09:49     GOME<00493> - Announcement (2)                                      

            The proposed cap amounts are determined after taking into         
    consideration the estimated number of stores and the estimated            
    proportion of sales of these stores to be involved in the transactions    
    contemplated under the Master Purchase Agreement, the estimated growth    
    in the PRC electrical appliances retail industry and the expected         
    improvement in the geographical coverage of the delivery network of the   
    suppliers of the Products during the period. The Company estimates that   
    around 10% to 15% of the sales of its stores in certain second-tier       
    cities will involve in the transactions contemplated under the Master     
    Purchase Agreement. Based on the average annual sales per store of        
    approximately HK$110 million for 2004 and an estimation of around 25 to   
    30 stores to be involved in the transactions contemplated under the       
    Master Purchase Agreement for 2005, the proposed cap amount for 2005 is   
    HK$400 million. Based on the compound annual growth rate in the number    
    of stores for the Group in the past 3 years of approximately 45% and      
    having considered the potential growth in the PRC electrical appliances   
    retail industrial and potential improvement in the geographical coverage  
    of the delivery network of the suppliers of the Products, the proposed    
    cap amounts for 2006 and 2007 are HK$500 million and HK$550 million       
    respectively.                                                             
                                                                              
    Payment:        Payments for the Products will be made 15 business days   
    after receipt of the Products, which is identical to the payment term     
    under the Master Supply Agreement.                                        
                                                                              
    (ii)        The Master Supply Agreement                                   
                                                                              
    Date:        17 March 2005                                                
                                                                              
    Parties:        GOME Appliance, a subsidiary of the Company               
            Beijing GOME, a member of the Parent Group which is wholly-owned  
    by Mr. Wong                                                               
                                                                              
    will sell the Products to Beijing GOME from time to time                  
                                                                              
    Term:        The Master Supply Agreement has a term of three financial    
    years ending 31 December 2007 and will be subject to the approval by the  
    Independent Shareholders at the Special General Meeting                   
                                                                              
    Price:        The Products will be sold to Beijing GOME by GOME           
    Appliance on an at-cost basis. In view that the sole purpose of the       
    reciprocal arrangement under the Master Purchase Agreement and the        
    Master Supply Agreement is to enhance the operational efficiency of the   
    Group and the Parent Group, the Directors consider that the arrangement   
    under the Master Supply Agreement, including the price of the Products    
    to be sold to Beijing GOME by GOME Appliance thereunder, is fair and in   
    the interests of the Independent Shareholders. The Directors confirm      
    that the terms of purchases respectively obtained by Beijing GOME and     
    GOME Appliance from the ultimate suppliers are the same.                  
                                                                              
    Proposed cap amounts:        The Directors propose that the cap amounts   
    of the transactions under the Master Supply Agreement for each of the     
    three financial years ending 31 December 2007 will not exceed HK$400      
    million (excluding value added tax), HK$500 million (excluding value      
    added tax) and HK$550 million (excluding value added tax) respectively.   
    The proposed amounts are determined with reference to the expansion plan  
    of the Parent Group provided by the Parent Group.                         
                                                                              
    Payment:        Payments for the Products will be made 15 business days   
    after receipt of the Products, which is identical to the payment term     
    under the Master Purchase Agreement.                                      
                                                                              
    REASON FOR THE CONTINUING CONNECTED TRANSACTIONS                          
                                                                              
    The following chart shows the simplified holding structure of the Group   
    and the Parent Group.                                                     
                                                                              
                                                                              
    Mr. Wong and his associates                                               
                                                                              
    Public Shareholder                                                        
                                                                              
    65.55%                                                                    
                                                                              
    35.45%                                                                    
                                                                              
    the Company                                                               
                                                                              
    100%                                                                      
                                                                              
    65%                                                                       
                                                                              
    GOME Appliance