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.

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

HISENSE KELON ELECTRICAL HOLDINGS COMPANY LIMITED 海信科龍電器股份有限公司

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

(Stock Code: 00921)

REVISED ANNUAL CAPS AND SUPPLEMENTAL AGREEMENT FOR CONTINUING CONNECTED TRANSACTIONS

Independent Financial Adviser to the Independent Board Committee and the Independent Shareholders

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A letter from the Board is set out on pages 6 to 22 of this circular. A letter from the Independent Board Committee is set out on pages 23 to 24 of this circular. A letter from the Independent Financial Adviser containing its advice to the Independent Board Committee and the Independent Shareholders is set out on pages 25 to 38 of this circular.

A notice of the EGM to be held on 8 November 2010 at 9:30 a.m. at the conference room of the Company’s head office, Shunde District, Foshan City, Guangdong Province, the PRC, a proxy form for use at the EGM and a reply slip have been despatched by the Company on 20 September 2010 and are also published on the websites of the Stock Exchange (http://www.hkexnews.hk) and the Company (http://www.kelon.com). If you are not able to attend the meeting in person, you are requested to complete and return the proxy form in accordance with the instructions printed thereon and to lodge the same with the Company’s branch share registrar in Hong Kong, Hong Kong Registrars Limited, at 17M/F, Hopewell Centre, 183 Queen’s Road East, Wanchai, Hong Kong, not less than 24 hours before the time fixed for holding the EGM or any adjournment thereof (as the case may be). Completion and delivery of the proxy form will not preclude you from attending and voting in person at the EGM or any adjournment thereof (as the case may be) if you so wish.

21 October 2010

	Page
Definitions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Letter from the Board. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Letter from the Independent Board Committee. . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Letter from the Independent Financial Adviser. . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Appendix — General Information. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39

— i —

DEFINITIONS

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

“A Shares”

domestic ordinary shares of the Company with a nominal value of RMB1.00 each and are listed on the Shenzhen Stock Exchange

“associates” has the meaning ascribed to it in the Listing Rules
“Board” or “Director(s)”

the board of Directors

“Business Co-operation Framework Agreement”

the agreement（業務合作框架協議）entered into between the Company, Hisense Electric and certain subsidiaries of Hisense Group (including Hisense Air-conditioning) dated 6 November 2009, the particulars of which were disclosed in the announcement and circular of the Company dated 6 November 2009 and 26 November 2009 respectively

“Business Co-operation Framework Agreement 2”
the agreement（業務合作框架協議（二））entered into between the Company, Hisense Group and Hisense Electric dated 5 May 2010, the particulars of which were disclosed in the announcement and circular of the Company dated 5 May 2010 and 18 May 2010 respectively
“Company” Hisense Kelon Electrical Holdings Company Limited, a company incorporated in the PRC with limited liability, whose shares are listed on the main board of the Stock Exchange and the Shenzhen Stock Exchange
“connected person” has the meaning ascribed to it in the Listing Rules

“EGM” the fourth 2010 extraordinary general meeting of the Company to be held at the conference room of the Company’s head office, Shunde District, Foshan City, Guangdong Province, the PRC on 8 November 2010 at 9:30 a.m. for the approval of the Supplemental Agreement (which provides for, inter alia, the revisions to the relevant annual caps in relation to the Relevant Transactions) and the transactions contemplated thereunder

— 1 —

DEFINITIONS

“Group”	the Company and its subsidiaries
“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 Company Limited（青
	島海信空調有限公司）, a company incorporated in the
	PRC with limited liability and a subsidiary of Hisense
	Group
“Hisense Electric”	Hisense Electric Co., Ltd.（青島海信電器股份有限公司）,
	a company incorporated in the PRC with limited liability,
	whose shares are listed on the Shanghai Stock Exchange
“Hisense Electronic	Qingdao Hisense Electronic Technology Service Co., Ltd
Technology”	（青島海信電子技術服務有限公司）, a company incorporated
	in the PRC with limited liability
“Hisense Group”	Hisense Company Limited（海信集團有限公司）, a company
	incorporated in the PRC with limited liability
“Hisense Import & Export”	青島海信進出口有限公司(Hisense (Qingdao) Import &
	Export Co., Ltd.), a company incorporated in the PRC
	with limited liability and a subsidiary of Hisense Group
“Hisense Marketing”	青島海信國際營銷股份有限公司(Qingdao Hisense
	International Marketing Co., Ltd.), a company
	incorporated in the PRC with limited liability and a
	subsidiary of Hisense Group
“Hong Kong”	the Hong Kong Special Administrative Region of the
	People’s Republic of China
“Independent Board	an independent board committee of the Company
Committee”	comprising all the independent non-executive Directors,
	namely Mr. Zhang Sheng Ping and Mr. Cheung Yui Kai,
	Warren

— 2 —

DEFINITIONS

“Independent Financial Adviser”
Access Capital Limited, a corporation licensed under the SFO for carrying on type 1 (dealing in securities), type 4 (advising on securities), type 6 (advising on corporate finance) and type 9 (asset management) regulated activities under the SFO, being the independent financial adviser to the Independent Board Committee and the Independent Shareholders in respect of the Supplemental Agreement and the transactions contemplated thereunder
“Independent Shareholders”
Shareholders other than Hisense Group, Hisense Electric and their respective associates
“Latest Practicable Date”
18 October 2010, being the latest practicable date prior to the printing of this circular for ascertaining certain information in this circular
“Listing Rules”
the Rules Governing the Listing of Securities on the Stock Exchange
“MOFTEC”
Ministry of Foreign Trade and Economic Corporation
“PRC”
the People’s Republic of China, which for the purposes of this circular, excludes Hong Kong, Macau Special Administrative Region of the People’s Republic of China and Taiwan
“Relevant Transactions” certain continuing connected transactions of the Group contemplated under the Business Co-operation Framework Agreement and the Business Co-operation Framework Agreement 2 (as amended and supplemented by the Supplemental Agreement) as set out in the section headed “Supplemental Agreement” in the “Letter from the Board” in this circular

— 3 —

DEFINITIONS

“Revised Annual Caps”
“Savor Electronic”
“SFO”
“Share(s)”
“Shareholder(s)”
“Shenzhen Stock Exchange”
“Stock Exchange”
“Subsidy Policy”
the revised annual caps for the Relevant Transactions for the year ending 31 December 2010, being (i) RMB176,580,000 in respect of the purchase of raw materials, equipment, parts and components by the Group from Hisense Group, Hisense Electric and their respective subsidiaries; (ii) RMB123,231,600 in respect of the provision of certain services as may be required by the Group by Hisense Group, Hisense Electric and their respective subsidiaries; (iii) RMB1,227,689,300 in respect of the sale and supply of home electrical appliances by the Group to Hisense Group, Hisense Electric and their respective subsidiaries; (iv) RMB111,445,700 in respect of the sale and supply of raw materials and parts by the Group to Hisense Group, Hisense Electric and their respective subsidiaries; and (v) RMB192,300,000 in respect of the sale and supply of moulds by the Group to Hisense Group, Hisense Electric and their respective subsidiaries
青島賽維電子信息服務股份有限公司 (Qingdao Savor Electrical Information Service Holdings Co., Ltd.), a company incorporated in the PRC with limited liability and a subsidiary of Hisense Group
Securities and Futures Ordinance (Cap. 571 of the Laws of Hong Kong)
share(s) of RMB1.00 each in the capital of the Company, comprising the A Shares and the H Shares
holder(s) of the Shares
The Shenzhen Stock Exchange
The Stock Exchange of Hong Kong Limited
the “Home Appliances Subsidy Policy for Rural Villages
（家電下鄉政策）” adopted by the PRC government

— 4 —

DEFINITIONS

“Supplemental Agreement”

the Supplemental Agreement to the Business Co-operation Framework Agreements（業務合作框架協議之補充協議） entered into between the Company, Hisense Group and Hisense Electric dated 20 September 2010, which amends and supplements the Business Co-operation Framework Agreement and the Business Co-operation Framework Agreement 2

“Target Group”

海信（北京）電器有限公司 (Hisense (Beijing) Electric Company Limited), 海信（南京）電器有限公司 (Hisense (Nanjing) Electric Co., Ltd.), 海信（山東）空調有限公司 (Hisense (Shandong) Air-conditioning Company Limited), 海信（浙江）空調有限公司 (Hisense (Zhejiang) Air-condition Co., Ltd.) and 青島海信模具有限公司 (Qingdao Hisense Mould Company Limited)

“HK$” Hong Kong dollars, the lawful currency of Hong Kong “RMB” Renminbi, the lawful currency of the PRC “%” per cent

— 5 —

LETTER FROM THE BOARD

HISENSE KELON ELECTRICAL HOLDINGS COMPANY LIMITED 海信科龍電器股份有限公司

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

(Stock Code: 00921)

Executive Directors: Registered Office: Mr. Tang Ye Guo No. 8 Ronggang Road Mr. Zhou Xiao Tian Ronggui Street Ms. Yu Shu Min Shunde District Mr. Lin Lan Foshan City Ms. Liu Chun Xin Guangdong Province Mr. Zhang Ming The PRC Independent non-executive Directors: Principal place of business in Hong Kong: Mr. Zhang Sheng Ping Room 3104-06 Mr. Cheung Yui Kai, Warren Singga Commercial Centre No. 148 Connaught Road West Hong Kong (with effect from 1 November 2010) Room 3101-05 Singga Commercial Centre No. 148 Connaught Road West Hong Kong 21 October 2010

To the Shareholders

Dear Sir or Madam,

REVISED ANNUAL CAPS AND SUPPLEMENTAL AGREEMENT FOR CONTINUING CONNECTED TRANSACTIONS

BACKGROUND

Reference is made to the announcement and circular of the Company dated 6 November 2009 and 26 November 2009 respectively on the Business Co-operation Framework Agreement in relation to the sale and supply of moulds, air-conditioners, refrigerators,

— 6 —

LETTER FROM THE BOARD

raw materials, components and facilities, home appliances and parts and components to, provision of leasing and property management services to, purchase of air-conditioners, refrigerators, raw materials, components and facilities from, and provision of services by, Hisense Electric, certain subsidiaries of Hisense Group and their respective subsidiaries. The Business Co-operation Framework Agreement and the transactions contemplated thereunder (subject to the related caps) were approved by the independent shareholders of the Company at the extraordinary general meeting of the Company held on 15 January 2010.

Following completion of the acquisition of, inter alia, certain interests in the Target Group, the Company’s transactions with the Target Group as contemplated under the Business Co-operation Framework Agreement will no longer constitute continuing connected transactions of the Company. However, the Company identified certain transactions between the Target Group and the connected persons of the Company that would constitute non-exempt continuing connected transactions after completion of the acquisition of the interests in the Target Group. Accordingly, the Company entered into the Business Co-operation Framework Agreement 2 in relation to the purchase of home electrical appliances, raw materials, equipment, parts and components from, provision of services by, sale and supply of home electrical appliances, moulds, raw materials and parts to, and provision of loading and unloading services and equipment rental services to, Hisense Group, Hisense Electric and their respective subsidiaries. Further details of the Business Co-operation Framework Agreement 2 were disclosed in the announcement and circular of the Company dated 5 May 2010 and 18 May 2010 respectively. The Business Co-operation Framework Agreement 2 and the transactions contemplated thereunder (subject to the related caps) were approved by the independent shareholders of the Company at the annual general meeting of the Company held on 4 June 2010.

As disclosed in the announcement of the Company dated 20 September 2010, in view of the increase of business co-operation between the Group and Hisense Electric, Hisense Group and their subsidiaries and being satisfied with the quality of the products and services of the counterparties, the Company has entered into the Supplemental Agreement with Hisense Group and Hisense Electric to revise the annual caps for the year ending 31 December 2010 for some of the transactions contemplated under the Business Co-operation Framework Agreement and the Business Co-operation Framework Agreement 2. Under the Supplemental Agreement, in view of the business needs of the Group, the scope of the services which may be provided by Hisense Electric and its subsidiaries to the Group has also been extended to include material processing services and material inspection services.

— 7 —

LETTER FROM THE BOARD

The purpose of this circular is (i) to provide you with further information on the Revised Annual Caps and the Supplemental Agreement, (ii) to set out the recommendation of the Independent Board Committee and (iii) to set out the letter of advice from the Independent Financial Adviser to the Independent Board Committee and the Independent Shareholders.

SUPPLEMENTAL AGREEMENT

Date:

20 September 2010

Parties:

(i) The Company
(ii) Hisense Group
(iii) Hisense Electric

Revision of annual caps:

(1) Purchase of raw materials, equipment, parts and components

Pursuant to the Business Co-operation Framework Agreement and the Business Cooperation Framework Agreement 2, the Company has agreed that the Group shall purchase from Hisense Group, Hisense Electric and their subsidiaries raw materials, equipment, parts and components as may be required by the Group from time to time upon the terms and conditions of the Business Co-operation Framework Agreement and the Business Co-operation Framework Agreement 2.

Original annual cap

— 8 —

LETTER FROM THE BOARD

the portion of the cap originally allocated to transactions between the Group and members of the Target Group prior to completion of the acquisition of the interests in the Target Group) was RMB111,580,000 (inclusive of value-added tax), of which:

(i) RMB3,780,000 was allocated to the purchase of parts and components from Savor Electronic and its subsidiaries under the Business Co-operation Framework Agreement;
(ii) in addition to (i) above, RMB83,800,000 was allocated to the purchase of raw materials and parts and components from Hisense Group and its subsidiaries under the Business Co-operation Framework Agreement 2;
(iii) RMB10,000,000 was allocated to the purchase of equipment from Hisense Group and its subsidiaries under the Business Co-operation Framework Agreement 2; and
(iv) RMB14,000,000 was allocated to the purchase of raw materials and parts and components from Hisense Electric and its subsidiaries under the Business Cooperation Framework Agreement 2.

Revised annual cap

Pursuant to the Supplemental Agreement and upon the approval by the Independent Shareholders, the annual cap for the above transactions for the year ending 31 December 2010 shall be revised to RMB176,580,000, of which the amount of the cap allocated to the purchase of raw materials and parts and components from Hisense Group and its subsidiaries (including Savor Electronic) shall be increased to RMB137,580,000 and that allocated to the purchase of raw materials and parts and components from Hisense Electric and its subsidiaries shall be increased to RMB29,000,000. The amount of the cap allocated to the transactions mentioned in (iii) above remains unchanged.

Historical figures

For the year ended 31 December 2009 and the 8 months ended 31 August 2010, the aggregate amount paid by the Group in relation to the above transactions (other than the historical figures for (i) the transactions between the Group and members of the Target Group which no longer constitute continuing connected transactions and (ii) the transactions between members of the Target Group and Hisense Group, Hisense Electric and their respective subsidiaries prior to the acquisition of the interests in the

— 9 —

LETTER FROM THE BOARD

Target Group by the Group which were not transactions entered into by the Group at that time) amounted to approximately RMB0 and RMB70,393,922 (of which approximately RMB63.85 million was attributable to the transactions with Hisense Group and its subsidiaries and approximately RMB6.54 million was attributable to the transactions with Hisense Electric and its subsidiaries) respectively. The revision of the annual caps for the year ending 31 December 2010 to RMB176,580,000 is the result of (i) an increase of RMB50,000,000 to the original amount (RMB87,580,000) allocated to the purchase of raw materials and parts and components from Hisense Group and its subsidiaries in view of the actual transaction amount already incurred for the 8 months ended 31 August 2010 and the projection on the transaction amount for transactions to be entered into between the Group and Hisense Group and its subsidiaries, taking into account the effect of the expected increase in sales of home appliances under the Subsidy Policy (including the estimated sales quantity for different models of home appliances in light of the said policy and the estimated unit price for such models) and factors such as the market share of the Group and the product market price; and (ii) an increase of RMB15,000,000 to the original amount (RMB14,000,000) allocated to the purchase of raw materials and parts and components from Hisense Electric and its subsidiaries in view of the new business need of a member of the Target Group involving the purchase of raw materials and parts and components from Hisense Electric and its subsidiaries brought about by the expected increase in sales of home appliances under the Subsidy Policy. In view of the above, the Directors are of the view that the revision of the relevant annual cap for the year ending 31 December 2010 to RMB176,580,000 is fair and reasonable.

(2) Provision of services

Pursuant to the Business Co-operation Framework Agreement and the Business Cooperation Framework Agreement 2, the Company has agreed that the Group shall engage Hisense Group and/or Hisense Electric and their subsidiaries to provide certain services as may be required by the Group from time to time upon the terms and conditions of the Business Co-operation Framework Agreement and the Business Co-operation Framework Agreement 2.

— 10 —

LETTER FROM THE BOARD

Original annual cap

(i) RMB24,782,000 was allocated to the engagement of Savor Electronic and its subsidiaries for the provision of after-sale maintenance and repair services and the provision and maintenance of electronic communication services under the Business Co-operation Framework Agreement;
(ii) RMB11,400,000 was allocated to the engagement of Hisense Electronic Technology and its subsidiaries for the provision and maintenance of electronic communication services under the Business Co-operation Framework Agreement;
(iii) RMB10,859,600 was allocated to the engagement of Hisense Import & Export and its subsidiaries for the provision of after-sale maintenance and repair services under the Business Co-operation Framework Agreement;
(iv) in addition to (i), (ii) and (iii) above, RMB63,430,000 was allocated to the engagement of Hisense Group and its subsidiaries for the provision of property management service, medical service, installation and maintenance, management consultancy, information system maintenance, leasing, design, equipment management, advertising, agency services for import and export and material processing services under the Business Co-operation Framework Agreement 2; and
(v) RMB4,140,000 was allocated to the engagement of Hisense Electric and its subsidiaries for the provision of property management services under the Business Co-operation Framework Agreement 2.

Revised annual cap

— 11 —

LETTER FROM THE BOARD

Savor Electronic, Hisense Electronic Technology and Hisense Import & Export) for the transactions mentioned in (i) to (iv) above shall be increased to RMB110,541,600 and that allocated to the engagement of Hisense Electric and its subsidiaries for the provision of property management services, material processing services and material inspection services shall be increased to RMB12,690,000.

Historical figures

For the year ended 31 December 2009 and the 8 months ended 31 August 2010, the aggregate amount paid by the Group in relation to the above transactions (other than the historical figures for the transactions between members of the Target Group and Hisense Group, Hisense Electric and their respective subsidiaries prior to the acquisition of the interests in the Target Group by the Group which were not transactions entered into by the Group at that time) amounted to approximately RMB4,360,500 and RMB25,605,325 respectively. The revision of the annual caps for the year ending 31 December 2010 to RMB123,231,600 is the result of (i) an increase of RMB70,000 to the original amount (RMB110,471,600) allocated to the provision of relevant services by Hisense Group and its subsidiaries in view of the projection on the transaction amount for transactions to be entered into between the Group and Hisense Group and its subsidiaries taking into account the expected increase in the Group’s demand for services (including after-sale and maintenance services) brought about by the expected increase in the products or raw materials, parts and components which may be purchased by the Group; and (ii) an increase of RMB8,550,000 to the original amount (RMB4,140,000) allocated to the provision of relevant services by Hisense Electric and its subsidiaries in view of the expansion of the scope of services (that is, material processing services and material inspection services) which may be provided by Hisense Electric and its subsidiaries, the actual transaction amount already incurred for the 8 months ended 31 August 2010 and the projection on the transaction amount for transactions to be entered into between the Group and Hisense Electric and its subsidiaries taking into account the expected increase in the Group’s demand for services (including material processing services and material inspection services) brought about by the expected increase in the products or raw materials, parts and components which may be purchased by the Group. In view of the above, the Directors are of the view that the revision of the relevant annual cap for the year ending 31 December 2010 to RMB123,231,600 is fair and reasonable.

— 12 —

LETTER FROM THE BOARD

(3) Sale and supply of home electrical appliances

Pursuant to the Business Co-operation Framework Agreement and the Business Cooperation Framework Agreement 2, the Company has agreed that the Group shall manufacture and supply home electrical appliances as Hisense Group and/or Hisense Electric and their subsidiaries may require from time to time upon the terms and conditions of the Business Co-operation Framework Agreement and the Business Cooperation Framework Agreement 2.

Original annual cap

(i) RMB882,769,300 was allocated to the sale and supply of home electrical appliances for export to Hisense Marketing and its subsidiaries under the Business Co-operation Framework Agreement;
(ii) RMB48,500,000 was allocated to the sale and supply of home electrical appliances for domestic market to Savor Electronic and its subsidiaries under the Business Co-operation Framework Agreement;
(iii) in addition to (i) and (ii) above, RMB291,900,000 was allocated to the sale and supply of home electrical appliances to Hisense Group and its subsidiaries under the Business Co-operation Framework Agreement 2; and
(iv) RMB2,520,000 was allocated to the sale and supply of home electrical appliances to Hisense Electric and its subsidiaries under the Business Cooperation Framework Agreement 2.

Revised annual cap

Pursuant to the Supplemental Agreement and upon the approval by the Independent Shareholders, the annual cap for the above transactions for the year ending 31 December 2010 shall be revised to RMB1,227,689,300, of which the amount of the cap allocated to the sale and supply of home electrical appliances to Hisense Electric and its subsidiaries shall be increased to RMB4,520,000. The amount of the cap allocated to the transactions mentioned in (i) to (iii) above remains unchanged.

— 13 —

LETTER FROM THE BOARD

Historical figures

(4) Sale and supply of raw materials and parts

Pursuant to the Business Co-operation Framework Agreement and the Business Cooperation Framework Agreement 2, the Company has agreed that the Group shall sell and supply raw materials and parts to Hisense Group, Hisense Electric and their subsidiaries as they may require from time to time upon the terms and conditions of the Business Co-operation Framework Agreement and the Business Co-operation Framework Agreement 2.

Original annual cap

The existing annual cap for the year ending 31 December 2010 for all similar continuing connected transactions with Hisense Group and/or Hisense Electric pursuant to the Business Co-operation Framework Agreement and the Business Cooperation Framework Agreement 2 (which, for the avoidance of doubt, exclude the portion of the cap originally allocated to transactions between the Group and members of the Target Group prior to completion of the acquisition of the interests in the Target Group) was RMB101,445,700 (inclusive of value-added tax), of which:

(i) RMB77,135,700 was allocated to the sale and supply of parts for export to Hisense Marketing and its subsidiaries under the Business Co-operation Framework Agreement;
(ii) RMB1,000,000 was allocated to the sale and supply of plastic parts to Hisense Electric and its subsidiaries under the Business Co-operation Framework Agreement;

— 14 —

LETTER FROM THE BOARD

(iii) RMB4,550,000 was allocated to the sale and supply of parts to Savor Electronic and its subsidiaries under the Business Co-operation Framework Agreement;
(iv) RMB18,720,000 was allocated to the sale and supply of raw materials to Hisense Group and its subsidiaries under the Business Co-operation Framework Agreement 2; and
(v) RMB40,000 was allocated to the sale and supply of raw materials to Hisense Electric and its subsidiaries under the Business Co-operation Framework Agreement 2.

Revised annual cap

Pursuant to the Supplemental Agreement and upon the approval by the Independent Shareholders, the annual cap for the above transactions for the year ending 31 December 2010 shall be revised to RMB111,445,700, of which the amount of the cap allocated to the sale and supply of raw materials and parts to Hisense Electric and its subsidiaries shall be increased to RMB11,040,000. The amount of the cap allocated to the transactions mentioned in (i), (iii) and (iv) above remains unchanged.

Historical figures

For the year ended 31 December 2009 and the 8 months ended 31 August 2010, the aggregate amount received by the Group in relation to the above transactions (other than the historical figures for (i) the transactions between the Group and members of the Target Group which no longer constitute continuing connected transactions and (ii) the transactions between members of the Target Group and Hisense Group, Hisense Electric and their respective subsidiaries prior to the acquisition of the interests in the Target Group by the Group which were not transactions entered into by the Group at that time) amounted to approximately RMB243,600 and RMB4,169,493 respectively. The revision of the annual caps for the year ending 31 December 2010 to RMB111,445,700 is the result of the increase of RMB10,000,000 to the original amount (RMB1,040,000) allocated to the sale and supply of raw materials and parts to Hisense Electric and its subsidiaries in view of the new business need of a member of the Target Group involving the sale and supply of raw materials and parts and components to Hisense Electric and its subsidiaries brought about by the expected increase in sales of home appliances under the Subsidy Policy. In view of the above, the Directors are of the view that the revision of the relevant annual cap for the year ending 31 December 2010 to RMB111,445,700 is fair and reasonable.

— 15 —

LETTER FROM THE BOARD

(5) Sale and supply of moulds

Pursuant to the Business Co-operation Framework Agreement and the Business Cooperation Framework Agreement 2, the Company has agreed that the Group shall sell and supply moulds to Hisense Group, Hisense Electric and their subsidiaries as they may require from time to time upon the terms and conditions of the Business Co-operation Framework Agreement and the Business Co-operation Framework Agreement 2.

Original annual cap

The existing annual cap for the year ending 31 December 2010 for all similar continuing connected transactions with Hisense Group and/or Hisense Electric pursuant to the Business Co-operation Framework Agreement and the Business Cooperation Framework Agreement 2 (which, for the avoidance of doubt, exclude the portion of the cap originally allocated to transactions between the Group and members of the Target Group prior to completion of the acquisition of the interests in the Target Group) was RMB138,300,000 (inclusive of value-added tax), of which:

(i) RMB79,100,000 was allocated to the sale and supply of moulds to Hisense Group and its subsidiaries under the Business Co-operation Framework Agreement 2; and
(ii) RMB59,200,000 was allocated to the sale and supply of moulds to Hisense Electric and its subsidiaries under the Business Co-operation Framework Agreement 2.

Revised annual cap

Pursuant to the Supplemental Agreement and upon the approval by the Independent Shareholders, the annual cap for the above transactions for the year ending 31 December 2010 shall be revised to RMB192,300,000, of which the amount of the cap allocated to the sale and supply of moulds to Hisense Group and its subsidiaries shall be increased to RMB112,100,000 and that allocated to the sale and supply of moulds to Hisense Electric and its subsidiaries shall be increased to RMB80,200,000.

— 16 —

LETTER FROM THE BOARD

Historical figures

The Supplemental Agreement is conditional upon the approval of the Supplemental Agreement (which provides for, inter alia, the revisions to the relevant annual caps in relation to the Relevant Transactions) by the Independent Shareholders.

Save and except for the revision of the annual caps and the expansion of the scope of services which may be provided by Hisense Electric and its subsidiaries to the Group as set out above, all other terms and conditions under the Business Co-operation Framework Agreement and the Business Co-operation Framework Agreement 2 shall remain unchanged.

BASIS OF THE REVISED ANNUAL CAPS

The historical figures for the year ended 31 December 2009 as mentioned above have not taken into account transactions entered into by the Group with members of the Target Group (which did not form part of the Group at the material time) which no longer constitute continuing connected transactions of the Company, nor transactions entered into between the Target Group and Hisense Group, Hisense Electric and their respective subsidiaries which did not constitute continuing connected transactions of the Company at the material time. Similarly, in calculating the historical figures for the 8 months ended 31 August 2010 as stated above, transactions between the Group and members of the Target Group have not been included, however, the said figures have taken into account transactions between members of the Target Group and Hisense Group, Hisense Electric and their respective subsidiaries which constitute continuing connected transactions of the Company from 1 April 2010 as a result of the acquisition of the interests in the Target Group which was completed on 31 March 2010.

— 17 —

LETTER FROM THE BOARD

The Revised Annual Caps for the year ending 31 December 2010 were determined with reference to the actual amounts paid or received by the Group in relation to the Relevant Transactions for the 8 months ended 31 August 2010 and the expected increase of business co-operation between the Group and Hisense Electric, Hisense Group and their subsidiaries having taken into account the adoption of the Subsidy Policy by the PRC government which resulted in the increase in demand for home appliances. It is estimated that the original annual caps will not be sufficient to meet the current requirement of the business development of the Company.

As at the Latest Practicable Date, the original annual caps for the Relevant Transactions have not been exceeded.

REASONS FOR THE REVISION OF THE ANNUAL CAPS

As a result of the adoption of the Subsidy Policy by the PRC government to improve the living standard of rural population through subsidising the purchase of home appliances in certain rural areas, the Directors consider that it is necessary to increase the annual caps for the Relevant Transactions to accommodate such expected increase in sale.

Furthermore, as market competition is getting intense, the further purchase of raw materials, equipments, parts and components by the Group from Hisense Group and/or Hisense Electric enable the Group to improve its control over its reserve funds, reduce procurement costs and benefit from the sharing of resources, which in turn enhance the competitiveness of the Group’s products in the market.

In addition, the Company is satisfied with the quality of the services provided by Hisense Group, Hisense Electric and/or their subsidiaries from their previous course of dealings and considers that Hisense Group, Hisense Electric and/or their subsidiaries possess the expertise and experience for the provision of relevant services which can enable the Group to carry out its daily operation smoothly.

It was also set out in the Business Co-operation Framework Agreement and the Business Co-operation Framework Agreement 2 that the transactions contemplated thereunder will be conducted in the ordinary and usual course of business of the Company, on normal commercial terms and on terms not less favourable to the Company than terms available to or from (as appropriate) independent third parties.

In view of the above,the Directors (including the independent non-executive Directors) are of the view that Relevant Transactions have been and will be conducted in the ordinary and usual course of business of the Company, on normal commercial terms and on terms

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LETTER FROM THE BOARD

not less favourable to the Company than terms available to or from (as appropriate) independent third parties. As such, the Directors (including the independent non-executive Directors) consider that the terms of the Supplemental Agreement and the Revised Annual Caps are fair and reasonable and in the interest of the Company and the Shareholders as a whole.

Mr. Tang Ye Guo, Mr. Zhou Xiao Tian, Ms. Yu Shu Min, Mr. Lin Lan, Ms. Liu Chun Xin and Mr. Zhang Ming, being Directors, have abstained from voting on the relevant board resolutions for approving the Supplemental Agreement and the transactions contemplated thereunder in view of their interest in the Supplemental Agreement and the transactions contemplated thereunder as set out below:

(a) Mr. Tang Ye Guo, Mr. Zhou Xiao Tian, Ms. Yu Shu Min, and Mr. Lin Lan, are also directors or senior management of Hisense Group or some of its subsidiaries;
(b) Ms. Yu Shu Min and Mr. Lin Lan are also directors of Hisense Electric; and
(c) Ms. Liu Chun Xin and Mr. Zhang Ming have interest in the shares of a subsidiary of Hisense Group.

INFORMATION RELATING TO THE COMPANY

The Company is principally engaged in the manufacture and sales of refrigerators and airconditioners.

INFORMATION RELATING TO HISENSE ELECTRIC

Hisense Electric was established on 17 April 1997 with a registered capital of RMB866,651,715. Its authorised representative is Ms. Yu Shu Min and registered address at 218 Qian Wan Gang Road, Qingdao Economic and Technological Development Zone. It is primarily engaged into the manufacture and sale of television, refrigerators, washing machines, radio and television equipment, communication products, information technology products, home and commercial appliances and electronic products and provision of the related services.

INFORMATION RELATING TO HISENSE GROUP

Hisense Group was incorporated in August 1979 with its registered address at No. 17 Donghai West Road, Shinan, Qingdao. Zhou Houjian is the legal representative of Hisense Group, a wholly state-owned enterprise with the registered capital of RMB806,170,000. Its scope of business includes: the entrusted operation of state-owned assets; the

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LETTER FROM THE BOARD

manufacture and sales of TV sets, refrigerators, freezers, washing machines, small home electrical appliances, VCD and DVD players, audio sets, broadcasting appliances, airconditioners, electronic computers, telephones, communication products, internet products and electronic products and the provision of related services; the development of software and the provision of internet services; the technological development and the provision of consultation services; the self-operated import and export business (with its operation subject to the list of projects as approved by the MOFTEC); the foreign economic and technical cooperation (with its operation subject to the list of projects as approved by the MOFTEC); operation of property rights transaction, provision of brokerage and information services; provision of industrial travel agency services; and provision of relevant business trainings. (Permit/licence shall be obtained for the operation of the businesses above if they fall into the requirements of licensure).

LISTING RULES IMPLICATIONS

As at the Latest Practicable Date, Hisense Air-conditioning is a connected person of the Company by virtue of being a substantial shareholder of the Company, holding 45.22% of the issued shares of the Company. As Hisense Group is the indirect holding company of Hisense Air-conditioning and Hisense Electric is owned as to 41.36% by Hisense Group, Hisense Group, Hisense Electric and their respective subsidiaries are associates of Hisense Air-conditioning and are therefore connected persons of the Company.

As the applicable percentage ratios for the transactions contemplated under the Business Co-operation Framework Agreement (other than those between the Group and members of the Target Group which are no longer constitute continuing connected transactions of the Company following the acquisition of the interests in the Target Group) and the Business Co-operation Framework Agreement 2 (as supplemented by the Supplemental Agreement) exceed 5% and the annual consideration exceeds HK$10,000,000, the Supplemental Agreement and the Revised Annual Caps are subject to the reporting, annual review, announcement and independent shareholders’ approval requirements under Rule 14A.35 of the Listing Rules.

EGM

The EGM 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 at 9:30 a.m. on Monday, 8 November 2010 at which ordinary resolution will be proposed to approve the Supplemental Agreement (which provides for, inter alia, the revisions to the relevant annual caps in relation to the Relevant Transactions) and the transactions contemplated thereunder by poll.

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LETTER FROM THE BOARD

A notice of the EGM, a proxy form for use at the EGM and a reply slip have been despatched by the Company on 20 September 2010 and are also published on the websites of the Stock Exchange (http://www.hkexnews.hk) and the Company (http://www.kelon. com). If you are not able to attend the meeting in person, you are requested to complete and return the proxy form in accordance with the instructions printed thereon and to lodge the same with the Company’s branch share registrar in Hong Kong, Hong Kong Registrars Limited, at 17M/F, Hopewell Centre, 183 Queen’s Road East, Wanchai, Hong Kong, not less than 24 hours before the time fixed for holding the EGM or any adjournment thereof (as the case may be). Completion and delivery of the proxy form will not preclude you from attending and voting in person at the EGM or any adjournment thereof (as the case may be) if you so wish.

In view of the interests of Hisense Group in the Company, Hisense Group and their respective associates will abstain from voting in relation to the resolution to approve the Supplemental Agreement (which provides for, inter alia, the revisions to the relevant annual caps in relation to the Relevant Transactions) and the transactions contemplated thereunder at the EGM. As such, Hisense Air-conditioning, which held 612,316,909 Shares, representing approximately 45.22% of the issued share capital of the Company as at the Latest Practicable Date, will abstain from voting in relation to the relevant resolution at the EGM.

In accordance with article 8.27 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 proxies; or
(c) one or more Shareholder(s) (including their proxies) representing, individually or in aggregate, 10% or more of all shares carrying the voting rights at the general meeting.

Pursuant to Rule 13.39(4) of the Listing Rules, all votes casted at the EGM must be taken by poll and the Company will procure the chairman of the EGM to demand for voting by poll, the results of which will be announced after the EGM in the manner prescribed under Rule 13.39(5) of the Listing Rules.

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LETTER FROM THE BOARD

The register of members of the Company has been closed since 9 October 2010 (Saturday) until 8 November (Monday) (both days inclusive). In order to qualify for attending the EGM, all transfer documents of H Shares together with the relevant share certificates must have been lodged with the Company’s branch share registrar in Hong Kong, Hong Kong Registrars Limited at Shops 1712-1716, 17/F, Hopewell Centre, 183 Queen’s Road East, Wan Chai, Hong Kong not later than 4:30 p.m. on 8 October 2010 (Friday) for registration.

RECOMMENDATION

The Independent Board Committee, having taking into account the advice of the Independent Financial Adviser, considers that the terms of the Supplemental Agreement and the Revised Annual Caps are in the interest of the Company and the Shareholders as a whole and are fair and reasonable so far as the Independent Shareholders are concerned. The Independent Board Committee therefore recommends the Independent Shareholders to vote in favour of the resolution to be proposed in the EGM to approve the Supplemental Agreement (which provides for, inter alia, the revisions to the relevant annual caps in relation to the Relevant Transactions) and the transactions contemplated thereunder.

ADDITIONAL INFORMATION

Your attention is drawn to the letters from the Independent Board Committee and the Independent Financial Adviser which are respectively set out on pages 23 to 24 and pages 25 to 38 of this circular. Additional information is also set out in the Appendix of this circular for your information.

Yours faithfully,

By Order of the Board of

Hisense Kelon Electrical Holdings Company Limited

Tang Ye Guo

Chairman

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LETTER FROM THE INDEPENDENT BOARD COMMITTEE

HISENSE KELON ELECTRICAL HOLDINGS COMPANY LIMITED 海信科龍電器股份有限公司

(a joint stock limited company incorporated in the People’s Republic of China with limited liability) (Stock Code: 00921)

To the Independent Shareholders

Dear Sir or Madam,

REVISED ANNUAL CAPS AND SUPPLEMENTAL AGREEMENT FOR CONTINUING CONNECTED TRANSACTIONS

We refer to the circular issued by the Company to the Shareholders dated 21 October 2010 (the “Circular”) of which this letter forms part. Terms defined in the Circular shall have the same meanings in this letter unless the context otherwise requires.

We have been appointed by the Board as the members of the Independent Board Committee to consider the terms of the Supplemental Agreement and the Revised Annual Caps as to the fairness and reasonableness of the same. The Independent Financial Adviser, Access Capital Limited, has been appointed as the independent financial adviser to advise the Independent Board Committee and the Independent Shareholders in this regard.

RECOMMENDATION

We wish to draw your attention to the letter from the Board and the letter from the Independent Financial Adviser as set out on pages 6 to 22 and pages 25 to 38 in the Circular respectively. Having considered the principal factors and reasons considered by, and the advice of the Independent Financial Adviser as set out in its letter of advice, we concur with the views of the Independent Financial Adviser and consider that the terms of the Supplemental Agreement and the Revised Annual Caps are in the interests of the Company and the Shareholders as a whole and are fair and reasonable so far as the Independent Shareholders are concerned.

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LETTER FROM THE INDEPENDENT BOARD COMMITTEE

Accordingly, we recommend the Independent Shareholders to vote in favour of the resolution to be proposed in the EGM to approve the Supplemental Agreement (which provides for, inter alia, the revisions to the relevant annual caps in relation to the Relevant Transactions) and the transactions contemplated thereunder.

Yours faithfully,

For and on behalf of the Independent Board Committee Zhang Sheng Ping Cheung Yui Kai, Warren Independent non-executive Directors Hisense Kelon Electrical Holdings Company Limited

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Set out below is the text of the letter of advice from Access Capital Limited to the Independent Board Committee and the Independent Shareholders prepared for inclusion in this Circular.

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Suite 606, 6th Floor Bank of America Tower 12 Harcourt Road Central Hong Kong

21 October 2010

To the Independent Board Committee and

the Independent Shareholders of

Hisense Kelon Electrical Holdings Company Limited

Dear Sirs,

CONTINUING CONNECTED TRANACTIONS

INTRODUCTION

We refer to our appointment as the independent financial adviser to the Independent Board Committee and the Independent Shareholders in respect of the Revised Annual Caps and the Supplemental Agreement, details of which are set out in the circular to the Shareholders dated 21 October 2010 (the “Circular”), of which this letter forms part. This letter contains our advice to the Independent Board Committee and the Independent Shareholders in respect of the Revised Annual Caps and the Supplemental Agreement. Unless otherwise stated, terms defined in the Circular have the same meanings in this letter.

On 20 September 2010, the Board announced that in view of (i) the increase of business co-operation between the Group and Hisense Electric, Hisense Group and their subsidiaries and (ii) being satisfied with the quality of the products and services of the counterparties, the Company has entered into the Supplemental Agreement with Hisense Group and Hisense Electric on 20 September 2010 to revise the annual caps for the year ending 31 December 2010 for some of the transactions contemplated under the Business

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Co-operation Framework Agreement and the Business Co-operation Framework Agreement 2. Under the Supplemental Agreement, the scope of the services which may be provided by Hisense Electric and its subsidiaries to the Group has also been extended to include material processing services and material inspection services.

As is the case of the Business Co-operation Framework Agreement and the Business Cooperation Framework Agreement 2, the transactions contemplated under the Supplemental Agreement also constitute continuing connected transactions (the “Continuing Connected Transactions”) of the Company under Chapter 14A of the Listing Rules and should be aggregated for the purpose of Rules 14A.25 to 14A.27 of the Listing Rules.

As the applicable percentage ratios for the transactions contemplated under the Business Co-operation Framework Agreement and the Business Co-operation Framework Agreement 2, both as amended and supplemented by the Supplemental Agreement, exceed 5% and the annual consideration exceeds HK$10,000,000, the Relevant Transactions are subject to reporting, announcement and independent shareholders’ approval requirements under Rule 14A.35 of the Listing Rules.

The Independent Board Committee, comprising all the independent non-executive Directors, has been formed to advise the Independent Shareholders as to whether the revision of the annual caps under the Supplemental Agreement is in the interests of the Company and the Shareholders as a whole, and the terms of the Supplemental Agreement including the proposed Revised Annual Caps are fair and reasonable. As the independent financial adviser to the Independent Board Committee and the Independent Shareholders, our role is to give an independent opinion to the Independent Board Committee and the Independent Shareholders as to (i) whether or not the revision of the annual caps under the Supplemental Agreement is in the interests of the Company and the Shareholders as a whole; (ii) whether or not the terms of the Supplemental Agreement, including the proposed Revised Annual Caps, are fair and reasonable; and (iii) how the Independent Shareholders should vote in respect of the resolution to approve the Supplemental Agreement and the Revised Annual Caps at the relevant general meeting of the Company.

BASIS OF OUR OPINION

In formulating our advice, we have relied solely on the statements, information, opinions and representations contained in the Circular and the information and representations provided to us by the Company and/or the Directors. We have assumed that all such statements, information, opinions and representations contained or referred to in the Circular or otherwise provided or made or given by the Company and/or its senior management staff and/or the Directors and for which it is/they are solely responsible were

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

true and accurate and valid at the time they were made and given and continue to be true and valid as at the date of the Circular. We have assumed that all the opinions and representations made or provided by the Directors and/or the senior management staff of the Company contained in the Circular have been reasonably made after due and careful enquiry. We have also sought and obtained confirmation from the Company and/or its senior management staff and/or the Directors that no material facts have been omitted from the information provided and referred to in the Circular.

We consider that we have reviewed all information and documents which are made available to us to enable us to reach an informed view and to justify our reliance on the information provided so as to provide a reasonable basis for our advice. We have no reason to doubt the truth, accuracy and completeness of the statements, information, opinions and representations provided to us by the Company and/or its senior management staff and/or the Directors and their respective advisers or to believe that material information has been withheld or omitted from the information provided to us or referred to in the aforesaid documents. We have not, however, carried out any independent verification of the information provided, nor have we conducted any independent investigation into the business and affairs of the Group.

PRINCIPAL FACTORS CONSIDERED

In formulating our opinion regarding the Supplemental Agreement and the Revised Annual Caps, we have taken into consideration the following principal factors:

I. Background information and reasons for the Supplemental Agreement

The principal activities of the Company, Hisense Electric and Hisense Group are similar and both include the manufacture and sales of household electrical appliances including air-conditioners and refrigerators and the provision of related services. Hisense Air-conditioning, a subsidiary of Hisense Group, is a substantial shareholder of the Company, holding 45.22% of the issued shares of the Company. Given the keen competition in the white goods market in the PRC and in view of the substantial interest of Hisense Group in the Company, the Directors consider that there are business co-operation arrangements which can be beneficial to both the Company and Hisense Group in terms of the enhancement of the competitiveness of both sides as the Company, Hisense Group and Hisense Electric combine the purchase of raw materials, bulk purchase orders can be placed in order to negotiate for a more favourable price for the purchasing of raw materials. In addition, as there may be idle capacity for the Group’s production solely for its own products during non-peak season, the co-operation with Hisense Electric and Hisense Group

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

and producing products for them can also help to reduce the idling capacity of the production facilities of the Group so that there are more effective utilisations of the production fixed costs.

Accordingly, in view of the anticipated benefits to be brought by the business cooperation between the Company and the relevant subsidiaries of Hisense Group and Hisense Electric, the relevant parties entered into the Business Co-operation Framework Agreement on 6 November 2009, pursuant to which the Company conditionally agreed that it and any of its subsidiaries might enter into certain transactions with the relevant subsidiaries of Hisense Group in respect of the purchase of compressors, sale and purchase of refrigerators, air-conditioners, raw materials, moulds, the sale of freezers, home appliances and parts and components for refrigerators, air-conditioners and freezers and the provision of after-sale maintenance, repair and consultation services, electronic communication services, property management services and leasing services.

Following completion of the acquisition of, inter alia, certain interests in the Target Group, the Company’s transactions with the Target Group as contemplated under the Business Co-operation Framework Agreement will no longer constitute continuing connected transactions of the Company. However, the Company identified certain transactions between the Target Group and the connected persons of the Company that would constitute non-exempt continuing connected transactions after completion of the acquisition of the interests in the Target Group. Accordingly, the Company entered into the Business Co-operation Framework Agreement 2 in relation to the purchase of home electrical appliances, raw materials, equipment, parts and components from, provision of services by, sale and supply of home electrical appliances, moulds, raw materials and parts to, and provision of loading and unloading services and equipment rental services to, Hisense Group, Hisense Electric and their respective subsidiaries. Further details of the Business Cooperation Framework Agreement 2 were disclosed in the announcement and the circular of the Company dated 5 May 2010 and 18 May 2010, respectively. The Business Co-operation Framework Agreement 2 and the transactions contemplated thereunder (subject to the related annual caps) were approved by the independent shareholders of the Company at the annual general meeting of the Company held on 4 June 2010. Since then, the Group has conducted the Continuing Connected Transactions with subsidiaries of Hisense Electric and Hisense Group in accordance with the terms and conditions of the Business Co-operation Framework Agreement and the Business Co-operation Framework Agreement 2.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

We understand that the Group has engaged Hisense Group and Hisense Electric and their subsidiaries for the provision of services for a few years and the Group is very satisfied with the quality of services received. Accordingly, the Group intends to extend the scope of the services which may be provided by Hisense Group and Hisense Electric and its subsidiaries to the Group.

As stated in the Letter from the Board, as a result of the adoption of the “Home Appliances Subsidy Policy for Rural Villages（家電下鄉政策）” (the “Subsidy Policy”) by the PRC government to improve the living standard of rural population through subsidising the purchase of home appliances in certain rural areas, the Directors consider that it is necessary to increase the annual caps for the Relevant Transactions to accommodate such expected increase in sale. The Company expects that the amount of the Relevant Transactions will exceed the existing annual caps for 2010 as the demand for such products remains strong. As such, the Company anticipates that certain existing annual caps (the “Existing Annual Caps”) under the Business Co-operation Framework Agreement and the Business Co-operation Framework Agreement 2 will not be sufficient to cover the anticipated increases.

Furthermore, as market competition is getting intense, the further purchase of raw materials, equipments, parts and components by the Group from Hisense Group and/or Hisense Electric enables the Group to (i) improve its control over its reserve funds as the Group is a large customer to Hisense Group and Hisense Electric, the pricings for products obtained from Hisense Group and Hisense Electric are more stable; (ii) reduce procurement costs as average costs from bulk purchase orders are lower; and (iii) benefit from the sharing of resources when the Company is in need of products or raw material during peak season, it can obtain resources from Hisense Group and Hisense Electric on an urgent basis, which in turn enhance the competitiveness of the Group’s products in the market.

Accordingly, the Company proposes to revise certain Existing Annual Caps by way of the Supplemental Agreement. Taking into account the factors stated above including (i) the actual amounts paid or received by the Group in relation to the Relevant Transactions for the eight months ended 31 August 2010; (ii) the increase in sales as a result of the Subsidy Policy; and (iii) the co-operation with Hisense Group and Hisense Electric can help the Group to control its costs, the Board considers that the Revised Annual Caps under the Supplemental Agreement are fair and reasonable and in the interests of the Shareholders and the Company as a whole.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Having considered that (i) the Business Co-operation Framework Agreement, the Business Co-operation Framework Agreement 2 and the Existing Annual Caps have already been formally approved by the Independent Shareholders pursuant to the relevant requirements of the Listing Rules; (ii) the Continuing Connected Transactions have been and will continue to be carried out by the Group in its ordinary and usual course of business and in accordance with the terms and conditions of the Business Co-operation Framework Agreement and the Business Co-operation Framework Agreement 2 which are fair and reasonable and in the interests of the Company and the Shareholders as a whole; (iii) other than the revision of certain Existing Annual Caps as proposed under the Supplemental Agreement and the scope of the services which may be provided by Hisense Electric and its subsidiaries to the Group has been extended, the terms and conditions of the Business Co-operation Framework Agreement and the Business Co-operation Framework Agreement 2 will remain unchanged; (iv) certain of the actual transaction value of the Relevant Transactions up to 31 August 2010 have already accounted for a substantial proportion of the relevant Existing Annual Caps (further details of the actual transaction value of the Relevant Transactions up to 31 August 2010 are set out in the section headed “Rationale for determining the Revised Annual Caps” below); and (v) certain Relevant Transactions including the sale and supply of home electrical appliances, raw materials and parts and moulds by the Group, when taken place, will increase the revenue of the Group , we are of the view that the Supplemental Agreement is in the interests of the Company and the Shareholders as a whole.

II. Rationale for determining the Revised Annual Caps

Under the Supplemental Agreement, the Existing Annual Caps relating to (i) purchase of raw materials, equipment, parts and components; (ii) provision of services; (iii) sale and supply of home electrical appliances; (iv) sale and supply

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

of raw materials and parts; and (v) sale and supply of moulds under the Business Co-operation Framework Agreement and the Business Co-operation Framework Agreement 2 shall be revised as follows:

	Existing	Revised
	Annual Caps	Annual Caps	% increase
	(RMB)	(RMB)
Maximum aggregate value (inclusive of value-	111,580,000	176,580,000	58.3%
added tax) of purchase of raw materials,
equipment, parts and components by the
relevant subsidiaries of the Company from the
relevant subsidiaries of Hisense Group and
Hisense Electric
Maximum aggregate value (inclusive of value-	114,611,600	123,231,600	7.5%
added tax) of the provision of services from
the relevant subsidiaries of Hisense Group and
Hisense Electric to the relevant subsidiaries of
the Company
Maximum aggregate value (inclusive of	1,225,689,300	1,227,689,300	0.2%
value-added tax) of the sale and supply of
home electrical appliances by the relevant
subsidiaries of the Company to the relevant
subsidiaries of Hisense Group and Hisense
Electric
Maximum aggregate value (inclusive of value-	101,445,700	111,445,700	9.9%
added tax) of the sale and supply of raw
materials and parts by the relevant subsidiaries
of the Company to the relevant subsidiaries of
Hisense Group and Hisense Electric
Maximum aggregate value (inclusive of value-	138,300,000	192,300,000	39.0%
added tax) of the sale and supply of moulds
by the relevant subsidiaries of the Company to
the relevant subsidiaries of Hisense Group and
Hisense Electric

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

As stated in the Letter from the Board, the historical figures for the year ended 31 December 2009 have not taken into account transactions entered into by the Group with members of the Target Group (which did not form part of the Group at the material time) which no longer constitute continuing connected transactions of the Company, nor transactions entered into between the Target Group and Hisense Group, Hisense Electric and their respective subsidiaries which did not constitute continuing connected transactions of the Company at the material time. Similarly, in calculating the historical figures for the eight months ended 31 August 2010, transactions between the Group and members of the Target Group have not been included, however, the said figures have taken into account transactions between members of the Target Group and Hisense Group, Hisense Electric and their respective subsidiaries which constitute continuing connected transactions of the Company from 1 April 2010 as a result of the acquisition of the interests in the Target Group which was completed on 31 March 2010.

As stated in the Letter from the Board, the Revised Annual Caps were determined with reference to the actual amounts paid or received by the Group in relation to the Relevant Transactions for the eight months ended 31 August 2010 and the expected increase of business co-operation between the Group and Hisense Electric, Hisense Group and their subsidiaries having taken into account the adoption of the Subsidy Policy by the PRC government which resulted in the increase in demand for home appliances. During the first half of 2010, the value of home appliances sold under the Subsidy Policy was approximately RMB67.8 billion, already exceeded the sales value under the Subsidy Policy for the full year in 2009.

The increase in Revised Annual Caps over the Existing Annual Caps ranging from 0.2% to 58.3% is made with reference to the overall effect of (i) certain connected transactions between members of the Target Group and Hisense Group and Hisense Electric, including the purchase of raw materials, equipment, parts and components, provision of services, sale and supply of raw materials and parts and moulds, only began to take place after the Group acquired certain interests in the Target Group; (ii) certain of the Relevant Transactions for the eight months ended 31 August 2010 has already accounted for a substantial proportion of the relevant Existing Annual Caps; and (iii) the increase in sales under the Subsidy Policy.

In view of the fact that the Revised Annual Caps were arrived at after taking into account the expected increase in sales as boosted by the adoption of the Subsidy Policy, we have reviewed the Subsidy Policy and its effect on domestic demand for home appliances. In particular, pursuant to the Subsidy Policy, the PRC government initially provided a 13% subsidy to farmers who bought designated brands of color

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

television sets, refrigerators and mobile phones in the three agricultural provinces of Shandong, Henan, and Sichuan. Since 1 February 2009, the PRC government expanded the Subsidy Policy nationwide to benefit all people living in rural areas and added four more products: motorcycles, personal computers, water heaters and air-conditioners.

According to the Ministry of Commence of the PRC, there were approximately 7.1 million units or RMB17.1 billion worth of home appliances sold under the Subsidy Policy in August 2010, representing an increase of approximately 88% and 126% over August 2009, respectively. The sales of home appliances under the Subsidy Policy continued to increase. During the first half of 2010, the value of home appliances sold under the Subsidy Policy was approximately RMB67.8 billion, already exceeded the sales value under the Subsidy Policy for the full year in 2009. For the eight months ended 31 August 2010, there were approximately 46.4 million units or RMB100.9 billion worth of home appliances sold under the Subsidy Policy, representing an increase of approximately 160% and 210%, respectively, over the same period in 2009. According to the Ministry of Commence of the PRC, the “Hisense” brand is one of the best selling brands under the Subsidy Policy.

We have also discussed with the management of the Company about the underlying assumptions of the estimated amount of the Relevant Transactions including the estimated sales quantity for different models of home appliances in light of the Subsidy Policy and the estimated unit price for such models, their basis as well as the projection of the relevant variables such as market share and product market price and we are of the view that such assumptions and basis are fair and reasonable. For the purpose of ensuring the accuracy of the computation of the Revised Annual Caps, we have also carried out a review on the relevant worksheets for calculation of the relevant annual caps including the review on the quantities and the unit prices of the subject items. Based on (i) our discussion with the management of the Company about the underlying assumptions; (ii) the result of our review; and (iii) the increase in home appliances sold under the Subsidy Policy in 2010 compared to 2009 as stated above, we are satisfied that the Company’s estimation of the Revised Annual Caps has been conducted on a fair and reasonable basis.

For comparison among the actual transaction value of the Relevant Transactions, the Existing Annual Caps and the Revised Annual Caps, the following table sets out the respective percentages as represented by the actual transaction value of the Relevant Transactions up to 31 August 2010 as a percentage of the Existing Annual Caps and the Revised Annual Caps.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

			Percentage		Percentage
			represented by		represented by
			the actual		the actual
			transaction		transaction
	Actual		value to the		value to the
	transaction		respective		respective
	value up to	Existing	Existing	Revised	Revised
	31 August 2010	Annual Caps	Annual Caps	Annual Caps	Annual Caps
	(RMB)	(RMB)		(RMB)
Maximum aggregate value (inclusive	70,393,922	111,580,000	63.1	176,580,000	39.9
of value-added tax) of purchase of
raw materials, equipment, parts
and components by the relevant
subsidiaries of the Company from
the relevant subsidiaries of Hisense
Group and Hisense Electric
Maximum aggregate value (inclusive	25,605,325	114,611,600	22.3	123,231,600	20.8
of value-added tax) of the provision
of services from the relevant
subsidiaries of Hisense Group and
Hisense Electric to the relevant
subsidiaries of the Company
Maximum aggregate value (inclusive	691,405,500	1,225,689,300	56.4	1,227,689,300	56.3
of value-added tax) of the sale and
supply of home electrical appliances
by the relevant subsidiaries of the
Company to the relevant subsidiaries
of Hisense Group and Hisense
Electric
Maximum aggregate value (inclusive	4,169,493	101,445,700	4.1	111,445,700	3.7
of value-added tax) of the sale and
supply of raw materials and parts
by the relevant subsidiaries of the
Company to the relevant subsidiaries
of Hisense Group and Hisense
Electric
Maximum aggregate value (inclusive	96,544,506	138,300,000	69.8	192,300,000	50.2
of value-added tax) of the sale and
supply of moulds by the relevant
subsidiaries of the Company to the
relevant subsidiaries of Hisense
Group and Hisense Electric

The actual transaction value of approximately RMB70.4 million for the purchase of raw materials, equipment, parts and components up to 31 August 2010 represents about 63.1% and 39.9% of the relevant Existing Annual Cap of RMB111,580,000 and the Revised Annual Cap of RMB176,580,000, respectively. In view of the fact

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

that such actual transaction value up to 31 August 2010 has already accounted for a substantial portion of the Existing Annual Cap for the year ending 31 December 2010, we concur with the management’s view that it is necessary to revise the relevant Existing Annual Cap so as to cover for the anticipated increasing transaction value of the Relevant Transactions. We note that the Revised Annual Cap of RMB176,580,000 represents a 58.3% increase over the Existing Annual Cap of RMB111,580,000. We understand from the Company that in order to save on overhead costs, the relevant subsidiaries of the Company and the relevant subsidiaries of Hisense Group and Hisense Electric intend to increase the cooperation in purchasing and supplying raw materials and parts to each other. Taking into account (i) the actual transaction amount for the eight months ended 31 August 2010 already accounted for approximately 63.1% of the Existing Annual Cap and (ii) the anticipated increasing demand for home appliances due to the Subsidy Policy, we are of the view that the Revised Annual Cap of RMB176,580,000 for the purchase of raw materials, equipment, parts and components for the year ending 31 December 2010 is fair and reasonable.

As regards to the provision of services, as stated in the Letter from the Board, in view of the business needs of the Group, the scope of the services which may be provided by Hisense Electric and its subsidiaries to the Group has also been extended to include material processing services and material inspection services. The revision of the annual caps for the year ending 31 December 2010 to RMB123,231,600 is the result of (i) an increase of RMB70,000 to the original amount (RMB110,471,600) allocated to the provision of relevant services by Hisense Group and its subsidiaries and the projection on the transaction amount for transactions to be entered into between the Group and Hisense Group and its subsidiaries; and (ii) an increase of RMB8,550,000 to the original amount (RMB4,140,000) allocated to the provision of relevant services by Hisense Electric and its subsidiaries in view of the expansion of the scope of services (that is, material processing services and material inspection services) which may be provided by Hisense Electric and its subsidiaries. We understand from the Company that the majority of the increase of the Revised Annual Cap is allocated to the provision of property management services, material processing services and material inspection services. Taking into account (i) the scope of services to be provided by Hisense Electric and its subsidiaries will be extended due to the business needs of the Group; and (ii) the increase of the Revised Annual Cap over the Existing Annual Cap of approximately 7.5% is relatively modest, we are of the view that the Revised Annual Cap of RMB123,231,600 for the provision of services for the year ending 31 December 2010 is fair and reasonable.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

As regards to the sale and supply of home electrical appliances, the actual transaction value of approximately RMB691.4 million up to 31 August 2010 represents about 56.4% and 56.3% of the relevant Existing Annual Cap of RMB1,225,689,300 and the Revised Annual Cap of RMB1,227,689,300, respectively. Taking into account (i) the actual transaction amount for the eight months ended 31 August 2010 already accounted for approximately 56.4% of the Existing Annual Cap; and (ii) the increase of the Revised Annual Cap over the Existing Annual Cap of approximately 0.2% is relatively modest, we are of the view that the Revised Annual Cap of RMB1,227,689,300 for the sale and supply of home electrical appliances for the year ending 31 December 2010 is fair and reasonable.

As regards to the sale and supply of raw materials and parts, as stated in the Letter from the Board, the revision of the annual caps for the year ending 31 December 2010 to RMB111,445,700 is the result of the increase of RMB10,000,000 to the original amount (RMB1,040,000) allocated to the sale and supply of raw materials and parts to Hisense Electric and its subsidiaries in view of the new business need of a member of the Target Group involving the sale and supply of raw materials and parts and components to Hisense Electric and its subsidiaries brought about by the expected increase in sales of home appliances under the Subsidy Policy. We understand from management of the Company that the relevant member of the Target Group intends to sell more raw materials and parts to the relevant subsidiaries of Hisense Electric. Taking into account (i) new business need of a member of the Target Group involving the sale and supply of raw materials and parts and components to Hisense Electric and its subsidiaries brought about by the expected increase in sales of home appliances under the Subsidy Policy; (ii) the increase of the Revised Annual Cap over the Existing Annual Cap of approximately 9.9% is relatively modest; and (iii) the supply of raw materials and parts to Hisense Electric and its subsidiaries would increase the revenue of the Group, we are of the view that the Revised Annual Cap of RMB111,445,700 for the sale and supply of raw materials and parts for the year ending 31 December 2010 is fair and reasonable.

As regards to the sale and supply of moulds, the actual transaction value up to 31 August 2010 of approximately RMB96.5 million represents about 69.8% and 50.2% of the Existing Annual Cap of RMB138,300,000 and the Revised Annual Cap of RMB192,300,000, respectively. We understand from the Company that depending on the business development plan of Hisense Group and Hisense Electric, they require mould as components for the development of certain of their new products. Accordingly, the sale and supply of moulds will facilitate the Company to maintain an important relationship with Hisense Group and Hisense Electric so that they

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

may become stable customers of the Company thereby further expanding the sales of the Company. Given that (i) the supply of moulds to Hisense Group and Hisense Electric helps the Company to maintain relationship with its customers and increase the revenue of the Group; and (ii) the actual transaction amount for the eight months ended 31 August 2010 already accounted for approximately 69.8% of the Existing Annual Cap, we are of the view that the Revised Annual Cap of RMB192,300,000 for the sale and supply of moulds for the year ending 31 December 2010 is fair and reasonable.

While the proposed Revised Annual Caps for the year ending 2010 depend on significant extent on the estimation of sales by the relevant parties, it should be noted that (i) the proposed transactions contemplated under the Business Cooperation Framework Agreement and the Business Co-operation Framework Agreement 2, both as amended and supplemented by the Supplement Agreement, will continue to be conducted in the ordinary and usual course of business of the Company and on normal commercial terms and on terms not less favourable to the Company than terms available to or from (as appropriate) independent third parties; (ii) the sale and supply of home electrical appliances, raw materials and parts and moulds by the relevant subsidiaries of the Company to the relevant subsidiaries of the Hisense Group will increase the Group’s overall revenue and profitability; and (iii) the non-exclusive arrangement under the Business Co-operation Framework Agreement and the Business Co-operation Framework Agreement 2, both as amended and supplemented by the Supplement Agreement, provides the Company with the flexibility without any commitment on the actual transaction values. As such, we are of the view that the Revised Annual Caps are in the interests of the Company and the Shareholders as a whole.

III. Conditions of the Revised Annual Caps under the Supplemental Agreement

As in the case of the Existing Annul Caps, the Revised Annual Caps for the year ending 31 December 2010 will be subject to the annual review by the independent non-executive Directors, details of which must be included in the Company’s subsequent published annual report and accounts. Also, pursuant to the Listing Rules, the auditors of the Company must provide a letter to the Board confirming, among other things, that the transactions contemplated under the Business Cooperation Framework Agreement and the Business Co-operation Framework Agreement 2, both as amended and supplemented by the Supplement Agreement, are conducted in accordance with their terms and that the relevant annual caps not being exceeded. In addition, pursuant to the Listing Rules, the Company shall

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

publish an announcement if it knows or has reason to believe that the independent non-executive Directors and/or its auditors will not be able to confirm the terms of such transactions or the relevant annual caps not being exceeded. We are of the view that there are appropriate measures in place to govern the conduct of the Continuing Connected Transactions and safeguard the interests of the Independent Shareholders.

RECOMMENDATION

Based on the above, we are of the opinion that the transactions contemplated under the Supplemental Agreement are on normal commercial terms and in the ordinary and usual course of business of the Company and that the terms of the Supplemental Agreement and the Revised Annual Caps are in the interests of the Company and the Shareholders as a whole and are fair and reasonable. Accordingly, we would advise the Independent Board Committee and the Independent Shareholders that the Independent Shareholders should vote in favour of the ordinary resolution to approve the Supplemental Agreement and the transactions contemplated thereunder and the Revised Annual Caps at the relevant general meeting of the Company.

Yours faithfully, For and on behalf of Access Capital Limited Alexander Tai Principal Director

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GENERAL INFORMATION

APPENDIX

1. RESPONSIBILITY STATEMENT

This circular, for which the Directors collectively and individually accepts full responsibility, includes particulars given in compliance with the Listing Rules for the purpose of giving information with regard to the Company. The Directors, having made all reasonable enquires, confirm that to the best of their knowledge and belief the information contained in this circular is accurate and complete in all material respects and not misleading or deceptive, and there are no other matters the omission of which would make any statement contained herein or this circular misleading.

2. DISCLOSURE OF INTERESTS

Directors, supervisors and chief executive of the Company

As at the Latest Practicable Date:

(a) none of the Directors, supervisors and chief executive of the Company had interests and short positions in the shares, underlying shares and/or debentures (as the case may be) of the Company or any of its associated corporations (within the meaning 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 any such Director or chief executive is taken or deemed to have under such provisions of the SFO) or which were required to be entered into the register required to be kept by the Company under section 352 of the SFO or which were otherwise required to be notified to the Company and the Stock Exchange pursuant to the Model Code for Securities Transactions by Directors of Listed Issuers in the Listing Rules;
(b) none of the Directors or supervisors of the Company had any interest, direct or indirect, in any asset which have been, since 31 December 2009, being the date to which the latest published audited financial statements of the Group were made up, acquired or disposed of by or leased to any member of the Group or are proposed to be acquired or disposed of by or leased to any member of the Group;
(c) none of the Directors or supervisors of the Company was materially interested in any contract or arrangement entered into by any member of the Group subsisting as at the Latest Practicable Date and which was significant in relation to the business of the Group; and

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GENERAL INFORMATION

APPENDIX

(d) Mr. Tang Ye Guo, Mr. Zhou Xiao Tian, Ms. Yu Shu Min, Mr. Lin Lan, being Directors, are also directors or senior management of Hisense Group or some of its subsidiaries. Ms. Yu Shu Min and Mr. Lin Lan, being Directors, are also directors of Hisense Electric. Ms. Liu Chun Xin and Mr. Zhang Ming, being Directors, have interest in the shares of a subsidiary of Hisense Group.

3. SERVICE AGREEMENTS

As at the Latest Practicable Date, none of the Directors, proposed directors, supervisors or proposed supervisors of the Company had any existing or proposed service contract with any member of the Group (excluding contracts expiring or determinable by the Group within one year without payment of compensation (other than statutory compensation)).

4. COMPETING BUSINESS

As at the Latest Practicable Date, the following Directors or their respective associates have interests in the following businesses which are considered to compete or are likely to compete, either directly or indirectly, with the businesses of the Group other than those businesses where the Directors were appointed as directors to represent the interests of the Company and/or the Group pursuant to the Listing Rules:

Name of Director

Description of business of

Name of entity business of which business is the entity which considered to is considered to compete or likely compete or likely to compete with to compete with Nature of interest the business of the business of of the Director the Group the Group in the entity

Mr. Tang Ye Guo The subsidiaries of Production of Director Hisense Group air-conditioning/ electrical products
Mr. Zhou Xiao Tian The subsidiaries of Production of Director Hisense Group air-conditioning/ electrical products

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GENERAL INFORMATION

APPENDIX

		Description of
	Name of entity	business of
	which business is	the entity which
	considered to	is considered to
	compete or likely	compete or likely
	to compete with	to compete with	Nature of interest
	the business of	the business of	of the Director
Name of Director	the Group	the Group	in the entity
Ms. Yu Shu Min	Hisense Group or	Production of	Director
	Hisense Electric	air-conditioning/	and/or senior
		electrical products	management
Mr. Lin Lan	Hisense Group or	Production of	Director
	Hisense Electric	air-conditioning/	and/or senior
		electrical products	management

As at the Latest Practicable Date, save as disclosed above, none of the Directors or their respective associates has interests in the businesses which compete or are likely to compete, either directly or indirectly, with the businesses of the Group.

5. NO MATERIAL ADVERSE CHANGE

As at the Latest Practicable Date, none of the Directors was aware of any material adverse change in the financial or trading position of the Group since 31 December 2009 (being the date to which the latest published audited financial statements of the Group were made up).

6. EXPERT

The following sets out the qualifications of the expert which has given its opinion or advice as contained in this circular:

Name Qualifications Access Capital Limited a corporation licensed under the SFO to carry on type 1 (dealing in securities), type 4 (advising on securities), type 6 (advising on corporate finance) and type 9 (asset management) regulated activities under the SFO

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GENERAL INFORMATION

APPENDIX

As at the Latest Practicable Date, the Independent Financial Adviser:

(a) did not have any shareholding, direct or indirect, 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;
(b) did not have any interest, direct or indirect, in any assets which have been, since 31 December 2009, the date to which the latest published audited financial statements of the Company were made up, acquired or disposed of by or leased to any member of the Group, or which are proposed to be acquired or disposed of by or leased to any member of the Group; and
(c) has given and has not withdrawn its written consent to the issue of this circular with the inclusion of and references to its name, letter and/or report in the form and context in which they are included.

The letter of advice given by the Independent Financial Adviser to the Independent Board Committee and the Independent Shareholders are given as of the date of this circular for incorporation herein.

7. DOCUMENTS AVAILABLE FOR INSPECTION

Copies of the following documents are available for inspection at the principal place of business in Hong Kong of the Company at (for the period from the date of this circular up to but excluding 1 November 2010) Room 3104-06, Singga Commercial Centre, No. 148 Connaught Road West, Hong Kong and (for the period from 1 November 2010 up to and including 15 November 2010) Room 3101-05, Singga Commercial Centre, No. 148 Connaught Road West, Hong Kong during normal business hours:

(a) the letter from the Independent Financial Adviser dated 21 October 2010;
(b) the Business Co-operation Framework Agreement;
(c) the Business Co-operation Framework Agreement 2; and
(e) the Supplemental Agreement.

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AI assistant

Medlive Technology Co., Ltd. — Proxy Solicitation & Information Statement 2010

50436_rns_2010-10-21_ee9ab90c-3773-4196-aa20-6979877aeaf2.pdf

HISENSE KELON ELECTRICAL HOLDINGS COMPANY LIMITED 海信科龍電器股份有限公司

REVISED ANNUAL CAPS AND SUPPLEMENTAL AGREEMENT FOR CONTINUING CONNECTED TRANSACTIONS

CONTENTS

DEFINITIONS

DEFINITIONS

DEFINITIONS

DEFINITIONS

HISENSE KELON ELECTRICAL HOLDINGS COMPANY LIMITED 海信科龍電器股份有限公司

REVISED ANNUAL CAPS AND SUPPLEMENTAL AGREEMENT FOR CONTINUING CONNECTED TRANSACTIONS

BACKGROUND

LETTER FROM THE BOARD

SUPPLEMENTAL AGREEMENT

Date:

Parties:

Revision of annual caps:

(1) Purchase of raw materials, equipment, parts and components

Original annual cap

Revised annual cap

Historical figures

LETTER FROM THE BOARD

(2) Provision of services

Original annual cap

Historical figures

(3) Sale and supply of home electrical appliances

Original annual cap

Revised annual cap

Historical figures

(4) Sale and supply of raw materials and parts

Original annual cap

Revised annual cap

Historical figures

(5) Sale and supply of moulds

Original annual cap

Revised annual cap

Historical figures

BASIS OF THE REVISED ANNUAL CAPS

LETTER FROM THE BOARD

REASONS FOR THE REVISION OF THE ANNUAL CAPS

LETTER FROM THE BOARD

INFORMATION RELATING TO THE COMPANY

INFORMATION RELATING TO HISENSE ELECTRIC

INFORMATION RELATING TO HISENSE GROUP

LETTER FROM THE BOARD

LISTING RULES IMPLICATIONS

EGM

LETTER FROM THE BOARD

LETTER FROM THE BOARD

RECOMMENDATION

ADDITIONAL INFORMATION

HISENSE KELON ELECTRICAL HOLDINGS COMPANY LIMITED 海信科龍電器股份有限公司

REVISED ANNUAL CAPS AND SUPPLEMENTAL AGREEMENT FOR CONTINUING CONNECTED TRANSACTIONS

RECOMMENDATION

Yours faithfully,

CONTINUING CONNECTED TRANACTIONS

INTRODUCTION

BASIS OF OUR OPINION

PRINCIPAL FACTORS CONSIDERED

I. Background information and reasons for the Supplemental Agreement

II. Rationale for determining the Revised Annual Caps

III. Conditions of the Revised Annual Caps under the Supplemental Agreement

RECOMMENDATION

1. RESPONSIBILITY STATEMENT

2. DISCLOSURE OF INTERESTS

Directors, supervisors and chief executive of the Company

3. SERVICE AGREEMENTS

4. COMPETING BUSINESS

Name of Director

Description of business of

5. NO MATERIAL ADVERSE CHANGE

6. EXPERT

7. DOCUMENTS AVAILABLE FOR INSPECTION

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Medlive Technology Co., Ltd. Proxy Solicitation & Information Statement 2010