CMON Limited - Interim / Quarterly Report 2011

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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)

(Stock code: 747)

ANNOUNCEMENT OF INTERIM RESULTS FOR THE SIX MONTHS ENDED 30 JUNE 2011

The board of directors (the “Board”) of Shenyang Public Utility Holdings Company Limited (the “Company”) is pleased to announce the unaudited consolidated interim results of the Company and its subsidiaries (collectively, the “Group”) for the six months ended 30 June 2011 (the “Period”).

FINANCIAL HIGHLIGHTS

For the six months ended 30 June 2011, the Group recorded a turnover of approximately RMB12,703,000, representing an increase of 60.86% compared to corresponding period in 2010.
Profit after tax and minority interests attributable to shareholders of the Company amounted to approximately RMB1,347,000 for the six months ended 30 June 2011.
The Board resolved that no dividend would be declared for the interim period ended 30 June 2011.
Earnings per share of the Group were approximately RMB0.002 for the six months ended 30 June 2011.

– 1 –

CONDENSED CONSOLIDATED INCOME STATEMENT

For the six months ended 30 June 2011

Notes
Turnover
3
Cost of properties sold
Taxes on sales of properties
Gross profit
Other operating income
Other operating expenses
Finance costs
Profit before taxation
Taxation
4
Profit after taxation
Gain on disposal of subsidiaries
Acquisition of subsidiaries
Expenditure on donation
Total profit
Of which:
Profit attributable to shareholders of the Company
Profit attributable to minority interests
Earnings per share – basic (cents)
6

Six months ended 30 June
2011
2010
(Unaudited)
(Unaudited)
RMB’000
RMB’000
12,703
7,897
(2,394)
(1,277)
(896)
(379)
9,413
6,241
7
–
(7,910)
(2,459)
80
(192)
1,590
3,590
–
(389)
1,590
3,201
–
1,468
–
37,391
–
(3,000)
1,590
39,060
1,347
38,896
243
164
0.16
3.83

– 2 –

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

Notes Profit for the year 3 Other consolidated income Exchange differences arising on translation Total comprehensive income for the period Of which: Profit attributable to shareholders of the Company 6 Profit attributable to minority interests	Six months ended 30 June 2011 2010 (Unaudited) (Unaudited) *RMB’000* RMB’000 1,590 39,060 – – 1,590 39,060 1,347 38,896 243 164	Six months ended 30 June 2011 2010 (Unaudited) (Unaudited) *RMB’000* RMB’000 1,590 39,060 – – 1,590 39,060 1,347 38,896 243 164
		39,060
		38,896
		164

– 3 –

CONDENSED CONSOLIDATED BALANCE SHEET

At 30 June 2011

Notes Non-current assets Plant and equipment Investment properties Prepaid lease payments on land use rights Available-for-sale financial assets Other non-current assets Current assets Properties held for sale Inventories Trade receivables 7 Amount due from the holding company Prepaid lease payments on land use rights Prepayments for acquisition of equity interests 8 Other receivables 9 Bank balances and cash Current liabilities Trade payables 10 Receipts in advance 11 Other payables and accrued charges Income tax payable bank borrowings – due within one year 12 Expected liabilities Net current assets Total assets less current liabilities	30 June 2011 (Unaudited) *RMB’000* 2,666 516,208 – 13,800 – 532,674 – 788 214 – – 74,000 36,821 18,298 130,121 5,435 73,990 44,343 – – 1,041 124,809 5,312 537,986	31 December 2010 (Audited) RMB’000 5,528 516,346 – 13,800 – 535,674 – – 287 – – – 39,754 19,312 59,353 5,742 10,715 40,097 1,036 – 1,041 58,631 722 536,396

– 4 –

Notes Equity Share capital Reserves Equity attributable to shareholders of the Company Minority interests Total equity Non-current liabilities Deferred taxation 13 Other non-current liabilities	30 June 2011 (Unaudited) *RMB’000* 1,020,400 (559,422) 460,978 40,672 501,650 33,105 3,231 537,986	31 December 2010 (Audited) RMB’000 1,020,400 (560,769) 459,631 40,429 500,060 33,105 3,231 536,396

– 5 –

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY For the six months ended 30 June 2011

Equity attributable to shareholders of the Company

				Statutory
			Statutory	public
	Share	Share	surplus	welfare	Accumulated	Minority
	capital	premium	reserve	reserve	profits	interests	Total
	RMB’000	RMB’000	RMB’000	RMB’000	RMB’000	RMB’000	RMB’000
At 1 January 2010	1,020,400	323,258	103,231	–	(1,016,786)	39,574	469,677
At 1 January 2010	1,020,400	323,258	103,231	–	(1,016,786)	39,574	469,677
Loss for the period				–	38,896	164	39,060
At 30 June 2010	1,020,400	323,258	103,231	–	(977,890)	39,738	508,737
At 1 January 2011	1,020,400	323,258	103,481	–	(987,508)	40,429	500,060
Earnings for
the period				–	1,347	243	1,590
At 30 June 2011	1,020,400	323,258	103,481		(986,161)	40,672	501,650

– 6 –

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

For the six months ended 30 June 2011

Net cash from (used in) operating activities Net cash from (used in) investing activities Net cash (used in) from financing activities Increase (decrease) in cash and cash equivalents Cash and cash equivalents at the beginning of the period Cash and cash equivalents at the end of the period Analysis of cash and cash equivalents at the end of the period as follows: Bank balances and cash	30 June 2011 (Unaudited) *RMB’000* 12,906 (14,000) 80 (1,014) 19,312 18,298 18,298	30 June 2010 (Unaudited) RMB’000 4,755 (12,328) (192) (7,745) 23,536 15,791 15,791

– 7 –

NOTES TO THE CONDENSED FINANCIAL STATEMENTS For the six months ended 30 June 2011

1. ACCOUNTING POLICIES AND BASIS OF PREPARATION

The unaudited condensed consolidated financial statements of the Group have 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. The standards are effective for accounting periods beginning on or after 1 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 judgment or complexity, or areas where assumptions and estimates are significant to the unaudited condensed consolidated financial statements include provision for bad or 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 profit of RMB1,590,000 for the half year ended 30 June 2011. The management of the Company has taken the following measures:

i) Up to the date of approval of these consolidated financial statements, the court litigations of the Group 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; and
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 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. The management of the Company is of the opinion that it is appropriate to prepare these consolidated financial statements on a going concern basis.

– 8 –

3. TURNOVER AND SEGMENT INFORMATION

For facilitation of management, the Group divides its businesses into two main operating segments, based on which the Group prepares all its important segment information reports.

The Group’s principal businesses are as follows:

Lease and management businesses: lease of campus and equipment; lease of office building and lease of parking space.

There have been no significant sales or other transactions made between different business segments of the Group during the past two periods.

For the six months ended 30 June 2011 (Unaudited)

Turnover Segment results Unallocated corporate expenses Profit from operations Finance costs Gain on disposal of a subsidiary Gain on acquisition of subsidiaries Expenditure on donation Profit before taxation Taxation Profit after taxation	Lease of property *RMB’000* 11,203 9,300	Education projects *RMB’000* 1,500 1,009	Others Consolidated *RMB’000* *RMB’000* – 12,703 – 10,309 8,799 1,510 80 – – – – – 1,590	Others Consolidated *RMB’000* *RMB’000* – 12,703 – 10,309 8,799 1,510 80 – – – – – 1,590
				10,309 8,799
				1,510 80 –
				– – – –
				1,590

– 9 –

For the six months ended 30 June 2010 (Unaudited)

Turnover Segment results Unallocated corporate expenses Profit from operations Finance costs Gain on disposal of a subsidiary Gain on acquisition of subsidiaries Expenditure on donation Profit before taxation Taxation Profit after taxation	Property development RMB’000 7,897 3,782	Education projects RMB’000 – –	Cemetery development RMB’000 – –	Others RMB’000 – –	Consolidated RMB’000 7,897
					3,782 –
					3,782 (192)
					1,468 37,391 (3,000)
					39,449 (389)
					39,060

4. TAXATION

Taxation of the Company and its subsidiaries comprises – PRC enterprise income tax – Deferred taxation	Six months ended 30 June 2011 2010 (Unaudited) (Unaudited) *RMB’000* RMB’000 – 389 – – – 389	Six months ended 30 June 2011 2010 (Unaudited) (Unaudited) *RMB’000* RMB’000 – 389 – – – 389
		389

“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.

5. DIVIDENDS

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

6. EARNINGS PER SHARE

The calculation of earnings per share is based on the profit attributable to shareholders of the Company for the Period of RMB1,347,000 (profit for the six months ended 30 June 2010: RMB38,896,000) and 1,020,400,000 shares in issue during the Period.

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

– 10 –

7. TRADE RECEIVABLES

As at the balance sheet date, the Group’s trade receivables mainly represent the rental receivables for leasing of campus and equipment. The Group normally allows a credit period of 30 days (2010: 30 days) for leasing of campus and equipment.

An aged analysis of trade 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 or doubtful debts Net amount of trade receivables	30 June 2011 *RMB’000* – – 214 – – – – 214	31 December 2010 RMB’000 – – 287 – –
		– –
		287

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

8. PREPAYMENTS FOR ACQUISITION OF EQUITY INTERESTS

On 11 May 2011, the Group entered into the share transfer agreement with Tianjin Zhongfang Yongyang Property Company Limited (天津中房雍陽置業有限公司) (“Tianjin Yongyang”) and Shenzhen Zhongfang Chuangzhan Investment Group Company Limited (深圳市中房創展投資集團有限公司) (“Shenzhen Chuangzhan”). Pursuant to the agreement, the Company acquired the entire equity interests in Zhongfang Chaozhou Project Investment Development Company Limited* (中房潮州項目投資開發有限公司) (“Zhongfang Chaozhou”) from Tianjin Yongyang and Shenzhen Chuangzhan (please refer to the Company’s announcement dated 11 May 2011 for further details).

During the Period, the amounts prepaid by the Group to Tianjin Yongyang and Shenzhen Chuangzhan in respect of the acquisition of the equity interests are set out as follows:

Prepayments	30 June 2011 *RMB’000* 74,000 74,000	31 December 2010 RMB’000 –
		–

For reference only

9. OTHER RECEIVABLES

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

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

– 11 –

10. TRADE PAYABLES

An aged analysis of trade 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	30 June 2011 *RMB’000* – – – – 5,435 5,435	31 December 2010 RMB’000 – – – – 5,742
		5,742

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

11. RECEIPTS IN ADVANCE

During the Period, the amounts received in advance by the Group from Shanghai Buotou and Beijing Sihai are set out as follows:

Receipts in advance	30 June 2011 *RMB’000* 60,000 60,000	31 December 2010 RMB’000 –
		–

For reference only

12. BANK LOANS

During the Period, the Group has no new bank loans.

– 12 –

13. DEFERRED TAXATION

At 1 January 2010 Credited to income statement for the Period At 30 June 2010 Credited to income statement for the Period At 1 January 2011 Credited to income statement At 30 June 2011 SHARE CAPITAL Registered, issued and fully paid: 600,000,000 state shares of RMB1 each 420,400,000 H-shares of RMB1 each	Fair value adjustment on business combination RMB’000 17,392 – 17,392 – 33,105 – 33,105 30 June 2011 31 December 2010 *RMB’000* RMB’000 600,000 600,000 420,400 420,400 1,020,400 1,020,400

14. SHARE CAPITAL

There were no movements in the share capital of the Company in both the current period and corresponding period last year.

– 13 –

15. CONNECTED PARTY TRANSACTIONS

Connected parties include the Group’s subsidiaries, holding companies and their subsidiaries, other stateowned enterprises and their subsidiaries that are directly or indirectly controlled by the PRC government, other companies that our Company may control or impose substantial influence on their financial and operational decisions, and entities and companies that are controlled and affected by the key management of our Company, our Group or its holding companies and their respective family members.

During the Period, the Group conducted the following connected transactions:

Zhuhai Education received rental income of RMB1,500,000 from Zhuhai School for leasing of Zhuhai Education’s properties and equipment. The Board considered that,

the above connected transaction was entered into by the Company in its ordinary and usual course of business in accordance with the terms of the relevant agreement, conducted on normal commercial terms (after making reference to the relevant terms of comparable transactions conducted by comparable entities in the PRC) or on terms not less favorable than those available to third parties, and was fair and reasonable as far as the independent shareholders of the Company were concerned; and
the amount of the connected transaction did not exceed the cap of the exempted connected transaction amount of the Company granted by the Hong Kong Stock Exchange previously.

The transaction ceased to be a connected transaction since Beida Jade Bird ceased to be an indirect shareholder of the Company.

Compensation of key management personnel

Short-term benefits Post-employment benefits	30 June 2011 *RMB’000* 0 0	31 December 2010 RMB’000 0 0

The remunerations of directors and key management personnel are determined by the Administrative Resources and the Remuneration Committee based on their respective performance and the market practice.

16. CONTINGENT LIABILITIES

During the Period, there was no new contingent liability.

17. ASSETS SECURED/PLEDGED

During the Period, there was no new asset secured/pledged.

– 14 –

MANAGEMENT DISCUSSION AND ANALYSIS

Review of the Group’s Financial Performance

For the six months ended 30 June 2011, the turnover of the Group amounted to approximately RMB12,703,000, representing an increase of approximately 60.86% as compared with that of the six months ended 30 June 2010 (the “2010 Period”); profit after taxation and minority interests amounted to approximately RMB1,347,000.

During the Period, the turnover from property leasing business amounted to approximately RMB11,064,000, mainly attributable to the rental income of the property located at 1st floor and 2nd floor, No.112, Jianguo Road, Beijing and Beida Jade Bird Building located at Keyuan Road in Shenzhen and rental income from Zhuhai Education.

During the Period, gross profit of the Group was RMB9,413,000, representing an increase of RMB3,172,000 as compared to 2010 Period, mainly attributable to the rental income from the property located at 1st floor and 2nd floor, No.112, Jianguo Road, Beijing and Beida Jade Bird Building located at Keyuan Road in Shenzhen during the period.

During the Period, the operating expense of the Group amounted to RMB7,910,000, representing an increase of 221.68% as compared to the corresponding period in 2010, mainly attributable to the increase in fees payable to the professional institutions.

During the Period, the Group had net cash outflow of RMB1,014,000, mainly from the increase in prepayments for acquisition of equity interests.

As at 30 June 2011, cash and cash equivalents held by the Group amounted to RMB18,298,000, up by RMB2,507,000 as compared to the same period in 2010.

The Group’s earnings/loss

During the Period, the profit after taxation and minority interests amounted to approximately RMB1,347,000, earnings per share was approximately RMB0.002.

Review of the Group’s Major Business

The Group is a real estate developer. It is principally engaged in the development and sale of real estate, leasing and management of property. The Company’s subsidiaries, Shenyang Development Real Estate Company Limited (“Shenfa Real Estate”) is a real estate developer in Shenyang. Beijing Shenfa Property Management Company Limited (“Beijing Shenfa”) and Shenzhen Jade Bird Optoelectronic Company Ltd (“Shenzhen Optoelectronic”) are service providers of property lease and property management in Beijing and Shenzhen respectively. The Company’s subsidiary, Zhuhai Beida Education Science Park Company Limited (“Zhuhai Education”) is an investor in education business in Zhuhai. During the Period, Shanghai Beida Jade Bird Education Investment Company Limited (“Shanghai Education”) was deregistered.

At early 2011, the Chinese government introduced such policies as purchase and credit limits in the first-tier cities such as Beijing to restrain the real estate bubble, and launched a series of austerity policies in the real estate market. As a result, the trading volume decreased in certain cities with the rising of the housing price eased. Currently, the austerity policies in the real estate market continued to be strictly implemented, and such policies as home purchase limits are most likely to expand into more cities.

– 15 –

The Consumer Price Index (CPI) in the PRC remained at high levels since 2011 with higher inflation rate. Accordingly, the People’s Bank of China introduced various austerity policies such as raising interest rate and deposit reserve ratio to tighten up the monetary policies and control the liquidity in the financial market. In such case, the real estate sector which requires substantial external financing is adversely affected with uncertain operation prospects.

Analysis of the Real Estate Development Business

In order to enhance the shareholders’ value, the Company seeks to explore new business growth points and business models that are in line with the principal businesses of the Company, less affected by the real estate austerity policies and less dependent on the external financing.

On 11 May 2011, the Company entered into the share transfer agreement with Tianjin Zhongfang Yongyang Property Company Limited (天津中房雍陽置業有限公司) (“Tianjin Yongyang”) and Shenzhen Zhongfang Chuangzhan Investment Group Company Limited (深圳市中房創展投資集團有限公司) (“Shenzhen Chuangzhan”). Pursuant to the agreement, the Company acquired the entire equity interests in Zhongfang Chaozhou Investment Development Company Limited* (中房潮州投資開發有限公司) (“Zhongfang Chaozhou”) from Tianjin Yongyang and Shenzhen Chuangzhan (please refer to the Company’s announcement published on 11 May 2011 for further details).

Zhongfang Chaozhou is mainly engaged in the business of first-class land development, which is consistent with the major business of the Group. Shenzhen (Chaozhou) Industry Park for Industrial Transfer, Jingnan Branch* (深圳（潮州）產業轉移工業園徑南分園), which is operated by Zhongfang Chaozhou, is a first-class land development project approved by Chaozhou municipal government. According to the relevant cooperation agreement, Zhongfang Chaozhou is entitled to a return of 18% of the total cost incurred from the land development of the project. Furthermore, the project is an integral part of the development plan approved by Chaozhou municipal government, whose support will significantly promote the completion of the project. The acquisition of Zhongfang Chaozhou will expand the existing businesses of the Company and provide it with future returns and new opportunities.

Property Leasing and Management Business

As the property projects leased by the Company were commercial real estate projects located at the prime areas, the occupancy rate and rental income were not affected by the real estate austerity policies. The occupancy rate of the Company’s properties remained at high levels with stable rental income and cash flow.

During the Period, the property at 1st floor and 2nd floor, No.112, Jianguo Road, Chaoyang District, Beijing had received rental income of RMB5,599,000, with an occupancy rate of 100%.

During the Period, Zhuhai Beida Subsidiary Experiment School (“Zhuhai School”) has paid Zhuhai Education a rental fee amounting to RMB1,500,000. During the spring semester 2011, Zhuhai School has 1,400 students. At present, Zhuhai Education covers a gross floor area of 60,000 square meters.

On 26 April 2011, the Company entered into the share transfer agreement with Shanghai Buotou Zongrenzong Environmental Science and Technology Company Limited* (上海博投眾人眾環保科技有限公司) (“Shanghai Buotou”). Pursuant to the agreement, the Company agreed to sell 70% equity interests in Zhuhai Education to Shanghai Buotou (please refer to the Company’s announcement published on 27 April 2011 for further details). The transaction will help the Company to cash in the investment projects with lower returns so as to identify other investment opportunities with higher returns to enhance the value of the Company and its Shareholders. Detailed information has been set out in the Company’s circular (“circular”) dated 24 June 2011, and the resolution as set out in the circular was duly passed at the First 2011 EGM of the Company (please refer to the Company’s announcement dated 14 July 2011 for further details).

For refernce only

– 16 –

On 23 May 2011, the Company entered into the share transfer agreement with Beijing Sihai Huaao Trading Company Limited (北京四海華澳貿易有限公司) (“Beijing Sihai”). Pursuant to the agreement, the Company agreed to sell 100% equity interests in Shenzhen Jade Bird Shenfa Guangdian Company Limited (深圳青鳥瀋發光電有限公司), which in turn holds 100% equity interests in Shenzhen Optoelectronic, to Beijing Sihai. The transaction will help the Company to cash in the investment in Shenzhen Optoelectronic such that more liquid capitals will be in hand for the development of the Zhongfang Chaozhou project acquired by the Company and for future investment opportunities (please refer to the Company’s announcement published on 23 May 2011 for further details).

Number of Employees, Emoluments, Training Schemes and Share Option Schemes

As at 30 June 2011, the Group employed a total of 23 employees (including the directors of the Company) and emoluments during the Period amounted to approximately RMB730,615 (2010 Period: RMB616,692) in total. The Group has entered into employment contracts with all employees, and offered them with different emoluments according to their 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 People’s Republic of China (“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 income tax at the prevailing tax rate of 15% to 25% in the PRC.

Prospects of the Second Half of 2010

To accelerate the progresses of acquisition of Zhongfang Chaozhou and disposal of Zhuhai Education.
To strengthen the management and improve the operation efficiency.
To proactively identify and explore new profit drivers.

Dividend Distribution

During the Period, no dividend was paid. The Board of the Company resolved not to declare any interim dividend in 2011.

Purchase, Sale or Redemption of Shares

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

Share Options

During the Period, the Company did not issue or grant any convertible securities, options, warrants or other similar rights.

– 17 –

Corporate Governance Report

During the Period, the Company has committed to complying with the PRC Company Law, the relevant provisions of the “Code on Corporate Governance Practices” (the “Code”) as set out in Appendix 14 to the Rules Governing the Listing of the Securities on the Stock Exchange of Hong Kong Limited (the “Listing Rules”) and other relevant laws and regulations and has endeavored to achieve a higher standard of corporate governance.

Board

The Board shall be responsible for leading the Company and provide effective control over the Company to safeguard the interests of shareholders. The Board will formulate policy and strategies for every business segment of the Group while implementing internal control and monitoring the effectiveness. The execution of the Board’s policy and strategies and the dayto-day management are delegated to the executive directors and the management.

On 30 June 2011, the Board comprised nine directors, of which four were executive directors, two were non-executive directors and three were independent non-executive directors. The Company disclosed the composition of the Board in all the communications according to the category of directors (including the chairman, executive director, non-executive director and independent non-executive director).

Mr. Lin Dong Hui has tendered resignation as non-executive director on 9 August 2011 (please refer to the Company’s announcement dated 10 August 2011 for further details).

All the directors (including non-executive directors and independent non-executive directors) have devoted reasonable time and effort in dealing with the affairs of the Company. Every non-executive director and independent non-executive director has appropriate academic and professional qualification and relevant management experience and will provide recommendation to the Board. The Board considers that non-executive directors and independent non-executive directors are capable of providing valuable and independent opinions on the aspects of the Company’s strategy, performance, conflict of interests and management procedures, and hence the interests of shareholders are fully considered and safeguarded.

Pursuant to the requirements of Rule 13.3 of the Listing Rules, the Company has appointed three independent non-executive directors and two of whom have appropriate qualification on accounting. All independent non-executive directors have confirmed their independence to the Company and the Company considers that each independent non-executive director is independent.

During the Period, the Company has adopted the Model Code for Securities Transactions by Directors of Listed Issuers (“the Model Code”), laid out in Appendix 10 to the Listing Rules, to regulate transactions such as our directors’ and supervisors’ dealings in the Company’s securities. The Company has also issued enquiry to each director and supervisor as to whether each of them has fully complied with or violated the Code. Each of the director and supervisor has confirmed that they have fully observed the Code as at 30 June 2010.

Supervisory Committee

The supervisory committee now consists of two members, namely Mr. Wang Xing Ye and Mr. Lu Ming. Each supervisor effectively performs their supervisory duties relating to the Company’s operations.

– 18 –

Audit Committee and Its Accountability

The audit committee is made up of three independent non-executive directors, namely Mr. Wong Kai Tat, Mr. Chan Ming Sun Jonathan and Mr. Cai Lian Jun.

The chairman of the committee is Mr. Wong Kai Tat, who has professional accounting qualifications and expertise in financial management. The duties of the audit committee include reviewing the accounting policies and practices adopted by the Group, reviewing internal control and financial reporting matters, making recommendations to the Board on appointing or removing of external auditors, and considering their remuneration and terms of engagement.

The audit committee held one meeting during the Period. Following Board practice, minutes of the meeting were circulated to all members for comment, approval and record as soon as practicable after each meeting. There was no disagreement between the Board and the audit committee regarding the selection and appointment of external auditors. The audit committee has reviewed the interim results for the half-year ended 30 June 2011 and discussed with the management and the Company’s auditors the accounting policies and practices adopted by the Group and financial reporting matters of the Period.

Internal Control

The Board is responsible for maintaining a system of effective internal control to protect the Group’s assets and its shareholders’ interests. The Board closely monitors the implementation of the Company’s internal control, assessing its effectiveness based on discussions between the management of the Company and its auditors and audit committee.

By order of the board of Shenyang Public Utility Holdings Company Limited An Mu Zong Chairman

Shenyang, the PRC, 26 August 2011

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

Executive directors: Mr. An Mu Zong, Mr. Wang Zai Xing, Mr. Chow Ka Wo Alex and Mr. Wang Hui

Non-executive directors: Mr. Bao Yi Qiang

Independent non-executive directors: Mr. Cai Lian Jun, Mr. Wong Kai Tat and Mr. Chan Ming Sun Jonathan

– 19 –