GOME ELECTRICAL APPLIANCES HOLDING LIMITED * (Incorporated in Bermuda with limited liability) (Stock Code: 493)

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1 The Stock Exchange of Hong Kong Limited takes no responsibility for the contents of this announcement, makes no representation as to its accuracy or completeness and expressly disclaims any liability whatsoever for any loss howsoever arising from or in reliance upon the whole or any part of the contents of this announcement GOME ELECTRICAL APPLIANCES HOLDING LIMITED * (Incorporated in Bermuda with limited liability) (Stock Code: 493) Financial adviser to GOME Electrical Appliances Holding Limited ANNOUNCEMENT DISCLOSEABLE TRANSACTION ANNOUNCEMENT PURSUANT TO RULE The Board announces that Tianjin Consultancy, a subsidiary of the Company, has entered into the Loan Transaction, pursuant to which Tianjin Consultancy will provide a loan in the amount of RMB3.6 billion (the Loan ) through the Lending Bank to the Purchasing Company. The Loan will be used by the Purchasing Company for the purpose of acquiring the entire registered share capital of the Target Company. The Purchasing Company and the shareholders of the Target Company have entered into an agreement for the sale and purchase of the entire registered share capital of the Target Company, and the change in the share ownership of the Target Company is in the process of being registered. The Board further announces that Tianjin Consultancy has also entered into the Management Agreement pursuant to which the Purchasing Company will appoint Tianjin Consultancy as agent to manage and operate the business of the Target Company. Tianjin Consultancy has also entered into the Option Agreement pursuant to which the Purchasing Company will grant Tianjin Consultancy an exclusive option to acquire all or any part of the registered share capital of the Target Company from the Purchasing Company. The Loan Transaction constitutes a discloseable transaction of the Company within the meaning of the Listing Rules, and constitutes a transaction subject to the requirements of Rule of the Listing Rules. A circular containing, among other things, further details of the Loan Transaction will be despatched to Shareholders in accordance with the requirements of the Listing Rules. - -

2 The Purchase Option (as defined below) does not constitute a notifiable transaction within the meaning of the Listing Rules. The Company will comply with the requirements of Chapter 14 of the Listing Rules if and when the Purchase Option is exercised. Shareholders and prospective investors of the Company should note that the Loan Transaction, the Option Transaction and the Management Transaction may or may not proceed. Accordingly, Shareholders and prospective investors of the Company are advised to exercise caution when dealing in the securities of the Company. BACKGROUND The Board announces that Tianjin Consultancy, a subsidiary of the Company, has entered into the Loan Transaction pursuant to which Tianjin Consultancy will provide a loan in the amount of RMB3.6 billion (the Loan ) through the Lending Bank to the Purchasing Company. The Loan will be used by the Purchasing Company for the purpose of acquiring the entire registered share capital of the Target Company. The Purchasing Company and the shareholders of the Target Company have entered into an agreement for the sale and purchase of the entire registered share capital of the Target Company, and the change in the share ownership of the Target Company is in the process of being registered. The Board further announces that Tianjin Consultancy has also entered into the Management Agreement pursuant to which the Purchasing Company will appoint Tianjin Consultancy as agent to manage and operate the business of the Target Company. Tianjin Consultancy has also entered into the Option Agreement pursuant to which the Purchasing Company will grant Tianjin Consultancy an option to acquire all or any part of the registered share capital of the Target Company from the Purchasing Company. LOAN TRANSACTION DOCUMENTS (1) THE LOAN AGREEMENT Date 14 December 2007 Parties (1) The Purchasing Company; (2) Tianjin Consultancy; and (3) The Lending Bank. - -

3 Principal Terms Tianjin Consultancy will provide the Purchasing Company with the Loan in the amount of RMB3.6 billion through the Lending Bank on the terms and conditions set out in the Loan Agreement. The loan period will be from 14 December 2007 to 13 December 2008, and the relevant interest rate will be 6.561% p.a., which is determined by reference to the interest rate published by the People s Bank of China. The Loan will be made available to the Purchasing Company as follows: (1) an amount of RMB700 million on 17 December 2007; (2) an amount of RMB400 million on 20 December 2007; (3) an amount of RMB400 million on 21 December 2007; (4) an amount of RMB1.5 billion on 10 January 2008; and (5) an amount of RMB600 million on 1 September The Loan will be repaid in one lump sum on the expiry of 12 months from the commencement of the Loan Agreement. Governing Law The Loan Agreement is governed by PRC law. (2) THE TARGET COMPANY SHARE PLEDGE AGREEMENT Date 14 December 2007 Parties (1) The Purchasing Company; and (2) Tianjin Consultancy

4 Principal Terms The Purchasing Company will charge to Tianjin Consultancy the entire registered share capital of the Target Company (including any dividends and other interests arising in relation to the relevant share capital) as security for the Loan (including, but not limited to, the principal, interest, penalty, fees and expenses incurred by the Company for any enforcement of the Loan Agreement). Governing Law The Target Company Share Pledge Agreement is governed by PRC law. (3) THE PURCHASING COMPANY SHARE PLEDGE AGREEMENT Date 14 December 2007 Parties (1) ; (2) ; and (3) Tianjin Consultancy. Principal Terms and, as shareholders of the Purchasing Company, will charge to the Company the entire registered share capital of the Purchasing Company (including any dividends and other interests arising in relation to the relevant share capital) as security for the Loan (including but not limited to the principal, interest, penalty, fees and expenses incurred by the Company for any enforcement of the Loan Agreement). Governing Law The Purchasing Company Share Pledge Agreement is governed by PRC law

5 THE MANAGEMENT AGREEMENT Date 14 December 2007 Parties (1) The Purchasing Company; and (2) Tianjin Consultancy. Principal Terms The Purchasing Company will appoint, on an exclusive basis, Tianjin Consultancy as agent to manage and operate the business of the Target Company (including subsidiaries and branches of the Target Company), commencing from the date of the Management Agreement up to the date on which Tianjin Consultancy and/or any of its designated parties acquire the entire registered share capital of the Target Company pursuant to the Option Agreement. During the above period, the Purchasing Company has agreed that it shall not be involved in the management of the Target Company (including subsidiaries and branches of the Target Company) and shall not appoint any other party to manage the Target Company (including subsidiaries and branches of the Target Company). Consideration In consideration of the provision of management services by Tianjin Consultancy in relation to the Target Company, Tianjin Consultancy shall receive management fees (the Management Fees ) calculated as follows: (1) an amount equivalent to the relevant net profits of the Target Company (before deduction of the Management Fees) as audited by an accountant appointed by Tianjin Consultancy (the Net Profit Amount ); less (2) the amount of interest payable by the Purchasing Company under the Loan Agreement (the Interest Amount ). In the event that the Net Profit Amount for any financial year is less than the relevant Interest Amount, no Management Fees shall be payable to Tianjin Consultancy, and the difference between the Net Profit Amount and Interest Amount shall be set off against the Management Fees payable to Tianjin Consultancy in subsequent financial years. Management Fees shall be paid by the Target Company to Tianjin Consultancy on a quarterly basis, and shall be adjusted at each financial year end based on the relevant audit

6 The basis on which the Management Fees are determined is based on arm s length negotiations between the Purchasing Company and Tianjin Consultancy and the performance results of the Target Company. Governing Law The Management Agreement is governed by PRC law. THE OPTION AGREEMENT Date 14 December 2007 Parties (1) Tianjin Consultancy; and (2) The Purchasing Company. Principal Terms The Purchasing Company irrevocably grants Tianjin Consultancy an option (the Purchase Option ), on an exclusive basis, for Tianjin Consultancy or any party(ies) designated by Tianjin Consultancy to acquire all or any part of the registered share capital of the Target Company held by the Purchasing Company, subject to the terms and conditions of the Option Agreement. Under the Option Agreement, no premium is payable by Tianjing Consultancy to the Purchasing Company for the grant of the Purchase Option. Subject to the requirements of PRC law, Tianjin Consultancy may exercise the Purchase Option at any time during the term of the Option Agreement as it deems appropriate. Save where valuation is required by law, the purchase price of the entire registered share capital of the Target Company shall be the higher of (1) RMB3.65 billion or (2) RMB3.65 billion plus the total amount of interest paid by the Purchasing Company during the period from the date of the Loan Agreement up to the date on which the Purchase Option is exercised (the Loan Outstanding Period ), minus the amount of net profit (before deduction of the Management Fees) of the Target Company distributed to the Purchasing Company during the Loan Outstanding Period. The purchase price of any part of the registered share capital shall be calculated on a pro rata basis. The purchase price of shares in the Target Company under the Option Agreement may be reduced by agreement between Tianjin Consultancy and the Purchasing Company but shall in any event be subject to the requirements of applicable PRC law

7 In the event that a valuation of the registered share capital of the Target Company is required by law, the Company shall appoint a valuer for conducting the relevant valuation. In the event that 90% of the valuation amount is less than the amount as set out in the preceding paragraph, the purchase price of the registered share capital of the Target Company shall be such amount as set out in the preceding paragraph. In the event that 90% of the valuation amount of the Target Company is greater than the amount as set out in the preceding paragraph, the purchase price of the registered share capital of the Target Company shall be determined as 90% of the valuation amount. The exercise price of the Purchase Option is determined on the basis of the Target Company s market position, its sales network and brand name and the potential benefits from cooperation with the Target Company. Governing Law The Option Agreement is governed by PRC law. REASONS FOR THE LOAN TRANSACTION, THE MANAGEMENT AGREEMENT AND THE OPTION AGREEMENT The Group has sought to increase shareholders return through market integration and industry cooperation. By entering into the Loan Transaction documents, the Management Agreement and the Option Agreement, the Group seeks to reinforce its position as the leading retailer of electrical appliances and electronic consumer products in the PRC and in particular the Beijing area. The Management Agreement allows the Group to achieve integration in the PRC market and in particular the Beijing area market, reduce competition and stabilize market prices. Moreover, the Group may integrate its supply channels with those of the Target Company, which may result in lowering the Group s supply costs and increase operating efficiency. The Management Agreement and the Loan Transaction will provide the Group with additional income streams via various sums payable including the Management Fees and interest, which will in turn increase earnings per share of the Company. The Target Company Share Pledge Agreement and the Purchasing Company Share Pledge Agreement will provide the Group with security in relation to the Loan. Through the Option Agreement, the Group has an exclusive option which it may (but is not obliged to) exercise to purchase the registered capital of the Target Company as such time as it deems appropriate

8 IMPLICATIONS UNDER THE LISTING RULES The Loan Transaction constitutes a discloseable transaction of the Company within the meaning of the Listing Rules, and constitutes a transaction subject to the requirements of Rule of Listing Rules. A circular containing, among other things, further details of the Loan Transaction will be despatched to Shareholders in accordance with the requirements of the Listing Rules. The Purchase Option does not constitute a notifiable transaction within the meaning of the Listing Rules. The Company will comply with the requirements of Chapter 14 of the Listing Rules if and when the Purchase Option is exercised. GENERAL Each of the Group and the Target Company is principally engaged in the retailing of electrical appliances and electronic consumer products. The Purchasing Company is principally engaged in investment and trading. To the best of the Directors knowledge, information and belief having made all reasonable enquiry, the Purchasing Company, the Target Company and their respective ultimate beneficial owners are third parties independent of the Company and connected persons of the Company. The Directors consider that each of the Transactions have been and will be entered into in the usual and ordinary course of business of the Group. They also consider that the terms of the Transactions have been negotiated and will be conducted on an arm s length basis and on normal commercial terms between the Company and the relevant parties. The Directors are of the view that the Transactions and their terms are fair and reasonable and in the best interests of the Group and the Shareholders as a whole. Shareholders and prospective investors of the Company should note that the Loan Transaction, the Option Transaction and the Management Transaction may or may not proceed. Accordingly, Shareholders and prospective investors of the Company are advised to exercise caution when dealing in the securities of the Company. DEFINITIONS Board : board of directors of the Company; Company : GOME Electrical Appliances Holding Limited, a company incorporated in Bermuda and whose shares are listed on the main board of the Stock Exchange (stock code: 493); Directors : directors of the Company; - 8 -

9 Group : the Company and its subsidiaries; Lending Bank : (Beijing Branch of Industrial Bank Co. Ltd.); Listing Rules : the Rules Governing the Listing of Securities on the Stock Exchange of Hong Kong Ltd.; Loan Agreement : the Loan Agreement ( ) dated 14 December 2007 and entered into between Tianjin Consultancy, the Lending Bank and the Purchasing Company, the details of which are set out in the section headed The Loan Agreement in this Announcement; Loan Transaction : the transaction as contemplated under the Loan Agreement, the Target Company Share Pledge Agreement and the Purchasing Company Share Pledge Agreement and other relevant matters; Management : the Management Agreement ( ) dated 14 December Agreement 007 entered into between the Purchasing Company and Tianjin Consultancy, the details of which are set out in the section headed The Management Agreement in this Announcement; Management : the transaction as contemplated under the Management Agreement Transaction and other relevant matters; Option Agreement : the Exclusive Purchase Agreement ( ) dated 14 December 2007 and entered into between Tianjin Consultancy and the Purchasing Company, the details of which are set out in the section headed The Option Agreement in this Announcement; Option Transaction : the transaction as contemplated under the Option Agreement and other relevant matters; Purchasing Company :, a company incorporated with limited liability under the laws of the PRC; PRC : the People s Republic of China; RMB : Renminbi, the lawful currency of the People s Republic of China; Target Company Share : the Share Pledge Agreement ( ) dated 14 December Pledge Agreement 007 entered into between the Purchasing Company and Tianjin Consultancy, the details of which are set out in the section headed Target Company Share Pledge Agreement in this Announcement; - 9 -

10 Purchasing Company : the Share Pledge Agreement ( ) dated 14 December Share Pledge 007 entered into between, and Tianjin Consultancy, Agreement the details of which are set out in the section headed Purchasing Company Share Pledge Agreement in this Announcement; Shareholders : shareholders of the Company; Stock Exchange : The Stock Exchange of Hong Kong Limited; Tianjin Consultancy :, a company incorporated with limited liability under the laws of the PRC and a subsidiary of the Company; and Target Company :, a company incorporated with limited liability under the laws of the PRC. Hong Kong, 14 December 2007 By order of the Board GOME Electrical Appliances Holding Limited Ng Kin Wah Executive Director As at the date of this announcement, the executive directors of the Company are Mr. Wong Kwong Yu, Ms Du Juan, Mr. Ng Kin Wah and Mr. Chen Xiao; the non-executive director of the Company is Mr. Sun Qiang Chang; and the independent non-executive directors of the Company are Mr. Michael Sze Tsai Ping, Mr. Chan Yuk Sang, Mr. Mark C. Greaves, Dr. Liu Peng Hui, Mr. Yu Tung Ho and Mr. Thomas Joseph Manning * For identification purpose only