CMON Limited — Capital/Financing Update 2004

Nov 30, 2004

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.

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)

(Stock Code: 747)

DISCLOSEABLE TRANSACTIONS DISPOSAL OF THE ENTIRE EQUITY INTEREST IN A SUBSIDIARY AND TRANSFER OF LAND DEPOSIT AND INTEREST IN LAND

On 2 November 2004, the Company and Shenyang Real Estate, a subsidiary owned as to 99.86% by the Company, entered into the First Share Transfer Agreement and the Second Share Transfer Agreement with Dalian Dongte and Dalian Zhengda respectively, pursuant to which the Company and Shenyang Real Estate agreed to transfer the entire equity interest in Shinning Festival to Dalian Dongte and Dalian Zhengda for an aggregate consideration of RMB27,714,320.80 (approximately HK$26,051,462). The consideration for the Share Transfer will be fully satisfied by the Purchasers in cash, of which RMB22,171,456.64 (approximately HK$20,841,169) shall be payable upon signing of the First Share Transfer Agreement and RMB5,542,864.16 (approximately HK$5,210,292) shall be payable on or before 31 January 2005.

Shinning Festival was established in March 2004, and is owned as to 90% by the Company and as to 10% by Shenyang Real Estate. Shinning Festival is principally engaged in the development of real estate in the PRC.

On 2 November 2004, the Company and Shenyang Real Estate entered into the Land Deposit Transfer Agreement with Dalian Dongte and Dalian Zhengda, pursuant to which Shenyang Real Estate agreed to transfer the Land Deposit to Dalian Dongte and Dalian Zhengda on or before completion of the Share Transfer. The consideration for the Land Deposit Transfer is RMB 67,285,679.20 (approximately HK$63,248,538) and will be fully satisfied in cash, of which RMB57,828,543.36 (approximately HK$54,358,831) shall be payable upon signing of the Land Deposit Transfer Agreement and RMB9,457,135.84 (approximately HK$8,889,708) will be payable within 5 days after the signing of the relevant agreements to be entered into between Shinning Festival and the relevant PRC government authority in relation to the development project regarding the Land.

The Directors intend to apply the aggregate proceeds from the Transfers of approximately RMB95 million (approximately HK$89.3 million) as working capital of the Group.

The Transfers constitute discloseable transactions under the Listing Rules. A circular setting out further details of the Transfers will be despatched to the Shareholders as soon as practicable.

Shareholders and the investing public should note that completion of the First Share Transfer Agreement, the Second Share Transfer Agreement and the Land Deposit Transfer Agreement is conditional and they should exercise caution when dealing in the Shares.

DISPOSAL OF THE ENTIRE EQUITY INTEREST IN SHINNING FESTIVAL

On 2 November 2004, the Company and Shenyang Real Estate entered into the First Share Transfer Agreement and the Second Share Transfer Agreement with Dalian Dongte and Dalian Zhengda respectively, pursuant to which the Company and Shenyang Real Estate agreed to transfer the entire equity interest in Shinning Festival to Dalian Dongte and Dalian Zhengda for an aggregate consideration of RMB27,714,320.8 (approximately HK$26,051,462). The details of the two share transfer agreements are set out below.

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The First Share Transfer Agreement

Date : 2 November 2004 Vendor : the Company Purchaser : Dalian Dongte To the best of the Directors’ knowledge, information and belief having made all reasonable enquiry, Dalian Dongte and its ultimate beneficial shareholders are not connected (for the purpose of the Listing Rules) with any of the promotors, directors, supervisors, chief executive or substantial shareholders of the Company and its subsidiaries or any of their respective associates. Assets to be transferred : 80% equity interest in Shinning Festival Consideration : RMB22,171,456.64 (approximately HK$20,841,169), which was arrived at after arm’s length negotiations between the Company and Dalian Dongte with reference to the current property market in Shenyang, the PRC. Such consideration shall be fully settled in cash upon signing of the First Share Transfer Agreement. Condition precedent : Completion of the First Share Transfer Agreement is conditional upon, among other things, Shinning Festival having completed the procedures in relation to the change in business registrations and the business license to reflect the First Share Transfer. Completion : Completion of the First Share Transfer Agreement shall take place on the day on which all the conditions precedent to the First Share Transfer Agreement have been satisfied. The Second Share Transfer Agreement Date : 2 November 2004 Vendors : (i) the Company (ii) Shenyang Real Estate Purchaser : Dalian Zhengda To the best of the Directors’ knowledge, information and belief having made all reasonable enquiry, Dalian Zhengda and its ultimate beneficial shareholders are not connected (for the purpose of the Listing Rules) with any of the promotors, directors, supervisors, chief executive or substantial shareholders of the Company and its subsidiaries or any of their respective associates. Assets to be transferred : 20% equity interest in Shinning Festival Consideration : RMB5,542,864.16 (approximately HK$5,210,292), which was arrived at after arm’s length negotiations between the Company and Dalian Zhengda with reference to the current property market in Shenyang, the PRC. Such consideration shall be fully settled in cash on or before 31 January 2005. Condition precedent : Completion of the Second Share Transfer Agreement is conditional upon, among other things, Shinning Festival having completed the procedures in relation to the change in business registrations and the business license to reflect the Second Share Transfer. Completion : Completion of the Second Share Transfer Agreement shall take place on the day on which all the conditions precedent to the Second Share Transfer Agreement have been satisfied.

TRANSFER OF THE LAND DEPOSIT

On 2 November 2004, the Company, Shenyang Real Estate, Dalian Dongte and Dalian Zhengda entered into the Land Deposit Transfer Agreement, pursuant to which Shenyang Real Estate agreed to transfer the Land Deposit to Dalian Dongte and Dalian Zhengda for a consideration of RMB67,285,679.20 (approximately HK$63,248,538). The details of the agreement are set out below:

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The Land Deposit Transfer Agreement

Date	:	2 November 2004
Parties	:	(i) the Company
		(ii) Shenyang Real Estate
		(iii) Dalian Dongte
		(iv) Dalian Zhengda
		To the best of the Directors’ knowledge, information and belief having made all
		reasonable enquiry, Dalian Dongte and Dalian Zhengda and their respective
		ultimate beneficial shareholders are not connected (for the purpose of the Listing
		Rules) with any of the promotors, directors, supervisors, chief executive or
		substantial shareholders of the Company and its subsidiaries or any of their
		respective associates.
Asset to be transferred	:	Deposit of RMB67,285,679.20 (approximately HK$63,248,538) paid by Shenyang
		Real Estate to the Shenyang Land Bureau for the Land, as the initial deposit for
		the acquisition of the Land with an aggregate purchase cost of approximately
		RMB334 million (approximately HK$314 million).
		At the date of this announcement, Shenyang Real Estate has not yet obtained the
		land use rights of the Land. Such transfer of land use rights to Shenyang Real
		Estate shall take place upon fulfillment of certain conditions, including demolition
		of the premises currently erected on the Land by the Shenyang Land Bureau and
		settlement of the balance payment of the consideration for the acquisition of the
		land use right of the Land by Shenyang Real Estate.
Consideration	:	RMB67,285,679.20 (approximately HK$63,248,538), which was based on the
		amount of the Land Deposit paid by Shenyang Real Estate. The consideration
		shall be fully settled in cash in the following manner:
		(a) RMB57,828,543.36 (approximately HK$54,358,831) upon signing of the
		Land Deposit Transfer Agreement; and
		(b) RMB9,457,135.84 (approximately HK$8,889,708) (the “Balance Payment”)
		within 5 days after the signing of the relevant agreements to be entered into
		between Shinning Festival and the relevant PRC government authority in
		relation to the development project regarding the Land.
Other term	:	The Company undertakes to repay the amount due to Shinning Festival by the
		Company and Shenyang Real Estate amounting to RMB10 million (approximately
		HK$9.4 million) upon receipt of the Balance Payment.

In entering into the Land Deposit Transfer Agreement, Shenyang Real Estate agrees to assist the Purchasers to obtain approval from the Shenyang Land Bureau for the transfer of the interest in the Land to Shinning Festival.

BACKGROUND INFORMATION OF THE LAND DEPOSIT

In December 2003, Shenyang Real Estate successfully acquired the land use right of a parcel of land with a site area of approximately 203,000 square meters located in Laoguapu, Dadong District of Shenyang in the PRC at a consideration of approximately RMB366 million (approximately HK$344 million) by way of auction. A deposit of RMB100 million (approximately HK$94 million) had been paid by Shenyang Real Estate.

In July 2004, Shenyang Real Estate disposed of its interest in approximately 18,000 square meters of the aforesaid land (the “Disposed Portion”) at a consideration of approximately RMB32.7 million (approximately HK$30.7 million) to a party not connected with (i) the promoters, directors, supervisors, chief executive or substantial shareholders of the Company or any of its subsidiaries or an associate of any of them; or (ii) the Purchasers or their respective associates. The consideration for the disposal of the Disposed Portion was arrived at after arm’s length negotiation between the parties with reference to the Group’s cost of investment. As the Disposed Portion is mainly used for development of commercial properties and the Group’s strength is in developing residential and educationalrelated properties, the Directors considered that it would be in the Group’s interests to dispose of the Disposed Portion at cost and concentrate on the development of residential projects on the remaining portion of the Land. At the time of the disposal, Shenyang Real Estate had not yet obtained the land use right of the Disposed Portion.

After such disposal, Shenyang Real Estate’s interest in the land is reduced to approximately 185,000 square meters (i.e. the Land) and the deposit paid by it is reduced to approximately RMB67.3 million (approximately HK$63.3 million) (i.e. the Land Deposit).

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The Group had not made any announcement in relation to the abovementioned acquisition and disposal since its principal activities include property development and therefore acquisition and disposal of interest in land is in its ordinary course of business. Besides, the Directors did not consider the abovementioned acquisition and disposal constituted price sensitive information.

As at the date of this announcement, Shenyang Real Estate has not yet obtained the land use rights of the Land. Such transfer of land use right to Shenyang Real Estate shall take place upon fulfillment of certain conditions, including demolition of premises currently erected on the Land by the Shenyang Land Bureau and settlement of the balance payment of the consideration for the acquisition of the land use right of the Land by Shenyang Real Estate. Up to the date of this announcement, the demolition of the premises currently erected on the Land has not been completed. Accordingly, the Shenyang Land Bureau has not requested Shenyang Real Estate to make further payment and there is no amount due by Shenyang Real Estate in respect of the Land.

As stated in the Company’s annual report for the year ended 31 December 2003, the Land was originally proposed to be used for commercial and residential development by Shinning Festival. However, as explained in the section headed “Reasons for the transfer and use of proceeds” below, the Directors consider that it is in the Company’s interest to realize its interest in the Land. Upon completion of the Transfers, the Group will cease to have any interest in Shinning Festival and the Land and Shenyang Real Estate will not have any further liability in respect of the Land.

REASONS FOR THE TRANSFERS AND USE OF PROCEEDS

Shinning Festival, with a registered capital of RMB10 million (approximately HK$9.4 million), was established in March 2004 by the Group to develop the Land purchased by the Group in December 2003 for commercial and residential development projects. No turnover has yet been recorded by Shinning Festival as it is still in the preliminary stage of operation. For the period up to 31 October 2004, the unaudited net loss of Shinning Festival amounted to approximately RMB353,000 (approximately HK$331,820), and the unaudited net asset value of Shinning Festival as at 31 October 2004 amounted to approximately RMB9.6 million (approximately HK$9.0 million). The Land Deposit paid by Shenyang Real Estate for the Land amounted to RMB67,285,679.2 (approximately HK$63,248,538).

As mentioned in the section headed “Background information of the Land Deposit” above, the Group acquired the Land in late 2003 with the view of developing it into a residential and commercial complex. However, in early 2004, the PRC Government implemented certain macro-economic control measures aimed at curbing excessive investment in, among other sectors, the overheated property sector. In particular, the PRC banks have tightened their lending policy to property developers and homebuyers. Such policy change has not only increased the difficulty and/or cost of obtaining bank financing to finance property development projects but also posed additional risk relating to the sale of units to the end users.

In view of the above macro-economic policy change, the Directors consider it appropriate to slow down the Group’s investment in property projects. Recently, the Purchasers made an offer to the Group to acquire its interest in the Land. Given the fact that the aggregate consideration of the Share Transfer and the Land Deposit Transfer exceeds the aggregate net asset value of Shinning Festival and the book value of the Land Deposit as at 31 October 2004, the Directors consider the Transfers provide an opportunity for the Group to realize its interest in Shinning Festival and the Land at a profit and reserve the proceeds from such transfer for other business opportunity. Accordingly, the Directors consider it would be in the interests of the Shareholders to dispose of Shinning Festival and to transfer the Land Deposit, and they further consider that the terms of the First Share Transfer Agreement, the Second Share Transfer Agreement and the Land Deposit Transfer Agreement are fair and reasonable and would be in the interests of the Shareholders as a whole.

The Directors intend to apply the aggregate proceeds from the Transfers of approximately HK$95 million (approximately HK$89.3 million) as working capital of the Group.

Upon completion of the Transfers, the Group is expected to record a gain on the Transfers, which will be calculated by reference to the carrying value of Shinning Festival and the book value of the Land Deposit at the time of completion of the Transfers. Based on the Directors’ estimate, such gain, which is subject to adjustment and review by the auditors of the Company, is expected to amount to approximately RMB18 million (approximately HK$17 million).

Given the fact that (i) the period between the initial acquisition of the Land (i.e. December 2003) and the Transfers (i.e. November 2004) is less than 1 year; (ii) no work has been done on the Land; and (iii) the advice obtained from an independent property consultant that no significant appreciation of the Land is expected, the Directors do not expect that there will be a significant appreciation of the Land. Accordingly, the Directors consider that the premium of the Transfers of approximately RMB18 million (approximately HK$17 million) acceptable.

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INFORMATION OF THE GROUP

The Group is principally engaged in the development and sale of real estate and investment in and management of education projects.

INFORMATION OF THE PURCHASERS

Dalian Dongte is a limited company established in the PRC in February 1994. It is principally engaged in the development of real estate, property management, sale of construction decoratives, warehouses, provision of services relating to real estate and sales planning.

Dalian Zhengda is a limited company established in the PRC in April 2000. It is principally engaged in the development of real estate.

To the best of the Directors’ knowledge, information and belief having made all reasonable enquiry, Dalian Dongte and Dalian Zhengda and their respective beneficial shareholders are not connected (for the purpose of the Listing Rules) with any of the promotors, directors, supervisors, chief executive or substantial shareholders of the Company and its subsidiaries or any of their respective associates.

INFORMATION OF SHINNING FESTIVAL

Shinning Festival is a limited company established in the PRC in March 2004. It is owned as to 90% by the Company and as to 10% by Shenyang Real Estate, a subsidiary owned as to 99.86% by the Company. Shinning Festival is principally engaged in the development of real estate in the PRC. Upon completion of the Share Transfer, the Group will cease to have any interest in Shinning Festival.

GENERAL

Given the fact that the aggregate consideration of the Transfers is over 5% but less than 25% of the Company’s market capitalisation, the Transfers constitute discloseable transactions pursuant to Rule 14.06(2) of the Listing Rules. A circular setting out further details of the Transfers will be despatched to the Shareholders as soon as practicable.

Shareholders and the investing public should note that completion of the First Share Transfer Agreement, the Second Share Transfer Agreement and the Land Deposit Transfer Agreement is conditional and they should exercise caution when dealing in the Shares.

DEFINITIONS

In this announcement, the following terms have the following meanings:

“associate”	has the meaning ascribed to it under the Listing Rules
“Board”	the board of Directors
“Company”	Shenyang Public Utility Holdings Company Limited (瀋陽公用發展股份有限公
	司), a joint stock limited company incorporated in the PRC and the H Shares of
	which are listed on the Stock Exchange
“Dalian Dongte”	Dalian Dongte Real Estate Development Company Limited (大連東特房地產有
	限公司), a company established in the PRC
“Dalian Zhengda”	Dalian Zhengda Real Estate Development Company Limited (大連正達房地產
	有限公司), a company established in the PRC
“Directors”	the directors of the Company
“First Share Transfer”	the transfer of 80% equity interest in Shinning Festival to Dalian Dongte by the
	Company pursuant to the First Share Transfer Agreement
“First Share Transfer	the conditional share transfer agreement dated 2 November 2004 and entered
Agreement”	into between the Company and Dalian Dongte in respect of the First Share Transfer
“Group”	the Company and its subsidiaries
“Hong Kong”	the Hong Kong Special Administrative Region of the PRC
“HK$”	Hong Kong dollars, the lawful currency of Hong Kong
“Land”	a parcel of land with a site area of approximately 185,000 square meters located in
	Laoguapu, Dadong District of Shenyang in the PRC
“Land Deposit”	deposit of RMB67,285,679.20 (approximately HK$63,248,538) paid by Shenyang
	Real Estate to the Shenyang Land Bureau for the Land

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“Land Deposit Transfer” the transfer of the Land Deposit by Shenyang Real Estate to Dalian Dongte and Dalian Zhengda pursuant to the Land Deposit Transfer Agreement “Land Deposit Transfer the land deposit transfer agreement dated 2 November 2004 and entered into Agreement” between the Company, Shenyang Real Estate, Dalian Dongte and Dalian Zhengda in respect of the Land Deposit Transfer “Listing Rules” the Rules Governing the Listing of Securities on the Stock Exchange “PRC” the People’s Republic of China “Purchasers” Dalian Dongte and Dalian Zhengda “RMB” Renminbi, the lawful currency of the PRC “Second Share Transfer” the transfer of 10% equity interest in Shinning Festival to Dalian Zhengda by each of the Company and Shenyang Real Estate pursuant to the Second Share Transfer Agreement “Second Share Transfer the conditional share transfer agreement dated 2 November 2004 and entered into Agreement” between the Company, Shenyang Real Estate and Dalian Zhengda in respect of the Second Share Transfer “Shenyang Land Bureau” 瀋陽市規劃和國土資源局 (Planning and National Land Resources Bureau of Shenyang) “Shinning Festival” Shenyang Shinning Festival Real Estate Development Company Limited (瀋陽上 東風華房產開發有限公司), a company established in the PRC and a subsidiary of the Company “Shareholders” holders of the Shares “Share(s)” ordinary share(s) of RMB1.00 each in the issued share capital of the Company “Share Transfer” the First Share Transfer and the Second Share Transfer “Shenyang Real Estate” Shenyang Development Real Estate Company Limited (瀋陽發展房產開發有限 公司), a company established in the PRC and is owned as to 99.86% directly by the Company “Stock Exchange” The Stock Exchange of Hong Kong Limited “Transfers” the First Share Transfer, the Second Share Transfer and the Land Deposit Transfer

Unless the context requires otherwise, translation of RMB into HK$ are made in this announcement, for illustration purposes only, at the rate of RMB1.00 = HK$0.94.

By Order of the Board of Shenyang Public Utility Holdings Company Limited Xu Er Hui Chairman

Shenyang, the PRC, 29 November 2004

The members of the Board and the Supervisory Committee of the Company as at the date of this announcement are as follows:—

Executive Directors Mr. Xu Er Hui, Mr. Zhang Jian Bo, Mr. Zhang Ying Jian, Mr. Wang Se, Mr. Geng Jian Wei, Mr. Chen Shu Xin Non-executive Directors Mr. Lin Wen Bin, Dr. Michel P. Detay, Mr. Zhang Wan Zhong, Mr. Chan Kam Ling Independent non-executive Directors Mr. Cheng Wei, Mr. Choy Shu Kwan, Wilson, Mr. Cui Yan Supervisors Mr. Wang Hong Yu, Ms. Li Shu Lian, Mr. Zhao Xue Zhi, Mr. Lin Dong Hui, Mr. Yang Zhi An

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

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