu Jun_(i)_	Director	Corporate	204,775,755 legal person shares
Gu Chu Jun_(ii)_	Director	Corporate	3,830,000 H shares
He Si	Supervisor	Personal/Family	50,000 A shares

Notes:

• (i) Greencool 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 90% of the total investment in Greencool.

• (ii) Mr. Gu Chu Jun is a 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 hold 3,830,000 H shares of the Company, representing approximately 0.39% of the issued share capital of the Company.

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GENERAL INFORMATION

APPENDIX V

The Company did not grant any right to subscribe for equity or debt securities of the Company to any director, supervisor or chief executive of the Company or to the spouse or children under 18 years of age of any such director, supervisor or chief executive as at the Latest Practicable Date.

Substantial Shareholders

As at the Latest Practicable Date, according to the register kept by the Company under section 16 of the SDI Ordinance and so far as is known to the Directors, the following parties were directly or indirectly interested in 10% or more of the nominal value of any class of share capital carrying rights to vote in all circumstances at general meetings of the Company and the amount of such parties’ interest in such securities were:

Name	Number of shares	Percentage of interest
Greencool	204,775,755 legal person shares	20.64%
Gu Chu Jun_(i)and(ii)_	204,775,755 legal person shares	21.03%
	3,830,000 H shares

Notes:

• (i) The 204,775,755 legal person shares are duplicated amongst Mr. Gu Chu Jun and Greencool.

• (ii) Greencool 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 90% of the total investment in Greencool and is a 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 hold 3,830,000 H shares of the Company, representing approximately 0.39% of the issued share capital of the Company.

Save as disclosed above, no other person was recorded in the register kept pursuant to section 16 of the SDI Ordinance as having an interest in 10% or more of the issued share capital of the Company as at the Latest Practicable Date.

3. LITIGATION

Neither the Company nor any of its subsidiaries is engaged in any litigation or arbitration of material importance and no litigation or claim of material importance is known to the Directors to be pending or threatened against the Company or any of its subsidiaries.

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GENERAL INFORMATION

APPENDIX V

4. QUALIFICATION OF EXPERTS

The following are the qualifications of the Experts:

Names	Qualifications
Vigers Hong Kong Ltd.	Independent professional valuer
Zhuhai City Zhengdaxin Certified Public	Independent professional valuer
Property & Appraisable

Guangdong Cai Xing Asset Valuation Company Independent professional valuer

5. EXPERTS’ INTERESTS

As at the Latest Practicable Date, none of the Experts had any shareholdings in any member of the Group or any right (whether legally enforceable or not) to subscribe for or to nominate persons to subscribe for securities in any member of the Group.

6. CONSENTS OF EXPERTS

Each of the Experts has given and has not withdrawn their respective written consents to the issue of this Circular with the inclusion of their letters and/or reports and/or references to their respective names, as the case may be, and references to their names in the form and context in which they respectively appear.

7. GENERAL

• (a) The secretary of the Company is Mr. Gary Li Chi Sing, Associate Member of Hong Kong Society of Accountants and Fellow Member of The Chartered Association of Certified Accountants.

• (b) The registered office of the Company in the PRC is situated at No. 8 Ronggang Road, Ronggui, Shunde, Guangdong Province, People’s Republic of China. The Company’s place of business in Hong Kong is situated at Room 2502–05, Harbour Centre, 25 Harbour Road, Wanchai, Hong Kong.

• (c) The share registrar and transfer office of the Company in Hong Kong is Hong Kong Registrars Limited of Room 1901–5, 19th Floor, Hopewell Centre, 183 Queen’s Road East, Hong Kong.

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