CMON Limited — Interim / Quarterly Report 2005

Aug 26, 2005

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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)

(Stock Code: 747)

2005 INTERIM RESULTS (RESULTS FOR THE SIX MONTHS ENDED 30TH JUNE 2005)

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 2005 (“the Period”), together with comparative figures for the corresponding period (“the Corresponding Period”) of 2004 (“the 2004 Period”) as follows:

CONDENSED CONSOLIDATED INCOME STATEMENT

		For the six months ended	For the six months ended	For the six months ended	For the six months ended
		30th June
		2005			2004
		(unaudited)	(unaudited)
	Notes	RMB’000		RMB’000
Turnover	3	17,082			18,226
Other operating income		364			5,160
Cost of properties sold		(9,646)			(10,968)
Taxes on sales of properties		(394)			(984)
Other operating expenses		(14,814)			(50,207)
Loss from operations	4	(7,408)			(38,773)
Finance costs		(14,132)			(22,573)
Loss before taxation		(21,540)			(61,346)
Taxation	5	392			392
Loss after taxation		(21,148)			(60,954)
Attributable to:
Loss attributable to the shareholders of
the Company		(19,778)			(60,407)
Loss attributable to minorities		(1,370)			(547)
		(21,148)			(60,954)
Loss per share – basic	7	RMB(0.02)		RMB(0.06)

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CONDENSED CONSOLIDATED BALANCE SHEET At 30th June 2005

	30th June 31st December	30th June 31st December
	2005	2004
	(unaudited)	(audited)
	RMB’000	RMB’000
Non-current assets
Property, plant and equipment	931,423	936,928
Goodwill	609,517	609,372
Available for sales financial assets	20,000	20,000
	1,560,940	1,566,300
Current assets
Properties held for sale	321,863	321,863
Inventories	15,103	2,099
Other investment	620	620
Accounts receivables	19,145	12,465
Amount due from a former jointly controlled entity	60,000	60,000
Long-term other receivable
– receivable portion within one year	96,656	97,056
Prepayments	109,134	101,835
Other receivables	209,702	551,894
Tax prepaid	9,387	8,459
Pledged bank deposits	71,069	180,399
Bank balance and cash	296,937	124,064
	1,209,616	1,460,754
Current liabilities
Account payables	11,385	14,772
Bills payable	–	31,000
Investment cost payable	39,512	39,512
Receipt in advance	255,374	285,850
Other payables and accrued charges	304,900	145,986
Deferred income	23,981	15,401
Bank loans – repayable portion within one year	379,926	537,858
	1,015,078	1,070,379
Net current assets	194,538	390,375
	1,755,478	1,956,675

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Equity Share capital Reserves Shareholders’ equity Minority interests Total equity Non-current liabilities Bank loans – repayable portion after one year Deferred taxation	1,020,400 613,751 1,634,151 58,849 1,693,000 – 62,478 62,478 1,755,478	1,020,400 642,185
		1,662,585 60,219
		1,722,804
		171,000 62,871
		233,871
		1,956,675

Notes:

1. ACCOUNTING POLICIES AND BASIS OF PREPARATION

The unaudited condensed consolidated information has been prepared in accordance with Hong Kong Financial Reporting Standards (“HKFRSs”) (which also include Hong Kong Accounting Standards (“HKAS”) and Interpretations) issued by the Hong Kong Institute of Certified Public Accountants (“HKICPA”), accounting principles generally accepted in Hong Kong and the disclosure requirements of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited. They have been prepared under historical cost convention. The principal accounting policies used in the preparation of the unaudited condensed consolidated information are consistent with those adopted in the preparation of the consolidated annual financial statements of the Group for the year ended 31st December 2004, except for those mentioned below. During the period beginning on 1st January 2005, the Group has adopted, for the first time, a number of new and revised Hong Kong Financial Reporting Standards and Hong Kong Accounting Standards, herein collectively referred to as the new HKFRSs, which are generally effective for the accounting periods beginning on or after 1st January 2005.

The major effects of the new HKFRSs, which have had a material impact on the unaudited condensed consolidated information, are set out below:

In prior years, the Group’s long term investment was stated at historical cost. The adoption of HKAS 39 “Financial Instruments: Recognition and Measurement”, it is grouped under availablefor-sale financial asset which is carried at fair value, where an active market exists, with any unrealized gains and losses recognized in equity. Available-for-sale financial asset that do not have a quoted market price in a non-active market and whose fair value cannot be reliably measured by valuation techniques are carried at cost less impairment. The adoption of HKAS 39 does not have any material effect on the accounts.

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The adoptions of HKFRS 3 “Business Combinations” and HKAS 36 “Impairment of Assets” have resulted in ceasing goodwill amortisation and to test for impairment annually at the cash generating unit level (unless an event occurs during the year which requires the goodwill to be tested more frequently) from 1st January 2005. The transitional provisions of HKFRS 3 have required the Group to eliminate the carrying amount of accumulated amortisation of RMB34,786,000 with a corresponding decrease in goodwill. Amotisation of goodwill for the period ended 30th June 2005 would have been approximately RMB16,104,500 if goodwill were amortised. HKFRS 3 is applied prospectively, accordingly, comparative figures for 2004 have not been restated.

The preparation of the unaudited condensed consolidated financial information in conformity with the new HKFRSs requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the Group’s accounting policies. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the unaudited condensed consolidated financial information include provision for doubtful debts, provision for taxation, provision for asset impairment and fair values of financial assets at fair value through profit or loss.

2. ADOPTION OF GOING CONCERN BASIS

The Group recorded a net loss of RMB21,148,000 for the period and had overdue bank loans totaling RMB24,426,000 as at 30th June 2005. Notwithstanding this, the financial statements have been prepared on the assumption that the Group will continue to operate as a going concern. In the opinion of Directors, the Group will have sufficient working capital to continue its operations in the coming year, after taking into consideration that the Group is currently negotiating with its bankers to extend and re-schedule the repayment terms of certain bank loans and borrowings which either have been overdue for payment at the balance sheet date or will be due for repayment in the coming year. The Group is also in the course of discussion with some of its bankers to apply for additional credit facilities. The Directors anticipate that the Group will be able to maintain the existing credit facilities and obtain additional credit facilities from its bankers.

The Directors believe that the aforementioned financing plans and operational measures will be successful and the principal bankers will continue to support the Group. Having regard to the cash flow projections of the Group, which are prepared based on the key assumptions that these measures will succeed, the Directors are of the opinion that, in the light of the measures taken to date, together with the expected results of other measures in progress, the Group will have sufficient cash resources to satisfy its future working capital and other financing requirements. Accordingly, the financial statements have been prepared on a going concern basis.

Should the Group be unable to generate sufficient cash flows and/or secure the support of its bankers, the Group might not be able to continue its business as a going concern. Adjustments would have to be made in the financial statements to restate the value of the assets to their recoverable amounts, to provide for any further liabilities which might arise, and to reclassify non-current assets and liabilities as current assets and liabilities respectively.

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3. TURNOVER AND SEGMENT INFORMATION

For management purposes, the Group is currently organised into three operating divisions. These divisions are the basis on which the Group reports its primary segment information.

Principal activities are as follows:

Property development – development and sale of properties

Education projects – leasing of campus and equipment, and investment and management of education projects

Cemetery development – development and lease of tomb sets and niches for cremation urns

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

Segment information about these businesses is presented below:

	Six	months ended 30th June (Unaudited)	months ended 30th June (Unaudited)	months ended 30th June (Unaudited)	months ended 30th June (Unaudited)
	Turnover		Segment results
	2005	2004	2005		2004
	RMB’000	RMB’000	RMB’000		RMB’000
Property development	4,898	13,381	(675)		(2,771)
Education projects	8,391	3,750	5,106		(7,021)
Cemetery development	530	–	(2,893)		–
Others	3,263	1,095	(576)		(1,891)
	17,082	18,226	962		(11,683)
Interest income			173		5,067
Unallocated corporate expenses			(8,543)		(32,157)
Loss from operations			(7,408)		(38,773)
Finance cost			(14,132)		(22,573)
			(21,540)		(61,346)

4. LOSS FROM OPERATIONS

	Six months	ended 30th June	ended 30th June
	2005		2004
	RMB’000		RMB’000
	(Unaudited)		(Unaudited)
Loss from operations has been arrived at after charging/(crediting):
Amortisation of goodwill	–		1,631
Depreciation of fixed assets	2,531		5,650
Amortisation of investments in unconsolidated subsidiaries	–		14,250
Total depreciation and amortization	2,531		21,531
Interest income from bank deposits	(173)		(5,067)

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5. TAXATION

Six months ended 30th June	Six months ended 30th June
2005	2004
RMB’000	RMB’000
(Unaudited)	(Unaudited)

Taxation comprises: The Company and its subsidiaries – PRC enterprise income tax – Deferred taxation	– (392) (392)	– (392) (392)

• “PRC” denotes the People’s Republic of China.

No provision for Hong Kong profits tax had been made as the Group’s income neither arose in, nor derived from, Hong Kong.

Taxation of the Group arising in the PRC was calculated at the rates of 15%-33%. As the Group did not derive any assessable profit for the period, no provision for PRC enterprise income tax had been made.

6. DIVIDEND

The Board resolved not to declare any dividend for the current interim period.

7. LOSS PER SHARE

The calculation of loss per share for the period is based on the loss attributable to the shareholders of the Company for the period of RMB19,778,000 (six months ended 30th June 2004: RMB60,407,000) and the number of 1,020,400,000 shares (2004: 1,020,400,000 shares) in issue during the period.

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

MANAGEMENT DISCUSSION AND ANALYSIS

• During the Period, the turnover of the Group amounted to approximately RMB17,082,000 (2004 Period: RMB18,226,000), representing a decrease of approximately 6.28%;

• During the Period, loss after taxation and minority interests amounted to approximately RMB19,778,000 (2004 Period: RMB60,407,000), representing a decrease in loss of approximately 67.26%;

• During the Period, loss per share was approximately RMB0.02 (2004 Period: RMB0.06), representing a decrease in loss of approximately 66.67%.

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1. Real Estate Development Business

During the Period, the Group focused its works on the completion and inspection of the residential project “Water-Flowers City” and the project “Cosmo International Mansion” in Shenyang, and the preliminary preparation of project “Scenic Bay” in Beijing.

During the Period, the primary focus of the Group in relation to project “WaterFlowers City” in Shenyang was the completion and inspection and the occupation arrangement for the phase two project. The primary focus of the Group in relation to Shenyang “Cosmo International Mansion” was the completion of reconstruction and the last stage completion and inspection . The decoration and ornament works for the mansion and its podium have basically been completed and the leasing has already begun. Rental income of the podium amounted to RMB1,976,000, while 30 units of the mansion have been leased, recording a rental income of RMB492,000.

The project “Scenic Bay” in Beijing covers an area of 129,000 square meters and the planned gross floor area is around 195,000 square meters. Affected by the national macro-economic control policies (policy adjustments regarding suspension of the application, approval and construction of all real estate development projects in Beijing), the procedure of land approval for the project was not completed as scheduled, leading to the delay of construction work. At present, Beijing Diye Real Estate Development Company Limited has obtained approval for land requisition from the relevant government authorities, and the subsequent work is under planning.

2. Education Investment Business

During the Period, major projects of Shenyang Development Beida Education Science Park (“Shenyang Education Park”), invested by Shenyang Development Beida Education Science Park Company Limited (“Shenyang Education”), were basically completed in August 2004, and is now undergoing last stage of completion and inspection. Shenyang Beida Jade Bird School (“Shenyang School”) formally commenced school in September 2004, and is now under active preparation for 2005 enrollment.

During the Period, the completion and inspection for acceptance of works for the first phase project of Zhuhai Beida Education Science Park (“Zhuhai Education Park”) has finished, and now is in the process of applying for Housing Ownership Certificates for the first phase project. At the same time, Zhuhai Beida Subsidiary Experiment School (“Zhuhai School”) is now under preparation for 2005 enrollment. During the Period, Zhuhai School has paid Zhuhai Beida Education Science Park Company Limited (“Zhuhai Education”) a rental fee amounting to RMB7,500,000.

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During the Period, the commencement of the project construction of Shanghai Beida Education Science Park (“Shanghai Education Park”) was delayed as a result of the Shanghai municipal government’s adjustment to the land use policy of substantial projects. However, after active negotiation and communication with relevant Shanghai government authorities, Shanghai Education Park has progressed well with its review and approval work, and is now undergoing preconstruction application work.

3. System Integration Business

During the Period, Shenyang Beida Jade Bird Business Information System Company Limited (“Shenyang Business Information”) has signed 30 project contracts with a contract sum of RMB5,321,200 and a total income of RMB3,262,800. Its accumulated loss amounted to RMB546,600. During the Period, Shenyang Business Information passed the test conducted by Liaoning Provincial Information Industry Bureau on three software products, including Beida Jade Bird Medical Insurance Management Information System, Beida Jade Bird Unemployment Insurance Management Information System, and Beida Jade Bird Labor Forces Market Management Information System, and obtained the product inspection reports. During the Period, Shenyang Business Information has commenced various operations principally relating to system integration and the R&D and sales of software. It is expected that competition in the IT industry will remain intensive in the second half of the year. Shenyang Business Information will actively develop new software products and put more efforts on the sales of existing software business, so as to improve operation results and turn loss to profit as soon as possible.

4. Cemetery Development Business

During the Period, Shenzhen Xili Baoen Fu Di Cemetery Company Limited (“Xili Cemetery”) realized a sales income of RMB8,244,200, sold 140 plots and generated a total profit of RMB451,000. During the Period, while enhancing construction of sales system and putting more efforts on marketing in the local markets, Xili Cemetery began to explore the Hong Kong market through promotion on major plain medias and setting up effective agent networks and sales team. On the other hand, the company made appropriate investment in the further improvement of cemetery’s environment and service level and grading. Based on the above, it is expected that Xili Cemetery will increase its sales income in the second half of the year.

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THE GROUP’S LIQUIDITY AND FINANCIAL RESOURCES

1. Borrowing Level and Analysis at the Balance Sheet Date

As at 30 June 2005, the Group’s bank borrowings totaled RMB379,926,000 (As at 31st December 2004: RMB708,858,000), of which RMB200,000,000 were loans secured by the Company’s bank deposits of RMB71,053,300, and loans in the amount of RMB39,000,000 were secured by the podium portion of the Company’s Cosmo International Mansion. Among the abovementioned borrowings, borrowings repayable within one year bear interest at 5.31% to 6.138% per annum, and borrowings repayable within two years bear interest at 5.49% to 6.039% per annum.

Bank borrowings payable as follows Overdue Within one year The second year 2. Financial Indicators and Basis of Calculation Financial Indicators Basis of Calculation Gearing ratio Total liabilities/ total assets x 100% Earnings/net assets ratio Net profit/ net assets x 100% Sales profit margin Net profit/sales x 100%	As at As at 30th June 31st December 2005 2004 RMB’000 RMB’000 24,426 199,638 355,500 338,220 – 171,000 379,926 708,858 As at As at 30th June 31st December 2005 2004 38.89% 43.09% -1.25% -11.32% -123.80% -552.21%

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CAPITAL STRUCTURE OF THE GROUP

Items Share capital Share premium Statutory surplus reserve Statutory public welfare reserve Accumulated profits Minority interests Total capital	As at 30th June 2005 Percentage of Amount Total Capital RMB’000 1,020,400 60.27% 323,258 19.09% 69,069 4.08% 34,535 2.04% 186,889 11.04% 58,849 3.48% 1,693,000 100%	As at 31st December 2004 Percentage of Amount Total Capital RMB’000 1,020,400 59.23% 323,258 18.77% 69,054 4.00% 34,528 2.00% 215,345 12.50% 60,219 3.50% 1,722,804 100%	As at 31st December 2004 Percentage of Amount Total Capital RMB’000 1,020,400 59.23% 323,258 18.77% 69,054 4.00% 34,528 2.00% 215,345 12.50% 60,219 3.50% 1,722,804 100%
			100%

DETAILS OF THE GROUP’S ASSETS SECURED/PLEDGED

At 30th June 2005, the secured/pledged asset of the Group were properties on the first to fifth floor of Cosmo International Mansion held by Shenyang Pollon Finance Building Management Company Limited.

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 2005, the exchange rate of Renminbi to Hong Kong dollar was stable as a whole, and the exchange rate of the Hong Kong dollar to Renminbi experienced slight fluctuations during the Period. Accordingly, the risks of the Company’s deposits in Hong Kong dollars were 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 was subject to pay income tax at the prevailing tax rate of 15%-33% in the PRC.

SIGNIFICANT INVESTMENTS HELD

During the Period, the Group held 8.00% equity interest in Tsinghua Unisplendour Hi-Tech Venture Capital Inc. (“THCI”) with investment cost of RMB20,000,000 (31st December 2004: RMB20,000,000). During the Period, THCI has recorded a loss of RMB3,133,000, representing a loss decrease of RMB1,747,000 as compared with that of the Corresponding Period.

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

As at 30th June 2005, the Group employed a total of 275 employees (including the directors of the Company) and provided them with emoluments totalling approximately RMB5,227,780 during the Period (2004 Period: RMB4,022,000). 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 employees 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

During the Period, there was no material change in composition of the Group.

USE OF PROCEEDS ARISING FROM THE ISSUE OF H SHARES

The issue of 420,400,000 H Shares of the Company in December 1999 raised net proceeds of RMB684,256,000. Since then, no proceeds were raised by means of issuing new shares. In the extraordinary general meeting of the Company convened on 20th August 2002, the Company approved the resolution to change the intended use of proceeds amounting to RMB200,000,000, which was the remaining unused net proceeds of the total amount of RMB489,000,000 originally intended to be used for Shenyang Water Company Limited (“Shenyang Water”). As at 30th June 2005, the Company had made investments totalling approximately RMB593,230,000 (As at 30th June 2004: RMB593,230,000), of which:

1. RMB231,951,000 had been applied to invest in the acquisition of No. 8 Water Plant (as defined in the Prospectus of the Company published on 7th December 1999, the “Prospectus”);

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

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

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

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

6. The balance was used as working capital.

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PROSPECTS OF THE SECOND HALF OF 2005

In the second half of the year, the Group’s operation will focus on the following:

1. To enhance internal management and cut costs and expenses, to strengthen sales and maximize the use of assets, to complete the construction and sales of existing real estate projects as soon as possible;

2. To actively explore new sources of income and to increase the incomes from education investment business such as Shenyang Education, Zhuhai Education etc;

3. To integrate marketing and management system, to actively develop Hong Kong market, such that sales income of Xili Cemetery will increase remarkably;

4. To enforce external cooperation and to seek new source of profit growth so that general operation of the Group will improve as soon as possible.

PURCHASE, SALE OR REDEMPTION OF SHARES

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

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

As at 30th June 2005, 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 which is 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.

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SHARE CAPITAL STRUCTURE

During the Period, there was no change in the share capital structure of the Company. As at 30th June 2005, the share capital structure of the Company was as follows:

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

SUBSTANTIAL SHAREHOLDERS

As at 30th June 2005, 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:

			Percentage to Total
	Beneficial Owners	Shares	Issued Share Capital
1.	Shenyang Public Utility Group	600,000,000	58.80%
	Company Limited (“SPU”)	State shares
		(unlisted shares)
2.	Shenyang Urban Infrastructure Facility	600,000,000	58.80%
	Construction Investment Development	State shares
	Company Limited
	(“Shenyang Urban Construction”)(Note 1)
3.	Beijing Beida Hi-tech Industry Investment	600,000,000	58.80%
	Company Limited (“Beida Hi-Tech”)	State shares
	(Note 2)
4.	Weifang Beida Jade Bird Huaguang	600,000,000	58.80%
	Technology Company Limited	State shares
	(“Jade Bird Huaguang”)(Note 3)
5.	HKSCC Nominees Limited_(Note 4)_	418,529,990	41.02%
		H shares
		(listed shares)

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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. Jade Bird Huaguang is a joint stock limited company established in the PRC. It holds 57.69% 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, Jade Bird Huaguang is regarded as holding interests in the underlying shares of the Company held by SPU.

4. As notified by HKSCC Nominees Limited, as at 30th June 2005, 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:

5. (1) Tai Fook Securities Company Limited as nominee holds 104,174,000 H shares, representing 24.78% of the issued H shares of the Company, of which Sino-French Water Development (Liaoning) Company Limited beneficially owned 88,146,000 H shares, representing 20.97% of the issued H shares of the Company.

6. (2) The Hong Kong and Shanghai Banking Corporation Limited as nominee holds 49,227,000 H shares, representing 11.71% of the issued H shares of the Company.

7. (3) Shenyin Wanguo Securities (H.K.) Limited as nominee holds 28,352,000 H shares, representing 6.74% 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 which are 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 2005.

CONNECTED TRANSACTIONS

During the Period, the connected transaction of the Group was shown as follows:

Zhuhai Education rented properties and equipment of phase one of Zhuhai Education Park to Zhuhai School at a rental of RMB7,500,000.

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The Board considered that:

1. the aforesaid connected transaction was conducted on normal commercial terms (by reference to terms of similar transactions conducted by similar entities in the PRC) in the ordinary and usual course of business of the Company in accordance with the terms of the agreement or terms that were no less favorable than those available to third parties and were fair and reasonable so far as the independent shareholders of the Company were concerned; and

2. the amount of the connected transaction did not exceed the cap in respect of the waiver for the connected transaction granted by the Hong Kong Stock Exchange.

COMPLIANCE WITH THE CODE ON CORPORATE GOVERNANCE PRACTICE UNDER THE LISTING RULES

The Board is pleased to confirm that the Company has referred to the Code on Corporate Governance Practices as set out in Appendix 14 of the Rules Governing the Listing of Securities on the Stock Exchange of Hong Kong Limited (“Listing Rules”) during the Period, and the Board is convinced that the Group has complied with the principles and provisions of the Code on Corporate Governance Practices in general during the Period.

MODEL CODE FOR SECURITIES TRANSACTIONS BY DIRECTORS OF LISTED ISSUERS

During the Period, the Company has adopted the Model Code for Securities Transactions by Directors of Listed Issuers (the “Code”) in Appendix 10 of the Listing Rules to govern the purchase and sales of the Company’s securities by the directors and supervisors of the Company. The Company has also issued enquiry in writing with each director and supervisor as to whether he/she has fully observed the Code. Each of the director or supervisor has replied to the Company in writing confirming that he/she has fully observed the Code and no violation of the Code has occurred.

AUDIT COMMITTEE

The Company held a board meeting to make adjustment to the Audit Committee on 28th September 2004 and finally gained approval of the Shareholders’ General Meeting on 15th November 2005. As such, the Audit Committee is now in compliance with the newly revised Rule 3.21 of Chapter 3 of the Listing Rules which came into effect on 31st March 2004.

On 23rd August 2005, the Company’s Audit Committee convened a meeting to review the unaudited interim accounts of the Group for the Period. The Audit Committee considered that the accounting principles and methods adopted and the internal monitoring mechanism and financial reporting of the Group are in line with the relevant requirements of the relevant accounting regulations.

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MATERIAL LITIGATION

On 24th January 2005, the Company and Shenzhen Development Bank Dalian Branch (the “Plaintiff”) reached a settlement of the claim and counterclaim in relation to the dispute on the Loan (details are set out in the announcement of the Company dated 12th July 2005). On 28th January 2005, the Company obtained the release of the cash held in various banks from sequestration and detainment. As at 28th April 2005, the Company has repaid an aggregate amount of RMB50,000,000 to the Plaintiff. Around 28th April 2005, the Plaintiff sequestrated an amount of RMB155,000,000 from Liao Ning Hua Jin Hua Gong Group Company Limited, one of the guarantors of the Loan. From then on, the Plaintiff has already received the outstanding amount due under the Loan and interest from the Company and its guarantors for the Loan.

On 17th May 2005, that guarantor began to take measures against the Company and its related parties to protect its security as a result of the sequestration of its monies by the Plaintiff and the guarantee it gave for the Loan.

At present, the Company and Beijing Beida Jade Bird Company Limited, an indirect shareholder of the Company, are in negotiations with that guarantor on the above matters and repayment but has not reached any final agreement.

EXTRAORDINARY GENERAL MEETINGS

During the Period, no extraordinary general meeting was held by the Company.

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 the Listing Rules.

By order of the Board Xu Er Hui Chairman

Shenyang, the PRC, 25th August 2005

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The Members of the Board and Supervisory Committee of the Company are as follows:

Executive Directors

Mr. Xu Er Hui, Mr. Zhang Jian Bo, Mr. Zhang Ying Jian, Mr. Wang Se, Mr. Geng Jian Wei and Mr. Chen Shu Xin

Non-executive Directors

Dr. Michel P. Detay and Mr. Zhang Wan Zhong

Independent Non-executive Directors

Mr. Cheng Wei, Mr. Choy Shu Kwan, Wilson and Mr. Cui Yan

Supervisors

Ms. Li Shu Lian, Mr. Zhao Xue Zhi, Mr. Lin Dong Hui and Mr. Yang Zhi An

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

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