CMON Limited — Annual Report 2003

Apr 27, 2004

������������ Shenyang Public Utility Holdings Company Limited

(a joint stock limited company incorporated in the People’s Republic of China with limited liability) (Stock Code: 747)

2003 Annual Results (Results for the year ended 31st December 2003)

The board of directors (the “Board”) of Shenyang Public Utility Holdings Company Limited (the “Company”) is pleased to announce the audited results of the Company and its subsidiaries (collectively the “Group”) for the year ended 31st December 2003 (the “Year”) and the comparative figures for the corresponding period of 2002, prepared in accordance with the accounting principles generally accepted in Hong Kong, as follows:

CONSOLIDATED INCOME STATEMENT (AUDITED)

Note Turnover 2 Other operating income 3 Cost of properties sold Taxes on sales of properties Staff costs Depreciation and amortisation Power costs Raw water purchase costs Other operating expenses Profit from operations Finance costs Share of results of a jointly controlled entity Loss on disposal of a subsidiary Profit before taxation Taxation 4 Profit after taxation Minority interests Profit attributable to shareholders Earnings per share-basic 7	2003 RMB’000 169,116 4,351 (113,157) (9,476) (8,532) (7,488) — — (21,245) 13,569 (6,023) 24,288 — 31,834 (14,380) 17,454 379 17,833 RMB0.02	2002 RMB’000 451,620 11,304 (94,995) (8,790) (35,246) (27,135) (42,944) (38,109) (57,145) 158,560 (2,286) 20,388 (20,382) 156,280 (63,087) 93,193 (402) 92,791 RMB0.09

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Note:

1. Accounting Policies

The financial statements have been prepared under the historical cost convention and in accordance with accounting principles generally accepted in Hong Kong.

In the current year, the Group has adopted, for the first time, the Hong Kong Financial Reporting Standard (“HKFRS”) issued by the Hong Kong Society of Accountants (“HKSA”), the term of HKFRS is inclusive of Statements of Standard Accounting Practice (“SSAP”) and Interpretations approved by the HKSA.

In the current year, the Group has adopted, for the first time, SSAP 12 (Revised) “Income Taxes”. The principal effect of the implementation of SSAP 12 (Revised) is in relation to deferred tax. In previous years, partial provision was made for deferred tax using the income statement liability method, i.e. a liability was recognised in respect of timing differences arising, except where those timing differences were not expected to reverse in the foreseeable future. SSAP 12 (Revised) requires the adoption of a balance sheet liability method, whereby deferred tax is recognised in respect of all temporary differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit, with limited exceptions. In the absence of any specific transitional requirements in SSAP 12 (Revised), the new accounting policy has been applied retrospectively.

The adoption of the SSAP 12 (Revised) has had no material effect on the results for the current or prior accounting years. Accordingly, no prior year adjustment has been required.

2. Segment Information and Segment Results Analysis:

For management purposes, the Group is currently organised into two operating divisions – property development and education projects. These divisions are the basis on which the Group reports its primary segment information.

Principal activities are as follows:

Property development - development and sale of properties

Education projects - leasing of campus and equipment and investment and management of education projects.

There was no business transaction between the segments for both years.

Continuing operations Property development Education projects Others Discontinuing operations Sales of urban purified water Interest income on bank deposits Interest income from a jointly controlled entity Unallocated corporate expenses Profit from operations	Turnover 2003 2002 RMB’000 RMB’000 165,762 125,820 2,500 — 854 400 — 325,400 169,116 451,620	Segment results 2003 2002 RMB’000 RMB’000 28,434 12,738 (2,711) — (1,327) (469) — 158,305 24,396 170,574 4,351 7,598 — 2,016 (15,178) (21,628) 13,569 158,560

All of the Group’s turnover for both years was made in the People’s Republic of China (the “PRC”).

As at 31st December 2002 and 2003, all of the Group’s segment assets were located in the PRC, no geographical segment information is presented accordingly.

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3. Other Operating Income

Interest on bank deposits Interest from a jointly controlled entity Total interest income Dividend income from investment securities Others Taxation The charge comprises : The Company and subsidiaries -PRC enterprise income tax -Deferred taxation Share of taxation of a jointly controlled entity in the PRC	2003 RMB’000 4,351 — 4,351 — — 4,351 2003 RMB’000 10,568 (196) 4,008 14,380	2002 RMB’000 7,598 2,016
		9,614 1,088 602
		11,304
		2002 RMB’000 59,069 — 4,018
		63,087

4. Taxation

No provision for Hong Kong Profits Tax has been made as the Group’s income neither arises in nor is derived from Hong Kong.

Taxation of the Group arising in the PRC is calculated at the rates of 15% - 33%.

The applicable PRC income tax rate for the jointly controlled entity is 16.5%.

5. Appropriations to Reserves

According to their respective Articles of Association, the Company and its subsidiaries are required to transfer a proportion to their retained earnings, as shown in the accounts prepared under the PRC accounting regulations, to various statutory reserves. The total amount transferred to each of these reserves for the year is set out as follows:

	Percentage of profit	Transferred from
	after taxation	accumulated profits
		RMB’000
Statutory surplus reserve	10%	69,054
Statutory public welfare reserve	5%	34,528
		103,582

Note:The proportion of the amount of reserves transferred was determined by the board of directors of each company of the Group.

6. Dividends

No dividend was paid or proposed during the year ended 31st December 2003, nor has any dividend been proposed since the balance sheet date (2002: Nil).

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7. Earnings per Share

The calculation of earnings per share for the year is based on the profit attributable to shareholders for the year of RMB17,833,000 (2002: RMB92,791,000) and the number of 1,020,400,000 shares (2002: 1,020,400,000 shares) in issue during the year.

No diluted earnings per share are presented as the Company has no dilutive potential shares outstanding in both years.

FINAL DIVIDEND

The Board resolved that no final dividend would be declared for 2003. Such resolution is subject to approval at the 2003 Annual General Meeting of the Company to be held on 16th June 2004.

BUSINESS REVIEW

• Turnover of the Group during the Year amounted to RMB169,116,000 (2002: RMB451,620,000), representing a decrease of approximately 62.55% from that of the year ended 31st December 2002 (the “Previous Year”).

• Profit after taxation during the Year was RMB17,454,000 (2002: RMB93,193,000), representing a decrease of approximately 81.27% from that of the Previous Year.

• Profit attributable to shareholders for the Year was RMB17,833,000 (2002: RMB92,791,000), representing a decrease of approximately 80.78% from that of the Previous Year.

• Earnings per share for the Year was RMB0.02 (2002: RMB0.09), representing a decrease of approximately 77.78% from that of the Previous Year.

1. Real Estate Development Business

• Turnover from real estate development business for the Year amounted to RMB165,762,000, up 31.75% over that of the Previous Year. Profit before taxation amounted to RMB28,434,000, up 121.02% over that of the Previous Year. This is principally because the “Water-Flowers City” project in Shenyang was in the selling phase during the Year, and most of the sales revenue were recongised during the Year.

• During the Year, sales area of Shenyang Development Real Estate Company Limited (“Shenyang Real Estate”) was 55,850 square meters (2002: 41,020 square meters), representing an increase of approximately 36.15% from that of the Previous Year.

• During the Year, in order to build a new base for profit growth, the Group acquired the residential projects of “Cosmo International Mansion” in Shenyang and “Scenic Bay” in Beijing (being the project named “Lakefront Jade Palace” referred to in the 2003 interim results announcement) by way of company acquisition. During the Year, the Group mainly focused on sales and construction of the phase one and phase two for the project of “Water-Flowers City”, internal and external decoration of the project “Cosmo International Mansion” in Shenyang and preliminary preparation work of the project “Scenic Bay” in Beijing.

• Phase one of project “Water-Flowers City” in Shenyang was formally offered for sale in March 2003. Currently, phase one of the project has been completed and ready for dwelling, and the main body of phase two of the project has basically been completed. As at 31st December 2003, the project “Water-Flowers City” in Shenyang recorded an actual sales area figure of 53,300 square metres and a sales revenue of RMB156,739,000.

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• The remaining saleable units of the “Hongji Garden” project in Shenyang achieved a sales area of 2,550 square metres and a sales revenue of RMB9,023,000.

• The project “Cosmo International Mansion” in Shenyang is the reconstruction of an incomplete project, with gross floor area of approximately 30,000 square metres. Currently, the decoration works for the sample floor has been completed. It is expected that by September 2004 the overall project will be completed.

• The site for the project of “Scenic Bay” in Beijing occupies an area of 129,000 square metres, and the planned gross floor area is approximately 195,000 square metres. During the Year, the project is under the preliminary planning phase. It is estimated that phase one of the project will be roofed by August 2004.

2. Education Investment Business

• The construction of phase one of Shenyang Beida Education Science Park (“Shenyang Education Park”) invested by Shenyang Development Beida Education Science Park Company Limited (“Shenyang Education”) commenced in September 2003. It is expected to be completed in July 2004. At the same time, Shenyang Beida Jade Bird School has begun working on the enrolment of students, and has signed teaching cooperation agreements and letters of intention with a number of overseas education organisations. Schooling is expected to commence in September 2004.

• All the construction of phase one of Zhuhai Beida Education Science Park invested by Zhuhai Beida Education Science Park Company Limited (“Zhuhai Education”) has been put into use during the Year. Zhuhai Beida Subsidiary Experiment School (“Zhuhai School”) commenced schooling on 1st September 2003. According to Zhuhai Master Lease Agreement (for details please refer to the Company’s circular dated 23rd December 2003), Zhuhai School entered into a Lease Contract with Zhuhai Education in September 2003. Under the Lease Contract, Zhuhai Education received the rent amounting to RMB2,500,000 for the Year paid by Zhuhai School.

• During the Year, construction works of Phase one of Shanghai Beida Education Science Park invested by Shanghai Beida Jade Bird Education Investment Company Limited has not commenced.

3. Electricity and Heat Co-generation Business

• Shenyang Shenhai Hot Electricity Company Limited (“Shenhai Co-generation”), a joint controlled entity of the Group, recorded a turnover and profit before taxation for the Year amounted to RMB576,914,000 (2002: RMB556,362,000) and RMB107,947,000 (2002: RMB90,613,000) , up 3.69% and 19.13% over that of the Previous Year respectively.

• On-grid sales volume of electricity of Shenhai Co-generation for the Year was 2,186,800 MWh (2002: 2,088,100MWh) , up 4.73% over that of the Previous Year. Total heat production was 4,749,635 GJ (2002: 4,631,991 GJ) , representing an increase of 2.54% over that of the Previous Year.

• The growth in electricity production is mainly attributable to an increase in on-grid sales volume of electricity of Shenhai Co-generation due to the increasing demand for electricity in the Year.

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• On 28th December 2002, the Company entered into an agreement with Pollon Investment Limited (“Pollon Investment”), pursuant to which the Company would transfer its 22.50% equity interests in Shenhai Co-generation to Pollon Investment. As the equity transfer failed to be completed before 31st December 2003, in accordance with the PRC laws and the terms in the Share Transfer Agreement and with the written confirmation from Pollon Investment, the Company was entitled to all rights and interests in connection with 22.50% equity interests in Shenhai Co-generation as at 31st December 2003.

4. System Integration Business

• During the Year, the Board approved an acquisition of the 90.00% equity interests in Shenyang Beida Jade Bird Business Information System Company Limited (“Shenyang Business Information”). Shenyang Business Information is principally engaged in development of application software and the Group plans to use its software development capability to provide facilities services for projects such as the Group’s building automation and electronic education projects.

BUSINESS OUTLOOK

Leveraging the development opportunities in 2004, the Group is committed to integrate its existing resources, strengthen internal management, establish a good brand, increase profit margin and control market risks, so as to create returns to our shareholders as a whole.

ASSETS AND FINANCIAL POSITION OF THE GROUP

1. Financial statistics of the Group

		As at 31st	As at 31st
Items	Basis of calculation	December 2003	December 2002
Gearing ratio	Total liabilities/total assets x 100%	28.20%	10.83%
Current ratio	Current assets/current liabilities	2.36	7.04
Quick ratio	(Current assets - inventories -
	properties under development -
	properties held for sale)/current liabilities	1.68	5.24
Earnings/net assets ratio	Net profit/net assets x 100%	0.91%	5.02%
Sales profit margin	Net profit/sales x 100%	10.54%	20.55%
Debt equity ratio	Total liabilities/shareholders’ equity x 100%	41.61%	12.20%

2. Overall position of the Group’s assets

During the Year, there was an increase in the total assets of the Group when compared with that of the Previous Year. The total assets of the Group increased to approximately RMB2,741,168,000 in 2003 from approximately RMB2,072,427,000 in the Previous Year, representing an increase of approximately RMB668,741,000 or 32.27%.

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RMB’000

			RMB’000
	As at	As at
	31st December	31st December	Changes
Items	2003	2002	in amount
Total assets	2,741,168	2,072,427	668,741
Of which :
Fixed assets	547,243	10,478	536,765
Interest in a jointly
controlled entity	103,380	100,265	3,115
Goodwill	62,638	—	62,638
Deposits paid for acquisitions
of subsidiaries	391,100	360,994	30,106
Investment securities	20,000	20,000	—
Long-term receivables	58,234	—	58,234
Current assets	1,558,573	1,580,690	(22,117)

3. Current assets of the Group

During the Year, the current assets of the Group decreased by approximately RMB22,117,000 to RMB1,558,573,000 as compared with RMB1,580,690,000 of the Previous Year, representing a decrease of approximately 1.40%.

			RMB’000
	As at 31st	As at 31st
	December	December	Changes
Items	2003	2002	in amount
Current assets	1,558,573	1,580,690	(22,117)
Of which:
Properties held for sale	452,002	403,877	48,125
Inventories	469	—	469
Account receivables	7,050	2,845	4,205
Other receivables and prepaid expenses	208,995	683,642	(474,647)
Amount due from a jointly controlled entity	60,000	2,733	57,267
Tax recoverable	—	1,285	(1,285)
Pledged bank deposits	46,072	—	46,072
Cash and bank balance	783,985	486,308	297,677

4. Bank borrowings of the Group

As at 31st December 2003, the Company’s bank borrowings totalled RMB425,000,000 (2002: RMB120,000,000, guaranteed by Shenyang Public Utility Group Company Limited (“SPU”)), of which RMB29,000,000 were loans secured by the Company’s pledged deposit of RMB10,302,700, and the remaining balance was guaranteed. RMB40,000,000 were credit loans, and the remaining balance were guaranteed loans, within which guarantees provided by Beijing Beida Jade Bird Company Limited and SPU totalled RMB246,000,000. Among the above-mentioned borrowings, borrowings repayable within one year bear interest at 5.31% per annum, and borrowings repayable within two years bear interest at 5.49% or 6.039% per annum. During the Year, the Group has no delay in repayment of bank borrowings.

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Bank borrowings repayable in the following periods Within one year The 2nd year	As at 31st December 2003 376,000 49,000 425,000	RMB’000 As at 31st December 2002 120,000 0 120,000

5. Bills payable

As at 31st December 2003, the balance of the Group’s bank acceptance totalled RMB83,792,000, of which RMB37,011,000 was used by the Company’s subsidiary, Shenyang Real Estate, as payment for the project “Water-Flowers City” in Shenyang; RMB10,781,000 was used by the Company’s subsidiary, Shenyang Education, as payment for the project Shenyang Education Park; and RMB36,000,000 was used by the Company as payment for acquisition of 95.00% equity interests in Shenzhen Jingmei Industrial Development Company Limited.

6 . Currency risks

According to the “Quotations of the Exchange Rates for Converting Renminbi to Foreign Currencies by the Head Office of Designated Banks” periodically promulgated by the State Administration of Foreign Exchange of the PRC in 2003, the exchange rates of Renminbi to US dollar and to Hong Kong dollar were stable as a whole, and the exchange rate of the Hong Kong dollar to Renminbi experienced slight fluctuations during the Year. Accordingly, the risks of the Company’s deposits in Hong Kong were relatively low.

7. Contingent liabilities

During the Year, the Group did not have any contingent liabilities.

USE OF PROCEEDS ARISING FROM THE ISSUE OF H SHARES

The issue of 420,400,000 H Shares of the Company in December 1999 raised net proceeds of RMB684,256,000. No proceeds were raised by means of issuing new shares thereafter. The proceeds were applied basically in accordance with the use of proceeds as disclosed in the prospectus of the Company dated 7th December 1999 (the “Prospectus”). The extraordinary general meeting of the Company convened on 20th August 2002 approved the resolution to change the intended use of the proceeds amounting to RMB200,000,000, which was the remaining unused net proceeds of the total amount of RMB489,000,000 originally intended to be used for Shenyang Water Company Limited (“Shenyang Water”). Up to 31st December 2003, the Company had made investments totalling approximately RMB593,230,000 (2002: RMB593,230,000), of which:

• (1) RMB231,951,000 had been applied to invest in the acquisition of No. 8 Water Plant (as defined in the Prospectus);

• (2) RMB56,787,000 had been applied for the acquisition and construction of the Shifosi Water Source expansion project (as defined in the Prospectus);

• (3) RMB9,041,000 had been applied to renovate the system of production facilities of Shenyang Water;

• (4) RMB1,000,000 had been applied to purchase new vehicles for Jingwei Transportation (as defined in the Prospectus);

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• (5) RMB100,000,000 had been applied to acquire the land use right of a parcel of land in Shenyang Economic and Technological Development Zone with an area of 790,000 square meters; and

• (6) the balance was used as working capital.

NUMBER OF EMPLOYEES AND THEIR EDUCATION LEVELS

As at 31st December 2003, the Group had 172 employees.

162 employees of the Group had received university or higher education, and 103 technicians were of intermediate rank or above.

During the Year, the aggregate salaries and allowances paid to the employees amounted to RMB8,532,000 (2002: RMB22,269,000). The Group has not established any share option scheme for any of its senior management or employees.

TRUST DEPOSITS

There were no deposits managed by trustees for the Year.

TAXATION

Details of taxation of the Group are set out in note 4 of the consolidated income statement .

• (1) The Group was subject to an enterprise income tax rates from 15% to 33% during the Year.

• (2) No tax reduction and exemption was enjoyed by holders of the listed securities of the Company for their holding of such securities.

STAFF QUARTERS

Pursuant to the “Housing Reserves Management Ordinance” stipulated by the PRC government and the document (Shenfangweihuifa [2000] No. 3) issued by Shenyang Municipal Government on 28th December 2000, the basis of contribution for the housing reserves was the monthly income of the staff, of which the ratio of contribution by the Company was 15% from 1st April 2003 onwards.

PURCHASE, SALE AND REDEMPTION OF SHARES

During the Year, the Group did not purchase, sell or redeem any of the Company’s shares.

PRE-EMPTIVE RIGHT

There are no provisions for pre-emptive rights under the Company’s Article of Association and the laws of the PRC which would acquire the Company to offer new shares to existing shareholders on a pro rata basis.

WORK OF THE AUDIT COMMITTEE

Pursuant to the Code of Best Practice as set out in Appendix 14 to the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (“Listing Rules”), the Company established an Audit Committee at the fifth meeting of the first Board. Adjustment will be made to the Committee by 30th September 2004 for compliance with the new requirements of Rule 3.21 of Chapter 3 in the revised Listing Rules which came into effect on 31st March 2004. The main function of the Audit Committee, which is a special committee under the Board, is to review and supervise the financial reporting procedures and methods of the Group. The Audit Committee comprises two independent non-executive directors of the Company, namely Messrs. Choy Shu Kwan, Wilson and Cheng Wei.

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At the meeting held on 21st April 2004, the Audit Committee reviewed the accounts of the Company and expressed its opinion in respect of the connected transactions of the Company as follows:

• 1 The information disclosed in the accounts of the Company is complete, accurate and fair and the accounting policies adopted are correct, without any material problems being discovered.

• 2 The connected transactions of the Company have been carried out:

• A. in the ordinary and usual course of business of the Company;

• B. on normal commercial terms (by reference to transactions of a similar nature and as made by similar entities in the PRC) or (where there is no available comparison) on terms no less favourable than those available to third parties;

• C. in accordance wth the terms of the respective agreements governing such transactions;

• D. are fair and reasonable so far as the shareholders of the Company are concerned; and

• E. the total amount of the connected transactions does not exceed the cap in respect of the waiver for the connected transactions granted by The Stock Exchange of Hong Kong Limited (“the Stock Exchange”), that is, as at 31st December 2003, rent paid by Zhuhai School to Zhuhai Education did not exceed RMB2,500,000.

MATERIAL LITIGATION

During the Year, the Group was not involved in any material litigation or arbitration.

CODE OF BEST PRACTICE

The directors of the Company are pleased to confirm that the Company has complied with the Code of Best Practice as set out in the Listing Rules during the Year.

PUBLICATION OF FURTHER INFORMATION ON THE WEB-SITE OF THE STOCK EXCHANGE

Financial and other relevant information of the Company in accordance with the paragraphs from 45(1) to 45(3) of Appendix 16 to the Listing Rules will be available for publication on the web-site of the Stock Exchange in due course.

By order of the Board Xu Er Hui Chairman

26th April 2004, Shenyang, the PRC

The members of the board of directors and supervisory committee of the Company are as follows:

Executive Directors

Mr. Xu Er Hui (Chairman), Mr. Zhang Jian Bo (President), Mr. Zhang Ying Jian (Vice-president), Mr. Wang Se (Company Secretary), Mr. Geng Jian Wei (Chief Financial Officer), Mr. Chen Shu Xin and Mr. Chan Kam Ling.

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Non-executive Directors

Mr. Lin Wen Bin, Dr. Michel P. Detay, Mr. Zhang Wan Zhong, Mr. Cheng Wei, Mr. Choy Shu Kwan, Wilson (*Independent Non-executive Directors)

Supervisors

Mr. Wang Hong Yu, Ms. Li Shu Lian, Mr. Zhao Xue Zhi, Mr. Lin Dong Hui, Ms. Gao Jing Juan and Mr. Yang Zhi An.

NOTICE OF 2003 ANNUAL GENERAL MEETING

NOTICE IS HEREBY GIVEN that the 2003 Annual General Meeting of Shenyang Public Utility Holdings Company Limited (the “Company”) will be held at the Company’s business office at the Conference Room, No. 14, Shisiwei Road, Heping District, Shenyang, the People’s Republic of China (the “PRC”) at 9:00 a.m. on Wednesday, 16th June 2004 for the following purposes:

By way of ordinary resolutions:

1. To consider and approve the 2003 report of the board of directors of the Company;

2. To consider and approve the 2003 report of the supervisory committee of the Company;

3. To consider and approve the 2003 financial statements of the Company;

4. To consider and approve the 2003 reports of the PRC auditors and the international auditors of the Company;

5. To consider and approve the 2003 profit allocation and dividend distribution proposals of the Company;

6. To consider and approve the re-appointment of Ho and Ho & Company, Certified Public Accountants as the international auditors of the Company and to authorise the board of directors to determine their remuneration;

7. To consider and approve the re-appointment of Liaoning Pan-China Certified Public Accountants Company Limited as the PRC auditors of the Company and to authorise the board of directors to determine their remuneration.

By way of special resolution:

1. To consider and approve the granting of authorisation to the board of directors of the Company to issue state shares and H shares repectively not exceeding 20.00% of the existing number of state shares and H shares respectively.

By order of the Board Wang Se Company Secretary

26th April 2004, Shenyang, the PRC

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Notes:

• (1) Each shareholder entitled to attend and vote at the meeting is entitled to appoint one or more proxies in writing to attend and vote at the meeting on his/her behalf. A proxy need not be a member of the Company. Shareholders or their proxies are entitled to attend and vote at the meeting.

• (2) To be valid, the proxy form together with the notarised power of attorney or authority (if any) must be delivered to the Company’s business address or the Company’s H share registrar, Hong Kong Registrars Limited at Rooms 1901-5 19th Floor, Hopewell Centre, 183 Queen’s Road East, Hong Kong, not less than 24 hours before the time of the meeting.

• (3) Shareholders or their proxies shall produce their identity documents when attending the meeting.

• (4) The register of members of the Company will be closed from Monday, 17th May 2004 to Tuesday, 15th June 2004 (both days inclusive), during which period no transfer of the Company’s shares will be registered.

• (5) Shareholders whose names appear in the register of members at 4:00pm, Friday, 14th May 2004 are entitled to attend and vote at the meeting.

• (6) Shareholders who intend to attend the meeting should complete and lodge the reply slip and return it to the Company’s business address at No. 14, Shisiwei Road, Heping District, Shenyang, the PRC, (postal code: 110003) or deliver the same to the Company’s H share registrar, Hong Kong Registrars Limited on or before Wednesday, 26th May 2004. The reply slip may be delivered by hand, by post, by cable or by fax. The fax no. of the Company is 8624-23257181. The fax no. of the Company’s H share registrar is 852-28650990/25296087. Completion and return of reply slip shall not affect the right of shareholders to attend the meeting pursuant to note (5) above.

• (7) The Annual General Meeting is expected to take not more than one day. The attending shareholders and proxies shall be responsible for their own travelling and accommodation expenses.

REPLY SLIP FOR THE 2003 ANNUAL GENERAL MEETING TO BE HELD ON 16TH JUNE 2004

To: Shenyang Public Utility Holdings Company Limited (the “Company”)

I/We (note 1)

(name(s) in Chinese):

of

(the registered address(es) as shown in the Register of Members) being the registered holder(s) of (note 2) state shares / H shares (note 3) of RMB1.00 each in the share capital of the Company, hereby inform the Company that I/we intend to attend (in person or by proxy ) the 2003 Annual General Meeting of the Company to be held at the Company’s office at Conference Room, No.14, Shisiwei Road, Heping District, Shenyang, the People’s Republic of China (the “PRC”) at 9:00 a.m. on Wednesday, 16th June 2004.

Date:

, 2004 Signature(s):

Notes:

1. Please insert full name(s) in Chinese and English and address(es) (as shown in the register of members) in BLOCK CAPITALS .

2. Please insert the number of H shares registered in your name(s).

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1. Please delete as appropriate.

2. The register of holders of H shares of the Company will be closed from Monday 17th May 2004 to Tuesday, 15th June 2004 (both days inclusive), during which period no transfer of H shares will be registered. Holders of state shares or H shares of the Company whose names appear in the register of members of the Company as at 4:00p.m. on Friday, 14th May 2004 shall be entitled to attend and to vote at the Annual General Meeting (and any adjournment thereof).

3. Holders of state shares or H shares of the Company who intend to attend the Annual General Meeting should complete and return this slip to the Company’s business address at No.14, Shisiwei Road, Heping District, Shenyang, the PRC or the Company’s H shares registrars in Hong Kong, Hong Kong Registrars Limited, at Rooms 1901-5, 19th Floor, Hopewell Centre, 183 Queen’s Road East, Hong Kong on or before Wednesday, 26th May 2004. The reply slip may be delivered by hand, by post or by fax to the number (852) 2865 0990/2529 6087.

Please also refer to the published version of this announcement in The Standard / Hong Kong Economic Times.

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