Medlive Technology Co., Ltd. — Proxy Solicitation & Information Statement 2007

Aug 14, 2007

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 obtain independent professional advice.

If you have sold or transferred all your shares in HISENSE 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.

HISENSE KELON ELECTRICAL HOLDINGS COMPANY LIMITED

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

(Stock Code: 0921)

CONNECTED TRANSACTION ESTABLISHMENT OF JOINT VENTURE

A notice convening the EGM of the Company to be held at 9:30 a.m. on 10 October 2007 at the conference room of the Company’s head office, Shunde District, Foshan City, Guangdong Province, the PRC is set out on pages 12 to 13 of this circular. If you are not able to attend the meeting in person, you are requested to complete and return the enclosed proxy form in accordance with the instructions printed thereon and lodge the same with the Company’s Branch Share Registrar in Hong Kong, Hong Kong Registrars Limited of Rooms 1712-1716, 17/F, Hopewell Centre, 183 Queen’s Road East, Wanchai, Hong Kong, not less than 24 hours before the time fixed for holding the meeting or any adjournment thereof. Completion and delivery of the form of proxy will not preclude you from attending and voting at the meeting or any adjournment thereof if you so wish.

14 August 2007

CONTENTS

	Page
Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	1
Letter from the Board . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	3
Notice of EGM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	12

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DEFINITIONS

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

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||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|
|“A|Shares”|domestic|ordinary|shares|of|the|Company|with|a|nominal|
|value|of|RMB1.00|each|and|are|listed|on|the|Shenzhen|
|Stock|Exchange|
|“Board”|the|board|of|Directors|
|“Company”|Hisense|Kelon|Electrical|Holdings|Company|Limited,|a|
|joint stock limited company incorporated in the PRC with|
|limited|liability|and|the|H|Shares|and A Shares|of|which|
|are|listed|on|the|main|board|of|the|Stock|Exchange|and|
|Shenzhen|Stock|Exchange,|respectively|
|“Director(s)”|the|current|director(s)|of|the|Company|
|“EGM”|The|extraordinary|general|meeting|of|the|Company|to|be|
|held|at|9:30|a.m.|on|10|October|2007|at|the|conference|
|room|of|the|Company’s|head|office,|Shunde|District,|
|Foshan|City,|Guangdong|Province,|the|PRC|to|consider|
|and|approve,|among|other|things,|the|JV Agreement|and|
|the|connected|transaction|contemplated|thereunder|
|“Group”|the|Company|and|subsidiaries|of|the|Company|
|“H|Shares”|overseas|listed|foreign|shares|of|the|Company|with|a|
|nominal|value|of|RMB1.00|each|and|are|listed|on|the|
|Stock|Exchange|
|“Hisense|Air-conditioning”|Qingdao Hisense Air-Conditioning Co., Ltd , a subsidiary|
|of|Hisense|Group|
|“Hisense|Electrical”|(Hisense Electric Co., Ltd) ,|
|a|joint|stock|limited|company|incorporated|in|the|PRC,|
|48.4%|of|its|interest|is|owned|by|Hisense|Group|
|“Hisense|Export”|(Hisense|Imp.|&|Exp.|Co.,|Ltd)|,|a|
|limited|company|incorporated|in|the|PRC,|an|indirect|
|non-wholly|owned|subsidiary|of|Hisense|Group|
|“Hisense|Group”|Hisense|Group|Company,|a|limited|company|
|incorporated|in|the|PRC|and|is|a|State-owned|enterprise|

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	DEFINITIONS
“Hong Kong”	the Hong Kong Special Administrative Region of the
	PRC
“HK$”	Hong Kong dollar(s), the lawful currency of Hong Kong
“JV Agreement”	the agreement dated 27 July 2007 entered into between
	the Company, Hisense Export, Hisense Electrical and
“JV Company”	Natural Person(s) to establish the JV Company , a joint venture company to
	be established under the laws of the PRC
“Listing Rules”	Rules Governing the Listing of Securities on the Stock
	Exchange
“Natural Person(s)”	natural person(s) and will be third parties independent of
	the Company and its connected persons (as defined in the
	Listing Rules)
“ODM”	original design manufacturing, under which the
	manufacturer owns both the pattern and cosmetic design
	of the products which are sold under the brand name of
	the customer
“OEM”	original equipment manufacturing, a type of
	manufacturing under which products are manufactured,
	in whole or in part, in accordance with specifications of
	the customer and are marketed and sold under the brand
	name of customer
“PRC”	the People’s Republic of China
“RMB”	Renminbi yuan, the lawful currency of the PRC
“Share(s)”	share(s) of RMB1.00 each in the capital of the Company,
	comprising the A Shares and the H Shares
“Shareholder(s)”	holders of the Shares
“Stock Exchange”	The Stock Exchange of Hong Kong Limited
“%”	per cent

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LETTER FROM THE BOARD

HISENSE KELON ELECTRICAL HOLDINGS COMPANY LIMITED

(A joint stock limited company incorporated in the People’s Republic of China with limited liability) (Stock Code: 0921)

Executive Directors: Mr. Tang Ye Guo Mr. Yang Yun Duo Mr. Wang Shi Lei Ms. Yu Shu Min Mr. Lin Lan Ms. Liu Chun Xin

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

Independent non-executive Directors: Mr. Zhang Sheng Ping Mr. Lu Qing Mr. Cheung Yui Kai, Warren

Principal place of business in Hong Kong: Room 3104-06 Singga Commercial Centre No. 148 Connaught Road West Hong Kong

14 August 2007

To the Shareholders

Dear Sir or Madam,

CONNECTED TRANSACTION ESTABLISHMENT OF JOINT VENTURE

INTRODUCTION

The Board announces that on 27 July 2007, the Company entered into the JV Agreement with Hisense Export, Hisense Electrical and Natural Person(s) to establish the JV Company for the purpose of conducting export of electrical appliances to overseas markets. Pursuant to the JV Agreement, each of the Company, Hisense Export, Hisense Electrical and Natural Person(s) agreed to invest the sums of RMB3,800,000, RMB10,400,000, RMB3,800,000, and RMB2,000,000, respectively, in cash as capital contribution to the JV Company. The total registered share capital of the JV Company will be in the sum of RMB20,000,000. The JV Company will be owned as to 19% by the Company, 52% by Hisense Export, 19% by Hisense Electrical and 10% by Natural Person(s).

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LETTER FROM THE BOARD

Hisense Air-conditioning is the substantial shareholder of the Company holding approximately 24.08% of the interest of the Company. Since Hisense Export is an indirect wholly-owned subsidiary of Hisense Group and 48.4% of the equity interest of Hisense Electrical is owned by the Hisense Group, the transaction under the JV Agreement constitutes a connected transaction of the Company under the Listing Rules.

As each of the applicable percentage ratio (as defined in Rule 14.07 of the Listing Rules) is less than 2.5%, the JV Agreement is subject to the reporting and announcement requirements under Chapter 14A of the Listing Rules. However, under the request of the relevant regulatory authorities of A shares in the PRC, this transaction is subject to the approval by the Shareholders in the general meeting of the Company. Hisense Airconditioning and its associates have to be abstained from voting in such general meeting. The Company will also disclose the relevant details in the next published annual report and accounts of the Company in accordance with the relevant requirements as set out in Rule 14A.45 of the Listing Rules. The purpose of this circular is to provide you with details of the JV Agreement.

JV AGREEMENT

Date

27 July 2007

Parties to the JV Agreement

1. The Company

2. Hisense Export

3. Hisense Electrical

4. Natural Person(s)

Scope of Business of the JV Company

The JV Company will be incorporated under the laws of the PRC with limited liability and located in Qingdao City. It will be principally engaged in conducting import and export of goods and technology to overseas markets and provision of other services relating to joint venture, production cooperation and further possessing.

Capital Contribution

The total registered share capital of the JV Company will be RMB20,000,000, which is determined according to the respective parties’ estimate of the working capital of the JV Company. The total registered share capital of the JV Company is intended to be used as

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LETTER FROM THE BOARD

working capital of the JV Company. Pursuant to the JV Agreement, each of the Company, Hisense Export, Hisense Electrical and Natural Person(s) agreed to invest the sums of RMB3,800,000, RMB10,400,000, RMB3,800,000,and RMB2,000,000, respectively, in cash as capital contribution to JV Company. The JV Company will be owned as to 19% by the Company, 52% by Hisense Export, 19% by Hisense Electrical and 10% by Natural Person(s).

The capital contribution to the JV Company shall be made by the respective parties within 10 business days from the date when the JV Agreement becomes effective as set out below. The payment of such capital contribution by the Company will be satisfied by its internal resources.

Save as disclosed above, there are no other capital commitment, guarantees or indemnity which have to be provided by the Company and the joint venture parties pursuant to the JV Agreement.

The JV structure was determined as a result of arm’s length negotiations between the Company, Hisense Export, Hisense Electrical and the Natural Person(s). Since Hisense Export has the relevant experience, expertise and sales channel in overseas sales of electrical appliances, it was agreed that Hisense Export should have the largest shareholding in the JV Company. The main purpose of the Company to establish the JV Company is to facilitate its overseas sales and it does not intend to have control or active participation in the operation of the JV Company. Thus, the Company is satisfied with 19% of the equity interest in the JV Company and remains as a passive participant.

Roles and Responsibilities of the JV Parties

The board of directors of the JV Company shall consist of seven directors. Each of the Company, Hisense Export and Hisense Electrical shall have the right to appoint two directors and the Natural Person(s) shall have the right to appoint one director. The chairman shall be appointed by Hisense Export.

The manager of the JV Company, who will be responsible for the day-to-day management of the Company, will be appointed by Hisense Export.

Upon the establishment of the JV Company, Hisense Electrical and the Company will be mainly responsible for the provision of electrical products to the JV Company for overseas sales, while Hisense Export will mainly be responsible for the provision of expertise and sales channel for overseas sales and the Natural Person(s) will mainly be responsible for the day-to-day management of the JV Company.

It is the current intention of the Company to sell products to the JV Company in the future. As such transactions will constitute connected transactions (as defined in the Listing Rules) of the Company, the Company will comply with the relevant requirements of the Listing Rules if and when such transactions take place.

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LETTER FROM THE BOARD

Term of the JV Company

The term of the JV Company is 15 years from the date of issue of its business licence.

Profit Distribution

Profits of the JV Company will be shared among its shareholders in accordance with their respective holdings of registered capital in the JV Company.

Effective Date of the JV Agreement

The JV Agreement will become effective upon obtaining the approval from the relevant authorities in the PRC.

Conditions Precedent

The JV Agreement is subject to the approval of the relevant authorities in the PRC according to the requirements under the laws and regulations of the PRC. There is no long stop day for fulfilling the conditions precedent under the JV Agreement.

Accounting Treatment of the JV Company

In accordance with PRC accounting standards, the JV Company and its revenues (if applicable) will be classified as long-term investment in the balance sheet and investment revenues in the financial statements of the Company, respectively.

In accordance with International Financial Reporting Standards, the JV Company and its revenues (if applicable) will be classified as an interest in an associate in the balance sheet and share of results of an associate in the financial statements of the Company, respectively.

FUTURE PLAN OF THE COMPANY

In order to facilitate the development of the overseas sales market, the JV Company may, after its incorporation, establish other overseas companies in Hong Kong or other areas (the “Overseas Companies”) to conduct its overseas business. It is the current intention of the Group to sell OEM products (including refrigerators, freezers, air-conditioners, moulds and other raw materials) to the JV Company or the Overseas Company in the future so as to develop its overseas sales markets. Such proposed transactions are to be conducted on normal commercial terms and in the ordinary and usual course of business of the Group and will be on terms no less favourable to Company than terms available to or from independent third parties. The prices of the OEM products will be determined according to the principle of fairness and reasonableness with reference to the market price of the OEM products from time to time and the pricing policy of OEM products within the industry.

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LETTER FROM THE BOARD

As such transactions will constitute connected transactions (as defined in the Listing Rules) of the Company, the Company will comply with the relevant requirements of the Listing Rules if and when such transactions take place.

After the establishment of the JV Company, the Company expects that its sales revenues will increase resulting from the sales channels of Hisense Export (including the airconditioners markets in Russia and Argentina, and the air-conditioner and the refrigerators market in Africa) and the improvement in its own brand businesses (i.e. air-conditioner and refrigerator business under its own brand names in North America). In addition, the sales revenues of the Company is also expected to increase as a result of the improvement in other businesses of the Company, such as moulds and small household appliances.

EFFECT OF THE FUTURE PLAN ON THE INDEPENDENCE OF THE COMPANY

After the establishment of the JV Company, the Company will retain its international business department. The existing customers of the Company will still enter into contracts with the Company. The exporting scale and the preferential export policies entitled by the Company will not be affected. In addition, the Company will enter into agreement with the JV Company specifying that in case the JV Company experiences any operating risks which may affect the export businesses of the Company, the Company shall have the right to choose to conduct the exports on its own or through other co-operative parties.

Considering the difficulties and complexity in promoting the Company’s own brand businesses, it is expected that the growth of the Company’s own brand businesses will be lower than that of the OEM businesses of the Company. It is expected that there will be a continuous increase in the volume of the connected transactions between the Company and the JV Company. However, it is expected that the rate of increase in the connected transactions between the Company and the JV Company will be lower than that of the overall export sales of the Company.

Even though the JV Company will increase the overall sales revenues and sales scale of the Company, it is expected that the sales revenues to be derived by the Company from the JV Company, when comparing with the Company’s overall overseas sales revenues, will decrease over years. Therefore, the Company will not become dependent on the connected transactions to be conducted with the JV Company.

On the other hand, the Company can promote its own brand businesses by making use of the original overseas sales platform of Hisense Export through the JV Company. The Company will also be able to keep abreast of the international market, to have a more direct involvement in such market and to compete with international brands globally. The Company’s global operation experiences will also be expanded with respect to the design and planning of products, the promotion and marketing of brands, the establishment of international logistics and distribution networks, the global after-sales service system. As a result, the Company’s internationalized operations will be strengthened, and the Company’s performance would be enhanced, which also motivates the progress of the internalization of the Company.

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LETTER FROM THE BOARD

Based on the foregoing, the Company considers that the future connected transactions to be conducted with the JV Company will reduce the selling expenses of the Company incurred in its overseas sales and, thus benefiting the Company’s development of overseas markets without affecting its independence.

BALANCE OF INTEREST BETWEEN TWO OVERSEAS SALES CHANNELS

After setting up the JV Company, the Company will have two overseas sales channels – the overseas sales of its own brands (to be conducted through the connected transactions with the JV Company) and OEM sales (to be conducted through the Company’s own sales channels). The apparent conflicts of interests between the two overseas sales channels of the Company will be resolved by stepping up efforts in products planning, setting up target markets and promotion and marketing as set out below:

(i) Differentiating the Key Product Series and the Sales Channels

The Company’s own brand business will be positioned at the medium-high end products, which will be characterized by high quality and medium price range. The brand will be built up on the medium-end advanced products. The design of the key products has been registered as patents. The sales channel is directly connected to the retail markets, such as home appliances stores and large chain stores. The OEM business of the Company will focus on customized ODM products for high-end products. The design and the position of these products will be specially developed for high-end customers.

(ii) Differentiating Promotion and Marketing and Selling Points

The promotion and marketing of the Company’s own brand businesses will be different from that of OEM. The Company’s own brand businesses will be imaged as products of advanced technology and of high quality.

REASONS FOR AND BENEFITS FOR ENTERING INTO THE JV AGREEMENT

Hisense Electrical is principally engaged in the manufacturing and sale of various electrical appliances. Hisense Export is principally engaged in conducting export of electrical appliances to overseas markets. The Company is principally engaged in the manufacturing and sale of air-conditioners and refrigerators.

At present, the sale of air-conditioners and refrigerators to overseas markets by the Company is to a large extent limited to the provision of OEM production services to overseas production enterprises. The gross profit margin for conducting such OEM business is low and it is difficult for the Company to sell its products of its own brand to overseas market.

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LETTER FROM THE BOARD

Since Hisense Export has the expertise, experience and sales channels in overseas sale of electrical appliances, the establishment of the JV Company would provide a means for the Company to expand and develop its sales of air-conditioners and refrigerators in different new overseas markets at a relatively low marketing costs and thus increasing its sales volume and strengthening its reputation as a leading electrical appliances manufacturer. Meanwhile, the selling costs of the Company for conducting overseas sales can be shared with Hisense Electrical and Hisense Export and the risks for conducting overseas sales can be better controlled through the establishment of the JV Company.

In light of the above, the Directors (including the independent non-executive Directors) consider that the terms of the JV Agreement are fair and reasonable and in the interest of the Company and the Shareholders as a whole.

INFORMATION RELATING TO THE COMPANY

The Company is principally engaged in the manufacture and sales of refrigerators and air-conditioners.

INFORMATION RELATING TO HISENSE ELECTRICAL

Hisense Electrical is principally engaged in the manufacturing and sale of various electrical appliances.

INFORMATION RELATING TO HISENSE EXPORT

Hisense Export is principally engaged in conducting export of electrical appliances to overseas markets.

INFORMATION RELATING TO THE NATURAL PERSON(S)

The Natural Person(s) will consist of 18 natural person(s) who are employees (excluding senior management) of the Company or Hisense Group or their subsidiaries. Six of them are employees of the Company or its subsidiaries and twelve of them are employees of Hisense Group or its subsidiaries. Upon the establishment of the JV Company, such employees of the Company or its subsidiaries will no longer work in the Company or its subsidiaries. The Natural Person(s) are third parties independent of the Company and its connected persons (as defined in the Listing Rules). The Natural Person(s) does not carry out any business activity.

CONNECTED TRANSACTION

Hisense Air-conditioning is the substantial shareholder of the Company holding approximately 24.08% of the interest of the Company. Since Hisense Export is an indirect wholly-owned subsidiary of Hisense Group (which is a connected person of the Company by virtue of it being an associate (as defined in the Listing Rules) of Hisense Air-conditioning) and 48.4% of the equity interest of Hisnese Electrical is owned by the Hisense Group, the transaction under the JV Agreement constitutes a connected transaction of the Company under the Listing Rules.

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LETTER FROM THE BOARD

As each of the applicable percentage ratio (as defined in Rule 14.07 of the Listing Rules) is less than 2.5%, the JV Agreement is subject to the reporting and announcement requirements under Chapter 14A of the Listing Rules. However, under the request of the relevant regulatory authorities of A shares in the PRC, this transaction is subject to the approval by the Shareholders in the general meeting of the Company. Hisense Air-conditioning and its associates have to be abstained from voting in such general meeting. The Company will also disclose the relevant details in the next published annual report and accounts of the Company in accordance with the relevant requirements as set out in Rule 14A.45 of the Listing Rules.

Based on the current corporate structure, the transactions between the Group and JV Company will constitute connected transactions which will be conducted in compliance with the applicable Listing Rules.

SUSPENSION OF TRADING IN THE H SHARES

At the request of the Company, trading in the H Shares was suspended with effect from 10:00 a.m. on 16 June 2005 until further notice.

EGM

The Company will convene the EGM, among other things, to consider and approve the JV Agreement and the connected transaction contemplated thereunder.

A notice convening the EGM is set out on pages 12 to 13 of this circular.

Hisense Air-conditioning and its associates have to be abstained from voting in the EGM.

POLL PROCEDURE

The voting in the EGM for the approval of the JV Agreement and the connected transaction contemplated thereunder will be taken by poll.

In accordance with article 8.28 of the articles of association of the Company, a poll may be demanded in any general meeting of the Company by:

• (A) the chairman of the meeting; or

• (B) at least two Shareholders with voting rights or their representative; or

• (C) individual or a group of Shareholders (including their representatives) holding 10% or more of the voting rights present in that general meeting.

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LETTER FROM THE BOARD

RECOMMENDATION

The Directors consider that the JV Agreement and the connected transaction contemplated thereunder are in the interests of the Company and its Shareholders as a whole. Accordingly, the Directors recommend the Shareholders to vote in favour of theresolution to be proposed at the EGM.

Yours faithfully,

By Order of the Board of Hisense Kelon Electrical Holdings Company Limited Tang Ye Guo Chairman

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NOTICE OF EGM

HISENSE KELON ELECTRICAL HOLDINGS COMPANY LIMITED

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

(Stock Code: 0921)

NOTICE OF EXTRAORDINARY GENERAL MEETING

NOTICE IS HEREBY GIVEN that the extraordinary general meeting (the “EGM”) of Hisense Kelon Electrical Holdings Company Limited (the “Company”) will be held at the conference room of the Company’s head office, Shunde District, Foshan City, Guangdong Province, the People’s Republic of China (the “PRC”) on 10 October 2007 at 9:30 a.m. to review and, if thought fit, pass the following resolution:

ORDINARY RESOLUTION

1. To consider and approve the “Joint Venture Agreement for ” entered into between the Company, Hisense Electric

Co., Ltd, Hisense Imp. & Exp. Co., Ltd and the Natural Person(s) and the connected transaction contemplated thereunder.

SUSPENSION OF TRADING IN THE H SHARES

At the request of the Company, trading in the H Shares was suspended with effect from 10:00 a.m. on 16 June 2005 until further notice.

By Order of the Board Hisense Kelon Electrical Holdings Company Limited Tang Ye Guo Chairman

Foshan City, Guangdong, the PRC, 14 August 2007

As at the date of this notice, the Company’s directors are Mr. Tang Ye Guo, Mr. Yang Yun Duo, Mr. Wang Shi Lei, Ms. Yu Shu Min, Mr. Lin Lan and Ms. Liu Chun Xin; and the Company’s independent non-executive directors are Mr. Zhang Sheng Ping, Mr. Lu Qing and Mr. Cheung Yui Kai, Warren.

Notes:

(1) H shares shareholders intending to attend the EGM shall give written reply slip, as attached, to the Company, which shall be lodged at the registered office of the Company on or before 20 September 2007. To qualify for attendance at the EGM, all H shares shareholders transfers accompanied by the relevant share certificates must be lodged with the Company’s Branch Share Registrar in Hong Kong, Hong Kong Registrars Limited of Rooms 1712-1716, 17/F Hopewell Centre, 183 Queen’s Road East, Wanchai, Hong Kong, no later than 4:00 p.m. on 10 September 2007 for registration.

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NOTICE OF EGM

• (2) Shareholders entitled to attend and vote at the EGM are entitled to appoint one or more persons (whether or not a shareholder of the Company) as their proxy to attend and vote on behalf of themselves.

• (3) Notice of the holders of domestic shares and H shares of the Company whose names appear on the register of members of the Company as at or before the close of business of 10 September 2007 (Monday) (including holders of H Shares of the Company who have submitted verification transfer forms on or before 10 September 2007) will be entitled to attend the EGM.

• (4) The register of members of the Company will be closed from 11 September 2007 (Tuesday) to 10 October 2007 (Wednesday) (both days inclusive).

• (5) In order to be valid, the form of proxy, together with a duly notarised power of attorney or other document of authority, if any, under which the form is signed must be deposited at the registered office of the Company not later than 24 hours before the time for holding the EGM.

• (6) The registered address of the Company is: No. 8 Ronggang Road, Ronggui Street, Shunde District, Foshan City, Guangdong Province.

Postal code: 528303 Tel: (86) 757 2836 2570 Fax: (85) 757 2836 1055 Contact person: Ms. Li Lin, Mr. Lv Yan Song, Mr. Mei Shi Liang

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