CMON Limited — M&A Activity 2011

May 11, 2011

Hong Kong Exchanges and Clearing Limited and The Stock Exchange of Hong Kong Limited take no responsibility for the contents of this announcement, make no representation as to its accuracy or completeness and expressly disclaim any liability whatsoever for any loss howsoever arising from or in reliance upon the whole or any part of the contents of this announcement.

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)

Financial Adviser to the Company

Karl Thomson Financial Advisory Limited

MAJOR ACQUISITION

THE ACQUISITION AGREEMENT

The Board is pleased to announce that on 11 May 2011, after trading hours, the Company entered into the Acquisition Agreement with the Vendors, whereby the Vendors have conditionally agreed to sell and the Company has conditionally agreed to purchase the Sale Shares, representing the entire issued share capital of all the Target Company for a consideration of RMB310 million.

Upon completion of the Acquisition, the Target Company will become a wholly-owned subsidiary of the Company and the financial statements of the Target Company will be consolidated in the accounts of the Group.

IMPLICATION OF LISTING RULES

The Acquisition constitutes a major acquisition for the Company under Chapter 14 of the Listing Rules. Pursuant to Rule 14.49 of the Listing Rules, the Acquisition Agreement and the transactions contemplated thereunder are subject to the approval of the Shareholders at the EGM as required under the Listing Rules.

To the best knowledge, information and belief of the Directors, having made all reasonable enquiries, each of the Vendors and their respective ultimate beneficial owners is an Independent Third Party. There is no other prior and/or continuing businesses/transactions entered into between each of the Vendor, its ultimate beneficial owner with the Company, its connected persons and associates.

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The circular containing, among other things, (i) further details of the Acquisition; (ii) financial information on the Group; (iii) financial information on the Target Company; (iv) the unaudited pro-forma financial information on the Group as enlarged by the Acquisition; (v) the valuation report on value of the Target Company to be prepared by a qualified independent valuer; and (vi) the notice of the EGM will be sent to the Shareholders on or before 1 June 2011.

THE ACQUISITION AGREEMENT

Date: 11 May 2011

Parties:

Purchaser: the Company Vendors: (1) Tianjin Zhongfang Yongyang Property Company Limited (天津中 房雍陽置業有限公司) (2) Shenzhen Zhongfang Chuangzhan Investment Group Company Limited (深圳市中房創展投資集團有限公司)

To the best of the Directors’ knowledge, information and belief having made all reasonable enquiries, each of the Vendors and their respective ultimate beneficial owners is an Independent Third Party. There is no other prior and/or continuing businesses/transactions entered into between each of the Vendor, its ultimate beneficial owner with the Company, its connected persons and associates.

The Sale Shares

Each of the Vendors holds 50% of the issued share capital of the Target Company as at the date of the Acquisition Agreement. According to the Acquisition Agreement, the Vendors have conditionally agreed to sell and the Company has conditionally agreed to acquire the entire issued share capital of the Target Company. Upon completion of the Acquisition Agreement, the Company will become the sole shareholder of the Target Company.

Consideration

The Consideration of RMB310 million was arrived at after arm’s length negotiations among the parties to the Acquisition Agreement and was determined after taking into account of the total asset value of the Target Company as of 31 March 2011 as reported on its management accounts, the value of which is subject to confirmation by (a) an accountant’s report on the Target Company to be prepared by an independent auditor appointed by the Company; and (b) a valuation report on the Target Company to be prepared by a qualified independent valuer appointed by the Company.

The Consideration shall be satisfied in the following manners:–

• (a) a refundable deposit of RMB20 million shall be paid by the Company to each of the Vendors in seven days upon signing the Acquisition Agreement, totalling RMB40 million to be paid by the Company in cash;

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• (b) upon fulfilling items (i) and (iv) of the Vendors’ Guarantees, the Company shall, after deducting a retained fund amounted to RMB10 million, settle the balance of the Consideration; and

• (c) the retained fund shall be settled by the Company according to the terms of the Vendors’ Guarantees.

Vendors’ Guarantees

• i. in six month upon the entering of the Acquisition Agreement, the Vendors will provide all necessary assistance to the Company to obtain the construction approval, the planning license and the construction license for the Project;

• ii. in six month upon the entering of the Acquisition Agreement, the Vendors will provide all necessary assistance to the transfer of the Land to the Target Company;

• iii. Target Company will achieve a net profit before tax of no less than RMB30 million in 2011;

• iv. in 90 days commencing from the Effective Day, the Company will obtain the registration of change of business and become the sole shareholder in the shareholders’ list;

• v. a retained fund amounted to RMB10 million, as part of the Considerations, will be retained by the Purchaser before all the above guarantee conditions being fulfilled;

• vi. the Vendors shall bear all the costs during the procedures of fulfilling item (i); (ii) and (iv) of the Vendors’ Guarantees; and

• vii. other custom clauses of warranties.

Completion

Completion shall take place on the day which all of the following conditions are fulfilled:

• i. the Acquisition Agreement becomes effective;

• ii. all the Consideration being settled by the Purchaser;

• iii. the construction approval, the planning license and the construction license being obtained by the Purchaser as guaranteed by the Vendors in clause (i) of the Vendors’ Guarantees; and

• iv. the Purchaser obtains the registration of change of business and becomes the sole shareholder in the shareholders’ list.

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INFORMATION OF THE TARGET COMPANY

The Target Company

The Target Company is a limited company incorporated in Chaozhou, Guangdong Province, PRC on 29 October 2009 and is principally engaged in property development and construction. Currently, the major project of the Target Company in progress is a land development project in Chaozhou, with a total area of 4,500 acre.

The Project

The Project was initially approved by the Guangdong government to build an industrial zone where complete facilities are built and high standard of management are provided by the developer. The Project targets to attract industrial operators who need to be relocated from the already crowded and over-demanded Pearl River Delta area. This Project offers one-stop and all-in-one service for the occupants of factories in this new area, where clustering industry with complete facilities and favourable environment supported by the local government.

FINANCIAL INFORMATION OF THE TARGET COMPANY

For the years ending 31 December 2009 and 2010, the Target Company recorded no turnover and the net loss as shown in its management accounts for the two years are approximately RMB562,000 and RMB2,369,000 respectively. The net asset of the Target Company as shown in its management accounts as at 30 December 2010 amounts to approximately RMB97,069,000.

REASONS FOR THE ACQUISITION

As at the date of this announcement, the Group is principally engaged in property development, educational investment and cemetery development in the PRC.

The tightening policies launched by the PRC government to cool the property market have been adding additional volatility to the Company, creating more risks and unforeseeable operating difficulties. The Company has been actively identifying potential projects to enhance return for its Shareholders. The Project, being a property development project, is in line with the principal businesses of the Group. Therefore, the Acquisition provides new opportunity for the Company to expand its existing business. Furthermore, pursuant to the terms of the Acquisition Agreement, the net profit before tax of the Target Company for the year ended 31 December 2011 is guaranteed by the Vendors at an amount of at least RMB30 million. Moreover, since the Project is a major property development supported by the local government of Chaozhou, the Company believes the supports from the local government are important and helpful in completing the Project. Therefore, future profitability of the Project shall be promising. In view of such favorable terms and conditions, the Board is of the view that the Acquisition is in the benefit of the Company.

In light of the above, the Directors (including the independent non-executive Directors) are of the view that the Acquisition is in the interest of the Group and the terms and conditions of the Acquisition Agreement are on normal commercial terms, which are fair and reasonable, and are in the interests of the Company and the Shareholders as a whole.

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LISTING RULES IMPLICATION OF THE ACQUISITION

As certain applicable percentage ratios under Rule 14.07 of the Listing Rules in respect of the Acquisition exceed 25% but less than 75%, the Acquisition constitutes a major acquisition of the Company under the Listing Rules. Accordingly, the Acquisition is subject to the Shareholders’ approval by way of poll at the EGM.

The circular containing, among other things, (i) further details of the Acquisition; (ii) financial information on the Group; (iii) financial information on the Target Company; (iv) the unaudited pro-forma financial information on the Group as enlarged by the Acquisition; (v) the valuation report on the value of the Target Company to be prepared by a qualified independent valuer; and (vi) the notice of the EGM will be sent to the Shareholders on or before 1 June 2011.

DEFINITIONS

In this announcement, unless the context otherwise requires, the following expressions shall have the following respective meanings.

“Acquisition”	the proposed acquisition of the Sale Shares by the Purchaser
	pursuant to the Acquisition Agreement
“Acquisition Agreement”	the acquisition agreement dated 11 May 2011 entered into
	between the Purchaser and the Vendors for the Acquisition
“associate(s)”	has the meaning ascribed to it under the Listing Rules
“Board”	the board of Directors
“Company” or “Purchaser”	Shenyang Public Utility Holdings Company Limited, also
	the purchaser of the Acquisition Agreement
“connected person”	has the meaning ascribed to it in the Listing Rules
“Consideration”	consideration for the Acquisition, being RMB310 million
“Director(s)”	means the directors of the Company
“Effective Day”	the effective day of the Acquisition Agreement, being the
	day on which both of the following two conditions are
	fulfilled: (1) the Acquisition Agreement is signed by the
	Purchaser and Vendors; and (2) the Acquisition being
	approved by the Board and the Shareholders at the EGM

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‘EGM”	an extraordinary general meeting of the Company to be
	convened and held to approve the Acquisition Agreement
	and the transactions contemplated thereunder
“Group”	the Company and its subsidiaries
“H-Share(s)”	ordinary share(s) of RMB1 each in the share capital of the
	Company
“Hong Kong”	the Hong Kong Special Administrative Region of the
	People’s Republic of China
“Independent Third	the independent third party(ies) who is/are, to the best of the
Party(ies)”	Directors’ knowledge, information and belief having made
	all reasonable enquiry, independent of the Company and its
	connected persons (as defined under the Listing Rules)
“Land”	the land with an area of 4,500 acre situated at Tie Pu Town,
	Chao An County, Chaozhou, Guangdong Province, PRC on
	which, the Project will be constructed
“Listing Rules”	the Rules Governing the Listing of Securities on the Stock
	Exchange
“PRC”	the People’s Republic of China
“Project”	the project in relation to the development of the Land
“Sale Shares”	100% of the issued share capital of the Target Company to
	be purchased by the Purchaser and disposed by the Vendors
	according to the Acquisition Agreement
“Shareholder(s)”	holder(s) of the H-Shares
“Stock Exchange”	The Stock Exchange of Hong Kong Limited
“Target Company”	Zhongfang Chaozhou Investment Development Company
	Limited* (中房潮州投資開發有限公司)
“Vendors”	Tianjin Zhongfang Yongyang Property Company Limited*
	(天津中房雍陽置業有限公司) and Shenzhen Zhongfang
	Chuangzhan Investment Group Company Limited* (深圳市
	中房創展投資集團有限公司), being the vendors of the
	Acquisition Agreement
“Vendors’ Guarantees”	guarantees provided by the Vendors to the Purchasers
	according to the Acquisition Agreement

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Renminbi, the lawful currency of the PRC

“RMB”

“%”

per cent.

• For reference only

By Order of the Board Shenyang Public Utility Holdings Company Limited An Mu Zong Chairman

Shenyang, PRC, 11 May 2011

As at the date of this announcement, the executive directors of the Company are Mr. An Mu Zong, Mr. Wang Zai Xing, Mr. Alex Chow Ka Wo and Mr. Wang Hui, the non executive directors are Mr. Lin Dong Hui and Mr. Bao Yi Qiang and the independent non-executive directors are Mr. Cai Lian Jun, Mr. Wong Kai Tat and Mr. Chan Ming Sun Jonathan.

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