Medlive Technology Co., Ltd. — Proxy Solicitation & Information Statement 2004

Nov 18, 2004

THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION

If you are in any doubt as to any aspect of this circular or as to the action to be taken, you should consult a licensed securities dealer, 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, licensed securities dealer 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

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

(Stock Code: 921)

DISCLOSEABLE TRANSACTION RELATING TO

THE FORMATION OF A JOINT VENTURE COMPANY

18th November, 2004

CONTENTS

	Page
DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	1
LETTER FROM THE BOARD. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	3
Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	3
The Joint Venture Agreement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	4
Information on Zhongshan Industrial, Kelon Weili and the Group
and reasons for the Transaction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	6
APPENDIX – GENERAL INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . .	7

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DEFINITIONS

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

“associate”	has the meaning ascribed to it under the Listing Rules	has the meaning ascribed to it under the Listing Rules
“Board”	the board of Directors
“Company”	Guangdong Kelon Electrical Holdings Company Limited,
	the shares of which are listed on the Stock Exchange
“Directors”	the directors of the Company
“Group”	the Company and its subsidiaries
“HK$”	Hong Kong dollars, the lawful currency of Hong	Kong
“Hong Kong”	the Hong Kong Special Administrative Region	of the
	People’s Republic of China
“Joint Venture Agreement”	an agreement dated 27th October, 2004 entered into
	between the Company, Kelon Development and
	Zhongshan Industrial in relation to the formation	of the
	Joint Venture Company
“Joint Venture Company”	a company to be formed pursuant to the Joint Venture
or “Kelon Weili”	Agreement whose proposed name is
	(Guangdong Kelon Weili Electrical
	Appliances Company Limited)
“Kelon Development”	Guangdong Kelon Development Company Limited, a
	company incorporated under the laws of Hong Kong with
	limited liability, which is a wholly-owned subsidiary of
	the Company
“Latest Practicable Date”	15th November, 2004, being the latest practicable date
	prior to the printing of this circular for ascertaining
	certain information contained herein
“Listing Rules”	The Rules Governing the Listing of Securities on the
	Stock Exchange
“PRC”	The People’s Republic of China
“RMB”	Renminbi, the lawful currency of the PRC

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DEFINITIONS

“SFO”	the Securities and Futures Ordinance (Cap. 571 of	the
	laws of Hong Kong)
“Share(s)”	share(s) of RMB1.00 each in the share capital of	the
	Company
“Shareholder(s)”	holder(s) of share(s) in the Company
“Stock Exchange”	The Stock Exchange of Hong Kong Limited
“US$”	United States of America dollars
“Zhongshan Industrial”	(Zhong Shan Fousha
	Town Shunchang Industrial Company Limited),	a
	company incorporated under the laws of the PRC, which
	is ultimately and beneficially owned by the government
	of Zhong Shan

Unless otherwise specified in this circular, amounts denominated in Renminbi have been converted, for the purpose of illustration only, into Hong Kong dollars at the rate of HK$1.00 = RMB1.06. This exchange rate is for the purpose of illustration only and does not constitute a representation that any amount has been, could have been or may be converted at the above rate or any other rate.

Unless otherwise specified in this circular, amounts denominated in US$ have been converted, for the purpose of illustration only, into Hong Kong dollars at the rate of US$1.00 = HK$7.8. This exchange rate is for the purpose of illustration only and does not constitute a representation that any amount has been, could have been or may be converted at the above rate or any other rate.

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LETTER FROM THE BOARD

GUANGDONG KELON ELECTRICAL HOLDINGS COMPANY LIMITED

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

(Stock Code: 921)

Executive Directors:

Mr. Gu Chu Jun Mr. Liu Cong Meng Mr. Li Zhen Hua Mr. Yan You Song Mr. Zhang Hong Mr. Fang Zhi Guo

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

Registered office: No. 8 Ronggang Road Ronggui Street, Shunde District Foshan City Guangdong Province China

Principal place of business in Hong Kong: Room 2502-2505 Harbour Centre 25 Harbour Road Wanchai Hong Kong

18th November, 2004

To the Shareholders,

Dear Sir or Madam,

DISCLOSEABLE TRANSACTION RELATING TO THE FORMATION OF A JOINT VENTURE COMPANY

INTRODUCTION

The Company announced in its announcement dated 27th October, 2004 that it, Kelon Development and Zhongshan Industrial entered into a joint venture agreement to form a joint venture company, Kelon Weili, in Zhongshan, PRC. Kelon Weili will be a sino-foreign equity joint venture whose currently proposed operations are the manufacture and sale of electrical appliances in Zhongshan, PRC. The purpose of this circular is to give you more information about the transaction.

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LETTER FROM THE BOARD

THE JOINT VENTURE AGREEMENT

Date

27th October, 2004

Parties

• (1) the Company

• (2) Kelon Development, a wholly-owned subsidiary of the Company

• (3) Zhongshan Industrial

Having made all reasonable enquiry, the Directors confirm to the best of their knowledge, information and belief that Zhongshan Industrial and its ultimate beneficial owner are third parties independent of and not connected with the directors, chief executive or substantial shareholders of the Company or its subsidiaries or any of their respective associates.

Joint Venture Company

The proposed name of the Joint Venture Company is (Guangdong Kelon Weili Electrical Appliances Company Limited).

Term

20 years

Investment amount

US$24,160,000 (equivalent to approximately HK$188,680,000)

Registered capital

US$24,160,000 (equivalent to approximately HK$188,680,000)

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LETTER FROM THE BOARD

Capital injection into registered capital

				Percentage
				of total
	Amount of			registered
Joint Venture Party	**capital **	injection	By way of	capital
	RMB	HK$		%
		equivalent
		(approximate)
Kelon Development	50,000,000	47,170,000	Cash	25%
Company	110,000,000	103,774,000	Cash, machineries,	55%
			and air
			conditioning
			technique (Note)
Zhongshan Industrial	40,000,000	37,736,000	Machineries and a	20%
			parcel of land in
			the Weili
			Industrial Park in
			Zhong Shan
Total	200,000,000	188,680,000		100%

Note: A valuation will be carried out on the machineries and air conditioning technique. If there is a shortfall on the Company’s portion of capital injection, the remaining portion will be satisfied by way of cash. If there is a surplus, the Company may make adjustment to the number of machineries to be injected.

The parties shall obtain a valuation and/or capital verification report from a valuer to be agreed by the three parties to the Joint Venture Agreement on its respective proportion of capital injection. It is expected that the valuer will be third party independent of and not connected with the directors, chief executive or substantial shareholders of the Company or its subsidiaries or any of their respective associates. Kelon Development and Zhongshan Industrial is to make capital injection within 2 months of the issue of the business licence of the Joint Venture Company. The Company is to make 20% of its proportion of capital injection within 2 months of issue of the business licence of the Joint Venture Company, within 8 months the remaining 40% and within 12 months the remaining 40%. It is currently expected (as the Company understands is normal practice) that the business licence of the Joint Venture Company will be issued within 2 months of application of the business licence. As at the Latest Practicable Date, no capital has been injected by the Company.

The Company’s portion of capital injection will be funded by internal resources of the Group. None of the parties to the Joint Venture Agreement is contractually bound to make future capital injection into the Joint Venture Company.

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LETTER FROM THE BOARD

Condition

The Joint Venture Agreement was subject to approval by the Zhong Shan City Foreign Economic Trade Cooperation Committee ( ). As at the Latest Practicable Date, this condition has been fulfilled.

Profit/loss arrangement

The profit and loss of Kelon Weili will be shared pro-rata to the joint venture party’s interest in its registered capital.

Pre-emptive right

Each party to the Joint Venture Company has a pre-emptive right over the transfer of interest in registered capital (in whole or in part) by the other parties.

Board composition

The board of directors of the Joint Venture Company will consist of 7 directors amongst whom 4 will be nominated by the Company, 1 will be nominated by Kelon Development and 2 will be nominated by Zhongshan Industrial.

INFORMATION ON ZHONGSHAN INDUSTRIAL, KELON WEILI AND THE GROUP AND REASONS FOR THE TRANSACTION

Kelon Weili will be a sino-foreign equity joint venture whose currently proposed operations are the manufacture and sale of electrical appliances in PRC.

Zhongshan Industrial is a company incorporated under the laws of the PRC. It is an investment holding company which is ultimately and beneficially owned by the government of Zhong Shan.

The Group is one of the largest domestic refrigeration appliances manufacturers in PRC, a market leader in the refrigeration and air-conditioning markets in PRC and overseas. The formation of the Joint Venture Company will enable the Group to diversify its operations into the manufacture and sale of electrical appliances in Zhong Shan, PRC. The Directors believe that the terms of the transaction are fair and reasonable and in the interest of the Company and the Shareholders as a whole. The entering into of the Joint Venture Agreement does not have a material effect on the Group’s earnings and assets and liabilities.

Yours faithfully,

By order of the Board of

Guangdong Kelon Electrical Holdings Company Limited

Gu Chu Jun

Chairman

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APPENDIX

GENERAL INFORMATION

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 collectively and individually accept full responsibility for the accuracy of the information contained in this circular and confirm, having made all reasonable enquires, that to the best of their knowledge and belief there are no other facts the omission of which would make any statement herein misleading.

DISCLOSURE OF INTERESTS

(a) Directors’ Interests and Short Position

As at the Latest Practicable Date, the interests and short positions of the Directors, chief executive and supervisors of the Company in the Shares, underlying Shares and debentures of the Company were required to be notified to the Company and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO (including interests and short positions which they are taken or deemed to have under such provisions of the SFO), required pursuant to section 352 of the SFO, to be entered into the register referred to therein, or which are required, pursuant to the Model Code for Securities Transactions by Directors of Listed Companies to be notified to the Company and the Stock Exchange were as follows:

Interests in the Company

					Proportion to
					the relevant	Proportion to
				Number of	class of issued	the total issued
		Type of	issued ordinary		share capital of	share capital of
Name	Position	interest		Shares held	the Company	the Company
Gu Chu Jun (i)	Director	Corporate		262,212,194	77.60%	26.43%
				Legal Person
				Shares
Gu Chu Jun (ii)	Director	Corporate		3,830,000	0.83%	0.39%
				H Shares
He Si	Supervisor	Personal/Family		50,000	0.03%	0.01%
				A Shares

Notes:

(i) As at the Latest Practicable Date, Greencool Enterprise Development Company Limited was interested in 262,212,194 Legal Person Shares in the Company, representing approximately 26.43% of the total issued share capital of the Company as at the Latest Practicable Date. Mr. Gu Chu Jun owns 60% of the total investment in Greencool Enterprise Development Company Limited. Accordingly, for the purposes of the SFO, Mr. Gu Chu Jun is deemed interested in such Shares through his interests in Greencool Enterprise Development Company Limited.

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APPENDIX

GENERAL INFORMATION

• (ii) 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. Mr. Gu Chu Jun is interested in approximately 62.5% 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. Accordingly, for the purposes of the SFO, Mr. Gu Chu Jun is deemed interested in such H Shares through his interests in Greencool Technology Holdings Limited.

Save as disclosed above, as at the Latest Practicable Date, none of the Directors or chief executive of the Company had any interests and short positions in the Shares, underlying Shares and debentures of the Company or any associated corporation (within the meaning of Part XV of the SFO) which were required to be notified to the Company and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO (including interests and short positions which they are taken or deemed to have under such provisions of the SFO), which were required pursuant to section 352 of the SFO to be entered into the register referred to therein or, which are required, pursuant to the Model Code for Securities Transactions by Directors of Listed Companies to be notified to the Company and the Stock Exchange.

(b) Interests of Substantial Shareholders

Interests in the Company

As at the Latest Practicable Date, according to the register of interest kept by the Company under Section 336 of the SFO and so far as is known to the Directors or the chief executive of the Company, the following person (other than a Director or chief executive of the Company) had an interest or short position in the Shares and underlying Shares which fall to be disclosed to the Company under the provisions of Division 2 and 3 of Part XV of the SFO:

			Proportion
			to the
			relevant	Proportion
			class of	to the total
		Number of	issued share	issued share
		issued	capital	capital
		ordinary	of the	of the
Name	Class of Shares	shares held	Company	Company
Greencool Enterprise	Legal Person	262,212,194	77.60%	26.43%
Development Company	Shares
Limited (Note 1)
Shunde Economic	Legal Person	68,666,667	20.32%	6.92%
Consultancy Company	Shares

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APPENDIX

GENERAL INFORMATION

			Proportion
			to the
			relevant	Proportion
			class of	to the total
		Number of	issued share	issued share
		issued	capital	capital
		ordinary	of the	of the
Name	Class of Shares	shares held	Company	Company
The Hongkong and	H Shares	141,039,896	30.69%	14.22%
Shanghai Banking
Corporation Ltd.
Guotai Junan Securities	H Shares	40,382,000	8.79%	4.07%
(Hong Kong) Limited
Standard Chartered Bank	H Shares	39,555,000	8.61%	3.99%
Shenyin Wanguo	H Shares	28,006,000	6.09%	2.82%
Securities (H.K.)
Limited
First Shanghai Securities	H Shares	27,015,000	5.88%	2.72%
Limited

Note 1: As at the Latest Practicable Date, Greencool Enterprise Development Company Limited was interested in 262,212,194 Legal Person Shares in the Company, representing approximately 26.43% of the total issued share capital of the Company as at the Latest Practicable Date. Mr. Gu Chu Jun owns 60% of the total investment in Greencool Enterprise Development Company Limited. Accordingly, for the purposes of the SFO, Mr. Gu Chu Jun is deemed interested in such Shares through his interests in Greencool Enterprise Development Company Limited.

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APPENDIX

GENERAL INFORMATION

As at the Latest Practicable Date, so far as is known to the directors, the following parties who was 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 Group:

Interests in other members of the Group

	Shareholders holding 10%	Percentage shareholding
	or more in other members	of shareholders in other
Other members of the Group	of the Group	members of the Group
Guangdong Kelon Air-Conditioner	Fo Shi Investments Company	40%
Co., Ltd.	Limited
Guangdong Kelon Mould Co., Ltd.	Hua Yi Compressor Company	30%
	Limited
Shunde Rongsheng Plastic	Hua Yi Compressor Company	30%
Products Co., Ltd.	Limited
Huaao Electrical Electronics	Foshan City Shunde District	30%
Co., Ltd.	Yun Long Enquiry Service
	Company Limited
Chengdu Kelon Refrigerator	Chengdu Generator Factory	30%
Co., Ltd.
Yingkou Kelon Refrigerator	Yingkou Yinglung (Group)	14.74%
Co., Ltd.	Bankruptcy Liquidation Team
Hangzhou Kelon Electrical	Hangzhou Xileng Group	30%
Company Limited	Company Limited
Xi’an Kelon Cooling Co., Ltd.	Xi’an Kouke (Group) Company	29.05%
Jiangxi Kelon Combine Electrical	Jiangxi Fadashi Domestic	45%
Appliances Co., Ltd.	Electrical Appliances
	Company Limited
Kaifeng Kelon Air-Conditioner	Kaifeng Economic Technique	30%
Co., Ltd.	Development (Group)
	Company

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APPENDIX

GENERAL INFORMATION

	Shareholders holding 10%	Percentage shareholding
	or more in other members	of shareholders in other
Other members of the Group	of the Group	members of the Group
Huayi Compressor Holdings	Huayi Electrical Appliances	40.67%
Company Limited	Company Limited
	A-Share public Shareholders	30.61%
Chongqing Kelon Rongsheng	Chongqing Shuang She Group	24%
Refrigerator Sales Co., Ltd.
	Chongqing Huaqing Commerce	24%
	Company
	Chongqing Department Building	24%
Guangzhou Antaida Logistic	Guangzhou Chongyuan	30%
Co., Ltd.	International Freight
	Forwarding Company Limited
	China Far Ocean Network	25%
	Company Limited
	Wuxi Small Swan Holdings	20%
	Company Limited

Save as disclosed above, the Directors and the chief executive of the Company are not aware that there are any other persons (other than a Director or chief executive of the Company) who, as at the Latest Practicable Date, had an interest or short position in the Shares and underlying Shares of the Company which would fall to be disclosed to the Company under the provisions of Divisions 2 and 3 of Part XV of the SFO, or who is, directly or indirectly, interested in 10 per cent. or more of the nominal value of any class of share capital carrying rights to vote in all circumstances at general meeting of any other member of the Group, or in any option, in respect of such capital.

COMPETING INTERESTS

None of the Directors and their respective associates have any interests in a business, which competes or may compete with the business of the Group.

SERVICE CONTRACTS

None of the Directors has entered into or is proposing to enter into a service contract with any member of the Group which may not be expiring or determinable within one year without payment of compensation (other than statutory compensation).

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GENERAL INFORMATION

APPENDIX

LITIGATION

As at the Latest Practicable Date, no member of the Group was engaged in any litigation or claims of material importance and, so far as the Directors are aware, no litigation or claims of material importance are pending or threatened by or against any member of the Group.

MISCELLANEOUS

• (a) The registered office of the Company is situated at No. 8 Ronggang Road, Ronggui Street, Shunde District, Foshan City, Guangdong Province, PRC. The head office and principal place of business of the Company is at Room 2502-2505 Harbour Centre, 25 Harbour Road, Wanchai, Hong Kong.

• (b) The company secretary and qualified accountant of the Company is Gary Li, CPA.

• (c) The auditors of the Company in Hong Kong is Deloitte Touche Tohmatsu of 26th Floor, Wing On Centre, 111 Connaught Road Central, Hong Kong.

• (d) The share registrar and transfer office of the Company in Hong Kong is Hong Kong Registrars Limited of Rooms 1901-5, 19/F., Hopewell Center, 183 Queen’s Road East, Hong Kong.

• (e) The English version of this circular shall prevail over the Chinese text.

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