Medlive Technology Co., Ltd. — Proxy Solicitation & Information Statement 2013

Jan 4, 2013

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)

(1) CONTINUING CONNECTED TRANSACTIONS (2) BUSINESS FRAMEWORK AGREEMENTS WITH QINGDAO HISENSE HITACHI AIR-CONDITIONING SYSTEMS CO., LTD. AND HISENSE WHIRLPOOL (ZHEJIANG) ELECTRIC APPLIANCES CO. LTD.

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

A letter from the Board is set out on pages 7 to 46 of this circular. A letter from the Independent Board Committee is set out on pages 47 to 48 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 49 to 93 of this circular.

A notice of the EGM to be held on 25 January 2013 at 2:30 p.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 6 December 2012 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 Shops 1712-1716, 17/F, Hopewell Centre, 183 Queen’s Road East, Wanchai, Hong Kong, not less than 24 hours before the time fixed for holding the 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.

4 January 2013

CONTENTS

	Page
Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	1
Letter from the Board. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	7
Letter from the Independent Board Committee. . . . . . . . . . . . . . . . . . . . . . . . . . .	47
Letter from the Independent Financial Adviser. . . . . . . . . . . . . . . . . . . . . . . . . . .	49
Appendix — General Information. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	94

— 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 under the Hong Kong Listing Rules;

• “Board” or “Director(s)” the board of directors of the Company;

• “Business Co-operation the Business Co-operation Framework Agreement （業務合 Framework Agreement” 作框架協議） entered into between the Company, Hisense Electric and Hisense Group dated 6 December 2012 in relation to the sale and purchase of home electrical appliances, raw materials, equipment, parts and components, supply of moulds, and the provision of various services;

“Caps”

• the annual caps for the transactions contemplated under the Huayi Compressors Purchase Framework Agreement, the Business Co-operation Framework Agreement and the Export Agency Framework Agreement for the year ending 31 December 2013, being (i) RMB1,180,000,000 in respect of the transactions contemplated under the Huayi Compressors Purchase Framework Agreement; (ii) RMB2,100,000 in respect of the purchase of home electrical appliances by the Group from Hisense Group, Hisense Electric and their respective subsidiaries under the Business Co-operation Framework Agreement; (iii) RMB8,550,000 in respect of the purchase of equipment by the Group from Hisense Group and its subsidiaries under the Business Co-operation Framework Agreement; (iv) RMB53,830,000 in respect of the purchase of raw materials, parts and components by the Group from Hisense Group, Hisense Electric and their respective subsidiaries under the Business Co-operation Framework Agreement; (v) RMB124,840,000 in respect of the provision of services by Hisense Group, Hisense Electric and their respective subsidiaries to the Group under the Business Cooperation Framework Agreement; (vi) RMB2,888,970,000

— 1 —

DEFINITIONS

in respect of the supply of home electrical appliances by the Group to Hisense Group, Hisense Electric and their respective subsidiaries under the Business Co-operation Framework Agreement; (vii) RMB8,550,000 in respect of the supply of equipment by the Group to Hisense Group and its subsidiaries under the Business Co-operation Framework Agreement; (viii) RMB358,550,000 in respect of the supply of moulds by the Group to Hisense Group, Hisense Electric and their respective subsidiaries under the Business Co-operation Framework Agreement; (ix) RMB26,350,000 in respect of the supply of raw materials, parts and components by the Group to Hisense Group, Hisense Electric and their respective subsidiaries under the Business Co-operation Framework Agreement; (x) RMB6,900,000 in respect of the provision of services by the Group to Hisense Group and its subsidiaries under the Business Co-operation Framework Agreement; and (xi) RMB280,000,000 in respect of the transactions contemplated under the Export Agency Framework Agreement;

• “Company”

Hisense Kelon Electrical Holdings Company Limited, a company incorporated in the PRC with limited liabilities, 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 Hong Kong Listing Rules;

“EGM” the first 2013 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 25 January 2013 at 2:30 p.m. for, among other things, the approval of the Business Co-operation Framework Agreement, the Huayi Compressors Purchase Framework Agreement, the Export Agency Framework Agreement, the Hitachi Business Framework Agreement, the Whirlpool Business Framework Agreement and the transactions contemplated thereunder and the annual caps in relation thereto;

— 2 —

DEFINITIONS

• “Existing Business the framework agreement （業務合作框架協議） entered into Co-operation Framework between the Company, Hisense Electric and Hisense Group Agreement” dated 29 November 2011 in relation to the sale and purchase of home electrical appliances, raw materials, equipment, parts and components, supply of moulds, and the provision of various services for the period up to 31 December 2012;

• “Existing Huayi the framework agreement （壓縮機採購供應框架協議） Compressors Purchase entered into between the Company and Huayi Compressor Framework Agreement” dated 29 November 2011 in connection with the purchase of compressors by the Group from Huayi Compressor and/or its subsidiaries for the period up to 31 December 2012;

• “Export Agency the Export Agency for White Goods Framework Agreement Framework Agreement” （白電產品出口代理框架協議） entered into between the Company and Hisense Marketing dated 6 December 2012 in connection with the provision by Hisense Marketing and/or its subsidiaries of agency services for export for the white goods products of the Group;

• “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 Group” Hisense Company Limited （海信集團有限公司）, a company incorporated in the PRC with limited liability;

• “Hisense Hitachi” Qingdao Hisense Hitachi Air-Conditioning Systems Co., Ltd. （青島海信日立空調系統有限公司）, a company incorporated in the PRC with limited liability;

— 3 —

DEFINITIONS

“Hisense HK”	Hisense (Hong Kong) Company Limited, a company
	incorporated in Hong Kong 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 Holdings Co., Ltd.), a company
	incorporated in the PRC with limited liability and a subsidiary
	of Hisense Group;
“Hisense Whirlpool”	Hisense Whirlpool (Zhejiang) Electric Appliances Co. Ltd.
	（海信惠而浦（浙江）電器有限公司）, a company incorporated
	in the PRC with limited liability;
“Hitachi Business	the business framework agreement 1（業務框架協議一）
Framework Agreement”	entered into between the Company and Hisense Hitachi dated
	6 December 2012 in relation to the sale of home electrical
	appliances, sale and purchase of raw materials, parts and
	components and supply of moulds;
“Hong Kong”	the Hong Kong Special Administrative Region of the People’s
	Republic of China;
“Hong Kong Listing	the Rules Governing the Listing of Securities on the Stock
Rules”	Exchange;
“Huayi Compressor”	Huayi Compressor Company Limited（華意壓縮機股份有限
	公司）(stock code: 000404), a limited company incorporated
	in the PRC and whose A shares are listed on the Shenzhen
	Stock Exchange;
“Huayi Compressors	the Compressors Purchase and Supply Framework Agreement
Purchase Framework	（壓縮機採購供應框架協議）entered into between the
Agreement”	Company and Huayi Compressor dated 6 December 2012 in
	connection with the purchase of compressors by the Group
	from Huayi Compressor and/or its subsidiaries;
“Independent Board	an independent board committee of the Company comprising
Committee”	all the independent non-executive Directors, namely Mr. Xu
	Xiang Yi, Mr. Wang Xin Yu and Mr. Wang Ai Guo;

— 4 —

DEFINITIONS

• “Independent Financial Investec Capital Asia Limited, a corporation licensed under Adviser” 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 Huayi Compressors Purchase Framework Agreement, the Business Co-operation Framework Agreement and the Export Agency Framework Agreement and the transactions contemplated thereunder and the Caps in relation thereto;

• “Independent (i) in respect of the Huayi Compressors Purchase Framework Shareholders” Agreement, Shareholders other than Huayi Compressor and its associates and other Shareholders which are required to abstain from voting in relation to the Huayi Compressors Purchase Framework Agreement under the Shenzhen Listing Rules, (ii) in respect of the Business Co-operation Framework Agreement, Shareholders other than Hisense Group, Hisense Electric and their respective associates and other Shareholders which are required to abstain from voting in relation to the Business Co-operation Framework Agreement under the Shenzhen Listing Rules, and (iii) in respect of the Export Agency Framework Agreement, Shareholders other than Hisense Marketing and its associates and other Shareholders which are required to abstain from voting in relation to the Export Agency Framework Agreement under the Shenzhen Listing Rules;

• “Latest Practicable Date” 31 December 2012, being the latest practicable date prior to the printing of this circular for ascertaining certain information in this circular;

“PRC” 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;

— 5 —

DEFINITIONS

“SFO”	Securities and Futures Ordinance (Cap. 571 of the Laws of
	Hong Kong);
“Share(s)”	share(s) of RMB1.00 each in the capital of the Company,
	comprising the A Shares and the H Shares;
“Shareholder(s)”	holder(s) of the Shares;
“Shenzhen Listing Rules”	the Rules Governing the Listing of Stocks on the Shenzhen
	Stock Exchange（深圳証劵交易所上市規則）;
“Shenzhen Stock	The Shenzhen Stock Exchange;
Exchange”
“Stock Exchange”	The Stock Exchange of Hong Kong Limited;
“substantial shareholder”	has the meaning ascribed to it under the Hong Kong Listing
	Rules;
“VAT”	value-added tax;
“Whirlpool Business	the business framework agreement 2（業務框架協議二）
Framework Agreement”	entered into between the Company and Hisense Whirlpool
	dated 6 December 2012 in relation to the sale and purchase
	of home electrical appliances, raw materials, equipment, parts
	and components, supply of moulds and provision of services;
“white goods”	the general term by which white-coloured household electrical
	appliances are commonly known which include, but not
	limited to, air-conditioners and refrigerators;
“HK$”	Hong Kong dollars, the lawful currency of Hong Kong;
“US$”	United States dollars, the lawful currency of the United States
	of America;
“RMB”	Renminbi, the lawful currency of the PRC; and
“%”	per cent.

— 6 —

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 Mr. Ren Li Ren

Ms. Yu Shu Min

Mr. Lin Lan

• Mr. Xiao Jian Lin

• Mr. Gan Yong He

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

Independent non-executive Directors:

Mr. Xu Xiang Yi

• Mr. Wang Xin Yu Mr. Wang Ai Guo

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

4 January 2013

To the Shareholders

Dear Sir or Madam,

(1) CONTINUING CONNECTED TRANSACTIONS (2) BUSINESS FRAMEWORK AGREEMENTS WITH QINGDAO HISENSE HITACHI AIR-CONDITIONING SYSTEMS CO., LTD. AND HISENSE WHIRLPOOL (ZHEJIANG) ELECTRIC APPLIANCES CO. LTD.

BACKGROUND

Reference is made to the announcement of the Company dated 29 November 2011 and the circular of the Company dated 28 December 2011 in relation to, inter alia, the Existing Huayi Compressors Purchase Framework Agreement and the Existing Business Cooperation Framework Agreement.

As disclosed in the announcement of the Company dated 6 December 2012, the Existing Huayi Compressors Purchase Framework Agreement and the Existing Business Cooperation Framework Agreement will expire on 31 December 2012 and it is expected that the Group will continue to enter into transactions of a nature similar to the transactions under those agreements from time to time thereafter. In view of the above and to modify

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LETTER FROM THE BOARD

the scope of the transactions between certain parties, on 6 December 2012, the following agreements were entered into by the Company:

• (a) the Huayi Compressors Purchase Framework Agreement;

• (b) the Business Co-operation Framework Agreement; and

• (c) the Export Agency Framework Agreement.

In addition, on 6 December 2012, the Company has also entered into the Hitachi Business Framework Agreement and the Whirlpool Business Framework Agreement with Hisense Hitachi and Hisense Whirlpool respectively. The transactions contemplated under the Hitachi Business Framework Agreement and the Whirlpool Business Framework Agreement constitute ordinary connected transactions under the Shenzhen Listing Rules and are subject to the approval at the EGM. The purpose of this circular is to:

• (a) provide you with further information on the Huayi Compressors Purchase Framework Agreement, the Business Co-operation Framework Agreement, the Export Agency Framework Agreement and the Caps in relation thereto;

• (b) provide you with further information on the Hitachi Business Framework Agreement and the Whirlpool Business Framework Agreement and the annual caps in relation thereto;

• (c) set out the letter of advice from the Independent Financial Adviser to the Independent Board Committee and Independent Shareholders in relation to the Huayi Compressors Purchase Framework Agreement, the Business Co-operation Framework Agreement and the Export Agency Framework Agreement; and

• (e) set out the recommendation from the Independent Board Committee in relation to the Huayi Compressors Purchase Framework Agreement, the Business Co-operation Framework Agreement and the Export Agency Framework Agreement.

I. CONTINUING CONNECTED TRANSACTIONS

• (A) HUAYI COMPRESSORS PURCHASE FRAMEWORK AGREEMENT

Date: 6 December 2012 Parties: The Company; and Huayi Compressor

Term:

The Huayi Compressors Purchase Framework Agreement shall commence from 1 January 2013 or the date of approval of the Huayi Compressors Purchase

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LETTER FROM THE BOARD

Framework Agreement at the EGM (whichever is the later) until 31 December 2013, which can be terminated before its expiration by mutual agreement of the parties.

In the event of any exemption for connected transactions being withdrawn or revoked or becoming invalid and there is non-compliance with the relevant Hong Kong Listing Rules and/or Shenzhen Listing Rules in respect of connected transactions for any transactions contemplated under the Huayi Compressors Purchase Framework Agreement, the performance of the Huayi Compressors Purchase Framework Agreement in respect of such transactions shall be terminated. The Huayi Compressors Purchase Framework Agreement will be terminated if all transactions contemplated thereunder have been terminated for the above reason.

Condition:

The Huayi Compressors Purchase Framework Agreement and the transactions contemplated thereunder are subject to the approval of the Independent Shareholders at the EGM.

Subject matter — Purchase of compressors:

Pursuant to the terms of the Huayi Compressors Purchase Framework Agreement, the Company and/or its subsidiaries will purchase on a nonexclusive basis such quantities of compressors as they may require from time to time from Huayi Compressor and/or its subsidiaries (as the case may be) for the purpose of manufacturing home electrical appliances, including but not limited to refrigerators and freezers, by the Group.

The relevant parties will enter into definitive contract(s) setting out specific terms including specifications of the compressors, quantity involved, pricing, quality standards and warranties, payment terms, terms of delivery, technological services and obligations of the parties upon default, but such terms shall be consistent with the principles and the terms of the Huayi Compressors Purchase Framework Agreement.

The Huayi Compressors Purchase Framework Agreement does not restrict the rights of Huayi Compressor and/or its subsidiaries (as the case may be) to sell its compressors to any other purchasers, nor the rights of the Company and/or its subsidiaries (as the case may be) to purchase compressors from any other suppliers.

Pricing:

Pricing for the purchase of compressors will be the market price of compressors which will be confirmed by commercial negotiation between the parties according to the principles of fairness and reasonableness from time to time. Such transactions will be conducted in the ordinary and usual course

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LETTER FROM THE BOARD

of business of the parties, on normal commercial terms and on terms not less favourable to the parties than terms available to or from (as appropriate) independent third parties.

Payment term:

Payment term(s) for the transactions contemplated under the Huayi Compressors Purchase Framework Agreement shall be in accordance with the payment term(s) as stipulated in the definitive contract(s) to be signed by the relevant parties thereto.

Historical figures:

The annual cap for the purchase of compressors by the Group from Huayi Compressor and/or its subsidiaries for the year ending 31 December 2012 as specified in the Existing Huayi Compressors Purchase Framework Agreement is RMB1,380,000,000 (inclusive of VAT). Without taking into account VAT, such annual cap will be RMB1,180,000,000 for the year ending 31 December 2012. For the nine months ended 30 September 2012, the aggregate transaction amount for the purchase of compressors by the Group from Huayi Compressor and/or its subsidiaries amounted to approximately RMB588,760,000 (exclusive of VAT and unaudited).

Proposed Cap:

The transactions contemplated under the Huayi Compressors Purchase Framework Agreement for the financial year ending 31 December 2013 are subject to the Cap of RMB1,180,000,000 (exclusive of VAT).

The above Cap was determined with reference to (a) similar transactions between the Group and Huayi Compressor and/or its subsidiaries in the past; (b) the prevailing market conditions relating to the demand for home electrical appliances in the PRC; and (c) the business development plan of the Company relating to the production and sales level of refrigerators and freezers in 2013. The management of the Group is confident that the production and sales level of refrigerators and freezers in 2013 will increase and the Group is expected to purchase more compressors from its suppliers, including Huayi Compressor, by the end of 2012 in preparation for the production peak next year. As such, the historical amount for the purchase of compressors from Huayi Compressor and/or its subsidiaries for the 9 months ended 30 September 2012 as shown above has not fully reflected the scale of the purchase of compressors from Huayi Compressor and/or its subsidiaries for the financial year ending 31 December 2012.

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LETTER FROM THE BOARD

Reasons for and benefits of the Huayi Compressors Purchase Framework Agreement:

The Group is engaged in the manufacture of home electrical appliances, including but not limited to refrigerators and freezers, which requires compressors as a component for its products. After considering a range of factors including the quality, the price and the compatibility of the compressors manufactured by Huayi Compressor and/or its subsidiaries with the current facilities used by and the refrigerators and freezers manufactured by the Group as well as the level of services provided by Huayi Compressor and/or its subsidiaries, the Company considers that Huayi Compressor and/ or its subsidiaries are in a good position to supply compressors to the Group. In addition, the Group can have bigger bargaining power by carrying out bulk purchase of compressors from Huayi Compressor and/or its subsidiaries, thus reducing purchase costs and increasing product competitiveness.

In light of the above, the Directors (including the independent non-executive Directors) are of the view that the terms of the Huayi Compressors Purchase Framework Agreement and the Cap in relation thereto are fair and reasonable and in the interest of the Company and the Shareholders as a whole.

(B) BUSINESS CO-OPERATION FRAMEWORK AGREEMENT

Date: 6 December 2012 Parties: The Company; Hisense Group; and Hisense Electric

Term:

The Business Co-operation Framework Agreement shall commence from 1 January 2013 or the date of approval of the Business Co-operation Framework Agreement by the Independent Shareholders at the EGM (whichever is the later) until 31 December 2013, which can be terminated before its expiration by mutual agreement of the parties.

In the event of any exemption for connected transactions being withdrawn or revoked or becoming invalid and there is non-compliance with the relevant Hong Kong Listing Rules and/or Shenzhen Listing Rules in respect of connected transactions for any transactions contemplated under the Business Co-operation Framework Agreement, the performance of the Business Cooperation Framework Agreement in respect of such transactions shall be terminated. The Business Co-operation Framework Agreement will be terminated if all transactions contemplated thereunder have been terminated for the above reason.

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LETTER FROM THE BOARD

Condition:

The Business Co-operation Framework Agreement and the transactions contemplated thereunder are subject to the approval of the Independent Shareholders at the EGM.

Subject matters:

The transactions contemplated under the Business Co-operation Framework Agreement will be conducted in the ordinary and usual course of business of the parties, on normal commercial terms and on terms not less favourable to the parties than terms available to or from (as appropriate) independent third parties. The Business Co-operation Framework Agreement does not restrict the rights of the parties (as the case may be) to sell or purchase products or services contemplated under the Business Co-operation Framework Agreement from any other purchasers or suppliers (as the case may be).

The relevant parties will enter into definitive contract(s) setting out specific terms including specifications of the products or services, quantity involved, pricing principles, quality standards and warranties, payment terms, terms of delivery, technological services and obligations in the event of default, but such terms shall be consistent with the principles and the terms of the Business Co-operation Framework Agreement.

Payment term(s) for the transactions contemplated under the Business Cooperation Framework Agreement shall be in accordance with the payment term(s) as stipulated in the definitive contract(s) to be signed by the relevant parties thereto.

The transactions contemplated under the Business Co-operation Framework Agreement are in connection with the following aspects of business cooperation between the parties:

(1) Purchase of home electrical appliances

Pursuant to the terms of the Business Co-operation Framework Agreement, the Company and/or its subsidiaries will purchase from Hisense Group, Hisense Electric and/or their respective subsidiaries on a non-exclusive basis home electrical appliances as they may require from time to time.

Pricing:

Pricing for the purchase of home electrical appliances is determined by commercial negotiation between the parties according to the principles of fairness and reasonableness mainly with reference to the market price of similar home electrical appliances from time to time.

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LETTER FROM THE BOARD

Historical figures:

The annual cap allocated to the purchase of home electrical appliances by the Group from Hisense Group, Hisense Electric and/or their respective subsidiaries for the financial year ending 31 December 2012 as specified in the Existing Business Co-operation Framework Agreement is RMB4,000,000 (inclusive of VAT). Without taking into account VAT, such annual cap will be RMB3,570,000 for the year ending 31 December 2012. For the nine months ended 30 September 2012, the aggregate transaction amount for the purchase of home electrical appliances by the Group from Hisense Group, Hisense Electric and/or their respective subsidiaries amounted to approximately RMB400,000 (exclusive of VAT and unaudited) (of which RMB20,000 was for the purchases from Hisense Group and/or its subsidiaries, whereas RMB380,000 was for the purchases from Hisense Electric and/or its subsidiaries).

Proposed Cap:

The transactions contemplated under the Business Co-operation Framework Agreement regarding the purchase of home electrical appliances by the Group from Hisense Group, Hisense Electric and/or their respective subsidiaries for the financial year ending 31 December 2013 are subject to the Cap of RMB2,100,000 (exclusive of VAT), of which:

• (i) RMB600,000 will be allocated to the purchase of home electrical appliances from Hisense Group and/or its subsidiaries; and

• (ii) RMB1,500,000 will be allocated to the purchase of home electrical appliances from Hisense Electric and/or its subsidiaries.

The above Cap was determined with reference to (a) the prevailing market conditions about the demand for electrical appliances; (b) the Group’s plan to boost the sales of the Group’s home electrical appliances through marketing and promotion activities; and (c) the projected need of purchase of television sets from Hisense Group, Hisense Electric and/ or their respective subsidiaries for the year ending 31 December 2013 as gifts for the Group’s marketing and promotion activities which aim at boosting the sales of the Group’s home electrical appliances such as refrigerators. Purchases of certain home electrical appliances as gifts for the Group’s marketing and promotion activities were not executed in 2012 as other alternative gifts were used for the Group’s marketing and promotion which resulted in the low transaction value for the purchase of home appliances from Hisense Group, Hisense Electric and/ or their subsidiaries for the nine months ended 30 September 2012. Following the launch of some innovative products by Hisense Electric, the Company has decided to use such products as gifts for the Group’s marketing and promotion in 2013 due to their small size and light

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LETTER FROM THE BOARD

weight, and therefore the transactions in relation to purchase of home electrical appliances from Hisense Group, Hisense Electric and/or their subsidiaries is expected to increase in 2013.

Reasons for and benefits of the purchase of home electrical appliances from Hisense Group, Hisense Electric and/or their respective subsidiaries:

The sales and overall image of the Company can be enhanced by purchasing television sets from Hisense Group, Hisense Electric and/ or their respective subsidiaries as gifts for the Group’s marketing and promotion activities which aim at boosting the sales of the Group’s home electrical appliances. In addition, the Group intends to procure models for electrical appliances (such as refrigerators and airconditioners) through Hisense Group and its subsidiaries for the purpose of conducting analysis and research so as to develop the Group’s market research functions. Since the pricing for the purchase of home electrical appliances will be determined with reference to the market price of similar home electrical appliances, it will be more convenient to the Group in terms of time and costs to purchase certain home electrical appliances through Hisense Group, Hisense Electric and/or their respective subsidiaries.

In light of the above, the Directors (including the independent nonexecutive Directors) are of the view that the terms of the purchase of home electrical appliances from Hisense Group, Hisense Electric and/or their respective subsidiaries under the Business Co-operation Agreement and the Cap in relation thereto are fair and reasonable and in the interest of the Company and the Shareholders as a whole.

(2) Purchase of equipment

Pursuant to the terms of the Business Co-operation Framework Agreement, the Company and/or its subsidiaries will purchase from Hisense Group and/or its subsidiaries on a non-exclusive basis such quantities of equipment as they may require from time to time.

Pricing:

As the Business Co-operation Framework Agreement is a framework agreement, it only sets out the principles in determining the pricing of the transactions relating to the purchase of equipment by the Group from Hisense Group and/or its subsidiaries contemplated thereunder (being that the pricing for the purchase of equipment is determined by commercial negotiation between the parties according to the principles of fairness and reasonableness). When the contracting parties enter into such transactions contemplated under the Business Co-operation

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LETTER FROM THE BOARD

Framework Agreement, the parties will enter into definitive contract(s) setting out specific terms including the prices/considerations for the relevant equipment to be procured.

During the commercial negotiation of the aforesaid definitive contract(s) between the parties, the Company will make reference to the then prevailing market price for the relevant equipment to be procured from Hisense Group and/or its subsidiaries, whereby the eventual price will not be less favourable to the Group than terms available from independent third parties. As such, the Company is of the view that the pricing of the aforesaid transactions will be on normal commercial terms and fair and reasonable and in the interests of the Company and the Shareholders as a whole.

Historical figures:

The annual cap allocated to the purchase of equipment by the Group from Hisense Group and/or its subsidiaries for the financial year ending 31 December 2012 as specified in the Existing Business Co-operation Framework Agreement is RMB10,000,000 (inclusive of VAT). Without taking into account VAT, such annual cap will be RMB8,550,000 for the year ending 31 December 2012. For the nine months ended 30 September 2012, the aggregate transaction amount for the purchase of equipment by the Group from Hisense Group and/or its subsidiaries amounted to approximately RMB170,000 (exclusive of VAT and unaudited).

Proposed Cap:

The transactions contemplated under the Business Co-operation Framework Agreement regarding the purchase of equipment by the Group from Hisense Group and/or its subsidiaries for the financial year ending 31 December 2013 are subject to the Cap of RMB8,550,000 (exclusive of VAT).

The above Cap was determined with reference to the projected level of production and sales of electrical appliances of the relevant subsidiaries of the Company for the year ending 31 December 2013. Due to the delay in overseas projects of the Group in 2012, the relevant transaction value for the purchase of equipment by the Group from Hisense Group and/or its subsidiaries for the nine months ended 30 September 2012 was lower than expected.

Reasons for and benefits of the purchase of equipment from Hisense Group and/or its subsidiaries:

Certain subsidiaries of Hisense Group are principally engaged in the import and export business. As such, Hisense Group has broad channels for import of equipment and is in an advantageous position to obtain

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products with better quality and pricing by placing bulk purchase orders. For these reasons, the purchase of equipment by the Group from Hisense Group and/or its subsidiaries will reduce purchase costs. At the same time, the Company is satisfied with the quality of the equipment provided by Hisense Group and/or its subsidiaries from their previous course of dealings. Besides, it is a trend of the Group’s business and production to move towards high-end products and it is expected that equipment will be purchased and imported from overseas to improve the Group’s current production line technology.

In light of the above, the Directors (including the independent nonexecutive Directors) are of the view that the terms of the purchase of equipment from Hisense Group and/or its subsidiaries under the Business Co-operation Agreement and the Cap in relation thereto are fair and reasonable and in the interest of the Company and the Shareholders as a whole.

(3) Purchase of raw materials, parts and components

Pursuant to the terms of the Business Co-operation Framework Agreement, the Company and/or its subsidiaries will purchase from Hisense Group, Hisense Electric and/or their respective subsidiaries on a non-exclusive basis such quantities of raw materials, parts and components as they may require from time to time.

Pricing:

As the Business Co-operation Framework Agreement is a framework agreement, it only sets out the principles in determining the pricing of the transactions relating to the purchase of raw materials, parts and components by the Group from Hisense Group, Hisense Electric and/ or their respective subsidiaries contemplated thereunder (being that the pricing for the purchase of raw materials, parts and components is determined by commercial negotiation between the parties according to the principles of fairness and reasonableness). When the contracting parties enter into such transactions contemplated under the Business Cooperation Framework Agreement, the parties will enter into definitive contract(s) setting out specific terms including the prices/considerations for the relevant raw materials, parts and components to be procured.

During the commercial negotiation of the aforesaid definitive contract(s) between the parties, the Company will make reference to the then prevailing market price for the relevant raw materials, parts and components to be procured from Hisense Group, Hisense Electric and/ or their respective subsidiaries, whereby the eventual price will not be less favourable to the Group than terms available from independent third parties. As such, the Company is of the view that the pricing of the

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aforesaid transactions will be on normal commercial terms and fair and reasonable and in the interests of the Company and the Shareholders as a whole.

Historical figures:

The annual cap allocated to the purchase of raw materials, parts and components by the Group from Hisense Group, Hisense Electric and/or their respective subsidiaries for the financial year ending 31 December 2012 as specified in the Existing Business Co-operation Framework Agreement is RMB68,030,000 (inclusive of VAT). Without taking into account VAT, such annual cap will be RMB58,150,000 for the year ending 31 December 2012. For the nine months ended 30 September 2012, the aggregate transaction amount for the purchase of raw materials, parts and components by the Group from Hisense Group, Hisense Electric and/or their respective subsidiaries amounted to approximately RMB15,460,000 (exclusive of VAT and unaudited) (of which RMB3,950,000 was for the purchases from Hisense Group and/ or its subsidiaries, whereas RMB11,510,000 was for the purchases from Hisense Electric and/or its subsidiaries).

Proposed Cap:

The transactions contemplated under the Business Co-operation Framework Agreement regarding the purchase of raw materials, parts and components by the Group from Hisense Group, Hisense Electric and/or their respective subsidiaries for the financial year ending 31 December 2013 are subject to the Cap of RMB53,830,000 (exclusive of VAT), of which:

• (i) RMB23,490,000 will be allocated to the purchase of raw materials, parts and components from Hisense Group and/or its subsidiaries;

• (ii) RMB30,340,000 will be allocated to the purchase of raw materials, parts and components from Hisense Electric and/or its subsidiaries.

The above Cap was determined with reference to (a) similar transactions between the Group with Hisense Group, Hisense Electric and/or their respective subsidiaries in the past; and (b) the projected level of production and sales of electrical appliances of the relevant subsidiaries of the Company for the year ending 31 December 2013. As some of the raw materials, parts and components of the Group were imported from overseas, the favourable RMB exchange rate resulted in the low transaction value for the purchase of raw materials, parts and components for the nine months ended 30 September 2012 while the Group expects the RMB exchange rate to remain stable throughout 2013 and the Group plans to purchase more raw materials, parts and components including some new parts and components in 2013.

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Reasons for and benefits of the purchase of raw materials, parts and components from Hisense Group, Hisense Electric and/or their respective subsidiaries:

Certain subsidiaries of Hisense Group and/or Hisense Electric are principally engaged in the import and export business. As such, Hisense Group and/or Hisense Electric have broad channels for import of materials and are in an advantageous position to obtain products with better quality and pricing by placing bulk purchase orders. For these reasons, the purchase of raw materials, parts and components for refrigerators and air-conditioners by the Group from Hisense Group, Hisense Electric and/or their respective subsidiaries will reduce purchase costs, and at the same time, the Group can benefit from the sharing of resources and the maximization of the economies of scale. Further, the Company is satisfied with the quality of the raw materials, parts and components provided by Hisense Group, Hisense Electric and/or their respective subsidiaries from their previous course of dealings. Quality of the Group’s products is enhanced by importing certain raw materials overseas, which in turn boosts the sales of high-end products and increases product and brand competitiveness.

In light of the above, the Directors (including the independent nonexecutive Directors) are of the view that the terms of the purchase of raw materials, parts and components from Hisense Group, Hisense Electric and/or their respective subsidiaries under the Business Co-operation Agreement and the Cap in relation thereto are fair and reasonable and in the interest of the Company and the Shareholders as a whole.

(4) Provision of services

Pursuant to the terms of the Business Co-operation Framework Agreement, the Company and/or its subsidiaries will engage (i) Hisense Group and/or its subsidiaries on a non-exclusive basis for the provision of material processing, installation and maintenance, property, medical, leasing, design, inspection, agency services for import and export (other than the agency services for export contemplated under the Export Agency Framework Agreement), property construction, management consultancy, technical support and information system maintenance services and (ii) Hisense Electric and/or its subsidiaries on non-exclusive basis for the provision of material processing, property and product design services as they may require from time to time.

Pricing:

The fees payable by the Group for the provision of the aforesaid services is determined by commercial negotiations according to the principles of fairness and reasonableness between the parties with reference to the market price for the provision of similar services from time to time.

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Historical figures:

The annual cap allocated to the provision of services by Hisense Group, Hisense Electric and/or their respective subsidiaries to the Group for the financial year ending 31 December 2012 as specified in the Existing Business Co-operation Framework Agreement is RMB319,220,000 (inclusive of the amount allocated for the provision by Hisense Marketing and/or its subsidiaries of agency services for export for the white goods products of the Group which services are to be covered under the Export Agency Framework Agreement for the financial year ending 31 December 2013). Without taking into account the agency services for export for the white goods products of the Group provided by Hisense Marketing and/or its subsidiaries, such annual cap will be RMB157,220,000 for the year ending 31 December 2012. For the nine months ended 30 September 2012, the aggregate transaction amount for the provision of services contemplated under the Business Co-operation Framework Agreement by Hisense Group, Hisense Electric and/or their respective subsidiaries to the Group (which, for the avoidance of doubt, does not include the provision by Hisense Marketing and/ or its subsidiaries of agency services for export for the white goods products of the Group and those services of which there have not been any historical transactions for the period) amounted to approximately RMB58,350,000 (unaudited) (of which RMB50,850,000 was for the provision of relevant services by Hisense Group and/or its subsidiaries, whereas RMB7,500,000 was for the provision of relevant services by Hisense Electric and/or its subsidiaries).

Proposed Cap:

The transactions contemplated under the Business Co-operation Framework Agreement regarding the provision of services by Hisense Group, Hisense Electric and/or their respective subsidiaries to the Group for the financial year ending 31 December 2013 are subject to the Cap of RMB124,840,000, of which:

• (i) RMB106,110,000 will be allocated to the provision of material processing, installation and maintenance, property, medical, leasing, design, inspection, agency services for import and export (other than the agency services for export contemplated under the Export Agency Framework Agreement), property construction, management consultancy, technical support and information system maintenance services by Hisense Group and/or its subsidiaries; and

• (ii) RMB18,730,000 will be allocated to the provision of material processing, property and product design services by Hisense Electric and/or its subsidiaries.

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LETTER FROM THE BOARD

The above Cap was determined with reference to (a) similar transactions between the Group with Hisense Group, Hisense Electric and/or their respective subsidiaries in the past; and (b) the projected level of production and sales of electrical appliances of the relevant subsidiaries of the Company for the year ending 31 December 2013. As (i) the Group shall engage Hisense Group and its subsidiaries to provide technical support and material processing to the Group in 2013 whereas the Group did not require such services from Hisense Group in 2012; and (ii) the property management services fees is expected to increase in 2013, the transaction amount for the provision of services by Hisense Group, Hisense Electric and/or their respective subsidiaries to the Group in 2013 is expected to increase significantly.

Reasons for and benefits of the engagement of services of Hisense Group, Hisense Electric and/or their respective subsidiaries:

The Company is satisfied with the quality of the services provided by Hisense Group, Hisense Electric and/or their respective subsidiaries from their previous course of dealings and considers that Hisense Group, Hisense Electric and/or their respective subsidiaries possess the expertise and experience for the provision of relevant services which can enable the Group to carry out its daily operation smoothly. Certain subsidiaries of Hisense Group are outstanding companies in the property development industry in Qingdao and the quality of property construction for the Group can be assured as a result of the professional quality which they can deliver.

In light of the above, the Directors (including the independent nonexecutive Directors) are of the view that the terms of the engagement of services of Hisense Group, Hisense Electric and/or their respective subsidiaries under the Business Co-operation Agreement and the Cap in relation thereto are fair and reasonable and in the interest of the Company and the Shareholders as a whole.

(5) Supply of home electrical appliances

Pursuant to the terms of the Business Co-operation Framework Agreement, the Company and/or its subsidiaries will supply on a nonexclusive basis home electrical appliances to Hisense Group, Hisense Electric and/or their respective subsidiaries as they may require from time to time.

Pricing:

Pricing for the supply of home electrical appliances is determined by commercial negotiation between the parties according to the principles of fairness and reasonableness with reference to the market price of similar home electrical appliances from time to time.

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LETTER FROM THE BOARD

Historical figures:

The annual cap allocated to the supply of home appliances by the Group to Hisense Group, Hisense Electric and/or their respective subsidiaries for the financial year ending 31 December 2012 as specified in the Existing Business Co-operation Framework Agreement is RMB2,504,000,000 (inclusive of VAT). Without taking into account VAT, such annual cap will be RMB2,500,510,000 for the year ending 31 December 2012. For the nine months ended 30 September 2012, the aggregate transaction amount for the supply of home electrical appliances by the Group to Hisense Group, Hisense Electric and/or their respective subsidiaries amounted to approximately RMB1,726,260,000 (exclusive of VAT and unaudited) (of which RMB1,726,240,000 was for the supply to Hisense Group and/or its subsidiaries, whereas RMB20,000 was for the supply to Hisense Electric and/or its subsidiaries).

Proposed Cap:

The transactions contemplated under the Business Co-operation Framework Agreement regarding the supply of home electrical appliances by the Group to Hisense Group, Hisense Electric and/or their respective subsidiaries for the financial year ending 31 December 2013 are subject to the Cap of RMB2,888,970,000 (exclusive of VAT), of which:

• (i) RMB2,888,670,000 will be allocated to the supply of home electrical appliances by the Group to Hisense Group and/or its subsidiaries; and

• (ii) RMB300,000 will be allocated to the supply of home electrical appliances by the Group to Hisense Electric and/or its subsidiaries.

The above Cap was determined with reference to (a) similar transactions between the Group with Hisense Group, Hisense Electric and/or their respective subsidiaries in the past; (b) the prevailing market conditions about the demand for electrical appliances in the PRC; and (c) the projected level of production and sales of electrical appliances of the relevant subsidiaries of the Company for the year ending 31 December 2013.

Reasons for and benefits of the supply of home electrical appliances to Hisense Group, Hisense Electric and/or their respective subsidiaries:

The production and supply of home electrical appliances by the Group to Hisense Group, Hisense Electric and/or their respective subsidiaries can help to lower the production costs of the Group by lowering the fixed costs per unit of product incurred by the Group as a result of the increase in production level, which in turn enhance the market competitiveness

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of the Group’s products. At the same time, the Group can continue to develop overseas market and enhance brand competitiveness and awareness. The Group can also increase market share and boost its sales turnover and revenue by selling products through the online platform of Hisense Group which reduces the product circulation links.

In light of the above, the Directors (including the independent nonexecutive Directors) are of the view that the terms of the supply of home electrical appliances to Hisense Group, Hisense Electric and/or their respective subsidiaries under the Business Co-operation Agreement and the Cap in relation thereto are fair and reasonable and in the interest of the Company and the Shareholders as a whole.

(6) Supply of equipment

Pursuant to the terms of the Business Co-operation Framework Agreement, the Company and/or its subsidiaries will supply on a nonexclusive basis such quantities of equipment to Hisense Group and/or its subsidiaries as they may require from time to time.

Pricing:

As the Business Co-operation Framework Agreement is a framework agreement, it only sets out the principles in determining the pricing of the transactions relating to the supply of equipment by the Group to Hisense Group and/or its subsidiaries contemplated thereunder (being that the pricing for the supply of equipment is determined by commercial negotiation between the parties according to the principles of fairness and reasonableness). When the contracting parties enter into such transactions contemplated under the Business Co-operation Framework Agreement, the parties will enter into definitive contract(s) setting out specific terms including the prices/considerations for the relevant equipment to be supplied.

During the commercial negotiation of the aforesaid definitive contract(s) between the parties, the Company will make reference to the then prevailing market price for the relevant equipment to be supplied by the Group to Hisense Group and/or its subsidiaries, whereby the eventual price will not be less favourable to the Group than terms available to independent third parties. As such, the Company is of the view that the pricing of the aforesaid transactions will be on normal commercial terms and fair and reasonable and in the interests of the Company and the Shareholders as a whole.

Historical figures:

The annual cap allocated to the supply of equipment by the Group to Hisense Group and/or its subsidiaries for the financial year ending 31

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December 2012 as specified in the Existing Business Co-operation Framework Agreement is RMB12,000,000 (inclusive of VAT). Without taking into account VAT, such annual cap will be RMB10,260,000 for the year ending 31 December 2012. For the nine months ended 30 September 2012, the aggregate transaction amount for the supply of equipment by the Group to Hisense Group and/or its subsidiaries amounted to approximately RMB2,550,000 (exclusive of VAT and unaudited).

Proposed Cap:

The transactions contemplated under the Business Co-operation Framework Agreement regarding the supply of equipment by the Group to Hisense Group and/or its subsidiaries for the financial year ending 31 December 2013 are subject to the Cap of RMB8,550,000 (exclusive of VAT).

The above Cap was determined with reference to (a) the prevailing market conditions about the demand for electrical appliances in the PRC; and (b) the projected level of production and sales of electrical appliances of the relevant subsidiaries of the Company for the year ending 31 December 2013.

Reasons for and benefits of the supply of equipment to Hisense Group and/or its subsidiaries:

The supply of equipment by the Group to Hisense Group and/or its subsidiaries will increase the Company’s revenue and satisfy the production needs of Hisense Group and/or its subsidiaries. At the same time, through the export channels of Hisense Group and/or its subsidiaries, sales to overseas markets will be enhanced to satisfy the demands therein.

In light of the above, the Directors (including the independent nonexecutive Directors) are of the view that the terms of the supply of equipment to Hisense Group and/or its subsidiaries under the Business Co-operation Agreement and the Cap in relation thereto are fair and reasonable and in the interest of the Company and the Shareholders as a whole.

(7) Supply of moulds

Pursuant to the terms of the Business Co-operation Framework Agreement, the Company and/or its subsidiaries will supply on a nonexclusive basis moulds to Hisense Group, Hisense Electric and/or their respective subsidiaries as they may require from time to time.

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Pricing:

In response to the invitations to tender from Hisense Group, Hisense Electric and/or their respective subsidiaries (which are also extended to various independent third parties) from time to time, the Group may submit such tenders or bids to supply the moulds for such products requested by Hisense Group, Hisense Electric and/or their respective subsidiaries in its/ their invitation to tender. Pricing for the supply of moulds is determined by the open bidding process.

Historical figures:

The annual cap allocated to the supply of moulds by the Group to Hisense Group, Hisense Electric and/or their respective subsidiaries for the financial year ending 31 December 2012 as specified in the Existing Business Co-operation Framework Agreement is RMB267,000,000 (inclusive of VAT). Without taking into account VAT, such annual cap will be RMB228,210,000 for the year ending 31 December 2012. For the nine months ended 30 September 2012, the aggregate transaction amount for the supply of moulds by the Group to Hisense Group, Hisense Electric and/or their respective subsidiaries amounted to approximately RMB153,690,000 (exclusive of VAT and unaudited) (of which RMB116,810,000 was for the supply to Hisense Group and/or its subsidiaries, whereas RMB36,880,000 was for the supply to Hisense Electric and/or its subsidiaries).

Proposed Cap:

The transactions contemplated under the Business Co-operation Framework Agreement regarding the supply of moulds by the Group to Hisense Group, Hisense Electric and/or their respective subsidiaries for the financial year ending 31 December 2013 are subject to the Cap of RMB358,550,000 (exclusive of VAT), of which:

• (i) RMB271,370,000 will be allocated to the supply of moulds to Hisense Group and/or its subsidiaries; and

• (ii) RMB87,180,000 will be allocated to the supply of moulds to Hisense Electric and/or its subsidiaries.

The above Cap was determined with reference to (a) similar transactions between the Group with Hisense Group, Hisense Electric and/or their respective subsidiaries in the past; and (b) the prevailing market conditions relating to the demand for electrical appliances in the PRC. The historical amount for the supply of moulds to Hisense Group, Hisense Electric and/or their respective subsidiaries for the nine months ended 30 September 2012 as shown above has not fully reflected the scale of the supply of moulds to Hisense Electric and/or its subsidiaries

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for the financial year ending 31 December 2012 as substantial amount of relevant orders have been placed by Hisense Electric and/or its subsidiaries in the fourth quarter of 2012. Further, the Group expects an increase in mould export sales through Hisense Group’s overseas customer network for the year ending 31 December 2013, so it is expected that the Group would supply more moulds to Hisense Group in 2013.

Reasons for and benefits of the supply of moulds to Hisense Group, Hisense Electric and/or their respective subsidiaries:

The sale of moulds by the Group to Hisense Group and Hisense Electric will become an important part of the Group’s business. The sale of moulds under the Business Co-operation Framework Agreement will facilitate the Group in maintaining an important existing relationship with the relevant subsidiaries of Hisense Group and Hisense Electric as the latter’s supplier for moulds. By maintaining such relationship, the relevant subsidiaries of Hisense Group and Hisense Electric may become stable customers of the Company in respect of the sale of moulds, thereby further expanding the sales of the Company.

In light of the above, the Directors (including the independent nonexecutive Directors) are of the view that the terms of the supply of moulds to Hisense Group, Hisense Electric and/or their respective subsidiaries under the Business Co-operation Agreement and the Cap in relation thereto are fair and reasonable and in the interest of the Company and the Shareholders as a whole.

(8) Supply of raw materials, parts and components

Pursuant to the terms of the Business Co-operation Framework Agreement, the Company and/or its subsidiaries will supply to Hisense Group, Hisense Electric and/or their respective subsidiaries on a nonexclusive basis such quantities of raw materials, parts and components to Hisense Group, Hisense Electric and/or their respective subsidiaries as they may require from time to time.

Pricing:

As the Business Co-operation Framework Agreement is a framework agreement, it only sets out the principles in determining the pricing of the transactions relating to the supply of raw materials, parts and components by the Group to Hisense Group, Hisense Electric and/ or their respective subsidiaries contemplated thereunder (being that the pricing for the supply of raw materials, parts and components is determined by commercial negotiation between the parties according to the principles of fairness and reasonableness). When the contracting

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parties enter into such transactions contemplated under the Business Cooperation Framework Agreement, the parties will enter into definitive contract(s) setting out specific terms including the prices/considerations for the relevant raw materials, parts and components to be supplied.

During the commercial negotiation of the aforesaid definitive contract(s) between the parties, the Company will make reference to the then prevailing market price for the relevant raw materials, parts and components to be supplied by the Group to Hisense Group, Hisense Electric and/or their respective subsidiaries, whereby the eventual price will not be less favourable to the Group than terms available to independent third parties. As such, the Company is of the view that the pricing of the aforesaid transactions will be on normal commercial terms and fair and reasonable and in the interests of the Company and the Shareholders as a whole.

Historical figures:

The annual cap allocated to the supply of raw materials, parts and components by the Group to Hisense Group, Hisense Electric and/or their respective subsidiaries for the financial year ending 31 December 2012 as specified in the Existing Business Co-operation Framework Agreement is RMB90,000,000 (inclusive of VAT). Without taking into account VAT, such annual cap will be RMB82,510,000 for the year ending 31 December 2012. For the nine months ended 30 September 2012, the aggregate transaction amount for the supply of raw materials, parts and components by the Group to Hisense Group, Hisense Electric and/or their respective subsidiaries amounted to approximately RMB16,450,000 (exclusive of VAT and unaudited) (of which RMB16,440,000 was for the supply to Hisense Group and/or its subsidiaries, whereas RMB10,000 was for the supply to Hisense Electric and/or its subsidiaries).

Proposed Cap:

The transactions contemplated under the Business Co-operation Framework Agreement regarding the supply of raw materials, parts and components by the Group to Hisense Group, Hisense Electric and/or their respective subsidiaries for the financial year ending 31 December 2013 are subject to the Cap of RMB26,350,000 (exclusive of VAT), of which:

• (i) RMB21,910,000 will be allocated to the supply of raw materials, parts and components to Hisense Group and/or its subsidiaries; and

• (ii) RMB4,440,000 will be allocated to the supply of raw materials, parts and components to Hisense Electric and/or its subsidiaries.

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The above Cap was determined with reference to (a) similar transactions between the Group with Hisense Group, Hisense Electric and/or their respective subsidiaries in the past; and (b) the prevailing market conditions relating to the demand for electrical appliances in the PRC. The Group expects an increase in supply of raw materials, parts and components to Hisense Group, Hisense Electric and/or their respective subsidiaries in 2013 as there will be additional subsidiaries of Hisense Group and Hisense Electric which would require supply of raw materials, parts and components from the Group for the year ending 31 December 2013.

Reasons for and benefits of the supply of raw materials, parts and components to Hisense Group, Hisense Electric and/or their respective subsidiaries:

Hisense Group and Hisense Electric have overseas sales channels and high quality customer resources which can enhance the sales of raw materials, parts and components of the Company. Further, the provision of raw materials, parts and components to Hisense Group, Hisense Electric and their respective subsidiaries can increase the revenues of the Company.

In light of the above, the Directors (including the independent nonexecutive Directors) are of the view that the terms of the supply of raw materials, parts and components to Hisense Group, Hisense Electric and/or their respective subsidiaries under the Business Co-operation Agreement and the Cap in relation thereto are fair and reasonable and in the interest of the Company and the Shareholders as a whole.

(9) Provision of services by the Group

Pursuant to the terms of the Business Co-operation Framework Agreement, the Company and/or its subsidiaries will provide loading and unloading, design, equipment rental and property services to Hisense Group and/or its subsidiaries on a non-exclusive basis from time to time.

Pricing:

The fees payable by Hisense Group and/or its subsidiaries for the aforesaid services is determined by commercial negotiations according to the principles of fairness and reasonableness between the parties with reference to the market price for the provision of similar services from time to time.

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Historical figures:

The annual cap allocated to the provision of services by the Group to Hisense Group, Hisense Electric and/or their respective subsidiaries for the financial year ending 31 December 2012 as specified in the Existing Business Co-operation Framework Agreement is RMB8,920,000 (of which RMB8,420,000 was allocated to the provision of services by the Group to Hisense Group and/or its subsidiaries). For the nine months ended 30 September 2012, the aggregate transaction amount for the provision of services contemplated under the Business Co-operation Framework Agreement by the Group to Hisense Group and/or its subsidiaries amounted to approximately RMB1,720,000 (unaudited).

Proposed Cap:

The transactions contemplated under the Business Co-operation Framework Agreement regarding the provision of loading and unloading, design, equipment rental and property services by the Group to Hisense Group and/or its subsidiaries for the financial year ending 31 December 2013 are subject to the Cap of RMB6,900,000.

The above Cap was determined with reference to (a) similar transactions between the Group with Hisense Group and/or its subsidiaries in the past; and (b) the prevailing market conditions relating to the provision of such services. As the Group will provide property management services to additional subsidiaries of Hisense Group for the year ending 31 December 2013 and the property management services fees is expected to increase in 2013, it is expected that the value of the services to be provided by the Group to Hisense Group and/or its subsidiaries would increase significantly in 2013.

Reasons for and benefits of the provision of services to Hisense Group and/or its subsidiaries:

The provision of design, loading and unloading services, equipment rental services and property services to Hisense Group and/or its subsidiaries will increase the Company’s revenue.

In light of the above, the Directors (including the independent nonexecutive Directors) are of the view that the terms of the provision of services to Hisense Group and/or its subsidiaries under the Business Cooperation Framework Agreement and the Cap in relation thereto are fair and reasonable and in the interest of the Company and the Shareholders as a whole.

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(C) EXPORT AGENCY FRAMEWORK AGREEMENT

Date: 6 December 2012

Parties: The Company; and Hisense Marketing

Term:

The Export Agency Framework Agreement shall commence from 1 January 2013 or the date of approval of the Export Agency Framework Agreement by the Independent Shareholders at the EGM (whichever is the later) until 31 December 2013, which can be terminated before its expiration by mutual agreement of the parties.

In the event of any exemption for connected transactions being withdrawn or revoked or becoming invalid and there is non-compliance with the relevant Hong Kong Listing Rules and/or Shenzhen Listing Rules in respect of connected transactions for any transactions contemplated under the Export Agency Framework Agreement, the performance of the Export Agency Framework Agreement in respect of such transactions shall be terminated. The Export Agency Framework Agreement will be terminated if all transactions contemplated thereunder have been terminated for the above reason.

Condition:

The Export Agency Framework Agreement and the transactions contemplated thereunder are subject to the approval of the Independent Shareholders at the EGM.

Subject matter — Provision of agency services for export for the white goods products of the Group:

Pursuant to the Export Agency Framework Agreement, the Company and/ or its subsidiaries will engage Hisense Marketing and/or its subsidiaries for the provision of agency services for export for the white goods products of the Group (which include without limitation, refrigerators, air-conditioners, freezers, small household electrical appliances and their related parts which are to be assembled) from time to time.

The agency services for export for the white goods products of the Group to be provided by Hisense Marketing and/or its subsidiaries will mainly include the following:

• (i) Hisense Marketing and/or its subsidiaries shall be responsible for expanding the customer base of the Group in the international market, and shall conduct business negotiation with third party customers in the name of the Company and/or its subsidiaries and accept orders for the

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goods after obtaining the latter’s consent. Contracts for such orders shall be entered into between the Company and/or its subsidiaries and the customers directly.

• (ii) Hisense Marketing and/or its subsidiaries shall provide information in relation to the delivery requirements of the customers to the Group which shall arrange for production. Any amendments proposed by Hisense Marketing and/or its subsidiaries in relation to the orders for the goods shall be subject to the Group’s consent. In case the Group needs to adjust the date of delivery for reasons such as production capacity, Hisense Marketing and/or its subsidiaries shall negotiate and confirm with the customers on behalf of the Group.

• (iii) The products to be supplied by the Group shall be delivered timely and in accordance with the specifications as per the purchase orders confirmed by the customers. There should not be any deficiencies in the design, raw materials and workmanship, and the quality and packaging shall meet the mandatory standards and requirements in the country of end use of the products. The Group shall provide technological services and warranties according to the agreement with the customers depending on the types of products involved.

The relevant parties may enter into definitive contract(s) for the transaction if they consider the same necessary, but the terms of the Export Agency Framework Agreement shall prevail in case there is any inconsistency between the Export Agency Framework Agreement and the definitive contract(s).

Pricing:

The fees payable by the Group for the provision of the agency services for export for the white goods of the Group is calculated by multiplying the Group’s revenue from export of the relevant type of products (which shall be the final amount of revenue for sales by the Group to third party customers in RMB) with an export agency fee percentage. Taking into consideration the audited rate of the charges actually incurred by Hisense Marketing and/ or its subsidiaries for providing agency services for export to the Group for the period from March 2011 to June 2012, the rate of the charges actually incurred during the first half of 2012 (being 7.24%) shall be used as the base percentage and the corresponding profit margin for export agency services payable by the Group to Hisense Marketing and/or its subsidiaries shall be determined according to the growth rate of the revenue from export subject to the export agency services in 2013, pursuant to which the export agency fee

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percentage during the term of the Export Agency Framework Agreement shall also be determined as provided in the table below.

Growth rate of the revenue	Corresponding profit	Corresponding
from export subject to the	margin for export	export agency fee
export agency services	agency services	percentage
Below 0%	0%	7.24%
0-5% (inclusive of 5%)	0.5%	7.74%
5-10% (inclusive of 10%)	0.8%	8.04%
10-15% (inclusive of 15%)	1%	8.24%
Above 15%	1.1%	8.34%

Note: Growth rate of the revenue from export subject to the export agency services = (the Group’s audited revenue from export subject to the export agency services in 2013 – the Group’s audited revenue from export subject to the export agency services in 2012)/the Group’s audited revenue from export subject to the export agency services in 2012.

In the course of provision of agency services for export for the white goods for the Group by Hisense Marketing and/or its subsidiaries, the Group will engage audit firm to conduct audit once every two years on the rate of the charges actually incurred by Hisense Marketing and/or its subsidiaries for providing agency services for export to the Group. If the difference between the latest audited rate of the charges actually incurred by Hisense Marketing and/or its subsidiaries for providing agency services for export to the Group and the rate of the charges actually incurred ascertained in the present audit does not exceed 1%, the export agency fee percentage shall remain the same as that agreed in the Export Agency Framework Agreement. However, if such difference exceeds 1%, then the parties shall further negotiate the export agency fee percentage based on the then circumstances.

Explanation for the adjustment of export agency fee percentage

The Group began to engage Hisense Marketing (being its connected party) to be its agent for its original OEM export business from March 2011 with the approval of the first extraordinary general meeting of the Company in 2011 in order to further stabilize and expand the Group’s sales in the international market, avoid risks in export business and utilize the well-established global sales network and human resources advantages of Hisense Marketing. The export agency fee percentage was then determined on the basis that it would be a certain percentage lower than the audited rate of the charges actually incurred by the Company for overseas sales during the first half of 2010 and was set at 6%.

During the period when Hisense Marketing provided agency services for export to the Group, the Group’s profit level for export agency business has experienced a steady increase as a result of Hisense Marketing’s effort in adjusting customer structures through negotiation. Nevertheless, owing to the significant growth in logistics costs and staff salaries in recent years, the costs and expenses incurred

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LETTER FROM THE BOARD

by Hisense Marketing for providing agency services for export to the Group have increased significantly. Since no adjustment has ever been made to the export agency fee percentage between Hisense Marketing and the Company, Hisense Marketing has recorded deficit for its export agency business as the actual rate of charges incurred was higher than the export agency fee percentage. According to the audit conducted by BDO China Shu Lun Pan Certified Public Accountants LLP, from January to June 2012, Hisense Marketing’s actual rate of charges recorded in its sales account for export agency business was 7.24%. In order to better utilize the resources of Hisense Marketing, expand the size of the Company and ensure the service charges of Hisense Marketing in the provision of agency services for export to the Group being relatively fair and reasonable, the export agency fee percentage shall be increased after negotiation between Hisense Marketing and the Company.

Furthermore, pursuant to the Export Agency Framework Agreement, the charges which may be imposed at the port of inspection in relation to the export of products and the fees for repair and spare parts shall be borne and paid by the Group, and Hisense Marketing and/or its subsidiaries shall bear and pay other export-related charges.

The Group shall however bear the following costs/ expenses in any of the following circumstances:

• (i) in the event that any liquidated damages, damages, compensation and other compensation costs are claimed by customers due to the failure of the Group to deliver relevant products in time (including without limitation, inability to deliver relevant products, delay in delivering relevant products and deficiency in the quality of the products), Hisense Marketing and/or its subsidiaries shall negotiate with the customers on the settlement proposal for and on behalf of the Group. The Group shall be responsible if the proposal is agreed to by the Group; and

• (ii) for reasons such as the Group’s need to expand its business, the Group may propose, and Hisense Marketing and/or its subsidiaries will communicate with the customers on, certain support to be provided to the customers in relation to the expenses for the promotion of sales, etc. The Group shall be responsible for those expenses which have been agreed to by the Group.

The transactions contemplated under the Export Agency Framework Agreement will be conducted in the ordinary and usual course of business of the parties, on normal commercial terms and on terms not less favourable to the parties than terms available to or from (as appropriate) independent third parties.

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LETTER FROM THE BOARD

Payment term:

The fees for the provision of the aforesaid services will be calculated on a monthly basis and the relevant members of the Group should pay the monthly fee for the preceding month by way of telegraphic transfer or bills.

Historical figures:

The annual cap allocated to the provision by Hisense Group and/or its subsidiaries of agency services for export for the financial year ending 31 December 2012 as specified in the Existing Business Co-operation Framework Agreement is RMB162,000,000. For the nine months ended 30 September 2012, the aggregate transaction amount for the provision by Hisense Marketing and/or its subsidiaries of agency services for export for the white goods products of the Group amounted to approximately RMB119,130,000 (unaudited).

Proposed Cap:

The transactions contemplated under the Export Agency Framework Agreement for the financial year ending 31 December 2013 are subject to the Cap of RMB280,000,000.

The above Cap was determined with reference to (a) similar transactions between the Group with Hisense Marketing and/or its subsidiaries in the past; and (b) the prevailing market conditions relating to the provision of such services.

Reasons for and benefits of the provision of services by Hisense Marketing and/ or its subsidiaries:

Hisense Marketing has over 10 years’ experience in overseas operations, professional expertise and mature market network and channels in overseas market. By engaging the export agency services of Hisense Marketing which will provide professional management services to the Group for its development of the international market, the Group can largely reduce costs which would have to be committed for running the operation by itself, and use the available resources on the research and development and the quality warranties for the products to be exported, which will be beneficial to the Group in enhancing the stable development of its export business. As the setting up of overseas market channels, the solicitation of and maintenance of relationship with customers and the overseas professional personnel are managed by Hisense Marketing under the export agency services, the Group is, to a certain extent, dependent on Hisense Marketing in respect of its export business. However, the Company’s revenue from export subject to the export agency services in the first half of 2012 only accounts for 15.16% of its total operating revenue.

Assuming an export agency fee percentage of 8.24% under the present adjustment is used for calculation, based on the Company’s revenue from export subject to the export agency services in 2011, the export agency fee of the Company in 2011 will increase by approximately RMB47,530,000, accounting for 20.94% of the audited

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LETTER FROM THE BOARD

net profit of 2011, whereas based on the Company’s revenue from export subject to the export agency services during the period from January to June 2012, the export agency fee of the Company for the period from January to June 2012 will increase by approximately RMB33,840,000, accounting for 8.91% of the unaudited net profit for the period from January to June 2012. However, the expansion in the scale of revenue from export subject to the export agency services can bring about increase in the amount of gross profit and sharing of the Company’s fixed costs and expenses as a whole which enables the Company to improve its earning capacity.

In light of the above, the Directors (including the independent non-executive Directors) are of the view that the terms of the provision of services by Hisense Marketing and/or its subsidiaries under the Export Agency Framework Agreement and the Cap in relation thereto are fair and reasonable and in the interest of the Company and the Shareholders as a whole.

INFORMATION RELATING TO THE COMPANY, HISENSE ELECTRIC, HISENSE GROUP, HISENSE MAKETING AND HUAYI COMPRESSOR

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

Hisense Electric was established on 17 April 1997 and has a registered capital of RMB1,306,645,222. Its authorised representative is Ms. Yu Shu Min and its registered address is at 218 Qian Wan Gang Road, Qingdao Economic and Technological Development Zone. It is primarily engaged in 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.

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. It is primarily engaged in the manufacture and sales of TV sets, refrigerators, freezers, washing machines, small home electrical appliances, VCD and DVD players, audio sets, broadcasting appliances, air-conditioners, 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; and the self-operated import and export business and property management.

Hisense Marketing was incorporated in the PRC in January 2008. Its legal representative is Ms. Yu Shu Min and it has a registered capital of RMB30,000,000. Its registered address is at 218 Qian Wan Gang Road, Qingdao Economic and Technological Development Zone. It is principally engaged in the operation and agency of import and export of goods and technology (permit/licence shall be obtained for the operation of businesses which are prohibited or restricted by law and administrative regulations) and marketing planning for enterprises.

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LETTER FROM THE BOARD

Huayi Compressor was incorporated in the PRC on 13 June 1996 with a registered capital of RMB324,581,200. Its authorised representative is Mr. Liu Ti Bin and its registered address is at Hi-Tech Development Zone, No. 1 Changhong Avenue, Jingde Town, Jiangxi Province, China. It is primarily engaged in the production and sale of fluorine-free compressors, refrigerators and related accessories, processing of refrigerating equipment with supplied materials and supplied samples, assembly of supplied components, compensation trade, processing and sale of hardware accessories and export and trading business.

IMPLICATIONS UNDER THE HONG KONG LISTING RULES

(A) Huayi Compressors Purchase Framework Agreement

As at the Latest Practicable Date, Huayi Compressor is a substantial shareholder holding 29.95% of Shunde Ronshen Plastic Products Co., Ltd. （佛 山市順德區容聲塑膠有限公司） and 29.89% of Guangdong Kelon Mould Co., Ltd. （廣東科龍模具有限公司） (both being non-wholly owned subsidiaries of the Company) and therefore Huayi Compressor is a connected person of the Company according to the Hong Kong Listing Rules. Accordingly, the transactions contemplated under the Huayi Compressors Purchase Framework Agreement will constitute continuing connected transactions for the Company under the Hong Kong Listing Rules. As the applicable percentage ratios for the transactions contemplated under the Huayi Compressors Purchase Framework Agreement exceed 5% on an annual basis and the annual consideration exceeds HK$10,000,000, the Huayi Compressors Purchase Framework Agreement, the transactions contemplated thereunder and the Cap in relation thereto are subject to the reporting, announcement, annual review and independent shareholders’ approval requirements under Rule 14A.35 of the Hong Kong Listing Rules.

Huayi Compressor and its associates are required under the Hong Kong Listing Rules to abstain from voting in relation to the continuing connected transactions under the Huayi Compressors Purchase Framework Agreement and so far as the Company is aware, none of them holds any Shares as at the Latest Practicable Date. Should Huayi Compressor or its associates become interested as registered or beneficial owner(s) of the Shares after the Latest Practicable Date to the date of the EGM, they would have to be abstained from voting in the EGM in relation to the continuing connected transactions entered between the Group and Huayi Compressor and the relevant Cap.

(B) Business Co-operation Framework Agreement and Export Agency Framework Agreement

As at the Latest Practicable Date, (i) 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 and (ii) Hisense HK holds 3.99% of the issued shares of the Company. As Hisense Group is the indirect holding company of Hisense Air-conditioning and

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LETTER FROM THE BOARD

Hisense HK and Hisense Electric is owned as to 41.25% by Hisense Group, Hisense Group, Hisense Electric and their respective subsidiaries (including without limitation Hisense Marketing and its subsidiaries) are connected persons of the Company according to the Hong Kong Listing Rules. As such, the transactions contemplated under the Business Co-operation Framework Agreement and the Export Agency Framework Agreement will constitute continuing connected transactions of the Company under the Hong Kong Listing Rules. As the applicable percentage ratios for the transactions contemplated under each of the Business Co-operation Framework Agreement and the Export Agency Framework Agreement exceed 5% on an annual basis and the annual consideration exceeds HK$10,000,000, the Business Cooperation Framework Agreement, the Export Agency Framework Agreement, the transactions contemplated thereunder and the Caps in relation thereto are subject to the reporting, announcement, annual review and independent shareholders’ approval requirements under Rule 14A.35 of the Hong Kong Listing Rules.

In view of the interests of Hisense Group and Hisense Electric in the Business Co-operation Framework Agreement and the interests of Hisense Marketing in the Export Agency Framework Agreement, Hisense Group and Hisense Electric and their respective associates will abstain from voting in relation to the resolution(s) to approve the Business Co-operation Framework Agreement and the transactions contemplated thereunder and the relevant Caps at the EGM and Hisense Marketing and its associates will abstain from voting in relation to the resolution(s) to approve the Export Agency Framework Agreement and the transactions contemplated thereunder and the relevant Cap 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) and Hisense HK, which held 54,000,000 Shares (representing approximately 3.99% of the issued share capital of the Company) as at the Latest Practicable Date, will abstain from voting in relation to the relevant resolution(s) at the EGM.

The Huayi Compressors Purchase Framework Agreement, the Business Co-operation Framework Agreement and the Export Agency Framework Agreement are not inter-conditional on each other.

GENERAL

Mr. Tang Ye Guo, Ms. Yu Shu Min, Mr. Lin Lan and Mr. Xiao Jian Lin, being Directors, have abstained from voting on the relevant board resolution(s) for approving the Business Co-operation Framework Agreement, the Export Agency Framework Agreement and the transactions contemplated thereunder in view of their interest therein as set out below:

• (a) Mr. Tang Ye Guo, Ms. Yu Shu Min, Mr. Lin Lan and Mr. Xiao Jian Lin are also directors or senior management of Hisense Group and/or some of its subsidiaries;

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• (b) Ms. Yu Shu Min, Mr. Lin Lan and Mr. Xiao Jian Lin are also directors of Hisense Electric and/or some of its subsidiaries; and

• (c) Ms. Yu Shu Min and Mr. Lin Lan are also directors or senior management of Hisense Marketing and/or some of its subsidiaries.

The Directors confirm that they do not have any material interest in the Huayi Compressors Purchase Framework Agreement and the transactions contemplated therein, and therefore, no Directors have abstained from voting on the board resolution for approving the same.

II. BUSINESS FRAMEWORK AGREEMENTS WITH HISENSE HITACHI AND HISENSE WHIRLPOOL

(A) HITACHI BUSINESS FRAMEWORK AGREEMENT

Date: 6 December 2012 Parties: The Company; and Hisense Hitachi

Term:

The Hitachi Business Framework Agreement shall commence from 1 January 2013 or the date of approval of the Hitachi Business Framework Agreement at the EGM (whichever is the later) until 31 December 2013, which can be terminated before its expiration by mutual agreement of the parties.

In the event of any exemption for connected transactions being withdrawn or revoked or becoming invalid and there is non-compliance with the relevant Hong Kong Listing Rules and/or Shenzhen Listing Rules and/or the Rules Governing the Listing of Stocks on Shanghai Stock Exchange in respect of connected transactions for any transactions contemplated under the Hitachi Business Framework Agreement, the performance of the Hitachi Business Framework Agreement in respect of such transactions shall be terminated. The Hitachi Business Framework Agreement will be terminated if all transactions contemplated thereunder have been terminated for the above reason.

Condition:

The Hitachi Business Framework Agreement and the transactions contemplated thereunder are subject to approval at the EGM by the independent Shareholders.

Subject matters:

The transactions contemplated under the Hitachi Business Framework Agreement will be conducted in the ordinary and usual course of business

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LETTER FROM THE BOARD

of the parties, on normal commercial terms and on terms not less favourable to the parties than terms available to or from (as appropriate) independent third parties. The Hitachi Business Framework Agreement does not restrict the rights of the Company to enter into transactions contemplated under the Hitachi Business Framework Agreement with any other third parties. The annual caps for the transactions contemplated under the Hitachi Business Framework Agreement and the historical amount of the transactions from January to September 2012 are set out as follows:

Unit: RMB (’0000) (exclusive of VAT)

	Annual caps of the	Amount paid/
	transaction amount	received in respect
	to be paid/received	of such type of
	during the term of	transactions from
	the Hitachi Business	January to
Types of	Framework	September 2012
transactions	Agreement	(unaudited)
Sale of products	10,903	4,945
Sale of raw material, parts and components	188	3
Sale of moulds	769	0
Purchase of raw material, parts and components	769	553

The parties will enter into definitive contract(s) setting out specific terms including specifications of the home electrical appliances, moulds, raw materials, parts and components, quantity involved, pricing principles, quality standards and warranties, payment terms, terms of delivery, technological services and obligations of the parties upon default, but such terms shall be consistent with the principles and the terms of the Hitachi Business Framework Agreement.

Pricing and payment term:

Pricing for the sale of home electrical appliances is determined by commercial negotiation between the parties according to the principles of fairness and reasonableness mainly with reference to the market price of similar home electrical appliances from time to time. Payment is settled with the payment method as provided in the definitive contract(s) to be signed between the parties.

Pricing for the purchase and supply of raw materials, parts and components is determined by commercial negotiation between the parties according to the principles of fairness and reasonableness and shall be confirmed in the definitive contract(s) signed by the parties. Payment is settled with the payment method as provided in the definitive contract(s) to be signed between the parties.

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LETTER FROM THE BOARD

The price for the sale of moulds by the Company to Hisense Hitachi is the market price determined by price comparison by way of open bidding. Payment is settled with the payment method as provided in the definitive contract(s) to be signed between the parties.

Reasons for and benefits of the transactions contemplated under the Hitachi Business Framework Agreement:

Sales of home appliances

The sale of home appliances to Hisense Hitachi may expand the sales and increase sales revenue of the Company.

Reciprocal purchase of raw materials, parts and components

In order to ensure the supply and after-sale service for products customized by Hisense Hitachi, both parties intend to reciprocally purchase raw materials, parts and components that match the customized products.

Sales of moulds

Sale of mould products is an important business component of 青島海信模 具有限公司 (Qingdao Hisense Mould Company Limited), the Company’s subsidiary. The sale of moulds to Hisense Hitachi to meet its production requirements may expand the sales of the Company and increase the sales revenue of the Company.

The above connected transactions will not prejudice the interests of the Company and will not cause adverse effect on the current and future financial situation and operating results of the Company.

Information of Hisense Hitachi

Hisense Hitachi was established on 8 January 2003, registered address: 218 Qian Wan Gang Road, Qingdao Economic and Technological Development Zone, legal representative: Qing Shangong, registered capital: US$46 million, scope of business: research and development of commercial air-conditioning system, manufacture and sale of self-produced products and provision of aftersale services. As at the Latest Practicable Date, the Company held 49% equity interest of Hisense Hitachi.

In view of the above, and based on the business credit and ability of commercial operation of Hisense Hitachi as known by the Company, the Board considers that Hisense Hitachi can honour its obligations, and deliver and pay to the Company the products and payments under the connected transactions.

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LETTER FROM THE BOARD

As Mr. Tang Ye Guo and Ms. Yu Shu Min, being Directors, are also the directors of Hisense Hitachi, the transactions contemplated under the Hitachi Business Framework Agreement will constitute ordinary connected transactions under the Shenzhen Listing Rules. The independent non-executive Directors have agreed to put forward the transactions contemplated under the Hitachi Business Framework Agreement for the consideration of the Board and they considered that such transactions would be conducted on normal commercial terms and based on the terms of the Hitachi Business Framework Agreement, and the terms of the transactions as agreed in the Hitachi Business Framework Agreement were fair and reasonable and were in the interests of the Company and its shareholders as a whole. They also considered that the terms of the Hitachi Business Framework Agreement and the annual caps in relation thereto were fair and reasonable so far as the independent Shareholders were concerned.

Mr. Tang Ye Guo and Ms. Yu Shu Min, being Directors, are also the directors of Hisense Hitachi and have abstained from voting on the relevant board resolution for approving the Hitachi Business Framework Agreement and the transactions contemplated thereunder.

(B) B U S I N E S S F R A M E W O R K A G R E E M E N T W I T H H I S E N S E WHIRLPOOL

Date: 6 December 2012

Parties: The Company; and Hisense Whirlpool

Term:

The Whirlpool Business Framework Agreement shall commence from 1 January 2013 or the date of approval of the Whirlpool Business Framework Agreement at the EGM (whichever is the later) until 31 December 2013, which can be terminated before its expiration by mutual agreement of the parties.

In the event of any exemption for connected transactions being withdrawn or revoked or becoming invalid and there is non-compliance with the relevant Hong Kong Listing Rules and/or Shenzhen Listing Rules and/or the Rules Governing the Listing of Stocks on Shanghai Stock Exchange in respect of connected transactions for any transactions contemplated under the Whirlpool Business Framework Agreement, the performance of the Whirlpool Business Framework Agreement in respect of such transactions shall be terminated. The Whirlpool Business Framework Agreement will be terminated if all transactions contemplated thereunder have been terminated for the above reason.

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LETTER FROM THE BOARD

Condition:

The Whirlpool Business Framework Agreement and the transactions contemplated thereunder are subject to approval at the EGM by the independent Shareholders.

Subject matters:

The transactions contemplated under the Whirlpool Business Framework Agreement will be conducted in the ordinary and usual course of business of the parties, on normal commercial terms and on terms not less favourable to the parties than terms available to or from (as appropriate) independent third parties. The Whirlpool Business Framework Agreement does not restrict the rights of the Company to enter into transactions contemplated under the Whirlpool Business Framework Agreement with any other third parties. The annual caps for the transactions contemplated under the Whirlpool Business Framework Agreement and the historical amount of the transactions from January to September 2012 are set out as follows:

Unit: RMB (’0000) (exclusive of VAT)

	Annual caps of the	Amount paid/
	transaction amount	received in respect
	to be paid/received	of such type of
	during the term	transactions from
	of the Whirlpool	January to
	Business Framework	September 2012
Types of transactions	Agreement	(unaudited)
Sale of products	171	0
Sale of raw materials, parts and components	2,184	1,878
Sale of moulds	1,026	1
Sale of equipment	85	0
Provision of services	473	232
Purchase of products	85,470	31,939
Purchase of raw materials, parts and components	1,301	792
Purchase of equipment	85	0

The parties will enter into definitive contract(s) setting out specific terms including specifications of the home electrical appliances, moulds, raw materials, parts and components and equipment, quantity involved, pricing principles, quality standards and warranties, payment terms, terms of delivery, technological services and obligations of the parties upon default, but such terms shall be consistent with the principles and the terms of the Whirlpool Business Framework Agreement.

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LETTER FROM THE BOARD

Pricing and payment term:

Pricing for the purchase and supply of home electrical appliances is determined by commercial negotiation between the parties according to the principles of fairness and reasonableness mainly with reference to the market price of similar home electrical appliances from time to time. Payment is settled with the payment method as provided in the definitive contract(s) to be signed between the parties.

Pricing for the purchase and supply of raw materials, parts and components is determined by commercial negotiation between the parties according to the principles of fairness and reasonableness and shall be confirmed in the definitive contract(s) to be signed by the parties. Payment is settled with the payment method as provided in the definitive contract(s) to be signed between the parties.

The price for the sale of moulds by the Company to Hisense Whirlpool is the market price determined by price comparison by way of open bidding. Payment is settled with the payment method as provided in the definitive contract(s) to be signed between the parties.

Pricing for the purchase and supply of equipment is determined by commercial negotiation between the parties according to the principles of fairness and reasonableness and shall be confirmed in the definitive contract(s) to be signed by the parties. Payment is settled with the payment method as provided in the definitive contract(s) to be signed between the parties.

The price for the provision of services is determined after commercial negotiation between the parties according to fair and reasonable pricing principles based on the market prices for similar services in the industry, and it shall be stipulated in the definitive service contract(s) to be signed between the parties. Payment is settled with the payment method as provided in the definitive contract(s) to be signed between the parties.

Reasons for and benefits of the transactions contemplated under the Whirlpool Business Framework Agreement:

Reciprocal purchase of home appliances

Hisense Whirlpool owns equipment for the manufacture of large refrigerators and washing machines. Procuring Hisense Whirlpool to manufacture home appliances may enhance the variety of the Company’s high-end products, expand the sales of high-end products, and raise the market share of such products, thereby increasing the Company’s income and facilitating the further development of its business. The sale of home appliances by the Company to Hisense Whirlpool may expand the sales of the Company and increase sales revenue.

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LETTER FROM THE BOARD

Reciprocal purchase of raw materials, parts and components

Since the Company purchases home appliances such as refrigerators from Hisense Whirlpool, to ensure the supply and after-sale service of products customized by the Company, the Company needs to purchase raw materials, parts and components that match the products customized by the Company. Meanwhile, the provision of raw materials, parts and components by the Company to Hisense Whirlpool may help the Company to expand its purchases and lower its procurement costs.

Sales of moulds

Sale of mould products is an important business component of 青島海信模 具有限公司 (Qingdao Hisense Mould Company Limited), the Company’s subsidiary. The sale of moulds to Hisense Whirlpool to meet its production requirements may expand the sales of the Company and increase the sales revenue of the Company.

Reciprocal purchase of equipment

The sale of equipment to Hisense Whirlpool to meet its production requirements may increase the revenue of the Company. The purchases of equipment from Hisense Whirlpool can satisfy the Company’s production requirements.

Provision of services

The provision of services to Hisense Whirlpool may enhance asset utilization ratio and increase revenue of the Company.

The above connected transactions will not prejudice the interests of the Company and will not cause adverse effect on the current and future financial situation and operating results of the Company.

Information of Hisense Whirlpool

Hisense Whirlpool was established on 4 November 2008, registered address: Zhongyang Avenue North Side, Changxing Economic Development Zone, Zhejiang Province, legal representative: BORRA BARBARA, registered capital: RMB450 million, scope of business: development, production and assembly of washing machines, refrigerators and their parts, sale of selfmanufactured products, provision of after-sale services and technical consultation services related to the above-mentioned products. The substantial shareholders of Hisense Whirlpool are Whirlpool (Hong Kong) Limited and the Company, each holding a 50% equity interest as at the Latest Practicable Date.

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LETTER FROM THE BOARD

In view of the above, and based on the business credit and ability of commercial operation of Hisense Whirlpool as known by the Company, the Board considers that Hisense Whirlpool can honour its obligations, and deliver and pay to the Company the products and payments under the connected transactions.

As Mr. Lin Lan and Mr. Gan Yong He, being Directors, are also the directors of Hisense Whirlpool, the transactions contemplated under the Whirlpool Business Framework Agreement will constitute ordinary connected transactions under the Shenzhen Listing Rules. The independent non-executive Directors have agreed to put forward the transactions contemplated under the Whirlpool Business Framework Agreement for the consideration of the Board and they considered that such transactions would be conducted on normal commercial terms and based on the terms of the Whirlpool Business Framework Agreement, and the terms of the transactions as agreed in the Whirlpool Business Framework Agreement were fair and reasonable and were in the interests of the Company and its shareholders as a whole. They also considered that the terms of the Whirlpool Business Framework Agreement and the annual caps in relation thereto were fair and reasonable so far as the independent shareholders were concerned.

Mr. Lin Lan and Mr. Gan Yong He, being Directors, are also the directors of Hisense Whirlpool and has abstained from voting on the relevant board resolution for approving the Whirlpool Business Framework Agreement and the transactions contemplated thereunder.

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 2:30 p.m. on Friday, 25 January 2013 at which ordinary resolutions will be proposed to approve, inter alia, the Huayi Compressors Purchase Agreement, the Business Co-operation Framework Agreement, the Export Agency Framework Agreement, the Hitachi Business Framework Agreement and the Whirlpool Business Framework Agreement and the transactions contemplated thereunder and the annual caps in relation thereto by poll.

A notice of the EGM, a proxy form for use at the EGM and a reply slip have been despatched by the Company on 6 December 2012 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 Shops 1712-1716, 17/F, Hopewell Centre, 183 Queen’s Road East, Wanchai, Hong Kong, not less than 24 hours before the time fixed for holding the 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.

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LETTER FROM THE BOARD

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 Hong Kong Listing Rules, all votes casted at the EGM must be taken by poll (except those which relate purely to a procedural or administrative matter) and the chairman of the meeting will make such demand at the EGM and the results of the poll will be announced 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 26 December 2012 (Wednesday) until 25 January 2013 (Friday) (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 25 December 2012 (Tuesday) for registration.

RECOMMENDATION

The Directors consider that the Hitachi Business Framework Agreement and the Whirlpool Business Framework Agreement and the transactions contemplated thereunder and the annual caps in relation thereto 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 relevant ordinary resolutions to be proposed at the EGM to approve the same.

The Independent Board Committee, having taken into account the advice of the Independent Financial Adviser, considers that the Huayi Compressors Purchase Agreement, the Business Co-operation Framework Agreement and the Export Agency Framework Agreement and the transactions contemplated thereunder and the Caps in relation thereto are in the interest of the Company 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 relevant ordinary resolutions to be proposed in the EGM to approve the same.

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LETTER FROM THE BOARD

ADDITIONAL INFORMATION

Your attention is drawn to the letters from the Independent Board Committee and the Independent Financial Adviser in relation to the Huayi Compressors Purchase Agreement, the Business Co-operation Framework Agreement and the Export Agency Framework Agreement and the transactions contemplated thereunder which are respectively set out on pages 47 to 48 and pages 49 to 93 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

— 46 —

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)

4 January 2013

To the Independent Shareholders

Dear Sir or Madam,

CONTINUING CONNECTED TRANSACTIONS

We refer to the circular issued by the Company to the Shareholders dated 4 January 2013 (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 Huayi Compressors Purchase Agreement, the Business Cooperation Framework Agreement and the Export Agency Framework Agreement and the transactions contemplated thereunder and the Caps in relation thereto as to the fairness and reasonableness of the same. The Independent Financial Adviser, Investec Capital Asia 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 7 to 46 and pages 49 and 93 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 Huayi Compressors Purchase Agreement, the Business Co-operation Framework Agreement and the Export Agency Framework Agreement and the transactions contemplated thereunder and the Caps in relation thereto 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 resolutions to be proposed in the EGM to approve the Huayi Compressors Purchase Agreement, the Business Co-operation Framework Agreement and the Export Agency Framework Agreement and the transactions contemplated thereunder and the Caps in relation thereto.

Yours faithfully,

For and on behalf of the Independent Board Committee Xu Xiang Yi Wang Xin Yu Wang Ai Guo Independent non-executive Directors Hisense Kelon Electrical Holdings Company Limited

— 48 —

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

The following is the text of the letter of advice from Investec Capital Asia Limited to the Independent Board Committee and the Independent Shareholders in relation to the Agreements prepared for the purpose of incorporation in this circular.

Investec Capital Asia Ltd

Room 3609, 36/F, Two International Finance Centre 8 Finance Street, Central, Hong Kong 香港中環金融街 8 號國際金融中心二期 36 樓 3609 室 Tel/ 電話 : (852) 3187 5000 Fax/ 傳真 : (852) 2501 0171 www.investec.com

4 January 2013

• To: The Independent Board Committee and

the Independent Shareholders of

Hisense Kelon Electrical Holdings Company Limited

Dear Sirs,

CONTINUING CONNECTED TRANSACTIONS

INTRODUCTION

We refer to our appointment as the independent financial adviser to the Independent Board Committee and the Independent Shareholders in respect of the Huayi Compressors Purchase Framework Agreement, the Business Co-operation Framework Agreement and the Export Agency Framework Agreement (collectively the “Agreements”), details of which are set out in the circular to the Shareholders dated 4 January 2013 (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 Agreements. Unless otherwise stated, terms defined in the Circular have the same meanings in this letter.

The Existing Huayi Compressors Purchase Framework Agreement, the Existing Business Co-operation Framework Agreement and the Existing Export Agency Framework Agreement will expire on 31 December 2012 and it is expected that the Group will continue to enter into transactions of a nature similar to the transactions under those agreements from time to time thereafter. As such, on 6 December 2012, the Board announced, among other things, that the Group entered into the Agreements with Huayi Compressor, Hisense Group, Hisense Electric, and Hisense Marketing (details of the Agreements are stated in the section headed “Terms of the Agreements” below).

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Huayi Compressors Purchase Framework Agreement

As at the date of the Huayi Compressors Purchase Framework Agreement and the Latest Practicable Date, Huayi Compressor was a substantial shareholder holding approximately 29.95% of Shunde Ronshen Plastic Products Co., Ltd. ( 佛山市順德區容聲塑膠有限公 司 ) and approximately 29.89% of Guangdong Kelon Mould Co., Ltd. ( 廣東科龍模具有 限公司 ) (both being non wholly owned subsidiaries of the Group) and therefore Huayi Compressor is a connected person of the Company according to the Hong Kong Listing Rules. Accordingly, the transactions contemplated under the Huayi Compressors Purchase Framework Agreement will constitute continuing connected transactions for the Company under the Hong Kong Listing Rules. As the applicable percentage ratios for the transactions contemplated under the Huayi Compressors Purchase Framework Agreement exceed 5% on an annual basis and the annual consideration exceeds HK$10,000,000, the Huayi Compressors Purchase Framework Agreement, the transactions contemplated thereunder and the annual cap in relation thereto are subject to the reporting, announcement, annual review and independent shareholders’ approval requirements under Rule 14A.35 of the Hong Kong Listing Rules.

Business Co-operation Framework Agreement and Export Agency Framework Agreement

As at the date of the Business Co-operation Framework Agreement and the Latest Practicable Date, (i) Hisense Air-conditioning was a connected person of the Company by virtue of being a substantial shareholder of the Company, holding approximately 45.22% of the issued shares of the Company and (ii) Hisense HK held approximately 3.99% of the issued shares of the Company. As Hisense Group is the indirect holding Group of both Hisense Air-conditioning and Hisense HK and Hisense Electric is owned as to 41.25% by Hisense Group, each of Hisense Group, Hisense Electric and their respective subsidiaries (including without limitation Hisense Marketing and its subsidiaries) is regarded as a connected person of the Company according to the Hong Kong Listing Rules. As such, the transactions contemplated under the Business Co-operation Framework Agreement and the Export Agency Framework Agreement will constitute continuing connected transactions of the Company under the Hong Kong Listing Rules. As the applicable percentage ratios for the transactions contemplated under each of the Business Co-operation Framework Agreement and the Export Agency Framework Agreement exceed 5% on an annual basis and the annual consideration exceeds HK$10,000,000, the Business Co-operation Framework Agreement, the Export Agency Framework Agreement, the transactions contemplated thereunder and the respective annual caps in relation thereto are subject to the reporting, announcement, annual review and independent shareholders’ approval requirements under Rule 14A.35 of the Hong Kong Listing Rules.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

The Independent Board Committee, comprising all the independent non-executive Directors, has been formed to advise the Independent Shareholders as to whether the transactions contemplated under the Agreements are in the interests of the Company and the Shareholders as a whole, and the terms of the Agreements including the proposed 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 transactions contemplated under each of the Agreements are on normal commercial terms, in ordinary and usual course of business of the Group and in the interests of the Company and the Shareholders as a whole; (ii) whether or not the respective terms of the Agreements, including the maximum value of the transactions contemplated thereunder, are fair and reasonable; and (iii) how the Independent Shareholders should vote in respect of the resolutions to approve each of the Agreements and the transactions contemplated thereunder at the EGM.

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 Group 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 Group and/or its senior management staff (the “Management”) and/or the Directors and for which it is/they are solely responsible were 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 Group 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 Group 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.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

PRINCIPAL FACTORS CONSIDERED

In formulating our opinion regarding the Agreements, we have taken into consideration the following principal factors:

I. Background information and reasons for the Agreements

1. Information on the Group

The Company was incorporated in the PRC on 16 December 1992 and, together with its subsidiaries, is principally engaged in the manufacture and sale of white household electrical appliances such as refrigerators, airconditioners, freezers and washing machines. As stated in the Company’s annual report for the year ended 31 December 2011 (the “2011 Annual Report”), the Group’s operations were carried out in the PRC and almost all of the production facilities of the Group were located in the PRC. For the year ended 31 December 2011, approximately 70.2% of the Group’s turnover was derived from the PRC market (including Hong Kong) with the rest derived from European, American and other overseas markets.

Set out below is a summary of the Group’s operating results and financial position for extracted from the Company’s annual report for the year ended 31 December 2011 (the “2011 Annual Report”) and the Company’s interim report for the six months ended 30 June 2012 (the “2012 Interim Report”):—

Turnover — Sales of refrigerators — Sales of air-conditioners — Sales of freezers — Sales of others Revenue from principal operations	For the year ended 31 December 2010 2011 RMB’000 RMB’000 (Audited and restated) (Audited) 7,989,072 8,246,155 5,979,521 6,516,775 765,865 669,211 1,096,503 1,316,309 15,830,961 16,748,450	For the six months ended 30 June 2011 2012 RMB’000 RMB’000 (Unaudited) (Unaudited) 4,395,138 4,266,280 4,269,849 3,756,833 435,820 432,587 580,326 590,997 9,681,133 9,046,697

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Revenue from other operations Total operating revenue Operating costs Business taxes and surcharges Selling and distribution expenses General and administrative expenses Financial expenses Impairment losses on assets Gain/(loss) from changes in fair value Investment income Operating profits Non-operating income Non-operating expenses Profit before tax Income tax expenses Profit for the year/period Attributable to: — Owners of the Company — Minority interests	For the year ended 31 December 2010 2011 RMB’000 RMB’000 (Audited and restated) (Audited) 1,859,362 1,740,214 17,690,323 18,488,664 14,796,732 15,202,894 19,940 63,151 2,523,719 2,636,212 529,344 547,650 74,596 56,004 29,555 24,877 17,973,885 18,530,788 17,633 4,962 394,879 138,561 412,512 143,522 128,950 101,398 518,757 158,722 19,999 13,420 627,708 246,700 31,588 21,250 596,120 225,450 585,278 227,015 10,843 (1,566)	For the six months ended 30 June 2011 2012 RMB’000 RMB’000 (Unaudited) (Unaudited) 1,053,776 921,030 10,734,909 9,967,727 8,910,556 7,982,126 26,603 32,388 1,399,644 1,310,271 275,034 299,728 28,526 25,298 12,285 3,345 10,652,649 9,653,155 (6,703) (14,093) 99,396 100,107 92,693 86,014 174,952 400,585 126,380 11,588 8,965 4,711 292,367 407,463 7,688 5,621 284,679 401,842 285,839 379,871 (1,160) 21,971

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

	As at 31	December	As at	30 June
	2010	2011	2011	2012
	RMB’000	RMB’000	RMB’000	RMB’000
	(Audited and	(Audited)	(Unaudited	(Unaudited)
	restated)		and restated)
Non-current assets	3,170,251	3,200,238	3,444,617	3,453,219
Current assets	4,848,718	4,435,201	4,024,528	6,064,469
Non-current liabilities	281,837	312,466	293,516	319,268
Current liabilities	6,826,184	6,162,159	5,227,092	7,041,770
Total net assets	910,948	1,160,815	1,948,536	2,156,649

For the year ended 31 December 2011, the Group recorded an audited turnover of approximately RMB18,488.7 million (representing an increase of approximately 4.3% from the turnover of approximately RMB17,690.3 million for the preceding year) and a net profit of approximately RMB225.5 million (representing a decrease of approximately 62.2% from the net profit of approximately RMB596.1 million in 2011). As explained in the 2011 Annual Report, in 2011, the growth rate of the PRC refrigerator and air-conditioner markets has significantly decelerated due to the lack of growth drivers while demand from export market was affected by the macro-environment of the global economic turmoil. These factors substantially intensified the operating pressure of the entire home electrical appliances industry and affected the Group’s profitability.

For the six months ended 30 June 2012, the Group recorded an unaudited turnover of approximately RMB9,967.7 million, representing a decrease of approximately 7.1% from the unaudited turnover of approximately RMB10,734.9 million for the corresponding period in 2011. The Group’s unaudited net profit attributable to the equity holders of the Company for the six months ended 30 June 2012 of approximately RMB379.9 million represents an increase of approximately 32.9% from the unaudited net profit attributable to the equity holders of the Company of approximately RMB RMB285.8 million for the corresponding period in 2011. As noted in the 2012 Interim Report, the combination of the continued weak global economy and the progressive withdrawal of the “Home Appliances Subsidy Policy for Rural Areas and Villages ( 家電下鄉 )”and”Trade-in ( 以舊換新 )” policies in the PRC affected both the domestic and export sales of the Group.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

As at 30 June 2012, the Group had unaudited total current assets of approximately RMB6,064.5 million and unaudited total current liabilities of approximately RMB7,041.8 million, representing net current liabilities of approximately RMB977.3 million. As at 30 June 2012, the Group had outstanding borrowings of approximately RMB1,102.5 million and its unaudited total equity was approximately RMB2,156.6 million.

We have noted from the 2011 Annual Report that the Company’s auditors (the “Auditors”), Crowe Horwath China Certified Public Accountants (LLP), had expressed a qualified opinion on the financial statements of the Group and its subsidiaries for the year ended 31 December 2011 due to matters related to the Group’s amount due from or to Guangdong Greencool Enterprise Development Company Limited. For further details of the Auditors’ opinion on the Group’s financial statements and its latest financial position, Shareholders are advised to read the 2011 Annual Report and the 2012 Interim Report. It should be noted while the Group’s financial statements contain qualified auditors’ opinion, we do not consider such qualified auditors’ opinion to have any impact on the fairness or reasonableness of the annual caps (details of the fairness and reasonableness of the annual caps are set out in the section headed “Rationale for determining the maximum value of the transactions contemplated under the Agreements” below).

2. Information on Huayi Compressor

Huayi Compressor has been listed on the Shenzhen Stock Exchange of the PRC (stock code: 000404) since 1996 and is located in Jingdezhen City, Jiangxi Province, the PRC. Based on the information available from the website of Huayi Compressor, it is one of the major fluorine-free compressor producers in the PRC. As disclosed in the interim report of Huayi Compressor for the six months ended 30 June 2012, its largest shareholder was 四川長 虹電器股份有限公司 (Sichuan Changhong Electric Group Limited), a PRC national enterprise holding approximately 29.92% of the issued share capital of Huayi Compressor as at 30 June 2012. We also note that the Group held approximately 6.45% of the issued share capital of Huayi Compressor as at 30 June 2012 and was the second largest shareholder. Set out below is the consolidated financial information of Huayi Compressor for each of the two years ended 31 December 2011 and the nine months ended 30 September 2012 which is extracted from its annual report for the year ended 31 December 2011 and the third quarter report for the nine months ended 30 September 2012.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

			For the
			nine months
	For the year ended		ended
	31 December		30 September
	2010	2011	2012
	RMB’000	RMB’000	RMB’000
	(Audited)	(Audited)	(Unaudited)
Turnover	4,617,019	5,367,953	4,638,113
Net Profit attributable
to owners of the
Company	19,076	30,604	79,879
Total assets as at year/
period end	3,592,170	4,216,610	4,914,993

As stated in its annual report for 2011, Huayi Compressor had a business segment turnover of approximately RMB5.4 billion which was generated from the sales of approximately 25.0 million units of compressors. In addition, Huayi Compressor has been the largest producer of refrigerator compressors in the PRC for 10 consecutive years in terms of sales volume with a market share of approximately 23.53%. As at 30 September 2012, Huayi Compressor had unaudited net assets of approximately RMB1,076.9 million and a net profit attributable to owners of Company of approximately RMB79.9 million which represents an increase of approximately 316.3% as compared to the corresponding period in 2011 due primarily to (i) the increase in sale of products with high gross margin and; (ii) the fall in the costs of major raw materials such as copper and silicon steel.

3. Information on Hisense Group

Based on the information available from the website of Hisense Group, Hisense Group is one of the major electronic companies in the PRC. Hisense Group is headquartered in Qingdao, the PRC and has operational presence in every major continent and sells its products to more than 100 countries worldwide. It is principally engaged in trust operation of state-owned assets; and the manufacturing and sale of TV set, DVD/VCD player, hi-fi set, broadcasting and television equipment, air-conditioner, electronic computer, telephone set, communications product, network product and electronic products;

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

the development of software; sale and after-sale services, technological development and consultancy, self-managed import & export trade with the items verified by the Ministry of Foreign Trade and Economic Co-operation (“MOFTEC”), Sino-foreign economic and technical co-operation with the items verified by MOFTEC. In 2011, Hisense Group generated revenue of approximately RMB23.5 billion, making it one of the largest company in the electronic industry in the PRC.

Hisense Electric Co., Ltd. (“Hisense Electric”) has been listed on the Shanghai Stock Exchange since 1997 (stock code: 600060). As at 31 December 2011, Hisense Group was interested in approximately 41.25% of the issued share capital of Hisense Electric. The following financial results of Hisense Electric for each of the two years ended 31 December 2011 and the nine months ended 30 September 2012 which are extracted from its annual report for the year ended 31 December 2011 and the third quarter report for the nine months ended 30 September 2012.

ended 30 September 2012.
			For the
			nine months
	For the year	ended	ended
	31 December		30 September
	2010	2011	2012
	RMB’000	RMB’000	RMB’000
	(Audited)	(Audited)	(Unaudited)
Turnover	21,263,701	23,523,724	16,712,123
Net Profit attributable
to owners of the
Company	979,402	1,964,806	907,079
Total assets as at year/
period end	12,494,043	16,144,615	17,158,636

As stated in its annual report for the year ended 31 December 2011, sales of televisions contributed to approximately 90.7% of Hisense Electric’s turnover and approximately 82.0% of its sales of televisions was generated from domestic sales in the PRC. As at 30 September 2012, Hisense Electric had unaudited net assets of approximately RMB8,088.5 million and a net profit attributable to owners of Company of approximately RMB907.1 million.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

4. Prevailing market conditions about the demand for electrical appliances

In light of the global economic downturn, the PRC government sets its GDP growth target for 2012 at 7.5 percent, down from the 8 percent goal in 2011 and has announced several measures in support of the economic growth. Such measures include the lowering of the one year borrowing rate from in 6.56% to 6.31% by the People’s Bank of China lowered in June 2012 and the approval of 60 infrastructure projects totaling more than RMB1 trillion by the National Development and Reform Commission in September 2012.

Based on the information from the National Bureau of Statistics of China, we note that the economic growth of China was 7.7% for the nine months ended 30 September 2012. In particular, as the economy of China turned to domestic consumption for growth, retail sales of consumer goods rose approximately 14.1% for the nine months ended 30 September 2012 as compared to the corresponding period in 2011 to approximately RMB16,835.6 billion. For the nine months ended 30 September 2012, the retail sales in cities reached approximately RMB14,577.5 billion, up by approximately 14.1% as compared to the same period last year, and the retail sales at and below county level stood at approximately RMB2,258.1 billion, representing an increase of approximately 14.4% on a year-on-year basis. According to the statistics from the website of chyxx.com ( 中國產業信息網 ), the export sales of home appliances for the nine months ended 30 September 2012 were approximately US$38,040.0 million, representing an increase of approximately 7.5% as compared with that in the same period of 2011. In this relation, we understand from the Management that the Group has recorded an approximately 20% growth in export sales for the nine months ended 30 September 2012 as compared to the same period of 2011.

In addition, there have been major changes in terms of the Government Policies which impact the home appliances industry. First of all, the implementation of Home Appliances Subsidy Policy for Rural Villages ( 家電 下鄉政策 ) (the “Subsidy Policy”) shall be ceased completely throughout all regions of the PRC by the end of January 2013. On the other hand, in June 2012, the General Office of the State Council announced the new energysaving subsidy policies ( 節能惠民補貼政策 ) (the “New Subsidy Policy”) which approximately RMB26.0 billion in subsidies have been set aside by the PRC government to encourage consumers to switch to low-energy appliances.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Based on (i) an expected stable future economic growth in the PRC; (ii) the launch of the New Subsidy Policy; and (iii) the Group’s continued growth in export sales as evidenced in its export sales for the nine months ended 30 September 2012, we concur with the Management’s view that the demand for home electrical appliances of the Group will be growing steadily in 2013.

5. Reasons for the Agreements

• a. The Huayi Compressors Purchase Framework Agreement

Under the Huayi Compressors Purchase Framework Agreement, the Company agreed that it and/or its relevant subsidiaries shall purchase on a non-exclusive basis such quantities of compressors as they may require from time to time from Huayi Compressor and/or its subsidiaries (the “Huayi Compressor Group”) (as the case may be) for the purpose of manufacturing household electrical appliances, including but not limited to refrigerators and freezers, by the Group. The transactions contemplated under the Huayi Compressors Purchase Framework Agreement are in the ordinary and usual course of business of the Company, and the Company and/or its subsidiaries have the right to purchase compressors from suppliers other than the Huayi Compressor Group from time to time according to their own needs.

As stated in the Letter from the Board, the Group is engaged in the manufacture of household electrical appliances, including but not limited to refrigerators and freezers, which requires compressors as a component for its products. After considering a range of factors including the quality, the price and the compatibility of the compressors manufactured by the Huayi Compressor Group with the current facilities used by and the refrigerators and freezers manufactured by the relevant subsidiaries of the Company, as well as the level of services provided by the Huayi Compressor and/or its subsidiaries, the Company considers that the Huayi Compressor Group is in a good position to supply compressors to the Group. In addition, the Company can have bigger bargaining power by carrying out bulk purchase of compressors from the Huayi Compressor Group, thus reducing purchase costs and increasing product competitiveness.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

We understand from the Company that the Group has been purchasing compressors from the Huayi Compressor Group since 2001 and the Company has been very satisfied with the quality and prices of the compressors produced by the Huayi Compressor Group. In view of the fact that the manufacture and sale of refrigerators and freezers is one of the principal businesses of the Group and compressors are essential components of refrigerators and freezers, it is reasonable for the Group to purchase compressors as part of the components for the manufacture of its products from time to time in its ordinary course of business. Furthermore, as mentioned above, Huayi Compressor is one of the major producers of compressors in the PRC and has also been one of the major suppliers of compressors of the Group, thus the Company could reduce purchase costs and increasing product competitiveness by carrying out bulk purchase of compressors from the Huayi Compressor Group. On this basis, we consider that the Huayi Compressor Group has the relevant experience and expertise in the manufacture of compressors and we are of the view that the entering into of the Huayi Compressors Purchase Framework Agreement for the purpose of sourcing compressors from the Huayi Compressor Group is in the interests of the Company and the Shareholders as a whole and the transactions contemplated under the Huayi Compressors Purchase Framework Agreement are in the ordinary and usual course of business of the Group.

• b. The Business Co-operation Framework Agreement

Under the Business Co-operation Framework Agreement, the Company has agreed that it (or any of its subsidiaries which will be entitled to have the same rights and obligations under the Business Co-operation Framework Agreement) may enter into certain transactions with the respective subsidiaries of Hisense Group and Hisense Electric in respect of the supply and purchase of home electrical appliances, equipments, raw materials, parts and components, provision of services and supply of moulds (particulars and terms of each category of the aforesaid transactions are discussed in the section headed “Terms of the Agreements” below).

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Given the similar principal activities between the Group, Hisense Group and Hisense Electric which include the manufacture of home electrical appliances and the provision of related services and the substantial interest of Hisense Group in the Company, we consider that the business arrangements under the Business Co-operation Framework Agreement serve essentially to assist the Group’s operations as a manufacturer of home electrical appliances.

In view of the substantial interest of Hisense Group in the Company and the fact that Hisense Group, together with its subsidiaries, is currently one of the major electronic companies in the PRC and has demonstrated a good track record in the sales of electrical appliances in the PRC, we are of the view that it is in the commercial interest of Hisense Group to assist the Group in its business conditions and improving its profitability. As Hisense Group and Hisense Electric have the relevant expertise in the domestic electrical appliances market in the PRC as well as strong financial resources and are therefore able to assist the Group, we are of the view that it is in the commercial interest of the Company to enter into the Business Co-operation Framework Agreement to co-operate with Hisense Group and Hisense Electric. Furthermore, as noted in the Letter from the Board, Hisense Group has over 10 years’ experience in overseas operations, professional expertise and mature market network and channels in overseas market. By leveraging on the overseas sales platform of Hisense Group, the Group can benefit in the development of its overseas sales channels, reduce setup costs for overseas market and reduce expenses in relation to export businesses.

Certain transactions contemplated under the Business Co-operation Framework Agreement such as the sales of home electrical appliances, moulds, raw materials parts and components and provision of property management services, design, loading and unloading services and equipment rental services by the Group, when take place, will be recognised by the Group as its sales or other income, and the overall revenue of the Group will therefore be increased as a result of such transactions. As stated in the Letter from the Board, the sale and supply of moulds under the Business Co-operation Framework Agreement will facilitate the Group to maintain an important relationship with the respective subsidiaries of Hisense Group and Hisense Electric as

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

the latter’s supplier for moulds. By maintaining such relationship, the relevant subsidiaries of Hisense Group and Hisense Electric may become stable customers of the Group in respect of the sale of moulds, thereby further expanding the sales of the Group.

As regards to the sale and supply of home electrical appliances, since certain subsidiaries of the Company currently possess excess production capacity and they will incur fixed costs such as depreciation of machinery and rent regardless of the production level, the sale and supply of home electrical appliances to the respective subsidiaries of Hisense Group and Hisense Electric can help to utilise their otherwise idling capacity as well as reduce the products’ per-unit fixed costs as a result of the increase in the production level. The competitiveness of the Group’s products in terms of costing may therefore increase.

As regards to those transactions contemplated under the Business Cooperation Framework Agreement in relation to the sale and purchase of raw materials, equipments, parts and components and purchase of home electrical appliances between the Group and the respective subsidiaries of Hisense Group and Hisense Electric, we understand that as the Group, 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. Accordingly, the total cost of sales of the Group may be reduced and the competitiveness and responsiveness of the Group’s products may therefore increase.

As regards to the provision of services by Hisense Group, Hisense Electric and/or their subsidiaries to the Group, we understand that both Hisense Group and Hisense Electric and/or their respective subsidiaries possess the expertise and experience for the provision of the relevant services and the Group is very satisfied with the quality of services provided by both Hisense Group and Hisense Electric and/or their respective subsidiaries from their previous course of dealings. We also understand that the Group does not possess the required expertise internally to perform the abovementioned services and therefore, by leveraging on the expertise of Hisense Group and Hisense Electric and/ or their subsidiaries, the Group can be assured that the relevant services essential to its daily operation can be carried out smoothly and thereby reducing the operational risk exposure of the Group.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

In summary, we are of the view that the respective co-operation between the Group and Hisense Group and Hisense Electric, which have broad channels for import of materials and are in an advantageous position to obtain products with better quality and pricing, can (i) benefit the Group in the development of its overseas sales channels, reduce setup costs for overseas market and reduce expenses in relation to export businesses; (ii) help lower the production costs of the Group by lowering the fixed costs per unit of product incurred by the Group as a result of the increase in production level, which in turn enhance the market competitiveness of the Group’s products; (iii) bring benefit to the Group from the sharing of resources and the maximization of the economies of scale; and (iv) continue to provide quality services to the Group due to their familiarity of the operations of the Group and help reduce the operational risk exposure of the Group.

Based on the nature of the transactions to be contemplated under the Business Co-operation Framework Agreement and the benefits expected to be brought by such transactions as discussed above, we consider that the transactions to be contemplated under the Business Co-operation Framework Agreement will be conducted in the ordinary and usual course of business of the Group and we concur with the view of the Company that the entering into of the Business Co-operation Framework Agreement is in the interests of the Company and the Shareholders as a whole.

c. The Export Agency Framework Agreement

Under the Export Agency Framework Agreement, the Company agreed that it and/or its subsidiaries will engage Hisense Marketing and/or its subsidiaries for the provision of agency services for export for the white goods products of the Group (which include without limitation, refrigerators, air-conditioners, freezers, small household electrical appliances and their related parts which are to be assembled) from time to time.

We understand from the Management that it is one of the Group’s strategies to increase the weight of its self-owned brand export and reinforce the effort of development for key export markets and in the absence of the necessary internal resources capable of fulfilling the agency services which Hisense Marketing has been providing, it is

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

essential for the Group to reply on external parties to further stabilise and expand the Group’s sales in the international market and avoid risks in export business. As stated in the Letter from the Board, Hisense Marketing has over 10 years’ experience in overseas operations, professional expertise and mature market network and channels in overseas market. In addition, as stated in the Letter from the Board, during the period when Hisense Marketing provided agency services for export to the Group, the Group’s profit level for export agency business has experienced a steady increase as a result of Hisense Marketing’s effort in adjusting customer structures through negotiation. Furthermore, the Group can also largely reduce costs which would have to be committed for running the operation by itself, and use the available resources on the research and development and the quality warranties for the products to be exported, which will be beneficial to the Group in enhancing the stable development of its export business.

Accordingly, we consider that the transactions contemplated under the Export Agency Framework Agreement will be conducted in the ordinary and usual course of business of the Company and we concur with the view of the Company that the entering into of the Export Agency Framework Agreement is in the interests of the Company and the Shareholders as a whole.

II. Terms of the Agreements

1. The Huayi Compressors Purchase Framework Agreement

The Huayi Compressors Purchase Framework Agreement shall commence from the date of approval of the Huayi Compressors Purchase Framework Agreement by the Independent Shareholders until 31 December 2013 (which can be terminated before its expiration by mutual agreement of the parties or in the event of any breaches of the agreement), pursuant to which the Company agreed that it and/or its relevant subsidiaries shall purchase on a non-exclusive basis such quantities of compressors as they may require from time to time from Huayi Compressor and/or its subsidiaries (as the case may be) for the purpose of manufacturing home electrical appliances, including but not limited to refrigerators and freezers, by the Group. The transactions contemplated under the Huayi Compressors Purchase Framework Agreement are in the ordinary and usual course of business of the Group.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

The parties will enter into definitive contract(s) setting out specific terms including specifications of the compressors, quantity involved, pricing, quality standards and warranties, payment terms, terms of delivery, technological services and obligations of the parties upon default, but such terms shall be consistent with the principles and the terms of the Huayi Compressors Purchase Framework Agreement.

The Company and/or its subsidiaries have the right to purchase compressors from suppliers other than Huayi Compressor and/or its subsidiaries from time to time according to their own needs. The Huayi Compressors Purchase Framework Agreement does not restrict the rights of Huayi Compressor and/or its subsidiaries (as the case may be) to sell its compressors to any other third parties.

Pricing for the purchase of compressors is determined principally by commercial negotiations between the parties according to the principles of fairness and reasonableness with reference to the market price of compressors from time to time. Such transactions will be conducted in the ordinary and usual course of business of the Group, on normal commercial terms and on terms not less favourable to the Group than terms available to or from (as appropriate) independent third parties. Payment term(s) for the transactions contemplated under the Huayi Compressors Purchase Framework Agreement shall be in accordance with the payment term(s) as stipulated in the definitive contract(s) to be signed by the relevant parties thereto.

On the basis that (i) the purchase of compressors will be conducted in the ordinary and usual course of business of the Group; and (ii) the terms of the definitive contract(s) to be entered into between the Company (and/or its subsidiaries) and Huayi Compressor (and/or its subsidiaries) will be consistent with those of the Huayi Compressors Purchase Framework Agreement and will be determined in accordance with the principle of fairness and reasonableness with reference to the market and will not be less favourable to the Group than those available from independent third party, we are of the view that the terms of the Huayi Compressors Purchase Framework Agreement are in the interests of the Company and the Shareholders as a whole, on normal commercial terms and fair and reasonable.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

2. The Business Co-operation Framework Agreement

The Business Co-operation Framework Agreement shall commence from the date of approval of the Business Co-operation Framework Agreement by the Independent Shareholders until 31 December 2013 (which can be terminated before its expiration by mutual agreement of the parties or in the event of any breaches of the agreement) and covers several aspects of business cooperation between the Group and the respective subsidiaries of Hisense Group and Hisense Electric. The contracting parties have also agreed to enter into definitive contract(s) setting out specific terms including specifications of the products or services, quantity involved, pricing principles, quality standards and warranties, payment terms, terms of delivery, technological services and obligations in the event of default, but such terms shall be consistent with the principles and the terms of the Business Co-operation Framework Agreement.

In terms of the pricing policy, as stated in the “Letter from the Board”, during the commercial negotiation of the aforesaid definitive contract(s) between the parties, the Company will make reference to the relevant then prevailing market prices, whereby the eventual price(s) will be not less favourable to the Group than terms available to or from (as appropriate) independent third parties. We also noted that, given the non-exclusive basis of the Business Co-operation Framework Agreement, in the event that the terms (including the price) of the transactions contemplated under the Business Co-operation Framework Agreement is less favourable to that available to or from (as appropriate) independent third parties, the Group has the flexibility of not entering into a definitive contract with the respective subsidiaries of Hisense Group and Hisense Electric.

In addition, payment term(s) for the transactions contemplated under the Business Co-operation Framework Agreement shall be in accordance with the payment term(s) as stipulated in the definitive contract(s) to be signed by the relevant parties thereto. In particular, the Business Co-operation Framework Agreement covers the following aspects of business co-operation between the contracting parties:

• a. Purchase of home electrical appliances

Under the Business Co-operation Framework Agreement, the relevant subsidiaries of Hisense Group and Hisense Electric have agreed to manufacture and supply on a non-exclusive basis such quantities of

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

home electrical appliances as the Company (or any of its subsidiaries which will be entitled to have the same rights and obligations under the Business Co-operation Framework Agreement) may require from time to time.

The purchase price of home electrical appliances supplied by the relevant subsidiaries of Hisense Group and Hisense Electric to the Group will be determined by commercial negotiations according to the principle of fairness and reasonableness between the contracting parties mainly with reference to the market price of similar home electrical appliances from time to time.

The purchase of home electrical appliances by the Group will be conducted in the ordinary and usual course of its business, on normal commercial terms and on terms not less favourable to the Group than terms available to or from (as appropriate) independent third parties. The Business Co-operation Framework Agreement will not restrict the Group from purchasing home electrical appliances from other suppliers apart from the subsidiaries of Hisense Group or Hisense Electric, nor will it restrict the subsidiaries of Hisense Group or Hisense Electric from selling their home electrical appliances to any other third parties.

On the basis that (i) the purchase of home electrical appliances by the Group will be conducted in the ordinary and usual course of its business and the terms of the definitive contract(s) to be entered into between the relevant contracting parties will be consistent with those of the Business Co-operation Framework Agreement and will be determined in accordance with the principle of fairness and reasonableness with reference to the market price of the similar home appliances and not less favourable to the Group than terms available to or from (as appropriate) independent third parties; and (ii) the non-exclusive arrangement under the Business Co-operation Framework Agreement provides the Group with the flexibility without any commitment on the purchase quantity from the respective subsidiaries of Hisense Group and Hisense Electric, we are of the view that the terms of the Business Co-operation Framework Agreement with respect to the purchase of home electrical appliances by the Group are in the interests of the Company and the Shareholders as a whole, on normal commercial terms and fair and reasonable.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

b. Purchase of equipment

Under the Business Co-operation Framework Agreement, the subsidiaries of Hisense Group have agreed to supply on a non-exclusive basis such quantities of equipment as the Company (or any of its subsidiaries which will be entitled to have the same rights and obligations under the Business Co-operation Framework Agreement) may require from time to time.

Pricing for the purchase of equipment is determined principally by commercial negotiations between the relevant subsidiaries of the Company and the relevant subsidiaries of Hisense Group with reference to the market price of similar equipment from time to time and according to the principles of fairness and reasonableness.

The Business Co-operation Framework Agreement will not restrict the Group from purchasing equipment from supplier other than the subsidiaries of Hisense Group, nor will it restrict the subsidiaries of Hisense Group from selling their equipment to any other third parties.

On the basis that (i) the purchase of equipment by the Group will be conducted in the ordinary and usual course of its business and the terms of the definitive contract(s) to be entered into between the relevant contracting parties will be consistent with those of the Business Cooperation Framework Agreement and will be determined in accordance with the principle of fairness and reasonableness with reference to the market price of similar equipment from time to time and not less favourable to the Group than terms available to or from (as appropriate) independent third parties; (ii) the non-exclusive arrangement under the Business Co-operation Framework Agreement provides the Group with the flexibility without any commitment on the purchase quantity from the relevant subsidiaries of Hisense Group; and (iii) the Group has conducted similar transactions under the same terms in the past, we are of the view that the terms of the Business Co-operation Framework Agreement with respect to the purchase of equipment by the Group are in the interests of the Company and the Shareholders as a whole, on normal commercial terms and fair and reasonable.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

c. Purchase of raw materials, parts and components

Under the Business Co-operation Framework Agreement, the respective subsidiaries of Hisense Group and Hisense Electric have agreed to supply on a non-exclusive basis such quantities of raw materials, parts and components as the Company (or any of its subsidiaries which will be entitled to have the same rights and obligations under the Business Co-operation Framework Agreement) may require from time to time.

Pricing for the purchase of raw materials, parts and components is determined principally by commercial negotiations between the relevant subsidiaries of the Company and the relevant subsidiaries of Hisense Group and Hisense Electric with reference to the market price of similar raw materials, parts and components from time to time and according to the principles of fairness and reasonableness.

The Business Co-operation Framework Agreement will not restrict the Group from purchasing raw materials, parts and components from suppliers other than the subsidiaries of Hisense Group or Hisense Electric, nor will it restrict the subsidiaries of Hisense Group or Hisense Electric from selling their raw materials, parts and components to any other third parties.

On the basis that (i) the purchase of raw materials, parts and components by the Group will be conducted in the ordinary and usual course of its business and the terms of the definitive contract(s) to be entered into between the relevant contracting parties will be consistent with those of the Business Co-operation Framework Agreement and will be determined in accordance with the principle of fairness and reasonableness with reference to the market price of similar raw materials, parts and components from time to time and not less favourable to the Group than terms available to or from (as appropriate) independent third parties; (ii) the non-exclusive arrangement under the Business Cooperation Framework Agreement provides the Group with the flexibility without any commitment on the purchase quantity from the relevant

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subsidiaries of Hisense Group and Hisense Electric; and (iii) the Group has conducted similar transactions under the same terms in the past, we are of the view that the terms of the Business Co-operation Framework Agreement with respect to the purchase of raw materials, parts and components by the Group are in the interests of the Company and the Shareholders as a whole, on normal commercial terms and fair and reasonable.

d. Provision of services

Under the Business Co-operation Framework Agreement, the Company has agreed that it (or any of its subsidiaries which will be entitled to have the same rights and obligations under the Business Co-operation Framework Agreement) may engage (i) Hisense Group and/or its subsidiaries on a non-exclusive basis for the provision of material processing, installation and maintenance, property, medical, leasing, design, inspection, agency services for import and export (other than the agency services for export contemplated under the Export Agency Framework Agreement), property construction, management consultancy, technical support and information system maintenance services and (ii) Hisense Electric and/or its subsidiaries on non-exclusive basis for the provision of material processing, property and product design services as they may require from time to time.

The fees payable by the Group to the relevant subsidiaries of Hisense Group and Hisense Electric for the provision of the aforesaid services (other than agency services for export) will be determined principally by commercial negotiations according to the principle of fairness and reasonableness between the contracting parties with reference to the market price for the provision of similar services from time to time.

The Business Co-operation Framework Agreement will not restrict the Group from engaging services providers other than the subsidiaries of Hisense Group or Hisense Electric, nor will it restrict the subsidiaries of Hisense Group or Hisense Electric from providing their services to any other third parties.

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On the basis that (i) the terms of the definitive contract(s) to be entered into between the contracting parties will be consistent with those of the Business Co-operation Framework Agreement and will be determined in accordance with the principle of fairness and reasonableness with reference to the market price of similar services from time to time and not less favourable to the Group than terms available to or from (as appropriate) independent third parties; (ii) the non-exclusive arrangement under the Business Co-operation Framework Agreement provides the Group with the flexibility without any commitment on the amount of services to be provided by the respective subsidiaries of Hisense Group and Hisense Electric; and (iii) the Group has conducted similar transactions in the past, we are of the view that the terms of the Business Co-operation Framework Agreement with respect to the provision of services are in the interests of the Company and the Shareholders as a whole, on normal commercial terms and fair and reasonable.

e. Supply of home electrical appliances

Under the Business Co-operation Framework Agreement, the Company has agreed that it (or any of its subsidiaries which will be entitled to have the same rights and obligations under the Business Co-operation Framework Agreement) may supply on a non-exclusive basis such quantities of home electrical appliances as the respective subsidiaries of Hisense Group and Hisense Electric may require from time to time.

The pricing for the supply of home electrical appliances by the Group to the respective subsidiaries of Hisense Group and Hisense Electric will be determined principally by commercial negotiations according to the principle of fairness and reasonableness between the contracting parties with reference to the market price of the similar home electrical appliances from time to time.

The Business Co-operation Framework Agreement will not restrict the relevant subsidiaries of Hisense Group or Hisense Electric from purchasing home electrical appliances from suppliers other than the Group, nor will it restrict the Group from selling its home electrical appliances to any other third parties.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

On the basis that (i) the sale and supply of home electrical appliances by the Group to the respective subsidiaries of Hisense Group and Hisense Electric will increase the revenue of the Group; (ii) such transactions will be able to utilise the Group’s resources so as to help to lower the production costs by lowering the fixed costs per unit of product as a result of the increase in production level, which in turn enhance the market competitiveness of the Group’s product; and (iii) such transactions will be conducted in the ordinary and usual course of business of the Group and on terms according to the principle of fairness and reasonableness between the contracting parties with reference to the market price of the similar home electrical appliances from time to time, we are of the view that the terms of the Business Co-operation Framework Agreement with respect to the sale and supply of home electrical appliances by the Group to the respective subsidiaries of Hisense Group and Hisense Electric are in the interests of the Company and the Shareholders as a whole, on normal commercial terms and fair and reasonable.

f. Supply of equipment

Under the Business Co-operation Framework Agreement, the Company has agreed that it (or any of its subsidiaries which will be entitled to have the same rights and obligations under the Business Co-operation Framework Agreement) may supply on a non-exclusive basis such quantities of equipment as the respective subsidiaries of Hisense Group may require from time to time.

Pricing for the sale and supply of equipment is determined by commercial negotiations between the parties with reference to the market price of similar equipment from time to time and according to the principles of fairness and reasonableness.

The Business Co-operation Framework Agreement will not restrict the relevant subsidiaries of Hisense Group from purchasing equipment from suppliers other than the Group, nor will it restrict the Group from selling its equipment to any other third parties.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

On the basis that (i) the sale and supply of equipment by the Group to the subsidiaries of Hisense Group will increase the revenue of the Group; and (ii) the terms of the definitive contract(s) to be entered into between the relevant contracting parties will be consistent with those of the Business Co-operation Framework Agreement and will be determined in accordance with the principle of fairness and reasonableness with reference to the market price of similar equipment from time to time and not less favourable to the Group than terms available to or from (as appropriate) independent third parties, we are of the view that the terms of the Business Co-operation Framework Agreement with respect to the sale and supply of equipment to the subsidiaries of Hisense Group are in the interests of the Company and the Shareholders as a whole, on normal commercial terms and fair and reasonable.

g. Supply of moulds

Under the Business Co-operation Framework Agreement, the Company has agreed that it (or any of its subsidiaries which will be entitled to have the same rights and obligations under the Business Co-operation Framework Agreement) may manufacture and supply on a non-exclusive basis such quantities of moulds as the respective subsidiaries of Hisense Group and Hisense Electric may require from time to time.

Pursuant to the Business Co-operation Framework Agreement and in response to the invitations to tender from Hisense Group, Hisense Electric and/or their respective subsidiaries (which are also extended to various independent third parties) from time to time, the Group may submit such tenders or bids to supply the moulds for such products requested by Hisense Group, Hisense Electric and/or their respective subsidiaries in its/ their invitation to tender. Pricing for the supply of moulds is determined by the open bidding process.

The Business Co-operation Framework Agreement will not restrict the relevant subsidiaries of Hisense Group or Hisense Electric from purchasing moulds from suppliers other than the Group, nor will it restrict the Group from supplying its moulds to any other third parties.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

In view of the pricing for the supply of moulds will be determined by open bidding process, which is a transparent pricing mechanism, we are of the view that the terms of the Business Co-operation Framework Agreement with respect to the sale and supply of moulds by the Group to the respective subsidiaries of Hisense Group and Hisense Electric are in the interests of the Company and the Shareholders as a whole, on normal commercial terms and fair and reasonable.

h. Supply of raw materials, parts and components

Under the Business Co-operation Framework Agreement, the Group has agreed that it (or any of its subsidiaries which will be entitled to have the same rights and obligations under the Business Co-operation Framework Agreement) may manufacture and supply on a non-exclusive basis such quantities of raw materials, parts and components as the respective subsidiaries of Hisense Group and Hisense Electric may require from time to time.

Pricing for the sale and supply of raw materials, parts and components is determined by commercial negotiations between the parties with reference to the market price of similar raw materials, parts and components from time to time and according to the principles of fairness and reasonableness.

The Business Co-operation Framework Agreement will not restrict the relevant subsidiaries of Hisense Group or Hisense Electric from purchasing raw materials, parts or components from suppliers other than the Group, nor will it restrict the Group from selling its raw materials, parts or components to any other third parties.

On the basis that (i) the sale and supply of raw materials, parts and components by the Group to the subsidiaries of Hisense Group or Hisense Electric will increase the revenue of the Group; (ii) the terms of the definitive contract(s) to be entered into between the relevant contracting parties will be consistent with those of the Business Cooperation Framework Agreement and will be determined in accordance with the principle of fairness and reasonableness with reference to the market price of similar raw materials, parts and components from time to time and not less favourable to the Group than terms available to or

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from (as appropriate) independent third parties; and (iii) the Group has conducted similar transactions in the past, we are of the view that the terms of the Business Co-operation Framework Agreement with respect to the supply of raw materials, parts and components to the subsidiaries of Hisense Group and Hisense Electric are in the interests of the Company and the Shareholders as a whole, on normal commercial terms and fair and reasonable.

i. Provision of services by the Group

Under the Business Co-operation Framework Agreement, the Company and/or its subsidiaries will provide design, loading and unloading services, equipment rental and property management services to Hisense Group and/or its subsidiaries on a non-exclusive basis from time to time.

The fees payable by Hisense Group and/or its subsidiaries for the aforesaid services is determined by commercial negotiations according to the principles of fairness and reasonableness between the parties with reference to the market price for the provision of similar services from time to time.

The Business Co-operation Framework Agreement will not restrict Hisense Group and/or its respective subsidiaries from engaging services providers other than the Group, nor will it restrict the Group from providing its services to any other third parties.

On the basis that (i) the terms of the definitive contract(s) to be entered into between the contracting parties will be consistent with those of the Business Co-operation Framework Agreement and will be determined in accordance with the principle of fairness and reasonableness with reference to the market price for the provision of such services from time to time; (ii) the transactions, when taken place, will increase the revenue of the Group; and (iii) the non-exclusive arrangement under the Business Co-operation Framework Agreement provides the Group with the flexibility without any commitment on the amount of services to be provided, we are of the view that the terms of the Business Co-operation Framework Agreement with respect to the provision of services are in the interests of the Company and the Shareholders as a whole, on normal commercial terms and fair and reasonable.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

3. The Export Agency Framework Agreement

The Export Agency Framework Agreement shall commence from the date of approval of the Export Agency Framework Agreement by the Independent Shareholders until 31 December 2013 (which can be terminated before its expiration by mutual agreement of the parties or in the event of any breaches of the agreement), pursuant to which the Company agreed that it and/or its relevant subsidiaries will engage Hisense Marketing and/or its subsidiaries for the provision of agency services for export for the white goods products of the Group (which include without limitation, refrigerators, air-conditioners, freezers, small household electrical appliances and their related parts which are to be assembled) from time to time.

As set out in the Letter from the Board, the agency services for export for the white goods products of the Group to be provided by Hisense Marketing and/ or its subsidiaries will mainly include the following:—

• (i) Hisense Marketing and/or its subsidiaries shall be responsible for expanding the customer base of the Group in the international market, and shall conduct business negotiation with third party customers in the name of the Company and/or its subsidiaries and accept orders for the goods after obtaining the latter’s consent. Contracts for such orders shall be entered into between the Company and/or its subsidiaries and the customers directly.

• (ii) Hisense Marketing and/or its subsidiaries shall provide information in relation to the delivery requirements of the customers to the Group which shall arrange for production. Any amendments proposed by Hisense Marketing and/or its subsidiaries in relation to the orders for the goods shall be subject to the Group’s consent. In case the Group needs to adjust the date of delivery for reasons such as production capacity, Hisense Marketing and/or its subsidiaries shall negotiate and confirm with the customers on behalf of the Group.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

• (iii) The products to be supplied by the Group shall be delivered timely and in accordance with the specifications as per the purchase orders confirmed by the customers. There should not be any deficiencies in the design, raw materials and workmanship, and the quality and packaging shall meet the mandatory standards and requirements in the country of end use of the products. The Group shall provide technological services and warranties according to the agreement with the customers depending on the types of products involved.

Furthermore, pursuant to the Export Agency Framework Agreement, the charges which may be imposed at the port of inspection in relation to the export of products and the fees for repair and spare parts shall be borne and paid by the Group, and Hisense Marketing and/or its subsidiaries shall bear and pay other export-related charges.

The Group shall however bear the following costs/ expenses in any of the following circumstances:—

• (i) in the event that any liquidated damages, damages, compensation and other compensation costs are claimed by customers due to the failure of the Group to deliver relevant products in time (including without limitation, inability to deliver relevant products, delay in delivering relevant products and deficiency in the quality of the products), Hisense Marketing and/or its subsidiaries shall negotiate with the customers on the settlement proposal for and on behalf of the Group. The Group shall be responsible if the proposal is agreed to by the Group; and

• (ii) for reasons such as the Group’s need to expand its business, the Group may propose, and Hisense Marketing and/or its subsidiaries will communicate with the customers on, certain support to be provided to the customers in relation to the expenses for the promotion of sales, etc. The Group shall be responsible for those expenses which have been agreed to by the Group.

The relevant parties will enter into definitive contract(s) setting out specific terms, but such terms shall be consistent with the principles and the terms of the Export Agency Framework Agreement.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Pursuant to the Export Agency Framework Agreement, the fees payable by the Group for the provision of the agency services for export for the white goods of the Group is calculated by multiplying the Group’s revenue from export of the relevant type of products (which shall be the final amount of revenue for sales by the Group to third party customers in RMB) with an export agency fee percentage.

The table below set out the export agency fee percentage with respect to various level of growth rate of the revenue from export subject to the export agency services:

Growth rate of the revenue	Corresponding profit	Corresponding
from export subject to the	margin for export	export agency fee
export agency services	agency services	percentage
Below 0%	0%	7.24%
0-5% (inclusive of 5%)	0.5%	7.74%
5-10% (inclusive of 10%)	0.8%	8.04%
10-15% (inclusive of 15%)	1%	8.24%
Above 15%	1.1%	8.34%

We understand from the Management that the abovementioned export agency fee percentage covers the major cost items (the “Major Cost Items”) involved in running of such export agency services including logistic and labour costs. We also understand that the export agency fee percentage was determined with reference to (i) the actual costs and expenses incurred by Hisense Marketing for providing agency services from January to June 2012, i.e. the actual rate of charges, of which as stated in the Letter from the Board, according to the audit conducted by BDO China Shu Lun Pan Certified Public Accountants LLP (“BDO”), was 7.24%; and (ii) a build in incentive, i.e. profit margin for export agency services, which link the export agency fee percentage to the growth rate of the revenue from export subject to the export agency services.

In relation to the abovementioned export agency fee percentage, having considered that (i) based on the Management’s estimation, it would cost the Group more than the export agency fee percentage payable to Hisense Marketing should the Group run the operation by itself; (ii) the Group had explored the possibility of procuring the similar export agency services from independent third parties but noted that the export agency services offered by Hisense Marketing is the most comprehensive with terms no less favourable

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to the Group than terms available from independent third parties; (iii) the increase in export agency fee percentage payable to Hisense Marketing from the 6% set in 2010 is less than the increase in the Major Cost Items observed by the Management; and (iv) as confirmed by BDO, the starting point of the export agency fee percentage of 7.24% is the actual costs and expenses incurred by Hisense Marketing for providing agency services during the period from January to June 2012, we are of the view that it is fair and reasonable to adopt 7.24% as the starting point of the export agency fee percentage.

We also understand from the Management that the profit margin (which ranges from 0% to 1.1%) for export agency services to be added to the initial 7.24% is in line with the profit margin of approximately 0.6% to 1.4% observed in the China import and export business and is no less favourable to the Group than terms available from independent third parties. In addition, such profit margin shall provide sufficient incentive for Hisense Marketing to help growing the Group’s export revenue and is therefore in the interest of the Company and the Shareholders as a whole. Based on the above, we are of the view that the profit margin is fair and reasonable.

On the basis that (i) the transactions contemplated under the Export Agency Framework Agreement will be conducted in the ordinary and usual course of business of the Group; (ii) the transactions, when taken place, will increase the revenue of the Group; (iii) the export agency fee percentage payable to Hisense Marketing under the Export Agency Framework Agreement is fair and reasonable; and (iv) the terms of the definitive contract(s) to be entered into between the Company (and/or its subsidiaries) and Hisense Marketing (and/or its subsidiaries) will be consistent with those of the Export Agency Framework Agreement; we are of the view that the terms of the Export Agency Framework Agreement are in the interests of the Company and the Shareholders as a whole, and are on normal commercial terms and fair and reasonable.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

• III. Rationale for determining the maximum value of the transactions contemplated under the Agreements

1. The Huayi Compressors Purchase Framework Agreement, the Business Co-operation Framework Agreement and the Export Agency Framework Agreement

Pursuant to Rule 14A.35(2) of the Listing Rules, the transactions contemplated under the Agreements during the year commencing from the date of approval of the relevant agreements by the Independent Shareholders to 31 December 2013 will be subject to an annual cap for the financial year ending 31 December 2013 of the Company. The proposed maximum aggregate values, or “caps”, of the transactions contemplated under the Agreements for the year ending 31 December 2013 and the estimated unaudited value of similar transactions between the relevant parties in 2012 are summarised below:—

			Increase of
			the proposed caps
			as compared to the
			estimated annualised
			unaudited value of
		Unaudited value of	the similar
		the similar	transactions for the
		transactions	year 2012 based on
		between the relevant	their unaudited
	Proposed caps for	parties for the	value for the
	the year ending	nine months ended	nine months ended
	31 December 2013	30 September 2012	30 September 2012
	(RMB)	(RMB)	(%)
The Huayi Compressors Purchase
Framework Agreement:
Maximum aggregate value of
purchase of compressors:	1,180,000,000	588,760,000	50.3%

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			Increase of
			the proposed caps
			as compared to the
			estimated annualised
			unaudited value of
		Unaudited value of	the similar
		the similar	transactions for the
		transactions	year 2012 based on
		between the relevant	their unaudited
	Proposed caps for	parties for the	value for the
	the year ending	nine months ended	nine months ended
	31 December 2013	30 September 2012	30 September 2012
	(RMB)	(RMB)	(%)
The Business Co-operation
Framework Agreement:
Maximum aggregate value of
purchase of home electrical
appliances:	2,100,000	400,000	293.8%
Maximum aggregate value of
purchase of equipment:	8,550,000	170,000	3,672.1%
Maximum aggregate value of
purchase of raw materials, parts
and components:	53,830,000	15,460,000	161.1%
Maximum aggregate value of the
provision of services by Hisense
Group and Hisense Electric:	124,840,000	58,350,000	60.5%
Maximum aggregate value of supply
of home electrical appliances:	2,888,970,000	1,726,260,000	25.5%
Maximum aggregate value of supply
of equipment:	8,550,000	2,550,000	151.5%
Maximum aggregate value of supply
of moulds:	358,550,000	153,690,000	75.0%
Maximum aggregate value of supply
of raw materials, parts and
components:	26,350,000	16,460,000	20.1%
Maximum aggregate value of the
provision of services by the
Group:	6,900,000	1,720,000	200.9%

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

			Increase of
			the proposed caps
			as compared to the
			estimated annualised
			unaudited value of
		Unaudited value of	the similar
		the similar	transactions for the
		transactions	year 2012 based on
		between the relevant	their unaudited
	Proposed caps for	parties for the	value for the
	the year ending	nine months ended	nine months ended
	31 December 2013	30 September 2012	30 September 2012
	(RMB)	(RMB)	(%)
The Export Agency Framework
Agreement:
Maximum aggregate value of the
provision of agency services by
Hisense Marketing:	280,000,000	119,130,000	76.3%

The basis for the proposed maximum value for each category of transactions contemplated under the Huayi Compressors Purchase Framework Agreement, the Business Co-operation Framework Agreement and the Export Agency Framework Agreement is set out in the Letter from the Board. The table below summaries the basis for each category of the transactions:

Category

Basis for the proposed annual cap

The Huayi Compressors Purchase Framework Agreement:

Purchase of (a) similar transactions between the Group and Huayi compressors Compressor and/or its subsidiaries in the past; (b) the prevailing market conditions relating to the demand for home electrical appliances in the PRC; and (c) the business development plan of the Group relating to the production and sales level of refrigerators and freezers in 2013

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

The Business Co-operation Framework Agreement:

• Purchase of home (a) the prevailing market conditions about the demand electrical appliances for electrical appliances; (b) the Group’s plan to boost the sales of the Group’s home electrical appliances through marketing and promotion activities; and (c) the projected need of purchasing television sets from Hisense Group, Hisense Electric and/or their respective subsidiaries for the year ending 31 December 2013 as gifts for the Group’s marketing and promotion activities which aimed at boosting the sales of the Group’s home electrical appliances such as refrigerators

• Purchase of (a) the projected level of production and sales of equipment electrical appliances of the relevant subsidiaries of the Company for the year ending 31 December 2013

• Purchase of raw (a) similar transactions between the Group with materials, parts and Hisense Group, Hisense Electric and/or their components respective subsidiaries in the past; and (b) the projected level of production and sales of electrical appliances of the relevant subsidiaries of the Company for the year ending 31 December 2013

• Provision of services (a) similar transactions between the Group with Hisense Group, Hisense Electric and/or their respective subsidiaries in the past; and (b) the projected level of production and sales of electrical appliances of the relevant subsidiaries of the Company for the year ending 31 December 2013

• Supply of home electrical appliances

• (a) similar transactions between the Group with Hisense Group, Hisense Electric and/or their respective subsidiaries in the past; (b) the prevailing market conditions about the demand for electrical appliances in the PRC; and (c) the projected level of production and sales of electrical appliances of the relevant subsidiaries of the Company for the year ending 31 December 2013

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

• Supply of equipment

• (a) the prevailing market conditions about the demand for electrical appliances in the PRC; and (b) the projected level of production and sales of electrical appliances of the relevant subsidiaries of the Company for the year ending 31 December 2013

• Supply of moulds

• (a) similar transactions between the Group with Hisense Group, Hisense Electric and/or their respective subsidiaries in the past; and (b) the prevailing market conditions relating to the demand for electrical appliances in the PRC

• Supply of raw (a) similar transactions between the Group with materials, parts and Hisense Group, Hisense Electric and/or their components respective subsidiaries in the past; and (b) the prevailing market conditions relating to the demand for electrical appliances in the PRC

• Provision of services (a) similar transactions between the Group with by the Group Hisense Group, Hisense Electric and/or their respective subsidiaries in the past; (b) the prevailing market conditions relating to the provision of such services

The Export Agency Framework Agreement:

• Provision of agency (a) similar transactions between the Group with services by Hisense Hisense Marketing and/or its subsidiaries in the past; Marketing and (b) the prevailing market conditions relating to the provision of such services.

The Huayi Compressors Purchase Framework Agreement

As regards the purchase of compressors by the Group under the Huayi Compressors Purchase Framework Agreement, we understand from the Management that (i) the quality of compressors manufactured by Huayi Compressor is high; (ii) the prices of compressors manufactured by Huayi Compressor are competitive; and (iii) the quality of the Group’s products would be enhanced by adopting compressors to be purchased from the Huayi Compressor Group, which in turn will boost the sales of the Group’s high-end products and increase the product and brand competitiveness of the Company. We also understand that by assessing the prevailing market conditions relating

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

to the demand for home electrical appliances in the PRC, the Management is confident that production and sales level of refrigerators and freezers in 2013 will increase and therefore the Group is expected to purchase more compressors from its suppliers, including Huayi Compressor by the end of 2012 in preparation for the production peak next year. In addition, with the expected growth in demand for home electrical appliances of the Group in 2013 as mentioned in the section headed “Prevailing market conditions about the demand for electrical appliances”, the transaction amount for 2013 under the Huayi Compressors Purchase Framework Agreement is expected to be higher than the transactions value for the nine months ended 30 September 2012. In order to determine the fairness and reasonableness of the proposed annual cap, we, for the purpose of ensuring the accuracy of the Company’s computation of the proposed annual cap, have carried out a review on the basis and the underlying assumptions prepared by the Management for calculation of the relevant annual cap. Based on (i) our discussion with the Management about the underlying assumptions; and (ii) the result of our review, we are satisfied that the proposed annual cap has been conducted on a fair and reasonable basis.

The Business Co-operation Framework Agreement

Purchase of home electrical appliances

As regards the proposed annual cap for the purchase of home electrical appliances, we understand from the Management that the purchase of certain home electrical appliances as gifts for the Group’s marketing and promotion activities were not executed in 2012 as other alternative gifts were used for the Group’s marketing and promotion which resulted in the low transactions value for the nine month ended 30 September 2012. Following the launch of some innovative products by Hisense Electric, the Company has decided to use such products as gift for the Group’s marketing and promotion in 2013 due to its small size and light weight, and therefore the transactions in relation to purchase of home electrical appliances is expected to increase in 2013. Taking into account that the Group is to use Hisense Electric’s products as gifts for the Group’s marketing and promotion, we are of the view that the proposed annual cap for the purchase of home electrical appliances for the year ending 31 December 2013 is not excessive.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Purchase of equipment

As regards the purchase of equipment by the Group, we understand from the Management that due to the delay in overseas expansion of the Group in 2012, the relevant transactions value for the nine months ended 30 September 2012 was lower than expected. We also note that as (i) the purchase of equipment by the Group from Hisense Group and/or its subsidiaries can reduce purchase costs; and (ii) the Group is satisfied with the quality of the equipment provided by Hisense Group and/or its subsidiaries from their previous course of dealings, the Group intends to purchase more imported equipment from Hisense Group and Hisense Electric in 2013 to improve the Group’s current production line technology and to move towards high-end products. Based on above, we are of the view that the proposed annual cap for the purchase of equipment from Hisense Group and Hisense Electric is prepared on a fair and reasonable basis.

Purchase of raw materials, parts and component

As regards the purchase of raw materials, parts and components, as stated in the Letter from the Board, the purchase of raw materials, parts and components for refrigerators and air-conditioners by the Group from Hisense Group, Hisense Electric and/or their respective subsidiaries will reduce purchase costs, and at the same time, the Group can benefit from the sharing of resources and the maximization of the economies of scale. Further, the Group is satisfied with the quality of raw materials, parts and components provided by Hisense Group, Hisense Electric and/or their respective subsidiaries from their previous course of dealings. Quality of the Group’s products is enhanced by importing certain raw materials overseas, which in turn boosts the sales of the Group’s high-end products and increase the product and brand competitiveness. We also understand from the Management that as some of the raw materials, parts and component were imported from overseas, the favourable RMB exchange rate resulted in the low transactions value for the nine months ended 30 September 2012 while the Group expects the RMB exchange rate to remain stable throughout 2013. Based on the above, taking into account that the Group’s plan to purchase more raw materials, parts and components including some new parts and components directly from Hisense Electric in 2013, we are of the view that the proposed annual cap for the purchase of raw materials, parts and components from Hisense Group and Hisense Electric is prepared on a fair and reasonable basis.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Provision of services by Hisense Group and Hisense Electric

As regards the provision of services by Hisense Group and Hisense Electric, we understand that (i) the Group shall engage Hisense Group and its subsidiaries to provide technical support and material processing to the Group in 2013 whereas the Group did not require such services from Hisense Group in 2012; and (ii) the property management services fees is expected to increase in 2013. Therefore, the transactions amount for 2013 is expected to increase significantly. In order to determine the fairness and reasonableness of the proposed annual cap, we, for the purpose of ensuring the accuracy of the Company’s computation of the proposed annual cap, have carried out a review on the basis and the underlying assumptions prepared by the Management for calculation of the relevant annual cap. Based on (i) our discussion with the Management about the underlying assumptions including the additional category of services, in particular, the additional technical support and material processing services to be provided by Hisense Group and its subsidiaries; (ii) the expected increase in property management services fees and (iii) the result of our review, we are satisfied that the proposed annual cap has been conducted on a fair and reasonable basis.

Supply of home electrical appliances

As regards the supply of home electric appliances, as advised by the Management, substantial amount of relevant orders have been placed in the fourth quarter of 2012 and the Management expects to sell approximately 20% more home electrical appliances to Hisense Group in 2013 as compared to 2012. Therefore, the transactions amount for 2013 is expected to increase significantly. In order to determine the fairness and reasonableness of the proposed annual cap, we, for the purpose of ensuring the accuracy of the Company’s computation of the proposed annual cap, have carried out a review on the basis and the underlying assumptions prepared by the Management for calculation of the relevant annual cap including the estimated models to be developed and their estimated unit price. Based on (i) our discussion with the Management about the underlying assumptions; and (ii) the result of our review, we are satisfied that the proposed annual cap has been conducted on a fair and reasonable basis.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Supply of equipment

As regards the increase in the proposed annual cap in relation to the supply of equipment for the year ending 31 December 2013, we have discussed with the Management and note that such proposed annual cap has been arrived at on the basis of (i) the Group’s estimation of the prevailing market conditions about the demand for home electrical appliances in the PRC in the future; and (ii) the projected level of production and sales of electrical appliances of the relevant subsidiaries of the Company for the year ending 31 December 2013. In order to determine the fairness and reasonableness of the proposed annual cap, we, for the purpose of ensuring the accuracy of the Company’s computation of the proposed annual cap, have carried out a review on the basis and the underlying assumptions prepared by the Management for calculation of the relevant annual cap. Based on (i) our discussion with the Management about the underlying assumptions including the projected level of production and sales of electrical appliances of the relevant subsidiaries of the Company for the year ending 31 December 2013; and (ii) the result of our review, we are satisfied that the proposed annual cap has been conducted on a fair and reasonable basis.

Supply of moulds

As regards the supply of moulds, we understand from the Management that (i) substantial amount of relevant orders have been placed in the fourth quarter of 2012; and (ii) the Group expects an increase in mould export sales through Hisense Group’s overseas customer network for the year ending 31 December 2013, and hence it is expected that the Group would supply more moulds to Hisense Group in 2013. In order to determine the fairness and reasonableness of the proposed annual cap, we, for the purpose of ensuring the accuracy of the Company’s computation of the proposed annual cap, have carried out a review on the basis and the underlying assumptions prepared by the Management for calculation of the relevant annual cap. Based on (i) our discussion with the Management about the underlying assumptions; and (ii) the result of our review, we are satisfied that the proposed annual cap has been conducted on a fair and reasonable basis.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Supply of raw materials, parts and components

As regards the supply of raw materials, parts and components, we understand from the Management that the Group expects an increase in supply of raw materials, parts and components to Hisense Group and Hisense Electric in 2013 as there will be additional subsidiaries of Hisense Group and Hisense Electric which would require supply of raw materials, parts and components from the Group for the year ending 31 December 2013. In order to determine the fairness and reasonableness of the proposed annual cap, we, for the purpose of ensuring the accuracy of the Company’s computation of the proposed annual cap, have carried out a review on the basis and the underlying assumptions prepared by the Management for calculation of the relevant annual cap. Based on (i) our discussion with the Management about the underlying assumptions; and (ii) the result of our review, we are satisfied that the proposed annual cap has been conducted on a fair and reasonable basis.

Provision of services by the Group

As regards the provision of services by the Group, we understand from the Group that due to (i) the additional subsidiaries of Hisense Group whom the Group will provide property management services to for the year ending 31 December 2013; and (ii) the property management services fees is expected to increase in 2013, it is expected that the value of the services to be provided by the Group to Hisense Group would increase significantly in 2013. In order to determine the fairness and reasonableness of the proposed annual cap, we, for the purpose of ensuring the accuracy of the Company’s computation of the proposed annual cap, have carried out a review on the basis and the underlying assumptions prepared by the Management for calculation of the relevant annual cap including the estimated transaction amount for each category of services. Based on (i) our discussion with the Management about the underlying assumptions including the additional subsidiaries of Hisense Group whom the Group will provide property management services to for the year ending 31 December 2013; and (ii) the result of our review, we are satisfied that the proposed annual cap has been conducted on a fair and reasonable basis.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

The Export Agency Framework Agreement

As regards the transactions contemplated under the Export Agency Framework Agreement, we understand from the Management that the export agency fee percentage was determined with reference to (i) the actual costs and expenses incurred by Hisense Marketing for providing agency services from January to June 2012 i.e. the actual rate of charges, of which as stated in the Letter from the Board, according to the audit conducted by BDO, was 7.24%; and (ii) a build in incentive which link the export agency fee percentage to the growth rate of the revenue from export subject to the export agency services. As advised by the Management, the Management expects an approximately 20% growth rate of the revenue from export subject to the export agency services for 2013 as compared to 2012; therefore, the corresponding export agency fee percentage for 2013 under the Export Agency Framework Agreement is expected to increase as compared to 2012. In order to determine the fairness and reasonableness of the proposed annual cap, we, for the purpose of ensuring the accuracy of the Company’s computation of the proposed annual cap, have carried out a review on the basis and the underlying assumptions prepared by the Management for calculation of the relevant annual cap. Based on (i) our discussion with the Management about the underlying assumptions including the expected 20% growth rate of the revenue from export subject to the export agency services for 2013 as compared to 2012; and (ii) the result of our review, we are satisfied that the proposed annual cap has been conducted on a fair and reasonable basis.

It should be noted that the Agreements will not restrict the relevant subsidiaries of Huayi Compressor, Hisense Group or Hisense Electric from purchasing products from suppliers other than the Group, nor will it restrict the Group from selling its products to any other third parties. Therefore, the anticipated value of the transactions to be carried does not reflect the Group’s projection of total purchases or sales of the relevant products.

While the proposed annual caps under the Huayi Compressors Purchase Framework Agreement, the Business Co-operation Framework Agreement and the Export Agency Framework Agreement for the year ending 2013 in certain cases represent a significant increase over the historical unaudited value of the similar transactions between the relevant parties in 2012, it should be noted that (i) the proposed transactions contemplated under the Huayi Compressors Purchase Framework Agreement, the Business Co-operation Framework Agreement and the Export Agency Framework Agreement will continue

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

to be conducted in the ordinary and usual course of business of the Group and on normal commercial terms; (ii) it is generally in the interest of the Company to maximise the value of the sales transactions contemplated under the Huayi Compressors Purchase Framework Agreement and the Business Co-operation Framework Agreement so as to increase the Group’s revenue; and (iii) the non-exclusive arrangement under the Agreements provides the Group with the flexibility without any commitment on the actual transaction values. Accordingly, we are of the view that the entering into of the Huayi Compressors Purchase Framework Agreement, the Business Co-operation Framework Agreement and the Export Agency Framework Agreement are in the interests of the Company and the Shareholders as a whole and the proposed annual caps under these agreements have been arrived at on a fair and reasonable basis.

IV. Conditions of the annual caps under the Agreements

There are certain conditions of the annual cap pursuant to the Listing Rules, in particular, the restriction of the value of the transactions contemplated under the Agreements by way of the annual cap for each of the relevant financial years and the annual review by the independent non-executive Directors of the terms of such transactions and the relevant annual caps not being exceeded, details of which must be included in the Company’s subsequent published annual reports and accounts. Also, pursuant to the Listing Rules, each year the auditors of the Company must provide a letter to the Board confirming, among other things, that the transactions contemplated under the Agreements are conducted in accordance with the terms of the relevant Agreements and that the relevant annual caps not being exceeded. In addition, pursuant to the Listing Rules, the Company shall 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 transactions to be contemplated under the Agreements and safeguard the interests of the Independent Shareholders.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

RECOMMENDATION

In formulating our recommendation to the Independent Board Committee and the Independent Shareholders, we have considered the above principal factors and reasons, in particular, the following:—

• (i) The manufacture and sale of home electrical appliances is one of the principal businesses of the Group and compressors are essential components of home electrical appliances such as refrigerators and freezers. Huayi Compressor is a major producer of compressors in the PRC and have the relevant experience and expertise in the manufacture of compressors. It is therefore in the commercial interest of the Company to enter into the Huayi Compressors Purchase Framework Agreement with Huayi Compressors;

• (ii) Hisense Group, together with its subsidiaries, is currently one of the major electronic companies in the PRC and has the relevant expertise in the domestic electric appliances market in the PRC as well as strong financial resources. Accordingly, Hisense Group and Hisense Electric are in a good position to assist the Group in its business development;

• (iii) By engaging Hisense Marketing, the Group can largely reduce costs which would have to be committed for running the operation by itself, and use the available resources on the research and development and the quality warranties for the products to be exported, which will be beneficial to the Group in enhancing the stable development of its export business, while the basis in determining the export agency fee percentage, including the profit margin for export agency services are fair and reasonable and in the interest of the Company and the Shareholders as a whole. It is therefore in the commercial interest of the Company to enter into the Export Agency Framework Agreement with Hisense Marketing;

• (iv) Certain transactions contemplated under the Agreements will increase the sales of the Group, so it is in the interest of the Company to enter into such transactions;

• (v) The terms of the definitive contract(s) to be entered into by the Group pursuant to the Agreements will be determined in accordance with the principle of fairness and reasonableness with reference to the market price, and the proposed transactions contemplated under the Agreements will be conducted in the ordinary and usual course of business of the Group and on normal commercial terms. In addition, all the transactions contemplated under the Agreements are to be conducted on a nonexclusive basis, so the Agreements will not restrict the Group from engaging in the similar transactions with other parties; and

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

• (vi) The value of, and the basis for determining, the annual caps under the Agreements are fair and reasonable, details of which are set out in the section headed “Rationale for determining the maximum value of the transactions contemplated under the Agreements”.

Based on the above, we are of the opinion that each of the Agreements is in the interests of the Company and the Shareholders as a whole, the transactions to be contemplated under the Agreements are in the ordinary and usual course of business of the Group, on normal commercial terms and in the interests of the Company and the Shareholder as a whole. We are also of the opinion that the terms of the Agreements, including the proposed annual caps and the export agency fee percentage under the Export Agency Framework Agreement, are in the interests of the Company and the Shareholders as a whole, on normal commercial terms and 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 resolutions to approve the Agreements at the EGM.

Yours faithfully

For and on behalf of Investec Capital Asia Limited

Alexander Tai

Managing Director Head of Corporate Finance

— 93 —

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 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.

2. DISCLOSURE OF INTERESTS

Interests of Directors, supervisors and chief executive of the Company in the securities of the Company

As at the Latest Practicable Date, the interests and short positions of the Directors, supervisors and chief executive of the Company in the shares, underlying shares and debentures of the Company or any of its associated corporations (within the meaning of Part XV of the SFO) which were required to be notified to the Company and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO (including interests and short positions which he was taken or deemed to have under such provisions of the SFO) or were required, pursuant to section 352 of the SFO, to be entered in the register maintained by the Company referred to therein, or which were required pursuant to the Model Code for Securities Transactions by Directors of Listed Issuers of the Listing Rules (the “ Model Code ”) to be notified to the Company and the Stock Exchange were as follows:

Long Position in the share options of the Company

	Number of		Approximate
	A Shares	Approximate	percentage
	which may be	percentage	of total issued
	subscribed	of issued	share capital
Name of Director/	under the	A Shares	of the Company
Supervisor	options	(%)	(%)
Tang Ye Guo	1,260,000_(Note)_	0.14	0.09
Ren Li Ren	720,000_(Note)_	0.08	0.05
Xiao Jian Lin	828,000_(Note)_	0.09	0.06
Gan Yong He	181,000_(Note)_	0.02	0.01
Zhang Jian Jun	56,000_(Note)_	0.006	0.004

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GENERAL INFORMATION

APPENDIX

• Note: These share options were granted on 31 August 2011 pursuant to the first A share share option incentive scheme of the Company and are exercisable at RMB7.65 per A Share after a restriction period of 2 years from the grant date until the trading day falling on the fifth anniversary of the grant date, subject to the exercise arrangements and conditions as set out in the scheme.

Save as disclosed above, as at the Latest Practicable Date, 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.

Other interests

As at the Latest Practicable Date:

• (a) none of the Directors or supervisors of the Company had any interest, direct or indirect, in any asset which have been, since 31 December 2011, 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;

• (b) 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

• (c) Mr. Tang Ye Guo, Ms. Yu Shu Min, Mr. Lin Lan and Mr. Xiao Jian Lin, being Directors, are also directors or senior management of Hisense Group or some of its subsidiaries. Hisense Group was deemed to have an interest in the shares of the Company which would fall to be disclosed to the Company under the provisions of Divisions 2 and 3 of Part XV of the SFO.

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GENERAL INFORMATION

APPENDIX

3. SERVICE AGREEMENTS

As at the Latest Practicable Date, none of the Directors or 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 Hong Kong Listing Rules:

Name of Director

Description of Name of entity business of the which business entity which is is considered to 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 airDirector Hisense Group conditioning/ electrical products

• Ms. Yu Shu Min Hisense Group, Production of airDirector and/or the subsidiaries of conditioning/ senior management Hisense Group or electrical products Hisense Electric

• Mr. Lin Lan Hisense Group or Production of airDirector and/or Hisense Electric conditioning/ senior management electrical products

• Mr. Xiao Jian Lin Hisense Group or Production of airDirector and/or Hisense Electric conditioning/ senior management electrical products

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GENERAL INFORMATION

APPENDIX

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 2011 (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

Investec Capital Asia 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

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 2011, 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.

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GENERAL INFORMATION

APPENDIX

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 Room 3101-05, Singga Commercial Centre, No. 148 Connaught Road West, Hong Kong during normal business hours from the date of this circular up to and including 25 January 2013:

• (a) the letter from the Independent Financial Adviser dated 4 January 2013;

• (b) the letter from the Independent Board Committee dated 4 January 2013;

• (c) the Huayi Compressors Purchase Framework Agreement;

• (d) the Business Co-operation Framework Agreement;

• (e) the Export Agency Framework Agreement;

• (f) the Hitachi Business Framework Agreement;

• (g) the Whirlpool Business Framework Agreement;

• (h) the resolutions passed at the sixth board meeting of the year 2012 of the eighth session of the Board;

• (i) the prior approval and independent opinion of the independent non-executive Directors dated 6 December 2012 in relation to the connected transactions;

• (j) the Existing Huayi Compressors Purchase Framework Agreement; and

• (k) the Existing Business Co-operation Framework Agreement.

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