Hisense Home Appliances : ▪ Circular

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 consult your licensed securities dealer or registered institution in securities, bank manager, solicitor, professional accountant or other professional adviser.

If you have sold or transferred all your shares in HISENSE HOME APPLIANCES GROUP CO., LTD., you should at once hand this circular to the purchaser(s) or transferee(s) or to the bank, licensed securities dealer or other agent through whom the sale or transfer was effected for transmission to the purchaser(s) or the transferee(s).

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 HOME APPLIANCES GROUP CO., LTD.

ऎڦ࢕ཥණྠٰ΅Ϟࠢʮ̡

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

(Stock Code: 00921)

(1) CONTINUING CONNECTED TRANSACTIONS;

(2) CONTINUING CONNECTED TRANSACTIONS AND MAJOR TRANSACTION; (3) CONTINUING CONNECTED TRANSACTIONS - REVISED ANNUAL CAPS AND

SUPPLEMENTAL AGREEMENT; AND

(4) BUSINESS FRAMEWORK AGREEMENT WITH QINGDAO HISENSE HITACHI AIR-CONDITIONING SYSTEMS CO., LTD.

Independent Financial Adviser to the Independent Board Committee and the Shareholders

A letter from the Board is set out on pages 8 to 64 of this circular. A letter from the Independent Board Committee is set out on pages 65 to 66 of this circular. A letter from the Independent Financial Adviser containing its advice to the Independent Board Committee and the Shareholders is set out on pages 67 to 139 of this circular.

A notice of the EGM to be held on 23 January 2019 at 3:00 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 26 November 2018 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.

7 January 2019

CONTENTS
Page
DEFINITIONS ......................................................	1
LETTER FROM THE BOARD .........................................	8
LETTER FROM THE INDEPENDENT BOARD COMMITTEE ...............	65
LETTER FROM THE INDEPENDENT FINANCIAL ADVISER ...............	67

APPENDIX I -	FINANCIAL INFORMATION OF THE GROUP ...........	140
GENERAL INFORMATION ...........................	142
-i-

APPENDIX II -

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

Framework Agreement"

the Business Co-operation Framework Agreement€ุਕ ΥЪ࣪ݖ՘ᙄ entered into between the Company, Hisense Electric, Hisense Electric Business and Hisense Group dated 26 November 2018 in relation to the sale and purchase of home electrical appliances, raw materials, parts and components, supply of equipment and moulds, and the provision of various services;

"Caps"

the annual caps for the transactions contemplated under the Business Co-operation Framework Agreement for the year ending 31 December 2019, being (i) RMB278,290,000 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; (ii) RMB267,900,000 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; (iii) RMB838,240,000 in respect of the provision of services by Hisense Group, Hisense Electric Business, Hisense Electric and their respective subsidiaries to the Group under the Business Co-operation Framework Agreement; (iv) RMB15,085,700,000 in respect of the supply of home electrical appliances by the Group to Hisense Group, Hisense Electric Business, Hisense Electric and their respective subsidiaries under the Business Co-operation Framework Agreement; (v) RMB12,500,000 in respect of the supply of equipment by the Group to Hisense Group and its subsidiaries under the Business Co-operation Framework Agreement; (vi) RMB228,320,000 in respect of the supply of moulds by the Group to Hisense Group, Hisense Electric and their respective subsidiaries under the Business Co-operationFramework Agreement; (vii) RMB161,420,000 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; (viii) RMB34,390,000 in respect of the provision of services by the Group to Hisense Group, Hisense Electric and their respective subsidiaries under the Business Co-operation Framework Agreement; and the annual caps for the transactions contemplated under the Financial Services Agreement during the term of the Financial Services Agreement, being (a) RMB8,000,000,000 (inclusive of interest) in respect of the maximum daily balance of the deposits placed by the Group with Hisense Finance under the Financial Services Agreement; (b) RMB9,000,000,000 in respect of the maximum balance of loan and electronic bank acceptance bills provided by Hisense Finance for the Group under the Financial Services Agreement (inclusive of interest and service fees); (c) RMB50,000,000 in respect of the annual discount interest payable by the Group to Hisense Finance for the provision of draft discount services under the Financial Services Agreement; and (d) US$500,000,000 in respect of the annual amount settled or sold by Hisense Finance for the Group under the Financial Services Agreement and (e) RMB3,000,000 in respect of the maximum annual amount of service fees payable by the Group to Hisense Finance for the provision of agency services such as settlement services for receipt and payment of funds under the Financial Services Agreement;

"CBRC"

ʕ਷ვБ္ุ၍၍ଣ։ࡰึ (China Banking Regulatory Commission);

"close associates"

has the meaning ascribed to it under the Hong Kong Listing Rules;

"Company"

Hisense Home Appliances Group Co., Ltd. , a company incorporated in the PRC with limited liability, whose shares are listed on the main board of the Stock Exchange and the Shenzhen Stock Exchange;

"connected person"

has the meaning ascribed to it in the Hong Kong Listing Rules;

"controlling shareholder"

has the meaning ascribed to it in the Hong Kong Listing Rules;

"EGM"

the first 2019 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 23 January 2019 at 3:00 p.m. for, among other things, the approval of (a) the Business Co-operation Framework Agreement, the Financial Services Agreement and the Hitachi Business Framework Agreement and the transactions contemplated thereunder and the Caps in relation thereto; and (b) the Supplemental Agreement and the transactions contemplated thereunder and the Revised Annual Caps and the Finance Leasing Services Annual Cap in relation thereto;

"Existing Business Co-operation

Framework Agreement"

the framework agreement €ุਕΥЪ࣪ݖ՘ᙄ entered into between the Company, Hisense Electric and Hisense Group dated 28 November 2017 in relation to the sale and purchase of home electrical appliances, raw materials, parts and components, supply of equipment and moulds, and the provision of various services;

"Existing Financial Services

Agreement"

the financial services agreement€ږፄ؂ਕ՘ᙄentered into between the Company and Hisense Finance dated 28 November 2017 in relation to the provision of financial services by Hisense Finance to the Group;

"Factoring Transactions"

the provision of recourse and non-recourse factoring services by Hisense Financial Holdings or its subsidiaries to the Group contemplated under the Financial Business Framework Agreement (as amended and supplemented by the Supplemental Agreement) as set out in the section headed "The Supplemental Agreement in relation to the Financial Business Framework Agreement" in this circular;

"Finance Leasing Services Annual

Cap"

the annual caps for the transactions contemplated under the Supplemental Agreement for the year ending 31 December 2019, being RMB300,000,000 (inclusive of interest) in respect of the maximum daily closing balance of the finance leasing services provided by Hisense Financial Holdings or its subsidiaries to the Group at Hisense Financial Holdings or its subsidiaries during the term of the Financial Business Framework Agreement;