09:58     HUALING<00382> - Announcement (4)                                   

    and Spare Parts. The following table sets out the expected capped         
    amounts of purchases of Materials and Spare Parts for each of             
    the three years ending 31 December 2007:                                  
                                                                              
    Year ending 31 December                                                   
    2005    2006    2007                                                      
                                                                              
    Expected Transaction    377,965,000     491,355,000     638,762,000       
      amount (RMB)  (equivalent to  (equivalent to  (equivalent to            
    approximately   approximately   approximately                             
    HK$356,570,755) HK$463,542,453) HK$602,605,660)                           
                                                                              
    The aforesaid caps are ascertained by reference to the                    
    anticipated growth in the market demand of household electrical           
    appliances in both mainland and overseas markets in the next              
    three years in view of the recovery of the world economy and              
    therefore in order to meet such an increasing market demand of            
    household electrical appliances, the Directors considers that             
    it is beneficial to the Group to establish a long term                    
    relationship with one major group of suppliers i.e. Midea Group           
    and Midea Electric Group, so more Materials and Spare Parts for           
    the manufacture of the household electrical appliances will be            
    required from the Midea Group. The caps are also ascertained              
    by reference to the expected increase of transactions between             
    members the Group and members of the Midea Group after Midea              
    International became the controlling shareholder of the Company           
    on 11 November 2004.                                                      
                                                                              
    (3)     Purchase of Household Appliances, semi-finished goods and         
    Materials and Spare Parts                                                 
                                                                              
    There is no historical transaction record between the Group and           
    the Midea Electric Group for the purchases of Household                   
    Appliances, semi-finished goods and Materials and Spare Parts.            
    The following table sets out the expected capped amounts of               
    purchases of Household Appliances, semi-finished goods and                
    Materials and Spare Parts for each of the three years ending              
    31 December 2007:                                                         
                                                                              
    Year ending 31 December                                                   
    2005    2006    2007                                                      
                                                                              
    Expected Transaction    425,350,000     567,055,000     745,972,000       
      amount (RMB)  (equivalent to  (equivalent to  (equivalent to            
    approximately   approximately   approximately                             
    HK$401,273,585) HK$534,957,547) HK$703,747,170)                           
                                                                              
    The aforesaid caps are ascertained by reference to the                    
    anticipated growth in the market demand of household electrical           
    appliances in both mainland and overseas markets in the next              
    three years in view of the recovery of the world economy and              
    therefore in order to meet such an increasing market demand of            
    household electrical appliances, the Directors considers that             
    it is beneficial to the Group to establish a long term                    
    relationship with one major group of suppliers i.e. Midea Group           
    and Midea Electric Group, so more Household Appliances,                   
    semi-finished goods and materials and spare parts manufactured            
    by members of the Midea Electric Group will be required. The              
    caps are also ascertained by reference to the expected increase           
    of transactions between members of the Group and members of the           
    Midea Electric Group after Midea International became the                 
    controlling shareholder of the Company on 11 November 2004.               
                                                                              
    REASONS FOR THE CONTINUING CONNNECTED TRANSACTIONS                        
                                                                              
    The Group is principally engaged in the manufacture and sale              
    of household electrical appliances, which include