CMON Limited - Interim / Quarterly Report 2003

�� Shenyang Public Utility Holdings Company Limited

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

2003 Interim Results

(Results for the Six Months Ended 30th June 2003)

The board of directors (the “Board”) of Shenyang Public Utility Holdings Company Limited (the “Company”) is pleased to announce the unaudited interim results of the Company and its subsidiaries (the “Group”) for the six months ended 30th June 2003 (the “Period”), together with comparative figures for the corresponding period (the “Corresponding Period”) of 2002 (the “2002 Period”) as follows:

CONDENSED CONSOLIDATED INCOME STATEMENT

For the six months ended 30th June 2003

Note
Turnover
2
Other operating income
Total income
Cost of properties sold
Taxes on sales of properties
Staff costs
Depreciation and
amortisation
Power costs
Raw water purchase costs
Repairs and maintenance
Other operating expenses
(Loss) profit from operations
3
Finance costs
Share of results of a jointly
controlled entity
Profit before taxation
Taxation
4
Profit before minority
interests
Minority interests
Net profit for the period
Earnings per share - basic
6

Unaudited
Six months ended 30th June
2003
2002
RMB'000
RMB'000
11,674
363,965
2,325
7,029
13,999
370,994
(6,681)
(60,062)
(647)
(4,725)
(3,345)
(27,888)
(2,843)
(22,738)
—
(37,948)
—
(31,656)
(17)
(5,402)
(9,804)
(28,263)
(9,338)
152,312
(1,064)
(295)
14,493
11,934
4,091
163,951
(2,391)
(35,527)
1,700
128,424
77
(757)
1,777
127,667
RMB0.0017
RMB0.1251

Notes:

1. BASIS OF PREPARATION AND PRINCIPAL ACCOUNTING POLICIES

The condensed financial statements have been prepared under historical cost convention and have been prepared in accordance with Statement of Standard Accounting Practice (“SSAP”) 25 “Interim Financial Reporting” issued by the Hong Kong Society of Accountants (“HKSA”).

In the current period, the Group has adopted, for the first time, SSAP 12 (Revised) “Income taxes” (“SSAP 12 (Revised)”) issued by the HKSA. SSAP 12 (Revised) has introduced a new basis of accounting for income taxes (including both current tax and deferred tax) which have been adopted in the condensed financial statements. In the absence of any specific transitional requirements in SSAP 12 (Revised), the new accounting policy has been applied retrospectively. Comparative amounts for prior period have been restated accordingly. Opening accumulated profits at 1st January, 2002 have been increased by RMB14,632,000, which is the cumulative effect of the change in policy on the results for period prior to 2002. Net profit for the six months period ended 30th June, 2002 has been increased by RMB17,558,000.

Other than as described above, the accounting policies adopted are consistent with those followed in the Group’s annual audited financial statements for the year ended 31st December, 2002.

In addition, the Group has acquired certain subsidiaries and resulted for a goodwill on acquisition of subsidiaries of approximately RMB 85,752,000 in the current period. Accordingly, the Group has adopted the accounting policy on goodwill as follows:

Goodwill arising on consolidation represents the excess of the cost of acquisition over the Group’s interest in the fair value of the identifiable assets and liabilities of the subsidiaries at the date of acquisition. Goodwill is recognised as an asset and amortised on a straight line basis over its useful economic life of not more than twenty years.

In the last year, the Group disposed of its 99.37% equity interest in Shenyang Water Company Limited (“Shenyang Water”) (“Disposal of Water Business”). The Disposal of Water Business was approved in the Company’s extraordinary general meeting held on 20th August, 2002. Accordingly, the effective date of discontinuance for accounting purposes was 31st July, 2002 upon the completion of the Disposal of Water Business. However, in the previously reported interim report for the six months period ended 30th June, 2002, the effective date of Disposal of Water Business was regarded at 31st March, 2002. Accordingly, the comparative amounts of the condensed financial statements for the six months period ended 30th June, 2002 have been restated. Net profit for the six months period ended 30th June, 2002 has been increased by RMB11,698,000.

2. TURNOVER AND SEGMENT INFORMATION

Business segments

Turnover Other operating income Segment results Bank interest income Unallocated corporate expenses Loss from operations Finance costs Share of results of a jointly controlled entity Profit before taxation Taxation Profit before minority interests Minority interests Net profit for the period	Unaudited Six months ended 30th June, 2003 Continuing operations Sales of Other properties operations Consolidated RMB’000 RMB’000 RMB’000 11,390 284 11,674 36 115 151 11,426 399 11,825 (3,080) (523) (3,603) 2,174 (7,909) (9,338) (1,064) — 14,493 14,493 4,091 (2,391) 1,700 77 1,777

Six months ended 30th June, 2003 - Unaudited Discontinuing

	operations	Continuing operations	Continuing operations
	Sales of
	purified	Sales of	Other
	water	properties	operations	Consolidated
	RMB’000	RMB’000	RMB’000		RMB’000
Turnover	277,189	68,644	18,132		363,965
Other operating income	115	23	1,088		1,226
	277,304	68,667	19,220		365,191

Segment results	137,825	18,826	5,985		162,636

Bank interest income					4,282
Interest income from a jointly
controlled entity					1,521
Unallocated corporate
expenses					(16,127)
Profit from operations					152,312
Finance costs					(295)
Share of results of
a jointly controlled entity	—	—	11,934		11,934
Profit before taxation					163,951
Taxation					(35,527)
Profit before minority
interests					128,424
Minority interests					(757)
Net profit for the period					127,667

All of the Group’s turnover for both periods was made in the People’s Republic
of China (the “PRC”). As	at 30th June,	2003 and 31st December,			2002, all of
the Group’s segment assets were located in the PRC. All of the changes in the
Group’s property, plant and equipment took place in the PRC for both periods.

3. (LOSS) PROFIT FROM OPERATIONS

	Six months	Six months
	ended 30th June,
	2003	2002
	*RMB’000*	RMB’000
(Loss) profit from operations has been
arrived at after charging:
Amortisation of goodwill	1,710	—
Depreciation of property, plant and equipment	1,133	22,738
and after crediting:
Bank interest income	2,174	4,282
Interest income from a jointly controlled entity	—	1,521
Dividend income from investment securities	—	1,088

4. TAXATION

The charge comprises: PRC Enterprise Income Tax Share of taxation attributable to a jointly controlled entity in the PRC Deferred tax credit	Six months ended 30th June, 2003 2002 *RMB’000* RMB’000 — 50,873 2,391 2,212 — (17,558) 2,391 35,527

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

Taxation of the Group arising in the PRC is calculated at the rates prevailing in the PRC. The Group is subject to an unified enterprise income tax rate of 33% for the period.

5. APPROPRIATION

The Board resolved not to declare any interim dividend in 2003.

No appropriations were made to the statutory surplus reserve and the statutory public welfare fund from the net profit during the period. In accordance with the Company’s and the Company’s subsidiaries’ Articles of Association, such appropriations should be made upon approval by the shareholders in the resolution proposed by the Board.

6. EARNINGS PER SHARE

The calculation of basic earnings per share for the period is based on the net profit for the period of RMB1,777,000 (six months ended 30th June, 2002: RMB127,667,000) and the number of 1,020,400,000 shares (2002: 1,020,400,000 shares) in issue during the period.

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

7. ADDITIONS TO PROPERTY, PLANT AND EQUIPMENT

During the Period, the Group spent approximately RMB5,683,000 (six months ended 30th June, 2002: RMB1,575,000) on acquisition of property, plant and equipment, which included the acquisition of property, plant and equipment arising from purchase of subsidiaries amounting to approximately RMB3,130,000 (six months ended 30th June, 2003: nil).

MANAGEMENT DISCUSSION AND ANALYSIS

The turnover of the Group during the Period was approximately RMB11,674,000 (2002 Period: RMB363,965,000), representing approximately 96.79% decrease as compared with that of the Corresponding Period.
Profit after taxation and minority interests during the Period amounted to approximately RMB1,777,000, (2002 Period: RMB127,667,000), representing approximately 98.61% decrease as compared with that of the Corresponding Period.
Earnings per share during the Period were approximately RMB0.0017 (2002 Period: RMB0.1251), representing approximately 98.64% decrease as compared with that of the Corresponding Period.

1. Real Estate Development

During the Period, the Group seized the opportunity of continuous growth in Shenyang real estate market and focused its works on the sale and project construction of phase one and two of the residential project “Water-Flowers City” in Shenyang, the commencement of construction work of project “Cosmo International Mansion” in Shenyang and the preparation of construction work of the residential project “Lakefront Jade Palace” (tentative name) in Beijing.
During the Period, 3,030 square metres of remaining saleable area of “Hongji Garden” were sold. Actual sales income of RMB 11,390,000 was recorded. The sales percentage reached 99.06%.
During the Period, phase one of residential project “Water-Flowers City” in Shenyang was formally available for sale in March 2003, of which 137 units were sold on that day, and the market response was very encouraging. The construction of phase two of residential project “Water-Flowers City” in Shenyang is being in tight progress and it is expected to be completed by the end of the year 2003. Up to 30th June 2003, based on the available saleable area, a total of 42,210 square metres of the saleable area of residential project “Water-Flowers City” in Shenyang had been sold and the sales percentage reached 58.26%. This project was awarded by the Construction Department of Liaoning Province as the “Liaoning Outstanding Building Project” in the Year 2003.
During the Period, the Company’s subsidiary Shenyang Development Real Estate Company Limited (“Real Estate Company”) acquired, through acquisition of corporations, the project “Cosmo International Mansion” in Shenyang and the residential project “Lakefront Jade Palace” in Beijing respectively. The project “Cosmo International Mansion” is the reconstruction of an incomplete project. The building will be reconstructed as hotel apartments with gross floor area of approximately 30,000 square metres. External and interior decoration works have already commenced. It is expected that the construction works will be completed by early 2004 (please refer to “Changes in the Composition of the Group” for details). Preparatory construction works are currently in progress for the project “Lakefront Jade Palace” in

Beijing for the proposed construction of medium to high-class residential buildings. The total area of the land for the project is 173,000 square metres. It is planned to construct gross floor area of approximately 287,000 square metres. It is expected that the construction works will commence in 2004 (please refer to “Changes in the Composition of the Group” for details).

During the Period, Real Estate Company recognised turnover of RMB 11,675,000 and loss of RMB 3,603,000, representing a decrease of 86.55% and 129.32% respectively as compared with that of the Corresponding Period. The main reason for the decrease was that the contribution to turnover and profits was relatively small for the sale of the remaining units of “Hongji Garden”. In addition, since the project “Water-Flowers City” in Shenyang was not up to the standard for completion and inspection, the sales income could not be recognised at this stage.

2. Education Investment Business

During the Period, the Company’s subsidiary, Shenyang Development Beida Education Science Park Company Limited (“Shenyang Education”) appointed a Canadian architecture design company to complete the overall design scheme of the park areas for Shenyang Development Beida Education Science Park (“Shenyang Education Park”). Construction of the project is expected to formally commence in September 2003. The plan of Shenyang Education to co-operate with foreign education institutions for the joint education programmes in international senior high school and preparatory level achieved preliminary progress and Shenyang Education entered into the “ Education Co-operation Framework Agreement” in April 2003 with Canadian Quebec Education International (Quebec public senior high school alliance) and Quebec CEGEP International (Quebec public preparatory alliance) for the proposed introduction of Canadian Quebec senior high school and preparatory level educational courses.
During the Period, phase one of Zhuhai Beida Education Science Park (“Zhuhai Education Park”) as operated by the Company’s subsidiary, Zhuhai Beida Education Science Park Company Limited (“Zhuhai Education”) passed the test of overall inspection in January 2003. Currently, all the education buildings can be delivered for use. Zhuhai Beida Subsidiary Experiment School (“Zhuhai School”) acquired school-running license approved and issued by Zhuhai Municipal Education Bureau in April 2003. At present, Zhuhai School is organising the admission work. It is planned that courses will formally commence on 1st September 2003. Pursuant to the “Zhuhai Master Lease Agreement”, Zhuhai School will enter into the “Zhuhai Formal Lease Agreement” with Zhuhai Education after courses have commenced (please refer to the Company’s circular to shareholders dated 23rd December 2002 for details).

During the Period, Shanghai Beida Education Science Park (“Shanghai Education Park”) as operated by the Company’s subsidiary, Shanghai Beida Jade Bird Education Investment Company Limited (“Shanghai Education”) was at the stage of preparatory works for construction and construction works had not commenced.

3. Electricity and Heat Co-generation Business

During the Period, the disposal of the Company’s 22.50% equity interest in Shenyang Shenhai Hot Electricity Company Limited (“Shenhai Cogeneration”) to Pollon Investment Limited (“Pollon Investment”) is still pending for the approval from the relevant government authorities in the PRC and the procedures relating to the change of equity holding have not been completed. Accordingly, the Company still holds 22.50% equity interest in Shenhai Co-generation during the Period.
During the Period, Shenhai Co-generation recognised turnover and profit before taxation of RMB 302,626,000 and RMB 64,414,000 respectively, representing an increase of 3.51% and 21.45% respectively over those of the Corresponding Period. On-grid sales volume of electricity of Shenhai Co-generation was 1,133,880 MWh, representing an increase of 9.62% over that of the Corresponding Period. Total heat production was 2,472,054 GJ, representing a decrease of 7.85% over that of the Corresponding Period.

4. System Integration Business

During the Period, the Board of the Company passed a resolution approving the subsidiary Shenyang Education to acquire the 90% equity interest in Shenyang Beida Jade Bird Business Information System Company Limited (“Shenyang Business Information”) from Beijing Tianqiao Beida Jade Bird Sci-Tech Company Limited (“Beijing Tianqiao”) at a consideration of approximately RMB 8,900,000. The registered capital of Shenyang Business Information is RMB10,000,000. It is principally engaged in system integration and development of applied software. The Company plans to take advantage of the professionals and resources of the aforesaid business of Shenyang Business Information to provide software design services for the real estate development and education park construction of the Group . The acquisition is a connected transaction and the Company has published the announcement in Hong Kong newspapers on 30th June 2003 in respect of the acquisition.

5. Investment in the Technology Business

During the Period, Tsinghua Unisplendour Hi-Tech Venture Capital Inc. (“THCI”) recognised investment income of RMB3,363,000, representing an increase of 950% from that of the Corresponding Period and recorded a loss of RMB 107,000. The loss was 98.16% narrower than that of the Corresponding Period.

The reduction of loss by THCI were mainly attributable to the active adjustment in investment portfolio, gradual increase in the scale of investment in production industries and repayment of bank loans to reduce the financial expenses.

GROUP’S WORKING CAPITAL AND FINANCIAL RESOURCES

1. Level and Analysis of Indebtedness at the Balance Sheet Date

As at 30th June 2003, the total amount of the Group’s bank borrowings was RMB 215,000,000 (31st December 2002: RMB120,000,000). The above borrowings was unsecured, bearing interests at 5.31% or 5.49% per annum.

Bank borrowings payable as follows Within one year The second year	As at 30th June 2003 *(RMB’000)* 205,000 10,000 215,000	As at 30th June 2002 (RMB’000) 120,000 — 120,000

During the Period, the Group had no delay in repayment of bank borrowings and interest.

2. Bills Payable

During the Period, the bank acceptance issued by the Company’s subsidiary, Real Estate Company, amounted to RMB 23,179,000. The funds were used for the payment of the project “Water-Flowers City” and the project “Cosmo International Mansion” in Shenyang.

3. Financial Indicators and Basis of Calculation

		As at 30th	As at 31st
Financial Indicators	Basis of Calculation	June 2003	December 2002
Gearing ratio	Total liabilities/total assets x 100%	22.47%	10.83%
Earnings/net assets ratio	Net profit/net assets x 100%	0.09%	5.02%
Sales profit margin	Net profit/sales x 100%	15.22%	20.55%

CAPITAL STRUCTURE OF THE GROUP

1. Capital Structure of the Group

Items Share capital Share premium Surplus from asset valuation Statutory surplus reserve Statutory public welfare reserve Accumulated profits Minority interests Total capital	As at 30th Amount (RMB’000) 1,020,400 323,258 — 66,332 33,167 398,367 57,663 1,899,187	June 2003 Percentage to Total Capital 53.73% 17.02% — 3.49% 1.75% 20.97% 3.04% 100%	As at 31st December 2002 Percentage to Total Amount Capital (RMB’000) 1,020,400 55.22% 323,258 17.49% — — 66,332 3.59% 33,167 1.79% 396,590 21.46% 8,181 0.45% 1,847,928 100%	As at 31st December 2002 Percentage to Total Amount Capital (RMB’000) 1,020,400 55.22% 323,258 17.49% — — 66,332 3.59% 33,167 1.79% 396,590 21.46% 8,181 0.45% 1,847,928 100%
				100%

2. Currencies and Structure of Interest Rates

	As at 30th	June 2003	As at 31st December 2002	As at 31st December 2002
		Average		Average
Currency	Amount (‘000)	Interest Rate	Amount (‘000)	Interest Rate
Hong Kong dollar	304,647	1.53%	306,664	2%
Renminbi	190,612	0.72%	160,907	0.74%

DETAILS OF THE GROUP’S ASSETS PLEDGED

As at 30th June 2003, the Group did not have any assets pledged as security.

CURRENCY RISKS

According to the regular announcements of the “Quotations of the Exchange Rates for Converting Renminbi to Foreign Currencies by the Head Office of Designated Banks (1-3 issues)” for 2003 announced by the State Administration of Foreign Exchange, the exchange rate of Renminbi to Hong Kong dollar experienced slight fluctuations during the Period. Accordingly, the risk of the Company’s deposits in Hong Kong dollars was relatively low.

TAXATION

During the Period, no provision for Hong Kong Profits Tax had been made as the Group’s income neither arose in nor was derived from Hong Kong.

During the Period, the Group paid income tax at the prevailing tax rate of 33% in the PRC.

SIGNIFICANT INVESTMENTS HELD

As at 30th June 2003, the Group held 8% equity interest in THCI with investment of RMB 20,000,000 (31st December 2002: RMB 20,000,000).

NUMBER OF EMPLOYEES, EMOLUMENTS POLICIES, TRAINING SCHEMES AND SHARE OPTION SCHEMES

As at 30th June 2003, the Group employed a total of 116 employees (including the directors of the Company) and provided them with emoluments totalling approximately RMB 2,521,000 during the Period (2002 Period: RMB 16,302,000). The Group has entered into employment contracts with all the employees. The employees are offered different emoluments with respect to their different positions. The Group also made contributions to endowment insurance, basic medical insurance and housing reserves for all the employees in accordance with the relevant laws of the PRC. The Group also provided them with vocational training courses. To date, the Group has not adopted any share option scheme for any of its senior management or employees.

CHANGES IN THE COMPOSITION OF THE GROUP

1. Acquisition of 70% equity interest in Zhuhai Education and 100% equity interest in Shanghai Education

During the Period, the Company convened an extraordinary general meeting on 10th February 2003 which considered and approved the acquisition by the Company from Beijing Beida Education Investment Company Limited (“Beida Education Investment”) and Beijing Beida Public School Education Investment Company Limited (“Beida Public School”) of 70% equity interest in Zhuhai Education (in which each of Beida Education Investment and Beida Public School held 35% equity interest) at a consideration of approximately RMB 166,600,000; and approved the acquisition by the Company and its subsidiary Real Estate Company from Beida Education Investment and Beida Public School of 80% and 20% equity interest respectively in Shanghai Education at a consideration of approximately RMB 194,400,000 (please refer to the Company’s announcement dated 11th February 2003 for details).

2. Acquisition of 100% equity interest in Beijing Diye Real Estate Development Company Limited (“Beijing Diye”)

During the Period, the Company convened an extraordinary board meeting on 26th April 2003 which considered and approved the acquisition jointly by the Company’s subsidiary Real Estate Company and Shenyang Education from independent third parties Shenzhen Municipal Diye Real Estate Company Limited, Beijing Xinruida Decoration Company Limited and other natural persons of 100% equity interest in Beijing Diye at a consideration of RMB 33,000,000 (in which Real Estate Company held 80% equity interest and Shenyang Education held 20% equity interest). The total area of the land for the residential project “Lakefront Jade Palace” in Beijing, which will be developed by Beijing Diye, is 173,000 square metres. It is planned to construct gross floor area of approximately 287,000 square metres. It is expected that the construction works will commence in 2004.

3. Acquisition of 100% equity interest in Shenyang Pollon Finance Building Management Company Limited (“Building Management Company”)

During the Period, the Company convened an extraordinary board meeting on 26th April 2003, which considered and approved the acquisition jointly by the Company and its subsidiary Real Estate Company from Pollon Industrial Limited (“Pollon Industrial”, a connected company of Pollon Investment) and Shenyang Municipal Dadong District Real Estate and Land Development General Corporation (“Dadong Development”) of 100% equity interest in Building Management Company (in which Pollon Industrial held 92.50% equity interest and Dadong Development held 7.50% equity interest). The Company and Real Estate Company entered into the “Agreement for the Transfer of Equity Interest in Shenyang Pollon Finance Building Management Company Limited” with Pollon Industrial and Dadong Development. Pursuant to the agreement, the Company and Real Estate Company will pay a total consideration of RMB 141,000,000 in cash and an assignment of debts (of which, the payments of RMB 130,500,000 to Pollon Industrial and RMB 10,500,000 to Dadong Development) in return for the 100% equity interest in Building Management Company. The only asset held by Building Management Company is Shenyang Pollon Finance Building (“Finance Building”) with gross floor area of 30,000 square metres. After the Company’s acquisition of Finance Building, it is planned to reconstruct the building as hotel apartments and rename the building as “Cosmo International Mansion”. Both the exterior and interior decoration works of the mansion have commenced and it is expected that the project will be completed for sale in early 2004. Pollon Investment has agreed that it will pay in cash the difference between the amount payable for the acquisition of the 22.50% equity interest in Shenhai Co-generation and the amount receivable for the disposal of the 92.50% equity interest in Building Management Company by the Company.

4. Acquisition of 90% equity interest in Shenyang Business Information

During the Period, the Company convened an extraordinary board meeting on 16th June 2003, which considered and approved the acquisition by the Company’s subsidiary Shenyang Education from Beijing Tiaoqiao of 90% equity interest in Shenyang Business Information at a consideration of approximately RMB 8,900,000. Shenyang Business Information is principally engaged in the development of applied software and provision of system integration for users in various industries such as logistics, finance, social insurance and campus education network construction. The Company is of the view that for the long term benefits of the Group, the acquisition of Shenyang Business Information will ensure that the Group will have the inhouse technical know-how in designing software solutions for the management of the Group’s various property development and educational complexes and for the development of the Group’s services relating to the provision of non compulsory education (please refer to the Company’s announcement dated 30th June 2003).

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 RMB 684,256,000. No proceeds were raised by means of issuing new shares thereafter. Up to 30th June 2003, the Company had made investments totalling RMB 593,230,000 (30th June 2002: RMB 493,230,000), of which:

RMB 231,951,000 had been applied to invest in the acquisition of No. 8 Water Plant (as defined in the prospectus issued by the Company on 7th December 1999, the “Prospectus”);
RMB 56,787,000 had been applied for the acquisition and construction of the Shifosi Water Source expansion project (as defined in the Prospectus);
RMB 9,041,000 had been applied to renovate the system of production facilities of Shenyang Water (as defined in the Prospectus);
RMB 1,000,000 had been applied to purchase new vehicles for Jingwei Transportation (as defined in the Prospectus);
RMB 100,000,000 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 metres (please refer to the Company’s circular to shareholders dated 5th July 2003 for details); and
The balance was used as working capital.

PURCHASE, SALE OR REDEMPTION OF SHARES

During the Period, the Group had not purchased, sold or redeemed any of the Company’s shares.

DIRECTORS’, SUPERVISORS’ AND CHIEF EXECUTIVE’s INTERESTS AND/OR SHORT POSITIONS IN SHARES, UNDERLYING SHARES, SECURITIES, EQUITY DERIVATIVES AND/OR DEBENTURES OF THE COMPANY OR THE COMPANY’S ASSOCIATED CORPORATIONS

As at 30th June 2003, for each of the Company’s directors, supervisors and chief executive of the Company, in respect of the Company or its associated corporations (as defined under Part XV of the Securities and Futures Ordinance, Chapter 571 of the Laws of Hong Kong (the “Securities and Futures Ordinance”):
(1) None of them held any interests and/or short positions in the shares, underlying shares, securities, equity derivatives and/or debentures as shown in the register maintained in accordance with section 352 of the Securities and Futures Ordinance; and
(2) None of them held any interests and/or short positions in the shares, underlying shares, securities, equity derivatives and/or debentures as required to notify the Company and The Stock Exchange of Hong Kong Limited (the “Hong Kong Stock Exchange”) in accordance with the Model Code for Securities Transactions by Directors of Listed Companies.

During the Period, save that the director Mr. Lin Wen Bin, who was also the chairman of Shenyang Public Utility Group Company Limited (“SPU”), the directors Mr. Zhang Jian Bo, Mr. Chen Shu Xin, Mr. Zhang Ying Jian who were also the directors of SPU, and Mr. Xu Er Hui, Mr. Zhang Jian Bo, Mr. Chen Shu Xin and Mr. Zhang Wan Zhong who were the vice-presidents of Beijing Beida Jade Bird Company Limited (“Beida Jade Bird”) (Beida Jade Bird is the controlling shareholder of Beijing Beida Hi-tech Industry Investment Company Limited (“Beida Hi-Tech”),which is the shareholder of SPU), none of the Company’s directors and supervisors were directors or employees of another body corporate which at the same time held any interests in the Company’s shares, underlying shares, securities, equity derivatives and/ or debentures that were required to be disclosed to the Company and the Hong Kong Stock Exchange in accordance with Divisions 2 and 3 of Part XV of the Securities and Futures Ordinance.
None of the Company, or its fellow subsidiaries or the controlling company entered into any material contract under which the directors and supervisors directly or indirectly had any material interest in any related business of the Group.

SHARE CAPITAL STRUCTURE

During the Period, there was no change in the share capital structure of the Company. As at 30th June 2003, the share capital structure of the Company was as follows:

Types of Shares	Number of Shares	Percentage to Total
		Issued Share Capital
Domestic shares	600,000,000	58.80%
H shares	420,400,000	41.20%
Total share capital	1,020,000,000	100%

SUBSTANTIAL SHAREHOLDERS

As at 30th June 2003, save as the Company’s directors, supervisors and chief executive, the register of holders maintained by the Company pursuant to section 336 of the Securities and Futures Ordinance showed that the following companies and persons had interests and /or short positions in the Company’s shares, underlying shares, securities, equity derivatives and/or debentures:

Shares Percentage to Total Issued Share Capital

Beneficial Owners

1	SPU	600,000,000	58.80%
		domestic shares
		(unlisted shares)
2	Shenyang Urban Infrastructure	600,000,000	58.80%
	Facility Construction Investment	domestic shares
	Development Company Limited
	(“Shenyang Urban Construction”)
	(note 1)
3	Beida Hi-Tech (note 2)	600,000,000	58.80%
		domestic shares
4	Beida Jade Bird (note 3)	600,000,000	58.80%
		domestic shares
5	Beijing Tianqiao (note 4)	600,000,000	58.80%
		domestic shares
6	Peking University (note 5)	600,000,000	58.80%
		domestic shares
7	HKSCC Nominees Limited (note 6)	418,803,990	41.04%
		H shares
		(listed shares)
Notes:

1 Shenyang Urban Construction is a limited company established in the PRC. It holds 42.23% equity interest in SPU. Pursuant to section 316 of the Securities and Futures Ordinance, Shenyang Urban Construction is regarded as holding interests in the underlying shares of the Company held by SPU.
2 Beida Hi-Tech is a limited company established in the PRC. It holds 50% equity interest in SPU. Pursuant to section 316 of the Securities and Futures Ordinance, Beida Hi-Tech is regarded as holding interests in the underlying shares of the Company held by SPU.
3 Beida Jade Bird is a limited company established in the PRC. It holds 50% equity interest in Beida Hi-Tech. Through Beida Hi-Tech, it holds 50% equity interest in SPU. Pursuant to section 316 of the Securities and Futures Ordinance, Beida Jade Bird is regarded as holding interests in the underlying shares of the Company held by SPU.
4 Beijing Tianqiao is a joint stock limited company established in the PRC and listed on Shanghai Stock Exchange. Beijing Tianqiao holds 50% equity interest in Beida Hi-Tech. Through Beida Hi-Tech, it holds 50% equity interest in SPU. Pursuant to section 316 of the Securities and Futures Ordinance, Beijing Tianqiao is regarded as holding interests in the underlying shares of the Company held by SPU.
5 Peking University is a famous comprehensive university in the PRC. Through its subsidiary Beijing Beida Jade Bird Software System Company (“Jade Bird Software”), Peking University holds 46% equity interest in Beida Jade Bird. As Beida Jade Bird holds 50% equity interest in Beida Hi-Tech and Beida Hi-Tech holds 50% equity interest in SPU, pursuant to section 316 of the Securities and Futures Ordinance, Peking University is regarded as holding interests in the underlying shares of the Company held by SPU.
6 As notified by HKSCC Nominees Limited, as at 30th June 2003, the following participants in the central clearance system had interests amounting to 5% or more of the total issued H shares of the Company as shown in the securities accounts in the central clearance system:
(1) Tai Fook Securities Company Limited as nominee holds 95,592,000 H shares, representing 22.74% of the issued H shares of the Company, of which Sino-French Water Development (Liaoning) Company Limited (“Sino-French Liaoning”) beneficially owned 88,146,000 H shares, representing 20.97% of the issued H shares of the Company.

(2) The Hong Kong and Shanghai Banking Corporation Limited as nominee holds 51,904,000 H shares, representing 12.35% of the issued H shares of the Company.
(3) Shenyin Wanguo Securities (Hong Kong) Limited as nominee holds 23,424,000 H shares, representing 5.57% of the issued H shares of the Company.
(4) Guotai Junan Securities (Hong Kong) Limited as nominee holds 21,298,000 H shares, representing 5.07% of the issued H shares of the Company.

Save as disclosed above, during the Period, the Company has not been notified of any interests and/or short positions in shares, underlying shares, securities, equity derivatives and/or debentures of the Company required to be recorded in the register maintained in accordance with section 336 of the Securities and Futures Ordinance.

DIVIDEND

During the Period, no dividend was paid. The Board resolved not to declare any interim dividend in 2003.

CONNECTED TRANSACTIONS

During the Period, the connected transactions of the Group were detailed as follows:

1 The Company acquired 70% equity interest in Zhuhai Education, jointly acquired 100% equity interest in Shanghai Education with Real Estate Company and applied for a waiver from the Hong Kong Stock Exchange in respect of the cap of the rental amounts arising from leasing education properties of Zhuhai Education to a connected party (please refer to the Company’s 2002 Annual Report for details). The connected transactions mentioned above had been disclosed by the Company in accordance with the requirements of the Rules Governing the Listing of Securities on the Stock Exchange of Hong Kong Limited (the “Listing Rules”) and had been approved by independent shareholders.
2 Shenyang Education acquired the 90% equity interest in Shenyang Business Information from Beijing Tianqiao at a consideration of approximately RMB 8,900,000. As the consideration for the acquisition is more than the higher of 0.03% of the Company’s net tangible assets or HK$1,000,000 but less than HK$10,000,000, pursuant to rule 14.25(1) of the Listing Rules, the acquisition is subject only to the disclosure requirements and the Board's approval, but does not require independent shareholders’ approval. During the Period, the Company had made relevant disclosure in accordance with the above rule in the newspapers in Hong Kong.

AUDIT COMMITTEE

The Company’s Audit Committee convened a meeting on 20th August 2003 to review the Group’s financial reporting process, internal monitoring mechanism and its unaudited interim financial statements for the Period.

The Audit Committee considered that the accounting principles and methods adopted by the Group, internal monitoring mechanism and financial reporting complied with the relevant requirements of the accounting regulations.

SIGNIFICANT LITIGATION

During the Period, the Group was not involved in any significant litigation.

EXTRAORDINARY GENERAL MEETINGS

1. The First Extraordinary General Meeting of 2003

On 10th February 2003, the Company convened the first extraordinary general meeting of 2003 which considered and approved the acquisition by the Company of 70% equity interest in Zhuhai Education at a consideration of RMB 166,600,000 and the acquisition jointly by the Company and Real Estate Company of 100% equity interest in Shanghai Education at a consideration of RMB 194,400,000, and did not discuss the proposal for the acquisition of 50% equity interest in Beijing Beida - Online Internet Company Limited (“Beida Online”) at the meeting. The Company’s annual general meeting of 2002 held on 16th June 2003 had ratified the Board’s resolution to terminate the proposal for the acquisition of 50% equity interest in Beida Online (please refer to the Company’s annual report for the year 2002 and the Company’s announcement dated 17th June 2003).

2. The Second Extraordinary General Meeting of 2003

On 26th April 2003, the Company convened the second extraordinary general meeting of 2003 which considered and approved: (1) the appointment of Deloitte Touche Tohmatsu, Certified Public Accountants, as the international auditors of the Company and Deloitte Touche Tohmatsu Certified Public Accountants Ltd. as the PRC auditors of the Company to hold office until the conclusion of the annual general meeting of 2002; (2) the Company’s application for conversion into a foreign investment joint stock limited company (please refer to the Company’s announcement dated 28th April 2003).

PUBLICATION OF FURTHER INFORMATION ON THE WEBSITE OF THE HONG KONG STOCK EXCHANGE

The Company will publish its interim results on the Hong Kong Stock Exchange’s website at an appropriate time as required by paragraph 46 of Appendix 16 of the Listing Rules.

By order of the Board Xu Er Hui Chairman

Shenyang, the PRC, 22nd August 2003

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