CMON Limited — Earnings Release 2001

Apr 22, 2002

Shenyang Public Utility Holdings Company Limited

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

2001 Annual Results

(Results for the year ended 31st December 2001)

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 2001 (the "Year"), prepared in accordance with the accounting principles generally accepted in Hong Kong, are as follows:

Consolidated Profit and Loss Account (Audited)

2001 2000

Note RMB'000 RMB'000

(As restated)

Turnover 2 667,435 612,640

Other revenues 3 122,872 82,137

Total revenues 790,307 694,777

Power costs (74,687 ) (86,237 )

Raw water purchase costs (50,283 ) (56,452 )

Cost of properties sold (60,739 ) -

Depreciation (46,246 ) (48,273 )

Staff costs (55,868 ) (54,345 )

Repairs and maintenance (11,127 ) (14,789 )

Provision for doubtful debts (130,587 ) -

Gain on disposal of a subsidiary - 7,898

Other operating expenses (65,412 ) (52,495 )

Profit from operations 295,358 390,084

Finance costs (10,996 ) (10,770 )

Share of profit of a joint venture 18,447 21,444

Profit before taxation 302,809 400,758

Taxation 4 (111,031 ) (111,238 )

Profit after taxation 191,778 289,520

Minority interests (1,162 ) (1,620 )

Profit attributable to shareholders 190,616 287,900

Dividends 6 71,428 118,228

Earnings per share 7 RMB0.19 RMB0.28

Notes:

1. Accounting policies

The accounts of the Company have been prepared in accordance with accounting principles generally accepted in Hong Kong and comply with accounting standards issued by the Hong Kong Society of Accountants (the "HKSA") (collectively "HKGAAP"). The accounts are prepared under the historical cost convention as modified by the revaluation of certain fixed assets.

In the Year, the Group adopted the following Statements of Standard Accounting Practice ("SSAPs") issued by the HKSA which are effective for accounting periods commencing on or after 1st January 2001:

SSAP 9 (revised) : Events after the balance sheet date

SSAP 14 (revised) : Leases (effective for periods commencing on or after 1st July 2000)

SSAP 26 ; Segment reporting

SSAP 28 : Provisions, contingent liabilities and contingent assets

SSAP 29 : Intangible assets

SSAP 30 : Business combinations

SSAP 31 : Impairment of assets

SSAP 32 : Consolidated financial statements and accounting for investments in subsidiaries

The effect of adopting these new standards, if any, is set out in the notes below.

2. Segment information and segment results analysis

The Group principally operates in the People's Republic of China (the "PRC"). The turnover and segment results of principal activities are as follows:

Turnover Segment results

2001 2000 2001 2000

RMB'000 RMB'000 RMB'000 RMB'000

By principal activities

Sales of purified water 577,362 595,285 267,167 357,319

Sales of properties 90,073 - 16,780 (403 )

Other operations - 17,355 27,372 40,132

667,435 612,640 311,319 397,048

Unallocated costs (15,961 ) (14,862 )

Gain on disposal of a subsidiary - 7,898

Profit from operations 295,358 390,084

3. Other revenues

2001 2000

RMB'000 RMB'000

Government subsidies - income tax

refund (Note 4(a)) 62,369 45,266

Interest income on overdue receivables 33,041 -

Bank interest income 20,062 27,200

Interest income from a joint venture 4,336 6,387

Income from unlisted investments 1,952 2,969

Dividend from investment securities 1,022 -

Others 90 315

122,872 82,137

1. Taxation

2001 2000

RMB'000 RMB'000

The Group:

PRC income tax charges 106,856 108,274

The joint venture:

PRC income tax charges 4,175 2,964

111,031 111,238

Notes:

(a) All PRC domestic enterprises are subject to a unified income tax rate of 33% on their taxable profit unless special arrangement is made and approved by the relevant PRC government authorities. Pursuant to the approval document dated 13th February 1999 issued by Liaoning Provincial Government, the Group is subject to an effective tax rate of 15% as the Finance Bureau of Shenyang Economic and Technological Development Zone will refund the 18% by way of government subsidies. The income tax refund for the year ended 31st December 2001 of RMB62,369,000 (2000: RMB45,266,000) was received and recorded as other revenues for the Year (Note 3).

(b) Pursuant to the circular "Guofa [2000] No.2" issued by the State Council on 11th January 2000, effective from 1st January 2000, any tax refund or subsidies granted by local government authorities should be terminated. However, pursuant to the circular "Caishui [2000] No.99" subsequently issued by the Ministry of Finance of the PRC on 13th October 2000, the income tax refund subsidy arrangements granted by local government authorities could be extended to 31st December 2001.

(c) In accordance with various approval documents issued by the State Administration of Taxation of the PRC, Shenyang Shenhai Hot Electricity Company Limited ("Shenhai Co-generation"), being a sino-foreign joint venture company engaged in power generation, is subject to an income tax rate of 15% plus local surcharge.

(d) No provision for Hong Kong profits tax has been made in the accounts as the Group has no income assessable to Hong Kong profits tax for the Year (2000: Nil).

(e) As at 31st December 2001 and during the Year, the Group did not have any significant unprovided deferred tax asset or liability (2000: Nil).

5. Appropriations to reserves

According to their respective Articles of Association, the Company and its subsidiaries are required to transfer a proportion of their retained earnings, as shown in the accounts prepared under the PRC accounting regulations, to various statutory reserve funds. The total amount transferred to each of these reserves for the year ended 31st December, 2001 is set out as follows:

Percentage of profit Transferred from

after taxation retained earnings

RMB'000

Statutory reserve fund 10% 45,165

Statutory public welfare fund 5% to10% 22,580

67,745

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

6. Dividends

2001 2000

RMB'000 RMB'000

Interim, paid, of RMB0.07

(2000: RMB0.06) per share 71,428 61,224

Final, proposed, Nil

(2000: RMB0.05586) per share

(Note (b)) - 57,004

71,428 118,228

Notes:

(a) The previously recorded final dividends proposed and declared after the balance sheet date but accrued in the accounts for the year ended 31st December 2000 were RMB57,004,000 (1999: Nil). According to the new accounting policies of the Group, these have been written back against the opening retained earnings as at 1st January 2001 and are now charged in the period in which they were proposed.

(b) At a meeting held by the Board on 19th April 2002, the directors of the Company did not recommend the payment of a final dividend for the Year.

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 RMB190,616,000 (2000: RMB287,900,000) and the number of 1,020,400,000 shares (2000: 1,020,400,000 shares) in issue during the Year.

No diluted earnings per share is presented as the Company has no dilutive potential shares.

Final Dividend

As the Company is actively pursuing investment opportunities in new projects and a substantial amount of capital is expected to be incurred in relation thereto in 2002, the Board resolved that no final dividend would be declared for 2001 in the long-term interest of the Company. Such resolution is subject to approval at the 2001 Annual General Meeting of the Company to be held on 7th June 2002.

Business Review

?Turnover of the Group during the Year amounted to RMB667,435,000 (2000: RMB612,640,000), representing an increase of approximately 8.94% from that of the year ended 31st December 2000 (the "Previous Year").

?Profit after taxation during the Year was RMB191,778,000 (2000: RMB289,520,000), representing a decrease of approximately 33.76% from that of the Previous Year.

?Profit attributable to shareholders for the Year was RMB190,616,000 (2000: RMB287,900,000), representing a decrease of approximately 33.79% from that of the Previous Year.

?Earnings per share for the Year was RMB0.19 (2000: RMB0.28), representing a decrease of approximately 32.14% from that of the Previous Year.

1. Urban Water Supply

?Shenyang Water Company Limited ("Shenyang Water"), a subsidiary of the Company, is currently the largest producer of purified water in Shenyang. During the Year, turnover and profit before taxation of Shenyang Water amounted to RMB577,362,000 (2000: RMB595,285,000) and RMB267,985,000 (2000: RMB356,739,000) respectively, representing a decrease of approximately 3.01% and 24.88% from those in the Previous Year respectively.

?Water sales volume of Shenyang Water amounted to 455,902,000 cu.m. during the Year (2000: 495,098,000 cu.m.), representing a decrease of approximately 7.92% from the Previous Year.

?During the Year, the operating results of Shenyang Water decreased significantly comparing to the Previous Year, this was mainly attributable to a serious drought which has happened in the northeastern China including Shenyang since early 2001. The average volume of rain per annum decreased by 35%, and water resource was in short supply. Shenyang Municipal Government demanded for the active adoption of water-saving measures by all the industrial and commercial enterprises and residents in the whole city. A progressive water fee scale was adopted for the consumption of water by residents so that demand for the purified water in Shenyang decreased. Accordingly, sales volume of the purified water of Shenyang Water was lower than that of the Previous Year. Its earnings level also decreased correspondingly. At the same time, the work in collecting water fee by Shenyang Water General Corporation ("SWGC") was very unsatisfactory. As a result, SWGC experienced very difficult financial positions and could not make full payment of water fee to Shenyang Water on a timely basis that caused to incur an interest on overdue payment. Accordingly, in accordance with the prudence principle, Shenyang Water had made a provision for doubtful debts of RMB130,587,000 for certain receivables in 2001.

2. Real Estate Development

Shenyang Development Real Estate Company Limited ("Real Estate Company"), a subsidiary of the Company, is a real estate developer in Shenyang. During the Year, there was a steady growth in the development of Real Estate Company. The construction of the first residential project "Hongji Garden" developed by Real Estate Company was officially completed. As at 31st December 2001, actual area sold amounted to 28,807 sq.m., representing 39% of the saleable area. 258 units of properties were sold, representing 40% of the total number of properties. Recognised turnover and profit before taxation amounted to approximately RMB90,073,000 and RMB16,974,000 respectively. As Real Estate Company was established in June 2000 and had no sales during the Previous Year, no year-on-year comparison was presented.

3. Power and Heat Co-generation

?Shenyang Shenhai Hot Electricity Company Limited ("Shenhai Co-generation"), a joint venture of the Company, is currently the largest power and heat co-generation enterprise in Shenyang. During the Year, turnover and profit before taxation of Shenhai Co-generation amounted to RMB520,159,000 (2000: RMB536,731,000) and RMB81,988,000 (2000: RMB95,305,000), representing decreases of approximately 3.09% and 13.97% from those of the Previous Year respectively.

?During the Year, net power generation of Shenhai Co-generation amounted to 1,921,970 MWh (2000: 2,006,000 MWh), representing a decrease of approximately 4.19% from that of the Previous Year. This was mainly because the State continued to consolidate power enterprises and adjust grid operations.

?Owing to heat demand in winter, there was an increase in heat supply of Shenhai Co-generation. During the Year, heat supply of Shenhai Co-generation amounted to 5,012,124 GJ (2000: 4,644,355GJ), representing an increase of approximately 7.92% over that of the Previous Year.

4. Advanced Technology Investment

?Qinghua Ziguang Technology Venture Investment Company Limited ("QTIL") was formally established in May 2000. It is a business venture principally engaged in high-tech investment projects. During the Year, profit after taxation of QTIL amounted to RMB16,007,000 and distributable profits amounted to RMB13,606,000. The Company had received dividends in the sum of RMB1,088,000 according to its proportionate shareholding after the balance sheet date. Following the increase in capital and issue of new shares by QTIL, the investment of the Company in the total registered capital of QTIL has been diluted from 11.11% to 8.00% during the year.

?As at 31st December 2001, the registered capital of QTIL was RMB250,000,000. It is owned by nine shareholders with total assets amounting to RMB364,083,000, including current assets of RMB311,720,000 and long-term investments of RMB49,784,000.

Assets and financial position of the Group

1. Financial statistics of the Group

As at 31st As at 31st

Items Basis of calculation December 2001 Dcember 2000

(As restated)

Gearing ratio Total liabilities/total assets x 100% 10.2% 20.7%

Current ratio Current assets/current liabilities 5.3 2.7

Quick ratio (Current assets - inventories -

properties under development for

sale - completed properties held for

sale)/current liabilities 4.0 2.2

Earnings/net assets ratio Net profit/net assets x 100% 10.9% 17.1%

Sales profit margin Net profit/sales x 100% 28.6% 47.0%

Debt equity ratio Total liabilities/shareholders' equity x 100% 11.4% 26.3%

2. Overall position of the Group's assets

During the Year, there was a decrease in the total assets of the Group when compared to that of the Previous Year. The total assets of the Group decreased to approximately RMB1,955,354,000 in 2001 from approximately RMB2,135,141,000 in the Previous Year, representing a decrease of approximately RMB179,787,000 or 8.42%.

RMB'000

As at As at Changes

31st December 31st December in amount

Items 2001 2000

Total assets 1,955,354 2,135,141 (179,787 )

Of which:

Fixed assets 731,718 751,252 (19,534 )

Construction-in-progress 2,521 11,174 (8,653 )

Interest in a joint venture 140,638 165,462 (24,824 )

Investment securities 20,000 20,000 -

Current assets 1,060,477 1,187,253 (126,776 )

3. Current assets of the Group

During the Year, the current assets of the Group was decreased by RMB126,776,000 to RMB1,060,477,000 compared to RMB1,187,253,000 of the Previous Year, representing a decrease of approximately 10.68%, mainly due to the repayment of bank loans during the Year.

RMB'000

Changes

Items 2001 2000 in amount

Current assets 1,060,477 1,187,253 (126,776 )

Of which:

Cash and bank deposits 506,664 651,682 (145,018 )

Accounts receivable 145,890 163,572 (17,682 )

Prepayments, deposits and

other receivables 111,278 158,957 (47,679 )

Properties under development

for sale 171,000 201,723 (30,723 )

Completed properties held for sale 98,079 ? 98,079

Amount due from a joint venture 23,855 10,423 13,432

Amount due from a fellow subsidiary 2,815 ? 2,815

Inventories 896 896 -

4. Pledge of foreign currency deposits of the Group

As at 31st December 2001, the Group had bank loans totalling RMB80,000,000 (2000: RMB250,000,000) of which an amount of RMB60,000,000 (2000: RMB250,000,000) was pledged by a bank deposit of HK$60,000,000 (2000: HK$250,000,000). Both the term of security and the repayment term of the loans were within one year.

5. 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 2001, 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 dollars were relatively low.

6. Contingent liabilities

As at 31st December 2001, the Group did not have any contingent liabilities.

7. Bank borrowings

As at 31st December 2001, the repayment terms of the Group's bank borrowings of RMB80,000,000 are either repayable on demand or repayable within one year. The bank borrowings were used as the working capital of the Group. During the Year, the Group had no delay in repayment of bank borrowings.

Use of Proceeds arising from the issue of H shareS

The issue of 420,400,000 H shares in 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 in accordance with the intended use as disclosed in the prospectus of the Company dated 7th December 1999 (the "Prospectus"). Up to 31st December 2001, the Company had made investments totalling approximately RMB493,230,000 (2000: RMB493,230,000), 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 to acquire and continue 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); and

(5) the balance was used as working capital.

Number of Employees and their Education Levels

As at 31st December 2001, the Group had 1,999 staff, of which 42 worked in the Company's headquarter, 1,939 worked in Shenyang Water and 18 worked in Real Estate Company.

429 staff of the Group had received university or higher education, and 185 technicians were of intermediate rank or above.

During the Year, the aggregate salary paid to the staff amounted to RMB44,419,000 (2000: RMB44,318,000). The Group has not established any share option scheme for any of its senior management or staff.

Trust Deposits

During the Year, the Group placed a trust deposit of RMB80,000,000 with Zhongxin Bank (Beishi Branch, Shenyang) for a short period of time. The Company earned an interest income of RMB1,889,000 from the deposit. The deposit had been recovered by 31st December 2001.

taxation

The Group's taxation is described in note 4 of the consolidated profit and loss account.

The Group expects that the results of the Group will be affected if the taxation preferential policy described in notes 4(a) and 4(b) is cancelled in 2002.

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

Staff Quarters

The Group did not have any balance of house revolving funds which was carried forward in its accounts during its incorporation in 1999, and no staff quarters were constructed, purchased or sold to staff.

Pursuant to the "Housing Reserves Management Ordinance" stipulated by the PRC government and the Shenfangweihuifa [2000] No.3 document issued by Shenyang Municipal Government on 28th December 2000, the basis of contribution for the housing reserves was the average monthly salary income in 2000 and the ratio of contribution by the Company was 8% from 1st January 2001.

Purchase, Sale and Redemption of Shares

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

Pre-emptive Rights

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

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 Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (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 of Hong Kong Limited in due course.

By order of the Board

Zhang Guo Xiang

Chairman

19th April 2002, Shenyang, the PRC

Notice of Annual General Meeting

Notice is hereby given that the 2001 Annual General Meeting of Shenyang Public Utility Holdings Company Limited (the "Company") will be held at the Company's office at the Conference Room, 4th Floor, No. 14, Shisiwei Road, Heping District, Shenyang, the People's Republic of China (the "PRC") at 9:00 a.m. on Friday, 7th June, 2002 for the following purposes.

By way of ordinary resolutions:

1. To consider and approve the 2001 Report of the Board of Directors of the Company;

2. To consider and approve the 2001 Report of the Supervisory Committee of the Company;

3. To consider and approve the 2001 financial statements of the Company;

4. To consider and approve the 2001 reports of the domestic auditors and the international auditors of the Company;

5. To consider and approve the 2001 profit allocation and dividend distribution proposals of the Company;

6. To consider and approve the re-appointment of PricewaterhouseCoopers, 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 newly appointment of Yuehua Certified Public Accountants as domestic auditors of the Company and to authorise the Board of Directors to determine their remuneration.

By order of the Board

Wang Se

Company Secretary

19th April 2002, Shenyang, the PRC

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, HKSCC Registrars Limited at 2nd Floor, Vicwood Plaza, 199 Des Voeux Road Central, 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 Wednesday, 8th May 2002 to Friday, 7th June 2002 (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 on Wednesday, 8th May 2002 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, HKSCC Registrars Limited on or before Friday, 17th May 2002. The reply slip may be delivered by hand, by post or by fax (at fax no. of the Company: (86-24) 2325 7181 or at the fax no. of the Company's H share registrar: (852) 2579 0095). 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.

Please also refer to the published version of this announcement in South China Morning Post / Hong Kong Economic Times.