CMON Limited — Capital/Financing Update 2002

Jul 30, 2002

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.

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瀋陽公用發展股份有限公司 SHENYANG PUBLIC UTILITY HOLDINGS COMPANY LIMITED

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

CAPITAL INJECTION INTO THE CONTROLLING SHAREHOLDER

The Directors are advised by SPU, the controlling shareholder of the Company, that on 25th July, 2002, Shenyang Urban Construction Company, Shenyang Asset Company and the Investor entered into the Capital Injection Agreement, pursuant to which the Investor has conditionally agreed to inject RMB1,250 million in cash to subscribe for 50% of the entire registered capital of SPU as increased by the Capital Injection.

As advised by SPU, the sole asset of SPU as at the date of this announcement is the holding of 600,000,000 State Shares, representing approximately 58.8% of the issued share capital of the Company. The consideration for the Capital Injection of RMB1,250 million represents an effective price of approximately RMB2.08 (approximately HK$1.96) per Share, representing a premium of approximately 69% and approximately 91% to the average closing price of the H Shares over the ten consecutive trading days as quoted on the Stock Exchange immediately prior to the date of the Capital Injection Agreement and to the closing price of the H Shares as quoted on the Stock Exchange on 26th July, 2002, being the last trading day prior to the issue of this announcement, respectively.

At present, Shenyang Urban Construction Company and Shenyang Asset Company hold as to 84.46% and 15.54% respectively of the entire registered capital of SPU of approximately RMB1,056 million. Upon completion of the Capital Injection, the registered capital of SPU will be enlarged to RMB2,112 million. Shenyang Urban Construction Company and Shenyang Asset Company will in aggregate hold 50% of the entire enlarged registered capital of SPU as enlarged by the Capital Injection and the Investor will hold the balance. Upon completion of the Capital Injection, the SPU Board will comprise 7 directors, 4 of which will be appointed by Shenyang Urban Construction Company and Shenyang Asset Company and the remaining 3 will be appointed by the Investor.

The Board currently comprises 10 Directors. The Investor intends to appoint 3 executive Directors to the Board upon completion of the Capital Injection.

Completion of the Capital Injection is conditional upon, among other things, the completion of the Disposal. Accordingly, the Capital Injection may or may not proceed. Shareholders and potential investors in the Company are advised to exercise caution when dealing in the H Shares.

At the request of the Company, trading in the H Shares on the Stock Exchange was suspended from 9:30 a.m. on 29th July, 2002 pending the issue of this announcement. Application has been made by the Company to the Stock Exchange for the resumption of trading in the H Shares on the Stock Exchange from 9:30 a.m. on 30th July, 2002.

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CAPITAL INJECTION INTO THE CONTROLLING SHAREHOLDER

The Directors are advised by SPU that on 25th July, 2002, SPU, Shenyang Urban Construction Company and Shenyang Asset Company entered into the Capital Injection Agreement with the Investor. Save for the Capital Injection, none of the Investor, its equity holders or Peking University and their respective associates has any relationship or prior transactions with SPU, Shenyang Urban Construction Company, Shenyang Asset Company or the Company.

Pursuant to the Capital Injection Agreement, the Investor conditionally agreed to pay RMB1,250 million cash to subscribe for 50% of the registered capital of SPU as enlarged by the Capital Injection. As advised by SPU, the sole asset of SPU as at the date of this announcement is the holding of 600,000,000 State Shares, representing approximately 58.8% of the issued share capital of the Company. Accordingly, the consideration for the Capital Injection of RMB1,250 million represents an effective price of approximately RMB2.08 (approximately HK$1.96) per Share, representing a premium of approximately 69% and 91% to the average closing prices of the H Shares over the ten consecutive trading days as quoted in the Stock Exchange immediately prior to the date of the Capital Injection Agreement and to the closing price of the H Shares as quoted on the Stock Exchange on 26th July, 2002, being the last trading day prior to the issue of this announcement, respectively.

IMPACT OF THE CAPITAL INJECTION ON THE COMPANY

Immediately after completion of the Capital Injection, each of Shenyang Municipal Government (through Shenyang Urban Construction Company and Shenyang Asset Company as defined below) and the Investor holds an equal interest of 50% in the enlarged registered capital of SPU.

The following table sets out the equity holding structures of SPU immediately prior to and after completion of the Capital Injection:–

of the Capital Injection:–
		Equity holding
	Equity holding in	in SPU
	SPU immediately	immediately after
	prior to the	completion of the
Equity holders	Capital Injection	Capital Injection
Shenyang Municipal Government:
Shenyang Urban Construction Company_(Note 1)_	84.46%	42.23%
Shenyang Asset Company_(Note 1)_	15.54%	7.77%
	100.00%	50.00%
The Investor_(Note 2)_	nil	50.00%
Total	100.00%	100.00%

Notes:

1. Both Shenyang Urban Construction Company and Shenyang Asset Company are under the supervisory control of Shenyang Municipal Government.

2. Save for the Capital Injection the Investor is independent of and not connected with any of the Directors, the promoters, the supervisors, chief executive or substantial shareholders of the Company or any of its subsidiaries or an associate of any of them.

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The Investor has no intention to change the business of the Group upon completion of the Capital Injection Agreement.

Upon completion of the capital Injection, Shenyang Municipal Government, Shenyang Urban Construction Company and Shenyang Asset Company will continue to have statutory control, as defined in the Takeovers Code, in SPU and the Company.

CONDITIONS TO COMPLETION OF THE CAPITAL INJECTION AGREEMENT

Completion of the Capital Injection is subject to certain conditions including (i) the receipt of relevant approval(s) from the PRC authorities in respect of the Capital Injection; (ii) the completion of the Disposal; and (iii) amendment to the articles of association being approved by the equity holders of SPU.

Pursuant to the Capital Injection Agreement, (i) conditional upon completion of the Capital Injection and subject to amendment of the articles of association of SPU, the SPU Board will comprise 7 directors and; (ii) Shenyang Urban Construction Company and Shenyang Asset Company are entitled to collectively appoint 4 directors and the Investor will appoint the remaining 3 directors.

The Board currently comprises 5 executive Directors, 3 non-executive Directors and 2 independent nonexecutive Directors. Upon completion of the Capital Injection, the Investor intends to appoint 3 executive Directors (the “Proposed Directors”) to the Board, which appointment will be subject to approval by the Shareholders in an extraordinary general meeting to be held for such purpose. Upon such appointment, the Board will comprise a total of 13 Directors, 8 of which are executive Directors with 3 being appointed by the Investor. If the appointment of the Proposed Directors is approved by the Shareholders, the Board will continue to be controlled by Shenyang Urban Construction Company and Shenyang Asset Company.

BENEFIT OF THE CAPITAL INJECTION TO THE COMPANY

As explained in the announcement of the Company dated 13th June, 2002 and the circular of the Company dated 5th July, 2002 in relation to the Disposal, as a result of the changes in the economic and business environment in Shenyang, the Company proposed to dispose of its water production supply business by disposing of its entire interest in Shenyang Water. Following the Disposal, the Company intends to focus on the development and management of real property projects and education projects in Shenyang Municipality. The Directors are advised by SPU that the equity holders of the Investor have experience in the development and management of educational projects for Peking University. The Investor is a limited liability company established in the PRC. Each of its equity holders is under the control of Peking University. The Directors believe that through the Capital Injection and participation of the Investor in the Board, the Company will benefit from the experience of the Investor and its equity holders, namely Peking University, in the development and management of educational projects.

GENERAL

Completion of the Capital Injection is conditional upon, among other things, the completion of the Disposal. Accordingly, the Capital Injection may or may not proceed. Shareholders and potential investors in the Company are advised to exercise caution when dealing in the H Shares.

At the request of the Company, trading in the H Shares on the Stock Exchange was suspended from 9:30 a.m. on 29th July, 2002 pending on the issue of this announcement. Application has been made by the Company to the Stock Exchange for the resumption of trading in the H Shares on the Stock Exchange from 9:30 a.m. on 30th July, 2002.

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DEFINITION

In this announcement, the following expressions have the meanings set out below unless the context requires otherwise:–

• “associates” has the meaning ascribed to it in the Rules Governing the Listing of Securities on the Stock Exchange

• “Board” the board of Directors “Capital Injection” the conditional capital payment in cash by the Investor of a total of RMB1,250 million to subscribe for the registered capital of SPU, which, upon completion of the subscription, represents 50% of the total registered capital of SPU as enlarged by conditional capital payment

• “Capital Injection the conditional capital injection agreement dated 25th July, 2002 entered Agreement” into between Shenyang Urban Construction Company, Shenyang Asset Company and the Investor in relation to the Capital Injection

• “Company” 瀋陽公用發展股份有限公司 (Shenyang Public Utility Holdings Company Limited), a joint stock limited company established in the PRC with limited liability, the H Shares of which are listed on the Stock Exchange

• “Directors” the directors of the Company “Disposal” the disposal of the Company’s approximately 99.37% equity interest in Shenyang Water by the Company to Zheng Xing pursuant to the conditional sale and purchase agreement dated 13th June, 2002 entered into between the Company and Zheng Xing

• “Extraordinary General the extraordinary general meeting of the Company to be held on 20th Meeting” August, 2002 to consider and, if thought fit, approve, the Disposal and the change in the use of proceeds raised from the issue of 420,400,000 H Shares subscribed for subscription by public investors at an issue price of HK$1.70 at the initial public offer of the Company in December 1999

• “Group” the Company and its subsidiaries “H Share(s)” overseas listed foreign invested shares in the issued share capital of the Company with a Renminbi-denominated nominal value of RMB1.00 each, which are listed on the Stock Exchange and subscribed for and traded in Hong Kong dollars

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• “Investor” 北京北大高科技產業投資有限公司 (Beijing Beida Hi-tech Industrial Investment Limited), a company incorporated in the PRC with limited liability and controlled by Peking University with an attributable beneficial interest of over 50%, which is independent of and not connected with the Directors, Supervisors, chief executive or substantial shareholders of the Company or any of its subsidiaries or an associate of any of them.

• “PRC” the People’s Republic of China which for the purpose of this announcement, excludes Hong Kong, Macau Special Administrative Region and Taiwan

• “Share(s)” State Shares and H Shares

• “Shareholder(s)” the holder(s) of the Share(s) “Shenyang Asset 瀋陽市國有資產經營有限公司 (Shenyang Assets Management Company” Company Limited), a company established in the PRC with limited liability, which is under the supervisory control of Shenyang Municipal Government

• “Shenyang Municipal 瀋陽市人民政府 (the Shenyang Municipal People’s Government) Government”

• “Shenyang Water” 瀋陽水業有限公司 (Shenyang Water Company Limited), a company established in the PRC with limited liability in which the Company owns an approximately 99.37% equity interest

• “Shenyang Urban 瀋陽市城市基礎設施建設投資發展有限公司 (Shenyang Urban Construction Company” Infrastructure Facility Construction Investment Development Company Limited), a company established in the PRC with limited liability, which is under the supervisory control of Shenyang Municipal Government

• “SPU” 瀋陽公用集團有限公司 (Shenyang Public Utility Group Company Limited), a company established in the PRC with limited liability and the existing controlling shareholder of the Company with an approximate interest of 58.8% in the issued share capital of the Company

• “SPU Board” board of directors of SPU

• “State Share(s)” ordinary shares with a nominal value of RMB1.00 each in the capital of the Company, issued by the Company to SPU credited as fully paid

• “Stock Exchange” The Stock Exchange of Hong Kong Limited

• “Takeovers Code” The Hong Kong Code on Takeovers and Mergers

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“Zheng Xing”

瀋陽政興企業集團有限責任公司 (Shenyang Zheng Xing Enterprise Group Company Limited), a limited liability company established in the PRC in 1999 by and is under the supervisory control of the Shenyang Municipal Government, which is independent of and not connected with the Directors, the promoters, the supervisors, chief executive or substantial shareholders of the Company or any of its subsidiaries or an associate of any of them.

By Order of the Board Wang Se Executive Director

Shenyang, the PRC, 29th July, 2002

“Please also refer to the published version of this announcement in The Standard”.

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