CMON Limited — Interim / Quarterly Report 2006

Oct 24, 2008

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)

(Stock code: 747)

ANNOUNCEMENT OF INTERIM RESULTS FOR THE SIX MONTHS ENDED 30TH JUNE 2006

FINANCIAL HIGHLIGHTS

• The Company’s share were listed in the main board of the Stock Exchange of Hong Kong Limited (“the Stock Exchange”) in December 1999, and the Company raised net proceeds of approximately HKD700 million.

• Income of the Group in the Period was RMB7,594,000, representing a year on year decrease of approximately 55.54%. Property business contracted during the Period, while education business remained stable and plots leasing business kept growing.

• Loss attributable to shareholders of the Company amounted to approximately RMB12,074,000, representing a decrease of 38.95%.

• The Board resolved that no dividend would be declared for the interim period ended 30th June 2006.

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The board of directors (“the Board”) of Shenyang Public Utility Holdings Company Limited (“the Company”) is pleased to present the unaudited interim results of the Company for the six months ended 30th June 2006, together with the comparative figures for the corresponding period in 2005, as follows:

CONDENSED CONSOLIDATED INCOME STATEMENT

For the six months ended 30th June 2006

Note Turnover 3 Other operating income Cost of properties sold Taxes on sales of properties Other operating expenses Loss from operations Finance costs Loss before taxation Taxation 4 Loss after taxation Loss attributable to: Shareholders of the Company Minority interests Loss per share – basic 6	Six months ended 30th June 2006 2005 (Unaudited) (Unaudited) RMB’000 RMB’000 7,594 17,082 30 364 (5,930 ) (9,646 ) (316 ) (394 ) (8,521 ) (14,814) (7,143 ) (7,408 ) (6,833 ) (14,132) (13,976 ) (21,540 ) (51 ) 392 (14,027 ) (21,148 ) (12,074 ) (19,778 ) (1,953 ) (1,370) (14,027 ) (21,148 ) RMB(0.01 ) RMB(0.02)

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CONDENSED CONSOLIDATED BALANCE SHEET

As at 30th June 2006

Note Non-current assets Property and equipment Investment properties Prepaid lease payments on land use rights Available-for-sale financial assets Current assets Properties held for sale Inventories Accounts receivable 7 Amount due from the holding company Prepaid lease payments on land use rights Prepayments Other receivables 8 Tax receivables Other current assets Pledged bank deposits Bank balances and cash Current liabilities Accounts payables 9 Investment costs payable Other payables and accrued charges Receipts in advance Deferred income 10 Estimated liabilities Bank loans – repayable within one year 11 Long-term liabilities – repayable within one year Net current assets	As at 30th June 2006 (Unaudited) RMB’000 187,120 378,469 91,880 20,000 677,469 604,424 – 2,000 – – 3,665 269,377 – 4,395 – 13,959 897,820 117,801 39,512 547,011 124,319 45,895 18,361 152,668 49,975 1,095,542 (197,722 ) 479,747	As at 31st December 2005 (Audited) RMB’000 160,863 390,930 91,880 20,000 663,673 266,768 361 674 268,194 2,564 102,561 188,937 2,059 5,720 71,598 9,053 918,489 58,744 39,512 350,502 232,048 33,895 21,890 338,290 – 1,074,881 (156,392) 507,281

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CONDENSED CONSOLIDATED BALANCE SHEET

As at 30th June 2006

Note Equity Share capital Reserves Equity attributable to shareholders of the Company Minority interests Total equity Non-current liabilities Bank loans – repayable after one year 11 Deferred taxation 12	As at 30th June 2006 (Unaudited) RMB’000 1,020,400 (602,011 ) 418,389 37,884 456,273 – 23,474 23,474 479,747	As at 31st December 2005 (Audited) RMB’000 1,020,400 (589,937) 430,463 39,837 470,300 13,200 23,781 36,981 507,281

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CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

For the six months ended 30th June 2006 (Unaudited)

At 1st January 2005 Loss for the Period At 30th June 2005 At 1st January 2006 Loss for the Period As at 30th June 2006	Equity attributable to shareholders of the Company Statutory Statutory public Share Share surplus welfare Accumulated capital premium reserve reserve profits RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 1,020,400 323,258 69,054 34,528 212,353 – – – – (19,778 ) 1,020,400 323,258 69,054 34,528 192,575 1,020,400 323,258 69,054 34,528 (1,016,777 ) – – – – (12,074 ) 1,020,400 323,258 69,054 34,528 1,028,851	Equity attributable to shareholders of the Company Statutory Statutory public Share Share surplus welfare Accumulated capital premium reserve reserve profits RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 1,020,400 323,258 69,054 34,528 212,353 – – – – (19,778 ) 1,020,400 323,258 69,054 34,528 192,575 1,020,400 323,258 69,054 34,528 (1,016,777 ) – – – – (12,074 ) 1,020,400 323,258 69,054 34,528 1,028,851	Equity attributable to shareholders of the Company Statutory Statutory public Share Share surplus welfare Accumulated capital premium reserve reserve profits RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 1,020,400 323,258 69,054 34,528 212,353 – – – – (19,778 ) 1,020,400 323,258 69,054 34,528 192,575 1,020,400 323,258 69,054 34,528 (1,016,777 ) – – – – (12,074 ) 1,020,400 323,258 69,054 34,528 1,028,851	Minority interests RMB’000 60,219 (1,370 ) 58,849 39,837 (1,953 ) 37,884	Total RMB’000 1,719,812 (21,148 ) 1,698,664 470,300 (14,027 ) 456,273
	Share capital RMB’000 1,020,400 – 1,020,400 1,020,400 – 1,020,400	Share premium RMB’000 323,258 – 323,258 323,258 – 323,258	Statutory surplus reserve RMB’000 69,054 – 69,054 69,054 – 69,054

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NOTES TO THE CONDENSED FINANCIAL STATEMENTS

For the six months ended 30th June 2006

1. Accounting policies and basis of preparation

The unaudited condensed consolidated financial statements of the Group has been prepared in accordance with new Hong Kong Financial Reporting Standards (“HKFRSs”), Hong Kong Accounting Standards (“HKAS”) and Interpretations issued by the Hong Kong Institute of Certified Public Accountants, and the disclosure requirements of the Rules Governing the Listing of Securities on the Stock Exchange of Hong Kong Limited, which are effective for accounting periods beginning on or after 1st January 2005. The accounts have been prepared under historical cost convention, except for certain financial instruments which are measured at their fair values.

The preparation of the unaudited condensed consolidated financial statements in conformity with the HKFRSs requires the use of certain critical accounting estimates. It also requires management to exercise its judgment 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 financial statements 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 the loss attributable to the shareholders of the Company of RMB12,074,000 for the Period and had overdue bank loans of RMB21,740,000 as at 30th June 2006.

The management of the Company has taken the following measures:

• (i) Carry out debt restructuring with its creditors. Up to the date of approval of these consolidated financial statements, the Group has reached agreements with its creditors in respect of debt restructuring and the court litigations have been discharged. Therefore, these consolidated financial statements have been prepared on the assumption that the Group will continue to operate as a going concern;

• (ii) The management of the Company is considering to strengthen the capital base of the Company and provide immediate cash flow through various financing activities and capital restructuring, including, but not limited to, private placement of the Company’s shares;

• (iii) The management of the Company continues to take action to strengthen cost control in respect of various administrative and other operating expenses, and is actively seeking new investment and business opportunities to pursue profitable businesses that would bring positive cash flow.

The management of the Company believes 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 working capital to finance its operations and remain as a going concern in the foreseeable future. Accordingly, notwithstanding that the Group had recorded a significant amount of loss for the year on continuous operations and had overdue outstanding debts as at 30th June 2006, the management of the Company is of the opinion that it is appropriate to prepare these consolidated financial statements on a going concern basis.

3. Turnover and segment information

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

Principal activities are as follows:

Property development – development, sale, rental and management 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 significant business and other transactions between the segments for both periods.

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For the six months ended 30th June 2006 (Unaudited)

Property development RMB’000 Turnover 1,977 Segment results 488 Unallocated corporate expenses Operating loss Finance costs Loss before taxation Taxation Loss after taxation	Education Cemetery projects development RMB’000 RMB’000 2,000 612 (879 ) (2,856 )	Others Consolidated RMB’000 RMB’000 3,005 7,594 (901 ) (4,148 ) (2,995) (7,143 ) (6,833) (13,976 ) (51) (14,027 )

For the six months ended 30th June 2005 (Unaudited)

Property development RMB’000 Turnover 4,898 Segment results (675 ) Interest income Unallocated corporate expenses Operating loss Finance costs Loss before taxation Taxation Loss after taxation	Education Cemetery projects development RMB’000 RMB’000 8,391 530 5,106 (2,893 )	Others Consolidated RMB’000 RMB’000 3,263 17,082 (576 ) 962 173 (8,543 ) (7,408 ) (14,132) (21,540 ) 392 (21,148 )

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4. Taxation

Taxation comprises : The Company and its subsidiaries – PRC enterprise income tax – Deferred taxation	Six months ended 30th June (Unaudited) (Unaudited) 2006 2005 RMB’000 RMB’000 – – (307 ) (392 ) (307 ) (392 )

• “PRC” represents 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 was 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.

5. Dividends

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

6. Loss Per Share

The calculation of loss per share for the period is based on the loss attributable to shareholders of the Company for the period of RMB12,074,000 (loss for the six months ended 30th June 2005: RMB19,778,000) and the number of 1,020,400,000 shares (2005: 1,020,400,000 shares) in issue during the period.

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

7. Accounts receivables

As at the balance sheet date, the Group’s accounts receivables mainly represent the amounts due from buyers of the Group’s developed properties held for sale, rental receivable for leasing of campus and equipment and amounts acquired through the acquisition of subsidiaries. The Group allows an average credit period of 30 days (2005: 30 days) to the buyers of the Group’s developed properties.

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An aged analysis of accounts receivables of the Group at the balance sheet date is set out as follows:

0-30 days 31-60 days 61-365 days 1-2 years Over 2 years Provision for bad and doubtful debts Net amount of accounts receivables	At 30th June 2006 RMB’000 333 333 2,112 1,134 10,620 14,533 (12,533 ) 2,000	At 31st December 2005 RMB’000 551 228 1,134 10,161 1,133 13,207 (12,533) 674

The management considered the carrying amount of accounts receivables approximates to their fair value.

8. Other receivables

Other receivables are unsecured, interest free and have no fixed repayments terms.

The management considered the carrying amount of other receivables approximates to their fair value.

9. Accounts payables

An aged analysis of accounts payables of the Group at the balance sheet date is set out as follows:

0-90 days 91-180 days 180-365 days 1-2 years Over 2 years	At 30th June 2006 RMB’000 – – – 42,587 75,214 117,801	At 31st December 2005 RMB’000 – – 43,972 10,266 4,506 58,744

The management considered the carrying amount of accounts payables approximates to their fair value.

10. Deferred income

The land on which the cemetery business is situated in a leasehold land with a medium lease terms expiry until 10th May 2048. The Group develops tomb sets and niches for cremation urns on the land and conveys to the lessees for the period as same as the lease terms of the land. The rental income is wholly received from the leasee when the legally binding contract is signed. Such rental income is recognized on a straight-line basis over the relevant lease terms. The rental income received but not yet recognized to income statement is classified as deferred income in the balance sheet.

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11. Bank loans

During the period, the Group obtained new bank loans of RMB89,330,000 and repaid RMB95,150,000. The loans bear interest at market rates and are repayable within 1 year. Out of the outstanding amount, RMB21,740,000 was overdue. The bank loans were used as the Group’s working capital.

12. Deferred taxation

At 1st January 2005 Credited to income statement At 30th June 2005 Credited to income statement At 31st December 2005 and 1st January 2006 Credited to income statement for the period As at 30th June 2006 Share capital Registered, issued and fully paid: 600,000,000 State shares of RMB1.00 each 420,400,000 H shares of RMB1.00 each	Fair value adjustment on business combination RMB’000 62,817 (392) 62,479 (38,698) 23,781 (307) 23,474 At At 30th June 31st December 2006 2005 RMB’000 RMB’000 600,000 600,000 420,400 420,400 1,020,400 1,020,400

13. Share capital

There were no movements in the share capital of the Company in both the current and the prior interim reporting periods.

14. Capital Commitments

At the balance sheet date, there were capital commitments contracted but not provided for in the financial statements:

Acquisition of fixed assets/construction costs Acquisition of a parcel of land	At 30th June 2006 RMB’000 2,517 59,397 61,914	At 31st December 2005 RMB’000 2,517 59,397 61,914

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15. Related party transactions

Related parties include the Group’s subsidiaries, the Group’s holding companies and their subsidiaries, other statedowned enterprises and their subsidiaries directly or indirectly controlled by the PRC government, other corporations in which the Company is able to control or exercise significant influence in making financial and operating decisions, and under the control and influence of key management personnel of the Company, the Group and its holding companies as well as their close family members.

The related parties of the Group are as follows:

Name of company

Relationships with the Company

Shenyang Public Utility Group Company Limited (“SPU”) Holding company of the Company Beijing Beida Hi-Tech Industry Investment Company Limited Shareholder of SPU (“Beida Hi-Tech”) Weifang Beida Jade Bird Huaguang Technology Holding company of Beida Hi-Tech Company Limited (“Jade Bird Huaguang”) Beijing Beida Jade Bird Company Limited (“Beida Jade Bird”) Shareholder of Jade Bird Huaguang Beijing Tianqiao Beida Jade Bird Technology Company Limited Shareholder of Jade Bird Huaguang (“Beijing Tianqiao”) Beijing Beida Education Investment Company Limited Subsidiary of Beida Jade Bird (“Beida Education Investment”) Zhuhai Beida Subsidiary Experiment School (“Zhuhai School”) Branch of Beida Education Investment Zhuhai Science and Education Ltd. Subsidiary of Beida Education Investment Beijing Teli Investment Management Ltd. (“Beijing Teli”) Subsidiary of Beida Jade Bird Shenzhen Sangxia Computer and AI Development Ltd (“Shenzhen Sangxia”) Subsidiary of Beida Jade Bird Shenyang Shenhai Hot Electricity Company Limited Former jointly controlled entity of the Company (“Shenhai Co-generation”) Liaoning Hua Jin Hua Gong Group Company Limited (“Hua Jin”) Other state-owned enterprise Beijing Peking University Resource Group Company Limited Other state-owned enterprise

In addition to the related party information shown elsewhere in the unaudited combined condensed financial statements, the following is a summary of significant related party transactions entered into between the Group and its related parties and the balances arising from related party transactions:

• a. During the period, the Group received rental income of RMB2,000,000 (the corresponding period in 2005: RMB2,000,000) from Zhuhai School for leasing of campus with related equipment.

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• b. As at balance sheet date, the outstanding balances with related parties are as follows:

Name of related parties Amount due from holding company SPU Accounts receivables Shenhai Electricity and Heat Beijing Teli Shenzhen Sangxia Beida Jade Bird Other payables and accrued charges Beida Jade Bird Beijing Teli Hua Jin Beijing Tianqiao Zhuhai School c. Compensation for the key management Short–term benefits post-employment benefit	At 30th June 2006 RMB’000 58,244 – – – – 43,748 27,170 241,380 5,400 14,730 At 30th June 2006 RMB’000 – 246 246	At 31st December 2005 RMB’000 268,194 60,000 6,450 2,115 1,498 7,061 18,760 161,380 5,400 16,546 At 31st December 2005 RMB’000 – 1,225 1,225

The remuneration of directors and key executives is determined by the administration resources and remuneration committee having regard to the performance of individuals and market trends.

16. Contingent liabilities

• a. Pursuant to the agreement for the acquisition of equity interests in Shenzhen Jingmei Industrial Development Company Limited (“Jingmei Industrial”) and Shenzhen Xili Baoen Fu Di Cemetery Company Limited (“Xili Cemetery”) (collectively refers as “Cemetery Companies”) dated 31st December 2003, all claims and debts not relating to the operations of cemetery business would be transferred out of the Cemetery Companies and taken up by the former shareholder of Cemetery Companies (the “Former Shareholder”). In 2004, the Company entered into an agreement with the Former Shareholder that a total of the Cemetery Companies’ other payables of approximately RMB24,771,000 and other receivables of approximately RMB8,785,000 would be offset against the outstanding balances of approximately RMB14,886,000 owed to the Cemetery Companies by the Former Shareholder and that the net balance of RMB1,100,000 owed to the Former Shareholder was waived.

As written confirmations from these creditors to signify their agreements to above arrangement had not yet been obtained, the Group was still primarily debtor to these liabilities. In the opinion of the Directors, as the debts had been undertaken up by the Former Shareholder, they believe that there will not have material adverse impact on the Group’s operating results and cash flows.

• b. The Group provided guarantee of RMB9,000,000 to the bank for 珠海科教’s bank borrowings. The fair value of the guarantee did not account for as financial liabilities in Consolidated Balance Sheet as the management considered the fair value of this guarantee is insignificant.

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17. Sequestration of assets/litigations

(a) The RMB200,000,000 loan dispute between the Company and Shenzhen Development Bank

On 6th December 2004, the Company received a writ of summons from the Higher People’s Court of Liaoning Province in relation to the RMB200,000,000 loan advanced by Shenzhen Development Bank Dalian branch to the Company. Liaoning Hua Jin Hua Gong Group Company Limited (“Hua Jin”) was the guarantor of the RMB200,000,000 loan. In the course of the legal action, Beijing Beida Jade Bird Company Limited (“Beida Jade Bird”), being the associates of the Company’s major shareholder, Beijing Diye Real Estate Development Company Limited (“Beijing Diye”) and Shenyang Pollon Finance Building Management Company Limited (“Shenyang Pollon”) provided another guarantee to Hua Jin for SPU. The Company has repaid RMB25,000,000 before the Civil Mediation Agreement issued by the Higher People’s Court of Liaoning Province becoming effective.

After the Civil Mediation Agreement becoming effective on 16th February 2005, the Company has repaid an additional RMB20,000,000 to Shenzhen Development Bank. On 22nd February 2005, Hua Jin paid RMB8,000,000 to Shenzhen Development Bank for the Company. On 26th April 2005, the Higher People’s Court of Liaoning Province sequestrated RMB153,380,000 from the account of Hua Jin in settlement of the loan.

As a result, the loan and interest thereof due to Shenzhen Development Bank had been fully settled.

(b) The subsequent claim from Hua Jin who acted as guarantor and paid the sum of RMB161,380,000 to Shenzhen Development Bank for the Company

Hua Jin then commenced legal action against the Company, Beida Jade Bird, Beijing Diye and Shenyang Pollon for a total sum of RMB161,380,000 it had paid to Shenzhen Development Bank Dalian branch for the Company as guarantor and the interest accrued.

On 12th December 2005, the Higher People’s Court of Liaoning Province issued the Civil Judgement (2005) Liao Min San Chu Zi No.26 民事判決書(2005)遼民三初字第26號, pursuant to which Shenyang Public Utility was liable to repay the sum of RMB161,380,000 together with interest and acceptance fee and custody fee of RMB1,624,330 to Hua Jin. Beida Jade Bird, Beijing Diye and Shenyang Pollon jointly guaranteed the repayment, and they reserved the right to recover the loss from SPU after the implementation of the liability of guarantee.

On 16th July 2007, the Higher People’s Court of Liaoning Province issued the Civil Execution Order (2006) Liao Zhi Er Zi No.53 民事裁定書(2006)遼執二字第53號, pursuant to which RMB55,000 from the Company, RMB195,000 from Beijing Diye and the sale proceeds of Beida Jade Bird’s assets and part of the sale proceeds of Shenyang Pollon’s real property from an auction were applied to settle the claim of RMB161,380,000. The amount received by Hua Jin covered the claim of RMB161,380,000, the interest in the sum of RMB22,000,000 and other fees arising from the legal action and execution in the sum of RMB3,388,730.

As a result, the judgment debt payable to Hua Jin has been fully settled.

On 17th September 2008, Beijing Diye executed a confirmation whereby (1) Beijing Diye has agreed not to claim against the Company for the assistance of RMB195,000; and (2) the assistance of RMB195,000 will be eliminated as Beijing Diye is a 80% held subsidiary of the Company.

On 17th September 2008, a settlement agreement was signed between the Company and Shenyang Pollon whereby (1) Shenyang Pollon has agreed not to claim against the Company for the assistance of approximately RMB33,000,000, being the proceeds of assets from the said auction, from the date of the settlement agreement; (2) As Shenyang Pollon is a 99.99% held subsidiary of the Company, the assistance of RMB33,000,000 will be eliminated.

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(c) Further legal action from Beida Jade Bird against the Company, Shenyang Public Utility Group Company Limited (“SPU”) and Shenzhen Jingmei Industrial Development Limited (“Shenzhen Jingmei”)

In the course of the legal action initiated by Hua Jin for the sum of RMB161,380,000, SPU and Shenzhen Jingmei provided another guarantee of not more than RMB91,000,000 to Beida Jade Bird. As mentioned above, the sale proceeds of Beida Jade Bird’s assets from an auction were applied to settle Hua Jin’s claim. On 14th May 2007, Beida Jade Bird commenced legal action against SPU and Shenzhen Jingmei for its payment to Hua Jin. On 13th June 2007, the First Intermediate People’s Court of Beijing issued the Civil Judgement (2007) Yi Zhong Min Chu Zi No.1843 民事判決書(2007)一中民初字第1843號 and handed down judgment, under which SPU and Shenzhen Jingmei were liable to discharge their liability of guarantee and pay off the claim. Up to 31st August 2008, SPU has repaid approximately RMB101,340,000 to Beida Jade Bird. The unpaid balance of the claim of Beida Jade Bird and the interest amount to approximately RMB82,000,000.

On 18th September 2008, an agreement was signed between Beida Jade Bird, Shenzhen Jingmei, SPU and the Company, whereby Beida Jade Bird has agreed not to claim against the Company for the assistance of RMB82,000,000 within two years from the date of the agreement.

(d) The two new loan disputes between the company and Guangdong Development Bank Shenyang branch (“Guangdong Development Bank”) and subsequent claims from Hua Jin

• (i) The loan dispute of RMB29,000,000 between the Company and Guangdong Development Bank

On 26th December 2005, Guangdong Development Bank commenced legal action for the RMB29,000,000 loan dispute against the Company as the borrower and Hua Jin, SPU, Beida Jade Bird and Liaoning Huajin Tongda Chemicals Co. Ltd. (“Huajin Tongda”), as the guarantors of the RMB29,000,000 loan.

On 18th February 2006, the Intermediate People’s Court of Shenyang issued the Civil Judgement (2006) Shen Zhong Min (3) He Chu Zi No.34《判決書》(2006)瀋中民三合初字第34號, pursuant to which (1) the Company was liable to repay the principal of RMB29,000,000 within 10 days from the date of judgement; (2) the Company was liable to pay the interest of the loan amounting to RMB179,916; (3) SPU, Hua Jin and Huajin Tongda jointly guaranteed the repayment of the loan and interest mentioned in (1) and (2); (4) the Company also undertook to pay the legal fee of RMB155,010 and custody fee of RMB145,520.

On 6th April 2006, RMB70,000,000 and RMB80,000,000 were sequestrated from the accounts of the Company and Hua Jin respectively in which RMB10,300,000 was repaid for the principal of the RMB29,000,000 loan and the remaining balance was used for the repayment of other RMB171,000,000 loan of Guangdong Development Bank (Please refer to section (ii) below). As such, the unpaid balances of the RMB29,000,000 loan was RMB18,700,000.

In August 2007, RMB56,461,629.47 was sequestrated from the account of Hua Jin by the Intermediate People’s Court of Shenyang in settlement of the unpaid balance at RMB29,000,000.

As a result, the RMB29,000,000 loan has been fully repaid to Guangdong Development Bank.

• (ii) The loan dispute of RMB171,000,000 between the Company and Guangdong Development Bank

In January 2006, Guangdong Development Bank commenced another legal action for the RMB171,000,000 loan dispute in the Higher People’s Court of Liaoning Province against the Company as borrower and Hua Jin, SPU, Beida Jade Bird and Huajin Tongda as guarantors of another loan in the sum of RMB171,000,000.

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On 6th April 2006, RMB70,000,000 and RMB80,000,000 were sequestrated from the accounts of the Company and Hua Jin respectively by Guangdong Development Bank in settlement of the loan. As such, the unpaid balances of the RMB171,000,000 loan was RMB30,895,693.45.

During the litigation, Guangdong Development Bank applied to the Higher People’s Court of Liaoning to withdraw the claim. The Higher People’s Court of Liaoning issued the (2006) Liao Min San Chu Zi No.31, Civil Execution Order, (2006)遼民三初字第31號《民事裁定書》to approve the withdrawal of the claim from Guangdong Development Bank.

On 12th May 2006, Guangdong Development Bank commenced legal action against the Company, Hua Jin, SPU, Beida Jade Bird and Huajin Tongda for the unpaid balance of RMB30,895,693.45 in Intermediate People’s Court of Shenyang.

On 31st January 2007, the Intermediate People’s Court of Shenyang issued the Civil Judgement (2006) Shen Zhong Min (3) He Chu Zi No.234 (2006) 瀋中民三合初字第 234 號《民事判決書》, pursuant to which (1) the Company was liable to repay the unpaid balance at RMB30,895,693.45 and the interest at RMB2,221,284.82 to Guangdong Development Bank within 10 days from the date of judgement; (2) Beida Jade Bird and SPU jointly guaranteed the payment; (3) Huajin Tongda and Hua Jin jointly guaranteed the repayment of the unpaid balance and interest mentioned in (1) but only limited to RMB50,000,000 and RMB51,300,000 respectively; and (4) the Company also undertook to pay the legal fee of RMB164,489 and custody fee of RMB160,520.

In August 2007, RMB56,461,629.47 was sequestrated from the account of Hua Jin by the Intermediate People’s Court of Shenyang in settlement of the unpaid balance of RMB30,895,693.45 and the full amount of loan and interest thereof.

As a result, the RMB171,000,000 loan has been fully repaid to Guangdong Development Bank.

• (iii) The claim of RMB80,000,000 from Hua Jin after the loan disputes between the Company and Guangdong Development Bank

RMB80,000,000 was sequestrated from the account of Hua Jin in partial settlement of the RMB29,000,000 loan and the RMB171,000,000 loan for the Company. On 12th April 2006, Hua Jin made a claim against the Company, SPU and Beida Jade Bird to recover the sum of RMB80,000,000.

In June 2006, Hua Jin reached a settlement with the Company, SPU and Beida Jade Bird, pursuant to which (1) the Company was liable to pay off Hua Jin’s claim of RMB80,000,000 together with interest before 25th November 2006; (2) in the event that the Company was unable to pay off the sum, each of the Company, SPU and Beida Jade Bird would pay one-third of the unpaid balance; the Company was liable to pay for the legal fee of RMB410,000 and custody fee of RMB400,520. The Higher People’s Court of Liaoning Province issued the Civil Mediation Agreement (2006) Liao Min San Chu Zi No.43 民事調解書 (2006)遼民三初字第43號 relating to this settlement.

• (iv) The claim of RMB80,000,000 from Hua Jin after the loan disputes between the Company and Guangdong Development Bank

Owing to the fact that the Company, SPU and Beida Jade Bird did not implement the repayment, the Railway Transport Intermediate Court of Shenyang (瀋陽鐵路運輸法院) held an auction on 29th December 2007 in which the Company’s 95% equity interest in Shenzhen Jingmei was disposed of. The proceeds from such auction in the sum of RMB83,540,000 was then applied to settle Hua Jin’s RMB80,000,000 claim together with the interest thereof, acceptance fee and enforcement fee.

On 10th March 2008, the Railway Transport Intermediate Court of Shenyang (瀋陽鐵路運輸法院) issued the Civil Execution Order (2007) Shen Tie Zhi Zi No.3-1 民事裁定書(2007)瀋鐵執指字第3-1號 and confirmed the conclusion of Hua Jin’s claim.

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• v) The claim of RMB56,461,629.47 from Hua Jin after the loan disputes between the Company and Guangdong Development Bank

RMB56,461,629.47 was sequestrated from the account of Hua Jin in settlement of the RMB29,000,000 loan and the RMB171,000,000 loan for the Company. In September 2007, Hua Jin commenced legal action against the Company, SPU and Beida Jade Bird to recover the sum of RMB56,461,629.47.

On 17th October 2007, Hua Jin reached a settlement with the Company, SPU, Beida Jade Bird, Shenyang Pollon and Beijing Mingyude Business and Trade Company Limited (“Mingyude”). The Higher People’s Court of Liaoning issued the Civil Mediation Agreement (2007) Liao Min San Chu Zi No.36 民事調解 書(2007)遼民三初字第36號 relating to this settlement, pursuant to which (1) the Company was liable to pay off Hua Jin’s claim of RMB56,460,000; (2) the Company would repay RMB32,160,000 of the claim before 30th November 2007 and in the event that the Company was unable to pay off the said amount, Mingyude would guarantee the repayment; (3) the Company was liable to repay RMB24,300,000 before 25th December 2007 and Shenyang Pollon would pledge its properties to Hua Jin to guarantee such repayment; (4) Beida Jade Bird and SPU jointly guaranteed the claim of RMB56,460,000, and in the event that the Company was unable to settle all the claim, each of SPU and Beida Jade Bird would pay one-third of the unpaid balance; (5) Hua Jin and the Company would equally share the legal fee of RMB162,054.07 and custody fee of RMB5,000.

In November 2007, Mingyude repaid RMB32,160,000 to Hua Jin for the Company.

In August 2008, the Company repaid RMB32,160,000 and the interest to Mingyude.

On 20th June 2008, Shenyang Pollon signed the Agreement of Settlement of Debts by Properties (以房 抵債協議) with Hua Jin, the Company, Beida Jade Bird and SPU, pursuant to which (1) RMB24,300,000 worth of 69 residential units of Cosmo International Mansion owned by Shenyang Pollon were sequestrated to settle Hua Jin’s claim for the Company; (b) the assistance will be eliminated as the Company holds 99.99% interest in Shenyang Pollon.

The transfer of ownership of Cosmo International Mansion to Hua Jin is still ongoing.

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MANAGEMENT DISCUSSION AND ANALYSIS

During the Period, the turnover of the Group amounted to approximately RMB7,594,000, representing a decrease of approximately 55.54% as compared with that of the corresponding period (“the Corresponding Period”) for the six months ended 30th June 2005 (“the 2005 Period”); loss after taxation and minority interests amounted to approximately RMB12,074,000, representing an increase in loss of approximately 38.95% as compared with that of the Corresponding Period; and loss per share was approximately RMB0.014, representing an increase in loss of approximately 30% as compared with that of the Corresponding Period.

Review of the Group’s Major Business

The Group is a real estate developer and an investor in education business. It is principally engaged in the development and sale of real estate and investment in and management of education. The Company’s subsidiaries, Shenyang Development Real Estate Company Limited (“Shenyang Real Estate”), Shenyang Pollon Finance Building Management Company Limited (“Building Management Company”) and Beijing Diye Real Estate Development Company Limited (“Beijing Diye”), are real estate developers in Shenyang and Beijing respectively. The Company’s subsidiaries, Shenyang Development Beida Education Science Park Company Limited (“Shenyang Education”), Zhuhai Beida Education Science Park Company Limited (“Zhuhai Education”) and Shanghai Beida Jade Bird Education Investment Company Limited (“Shanghai Education”), are investors in education business in Shenyang, Zhuhai and Shanghai respectively. The Company’s subsidiary, Shenyang Beida Jade Bird Business Information System Company Limited (“Shenyang Business Information”) is a developer of application software in Shenyang. The Company’s subsidiary, Shenzhen Jingmei Industrial Development Company Limited (“Jingmei Industrial”), is a developer of cemetery in Shenzhen through Shenzhen Xili Baoen Fu Di Cemetery Company Limited (“Xili Cemetery”). The Company’s subsidiary, Shenzhen Grand Scence Investment Development Company Limited (“Shenzhen Grand Scence”) is an industrial investor in Shenzhen. The Company’s subsidiary, Shenyang Development Property Management Company Limited (“Shenyang Property”) is a property management services provider in Shenyang.

Real Estate Development Business

During the Period, the sales and the occupation arrangement of the phase two project of Shenyang Real Estate “Water-Flowers City” was completed in early section, with the last stage improvement of construction, completion and inspection and certificate registration are still under progress. Based on the ongoing effort of the Group, the relevant registration of the phase two project of “Water-Flowers City” was finished in September 2008 and the registration of property title certificate was started.

During the Period, the last stage improvement of construction and completion and inspection of Building Management Company “Cosmo International Mansion” was the primary focus.

The “Scenic Bay” of Beijing Diye has obtained the approval for land requisition and certificate of land approval. However, it was required to sale by listing in the market due to the suspension of the “Green Belt” construction project policy of Beijing Municipal Government. Under the active negotiation of Beijing Diye, the Level 1 Development Qualification of “Scenic Bay” has been obtained.

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Education Investment Business

During the Period, Shenyang Education continued to process the last stage improvement of construction.

During the Period, Zhuhai School has paid Zhuhai Education a rental fee amounting to RMB2,000,000.

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. During the Period, the Company actively negotiated with competent authorities of Shanghai Municipal Government about the change of the land.

Technology Investment Business

During the Period, Tsinghua Unisplendour Hi-Tech Venture Capital, Inc., (“THCI”) recorded an loss of RMB2,265,000, representing a decrease in loss of approximately 27.7% as compared with that of the Corresponding Period.

Analysis of Cemetery Development Business

During the Period, Xili Cemetery realized a sales income of RMB12,612,000 and sold 214 plots.

FINANCIAL REVIEW

Operating Revenue

Income of the Period was approximately RMB7,594,000, representing a year on year decrease of approximately 55.54%. Loss attributable to shareholders of the Company amounted to RMB12,074,000, representing a decrease of 38.95% over 2005.

Income from property business in the Period was mainly derived from the rental income of 1-5 floor of Cosmo Building;

Income of Eduction projects mainly comprises the rental income of Zhuhai Education Park of RMB2,000,000;

214 plots were leased during the Period, representing an increase of 77 plots over the corresponding period last year; the business recorded a sales income of RMB12,612,000 and a profit of RMB612,000, representing an increase of 15.47% over the corresponding period last year.

Profits

Loss attributable to shareholders of the Company amounted to approximately RMB12,074,000, representing an increase of 38.95% over the corresponding period last year. The loss is due to the contraction of the property business.

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Borrowing Level and Analysis at the Balance Sheet Date

As at 30th June 2006, the Group’s bank borrowings totaled RMB202,643,000 (As at 31st December 2005: RMB351,490,000). Abovementioned borrowings bear interest at 5.3% to 7.3% per annum.

SIGNIFICANT INVESTMENTS HELD

As at 30th June 2006, the Group held 8% equity interest in THCI with investment cost of RMB20,000,000 (31st December 2005: RMB20,000,000). During the Period, THCI has recorded a loss of RMB2,265,000, representing a loss decrease of RMB868,000 as compared with that of the Corresponding Period.

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

As at 30th June 2006, the Group employed a total of 137 employees and provided them with emoluments totaling approximately RMB3,210,240 during the Period (2005 Period: RMB5,227,780). 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. To date, the Group has not adopted any share option scheme for any of its senior management or employees.

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.

PROSPECTS OF THE SECOND HALF OF 2006

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

1. To actively negotiate with the Management Committee of Shenyang Economic and Technological Development Zone and settle the land issue of Shenyang Education properly;

2. To reorganize existing assets and businesses, and maximize the use of assets;

3. To accelerate the ending work such as the last stage improvement of construction and completion and inspection of the Company’s existing property development projects.

4. To accelerate the settlement of existing litigations in order to resume the normal operation of the Company.

DIVIDEND

During the Period, no dividend was paid. The Board resolved not to declare any interim dividend in 2006.

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

Due to the suspension of trading and litigation, the Company has not complied with the Code on Corporate Governance Practices as set out in the Listing Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (“Listing Rules”) during the Period. The Directors will be committed to ensuring the Group to comply with the principles and provisions of the Code on Corporate Governance Practices in general.

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. 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.

By order of the board of Shenyang Public Utility Holdings Company Limited Wang Hui Director

24th October, 2008, Shenyang, the PRC

As at the date of this announcement, the directors of the Company are as follows:

Executive directors: Mr. An Mu Zong and Mr. Wang Zai Xing

Non executive directors: Mr. Deng Yan Bin, Mr. Lin Dong Hui and Mr. Wang Hui

Independent non executive director: Mr. Cai Lian Jun

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