Medlive Technology Co., Ltd. - Proxy Solicitation & Information Statement 2011

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)

PROPOSED ADOPTION OF FIRST SHARE OPTION INCENTIVE SCHEME AND PROPOSED GRANT THEREUNDER

A letter from the Board is set out on pages 5 to 11 of this circular.

The EGM will be held at the conference room of the Company’s head office, Shunde District, Foshan City, Guangdong Province, the PRC at 2:00 p.m. on Monday, 1 August 2011 at which special resolutions will be proposed to, among other things, approve and adopt the revised draft of the Scheme and its related matters by poll.

The H Shareholders’ Class Meeting will be held at the conference room of the Company’s head office, Shunde District, Foshan City, Guangdong Province, the PRC at 3:00 p.m. (or immediately after the conclusion or adjournment of the A Shareholders’ Class Meeting) on Monday, 1 August 2011 at which special resolutions will be proposed to, among other things, approve and adopt the revised draft of the Scheme and its related matters by poll.

Notices convening the EGM and the H Shareholders’ Class Meeting and the proxy forms and the Independent Director’s Proxy Forms for use at the EGM and the H Shareholders’ Class Meeting and the reply slips for the EGM and the H Shareholders’ Class Meeting have been despatched on 10 June 2011 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 EGM and/or the H Shareholders’ Class Meeting in person, you are requested to complete and return the proxy forms or the Independent Director’s Proxy Forms 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 relevant meetings or any adjournment thereof (as the case may be). Completion and delivery of the proxy forms or the Independent Director’s Proxy Forms will not preclude you from attending and voting in person at the EGM and/or the H Shareholders’ Class Meeting or any adjournment thereof (as the case may be) if you so wish.

7 July 2011

		Page
Definitions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Letter from the Board. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Appendix I	— Summary of the principal terms of the Scheme and
	the Grant thereunder. . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Appendix II	— Measures for Performance Appraisal for the Share
	Option Incentive Scheme. . . . . . . . . . . . . . . . . . . . . . . . .	37

— i —

DEFINITIONS

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

“A share(s)”	domestic ordinary share(s) of the Company;
“A Shareholders’ Class	the class meeting of the A shareholders of the Company
Meeting”	to be held at the conference room of the Company’s head
	office, Shunde District, Foshan City, Guangdong Province,
	the PRC on 1 August 2011 at 2:30 p.m. (or immediately
	after the conclusion or adjournment of the EGM) to, among
	other things, approve and adopt the revised draft of the
	Scheme and its related matters or any adjournment thereof
	(as the case may be);
“Articles of Association”	Articles of Association of the Company;
“associates”	natural person, corporations or trustees referred to in the
	definition of “associates” in Rule 19A.04 of the Hong Kong
	Listing Rules;
“Board”	the board of directors of the Company;
“Class Meetings”	collectively, the A Shareholders’ Class Meeting and the H
	Shareholders’ Class Meeting;
“Company”	Hisense Kelon Electrical Holdings Company Limited, a
	company incorporated in the PRC with limited liabilities, the
	H shares and A shares of which are listed on the main board
	of the Hong Kong Stock Exchange and the Shenzhen Stock
	Exchange respectively;
“CSRC”	China Securities Regulatory Commission（中國證券監督管
	理委員會）;
“Director(s)”	the director(s) of the Company;

— 1 —

DEFINITIONS

“EGM”	the second 2011 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 1 August 2011 at
	2:00 p.m. to, among other things, approve and adopt the
	revised draft of the Scheme and its related matters or any
	adjournment thereof (as the case may be);
“Exercisable Date”	the date on which the Participants is entitled to exercise the
	Share Options, which must be a trading day;
“Exercisable Period”	the period commencing from the Exercisable Date and
	ending on the date when the Share Options lapse;
“exercise of the Share	the acts by Participants to purchase the shares of the
Options”	Company at the pre-determined price and on the exercise
	conditions according to the Scheme during the Exercisable
	Period;
“Exercise Price”	the price at which Participants are able to purchase A shares
	of the Company and determined when the Share Options are
	granted to such Participants by the Company;
“Grant”	the proposed grant of 20,610,000 Share Options to the
	Participants pursuant to the Scheme;
“Grant Date”	the date on which Share Options are granted to Participants
	by the Company. The Grant Date must be a trading day;
“Group”	the Company and its subsidiaries;
“H share(s)”	overseas listed foreign shares of the Company;
“H Shareholders’ Class	the class meeting of the H shareholders of the Company
Meeting”	to be held at the conference room of the Company’s head
	office, Shunde District, Foshan City, Guangdong Province,
	the PRC on 1 August 2011 at 3:00 p.m. (or immediately
	after the conclusion or adjournment of the A Shareholders’
	Class Meeting) to, among other things, approve and adopt
	the revised draft of the Scheme and its related matters or
	any adjournment thereof (as the case may be);

— 2 —

DEFINITIONS

“Hisense Group” Hisense Company Limited（海信集團有限公司）, a company incorporated in the PRC with limited liability, and its subsidiaries (excluding the Company and its subsidiaries); “Hong Kong” the Hong Kong Special Administrative Region of the People’s Republic of China; “Hong Kong Listing Rules” the Rules Governing the Listing of Securities on the Hong Kong Stock Exchange; “Hong Kong Stock The Stock Exchange of Hong Kong Limited; Exchange” “Independent Director’s the proxy form(s) for the solicitation of votes by Proxy Form(s)” independent directors sent out by Mr. Zhang Sheng Ping, an independent non-executive Director, to solicit votes from the Shareholders on the special resolutions regarding the Scheme and its related matters at the EGM and the Class Meetings; “Latest Practicable Date” 5 July 2011, being the latest practicable date prior to the printing of this circular for ascertaining certain information in this circular; “Measures for Performance Measures for Performance Appraisal for the Share Option Appraisal” Incentive Scheme of Hisense Kelon Electrical Holdings Company Limited（海信科龍電器股份有限公司股票期權激勵計劃考核辦法）; “Participant(s)” directors, senior management and other staff of the Company eligible to receive certain amount of Share Options as provided under the Scheme; “PRC” or “State” the People’s Republic of China, which for the purposes of this circular, excludes Hong Kong, the Macau Special Administrative Region of the People’s Republic of China and Taiwan; “SASAC of Qingdao” the State-owned Assets Supervision and Administration Commission of the Qingdao Municipal Government（青島市人民政府國有資產監督管理委員會）;

— 3 —

DEFINITIONS

“SASAC of the State	the State-owned Assets Supervision and Administration
Council”	Commission of the State Council of the PRC（國務院國有資
	產監督管理委員會）;
“Scheme” or “First Share	the first A share share option incentive scheme of the
Option Incentive Scheme”	Company;
“Share(s)”	share(s) in the capital of the Company, comprising the A
	shares and the H shares;
“Share Option(s)”	the right granted to the Participants to acquire certain
	amount of A shares of the Company at a pre- determined
	price and upon certain conditions during a certain period of
	time in the future in accordance with the Scheme;
“Shareholder(s)”	holder(s) of the Shares;
“Shenzhen Stock Exchange”	The Shenzhen Stock Exchange;
“Supervisory Committee”	the supervisory committee of the Company;
“Validity Period of the	the period commencing from the Grant Date to the date
Share Options”	when the Share Options lapse;
“HK$”	Hong Kong dollars, the lawful currency of Hong Kong;
“RMB”	Renminbi, the lawful currency of the PRC;
“%”	per cent.

— 4 —

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:

Mr. Tang Ye Guo Ms. Yu Shu Min Mr. Lin Lan Mr. Xiao Jin Lin Ms. Liu Chun Xin

Registered Office: No. 8 Ronggang Road Ronggui Street Shunde District Foshan City Guangdong Province The PRC

Independent non-executive Directors:

Mr. Zhang Sheng Ping

Mr. Cheung Yui Kai, Warren

Mr. Wang Ai Guo

Principal place of business in Hong Kong: Room 3101-05 Singga Commercial Centre No. 148 Connaught Road West Hong Kong

7 July 2011

To the Shareholders

Dear Sir or Madam,

PROPOSED ADOPTION OF FIRST SHARE OPTION INCENTIVE SCHEME AND PROPOSED GRANT THEREUNDER

INTRODUCTION

On 2 December 2010, the Company announced that the Board had passed a resolution in respect of the proposed adoption of the Scheme and the grant thereunder by the Company. It was further announced by the Company on 10 June 2011 that the Board had passed a resolution to approve certain amendments to the proposed terms of the Scheme and the proposed grant thereunder in view of the requests of the SASAC of Qingdao, the SASAC of the State Council and the CSRC.

— 5 —

LETTER FROM THE BOARD

At the EGM and the Class Meetings, resolutions will be proposed to the Shareholders to, among other things, approve and adopt the revised draft of the Scheme and its related matters by way of special resolutions.

The purpose of this circular is to provide you with details of the information concerning the proposed resolutions to be passed at the EGM and the Class Meetings in relation to the Scheme and its related matters.

PROPOSED ADOPTION OF FIRST SHARE OPTION INCENTIVE SCHEME

The Scheme is formulated to further refine the management structure of the Company, provide long-term rewards and retention incentives for the senior and mid-level management, key technical, sales and management personnel of the Company, fully motivate their pro-activeness and creativity, closely correlate their interests with the long term development of the Company, and allow sustainable development of the Company. A summary of the principal terms of the revised draft of the Scheme is set out in Appendix I on pages 12 to 36 of this circular.

PROPOSED GRANT

Source and number of shares subject to the Share Options

The source of the underlying shares of the Share Options which are proposed to be granted to the Participants under the Scheme shall be ordinary A shares of the Company.

The number of underlying shares of the Share Options which are proposed to be granted to the Participants under the Scheme shall not exceed 20,610,000 shares, representing approximately 1.522% of the total issued share capital of the Company (1,354,054,750 shares) and approximately 2.304% of the share capital of the same class (894,464,942 A shares).

Exercisable Period and performance targets before Options can be exercised

The exercise of the Share Options under the Grant is subject to a restriction period of 2 years, during which period the rights are not exercisable. Subject to the fulfillment of the exercise conditions, the Share Options under the Grant can be exercised in batches commencing from the trading day immediately after the second, third and fourth anniversary of the Grant Date respectively in the manner set forth in the paragraph headed “Validity Period of the Share Options, Exercise Arrangement, Exercisable Period, Grant Date and Lock-up Provisions” in Appendix I to this circular. The two-year restriction period may provide incentives to the Participants to remain employed with the Company

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LETTER FROM THE BOARD

during such period and thereby enable the Company to benefit from the continued service of such Participants, thus providing long-term rewards and retention incentives to the Participants and attract and retain human resources that are valuable to the growth and development of the Company as a whole.

In addition, Share Options may only be exercised by the Participants upon fulfillment of the conditions as set out in the paragraph headed “Conditions of Grant and Conditions of the Exercise of the Share Options” in Appendix I to this circular. Besides, where the Participant is a director or member of the senior management, Share Options of not less than 20% of the total Share Options granted to such Participant can only be exercised after the Participant has reached a pass grade or above in the performance appraisal for his/her employment (or office). These requirements, together with the restriction period as mentioned above, may enable the Company to provide incentives to the Participants to motivate their pro-activeness and creativity in using their best endeavours to facilitate the growth and development of the Company. The above also correlates their interests with the long term development of the Company, and allow sustainable development of the Company.

The details of the Grant, including the information of the Participants, the number of A shares subject to the Share Options which are proposed to be granted to the Participants and the Exercise Price, are set out in Appendix I on pages 12 to 36 of this circular.

MEASURES FOR PERFORMANCE APPRAISAL FOR THE SHARE OPTION INCENTIVE SCHEME

Under the Scheme, the Participants must reach a pass grade or above in the performance appraisal in the preceding year according to the Measures for Performance Appraisal before the grant of any Share Options to, or the exercise of any Share Options by, the Participants. Details of the Measures for Performance Appraisal are set out in Appendix II on pages 37 to 43 of this circular.

CONDITIONS TO THE SCHEME BECOMING EFFECTIVE

The Scheme shall be effective upon satisfaction of the following conditions: the examination and approval of the Scheme by the SASAC of Qingdao, filing of the Scheme to the SASAC of the State Council for its record, the no-objection filing of the Scheme with the CSRC and approval of the Scheme at the general meeting of the Company.

— 7 —

LETTER FROM THE BOARD

As at the Latest Practicable Date, the revised draft of the Scheme has been examined and approved by the SASAC of Qingdao, filed with the SASAC of the State Council and filed with the CSRC with no objection. The Scheme shall be effective upon approval of the Scheme at the general meeting of the Company. The grant of Share Options and its effectiveness are also subject to the satisfaction of the conditions stipulated under the Scheme.

WAIVER FROM STRICT COMPLIANCE WITH THE HONG KONG LISTING RULES

The Exercise Price of the Share Options proposed to be granted under the Scheme shall be RMB7.65 per A share, which is the higher of the following two prices:

(i) the closing price of the A shares on the last trading day immediately preceding the date of the announcement of the summary of the Scheme (that is, 29 November 2010), which was RMB7.65 per share; and
(ii) the average closing price of the A shares during the last 30 trading days immediately preceding the date of announcement of the summary of the Scheme, which was RMB7.37 per share.

Note 1 of Rule 17.03(9) of the Hong Kong Listing Rules requires that the exercise price must be at least the higher of (i) the closing price of the securities as stated in the daily quotations sheet of the Hong Kong Stock Exchange on the date of grant; and (ii) the average closing price of the securities as stated in the daily quotations sheets for the five business days immediately preceding the date of grant.

However, since the Share Options subject to the Grant relate to A shares only, and the determination of the Exercise Price is in accordance with the relevant rules and regulations promulgated by the SASAC of the State Council and the CSRC, which are the relevant regulatory bodies governing the market of the A Shares and the market practice in the PRC, and in view of the practical difficulties involved and the interests of the shareholders of the Company being sufficiently protected, the Company has applied for, and the Hong Kong Stock Exchange has granted, a waiver from strict compliance with Note 1 of Rule 17.03(9) of the Hong Kong Listing Rules. For details of the determination of the Exercise Price under the Scheme, please refer to the paragraph headed “Exercise Price of the Grant” in Appendix I to this circular.

— 8 —

LETTER FROM THE BOARD

EGM AND THE H SHAREHOLDERS’ CLASS MEETING

Please note that Mr. Zhang Sheng Ping, an independent non-executive Director, has sent out the Independent Director’s Proxy Forms in accordance with the relevant regulations of the PRC to solicit votes from the Shareholders on the resolutions regarding the Scheme and its related matters at the EGM and the Class Meetings. Should you wish to appoint Mr. Zhang Sheng Ping as your proxy to vote for you and on your behalf at the EGM and/or the H Shareholders’ Class Meeting on the resolutions regarding the Scheme, please complete the Independent Director’s Proxy Forms. Alternatively, if you wish to appoint any person other than Mr. Zhang Sheng Ping as your proxy to vote for you and on your behalf at the EGM and/or the H Shareholders’ Class Meeting on the resolutions regarding the Scheme, you may simply disregard the Independent Director’s Proxy Forms and complete and return the proxy forms instead. The Report on the Solicitation of Votes by the Independent Nonexecutive Directors（獨立非執行董事徵集投票權報告書）prepared by Mr. Zhang Sheng Ping has also been published on the websites of the Hong Kong Stock Exchange (http:// www.hkexnews.hk) and the Company (http://www.kelon.com) by an announcement of the Company dated 10 June 2011.

Notices convening the EGM and the H Shareholders’ Class Meeting and the proxy forms and the Independent Director’s Proxy Forms for use at the EGM and the H Shareholders’ Class Meeting and the reply slips for the EGM and the H Shareholders’ Class Meeting have been despatched by the Company on 10 June 2011 and are also published on the websites of the Hong Kong Stock Exchange (http://www.hkexnews.hk) and the Company (http://www.kelon.com). If you are not able to attend the EGM and/or the H Shareholders’ Class Meeting in person, you are requested to complete and return the proxy forms or the Independent Director’s Proxy Forms 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 relevant meetings or any adjournment thereof (as the case may be). Completion and delivery of the proxy

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LETTER FROM THE BOARD

forms or the Independent Director’s Proxy Forms will not preclude you from attending and voting in person at the EGM and/or the H Shareholders’ Class Meeting or any adjournment thereof (as the case may be) if you so wish.

In accordance with article 8.27 of the Articles of Association, 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 Hong Kong Listing Rules, all votes casted at the EGM and the H Shareholders’ Class Meeting must be taken by poll and the Company will procure the chairman of the EGM and the H Shareholders’ Class Meeting to demand for voting by poll, the results of which will be announced after such meetings in the manner prescribed under Rule 13.39(5) of the Hong Kong Listing Rules.

The register of members of the Company has been closed since 1 July 2011 (Friday) until 1 August 2011 (Monday) (both days inclusive). In order to qualify for attending the EGM and/or the H Shareholders’ Class Meeting, 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 30 June 2011 (Thursday) for registration.

To the extent that the Company is aware having made all reasonable enquiries, none of the Shareholders is required to abstain from voting in respect of any of the special resolutions to be proposed at the EGM or the H Shareholders Class Meeting.

RECOMMENDATION

The Directors (including the independent non-executive Directors) consider that the proposed special resolutions for approving and adopting the revised draft of the Scheme and its related matters (including the authorization to the Board and the Measures for Performance Appraisal) are in the interests of the Company and its Shareholders as a whole and are fair and reasonable. Accordingly, the Directors recommend the Shareholders to vote in favour of the special resolutions to be proposed at the EGM and the H Shareholders’ Class Meeting to approve the same.

— 10 —

LETTER FROM THE BOARD

ADDITIONAL INFORMATION

Your attention is drawn to the additional information set out in Appendix I (Summary of the principal terms of the Scheme and the Grant thereunder) and Appendix II (Measures for Performance Appraisal for the Share Option Incentive Scheme) to this circular for your information.

A copy of the revised draft of the Scheme is available for inspection at the principal place of business of the Company in Hong Kong at Room 3101-05, Singga Commercial Centre, No. 148 Connaught Road West, Hong Kong during normal business hours from the date hereof up to and including 1 August 2011, being the date of the EGM and the Class Meetings.

RESPONSIBILITY STATEMENT

This circular, for which the Directors collectively and individually accepts full responsibility, includes particulars given in compliance with the Hong Kong 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.

Yours faithfully, By Order of the Board of

Hisense Kelon Electrical Holdings Company Limited Tang Ye Guo Chairman

— 11 —

SUMMARY OF THE PRINCIPAL TERMS OF THE SCHEME AND THE GRANT THEREUNDER

APPENDIx I

The following is a summary of the principal terms of the Scheme to be approved and adopted at the EGM and the Class Meetings. It does not form part of, nor is it intended to be part of, the terms of the Scheme and it should not be taken as affecting the interpretation of the terms of the Scheme. As the Scheme is prepared in Chinese, should there be any inconsistencies or conflicts between the English and the Chinese versions, the Chinese version shall prevail.

I. SUMMARY OF THE PRINCIPAL TERMS OF THE SCHEME

1. Purposes of the Scheme

2. Basis for Determining the Participants and the Scope of Participants

(1) Basis for Determining the Participants

The Participants shall be determined in accordance with relevant laws, administrative regulations, rules and regulatory documents of government authorities, the value of the Participants’ positions in the Company and their contribution to the Company’s performance.

(2) Scope of Participants

The Participants include the directors of the Company (exclusive of the independent directors and external directors who are not officers of the Hisense Group), senior management (including president, vice president, financial controller, secretary to the Board, company secretary and other officers which are regarded as senior management under the Articles of Association) of the Company, mid-level management staff of the Company and its subsidiaries, and such key technical personnel of the Company and its subsidiaries as determined by the Board, but no Participants shall participate in the share option schemes of two (or more) listed companies during the same period.

— 12 —

SUMMARY OF THE PRINCIPAL TERMS OF THE SCHEME AND THE GRANT THEREUNDER

APPENDIx I

On the Grant Date, substantial shareholders or de facto controllers which hold shares representing 5% voting rights of the Company or above and their associates or the associates of any independent directors cannot participate in this Scheme without the approval at the general meeting.

In addition, persons listed above cannot be Participants under the Scheme if they:

(i) have been publicly censured or declared as ineligible candidates by the Shenzhen Stock Exchange within the previous three years;
(ii) have been imposed with administrative penalties by CSRC within the previous three years due to material non-compliance of laws and regulations;
(iii) are prohibited from acting as directors and senior management of a company under the Company Law of PRC;
(iv) cannot reach a pass grade or above in the performance appraisal according to the “Measures for Performance Appraisal for the Share Option Incentive Scheme of Hisense Kelon Electrical Holdings Company Limited”（《海信科龍電器股份有限公司股票期權激勵計劃考核辦法》）.

3. Incentive Method of the Scheme

Share Options will be granted under the Scheme as incentives. The underlying shares are ordinary A shares of the Company. Within the Validity Period of the Share Options and the Exercisable Period, and subject to the fulfillment of the exercise conditions of the Scheme and exercise arrangement, each Share Option entitles the holder to acquire one A share of the Company at a predetermined price.

4. Source and Number of Shares under the Scheme

(1) Source of shares under the Scheme

The source of the underlying shares under the Scheme shall be ordinary A shares of the Company to be issued to the Participants.

— 13 —

SUMMARY OF THE PRINCIPAL TERMS OF THE SCHEME AND THE GRANT THEREUNDER

APPENDIx I

(2) Total Number of Share Options in Relation to the Scheme and Its Limit

The total number of the underlying shares in relation to all effective share option incentive schemes of the Company shall not exceed 10% of the Company’s total share capital of the same class. The number of underlying shares of the Share Options which are proposed to be granted to the Participants under this Scheme shall not exceed 20,610,000 shares, representing approximately 1.522% of the total issued share capital of the Company and approximately 2.304% of the share capital of the same class.

Unless approved by the general meeting, the aggregate number of underlying shares which may be acquired by any Participant through the Scheme or other effective share option incentive schemes of the Company (if any) at any time shall not exceed 1% of the Company’s total share capital of the same class, and the maximum entitlement which may be granted to a Participant (including exercised, cancelled and outstanding share options) within any 12-month period shall not exceed 1% of the Company’s total share capital of the same class.

5. Validity Period of the Share Options, Exercise Arrangement, Exercisable Period, Grant Date and Lock-up Provisions

(1) Validity Period of the Share Options

The Validity Period of the Share Options under the Grant shall be a term of 5 years commencing from the Grant Date.

(2) Exercise Arrangement

The exercise of the Share Options under the Grant is subject to a restriction period of 2 years, during which period the rights are not exercisable.

Subject to the fulfillment of the exercise conditions, the Share Options under the Grant can be exercised in batches after the expiry of the 2-year period from the Grant Date according to the following exercise arrangement:

— 14 —

SUMMARY OF THE PRINCIPAL TERMS OF THE SCHEME AND THE GRANT THEREUNDER

APPENDIx I

i. 33% of the Share Options granted to each Participant shall become exercisable on the trading day immediately after the second anniversary of the Grant Date until the trading day falling on the fifth anniversary of the Grant Date;
ii. Another 33% of the Share Options granted to each Participant shall become exercisable on the trading day immediately after the third anniversary of the Grant Date until the trading day falling on the fifth anniversary of the Grant Date; and
iii. The remaining 34% of the Share Options granted to each Participant shall become exercisable on the trading day immediately after the fourth anniversary of the Grant Date until the trading day falling on the fifth anniversary of the Grant Date.

Where the Participant is a director or member of the senior management, Share Options of not less than 20% of the total Share Options granted to such Participant can only be exercised after the Participant has reached a pass grade or above in the performance appraisal for his/her employment (or office).

(3) Exercisable Period

The Exercisable Period of the Share Options commences from the effective date (that is, the Exercisable Date) up to the date when the Share Options lapse. The Participants may exercise the Share Options 2 years after the Grant Date during the Exercisable Period, but shall not exercise any Share Options during the following periods:

i. The period commencing from 30 days prior to the publication of periodic reports of the Company and ending on the second trading day after such reports are published. Should the publication of the periodic reports be postponed due to special reasons, the period shall commence from 30 days prior to the originally scheduled publication date of such reports;
ii. The period commencing from 10 days prior to the publication of the Company’s announcement of estimated results and preliminary results and ending on the second trading day after such announcements are published;

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SUMMARY OF THE PRINCIPAL TERMS OF THE SCHEME AND THE GRANT THEREUNDER

APPENDIx I

iii. Anytime during the decision making process of a material transaction or significant event until 2 trading days after such transaction or event is announced;
iv. Where the Participant is a director or member of the senior management, the period from 60 days immediately preceding the publication date of the annual results up to the publication date of the results; and the period from 30 days immediately preceding the publication date of the half-year results and quarterly results up to the publication date of the results.

(4) The Grant Date of Share Options

Please see the section “Grant Date of the Grant” below for further information of the Grant Date of the Grant.

(5) Lock-up Provisions on the Underlying Shares

The A shares acquired by the Participants pursuant to the exercise of the Share Options under the Scheme are subject to the following lock-up provisions:

i. Where the Participant is a director or member of the senior management, the number of shares which may be transferred by the Participant per year during his/her tenure of office shall not exceed 25% of the total number of the shares held by him/her, and the Participant shall not transfer the shares held by him/her within 6 months after his/her resignation.
ii. Where the Participant is a director or member of senior management, all gains from the sale of shares within 6 months of acquisition or from the acquisition of shares within 6 months of sale by the Participant shall be accounted to the Company and the Board will collect all such gains.
iii. If there is a change in relevant regulations in relation to share transfer by directors and senior management of a company, then the transfer of shares by such Participants shall comply with the stipulations of the Company Law of PRC and Articles of Associations as amended.

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SUMMARY OF THE PRINCIPAL TERMS OF THE SCHEME AND THE GRANT THEREUNDER

APPENDIx I

6. Exercise Price of Share Options and Its Determination Method

Please see the section “Exercise Price of the Grant” below for details of the Exercise Price for the Share Options proposed to be granted and its determination method.

7. Conditions of Grant and Conditions of the Exercise of the Share Options

(1) Conditions of Grant of Share Options

The following conditions must be fulfilled before Participants are granted Share Options:

i. The results of the Company have reached the following conditions:

When comparing the years ended 2009 and 2010, the growth rate of the audited net profit (after deduction of any extraordinary gain or loss) shall not be lower than 20% (including 20%) and shall not be lower than the average growth rate of the industry, and the weighted average rate of return on net assets（加權平均淨資產收益率）(after deduction of any extraordinary gain or loss) shall not be lower than 15% (including 15%) and shall not be lower than the average of the industry.

ii. None of the following circumstances has occurred in relation to the Company:
(i) Issue of the Company’s financial and accounting report for the most recent financial year in which a certified public accountant gives a negative opinion or indicates the inability to give an opinion;
(ii) The imposition of administrative penalties by the CSRC during the past one year due to material non-compliance of laws and regulations by the Company;
(iii) Other circumstances determined by the CSRC.

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iii. The Participant must reach a pass grade or above in the performance appraisal in the preceding year according to the “Measures for Performance Appraisal for the Share Option Incentive Scheme of Hisense Kelon Electrical Holdings Company Limited”（《海信科龍電器股份有限公司股票期權激勵計劃考核辦法》）.
iv. None of the following circumstances has occurred in relation to the Participant:
(i) Public censure or declaration as ineligible candidate by the Shenzhen Stock Exchange in the previous three years;
(ii) The imposition of administrative penalties by the CSRC during the previous three years due to material noncompliance of laws and regulations;
(iii) Occurrence of circumstances under which the Participant is prohibited from acting as a director and member of the senior management of a company, as stipulated in the Company Law of the PRC.

(2) Exercise Conditions of Share Options

Share Options may only be exercised by the Participants upon fulfillment of the following conditions:

i. The results of the Company have reached the following conditions:

During the Validity Period of the Share Options, the average figure for the growth rate of the audited net profit (after deduction of any extraordinary gain or loss) of the Company for each year shall not be lower than 20% (including 20%) and shall not be lower than the average growth rate of the industry, and the average figure for the weighted average rate of return on net assets（加權平均淨資產收益率）(after deduction of any extraordinary gain or loss) of the Company for each year shall not be lower than 15% (including

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15%) and shall not be lower than the average of the industry, and the details of the conditions in relation to the Company’s results of each Exercisable Period are as follows:

(i) First Exercisable Period

(1) The average figure for (a) the growth rate of the audited net profit (after deduction of any extraordinary gain or loss) for the years 2010 and 2011 and (b) the growth rate of the audited net profit (after deduction of any extraordinary gain or loss) for the years 2011 and 2012 shall not be lower than 20% and shall not be lower than the average of the industry.
(2) The average figure for the weighted average rate of return on net assets（加權平均淨資產收益率）for the years 2011 and 2012 shall not be lower than 15% and shall not be lower than the average of the industry.
(ii) Second Exercisable Period
(1) The average figure for (a) the growth rate of the audited net profit (after deduction of any extraordinary gain or loss) for the years 2010 and 2011, (b) the growth rate of the audited net profit (after deduction of any extraordinary gain or loss) for the years 2011 and 2012 and (c) the growth rate of the audited net profit (after deduction of any extraordinary gain or loss) for the years 2012 and 2013 shall not be lower than 20% and shall not be lower than the average of the industry.
(2) The average figure for the weighted average rate of return on net assets（加權平均淨資產收益率）for the years 2011, 2012 and 2013 shall not be lower than 15% and shall not be lower than the average of the industry.

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(iii) Third Exercisable Period
- (1) The average figure for (a) the growth rate of the audited net profit (after deduction of any extraordinary gain or loss) for the years 2010 and 2011, (b) the growth rate of the audited net profit (after deduction of any extraordinary gain or loss) for the years 2011 and 2012, (c) the growth rate of the audited net profit (after deduction of any extraordinary gain or loss) for the years 2012 and 2013 and (d) the growth rate of the audited net profit (after deduction of any extraordinary gain or loss) for the years 2013 and 2014 shall not be lower than 20% and shall not be lower than the average of the industry.
- (2) The average figure for the weighted average rate of return on net assets（加權平均淨資產收益率）for the years 2011, 2012, 2013 and 2014 shall not be lower than 15% and shall not be lower than the average of the industry.
ii. None of the following circumstances has occurred in relation to the Company:
(i) Issue of the Company’s financial and accounting report for the most recent financial year in which a certified public accountant gives a negative opinion or indicates the inability to give an opinion;
(ii) The imposition of administrative penalties by the CSRC during the past one year due to material non-compliance of laws and regulations by the Company;
(iii) Other circumstances determined by the CSRC.
iii. the performance appraisal of the Participant in the preceding year must reach the pass grade or above under the appraisal methods of the Company according to the “Measures for Performance Appraisal for the Share Option Incentive Scheme of Hisense Kelon Electrical Holdings Company Limited”（《海信科龍電器股份有限公司股票期權激勵計劃考核辦法》）.

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iv. None of the following circumstances has occurred in relation to a Participant:
(i) Public censure or declaration as ineligible candidate by the Shenzhen Stock Exchange in the previous three years;
(ii) The imposition of administrative penalties by the CSRC during the previous three years due to material noncompliance of laws and regulations;
(iii) Occurrence of circumstances under which the Participant is prohibited from acting as a director and member of the senior management of a company, as stipulated in the Company Law of PRC.

If the above conditions cannot be fulfilled, the number of Share Options granted to the Participants which corresponds to the relevant Exercisable Period shall be cancelled by the Company.

The net profit attributable to the shareholders of the Company and the net profit (after deduction of any extraordinary gain or loss) attributable to the shareholders of the Company for each year during the restriction period for the exercise of the Share Options shall not be lower than the average level for the three financial years preceding the Grant Date and shall not be negative.

The Company confirms that the “average of the industry” as referred to in the “Conditions of Grant of Share Options” and the “Exercise Conditions of Share Options” above will be determined based on the relevant figures and information disclosed in the annual reports of the peer sample companies. Under the Scheme, the Board will determine the peer sample companies according to the relevant industry classification method（相關行業劃分方法）. If there is any material change in the principal business of any peer sample company during the appraisal process in the year, the Board will remove such company as a sample company or change the sample companies in the yearend appraisal.

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8. Methods and Procedures for Adjustment of the Scheme

(1) Method of Adjusting the Number of Share Options

In case of any capitalisation issue, bonus issue, sub-division or consolidation of shares, rights issue (allotment of shares to existing shareholders) or reduction of share capital in relation to the A shares of the Company before the exercise of the Share Options, an adjustment to the number of Share Options shall be made accordingly. Such adjustments shall comply with the relevant provisions, guidance or interpretation of the Hong Kong Listing Rules and no adjustments shall be made to the effect that the A shares would be issued at less than the nominal value. The method of adjustment in principle is set out below:

i. Capitalisation issue, bonus issue and sub-division of shares

Q = Q0 × (1+n)

Where: Q0 represents the number of Share Options before the adjustment; n represents the ratio of increase per share resulting from the capitalisation issue, bonus issue and sub-division of shares (i.e. the number of increased shares per share upon capitalisation issue, bonus issue or sub division of shares); Q represents the adjusted number of Share Options.

ii. Consolidation of Shares and Reduction of Share Capital

Q = Q0 × n

Where: Q0 represents the number of Share Options before the adjustment; n represents the ratio of consolidation of shares (i.e. one share shall be consolidated into n shares) or ratio of reduction of share capital; Q represents the adjusted number of Share Options.

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iii. Rights Issue (allotment of shares to existing shareholders)

Q = Q0 × P1 × (1+n) / (P1+P2×n)

Where: Q0 represents the number of Share Options before the adjustment; P1 represents the closing price as at the record date; P2 represents the subscription price of the rights issue; n represents the basis of the rights issue (i.e. the number of shares to be issued under the rights issue in proportion to the total share capital of the Company before the rights issue); Q represents the adjusted amount of Share Options.

(2) Methods of Adjusting the Exercise Price

In case of any capitalisation issue, bonus issue, sub-division or consolidation of shares, rights issue (allotment of shares to existing shareholders) or reduction of share capital in relation to the A shares of the Company before the exercise of the Share Options, an adjustment to the Exercise Price shall be made accordingly. Such adjustments shall comply with the relevant provisions, guidance or interpretation of the Hong Kong Listing Rules and no adjustments shall be made to the effect that the A shares would be issued at less than the nominal value. The method of adjustment in principle is set out below:

i. Capitalisation issue, bonus issue and sub-division of Shares

P = P0 ÷ (1+n)

Where: P0 represents the Exercise Price before the adjustment; n represents the ratio of increase per share resulting from the capitalisation issue, bonus issue and sub-division of shares (i.e. the number of increased shares per share upon capitalisation issue, bonus issue or sub division of shares); P represents the adjusted Exercise Price.

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ii. Consolidation of Shares or Reduction of Share Capital

P = P0 ÷ n

Where: P0 represents the Exercise Price before the adjustment; n represents the ratio of consolidation of shares (i.e. one share shall be consolidated into n shares) or ratio of reduction of share capital; P represents the adjusted Exercise Price.

iii. Rights issue (allotment of shares to existing shareholders)

P = P0 × (P1+P2×n) / (P1 × (1+n))

Where: P0 represents the Exercise Price before the adjustment; P1 represents the closing price as at the record date; P2 represents the subscription price of the rights issue; n represents the basis of the rights issue (i.e. the number of shares to be issued under the rights issue in proportion to the total share capital of the Company before the rights issue); P represents the adjusted Exercise Price.

(3) Procedures for Adjusting the Amount of Share Options and the Exercise Price
i. The Board will be authorized by the general meeting to adjust the number of Share Options and the Exercise Price according to the reasons prescribed above. The Board shall issue an announcement and inform the Participants in a timely manner after adjustment of the Exercise Price or the number of Share Options pursuant to the above provisions.
ii. If the amount of Share Options, the Exercise Price or other term(s) needs to be adjusted for other reasons, such adjustment shall be subject to the approval of the Board and the filing with CSRC and SASAC with no objection and approvals at the general meeting.
iii. Lawyers shall issue professional advice to the Board as to whether the above adjustments conform to relevant regulations promulgated by the CSRC and SASAC, the Articles of Association and the provisions of the Scheme.

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iv. Auditors of the Company or independent financial advisor shall issue written opinion to the Company to confirm that the above adjustments comply with the relevant provisions, guidance or interpretation of the Hong Kong Listing Rules.

9. Handling Methods for Special Cases

(1) When there is a change of position, dismissal, resignation, incapacitation or death of the Participant, the arrangements will be as follows:

(a) Change of Position

When the position of the Participant is changed within the Company (or the Company’s subsidiaries) under normal circumstances, the Share Options already granted shall not be affected and the Participant can exercise the Share Options in accordance with the provisions of the Scheme.

When the Participant leaves the Company (or the Company’s subsidiaries) due to job changes, the Share Options which are exercisable but yet to be exercised can be exercised by the Participant within 6 months from the date of termination of employment and Share Options which are not yet exercisable shall lapse forthwith.

When the position of the Participant in the Company (or the Company’s subsidiaries) is changed due to his/her failure in passing the performance appraisal, his/her incompetence in performing his/her duties or commission of acts that are prejudicial to the Company’s interests or acts that amounts to a breach of laws or regulations, all Share Options which are exercisable but not yet exercised shall cease to be exercisable forthwith and Share Options which are not yet exercisable shall lapse forthwith.

(b) Dismissal

When the Participant is dismissed due to his/her failure in passing the performance appraisal, his/her incompetence in performing his/her duties or commission of acts that are prejudicial to the Company’s interests or acts that amounts to a breach of laws or

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regulations, all Share Options which are exercisable but not yet exercised shall cease to be exercisable forthwith and Share Options which are not yet exercisable shall lapse forthwith.

(c) Resignation

When the Participant resigns from his/her position in the Company (or the Company’s subsidiaries), all Share Options which are exercisable but not yet exercised shall cease to be exercisable forthwith and Share Options which are not yet exercisable shall lapse forthwith.

(d) Incapacitation

When the Participant loses his/her capacity to work due to work related injuries, the Share Options which are exercisable but not yet exercised can be exercised by the Participant within 6 months from the date of termination of employment and Share Options which are not yet exercisable shall lapse forthwith.

(e) Retirement

When the Participant retires as he/she attains the retirement age stipulated by the State or the Company, the Share Options which are exercisable but not yet exercised can be exercised by the Participant within 6 months from the date of retirement and Share Options which are not yet exercisable shall lapse forthwith.

(f) Death

Upon the death of the Participant, the Share Options which are exercisable but not yet exercised can be exercised by the lawful heir of the Participant within 6 months from the date of death and Share Options which are not yet exercisable shall lapse forthwith.

The Company shall cancel the Share Options which cease to be exercisable or lapse due to any of the aforesaid reasons after the same has been considered and approved by the Board.

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(2) During the implementation of the Scheme, should any of the following occur in relation to a Participant, all Share Options which are exercisable but not yet exercised shall cease to be exercisable and be cancelled and Share Options which are not yet exercisable shall lapse forthwith:
i. public censure or declaration of the Participant as ineligible candidate by the Shenzhen Stock Exchange in the previous 3 years;
ii. imposition of administrative penalties by the CSRC against the Participant during the previous 3 years due to material noncompliance of laws and regulations by the Participant;
iii. circumstances under which the Participant is prohibited from acting as a director and a member of the senior management of a company as stipulated in the Company Law of the PRC;
iv. during the term of office, the Participant is involved in solicitation or acceptance of any bribes, corruption, theft, unauthorized disclosure of operational and technical secrets of the Company, conducting connected transactions, commission of other serious violation of laws and regulations which are significantly detrimental to the Company’s interests, reputation and image and bring losses to the Company;
v. breach of the relevant laws and regulations of the State and the provisions of the Articles of Association.
(3) Share Options having been granted shall remain unchanged in case of amalgamation, spin-off or change in control of the Company for any reason.
(4) If any of the following has occurred in relation to the Company, the Company shall terminate the implementation of the Scheme, and no new Share Options shall be granted to the Participants under the Scheme. Share Options which are exercisable but not yet exercised by the

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Participants shall cease to be exercisable and be cancelled and Share Options which are not yet exercisable by the Participants shall lapse forthwith:

i. Issue of the Company’s financial and accounting report for the most recent accounting year in which a certified public accountant gives a negative opinion or indicates the inability to give an opinion;
ii. The imposition of administrative penalties by the CSRC due to material non-compliance of laws and regulations by the Company;
iii. Operational loss of the Company leading to indefinite suspension of trading of the shares of the Company, delisting, winding-up or dissolution of the Company;
iv. The delisting of the Company as a result of its failure to meet the listing requirements due to repurchase and cancellation of the shares of the Company;
v. Other circumstances determined by the CSRC.

10. Amendments to the Scheme

Amendment to the Scheme shall be approved at the general meeting if (i) the amendment is required by the relevant documents issued by the CSRC or the SASAC (including any amendments thereto from time to time and any other laws, regulations or regulatory documents in replacement) to be approved at the general meeting; (ii) the amendment relates to matters provided in Rule 17.03 of the Hong Kong Listing Rules and is beneficial to the Participants; (iii) the amendment substantially revises the provisions of the Scheme or the terms of the Share Options granted; or (iv) the amendment relates to the power of the Board in amending the provisions of the Scheme. Any other amendments to the Scheme shall be determined by the Board.

When there are changes in the share capital of the Company due to issue of new shares, capital conversion, amalgamation, de-merger and repurchase and other reasons so that amendments to the major contents of the Scheme (such as the scope of the Participants and the amount of Share Options to be granted, etc.) shall be necessary, such amendments shall be considered by the Board and reported to the SASAC and CSRC thereafter and be implemented after the approval of the general meeting.

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11. Supplementary Provisions

(1) The Scheme shall be effective upon satisfaction of the following conditions: the examination and approval of the Scheme by the SASAC of Qingdao, filing of the Scheme to the SASAC of the State Council for its record, the no-objection filing of the Scheme with the CSRC and approval of the Scheme at the general meeting of the Company.
(2) The Company shall not provide any loans or any other forms of financial assistance (including providing guarantee for the loan extended to the Participants) to the Participants for exercising the Share Options.
(3) From the date of announcement of the summary of the Scheme to 30 days after the date of the approval of the Scheme at the general meeting, the Company shall not conduct any material transactions, such as issue of new shares, injection of assets into the Company or issue of convertible notes.
(4) In case of any conflicts between relevant terms of the Scheme and relevant laws, regulations, administrative rules or regulatory documents of the State, the relevant laws, regulations and administrative rules and systems shall prevail. Any issues not specified in the Scheme shall be implemented in accordance with the relevant national laws, regulations, administrative rules and regulatory documents.
(5) The right of interpretation of the Scheme belongs to the Board.
(6) The issue of shares pursuant to the exercise of the Share Options granted under the Scheme shall be in accordance with provisions of the Articles of Association as at the date of issue of shares (the “ Issue Date ”), and shall rank pari passu in all respects with all paid-up A shares in issue as at the Issue Date, entitling the Participants to qualify for all dividends and other distributions declared paid or made after the Issue Date (except dividends and other distributions declared or resolved to be paid or made before the Issue Date if resolutions for approving each distribution or payment are passed before the Issue Date). Participants are bound by the lock-up provisions of the Scheme (if applicable).

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(7) Share Options granted to the Participants under the Scheme is personal and the Participants shall not sell, assign, charge or mortgage or create any encumbrances in respect of any Share Options or to make third party being the beneficial owners of the Share Options or intend to do any such acts. If the Participant is in breach of any of the aforesaid provisions, the Company shall be entitled to cancel Share Options granted to such Participants (but yet to be exercised).
(8) The Share Options cancelled shall not be re-granted according to the Scheme.
(9) The Scheme shall become effective for a term of 5 years upon the approval at the general meeting and no Share Options will be granted under the Scheme thereafter, but the provisions of the Scheme will be in full force in all aspects for the Share Options granted during the effective period of the Scheme.

II. PROPOSED GRANT

Major terms of the proposal in respect of the Grant are set out in details in this paragraph. Relevant contents of the proposal of the Grant shall also comply with the restrictive provisions under the Scheme. Other contents not provided in the proposal in respect of the Grant shall be determined by reference to relevant terms under the Scheme. The Scheme (which contains provisions in relation to the grant of Share Options to Participants which are Directors and senior management members of the Company as stipulated therein) has been approved by the Board (including the independent non-executive Directors). After the approval of the Scheme at the general meeting of the Company, the Company shall convene a Board meeting to determine the Grant Date and the independent non-executive Directors will give their opinions on their agreement to the Grant Date determined by the Board and the grant of Share Options to the Participants (including Participants which are Directors and senior management members of the Company).

1. Number of underlying shares subject to the Share Options under the Grant

The number of underlying shares subject to the Share Options under the proposed Grant will be 20,610,000 shares, representing approximately 1.522% of the total share capital (1,354,054,750 shares) of the Company and approximately 2.304% of the share capital of the same class (894,464,942 A shares).

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2. Allocation of the Share Options under the Grant

The Share Options will be granted to 237 persons. In particular, Share Options of a total number of 6,192,000 shares will be granted to 7 Directors and senior management members, representing approximately 30.04% of the total number of Share Options under the Grant. Details of the allocation are as follows:

						As a
					As a	percentage
					percentage	of share
			Number	As a	of the	capital of
			of Share	percentage	total	the same
			Options	of the	share	class
No.	Name	Position	granted	Grant	capital	(A shares)
			(’0000	%	%	%
			shares)
1.	Tang Ye Guo	Chairman	126	6.11	0.093	0.141
2.	Xiao Jian Lin	Director	82.8	4.02	0.061	0.093
3.	Jia Shao Qian	Vice-President	82.8	4.02	0.061	0.093
4.	Liu Chun Xin	Director,	90	4.37	0.066	0.101
		Vice-President,
		Head of Finance
		Department
5.	Ren Li Ren	Vice-President	72	3.49	0.053	0.080
		Note
6.	Zhang Yu Qing	Vice-President	82.8	4.02	0.061	0.093
7.	Wang Yun Li	Vice-President	82.8	4.02	0.061	0.093
8.	Mid level		1,441.8	69.96	1.065	1.612
	management
	staff and key
	personnel (230
	individuals)
	Total		2,061	100.00	1.522	2.304

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Explanation: Since Mr. Lin Lan, being a Director, is a foreign natural person, he cannot be granted and cannot exercise A share share options according to the current laws and regulations.

Note: Mr. Ren Li Ren was appointed as the President of the Company with effect from 27 June 2011 and was nominated as a director candidate for the Board (subject to approval by the general meeting of the Company).

The above allocation in relation to the mid-level management staff and key personnel of the Company and its subsidiaries is proposed by the general manager, determined by the Board and reviewed by the Supervisory Committee. Particulars of the name list have been disclosed on the website of CNINF (www.cninfo.com.cn) on 11 June 2011 and on the website of the Stock Exchange on 10 June 2011.

In addition, during the Validity Period of the Share Options, the maximum gain which the Participants can obtain from the share option incentives shall not exceed 40% of their remuneration level (inclusive of the gain from the share option incentives). In the event that the gain from the share option incentive exceeds the above proportion, Share Options which have not been exercised will not be exercised.

3. Grant date of the Grant

Within 30 days from the date of approval of the Scheme at general meeting, the Company shall convene a board meeting to grant Share Options to the Participants and complete the relevant registration and announcement procedures in accordance with relevant regulations. The Grant Date shall be determined by the Board pursuant to relevant regulations, and in principle, shall be the date of the relevant Board meeting. The Grant Date shall be a trading day, and cannot be any of the following periods:

i. 30 days prior to the earlier of the publication of periodic reports and the date of the Board meeting for the purpose of approving such periodic report. The aforesaid period will end on the date of the publication of the Company’s periodic report;
ii. Any time during the decision making process of a material transaction or significant event until 2 trading days after such transaction or event is announced;

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iii. Any other period commencing from the date on which a significant event that is of price sensitive nature occurs until 2 trading days after such significant event is announced;
iv. Where the Participant is a director of the Company, the period from 60 days immediately preceding the publication date of the annual results up to the publication date of the results; and the period from 30 days immediately preceding the publication date of the half-year results and quarterly results up to the publication date of the results.

If the procedures of the Grant cannot be completed within 30 days of the approval of the Scheme at the general meeting as a result of the above circumstances, the Grant Date may be postponed accordingly.

The Company confirms that the “periodic report” mentioned in the Scheme refers to the annual, interim and quarterly report which are required to be published by the Company for its A share shareholders. Under the relevant laws, regulations and listing rules in the PRC, the Company is not required to publish any preliminary announcements of results preceding the publication of the said “periodic reports”. The Company will publish the “periodic report” for its A share shareholders and the preliminary announcement of results for its H share shareholders on the same day to ensure that the financial information released to the market in Hong Kong is also released in the PRC. The Company will also ensure that the determination of the Grant Date satisfies the requirement under Rule 17.05 of the Hong Kong Listing Rules.

4. Exercise Price of the Grant

(1) Exercise Price

The Exercise Price of the Share Options proposed to be granted under the Scheme shall be RMB7.65 per share. Upon fulfillment of exercise conditions, each of the Share Option granted to the Participants entitles the Participant to acquire one A share of the Company at RMB7.65 per share.

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(2) Determination Method of Exercise Price

The Exercise Price of the Grant is the higher of the following two prices:

(i) The closing price of the A shares on the last trading day immediately preceding the date of the announcement of the summary of the Scheme (that is, 29 November 2010), which was RMB7.65 per share; and
(ii) The average closing price of the A shares during the last 30 trading days immediately preceding the date of announcement of the summary of the Scheme, which was RMB7.37 per share.

5. Conditions of Grant and Exercisable Conditions for the Grant

The grant of Share Options and its effectiveness are also subject to the satisfaction of the conditions stipulated under the Scheme (the major terms of which have been set out above).

6. Value of the Share Options

The Company used the Black-Scholes model to calculate the value of the Share Options, taking the Latest Practicable Date as the measurement date. The estimated value of the Share Options is RMB1.16 per A share, representing 17.5% of the market price of the A share as at the Latest Practicable Date. Data used in and results of the calculation are as follows:

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Factors

Amount of factors and description

Exercise price RMB7.65. The exercise price used herein was determined in accordance with the relevant provisions stated in the Scheme, being the higher of:

(1) the closing price of the A shares on the last trading day immediately preceding the date of the announcement of the summary of the Scheme (that is, 29 November 2010), which was RMB7.65; and
(2) the average closing price of the A shares during the last 30 trading days immediately preceding the date of announcement of the summary of the Scheme, which was RMB7.37 per share.
Market price RMB6.64, being the closing price of the A shares on the Latest Practicable Date

Expected Life the exercisable periods of the Share Options being 3 years, 2 years and 1 year respectively

Expected price price volatility rates of the Company’s volatility rate shares being 40.24%, 36.53% and 29.70% for the exercisable periods of the Share Options of 3 years, 2 years and 1 year respectively

Risk-free interest Continuous compound interest calculated rate based on the rate of interest on fixed deposits of RMB in the PRC for the corresponding period as announced by the People’s Bank of China, being 4.64%, 4.07% and 3.20% for the exercisable periods of the Share Options of 3 years, 2 years and 1 year respectively

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Factors

Amount of factors and description

Value of Options RMB1.16 per A Share

Calculation rate of the Black-Scholes model = 17.5%

Notes:

The calculation results of the value of the Share Options are subject to a number of assumptions of the parameters used herein and the limitation of the model adopted, therefore the estimated value of the Share Options may be subjective and uncertain.
The exercise price used herein was determined in accordance with the relevant provisions stated in the Scheme, being the higher of:
(1) the closing price of the A shares on the last trading day immediately preceding the date of the announcement of the summary of the Scheme (that is, 29 November 2010), which was RMB7.65; and
(2) the average closing price of the A shares during the last 30 trading days immediately preceding the date of announcement of the summary of the Scheme, which was RMB7.37 per share.

Therefore, the exercise price for calculating the value of the Share Option is RMB7.65.

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APPENDIx II MEASURES FOR PERFORMANCE APPRAISAL FOR THE SHARE OPTION INCENTIVE SCHEME

This Appendix sets out the English translation of the Chinese version of the Measures for Performance Appraisal. Should there be any inconsistencies or conflicts between the English and the Chinese versions, the Chinese version shall prevail.

HISENSE KELON ELECTRICAL HOLDINGS COMPANY LIMITED MEASURES FOR PERFORMANCE APPRAISAL FOR THE SHARE OPTION INCENTIVE SCHEME

Based on the consideration of both long term and short term interests of Hisense Kelon Electrical Holdings Company Limited (the “ Company ”) and under the guiding philosophy of collaborative and continuous development of the Company and individuals, the “Share Option Incentive Scheme of Hisense Kelon Electrical Holdings Company Limited (draft)” has been prepared to further optimize the Company’s corporate governance structure, strengthen the incentive and retention mechanism of the Company, effectively motivate the pro-activeness of management personnel and key staff, attract and retain outstanding management and operation personnel, materialize the uniformity of the interests of all shareholders, the Company and individuals and enhance long term and stable development of the Company.

In order to ensure the smooth implementation of the aforesaid Share Option Incentive Scheme upon examination and approval by the SASAC of Qingdao, filing with the SASAC of the State Council, no-objection filing with the CSRC and approval at the general meeting of the Company, these Measures was made in accordance with the relevant laws and regulations such as the “Company Law of the People’s Republic of China” and provisions of the Articles of Association of the Company, after taking into account the actual situation of the Company.

A. GENERAL PROVISIONS

1. Objectives

Guided by the philosophy of the Company of “seek, use, train, promote and retain personnel”, the Company aims to further optimize its corporate governance structure, form a well-balanced value allocation system, establish and refine the incentive and retention mechanism for senior management, mid-level management and key staff of the Company to encourage senior management, mid-level management and key staff of the Company to work diligently in good faith to ensure steady improvement of the Company’s result, realization of the development strategies and operation goals of the Company and proper implementation of the Company’s Share Option Incentive Scheme.

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MEASURES FOR PERFORMANCE APPRAISAL FOR THE SHARE OPTION INCENTIVE SCHEME

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2. Principles

(1) Appraisal must adhere to the principles of science, openness, fairness and justice;
(2) The principles of correlation of the Company’s interest and individuals’ incentives and correlation of personal work performance and his/her abilities and attitudes should be upheld;
(3) Combination of the principles of certainty and flexibility: appraisal standards cannot be arbitrarily amended once confirmed, however, if one of the events stipulated below takes place, the standards can be adjusted upon the application submitted by the Remuneration and Evaluation Committee and the approval by the Board of the Company:
i. Material changes to the standards resulted from objective factors due to force majeure during the appraisal period.
ii. Fulfillment of the standards can no longer reflect the results of the continuous improvement of the Company’s operation and management.

3. Qualifying Participants

These Measures shall apply to the participants of Share Option Incentive Scheme which include:

(1) Directors of the Company (excluding independent directors and external directors who are not officers of the Hisense Company Limited);
(2) Senior management, including general manager, vice-general manager, financial controller, secretary to the Board, company secretary and those officers stipulated under the “Articles of Association”;
(3) Mid-level management and key staff.

All of the above staff must have served the Company or its subsidiaries consecutively for 2 years or more and have made special contribution. The requirement for length of service could be otherwise determined if approved by the Remuneration and Evaluation Committee of the Board of the Company.

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MEASURES FOR PERFORMANCE APPRAISAL FOR THE SHARE OPTION INCENTIVE SCHEME

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B. RESPONSIBILITIES AND AUTHORITIES OF THE EVALUATING ORGANIzATION

The general meeting of the Company shall be responsible for determining the targets for performance appraisal.
The Board of the Company is responsible for reviewing and approving these Measures.
The Remuneration and Evaluation Committee of the Board of the Company is responsible for organization and review of the appraisal.
The Working Group of the Remuneration and Evaluation Committee of the Board of the Company is responsible for implementing the appraisal.
Relevant departments such as human resources department and finance department are responsible for assisting the Remuneration and Evaluation Committee. These departments are responsible for collecting and supplying relevant data and are responsible for the authenticity and accuracy of such data.

C. APPRAISAL SYSTEM

1. Details of the Appraisal

As the Company emphasizes the importance of both personality and performance of each individual, the persons to be appraised will be subject to an overall evaluation based on the following areas:

(1) Work performance
(2) Work attitudes and abilities

2. Items and Standards of the Appraisal

(1) Directors and senior management of the Company

Based on the “Operator’s Annual Emolument Contract” concluded at the beginning of the year, the person to be appraised will be evaluated based on the level of materialization of the Company’s operation plan, which mainly include standards such as revenue, profit, refund and quality.

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MEASURES FOR PERFORMANCE APPRAISAL FOR THE SHARE OPTION INCENTIVE SCHEME

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(2) Mid-level management and key staff of the Company

i. Work performance appraisal: mainly based on the standards and completion level of work tasks, including quantified standards/ targets, non-quantified standards and completion level of normal tasks. For mid-level personnel subject to multiple standards, the performance ratings are calculated by summing up all performance ratings on a weighted basis.
ii. General appraisal: mainly refer to the general appraisal made by sub-management personnel regarding ad-hoc task and the attitude, innovation and execution ability etc of the staff.
iii. Single item appraisal: single item appraisal on the Company level includes appraisal data such as complements, criticism and reports issued by the Company, and appraisal results are directly reflected in monthly appraisal results.
iv. Monthly appraisal results = (performance rating × 70%) + (general appraisal rating × 30%) + single item appraisal results

Annual appraisal results (S) = ∑ Monthly appraisal results/12

If the incentive scheme participant is repositioned during the appraisal period, appraisal standards will be changed accordingly while the numbers of share options under the incentive scheme remain unchanged (excluding dismissal, demotion and disciplinary actions taken due to personal reasons). At the year end survey, total appraisal results will be calculated based on the duration of former and current position in a pro rata manner. If there is transition period before repositioning to a new position, the transition period will be excluded from the calculation.

3. Appraisal Procedures

(1) The Company determines the annual position goal of the incentive scheme participants and submits the same to the Remuneration and Evaluation Committee for filing.

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MEASURES FOR PERFORMANCE APPRAISAL FOR THE SHARE OPTION INCENTIVE SCHEME

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(2) Human resources department and finance department of the Company will keep track of the appraisal data on a monthly basis and prepare monthly appraisal report for the Company and the Remuneration and Evaluation Committee for filing.
(3) At the end of each appraisal year, the Working Group of the Remuneration and Evaluation Committee is responsible for the overall operation of the appraisal, prepare a unified form, appraise and evaluate the work performance, attitude and ability of the person subject to appraisal, and issue an “Opinion on performance appraisal” for the final approval of the Remuneration and Evaluation Committee.
(4) Incentive scheme participants with outstanding appraisal results (where the appraisal result is above 80) can exercise their rights:

Appraisal Results (S) S≥90 89≥S>80 80≥S>70 70≥S>60 S<60 Appraisal excellent outstanding good fair unqualified Standards

(5) Events overriding the appraisal results:
i. During the appraisal period, if there is violation of laws and regulations, major safety (quality) incident and other situations in which the Company’s reputation and market image is materially affected in the department (or company) in which the incentive scheme participant stays, the appraisal result of such participant for that year will immediately be classified as unqualified;
ii. During the appraisal period, if the incentive scheme participant has not executed an “annual responsibility letter on position goal”, such participant will immediately be classified as unqualified.
Note: The aforesaid “appraisal year” refers to the accounting year prior to the exercise of the share options by the incentive scheme participants.

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MEASURES FOR PERFORMANCE APPRAISAL FOR THE SHARE OPTION INCENTIVE SCHEME

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4. Management of the Appraisal Results

(1) Amendment of appraisal standards and results

If the work performance of the person subject to the appraisal is affected by force majeure factors or special reason during the appraisal period, the Remuneration and Evaluation Committee can amend the appraisal standards and results which are deviated to a significant extent, but such amendments must be submitted to the Board for filing.

(2) Feedback and application of the appraisal results

The person subject to the appraisal has the right to access his/ her appraisal results. The Working Group of the Remuneration and Evaluation Committee of the Board should notify the person subject to the appraisal regarding his/her appraisal results within five working days after the completion of the appraisal. If the person subject to the appraisal objects to such results, he/she can appeal to the Remuneration and Evaluation Committee within five days after receiving the appraisal results notification. The Remuneration and Evaluation Committee will review the appraisal results according to the actual situation. The review shall not take more than thirty days. Based on the review results, the Committee will amend the appraisal results.

The appraisal results will serve as the basis of exercising the share options.

(3) Filing of the appraisal results and post-appraisal management

i. Upon completion of the appraisal, appraisal results will be filed as confidential materials and be kept by the Remuneration and Evaluation Committee.
ii. In order to ensure the fairness and justice of the appraisal results, appraisal records can not be amended. If amendments or new record is required, it must be signed by the parties concerned in order to be valid.

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MEASURES FOR PERFORMANCE APPRAISAL

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FOR THE SHARE OPTION INCENTIVE SCHEME

iii. Relevant records will be gathered and destroyed by the Remuneration and Evaluation Committee three years after the completion of the Share Option Incentive Scheme.

D. SUPPLEMENTAL PROVISIONS

The Remuneration and Evaluation Committee of the Board of the Company is responsible for the preparation, amendment and interpretation of these Measures.
These Measures will become effective on the day when they are considered and passed by the Board and the general meeting of the Company.

The Board of

Hisense Kelon Electrical Holdings Company Limited December 2010

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AI assistant

Medlive Technology Co., Ltd. — Proxy Solicitation & Information Statement 2011

50436_rns_2011-07-07_1f7d860f-ca78-4992-8bed-d78b148111d5.pdf

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

PROPOSED ADOPTION OF FIRST SHARE OPTION INCENTIVE SCHEME AND PROPOSED GRANT THEREUNDER

CONTENTS

DEFINITIONS

DEFINITIONS

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

PROPOSED ADOPTION OF FIRST SHARE OPTION INCENTIVE SCHEME AND PROPOSED GRANT THEREUNDER

INTRODUCTION

PROPOSED ADOPTION OF FIRST SHARE OPTION INCENTIVE SCHEME

PROPOSED GRANT

Source and number of shares subject to the Share Options

Exercisable Period and performance targets before Options can be exercised

MEASURES FOR PERFORMANCE APPRAISAL FOR THE SHARE OPTION INCENTIVE SCHEME

CONDITIONS TO THE SCHEME BECOMING EFFECTIVE

LETTER FROM THE BOARD

WAIVER FROM STRICT COMPLIANCE WITH THE HONG KONG LISTING RULES

EGM AND THE H SHAREHOLDERS’ CLASS MEETING

RECOMMENDATION

ADDITIONAL INFORMATION

RESPONSIBILITY STATEMENT

I. SUMMARY OF THE PRINCIPAL TERMS OF THE SCHEME

1. Purposes of the Scheme

2. Basis for Determining the Participants and the Scope of Participants

(1) Basis for Determining the Participants

(2) Scope of Participants

3. Incentive Method of the Scheme

4. Source and Number of Shares under the Scheme

(1) Source of shares under the Scheme

(1) Validity Period of the Share Options

(2) Exercise Arrangement

(3) Exercisable Period

(4) The Grant Date of Share Options

(5) Lock-up Provisions on the Underlying Shares

6. Exercise Price of Share Options and Its Determination Method

7. Conditions of Grant and Conditions of the Exercise of the Share Options

(1) Conditions of Grant of Share Options

(2) Exercise Conditions of Share Options

(i) First Exercisable Period

8. Methods and Procedures for Adjustment of the Scheme

(1) Method of Adjusting the Number of Share Options

Q = Q0 × (1+n)

Q = Q0 × n

(2) Methods of Adjusting the Exercise Price

9. Handling Methods for Special Cases

(a) Change of Position

(b) Dismissal

(c) Resignation

(d) Incapacitation

(e) Retirement

(f) Death

10. Amendments to the Scheme

11. Supplementary Provisions

II. PROPOSED GRANT

1. Number of underlying shares subject to the Share Options under the Grant

2. Allocation of the Share Options under the Grant

3. Grant date of the Grant

4. Exercise Price of the Grant

(1) Exercise Price

(2) Determination Method of Exercise Price

5. Conditions of Grant and Exercisable Conditions for the Grant

6. Value of the Share Options

Factors

Amount of factors and description

Factors

Amount of factors and description

Value of Options RMB1.16 per A Share

HISENSE KELON ELECTRICAL HOLDINGS COMPANY LIMITED MEASURES FOR PERFORMANCE APPRAISAL FOR THE SHARE OPTION INCENTIVE SCHEME

A. GENERAL PROVISIONS

1. Objectives

2. Principles

3. Qualifying Participants

B. RESPONSIBILITIES AND AUTHORITIES OF THE EVALUATING ORGANIzATION

C. APPRAISAL SYSTEM

1. Details of the Appraisal

2. Items and Standards of the Appraisal

(1) Directors and senior management of the Company

(2) Mid-level management and key staff of the Company

Medlive Technology Co., Ltd. Proxy Solicitation & Information Statement 2011