CMON Limited - M&A Activity 2012 | FinancialReports.eu

THIS DOCUMENT IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION

If you are in any doubt as to any aspect of the Offer or this Composite Document or as to the action to be taken, you should consult a licensed securities dealer or registered institution in securities, a bank manager, solicitor, professional accountant or other professional adviser.

If you have sold or transferred all your shares in Shenyang Public Utility Holdings Company Limited, you should at once hand this Composite Document including the accompanying Form of Acceptance to the purchaser(s) or the transferee(s) or to the licensed securities dealer or registered institution in securities or other agent through whom the sale or transfer was effected for transmission to the purchaser(s) or transferee(s). This Composite Document should be read in conjunction with the Form of Acceptance, the contents of which form part of the terms of the Offer contained therein.

Hong Kong Exchanges and Clearing Limited, The Stock Exchange of Hong Kong Limited and the Securities and Futures Commission of Hong Kong take no responsibility for the contents of this Composite Document, 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 Composite Document and the accompanying Form of Acceptance.

SKY EARTH LIMITED (a company incorporated in the BVI with limited liability)

瀋陽公用發展股份有限公司 Shenyang Public Utility Holdings Company Limited (a joint stock limited company established in the People’s Republic of China) (Stock Code: 747)

COMPOSITE DOCUMENT RELATING TO THE MANDATORY UNCONDITIONAL CASH OFFER BY

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KINGSTON SECURITIES LTD

ON BEHALF OF SKY EARTH LIMITED TO ACQUIRE ALL THE ISSUED H SHARES (OTHER THAN THOSE ALREADY OWNED OR AGREED TO BE ACQUIRED BY SKY EARTH LIMITED AND PARTIES ACTING IN CONCERT WITH IT) IN SHENYANG PUBLIC UTILITY HOLDINGS COMPANY LIMITED

Financial adviser to the Offeror Financial adviser to the Company

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KINGSTON CORPORATE FINANCE LTD Karl Thomson Financial Advisory Limited

Independent financial adviser to the Independent Board Committee

Capitalised terms used in this cover page shall have the same meanings as those defined in the section headed “Definitions” in this Composite Document.

A letter from Kingston Securities containing, among other things, details of the terms of the Offer is set out on pages 6 to 16 of this Composite Document.

A letter from the Board is set out on pages 17 to 24 of this Composite Document.

A letter from the Independent Board Committee containing its recommendation to the H Shareholders in relation to the Offer is set out on pages 25 to 26 of this Composite Document.

A letter from the Independent Financial Adviser containing its advice to the Independent Board Committee is set out on pages 27 to 45 of this Composite Document.

The procedures for acceptance and settlement of the Offer and other related information are set out in Appendix I to this Composite Document and in the accompanying Form of Acceptance. Acceptance of the Offer should be received by the Registrar no later than 4:00 p.m. on Friday, 11 January 2013 or such later time and/or date as the Offeror may determine and announce with the consent of the Executive, in accordance with the Takeovers Code.

21 December 2012

CONTENTS

		Page
EXPECTED TIMETABLE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .		ii
DEFINITIONS	. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	1
LETTER FROM	KINGSTON SECURITIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	6
LETTER FROM	THE BOARD . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	17
LETTER FROM	THE INDEPENDENT BOARD COMMITTEE . . . . . . . . . . . . . . .	25
LETTER FROM	THE INDEPENDENT FINANCIAL ADVISER . . . . . . . . . . . . . . .	27
APPENDIX I	– FURTHER TERMS OF THE OFFER . . . . . . . . . . . . . . . . . .	I-1
APPENDIX II	– FINANCIAL INFORMATION OF THE GROUP . . . . . . . .	II-1
APPENDIX III	– GENERAL INFORMATION . . . . . . . . . . . . . . . . . . . . . . .	III-1
ACCOMPANYING DOCUMENT:
FORM OF ACCEPTANCE

– i –

EXPECTED TIMETABLE

The timetable sets out below is indicative only and is subject to change. Any changes to the timetable will be jointly announced by the Offeror and the Company.

2012

Despatch date of this Composite Document and
the Form of Acceptance and
the commencement date of the Offer (Note 1) . . . . . . . . . . . . . . . Friday, 21 December

2013

Latest time and date for acceptance
of the Offer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4:00 p.m. on Friday, 11 January
Closing Date of the Offer (Note 2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . Friday, 11 January
Announcement of the results of the Offer and
the level of acceptances
as at the Closing Date to be uploaded to the Stock Exchange’s website . . . . . . . . . . . . . . . . . . . . 7:00 p.m. on Friday, 11 January

Latest date for despatch of remittances for

the amounts due under the Offer in respect of
valid acceptances received on or before
4:00 p.m. on the Closing Date (Note 3) . . . . . . . . . . . . . . . . . . . . . . Tuesday, 22 January

Notes:

The Offer, which is unconditional in all respects, is made on the date of posting of this Composite Document, and is capable of acceptance on and from that date until the Closing Date. Acceptance of the Offer shall be irrevocable and not capable of being withdrawn, except as permitted under the Takeovers Code as described in paragraph 5 headed “Right of Withdrawal” in Appendix I to this Composite Document.
In accordance with the Takeovers Code, the Offer must initially be open for acceptance for at least 21 days following the date on which this Composite Document is posted. The latest time and date for acceptance of the Offer is 4:00 p.m. on Friday, 11 January 2013. The Offeror does not intend to revise the terms, or extend the period, of the Offer and does not reserve the right to do so.
In accordance with the Takeovers Code, remittance in respect of the cash consideration payable for the Shares tendered under the Offer will be despatched to the accepting holders of the H Shares by ordinary post at their own risk as soon as possible but in any event within 7 Business Days after the date of receipt of duly completed Form of Acceptance.

All references to times and dates contained in this Composite Document refer to Hong Kong time and dates.

– ii –

DEFINITIONS

In this Composite Document, the following expressions shall have the meanings set out below unless the context requires otherwise:

“Acquisition”

the sale and purchase of the Sale Shares

“acting in concert”
has the meaning ascribed thereto in the Takeovers Code
“Articles”
the articles of association of the Company
“Announcement”
the joint announcement dated 28 September 2012 issued by the Company and the Offeror in relation to the Acquisition and the Offer
“associate(s)”
has the meaning ascribed to it under the Listing Rules and the Takeovers Code (as the case may be)
“Beijing Mingde”
Beijing Mingde Guangye Investment Consultant Company Limited* (北京明德廣業投資諮詢有限公司), a company established in the PRC with limited liability, the entire issued share capital of which is held as to 90% and 10% by Beijing Mingyude and Mr. Li Peng, respectively
“Beijing Mingyude”
Beijing Mingyude Business and Trade Company Limited* (北京明裕德商貿有限公司), a company established in the PRC with limited liability, which holds 90% equity interest in Beijing Mingde, and the equity interest of which is held as to 60% and 40% by Mr. Li Peng and Mr. Shen Yun Xie, respectively
“Board”
the board of Directors
“Business Day”
a day on which licensed banks in Hong Kong are required to be and are generally open for business (other than any Saturday, Sunday, gazetted public holiday in Hong Kong and days on which a tropical cyclone warning signal No. 8 or above or a black rainstorm warning signal is hoisted in Hong Kong at any time between 9:00 a.m. and 5:00 p.m.)
“BVI”

the British Virgin Islands

“CCASS”

the Central Clearing and Settlement System established and operated by HKSCC

“Clarification Announcement”

the joint announcement dated 6 December 2012 issued by the Company and the Offeror in relation to, among other things, the update of disclosure of shareholdings in the Company of parties acting in concert with the Offeror

– 1 –

DEFINITIONS

“Closing Date”
“Company”
“Completion”
“Completion Announcement”
“Composite Document”
“Controlling Shareholder”
“Directors(s)”
“Domestic Share(s)”
“Executive”
“Facility Agreement”
Friday, 11 January 2013, being the 21st day after the date on which this Composite Document is posted
Shenyang Public Utility Holdings Company Limited (瀋陽公用發展股份有限公司), a joint stock limited company established in the PRC and whose H Shares are listed on the Main Board of the Stock Exchange
completion of the Sale and Purchase Agreement in accordance with the terms therein
the announcement of the Company dated 14 December 2012 in relation to the completion of the Sale and Purchase Agreement
this document dated 21 December 2012 jointly issued by the Company and Offeror in relation to the Offer
Shenzhen Jinma Asset Management Company Limited* (深圳市金馬資產管理有限公司), a company established in the PRC with limited liability, the registered capital of which is owned as to 90% by Mr. Ma Zhonghong (馬鐘鴻) and 10% by Mr. Lin Weicheng (林偉成)
director(s) of the Company
ordinary share(s) in the share capital of the Company, with a nominal value of RMB1.00 each, which are subscribed for in RMB by PRC nationals and/or PRC incorporated entities
the Executive Director of the Corporate Finance Division of the SFC or any of his delegates
a short-term loan facility agreement dated 21 September 2012 entered into between the Offeror and Kingston Securities whereby the Offeror obtained a loan facility of HK$82.8 million from Kingston Securities for a period up to a day which is not later than the seventh Business Day immediately after the final closing of the Offer or 31 January 2013, whichever is earlier (or such other date as agreed between the Offeror and Kingston Securities)

– 2 –

DEFINITIONS

“Form of Acceptance”

the WHITE form of acceptance and transfer accompanying this Composite Document in respect of the Offer

“Group” the Company and its subsidiaries
“H Share(s)” overseas listed foreign share(s) in the share capital of the Company, with a nominal value of RMB1.00 each, all of which are listed on the Main Board of the Stock Exchange, and are subscribed for and traded in Hong Kong dollars
“H Shareholder(s)” holder(s) of the H Share(s)
“HK$” Hong Kong dollars, the lawful currency of Hong Kong
“HKSCC” Hong Kong Securities Clearing Company Limited
“Hong Kong” the Hong Kong Special Administrative Region of the People’s Republic of China
“Independent Board Committee”
the independent board committee of the Company constituted to advise the H Shareholders on the terms of the Offer which comprises all the non-executive Directors and all the independent non-executive Directors
“Independent Financial Adviser”
Messis Capital Limited, a corporation licensed to carry out Type 1 (dealing in securities) and Type 6 (advising on corporate finance) regulated activities under the SFO and the independent financial adviser to the Independent Board Committee
“Kingston Corporate Finance”
Kingston Corporate Finance Limited, a corporation licensed to carry out Type 6 (advising on corporate finance) regulated activities under the SFO and the financial adviser to the Offeror
“Kingston Securities”
Kingston Securities Limited, a corporation licensed to carry out Type 1 (dealing in securities) regulated activities under the SFO which is making the Offer on behalf of Offeror
“Last Trading Day”
21 September 2012, being the last trading day of the H Shares on the Stock Exchange prior to the publication of the Announcement

– 3 –

DEFINITIONS

“Latest Practicable Date”
“Listing Rules”
“Mrs. Chim”
“Offer”
“Offer Period”
“Offer Price”
“Offeror”
“Overseas Shareholder(s)”
“PRC”
“Registrar”
18 December 2012, being the latest practicable date prior to the printing of this Composite Document for the purpose of ascertaining certain information contained in this Composite Document
the Rules Governing the Listing of Securities on the Stock Exchange (as amended from time to time)
Li Oi Kay Clara, spouse of Mr. Chim Kim Lun Ricky who is the sole director and the sole member of the Offeror
the mandatory unconditional cash offer made by Kingston Securities on behalf of the Offeror for all the H Shares not already owned or agreed to be acquired by the Controlling Shareholder or parties acting in concert with it in accordance with the Takeovers Code
has the meaning ascribed thereto in the Takeovers Code, being the period from 28 September 2012, i.e. the date of the Announcement, to 4:00 p.m. on the Closing Date, or such other time or date to which the Offeror may decide to extend or revise the Offer in accordance with the Takeovers Code
HK$0.214 per H Share, equivalent to RMB0.175, being the price per Domestic Share at which the Domestic Shares were transferred to the Controlling Shareholder under the Acquisition, and converted into Hong Kong dollars based on the exchange rate of RMB0.81782 to HK$1 prevailing on 28 September 2012, being the date of the Announcement
Sky Earth Limited, a company incorporated in the BVI with limited liability, the entire issued share capital of which is held by Mr. Chim Kim Lun Ricky
holder(s) of H Shares whose addresses, as shown on the register of members of the Company, are outside Hong Kong
the People’s Republic of China, and for the purpose of this Composite Document, excluding Hong Kong, the Macau Special Administrative Region of the PRC and Taiwan
Hong Kong Registrars Limited, the H Share registrar and transfer office of the Company in Hong Kong

– 4 –

DEFINITIONS

“Relevant Period” the period commencing on 28 March 2012, i.e. the date falling six (6) months preceding the commencement date of the Offer Period and ending on the Latest Practicable Date
“RMB” Renminbi, the lawful currency of the PRC “Sale Shares” the 600,000,000 Domestic Shares acquired by the Controlling Shareholder from Beijing Mingde pursuant to the Sale and Purchase Agreement and “Sale Share” means any of them
“Sale and Purchase Agreement” the conditional sale and purchase agreement dated 21 September 2012 entered into between Beijing Mingde (as vendor) and the Controlling Shareholder (as purchaser) in relation to the Acquisition
“SFC” Securities and Futures Commission of Hong Kong “SFO” the Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong)
“Share(s)” Domestic Share(s) and/or H Share(s), as the case may be
“Shareholder(s)” holder(s) of the Shares “Stock Exchange” The Stock Exchange of Hong Kong Limited “Takeovers Code” the Code on Takeovers and Mergers “%” per cent.
For identification purpose only

– 5 –

LETTER FROM KINGSTON SECURITIES

21 December 2012

To the H Shareholders

Dear Sir or Madam,

MANDATORY UNCONDITIONAL CASH OFFER BY KINGSTON SECURITIES LIMITED ON BEHALF OF SKY EARTH LIMITED TO ACQUIRE ALL THE ISSUED H SHARES (OTHER THAN THOSE ALREADY OWNED OR AGREED TO BE ACQUIRED BY SKY EARTH LIMITED AND PARTIES ACTING IN CONCERT WITH IT) IN SHENYANG PUBLIC UTILITY HOLDINGS COMPANY LIMITED

INTRODUCTION

Reference is made to the Announcement, the Clarification Announcement and the Completion Announcement dated 28 September, 6 December and 14 December 2012, respectively, issued by the Company and the Offeror in relation to the Acquisition and the Offer.

Completion of the Sale and Purchase Agreement is subject to the satisfaction of the conditions precedent therein, including, among other things, completion of amendments to the Articles and the registration procedures with Shenyang Administration for Industry and Commerce (瀋陽市工商行政管理局) in connection with the change in the Shareholder of the Domestic Shares. The change in the Shareholder of the Domestic Shares was registered with Shenyang Administration of Industry and Commerce (瀋陽市工商行政管理局) on 10 December 2012. Completion took place on 14 December 2012 upon satisfaction of all the conditions of the Sale and Purchase Agreement.

– 6 –

LETTER FROM KINGSTON SECURITIES

the issued share capital of the Company. Upon Completion, the Controlling Shareholder and parties acting in concert with it became interested in 600,000,000 Domestic Shares and 1,282,000 H Shares, representing an aggregate of approximately 58.93% of the issued share capital of the Company as at the Latest Practicable Date. As at the Latest Practicable Date, the outstanding Shares other than those already owned or agreed to be acquired by the Controlling Shareholder and parties acting in concert with it amount to 419,118,000 H Shares, representing approximately 41.07% of the issued share capital of the Company.

In accordance with Rule 26.1 of the Takeovers Code, the Controlling Shareholder and parties acting in concert with it, as a result of the Acquisition, are required to make a mandatory unconditional general offer for all the outstanding H Shares other than those already owned or agreed to be acquired by the Controlling Shareholder and parties acting in concert with it. Since the Controlling Shareholder, a company established in the PRC, has not carried out the necessary application procedures nor has it obtained the approvals from the relevant authorities in relation to overseas investments under the relevant rules and regulations in the PRC, the Controlling Shareholder and the Offeror formed a consortium for the purpose of the Offer. The Offeror became a party acting in concert with the Controlling Shareholder and will make the Offer, whereby the H Shares acquired pursuant to the Offer will be owned by the Offeror.

Kingston Corporate Finance has been appointed as the financial adviser to the Offeror. Kingston Securities has been appointed by the Offeror to make the Offer on its behalf.

This letter sets out the details of the Offer, information on the Offeror, information on the Controlling Shareholder, intention of the Offeror on the Group and intention of the Controlling Shareholder on the Group. Further details of the terms of the Offer are set out in the paragraphs headed “Further Procedures for Acceptance of the Offer” and “Settlement of the Offer” in Appendix I to this Composite Document and the accompanying Form of Acceptance.

– 7 –

LETTER FROM KINGSTON SECURITIES

SHAREHOLDING STRUCTURE OF THE COMPANY

The issued share capital of the Company as at the Latest Practicable Date comprises:

Offeror and parties acting in concert with it Domestic Shares H Shares (Note 1) Sub-total Public H Shares Total	Number of Shares held as at the Latest Practicable Date 600,000,000 (representing all issued Domestic Shares in the share capital of the Company) 1,282,000	Approximate percentage of shareholding in the issued share capital of the Company (%) 58.80 0.13
	601,282,000 419,118,000	58.93 41.07
	1,020,400,000	100.00

Note:

These H Shares are held by Mrs. Chim, who is presumed to be acting in concert with the Offeror in accordance with class 2 of the definition of “acting in concert” in the Takeovers Code. Under the SFO, Mr. Chim Kim Lun Ricky is deemed to be interested in the same number of Shares in which Mrs. Chim is interested.

MANDATORY UNCONDITIONAL CASH OFFER

Immediately following Completion, the Controlling Shareholder and parties acting in concert with it became interested in the Sale Shares of 600,000,000 Domestic Shares and 1,282,000 H Shares, representing an aggregate of approximately 58.93% of the entire issued share capital of the Company as at the Latest Practicable Date.

– 8 –

LETTER FROM KINGSTON SECURITIES

has not carried out the necessary application procedures nor has it obtained the approvals from the relevant authorities in relation to overseas investments under the relevant rules and regulations in the PRC, the Controlling Shareholder and the Offeror formed a consortium for the purpose of the Offer. The Offeror became a party acting in concert with the Controlling Shareholder and will make the Offer, whereby the H Shares acquired pursuant to the Offer will be owned by the Offeror.

Principal terms of the Offer

Kingston Securities is making the Offer on behalf of the Offeror for all the H Shares not already owned or agreed to be acquired by the Controlling Shareholder and parties acting in concert with it.

The Offer is being made in compliance with the Takeovers Code on the following basis:

For each H Share . . . . . . . . . . . . . . . . . HK$0.214 (equivalent to RMB0.175) in cash

The H Shares to be acquired under the Offer shall be fully paid and free from all liens, charges, options, claims, equities, adverse interests, rights of pre-emption, third party rights or encumbrances of any nature and together with all rights accruing or attaching to them on or after the date on which the Offer is made, including the right to receive in full all dividends and other distributions, if any, declared, made or paid on or after the date on which the Offer is made.

Mrs. Chim acquired the 1,282,000 H Shares at the price ranges of HK$0.67 to HK$1.19 per H Share between 2010 and 2011. Given that 1,282,000 H Shares held by Mrs. Chim were acquired over six months prior to the date of the Announcement, it will not affect the Offer or any terms thereto including the Offer Price.

The Company does not have any outstanding warrants or options or convertible securities or derivatives to acquire Shares or other securities which are convertible into H Shares as at the Latest Practicable Date.

Neither the Offeror nor any party acting in concert with it has received any irrevocable commitment to accept the Offer as at the Latest Practicable Date.

The Offeror did not enter into any agreement or arrangement which is related to the circumstances in which it may or may not invoke or seek to invoke a pre-condition or a condition to the Offer and the consequences of which would give rise to any break fees payable.

There is no other arrangement (whether by way of option, indemnity or otherwise) of the kind referred to in Note 8 to Rule 22 of the Takeovers Code in relation to the securities of the Offeror or the Company. In addition, save for the Acquisition, the Offeror and parties acting in concert with it have not dealt in the Shares or any other securities of the Company during the period commencing from the date falling six months before the date of the Announcement and up to the Latest Practicable Date.

– 9 –

LETTER FROM KINGSTON SECURITIES

The Offeror or any person acting in concert with it has not borrowed or lent any relevant securities (as defined in Note 4 to Rule 22 of the Takeovers Code) in the Company.

The Offer is unconditional and is therefore not conditional upon any minimum level of acceptances being received nor subject to any other conditions.

The Offer is required to be open for acceptance for at least 21 days after the despatch of this Composite Document.

The Offeror does not intend to revise the terms of the Offer, increase the Offer Price or extend the latest time for acceptance of the Offer, and does not reserve the right to do so. H Shareholders and potential investors should be aware that, following the making of this statement, the Offeror will not be allowed to extend the Offer beyond the stated date and increase the Offer Price, save in wholly exceptional circumstances as provided in Rule 18.2 and Rule 18.3 of the Takeovers Code. Your attention is drawn to the expected timetable set out in the section headed “Expected Timetable” of this Composite Document.

Basis of the Offer

The Offer Price is equivalent to RMB0.175, being the price per Domestic Share at which the Domestic Shares were transferred to the Controlling Shareholder under the Acquisition, and converted into Hong Kong dollars based on the exchange rate of RMB0.81782 to HK$1 (as quoted from The People’s Bank of China) prevailing on 28 September 2012, being the date of the Announcement.

The Controlling Shareholder confirms that, being a company established in the PRC, it has not carried out the necessary application procedures nor has it obtained the approvals from the relevant authorities in relation to overseas investments under the relevant rules and regulations in the PRC. In light of this, the Controlling Shareholder and the Offeror formed a consortium to make the Offer, whereby the H Shares acquired pursuant to the Offer will be owned by the Offeror.

Comparisons of value

The Offer Price of HK$0.214 per H Share represents:

(i) a discount of approximately 58.04% to the closing price of HK$0.510 per H Share as quoted on the Stock Exchange on the Last Trading Day;
(ii) a discount of approximately 58.69% to the average closing price of HK$0.518 per H Share as quoted on the Stock Exchange for the last 5 consecutive trading days up to and including the Last Trading Day;
(iii) a discount of approximately 59.16% to the average closing price of HK$0.524 per H Share as quoted on the Stock Exchange for the last 10 consecutive trading days up to and including the Last Trading Day;

– 10 –

LETTER FROM KINGSTON SECURITIES

(iv) a discount of approximately 59.70% to the average closing price of HK$0.531 per H Share as quoted on the Stock Exchange for the last 30 consecutive trading days up to and including the Last Trading Day; and
(v) a discount of approximately 61.09% to the closing price of HK$0.55 per H Share as quoted on the Stock Exchange on the Latest Practicable Date.

Highest and lowest prices

The highest and lowest closing prices per H Share as quoted on the Stock Exchange during the Relevant Period were HK$0.650 on 28 and 29 May 2012 and HK$0.495 on 30 March 2012, respectively.

Total consideration

There are 419,118,000 H Shares subject to the Offer. The Offer is valued at approximately HK$89.70 million based on the Offer Price.

Financial resources available to the Offeror

The Offeror will satisfy the cash consideration payable under the Offer by the loan facility of HK$82,800,000 granted to the Offeror by Kingston Securities under the Facility Agreement, together with the cash deposited by the Offeror with Kingston Securities. Kingston Corporate Finance, the financial adviser to the Offeror, is satisfied that sufficient financial resources are available to the Offeror to satisfy the full acceptance of the Offer.

The Offeror confirms that payment of interest on, repayment of or security for any liability (contingent or otherwise) in relation to the facility referred to above will not depend to any significant extent on the business of the Company.

Effects of accepting the Offer

By accepting the Offer, the H Shareholders will sell their H Shares to the Offeror with all rights attached thereto, including the rights to receive all dividends and other distribution declared, made or paid on or after the date on which the Offer is made (i.e. the date of this Composite Document), and free from all liens, charges, options, claims, equities, adverse interests, rights of pre-emption, third party rights and encumbrances of any nature. There have not been any changes to the rights and benefits of the Shareholders or distribution declared, made or paid between the date of the Announcement and the Latest Practicable Date.

Stamp duty

Seller’s Hong Kong ad valorem stamp duty at a rate of 0.1% of the market value of the H Shares or consideration payable by the Offeror in respect of the relevant acceptances of the Offer, whichever is higher, will be deducted from the amount payable to the relevant Shareholders on acceptance of the Offer. The Offeror will arrange for payment of the seller’s Hong Kong ad valorem stamp duty on behalf of the accepting Shareholders and will pay the buyer’s Hong Kong ad valorem stamp duty in connection with the acceptances of the Offer and the transfers of the H Shares.

– 11 –

LETTER FROM KINGSTON SECURITIES

Payment

Payment in cash in respect of acceptances of the Offer, net of seller’s Hong Kong ad valorem stamp duty, will be made as soon as possible but in any event within 7 Business Days from the date of receipt of the relevant documents of title and duly completed Form of Acceptance(s) by the Offeror to render each such acceptance complete and valid pursuant to Rule 20.1 and Note 1 to Rule 30.2 of the Takeovers Code.

Overseas Shareholders

The availability of the Offer to persons not resident in Hong Kong may be affected by the applicable laws of the relevant jurisdiction in which they are resident. Overseas Shareholders who are citizens, residents or nationals of a jurisdiction outside Hong Kong should observe any applicable legal or regulatory requirements in their own jurisdictions and, where necessary, seek legal advice. It is the responsibility of the Overseas Shareholders who wish to accept the Offer to satisfy themselves as to the full observance of the laws and regulations of the relevant jurisdictions in connection with the acceptance of the Offer (including the obtaining of any governmental or other consent which may be required or the compliance with other necessary formalities and the payment of any transfer or other taxes due by such Overseas Shareholders in respect of such jurisdictions).

Further terms of the Offer

Further terms of the Offer, including the procedures for acceptance and settlement, and the acceptance period, are set out in Appendix I to this Composite Document and in the accompanying Form of Acceptance.

INFORMATION ON THE COMPANY

The Company is an investment holding company and the principal activities of its subsidiaries are property development and sale in the PRC.

INFORMATION ON THE OFFEROR

The Offeror is a company incorporated in the BVI with limited liability solely for the purpose of the Offer. It is an investment holding company with no substantive business operation. As at the date of this Composite Document, the sole director and sole shareholder of the Offeror is Mr. Chim Kim Lun Ricky.

Mr. Chim Kim Lun Ricky, aged 43, holds a Bachelor degree in Arts from the University of British Columbia in Canada and has over 20 years of commercial and investment experience. Mr. Chim is an executive director of Bestway International Holdings Limited (stock code: 718), and an executive director and the chairman of Asia Resources Holdings Limited (stock code: 899), the shares of both companies are listed on the main board of the Stock Exchange.

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LETTER FROM KINGSTON SECURITIES

INFORMATION ON THE CONTROLLING SHAREHOLDER

The Controlling Shareholder is beneficially owned as to 90% by Mr. Ma Zhonghong and 10% by Mr. Lin Weicheng. The board of directors of the Controlling Shareholder comprises Mr. Ma Zhonghong, Mr. Lin Weicheng and Ms. Lin Xiaona.

Mr. Ma Zhonghong, aged 39, is the legal representative, chairman of the board of directors and a director of the Controlling Shareholder. Mr. Ma is not a director of any company whose shares are listed on the Stock Exchange. Mr. Ma is the uncle of both Mr. Lin Weicheng and Ms. Lin Xiaona.

Mr. Lin Weicheng, aged 25, is a director of the Controlling Shareholder. Mr. Lin is not a director of any company whose shares are listed on the Stock Exchange. Mr. Lin is the nephew of Mr. Ma Zhonghong and the brother of Ms. Lin Xiaona.

Ms. Lin Xiaona, aged 19, is a director of the Controlling Shareholder. Ms. Lin is not a director of any company whose shares are listed on the Stock Exchange. Ms. Lin is the niece of Mr. Ma Zhonghong and the sister of Mr. Lin Weicheng.

Save for Mr. Ma Zhonghong, Mr. Lin Weicheng and Ms. Lin Xiaona, the Controlling Shareholder has no other directors.

Reference is made to the announcements of the Company dated 11 May 2011 and 31 May 2011, the circular of the Company dated 25 September 2011 and the announcement of the Company dated 8 August 2012 in relation to the acquisition of the entire issued share capital of Zhongfang Chaozhou Investment Development Company Limited (中房潮州投資開發有限公司) (“Zhongfang Chaozhou”) by the Company from Tianjin Zhongfang Yongyang Property Company Limited (天津中房雍陽置業有限公司) (“Tianjin Zhongfang”) and Shenzhen Zhongfang Chuangzhan Investment Group Company Limited* (深圳市中房創展投資集團有限公司) (“Shenzhen Zhongfang”). As at the time of entering into the relevant acquisition agreement (the “Acquisition Agreement”) and up to the date of this Composite Document, Shenzhen Zhongfang has been owned as to 60% by Mr. Ma Zhonghong and 40% by Mr. Chen Ruizhan (陳瑞展) and Mr. Ma Zhonghong has been a director of Shenzhen Zhongfang.

Upon completion of the acquisition of the entire issued share capital of Zhongfang Chaozhou on 8 June 2012, Zhongfang Chaozhou has become a wholly-owned subsidiary of the Company. As at the date of this Composite Document, Mr. Ma Zhonghong is the chairman of the board of directors of Zhongfang Chaozhou. For details, please refer to the announcement of the Company dated 8 August 2012.

For identification purpose only

– 13 –

LETTER FROM KINGSTON SECURITIES

INTENTION OF THE OFFEROR ON THE GROUP

The Offeror intends that the Company will continue with its existing principal activities and will maintain the listing status of the Company on the Stock Exchange after closing of the Offer. The Offeror has no intention to (i) introduce any major changes to the Group’s business or (ii) re-deploy employees or fixed assets of the Group within 6 months from the date of this Composite Document other than in its ordinary course of business. Except for the intention of the Offeror to hold the accepted H Shares, if any, for investment purpose, the Offeror will not take any role in the Company.

INTENTION OF THE CONTROLLING SHAREHOLDER ON THE GROUP

The Controlling Shareholder intends that the Company will continue with its existing principal activities and will maintain the listing status of the Company on the Stock Exchange after closing of the Offer.

The Controlling Shareholder intends to nominate new Director(s) to the Board with effect from the earliest time permitted for appointment of directors under the Takeovers Code, the Listing Rules and applicable laws. Details of the change of the Board composition and the biographies of the newly appointed Director(s) will be made in compliance with the Takeovers Code and the Listing Rules and announced in due course. The Controlling Shareholder intends to maintain the listing status of the Company on the Stock Exchange after closing of the Offer. The Controlling Shareholder has no intention to (i) introduce any major changes to the Group’s business or (ii) re-deploy employees or fixed assets of the Group within 6 months from the date of this Composite Document other than in its ordinary course of business.

In view of the experience its shareholder possesses in property development, finance and investment industry in the PRC, the Controlling Shareholder considers that its experience and business network will be able to benefit the Company’s development in the long run.

Subject to market conditions and the financing needs of the Company, the Controlling Shareholder and the Company are considering various forms of fund-raising exercises (both equity and debt financing) to be conducted to increase capital of the Company, including (but not limited to) issue of bonds, issue of convertible notes, obtaining loans from banks or other sources and placing of new shares of the Company. As at the Latest Practicable Date, the form and timing of fund-raising exercise(s) have not been determined. In the event that the form, timing and other details of any fund-raising exercise(s) are determined, the Company will make further announcement as and when required by the Listing Rules.

BOARD COMPOSITION OF THE COMPANY

As at the Latest Practicable Date, the executive Directors are Mr. An Mu Zong, Mr. Wang Zai Xing, Mr. Chow Ka Wo Alex and Mr. Wang Hui, the non-executive Directors are Mr. Bao Yi Qiang and Mrs. Zhang Lei Lei, and the independent non-executive Directors are Mr. Cai Lian Jun, Mr. Wong Kai Tat, Mr. Wei Jie Sheng and Mr. Chan Ming Sun Jonathan.

– 14 –

LETTER FROM KINGSTON SECURITIES

It is intended that new Director(s) may be nominated with effect from the earliest time permitted for appointment of directors under the Takeovers Code, the Listing Rules and applicable laws. Details of any change to the composition of the Board will be announced as and when necessary.

COMPULSORY ACQUISITION

The Offeror does not intend to exercise any right which may be available to it to acquire compulsorily any H Share not tendered for acceptance under the Offer.

MAINTAINING THE LISTING STATUS OF THE COMPANY

The Offeror has no intention to privatise the Group. The Offeror intends to maintain the listing of the H Shares on the Stock Exchange after closing of the Offer. The sole director of the Offeror and the new directors to be appointed to the Board will jointly and severally undertake to the Stock Exchange to take appropriate steps as soon as possible following closing of the Offer to ensure sufficient public float exists in the H Shares. The Stock Exchange has indicated that if, upon closing of the Offer, less than the minimum prescribed percentage applicable to the Company, being 25% of the issued Shares, are held by the public or if the Stock Exchange believes that:

(i) a false market exists or may exist in the H Shares; or
(ii) there are insufficient H Shares in public hands to maintain an orderly market,

it will consider exercising its discretion to suspend trading in the H Shares.

As the Company and the Offeror are unable to ascertain at this stage the level of acceptances by the holders of H Shares under the Offer, the aforesaid parties have not decided the exact steps/actions that will be taken by them after closing of the Offer to restore the public float of the H Shares, if required. Notwithstanding this, the Company and the Offeror consider that the appropriate actions to be taken shall include placing down of sufficient number of accepted H Shares by the Offeror for this purpose. The Company and the Offeror will issue a separate announcement as and when necessary in this regard.

GENERAL

To ensure equality of treatment of all H Shareholders, those registered H Shareholders who hold H Shares as nominee for more than one beneficial owner should, as far as practicable, treat the holding of each beneficial owner separately. It is essential for the beneficial owners of the H Shares whose investments are registered in the names of nominees to provide instructions to their nominees of their intentions with regard to the Offer.

The attention of H Shareholders not being resident in Hong Kong is drawn to paragraph 8(i) of the section headed “General” in Appendix I to this Composite Document.

– 15 –

LETTER FROM KINGSTON SECURITIES

All documents and remittances sent to H Shareholders by post will be sent to them by ordinary post at their own risk. Such documents and remittances will be sent to the H Shareholders at their respective addresses as they appear in the register of members of the Company or, in the case of joint H Shareholders, to the H Shareholder whose name appears first in the register of members of the Company, as applicable. None of the Company, the Controlling Shareholder, the Offeror, Kingston Corporate Finance, Kingston Securities, nor any of their respective directors or any persons involved in the Offer will be responsible for any loss or delay in transmission or any other liabilities that may arise as a result thereof.

ADDITIONAL INFORMATION

Your attention is drawn to the letter from the Independent Board Committee and the letter from the Independent Financial Adviser, which are contained in this Composite Document, in relation to their respective recommendation regarding the Offer. You should also take note of additional information set out in the Appendices to this Composite Document.

Yours faithfully, For and on behalf of Kingston Securities Limited Nicholas Chu Director

– 16 –

LETTER FROM THE BOARD

瀋陽公用發展股份有限公司 Shenyang Public Utility Holdings Company Limited

(a joint stock limited company established in the People’s Republic of China)

(Stock code: 747)

Executive Directors: Registered office: Mr. An Mu Zong No.1-4, 20A, Central Street, Mr. Wang Zai Xing Shenyang Economic and Mr. Chow Ka Wo Alex Technological Development Zone Mr. Wang Hui the PRC Non-executive Directors: Principal place of business in the PRC: Mr. Bao Yi Qiang 14/F. Jinmao International Apartment Mrs. Zhang Lei Lei Da Dong District, Shenyang the PRC

Independent Non-executive Directors: Mr. Cai Lian Jun Principal place of business in Hong Kong: Mr. Wong Kai Tat 3rd Floor, Alliance Building Mr. Wei Jie Sheng 130-136 Connaught Road Central Mr. Chan Ming Sun Jonathan Hong Kong

21 December 2012

To the H Shareholders

Dear Sir or Madam,

MANDATORY UNCONDITIONAL CASH OFFER BY KINGSTON SECURITIES LIMITED ON BEHALF OF SKY EARTH LIMITED

TO ACQUIRE ALL THE ISSUED H SHARES (OTHER THAN THOSE ALREADY OWNED OR AGREED TO BE ACQUIRED BY SKY EARTH LIMITED AND PARTIES ACTING IN CONCERT WITH IT) IN SHENYANG PUBLIC UTILITY HOLDINGS COMPANY LIMITED

INTRODUCTION

Reference is made to the Announcement, the Clarification Announcement and the Completion Announcement dated 28 September, 6 December and 14 December 2012 issued by the Company and the Offeror in relation to the Acquisition and the Offer.

– 17 –

LETTER FROM THE BOARD

On 21 September 2012, the Board was informed by Beijing Mingde, the controlling shareholder of the Company, that it had entered into the conditional Sale and Purchase Agreement with the Controlling Shareholder, pursuant to which Beijing Mingde agreed to sell, and the Controlling Shareholder agreed to purchase, the Sale Shares of 600,000,000 Domestic Shares at a consideration of RMB105 million (or approximately HKD128.39 million), which was equivalent to RMB0.175 (or approximately HKD0.214) per Sale Share. The change in the Shareholder of the Domestic Shares was registered with Shenyang Administration of Industry and Commerce (瀋陽市工商行政管理局) on 10 December 2012. Completion took place on 14 December 2012 upon satisfaction of all the conditions of the Sale and Purchase Agreement.

Prior to Completion, Mrs. Chim held 1,282,000 H Shares. As the Offeror has been a party acting in concert with the Controlling Shareholder (as explained below), accordingly, prior to Completion, the Controlling Shareholder and parties acting in concert with it were interested in 1,282,000 H Shares, representing approximately 0.13% of the issued share capital of the Company. Upon Completion, the Controlling Shareholder and parties acting in concert with it became interested in 600,000,000 Domestic Shares and 1,282,000 H Shares, representing an aggregate of approximately 58.93% of the issued share capital of the Company as at the Latest Practicable Date. As at the Latest Practicable Date, the outstanding H Shares other than those already owned or agreed to be acquired by the Controlling Shareholder and parties acting in concert with it amount to 419,118,000 H Shares, representing approximately 41.07% of the issued share capital of the Company.

In accordance with Rule 2.1 of the Takeovers Code, the Independent Board Committee which comprises Mr. Bao Yi Qiang and Mrs. Zhang Lei Lei, both being the non-executive Directors, and Mr. Cai Lian Jun, Mr. Wong Kai Tat, Mr. Wei Jie Sheng and Mr. Chan Ming Sun Jonathan, all being the independent non-executive Directors, and each of whom have no direct or indirect interests in the Offer, has been established to advise and make recommendations to the H Shareholders in respect of the Offer. The Company, with the approval of the Independent Board Committee, has appointed Messis Capital Limited as the independent financial adviser to advise the Independent Board Committee on the terms of the Offer.

– 18 –

LETTER FROM THE BOARD

The purposes of this Composite Document is to provide you with, among other things, information relating to the Company, the Offeror, the Controlling Shareholder and the Offer, and to set out the letter from the Independent Board Committee containing its advice to the H Shareholders and the letter from the Independent Financial Adviser in respect of the Offer.

SHAREHOLDING STRUCTURE OF THE COMPANY

The registered share capital of the Company as at the Latest Practicable Date is RMB1,020,400,000.

The issued share capital of the Company as at the Latest Practicable Date comprises:

Number of Shares held as at the Latest Practicable Date Offeror and parties acting in concert with it Domestic Shares 600,000,000 (representing all issued Domestic Shares in the share capital of the Company) H Shares (Note 1) 1,282,000 Sub-total 601,282,000 Public H Shares 419,118,000 Total 1,020,400,000	Number of Shares held as at the Latest Practicable Date Offeror and parties acting in concert with it Domestic Shares 600,000,000 (representing all issued Domestic Shares in the share capital of the Company) H Shares (Note 1) 1,282,000 Sub-total 601,282,000 Public H Shares 419,118,000 Total 1,020,400,000	Approximate percentage of shareholding in the issued share capital of the Company (%) 58.80 0.13
	601,282,000 419,118,000	58.93 41.07
	1,020,400,000	100.00

Note:

These H Shares are held by Mrs. Chim, who is presumed to be acting in concert with the Offeror in accordance with class 2 of the definition of “acting in concert” in the Takeovers Code. Under the SFO, Mr. Chim Kim Lun Ricky is deemed to be interested in the same number of Shares in which Mrs. Chim is interested.

No new Shares were issued since 31 December 2011 (being the date to which the latest published audited consolidated financial statements of the Company were made up) and up to the Latest Practicable Date.

– 19 –

LETTER FROM THE BOARD

All existing issued Shares rank pari passu in all respect including all rights as to dividends, voting and interests in capital.

As at the Latest Practicable Date, the Company does not have any outstanding warrants, options, convertible securities or derivatives to acquire Shares or other securities which are convertible into Shares.

MANDATORY UNCONDITIONAL CASH OFFER

On 21 September 2012, the Board was informed by Beijing Mingde, the then controlling shareholder of the Company, that it had entered into the conditional Sale and Purchase Agreement with the Controlling Shareholder, pursuant to which Beijing Mingde agreed to sell, and the Controlling Shareholder agreed to purchase, the Sale Shares of 600,000,000 Domestic Shares at a consideration of RMB105 million (or approximately HKD128.39 million), which was equivalent to RMB0.175 (or approximately HKD0.2140) per Sale Share. The change in the Shareholder of the Domestic Shares was registered with Shenyang Administration of Industry and Commerce (瀋陽市工商行政管理局) on 10 December 2012. Completion took place on 14 December 2012 upon satisfaction of all the conditions of the Sale and Purchase Agreement.

In accordance with Rule 26.1 of the Takeovers Code, the Controlling Shareholder and parties acting in concert with it, as a result of the Acquisition, are required to make a mandatory unconditional general offer for all the outstanding H Shares other than those already owned or agreed to be acquired by the Controlling Shareholder and parties acting in concert with it. Since the Controlling Shareholder, a company established in the PRC, has not carried out the necessary application procedures nor has it obtained the approvals from the relevant authorities in relation to overseas investments under the relevant rules and regulations in the PRC, the Controlling Shareholder and the Offeror formed a consortium to make the Offer, pursuant to which the Offeror became a party acting in concert with the Controlling Shareholder and will make the Offer, whereby the H Shares acquired pursuant to the Offer will be owned by the Offeror.

Principal terms of the Offer

Kingston Securities is making the Offer on behalf of the Offeror for all the H Shares not already owned or agreed to be acquired by the Controlling Shareholder and parties acting in concert with it.

– 20 –

LETTER FROM THE BOARD

The Offer is being made in compliance with the Takeovers Code on the following basis:

For each H Share . . . . . . . . . . . . . . . . . HK$0.214 (equivalent to RMB0.175) in cash

The Offer is unconditional and acceptance of which shall be irrevocable and cannot be withdrawn, except for the circumstances set out in Rule 19.2 of the Takeovers Code, which provides that if the Controlling Shareholder and the Offeror are unable to comply with any of the requirements of Rule 19 of the Takeovers Code (which states that, where applicable, the Controlling Shareholder and the Offeror must inform the Executive and the Stock Exchange their decision in relation to the revision, extension, expiry or unconditionality of the Offer by 6:00 p.m. on the Closing Date, i.e. 11 January 2013, and to publish an announcement on the Stock Exchange’s website by 7:00 p.m. on the Closing Date stating the same) the Executive may require the acceptors be granted a right of withdrawal, on terms acceptable to the Executive until the requirements under Rule 19 of the Takeovers Code can be met. The Directors note from the “Letter from Kingston Securities” that the Offeror does not intend to revise the terms, or extend the period, of the Offer and does not reserve the right to do so.

Mrs. Chim acquired the 1,282,000 H Shares at the price ranges of HK$0.67 to HK$1.19 per H Share between 2010 and 2011. Given that the 1,282,000 H Shares held by Mrs. Chim were acquired over six months prior to the date of the Announcement, it will not affect the Offer or any terms thereto including the Offer Price.

Further details of the Offer

Further details of the Offer, including the terms and conditions of the Offer and the procedures for acceptance of the Offer, are contained in the “Letter from Kingston Securities” in this Composite Document, in Appendix I to this Composite Document and in the accompanying Form of Acceptance.

– 21 –

LETTER FROM THE BOARD

INFORMATION ON THE COMPANY

Business

The Company is an investment holding company and the principal activities of its subsidiaries are property development and sale in the PRC.

The Company has no intention or plan to conduct business other than the Company’s existing principal business in property development and sale in the PRC.

Financial information

Based on the Company’s audited financial results as disclosed in the Company’s annual report for the year ended 31 December 2011, the Group recorded an audited net profit of approximately RMB40.9 million and approximately RMB26.7 million for the financial years ended 31 December 2011 and 31 December 2010, respectively. The audited consolidated total equity attributable to equity holders of the Company were approximately RMB505.2 million and approximately RMB459.6 million as at 31 December 2011 and 31 December 2010, respectively.

A summary of the audited results of the Company for each of the three financial years ended 31 December 2009, 2010 and 2011 and the unaudited results of the Company for each of the six months ended 30 June 2011 and 2012, the audited financial statements of the Company for the year ended 31 December 2011 and the unaudited financial statements of the Company for the six months ended 30 June 2012 are set out in Appendix II to this Composite Document.

Further information

Further information in relation to the Company is set out in Appendix III to this Composite Document. An expected timetable in relation to the Offer is set out under the section headed “Expected timetable” of this Composite Document.

INFORMATION ON THE OFFEROR AND THE CONTROLLING SHAREHOLDER

Your attention is drawn to the sections headed “Information on the Offeror” and “Information on the Controlling Shareholder” in the “Letter from Kingston Securities” as set out on pages 12 to 13 of this Composite Document.

THE INTENTION OF THE OFFEROR ON THE GROUP

The Directors note from the “Letter from Kingston Securities” that the Offeror intends that the Company will continue with its existing principal activities and will maintain the listing status of the Company on the Stock Exchange after closing of the Offer. The Offeror has no intention to (i) introduce any major changes to the Group’s business or (ii) re-deploy employees or fixed assets of the Group within 6 months from the

– 22 –

LETTER FROM THE BOARD

date of this Composite Document other than in its ordinary course of business. Except for the intention of the Offeror to hold the accepted H Shares, if any, for investment purpose, the Offeror will not take any role in the Company. The Board has noted the intention of the Offeror in respect of the Group and its employees and is willing to render cooperation and support to the Offeror, which are in the interests of the Company and the Shareholders as a whole.

THE INTENTION OF THE CONTROLLING SHAREHOLDER ON THE GROUP

The Directors note from the “Letter from Kingston Securities” that the Controlling Shareholder intends that the Company will continue with its existing principal activities and will maintain the listing status of the Company on the Stock Exchange after closing of the Offer.

The Controlling Shareholder intends to nominate new Director(s) to the Board with effect from the earliest time permitted for appointment of directors under the Takeovers Code, the Listing Rules and applicable laws. Details of the change of the Board composition and the biographies of the newly appointed Director(s) will be made in compliance with the Takeovers Code and the Listing Rules and announced in due course. It is also the intention of the Controlling Shareholder to maintain the listing status of the Company on the Stock Exchange after closing of the Offer. The Controlling Shareholder has no intention to (i) introduce any major changes to the Group’s business or (ii) re-deploy employees or fixed assets of the Group within 6 months from the date of this Composite Document other than in its ordinary course of business.

BOARD COMPOSITION OF THE COMPANY

The Directors note from the “Letter from Kingston Securities” that new Director(s) may be nominated with effect from the earliest time permitted for appointment of directors under the Takeovers Code, the Listing Rules and applicable laws. Details of any change of the composition of the Board will be announced as and when necessary.

– 23 –

LETTER FROM THE BOARD

MAINTAINING THE LISTING STATUS OF THE COMPANY

The Offeror intends to maintain the listing status of the H Shares on the Stock Exchange after closing of the Offer. The Board, the sole director of the Offeror and the new directors to be appointed to the Board will jointly and severally undertake to the Stock Exchange to take appropriate steps as soon as possible following closing of the Offer to ensure that sufficient public float exists in the H Shares. As the Company and the Offeror are unable to ascertain at this stage the level of acceptances of the H Shares by the H Shareholders under the Offer, the aforesaid parties have not decided the exact steps/actions that will be taken by them after closing of the Offer to restore the public float of the H Shares, if required. Notwithstanding this, the Company and the Offeror consider that the appropriate actions to be taken shall include placing down of sufficient number of accepted H Shares by the Offeror for this purpose. The Company and the Offeror will issue a separate announcement as and when necessary regarding the decision of any such placing down, if the circumstances warrant.

The Stock Exchange has stated that if, upon closing of the Offer, the number of H Shares held by the public is less than the minimum required percentage applicable to the Company are held by the public or if the Stock Exchange believes that (i) a false market exists or may exist in the trading of the H Shares; or (ii) there are insufficient H Shares in public hands to maintain an orderly market, then it will consider exercising its discretion to suspend dealings in the H Shares.

RECOMMENDATIONS

Your attention is drawn to the “Letter from the Independent Board Committee” set out on pages 25 to 26 of this Composite Document, which contains its recommendation to the H Shareholders regarding the Offer and the “Letter from the Independent Financial Adviser” set out on pages 27 to 45 of this Composite Document, which sets out its advice to the Independent Board Committee in respect of the terms of the Offer, and the principal factors which it has considered before arriving at its advice to the Independent Board Committee.

ADDITIONAL INFORMATION

Your attention is drawn to the “Letter from Kingston Securities” as set out on pages 6 to 16 of this Composite Document which contains details of the Offer.

In considering what action is to be taken in connection with the Offer, H Shareholders should consider their own tax positions and, if they are in any doubt, they should consult their professional advisers. You are recommended to read this Composite Document together with the accompanying Form of Acceptance for details of the Offer. Your attention is also drawn to the additional information contained in the Appendices to this Composite Document.

By Order of the Board SHENYANG PUBLIC UTILITY HOLDINGS COMPANY LIMITED Mr. An Mu Zong Chairman

– 24 –

LETTER FROM THE INDEPENDENT BOARD COMMITTEE

The following is the full text of a letter from the Independent Board Committee to the H Shareholders in relation to the Offer prepared for inclusion in this Composite Document.

瀋陽公用發展股份有限公司 Shenyang Public Utility Holdings Company Limited

(a joint stock limited company established in the People’s Republic of China) (Stock code: 747)

21 December 2012

To the H Shareholders

Dear Sir or Madam,

MANDATORY UNCONDITIONAL CASH OFFER BY KINGSTON SECURITIES LIMITED ON BEHALF OF SKY EARTH LIMITED TO ACQUIRE ALL THE ISSUED H SHARES (OTHER THAN THOSE ALREADY OWNED OR AGREED TO BE ACQUIRED BY SKY EARTH LIMITED AND PARTIES ACTING IN CONCERT WITH IT) IN SHENYANG PUBLIC UTILITY HOLDINGS COMPANY LIMITED

We refer to this composite offer and response document dated 21 December 2012 jointly issued by Sky Earth Limited and Shenyang Public Utility Holdings Company Limited (the “Composite Document”), of which this letter forms part. Capitalised terms used in the Composite Document shall have the same meanings in this letter unless the context otherwise requires.

We have been appointed as members of the Independent Board Committee to consider whether, in our opinion, the terms of the Offer are fair and reasonable so far as the H Shareholders are concerned, and to make recommendations to the H Shareholders in connection with the Offer. Messis Capital Limited (the “Independent Financial Adviser”) has been appointed as the independent financial adviser to advise us and the H Shareholders in respect of the terms of the Offer.

We wish to draw your attention to the “Letter from the Board”, the “Letter from the Independent Financial Adviser” and the additional information set out in the Appendices to the Composite Document.

Having taken into account the principal factors and reasons considered by, and the advice of, the Independent Financial Adviser as set out in its letter of advice, we consider that the terms of the Offer are not fair and reasonable so far as the H Shareholders are concerned. Accordingly, we recommend the H Shareholders not to accept the Offer.

– 25 –

LETTER FROM THE INDEPENDENT BOARD COMMITTEE

The letter from the Independent Financial Adviser containing its recommendations to us and the principal factors and reasons taken into account by it in arriving at such recommendations is set out on pages 27 to 45 of the Composite Document.

Notwithstanding our views and recommendation(s) in respect of the terms of the Offer, Shareholders are advised to make their decisions as to hold or realize their investments in the Company on the basis of their evaluation and assessment of their own circumstances and investment objectives and they shall consult their advisers including financial, legal and accounting advisers in case of doubt of if necessary.

Yours faithfully, For and on behalf of the

Independent Board Committee

Bao Yi Qiang Zhang Lei Lei

Non-executive Directors Cai Lian Jun Wong Kai Tat Wei Jie Sheng Chan Ming Sun Jonathan Independent non-executive Directors

– 26 –

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

The following is the text of the letter of advice from the Independent Financial Adviser to the Independent Board Committee for inclusion into this Composite Document.

==> picture [188 x 33] intentionally omitted <==

21 December 2012

To: Independent Board Committee of Shenyang Public Utility Holdings Company Limited

Dear Sir or Madam,

MANDATORY UNCONDITIONAL CASH OFFER BY KINGSTON SECURITIES LIMITED ON BEHALF OF SKY EARTH LIMITED TO ACQUIRE ALL THE ISSUED H SHARES (OTHER THAN THOSE ALREADY OWNED OR AGREED TO BE ACQUIRED BY SKY EARTH LIMITED AND PARTIES ACTING IN CONCERT WITH IT) IN SHENYANG PUBLIC UTILITY HOLDINGS COMPANY LIMITED

INTRODUCTION

We refer to our appointment as the independent financial adviser to advise the Independent Board Committee in respect of the Offer, details of which are set out in the composite offer and response document of the Company dated 21 December 2012 to the Shareholders (the “ Composite Document ”), of which this letter forms part. Capitalised terms used in this letter shall have the same meanings as defined in the Composite Document unless the context otherwise requires.

On 28 September 2012, the Offeror and the Company jointly announced that, among other things, Beijing Mingde, the then controlling shareholder of the Company, and the Controlling Shareholder entered into the conditional Sale and Purchase Agreement on 21 September 2012 pursuant to which Beijing Mingde agreed to sell, and the Controlling Shareholder agreed to purchase, the Sale Shares of 600,000,000 Domestic Shares, representing approximately 58.80% of the entire issued share capital of the Company as at the Latest Practicable Date at a consideration of RMB105 million (or approximately HK$128.39 million), which was equivalent to RMB0.175 (or approximately HK$0.214) per Sale Share. Completion of the Sale and Purchase Agreement is subject to the satisfaction of the conditions precedent therein, including, among other things, completion of amendments to the Articles and the registration procedures with Shenyang Administration of Industry and Commerce (瀋陽市工商行政管理局) in connection with the

For identification purpose only

– 27 –

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

change in the Shareholder of the Domestic Shares. The change in the Shareholder of the Domestic Shares was registered with Shenyang Administration of Industry and Commerce (瀋陽市工商行政管理局) on 10 December 2012. Completion took place on 14 December 2012 upon satisfaction of all the conditions of the Sale and Purchase Agreement.

Prior to Completion, Mrs. Chim held 1,282,000 H Shares. As the Offeror has been a party acting in concert with the Controlling Shareholder (as explained below), accordingly, prior to Completion, the Controlling Shareholder and parties acting in concert with it were interested in 1,282,000 H Shares, representing approximately 0.13% of the issued share capital of the Company. Upon Completion, the Controlling Shareholder and parties acting in concert with it became interested in 600,000,000 Domestic Shares and 1,282,000 H Shares, representing an aggregate of approximately 58.93% of the issued share capital of the Company as at the Latest Practicable Date. Pursuant to Rule 26.1 of the Takeovers Code, the Controlling Shareholder and parties acting in concert with it, as a result of the Acquisition, are required to make a mandatory unconditional general offer for all the outstanding H Shares other than those already owned or agreed to be acquired by the Controlling Shareholder and parties acting in concert with it.

As at the Latest Practicable Date, the outstanding Shares other than those already owned or agreed to be acquired by the Controlling Shareholder and parties acting in concert with it amounted to 419,118,000 H Shares, representing approximately 41.07% of the issued share capital of the Company. Since the Controlling Shareholder, a company established in the PRC, has not carried out the necessary application procedures nor has it obtained the approvals from the relevant authorities in relation to overseas investments under the relevant rules and regulations in the PRC, the Controlling Shareholder and the Offeror formed a consortium for the purpose of the Offer. The Offeror became a party acting in concert with the Controlling Shareholder and will make the Offer, whereby the H Shares acquired pursuant to the Offer will be owned by the Offeror. Kingston Securities is making the Offer on behalf of the Offeror for all the H Shares not already owned or agreed to be acquired by the Controlling Shareholder and parties acting in concert with it at the Offer Price, in accordance with Rule 26.1 of the Takeovers Code.

In accordance with Rule 2.1 of the Takeovers Code, the Independent Board Committee which comprises Mr. Bao Yi Qiang and Mrs. Zhang Lei Lei, both being the non-executive Directors, and Mr. Cai Lian Jun, Mr. Wong Kai Tat, Mr. Wei Jie Sheng and Mr. Chan Ming Sun Jonathan, all being the independent non-executive Directors, and each of whom have no direct or indirect interests in the Offer, has been established to advise and make recommendations to the H Shareholders in respect of the Offer. We have been appointed as the independent financial adviser to advise the Independent Board Committee in connection with the Offer and in particular as to whether the terms of the Offer are fair and reasonable and to give an opinion and recommendation as regards to the acceptance of the Offer. Our appointment as the independent financial adviser to the Independent Board Committee has been approved by the Independent Board Committee.

– 28 –

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

BASIS OF OUR OPINION

In arriving at our recommendation, we have relied on the statements, information and representations contained or referred to in the Composite Document and the information provided and representations made to us by the Directors and the management of the Company. We have assumed that all the statements, information and representations contained or referred to in the Composite Document and all information provided and representations made by the Directors and the management of the Company for which they are solely responsible, are true and accurate at the time they were provided and made and will continue to be so at the Latest Practicable Date. H Shareholders will be notified of material changes as soon as possible, if any, to the information and representations provided and made to us after the Latest Practicable Date and up to the date throughout the offer period (as defined under the Takeovers Code). We have no reason to doubt the truth, accuracy and completeness of the information provided and representations made to us by the Directors and the management of the Company. We consider that the information provided and representations made to us are sufficient for us to form a reasonable basis for our opinion. We are not aware of any reason to suspect any relevant information has been withheld, nor are we aware of any fact or circumstance which would render the information provided and representations made to us untrue, inaccurate or misleading. The Directors have further confirmed that, having made all reasonable enquiries, and to the best of their knowledge, they believe there are no other facts or representations the omission of which would make any statement in the Composite Document, including this letter, incorrect or misleading. We have not, however, carried out any independent verification of the information provided and representations made to us by the Directors and the management of the Company, nor have we conducted an independent investigation into the business and affairs of the Group, the Controlling Shareholder and the Offeror.

We have not considered the tax consequences on the H Shareholders of their acceptance or non-acceptance of the Offer since they are particular to their own individual circumstances. In particular, H Shareholders who are residents overseas or subject to overseas taxes or Hong Kong taxation on securities dealings should consider their own tax positions with regard to the Offer and, if in any doubt, should consult their own professional advisers.

This letter is issued to the Independent Board Committee regarding the Offer for its information only, and except for its inclusion in the Composite Document, is not to be quoted or referred to, in whole or in part, nor shall this letter be used for any other purposes, without our prior written consent.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

PRINCIPAL FACTORS AND REASONS CONSIDERED

In formulating our opinion and recommendation with regard to the Offer, we have taken into account the following principal factors and reasons:

1. Background of the Offer

As disclosed in the Announcement, on 21 September 2012, Beijing Mingde, the then controlling shareholder of the Company, and the Controlling Shareholder entered into the conditional Sale and Purchase Agreement on 21 September 2012 pursuant to which Beijing Mingde agreed to sell, and the Controlling Shareholder agreed to purchase, the Sale Shares of 600,000,000 Domestic Shares, representing approximately 58.80% of the entire issued share capital of the Company as at the Latest Practicable Date, at a consideration of RMB105 million (or approximately HK$128.39 million), which was equivalent to RMB0.175 (or approximately HK$0.214) per Sale Share. Completion of the Sale and Purchase Agreement is subject to the satisfaction of the conditions precedent therein, including, among other things, completion of amendments to the Articles and the registration procedures with Shenyang Administration of Industry and Commerce (瀋陽市工商行政管理局) in connection with the change in the Shareholder of the Domestic Shares. The change in the Shareholder of the Domestic Shares was registered with Shenyang Administration of Industry and Commerce (瀋陽市工商行政管理局) on 10 December 2012. Completion took place on 14 December 2012 upon satisfaction of all the conditions of the Sale and Purchase Agreement.

Prior to Completion, Mrs. Chim held 1,282,000 H Shares. As the Offeror has been a party acting in concert with the Controlling Shareholder (as explained below), accordingly, prior to Completion, the Controlling Shareholder and parties acting in concert with it were interested in 1,282,000 H Shares, representing approximately 0.13% of the issued share capital of the Company. Upon Completion, the Controlling Shareholder and parties acting in concert with it became interested in 600,000,000 Domestic Shares and 1,282,000 H Shares, representing an aggregate of approximately 58.93% of the issued share capital of the Company as at the Latest Practicable Date. Accordingly, the Controlling Shareholder and parties acting in concert with it, as a result of the Acquisition, are required to make a mandatory unconditional general offer for all the outstanding H Shares other than those already owned or agreed to be acquired by the Controlling Shareholder and parties acting in concert with it under Rule 26.1 of the Takeovers Code.

As at the Latest Practicable Date, the outstanding H Shares other than those already owned or agreed to be acquired by the Controlling Shareholder and parties acting in concert with it amounted to 419,118,000 H Shares, representing approximately 41.07% of the issued share capital of the Company. Since the Controlling Shareholder, a company established in the PRC, has not carried out the necessary application procedures nor has it obtained the approvals from the relevant authorities in relation to overseas investments under the relevant rules and regulations in the PRC, the Controlling Shareholder and the Offeror formed a consortium for the purpose of the Offer. The Offeror became a party acting in

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

concert with the Controlling Shareholder and will make the Offer, whereby the H Shares acquired pursuant to the Offer will be owned by the Offeror.

Based on the 419,118,000 H Shares subject to the Offer, the Offer is valued at approximately HK$89.70 million based on the Offer Price. As at the Latest Practicable Date, the Company did not have any outstanding warrants or options or convertible securities or derivatives to acquire Shares or other securities which are convertible into H Shares.

2. Information of the Group

The Group is a real estate developer and is principally engaged in the businesses of development and sale of real estate, leasing and management of property in the PRC.

Historical financial performance of the Group

Set out below is a summary of the financial information of the Group for each of the three years ended 31 December 2011 as extracted from the annual reports of the Company for the year ended 31 December 2010 (the “ 2010 Annual Report ”) and for the year ended 31 December 2011 (the “ 2011 Annual Report ”) and the interim report of the Company for the six months ended 30 June 2011 (the “ 2012 Interim Report ”).

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

For the year ended 31 December For the six months ended 30 June 2009 2010 2011 2011 2012 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 (audited) (audited) (audited) (unaudited) (unaudited) 3,651 17,682 22,879 12,703 4,802 (2,000) 32,406 38,300 n/a n/a (15,728) 31,808 64,600 1,590 4,275 n/a 23,829 52,650 n/a n/a n/a 2,848 (11,740) n/a n/a (15,428) 26,677 40,910 1,590 4,275	For the year ended 31 December For the six months ended 30 June 2009 2010 2011 2011 2012 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 (audited) (audited) (audited) (unaudited) (unaudited) 3,651 17,682 22,879 12,703 4,802 (2,000) 32,406 38,300 n/a n/a (15,728) 31,808 64,600 1,590 4,275 n/a 23,829 52,650 n/a n/a n/a 2,848 (11,740) n/a n/a (15,428) 26,677 40,910 1,590 4,275	For the year ended 31 December For the six months ended 30 June 2009 2010 2011 2011 2012 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 (audited) (audited) (audited) (unaudited) (unaudited) 3,651 17,682 22,879 12,703 4,802 (2,000) 32,406 38,300 n/a n/a (15,728) 31,808 64,600 1,590 4,275 n/a 23,829 52,650 n/a n/a n/a 2,848 (11,740) n/a n/a (15,428) 26,677 40,910 1,590 4,275	For the year ended 31 December For the six months ended 30 June 2009 2010 2011 2011 2012 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 (audited) (audited) (audited) (unaudited) (unaudited) 3,651 17,682 22,879 12,703 4,802 (2,000) 32,406 38,300 n/a n/a (15,728) 31,808 64,600 1,590 4,275 n/a 23,829 52,650 n/a n/a n/a 2,848 (11,740) n/a n/a (15,428) 26,677 40,910 1,590 4,275	For the year ended 31 December For the six months ended 30 June 2009 2010 2011 2011 2012 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 (audited) (audited) (audited) (unaudited) (unaudited) 3,651 17,682 22,879 12,703 4,802 (2,000) 32,406 38,300 n/a n/a (15,728) 31,808 64,600 1,590 4,275 n/a 23,829 52,650 n/a n/a n/a 2,848 (11,740) n/a n/a (15,428) 26,677 40,910 1,590 4,275
				4,275

(14,974) (454)	25,833 844	45,612 (4,702)	1,347 243	4,275 –
(15,428) 26,677 40,910 1,590 4,275 (1.47) 2.53 4.47 0.13 0.42 n/a 2.34 5.16 n/a n/a As at 31 December As at 30 June 2009 2010 2011 2012 RMB’000 RMB’000 RMB’000 RMB’000 (audited) (audited) (audited) (unaudited) ers 430,103 459,631 505,243 509,518				4,275

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

For the year ended 31 December 2010, the Group recorded a turnover of approximately RMB17,682,000, representing an increase of approximately 384.3% as compared with approximately RMB3,651,000 in the previous year. According to the 2010 Annual Report, the increase in the Group’s turnover was attributable to the revenue generated from newly acquired investment properties during the year which include the Beida Jade Bird Building located at Keyuan Road in Shenzhen and the property located at 1st floor and 2nd floor, No. 112, Jianguo Road, Chaoyang District, Beijing, the PRC. The Group’s profit for the year attributable to owners of the Company was approximately RMB25,833,000 compared to a loss for the year attributable to owners of the Company of approximately RMB14,974,000. As shown in the 2010 Annual Report, the Group was able to generate profit for the year for the year ended 31 December 2010 mainly attributable to the recognition of a net change in fair value of investment properties of approximately RMB32,406,000.

For the year ended 31 December 2011, the Group recorded a turnover of approximately RMB22,879,000, representing an increase of approximately 29.4% as compared with approximately RMB17,682,000 in the previous year. According to the 2011 Annual Report, the increase in the Group’s turnover was attributable to increase in rental income generated from properties during the year. The Group recorded a profit for the year attributable to owners of the Company of approximately RMB45,612,000, representing an increase of approximately 76.6% as compared with approximately RMB25,833,000 for the year ended 31 December 2010. As shown in the 2011 Annual Report, the increase in the Group’s net profit was mainly attributable to increase in turnover, the recognition of a waiver of debt of other payables of approximately RMB25,065,000 and an increase in the net change in fair value of investment properties. As shown in the 2011 Annual Report, the Group discontinued its education project business which involves the leasing of campus and equipment, investment and management of education projects during the year.

For the six months ended 30 June 2012, the turnover of the Group amounted to approximately RMB4,802,000, representing a decrease of approximately 62.2% as compared to that of the six months ended 30 June 2011. As shown in the 2012 Interim Report, the decrease in turnover arose mainly from decrease in turnover from the leasing of property segment and the education projects segment of the Group. As shown in the 2011 Annual Report, the Group had disposed in 2011 (i) the 70% equity interests in Zhuhai Beida Education Science Park Company Limited* (珠海北大教育科學園有限公司) which was principally engaged in property development and educational investment in the PRC; and (ii) the 99.86% equity interests in Shenyang Development Real Estate Company Limited which was principally engaged in property development in the PRC. The profit attributable to owners of the Company of the Group for the six months ended 30 June 2012 was approximately RMB4,275,000, representing an increase of approximately 217.4% as compared to that of the six months ended 30 June 2011. As shown in the 2012 Interim Report, the increase in net profit was mainly attributable to the recognition of a gain on disposal of subsidiaries during the period.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

The equity attributable to owners of the Company increased gradually from approximately RMB430,103,000 as at 31 December 2009 to approximately RMB509,518,000 as at 30 June 2012. The increase in the equity attributable to owners of the Company corresponded to the increase in profit attributable to owners of the Company over the same period.

Prospect and outlook of the Group

As noted from the Company’s 2011 Annual Report, the PRC central government geared up its efforts in 2011 through administrative and fiscal measures such as tighter limits for home purchases, property prices and mortgage loans, expedited construction of social security houses and a further tightened monetary policy. After careful consideration of the business risks under the strengthened government measures to regulate the property market, the Company divested property assets with low investment returns while diversifying to the businesses of industrial real estate and primary land development and formation. During the six months ended 30 June 2012, the Group had completed the disposal of 100% equity interests in Beijing Shenfa Property Management Company Limited[] (北京瀋發物業管理有限公司) and Shenzhen Jade Bird Shenfa Optoelectronic Company[] (深圳青鳥瀋發光電有限公司) whose principal activities are leasing and management of property.

On 8 June 2012, the Company completed the acquisition of 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 ”) which is primarily engaged in the business of real estate development and construction. As advised by the Directors, the major project of Zhongfang Chaozhou in progress is a land development project in Chaozhou (the “ Chaozhou Project ”) with a total area of 4,500 mu. to build an industrial zone which targets to attract industrial operators to relocate from the already crowded and over-demanded Pearl River Delta area. The Chaozhou Project is developed by two phases, the first of which was finished in early April 2012 and the whole Chaozhou Project is targeted to be completed by June 2013. On 13 June 2012, the Company completed the acquisition of 90% equity interests in Guangzhou Zhongzhan Investment Holdings Company Limited[] (廣州市中展投資控股有限公司) (“ Guangzhou Zhongzhan ”). As advised by the Directors, Guangzhou Zhongzhan is currently engaging in a comprehensive real estate development project in the PRC (the “ Guangzhou Project ”) in which government indemnificatory houses, residential apartments and commercial properties will be constructed. The Guangzhou Project is located at San Lian Village, Li Cheng Street, Zeng Cheng City, Guangdong Province, the PRC (中國廣東省廣州增城市荔城街三聯村), with a total land area of approximately 58,090 square meters. The construction of the government indemnificatory houses is expected to be completed by the end of 2013 while the other parts of the Guangzhou Project are expected to be completed by the end of 2014.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Based on statistics published on the website of the National Bureau of Statistics of China (中華人民共和國國家統計局) (http://www.stats.gov.cn/tjfx/jdfx/) in relation to the property development and sales situations in the PRC, the effect of various administrative measures and government policies introduced by the PRC government on the property market in the PRC can be shown on the charts below:

Chart A: Growth in property development investment in the PRC

==> picture [317 x 189] intentionally omitted <==

----- Start of picture text -----

40.0%
35.0%
30.0%
25.0%
20.0%
15.0%
10.0%
2011 Jan - FebJan - MarJan - AprJan - MayJan - JunJan - JulJan - AugJan - SepJan - OctJan - NovJan - Dec2012 Jan - FebJan - MarJan - AprJan - MayJan - JunJan - JulJan - AugJan - SepJan - Oct
----- End of picture text -----

Source: the website of the National Bureau of Statistics of China (www.stats.gov.cn)

Chart B: Growth in total acquisition land area by property development enterprises in the PRC

==> picture [318 x 187] intentionally omitted <==

----- Start of picture text -----

60.0%
50.0%
40.0%
30.0%
20.0%
10.0%
0.0%
-10.0%
-20.0%
-30.0%
2011 Jan - FebJan - MarJan - AprJan - MayJan - JunJan - JulJan - AugJan - SepJan - OctJan - NovJan - Dec2012 Jan - FebJan - MarJan - AprJan - MayJan - JunJan - JulJan - AugJan - SepJan - Oct
----- End of picture text -----

Source: the website of the National Bureau of Statistics of China (www.stats.gov.cn)

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

The above charts show that administrative and fiscal measures adopted by the PRC government have led to substantial decreases in the growth rate of property development investment and the growth rate of total acquisition land area by property development enterprises in the PRC since 2011. According to statistics published in an article named “Property development and sales situations in the PRC in January to October 2012” on the website of the National Bureau of Statistics of China (中華人民共和國國家統計局) (http://www.stats.gov.cn/tjfx/jdfx/t20121109_402850026.htm), for the first ten months in 2012, total investment in real estate development in the PRC amounted to approximately RMB5,762.9 billion, representing an increase of approximately 15.4% as compared to the same period last year. The total acquisition land area by property development enterprises in the PRC was approximately 27.7 million square meters for the first ten months in 2012, representing a decrease of approximately 18.0% as compared to the same period last year. According to statistics published on the website of Statistics Bureau of Guangdong Province (廣東省統計局) (http://www.gdstats.gov.cn/tjzl/tjkx/201211/t20121115_96574.html), for the first ten months in 2012, total investment in real estate development in Guangdong Province amounted to approximately RMB413.3 billion, representing an increase of approximately 10.8% as compared to the same period last year but the rate of increase was lower than the corresponding 12.1% increase for the first nine months in 2012. Within Guangdong Province, total investment in real estate development in Chaozhou City for the first ten months in 2012 amounted to approximately RMB1.68 billion, representing a decrease of approximately 8.1% as compared to the same period last year.

Notwithstanding that the Chaozhou Project and the Guangzhou Project may provide future income to the Group, we consider that there remain some risk factors associated with the operation and the prospect of the Group. The PRC central government will continue to enforce tightening polices on the real estate market and implement administrative measures to control property speculation activities and property prices in the PRC. One of such measures is the implementation of property tax which is targeted to be extended to other cities in next year. As analysed above, the PRC property market can be adversely affected by administrative measures or policies implemented by the PRC central government which may have an adverse effect on the business and prospects of the Group. Another factor affecting the PRC property market is the macroeconomic environment in the PRC which may be affected by the global and regional economic environment such as the latest European sovereign debt crisis. According to statistics published on the website of the National Bureau of Statistics of China (中華人民共和國國家統計局) (http://www.stats.gov.cn/tjsj/jidusj/), the GDP growth has declined from approximately 9.8% in the first quarter in 2011 to approximately 7.7% for the first three quarters in 2012. The decline in the economic growth in the PRC coincides with the decline in the property market in the PRC during the same period. Although the European sovereign debt crisis has already had an adverse effect on the global economy, there is uncertainty about how long the crisis will last and when the slowdown in the Chinese economy will end. In addition, the United States may encounter the problem of financial cliff in 2013 where a number of current laws, if unchanged, could result in tax

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

increases, spending cuts, and a corresponding reduction in the budget deficit beginning in 2013 which may lead to recession during 2013 in the US economy and may have an adverse effect on the global economy and the Chinese economy. Therefore, we remain cautious about the outlook and prospects of the Group in light of the uncertainties in the current economic and market conditions.

3. Principal terms of the Offer

Kingston Securities is making the Offer on behalf of the Offeror for all the H Shares not already owned or agreed to be acquired by the Controlling Shareholder and parties acting in concert with it on the following basis:

For each H Share . . . . . . . . . . . . . HK$0.214 (equivalent to RMB0.175) in cash

(i) a discount of approximately 58.04% to the closing price of HK$0.51 per H Share as quoted on the Stock Exchange on the Last Trading Day;
(ii) a discount of approximately 58.69% to the average closing price of HK$0.518 per H Share as quoted on the Stock Exchange for the last five consecutive trading days up to and including the Last Trading Day;
(iii) a discount of approximately 59.16% to the average closing price of HK$0.524 per H Share as quoted on the Stock Exchange for the last ten consecutive trading days up to and including the Last Trading Day;
(iv) a discount of approximately 59.70% to the average closing price of HK$0.531 per H Share as quoted on the Stock Exchange for the last thirty consecutive trading days up to and including the Last Trading Day;
(v) a discount of approximately 61.09% to the closing price of approximately HK$0.55 per Share as quoted on the Stock Exchange on the Latest Practicable Date; and
(vi) a discount of approximately 64.33% to the unaudited net asset attributable to of the Group of approximately RMB0.50 per Share (or approximately HK$0.60 per Share) as at 30 June 2012.

Further terms and conditions of the Offer, including the procedures for acceptance, are set out in the section headed “Letter from Kingston Securities” contained in the Composite Document.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

4. Historical performance of H Shares

4.1 Price of H Shares

The following chart sets out the daily closing prices of H Shares on the Stock Exchange for the period from 3 October 2011 (being the first trading day of the 12 month period prior to the Last Trading Day) up to and including the Latest Practicable Date (the “ Review Period ”).

Chart C: The closing prices of H Shares during the Review Period

==> picture [320 x 200] intentionally omitted <==

----- Start of picture text -----

Share price (HK$)
0.7
0.6
0.5
0.4
0.3
0.2
Offer Price of HK$0.214
0.1
0.0
Oct-2011Nov-2011Dec-2011Jan-2012Feb-2012Mar-2012Apr-2012May-2012Jun-2012 Jul-2012Aug-2012Sep-2012Oct-2012Nov-2012Dec-2012
----- End of picture text -----

Source: the website of the Stock Exchange (www.hkex.com.hk)

Note: Trading in H Shares on the Stock Exchange was suspended from 24 September 2012 to 28 September 2012 (both days inclusive) pending the release of the Announcement.

During the Review Period, the closing price of H Shares fluctuated in a range from HK$0.445 to HK$0.65. The closing price of H Shares fell from HK$0.50 on 3 October 2012 to the lowest of HK$0.445 on 28 December 2012 and subsequently showed a gradual upward increasing trend and reached the highest of HK$0.65 on 28 and 29 May 2012. Since then, the closing price of H Shares started to decrease gradually and was HK$0.51 on the Last Trading Day.

From 24 September 2012 to 28 September 2012, the trading of H Shares was suspended as requested by the Company pending the release of the Announcement. Since 3 October 2012, being the first trading day of H Shares after the publication of the Announcement, the closing price of H Shares fluctuated within the range from HK$0.51 to HK$0.59 during the period from 3 October 2012 up to the Latest Practicable Date.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

As shown in Chart C above, the closing prices of H Shares were above the Offer Price during the entire Review Period. During the Review Period, the highest and lowest closing price of H Shares was HK$0.65 on 28 and 29 May 2012 and HK$0.445 on 28 December 2011 respectively. The Offer Price represents a discount of approximately 67.1% to the highest closing price of HK$0.65 and a discount of approximately 51.9% to the lowest closing price of HK$0.445. The average of the closing prices of H Shares during the Review Period was approximately HK$0.54. The Offer Price represents a discount of approximately 60.4% to such average closing price.

Taking into account that the closing prices of H Shares were above the Offer Price during the entire Review Period, we are of the view that H Shareholders who wish to realize their investment in H Shares can dispose their H Shares in the market at a price above the Offer Price and therefore the Offer Price is not fair and reasonable so far as the H Shareholders are concerned.

For those H Shareholders who wish to realize their investment in H Shares are reminded that they should carefully and closely monitor the market price of H Shares during the Offer Period and consider selling their shares in the open market during the Offer Period, rather than accepting the Offer, if the net proceeds from the sales of such H Shares in the open market would exceed the net amount receivable under the Offer.

4.2 Liquidity of H Shares

The following chart sets out the daily trading volume of H Shares during the Review Period:

Chart D: The daily trading volume of H Shares during the Review Period

==> picture [319 x 186] intentionally omitted <==

----- Start of picture text -----

Trading Volume
7,000,000
6,000,000
5,000,000
4,000,000
3,000,000
2,000,000
1,000,000
0
Oct-2011Nov-2011Dec-2011Jan-2012Feb-2012Mar-2012Apr-2012May-2012Jun-2012Jul-2012Aug-2012Sep-2012Oct-2012Nov-2012Dec-2012
----- End of picture text -----

Source: the website of the Stock Exchange (www.hkex.com.hk)

Note: Trading in H Shares on the Stock Exchange was suspended from 24 September 2012 to 28 September 2012 (both days inclusive) pending the release of the Announcement.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

The following table sets out the monthly total trading volume, the highest, lowest and average daily number of H Shares traded in each month, number of trading days with no trading volume, and the percentage of average daily trading volume of H Shares as compared to the total number of H Shares in issue during the Review Period:

						Percentage
						of average
						daily
						trading
					Number of	volume
		Highest	Lowest	Average	trading	to total
	Total	daily	daily	daily	days with	number of
	trading	trading	trading	trading	no trading	H Shares
Month	volume	volume	volume	volume	volume	in issue
	(number of	(number of	(number of	(number of	(days)	(%)
	H Shares)	H Shares)	H Shares)	H Shares)		(Note)
2011
October	18,168,000	2,220,000	100,000	908,400	0	0.22%
November	23,086,000	6,298,000	110,000	1,049,364	0	0.25%
December	3,580,000	760,000	0	179,000	5	0.04%
2012
January	6,830,000	1,196,000	0	379,444	1	0.09%
February	10,710,000	2,200,000	0	510,000	2	0.12%
March	27,096,000	5,986,000	80,000	1,231,636	0	0.29%
April	8,882,000	2,070,000	0	493,444	1	0.12%
May	23,152,000	4,270,000	10,000	1,052,364	0	0.25%
June	8,678,000	1,596,000	0	413,238	1	0.10%
July	6,940,000	1,408,000	0	330,476	2	0.08%
August	1,970,000	468,000	0	85,652	9	0.02%
September	1,548,000	432,000	0	103,200	1	0.02%
October	17,948,000	4,704,000	0	897,400	0	0.21%
November	22,532,000	5,726,000	0	1,024,182	2	0.24%
December (up to and
including the Latest
Practicable Date)	7,992,000	2,836,000	0	666,000	1	0.16%

Source: the website of the Stock Exchange (www.hkex.com.hk)

Note: Based on 420,400,000 H Shares in issue as at the Latest Practicable Date.

As illustrated above, during the Review Period, the average daily trading volume of H Shares as a percentage of the total number of H Shares in issue ranged from 0.02% to 0.29%. The highest average daily trading volume occurred in March 2012 when the Company published its annual results for the year ended 31 December 2011 that the Group’s turnover and net profit increased by approximately 29.4% and 53.4% respectively as compared to the

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

corresponding figure in the previous year. Save for the publication of annual results for the year ended 31 December 2011, we are not aware of any other public announcements made by the Company in March 2012 that were price sensitive in nature and thus, we consider the increase in the average daily trading volume of H Shares during March 2012, to a large extent, may likely be due to market speculation on the financial results of the Company for the year ended 31 December 2011. Although there were only 25 trading days during the Review Period with no actual Shares traded during the day, the average daily trading volume of the Shares during the entire Review Period was approximately 0.15% of the total number of issued H Shares. Based on the above, we consider that the liquidity of H Shares was relatively thin during the Review Period.

Given the generally low liquidity of H Shares, we consider that H Shareholders who may wish to realize their investment in the Company, especially those with relatively sizeable shareholdings, might not be able to do so without having an adverse impact on the market price level of H Shares. As a result, H Shareholders who intend to dispose of their H Shares in the open market rather than accepting the Offer are advised to monitor the market price and liquidity of H Shares during the Offer Period and consider selling their H Shares in the open market during the Offer Period, rather than accepting the Offer, if the net proceeds from the sales of such H Shares in the open market would exceed the net amount receivable under the Offer.

5. Comparison with comparable companies

In assessing the fairness and reasonableness of the Offer Price, we have identified the following comparables (the “ Comparables ”) being companies listed on the Main Board of the Stock Exchange engaging in businesses similar to those of the Group and have similar sizes in terms of net assets as that of the Group. The Group is principally engaged in the development and sale of real estate, leasing and management of property in the PRC. In general, in assessing whether a business segment is principal to a company, we consider it is a justifiable basis to make reference to the revenue generated from a business segment which contributes more than 50% of the total revenue of a company. To the best of our knowledge, effort and endeavor and based on the information available from the website of the Stock Exchange, we have thus identified an exhaustive list of 7 Comparables which (i) are principally engaged in the development and sale of real estate, leasing and management of property in the PRC; (ii) have more than 50% of the total revenue derived from the development and sale of real estate, leasing and management of property in the PRC for their respective latest financial year; and (iii) have net asset attributable to shareholders of more than HK$100 million but less than HK$1,000 million as shown from their respective latest annual or interim report (after taking into account the business scale of the Group that the unaudited consolidated net asset attributable to shareholders of the Group was approximately RMB509.5 million as at 30 June 2012). We consider that the Comparables are fair and representative samples for comparison as the principal business and size of the Comparables are similar to those of the Group. For comparison purpose, we have

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

used the price to earnings ratio (the “ P/E ratio(s) ”) and the price-to-book ratios (the “ P/B ratio(s) ”) which are commonly used valuation methods to value a company. Details of our findings on the Comparables are summarized in the table below.

					Net asset
					attributable
			Closing	Earnings/	to
			price as at	(Loss) per	shareholders
			the Last	share	based on
			Trading	based on	the latest
			Day	the latest	published
			(being 21	published	annual/	Net asset
Company name		Market	September	annual	interim	value per
(stock code)	Principal activities	capitalisation	2012)	report	report	share	P/E ratio	P/B ratio
		(HK$	(HK$)	(HK$)	(HK$’000)	(HK$)	(times)	(times)
		million)
		(Note 1)					(Note 2)	(Note 3)
Waytung Global	Property development and	430	0.223	(0.007)	278,317	0.24	N/A	0.93
Group Ltd. (21)	investment in the PRC						(Note 5)
New Heritage	Property development and	386	0.375	0.0095	912,498	0.71	39.47	0.53
Holdings Ltd. (95)	property investment in
	the PRC
Grand Field Group	Property development,	302	N/A	(0.0052)	254,660	0.10	N/A	N/A
Holdings Ltd. (115)	property investment and		(Note 4)				(Note 4)	(Note 4)
	property management in
	the PRC
Hengli Commercial	Property development and	694	0.315	0.08	685,596	0.29	3.94	1.08
Properties (Group)	property investment in
Ltd. (169)	the PRC
New City	Property development and	738	0.245	(0.0861)	160,782	0.06	N/A	3.88
Development Group	investment in the PRC						(Note 5)
Ltd. (456)
Kai Shi China	Development of residential	972	0.99	0.4080	349,632	0.58	2.43	1.70
Holdings Co. Ltd.	real estate and processing
(1281)	of doors and windows
	business in the PRC
Sun Century Group	Development and leasing of	249	1.54	(0.8939)	794,494	3.80	N/A	0.41
Ltd. (1383)	property in the PRC						(Note 5)
						Maximum	39.47	3.88
						Minimum	2.43	0.41
						Average	15.28	1.42
						Medium	3.94	1.01
The Company (747)	Development and sale of real	231	0.214	0.0546	616,007	0.60	3.92	0.35
	estate, leasing and		(being				(Note 6)	(Note 7)
	management of property		the Offer
			Price)

Source: the website of the Stock Exchange (www.hkex.com.hk)

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Notes:

The market capitalization is based on the respective share closing price on the Latest Practicable Date (or, if suspended, the respective share closing price on the last trading day before the Latest Practicable Date) and the issued shares of the Comparables on the Latest Practicable Date.
P/E ratios of the Comparables are calculated based on their respective closing price per share as quoted on the Stock Exchange as at the Last Trading Day and their respective basic earnings per share for the latest financial year as extracted from their respective latest annual reports.
P/B ratios of the Comparables are calculated based on their respective closing prices as quoted on the Stock Exchange as at the Last Trading Day and their respective consolidated net asset value per share, which is calculated by dividing the consolidated net asset attributable to shareholders by the total number of shares in issue as shown from their respective latest annual/interim reports.
The shares of Grand Field Group Holdings Ltd. had been suspended on 21 September 2012 and hence its P/E and P/B ratios cannot be calculated.
N/A denotes cases where P/E ratios are not applicable as the respective Comparables recorded losses per share in their respective latest annual reports.
The implied P/E ratio is calculated based on the Offer Price and the basic earnings per share for the latest financial year as extracted from the latest annual report of the Company.
The implied P/B ratio is calculated based on the Offer Price and the consolidated net asset value per share, which is calculated by dividing the consolidated net asset attributable to shareholders by the total number of shares in issue as shown from the latest interim report of the Company.

As shown in the above table, the P/E ratios of the Comparables range from approximately 2.43 times to 39.47 times, with an average of approximately 15.28 times and a median of approximately 3.94 times. The implied P/E ratio of approximately 3.92 times as represented by the Offer Price falls within the range of the Comparables and is lower than the median P/E ratio of the Comparables. The P/B ratios of the Comparables range from approximately 0.41 time to 3.88 times, with an average of approximately 1.42 time and a median of approximately 1.01 time. Since four out of seven of the Comparables recorded negative earnings for their latest financial year, we consider that it may not be meaningful to use just P/E ratio for comparison purpose. The implied P/B ratio of approximately 0.35 time as represented by the Offer Price falls outside the lower end of the range of the Comparables and is lower than the average and median P/B ratios of the Comparables. Based on the above, we are of the view that the Offer Price is not fair and reasonable so far as the H Shareholders are concerned.

6. Background and intention of the Offeror and the Controlling Shareholder

Information on the Offeror and intention of the Offeror on the Group

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

director and sole shareholder of the Offeror is Mr. Chim Kim Lun Ricky. Please refer to the section headed “Letter from Kingston Securities” contained in the Composite Document for more information about him.

As set out in the “Letter from Kingston Securities” of the Composite Document, it is the intention of the Offeror to continue the Company’s existing principal activities. The Offeror intends to maintain the listing status of the Company on the Stock Exchange after closing of the Offer. The sole director of the Offeror and the new directors to be appointed to the Board will jointly and severally undertake to the Stock Exchange to take appropriate steps as soon as possible following closing of the Offer to ensure sufficient public float exists in the H Shares. The Offeror has no intention to (i) introduce any major changes to the Group’s business or (ii) re-deploy employees or fixed assets of the Group within 6 months from the date of the Composite Document other than in its ordinary course of business. Except for the intention of the Offeror to hold the accepted H Shares, if any, for investment purpose, the Offeror will not take any role in the Company.

Information on the Controlling Shareholder and intention of the Controlling Shareholder on the Group

The Controlling Shareholder is a limited liability company established in the PRC and is principally engaged in trust asset management, investment management (excluding finance, insurance, securities, futures and other restricted items), financial management advisory, investment information advisory, corporate management advisory (excluding human resources intermediary services, securities and other restricted items) and investment and establishment of enterprises. As at the Latest Practicable Date, the Controlling Shareholder was beneficially owned as to 90% by Mr. Ma Zhonghong and 10% by Mr. Lin Weichen. The board of directors of the Controlling Shareholder comprises Mr. Ma Zhonghong, Mr. Lin Weicheng and Ms. Lin Xiaona. Please refer to the section headed “Letter from Kingston Securities” contained in the Composite Document for more information about them.

As set out in the “Letter from Kingston Securities” of the Composite Document, it is the intention of the Controlling Shareholder to continue with the Company’s existing principal activities and to maintain the listing status of the Company on the Stock Exchange after closing of the Offer. The Controlling Shareholder has no intention to (i) introduce any major changes to the Group’s business or (ii) re-deploy employees or fixed assets of the Group within 6 months from the date of the Composite Document other than in its ordinary course of business. The Controlling Shareholder intends to nominate new Director(s) to the Board with effect from the earliest time permitted for appointment of directors under the Takeovers Code, the Listing Rules and applicable laws. In view of the experience its shareholder possesses in property development, finance and investment industry in the PRC, the Controlling Shareholder considers that its experience and business network will be able to benefit the Company’s development in the long run.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Given that (i) both the Offeror and the Controlling Shareholder intend to continue with the Company’s existing principal activities; (ii) the Offeror has no intention to introduce any major changes to the Group’s business or to re-deploy employees or fixed assets of the Group as at the Latest Practicable Date; and (iii) both the Offeror and the Controlling Shareholder intend to maintain the listing status of the Company on the Stock Exchange after closing of the Offer, we consider that there should not be any material change to the operations of the Group as a result of the Offer.

RECOMMENDATION

Having taken into account the above principal factors and reasons, namely,

(i) the uncertainty in the outlook and prospects of the Group in light of the current economic and market conditions as analysed under the paragraph headed “Prospect and outlook of the Group” in the section headed “Information of the Group” above;
(ii) the Offer Price was below the closing prices of H Shares during the entire Review Period and the Offer Price represents a discount of approximately 61.09% to the closing price of H Shares on the Latest Practicable Date, a discount of approximately 58.69%, 59.16% and 59.70% to the respective average closing price of H Shares for the last five, ten and thirty consecutive trading days up to and including the Last Trading Day;
(iii) the Offer Price represents a discount of approximately 64.33% to the unaudited net asset value of the Group of approximately RMB0.50 per Share (or approximately HK$0.60 per Share) as at 30 June 2012; and
(iv) the implied P/E ratio and P/B ratio of the Offer Price are lower than the respective average and median P/E ratios and P/B ratios of the Comparables,

we are of the opinion that the terms of the Offer are not fair and reasonable so far as the H Shareholders are concerned. Accordingly, we recommend the Independent Board Committee to advise the H Shareholders to reject the Offer.

For those H Shareholders who wish to realize their investment in H Shares in the open market are reminded that they should carefully and closely monitor the market price of H Shares during the Offer Period and consider selling their H Shares in the open market during the Offer Period, rather than accepting the Offer, if the net proceeds from the sales of such H Shares in the open market would exceed the net amount receivable under the Offer.

Yours faithfully, For and on behalf of Messis Capital Limited Robert Siu Executive Director

– 45 –

APPENDIX I

FURTHER TERMS OF THE OFFER

1. FURTHER PROCEDURES FOR ACCEPTANCE OF THE OFFER

(a) If the share certificate(s) and/or transfer receipt(s) and/or any other document(s) of title (and/or any satisfactory indemnity or indemnities required in respect thereof) in respect of your H Shares is/are in your name, and you wish to accept the Offer, you must send the duly completed Form of Acceptance together with the relevant H Share certificate(s) and/or transfer receipt(s) and/or other document(s) of title (and/or any satisfactory indemnity or indemnities required in respect thereof) for not less than the number of H Shares in respect of which you intend to accept the Offer by post or by hand to the Registrar at Shops 1712-1716, 17th Floor, Hopewell Centre, 183 Queen’s Road East, Wan Chai, Hong Kong.
(b) If the share certificate(s) and/or transfer receipt(s) and/or any other document(s) of title (and/or any satisfactory indemnity or indemnities required in respect thereof) in respect of your H Shares is/are in the name of a nominee company or a name other than your own, and you wish to accept the Offer in respect of your H Shares, you must either:
(i) lodge your share certificate(s) and/or transfer receipt(s) and/or any other document(s) of title (and/or any satisfactory indemnity or indemnities required in respect thereof) in respect of your H Shares with the nominee company, or other nominee, with instructions authorising it to accept the Offer on your behalf and requesting it to deliver the duly completed Form of Acceptance together with the relevant share certificate(s) and/or transfer receipt(s) and/or any other document(s) of title (and/or any satisfactory indemnity or indemnities required in respect thereof) to the Registrar; or
(ii) arrange for the H Shares to be registered in your name by the Company through the Registrar, and send the duly completed Form of Acceptance together with the relevant share certificate(s) and/or transfer receipt(s) and/or any other document(s) of title (and/or any satisfactory indemnity or indemnities required in respect thereof) for the H Shares to the Registrar; or
(iii) if your H Shares have been lodged with your licensed securities dealer/registered institution in securities/custodian bank through CCASS, instruct your licensed securities dealer/registered institution in securities/custodian bank to authorise HKSCC Nominees Limited to accept the Offer on your behalf on or before the deadline set by HKSCC Nominees Limited, in this case, on Thursday, 10 January 2013 which is one Business Day before the latest date on which acceptances of the Offer must be received by the Registrar. In order to meet the deadline set by HKSCC Nominees Limited, you should check with your licensed securities dealer/registered institution in securities/custodian bank for the timing on the processing of your instruction, and submit your

– I-1 –

APPENDIX I

FURTHER TERMS OF THE OFFER

instruction to your licensed securities dealer/registered institution in securities/custodian bank as required by them; or

(iv) if your H Shares have been lodged with your Investor Participant’s Account maintained with CCASS, authorise your instruction via the CCASS Phone System or CCASS Internet System not later than one Business Day before the latest date on which acceptances of the Offer must be received by the Registrar, which is Thursday, 10 January 2013 in this case.
(c) If the share certificate(s) and/or transfer receipt(s) and/or other document(s) of title (and/or any satisfactory indemnity or indemnities required in respect thereof) in respect of your H Shares is/are not readily available and/or is/are lost and you wish to accept the Offer in respect of your H Shares, the Form of Acceptance should nevertheless be completed and delivered to the Registrar together with a letter stating that you have lost one or more of your share certificate(s) and/or transfer receipt(s) and/or other document(s) of title (and/or any satisfactory indemnity or indemnities required in respect thereof) or that it/they is/are not readily available. If you find such document(s) or if it/they become(s) available, the relevant share certificate(s) and/or transfer receipt(s) and/or any other document(s) of title (and/or any satisfactory indemnity or indemnities required in respect thereof) should be forwarded to the Registrar as soon as possible thereafter. If you have lost your share certificate(s) for the H Shares, you should also write to the Registrar for a letter of indemnity which, when completed in accordance with the instructions given, should be returned to the Registrar.
(d) If you have lodged transfer(s) of any of your H Shares for registration in your name and have not yet received your share certificate(s), and you wish to accept the Offer in respect of your H Shares, you should nevertheless complete the Form of Acceptance and deliver it to the Registrar together with the transfer receipt(s) duly signed by yourself. Such action will be deemed to be an irrevocable authority to Kingston Securities and/or the Offeror or their respective agent(s) to collect from the Registrar on your behalf the relevant share certificate(s) when issued and to deliver such certificate(s) to the Registrar as if it was/they were delivered to the Registrar with the Form of Acceptance.
(e) Acceptance of the Offer will be treated as valid only if the completed Form of Acceptance is received by the Registrar no later than 4:00 p.m. on Friday, 11 January 2013 or such later time and/or date as the Offeror may determine and announce with the consent of the Executive, and is:
(i) accompanied by the relevant share certificate(s) and/or transfer receipt(s) and/or other document(s) of title (and/or any satisfactory indemnity or indemnities required in respect thereof) and, if those share certificate(s) is/are not in your name, such other documents in order to establish your right to become the registered holder of the relevant H Shares; or

– I-2 –

APPENDIX I

FURTHER TERMS OF THE OFFER

(ii) from a registered H Shareholder or his personal representative (but only up to the amount of the registered holding and only to the extent that the acceptance relates to H Shares which are not taken into account under another sub-paragraph of this paragraph (e)); or
(iii) certified by the Registrar or the Stock Exchange.

If the Form of Acceptance is executed by a person other than the registered H Shareholder, appropriate documentary evidence of authority to the satisfaction of the Registrar must be produced.

(f) No acknowledgement of receipt of any Form of Acceptance, share certificate(s) and/or transfer receipt(s) and/or any other document(s) of title (and/or any satisfactory indemnity or indemnities required in respect thereof) will be given.

2. SETTLEMENT OF THE OFFER

Provided that the Form of Acceptance and the relevant share certificate(s) and/or transfer receipt(s) and/or any other document(s) of title (and/or any satisfactory indemnity or indemnities required in respect thereof) are complete and in good order and have been received by the Registrar no later than the latest time for acceptance, a cheque for the amount due to each of the H Shareholders less seller’s ad valorem stamp duty in respect of the H Shares tendered by him/her/it under the Offer will be despatched to such H Shareholders by ordinary post at his/her/its own risk as soon as possible but in any event within 7 Business Days after the receipt of duly completed Form of Acceptance by the Registrar.

The settlement of the consideration to which any H Shareholder(s) is/are entitled under the Offer will be satisfied in full in accordance with the terms of the Offer without regard to any lien, right of set-off, counterclaim or other analogous right to which the Offeror may otherwise be, or claim to be, entitled against such H Shareholder(s).

3. ACCEPTANCE PERIOD AND REVISIONS

(a) All acceptances must be received by the latest time for acceptances, being 4:00 p.m. on the Closing Date in accordance with the instructions printed on the Form of Acceptance and the Offer will be closed on the Closing Date.
(b) The Offeror does not intend to revise the terms of the Offer, to increase the Offer Price or to extend the latest time for acceptance of the Offer, and does not reserve the right to do so. H Shareholders and potential investors should be aware that, following the making of this statement, the Offeror will not be allowed to extend the Offer beyond the stated date and increase the Offer Price, save in wholly exceptional circumstances as provided in Rule 18.2 and Rule 18.3 of the Takeovers Code.

– I-3 –

APPENDIX I

FURTHER TERMS OF THE OFFER

4. ANNOUNCEMENT

(a) By 6:00 p.m. on the Closing Date (or such later time and/or date as the Executive may in exceptional circumstances permit), the Offeror must inform the Executive and the Stock Exchange of the results of the Offer. The Offeror must publish an announcement on the Stock Exchange’s website by 7:00 p.m. on the Closing Date stating the results of the Offer.
(b) The announcement must state the following:
(i) the total number of H Shares and rights over H Shares for which acceptances of the Offer have been received;
(ii) the total number of H Shares and rights over H Shares held, controlled or directed by the Offeror or parties acting in concert with it before the period of the Offer; and
(iii) the total number of H Shares and rights over H Shares acquired or agreed to be acquired during the period of the Offer by the Offeror or parties acting in concert with it.

The announcement must include details of any relevant securities (as defined in Note 4 to Rule 22 of the Takeovers Code) in the Company which the Offeror or any person acting in concert with it has borrowed or lent, save for any borrowed H Share which has been either on-lent or sold.

The announcement must specify the percentages of the issued share capital of the Company and the percentages of voting rights of the Company represented by these numbers of H Shares.

(c) In computing the total number of H Shares represented by acceptances, only valid acceptances that are complete and in good order and which have been received by the Registrar no later than 4:00 p.m. on the Closing Date, being the latest time and date for acceptance of the Offer, shall be included.

5. RIGHT OF WITHDRAWAL

(a) Acceptance of the Offer tendered by the H Shareholders shall be irrevocable and cannot be withdrawn, except in the circumstances set out in (b) below.
(b) If the Offeror are unable to comply with the requirements set out in the paragraph headed “Announcement” in this Appendix, the Executive may require that the H Shareholders who have tendered acceptances to the Offer be granted a right of withdrawal on terms that are acceptable to the Executive until the requirements set out in that paragraph are met.

– I-4 –

APPENDIX I

FURTHER TERMS OF THE OFFER

6. STAMP DUTY

Seller’s ad valorem stamp duty (rounded up to nearest HK$1.00) for transfer of H Shares registered on the Registrar arising in connection with acceptance of the Offer will be payable by each accepting H Shareholder at the rate of 0.1% of the greater of (i) the consideration payable by the Offeror in respect of the relevant acceptance and (ii) the market value of the H Shares under the acceptance, and will be deducted from the cash amount due to such person under the Offer. The Offeror will arrange for payment of the seller’s ad valorem stamp duty on behalf of the accepting H Shareholders and will pay the buyer’s ad valorem stamp duty in respect of H Shares accepted under the Offer.

7. TAXATION

H Shareholders are recommended to consult their own professional advisers if they are in any doubt as to the taxation implications of accepting the Offer. None of the Company, the Offeror and parties acting in concert with the Offeror, Kingston Corporate Finance, Kingston Securities and the Independent Financial Adviser nor any of their respective directors nor any persons involved in the Offer accepts responsibility for any taxation effects on, or liabilities of, any person or persons as a result of their acceptance of the Offer.

8. GENERAL

(a) All communications, notices, Form of Acceptance, certificate(s) of H Shares, transfer receipt(s), other documents of title or indemnity and remittances to settle the consideration payable under the Offer to be delivered by or sent to or from the H Shareholders will be delivered by or sent to or from them, or their designated agents, at their own risk. None of the Company, the Offeror and parties acting in concert with the Offeror, Kingston Corporate Finance and Kingston Securities, nor any of their respective directors or other parties involved in the Offer or any of this respective agents accepts any liability for any loss in postage or any other liabilities that may arise as a result thereof.
(b) The provisions set out in the Form of Acceptance form part of the terms of the Offer.
(c) The accidental omission to despatch this Composite Document and/or the Form of Acceptance or any of them to any person to whom the Offer are made will not invalidate the Offer in any way.
(d) The Offer is, and all acceptances will be, governed by and construed in accordance with the laws of Hong Kong.
(e) Due execution of the Form of Acceptance will constitute an authority to any of the Offeror or such person or persons as the Offeror may direct to complete and execute any document on behalf of the person accepting the Offer and to do any other act that may be necessary or expedient for the purpose of vesting in the Offeror, or such person or persons as it may direct, the H Shares in respect of which such person has accepted the Offer.

– I-5 –

APPENDIX I

FURTHER TERMS OF THE OFFER

(f) Acceptance of the Offer by any person or persons will be deemed to constitute a warranty by such person or persons to the Offeror and the Company that the H Shares acquired under the Offer are sold by any such person or persons free from all liens, charges, options, claims, equities, adverse interests, rights of pre-emption, third party rights or encumbrances of any nature and together with all rights accruing or attaching thereto on or after the date on which the Offer is made, including, without limitation, the rights to receive in full all dividends or other distributions, if any, declared, made or paid, if any, on or after the date on which the Offer is made.
(g) Acceptance of the Offer by any nominee will be deemed to constitute a warranty by such nominee to the Offeror that the number of H Shares in respect of which it is indicated in the Form of Acceptance is the aggregate number of H Shares held by such nominee for such beneficial owners who are accepting the Offer.
(h) References to the Offer in this Composite Document and in the Form of Acceptance shall include any revision and/or extension thereof.
(i) The making of the Offer to persons resident in any jurisdiction outside Hong Kong may be prohibited or affected by the laws of the relevant jurisdictions. H Shareholders who are so resident should inform themselves about and observe any applicable legal requirements. It is the responsibility of any person who is a citizen, resident or national of a jurisdiction outside Hong Kong and who wishes to accept the Offer to satisfy himself/herself/itself as to the full observance of the laws of the relevant jurisdiction in connection therewith, including the obtaining of any governmental or other consent, exchange control and any registration or filing which may be required in compliance with all necessary formalities, taxation, regulatory and/or legal requirements. Any such persons shall be fully responsible for the payment of any transfer or other taxes and duties due by such overseas shareholders in respect of that jurisdiction. Acceptance of the Offer by any such person will constitute a warranty by such person that such person is permitted under all applicable laws to accept the Offer, and any revision thereof, and such acceptance shall be valid and binding in accordance with all applicable laws.
(j) The English text of this Composite Document and the Form of Acceptance shall prevail their Chinese text for the purpose of interpretation.

– I-6 –

APPENDIX II

FINANCIAL INFORMATION OF THE GROUP

1. THREE YEAR FINANCIAL SUMMARY

Set out below is a summary of the audited consolidated results of the Group for the three years ended 31 December 2009, 2010 and 2011 and the assets and liabilities of the Group as at 31 December 2009, 2010 and 2011 as extracted from the published annual reports of the Company for the relevant years, and the unaudited financial results of the Group for the six months ended 30 June 2011 and 2012 and unaudited assets and liabilities of the Group as at 30 June 2012 as extracted from the interim reports of the Company for the relevant periods.

Consolidated Income Statement

Six months ended 30 June 2012 2011 RMB’000 RMB’000 (unaudited) (unaudited) 4,802 12,703	Six months ended 30 June 2012 2011 RMB’000 RMB’000 (unaudited) (unaudited) 4,802 12,703	Year ended 31 December 2011 2010 2009 RMB’000 RMB’000 RMB’000 22,879 17,682 3,651	Year ended 31 December 2011 2010 2009 RMB’000 RMB’000 RMB’000 22,879 17,682 3,651	Year ended 31 December 2011 2010 2009 RMB’000 RMB’000 RMB’000 22,879 17,682 3,651
4,275 –	1,590 –	64,600 (11,950)	31,808 (7,979)	(15,728 300
4,275	1,590	52,650	23,829	(15,428

N/A	N/A	(11,740)	2,848	N/A
4,275	1,590	40,910	26,677	(15,428

4,275 –	1,347 243	45,612 (4,702)	25,833 844	(14,974 (454
4,275 0.0042 N/A –	1,590 0.0013 N/A –	40,910 0.0516 0.0069 –	26,677 0.0234 0.0019 –	(15,428

				(0.0147 N/A

				–

Note:

The Company has no dividend, exceptional or extraordinary items for each of the three years ended 31 December 2011 and the six months ended 30 June 2012.

– II-1 –

APPENDIX II

FINANCIAL INFORMATION OF THE GROUP

Consolidated Balance Sheet

Total assets Total liabilities Equity Share capital Reserves Shareholders’ equity Minority interests Total equity	As at 30 June 2012 RMB’000 798,339 (288,821) 1,020,400 (510,882) 509,518 – 509,518	As at 31 December 2011 2010 2009 RMB’000 RMB’000 RMB’000 568,969 595,027 586,402 (63,726) (94,967) (116,725) 1,020,400 1,020,400 1,020,400 (515,157) (560,769) (590,297) 505,243 459,631 430,103 – 40,429 39,574 505,243 500,060 469,677

– II-2 –

APPENDIX II

FINANCIAL INFORMATION OF THE GROUP

2. INDEPENDENT AUDITOR’S REPORTS

The following is a reproduction of (i) the independent auditor’s reports issued by Lo and Kwong C.P.A. Company Limited, the then auditor of the Company, on the consolidated financial statements of the Group which are contained in the 2009 and 2010 annual reports of the Company respectively; and (ii) the independent auditor’s report issued by ZHONGLEI (HK) CPA Company Limited, the current auditor of the Company, on the consolidated financial statement of the Group which are contained in the 2011 annual report of the Company. References to page number in this section refer to page number of the corresponding annual report of the Company.

(i) In respect of the financial statements for 2009

TO THE MEMBERS OF

Shenyang Public Utility Holdings Company Limited

(incorporated in the People’s Republic of China with limited liability)

We have audited the consolidated financial statements of Shenyang Public Utility Holdings Company Limited (the “Company”) and its subsidiaries (collectively referred to as the “Group”) as set out on pages 31 to 81, which comprise the consolidated statement of financial position as at 31 December 2009, consolidated income statement, consolidated statement of comprehensive income, consolidated statement of changes in equity and consolidated statement of cash flows for the year then ended, and a summary of significant accounting policies and other explanatory notes.

DIRECTORS’ RESPONSIBILITY FOR THE CONSOLIDATED FINANCIAL STATEMENTS

The directors of the Company are responsible for the preparation and the true and fair presentation of these consolidated financial statements in accordance with Hong Kong Financial Reporting Standards issued by the Hong Kong Institute of Certified Public Accountants and the disclosure requirements of the Hong Kong Companies Ordinance. This responsibility includes designing, implementing and maintaining internal control relevant to the preparation and the true and fair presentation of the consolidated financial statements that are free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances.

– II-3 –

APPENDIX II

FINANCIAL INFORMATION OF THE GROUP

AUDITOR’S RESPONSIBILITY

We conducted our audit in accordance with Hong Kong Standards on Auditing issued by the Hong Kong Institute of Certified Public Accountants. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance as to whether the consolidated financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on the auditor’s judgement, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and true and fair presentation of the consolidated financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the directors, as well as evaluating the overall presentation of the consolidated financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

OPINION

In our opinion, the consolidated financial statements give a true and fair view of the state of affairs of the Group as at 31 December 2009 and of the Group’s loss and cash flows for the year then ended in accordance with Hong Kong Financial Reporting Standards and have been properly prepared in accordance with the disclosure requirements of the Hong Kong Companies Ordinance.

EMPHASIS OF MATTER IN RELATION TO THE GOING CONCERN BASIS FOR PREPARATION OF CONSOLIDATED FINANCIAL STATEMENTS

Without qualifying our opinion, we draw attention that the Group sustained continuous operating losses and incurred loss of approximately RMB15,428,000 for the year ended 31 December 2009. This condition indicates the existence of a material uncertainty which may cast significant doubt about the Group’s ability to continue as a going concern.

– II-4 –

APPENDIX II

FINANCIAL INFORMATION OF THE GROUP

The directors of the Company are of the opinion that it is appropriate to prepare the consolidated financial statements on a going concern basis based on the considerations as set out in Note 2 to the consolidated financial statements, the validity of which primarily depends upon the financial support from the controlling shareholder to cover the Group’s operating costs and to meet its financing commitments. The consolidated financial statements do not include any adjustments that would result from a failure to obtain such financial support.

Lo and Kwong C.P.A. Company Limited Certified Public Accountants Lo Wah Wai

Practising Certificate Number: P02693

Hong Kong 21 April 2010

– II-5 –

APPENDIX II

FINANCIAL INFORMATION OF THE GROUP

(ii) In respect of the financial statements for 2010

TO THE MEMBERS OF

Shenyang Public Utility Holdings Company Limited

(incorporated in the People’s Republic of China with limited liability)

We have audited the consolidated financial statements of Shenyang Public Utility Holdings Company Limited (the “Company”) and its subsidiaries (collectively referred to as the “Group”) as set out on pages 29 to 76, which comprise the consolidated statement of financial position as at 31 December 2010, and the consolidated income statement, consolidated statement of comprehensive income, consolidated statement of changes in equity and consolidated statement of cash flows for the year then ended, and a summary of significant accounting policies and other explanatory information.

DIRECTORS’ RESPONSIBILITY FOR THE CONSOLIDATED FINANCIAL STATEMENTS

The directors of the Company are responsible for the preparation of consolidated financial statements that give a true and fair view in accordance with Hong Kong Financial Reporting Standards issued by the Hong Kong Institute of Certified Public Accountants and the disclosure requirements of the Hong Kong Companies Ordinance, and for such internal control as the directors determine is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.

AUDITOR’S RESPONSIBILITY

Our responsibility is to express an opinion on these consolidated financial statements based on our audit and to report our opinion solely to you, as a body, and for no other purpose. We do not assume responsibility towards or accept liability to any other person for the contents of this report. We conducted our audit in accordance with Hong Kong Standards on Auditing issued by the Hong Kong Institute of Certified Public Accountants. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free from material misstatement.

– II-6 –

APPENDIX II

FINANCIAL INFORMATION OF THE GROUP

design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the directors, as well as evaluating the overall presentation of the consolidated financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

OPINION

In our opinion, the consolidated financial statements give a true and fair view of the state of affairs of the Group as at 31 December 2010 and of the Group’s profit and cash flows for the year then ended in accordance with Hong Kong Financial Reporting Standards and have been properly prepared in accordance with the disclosure requirements of the Hong Kong Companies Ordinance.

Lo and Kwong C.P.A. Company Limited Certified Public Accountants Chan Chi Kei Ronald Practising Certificate Number: P04255

Hong Kong 22 March 2011

– II-7 –

APPENDIX II

FINANCIAL INFORMATION OF THE GROUP

(iii) In respect of the financial statements for 2011

TO THE MEMBERS OF

Shenyang Public Utility Holdings Company Limited

(incorporated in the People’s Republic of China with limited liability)

We have audited the consolidated financial statements of Shenyang Public Utility Holdings Company Limited (the “Company”) and its subsidiaries (collectively referred to as the “Group”) set out on pages 29 to 88, which comprise the consolidated statement of financial position as at 31 December 2011, and the consolidated income statement, the consolidated statement of comprehensive income, the consolidated statement of changes in equity and the consolidated statement of cash flows for the year then ended, and a summary of significant accounting policies and other explanatory information.

DIRECTORS’ RESPONSIBILITY FOR THE CONSOLIDATED FINANCIAL STATEMENTS

AUDITOR’S RESPONSIBILITY

Our responsibility is to express an opinion on these consolidated financial statements based on our audit and to report our opinion solely to you, as a body, in accordance with our agreed terms of engagement, and for no other purpose. We do not assume responsibility towards or accept liability to any other person for the contents of this report. We conducted our audit in accordance with Hong Kong Standards on Auditing issued by the Hong Kong Institute of Certified Public Accountants. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free from material misstatement.

– II-8 –

APPENDIX II

FINANCIAL INFORMATION OF THE GROUP

the consolidated financial statements that give a true and fair view in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the directors, as well as evaluating the overall presentation of the consolidated financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

OPINION

In our opinion, the consolidated financial statements give a true and fair view of the state of affairs of the Group as at 31 December 2011, and of the Group’s profit and cash flows for the year then ended in accordance with Hong Kong Financial Reporting Standards and have been properly prepared in accordance with the disclosure requirements of the Hong Kong Companies Ordinance.

ZHONGLEI (HK) CPA Company Limited Certified Public Accountants (Practising) Ho Yiu Hang, Ricky Practising Certificate Number: P05494

Hong Kong 30 March 2012

– II-9 –

APPENDIX II

FINANCIAL INFORMATION OF THE GROUP

3. AUDITED FINANCIAL INFORMATION

The following is an extract of the financial statements of the Group from the latest annual report of the Company for the year ended 31 December 2011:

Consolidated Income Statement

For the year ended 31 December 2011

Notes Turnover 7 Sales taxes on turnover Cost of sales Other income 9 Waived of debt of other payables Gain on disposal of subsidiaries 35 Gain on deregistration of a subsidiary 36 Loss on disposal of available-for-sale investment 20 Depreciation Staff costs Impairment loss recognised in respect of available-for-sale investment 20 Net change in fair value of investment properties Impairment loss recognised in respect of trade receivables Other operating expenses Profit before taxation Income tax expense 10 Profit for the year from continuing operations Discontinued operation 12 (Loss) profit for the year from discontinued operation Profit for the year 11	2011 RMB’000 22,879 (1,199) (1,901) 178 25,065 8,225 162 (12,900) (541) (1,259) – 38,300 (180) (12,229)	2010 RMB’000 17,682 (872) (1,626) 151 – 1,510 – – (493) (1,666) (3,200) 32,406 – (12,084) 31,808 (7,979) 23,829 2,848 26,677
	64,600 (11,950) 52,650 (11,740)	31,808 (7,979
		23,829 2,848
	40,910

– II-10 –

APPENDIX II

FINANCIAL INFORMATION OF THE GROUP

Notes Profit (loss) for the year attributable to owners of the Company – from continuing operations – from discontinued operation (Loss) profit for the year attributable to non-controlling interests – from continuing operations – from discontinued operation Earnings per share from continuing and discontinued operations 15 – Basic (RMB cents) – Diluted (RMB cents) Earnings per share from continuing operations – Basic (RMB cents) – Diluted (RMB cents) Dividends 16	2011 RMB’000 52,678 (7,066) 45,612 (28) (4,674) (4,702) 40,910 4.47 N/A 5.16 N/A –	2010 RMB’000 23,830 2,003 25,833 (1) 845 844 26,677 2.53 N/A 2.34 N/A –

– II-11 –

APPENDIX II

FINANCIAL INFORMATION OF THE GROUP

Consolidated Statement of Comprehensive Income

For the year ended 31 December 2011

Profit for the year Other comprehensive income Exchange differences arising on translation Total comprehensive income for the year Total comprehensive income (expenses) attributable to: Owners of the Company Non-controlling interests	2011 RMB’000 40,910 – 40,910 45,612 (4,702) 40,910	2010 RMB’000 26,677 –
		26,677

		25,833 844
		26,677

– II-12 –

APPENDIX II

FINANCIAL INFORMATION OF THE GROUP

Consolidated Statement of Financial Position

At 31 December 2011

Notes NON-CURRENT ASSETS Goodwill 17 Property, plant and equipment 18 Investment properties 19 Available-for-sale investment 20 Deposit paid for acquisition of a subsidiary 21 CURRENT ASSETS Properties held for sale 22 Trade receivables 23 Amount due from a former customer 24 Other receivables 25 Held for trading investment 26 Bank balances and cash 27 Assets classified as held for sale 28 CURRENT LIABILITIES Trade payables 29 Other payables and accruals Receipts in advance 30 Other current liabilities 34 Provisions 31 Tax liabilities Liabilities classified as held for sale 28 NET CURRENT ASSETS TOTAL ASSETS LESS CURRENT LIABILITIES	2011 RMB’000 – 7 148,300 – 74,000	2010 RMB’000 – 5,528 516,346 13,800 –
	222,307 – 225 – 233,685 1,848 5,187 240,945 105,717 346,662 – 1,836 30,067 2,231 – 2,423 36,557 13,188 49,745 296,917	535,674
		– 287 – 39,754 – 19,312
		59,353 –
		59,353
		5,742 40,097 10,715 – 1,041 1,036
		58,631 –
		58,631
		722
	519,224	536,396

– II-13 –

APPENDIX II

FINANCIAL INFORMATION OF THE GROUP

Notes CAPITAL AND RESERVES Share capital 32 Reserves Equity attributable to owners of the Company Non-controlling interests TOTAL EQUITY NON-CURRENT LIABILITIES Deferred taxation 33 Other non-current liabilities 34	2011 RMB’000 1,020,400 (515,157) 505,243 – 505,243 13,981 – 13,981 519,224	2010 RMB’000 1,020,400 (560,769) 459,631 40,429 500,060 33,105 3,231 36,336 536,396

– II-14 –

APPENDIX II

FINANCIAL INFORMATION OF THE GROUP

Consolidated Statement of Changes in Equity

For the year ended 31 December 2011

Equity attributable to owners of the Company

	Equity attributable to owners of the Company	Equity attributable to owners of the Company	Equity attributable to owners of the Company	Equity attributable to owners of the Company	Equity attributable to owners of the Company	Equity attributable to owners of the Company	Equity attributable to owners of the Company

At 1 January 2010 Profit for the year, representing total comprehensive income for the year Transfer Acquisition of a subsidiary (Note 37) Disposal of subsidiaries (Note 35) At 31 December 2010 and 1 January 2011 Profit (loss) for the year, representing total comprehensive income (expenses) for the year Disposal of subsidiaries (Note 35) At 31 December 2011	Share capital RMB’000 (Note 32) 1,020,400 – – – –	Share premium RMB’000 (Note a) 323,258 – – – –	Statutory surplus reserve Accumulated losses RMB’000 RMB’000 (Note b) 103,231 (1,016,786) – 25,833 250 (250) – 3,695 – – 103,481 (987,508) – 45,612 – –		Total RMB’000 430,103 25,833 – 3,695 –	Non– controlling interests RMB’000 39,574 844 – – 11	Total RMB’000 469,677 26,677 – 3,695 11
	1,020,400 – –	323,258 – –	103,481 – –	(987,508) 45,612 –	459,631 45,612 –	40,429 (4,702) (35,727)	500,060 40,910 (35,727)
	1,020,400	323,258	103,481	(941,896)	505,243	–	505,243

Notes:

(a) Share Premium

Share premium comprises surplus between the value of net assets acquired and the nominal value of state shares issued as a result of the incorporation of the Company as a joint stock limited company and the share premium from the issuance of H-shares.

(b) Statutory Surplus Reserve

The Group is required to set aside 10% of its profit after taxation prepared in accordance with the PRC accounting regulations to the statutory surplus reserve until the balance reaches 50% of their respective paid up capital or registered capital, where further appropriation will be at the directors’ recommendation. Such reserve can be used to reduce any losses incurred or to increase the capital.

(c) Distributable Reserve

Pursuant to the relevant PRC regulations, distributable reserve shall be the lower of the accumulated distributable profits determined in accordance with PRC accounting standards and regulations as stated in the PRC statutory audited financial statements and the accumulated distributable profits determined in accordance with accounting principles generally accepted in Hong Kong. The Group did not have any reserve available for distribution as at 31 December 2010 and 2011.

– II-15 –

APPENDIX II

FINANCIAL INFORMATION OF THE GROUP

Consolidated Statement of Cash Flows

For the year ended 31 December 2011

OPERATING ACTIVITIES Profit (loss) before taxation – from continuing operations – from discontinued operation Adjustments for: Interest income Gain on change in fair value of held for trading investment Gain on disposal of subsidiaries Gain on deregistration of a subsidiary Loss on disposal of property, plant and equipment Loss on disposal of available-for-sale investment Depreciation Impairment loss recognised in respect of available-for-sale investment Net change in fair value of investment properties Waived of debt of other payables Impairment loss recognised in respect of trade receivables Finance costs Operating cash flows before movements in working capital Increase in trade receivables Decrease in other receivables Decrease in prepayments Decrease in trade payables (Decrease) increase in other payables and accruals (Decrease) increase in non-current liabilities Increase (decrease) in receipts in advance Decrease in amount due to a former shareholder Cash from (used in) operations Income tax paid NET CASH FROM (USED IN) OPERATING ACTIVITIES INVESTING ACTIVITIES Interest received Purchase of investment properties Purchase of property, plant and equipment Proceeds received from the disposal of property, plant and equipment Purchase of held for trading investment Increase in other long term receivables Deposit paid for acquisition of a subsidiary Net cash inflow from disposal of subsidiaries Net cash outflow from deregistration of a subsidiary Net cash outflow from acquisition of a subsidiary NET CASH (USED IN) FROM INVESTING ACTIVITIES	2011 RMB’000 64,600 (11,740) (161) (48) (12,070) (162) 8 12,900 1,414 – (21,940) (25,065) 180 –	2010 RMB’000 31,808 3,148 (153) – (1,510) – – – 1,334 3,200 (34,406) – – 429
	7,916 (496) 7,652 – (48) (2,593) (1,000) 30,503 – 41,934 (713) 41,221 161 – (8) 8 (1,800) (6,350) (74,000) 28,220 (1) –	3,850 – 5,401 2,000 (502) 9,983 3,231 (2,994) (29,328)
		(8,359) (199)
		(8,558)
		153 (2,791) (353) – – – – 84,407 – (67,653)
	(53,770)	13,763

– II-16 –

APPENDIX II

FINANCIAL INFORMATION OF THE GROUP

FINANCING ACTIVITIES Repayments of bank borrowings Interest payment NET CASH USED IN FINANCING ACTIVITIES NET DECREASE IN CASH AND CASH EQUIVALENTS CASH AND CASH EQUIVALENTS AT BEGINNING OF THE YEAR CASH AND CASH EQUIVALENTS AT END OF THE YEAR ANALYSIS OF BALANCES OF CASH AND CASH EQUIVALENTS AT END OF THE YEAR Bank balances and cash Bank balances and cash classified as assets held for sale	2011 RMB’000 – – – (12,549) 19,312 6,763 5,187 1,576 6,763	2010 RMB’000 (9,000) (429)
		(9,429)
		(4,224) 23,536
		19,312

		19,312 –
		19,312

– II-17 –

APPENDIX II

FINANCIAL INFORMATION OF THE GROUP

Notes to the Consolidated Financial Statements

For the year ended 31 December 2011

1. GENERAL INFORMATION

Shenyang Public Utility Holdings Company Limited (the “Company”) is a joint stock limited company incorporated in the People’s Republic of China (the “PRC”). The address of the principal place of business of the Company is 14/F, Jinmao International Apartment, No. 1 Xiao Dong Road, Da Dong District, Shenyang, the PRC. The address of the registered office of the Company is No. 1–4, 20A, Central Street, Shenyang Economic and Technological Development Zone, the PRC.

The consolidated financial statements are presented in Renminbi (“RMB”) which is the same as functional currency of the Company and its subsidiaries (collectively known as the “Group”).

The Company is an investment holding company and the principal activities of its subsidiaries are set out in Note 43 to the consolidated financial statements. During the year, the Group has disposed of its education projects operation, which was classified as discontinued operation for the year ended 31 December 2011 (Note 12).

The Company’s H-shares are listed on The Stock Exchange of Hong Kong Limited (the “Stock Exchange”) on 16 December 1999. As requested by the Company, trading in H shares of the Company on the Stock Exchange was suspended on 15 December 2004. Trading in H-shares of the Company has been resumed on 1 April 2010.

2. APPLICATION OF NEW AND REVISED HONG KONG FINANCIAL REPORTING STANDARDS (“HKFRSS”)

In the current year, the Group has applied the following new and revised HKFRSs issued by the Hong Kong Institute of Certified Public Accountants (“HKICPA”).

Amendments to HKFRSs	Improvements to HKFRSs issued in 2010
Hong Kong Accounting Standard	Related Party Disclosures
(“HKAS”) 24 (as revised in 2009)
Amendments to HKAS 32	Classification of Rights Issues
Amendments to HK(IFRIC) – Int 14	Prepayments of a Minimum Funding Requirement
HK(IFRIC) – Int 19	Extinguishing Financial Liabilities with Equity
	Instruments

Except as described below, the application of the new and revised HKFRSs in the current year has had no material impact on the Group’s financial performance and positions for the current and prior years and/or on the disclosures set out in these consolidated financial statements.

Amendments to HKAS 1 Presentation of Financial Statements (as part of Improvements to HKFRSs issued in 2010)

The amendments to HKAS 1 clarify that an entity may choose to disclose an analysis of other comprehensive income by item in the statement of changes in equity or in the notes to the consolidated financial statements. In the current year, for each component of equity, the Group has chosen to present such an analysis in the statement of changes in equity. The revised standard has no impact on the consolidated financial statements of the Group.

HKAS 24 Related Party Disclosures (as revised in 2009)

HKAS 24 (as revised in 2009) clarifies and simplifies the definitions of related parties. The new definitions emphasise a symmetrical view of related party relationships and clarify the circumstances in which persons and key management personnel affect related party relationships of an entity. The revised standard also introduces an exemption from the general related party disclosure requirements for transactions with a government and entities that are controlled,

– II-18 –

APPENDIX II

FINANCIAL INFORMATION OF THE GROUP

jointly controlled or significantly influenced by the same government as the reporting entity. The accounting policy for related parties has been revised to reflect the changes in the definitions of related parties under the revised standard. The revised standard has no financial impact on the Group. Details of the related party transactions, including the related comparative information, are included in Note 42 to the consolidated financial statements.

The Group has not early applied the following new or revised HKFRSs that have been issued but are not yet effective:

Amendments to HKFRS 7	Disclosures – Transfers of Financial	Assets1
	Disclosures – Offsetting Financial Assets			and
	Financial Liabilities2
	Mandatory Effective Date of	HKFRS	9	and
	Transition Disclosures3
HKFRS 9	Financial Instruments3
HKFRS 10	Consolidated Financial Statements2
HKFRS 11	Joint Arrangements2
HKFRS 12	Disclosure of Interests in Other Entities2
HKFRS 13	Fair Value Measurement2
Amendments to HKAS 1	Presentation of Items of Other Comprehensive
	Income5
Amendments to HKAS 12	Deferred Tax: Recovery of Underlying Assets4
HKAS 19 (as revised in 2011)	Employee Benefits2
HKAS 27 (as revised in 2011)	Separate Financial Statements2
HKAS 28 (as revised in 2011)	Investment in Associates and Joint Ventures2
Amendments to HKAS 32	Presentation – Offsetting Financial Assets			and
	Financial Liabilities6
HK(IFRIC) – Int 20	Stripping Costs in the Production Phase of a Surface
	Mine2

1 Effective for annual periods beginning on or after 1 July 2011

2 Effective for annual periods beginning on or after 1 January 2013

3 Effective for annual periods beginning on or after 1 January 2015

4 Effective for annual periods beginning on or after 1 January 2012

5 Effective for annual periods beginning on or after 1 July 2012

6 Effective for annual periods beginning on or after 1 January 2014

Amendments to HKFRS 7 Disclosures – Transfers of Financial Assets

The amendments to HKFRS 7 increase the disclosure requirements for transactions involving transfers of financial assets. These amendments are intended to provide greater transparency around risk exposures when a financial asset is transferred but the transferor retains some level of continuing exposure in the asset. The amendments also require disclosures where transfers of financial assets are not evenly distributed throughout the period.

The directors anticipate that the application of the amendments to HKFRS 7 will affect the Group’s disclosures regarding transfers of financial assets in the future.

Amendments to HKAS 32 Offsetting Financial Assets and Financial Liabilities and amendments to HKFRS 7 Disclosures – Offsetting Financial Assets and Financial Liabilities

The amendments to HKAS 32 clarify existing application issues relating to the offsetting requirements. Specifically, the amendments clarify the meaning of “currently has a legally enforceable right of set-off” and “simultaneous realisation and settlement”.

The amendments to HKFRS 7 require entities to disclose information about rights of offset and related arrangements (such as collateral posting requirements) for financial instruments under an enforceable master netting agreement or similar arrangement.

– II-19 –

APPENDIX II

FINANCIAL INFORMATION OF THE GROUP

The amended offsetting disclosures are required for annual periods beginning on or after 1 January 2013 and interim periods within those annual periods. The disclosures should also be provided retrospectively for all comparative periods. However, the amendments to HKAS 32 are not effective until annual periods beginning on or after 1 January 2014, with retrospective application required.

HKFRS 9 Financial Instruments

HKFRS 9 issued in 2009 introduces new requirements for the classification and measurement of financial assets. HKFRS 9 amended in 2010 includes the requirements for the classification and measurement of financial liabilities and for derecognition.

Key requirements of HKFRS 9 are described as follows:

HKFRS 9 requires all recognised financial assets that are within the scope of HKAS 39 Financial Instruments: Recognition and Measurement to be subsequently measured at amortised cost or fair value. Specifically, debt investments that are held within a business model whose objective is to collect the contractual cash flows, and that have contractual cash flows that are solely payments of principal and interest on the principal outstanding are generally measured at amortised cost at the end of subsequent accounting periods. All other debt investments and equity investments are measured at their fair values at the end of subsequent reporting periods. In addition, under HKFRS 9, entities may make an irrevocable election to present subsequent changes in the fair value of an equity investment (that is not held for trading) in other comprehensive income, with only dividend income generally recognised in profit or loss.
The most significant effect of HKFRS 9 regarding the classification and measurement of financial liabilities relates to the presentation of changes in the fair value of a financial liability (designated as at fair value through profit or loss) attributable to changes in the credit risk of that liability. Specifically, under HKFRS 9, for financial liabilities that are designated as at fair value through profit or loss, the amount of change in the fair value of the financial liability that is attributable to changes in the credit risk of that liability is presented in other comprehensive income, unless the recognition of the effects of changes in the liability’s credit risk in other comprehensive income would create or enlarge an accounting mismatch in profit or loss. Changes in fair value attributable to a financial liability’s credit risk are not subsequently reclassified to profit or loss. Previously, under HKAS 39, the entire amount of the change in the fair value of the financial liability designated as at fair value through profit or loss was presented in profit or loss.

The directors anticipate that the adoption of HKFRS 9 in the future may not have significant impact on the Group’s financial assets and financial liabilities.

New and revised Standards on consolidation, joint arrangements, associates and disclosures

In June 2011, a package of five standards on consolidation, joint arrangements, associates and disclosures was issued, including HKFRS 10, HKFRS 11, HKFRS 12, HKAS 27 (as revised in 2011) and HKAS 28 (as revised in 2011).

Key requirements of these five standards are described below.

HKFRS 10 replaces the parts of HKAS 27 Consolidated and Separate Financial Statements that deal with consolidated financial statements and HK (SIC)-Int 12 Consolidation – Special Purpose Entities . HKFRS 10 includes a new definition of control that contains three elements: (a) power over an investee, (b) exposure, or rights, to variable returns from its involvement with the investee, and (c) the ability to use its power over the investee to affect the amount of the investor’s returns. Extensive guidance has been added in HKFRS 10 to deal with complex scenarios.

– II-20 –

APPENDIX II

FINANCIAL INFORMATION OF THE GROUP

HKFRS 11 replaces HKAS 31 Interests in Joint Ventures and HK (SIC)-Int 13 Jointly Controlled Entities – Non-Monetary Contributions by Venturers . HKFRS 11 deals with how a joint arrangement of which two or more parties have joint control should be classified. Under HKFRS 11, joint arrangements are classified as joint operations or joint ventures, depending on the rights and obligations of the parties to the arrangements. In contrast, under HKAS 31, there are three types of joint arrangements: jointly controlled entities, jointly controlled assets and jointly controlled operations.

In addition, joint ventures under HKFRS 11 are required to be accounted for using the equity method of accounting, whereas jointly controlled entities under HKAS 31 can be accounted for using the equity method of accounting or proportionate accounting.

HKFRS 12 is a disclosure standard and is applicable to entities that have interests in subsidiaries, joint arrangements, associates and/or unconsolidated structured entities. In general, the disclosure requirements in HKFRS 12 are more extensive than those in the current standards.

These five standards are effective for annual periods beginning on or after 1 January 2013. Earlier application is permitted provided that all of these five standards are applied early at the same time.

The directors anticipate that the application of these five standards would not have significant impact on amounts reported in the consolidated financial statements.

HKFRS 13 Fair Value Measurement

HKFRS 13 establishes a single source of guidance for fair value measurements and disclosures about fair value measurements. The Standard defines fair value, establishes a framework for measuring fair value, and requires disclosures about fair value measurements. The scope of HKFRS 13 is broad; it applies to both financial instrument items and non-financial instrument items for which other HKFRSs require or permit fair value measurements and disclosures about fair value measurements, except in specified circumstances. In general, the disclosure requirements in HKFRS 13 are more extensive than those in the current standards. For example, quantitative and qualitative disclosures based on the three-level fair value hierarchy currently required for financial instruments only under HKFRS 7 Financial Instruments: Disclosures will be extended by HKFRS 13 to cover all assets and liabilities within its scope.

HKFRS 13 is effective for annual periods beginning on or after 1 January 2013, with earlier application permitted.

Amendments to HKAS 1 Presentation of Items of Other Comprehensive Income

The amendments to HKAS 1 retain the option to present profit or loss and other comprehensive income in either a single statement or in two separate but consecutive statements. However, the amendments to HKAS 1 require additional disclosures to be made in the other comprehensive income section such that items of other comprehensive income are grouped into two categories: (a) items that will not be reclassified subsequently to profit or loss; and (b) items that may be reclassified subsequently to profit or loss when specific conditions are met. Income tax on items of other comprehensive income is required to be allocated on the same basis.

The amendments to HKAS 1 are effective for annual periods beginning on or after 1 July 2012. The presentation of items of other comprehensive income will be modified accordingly when the amendments are applied in the future accounting periods.

The consolidated financial statements have been prepared in accordance with HKFRSs issued by the HKICPA. In addition, the consolidated financial statements include applicable disclosures required by the Listing Rules and by the Hong Kong Companies Ordinance.

The consolidated financial statements have been prepared on the historical cost basis except for certain properties and financial instruments that are measured at fair values, as explained in the accounting policies set out below. Historical cost is generally based on the fair value of the consideration given in exchange for goods.

– II-21 –

APPENDIX II

FINANCIAL INFORMATION OF THE GROUP

The principal accounting policies are set out below:

3. SIGNIFICANT ACCOUNTING POLICIES

3.1 Basis of consolidation

The consolidated financial statements incorporate the financial statements of the Company and entities controlled by the Company (its subsidiaries). Control is achieved where the Company has the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities.

The results of subsidiaries acquired or disposed of during the year are included in the consolidated income statement from the effective date of acquisition or up to the effective date of disposal, as appropriate.

Where necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting policies into line with those used by other members of the Group.

All intra-group transactions, balances, income and expenses are eliminated in full on consolidation.

Non-controlling interests in subsidiaries are presented separately from the Group’s equity therein.

Allocation of total comprehensive income to non-controlling interests

Total comprehensive income and expense of a subsidiary is attributed to the owners of the Company and to the non-controlling interests even if this results in the non-controlling interests having a deficit balance. (effective from 1 January 2010 onwards)

3.2 Business combinations

Business combinations that took place on or after 1 January 2010

Acquisitions of businesses are accounted for using the acquisition method. The consideration transferred in a business combination is measured at fair value, which is calculated as the sum of the acquisition-date fair values of the assets transferred by the Group, liabilities incurred by the Group to the former owners of the acquiree and the equity interests issued by the Group in exchange for control of the acquiree. Acquisition related costs are generally recognised in profit or loss as incurred.

At the acquisition date, the identifiable assets acquired and the liabilities assumed are recognised at their fair value at the acquisition date, except that:

deferred tax assets or liabilities and liabilities or assets related to employee benefit arrangements are recognised and measured in accordance with HKAS 12 Income Taxes and HKAS 19 Employee Benefits respectively;
liabilities or equity instruments related to share-based payment transactions of the acquiree or the replacement of an acquiree’s share-based payment transactions with share-based payment transactions of the Group are measured in accordance with HKFRS 2 Share-based Payment at the acquisition date; and
assets (or disposal groups) that are classified as held for sale in accordance with HKFRS 5 Non-current Assets Held for Sale and Discontinued Operations are measured in accordance with that standard.

Goodwill is measured as the excess of the sum of the consideration transferred, the amount of any non-controlling interests in the acquiree, and the fair value of the acquirer’s previously held equity interest in the acquiree (if any) over the net of the

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acquisition-date amounts of the identifiable assets acquired and the liabilities assumed. If, after re-assessment, the net of the acquisition-date amounts of the identifiable assets acquired and liabilities assumed exceeds the sum of the consideration transferred, the amount of any non-controlling interests in the acquiree and the fair value of the acquirer’s previously held interest in the acquire (if any), the excess is recognised immediately in profit or loss as a bargain purchase gain.

Non-controlling interests that are present ownership interests and entitle their holders to a proportionate share of the entity’s net assets in the event of liquidation may be initially measured either at fair value or at the non-controlling interests’ proportionate share of the recognised amounts of the acquiree’s identifiable net assets. The choice of measurement basis is made on a transaction-by-transaction basis. Other types of non-controlling interests are measured at their fair value or another measurement basis required by another standard.

Where the consideration transferred by the Group in a business combination includes assets or liabilities resulting from a contingent consideration arrangement, the contingent consideration is measured at its acquisition-date fair value and considered as part of the consideration transferred in a business combination. Changes in the fair value of the contingent consideration that qualify as measurement period adjustments are adjusted retrospectively, with the corresponding adjustments made against goodwill. Measurement period adjustments are adjustments that arise from additional information obtained during the “measurement period” (which cannot exceed one year form the acquisition date) about facts and circumstances that existed at the acquisition date.

The subsequent accounting for changes in the fair value of the contingent consideration that do not qualify as measurement period adjustments depends on how the contingent consideration is classified. Contingent consideration that is classified as equity is not remeasured at subsequent reporting dates and its subsequent settlement is accounted for within equity. Contingent consideration that is classified as an asset or a liability is remeasured at subsequent reporting dates in accordance with HKAS 39, or HKAS 37 Provisions, Contingent Liabilities and Contingent Assets , as appropriate, with the corresponding gain or loss being recognised in profit or loss.

When a business combination is achieved in stages, the Group’s previously held equity interest in the acquiree is remeasured to fair value at the acquisition date (i.e. the date when the Group obtains control) and the resulting gain or loss, if any, is recognised in profit or loss. Amounts arising from interests in the acquiree prior to the acquisition date that have previously been recognised in other comprehensive income are reclassified to profit or loss where such treatment would be appropriate if that interest were disposed of.

If the initial accounting for a business combination is incomplete by the end of the reporting period in which the combination occurs, the Group reports provisional amounts for the items for which the accounting is incomplete. Those provisional amounts are adjusted during the measurement period (see above), or additional assets or liabilities are recognised, to reflect new information obtained about facts and circumstances that existed at the acquisition date that, if known, would have affected the amounts recognised at that date.

Business combinations that took place prior to 1 January 2010

Acquisition of businesses was accounted for using the purchase method. The cost of the acquisition was measured at the aggregate of the fair values, at the date of exchange, of assets given, liabilities incurred or assumed, and equity instruments issued by the Group in exchange for control of the acquiree, plus any costs directly attributable to the business combination. The acquiree’s identifiable assets, liabilities and contingent liabilities that met the relevant conditions for recognition were generally recognised at their fair value at the acquisition date.

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Goodwill arising on acquisition was recognised as an asset and initially measured at cost, being the excess of the cost of the acquisition over the Group’s interest in the recognised amounts of the identifiable assets, liabilities and contingent liabilities recognised. If, after assessment, the Group’s interest in the recognised amounts of the acquiree’s identifiable assets, liabilities and contingent liabilities exceeded the cost of the acquisition, the excess was recognised immediately in profit or loss.

The minority interest in the acquiree was initially measured at the minority interest’s proportionate share of the recognised amounts of the assets, liabilities and contingent liabilities of the acquiree.

Contingent consideration was recognised, if and only if, the contingent consideration was probable and could be measured reliably. Subsequent adjustments to contingent consideration were recognised against the cost of the acquisition.

Business combinations achieved in stages were accounted for as separate steps. Goodwill was determined at each step. Any additional acquisition did not affect the previously recognised goodwill.

3.3 Goodwill

Goodwill arising on an acquisition of a business is carried at cost less accumulated impairment losses, if any, and is presented separately in the consolidated statement of financial position as an intangible asset.

For the purposes of impairment testing, goodwill is allocated to each of the cash-generating units (or groups of cash-generating units) that is expected to benefit from the synergies of the combination.

A cash-generating unit to which goodwill has been allocated is tested for impairment annually, or more frequently whenever there is indication that the unit may be impaired. For goodwill arising on an acquisition in a financial year, the cash-generating unit to which goodwill has been allocated is tested for impairment before the end of that financial year. If the recoverable amount of the cash-generating unit is less than the carrying amount of the unit, the impairment loss is allocated first to reduce the carrying amount of any goodwill allocated to the unit and then to the other assets of the unit pro rata on the basis of the carrying amount of each asset in the unit. Any impairment loss for goodwill is recognised directly in profit or loss in the consolidated income statement. An impairment loss recognised for goodwill is not reversed in subsequent periods.

On disposal of the relevant cash-generating unit, the attributable amount of goodwill is included in the determination of the amount of profit or loss on disposal.

3.4 Non-current assets held for sale

Non-current assets and disposal groups are classified as held for sale if their carrying amount will be recovered principally through a sale transaction rather than through continuing use. This condition is regarded as met only when the sale is highly probable and the non-current asset (or disposal group) is available for immediate sale in its present condition. Management must be committed to the sale, which should be expected to qualify for recognition as a completed sale within one year from the date of classification.

When the Group is committed to a sale plan involving loss of control of a subsidiary, all of the assets and liabilities of that subsidiary are classified as held for sale when the criteria described above are met, regardless of whether the Group will retain a non-controlling interest in its former subsidiary after the sale.

Non-current assets (and disposal groups) classified as held for sale are measured at the lower of their previous carrying amount and fair value less costs to sell.

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FINANCIAL INFORMATION OF THE GROUP

3.5 Revenue recognition

Revenue is measured at the fair value of the consideration received or receivable and represents amounts receivable for goods sold and services provided in the normal course of business and net of discounts.

Revenue from sales of properties is recognised when the risks and rewards of properties are transferred to the purchasers, which is when the construction of relevant properties had been completed reasonably assured. Deposit and installments received on properties sold prior to the date of revenue recognition are included in the consolidated statement of financial position under current liabilities.

Rental income under operating leases is recognised in the consolidated income statement in equal installments over the accounting periods covered by the lease terms. Lease incentives granted are recognised in the consolidated income statement as an integral part of the aggregate net lease payments receivable. Contingent rentals are recognised as income in the consolidated income statement in the accounting period in which they are earned.

Income from provision of property management services is recognised when the services are rendered.

Interest income from financial asset is accrued on a time basis, by reference to the principal outstanding and at the effective interest rate applicable, which is the rate that exactly discounts the estimated future cash receipts through the expected life of the financial asset to that asset’s net carrying amount on initial recognition.

3.6 Property, plant and equipment

Property, plant and equipment including buildings held for use in the production or supply of goods or services, or for administrative purposes other than construction in progress are stated in the consolidated statement of financial position at cost less subsequent accumulated depreciation and accumulated impairment losses, if any.

Depreciation is recognised so as to write off the cost of items of property, plant and equipment other than construction in progress less their residual values over their estimated useful lives, using the straight-line method. The estimated useful lives, residual values and depreciation method are reviewed at the end of each reporting period, with the effect of any changes in estimate accounted for a prospective basis.

Construction in progress includes property, plant and equipment in the course of construction for production or for its own use purpose. Construction in progress is carried at cost less any recognised impairment loss. Construction in progress is classified to the appropriate category of property, plant and equipment when completed and ready for intended use. Depreciation of these assets, on the same basis as other property assets, commences when the assets are ready for their intended use.

An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits are expected to arise from the continued use of the asset. Any gain or loss arising on derecognition of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the item) is included in profit or loss in the period in which the item is derecognised.

3.7 Investment properties

Investment properties are properties held to earn rentals or for capital appreciation. Investment properties include land held for undetermined future use, which is regarded as held for capital appreciation purpose.

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FINANCIAL INFORMATION OF THE GROUP

Investment properties measured using the fair value model

Investment properties are initially measured at cost, including any directly attributable expenditure. Subsequent to initial recognition, investment properties are measured at their fair values. Gains or losses arising from changes in the fair value of investment property are included in profit or loss for the period in which they arise.

Investment properties measured using the cost model

Investment properties are initially measured at cost, including any directly attributable expenditure. Subsequent to initial recognition, investment properties are stated at cost less subsequent accumulated depreciation and any accumulated impairment losses. Depreciation is recognised so as to write off the cost of investment properties over their estimated useful lives and after taking into account of their estimated residual value, using the straight-line method.

Construction costs incurred for investment properties under construction are capitalised as part of the carrying amount of the investment properties under construction.

Investment properties are derecognised upon disposal or when the investment properties are permanently withdrawn from use and on future economic benefits are expected from its disposals. Any gain or loss arising on derecognition of the asset (calculated as the different between the net disposal proceeds and the carrying amount of the asset) is included in the consolidated income statement in the year in which the item is derecognised.

3.8 Leasing

Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessee. All other leases are classified as operating leases.

The Group as lessor

Rental income from operating leases is recognised in profit or loss on a straight-line basis over the term of the relevant lease. Initial direct costs incurred in negotiating and arranging an operating lease are added to the carrying amount of the leased asset and recognised as an expense on a straight-line basis over the lease term.

Leasehold land

Payment for obtaining leasehold land is considered as operating lease payment. To the extent the allocation of the operating lease payments can be made reliably, interest in leasehold land that is accounted for as an operating lease is presented as “prepaid lease payments” in the consolidated statement of financial position and is amortised over the lease term on a straight-line basis.

3.9 Properties held for sale

Properties held for sale including properties under development for sale. They are included in current assets at the lower of cost and net realisable value. The costs of properties under development for sale consist of construction expenditures, amounts capitalised in respect of amortisation of upfront payments of land use rights, borrowing costs directly attributable to construction of such properties and other direct costs. Net realisable value is based on estimated selling price in the ordinary course of business as determined by management with reference to the prevailing market conditions, less further costs expected to be incurred to completion and selling and marketing costs. No depreciation is provided on properties under development for sale.

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FINANCIAL INFORMATION OF THE GROUP

3.10 Foreign currencies

In preparing the financial statements of each individual group entity, transactions in currencies other than the functional currency of that entity (foreign currencies) are recorded in the respective functional currency (i.e. the currency of the primary economic environment in which the entity operates) at the rates of exchanges prevailing on the dates of the transactions. At the end of the reporting period, monetary items denominated in foreign currencies are retranslated at the rates prevailing at that date. Non-monetary items carried at fair value that are denominated in foreign currencies are retranslated at the rates prevailing on the date when the fair value was determined. Non-monetary items that are measured in terms of historical cost in a foreign currency are not retranslated.

Exchange differences arising on the settlement of monetary items, and on the retranslation of monetary items, are recognised in profit or loss in the period in which they arise, except for exchange differences arising on a monetary item that forms part of the Company’s net investment in a foreign operation, in which case, such exchange differences are recognised in other comprehensive income and accumulated in equity and will be reclassified from equity to profit or loss on disposal of foreign operation. Exchange differences arising on the retranslation of non-monetary items carried at fair value are included in profit or loss for the period except for exchange differences arising on the retranslation of non-monetary items in respect of which gains and losses are recognised directly in other comprehensive income, in which cases, the exchange differences are also recognised directly in other comprehensive income.

For the purposes of presenting the consolidated financial statements, the assets and liabilities of the Group’s foreign operations are translated into the presentation currency of the Group (i.e. Renminbi) using exchange rates prevailing at the end of each reporting period, Income and expenses items are translated at the average exchange rates for the year, unless exchange rates fluctuate significantly during the period, in which case, the exchange rates prevailing at the dates of transactions are used. Exchange differences arising, if any, are recognised in other comprehensive income and accumulated in equity.

On the disposal of a foreign operation (i.e. a disposal of the Group’s entire interest in a foreign operation, or a disposal involving loss of control over a subsidiary that includes a foreign operation, a disposal involving loss of joint control over a jointly controlled entity that includes a foreign operation, or a disposal involving loss of significant influence over an associate that includes a foreign operation), all of the exchange differences accumulated in equity in respect of that operation attributable to the owners of the Company are reclassified to profit or loss. In addition, in relation to a partial disposal of a subsidiary that does not result in the Group losing control over the subsidiary, the proportionate share of accumulated exchange differences are re-attributed to non-controlling interests and are not recognised in profit or loss. For all other partial disposals (i.e. partial disposals of associates or jointly controlled entities that do not result in the Group losing significant influence or joint control), the proportionate share of the accumulated exchange differences is reclassified to profit or loss.

Goodwill and fair value adjustments on identifiable assets acquired arising on an acquisition of a foreign operation are treated as assets and liabilities of that foreign operation and retranslated at the rate of exchange prevailing at the end of each reporting period. Exchange differences arising are recognised in equity.

3.11 Retirement benefit costs

Payments to state-managed retirement benefit schemes and the Mandatory Provident Fund Scheme are recognised as an expense when employees have rendered service entitling them to the contributions.

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FINANCIAL INFORMATION OF THE GROUP

3.12 Taxation

Income tax expense represents the sum of the tax currently payable and deferred tax.

The tax currently payable is based on taxable profit for the year. Taxable profit differs from profit as reported in the consolidated income statement because it excludes items of income or expense that are taxable or deductible in other years and items that are never taxable or deductible. The Group’s liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the end of the reporting period.

Deferred tax is recognised on temporary differences between the carrying amounts of assets and liabilities in the consolidated financial statements and the corresponding tax base used in the computation of taxable profit. Deferred tax liabilities are generally recognised for all taxable temporary differences. Deferred tax assets are generally recognised for all deductible temporary difference to the extent that it is probable that taxable profits will be available against which those deductible temporary differences can be utilised. Such deferred tax assets and liabilities are not recognised if the temporary difference arises from goodwill or from the initial recognition (other than in a business combination) of other assets and liabilities in a transaction that affects neither the taxable profit nor the accounting profit.

Deferred tax liabilities are recognised for taxable temporary differences associated with investments in subsidiaries, except where the Group is able to control the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future. Deferred tax assets arising from deductible temporary differences associated with such investments and interests are only recognised to the extent that it is probable that there will be sufficient taxable profits against which to utilise the benefits of the temporary differences and they are expected to reverse in the foreseeable future.

The carrying amount of deferred tax asset is reviewed at the end of the reporting period and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered.

Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the period in which the liability is settled or the asset is realised, based on tax rate (and tax laws) that have been enacted or substantively enacted by the end of the reporting period.

The measurement of deferred tax liabilities and assets reflects the tax consequences that would follow from the manner in which the Group expects, at the end of the reporting period, to recover or settle the carrying amount of its assets and liabilities.

Current and deferred tax is recognised in profit or loss, except when it relates to items that are recognised in other comprehensive income or directly in equity, in which case, the current and deferred tax is also recognised in other comprehensive income or directly in equity respectively. Where current tax or deferred tax arises from the initial accounting for a business combination, the tax effect is included in the accounting for the business combination.

3.13 Financial instruments

Financial assets and financial liabilities are recognised in the consolidated statement of financial position when a group entity becomes a party to the contractual provisions of the instrument.

Financial assets and financial liabilities are initially measured at fair value. Transaction costs that are directly attributable to the acquisition or issue of financial assets and financial liabilities (other than financial assets or financial liabilities at fair value through profit or loss) are added to or deducted from the fair value of the financial assets or financial liabilities, as appropriate, on initial recognition. Transaction costs directly

– II-28 –

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FINANCIAL INFORMATION OF THE GROUP

attributable to the acquisition of financial assets or financial liabilities at fair value through profit or loss are recognised immediately in profit or loss.

Financial assets

The Group’s financial assets are classified into one of the three categories, including financial assets at fair value through profit or loss (“FVTPL”), loans and receivables and available-for-sale financial assets (“AFS”). The classification depends on the nature and purpose of the financial assets and is determined at the time of initial recognition. All regular way purchases or sales of financial assets are recognised and decognised on a trade date basis. Regular way purchases or sales are purchases or sales of financial assets that require delivery of assets within the time frame established by regulation or convention in the marketplace.

Effective interest method

The effective interest method is a method of calculating the amortised cost of a financial asset and of allocating interest income over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash receipts (including all fees paid or received that form an integral part of the effective interest rate, transaction costs and other premiums or discounts) through the expected life of the financial asset, or, when appropriate, a shorter period to the net carrying amount on initial recognition.

Interest income is recognised on an effective interest basis for debt instruments other than those financial assets classified as at FVTPL, of which interest income is included in net gains or losses.

Financial assets at fair value through profit or loss

Financial assets at FVTPL represent financial assets held for trading.

A financial asset is classified as held for trading if:

it has been acquired principally for the purpose of selling in the near future; or
it is a part of an identified portfolio of financial instruments that the Group manages together and has a recent actual pattern of short-term profit-taking; or
it is a derivative that is not designated and effective as a hedging instrument.

Financial assets at FVTPL are measured at fair value, with changes in fair value arising from remeasurement recognised directly in profit or loss in the period in which they arise. The net gain or loss recognised in profit or loss excludes any dividend or interest earned on the financial assets.

Loans and receivables

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. Subsequent to initial recognition, loans and receivables (including trade receivables, amount due from a former customer, other receivables and bank balances and cash) are carried at amortised cost using the effective interest method, less any identified impairment losses (see accounting policy on impairment loss on financial assets below).

Available-for-sale financial assets

Available-for-sale financial assets are non-derivatives that are either designated or not classified as financial assets at FVTPL, loans and receivables or held-to-maturity investments.

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FINANCIAL INFORMATION OF THE GROUP

For available-for-sale equity investments that do not have a quoted market price in an active market and whose fair value cannot be reliably measured and derivatives that are linked to and must be settled by delivery of such unquoted equity investments, they are measured at cost less any identified impairment loss on financial assets (see accounting policy on impairment loss on financial assets below).

Impairment on financial assets

Financial assets, other than those at FVTPL, are assessed for indicators of impairment at the end of the reporting period. Financial assets are considered to be impaired where there is objective evidence that, as a result of one or more events that occurred after the initial recognition of the financial asset, the estimated future cash flows of the financial assets have been affected.

For an available-for-sale equity investment, a significant or prolonged decline in the fair value of that investment below its cost is considered to be objective evidence of impairment.

For all other financial assets, objective evidence of impairment could include:

significant financial difficulty of the issuer or counterparty; or
breach of contract, such as default or delinquency in interest or principal payments; or
it becoming probable that the borrower will enter bankruptcy or financial re-organisation; or
Disappearance of an active market for that financial asset because of financial difficulties.

For certain categories of financial asset, such as trade receivables, assets that are assessed not to be impaired individually are assessed for impairment on a collective basis. Objective evidence of impairment for a portfolio of receivables could include the Group’s past experience of collecting payments, an increase in the number of delayed payments in the portfolio past the average credit period, as well as observable changes in national or local economic conditions that correlate with default on receivables.

For financial assets carried at amortised cost, the amount of the impairment loss is the difference between the asset’s carrying amount and the present value of estimated future cash flows, discounted at the financial asset’s original effective interest rate.

For financial assets carried at cost, the amount of the impairment loss is measured as the difference between the asset’s carrying amount and the present value of the estimated future cash flows discounted at the current market rate of return for a similar financial asset. Such impairment loss will not be reversed in subsequent periods.

The carrying amount of the financial asset is reduced by the impairment loss directly for all financial assets with the exception of trade receivables, where the carrying amount is reduced through the use of an allowance account. When a trade receivable is considered uncollectible, it is written off against the allowance account. Subsequent recoveries of amounts previously written off are credited to profit or loss. Changes in the carrying amount of the allowance account are recognised in profit or loss.

When an available-for-sale financial asset is considered to be impaired, cumulative gains or losses previously recognised in other comprehensive income are reclassified to profit or loss in the period in which the impairment takes place.

For financial assets measured at amortised cost, if, in a subsequent period, the amount of impairment loss decreases and the decrease can be related objectively to an event

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FINANCIAL INFORMATION OF THE GROUP

occurring after the impairment losses was recognised, the previously recognised impairment loss is reversed through profit or loss to the extent that the carrying amount of the asset at the date the impairment is reversed does not exceed what the amortised cost would have been had the impairment not been recognised.

Impairment losses on available-for-sale equity investments will not be reversed through profit or loss. Any increase in fair value subsequent to impairment loss is recognised directly in other comprehensive income and accumulated in investment revaluation reserve. For available-for-sale debt investments, impairment losses are subsequently reversed through profit or loss if an increase in the fair value of the investment can be objectively related to an event occurring after the recognition of the impairment loss.

Financial liabilities and equity instruments

Financial liabilities and equity instruments issued by a group entity are classified as either financial liabilities or as equity in accordance with the substance of the contractual arrangements and the definitions of a financial liability and an equity instrument.

Equity instruments

An equity instrument is any contract that evidences a residual interest in the assets of the group after deducting all of its liabilities. Equity instruments issued by the Group are recognised at the proceeds received, net of direct issue costs.

Effective interest method

The effective interest method is a method of calculating the amortised cost of a financial liability and of allocating interest expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash payments through the expected life of the financial liability, or, where appropriate, a shorter period.

Interest expense is recognised on an effective interest basis.

Other financial liabilities

Other financial liabilities including trade payables, other payables and accruals, other current liabilities and other non-current liabilities are subsequently measured at amortised cost, using the effective interest method.

Derecognition

The Group derecognises a financial asset only when the contractual rights to the cash flows from the asset expire, or when it transfers the financial asset and substantially all the risks and rewards of ownership of the asset to another entity. If the Group neither transfers nor retains substantially all the risks and rewards of ownership and continues to control the transferred asset, the Group continues to recognise the asset to the extent of its continuing involvement and recognises an associated liability. If the Group retains substantially all the risks and rewards of ownership of a transferred financial asset, the Group continues to recognise the financial asset and also recognises a collateralised borrowing for the proceeds received.

On derecognition of a financial asset in its entirety, the difference between the asset’s carrying amount and the sum of the consideration received and receivable and the cumulative gain or loss that had been recognised in other comprehensive income and accumulated in equity is recognised in profit or loss.

On derecognition of a financial asset other than in its entirety, the Group allocates the previous carrying amount of the financial asset between the part it continues to recognise, and the part it no longer recognises on the basis of the relative fair values of those parts on the date of the transfer. The difference between the carrying amount allocated to the part

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FINANCIAL INFORMATION OF THE GROUP

that is no longer recognised and the sum of the consideration received for the part no longer recognised and any cumulative gain or loss allocated to it that had been recognised in other comprehensive income is recognised in profit or loss. A cumulative gain or loss that had been recognised in other comprehensive income is allocated between the part that continues to be recognised and the part that is no longer recognised on the basis of the relative fair values of those parts.

The Group derecognises financial liabilities when, and only when, the Group’s obligations are discharged, cancelled or expire. The difference between the carrying amount of the financial liability derecognised and the consideration paid and payable is recognised in profit or loss.

3.14 Provisions

Provisions are recognised when the Group has a present obligation as a result of past events, and it is probable that the Group will be required to settle the obligation, and a reliable estimate can be made of the amount of the obligation. Provisions are measured at the best estimate of the cons ideration required to settle the present obligation at the end of the reporting period, taking into account the risks and uncertainties surrounding the obligation. Where a provision is measured using the cash flows estimated to settle the present obligation, its carrying amount is the present value of those cash flows (where the effect of the time value of money is material).

When some or all of the economic benefits required to settle a provision are expected to be recovered from a third party, a receivable is recognised as an asset if it is virtually certain that reimbursement will be received and the amount of the receivable can be measured reliably.

4. KEY SOURCES OF ESTIMATION UNCERTAINTY

In the application of the Group’s accounting policies, which are described in Note 3, the directors of the Company are required to make judgements, estimates and assumptions about the carrying amounts of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates.

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods.

The followings are the key assumptions concerning the future, and other key sources of estimation uncertainty at the end of the reporting period, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year.

Useful lives of property, plant and equipment

In applying the accounting policy on property, plant and equipment with respect to depreciation, management estimates the useful lives of various categories of property, plant and equipment according to the industrial experiences over the usage of property, plant and equipment and also by reference to the relevant industrial norm. When the actual useful lives of property, plant and equipment due to the change of commercial environment are different from their estimated useful lives, such difference will impact the depreciation charges and the amounts of assets written down for future periods.

Impairment loss recognised in respect of property, plant and equipment

The Group evaluates whether items of property, plant and equipment have suffered any impairment whenever events or changes in circumstances indicate that the carrying amount of

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FINANCIAL INFORMATION OF THE GROUP

the assets may not be recoverable, in accordance with the stated accounting policy. The recoverable amounts of cash-generating units have been determined based on value-in-use calculations. No impairment loss in respect of property, plant and equipment was recognised for the years ended 31 December 2011 and 2010.

Estimated impairment of trade and other receivables

The policy for the provision for impairment of trade and other receivables of the Group is based on the evaluation of collectability and on management’s estimation. A considerable amount of estimation is required in assessing the ultimate realisation of these receivables, including the current creditworthiness and the collateral security. If the financial conditions of the borrowers of the Group deteriorate, resulting in impairment of their ability to make repayments, additional provision may be required. If the financial conditions of the borrowers of the Group, on whose account provision for impairment has been made, are improved and no impairment of their ability to make payments were noted, reversal of provision for impairment may be required.

Estimate of fair value of investment properties

The Group’s investment properties are stated at their fair values in the consolidated statement of financial position, which are assessed annually by management with reference to valuations performed by independent qualified professional valuers using the fair value model. This approach requires an estimate of the market value of the land parcel in the existing state by the comparison approach and an estimate of the fair value of the property and other site works, from which deductions are then made to allow for the age, condition, economic or functional obsolescence and environmental factors, changes to these assumptions would result in changes in the fair values of the Group’s investment properties and the corresponding adjustments to the amount of gain or loss reported in the consolidated income statement.

Impairment of available-for-sale investment

In determining whether there is any objective evidence that impairment losses on available-for-sale investment has occurred, the Group assesses periodically whether there has been a significant or prolonged decline in the fair value below its cost or carrying amount, or whether other objective evidence of impairment exists based on the investees’ financial conditions. This requires a significant level of estimation of the management, which would affect the amount of the impairment losses.

5. CAPITAL RISK MANAGEMENT

The Group manages its capital to ensure that entities in the Group will be able to continue as a going concern while maximising the return to shareholders through the optimisation of the debt and equity balance. The Group’s overall strategy remains unchanged from prior year.

The capital structure of the Group consists of debt, which includes bank balances and cash and equity attributable to owners of the Company, comprising issued share capital and reserves.

The directors of the Company review the capital structure regularly. As a part of this review, the directors of the Company consider the cost of capital and the risks associated with each class of capital. Based on the recommendations of the Company’s directors, the Group will balance its overall capital structure through the new share issues and share buy-back as well as the issue of new debt or the redemption of existing debt.

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6. FINANCIAL INSTRUMENTS

(a) Categories of financial instruments

Financial assets Held for trading investment Available-for-sale investment Loans and receivables (including cash and cash equivalents) Financial liabilities Financial liabilities measured at amortised cost	2011 RMB’000 1,848 – 239,097 240,945 4,067	2010 RMB’000 – 13,800 59,353
		73,153

		49,070

(b) Financial Risk Management Objectives and Policies

The Group’s major financial instruments include available-for-sale investment, trade receivables, amount due from a former customer, other receivables, held-for-trading investment, bank balances and cash, trade payables, other payables and accruals, other current liabilities and other non-current liabilities. Details of these financial instruments are disclosed in respective notes. The risks associated with these financial instruments include market risk (currency risk and interest rate risk), credit risk and liquidity risk. The policies on how to mitigate these risks are set out below. The management manages and monitors these exposures to ensure appropriate measures are implemented on timely and effective manner.

Market risk

The Group’s activities expose it primarily to the financial risks of changes in foreign currency and interest rates. Market risk exposures are further measured by sensitivity analysis. There has been no significant change to the Group’s exposure to market risks or the manner in which it manages and measures the risk. Details of each type of market risks are described as follows:

(i) Currency risk

Currency risk refers to the risk associated with movements in foreign currency rates which will affect the Group’s financial results and its cash flow. The directors of the Company consider the Group is not exposed to significant foreign currency risk as the majority of its operations and transactions are in the PRC with their functional currency of RMB.

In the opinion of the directors of the Company, as the currency risk is minimal, no sensitivity analysis is presented.

(ii) Interest rate risk

The Group is exposed to cash flow interest rate risk mainly in relation to variable-rate bank balances as detailed in Note 27.

– II-34 –

APPENDIX II

FINANCIAL INFORMATION OF THE GROUP

The Group’s exposures to interest rates on financial liabilities are detailed in the liquidity risk section of this note. The Group’s cash flow interest rate risk is mainly concentrated on the fluctuation of the base rate of People’s Bank of China arising from the Group’s bank balances.

Sensitivity analysis

The sensitivity analyses below have been determined based on the exposure to interest rates for non-derivative instruments. The analysis is prepared assuming the financial instruments outstanding at the end of the reporting period were outstanding for the whole year. A 100 basis points (2010: 100 basis points) increase or decrease in interest rates of the Peoples’ Bank of China is used when reporting interest rate risk internally to key management personnel and represents directors’ assessment of the reasonably possible change in interest rates.

If interest rates had been 100 basis points (2010: 100 basis points) higher or lower and all other variables were held constant, the Group’s profit for the year ended 31 December 2011 would increase or decrease by approximately RMB52,000 (2010: profit for the year would increase or decrease by approximately RMB193,000).

Credit risk

As at 31 December 2011, the Group’s maximum exposure to credit risk which will cause a financial loss to the Group due to failure to discharge an obligation by the counterparties is arising from the carrying amount of the respective recognised financial assets, mainly trade receivables, other receivables and bank balances, as stated in the consolidated statement of financial position.

The Group reviews the recoverable amount of each individual trade and other receivables at the end of the reporting period to ensure that adequate impairment losses are made for irrecoverable amounts. In this regard, the directors of the Company consider that the Group’s credit risk is significantly reduced.

The Group’s concentration of credit risk by geographical locations is mainly in PRC.

The management of the Group considered that at the end of the reporting period, no significant concentration of credit risk of the total trade receivables were due from the Group for the year ended 31 December 2010 and 2011.

The credit risk on liquid funds is limited because the counterparties are banks with high credit ratings assigned by international credit-rating agencies and authorised banks in the PRC with high-credit ratings.

Liquidity risk

In management of the liquidity risk, the Group monitors and maintains a level of bank balance and cash considered adequate by the management to finance the Group’s operations and mitigate the effects of fluctuations in cash flows.

The following table details the Group’s remaining contractual maturity for its non-derivative financial liabilities. The table has been drawn up based on the undiscounted cash flows of financial liabilities based on the earliest date on which the Group can be required to pay. The table includes both interest and principal cash flows. To the extent that interest flows are floating rate, the undiscounted amount is derived from interest rate at the end of the reporting period.

– II-35 –

APPENDIX II

FINANCIAL INFORMATION OF THE GROUP

Liquidity tables

Weighted average interest rate – –	On demand or within one year RMB’000 1,836 2,231	More than one year but less than two years RMB’000 – –	Total undiscounted cash flows RMB’000 1,836 2,231	Carrying amount RMB’000 1,836 2,231
–	4,067	–	4,067	4,067

Weighted average interest rate – – –	On demand or within one year RMB’000 5,742 40,097 3,231	More than one year but less than two years RMB’000 – – –	Total undiscounted cash flows RMB’000 5,742 40,097 3,231	Carrying amount RMB’000 5,742 40,097 3,231
–	49,070	–	49,070	49,070

Fair value

The fair value of financial assets and financial liabilities are determined as follows:

the fair value of financial assets and financial liabilities with standard terms and conditions and traded in active liquid markets are determined with reference to quoted market bid prices;
the fair value of other financial assets and financial liabilities is determined in accordance with generally accepted pricing models based on discounted cash flow analysis.

The directors of the Company consider that the carrying amounts of other financial assets and financial liabilities recorded at amortised cost in the consolidated financial statements approximate their fair values.

Fair value measurements recognised in the consolidated statement of financial position

The following table provides an analysis of financial instruments that are measured subsequent to initial recognition at fair value, grouped into Levels 1 to 3 based on the degree to which the fair value is observable:

Level 1: fair value measurements are those derived from quoted prices (unadjusted) in active market for identical assets or liabilities.

– II-36 –

APPENDIX II

FINANCIAL INFORMATION OF THE GROUP

Level 2: fair value measurements are those derived from inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices).
Level 3: fair value measurements are those derived from valuation techniques that include inputs for the asset or liability that are not based on observable market data (unobservable inputs).

		At 31 December 2011	At 31 December 2011
	Level 1	Level 2	Level 3	Total
	RMB’000	RMB’000	RMB’000	RMB’000
Financial assets at FVTPL
Held for trading investment	–	1,848	–	1,848

7. TURNOVER

Turnover represents the amounts received and receivable for (i) development, sale, rental and management of properties less sale returns and discounts, and (ii) revenue from education projects. The Group’s turnover for the year is as follows:

Continuing operations Development, sale, rental and management of properties Discontinued operation Education projects (rental income)	2011 RMB’000 22,879 2,000 24,879	2010 RMB’000 17,682 3,000
		20,682

8. SEGMENT INFORMATION

The Group’s operation segments, based on information reported to the board of directors of the Company, being the chief operating decision maker, for the purposes of resource allocation and assessment of segment performance focus on types of goods or services delivered or provided.

Specially, the Group’s reportable segments under HKFRS 8 are as follows:

a) Property development – development, sale, rental and management of properties b) Education projects – leasing of campus and equipment, investment and management of education projects

For the education projects, this segment was discontinued during the year ended 31 December 2011. Further details of discontinued operation under the education projects are set out in Note 12 to this consolidated financial statements.

– II-37 –

APPENDIX II

FINANCIAL INFORMATION OF THE GROUP

The following is an analysis of the Group’s turnover and results by reportable segment:

Discontinued operation Education projects 2011 2010 RMB’000 RMB’000 2,000 3,000 745 1,573 3,845 – (16,360) 2,000 – (429) 31 2 – 303,604 – 25,233 – 112 873 841 8 – – – – – – – 16,360 (2,000)	Total 2011 2010 RMB’000 RMB’000 24,879 20,682 10,695 5,286	Total 2011 2010 RMB’000 RMB’000 24,879 20,682 10,695 5,286

		5,286
– 2,000 (429) 2	12,070 162 (12,900) – 21,940 – 161 20,732 52,860 (11,950)	1,510 – – (3,200 34,406 (429 153 (2,770
		34,956 (8,279
303,604 25,233 112 841 – – – – (2,000)	40,910	26,677

	266,057 302,912	549,384 45,643
	568,969	595,027

	29,893 33,833	47,534 47,433
	63,726 8	94,967

		175,924

	1,391 23	1,311 23
	1,414 8 180 – 12,900 (21,940)	1,334

		–

		–

		3,200

		–

		(34,406

– II-38 –

APPENDIX II

FINANCIAL INFORMATION OF THE GROUP

Geographical information

Since the Group’s businesses were mainly taken place in the PRC, no geographical information is used by chief operating decision maker for further evaluated.

Information about major customers

Turnover from customers of the corresponding years contributing over 10% of the total turnover of the Group are as follows:

		2011	2010
		RMB’000	RMB’000
Customer	A1	5,281	4,124
Customer	B1	4,747	3,768
Customer	C1	3,689	2,796
Customer	D2	N/A3	3,000

1 Turnover from development, sale, rental and management of properties.

2 Turnover from education projects.

3 The corresponding turnover did not contribute over 10% of the total turnover of the Group in the respective year.

9. OTHER INCOME

Continuing operations Interest income on financial assets stated at amortised cost Change in fair value of held for trading investment Discontinued operation Interest income on financial assets stated at amortised cost Sundry income	2011 RMB’000 130 48	2010 RMB’000 151 –
	178 31 38 69	151
		2 46
		48
	247	199

– II-39 –

APPENDIX II

FINANCIAL INFORMATION OF THE GROUP

10. INCOME TAX EXPENSE

Continuing operations PRC enterprise income tax Deferred taxation (Note 33) Discontinued operation PRC enterprise income tax Deferred taxation (Note 33)	2011 RMB’000 15,977 (4,027)	2010 RMB’000 700 7,279
	11,950 4,090 (4,090) –	7,979
		– 300
		300
	11,950	8,279

Under the Law of the People’s Republic of China on Enterprise Income Tax (the “EIT Law”) and Implementation Regulation of the EIT Law, the tax rate of the Group is 25% from 1 January 2008 onwards.

The income tax expense for the year can be reconciled to the profit (loss) before taxation from continuing and discontinued operations per the consolidated income statement as follows:

Continuing operations Discontinued operation Total 2011 2010 2011 2010 2011 2010 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 Profit (loss) before taxation 64,600 31,808 (11,740) 3,148 52,860 34,956 Income tax at applicable tax rates 16,150 8,358 (2,935) 472 13,215 8,830 Tax effect of expenses not deductible for tax purpose – 4 4,090 25 4,090 29 Tax effect of income not taxable for tax purpose (9,576) – – – (9,576) – Tax effect of deductible temporary differences not recognised (4,027) (1,652) (4,090) – (8,117) (1,652 Tax effect of tax losses not recognised 10,172 1,269 2,935 – 13,107 1,269 Utilisation of tax losses previously not recognised (769) – – (197) (769) (197 Income tax expense* 11,950 7,979 – 300 11,950 8,279	Continuing operations Discontinued operation Total 2011 2010 2011 2010 2011 2010 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 Profit (loss) before taxation 64,600 31,808 (11,740) 3,148 52,860 34,956 Income tax at applicable tax rates 16,150 8,358 (2,935) 472 13,215 8,830 Tax effect of expenses not deductible for tax purpose – 4 4,090 25 4,090 29 Tax effect of income not taxable for tax purpose (9,576) – – – (9,576) – Tax effect of deductible temporary differences not recognised (4,027) (1,652) (4,090) – (8,117) (1,652 Tax effect of tax losses not recognised 10,172 1,269 2,935 – 13,107 1,269 Utilisation of tax losses previously not recognised (769) – – (197) (769) (197 Income tax expense* 11,950 7,979 – 300 11,950 8,279	Continuing operations Discontinued operation Total 2011 2010 2011 2010 2011 2010 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 Profit (loss) before taxation 64,600 31,808 (11,740) 3,148 52,860 34,956 Income tax at applicable tax rates 16,150 8,358 (2,935) 472 13,215 8,830 Tax effect of expenses not deductible for tax purpose – 4 4,090 25 4,090 29 Tax effect of income not taxable for tax purpose (9,576) – – – (9,576) – Tax effect of deductible temporary differences not recognised (4,027) (1,652) (4,090) – (8,117) (1,652 Tax effect of tax losses not recognised 10,172 1,269 2,935 – 13,107 1,269 Utilisation of tax losses previously not recognised (769) – – (197) (769) (197 Income tax expense* 11,950 7,979 – 300 11,950 8,279	Continuing operations Discontinued operation Total 2011 2010 2011 2010 2011 2010 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 Profit (loss) before taxation 64,600 31,808 (11,740) 3,148 52,860 34,956 Income tax at applicable tax rates 16,150 8,358 (2,935) 472 13,215 8,830 Tax effect of expenses not deductible for tax purpose – 4 4,090 25 4,090 29 Tax effect of income not taxable for tax purpose (9,576) – – – (9,576) – Tax effect of deductible temporary differences not recognised (4,027) (1,652) (4,090) – (8,117) (1,652 Tax effect of tax losses not recognised 10,172 1,269 2,935 – 13,107 1,269 Utilisation of tax losses previously not recognised (769) – – (197) (769) (197 Income tax expense* 11,950 7,979 – 300 11,950 8,279	Continuing operations Discontinued operation Total 2011 2010 2011 2010 2011 2010 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 Profit (loss) before taxation 64,600 31,808 (11,740) 3,148 52,860 34,956 Income tax at applicable tax rates 16,150 8,358 (2,935) 472 13,215 8,830 Tax effect of expenses not deductible for tax purpose – 4 4,090 25 4,090 29 Tax effect of income not taxable for tax purpose (9,576) – – – (9,576) – Tax effect of deductible temporary differences not recognised (4,027) (1,652) (4,090) – (8,117) (1,652 Tax effect of tax losses not recognised 10,172 1,269 2,935 – 13,107 1,269 Utilisation of tax losses previously not recognised (769) – – (197) (769) (197 Income tax expense* 11,950 7,979 – 300 11,950 8,279	Continuing operations Discontinued operation Total 2011 2010 2011 2010 2011 2010 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 Profit (loss) before taxation 64,600 31,808 (11,740) 3,148 52,860 34,956 Income tax at applicable tax rates 16,150 8,358 (2,935) 472 13,215 8,830 Tax effect of expenses not deductible for tax purpose – 4 4,090 25 4,090 29 Tax effect of income not taxable for tax purpose (9,576) – – – (9,576) – Tax effect of deductible temporary differences not recognised (4,027) (1,652) (4,090) – (8,117) (1,652 Tax effect of tax losses not recognised 10,172 1,269 2,935 – 13,107 1,269 Utilisation of tax losses previously not recognised (769) – – (197) (769) (197 Income tax expense* 11,950 7,979 – 300 11,950 8,279

16,150 – (9,576) (4,027) 10,172 (769)	8,358 4 – (1,652) 1,269 –	(2,935) 4,090 – (4,090) 2,935 –	472 25 – – – (197)	13,215 4,090 (9,576) (8,117) 13,107 (769)	8,830 29 – (1,652 1,269 (197
11,950	7,979	–	300	11,950	8,279

The loss before taxation included the amount of gain on disposal of Zhuhai Beida RMB3,845,000.

– II-40 –

APPENDIX II

FINANCIAL INFORMATION OF THE GROUP

11. PROFIT FOR THE YEAR

	Continuing	Continuing	Continuing	Discontinued	Discontinued
	operations			operation		Total
	2011	2010		2011	2010	2011	2010
	_RMB’000 _	_RMB’000 _		_RMB’000 _	_RMB’000 _	RMB’000 RMB’000
Profit for the year is arrived at
after charging:
Directors’ and supervisors’
emoluments (Note 13)	543		584	–	–	543	584
Staff salaries, allowances and
bonuses	547		608	120	180	667	788
Contributions to retirement
benefits schemes	169		474	20	29	189	503
	1,259	1,666		140	209	1,399	1,875
Auditor’s remuneration	858		600	3	–	861	600

12. DISCONTINUED OPERATION

On 26 April 2011, the Company entered into a sale agreement to dispose of a subsidiary, Zhuhai Beida Education Science Park Company Limited (“Zhuhai Beida”), which carried out all of the Group’s education projects operation. The disposal was effected in order to generate cash flows for the expansion of the Group’s other businesses. The disposal was completed on 1 September 2011, details of the assets and liabilities disposed of, and the calculation of the gain on disposal, are disclosed in Note 35.

The (loss) profit for the year from the discontinued operation is analysed as follows:

(Loss) profit of education projects operation for the year Gain on disposal of education projects operation (Note 35)	2011 RMB’000 (15,585) 3,845 (11,740)	2010 RMB’000 2,848 –
		2,848

– II-41 –

APPENDIX II

FINANCIAL INFORMATION OF THE GROUP

The results of the education projects operation included in the consolidated income statement are set out below. The comparative results and cash flows from discontinued operations have been re-presented to include those operations classified as discontinued in the current year.

Turnover Sales taxes on turnover Cost of sales Other income Loss on disposal of property, plant and equipment (Loss) gain on change in fair value of investment properties Depreciation Staff costs Other operating expenses Finance costs (Loss) profit before taxation Income tax expense (Loss) profit for the year from discontinued operation Cash flows from discontinued operation: Net cash inflow from operating activities Net cash inflow (outflow) from investing activities Net cash outflow from financing activities Net cash inflow	2011 RMB’000 2,000 (113) (99) 69 (8) (16,360) (873) (140) (61) – (15,585) – (15,585)	2010 RMB’000 3,000 (165) (149) 48 – 2,000 (841) (209) (107) (429)
		3,148 (300)
		2,848

	701 46 –	10,449 (110) (9,429)
	747	910

– II-42 –

APPENDIX II

FINANCIAL INFORMATION OF THE GROUP

13. DIRECTORS’, SUPERVISORS’ AND EMPLOYEES’ EMOLUMENTS

(a) Directors’ and supervisors’ emoluments

The emoluments paid or payable to each of the nine (2010: ten) directors were as follows:

Fees RMB’000 30 30 120 30	Salaries, allowances and bonus Contributions to retirement benefits schemes RMB’000 RMB’000 – – – – – – – –	Salaries, allowances and bonus Contributions to retirement benefits schemes RMB’000 RMB’000 – – – – – – – –	Total RMB’000 30 30 120 30
210 30 33 63 30 120 120 270 543 – – –	– – – – – – – – – – – –	– – – – – – – – – – – –	210
			30 33
			63
			30 120 120
			270
			543
			– –
			–
543	–	–	543

– II-43 –

APPENDIX II

FINANCIAL INFORMATION OF THE GROUP

Fees RMB’000 30 30 120 30	Salaries, allowances and bonus Contributions to retirement benefits schemes RMB’000 RMB’000 – – – – – – – –	Salaries, allowances and bonus Contributions to retirement benefits schemes RMB’000 RMB’000 – – – – – – – –	Total RMB’000 30 30 120 30
210 15 10 30 55 30 120 120 270 535 15 15 30	– – – 17 17 – – – – 17 – – –	– – – 2 2 – – – – 2 – – –	210
			15 10 49
			74
			30 120 120
			270
			554
			15 15 30
565	17	2	584

Notes:

i. Appointed on 25 June 2010

ii. Resigned on 10 May 2010

iii. Resigned on 9 August 2011

– II-44 –

APPENDIX II

FINANCIAL INFORMATION OF THE GROUP

(b) Five highest paid individuals

Of the five individuals with the highest emoluments in the Group, three (2010: three) were directors of the Company whose emoluments are included in the disclosures in Note 13(a) above. The emoluments of the remaining two (2010: two) individuals were as follows:

Salaries, allowances and bonuses Contributions to retirement benefits schemes	2011 RMB’000 167 24 191	2010 RMB’000 200 2
		202

Their emoluments were within the following bands:

			Number of individuals
			2011	2010
Nil	to	RMB1,000,000	2	2

During the two years ended 31 December 2010 and 2011, no emoluments were paid by the Group to the Company’s directors or any of the five highest paid employees as an inducement to join, or upon joining the Group, or as compensation for loss of office. None of the directors has waived or agreed to waive any emoluments during each of the two years ended 31 December 2010 and 2011.

14. RETIREMENT BENEFITS SCHEME

The employees employed in the PRC are members of the state-managed retirement benefit schemes operated by the PRC government. The Group is required to contribute a certain percentage of their payroll to the retirement benefit schemes to fund the benefits. The only obligation of the Group with respect to the retirement benefit schemes is to make the required contributions under the schemes.

15. EARNINGS PER SHARE

From continuing and discontinued operations

The calculation of the basic earnings per share attributable to owners of the Company is based on the profit for the year attributable to owners of the Company of approximately RMB45,612,000 (2010: RMB25,833,000) and the weighted average of 1,020,400,000 (2010: 1,020,400,000) ordinary shares of the Company in issue during the year.

No diluted earnings per share has been presented as there was no dilutive potential ordinary share for the years ended 31 December 2010 and 2011.

From continuing operations

The calculation of the basic earnings per share attributable to owners of the Company is based on the profit for the year from continuing operations attributable to owners of the Company of approximately RMB52,678,000 (2010: RMB23,830,000) and the weighted average of 1,020,400,000 (2010: 1,020,400,000) ordinary shares of the Company in issue during the year.

No diluted earnings per share has been presented as there was no dilutive potential ordinary share for the years ended 31 December 2010 and 2011.

– II-45 –

APPENDIX II

FINANCIAL INFORMATION OF THE GROUP

From discontinued operation

The calculation of the basic (loss) earnings per share of RMB0.69 cents (2010: RMB0.20 cents) attributable to owners of the Company is based on the loss for the year from discontinued operation attributable to owners of the Company of approximately RMB7,066,000 (2010: profit of approximately RMB2,003,000) and the weighted average of 1,020,400,000 (2010: 1,020,400,000) ordinary shares of the Company in issue during the year.

No diluted earnings per share has been presented as there was no dilutive potential ordinary share for the years ended 31 December 2010 and 2011.

16. DIVIDENDS

No dividend was paid or proposed during the year ended 31 December 2011, nor has any dividend been proposed since the end of the reporting period (2010: Nil).

17. GOODWILL

Cost At 1 January 2010, 31 December 2010 and 1 January 2011 Deregistration of a subsidiary (Note 36) At 31 December 2011 Accumulated impairment At 1 January 2010, 31 December 2010 and 1 January 2011 Eliminated on deregistration of a subsidiary At 31 December 2011 Carrying values At 31 December 2011 At 31 December 2010	RMB’000 59,376 (59,376)
	–
	59,376 (59,376)
	–
	–

	–

Goodwill arose on acquisition of a subsidiary, Shanghai Beida Jade Bird Education Investment Company Limited (“Shanghai Beida”). As Shanghai Beida ceased the business during the year ended 31 December 2005, a full impairment has been recognised in the consolidated income statement during the year ended 31 December 2005. Shanghai Beida has been deregistered during the year ended 31 December 2011, the goodwill arose on acquisition of Shanghai Beida has been eliminated during the year ended 31 December 2011.

– II-46 –

APPENDIX II

FINANCIAL INFORMATION OF THE GROUP

18. PROPERTY, PLANT AND EQUIPMENT

Furniture, fixtures and office equipment RMB’000 15,474 117 216 (51)	Motor vehicles Construction in progress RMB’000 RMB’000 1,021 3,179 236 – 1,319 – (1,022) –	Motor vehicles Construction in progress RMB’000 RMB’000 1,021 3,179 236 – 1,319 – (1,022) –	Total RMB’000 19,674 353 1,535 (1,073)
15,756 8 (61) (15,213) (65) (224) 201 10,076 863 176 (49) 11,066 873 (45) (11,530) (65) (105) 194	1,554 – – – – (1,554) – 745 196 483 (708) 716 267 – – – (983) –	3,179 – – (3,179) – – – 3,179 – – – 3,179 – – (3,179) – – –	20,489 8 (61) (18,392) (65) (1,778)
			201
			14,000 1,059 659 (757)
			14,961 1,140 (45) (14,709) (65) (1,088)
			194
7 4,690	– 838	– –	7

			5,528

– II-47 –

APPENDIX II

FINANCIAL INFORMATION OF THE GROUP

The above items of property, plant and equipment are depreciated on a straight-line basis at the following rates per annum:

Furniture, fixtures and office equipment 8 – 16% Motor vehicles 8 – 16%

19. INVESTMENT PROPERTIES

Investment properties under the fair value model:

At 1 January 2010 Acquisition of a subsidiary (Note 37) Additions Net change in fair value of investment properties – continuing operations Net change in fair value of investment properties – discontinued operation At 31 December 2010 and 1 January 2011 Disposal of subsidiaries (Note 35) Reclassified as held for sale (Note 28) Net change in fair value of investment properties – continuing operations Net change in fair value of investment properties – discontinued operation At 31 December 2011 Investment properties under the cost model: Cost At 1 January 2010, 31 December 2010 Disposal of subsidiaries (Note 35) At 31 December 2011 Accumulated depreciation and accumulated impairment At 1 January 2010 Provided for the year At 31 December 2010 and 1 January 2011 Provided for the year Eliminated on disposal of subsidiaries (Note 35) At 31 December 2011 Carrying values At 31 December 2011 At 31 December 2010	RMB’ 000 296,000 87,200 87,495 32,406 2,000
	505,101 (281,641 (97,100 38,300 (16,360
	148,300

	RMB’000 11,794 (11,794
	–

	274 275
	549 274 (823
	–

	–

	11,245

– II-48 –

APPENDIX II

FINANCIAL INFORMATION OF THE GROUP

Investment properties represented by: Under fair value model Under cost model	2011 RMB’000 148,300 – 148,300	2010 RMB’000 505,101 11,245
		516,346

The investment properties classified by their nature were as follows:

Campus (Note i and ii) Car park (Note i and iii) Properties (Note i and ii)	2011 RMB’000 – – 148,300 148,300	2010 RMB’000 298,000 11,245 207,101
		516,346

Notes:

i) The investment properties represent land and buildings situated in the PRC under medium-term land use rights.

All of the Group’s properties interests held under operating lease to earn rentals or for capital appreciation purposes are classified and accounted for as investment properties.

ii) At 31 December 2011, the properties were measured by using the fair value model. The fair value of the properties have been arrived at on the basis of a valuation carried out on that date by BMI Appraisal Limited, independent qualified professional valuers not connected with the Group. BMI Appraisal Limited have appropriate qualifications and recent experiences in the valuation of similar properties in the relevant locations. The valuation was arrived at by reference to market evidence of transaction prices for similar properties in the same locations and conditions.

At 31 December 2010, the campus and properties was measured by using the fair value model. The fair value of the campus and properties have been arrived at on the basis of a valuation carried out on that date by Malcolm & Associated Appraisal Limited, independent qualified professional valuers not connected with the Group. Malcolm & Associated Appraisal Limited have appropriate qualifications and recent experiences in the valuation of similar properties in the relevant locations. The valuation was arrived at by reference to market evidence of transaction prices for similar properties in the same locations and conditions.

iii) For the car park, it was measured by using the cost model. Since the comparable market transactions are infrequent and the alternative reliable estimates of fair value are not available when the Group first transfer the properties held for sales into investment properties. As such, the directors of the Company are of the opinion that the Group measures that investment properties by using the cost model in accordance HKAS 16.

– II-49 –

APPENDIX II

FINANCIAL INFORMATION OF THE GROUP

20. AVAILABLE-FOR-SALE INVESTMENT

Unlisted investment, at cost Cost At 1 January 2010, 31 December 2010 and 1 January 2011 Disposal At 31 December 2011 Accumulated impairment At 1 January 2010 Provided for the year At 31 December 2010 and 1 January 2011 Eliminated on disposal At 31 December 2011 Carrying values At 31 December 2011 At 31 December 2010	RMB’000 20,000 (20,000)
	–

	3,000 3,200
	6,200 (6,200)
	–

	–

	13,800

The amount represented 8% equity interests in Unisplendour Venture Capital Inc (“Unisplendour Venture”). Unisplendour Venture is an unlisted company established in the PRC and is engaged in investment in technology projects.

The available-for-sale investment is measured at cost less accumulated impairment at the end of the reporting period because there is no quoted market price available and the range of reasonable fair values estimates is so significant that the directors of the Company are of the opinion that their fair values cannot be measured reliably.

During the year ended 31 December 2011, the Group disposed of Unisplendour Venture to an independent third party at a consideration of RMB900,000 and a loss on disposal of RMB12,900,000 has been recognised in the consolidated income statement accordingly.

21. DEPOSIT PAID FOR ACQUISITION OF A SUBSIDIARY

Pursuant to the circular of the Company dated 23 September 2011, the Company has entered into an acquisition agreement (“Acquisition Agreement”) with Tianjin Zhongfang Yongyang Property Company Limited and Shenzhen Zhongfang Chuangzhan Investment Group Company Limited (the “Vendors”) for the acquisition of the entire issued share capital of Zhongfang Chaozhou Investment Development Company Limited at a consideration of RMB310,000,000 (“Zhongfang Chaozhou Acquisition”). At 31 December 2011, the balance of RMB74,000,000 represent a refundable deposit paid upon signing the Acquisition Agreement. The Zhongfang Chaozhou Acquisition was approved by the shareholders of the Company on 12 October 2011 and has not yet completed up to the date of this report.

– II-50 –

APPENDIX II

FINANCIAL INFORMATION OF THE GROUP

22. PROPERTIES HELD FOR SALE

Properties under development for sales Cost At 1 January 2010 Disposal of a subsidiary At 31 December 2010 and 31 December 2011 Accumulated impairment At 1 January 2010 Eliminated on disposal of a subsidiary At 31 December 2010 and 31 December 2011 Carrying values At 31 December 2011 At 31 December 2010	RMB’000 410,379 (410,379)
	–
	216,438 (216,438)
	–
	–

	–

The Group’s properties held for sales were all located in PRC and under medium-term leases. During the year ended 31 December 2010, the Group has disposed of the development right for the land, which acquired from the Municipal Government of Zhaoyang District of Beijing, together with the disposal of Beijing Diye Real Estate Development Company Limited (“Beijing Diye”) at a total consideration of RMB200,000,000 (Note 35).

23. TRADE RECEIVABLES

Trade receivables Less: Allowance for doubtful debts	2011 RMB’000 225 – 225	2010 RMB’000 925 (638)
		287

The Group allows an average credit period of 30 days to its trade customers. The following is an aged analysis of trade receivables net of allowance for doubtful debts presented based on the invoice date at the end of the reporting period is as follows:

0 – 30 days 31 – 60 days 61 – 90 days > 90 days	2011 RMB’000 225 – – – 225	2010 RMB’000 56 97 52 82
		287

– II-51 –

APPENDIX II

FINANCIAL INFORMATION OF THE GROUP

Included in the Group’s trade receivables balance, none of the trade receivables which are past due as at the end of the reporting period for which the Group has not provided for impairment loss (2010: RMB231,000). The Group does not hold any collateral over these balances.

The ageing analysis of trade receivables which are past due but not impaired is as follows:

Overdue by: 31 to 60 days 61 to 90 days > 90 days	2011 RMB’000 – – – –	2010 RMB’000 97 52 82
		231

Movement in the allowance for doubtful debts:

1 January Impairment loss recognised during the year Acquisition of a subsidiary Disposal of subsidiaries Reclassified as held for sales 31 December	2011 RMB’000 638 180 – (200) (618) –	2010 RMB’000 200 – 438 – –
		638

Included in the allowance for doubtful debts of trade receivables are individually impaired trade receivables with an aggregated balances of nil (2010: RMB638,000) which are either in severe financial difficulties or due to long outstanding. The Group does not hold any collateral over these balances.

24. AMOUNT DUE FROM A FORMER CUSTOMER

Shenyang Water General Corporation (“SWGC”) Accumulated impairment	2011 RMB’000 96,656 (96,656) –	2010 RMB’000 96,656 (96,656)
		–

When the Group was engaged in production and sale of urban purified water business before July 2002, SWGC was its sole customer. The amount represented the outstanding balance on the purchase of water. Pursuant to the agreement entered between the Group and SWGC, the amount has to fully settle before 31 December 2005. However, SWGC had settled RMB400,000 only up to 31 December 2005. The directors of the Company are of the opinion that the outstanding balance is unable to recover and a full impairment has been recognised in the consolidated income statement in previous years.

– II-52 –

APPENDIX II

FINANCIAL INFORMATION OF THE GROUP

25. OTHER RECEIVABLES

		2011	2010
		RMB’000	RMB’000
Other	receivables	233,685	39,754

At 31 December 2011, included in other receivables, are the consideration receivables from a) Shanghai Buotou Zongrenzong Environmental Science and Technology Company Limited in respect of the disposal of 70% equity interests of its subsidiary, Zhuhai Beida Education Science Park Company Limited amounting to approximately RMB201,084,000; and b) Beijing Otley Investment Management Company Limited in respect of the disposal of 99.86% equity interests of its subsidiary, Shenyang Development Real Estate Company Limited amounting to approximately RMB100,000. For details, please refer to Note 35.

26. HELD FOR TRADING INVESTMENT

					2011	2010
					RMB’000	RMB’000
Currency	funds	at	fair	value	1,848	–

27. BANK BALANCES AND CASH

The bank balances and cash are denominated in RMB and deposited with banks in the PRC. The RMB is not freely convertible into other currencies, however, under Mainland China’s Foreign Exchange Control Regulations and Administration of Settlement, Sale and Payment of Foreign Exchange Regulations, the Group is permitted to exchange RMB for other currencies through banks authorised to conduct foreign exchange business.

The bank balances carry interest at average market rates of 0.37% (2010: 1.08%) per annum during the year ended 31 December 2011. The bank balances are deposited with creditworthy banks with no recent history of default.

28. ASSETS/LIABILITIES CLASSIFIED AS HELD FOR SALE

On 23 May 2011, the Company entered into a sale agreement with Beijing Sihai Huaao Trading Company Limited, an independent third party, in respect of the disposal of 100% equity interests in Shenzhen Jade Bird Shenfa Guangdian Company Limited and its subsidiaries (the “Shenzhen Group”) at a consideration of approximately RMB81,000,000. The principal activities of the Shenzhen Group are engaged in leasing and management of property. The assets and liabilities attributable to those businesses, which are expected to be sold within twelve months, have been classified as a disposal group held for sale and are presented separately in the consolidated statement of financial position accordingly.

– II-53 –

APPENDIX II

FINANCIAL INFORMATION OF THE GROUP

The major classes of assets and liabilities classified as held for sale at 31 December 2011, which have been presented separately in the consolidated statement of financial position, are as follows:

Property, plant and equipment Investment properties Loan receivables Other receivables Bank balances and cash Assets classified as held for sale Trade payables Other payables and accruals Tax payables Deferred taxation Liabilities classified as held for sale	2011 RMB’000 690 97,100 6,350 1 1,576
	105,717

	529 1,337 315 11,007
	13,188

29. TRADE PAYABLES

The following is an aged analysis of trade payables presented based on the invoice date at the end of the reporting period:

Over 2 years 30. RECEIPTS IN ADVANCE Sales of properties Deposit received on disposal of subsidiaries (Note) Other	2011 RMB’000 – 2011 RMB’000 – 30,000 67 30,067	2010 RMB’000 5,742

		2010 RMB’000 10,715 – –
		10,715

Note: It represents an non-refundable deposits of RMB30,000,000 received in respect of disposal of Shenzhen Group. The assets and liabilities of Shenzhen Group have reclassified as held for sales at 31 December 2011 (Note 28).

31. PROVISIONS

		2011	2010
		RMB’000	RMB’000
Analysed	for reporting purposes as:
current	liabilities	–	1,041

– II-54 –

APPENDIX II

FINANCIAL INFORMATION OF THE GROUP

At 31 December 2010, the provisions of RMB1,041,000 were derived from the delayed delivery of apartment to customers in one of the real estate development project of Shenyang Development Real Estate Company Limited (“Shenyang Development”). Therefore, Shenyang Development was potentially liable to pay penalty charges to the buyers for unable to discharge the sales contracts on time. Since Shenyang Development was disposed during the year ended 31 December 2011 (Note 35), the provision has been eliminated upon disposal.

32. SHARE CAPITAL

Authorised, issued and fully paid: At 1 January 2010, 31 December 2010 and 31 December 2011 Domestic shares of RMB1 each H shares of RMB1 each	Number of shares 600,000,000 420,400,000 1,020,400,000	Amount RMB’000 600,000 420,400
		1,020,400

33. DEFERRED TAXATION

The following are the major deferred tax liabilities recognised and the movements thereon during the year:

At 1 January 2010 Acquisition of subsidiary Charged to consolidated income statement – continuing operations Charged to consolidated income statement – discontinued operation At 31 December 2010 Reclassified as held for sales Credit to consolidated income statement – continuing operations Credit to consolidated income statement – discontinued operation At 31 December 2011	RMB’000 (17,392 (8,134 (7,279 (300
	(33,105 11,007 4,090 4,027
	(13,981

At the end of the reporting period, the Group had estimated unused tax losses of approximately RMB59,012,000 (2010: RMB21,400,000) available for offset against future profits. No deferred tax asset has been recognised in respect of the unused tax losses due to the unpredictability of future profits stream.

34. OTHER CURRENT/NON-CURRENT LIABILITIES

The amount is unsecured, interest-free and would not be required for repayment before 2012.

– II-55 –

APPENDIX II

FINANCIAL INFORMATION OF THE GROUP

35. DISPOSAL OF SUBSIDIARIES

Year ended 31 December 2011

Shenyang Development Real Estate Company Limited

On 16 December 2011, the Group had disposal of 99.86% equity interests of its subsidiary, Shenyang Development to an independent third party at a consideration of RMB100,000. The net liabilities of Shenyang Development at the date of disposal were as follows:

Net liabilities disposed of: Investment properties Trade receivables Bank balances and cash Tax refundable Trade payables Other payables and accruals Receipts in advance Provisions Net liabilities disposed of Gain on disposal of a subsidiary: Consideration receivable Net liabilities disposed of Non-controlling interests Gain on disposal Payment manner: Deferred cash consideration (Note 25) Net cash outflow arising on disposal: Cash consideration Less: bank balances and cash disposed of	Shenyang Development RMB’000 10,971 378 2 41 (5,165 (2,142 (11,151 (1,041
	(8,107

	100 8,107 18
	8,225

	100

	– (2
	(2

– II-56 –

APPENDIX II

FINANCIAL INFORMATION OF THE GROUP

Zhuhai Beida Education Science Park Company Limited

On 1 September 2011, the Group had disposal of 70% equity interests of its subsidiary, Zhuhai Beida to an independent third party at a consideration of RMB231,084,000. The Group has discontinued its education projects operations upon the completion of the disposal of Zhuhai Beida (Note 12). The net assets of Zhuhai Beida at the date of disposal were as follows:

Net assets disposed of: Investment properties Property, plant and equipment Other receivables Bank balances and cash Other payables and accruals Tax liabilities Deferred taxation Net assets disposed of Gain on disposal of a subsidiary: Consideration received and receivable Net assets disposed of Non-controlling interests Gain on disposal Payment manner: Cash received Deferred cash consideration (Note 25) Net cash inflow arising on disposal: Cash consideration Less: bank balances and cash disposed of	Zhuhai Beida RMB’000 281,641 3,683 500 1,778 (6,962 (4,090 (13,602
	262,948

	231,084 (262,948 35,709
	3,845

	30,000 201,084
	231,084

	30,000 (1,778
	28,222

The gain on disposal of a subsidiary arising on the disposal of 70% equity interests of Zhuhai Beida is included in the loss for the year from discontinued operation in the consolidated income statement.

– II-57 –

APPENDIX II

FINANCIAL INFORMATION OF THE GROUP

Year ended 31 December 2010

Beijing Diye Real Estate Development Company Limited

The Group disposed its entire 80% equity interests in Beijing Diye to an independent third party at a total consideration of RMB200,000,000 on 1 February 2010.

The net liabilities of Beijing Diye at the date of disposal were as follows:

Net liabilities disposed of: Property, plant and equipment Properties held for sale Other receivables Bank balances and cash Trade payables Other payables and accruals Amounts due from group companies Amounts due to group companies Non-controlling interests Waiver of loans granted by group companies Gain on disposal Total consideration Payment manner: Cash consideration Other receivable Deposit Net cash inflow arising from disposal: Cash consideration Less: Bank balances and cash disposed	Beijing Diye RMB’000 316 193,941 310 21,593 (20 (893 17,865 (495,818 11
	(262,695 461,185 1,510
	200,000

	106,000 92,000 2,000
	200,000

	106,000 (21,593
	84,407

– II-58 –

APPENDIX II

FINANCIAL INFORMATION OF THE GROUP

36. DEREGISTRATION OF A SUBSIDIARY

Year ended 31 December 2011

Shanghai Beida Jade Bird Education Investment Company Limited

On 14 June 2011, the Company deregistration of 100% equity interests of its subsidiary, Shanghai Beida Jade Bird Education Investment Company Limited. The net liabilities of Shanghai Beida Jade Bird Education Investment Company Limited at the date of deregistration were as follows:

Analysis of assets and liabilities over which control was lost: Bank balances and cash Other payables and accruals Net liabilities disposed of Gain on deregistration of a subsidiary: Net liabilities disposed of Gain on deregistration	RMB’000 1 (163)
	(162)

	162
	162

The gain on deregistration of a subsidiary arising on the deregistration of 100% equity interests Shanghai Beida Jade Bird Education Investment Company Limited is recognised in the consolidated income statement in accordance with HKFRS.

37. ACQUISITION OF A SUBSIDIARY

Year ended 31 December 2010

Shenzhen Jade Bird Optoelectronics Company Limited (“JBMOE”) Acquisition

On 5 January 2009, the Group and Beijing Tianqiao Beida Jade Bird Sci-tech Company Limited entered into an agreement (the “JBMOE Acquisition Agreement”) with the Beijing Beida Jade Bird Company Limited and Shenzhen Beida Jade Bird Sci-tech Company Limited (the “JBMOE Vendors”), pursuant to which the Company agreed to purchase and the JBMOE Vendors agreed to sell their entire equity interests to JBMOE at a consideration of RMB80,000,000 (the “JBMOE Acquisition”). The JBMOE Acquisition Agreement stipulates that a guarantee shall be provided by the JBMOE Vendors that the annual rental income to be generated by JBMOE for two years following the JBMOE Acquisition shall be no less than RMB3,500,000.

On 22 February 2010, the Group acquired entire equity interests of JBMOE, the JBMOE Acquisition has been accounted for using the purchase method. JBMOE is engaged in leasing and management of property. JBMOE is acquired so as to continue the expansion of the Group’s leasing and management of property operation. Pursuant to the JBMOE Acquisition Agreement, the results generated by JBMOE from 5 January 2009 to 22 February 2010 (“the Completion Period”) would be attributable to the Group upon completion.

– II-59 –

APPENDIX II

FINANCIAL INFORMATION OF THE GROUP

Details of the fair value of identifiable assets and liabilities acquired, purchase consideration and the excess of fair value of net assets acquired over considerations at the date of acquisition are as follows:

Carrying amount as at 5 January 2009 RMB’000 1,064 34,431 – 3,273 3,537 (1,621) (7,105) 325 –	Net assets generated during the Completion Period RMB’000 (188) (1,461) 287 (2,923) 7,810 1,092 (62) (860) –	Pre- acquisition carrying amount at the acquisition Fair value adjustments RMB’000 RMB’000 876 – 32,970 54,230 287 – 350 – 11,347 – (529) – (7,167) – (535) – – (8,134)	Pre- acquisition carrying amount at the acquisition Fair value adjustments RMB’000 RMB’000 876 – 32,970 54,230 287 – 350 – 11,347 – (529) – (7,167) – (535) – – (8,134)	Fair value RMB’000 876 87,200 287 350 11,347 (529 (7,167 (535 (8,134
33,904	3,695	37,599	46,096	83,695 (3,695
				80,000
				79,000 1,000
				80,000
				–

				79,000 (11,347
				67,653

– II-60 –

APPENDIX II

FINANCIAL INFORMATION OF THE GROUP

38. OPERATING LEASE

The Group as lessor

During the year, the gross rental income received by the Group from leasing schoolhouse and related equipments and investment properties was analysed as follows:

Schoolhouse and equipment Investment properties	2011 RMB’000 2,000 22,879 24,879	2010 RMB’000 3,000 19,453
		22,453

At the end of the reporting period, the Group has future minimum lease receipts under non-cancellable operating leases in respect of schoolhouse and related equipments and investment properties.

At the end of the reporting period, the Group had contracted with tenants for the following minimum lease payments:

Within one year In the second to fifth years, inclusive	2011 RMB’000 10,955 10,955 21,910	2010 RMB’000 13,476 8,977
		22,453

The lease period was from one year to two years (2010: one year to three years).

39. CAPITAL COMMITMENT

At the end of the reporting period, the Group had the following capital commitment:

	2011
	RMB’000
Capital expenditure in respect of the acquisition of a subsidiary contracted
for but not provided in the consolidated financial statements	236,000

40. MATERIAL LITIGATIONS

During the year ended 31 December 2011 and 2010, the Group was not involved in any new litigation and the claim by Beijing Beida Jade Bird Company Limited (“Beida Jade Bird”) against the Company with respect to outstanding guaranteed amount was settled.

In December 2006, the assets of Beida Jade Bird have been auctioned by the Court and the proceeds were applied to settle the guaranteed amount provided by Liaoning Hua Jin Hua Gong Group Company Limited (“Hua Jin Hua Gong”) to the Company due to the litigation over the loan from Dalian Branch of Shenzhen Development Bank. In May 2007, Beida Jade Bird commenced legal action against the Company and Shenyang Public Utility Group Company Limited (“SPUG”), the guarantors, for the said amount. Up to 31 August 2008, the Company has repaid approximately RMB101,340,000 to Beida Jade Bird. The unpaid balance of the claim of Beida Jade Bird and the interest thereof amount to approximately RMB83,000,000.

– II-61 –

APPENDIX II

FINANCIAL INFORMATION OF THE GROUP

Later, application was made by Beida Jade Bird to Beijing No. 1 Intermediate People’s Court for the implementation of SPUG’s assets. In February 2009, Beijing No. 1 Intermediate People’s Court had entrusted an auctioneer to hold a legal auction in respect of the 58.8% equity interests held by SPUG in the Company. Beijing Mingde successfully bid for the equity interests. The proceeds were used in the guaranteed amount owed to Beida Jade Bird. As such, the guaranteed amount due to Beijing Jade Bird from the Company had been fully settled.

As a result of auction of the SPUG’s assets to repay the Company’s debts, the Company has an outstanding guaranteed amount due to SPUG of approximately RMB84,000,000. As of March 2010, the Company was financed such amount from various sources and repaid all outstanding guaranteed amount to SPUG.

41. MATERIAL NON-CASH TRANSACTIONS

There is consideration of RMB84,704,000 in relation to acquisition of investment properties was settled by other receivables from Beijing Zhong Yi Chong Yi Technology Development Company during the year ended 31 December 2010.

42. SIGNIFICANT CONNECTED TRANSACTIONS

The Group operates in an economic environment currently predominated by entities directly or indirectly owned or controlled by the PRC government (“state-controlled entities”). In addition, the Group itself is part of a larger group of companies under Beijing Mingde Guangye Investment Consultant Company Limited (“Mingde”). Apart from the transactions with Mingde and fellow subsidiaries and other related parties disclosed below, the Group also conducts business with other state-controlled entities. The directors of the Company consider those state-controlled entities are independent third parties so far as the Group’s business transactions with them are concerned.

The identified connected party which has transaction with the Group is as follows:

Name of the Company Relationships with the Company

Zhuhai School (Note a) A branch of 北京北大教育投資有限公司 (“Beida Education Investment”), in which Beida Education Investment is a related company of Beida Jade Bird

The principal connected party transactions in the ordinary course of business between the Group and connected parties are as follows:

(a) During the year ended 31 December 2010 and 2011, the Group received rental income of RMB3,000,000 and RMB2,000,000 from Zhuhai School for leasing of schoolhouse and related equipment. The lease period was from January 2003 to December 2013. Rental would negotiate on December on yearly basis.
(b) At the end of the reporting period, the balance of connected party is as follows:

Name of connected party 2011 2010 RMB’000 RMB’000

Other payables and accruals – Zhuhai School – 4,474

– II-62 –

APPENDIX II

FINANCIAL INFORMATION OF THE GROUP

43. PARTICULARS OF SUBSIDIARIES

Particulars of the subsidiaries held by the Company at 31 December 2011 are as follows:

	Place of
	incorporation/	Paid-up	Percentage of effective
	registration/	registered	equity interest held				Principal
Name of subsidiary	operation	capital	by the Company				activities
		RMB’000	Directly		Indirectly
Beijing ShenFa Property	PRC	500	100.00%			–	Leasing and
Management Company							management
Limited#							of property
Shenzhen Jade Bird ShenFa	PRC	500	100.00%			–	Inactive
Optoelectronic Company
Limited#
Shenzhen Jade Bird	PRC	10,650		–		100.00%	Leasing and
Optoelectronic Co., Ltd.#							management
							of property
Shenzhen Jade Bird	PRC	500		–		100.00%	Inactive
Guanghua Technology
Company Limited#

English name is for identification only

All of the above subsidiaries are limited company which incorporated and operated in the PRC.

None of the subsidiaries had any debt securities outstanding at the end of the reporting period or at any time during the year.

– II-63 –

APPENDIX II

FINANCIAL INFORMATION OF THE GROUP

44. STATEMENT OF FINANCIAL POSITION OF THE COMPANY

Note NON-CURRENT ASSETS Property, plant and equipment Investments in subsidiaries (a) Available-for-sale investment Deposit paid for acquisition of a subsidiary CURRENT ASSETS Amounts due from subsidiaries (b) Other receivables Bank balances and cash Assets classified as held for sale CURRENT LIABILITIES Receipts in advance Other payables and accruals Other current liabilities Amounts due to subsidiaries (b) Tax liabilities NET CURRENT ASSETS TOTAL ASSETS LESS CURRENT LIABILITIES CAPITAL AND RESERVES Share capital Reserves (c) TOTAL EQUITY NON-CURRENT LIABILITY Other non-current liabilities	2011 RMB’000 3 500 – 74,000	2010 RMB’000 27 122,770 13,800 –
	74,503 15,009 225,372 2,543 242,924 500 243,424 30,000 1,602 19,000 – 13,679 64,281 179,143	136,597
		145,102 30,764 57
		175,923 –
		175,923
		– 27,436 – 109,622 –
		137,058
		38,865
	253,646	175,462

	1,020,400 (766,754) 253,646 –	1,020,400 (864,938
		155,462
		20,000
	253,646	175,462

– II-64 –

APPENDIX II

FINANCIAL INFORMATION OF THE GROUP

Notes:

(a) Investments in subsidiaries

Unlisted shares, at cost Less: Accumulated impairment	2011 RMB’000 500 – 500	2010 RMB’000 344,650 (221,880)
		122,770

(b) The amounts due from (to) subsidiaries are unsecured, non-interest bearing and have no fixed terms of repayment.
(c) Reserves

At 1 January 2010 Loss for the year, representing total comprehensive expenses for the year At 31 December 2010 and 1 January 2011 Profit for the year, representing total comprehensive income for the year At 31 December 2011	Share premium RMB’000 (Note i) 323,258 –	Statutory surplus reserve Accumulated losses RMB’000 RMB’000 (Note ii) 103,215 (609,043) – (682,368)	Statutory surplus reserve Accumulated losses RMB’000 RMB’000 (Note ii) 103,215 (609,043) – (682,368)	Total RMB’000 (182,570) (682,368)
	323,258 –	103,215 –	(1,291,411) 98,184	(864,938) 98,184
	323,258	103,215	(1,193,227)	(766,754)

Notes:

(i) Share Premium

(ii) Statutory Surplus Reserve

– II-65 –

APPENDIX II

FINANCIAL INFORMATION OF THE GROUP

4. UNAUDITED INTERIM RESULT

The following financial information is extracted from the interim report of the Company for six months ended 30 June 2012. All information in this paragraph should be read in conjunction with the unaudited financial statements of the Group for the six months ended 30 June 2012 which are included in the 2012 interim report dated 26 September 2012.

Condensed Consolidated Income Statement

For the six months ended 30 June 2012

Notes Turnover 3 Cost of properties sold Taxes on sales of properties Gross profit Gain on disposal of subsidiaries Other operating income Other operating expenses Finance costs Profit before taxation Taxation 4 Profit for the period 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 2012 2011 (Unaudited) (Unaudited) RMB’000 RMB’000 4,802 12,703 – (2,394) (269) (896) 4,533 9,413 2,452 – – 7 (2,858) (7,910) 148 80 4,275 1,590 – – 4,275 1,590 4,275 1,347 – 243 0.42 0.13	Six months ended 30 June 2012 2011 (Unaudited) (Unaudited) RMB’000 RMB’000 4,802 12,703 – (2,394) (269) (896) 4,533 9,413 2,452 – – 7 (2,858) (7,910) 148 80 4,275 1,590 – – 4,275 1,590 4,275 1,347 – 243 0.42 0.13
	4,533 2,452 – (2,858) 148 4,275 –	9,413 – 7 (7,910 80
		1,590 –
	4,275 4,275 – 0.42

– II-66 –

APPENDIX II

FINANCIAL INFORMATION OF THE GROUP

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 2012 2011 (Unaudited) (Unaudited) RMB’000 RMB’000 4,275 1,590 – – 4,275 1,590 4,275 1,347 – 243	Six months ended 30 June 2012 2011 (Unaudited) (Unaudited) RMB’000 RMB’000 4,275 1,590 – – 4,275 1,590 4,275 1,347 – 243
		1,590

		1,347

		243

– II-67 –

APPENDIX II

FINANCIAL INFORMATION OF THE GROUP

Condensed Consolidated Balance Sheet

At 30 June 2012

Notes Non-current assets Goodwill 7 Plant and equipment Investment properties Deposit paid for acquisition of a subsidiary Current assets Inventories 8 Trade receivables Other receivables 10 Investment held for trading Bank balances and cash Assets classified as held for sale Current liabilities Trade payables 12 Receipts in advance 11 Other payables and accrued charges 13 Tax liabilities Bank borrowings – due within one year 14 Other current liabilities Liabilities classified as held for sale Net current assets Total assets less current liabilities	30 June 2012 (Unaudited) RMB’000 86,816 670 – – 87,486	31 December 2011 (Audited) RMB’000 – 7 148,300 74,000
		222,307

	514,522 – 21,106 – 15,807 551,435 159,418 710,853 87 99,500 186,283 – – – 285,870 2,951 288,821 422,032	– 225 233,685 1,848 5,187
		240,945 105,717
		346,662
		– 30,067 1,836 2,423 – 2,231
		36,557 13,188
		49,745
		296,917
	509,518	519,224

– II-68 –

APPENDIX II

FINANCIAL INFORMATION OF THE GROUP

Notes Capital and reserves Share capital 16 Reserves Equity attributable to owners of the Company Non-controlling interests Total equity Non-current liabilities Deferred taxation 15	30 June 2012 (Unaudited) RMB’000 1,020,400 (510,882) 509,518 – 509,518 – 509,518	31 December 2011 (Audited) RMB’000 1,020,400 (515,157) 505,243 – 505,243 13,981 519,224

– II-69 –

APPENDIX II

FINANCIAL INFORMATION OF THE GROUP

Condensed Consolidated Statement of Changes in Equity

For the six months ended 30 June 2012

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 2011	1,020,400	323,258	103,481	–	(987,508)	40,429	500,060
Loss 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
At 1 January 2012	1,020,400	323,258	103,481	–	(941,896)	–	505,243
Earnings for the Period				–	4,275	–	4,275
At 30 June 2012	1,020,400	323,258	103,481	–	(937,621)	–	509,518

– II-70 –

APPENDIX II

FINANCIAL INFORMATION OF THE GROUP

Condensed Consolidated Statement of Cash Flows

For the six months ended 30 June 2012

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 2012 (Unaudited) RMB’000 (87,857) 79,930 18,547 10,620 5,187 15,807 15,807	30 June 2011 (Unaudited) RMB’000 12,906 (14,000) 80 (1,014) 19,312 18,298 18,298

– II-71 –

APPENDIX II

FINANCIAL INFORMATION OF THE GROUP

Notes to the Condensed Financial Statements

For the six months ended 30 June 2012

1. GENERAL INFORMATION

Shenyang Public Utility Holdings Company Limited is a joint stock limited company incorporated in the People’s Republic of China (the “PRC”). The address of the principal place of business of the Company is 14/F, Jinmao International Apartment, No. 1 Xiao Dong Road, Da Dong District, Shenyang, the PRC. The address of the registered office of the Company is No. 1–4, 20A, Central Street, Shenyang Economic and Technological Development Zone, the PRC.

There consolidated financial statements are presented in Renminbi which is the functional currency of the Company and its subsidiaries.

The Company is an investment holding company and the principal activities of its subsidiaries are property development and leasing and management of property. During the year, the Group planned to dispose of its property leasing operation, which was classified as available-for-sale assets for the six months ended 30 June 2012.

The Company’s H shares were listed on The Stock Exchange of Hong Kong Limited on 16 December 1999. At the request of the Company, trading in H shares of the Company on the Stock Exchange was suspended on 15 December 2004. Trading in H shares of the Company was resumed on 1 April 2010.

2. 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 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. These standards are effective for the accounting periods beginning on or after 1 January 2005. These 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 the 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 statements include provision for bad and doubtful debts, provision for taxation, provision for asset impairment and fair values of financial assets stated at fair value and those dealt in profit or loss accounts.

3. TURNOVER AND SEGMENT INFORMATION

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

Principal activities are as follows:

1) Property development: Housing development; and
2) Leasing and management business: leasing of offices

– II-72 –

APPENDIX II

FINANCIAL INFORMATION OF THE GROUP

The analysis of revenue and results by reportable segment of the Group is as follows:

For the six months ended 30 June 2012 (Unaudited)

Turnover Segment results Unallocated corporate expenses Profit from operations Finance costs Gain on disposal of a subsidiary Expenditure on donation Profit before taxation Taxation Profit after taxation	Leasing of property Property development RMB’000 RMB’000 4,802 – 4,142 (406)	Others Consolidated RMB’000 RMB’000 – 4,802 – 3,736	Others Consolidated RMB’000 RMB’000 – 4,802 – 3,736

			3,736
			2,061
			1,675 148
			2,452 – – –
			4,275

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 Profit before taxation Taxation Profit after taxation	Leasing of property RMB’000 11,203 9,300	Education projects Property development RMB’000 RMB’000 1,500 – 1,009 –	Others Consolidated RMB’000 RMB’000 – 12,703 – 10,309	Others Consolidated RMB’000 RMB’000 – 12,703 – 10,309

				10,309
				8,799
				1,510 80
				– 1,590 –
				1,590

– II-73 –

APPENDIX II

FINANCIAL INFORMATION OF THE GROUP

4. TAXATION

Taxation of the Company and its subsidiaries comprises – The PRC enterprise income tax – Deferred taxation	Six months ended 30 June 2012 2011 (Unaudited) (Unaudited) RMB’000 RMB’000 – – – – – –	Six months ended 30 June 2012 2011 (Unaudited) (Unaudited) RMB’000 RMB’000 – – – – – –
		–

The “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.

Under the Law of the People’s Republic of China on Enterprise Income Tax (“EIT Law”) and the Implementation Regulation of the EIT Law, the tax rate of the Group is 25% from 1 January 2008 onwards.

5. DIVIDENDS

The Board resolved not to declare any dividend for the 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 RMB4,275,000 (profit for the six months ended 30 June 2011: RMB1,347,000) and 1,020,400,000 shares in issue during the Period.

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

7. GOODWILL

The details of goodwill of the Group as at the balance sheet date is set out as follows:

	30 June	31 December
	2012	2011
	(Unaudited)	(Audited)
	RMB’000	RMB’000
Goodwill	81,816	–

The goodwill of the Group mainly derived from premium of the equity arose from the acquisition of Zhongfang Chaozhou Investment Development Company Limited (“Zhongfang Chaozhou”) and Guangzhou Zhongzhan Investment Holdings Company Limited (“Guangzhou Zhongzhan”).

– II-74 –

APPENDIX II

FINANCIAL INFORMATION OF THE GROUP

8. INVENTORIES

The details of inventories of the Group as at the balance sheet date are set out as follows:

	30 June	31 December
	2012	2011
	(Unaudited)	(Audited)
	RMB’000	RMB’000
Inventories	514,522	–

The Group principally engages in the property development. The inventories was mainly contributed by land development cost and construction cost of Zhongfang Chaozhou and Guangzhou Zhongzhan as at the balance sheet date.

9. TRADE RECEIVABLES

The Group has no accounts receivables as at the balance sheet date.

10. OTHER RECEIVABLES

An aged analysis of other receivables of the Group as 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 other receivables	30 June 2012 (Unaudited) RMB’000 – – 21,106 – – – 21,106	31 December 2011 (Audited) RMB’000 – – 233,685 – –
		–
		233,685

During the Period, the Group has received 70% of the equity transfer payment on the disposal of Zhuhai Beida Education and Science Park Company Limited. In addition, the amount due from Shanghai Hanhua Property Management Company Limited to the Company was repaid in July 2012.

The other receivables were unsecured, interest free and have no fixed repayment terms.

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

– II-75 –

APPENDIX II

FINANCIAL INFORMATION OF THE GROUP

11. RECEIPTS IN ADVANCE

An analysis of receipts in advance of the Group as at the balance sheet date is set out as follows:

			30 June	31 December
			2012	2011
			(Unaudited)	(Audited)
			RMB’000	RMB’000
Receipts	in	advance	99,500	30,067

Receipts in advance were mainly the land repurchase payment of Zhongfang Chaozhou as at the balance sheet date. According to the agreement entered into on 17 April 2012 between Chaozhou Jinshan Investment and Development Company Limited (“Chaozhou Jinshan”) and Zhongfang Chaozhou, Zhongfang Chaozhou transferred the land of 1,000 mu to Chaozhou Jinshan, and Chaozhou Jinshan agreed to prepay part of the amount of RMB140,000,000 which was determined based on 60% of the total land development cost being paid by Zhongfang Chaozhou for the 1,000 mu constructed land. A prepayment of RMB99,500,000 has been received during the Period.

12. TRADE PAYABLES

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

0–90 days 91–180 days 181–365 days 1–2 years Over 2 years	30 June 2012 (Unaudited) RMB’000 – – 87 – – 87	31 December 2011 (Audited) RMB’000 – – – – 5,435
		5,435

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

13. OTHER PAYABLES

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

0–90 days 91–180 days 181–365 days 1–2 years Over 2 years	30 June 2012 (Unaudited) RMB’000 – – 186,283 – – 186,283	31 December 2011 (Audited) RMB’000 – – 1,836 – –
		1,836

– II-76 –

APPENDIX II

FINANCIAL INFORMATION OF THE GROUP

During the Period, other payables were mainly the equity transfer payment for the acquisition of Guangzhou Zhongzhan of RMB87,000,000 and the loans for the purpose of commencing the project by Zhongfang Chaozhou of RMB68,000,000.

14. BANK LOANS

The Group did not have any new bank loans during the Period.

15. DEFERRED TAXATION

At 1 January 2011 Charged to income statement for the Period At 30 June 2011 Charged to income statement for the Period At 1 January 2012 Charged to income statement At 30 June 2012 16. SHARE CAPITAL Registered, issued and fully paid: 600,000,000 domestic shares of RMB1 each 420,400,000 H shares of RMB1 each	30 June 2012 RMB’000 600,000 420,400 1,020,400	Fair value adjustment on business combination RMB’000 33,105 –
		33,105

		–

		13,981

		–
		–

		31 December 2011 RMB’000 600,000 420,400

		1,020,400

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

17. CONTINGENT LIABILITIES

During the Period, there was no new contingent liability.

18. ASSETS SECURED/PLEDGED

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

– II-77 –

APPENDIX II

FINANCIAL INFORMATION OF THE GROUP

5. INDEBTEDNESS STATEMENT

As at the close of business on 30 September 2012, being the latest practicable date for the purpose of this indebtedness prior to the printing of this Composite Document, the Group had indebtedness as follows:

Other borrowings

RMB’000

Other borrowings

157,503

Disclaimer

Save as aforesaid or as otherwise disclosed herein, and apart from intra-group liabilities, normal trade and other payables, receipt in advance as at 30 September 2012, the Group did not have any loan capital issued or agreed to be issued, bank overdrafts, loans, debt securities issued and outstanding, and authorized or otherwise created but unissued term loans or other borrowings, indebtedness in nature of borrowings, liabilities under acceptances (other than trade bills) or acceptance credits, debentures, mortgages, charges, finance lease or hire purchase commitments, which are either guaranteed, unguaranteed, secured, or unsecured, guarantees or other material contingent liabilities outstanding at the close of business on 30 September 2012.

The Directors confirmed that there has been no material change in the indebtedness and contingent liabilities of the Group since 30 September 2012.

6. MATERIAL CHANGE

The Directors confirm that, save for (i) the acquisition of 90% equity interests of Guangzhou Zhongzhan Investment Holdings Company Limited (廣州市中展投資控股有限公司) by the Group disclosed in the announcement of the Company dated 17 May 2012; (ii) the disposal of the entire equity interests of Beijing ShenFa Property Management Company Limited (北京瀋發物業管理有限公司) by the Group (the” Disposal ”) as disclosed in the announcement of the Company dated 13 June 2012 whereby following the completion of the Disposal, the Group ceased to carry on the property leasing and management business and is only engaged in real estate development and sale business in the PRC; and (iii) as disclosed in the interim report of the Company for the six months ended 30 June 2012, the decrease in revenue of the Group as compared to the corresponding period in 2011 was mainly due to the decrease in turnover generated from the property leasing and management segment of the Group, there has been no material changes in the financial or trading position or outlook of the Group since 31 December 2011, the date to which the latest published audited consolidated accounts of the Group were made, up to the Latest Practicable Date.

For identification purposes only

– II-78 –

APPENDIX III

GENERAL INFORMATION

1. RESPONSIBILITY STATEMENT

The information contained herein relating to the Company has been supplied by the Directors, who jointly and severally accept full responsibility for the accuracy of the information contained in this Composite Document (other than information in relation to the Offer and the Offeror) and confirm, having made all reasonable enquiries, that to the best of their knowledge, opinions expressed in this Composite Document (other than those expressed by the Offeror) have been arrived at after due and careful consideration and there are no other facts not contained in this Composite Document the omission of which would make any statement contained herein misleading.

The information contained herein relating to the Offer and the Offeror has been supplied by the sole director of the Offeror, who accepts full responsibility for the accuracy of the information contained in this Composite Document (other than information in relation to the Group) and confirms, having made all reasonable enquiries, that to the best of his knowledge, opinions expressed in this Composite Document (other than those expressed by the Group) have been arrived at after due and careful consideration and there are no other facts not contained in this Composite Document the omission of which would make any statement contained herein misleading.

2. INFORMATION ON THE COMPANY

The Company is an investment holding company and the principal activities of its subsidiaries are property development and sale in the PRC.

3. SHARE CAPITAL

Registered, issued and fully paid: 600,000,000 domestic shares of RMB1 each 420,400,000 H shares of RMB1 each	As at the Latest Practicable Date RMB’000 600,000 420,400
	1,020,400

– III-1 –

APPENDIX III

GENERAL INFORMATION

4. MARKET PRICE

The table below shows the closing price per H Share as quoted on the Stock Exchange on (i) the last trading day of each of the calendar months during the Relevant Period; (ii) the Last Trading Day; and (iii) the Latest Practicable Date.

	Closing	Closing	price
Date	per H Share
		(HK$)
30 March 2012			0.495
30 April 2012			0.570
31 May 2012			0.630
29 June 2012			0.610
31 July 2012			0.520
31 August 2012			0.500
21 September 2012 (Last Trading Day)			0.510
31 October 2012			0.550
30 November 2012			0.550
18 December 2012, being the Latest Practicable Date			0.550

The highest and lowest closing prices per H Share as quoted on the Stock Exchange during the Relevant Period were HK$0.650 on 28 and 29 May 2012 and HK$0.495 on 30 March 2012, respectively.

5. DISCLOSURE OF INTERESTS

(a) Interests and short positions of the Directors and chief executive in the securities of the Company and its associated corporations

As at the Latest Practicable Date, the interest of the directors, supervisors and chief executives of the Company in the issued share capital of the Company are set out as follows:

Beneficial Owner Position Number of Shares Ms. Qian Fang Fang Supervisor 132,000 H Shares (Note 1)

Note 1: The number of H Shares held by Ms. Qian Fang Fang represents approximately 0.031% of the total issued H Shares of the Company as at the Latest Practicable Date.

Save as aforesaid, as at the Latest Practicable Date, none of the Directors, supervisors and chief executives of the Company had or was deemed to have any interests and short positions in the shares, underlying shares and debentures of the Company or any of its associated corporation (within the meaning of Part XV of the SFO), which was required to be (i) notified to the Company and the Stock Exchange

– III-2 –

APPENDIX III

GENERAL INFORMATION

pursuant to Divisions 7 and 8 of Part XV of the SFO (including any interests and short positions which they have taken or deemed to have taken under such provisions of the SFO); or (ii) pursuant to section 352 of the SFO, to be entered in the register referred to therein; or (iii) notified to the Company and the Stock Exchange pursuant to the Model Code for Securities Transactions by Directors of Listed Issuers as set out in Appendix 10 to the Listing Rules (which for this purpose shall be deemed to apply to the supervisors of the Company to the same extent as it applies to the Directors).

(b) Interests and short positions of the substantial shareholders and other person’s in the securities of the Company

As at the Latest Practicable Date, so far as was known to the Directors or the chief executive of the Company, the following persons (other than Director or chief executive of the Company) had, an interest or short position in the Shares or underlying Shares which would fall to be disclosed to the Company and the Stock Exchange under the provisions of Divisions 2 and 3 of Part XV of the SFO or, who were, directly or indirectly, interested in 10% or more of the nominal value of any class of share capital carrying rights to vote in all circumstance at general meetings of any other member of the Group (if any) or had any options in respect of such capital:

				Approximate	Approximate
			Approximate		% of
			% of	shareholding
			shareholding	in the issued
			in the same	share capital
		No./Amount	class of		of the
Name	Class of Shares	of Shares	securities		Company
Shenzhen Jinma Asset	Domestic Shares	600,000,000	100%		58.80%
Management Company
Limited
(i.e. the Controlling
Shareholder)
Ma Zhonghong_(Note 1)_	Domestic Shares	600,000,000	100%		58.80%

Note 1: Ma Zhonghong is a PRC legal person who holds 90% equity interest in the Controlling Shareholder. Pursuant to the SFO, Ma Zhonghong is deemed to be interested in the shares of the Company held by the Controlling Shareholder.

Save as aforesaid, as at the Latest Practicable Date, so far as was known to the Directors, no person had any interest or short position in the Shares and underlying Shares which would fall to be disclosed to the Company and the Stock Exchange under the provisions of Divisions 2 and 3 of Part XV of the SFO, or who was, directly or indirectly, interested in 10% or more of the nominal value of any class of share capital carrying rights to vote in all circumstances at general meetings of any other member of the Group (if any) or who had any option in respect of such capital.

– III-3 –

APPENDIX III

GENERAL INFORMATION

(c) Other interests in the Company and the Offeror

As at the Latest Practicable Date,

(i) none of the Directors held any interest in the securities (as defined under Note 4 to Rule 22 of the Takeovers Code) of the Company;
(ii) neither the Company nor any of the Directors held any interest in the securities (as defined under Note 4 to Rule 22 of the Takeovers Code) of the Offeror;
(iii) none of the members of the Group or any pension fund of the Company, or of a subsidiary of the Company or any of the advisers to the Company as specified in class (2) of the definition of “associate” under the Takeovers Code owned or controlled any securities (as defined under Note 4 to Rule 22 of Takeovers Code) in the Company;
(iv) no person had any arrangement of the kind referred to in Note 8 to Rule 22 of the Takeovers Code with the Company or with any person who is an associate of the Company by virtue of classes (1), (2), (3) and (4) of the definition of “associate” in the Takeovers Code;
(v) no shareholding in the Company was owned or controlled by a person with whom the Offeror or any person acting in concert with it had any arrangement of the kind referred to in Note 8 to Rule 22 of the Takeovers Code;
(vi) no persons including any Directors had irrevocably committed themselves to accept or reject the Offer;
(vii) no shareholding in the Company was managed on a discretionary basis by fund managers connected with the Company;
(viii) none of the Offeror, the Controlling Shareholder or parties acting in concert with any of them has borrowed or lent any Shares; and
(ix) none of the Company or any Directors has borrowed or lent any Shares or other securities (as defined under Note 4 to Rule 22 of the Takeovers Code) of the Company.

6. DEALINGS IN SECURITIES

(i) The Offeror and parties acting in concert with it were interested in 600,000,000 Domestic Shares and 1,282,000 H Shares, details of which are set out under the paragraph headed “Shareholding Structure of the Company” in the “Letter from Kingston Securities” in this Composite Document. Save for the above, none of the Offeror, the Controlling Shareholder or parties acting in concert with any of them was interested in or owned or controlled any Shares or other securities (as defined under Note 4 to Rule 22 of the Takeovers Code) in the Company as at the Latest Practicable Date.

– III-4 –

APPENDIX III

GENERAL INFORMATION

(ii) Save for the Acquisition as disclosed in the “Letter from Kingston Securities” in this Composite Document, none of the Offeror, the Controlling Shareholder or parties acting in concert with any of them had dealt for value in any Shares or other securities (as defined under Note 4 to Rule 22 of the Takeovers Code) of the Company or the Offeror during the Relevant Period.
(iii) As at the Latest Practicable Date, save that Mr. Chim Kim Lun Ricky is deemed to be interested in 1,282,000 H Shares in which Mrs. Chim is interested and Mr. Ma Zhonghong is deemed to be interested in 600,000,000 Domestic Shares in which the Controlling Shareholder is interested under the SFO, none of the directors of the Offeror or of the Controlling Shareholder was interested in or own or control any Shares or other securities (as defined under Note 4 to Rule 22 of the Takeovers Code) in the Company.
(iv) None of the directors of the Offeror, or of the Controlling Shareholder had dealt for value in any shares or other securities (as defined under Note 4 to Rule 22 of the Takeovers Code) of the Company or the Offeror during the Relevant Period.
(v) As at the Latest Practicable Date, there was no arrangement of the kind referred to in Note 8 to Rule 22 of the Takeovers Code between the Offeror, the Controlling Shareholder or their respective associates, or any person acting in concert with any of them and any other person.
(vi) During the Relevant Period, none of the Company or any of the Directors had dealt for value in any securities (as defined under Note 4 to Rule 22 of Takeovers Code) of the Company or the Offeror.
(vii) During the Relevant Period, none of the subsidiaries, the Company or any pension fund of the Company or of a subsidiary of the Company, or any of the advisers to the Company as specified in class (2) of the definition of “associate” under the Takeovers Code had dealt for value in any securities (as defined under Note 4 to Rule 22 of Takeovers Code) of the Company.
(viii) During the Relevant Period, no shareholding in the Company was managed on a discretionary basis by the fund managers connected with the Company.
(ix) During the Relevant Period, none of the Shares and other securities (as defined under Note 4 to Rule 22 of the Takeovers Code) in the Company had been dealt for value which was managed on a discretionary basis by the fund manager connected with the Company.
(x) Save for the Acquisition as disclosed in the “Letter from Kingston Securities” in this Composite Document, as at the Latest Practicable Date, no person who had any arrangement of the kind referred to in Note 8 to Rule 22 of the Takeovers Code with the Offeror, the Controlling Shareholder or any person acting in concert with any of them had dealt for value in any securities in the Company.

– III-5 –

APPENDIX III

GENERAL INFORMATION

7. ARRANGEMENTS IN CONNECTION WITH THE OFFER

(i) No benefit has been given or will be given to any Directors as compensation for loss of office or otherwise in connection with the Offer.
(ii) There was no agreement, arrangement or understanding (including any compensation arrangement) between the Offeror, the Controlling Shareholder or any person acting in concert with any of them and any Directors, recent Directors, Shareholders or recent Shareholders having any connection with or dependent upon the Offer as at the Latest Practicable Date.
(iii) There was no material contract entered into by the Offeror or the Controlling Shareholder in which any Director had a material personal interest as at the Latest Practicable Date.
(iv) There was no agreement or arrangement between any Director and any other person which is conditional on or dependent upon the outcome of the Offer or otherwise connected with the Offer as at the Latest Practicable Date.
(v) As disclosed in paragraph 5(a) and (c) above in this Appendix, none of the Directors was interested in any securities in the Company as at the Latest Practicable Date and none of them is expected to accept or reject the Offer.
(vi) There was no agreement or arrangement to which the Offeror or the Controlling Shareholder is a party which relates to the circumstances in which any of them may or may not invoke or seek to invoke a condition to the Offer as at the Latest Practicable Date.
(vii) As at the Latest Practicable Date, the Offeror had no arrangement, agreement, understanding or intention to transfer, charge or pledge the securities to be acquired in pursuance of the Offer and no arrangements are in place for the transfer, charge or pledge of the securities to be acquired in pursuance of the Offer to any other persons.

– III-6 –

APPENDIX III

GENERAL INFORMATION

8. SERVICE CONTRACTS

The existing service contracts between the Company and the Directors are of a term of 3 years commencing on 12 February 2012 and expiring on the date of the 2015 annual general meeting of the Company, save for those between the Company and Mr. Bao Yi Qiang, the Company and Mr. Wei Jie Sheng and the Company and Ms. Zhang Lei Lei whose terms will be expiring on 11 February 2015. Fixed remuneration of the Directors as set out in their respective existing service contract with the Company are as follows:

	Annual
Director	emoluments
	(Note)
	(RMB)
Mr. An Mu Zong	30,000
Mr. Wang Zai Xing	30,000
Mr. Chow Ka Wo Alex	120,000
Mr. Wang Hui	30,000
Mr. Bao Yi Qiang	30,000
Mr. Wei Jie Sheng	30,000
Ms. Zhang Lei Lei	30,000
Mr. Cai Lian Jun	30,000
Mr. Wong Kai Tat	120,000
Mr. Chan Ming Sun Jonathan	120,000

Note: According to the existing service agreements entered into between the Directors and the Company, apart from the fixed remuneration payable under the service agreements, the executive Directors might also be entitled to a management bonus in respect of each financial year of the Company in an amount to be determined by the Board with reference to the overall business performance of the Company and the performance of the executive Directors. However, the total amount of management bonus issued to the executive Directors and members of the core management shall not be more than 10% of the audited net profit (after taxation and minority interest) of the Group for that financial year.

Save as disclosed above, no service contract (including both continuous and fixed terms contracts) between any company comprising the Group or any associated company of the Company and any Director (i) which had been entered into or amended 6 months before the commencement of the Offer Period; (ii) which is a continuous contract with a notice period of 12 months or more; or (iii) which is a fixed term contract with more than 12 months to run irrespective of the notice period.

9. MATERIAL CONTRACTS

The following contracts (not being contracts entered into in the ordinary course of business carried on or intended to be carried on by the Company or any of its subsidiaries) had been entered into by the Company within the two years preceding the commencement of the Offer Period and up to and including the Latest Practicable Date and are or may be material:

(i) the Sale and Purchase Agreement;

– III-7 –

APPENDIX III

GENERAL INFORMATION

(ii) the disposal agreement dated 13 June 2012 entered into between Xinjiang Dingxin Huayu Equity Investment Company Limited (新疆鼎新華域股權投資有限公司) and Xinjiang Shengshi Xintian Equity Investment Company Limited (新疆盛世新天股權投資有限公司) as the purchasers and the Company as the vendor in relation to the disposal of the entire equity interests and the shareholder’s loan of Beijing ShenFa Property Management Company Limited* (北京瀋發物業管理有限公司) at a consideration of RMB150 million;
(iii) the acquisition agreement dated 17 May 2012 entered into between Zhongtou Chuangye (Beijing) Investment Holdings Company Limited (中投創業（北京）投資控股有限公司) and Shenzhen Zhongzhan Chuangzhan Investment Development Company Limited (深圳市中展創展投資發展有限公司) as the vendors and the Company as the purchaser in relation to the acquisition of 90% equity interests and the shareholder’s loan of Guangzhou Zhongzhan Investment Holdings Company Limited* (廣州市中展投資控股有限公司) at a consideration of RMB115 million;
(iv) the acquisition agreement dated 11 May 2011 entered into between Tianjin Zhongfang Yongyang Property Company Limited (天津中房雍陽置業有限公司), Shenzhen Zhongfang Chuangzhan Investment Holdings Company Limited (深圳市中房創展投資控股有限公司) as the vendors and the Company as the purchaser in relation to the acquisition of 100% equity interests and the shareholder ’s loan of Zhongfang Chaozhou Investment Development Company Limited* (中房潮州投資開發有限公司) at a consideration of RMB310 million;
(v) the disposal agreement dated 23 May 2011 entered into between Beijing Sihai Huaao Trading Company Limited (北京四海華澳貿易有限公司) as the purchaser and the Company as the vendor in relation to the disposal of the entire equity interests and the shareholder’s loan of Shenzhen Jade Bird Shenfa Guangdian Company Limited (深圳青鳥瀋發光電有限公司) at a consideration of RMB81 million; and
(vi) the disposal agreement dated 26 April 2011 entered into between Shanghai Buotou Zongrenzong Environmental Science and Technology Company Limited (上海博投眾人眾環保科技有限司) as the purchaser and the Company as the vendor in relation to the disposal of 70% of the issued share capital and the shareholder’s loan of Zhuhai Beida Education and Science Park Company Limited (珠海北大教育科學園有限公司) at a consideration of approximately RMB231 million.

10. LITIGATION

As at the Latest Practicable Date, the Company was not engaged in any litigation, arbitration or claim of material importance and no litigation, arbitration or claim of material importance is known to the Directors to be pending or threatened against the Company.

For identification purposes only

– III-8 –

APPENDIX III

GENERAL INFORMATION

11. QUALIFICATIONS AND CONSENTS OF EXPERTS

The followings are the names and qualifications of each of the experts who has given its opinion or advice which is contained in this Composite Document:

Name

Qualifications

Kingston Securities a licensed corporation under the SFO to carry out Limited Type 1 (dealing in securities) regulated activity Kingston Corporate a licensed corporation under the SFO to carry out Finance Limited Type 6 (advising on corporate finance) regulated activity Messis Capital Limited a licensed corporation under the SFO to carry out Type 1 (dealing in securities) and Type 6 (advising on corporate finance) regulated activities

Each of Kingston Securities, Kingston Corporate Finance and the Independent Financial Adviser has given and has not withdrawn its written consent to the issue of this Composite Document with the inclusion of its letter and/or references to its name in the form and context in which they appear.

12. CONTINGENT LIABILITIES

Save as disclosed in the paragraph headed “Indebtedness Statement” in Appendix II to this Composite Document, the Directors were not aware of any material changes in respect of the indebtedness or other contingent liabilities of the Group since 30 September 2012.

13. MISCELLANEOUS

As of the Latest Practicable Date:

(i) The registered address of the Company is at No.1–4, 20A, Central Street, Shenyang Economic and Technological Development Zone, PRC.
(ii) The principal place of business of the Company in the PRC is at 14/F., Jinmao International Apartment, Da Dong District, Shenyang, PRC.
(iii) The principal place of business of the Company in Hong Kong is at 3rd Floor, Alliance Building, 130–136 Connaught Road Central, Hong Kong.
(iv) The registered address of the Offeror and the correspondence address of its directors are at P.O. Box 957, Offshore Incorporations Centre, Road Town, Tortola, BVI and Unit 04, 34/F., Bank of America Tower, 12 Harcourt Road, Central, Hong Kong, respectively.

– III-9 –

APPENDIX III

GENERAL INFORMATION

(v) The registered address of Kingston Securities is at Suite 2801, 28/F, One International Finance Centre, 1 Harbour View Street, Central, Hong Kong.
(vi) The registered address of Kingston Corporate Finance is at Suite 2801, 28/F, One International Finance Centre, 1 Harbour View Street, Central, Hong Kong.
(vii) The principal place of business of Karl Thomson Securities in Hong Kong is at 27/F, Fortis Tower, 77–79 Gloucester Road, Wan Chai, Hong Kong.
(viii) The registered address of the Independent Financial Adviser is at Room 2002, 20/F, Tower One, Lippo Centre, 89 Queensway, Hong Kong.
(ix) The H Share registrar and transfer office of the Company in Hong Kong is Hong Kong Registrars Limited at Shops 1712–1716, 17th Floor, Hopewell Centre, 183 Queen’s Road East, Wan Chai, Hong Kong.
(x) Unless otherwise stated, in the event of inconsistency, the English text of this Composite Document and the accompanying Form of Acceptance shall prevail over the Chinese text.

14. DOCUMENTS AVAILABLE FOR INSPECTION

Copies of the following documents are available for inspection (i) during normal business hours from 9:00 a.m. to 5:00 p.m. (other than Saturdays, Sundays and public holidays) at the principal place of business of the Company in Hong Kong at 3rd Floor, Alliance Building, 130–136 Connaught Road Central, Hong Kong; (ii) on the website of the SFC at www.sfc.hk; and (iii) on the Company website at www.sygyfz.com, during the period from 21 December 2012, being the date of this Composite Document, for as long as the Offer remains open for acceptances:

(i) the memorandum and articles of association of the Company;
(ii) the memorandum and articles of association of the Offeror;
(iii) the “Letter from Kingston Securities”, the text of which is set out on pages 6 to 16 of this Composite Document;
(iv) the “Letter from the Board”, the text of which is set out on pages 17 to 24 of this Composite Document;
(v) the “Letter from the Independent Board Committee”, the text of which is set out on pages 25 to 26 of this Composite Document;
(vi) the “Letter from the Independent Financial Adviser”, the text of which is set out on pages 27 to 45 of this Composite Document;

– III-10 –

APPENDIX III

GENERAL INFORMATION

(vii) the written consents referred to in the section headed “Qualifications and Consents of Experts” in this Appendix;
(viii) the annual reports of the Company for the two years ended 31 December 2010 and 2011;
(xi) the interim report of the Company for the six months ended 30 June 2012;
(x) the material contracts referred to in the paragraph headed “Material Contracts” in this Appendix; and
(xi) the service contracts referred to in the paragraph headed “Service Contracts” in this Appendix.

– III-11 –

AI assistant

CMON Limited — M&A Activity 2012

50172_rns_2012-12-20_22c0bd83-5616-4508-bb1a-f13207cfbcb7.pdf

KINGSTON SECURITIES LTD

ON BEHALF OF SKY EARTH LIMITED TO ACQUIRE ALL THE ISSUED H SHARES (OTHER THAN THOSE ALREADY OWNED OR AGREED TO BE ACQUIRED BY SKY EARTH LIMITED AND PARTIES ACTING IN CONCERT WITH IT) IN SHENYANG PUBLIC UTILITY HOLDINGS COMPANY LIMITED

EXPECTED TIMETABLE

Latest date for despatch of remittances for

INTRODUCTION

SHAREHOLDING STRUCTURE OF THE COMPANY

MANDATORY UNCONDITIONAL CASH OFFER

Principal terms of the Offer

Basis of the Offer

Comparisons of value

Highest and lowest prices

Total consideration

Financial resources available to the Offeror

Effects of accepting the Offer

Stamp duty

Payment

Overseas Shareholders

Further terms of the Offer

INFORMATION ON THE COMPANY

INFORMATION ON THE OFFEROR

INFORMATION ON THE CONTROLLING SHAREHOLDER

INTENTION OF THE OFFEROR ON THE GROUP

INTENTION OF THE CONTROLLING SHAREHOLDER ON THE GROUP

BOARD COMPOSITION OF THE COMPANY

COMPULSORY ACQUISITION

MAINTAINING THE LISTING STATUS OF THE COMPANY

GENERAL

LETTER FROM KINGSTON SECURITIES

ADDITIONAL INFORMATION

瀋陽公用發展股份有限公司 Shenyang Public Utility Holdings Company Limited

(Stock code: 747)

MANDATORY UNCONDITIONAL CASH OFFER BY KINGSTON SECURITIES LIMITED ON BEHALF OF SKY EARTH LIMITED

TO ACQUIRE ALL THE ISSUED H SHARES (OTHER THAN THOSE ALREADY OWNED OR AGREED TO BE ACQUIRED BY SKY EARTH LIMITED AND PARTIES ACTING IN CONCERT WITH IT) IN SHENYANG PUBLIC UTILITY HOLDINGS COMPANY LIMITED

INTRODUCTION

LETTER FROM THE BOARD

SHAREHOLDING STRUCTURE OF THE COMPANY

MANDATORY UNCONDITIONAL CASH OFFER

Principal terms of the Offer

For each H Share . . . . . . . . . . . . . . . . . HK$0.214 (equivalent to RMB0.175) in cash

Further details of the Offer

INFORMATION ON THE COMPANY

Business

Financial information

Further information

INFORMATION ON THE OFFEROR AND THE CONTROLLING SHAREHOLDER

THE INTENTION OF THE OFFEROR ON THE GROUP

THE INTENTION OF THE CONTROLLING SHAREHOLDER ON THE GROUP

BOARD COMPOSITION OF THE COMPANY

MAINTAINING THE LISTING STATUS OF THE COMPANY

RECOMMENDATIONS

ADDITIONAL INFORMATION

瀋陽公用發展股份有限公司 Shenyang Public Utility Holdings Company Limited

Yours faithfully, For and on behalf of the

INTRODUCTION

BASIS OF OUR OPINION

PRINCIPAL FACTORS AND REASONS CONSIDERED

1. Background of the Offer

2. Information of the Group

Historical financial performance of the Group

Prospect and outlook of the Group

3. Principal terms of the Offer

4. Historical performance of H Shares

4.1 Price of H Shares

Chart C: The closing prices of H Shares during the Review Period

4.2 Liquidity of H Shares

Chart D: The daily trading volume of H Shares during the Review Period

5. Comparison with comparable companies

6. Background and intention of the Offeror and the Controlling Shareholder

Information on the Offeror and intention of the Offeror on the Group

RECOMMENDATION

1. FURTHER PROCEDURES FOR ACCEPTANCE OF THE OFFER

2. SETTLEMENT OF THE OFFER

3. ACCEPTANCE PERIOD AND REVISIONS

4. ANNOUNCEMENT

5. RIGHT OF WITHDRAWAL

6. STAMP DUTY

7. TAXATION

CMON Limited M&A Activity 2012