CMON Limited - Merger & Acquisition 2009

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(s) of Acceptance to the purchaser or the transferee 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 or transferee. This Composite Document should be read in conjunction with the Form(s) 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.

AMAZING WEALTH DEVELOPMENT LIMITED

(a company incorporated in the British Virgin Islands 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)

MANDATORY UNCONDITIONAL CASH OFFER BY

ON BEHALF OF AMAZING WEALTH DEVELOPMENT LIMITED FOR ALL THE ISSUED H SHARES IN SHENYANG PUBLIC UTILITY HOLDINGS COMPANY LIMITED

Financial adviser to Amazing Wealth Development Limited

Independent financial adviser to the Independent Board Committee

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A letter from Kingston Securities containing, among other things, details of the terms of the Offer is set out on pages 6 to 15 of this Composite Document.

A letter from the Board is set out on pages 16 to 28 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 29 to 30 of this Composite Document.

A letter from the Independent Financial Adviser containing its advice to the Independent Board Committee is set out on pages 31 to 47 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 Form of Acceptance. Acceptance of the Offer should be received by the Registrar no later than 4:00 p.m. on Monday, 9 November 2009 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.

19 October 2009

CONTENTS

		Page
EXPECTED TIMETABLE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .		ii
DEFINITIONS	. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	1
LETTER FROM	KINGSTON SECURITIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	6
LETTER FROM	THE BOARD . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	16
LETTER FROM	THE INDEPENDENT BOARD COMMITTEE . . . . . . . . . . . . . . .	29
LETTER FROM	THE INDEPENDENT FINANCIAL ADVISER . . . . . . . . . . . . . . .	31
APPENDIX I	– FURTHER TERMS OF THE OFFER . . . . . . . . . . . . . . . . . .	I-1
APPENDIX II	– FINANCIAL INFORMATION OF THE GROUP . . . . . . . .	II-1
APPENDIX III	– PROPERTY VALUATION . . . . . . . . . . . . . . . . . . . . . . . . . .	III-1
APPENDIX IV	– GENERAL INFORMATION . . . . . . . . . . . . . . . . . . . . . . .	IV-1
ACCOMPANYING DOCUMENT:
FORM OF ACCEPTANCE

– i –

EXPECTED TIMETABLE

2009

Acceptance period of the Offer commences . . . . . . . . . . . . . . . . . . Monday, 19 October

Latest time and date for acceptance of the Offer (Note 1) . . . . . . . . . . . . . . . . . . . . . . . 4:00 p.m. on Monday, 9 November

Closing Date of the Offer (Note 2) . . . . . . . . . . . . . . . . . . . . . . . . . Monday, 9 November

Announcement of the results of the Offer and

the level of acceptances uploaded to the Stock Exchange’s website . . . . . . . . . . . . . . . . 7:00 p.m. on Monday, 9 November

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) . . . . . . . . . . . . . . . . . Thursday, 19 November

Notes:

The Offer is unconditional. 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 Monday, 9 November 2009. 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, the consideration under the Offer must be settled within 10 days from the date of receipt of duly completed Form of Acceptance. The latest date for settlement of consideration under the Offer is on Thursday, 19 November 2009.

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

– ii –

DEFINITIONS

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

“acting in concert”
has the meaning ascribed thereto in the Takeovers Code
“Announcement”
the joint announcement dated 8 September 2009 issued by the Company and the Offeror in relation to the Offer
“Beijing Diye”
Beijing Diye Real Estate Development Company Limited* (北京地業房地產開發有限公司), a company established in the PRC with limited liability
“Beijing Jade Bird”
Beijing Beida Jade Bird Company Limited* (北京北大青鳥有限責任公司), a company established in the PRC with limited liability
“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 the Controlling Shareholder, 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”
means 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.)
“CCASS”
the Central Clearing and Settlement System established and operated by HKSCC
“Closing Date”
Monday, 9 November 2009, being the 21st day after the date on which this Composite Document is posted

– 1 –

DEFINITIONS

“Commencement Date”
“Company”
“Composite Document”
“Controlling Shareholder”
“Directors(s)”
“Domestic Share(s)”
“Executive”
“Form of Acceptance”
“Group”
“H Share(s)”
“H Shareholder(s)”
the date falling on the earlier of: (i) the date on which the deadline for fulfillment or, where permitted, waiver, of the conditions for the resumption of trading of the H Shares as imposed by the Stock Exchange has elapsed without fulfillment or, as the case may be, waiver of all such conditions; and (ii) 30 June 2010
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
this document dated 19 October 2009 jointly issued by the Company and Offeror in relation to the Offer
Beijing Mingde Guangye Investment Consultant Company Limited* (北京明德廣業投資咨詢有限公司), 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
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
the WHITE form of acceptance and transfer accompanying this Composite Document in respect of the Offer
the Company and its subsidiaries
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 Main Board of the Stock Exchange, and are subscribed for and traded in Hong Kong dollars
holder(s) of the H Share(s)

– 2 –

DEFINITIONS

“HK$”
“HKSCC”
“Hong Kong”
“Hua Jin Hua Gong”
“Independent Board Committee”
“Independent Financial Adviser”
“Judgment”
“Kingston Corporate Finance”
“Kingston Securities”
“Last Trading Date”
Hong Kong dollars, the lawful currency of Hong Kong
Hong Kong Securities Clearing Company Limited
the Hong Kong Special Administrative Region of the People’s Republic of China
Liaoning Hua Jin Hua Gong Group Limited (遼寧華錦化工（集團）有限責任公司), a company established in the PRC with limited liability
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
Cinda International 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
the judgment delivered by the Intermediate People’s Court of Beijing on 24 February 2009 with respect to the transfer of the Domestic Shares of the Company, [2007] Yi Zhong Zhi Zi No.1192–3, Civil Judgment (民事裁定書(2007)一中執字第1192–3號)
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 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
14 December 2004, being the last trading day of the H Shares on the Stock Exchange prior to the suspension of trading of the H Shares with effect from 9:30 a.m. on 15 December 2004

– 3 –

DEFINITIONS

“Latest Practicable Date”
“Listing Rules”
“Offer”
“Offer Price”
“Offeror”
“PRC”
“Put Option Deed”
16 October 2009, 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 of Hong Kong Limited (as amended from time to time)
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
HK$0.1939 per H Share, equivalent to RMB0.171, being the price per Domestic Share at which the Domestic Shares were transferred to the Controlling Shareholder under the Transfer, and converted into Hong Kong dollars based on the exchange rate of RMB0.8818 to HK$1 prevailing on 24 February 2009, being the delivery date of the Judgment
Amazing Wealth Development Limited (奇源發展有限公司), a company incorporated in the British Virgin Islands with limited liability, the entire issued share capital of which is held as to 51% and 49% by Mr. Chim Kim Lun Ricky and Mr. Chui Tak Keung Duncan, respectively

the People’s Republic of China, and for the purpose of this Composite Document, excluding Hong Kong, the Macau Special Administrative Region of the People’s Republic of China and Taiwan

the put option deed entered into between the Controlling Shareholder and the Offeror dated 7 August 2009, pursuant to which the Controlling Shareholder agreed to grant to the Offeror an option to require the Controlling Shareholder or any person nominated by it to purchase from the Offeror all (but not part) of the H Shares acquired by the Offeror under the Offer at the aggregate amount of all the cash payments made by the Offeror for the H Shares under the Offer

– 4 –

DEFINITIONS

“Registrar”

Hong Kong Registrars Limited, the H Share registrar and transfer office of the Company in Hong Kong
“Relevant Period” the period commencing on the date falling six months prior to the commencement date of the period of the Offer and ending on the Latest Practicable Date
“RMB” Renminbi, the lawful currency of the PRC
“SFC” Securities and Futures Commission of Hong Kong
“SFO” the Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong)
“Shares” Domestic Shares and H Shares
“Shareholder(s)” holder(s) of the Shares
“Shenyang Public Utility Group” Shenyang Public Utility Group Company Limited* (瀋陽公用集團有限公司), a company established in the PRC with limited liability
“SJBO” Shenzhen Jade Bird Optoelectronic Co. Ltd* (深圳青鳥光電有限公司), a company established in the PRC with limited liability
“Stock Exchange” The Stock Exchange of Hong Kong Limited
“Takeovers Code” the Code on Takeovers and Mergers
“Transfer” the transfer of 600,000,000 Domestic Shares from Shenyang Public Utility Group to the Controlling Shareholder under an auction ordered by the Intermediate People’s Court of Beijing, the PRC, on 13 February 2009, details of which was included in the announcement of the Company dated 24 March 2009
“%”

per cent.

For identification purpose only

– 5 –

LETTER FROM KINGSTON SECURITIES

19 October 2009

To the H Shareholders

Dear Sir or Madam,

MANDATORY UNCONDITIONAL CASH OFFER BY KINGSTON SECURITIES LIMITED ON BEHALF OF AMAZING WEALTH DEVELOPMENT LIMITED FOR ALL THE ISSUED H SHARES IN SHENYANG PUBLIC UTILITY HOLDINGS COMPANY LIMITED

INTRODUCTION

Reference is made to the announcement dated 24 March 2009 issued by the Company in relation to the Transfer and the Announcement dated 8 September 2009 issued by the Company and the Offeror in relation to the Offer.

As disclosed in the announcement of the Company dated 24 March 2009, 600,000,000 Domestic Shares (representing approximately 58.8% equity interest of the issued share capital of the Company as at the Latest Practicable Date) held by Shenyang Public Utility Group were put under an auction pursuant to the Court’s order on 13 February 2009. According to the Judgment delivered on 24 February 2009, the Court ruled that the bidding of the Controlling Shareholder for the Domestic Shares at the auction held on 13 February 2009 was legal and effective, and accordingly the Domestic Shares belong to the Controlling Shareholder subject to certain registration procedures at relevant authorities in the PRC. The auction price for the 600,000,000 Domestic Shares was fully paid for on 20 February 2009 and the Transfer was registered with Shenyang Administration of Industry and Commerce (瀋陽市工商登記行政管理局) on 20 March 2009.

Upon the Transfer taking effect, the Controlling Shareholder became interested in an aggregate of 600,000,000 Domestic Shares, representing approximately 58.8% 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 are the entire 420,400,000 H Shares, representing approximately 41.2% of the issued share capital of the Company.

– 6 –

LETTER FROM KINGSTON SECURITIES

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 subject to a put option under the Put Option Deed.

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.

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 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)	Approximate percentage of shareholding (%) 58.8
	0 600,000,000	0
		58.8
	420,400,000 1,020,400,000	41.2 100.0

– 7 –

LETTER FROM KINGSTON SECURITIES

MANDATORY UNCONDITIONAL CASH OFFER

Upon the Transfer taking effect, the Controlling Shareholder became interested in an aggregate of 600,000,000 Domestic Shares, representing approximately 58.8% equity interest of the issued share capital of the Company as at the Latest Practicable Date.

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 Transfer, are required to make a mandatory unconditional general offer for all the outstanding 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, is restricted from holding overseas listed foreign invested shares 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 subject to a put option under the Put Option Deed. Further details of the Put Option Deed are set out in the paragraph headed “Put Option Deed” below.

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$0.1939 (equivalent to RMB0.171) 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 as at the date of the Announcement, including the right to receive in full all dividends and other distributions, if any, declared, made or paid on or after the date of the Announcement.

The Company does not have any outstanding warrants or options or derivatives to acquire Shares or other securities which are convertible into H Shares.

Neither the Offeror nor any party acting in concert with it has received any irrevocable commitment to accept the Offer.

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.

– 8 –

LETTER FROM KINGSTON SECURITIES

Save for the Put Option Deed, 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 Transfer, the Offeror and parties acting in concert with it have not dealt in the H Shares or any other securities of the Company during the period commencing from the date falling six months before the Last Trading Date and up to the Latest Practicable Date.

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 RMB0.171, being the price per Domestic Share at which the Domestic Shares were transferred to the Controlling Shareholder under the Transfer, and converted into Hong Kong dollars based on the exchange rate of RMB0.8818 to HK$1 (representing the daily average exchange rate from RMB to HK$ as quoted from Bloomberg) prevailing on 24 February 2009, being the delivery date of the Judgment.

According to the advice of the PRC legal advisers of the Controlling Shareholder, Beijing Kaiwen Law Firm* (北京市凱文律師事務所), the Controlling Shareholder, being a company established in the PRC, is restricted from holding overseas listed foreign invested shares 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 subject to a put option under the Put Option Deed.

Put Option Deed

On 7 August 2009, the Controlling Shareholder entered into the Put Option Deed with the Offeror pursuant to which the Controlling Shareholder agreed to grant to the Offeror an option to require the Controlling Shareholder or any person nominated by it to purchase from the Offeror all (but not part) of the H Shares acquired by the Offeror under the Offer at the aggregated amount of all the cash payments made by the Offeror for the H Shares under the Offer. No consideration is involved under the Put Option Deed.

– 9 –

LETTER FROM KINGSTON SECURITIES

To the extent permitted by all applicable laws, all the H Shares to be acquired by the Offeror under the Offer would be transferred to the Controlling Shareholder upon exercise of the option by the Offeror under the Put Option Deed. On the other hand, upon the exercise of the option by the Offeror under the Put Option Deed, should the Controlling Shareholder be restricted, under applicable laws, from holding offshore assets or investments, the Controlling Shareholder may nominate a person, who is permitted to hold the H Shares under the applicable laws, to hold the H Shares to be acquired by the Offeror under the Offer.

The option granted under the Put Option Deed is exercisable at any time after the Commencement Date, and will lapse on the earlier of (i) the date immediately preceding the date on which the H Shares resume trading on the Stock Exchange; and (ii) the date falling 6 months of the Commencement Date. The option granted under the Put Option Deed may be exercised by the Offeror by serving on the Controlling Shareholder a written notice specifying the date on which the exercise of the put option shall be completed.

Pursuant to the Put Option Deed, the Controlling Shareholder, as the sole legal and beneficial owner, agrees to charge to the Offeror, to the extent permitted by all applicable laws, all its present and future right, title, benefit and interest in and to all the Domestic Shares held by the Controlling Shareholder as a continuing security for the due and punctual discharge of all obligations and liabilities of the Controlling Shareholder under the Put Option Deed.

Comparisons of value

The Offer Price of HK$0.1939 per H Share represents:

(i) a discount of approximately 67.68% to the closing price of HK$0.60 per H Share as quoted on the Stock Exchange on the Last Trading Date (and the Latest Practicable Date as the trading in H Shares has been suspended since 15 December 2004);
(ii) a discount of approximately 68.21% over the average closing price of HK$0.61 per H Share as quoted on the Stock Exchange for the last five consecutive trading days up to and including the Last Trading Date;
(iii) a discount of approximately 68.73% over the average closing price of HK$0.62 per H Share as quoted on the Stock Exchange for the last ten consecutive trading days up to and including the Last Trading Date; and
(iv) a discount of approximately 60.43% to the audited consolidated net asset value of approximately RMB0.43 per Share (representing approximately HK$0.49 per Share) as at 31 December 2008 (being the latest published audited net asset value of the Company prior to the Latest Practicable Date).

Highest and lowest prices

The highest and lowest closing prices of the H Shares as quoted on the Stock Exchange during the six-month period preceding the Last Trading Date were HK$0.78 per H Share on 8 July 2004 and HK$0.55 per H Share on 30 August 2004, respectively.

– 10 –

LETTER FROM KINGSTON SECURITIES

Total consideration

There are 420,400,000 H Shares subject to the Offer. The Offer is valued at approximately HK$81,515,560 based on the Offer Price.

Based on a loan facility of up to HK$72,900,000 granted to the Offeror by Kingston Securities, together with an amount of HK$10,000,000 deposited by the Offeror to Kingston Securities to finance the payment obligation of the Offeror under the Offer, Kingston Corporate Finance is satisfied that sufficient financial resources are available to the Offeror to meet acceptances in full 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 of the Announcement, and free from all liens, charges, options, claims, equities, adverse interests, rights of pre-emption, third party rights and encumbrances of any nature.

Stamp duty

Seller’s 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 H Shareholders on acceptance of the Offer. The Offeror will arrange for payment of the seller’s ad valorem stamp duty on behalf of accepting H Shareholders in connection with the acceptance of the Offer and the transfer of the H Shares.

Payment

Payment in cash in respect of acceptances of the Offer, net of seller’s ad valorem stamp duty, will be made as soon as possible but in any event within 10 days from the date of receipt of duly completed Form of Acceptance by the Registrar.

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.

– 11 –

LETTER FROM KINGSTON SECURITIES

INFORMATION ON THE OFFEROR

The Offeror is a company incorporated in the British Virgin Islands with limited liability solely for the purpose of the Offer. It is an investment holding company with no substantive business operation. The directors of the Offeror are Mr. Chim Kim Lun Ricky and Mr. Chui Tak Keung Duncan.

Mr. Chim Kim Lun Ricky, aged 40, holds a Bachelor degree in Arts from the University of British Columbia in Canada and has over 10 years of commercial and industrial experiences and of experience in investment. Mr. Chim is an executive director of each of Huscoke Resources Holdings Limited (stock code: 704), Bestway International Holdings Limited (stock code: 718) and Yueshou Environmental Holdings Limited (stock code: 1191), which are listed on the Main Board of the Stock Exchange. Mr. Chim is also the chairman and an executive director of Asia Resources Holdings Limited (stock code: 899), which is also listed on the Main Board of the Stock Exchange.

Mr. Chui Tak Keung Duncan, aged 40, is an experienced investor and business manager for direct investment and private equity ventures in Asia. He received a Bachelor of Science degree (Applied and Engineering Physics) and a Master of Engineering degree (Operations Research and Industrial Engineering) from Cornell University in 1991 and 1992, respectively. Mr. Chui has previously held positions at management consulting firms, Andersen Consulting and A.T. Kearney, as well as venture capital firm, Transpac Capital Group, which focused on private equity investments in Asia. Mr. Chui is the chairman and an executive director of Sino Katalytics Investment Corporation (stock code: 2324) which is listed on the Main Board of the Stock Exchange.

INFORMATION ON THE CONTROLLING SHAREHOLDER

The Controlling Shareholder is a limited company established in the PRC and is principally engaged in investment consultancy services and technology promotion.

The Controlling Shareholder is held as to 90% by Beijing Mingyude and 10% by Mr. Li Peng. Beijing Mingyude is a company established in the PRC with limited liability, and is principally engaged in the sales of mechanical facilities, household electrical appliances, communication devices and electronic products, and provision of economic and trade consultancy services, technology promotion, import and export of goods, import and export agency and labour services.

Mr. Li Peng and Mr. Shen Yun Xie are the beneficial owners of Beijing Mingyude. The sole director of Beijing Mingyude is Mr. Li Peng.

Mr. Li Peng, aged 34, is the chairman of the board of directors of the Controlling Shareholder, and the executive director and chairman of the board of directors of Beijing Mingyude. Mr. Li is not a director of any company which is listed on the Stock Exchange.

Mr. Shen Yun Xie, aged 39, is the supervisor of Beijing Mingyude. Mr. Shen is not a director of any company which is listed on the Stock Exchange.

– 12 –

LETTER FROM KINGSTON SECURITIES

INTENTION OF THE OFFEROR ON THE GROUP

It is the intention of the Offeror that the existing principal activities of the Group will remain unchanged immediately after the close of the Offer.

The Offeror intends that the Company will maintain the listing status of the Company on the Stock Exchange after closing of the Offer. The Offeror has no intention to re-deploy employees or fixed assets of the Group within 6 months from the date of the Announcement other than in its ordinary course of business and such transactions as contemplated under the conditions set out in the announcement of the Company dated 26 June 2009 (which conditions are also set out under the paragraph headed “Resumption Proposal” in the “Letter from the Board” in this Composite Document). The Offeror confirms that it does not intend to participate in the daily management of the Company. Subject to the Put Option Deed and market conditions, it is the intention of the Offeror to hold the accepted H Shares, if any, for investment purpose.

Trading in the H Shares has remained suspended as at the Latest Practicable Date. It is the intention of the Offeror to maintain the listing status of the Company on the Stock Exchange after closing of the Offer. Application will be made to the Stock Exchange to resume trading in the H Shares.

INTENTION OF THE CONTROLLING SHAREHOLDER ON THE GROUP

It is the intention of the Controlling Shareholder that the existing principal activities of the Group will remain unchanged immediately after the close of the Offer.

The Controlling Shareholder intends to maintain the listing status of the Company on the Stock Exchange after closing of the Offer. The Controlling Shareholder fully supports the Company to apply to the Stock Exchange for the resumption of trading in the H Shares.

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. Deng Yan Bin and Mr. Lin Dong Hui, and the independent non-executive Directors are Mr. Cai Lian Jun, Mr. Wong Kai Tat and Mr. Chan Ming Sun Jonathan.

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. Details of any change to the composition of the Board will be announced as and when necessary.

MAINTAINING THE LISTING STATUS OF THE COMPANY

– 13 –

LETTER FROM KINGSTON SECURITIES

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 the close 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.

Trading in the H Shares has been suspended since 9:30 a.m. on 15 December 2004. On 22 June 2009, the Stock Exchange informed the Company that the Listing Appeals Committee approved the resumption of trading in the H Shares subject to certain conditions set out in the announcement of the Company dated 26 June 2009. These conditions include the making of a general offer under the Takeovers Code as a result of the Transfer. All conditions for the resumption of trading in the H Shares imposed by the Listing Appeals Committee are detailed in the paragraph headed “Resumption Proposal” in the “Letter from the Board” in this Composite Document.

The resumption of trading in the H Shares is subject to the satisfaction of all conditions set out in the announcement of the Company dated 26 June 2009. As at the Latest Practicable Date, certain conditions set out in the announcement of the Company dated 26 June 2009 have not been satisfied. Investors are reminded that trading of the H Shares may or may not be resumed after closing of the Offer and are advised to exercise caution when considering whether the Offer should be accepted.

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.

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.

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

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LETTER FROM KINGSTON SECURITIES

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

– 15 –

LETTER FROM THE BOARD

==> picture [101 x 42] intentionally omitted <==

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. Deng Yan Bin 14/F. Jinmao International Apartment Mr. Lin Dong Hui 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 Suite 06-12, 33/F, Mr. Chan Ming Sun Jonathan Shui On Centre, 6-8 Harbour Road, Wanchai, Hong Kong

19 October 2009

To the H Shareholders

Dear Sir or Madam,

MANDATORY UNCONDITIONAL CASH OFFER BY KINGSTON SECURITIES LIMITED ON BEHALF OF AMAZING WEALTH DEVELOPMENT LIMITED FOR ALL THE ISSUED H SHARES IN SHENYANG PUBLIC UTILITY HOLDINGS COMPANY LIMITED

INTRODUCTION

On the basis that guarantee be provided by Beijing Jade Bird for the debt owed by the Company to Hua Jia Hua Gong, the assets of Beijing Jade Bird were auctioned by the Court in the PRC in December 2006 and proceeds of the auction were applied to settle the

– 16 –

LETTER FROM THE BOARD

said debt. On 10 July 2007, Beijing Jade Bird transferred its creditor’s right, for its claim against Shenyang Public Utility Group and Shenzhen Jingmei Industrial Development Limited (深圳市景梅實業發展有限公司) (“ Shenzhen Jingmei ”), to Beijing Teli Investment Management Company Limited (北京特利投資管理有限公司) (“ BTIM ”). As Shenyang Public Utility Group and Shenzhen Jingmei did not duly repay the said debt, an application was made on 30 July 2007 to the Court in the PRC by BTIM to dispose, by way of an auction, the 600,000,000 Domestic Shares held by Shenyang Public Utility Group to enforce its creditor’s right to repayment.

Accordingly, as disclosed in the announcement of the Company dated 24 March 2009, 600,000,000 Domestic Shares (representing approximately 58.8% equity interest of the issued share capital of the Company as at the Latest Practicable Date) held by Shenyang Public Utility Group were put under an auction pursuant to the Court’s order on 13 February 2009. According to the Judgment delivered on 24 February 2009, the Court ruled that the bidding of the Controlling Shareholder for the Domestic Shares at the auction held on 13 February 2009 was legal and effective, and accordingly the Domestic Shares belong to the Controlling Shareholder subject to certain registration procedures at relevant authorities in the PRC. The auction price for the 600,000,000 Domestic Shares was fully paid for on 20 February 2009. The Transfer was registered with Shenyang Administration of Industry and Commerce (瀋陽市工商登記行政管理局) on 20 March 2009.

Upon the Transfer taking effect, the Controlling Shareholder became interested in an aggregate of 600,000,000 Domestic Shares, representing approximately 58.8% 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 are the entire 420,400,000 H Shares, representing approximately 41.2% 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. Deng Yan Bin and Mr. Lin Dong Hui, both being the non-executive Directors, and Mr. Cai Lian Jun, Mr. Wong Kai Tat 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 Independent Board Committee has approved the appointment of the Cinda International Capital Limited as the independent financial adviser to advise the Independent Board Committee on the terms of the Offer.

– 17 –

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.

RESUMPTION PROPOSAL

According to the announcement of the Company dated 22 July 2008, at the request of the Company, trading of the H Shares of the Company had been suspended since 15 December 2004. The Company was notified by the Stock Exchange on 16 July 2008 that pursuant to the decision of the Listing Committee on 15 July 2008 for rejecting the Company’s application for an extension of time for filing the resumption proposal by the Company, the Stock Exchange would cancel the listing of the H Shares on 23 July 2008 in accordance with Practice Note 17 of the Listing Rules. Thereafter, the Company had submitted an application together with a resumption proposal to the Listing (Review) Committee to review the said decision of the Listing Committee.

On 5 November 2008, the Listing (Review) Committee informed the Company that the application for review of the said decision of Listing Committee was unsuccessful. Subsequently, the Company submitted an application together with a revised resumption proposal to the Listing Appeals Committee for appeal against the said decision of the Listing (Review) Committee. On 18 June 2009, the Listing Appeals Committee held a meeting to hear and consider the application from the Company for the appeal of the decision of the Listing (Review) Committee.

On 22 June 2009, the Stock Exchange informed the Company in writing (the “ Decision Letter ”) that it was granted an approval from the Listing Appeals Committee to resume trading in its H Shares on the Stock Exchange subject to, among other things, all conditions as set out in the Decision Letter have been complied with to the satisfaction of the Listing Division before 28 February 2010.

Conditions in the Decision Letter

Having considered all submissions (both written and oral) presented by the review parties, the Listing Appeals Committee decided to allow the Company to resume trading of its H Shares, subject to the Company’s compliance with conditions 1 to 12 set out below and provided that the SFC considers that the situation at that time with respect to condition 13 is acceptable:

shareholders’ approval obtained by the Company as required by the Listing Rules for the transactions in conditions 2, 3 and 4 below;
completion of the sale of the Company’s entire interest in Beijing Diye for RMB200 million and evidence of receipt of the proceeds;
completion of the purchase of the property of 1st and 2nd Floors, Huipu Building No. 112 Jianguo Road Chaoyang District, Beijing (the “ CY Property ”) for RMB93 million with evidence of payment of the consideration and transfer of title;

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LETTER FROM THE BOARD

completion of the purchase of SJBO for RMB80 million with evidence of payment of the consideration and transfer of title;
evidence that SJBO has unencumbered ownership of the property located at Keyuan Road East, Jingsi Road West, South Avenue of High-tech Industrial Park, Nanshan District, Shenzhen (the “ SZ Property ”) occupying a gross floor area of 12,508 sq.m.;
evidence that rental revenues of at least RMB1.745 million per month have been paid by the tenants of the CY Property, the SZ Property and Zhuhai Education Park, which situates at Nan Mang Wan, Qi Ao, Zhuhai, Guangdong Province, PRC, for at least three months, albeit to the previous owners of the properties;
evidence that Shanghai Hanhua Property Management Company Limited (上海瀚華物業管理有限公司) is fully up to date with the following payments:
a. RMB5 million in October 2008;
b. RMB5 million in December 2008;
c. RMB20 million in March 2009;
d. RMB20 million in June 2009;
e. RMB20 million in September 2009; and
f. RMB20 million in December 2009.
the buyers of the units in the “Water Flowers City” have been issued with Real Estate Title Certificates and RMB12.759 million has been recognized as income;
the Company will not issue new shares or options before resumption of trading;
the Company to appoint a new qualified compliance adviser as defined in Rule 3A.01 of the Listing Rules;
the above evidence to be certified in a report by a corporation licensed by the SFC to advise on corporate finance;
full payment of all and any outstanding listing fees by the Company; and
the Company to comply with the relevant general offer obligations under the Takeovers Code.

Save for condition 13, all the above conditions must be complied with to the satisfaction of the Listing Division before 28 February 2010. The Listing Division may negotiate for minor variations to the above figures provided that they do not materially weaken the intent of ensuring that the Company implements the essential features of the resumption proposal.

The Board wishes to provide an update on the said 13 conditions as follows:

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LETTER FROM THE BOARD

Condition

shareholders’ approval obtained by the Company as required by the Listing Rules for the transactions in conditions 2, 3 and 4 below
completion of the sale of the Company’s entire interest in Beijing Diye for RMB200 million and evidence of receipt of the proceeds

Status

The Company is in the process of preparing the outstanding documents for the transactions in 2, 3 and 4. EGM will be held after the despatch of the corresponding circulars to the Shareholders for the approval of the transactions.

(a) The Company has published the announcement dated 10 August 2009 in relation to the disposal of 80% equity interest in Beijing Diye by the Company;
(b) The Company has published another announcement dated 4 September 2009 in relation to the delay in despatch of the circular and the circular is proposed to be despatched on or before 30 November 2009.
completion of the purchase of the CY Property for RMB93 million with evidence of payment of the consideration and transfer of title
completion of the purchase of SJBO for RMB80 million with evidence of payment of the consideration and transfer of title

The Company is in the process of preparing the corresponding announcement and circular.

(a) The Company has published the announcement dated 16 September 2009 in relation to the acquisition of entire equity interest in SJBO;
(b) The Company has published another announcement dated 7 October 2009 in relation to the delay in despatch of the circular and the circular is proposed to be despatched on or before 30 November 2009.
evidence that SJBO has unencumbered ownership of the SZ Property occupying a GFA of 12,508 sq.m.

This condition has not been fulfilled and the Company is in the process of obtaining the relevant evidence.

– 20 –

LETTER FROM THE BOARD

Condition

evidence that rental revenues of at least RMB1.745 million per month have been paid by the tenants of the CY Property, the SZ Property and Zhuhai Education Park for at least three months, albeit to the previous owners of the properties
evidence that Shanghai Hanhua Property Management Company Limited is fully up to date with the following payments:
a. RMB5 million in October 2008;
b. RMB5 million in December 2008;
c. RMB20 million in March 2009;

Status

This condition has not been fulfilled as the relevant acquisitions have not been completed. The Company is in the process of completing the acquisitions.

Payments (a) to (d) have been received as of today.

The payment in September 2009 has not been received by the Company as at the Latest Practicable Date. The Company has been demanding the payment since it has become overdue and Shanghai Hanhua Property Management Company Limited indicates that the payment will be completed within October 2009.

d. RMB20 million in June 2009;
e. RMB20 million in September 2009; and
f. RMB20 million in December 2009
the buyers of the units in the “Water Flowers City” have been issued with Real Estate Title Certificates and RMB12.759 million has been recognized as income
the Company will not issue new shares or options before resumption of trading

This condition has not been fulfilled as the Company’s auditors have to obtain further evidence to allow the RMB12.759 million to be recognized as income of the Company. The Company is in the process of obtaining all the necessary documents to comply with the condition.

The Company has confirmed in writing that no new Shares or options has been or will be issued before resumption of trading

– 21 –

LETTER FROM THE BOARD

Condition

Status

the Company to appoint a new qualified compliance adviser as defined in Rule 3A.01 of the Listing Rules

The Company is in the process of selecting a compliance adviser.

the above evidence to be certified in a report by a corporation licensed by the SFC to advise on corporate finance

The Company is in the process of selecting a corporation licensed by the SFC to advise on corporate finance to produce the relevant certification.

full payment of all and any outstanding listing fees by the Company

All outstanding listing fees have been paid.

the Company to comply with the relevant general offer obligations under the Takeovers Code.
(a) The Company has published the joint announcement with the Offeror dated 8 September 2009 in relation to the Offer;
(b) The Company has published the announcement dated 21 September 2009 in relation to the appointment of Cinda International Capital Limited as the independent financial adviser to advise the Independent Board Committee in respect of the Offer pursuant to Rule 2.1 of the Takeovers Code;
(c) The Company has published another joint announcement dated 28 September 2009 in relation to delay in despatch of the composite offer document in relation to the Offer and extended the date to despatch the Document to a date no later than 19 October 2009.

There is a possibility that the Company may apply to the Listing Appeals Committee for an approval to alter condition 3 for the interests of the Company and its Shareholders.

– 22 –

LETTER FROM THE BOARD

Regarding condition 3, the Company believes that if the Company acquires the CY Property by acquiring Beijing Zhong Yi Chong Yi Technology Development Company (北京中億創一科技發展有限公司 ) (“ Zhong Yi Chong Yi* ”), the company which owns the CY Property, the Company will be able to reduce its tax liability under the acquisition. The Company is taking PRC legal advice on such matter and the feasibility of such alteration and will make submission to the Listing Appeals Committee as soon as possible if it decided to apply for such alteration.

The Company intends to fulfill all the aforesaid conditions on or before 28 February 2010 in order to maintain the listing status of the Company on the Stock Exchange.

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 0 Sub-total 600,000,000 Public H Shares 420,400,000 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 0 Sub-total 600,000,000 Public H Shares 420,400,000 Total 1,020,400,000	Approximate percentage of shareholding (%) 58.8
	0 600,000,000	0
		58.8
	420,400,000 1,020,400,000	41.2 100.0

No new Shares were issued since 31 December 2008 (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.

– 23 –

LETTER FROM THE BOARD

All existing issued H 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 or options or derivatives to acquire H Shares or other securities which are convertible into H Shares.

MANDATORY UNCONDITIONAL CASH OFFER

As disclosed in the announcement of the Company dated 24 March 2009, 600,000,000 Domestic Shares (representing approximately 58.8% equity interest of the issued share capital of the Company as at the Latest Practicable Date) held by Shenyang Public Utility Group were put under an auction pursuant to the Court’s order on 13 February 2009. According to the Judgment delivered on 24 February 2009, the Court ruled that the bidding of the Controlling Shareholder for the Domestic Shares at the auction held on 13 February 2009 was legal and effective, and accordingly the Domestic Shares belong to the Controlling Shareholder subject to certain registration procedures at relevant authorities in the PRC. The auction price for the 600,000,000 Domestic Shares was fully paid for on 20 February 2009. The Transfer was registered with Shenyang Administration of Industry and Commerce (瀋陽市工商登記行政管理局) on 20 March 2009.

Upon the Transfer taking effect, the Controlling Shareholder became interested in an aggregate of 600,000,000 Domestic Shares, representing approximately 58.8% 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 are the entire 420,400,000 H Shares, representing approximately 41.2% 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 Transfer, are required to make a mandatory unconditional general offer for all the outstanding 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, is restricted from holding overseas listed foreign invested shares 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 subject to a put option under the Put Option Deed. Further details of the Put Option Deed is set out in the paragraph headed “Put Option Deed” in the “Letter from Kingston Securities” in this Composite Document.

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.

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LETTER FROM THE BOARD

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

For each H Share . . . . . . . . . . . . . . . . HK$0.1939 (equivalent to RMB0.171) 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 of the Offer, i.e. 9 November 2009, 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.

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.

INFORMATION OF THE COMPANY

Business

The Company is principally engaged in the development, sales and leasing of real estate, and the investment and management of education projects through its subsidiaries.

The Company has no intention or plan to conduct business other than the Company’s existing principal business in development, sales and leasing of real estate, and investment and management of education projects.

– 25 –

LETTER FROM THE BOARD

Financial information

Based on the Company’s audited financial results as disclosed in the Company’s annual report for the year ended 31 December 2008, the Group recorded an audited profit attributable to equity holders of the Company of approximately RMB115.7 million and an audited loss attributable to equity holders of the Company of approximately RMB54.6 million for the financial years ended 31 December 2007 and 2008, respectively. The audited consolidated total equity attributable to equity holders of the Company were approximately RMB469.4 million and approximately RMB414.4 million as at 31 December 2007 and 31 December 2008, respectively.

A summary of the audited results of the Company for each of the three financial years ended 31 December 2006, 2007 and 2008 and the unaudited results of the Company for the six months ended 30 June 2009, and the audited financial statements of the Company for the year ended 31 December 2008 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 6 to 15 of this Composite Document.

THE INTENTION OF THE OFFEROR ON THE GROUP

The Directors note from the “Letter from Kingston Securities” that it is the intention of the Offeror 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 current intention to change the existing principal business conducted by the Company, which includes development, sales and leasing of real estate, and investment and management of education project. The Offeror has no intention to re-deploy the employees or the fixed assets of the Company within 6 months from the date of the Announcement other than in its ordinary course of business and such transactions as contemplated under the conditions set out in the announcement of the Company dated 26 June 2009 (which conditions are also set out under the paragraph headed “Resumption Proposal” above). The Offeror confirms that it does not intend to participate in the daily management of the Company. Subject to the Put Option Deed and market conditions, it is the intention of the Offeror to hold the accepted H Shares, if any, for investment purpose.

– 26 –

LETTER FROM THE BOARD

Trading in the H Shares has remained suspended as at the Latest Practicable Date. It is the intention of the Offeor to maintain the listing status of the Company on the Stock Exchange after closing of the Offer. Application will be made to the Stock Exchange to resume trading in the H Shares.

THE INTENTION OF THE CONTROLLING SHAREHOLDER ON THE GROUP

The Directors note from the “Letter from Kingston Securities” that it is the intention of the Controlling Shareholder that the existing principal activities of the Group will remain unchanged immediately after the close of the Offer. The Controlling Shareholder has no current intention to change the existing principal business conducted by the Company, which includes development, sales and leasing of real estate, and investment and management of education project. It is the current intention of the Controlling Shareholder not to dispose of the Domestic Shares.

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 fully supports the Company to apply to the Stock Exchange for the resumption of trading in the H Shares.

BOARD COMPOSITION OF THE COMPANY

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

MAINTAINING THE LISTING STATUS OF THE COMPANY

The Offeror intends to maintain the listing status of the H Shares on the Stock Exchange after the close of the Offer. The Company and the Offeror will undertake to the Stock Exchange to take appropriate steps as soon as possible following the close of the Offer to ensure that there will be at least the minimum prescribed percentage of H Shares held by the public as required by the Listing Rules. 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 the close 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.

– 27 –

LETTER FROM THE BOARD

Trading in the H Shares has been suspended since 9:30 a.m. on 15 December 2004. On 22 June 2009, the Stock Exchange informed the Company that the Listing Appeals Committee approved the resumption of trading in the H Shares subject to certain conditions set out in the announcement of the Company dated 26 June 2009. These conditions include the making of a general offer under the Takeovers Code as a result of the Transfer. All conditions imposed by the Listing Appeals Committee for the resumption of trading in the H Shares are set out in the paragraph headed “Resumption Proposal” above.

RECOMMENDATIONS

Your attention is drawn to the “Letter from the Independent Board Committee” set out on pages 29 to 30 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 31 to 47 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 15 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

– 28 –

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.

==> picture [101 x 42] intentionally omitted <==

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)

19 October 2009

To the H Shareholders

Dear Sir or Madam,

MANDATORY UNCONDITIONAL CASH OFFER BY KINGSTON SECURITIES LIMITED ON BEHALF OF AMAZING WEALTH DEVELOPMENT LIMITED FOR ALL THE ISSUED H SHARES IN SHENYANG PUBLIC UTILITY HOLDINGS COMPANY LIMITED

We refer to this composite offer and response document dated 19 October 2009 jointly issued by Amazing Wealth Development 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. Cinda International Capital Limited 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 Kingston Securities”, 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 fair and reasonable so far as the H Shareholders are concerned. Accordingly, we recommend the H Shareholders to accept the Offer.

– 29 –

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 31 to 47 of the Composite Document.

Yours faithfully,

For and on behalf of the Independent Board Committee

Deng Yan Bin Lin Dong Hui

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

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

The following is the text of a letter of advice from the Independent Financial Adviser, which has been prepared for the purpose of incorporation into this document, setting out its advice to the Independent Board Committee in connection with the Offer.

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45th Floor, COSCO Tower 183 Queen’s Road Central Hong Kong

19 October 2009

To the Independent Board Committee

of Shenyang Public Utility Holdings Company Limited

Dear Sirs,

MANDATORY UNCONDITIONAL CASH OFFER BY KINGSTON SECURITIES LIMITED ON BEHALF OF AMAZING WEALTH DEVELOPMENT LIMITED FOR ALL THE ISSUED H SHARES IN SHENYANG PUBLIC UTILITY HOLDINGS COMPANY LIMITED

INTRODUCTION

We refer to our engagement as the independent financial adviser to the Independent Board Committee in respect of the Offer and to give an opinion as to whether the terms of the Offer are fair and reasonable so far as the Independent Shareholders are concerned. Details of the Offer are contained in the Letter from the Board (the “ Letter from the Board ”) of the composite document dated 19 October 2009 to the Shareholders (the “ Composite Document ”) of which this letter forms part. Terms used in this letter shall have the same meanings as defined in the Composite Document unless the context otherwise requires.

As disclosed in the announcement of the Company dated 24 March 2009, 600,000,000 Domestic Shares (representing approximately 58.8% equity interest of the issued share capital of the Company as at the Latest Practicable Date) held by Shenyang Public Utility Group were put under an auction pursuant to the Court’s order on 13 February 2009. According to the Judgment delivered on 24 February 2009, the Court ruled that the bidding of the Controlling Shareholder for the Domestic Shares at the auction held on 13 February 2009 was legal and effective, and accordingly the Domestic Shares belong to the Controlling Shareholder subject to certain registration procedures at relevant authorities in the PRC. The auction price for the 600,000,000 Domestic Shares was fully paid for on 20 February 2009. The Transfer was registered with Shenyang Administration of Industry and Commerce (瀋陽市工商登記行政管理局) on 20 March 2009.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Upon the Transfer taking effect, the Controlling Shareholder became interested in an aggregate of 600,000,000 Domestic Shares, representing approximately 58.8% of the issued share capital of the Company as at the Latest Practicable Date. In compliance with Rule 26.1 of the Takeovers Code, the Controlling Shareholder and parties acting in concert with it, as a result of the Transfer, are required to make a mandatory unconditional general offer for all the outstanding 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 amounted the entire 420,400,000 H Shares, representing approximately 41.2% of the issued share capital of the Company. Since the Controlling Shareholder, a company established in the PRC, is restricted from holding overseas listed foreign invested shares 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 is making the Offer, whereby the H Shares acquired pursuant to the Offer will be owned by the Offeror subject to a put option, as detailed in the Letter from the Board, under the Put Option Deed. 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 Offeror and parties acting in concert with it at the Offer Price, in accordance with Rule 26.1 of the Takeovers Code.

The Independent Board Committee (comprises Mr. Deng Yan Bin and Mr. Lin Dong Hui, both being the non-executive Directors, and Mr. Cai Lian Jun, Mr. Wong Kai Tat 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 formed to advise the Independent Shareholders on the terms of the Offer. We have been appointed as the independent financial adviser to advise the Independent Board Committee in respect of the Offer and such appointment has been approved by the Independent Board Committee.

For information purpose, we have been appointed as the independent financial adviser to advise the independent board committee and the independent shareholders of Huscoke Resources Holdings Limited (“ Huscoke ”) in connection with (i) a major connected transaction in relation to the disposal of the sale shares of the target company as published in the circular of Huscoke on 1 September 2009; (ii) the refreshment of the general mandate to allot and issue shares as published in the circular of Huscoke on 3 October 2008; and (iii) a very substantial acquisition and connected transaction and continuing connected transactions as published in the circular of Huscoke on 30 June 2008. Huscoke is a company listed on the main board of the Stock Exchange, an executive director of which is Mr. Chim Kim Lun Ricky (a director of the Offeror who also holds 51% of its issued share capital). We consider our participation in above transactions of Huscoke would not affect our independence to give objective advice to the independent board committee of the Company given (i) we were appointed as the independent financial adviser to advise the independent board committee and independent shareholders of Huscoke whether the relevant transactions are in the interests of the independent shareholders; and (ii) Mr. Chim Kim Lun Ricky was not a connected person (has the meaning ascribed thereto in the Listing Rules) nor have any interests in these transactions save for his role as executive director of Huscoke.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

BASIS OF OUR ADVICE

In arriving at our recommendation, we have relied on the statements, information and representations contained in the Composite Document and the information and representations provided to us by the Directors and the management of the Company. We have assumed that all information and representations contained or referred to in the Composite Document and all information and representations which have been provided by the Directors and the management of the Company for which they are solely responsible, are true and accurate as at the date of the despatch of the Composite Document. We have no reason to doubt the truth, accuracy and completeness of the information and representations provided to us by the Directors and the management of the Company.

We consider that we have been provided with sufficient information on which to form a reasonable basis for our opinion. We have no reason to suspect that any relevant information has been withheld, nor are we aware of any facts or circumstances which would render the information provided and representations made to us untrue, inaccurate or misleading. We consider that we have performed all the necessary steps to enable us to reach an informed view and to justify our reliance on the information provided so as to provide a reasonable basis for our opinion. Having made all reasonable enquiries, the Directors have further confirmed that, to the best of their knowledge, they believe there are no other facts or representations the omission of which would make any statements in the Composite Document, including this letter, misleading. We have not, however, carried out any independent verification of the information provided 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 Independent Shareholders in respect of their acceptance or non-acceptance of the Offer since they vary depending on respective individual circumstances. The Independent Shareholders who are overseas residents or subject to overseas taxes or Hong Kong taxation on securities dealings should consider their own tax positions and, if in any doubt, should consult their own professional advisers.

PRINCIPAL FACTORS TAKEN INTO ACCOUNT

In formulating our recommendations, we have taken into consideration the following principal factors:

1. Principal terms of the Offer

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

represented the then highest available consideration for the acquisition of the 600,000,000 Domestic Shares. As at the Latest Practicable Date, the outstanding Shares other than those already owned or agreed to be acquired by the Controlling Shareholder are the entire 420,400,000 H Shares, representing approximately 41.2% 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 Transfer, are required to make a mandatory unconditional general offer for all the outstanding 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, is restricted from holding overseas listed foreign invested shares 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 is making the Offer, whereby the H Shares acquired pursuant to the Offer will be owned by the Offeror subject to a put option under the Put Option Deed.

Kingston Securities is making the Offer on behalf of the Offeror for all the H Shares.

For each H Share . . . . . . . . . . . HK$0.1939 (equivalent to RMB0.171) in cash

The Offer Price is equivalent to RMB0.171, being the price per Domestic Share at which the Domestic Shares were transferred to the Controlling Shareholder under the Transfer, and converted into Hong Kong dollars based on the exchange rate of RMB0.8818 to HK$1 prevailing on 24 February 2009, being the delivery date of the Judgment (represent the daily average exchange rate from RMB to HK$ as quoted from Bloomberg).

2. Financial performance of the Group

The Company was principally engaged in the development, sales and leasing of real estate, and the investment and management of education projects through its subsidiaries.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Based on the information as set out in the interim report of the Group for the six months ended 30 June 2009, and the annual report of the Group for each of the three years ended 31 December 2008, the key financial results of the Group for the respective periods (“the Relevant Financial Periods ”) are summarized as follows:

	For the six	For the six	For the six	For the six	For the year		For the year	For the year
	months ended	months	ended		ended 31		ended 31	ended 31
	30 June 2009	30 June		2008	December		December	December
	(unaudited)	(unaudited)			2008 (audited)		2007 (audited)	2006 (audited)
	RMB’000	RMB’000			RMB’000		RMB’000	RMB’000
Turnover	2,167		38,117		39,617		7,116	16,465
Profit/(loss)
attributable to the
Shareholders	(1,788) 138,094				(54,638)		115,657	(76,075)
					As at 31		As at 31	As at 31
	As at 30			December		December		December
	June 2009				2008		2007	2006
	(unaudited)			(audited)			(audited)	(audited)
	RMB’000				RMB’000		RMB’000	RMB’000
Non-current assets		330,355			320,287		508,937	587,033
Current assets		264,518			294,802		581,591	752,813
Current liabilities		67,187			67,008		564,201	926,989
Non-current liabilities		86,270			104,940		22,555	23,168
Net-current
assets/(liabilities)		197,331			227,794		17,390	(174,176)
Shareholders’ equity		412,638			414,426		469,415	353,758

Disclaimer of auditor’s opinion

The attention of the Independent Shareholders should be drawn to the fact that the auditor of the Company (the “ Auditor ”) had set out in its reports for the each of the three years ended 31 December 2008 that the Auditor was not able to obtain sufficient appropriate audit evidence to provide a basis for an audit opinion and the consolidated financial statements have been prepared on a going concern basis. As such, the Auditor did not express opinion on the consolidated financial statements as to whether they give a true and fair view of the financial positions of the Group as at 31 December 2006, 2007 and 2008 and of its loss/loss on continuous operations and cash flows for the year then ended in accordance with Hong Kong Financial Reporting Standards. Further details of the Auditor’s opinion are set out in Appendix II to the Composite Document. In view of that the Auditor did not express opinion on the consolidated financial statements of the Group for the

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

year ended 31 December 2006, 2007 and 2008, we consider that the consolidated financial statements should be read with caution by the Shareholders as the information contained in the consolidated financial statements may or may not reflect the actual financial position of the Group.

The six months ended 30 June 2009 versus the six months ended 30 June 2008

For the six months ended 30 June 2009, the Group recorded an unaudited turnover of approximately RMB2.2 million, which represented a substantial decrease of approximately 94.3% comparing with the unaudited turnover of approximately RMB38.1 million for the six months ended 30 June 2008. The decrease was mainly attributable to the drop in turnover from property related business from approximately RMB36.6 million for the six months ended 30 June 2008 to approximately RMB667,000 for the respective period in 2009. The deterioration of the Group’s property related business was mainly due to operations and funding difficulties the Group faced during the period. As such, the Group downsized its real estate development business, save for two remaining projects (one of which is intended to be disposed of as stated in the announcement of the Company dated 10 August 2009) on hand, the Group has no new real estate development businesses. The unaudited loss attributable to the Shareholders for the six months ended 30 June 2009 amounted to approximately RMB1.8 million, which represented a drop of approximately RMB139.9 million from approximately RMB138.1 million for the respective period in 2008. The significant gain of the Group for the six months ended 30 June 2008 was attributable to a one-off gain on disposal of subsidiaries of approximately RMB157.9 million.

The year ended 31 December 2008 versus the year ended 31 December 2007

The Group recorded turnover of approximately RMB39.6 million for the year ended 31 December 2008, which represents more than four times to the Group’s turnover recorded for the year ended 31 December 2007 of approximately RMB7.1 million. The increase was mainly attributable the improvement in the property related business from which the turnover contributed amounted to approximately RMB36.6 million for the year ended 31 December 2008 as compared to approximately RMB3.9 million for the respective period in 2007. Nevertheless, the Group recorded loss attributable to the Shareholders of approximately RMB54.6 million for the year ended 31 December 2008, which represented a decrease of approximately RMB170.3 million from the profit attributable to the Shareholders of approximately RMB115.7 million for the year ended 31 December 2007. The Group recorded a profit from discontinued operations of the cemetery development business of approximately RMB166.9 million for the year ended 31 December 2007, including a operating loss of approximately RMB31.6 million and a profit from disposal of cemetery development business of RMB198.4 million respectively, which constituted the substantial increase in profit attributable to the Shareholders for the year ended 31 December 2007.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

The year ended 31 December 2007 versus the year ended 31 December 2006

The Group recorded turnover of approximately RMB7.1 million for the year ended 31 December 2007, which represented a decrease of approximately 56.8% as compared to the Group’s turnover for the year ended 31 December 2006 of approximately RMB16.5 million. The decrease was mainly attributable to the deteriorated performance of the Group’s property and education businesses. The turnover contributed from the property related business dropped from approximately RMB9.5 million for the year ended 31 December 2006 to approximately RMB3.9 million for the year ended 31 December 2007, representing a decrease of approximately 59.0% and the turnover from education business also dropped from approximately RMB6.4 million for the year ended 31 December 2006 to approximately RMB3.2 million for the year ended 31 December 2007, representing a decrease of approximately 49.6%. Nevertheless, the Group recorded profit attributable to the Shareholders of approximately RMB115.7 million for the year ended 31 December 2007 as compared to the loss attributable to the Shareholders of approximately RMB76.7 million for the year ended 31 December 2006. The substantial increase in the Group’s profit for the year ended 31 December 2007 was mainly attributable to the one-off gain from the disposal of the cemetery development business as stated above.

Financial position of the Group

In respect of the financial position of the Group as illustrated in the table above, the Group recorded net current liabilities of approximately RMB174.2 million as at 31 December 2006, which improved to net current assets of approximately RMB17.4 million as at 31 December 2007 and further to net current assets of approximately RMB227.8 million as at 31 December 2008, but net current assets were then decreased to approximately RMB197.3 million as at 30 June 2009. The improvement of the net current assets as at 31 December 2007 and 2008 was mainly attributable to (i) the drop in bank loans repayable within one year from approximately RMB181.3 million as at 31 December 2006 to approximately RMB62.0 million as at 31 December 2007 and further to approximately RMB14.0 million as at 31 December 2008; and (ii) the decrease in other payables and accrued charges from approximately RMB540.3 million as at 31 December 2006 to approximately RMB413.0 million as at 31 December 2007 and further to approximately RMB33.3 million as at 31 December 2008.

Given the continuing operating losses position of the Group (save as the one-off gain in the year ended 31 December 2007 resulting from the disposal of discontinued operations) and the Group’s operation on a going concern basis, it is difficult to estimate the time required for the Group to reach a breakeven position and to cover the accumulated losses throughout the years before starting to generate profit. We therefore consider the prospects and future profitability of the Group are of great uncertainties. In addition, given the unaudited negative reserve of the Group amounted approximately RMB607.8 million as at 30 June 2009, we consider it is unlikely for the Company to distribute dividends in the near future.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

3. Industry outlook

The Company was principally engaged in the development, sales and leasing of real estate, and the investment and management of education projects through its subsidiaries. The following table indicates the latest available price index of the PRC property markets:

	March	April	May	June	July	August
	2009	2009	2009	2009	2009	2009
Property sale price
index	100.2	100.4	100.6	100.8	100.9	100.9
Newly constructed
residential price
index	100.1	100.3	100.7	100.8	101.1	101.1
Second hand
residential price
index	100.3	100.8	100.7	101.1	100.9	100.6

Note: All the indexes above compare with figures in previous month which base is 100 (For example, the property sale price index of August 2009 of 100.9 is based on July 2009 of 100).

Source: National Bureau of Statistics of China

As shown in the above table, the PRC property market is in general on an upward trend. However, as disclosed in Appendix III of the Composite Document, the Group only has two properties on hand and one of which may be disposed of. Given that the Group’s future prospects remain uncertain and the Group may or may not be able to enrich its property portfolio in future, we are of the view that the Shareholders should not solely rely on the industry outlook to make their decision to accept the Offer and should consider the financial and trading position of the Group instead.

4. Conditions for resumption of trading in the H Shares

Trading in the H Shares has been suspended since 9:30 a.m. on 15 December 2004. On 22 June 2009, the Stock Exchange informed the Company in writing (the “ Decision Letter ”) that it was granted an approval from the Listing Appeals Committee of the Stock Exchange to resume trading in its H shares on the Stock Exchange subject to, among other things, all conditions (the “ Conditions ”) except the Offer as set out in the Decision Letter have been complied with to the satisfaction of the Listing Division before 28 February 2010. Details and status of each of the Conditions are set out in the Letter from the Board. We have discussed with the Directors regarding the resumption proposal and the Decision Letter and given to understand that although the Company is in the process of preparing relevant documents for the compliance of the Conditions and the Directors will try their best

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

efforts and endeavor to fulfill the Conditions before the deadline of 28 February 2010, there is no assurance that all the Conditions will be fulfilled prior to the said deadline.

Given that (i) there is no assurance for the Conditions to be fulfilled prior to the deadline on 28 February 2010 and hence the trading of the H Shares may or may not be resumed after closing of the Offer; and (ii) in the event that the Conditions cannot be fulfilled prior to the deadline on 28 February 2010 and the extension or waiver of such Conditions was not granted by the Stock Exchange, there is no assurance that the listing status of the Company will be maintained after the deadline, we advise the Independent Shareholders to exercise caution when considering whether the Offer should be accepted.

5. Historical H Share price performance and trading liquidity of the H Shares

(a) The Offer Price

The Offer Price of HK$0.1939 per H Share represents:

(i) a discount of approximately 67.68% to the closing price of HK$0.60 per H Share as quoted on the Stock Exchange on the Last Trading Date (and the Latest Practicable Date as the trading in H Shares has been suspended since 15 December 2004);
(ii) a discount of approximately 68.21% over the average closing price of HK$0.61 per H Share as quoted on the Stock Exchange for the last five consecutive trading days up to and including the Last Trading Date;
(iii) a discount of approximately 68.73% over the average closing price of HK$0.62 per H Share as quoted on the Stock Exchange for the last ten consecutive trading days up to and including the Last Trading Date; and
(iv) a discount of approximately 60.43% to the audited consolidated net asset value of approximately RMB0.43 per Share (representing approximately HK$0.49 per Share) as at 31 December 2008 (being the latest published audited net asset value of the Company prior to the Latest Practicable Date).

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

(b) Price performance of the H Shares

The highest and lowest closing prices and the average daily closing price of the H Shares as quoted on the Stock Exchange for the period from 1 December 2003 (being the first trading day of the twelve-month period immediately preceding the Last Trading Date) to the Last Trading Date (the “ Review Period ”) are shown as follows:

				No. of trading
	Highest	Lowest	Average daily	days in
Month	closing price	closing price	closing price	each month
	(HK$)	(HK$)	(HK$)
2003
December	1.010	0.930	0.970	21
2004
January	1.190	0.960	1.099	19
February	1.330	1.060	1.179	20
March_(Note)_	1.300	1.110	1.173	21
April	1.170	0.790	0.997	19
May	0.850	0.700	0.788	20
June	0.820	0.730	0.783	20
July	0.790	0.720	0.751	20
August	0.750	0.550	0.625	22
September	0.690	0.560	0.621	21
October	0.650	0.610	0.626	19
November	0.660	0.630	0.643	22
December (up to
and including the
Last Trading Date)	0.640	0.600	0.620	10

Source of data: Website of the Stock Exchange

Note: Trading in the H Shares was suspended from 9 March 2004 to 10 March 2004.

During the Review Period, the highest closing price per H Share was HK$1.33 which was recorded on 18 February 2004 and the lowest closing price per H Share was HK$0.55 which was recorded on 30 August 2004. Although the closing prices of the H Shares had been in a general decreasing trend during the Review Period, the closing prices of the H Shares throughout the Review Period were higher than the Offer Price.

According to the annual report of the Company 2004, the Company was involved in a litigation with Shenzhen Development Bank, Dalian Branch, in relation to a loan in the amount of RMB200 million. As a result of the above, trading in the Company’s H Shares was suspended on the Stock Exchange. The relevant parties reached an amicable settlement agreement on 24 January 2005 and the Company had failed in demonstration of sufficient level of operation to support resumption of trading in the H Shares until the Listing Appeals Committee meeting held in June 2009. On 22 June 2009, the Stock Exchange informed the Company in writing that it was granted an approval from the Listing Appeals Committee to resume trading in its H Shares on the Stock Exchange subject to, among other things, all conditions (except the

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Offer) as set out in the Decision Letter have been complied with to the satisfaction of the Listing Division before 28 February 2010. Independent Shareholders should note that due to the prolonged suspension of trading in the H Shares on the Stock Exchange for more than four years and the Group’s unsatisfactory financial performance since the suspension, comparison of the Offer Price with the closing prices of the H Shares prior to the suspension of trading in the H Shares may be rather irrelevant.

(c) Liquidity

The following table sets out the trading volume and the relative value as a percentage of the total number of issued H Shares of 420,400,000 held by the public (representing approximately 41.2% of the entire issued share capital of the Company as at the Latest Practicable Date) during the Review Period:

		Percentage of
		average daily
		trading volume
		to the total
		number of
	Average daily	issued H Shares
	trading volume	held by the public
Month	(H Shares)	(approximate %)
		(Note 1)
2003
December	3,024,762	0.719
2004
January	7,392,105	1.758
February	4,656,450	1.108
March (Note 2)	3,028,762	0.720
April	2,037,053	0.485
May	594,100	0.141
June	370,400	0.088
July	323,700	0.077
August	481,273	0.114
September	538,742	0.128
October	322,360	0.077
November	656,091	0.156
December (up to and
including the Last
Trading Date)	326,400	0.078

Source of data: website of the Stock Exchange

Notes:

Based on 420,400,000 H Shares held by the public as at the Latest Practicable Date.
Trading in the H Shares was suspended from 9 March 2004 to 10 March 2004.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

The average trading volume of the H Shares on the Stock Exchange during the Review Period was thin and within the range of 0.077% to 1.758% of the issued H Shares held by the public. Save and except for January and February 2004, the trading average of the H Shares was below 1% of the total number of issued H Shares held by the public as at the Last Trading Date during the entire Review Period. As disclosed in the announcements of the Company dated 7 January 2004, 12 February 2004 and 18 February 2004 respectively, save for the proposed acquisition as disclosed in the announcement of the Company dated 6 January 2004, the then Directors were not aware of any reason for the increase in trading volume.

Given that the H Shares were illiquid during the Review Period and the trading of H Shares has been suspended for over four years, the disposal of large block of Shares held by the Independent Shareholders in the open market (in the event that the trading in the H Shares on the Stock Exchange is resumed) may trigger price slump of the H Shares.

Despite the fact that the Offer Price represents a substantial discount to the closing price during the Review Period, we consider that such substantial discount may not be relevant in forming an opinion as to whether or not the Offer Price is fair and reasonable due to the reasons that (i) the prolonged suspension of trading in the H Shares on the Stock Exchange for more than four years; and (ii) the thin trading volume during the Review Period as discussed above. In view of the above, we consider that the closing prices during the Review Period may not reflect the fair value of the H Shares.

6. Price/earnings multiples and dividend yields

One of the most commonly used references for valuing a company is the price/earnings multiple and we have considered such an approach in assessing the value of the H Shares by applying the price/earnings multiple.

However, since the Company has recorded losses in the year ended 31 December 2008, a meaningful price/earnings multiple cannot be derived for assessing the value of the Group.

We have also reviewed the dividend payment history of the Company and noted that during the Relevant Financial Periods, the Company has not paid or declared any dividends to the Shareholders. Accordingly, no basis can be formed to appraise the fairness and reasonableness of the Offer Price based on the historical dividend yield of the Company.

7. Net assets value

As at 31 December 2008, the Group’s audited consolidated net asset value was approximately RMB414,426,000, equivalent to approximately HK$0.49 per Share based on 1,020,400,000 Shares in issue. In accordance to the interim report of the Company for the six months ended 30 June 2009, the Group’s unaudited

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

consolidated net asset value as at 30 June 2009 was approximately RMB412,638,000, equivalent to approximately HK$0.46 per Share based on 1,020,400,000 Shares in issue as at the Latest Practicable Date. The Offer Price represents a discount of approximately 60.43% over the audited consolidated net asset value as at 31 December 2008 and a discount of approximately 57.8% over the unaudited consolidated net asset value as at 30 June 2009.

In assessing the fairness and reasonableness of the Offer Price, we have performed the price to net asset value ratio analysis, which is one of the commonly adopted trading multiple analyses. In performing our price to net asset value ratio analysis, we have researched for companies listed on the Stock Exchange which operations are similar to the Group. The Group is principally engaged in the development, sales and leasing of real estate, and the investment and management of education projects. To the best of our knowledge, effort and endeavor and based on the information available from the website of the Stock Exchange, we have identified 7 comparable companies (the “ Comparable Companies ”) which (i) are listed on the Main Board of the Stock Exchange; (2) are engaged in property investment and development in the PRC; (iii) had net asset values of more than HK$100 million but less than HK$4,000 million (taking into account of the business scale of the Group that the unaudited consolidated net asset value of the Group of approximately RMB412,638,000 as at 30 June 2009). Our review is summarized as follows:

			Market		Net asset value
			Capitalization as	Price as at	as at the Latest
			at the Latest	the Latest	Practicable Date	Price to net asset
			Practicable Date	Practicable Date	(HK$ million)	value ratio
Stock code	Company	Principal business	(HK$ million)	(HK$)	(Note 1)	(Note 2)
29	Dynamic	Property investment and	346.18	1.58	1,430.68	0.24
	Holdings	development			(Note 4)
	Limited
59	Skyfame Realty	Property development and	642.79	0.435	2,149.03	0.30
	(Holdings)	investment, hotel			(Note 5)
	Limited	operation and related
		ancillary services,
		provision of management
		services and interior
		design services for
		property development
		project
95	New Heritage	Property development and	327.44	0.28	841.54	0.39
	Holdings Ltd.	property investment in			(Note 6)
		the PRC

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

			Market		Net asset value
			Capitalization as	Price as at	as at the Latest
			at the Latest	the Latest	Practicable Date	Price to net asset
			Practicable Date	Practicable Date	(HK$ million)	value ratio
Stock code	Company	Principal business	(HK$ million)	(HK$)	(Note 1)	(Note 2)
169	Hengli Properties	Property development in	408.26	0.365	183.75	2.22
	Development	the PRC			(Note 6)
	(Group) Ltd.
231	Dynamic Global	Development and leasing of	538.87	0.137	258.56	2.08
	Holdings	properties, investment			(Note 6)
	Limited	holding and resort
		operation
736	China Properties	Property investment	481.55	0.129	133.56	3.61
	Investment				(Note 6)
	Holdings Ltd.
1124	Coastal	Property development,	1,702.26	0.61	3,617.81	0.47
	Greenland Ltd.	property investment and			(Note 6)
		provision of property
		management services
	Average:					1.33
	Median:					0.47
747	The Company	Development, sales and	197.86	0.1939	466.28	0.42
		leasing of real estate, and	(Note 3)
		the investment and
		management of education
		projects

Source of data: website of the Stock Exchange

Notes:

Based on the latest published net asset value set out in the respective latest interim report or annual report.
Calculated based on the price as at the Latest Practicable Date divided by the latest published net asset value set out in the respective latest interim report or annual report.
Calculated based on the Offer Price of HK$0.1939 per H Share.
Based on the 2009 annual report as at 30 June 2009.
Based on the 2009 interim report as at 30 June 2009.
Based on the 2009 annual report as at 31 March 2009.

– 44 –

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Despite the difference in market capitalization between the Comparable Companies and the Company, we consider that such comparison would provide a reference for the Independent Shareholders on the general price to net asset value ratios of other listed companies engaging in property investment and development business since these ratios are relative parameters which neutralizes the effect of difference in market capitalization and are commonly used in corporate analysis.

As illustrated in the table as stated above, we note that the average price to net asset value ratio as represented by the Comparable Companies was approximately 1.33 times and with a range from approximately 0.24 times to 3.61 times. We also note that the price to net asset value per share ratio represented by the Offer Price is approximately 0.42 times, which is lower than the average of the Comparable Companies.

Based on the comparison of the price to net asset value ratio with the Comparable Companies above, we are of the view that the Offer Price is not attractive. However, taken in account of the operating loss position of the Group and nil dividend paid during the Relevant Financial Periods, we consider that the Independent Shareholders should not solely rely on the price to net asset value ratio to make their decision to accept the Offer.

8. Intention of the Offeror and the Controlling Shareholder on the Group

(a) 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. The directors of the Offeror are Mr. Chim Kim Lun Ricky and Mr. Chui Tak Keung Duncan and the biographies of which are set out in the Letter from Kingston Securities contained in the Composite Document.

As set out in the Letter from Kingston Securities contained in the Composite Document, it is the intention of the Offeror that the existing principal activities of the Group will remain unchanged immediately after the close of the Offer. The Offeror intends that the Company will maintain the listing status of the Company on the Stock Exchange after closing of the Offer. The Offeror has no intention to re-deploy employees or fixed assets of the Group within 6 months from the date of the Announcement other than in its ordinary course of business and such transactions as contemplated under the conditions set out in the announcement of the Company dated 26 June 2009. The Offeror confirms that it does not intend to participate in the daily management of the Company. Subject to the Put Option Deed and market conditions, it is the intention of the Offeror to hold the accepted H Shares, if any, for investment purpose.

– 45 –

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

(b) The Controlling Shareholder

It is the intention of the Controlling Shareholder that the existing principal activities of the Group will remain unchanged immediately after the close of the Offer. It is the current intention of the Controlling Shareholder not to dispose of the Domestic Shares. The Controlling Shareholder intends to maintain the listing status of the Company on the Stock Exchange after closing of the Offer. The Controlling Shareholder fully supports the Company to apply to the Stock Exchange for the resumption of trading in the H Shares.

Having taken into account (i) the Group’s historical unsatisfactory financial performance; and (ii) the uncertainty in the timing and possibility of resumption of trading in the H Shares, we are of the opinion that the Offer provides a ready exit for the Independent Shareholders to realize their investments in the H Shares.

9. Maintaining the listing status of the Company

The Offeror intends to maintain the listing status of the H Shares on the Stock Exchange after the close of the Offer. The Company and the Offeror will undertake to the Stock Exchange to take appropriate steps as soon as possible following the close of the Offer to ensure that there will be at least the minimum prescribed percentage of Shares held by the public as required by the Listing Rules. As the Company and the Offeror are unable to ascertain at this stage the level of acceptances of the H Shares 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 the close of the Offer to restore the public float of the 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.

Although it is the intention of the Offeror to maintain the listing status of the Shares on the Stock Exchange after the close of the Offer, Independent Shareholders should note that there are certain requirements on the minimum public float of the Shares under the Listing Rules. Failure to maintain a sufficient level of public float upon completion of the Offer may result in continuous suspension in dealings in the Shares even if all the Conditions as stated in the Letter from the Board are fulfilled unless successful placing down of sufficient number of accepted H Shares.

RECOMMENDATION

Having considered the above factors, and in particular that:

(i) the uncertainty in the timing and possibility of resumption of trading in the H Shares including the fulfillment of the Conditions and the maintenance of the required public float;

– 46 –

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

(ii) the Offer is a result of the Transfer that the Controlling Shareholder acquired the 600,000,000 Domestic Shares (representing approximately 58.8% equity interest of the issued share capital of the Company) from the auction pursuant to the Court’s order on 13 February 2009 which the auction price represented the then highest available consideration for the acquisition of the 600,000,000 Domestic Shares;
(iii) the Company has been making losses for the financial year ended 31 December 2006, 31 December 2008 and for the six month period ended 30 June 2009 and the profit for the year ended 31 December 2007 was only attributable to the one-off gain from the disposal of discontinued operations and the Auditor did not express opinion on the consolidated financial statements as to whether they give a true and fair view of the financial positions of the Group as at 31 December 2006, 2007 and 2008 and of its loss/loss on continuous operations and cash flows for the year then ended in accordance with Hong Kong Financial Reporting Standards; and
(iv) no dividend has been paid or declared to its Shareholders during the Relevant Financial Periods,

we are of the opinion that the terms of the Offer is fair and reasonable so far as the Independent Shareholders are concerned, and advise the Independent Board Committee to recommend the Independent Shareholders that they should accept the Offer. In view of that the uncertainty of resumption of trading in the H Shares and the Offeror and the Controlling Shareholder do not have a concrete business plan, we are of the view that the Offer provides an opportunity to the Independent Shareholders to realize their investment in the Company.

Based on the factors stated above, we consider the prospects and future profitability of the Group are of great uncertainties. However, if the Independent Shareholders are confident on the future performance of the Group and the resumption of trading in the H Shares, they may wish to consider holding onto their H Shares and not accepting the Offer. However, such Independent Shareholders should carefully study the risks associated with their investment in the H Shares, in particular the uncertainty of the resumption of trading in the H Shares. Independent Shareholders who wish to exit from the investments in the Company may wish to consider to accept the Offer. Independent Shareholders should carefully consider all factors and exercise their own judgment in respect of the merits and drawbacks of accepting or declining the Offer as every Shareholder may have different investment concerns and objectives.

Yours faithfully, For and on behalf of

Cinda International Capital Limited

Thomas Lai Robert Siu Executive Director Executive Director

– 47 –

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 Friday, 6 November 2009 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 Friday, 6 November 2009 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 Monday, 9 November 2009 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 10 days from 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 advisors 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 as at the date of the Announcement, 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 of the Announcement.
(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 imposed by whomsoever payable 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.

– 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 2006, 2007 and 2008 and the assets and liabilities of the Group as at 31 December 2006, 2007 and 2008 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 2008 and 2009 and unaudited assets and liabilities of the Group as at 30 June 2009 as extracted from the interim reports of the Company for the relevant periods.

Consolidated Income Statement

Six months ended 30 June 2009 2008 RMB’000 RMB’000 (unaudited) (unaudited) 2,167 38,117	Six months ended 30 June 2009 2008 RMB’000 RMB’000 (unaudited) (unaudited) 2,167 38,117	Year ended 31 December 2008 2007 2006 RMB’000 RMB’000 RMB’000 39,617 7,116 16,465	Year ended 31 December 2008 2007 2006 RMB’000 RMB’000 RMB’000 39,617 7,116 16,465	Year ended 31 December 2008 2007 2006 RMB’000 RMB’000 RMB’000 39,617 7,116 16,465
(1,725) –	(19,837) –	(59,007) 613	(55,170) 613	(63,891 613
(1,725)	138,072	(58,394)	(54,557)	(63,278

N/A	N/A	N/A	166,876	(17,333
(1,725)	138,072	(58,394)	112,319	(80,611

(1,788) 63	138,094 (22)	(54,638) (3,756)	115,657 (3,338)	(76,705 (3,906
(1,725) (RMB0.002) N/A –	138,072 RMB0.135 N/A –	(58,394) (RMB0.06) N/A –	112,319 (RMB0.05) RMB0.16 –	(80,611

				(RMB0.06 (RMB0.02

				–

Note:

The Company has no dividend, exceptional or extraordinary items for each of the three years ended 31December 2008 and the six months ended 30 June 2009.

– 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 2009 RMB’000 594,873 (153,457) 1,020,400 (607,762) 412,638 28,778 441,416	As at 31 December 2008 2007 2006 RMB’000 RMB’000 RMB’000 615,089 1,090,528 1,339,846 (171,948) (586,756) (950,157) 1,020,400 1,020,400 1,020,400 (605,974) (550,985) (666,642) 414,426 469,415 353,758 28,715 34,357 35,931 443,141 503,772 389,689

– II-2 –

APPENDIX II

FINANCIAL INFORMATION OF THE GROUP

2. INDEPENDENT AUDITOR’S REPORTS

The following is a reproduction of the independent auditor’s reports issued by Lo and Kwong C.P.A. Company Limited, the auditor of the Company, on the consolidated financial statements of the Group which are contained in the 2006, 2007 and 2008 annual reports of the Company respectively. 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 2006

TO THE SHAREHOLDERS OF

Shenyang Public Utility Holdings Company Limited

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

We were engaged to audit 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 page 30 to 87 which comprise the consolidated balance sheet as at 31st December 2006, and the consolidated income statement, the consolidated statement of changes in equity and the consolidated cash flow statement for the year then ended, and a summary of significant accounting policies and other explanatory notes.

DIRECTORS’ RESPONSIBILITY FOR THE CONSOLIDATED FINANCIAL STATEMENTS

The Company’s directors are responsible for the preparation and the true and fair presentation of these consolidated financial statements in accordance with the 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 reasonable accounting estimates in different circumstances.

– II-3 –

APPENDIX II

FINANCIAL INFORMATION OF THE GROUP

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 resume responsibility towards or accept liability to any other person for the contents of this report. Except for the limitation in the scope of our work as explained below, 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.

However, because of the matters described in the paragraph described in the basis for disclaimer of opinion, we were not able to obtain sufficient appropriate audit evidence to provide a basis for an audit opinion.

BASIS FOR DISCLAIMER OF OPINION

As disclosed in note 22(b) to the consolidated financial statements, the Group’s subsidiary, Beijing Diye Real Estate Development Company Limited, had a held-for-sale property under development project in Beijing with a carrying value of RMB 405,014,000 as at 31st December 2006. The land use right of the land used for such property development project must be obtained by way of public tender as a result of the change in the related land policy. If the Group ultimately succeeded in winning the tender of the land and completing the development, the recoverable amount of such project shall depend on the realisable value of the completed property in the future. If the Group did not participate in the public tender or it failed to obtain the land use right of the land in the tender, the recoverable amount of such project shall depend on the amount invested by the Group and such amount should be confirmed by the relevant authorities of the People’s Republic of China (“PRC”). Based on our on-site investigation, no buildings were erected on the land nor had it been put on a public tender up to the date of this report. Due to insufficient evidence, we were not able to confirm whether the Group could successfully recover the development cost invested in such project in full, and whether impairment provision should be made in respect of the development cost of RMB405,014,000 paid.
As disclosed in note 16(d) and 18 to the consolidated financial statements, the Group had a building and its corresponding leasehold land with carrying value of RMB135,987,000 and RMB91,880,000 respectively as of 31st December 2006. We were unable to obtain the corresponding Real Estate Title Certificates and the land use right certificate of a portion of the land with carrying value of RMB74,599,000 to ensure the ownership of the abovementioned assets at the balance sheet date.

– II-4 –

APPENDIX II

FINANCIAL INFORMATION OF THE GROUP

As disclosed in note 43 to the consolidated financial statements, the Group had contingent liabilities in respect of the involvement in a number of litigations in the PRC. Since we were unable to carry out the necessary audit procedures to assure the completeness of the litigation claims and other liabilities should be incurred, we were unable to satisfy ourselves as to whether or not the litigations and total liabilities up to the date of this report were fairly stated.

Any adjustment to the abovementioned figures could have a consequential and significant effect on the Group’s equity interests as at 31st December 2006 and its loss for the year then ended.

MATERIAL FUNDAMENTAL UNCERTAINTY RELATING TO THE GOING CONCERN BASIS

In forming our opinion, we have considered the adequacy of the disclosures made in the consolidated financial statements concerning the adoption of the going concern basis in preparing such consolidated financial statements. As set out in note 2 the consolidated financial statements have been prepared on a going concern basis, the validity of which depends upon the successful implementation of certain financing and share capital restructuring plans and the debt restructuring result reached with the creditors including, among other things, the successful recovery in full of the development cost invested in the property development project in Beijing. We consider that appropriate disclosures have been made in such consolidated financial statements concerning the relevant material uncertainty, but the inherent uncertainties surrounding the circumstances under which the Group might successfully continue to adopt the going concern basis are so extreme, we have disclaimed our opinion on material uncertainty relating to the going concern basis.

The consolidated financial statements of the Group do not include any adjustment that would be necessary if the Group failed to operate as a going concern. Had the going concern basis not been used, adjustments would have to be made to reduce the value of the Group’s assets to their recoverable amounts, to provide for any further liabilities which might arise, and to reclassify non-current assets and non-current liabilities as current assets and current liabilities respectively.

– II-5 –

APPENDIX II

FINANCIAL INFORMATION OF THE GROUP

DISCLAIMER OF OPINION: DISCLAIMER ON VIEW GIVEN BY CONSOLIDATED FINANCIAL STATEMENTS

Because of the significance of the matters described in the basis for disclaimer of opinion paragraph and material uncertainty relating to going concern basis paragraph, we do not express an opinion on the consolidated financial statements as to whether they give a true and fair view of the financial position of the Group as at 31st December 2006 and of its loss and cash flows for the year then ended in accordance with Hong Kong Financial Reporting Standards. In all other respects, in our opinion, the consolidated financial statements 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 Lo Wah Wai Practising Certificate Number: P02693

Hong Kong 24th October 2008

– II-6 –

APPENDIX II

FINANCIAL INFORMATION OF THE GROUP

(ii) In respect of the financial statements for 2007

TO THE SHAREHOLDERS OF

Shenyang Public Utility Holdings Company Limited

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

We were engaged to audit 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 page 31 to 91, which comprise the consolidated balance sheet as at 31st December 2007, and the consolidated income statement, the consolidated statement of changes in equity and the consolidated cash flow statement for the year then ended, and a summary of significant accounting policies and other explanatory notes.

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 and for no other purpose. We do not assume responsibility towards or accept liability to any other person for the contents of this report. Except for the limitation in the scope of our work as explained below, 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.

However, because of the matters described in the paragraphs of the basis for disclaimer of opinion, we were not able to obtain sufficient appropriate audit evidence to provide a basis for an audit opinion.

– II-7 –

APPENDIX II

FINANCIAL INFORMATION OF THE GROUP

BASIS FOR DISCLAIMER OF OPINION

As disclosed in note 24(b) to the consolidated financial statements, the Group’s subsidiary, Beijing Diye Real Estate Development Company Limited (“Beijing Diye”), had a held-for-sale property under development project in Beijing with a carrying value of RMB407,148,000 as at 31st December 2007. The land use right of the land used for such property development project must be obtained by way of public tender as a result of the change in the related land policy. If the Group ultimately succeeded in winning the tender of the land and completing the development, the recoverable amount of such project shall depend on the realizable value of the completed property in the future. If the Group did not participate in the public tender or it failed to obtain the land use right of the land in the tender, the recoverable amount of such project shall depend on the amount invested by the Group and such amount should be confirmed by the relevant authorities of the People’s Republic of China (“PRC”). Based on our on-site investigation, no buildings were erected on the land nor had it been put on a public tender up to the date of this report. Due to insufficient evidence, we were not able to confirm whether the Group could successfully recover the development cost invested in such project in full, and whether impairment provision should be made in respect of the development cost of RMB407,148,000 paid.
As disclosed in note 39 to the consolidated financial statements, the Group pledged 80% equity interests of Beijing Diye to a creditor as a security for repayment of the debt of approximately RMB45,030,000 on 1st June 2007. We acknowledged, in the process of company register checking, that Shenyang Development Real Estate Company Limited (“Shenyang Real Estate”), which originally held 80% equity interests of Beijing Diye, has been changed to that creditor. According to the “Agreement of Compensation and Pledge of Equity Interests”《代償及股權質押協議》dated 1st June 2007 signed with that creditor offered by the Group, as Beijing Diye is a non-listed company and the corresponding PRC’s industry and commerce departments do not accept the application for pledge of equity interests from non-listed company, the equity interests of Beijing Diye were first transferred to that creditor under mutual agreement. After the Group has fully repaid the related debts and interests, that creditor will transfer the equity interests of Beijing Diye back to the Group unconditionally. The equity interests of Beijing Diye have been transferred back to the Group in August 2008. As at the balance sheet date, the Group still regarded Beijing Diye as the Group’s subsidiary and the assets and liabilities on 31st December 2007 and the year’s operating results of Beijing Diye have been included in these consolidated financial statements. We were unable to obtain adequate information and were unable to carry out relevant procedures to satisfied ourselves that whether the Group has the ownership of Beijing Diye and control or material influence over

– II-8 –

APPENDIX II

FINANCIAL INFORMATION OF THE GROUP

Beijing Diye’s operating and financial policies as at the balance sheet date, and whether the assets and liabilities and operating results of Beijing Diye should end being consolidated into the Group’s consolidated financial statements. Also, we cannot confirm whether the Group has incurred unrecorded liabilities, financial burdens and contingent liabilities due to the above.

As disclosed in note 18(c) and 20 to the consolidated financial statements, the Group had a building and its corresponding leasehold land with carrying value of RMB121,333,000 and RMB89,316,000 respectively as of 31st December 2007. We were unable to obtain the corresponding real estate title certificates of the building and the land use right certificate of a portion of the land with carrying value of RMB72,574,000 to ensure the ownership of the abovementioned assets at the balance sheet date.
As disclosed in note 43 to the consolidated financial statements, the Group had contingent liabilities in respect of the involvement in a number of litigations in the PRC. Since we were unable to carry out the necessary audit procedures to assure the completeness of the litigation claims and other liabilities should be incurred, we were unable to satisfy ourselves as to whether or not the litigations and total liabilities up to the date of this report were fairly stated.

Any adjustment to the abovementioned figures could have a consequential and significant effect on the Group’s net asset value as at 31st December 2007 and its operating loss for the year then ended.

MATERIAL FUNDAMENTAL UNCERTAINTY RELATING TO THE GOING CONCERN BASIS

In forming our opinion, we have considered the adequacy of the disclosures made in the consolidated financial statements concerning the adoption of the going concern basis in preparing such consolidated financial statements. As set out in note 2 to the consolidated financial statements, the consolidated financial statements have been prepared on a going concern basis, the validity of which depends upon the successful implementation of certain financing and share capital restructuring plans and the debt restructuring result reached with the creditors including, among other things, the successful recovery in full of the development cost invested in the property development project in Beijing. We consider that appropriate disclosures have been made in such consolidated financial statements concerning the relevant material uncertainty, but the inherent uncertainties surrounding the circumstances under which the Group might successfully continue to adopt the going concern basis are so extreme, we have disclaimed our opinion on material uncertainty relating to the going concern basis.

– II-9 –

APPENDIX II

FINANCIAL INFORMATION OF THE GROUP

DISCLAIMER OF OPINION: DISCLAIMER ON VIEW GIVEN BY CONSOLIDATED FINANCIAL STATEMENTS

Because of the significance of the matters described in the basis for disclaimer of opinion paragraph and the material uncertainty relating to going concern basis paragraph, we do not express an opinion on the consolidated financial statements as to whether they give a true and fair view of the financial position of the Group as at 31st December 2007 and of its loss on continuous operations and cash flows for the year then ended in accordance with Hong Kong Financial Reporting Standards. In all other respects, in our opinion, the consolidated financial statements 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 Lo Wah Wai Practising Certificate Number: P02693

Hong Kong 24th October 2008

– II-10 –

APPENDIX II

FINANCIAL INFORMATION OF THE GROUP

(iii) In respect of the financial statements for 2008

TO THE SHAREHOLDERS OF

SHENYANG PUBLIC UTILITY HOLDINGS COMPANY LIMITED

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

We were engaged to audit 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 page 29 to 85, which comprise the consolidated balance sheet as at 31 December 2008, and the consolidated income statement, the consolidated statement of changes in equity and the consolidated cash flow statement 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 the 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 reasonable accounting estimates in different circumstances.

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. Except for the limitation in the scope of our work as explained below, 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 evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on the auditor’s judgment, 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

– II-11 –

APPENDIX II

FINANCIAL INFORMATION OF THE GROUP

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.

BASIS FOR DISCLAIMER OF OPINION

As disclosed in note 23 to the consolidated financial statements, the Group’s subsidiary, Beijing Diye Real Estate Development Company Limited (“Beijing Diye”), had a held-for-sale property under development project in Beijing with a carrying value of approximately RMB193,941,000 as at 31 December 2008. According to a sale and purchase agreement dated 31 December 2008, the entire interest, that is 80% of Beijing Diye, will be disposed to a third party for a total consideration of RMB200,000,000 upon reaching several conditions. The management has then made approximately RMB216,438,000 impairment provision on the held-for-sale property for the year ended 31 December 2008. Due to insufficient evidence, we were not able to confirm, whether the Group could successfully dispose the Beijing Diye at the captioned consideration of RMB200,000,000 and whether impairment provision of approximately RMB216,438,000 was properly made in respect of the cost of the held-for-sale property of approximately RMB410,379,000 for the year ended 31 December 2008.

Nevertheless, if the sale and purchase agreement is not completed, the land use right of the land used for such property development project must be obtained by way of public tender as a result of the change in the related land policy. If the Group ultimately succeeded in winning the tender of the land and completing the development, the recoverable amount of such project shall depend on the realisable value of the completed property in the future. If the Group did not participate in the public tender or it failed to obtain the land use right of the land in the tender, the recoverable amount of such project shall depend on the amount invested by the Group and such amount should be confirmed by the relevant authorities of the People’s Republic of China (the “PRC”). Based on our on-site investigation, no buildings were erected on the land nor had it been put on a public tender up to the date of this report. Due to insufficient evidence, we were not able to confirm whether the Group could successfully recover the development cost invested in such project in full or in the amount net of provision, and whether impairment provision of approximately RMB 216,438,000 should be made in respect of the development cost of RMB 410,379,000 is sufficient.

– II-12 –

APPENDIX II

FINANCIAL INFORMATION OF THE GROUP

On 1 June 2007, the Group pledged 80% equity interests of Beijing Diye to a creditor as a security for repayment of the debt of approximately RMB45,030,000. We acknowledged, in the process of company register checking, that Shenyang Development Real Estate Company Limited (“Shenyang Real Estate”), which originally held 80% equity interests of Beijing Diye, has been changed to that creditor. According to the “Agreement of Compensation and Pledge of Equity Interests”《代償及股權質押協議》dated 1 June 2007 signed with that creditor offered by the Group, as Beijing Diye is a non-listed company and the corresponding PRC’s industry and commerce departments do not accept the application for pledge of equity interests from non-listed company, the equity interests of Beijing Diye were first transferred to that creditor under mutual agreement. After the Group has fully repaid the related debts and interests, that creditor will transfer the equity interests of Beijing Diye back to the Group unconditionally. The equity interests of Beijing Diye have been transferred back to the Group in August 2008. As at the balance sheet date, the Group had regarded Beijing Diye as the Group’s subsidiary and the assets and liabilities on 31 December 2008 and the full year’s operating results of Beijing Diye have been included in these consolidated financial statements. We were unable to obtain adequate information and were unable to carry out relevant procedures to satisfied ourselves that whether the Group has the ownership of Beijing Diye and control or material influence over Beijing Diye’s operating and financial policies for the period from 1 January 2008 to 31 July 2008, and whether the corresponding operating results of Beijing Diye should end being consolidated into the Group’s consolidated financial statements. Also, we cannot confirm whether the Group has incurred unrecorded liabilities, financial burdens and contingent liabilities due to the above.

Any adjustment to the abovementioned figures could have a consequential and significant effect on the Group’s net asset value as at 31 December 2008 and its operating loss for the year then ended.

MATERIAL FUNDAMENTAL UNCERTAINTY RELATING TO THE GOING CONCERN BASIS

– II-13 –

APPENDIX II

FINANCIAL INFORMATION OF THE GROUP

shareholder. We consider that appropriate disclosures have been made in such consolidated financial statements concerning the relevant material uncertainty, but the inherent uncertainties surrounding the circumstances under which the Company might successfully continue to adopt the going concern basis are so extreme, we have disclaimed our opinion on material uncertainty relating to the going concern basis.

DISCLAIMER OF OPINION: DISCLAIMER ON VIEW GIVEN BY CONSOLIDATED FINANCIAL STATEMENTS

Because of the significance of the matters described in the basis for disclaimer of opinion paragraph and the material fundamental uncertainty relating to the going concern basis paragraph, we do not express an opinion on the consolidated financial statements as to whether they give a true and fair view of the financial position of the Group as at 31 December 2008 and of its loss and cash flows for the year then ended in accordance with Hong Kong Financial Reporting Standards. In all other respects, in our opinion, the consolidated financial statements 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 Lo Wah Wai

Practising Certificate Number: P02693

Hong Kong 21 April 2009

– II-14 –

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 2008:

Consolidated Income Statement

For the year ended 31 December 2008

Notes Continuous operations Turnover 8 Bank interests received Other income Cost of properties sold Taxes on sales of properties Staff costs Depreciation and amortisation Impairment loss on properties held for sale Gain on disposal of subsidiaries Impairment loss on investment in associate Allowance for bad and doubtful debt Other operating expenses Finance costs 10 Loss before taxation 11 Taxation 14 Loss for the year on continuous operations Discontinued operations Profit for the year on discontinued operations 15 (Loss) profit for the year on continuous and discontinued operations Attributable to: Shareholders of the Company Minority interests (Loss) earning per share 17 – Basic Arising from continuous operations Arising from discontinued operations Arising from continuous and discontinued operations – Diluted	2008 RMB’000 39,617 33 16,296 (40,237) (2,179) (4,359) (12,216) (216,438) 204,123 (200) (4,034) (21,537) (17,876)	2007 RMB’000 7,116 21 555 (3,889) (436) (5,545) (19,083) – – – (94) (10,238) (23,577) (55,170) 613 (54,557) 166,876 112,319 115,657 (3,338) 112,319 (RMB0.05) RMB0.16 RMB0.11 N/A
	(59,007) 613	(55,170 613
	(58,394)
	N/A	166,876
	(58,394)
	(54,638) (3,756)	115,657 (3,338
	(58,394)
	(RMB0.06) N/A	(RMB0.05 RMB0.16
	N/A N/A

– II-15 –

APPENDIX II

FINANCIAL INFORMATION OF THE GROUP

Consolidated Balance Sheet

At 31 December 2008

Notes NON CURRENT ASSETS Property and equipment 18 Investment properties 19 Prepaid lease payments on land use rights 20 Available-for-sale fnancial assets 22 Other long term receivable 26 CURRENT ASSETS Properties held for sale 23 Inventories Amount due from parent company Prepaid lease payments on land use rights 20 Prepayments Other receivables 26 Bank balances and cash CURRENT LIABILITIES Trade payables 28 Other payables and accruals 34 Receipts in advance 29 Provision for potential liabilities 30 Bank loans – repayable within one year 31 NET CURRENT ASSET TOTAL ASSETS LESS CURRENT LIABILITIES CAPITAL AND RESERVES Share capital 32 Reserves Equity attributable to shareholders of the Company Minority interests TOTAL EQUITY NON-CURRENT LIABILITIES Deferred taxation 33 Other non current liabilities 34 TOTAL EQUITY AND NON-CURRENT LIABILITIES	2008 RMB’000 19,200 248,342 – 20,000 32,745	2007 RMB’000 146,795 255,390 86,752 20,000 – 508,937 484,987 341 54,268 2,564 3,039 31,914 4,478 581,591 43,080 412,989 44,089 2,043 62,000 564,201 17,390 526,327 1,020,400 (550,985) 469,415 34,357 503,772 22,555 – 22,555 526,327
	320,287 205,735 – – – 1,572 80,692 6,803 294,802 5,875 33,333 12,759 1,041 14,000 67,008 227,794	508,937
		484,987 341 54,268 2,564 3,039 31,914 4,478
		581,591
		43,080 412,989 44,089 2,043 62,000
		564,201
		17,390
	548,081
	1,020,400 (605,974) 414,426 28,715	1,020,400 (550,985
		469,415 34,357
	443,141
	21,942 82,998 104,940	22,555 –
		22,555
	548,081

– II-16 –

APPENDIX II

FINANCIAL INFORMATION OF THE GROUP

Consolidated Statement of Changes in Equity

For the year ended 31 December 2008

Equity attributable to shareholders of the Company

	Equity attributable to shareholders of the Company	Equity attributable to shareholders of the Company	Equity attributable to shareholders of the Company	Equity attributable to shareholders of the Company	Equity attributable to shareholders of the Company	Equity attributable to shareholders of the Company	Equity attributable to shareholders of the Company

At 1 January 2007 Profit (loss) for the year Disposal of subsidiaries At 31 December 2007 and 1 January 2008 Loss for the year Disposal of subsidiaries At 31 December 2008	Share capital RMB’000 1,020,400 – – 1,020,400 – –	Share premium RMB’000 323,258 – – 323,258 – –	Statutory Surplus reserve RMB’000 103,582 – – 103,582 – (351)	Retained losses RMB’000 (1,093,482) 115,657 – (977,825) (54,638) –	Total RMB’000 353,758 115,657 – 469,415 (54,638) (351)	Minority interests RMB’000 35,931 (3,338) 1,764 34,357 (3,756) (1,886)	Total equity RMB’000 389,689 112,319 1,764
							503,772 (58,394) (2,237)
	1,020,400	323,258	103,231	(1,032,463)	414,426	28,715	443,141

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 issue of H shares.

STATUTORY SURPLUS RESERVE

The Group is required to set aside 10% of their 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. As the Group recorded an operating loss for the year, no appropriation was made.

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 Company did not have reserve available for distribution as at 31 December 2008 and 31 December 2007.

– II-17 –

APPENDIX II

FINANCIAL INFORMATION OF THE GROUP

Consolidated Cash Flow Statement

For the year ended 31 December 2008

Notes OPERATING ACTIVITIES Loss before taxation of continuous operations Profit before taxation of discontinued operations Adjustments for: Bank interest received Depreciation on property and equipment Depreciation on investment properties Amortisation of prepaid lease payments on land use rights Impairment loss on properties held for sale 23 Impairment loss on investment in associate Finance costs Loss on disposal of property and equipment Allowance for bad and doubtful debts Gain on disposal of subsidiaries 35 Operating cash flows before movements in working capital Decrease in properties held for sale Decrease in inventories Decrease in trade receivables Decrease (increase) in prepayments Decrease in amount due from a holding company Decrease in trade payable Increase in other payables and accrued charges Decrease in provision for potential liabilities Increase (decrease) in receipts in advance Increase in deferred income Cash generated from operations PRC Enterprise Income Tax paid NET CASH FROM OPERATING ACTIVITIES	2008 RMB’000 (59,007) –	2007 RMB’000 (55,170) 167,971 112,801 (21) 8,307 10,293 2,564 – – 23,577 – – (198,436) (40,915) 10,728 128 1,192 (521) – (11,932) 55,539 (16,459) (19,525) 50,434 28,669 (130) 28,539
	(59,007) (33) 2,061 10,155 – 216,438 200 17,876 852 4,034 (204,123) (11,547) 42,789 – – 1,467 54,268 (18,318) 60,897 (1,002) 2,706 – 131,260 –	112,801 (21 8,307 10,293 2,564 – – 23,577 – – (198,436
		(40,915 10,728 128 1,192 (521 – (11,932 55,539 (16,459 (19,525 50,434
		28,669 (130
	131,260

– II-18 –

APPENDIX II

FINANCIAL INFORMATION OF THE GROUP

Notes INVESTING ACTIVITIES Bank interest received Disposal of subsidiaries (Net cash and cash equivalents) 35 Purchase of property and equipment Purchase of investment properties Decrease in amount due from parent company (Increase) decrease in other receivables NET CASH (USED IN) GENERATED FROM INVESTING ACTIVITIES FINANCING ACTIVITIES New bank loans raised Repayment of bank loans borrowed Interests payment Decrease in other payables NET CASH USED IN FINANCING ACTIVITIES NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS CASH AND CASH EQUIVALENTS AT THE BEGINNING OF THE YEAR CASH AND CASH EQUIVALENTS AT THE END OF THE YEAR	2008 RMB’000 33 8,502 (1,521) – – (112,073)	2007 RMB’000 21 (6,490) (7,730) (107) 1,028 149,393 136,115 – (118,554) (23,577) (27,489) (169,620) (4,966) 9,444 4,478
	(105,059) 14,000 (20,000) (17,876) – (23,876) 2,325 4,478	136,115
		– (118,554 (23,577 (27,489
		(169,620
		(4,966 9,444
	6,803

– II-19 –

APPENDIX II

FINANCIAL INFORMATION OF THE GROUP

Notes to the Consolidated Financial Statements

For the year ended 31 December 2008

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 addresses of the registered office and principal place of business of the Company are disclosed in the section headed “Company Information”) in this annual report.

These consolidated financial statements are presented in Renminbi (“RMB”). RMB is the functional currency of the Company and all of its subsidiaries.

The Group is presently engaged in the development, sale and rental of properties and investment and management of education projects.

The Company’s H shares are listed on The Stock Exchange of Hong Kong Limited. As requested by the Company, trading in the shares of the Company in the Stock Exchange of Hong Kong Limited was suspended since 15 December 2004 until further notice.

2. ADOPTION OF GOING CONCERN BASIS

The Group suffered a loss of approximately RMB58,394,000 for the year ended 31 December 2008 and two short term bank loans amounting to RMB14,000,000 has to be repaid in 2009. The management of the Company has taken the following measures:

(i) Carry out debt restructuring with its creditors. Up to the date of approval of these consolidated financial statements, the Group has reached agreements with its creditors in respect of debt restructuring and the court litigations have been discharged. Therefore, these consolidated financial statements have been prepared on the assumption that the Group will continue to operate as a going concern;
(ii) The management of the Company is considering to strengthen the capital base of the Company and provide immediate cash flow through various financing activities and capital restructuring, including, but not limited to, private placement of the Company’s shares;
(iii) The management of the Company continues to take action to strengthen cost control in respect of various administrative and other operating expenses, and is actively seeking new investment and business opportunities to pursue profitable businesses that would bring positive cash flow.
(iv) The substantial shareholder of the Company has changed from Shenyang Public Utility Group Company Limited to Beijing Mingde Guangye Investment Consultant Company Limited on 24 February 2009. The management is now working for obtaining the financial support from the new substantial shareholder. The new shareholder has indicated in a letter to the Company on 26 February 2009 that they would fully support the resumption of trading of H-shares of the Company.

The management of the Company believes that, in the light of the measures taken to date, together with the expected results of other measures in progress, the Group will have sufficient working capital to finance its operations and remain as a going concern in the foreseeable future. Accordingly, notwithstanding that the Group had recorded a significant amount of loss for the year and had overdue debts as at 31 December 2008, the management of the Company is of the opinion that it is appropriate to prepare these consolidated financial statements on a going concern basis.

– II-20 –

APPENDIX II

FINANCIAL INFORMATION OF THE GROUP

3. ADOPTION OF NEW AND REVISED HONG KONG FINANCIAL REPORT STANDARD

In the current year, the Group has applied all of the new Hong Kong Financial Reporting Standards, Hong Kong Accounting Standards and Interpretations (hereinafter collectively referred to as “new HKFRSs”) that are effective for accounting periods beginning on 1 January 2008. The application of those new HKFRSs has had no material effect on how the results for the current and prior accounting periods are prepared and presented. Accordingly, no prior period adjustments are required.

The Group has not early applied the following new standards, amendments or interpretations that have been issued but are not yet effective as at 1 January 2007. The directors of the Group anticipate the application of these new standards, amendments or interpretations will have no material impact on the Group’s results and financial position.

HKFRS (Amendment) Improvements to HKFRS[1] HKAS 1 (Revised) Presentation of Financial Statements[2] HKAS 32 and HKAS 1 Puttable Financial Instruments and Obligations Arising on (Amendments) Liquidation[2] HKAS 23 (Revised) Borrowing Costs[2] HKAS 27 (Revised) Consolidated and Separate Financial Statements[3] HKAS 39 (Amendment) Financial Instruments: Recognition and Measurement – Eligible Hedge Items[3] HKFRS 1 & HKAS 27 Cost of an Investment in a Subsidiary, Jointly Controlled Entity or (Amendments) Associate[2] HKFRS 2 (Amendment) Share-based Payment – Vesting Conditions and Cancellations[2] HKFRS 3 (Revised) Business Combinations[3] HKFRS 8 Operating Segments[2] HK(IFRIC)-INT 13 Customer Loyalty Programmes[4] HK(IFRIC)-INT 15 Agreements for the Construction of Real Estate[2] HK(IFRIC)-INT 16 Hedges of a Net Investment in a Foreign Operation[5] HK(IFRIC)-INT 17 Distributions of Non-cash Assets to Owners[3]

1 Effective for annual periods beginning on or after 1 January 2009, except the amendments to HKFRS 5 which are effective for annual periods beginning on or after 1 July 2009.
2 Effective for annual periods beginning on or after 1 January 2009.
3 Effective for annual periods beginning on or after 1 July 2009.
4 Effective for annual periods beginning on or after 1 July 2008.
5 Effective for annual periods beginning on or after 1 October 2008.

4. SIGNIFICANT ACCOUNTING POLICIES

The consolidated financial statements have been prepared on the historical cost basis, except for certain financial instruments which are measured at fair values as explained in the accounting policies set out below.

The consolidated financial statements have been prepared in accordance with Hong Kong Financial Reporting Standards issued by the Hong Kong Institute of Certified Public Accountants. In addition, the consolidated financial statements include applicable disclosures required by the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited and by the Hong Kong Companies Ordinance.

– II-21 –

APPENDIX II

FINANCIAL INFORMATION OF THE GROUP

The principal accounting policies adopted are as follows:

Basis of Consolidation

The consolidated financial statements incorporate the financial statements of the Company and its subsidiaries. All intra-group transactions, balances, income and expenses are eliminated on consolidation.

The results of the 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, adjustment will be made to the financial statements of the subsidiaries to bring their accounting policies in line with those used by other members of the Group.

Minority interests in the net assets of consolidated subsidiaries are presented separately from the Group’s equity therein. Minority interests in the net assets consist of the amount of those interests at the date of the original business combination and the minority’s share of changes in equity since the date of the combination. Losses applicable to the minority in excess of the minority’s interest in the subsidiary’s equity are allocated against the interests of the Group except to the extent that the minority has a binding obligation and is able to make an additional investment to cover the losses.

Goodwill

Goodwill arising on an acquisition of a subsidiary, with an agreement dated on or after 1 January 2005, represents the excess of the cost of acquisition over the Group’s interest in the fair value of the identifiable assets and liabilities of the relevant subsidiary at the date of acquisition.

With respect to goodwill previously capitalised, the Group has discontinued amortising such goodwill from 1 January 2005 onwards. A cash-generating unit to which goodwill is tested for impairment annually, and whenever there is an indication that the unit may be impaired (see the accounting policies below).

Goodwill arising on an acquisition of a subsidiary, with an agreement dated before 1 January 2005, represents the excess of the cost of acquisition over the Group’s interest in the fair value of the identifiable assets, liabilities and contingent liabilities of the relevant subsidiary at the date of acquisition. Such goodwill is carried at cost less any accumulated impairment losses.

Capitalised goodwill arising on an acquisition of a subsidiary is presented separately in the balance sheet.

For the purposes of impairment testing, goodwill arising from an acquisition is allocated to each of the relevant cash-generating units, or groups of cash-generating units, that are expected to benefit from the synergies of the acquisition. A cash-generating unit to which goodwill has been allocated is tested for impairment annually, and whenever there is an 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. When the recoverable amount of the cash-generating unit is less than the carrying amount of the unit, the impairment loss is allocated to reduce the carrying amount of any goodwill allocated to the unit first, 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 the consolidated income statement. An impairment loss for goodwill is not reversed in subsequent periods.

On subsequent disposal of a subsidiary, the attributable amount of goodwill capitalised is included in the determination of the amount of profit or loss on disposal.

– II-22 –

APPENDIX II

FINANCIAL INFORMATION OF THE GROUP

Revenue Recognition

Revenue is measured at the fair value of the consideration received or receivable and represents amounts receivable for goods provided in the normal course of business. The bases are as follows:

Sales of properties are recognised on execution of legally binding, unconditional and irrevocable sale contracts.

Sales of other goods are recognised when goods are delivered and title has passed.

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.

Tuitional fee is recognised over the tuition period in the consolidated income statement on a straight-line basis.

Interest income from financial assets 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.

Property and Equipment

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

Depreciation is provided to write off the cost of items of property and equipment other than construction in progress over their estimated useful lives and after taking into account of their estimated residual value, using the straight-line method, at the following rates per annum:

Building	2 – 10%
Furniture, fixtures and office equipment	8 – 16%
Motor vehicles	8 – 16%

An item of properties 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 the consolidated income statement in the year in which the item is derecognised.

Construction in progress represents property and equipment under development or installment is stated at cost less any identified impairment losses. Upon completion of construction, the relevant costs are transferred to appropriate category of property and equipment when they are ready for use.

No depreciation or amortisation is provided on construction in progress until the asset is completed and put into use.

– II-23 –

APPENDIX II

FINANCIAL INFORMATION OF THE GROUP

Investment Properties

On initial recognition, investment properties are 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 provided on investment properties over their estimated useful lives and residual value, using the straight-line method at the rate of 2 – 10% per annum.

An item of investment properties 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 the consolidated income statement in the year in which the item is derecognised.

Land Use Rights

Land use rights are stated at cost less accumulated amortisation and accumulated impairment losses. The cost of land use rights is amortised on a straight-line basis over the period of the land use rights or the term of the respective enterprise to which the land use rights are granted, whichever is the shorter.

Properties under Development for Sale

Properties under development for sale are stated at cost less any identified impairment loss. Cost comprises the land cost with development expenditure, which includes construction costs, capitalised interest and direct costs attributable to the development of the properties.

Completed Properties Held for Sale

Completed properties held for sale are classified under current assets and stated at the lower of cost and net realisable value. Cost comprises land cost, direct purchase cost or expenditure incurred for the construction and, where applicable, other incidental expenses that has been incurred in bringing the properties to their present location and condition, is calculated using the weighted average method. Net realisable value represents the actual or estimated selling price in the ordinary course of business less all related selling and marketing costs.

Inventories

Inventories comprise consumable supplies and spare parts held for consumption and usage and are stated at the lower of cost and net relisable value. Cost is determined on the weighted average basis.

Consumable supplies and spare parts are charged to income statement upon consumption and usage.

Financial Instruments

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

– II-24 –

APPENDIX II

FINANCIAL INFORMATION OF THE GROUP

Financial Assets

The Group’s financial assets are classified as loans and receivables and available-for-sale financial assets. All regular way purchases or sales of financial assets are recognised and derecognised 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. The accounting policies adopted in respect of each category of financial assets are set out below.

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 on points 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, where appropriate, a shorter period.

Loans and Receivables

Loans and receivables are non-derivative instruments with fixed or determinable payments that are not quoted in an active market. At each balance sheet date subsequent to initial recognition, loans and receivables (including other long term receivables, trade receivables, amount due from a former customer, amount due from parent company, other receivables and bank balances) are carried at amortized 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 fair value through profit or loss, loans and receivables or held-to-maturity investments.

At each balance sheet date subsequent to initial recognition, available-for-sale financial assets are measured at fair value. Changes in fair value are recognised in equity, until the financial asset is disposed of or is determined to be impaired, at which time, the cumulative gain or loss previously recognised in equity is removed from equity and recognised in profit or loss. (See accounting policy on impairment loss on financial assets below)

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 instruments, they are measured as cost less any identified impairment losses at each balance sheet date subsequent to initial recognition. (See accounting policy on impairment loss on financial assets below)

Impairment of Financial Assets

Financial assets are assessed for indicators of impairment at each balance sheet date. Financial assets are 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 impacted.

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
default or delinquency in interest or principal payments; or
it becoming probable that the borrower will enter bankruptcy or financial reorganisation.

– II-25 –

APPENDIX II

FINANCIAL INFORMATION OF THE GROUP

For certain categories of financial asset, such as trade receivables and assets that are assessed not to be impaired individually are subsequently 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 of 90 days, observable changes in national or local economic conditions that correlate with default on receivables.

For financial assets carried at amortised cost, an impairment loss is recognised in profit or loss when there is objective evidence that the asset is impaired, and is measured as the difference between the asset’s carrying amount and the present value of the estimated future cash flows discounted at the 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 and other receivables, where the carrying amount is reduced through the use of an allowance account. Changes in the carrying amount of the allowance account are recognised in profit or loss. When trade receivables and other receivable are considered uncollectible, it is written off against the allowance account. Subsequent recoveries of amounts previously written off are credited to profit or loss.

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 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 in profit or loss in subsequent periods. Any increase in fair value subsequent to impairment loss is recognised directly in equity. For available-for-sale debt investments, impairment losses are subsequently reversed 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

Financial liabilities and equity investment instruments issued by a group entity are classified according to the substance of the contractual arrangements entered into and the definitions of a financial liability and an equity investment instrument.

An equity investment instrument is any contract that evidences a residual interest in the assets of the Group after deducting all of its liabilities. The Group’s financial liabilities are generally classified into financial liabilities at fair value through profit or loss and other financial liabilities. The accounting policies adopted in respect of financial liabilities and equity instruments are set out below.

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 expenses are recognised on an effective interest basis.

– II-26 –

APPENDIX II

FINANCIAL INFORMATION OF THE GROUP

Other financial liabilities

Other financial liabilities including trade payables, other payables, receipts in advance, estimated liabilities and bank loans are subsequently measured at amortised cost, using the effective interest rate method.

Equity investments

Equity instruments issued by the Company are recorded at the proceeds received, net of direct issue costs.

Derecognition

Financial assets are derecognised when the rights to receive cash flows from the assets expire or, the financial assets are transferred and the Group has transferred substantially all the risks and rewards of ownership of the financial assets. On derecognition of a financial asset, 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 directly in equity is recognised in consolidated income statement.

Financial liabilities are derecognised from the Group’s balance sheet when the obligation specified in the relevant contract is discharged, cancelled or expires. The difference between the carrying amount of the financial liability derecognised and the consideration paid and payable is recognised in consolidated income statement.

Impairment (other than goodwill (see the accounting policies in respect to goodwill above))

At each balance sheet date, the Group reviews the carrying amounts of its tangible and intangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If the recoverable amount of an asset is less than its carrying amount, the carrying amount of the asset is reduced to its recoverable amount. An impairment loss is recognised as an expense immediately, unless the relevant asset is carried at a revalued amount under another accounting standard, in which case the impairment loss is treated as a revaluation decrease under that standard.

When reverses an impairment loss, the carrying amount of the asset can be increased to its revised recoverable amount, such that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset in prior years. A reversal of an impairment loss is recognised as income immediately, unless the relevant asset is carried at a revalued amount under other standard, in which case the reversal of the impairment loss is treated as a revaluation increase.

Borrowings Costs

Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, which are assets that necessarily take a substantial period of time to get ready for their intended use or sale, are capitalised as part of the cost of those assets. Capitalisation of such borrowing costs ceases when the assets are substantially ready for their intended use or sale.

All other borrowing costs are recognised as expenses in the period in which they are incurred.

– II-27 –

APPENDIX II

FINANCIAL INFORMATION OF THE GROUP

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 its 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 each balance sheet date, monetary items denominated in foreign currencies are retranslated at the rates prevailing on the balance sheet 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 translation 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 Group’s net investment in a foreign operation, in which case, such exchange differences are recognised in equity in the consolidated financial statements. 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 differences arising on the retranslation of non-monetary items in respect of which gains and losses are recognised directly in equity, in which cases, the exchange differences are also recognised directly in equity.

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) at the rate of exchange prevailing at the balance sheet date, and their income and expenses 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 as a separate component of equity (the exchange reserve). Such exchange differences are recognised in profit or loss in the period in which the foreign operation is disposed of.

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 net profit as reported in the income statement because the former excludes items of income or expense that are taxable or deductible in other years, and it further excludes income statement 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 balance sheet date.

Deferred tax is recognised on differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax base used in the computation of tax profits, and is accounted for using the balance sheet liability method. Deferred tax liabilities are generally recognised for all taxable temporary differences, and deferred tax assets are recognised to the extent that it is probable that entire taxable profits will offset against deductible temporary differences. Such 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 arising on 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 is calculated at the tax rates that are expected to apply in the year when the liability is settled or the asset is realised. Deferred tax is charged or credited to the income statement, except when it relates to items charged or credited directly to equity, in which case the deferred tax is also dealt with in equity.

– II-28 –

APPENDIX II

FINANCIAL INFORMATION OF THE GROUP

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 the income statement 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.

The Group as lessee

Rentals payable under operating leases are charged to profit or loss on a straight-line basis over the term of the relevant lease. Benefits received and receivable as an incentive to enter into an operating lease are recognised as a reduction of rental expense over the lease term on a straight-line basis.

Retirement Benefit Costs

Payments to defined contribution retirement benefit schemes, state-managed retirement benefit schemes and mandatory provident fund are charged from profit or loss as an expense as they fall due.

Provision

Provision are recognised when the Group has a present obligation as a result of a past event, and it is probable that the Group will be required to settle that obligation. Provisions are measured at the directors’ best estimate of the expenditure required to settle the obligation at the balance sheet date, and are discounted to present value where the effect is material.

5. CRITICAL ACCOUNTING JUDGEMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY

In the application of the Group’s accounting policies, which are described in Note 4, 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 following are the key assumptions concerning the future and other key sources of estimation uncertainty at the balance sheet date, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year.

– II-29 –

APPENDIX II

FINANCIAL INFORMATION OF THE GROUP

Depreciation and Amortisation of Property and Equipment and Investment Properties

The net carrying amount of the Group’s property and equipment (excluding construction in progress) and investment properties as at 31 December 2008 was approximately RMB7,256,000 and RMB248,342,000 respectively. The Group depreciates and amortises the property and equipment and investment properties on a straight line basis at 2% to 20% each year over the estimated useful life between 5 and 50 years after including its estimated remaining value, commencing from the date the property and equipment and investment properties is placed into use. The estimated useful life represents the number of years which the Group places the property and equipment and investment properties into production, reflecting the directors’ estimate of the periods that the Group intends to derive future economic benefits from the use of the Group’s property and equipment and investment properties.

Impairment of Property and Equipment and Investment Properties

The impairment loss for property and equipment and investment properties are recognised for the amounts by which the carrying amounts exceeds its recoverable amount, in accordance with the Group’s accounting policy.

The Group tests annually whether property, plant and equipment are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of the net asset exceed its recoverable amount. The recoverable amount of an asset or a cash-generating unit is determined based on value-in-use calculations prepared on the basis of management’s assumptions and estimates such as the future revenue and discount rates, taking into account the existing business expansion plan going forward, the current sales orders on hand and other strategic new business development. The management had reviewed the Group’s property, plant and equipment for impairment using cash flow projections and valuation report prepared by an independent professional valuer. No impairment loss was provided for both years.

Impairment of Held-for-sell Properties

Impairment loss of held-for-sell properties are recognised for the amounts by which the carrying amounts exceeds its realisable value, in accordance with the Group’s accounting policy. The realisable value are determined based primarily on the latest invoice prices and current market conditions.

Allowances for Bad and Doubtful Debts

Management regularly reviews the recoverability and age of the trade and other receivables. Appropriate impairment for estimated irrecoverable amounts are recognise in the income statement when there is objective evidence that the asset is impaired.

In determining whether allowance for bad and doubtful debts is required, the Group takes into consideration the current creditworthiness, the past collection history, age status and likelihood of collection. Specific allowance is only made for receivables that are unlikely to be collected and is recognised on the difference between the estimated future cash flow expected to receive discounted using the original effective interest rate and its carrying value. If the financial conditions of customers of the Group were to deteriorate, resulting in an impairment of their ability to make payments, additional impairment may be required.

– II-30 –

APPENDIX II

FINANCIAL INFORMATION OF THE GROUP

6. CAPITAL RISK MANAGEMEMT

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 borrowings (note 30), cash and cash equivalents and equity attributable to equity holders of the Company, comprising issued share capital and reserves.

The directors of the Company review the capital structure on a regular basis. As a part of this review, the directors of the Company consider the cost of capital and the associated risks and take appropriate actions to adjust the Group’s capital structure. The overall strategy of the Group remained unchanged during the two years ended 31 December 2008 and 2007.

7. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES

The Group’s major financial instruments include trade receivables, amount due from a former customer, amount due from parent company, other receivables, bank balances, trade payables, other payables, receipts in advance, estimated liabilities and bank loans. Details of these financial instruments are disclosed in respective notes. The risks associated with these financial instruments and 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 a timely and effective manner.

Currency Risk

Certain deposits of the Group are denominated in foreign currencies. The Group currently does not have a foreign currency hedging policy. However, the management monitors foreign exchange exposure and will consider hedging significant foreign currency exposure should the need arises.

Interest Rate Risk

The Group’s interest rate risk relates primarily to bank savings and variable-rate borrowings. (See note 30 for details of these borrowings.) It is the Group’s policy to keep its borrowings at floating rate of interests so as to minimise the fair interest rate risk.

The Group’s exposures to interest rates on financial assets and financial liabilities are detailed in the liquidity risk management section of this note. The Group cash flow interest rate risk is mainly concentrated on the interest rate fluctuation arising from the Group’s borrowings.

The sensitivity analyses below have been determined based on the exposure to interest rates for derivatives and non-derivative instruments. The analysis is prepared assuming the financial instruments outstanding at the balance sheet date were outstanding for the whole year. A 200 basis point (2007: 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 management’s assessment of the reasonably possible change in interest rates.

The management adjusted the sensitivity rate from 100 basis points to 200 basis points for assessing interest rate risk after considering the impact of the volatile financial market conditions after the third quarter of 2008.

If interest rates had been 200 basis points (2007: 100 basis points) higher or lower and all other variables were held constant, the Group’s after-tax loss for the year ended 31 December 2008 would increase or decrease by approximately RMB280,000 (2007: increase or decrease by approximately RMB502,000). This is mainly attributable to the Group’s exposure to interest rates on its variable-rate bank borrowings.

– II-31 –

APPENDIX II

FINANCIAL INFORMATION OF THE GROUP

The Group’s sensitivity to interest rates has decreased during the current year mainly due to the decrease in variable-rate bank borrowings.

Credit Risk

The Group’s maximum exposure to credit risk in the event of the counterparties failure to perform their obligations as at 31 December 2008 in relation to each class of recognised financial assets is the carrying amount of the respective recognised financial assets as stated in the consolidated balance sheet. As at 31 December 2008, the Group has significant concentration of credit risk as 100% (2007: 100%) of the total other receivables was due from a counterparty.

In order to minimise the credit risk, the management of the Group has delegated a team responsible for determination of credit limits, credit approvals and other monitoring procedures to ensure that follow-up action is taken to recover overdue debts. In addition, the Group reviews regularly the recoverable amount of each individual trade receivable at each balance sheet date 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 credit risk on liquid funds is limited because the counterparties are banks with high credit ratings.

Liquidity Risk

As the Group suffered a loss on approximately RMB58,394,000 for the year ended 31 December 2008, the management has carefully considered the present policy applied by the Group on liquidity. Regarding the present policy in the management of the liquidity risk, the Group monitors and maintains a level of cash and cash equivalents deemed adequate by the management to finance the Group’s operations and mitigate the effects of fluctuations in cash flows. The management monitors the utilisation of bank borrowings and ensures compliance with loan covenants. As disclosed in note 2, the management believes the Group will perform financial duties in the future.

The following table details the Group’s remaining contractual maturity for its financial liabilities. For 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.

2008 Non-derivative financial liabilities Trade payables Other payables and accruals Receipts in advance Provision for potential liabilities Bank borrowings due within one year	Weighted average effective interest rate Undiscounted cash flows within 1 year RMB’000 5,875 33,333 12,759 1,041 6.9% 14,000 67,008	Carrying amounts at 31 December 2008 RMB’000 5,875 33,333 12,759 1,041 14,000
		67,008

– II-32 –

APPENDIX II

FINANCIAL INFORMATION OF THE GROUP

2007 Non-derivative financial liabilities Trade payables Other payables and accruals Receipt in advance Provision for potential liabilities Bank borrowings due within one year	Weighted average effective interest rate Undiscounted cash flows within 1 year RMB’000 43,080 412,989 44,089 2,043 8.10% 67,022 569,223	Carrying amounts at 31 December 2007 RMB’000 43,080 412,989 44,089 2,043 62,000
		564,201

Fair value

The directors of the Company consider that the fair values of financial assets and financial liabilities recorded at amortised cost in the consolidated balance sheet approximate to the corresponding carrying amounts due to their short-term maturities.

Categories of financial instruments

Financial assets Loans and receivables (including cash and cash equivalents) Amount due from parent company Other receivables Prepayment Bank balances and cash Financial liabilities Financial liabilities measured at amortised cost Trade payables Other payables and accruals Bank loans-repayable within one year Receipts in advance Provision for a potential liability	2008 RMB’000 – 80,692 1,572 6,803 89,067	2007 RMB’000 54,268 31,914 3,039 4,478
		93,699

	5,875 33,333 14,000 12,759 1,041	43,080 412,989 62,000 44,089 2,043
	67,008	564,201

– II-33 –

APPENDIX II

FINANCIAL INFORMATION OF THE GROUP

8. TURNOVER

Turnover represents the amounts received and receivable for development, sale, rental and management of properties less sale returns and discounts and revenue from education projects for the year, the Group’s turnover for the year is stated below:

Continuous operations Development, sale, rental and management of properties Education projects Discontinued operations (Note) Cemetery development (Note)	2008 RMB’000 36,617 3,000	2007 RMB’000 3,905 3,211
	39,617 –	7,116 2,832
	39,617	9,948

Note: One former subsidiary of the Group, 深圳市西麗報恩福地墓園有限公司 Shenzhen Xili Baoen Fu Di Cemetery Company Limited (“Xili Cemetery”) operates cemetery business in Shenzhen of Guangdong Province, the PRC. The land on which the business is situated is a leasehold land with a medium lease terms expiry until 10 May 2048. Xili Cemetery develops tomb sets and niches for cremation urns on the land and conveys to the lessees for the period as same as the lease terms of the land. The rental income is wholly received from the leasee when the legally binding contract is signed. Such rental income is recognised on a straight-line basis in the income statement over the relevant lease terms. The rental income received but not yet recognised to consolidated balance sheet is classified as deferred income in the balance sheet.

9. SEGMENT INFORMATION

Business Segments

For management purposes, the Group is currently organised into two (2007: three) operating divisions: property development and education projects. These divisions are the basis on which the Group reports its primary segment information.

Principal activities are as follows:

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

There was no significant business and other transactions between the segments for both years.

The Group disposed cemetery development business in 2007 (See Note 15 for details).

– II-34 –

APPENDIX II

FINANCIAL INFORMATION OF THE GROUP

Segment information about these businesses is presented below:

(a) For the year ended 31 December 2008/as at 31December 2008:

Continuous	operations
Education projects RMB’000 3,000 (7,603) 266,981 36,959 4,628 11,980 852 –	Other business RMB’000 – –	Total RMB’000 39,617

		(19,147
		33 (9,502 (17,876 (216,438 204,123 (200
		(59,007 613
	– – – – – –	(58,394

		481,218 133,871
		615,089

		59,993 111,955 171,948

		4,628 – 12,094 122 852 – 2,987 1,047 216,438 –

– II-35 –

APPENDIX II

FINANCIAL INFORMATION OF THE GROUP

(b) For the year ended 31 December 2007/as at 31 December 2007:

Continuous operations	Continuous operations	Discontinued operations Sub-Total Cemetery development RMB’000 RMB’000 7,116 2,832 (23,574) (26,354)	Discontinued operations Sub-Total Cemetery development RMB’000 RMB’000 7,116 2,832 (23,574) (26,354)	Total RMB’000 9,948
Education projects RMB’000 3,211 (18,461) 405,356 116,731 5,771 18,567 – 94	Other business RMB’000 – –

				(49,928
		21 (8,040) (23,577) – (55,170) 613	– – (4,111) 198,436 167,971 (1,095)	21 (8,040 (27,688 198,436
				112,801 (482
	193 2,590 – – – –	(54,557)	166,876	112,319

		888,095 54,268 148,165	– – –	888,095 54,268 148,165
		1,090,528	–	1,090,528

		293,186 293,570	– –	293,186 293,570
		586,756 5,820 – 18,953 126 – – 94 –	– 1,910 2,081 – –	586,756

				7,730 – 21,034 126 – – 94 –

For the year ended 31 December 2008 and 2007, all of the Group’s businesses were taken place in the PRC. All of the Group’s turnover and operating results were originated in the PRC. In addition, all of the Group’s assets were located in the PRC, accordingly no geographical segment information is presented.

– II-36 –

APPENDIX II

FINANCIAL INFORMATION OF THE GROUP

10. FINANCE COSTS

Interest on bank borrowings wholly repayable within five years	Continuous operations 2008 2007 RMB’000 RMB’000 17,876 23,577	Discontinued operations 2008 2007 RMB’000 RMB’000 – 4,111	Total
			2008 2007 RMB’000 RMB’000 17,876 27,688

11. LOSS BEFORE TAXATION

Continuous	operations	Discontinued operations	Discontinued operations	Total	Total
2008 RMB’000 195 3,492 672 4,359	2007 RMB’000 203 4,208 1,134 5,545	2008 RMB’000 – – – –	2007 RMB’000 – 1,956 184 2,140	2008 RMB’000 195 3,492 672 4,359	2007 RMB’000 203 6,164 1,318
					7,685
1,000 800 2,061 10,155 –	1,100 – 7,466 9,053 2,564	– – – – –	– – 841 1,240 –	1,000 800 2,061 10,155 –	1,100 – 8,307 10,293 2,564

12. DIRECTORS’, SUPERVISORS’ AND SENIOR MANAGEMENTS’ REMUNERATION

(a) Directors’ and Supervisors’ Remuneration

The emoluments paid or payable to directors and supervisors were as follows:

Fees: Executive Directors Non-executive Directors Independent non-executive Directors Supervisors Other emoluments: Salary allowances and benefits in kind Contributions to retirement benefits schemes	2008 RMB’000 60 90 30 15	2007 RMB’000 45 – 135 23
	195 – – –	203
		– –
		–
	195	203

– II-37 –

APPENDIX II

FINANCIAL INFORMATION OF THE GROUP

The emoluments of each of the directors and supervisors were disclosed as below:

For the year ended 31 December 2008

Fees RMB’000 30 30 60 30 30 30 90 30 30 15	Other emoluments	Other emoluments
	Salary allowances and benefits in kind Contributions to retirement benefits schemes RMB’000 RMB’000 – – – – – – – – – – – – – – – – – – – –		Total emoluments RMB’000 30 30
60			60
30 30 30			30 30 30
90			90
30			30
30			30
15			15
195	–	–	195

– II-38 –

APPENDIX II

FINANCIAL INFORMATION OF THE GROUP

For the year ended 31 December 2007

Fees RMB’000 – 45 – – – 45 – – – – – – 45 45 45 135 23 – 23	Other emoluments	Other emoluments	Total emoluments Note RMB’000 – Resigned on 5 May 2007 45 Resigned on 5 May 2007 – – – Resigned on 1 March 2007 – – 45 – Resigned on 22 January 2007 – – – – Passed away in January 2007 – 45 Resigned on 8 June 2007 45 Resigned on 1 February 2007 45 135 23 Resigned on 6 March 2007 – – 203
	Salary allowances and benefits in kind Contributions to retirement benefits schemes RMB’000 RMB’000 – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – –		Total emoluments RMB’000 – 45 – – –
45			45
– – – – –			– – – – –
–			–
45 45 45			45 45 45
135			135
23 –			23 –
23			–
203	–	–

None of the directors of the company waived or agreed to waive any emoluments paid by the Group and no incentive payment for joining the Group or compensation for loss of office was paid or payable to any director of the company the two years ended 31 December 2008 and 2007.

– II-39 –

APPENDIX II

FINANCIAL INFORMATION OF THE GROUP

(b) Employees’ Emoluments

Of the five individuals with the highest emoluments in the Company, no director (2007: no director), whose emoluments are included in the disclosures in note(a) above. The emoluments of the remaining individuals, five (2007:five), non-director, highest paid individuals for the two years ended 31December 2008 and 2007 were as follows:

Salaries, allowance and other benefits Retirement benefit scheme contributions	2008 679 – 679	2007 1,082 –
		1,082

13. RETIREMENT BENEFITS SCHEME

The employees of the Group are members of state-managed retirement benefits schemes operated by the PRC government. The Group is required to contribute at a certain percentage on the total compensation paid to the Group’s employees for the year to fund the retirement benefits. The rate of contributions for the current year is 25.5% (2007: 25.5%). The only obligation of the Group with respect to the retirement benefits schemes is to make such specified contributions.

14. TAXATION

The taxation comprises of: The Company and subsidiaries – PRC enterprise income tax – Deferred taxation_(Note 34)_	Continuous	operations	Discontinued operations	Discontinued operations	Total	Total
	2008 RMB’000 – 613	2007 RMB’000 – 613	2008 RMB’000 – –	2007 RMB’000 (1,095) –	2008 RMB’000 – 613	2007 RMB’000 (1,095) 613
	613	613	–	(1,095)	613	(482)

No provision for Hong Kong profits tax has been made as the Group’s income neither arises in, nor is derived from Hong Kong for each of the two years ended 31 December 2008 and 2007.

The taxation rates applicable to the Group in the PRC is 15% – 25% (2007: 15% – 33%).

On 16 March 2007, the PRC promulgated the Law of the PRC on Enterprise Income Tax (the “New Law”) by Order No. 63 issued by the Tenth National People’s Congress. On 6 December 2007, the State Council of the PRC issued Implementation Regulations of the New law. Pursuant to the New Law and Implementation Regulations, the Enterprise income Tax for both domestic and foreign-invested enterprises will be unified at 25 % effective from 1 January 2008. There will be a transitional period for PRC subsidiaries that currently entitled to preferential tax treatments granted by the relevant tax authorities. PRC subsidiaries currently subject to an enterprise income tax rate lower than 25% will continue to enjoy the lower tax rate and be gradually transitioned to the new unified rate of 25 % within five years after 1 January 2008.

– II-40 –

APPENDIX II

FINANCIAL INFORMATION OF THE GROUP

The taxation for the year can be reconciled to the (loss) profit per the consolidated income statement as follows:

(Loss) profit before taxation – Continuous operations – Discontinued operations Income tax at the applicable tax rates Tax effect of income and expenses not taxable or deductible for tax purpose Tax effect of unrecognised tax losses Taxation expenses	2008 RMB’000 (59,007) –	2007 RMB’000 (55,170) 167,971
	(59,007) (14,752) 7,206 8,159	112,801
		38,814 61,417 (99,749)
	613	482

15. DISCONTINUED OPERATIONS

On 29 December 2007, the Railway Transport Intermediate Court of Shenyang held an auction in which Shenzhen Jingmei Industrial Development Limited (“Shenzhen Jingmei”) held by the Group and Xili Cemetery, the Group’s subsidiary operating cemetery development business were disposed of at the auction price of RMB110,000,000. The proceedings were used to repay the loans owing to Liaoning Hua Jin Hua Gong Group Company Limited (“Hua Jin Company”). These were regardedas discontinued operations and the consolidated income statement was therefore restated.

Below is the profit and loss analysis of the discontinued operations:

Operating loss of cemetery development business Profit from disposal of cemetery development business Attributable to: Equity holders of the Company Minority interests	2008 RMB’000 – – –	2007 RMB’000 (31,560) 198,436
		166,876

	– –	166,876 –
	–	166,876

– II-41 –

APPENDIX II

FINANCIAL INFORMATION OF THE GROUP

The cemetery development business has been included into the consolidated income statement for the two years ended 31 December 2008 and 2007 as follow:

Turnover Bank interests received Staff costs Depreciation and amorisation Loss on disposal of property and equipment Other operating expenses Finance costs Loss before taxation Taxation Loss for the year	2008 RMB’000 – – – – – – –	2007 RMB’000 2,832 – (2,140) (2,081) – (24,965) (4,111)
	– –	(30,465) (1,095)
	–	(31,560)

The auction of cemetery development business has not incurred taxation expenses or compensated loss.

16. DIVIDENDS

No dividend was paid or proposed, nor has any dividend been proposed since the balance sheet date (2007: Nil).

17. (LOSS) EARNING PER SHARE

For continuing and discontinued operations

The calculation of the basic loss per share attributable to the ordinary equity holders of the Company is based on the following data:

	2008	2007
Number of shares:
Weighted average number of ordinary shares for the
purpose of basic loss per share	1,020,400,000	1,020,400,000

No diluted loss per share have been presented for the two years ended 31 December 2008 and 2007 as there was no dilutive potential ordinary share for both years.

Earnings figures are calculated as follows:

(Loss) profit attributable to shareholders of the Company Less: Profit for the year of discontinued operations Loss per share calculated from continuous operations	2008 RMB’000 (54,638) – (54,638)	2007 RMB’000 115,657 166,876
		(51,219)

– II-42 –

APPENDIX II

FINANCIAL INFORMATION OF THE GROUP

18. PROPERTY AND EQUIPMENT

Buildings RMB’000 265,726 2,336 1,760 (14,460)	Furniture, Fixtures and office equipment RMB’000 20,579 114 125 (825)	Motor Vehicles Construction in progress RMB’000 RMB’000 4,578 10,173 – (2,450) – 5,845 (1,297) –	Motor Vehicles Construction in progress RMB’000 RMB’000 4,578 10,173 – (2,450) – 5,845 (1,297) –	Total RMB’000 301,056 – 7,730 (16,582)
255,362 – – (701) (254,661) – 15,297 7,404 (3,101) 19,600 – – (19,600) – 114,429 (114,429) –	19,993 – 38 – (3,526) 16,505 8,944 616 (460) 9,100 1,959 – (1,390) 9,669 – – –	3,281 – – (872) (1,127) 1,282 2,455 287 (462) 2,280 102 (722) (798) 862 – – –	13,568 (3,107) 1,483 – – 11,944 – – – – – – – – – – –	292,204 (3,107) 1,521 (1,573) (259,314)
				29,731
				26,696 8,307 (4,023)
				30,980 2,061 (722) (21,788)
				10,531
				114,429 (114,429)
				–
– 121,333	6,836 10,893	420 1,001	11,944 13,568	19,200

				146,795

– II-43 –

APPENDIX II

FINANCIAL INFORMATION OF THE GROUP

(a) The depreciation of the property and equipments is provided for based on the estimated useful lives and residual value, using the straight-line method and the following annual discount rates:

Buildings	2 – 10%
Furniture, fixture and office equipment	8 – 16%
Motor vehicles	8 – 16%

19. INVESTMENT PROPERTIES

RMB’000

Costs At 1 January 2007 Additions Disposals of subsidiaries At 31 December 2007 and 1 January 2008 Transfer from construction in progress At 31 December 2008 Accumulated depreciation At 1 January 2007 Provided for the year Eliminated on disposal of subsidiaries At 31 December 2007 and 1 January 2008 Provided for the year At 31 December 2008 Impairment loss At 1 January 2007, 1 January 2008 and 31 December 2008 Book value At 31 December 2008 At 31 December 2007	396,039 107 (56,686
	339,460 3,107
	342,567
	30,567 10,293 (4,476
	36,384 10,155
	46,539
	47,686
	248,342

	255,390

Investment properties represent land and buildings located in the PRC under medium terms and held for leasing.

At the balance sheet date, properties classified by their nature were as follows:

	2008	2007
	RMB’000	RMB’000
Campus	248,342	255,390

The investment properties was valued by an independent professional valuer, Malcolm & Associates Appraisal Limited, on 31 December 2008 based on open market basis, of which fair value was RMB298,000,000.

– II-44 –

APPENDIX II

FINANCIAL INFORMATION OF THE GROUP

20. PREPAID LEASE PAYMENTS ON LAND USE RIGHTS

Prepaid lease payments on land use rights of leasehold land in the PRC held under medium terms Analysed for reporting purposes as: Non-current assets Current assets	2008 RMB’000 –	2007 RMB’000 89,316

	– –	86,752 2,564
	–	89,316

The above amount was the prepaid lease payment for a piece of land located in Shenyang PRC used for education project purpose. The prepaid lease payments on land use right had been disposed during the year. Details please refer to note 35(c) of the notes to the financial statements.

21. GOODWILL

Costs At 1January 2007, 31December 2008 and 1 January 2008 Impairment At 1 January 2007, 31 December 2008 and 1 January 2008 Book value At 31 December 2008 At 31 December 2007	RMB’000 59,376
	59,376
	–

	–

22. AVAILABLE-FOR-SALE FINANCIAL ASSETS

					2008	2007
					RMB’000	RMB’000
Unlisted	equity	securities,	at	cost	20,000	20,000

The amount represents investment in Tsinghua Unisplendour Hi-Tech Venture Capital, Inc. (“Tsinghua Unisplendour”). The Group had 8% (2007: 8%) equity interests in Tsinghua Unisplenour. Tsinghua Unisplenour is an unlisted company established in the PRC and is engaged in investment in technology projects. The above investment is an unlisted equity securities issued by private companies. They are measured at cost less impairment at each balance sheet date because the range of reasonable fair value estimate is so significant that the directors of the Company are of the opinion that their fair values cannot be measured reliably.

– II-45 –

APPENDIX II

FINANCIAL INFORMATION OF THE GROUP

23. PROPERTIES HELD FOR SALE

Properties under development At cost Less: Impairment loss Realisable value Completed properties At cost Less: Impairement loss Realisable value	2008 RMB’000 410,379 (216,438) 193,941	2007 RMB’000 407,148 –
		407,148

	11,794 – 11,794	143,727 (65,888)
		77,839
	205,735	484,987

(a) The Group’s properties held for sale were all located in PRC and under medium-term leases (lease periods of 20 years or more but less than 50 years).
(b) Included in properties under development was development cost of a property development project in Beijing of approximately RMB193,941,000 (2007: RMB407,148,000). The development right for the land was acquired from the Municipal Government of Zhaoyang District of Beijing in previous years.

Relevant land policies in the PRC have been revised in recent years, so the land use right of the land must be obtained through public tendering procedures. Having not obtained the land use right of the land, the Group must participate in the public tendering procedures no matter whether the Group plans to continue developing or transfer the land. The Group has registered in the tendering for the use right of the land. Pursuant to the opinion of the Group’s lawyer, if the highest price in the tender is offered by the Group, the Group will obtain the land use right after paying the land premium. On the other hand, if the land is obtained by others, the Group can recover the paid land development costs, related expenses and a certain proportion of the profits in accordance with relevant regulations. The amount the Group can recover depends on the price of tender and the final cost confirmed by relevant authorities.

(c) As disclosed in note 33(a), a project of “Jinmao Tower” located in Shenyang, the PRC with the book value of approximately RMB23,257,000 in 2007 was disposed along with the disposal of the equity interest in Shenyang Pollon Finance Building Management Company Limited.
(d) Included in the completed properties was a project of “Water-Flowers City” located in Shenyang, the PRC with the book value of approximately RMB11,794,000 (2007: RMB54,582,000). The properties have been started to pre-sales in 2003. Up to 31 December 2005, all the units were subscribed. Due to the delay in the construction, the properties were unable to hand-over to the customers on schedule. Consequently, some of the customers demanded for refund of deposits paid.

– II-46 –

APPENDIX II

FINANCIAL INFORMATION OF THE GROUP

During the year, some customers have occupied the units they purchased. But since the Group has not completed the procedures of obtaining Real Estates Title certificate for purchasers as of the balance date of the financial statements, the sales amount of approximately RMB12,759,000 (2007: approximately RMB29,622,000) received was not recognized as income but stated as receipts in advance under current liabilities (Note 29).

As at 18 September 2008, the Group has obtained confirmation letter from Shenyang Building Ownership Certificate Registration Office, which allowed the buyers of the project housing “Water-Flowers City” to have ownership registered. The receipts in advance of “Water-Flowers City” is estimated to be transferred sale of housing in the coming future.

24. TRADE RECEIVABLES

The sale was recognised by the Group on accrual basis. The Group allows an average credit period of 30 days to the customers and the management will examine the credit period on a regular basis.

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

Over 2 years Allowances for bad and doubtful debts Net amount of trade receivables	2008 RMB’000 12,518 (12,518) –	2007 RMB’000 12,518 (12,518)
		–

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

Movement in allowance of receivables impairment is as follows:

At 1 January Reversal during disposing subsidiary At 31 December	2008 RMB’000 12,518 – 12,518	2007 RMB’000 12,588 (70)
		12,518

The allowance for bad and doubtful debts is individually impaired. Allowance is made for debtors who are either been placed under liquidation or in severe financial difficulties.

25. AMOUNT DUE FROM A FORMER CUSTOMER

Shenyang Water General Corporation (“SWGC”) Less: impairment loss	2008 RMB’000 96,656 (96,656) –	2007 RMB’000 96,656 (96,656)
		–

– II-47 –

APPENDIX II

FINANCIAL INFORMATION OF THE GROUP

SWGC was a sole customer of water and was a subsidiary of SPU when the Group was engaged in production and sale of urban purified water business before July 2002. The amount due from SWGC was the remaining balance of the purchase of water. According to the agreement entered with SWGC, the amount is required to be settled fully by the end of 2005. However, up to the date of approval of these financial statements, SWGC settled RMB400,000 only. The directors of the Company consider that recovery of the amount is remote, therefore, have made an impairment loss for the balance in full.

The amount is unsecured and interest free.

26. OTHER LONG TERM RECEIVABLES AND OTHER RECEIVABLES

Other long term receivables are amounts unsecured, interest free and payable over 1 year.

Other receivables are amounts unsecured, interest free and payable on demand.

The directors of the Company consider that the carrying amount of other long term receivables and other receivables approximates to their fair value.

27. INVESTMENT IN ASSOCIATE

Cost of investment in unlisted associates Less: Accumulated impairment	2008 RMB’000 200 (200) –	2007 RMB’000 – –
		–

At 31 December 2008, the Group had interests in the following associates:

			Percentage of
	Class of	Paid-up	effective equity
	shares	registered	interest held by	Principal
Name of subsidiary	held	capital	the Company	activities
		RMB’000	Directly Indirectly
Shenyang Development	Ordinary	200	1% 39%	Provision of
Property Management	share			property
Company Limited				management
				services

28. TRADE PAYABLES

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

			2008	2007
			RMB’000	RMB’000
Over	2	years	5,875	43,080

The directors of the Company consider that the carrying amount of trade payable approximates to their fair value.

– II-48 –

APPENDIX II

FINANCIAL INFORMATION OF THE GROUP

29. RECEIPTS IN ADVANCE

Sales of properties (Note23(c) and 23(d)) Others 30. PROVISION FOR POTENTIAL LIABILITIES Default payments for sales of properties 31. BANK LOANS Secured, variable rate loans due within one year Details of above-mentioned secured loans are as follows: SPUG Beijing Beida Jade Bird Company Limited (“Beida Jade Bird”) Zhuhai Beida Education Science Park Company Limited (“Zhuhai Beida”)	2008 RMB’000 12,759 – 12,759 2008 RMB’000 1,041 2008 RMB’000 14,000 14,000 2008 RMB’000 – – 14,000 14,000	2007 RMB’000 43,947 142
		44,089

		2007 RMB’000 2,043

		2007 RMB’000 62,000
		62,000

		2007 RMB’000 42,000 20,000 –
		62,000

The weighted average effective interest rates on the Group’s variable rate bank loans was 6.9% (2007: 8.1%).

– II-49 –

APPENDIX II

FINANCIAL INFORMATION OF THE GROUP

32. SHARE CAPITAL

Authorised: At 31 December 2007 and 31 December 2008 Domestic shares of RMB1.00 each H shares of RMB1.00 each Issued and fully paid: At 31 December 2007 and 31 December 2008 Domestic shares of RMB1.00 each H shares of RMB1.00 each	Number of shares 600,000,000 420,400,000 1,020,400,000	Amount RMB’000 600,000 420,400
		1,020,400

	600,000,000 420,400,000	600,000 420,400
	1,020,400,000	1,020,400

33. DEFERRED TAXATION

The following are the major deferred tax liabilities recognised and the movements thereon during the current and previous years:

At 1January 2007 Written back to consolidated income statement for the year At 31 December 2007 and 1 January 2008 Written back to consolidated income statement for the year At 31 December 2008	RMB’000 23,168 (613
	22,555 (613
	21,942

The Group’s deferred tax were related to the differences between the fair value of assets acquired and the corresponding tax bases arising from the acquisition of the subsidiaries.

As at 31 December 2008, the Group has estimated unused tax losses of RMB392,985,000 (2007: RMB392,985,000) available for offsetting future profits. No tax losses have been recognised as deferred tax assets due to the unpredictability of future profit streams. These unused tax losses will be expired by 2012.

34. OTHER NON-CURRENT LIABILITIES, OTHER PAYABLES AND ACCRUALS

Other non-current liabilities are amounts unsecured, interest free and payable over 1 year.

Other payables and accruals are amounts unsecured, interest free and payable on demand.

The director of the Company consider that the carrying amount of other non-current liabilities, other payables and accruals approximates to their fair value.

– II-50 –

APPENDIX II

FINANCIAL INFORMATION OF THE GROUP

35. DISPOSAL AND DEREGISTRATION OF SUBSIDIARIES

(a) The Group disposed its all equity interests in Shenyang Pollon Finance Building Management Company Limited at a total consideration of RMB200,000 on 30 October 2008.

The net assets of the subsidiary on the disposal date are as follows:

Net value of disposed assets: Property and equipment Properties held for sale Other receivables Bank overdrafts Trade payable Other payables and accrual expenses Receipts in advance Amounts due to Group companies Gain on disposal Total consideration Payment manner: Bank and cash Net amount of cash inflows arising from disposal Disposed bank overdrafts and sales proceed received	Building Management Company RMB’000 5 23,257 720 (1,642) (16,250) (8,025) (34,036) (27,087)
	(63,058) 63,258
	200

	200

	1,842

– II-51 –

APPENDIX II

FINANCIAL INFORMATION OF THE GROUP

(b) The Group disposed its 60% equity interests in Shenyang Development Property Management Company Limited at a total consideration of RMB600,000 on 28 March 2008.

The net assets of the subsidiary on the disposal date are as follows:

Net value of disposed assets: Property and equipment Other receivables Amount due from Group companies Bank balances and cash Other payables and accrual expenses Amount due to Group companies Minority interests Gain on disposal Total consideration Payment manner: Bank and cash Net amount of cash outflows arising from disposal Disposed bank balances and cash and sales proceed received	Shenyang Property RMB’000 142 8 9,034 2,291 (1,464) (11,936)
	(1,925) (1,765) 4,290
	600

	600

	1,691

– II-52 –

APPENDIX II

FINANCIAL INFORMATION OF THE GROUP

(c) The Group disposed its all equity and debts interests in Shenyang Development Beida Education Science Park Company Limited, Shenyang Jade Bird School Foreign Language School and Shenyang Beida Jade Bird Business Information System Co Ltd (“Shenyang Business Information”) at a total consideration of RMB8,380,207 on 25 September 2008.

The net assets of these subsidiaries on the disposal date are as follows:

	Shenyang Education,
	Jade Bird School and
	Shenyang Business
	Information
	RMB’000
Net value of disposed assets:
Property and equipment	122,950
Prepaid lease payments on land use rights	89,316
Inventories	342
Other receivables	2,576
Amount due from Group companies	8,210
Bank balances and cash	21
Trade payable	(2,637)
Other payables and accrual expenses	(39,952)
Amount due to Group companies	(266,486)
Bank borrowings	(42,000)
	(127,660)
Other reserves	(351)
Minority interests	(121)
Gain on disposal	136,512
Total consideration	8,380

Payment manner:
Bank and cash	8,380

Net amount of cash inflows arising from disposal
Disposed bank balances and cash and sales proceed received	8,359

– II-53 –

APPENDIX II

FINANCIAL INFORMATION OF THE GROUP

(d) Shenzhen Grand Scene Investment Development Co Ltd was deregistered on 11 November 2008.

The net assets of the subsidiary on the disposal date are as follows:

Net value of disposed assets: Bank balances and cash Amount due to Group companies Gain on deregistration Net amount of cash outflows arising from deregistration Deregistered bank balances and cash	Shenzhen Grand Scene RMB’000 7 (70)
	63

	(7)

36. OPERATION LEASE COMMITTMENTS

As a lessor

During the year, the rental income received by the Group from leasing schoolhouse and related equipments was analyzed as follows:

				2008	2007
				RMB’000	RMB’000
Schoolhouse	and	equipment	(Note)	3,000	3,000

Note: Pursuant to the agreement in respect of leasing schoolhouse and related equipments between the Group and the lessee Zhuhai Beida Subsidiary Experiment School (“Zhuhai School”), Zhuhai School had no amount owed to the Group (2007: RMB3,000,000).

As at the balance sheet date, the Group has entered into agreements with tenants to lease schoolhouse and related equipments. The lease period was from January 2003 to December 2013. Rents have been determined, until December 2009, and the subsequent rents would be otherwise negotiated.

As at the balance sheet date, the contracted and irrevocable minimum rents (excluding the rents for leasing schoolhouse and equipments) are as follows:

			2008	2007
			RMB’000	RMB’000
Within	one	year	3,000	3,000

– II-54 –

APPENDIX II

FINANCIAL INFORMATION OF THE GROUP

37. CONTINGENT LIABILITIES

Pursuant to the sales and purchase agreement for the acquisition of equity interests in Shenzhen Jingmei and Xili Cemetery (collectively refers as “Cemetery Companies” below) dated 31 December 2003, all liabilities not relating to the operations of cemetery business would be transferred out of the Cemetery Companies and undertaken up by the former shareholder of Cemetery Companies (the “Former Shareholder”). During 2004, the Company entered into an agreement with the Former Shareholder that of the Cemetery Companies’ other payables of approximately RMB24,771,000 and other receivables of approximately RMB8,785,000 would be offset against the outstanding balances of approximately RMB14,886,000 owed to the Cemetery Companies by the Former Shareholder and that the net balance of RMB1,100,000 owed to the Former Shareholder was waived.

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

The above contingent liabilities were released as Shenzhen Jingmei’s and Xili Cemetery’s equity interests were transferred in 2007.

38. LITIGATIONS AND SEQUESTRATION OF ASSETS

Up to the date of this report, the Group had a number of litigations in the PRC closed and in progress during the two years ended 31 December 2008 and 2007.

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

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

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

As a result, the loan and interest due to Dalian Branch of Shenzhen Development Bank had been fully settled pursuant to the Civil Mediation Agreement.

– II-55 –

APPENDIX II

FINANCIAL INFORMATION OF THE GROUP

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

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

On 12 December 2005, the Higher People’s Court of Liaoning Province issued the Civil Judgement (2005) Liao Min San Chu Zi No.26 民事判決書(2005)遼民三初字第26號, pursuant to which SPU was liable to repay the sum of RMB161,380,000 together with interest and other fees arising from the legal action in the total sum of RMB1,624,330 to Hua Jin Hua Gong within 10 days from the effective date of the Judgement. Beijing Diye and Beida Jade Bird undertook to repay the above-mentioned amounts for SPU ; Shenyang Pollon also undertook to repay the above-mentioned amounts for SPU, but they reserved the right to recover the loss from SPU after the assumption of liability as guarantors by Beijing Diye and Beida Jade Bird and compensation responsibility by Shenyang Pollon, respectively.

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

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

Pursuant to the letter of confirmation issued by Beijing Diye Real Estate Development Company Limited, the assistance of RMB195,000 due to Beijing Diye has been offset by its debt owed to the Company, whereby Beijing Diye has agreed not to claim against the Company for the above assistance.

Pursuant to a settlement agreement signed between the Company and Shenyang Pollon Finance Building Management Company Limited, the assistance of approximately RMB33,000,000 due to Shenyang Pollon, being the proceeds of assets from the said auction, will be offset by its debt owed to the Company, whereby Shenyang Pollon Finance Building Management Company Limited has agreed not to claim against the Company for the above assistance in judicial or other ways.

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

In the course of the legal action initiated by Hua Jin Hua Gong for the sum of RMB161,380,000, SPUG and Shenzhen Jingmei provided another guarantee of not more than RMB91,910,000 to Beida Jade Bird. As mentioned above, the sale proceeds of Beida Jade Bird’s assets from an auction were applied to settle Hua Jin Hua Gong’s claim. On 14 May 2007, Beida Jade Bird commenced legal action against SPUG and Shenzhen Jingmei for its payment to Hua Jin Hua Gong. On 13 June 2007, Beijing Intermediate People’s Court issued the Civil Judgement (2007) Yi Zhong Min Chu Zi No.1843 民事判決書(2007)一中民初字第1843號 and handed down judgment, under which SPUG and Shenzhen Jingmei were liable to pay off the claim of Beida Jade Bird together with the relavant interest. Up to 31 August 2008, SPU has repaid approximately RMB101,340,000 to Beida Jade Bird. The unpaid balance of the claim of Beijing Jade Bird and the interest amount to approximately RMB82,000,000.

– II-56 –

APPENDIX II

FINANCIAL INFORMATION OF THE GROUP

According to the letter of undertaking issued by Beida Jade Bird on 17 September 2008, Beida Jade Bird undertook that it would not require Shenyang Public Utility to make repayment in cash within 24 months from 17 September 2008.

According to the letter of undertaking issued by Shenyang Public Utility Group Company Limited on 18 September 2008, Shenyang Public Utility Group Company Limited undertook that it would not require SPU to make repayment in cash within 24 months from 18 September 2008 if Shenyang Public Utility Group Company Limited repaid corresponding debts on behalf of SPU.

(d) The two loan disputes between the Company and Shenyang Branch of Guangdong Development Bank (“Guangdong Development Bank”) and subsequent lawsuits with Hua Jin Hua Gong

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

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

On 18 February 2006, Shenyang Intermediate People’s Court issued the Civil Judgement [2006] Shen Zhong Min (3) He Chu Zi No.34 （《判決書》(2006)瀋中民三合初字第34號）, pursuant to which, (1) the Company was liable to repay the principal of RMB29,000,000 within 10 days from the date of judgement; (2) the Company was liable to pay the interest of the loan amounting to RMB179,916; (3) Guangdong Development Bank lawfully enjoyed priority in compensation in respect of the two time deposits of the Company amounting to RMB10,302,700 which were the pledge of the pledge guarantee set by the Company for the allowance of RMB29,000,000; (4) SPUG, Hua Jin Hua Gong, Huajin Tongda and Beida Jade Bird were entitled to recover the amount from the Company after they jointly undertook joint responsibility and joint repayment responsibility for the repayment obligation mentioned in (1) and (2); and (5) the Company also undertook to pay the legal fee of RMB155,010 and a property custody fee of RMB145,520.

On 6 April 2006, Guangdong Development Bank sequestrated RMB70,000,000 and RMB80,000,000 from the accounts of the Company and Hua Jin Hua Gong respectively. Among above-mentioned amount, RMB10,300,000 was used to repay the principal of the loan of RMB20,000,000, and the balance was used to repay another loan of RMB171,000,000. Thus the outstanding amount of the loan of RMB29,000,000 was RMB18,700,000.

In August 2007, Shenyang Intermediate People’s Court sequestrated RMB56,462,000 from the account of Hua Jin Hua Gong to settle the outstanding principal and interest of the loan of RMB29,000,000.

As a result, the principal and interest of the loan of RMB29,000,000 has been fully recovered by Guangdong Development Bank.

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

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

– II-57 –

APPENDIX II

FINANCIAL INFORMATION OF THE GROUP

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

Pursuant to Civil Mediation Agreement (2006) Shen Zhong Min Er Fang Chu Zi No.190 民事調解書(2006)瀋中民二房初字第190號 issued by Shenyang Intermediate People’s Court of Liaoning Province, during the litigation, Guang Dong Development Bank repaid the principal and interest of the loan by the principal and interest of the pledged deposits of the Company which amounted to RMB63,389,000, in which RMB60,192,000 was repaid for the principal of the loan, RMB3,197,000 were used for the repayment of interest and compound interest respectively on 6th April 2006, and Guang Dong Development Bank recovered RMB60,730,000 as the principal of the loan and RMB88,000 of interest from a deposit of RMB80,000,000 of Hua Jin Hua Gong in the Guang Dong Development Bank. And Guang Dong Development Bank also took the remaining RMB19,183,000 of the above RMB80,000,000 as settlement of the principal of the loan on 12 April 2006. As a result, the remaining outstanding principal was RMB30,896,000.

On 12 May 2006, Guangdong Development Bank commenced legal action against the Company, Hua Jin Hua Gong, SPU, Beida Jade Bird and Huajin Tongda for the outstanding amount of RMB30,896,000 in Shenyang Intermediate People’s Court.

On 31 January 2007, Shenyang Intermediate People’s Court issued the Civil Judgement [2006] Shen Zhong Min (3) He Chu Zi No.234 (2006)瀋中民三合初字第 234號《民事判決書》, pursuant to which (1) the Company was liable to repay the outstanding amount of RMB30,896,000 and the interest of RMB2,221,000 to Guangdong Development Bank within 10 days from the date of judgment; (2) Beida Jade Bird and SPU were jointly liable to pay off the amount payable; (3) Huajin Tongda and Hua Jin Hua Gong jointly guaranteed the repayment of the outstanding amount mentioned in (1) but only limited to RMB50,000,000 and RMB51,300,000 respectively; and (4) the Company, Hua Jin Hua Gong, SPU, Beida Jade Bird and Huajin Tongda undertook to pay the legal expense of RMB164,000 and the custody fee of RMB160,000.

In August 2007, Shenyang Intermediate People’s Court sequestrated RMB56,462,000 from the account of Hua Jin Hua Gong to settle the outstanding amount of RMB30,896,000 and all the principal and interest of the loan.

As a result, Guangdong Development Bank has recovered all the principal and interest of the loan of RMB171,000,000.

(e) The claim for RMB80,000,000 from Hua Jin Hua Gong after the loan disputes between the Company and Guangdong Development Bank

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

Higher People’s Court of Liaoning Province issued the Civil Mediation Agreement (2006) Liao Min San Chu Zi No.43 民事調解書(2006)遼民三初字第43號 in respect of the settlement.

– II-58 –

APPENDIX II

FINANCIAL INFORMATION OF THE GROUP

In June 2006, Hua Jin Hua Gong entered into a compromise agreement with the Company, SPU and Beida Jade Bird, pursuant to which (1) the Company was liable to pay off RMB80,000,000 and the interest incurred before 25 November 2006; (2) in the event that the Company was unable to pay off the sum, each of SPUG and Beida Jade Bird would pay one-third of the outstanding balance and the Company shall repay the remaining one-third; and the Company was liable to pay the legal expense of RMB410,000 and the custody fee of RMB401,000.

Owing to the fact that the Company, SPU and Beida Jade Bird did not implement the repayment voluntarily, the Railway Transport Intermediate Court of Shenyang (瀋陽鐵路運輸法院) held an judicial sale on 29 December 2007, through which the 95% equity interest in Shenzhen Jingmei held by the Company was disposed of. Subsequently the total sum of the principal, interest, legal expense and execution fee amounting to RMB83,540,000 was repaid to Hua Jin to fully settle the amount of RMB80,000,000 and the interest owed to Hua Jin.

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

RMB56,462,000 was sequestrated from the account of Hua Jin respectively in settlement of the RMB29,000,000 loan and the RMB171,000,000 loan payable by the Company. In September 2007, Hua Jin commenced a legal action against the Company, SPU and Beida Jade Bird to recover the sum of RMB56,462,000.

On 17 October 2007, Hua Jin reached a settlement with the Company, SPU, Beida Jade Bird, Shenyang Pollon and Beijing Mingyude Business and Trade Company Limited (“Beijing Mingyude”) in respect of the dispute about guarantee recourse. The Higher People’s Court of Liaoning Province issued the Civil Mediation Agreement (2007) Liao Min San Chu Zi No.36 民事調解書(2007)遼民三初字第36號 relating to this settlement, pursuant to which (1) the sum of RMB56,462,000 as an assistant amount for fulfilling its guarantee responsibility and the remaining interest incurred from the date of making assistant payment to the date of actual repayment calculated at then prevailing loan interest rate for circulating fund issued by the People’s Bank of China are payable by the Company to Hua Jin; (2) Hua Jin agrees the Company to repay the aggregate debt of RMB56,462,000.

The Company was liable to repay RMB32,160,000 before 30 November 2007 and to repay RMB24,300,000 before 25 December 2007; (3) Beida Jade Bird and SPUG continue to jointly guaranteed the debt of RMB56,460,000 payable by the Company to Hua Jin, and in the event that Hua Jin was unable to recover the sum, each of the Beida Jade Bird and SPU would pay one-third of the outstanding amount; (4) Mingyude guaranteed the debt of RMB32,160,000 payable by the Company, and pledged the time deposit certificate of RMB32,000,000 as a guarantee; Shenyang Pollon guaranteed the debt of RMB24,300,000 payable by the Company; (5) If the Company did not implemented the repayment on time and Mingyude and Shenyang Pollon did not fulfilled the guarantee responsibility on the agreed term, the Company shall be liable to repay the plaintiff Hua Jin based on the aggregate debt of RMB56,462,000; (6) after above-mentioned guarantors fulfilled the guarantee responsibility, they are entitled to recover the debt from the Company at the amount they made repayment on behalf of the Company; (7) each of Hua Jin and the Company was liable to pay for the legal fee of RMB162,000 and a custody fee of RMB5,000.

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

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

– II-59 –

APPENDIX II

FINANCIAL INFORMATION OF THE GROUP

(f) The claim for RMB56,462,000 by Hua Jin after the loan disputes between the Company and Guangdong Development Bank

On 20 June 2008, Shenyang Pollon signed the Agreement of Settlement of Debts by Properties with Hua Jin Hua Gong, the Company, Beida Jade Bird and SPUG, pursuant to which RMB24,300,000 worth of 69 residential units of Cosmo International Mansion owned by Shenyang Pollon were sequestrated to settle Hua Jin Hua Gong’s claim. The transfer of ownership of Cosmo International Mansion to Hua Jin Hua Gong is still ongoing.

According to the Agreement signed by the Company and Shenyang Pollon, Shenyang Pollon and the Company agreed unanimously to settle the debts by eliminating debts by properties in respect of the situation that Shenyang Pollon repaid the debt of RMB24,300,000 to Hua Jin Hua Gong for the Company by settlement of debts by properties, and Shenyang Pollon guaranteed not to recover the above amounts through law or other ways compulsorily.

(g) According to the information provided by the Company, there are 2 cases of material lawsuits involved with a subsidiary of the Company, Shenyang Development Real Estate Company Limited (“Shenyang Development”) occurred within PRC mainland from the suspension date to the date of issuing the legal opinion, which include:
(i) The dispute in relation to a construction contract amongst Shenyang Development, No.6 Construction Work Company of No. 4 Works Bureau of China Construction (“China Construction) and the guarantor Shanghai Hanhua Property Management Company Limited (“Shanghai Hanhua”)

After the mediation of Shenyang Intermediate People’s Court, all parties involved had voluntarily reached a mediation agreement pursuant to which, Shenyang Intermediate People’s Court issued the Civil Mediation of (2006) Liao Zhong Min (2) Fang Chu Zi No. 129 and the Civil Execution Order of (2006) Shen Zhong Min (2) Fang Chu Zi No. 129 to confirm the main contents of the mediation agreement are as follows: (1) both parties have agreed that Shenyang Development shall pay the construction cost and interest totaling RMB5,831,000 by two instalments; (2) the legal fee and custody fee shall be borne by Shenyang Development and China Construction equally; and if the guarantor shall not implement the repayment on time, Shenyang Development shall pay all the litigation fees; (3) a sum of RMB2,000,000 shall be paid to China Construction before 14 February 2007; and a sum of RMB3,831,000 and litigation fee shall be paid to China Construction before 10 April 2007. If the guarantor failed to make the repayment on time, Shenyang Development shall pay half of the interest forgone by China Construction; (4) the guarantor Shanghai Hanhua guaranteed the payment of the above amount by Shenyang Development to China Construction. If Shenyang Development fails to make payment as per the term provided in Clause 2 of the agreement, the guarantor shall make the payment accordingly. If the guarantor fails to perform its responsibility after the due date, China Construction may apply for compulsory execution of the guarantee pursuant to a Civil Mediation Agreement delivered by the Court in accordance with the law; (5) the three parties of the agreement have agreed that, if the guarantor shall obtain all the title of debts requested by China Construction towards Shenyang Development in the litigation, and the right of custody over the assets of Shenyang Development involved in the litigation; (6) after performance of its responsibility, the guarantor shall have the right of recourse against Shenyang Development in accordance with Article 31 of the Law of Guarantee of the People’s Republic of China and shall have the right to apply for compulsory execution of the Civil Mediation issued by the Court in accordance with the applicable law.

The guarantor Shanghai Hanhua shall perform its responsibility by making all payments on behalf of Shenyang Development.

– II-60 –

APPENDIX II

FINANCIAL INFORMATION OF THE GROUP

The litigation was handled and mediated by the Intermediate People’s Court of Shenyang and all parties involved had reached a reconciliation agreement voluntarily, pursuant to which, the Court issued a Civil Mediation Agreement 《民事調解書》 (2006) Liao Zhong Min Er Fang Chu Zi No. 190 as follows, inter alias: (1) both parties agreed that the Company shall pay to Shenyang Tianbei the construction fee and interest totaling RMB17,000,000 by two instalments. The legal fee, custody fee and audit fee totaling RMB281,000 shall be borne by Shenyang Development and Shenyang Tianbei equally in the amount of RMB140,000. Shenyang Development shall pay such amount to Shenyang Tianbei on or before 20 July 2007. Shenyang Tianbei and Shenyang Development have no other dispute over the petition by Shenyang Tianbei; (2) Shenyang Development shall pay RMB4,130,000 and RMB12,870,000 to Shenyang Tianbei on or before 28 June 2007 and 6 July 2007 respectively; (3) Shanghai Hanhua, the Guarantor, has agreed to assume the responsibility of Shenyang Development to pay RMB4,130,000 to Shenyang Tianbei pursuant to Article 2 of the agreement, and Beijing Mingyude, the Guarantor, has agreed to assume the responsibility of Shenyang Development to pay RMB12,870,000 to Shenyang Tianbei pursuant to Article 2 of the agreement. If Shenyang Development fails to make payment on or before the due dates as stated in Article 2 of the agreement, the Guarantors shall assume the payment responsibility from the due dates as stated in Article 2 of the agreement for two years;

(ii) The dispute of a construction contract amongst Shenyang Development and Shenyang Tianbei Construction Installation work Company (“Shenyang Tianbei”), Shanghai Hanhua (the Guarantor), Beijing Mingyude Business and Trade Company Limited (“Beijing Mingyude”)

(4) Shenyang Tianbei has agreed to return all project files and relevant information for completion examination of the projects involved in the litigation, as well as to deliver vacant possession all 6 residential units and one shop in “Shui Xie Hua Du” 水榭花都 currently occupied by it to Shenyang Development within 3 days upon receipt of RMB4,130,000 as provided in Article 2 of the agreement; (5) Shenyang Tianbei has agreed to issue receipt and tax vouchers to Shenyang Development within 15 days upon receipt of RMB12,870,000 as required in Article 2 of the agreement. Shenyang Tianbei shall also assign a designated person to assist Shenyang Development to complete the registration and examination of the projects with the related authorities (the registrars). Shenyang Tianbei has agreed to submit its consent to the Court for the release of the confiscated and frozen assets of Shenyang Development and assist Shenyang Development to finish the relief of the assets; (6) if Shenyang Tianbei fails to perform its responsibilities as provided in Article 4 and 5 of the agreement in time, Shenyang Development may apply to the competent court for compulsory performance of the responsibilities of Shenyang Tianbei as provided in Article 4 and 5 in the agreement; (7) the four parties to the agreement have agreed that, after the execution of the agreement, if the Guarantors have paid all of the debts as stated in Article 2 of the agreement on behalf of Shenyang Development, the Guarantors shall have the right of recourse against Shenyang Development in an amount equal to the debts repaid to Shenyang Tianbei and obtain the custodian rights of Shenyang Tianbei over the assets of Shenyang Development; and (8) after performance of their responsibilities, the Guarantors shall have the right of recourse against Shenyang Development in accordance with Article 31 of the Law of Guarantee of the People’s Republic of China and shall have the right to apply for compulsory execution of the Civil Mediation issued by the Court in respect to the litigation in accordance with the applicable law.

The Guarantors, Shanghai Hanhua and Beijing Mingyude, had performed their responsibilities as provided in the above civil mediation agreement by making payments of RMB4,130,000 and RMB12,870,000 respectively on behalf of Shenyang Development.

– II-61 –

APPENDIX II

FINANCIAL INFORMATION OF THE GROUP

According to a Confirmation Letter 《確認函》 issued by Shanghai Hanhua, the RMB4,130,000 paid by Shanghai Hanhua for Shenyang Development has been settled. Shanghai Hanhua will not invoke a claim against Shenyang Development to pay the claim in cash.

According to the engagement letter of settlement business by China Merchants Bank （招商銀行結算業務委託書） (NO0013645688) and the entrustment payment notice provided by the Company, the Company had paid RMB46,799,130 to Beijing Mingyude in July 2008 by way of entrustment payment, RMB13,567,000 of which was for the RMB12,870,000 that Beijing Mingyude had paid for the Company as a guarantor and the interest accrued.

(iii) The petition for execution of right of recourse by Shanghai Hanhua, the execution applicant, against Shenyang Development, the enforcee

As Shanghai Hanhua has performed its guarantee responsibility by repaying to Shenyang Development pursuant to Civil Mediation Agreement (2006) Liao Zhong Min (2) Fang Chu Zi No. 129, Shanghai Hanhua applied to the Intermediate People’s Court of Shenyang for compulsory execution of Civil Mediation Agreement (2006) Liao Zhong Min (2) Fang Chu Zi No.129. Both parties had reached a settlement agreement to settle all the debts by transferring the entire equity interest in Shenyang Development Beida Education Science Park Company Limited held by Shenyang Development, the enforce, at a value of RMB5,866,000. In this respect, the parties had executed a Share Settlement Agreement.

On 19 November 2007, Shanghai Hanhua, the execution applicant, applied to the Intermediate People’s Court of Shenyang for the closure of the litigation. The Intermediate People’s Court of Shenyang issued a Civil Order (Execution) (2007) Shen Fa Zhi Ji No.577 on 15 January 2008, which approved the Share Settlement Agreement between the parties allowed the transfer of equity interest. The execution of the Civil Mediation Agreement of Intermediate People’s Court of Shenyang (2006) Liao Zhong Min (2) Fang Chu Ji No. 129 was completed.

(h) In 2008, there were a number of new litigation cases regarding to the claims from individual customers and contractors against Shenyang Development, Pollon Finance and Shenyang Business Information of which the amount of total claims was uncertain up to the date of this report. The directors of the Company are of their opinion that the captioned contingent liabilities arising from the litigations of Pollon Finance and Shenyang Business Information were released as their equity interests were transferred in 2008.

39. POST BALANCE SHEET EVENT

(a) According to the sale and purchase agreement dated 31 December 2008, the entire interest, that is 80% of Beijing Diye, will be disposed to a third party for a total consideration of RMB200,000,000. The agreement is subject to the approval of the resumption status of the company and the approval of the disposal by the shareholders of the company.

– II-62 –

APPENDIX II

FINANCIAL INFORMATION OF THE GROUP

Particulars of its assets and liabilities, as at 31 December 2008 are as follows:

Assets Property and equipment Properties held for sale Bank balances and cash Liabilities Trade payables Other payables and accrual expenses Internal amounts due to the Group’s companies	RMB’000 427 193,941 6,532
	200,900

	20 880 461,184
	462,084

(b) On 5 January 2009, the Company as purchaser signed a sale and purchase agreement of which the Company will purchase a property in Beijing for a total consideration of RMB93,000,000 from a third party. The property comprises the first and second floors of an 18-storey commercial building in Beijing and the gross floor area of the property is approximately 3,808.27 square meter. The agreement is subject to the approval of the resumption of listing status of the Company, the approval of the purchase by the shareholders of the Company and the completion of the sale of the entire interest held by the Company in Beijing Diye.
(c) On 5 January 2009, the Company singed a sale and purchase agreement with third parties for the sale and purchase of Shenzhen Jade Bird Optoelectroice Company which owns a property comprising a 7-storey building located in the Shenzhen for a total consideration of RMB83,000,000. The gross floor area of the property is approximately 12,508.18 square meter. The agreement is subject to the approval of the resumption of listing status of the Company, the approval of the purchase by the shareholders of the Company and the completion of the sale of the entire interest held by the Company in Beijing Diye.
(d) Change of Substantial Shareholder

On 26 February 2009, the Company received a copy of [2007] Yi Zhong Zhi Zi No.1192-3, Civil Judgment, 民事裁定書(2007)一中執字第1192-3 號 issued by the Intermediate People’s Court of Beijing (the “Court”) on 24 February 2009 (the “Judgment”). The Judgment indicated that the 600,000,000 domestic shares of the Company (representing approximately 58.8% equity interest of the issued share capital of the Company as at the date of this announcement) held by Shenyang Public Utility Group Company Limited (“SPU”) (the “Domestic Shares”) were put under an auction pursuant to the Court’s order dated 13 February 2009. The Domestic Shares are then being transferred to Beijing Mingde Guangye Investment Consultant Company Limited (北京明德廣業投資咨詢有限公司) (“Beijing Mingde Guangye”) at a consideration of RMB102,520,000, representing RMB0.17 per Domestic Share as a result of the aforesaid auction.

The Judgment indicated that on 10 July 2007, Beijing Beida Jade Bird Company Limited (“Beida Jade Bird”) transferred its creditor’s right for its claim against SPU and Shenzhen Jingmei to Beijing Teli. The Domestic Shares were sequestrated by the Court on 21 July 2008.

– II-63 –

APPENDIX II

FINANCIAL INFORMATION OF THE GROUP

The Judgment indicated that due to the fact that the SPU and Shenzhen Jingmei did not implement the required relevant repayment, Beijing Teli applied to the Court to dispose the Domestic Shares by an auction. The Domestic Shares were put under an auction pursuant to the Court’s order on 13 February 2009. The Domestic Shares are being transferred to Beijing Mingde Guangye at a consideration of RMB102,520,000, representing RMB0.17 per Domestic Share as a result of the aforesaid auction.

Trading in the H Shares was suspended with effect on 23 December 2004 and has remained suspended pending the release of announcement relating to the outstanding financial statements of the Company and the submission of a viable resumption proposal to demonstrate, among other things, that the Company (i) complies with Rule 13.24 of the Listing Rules; (ii) has in place adequate financial reporting system and internal control procedures; and (iii) has sufficient working capital for the operation to seek its approval for the resumption of trading in the H Shares. Further announcement will be made in this regard in compliance with the Listing Rules. Trading in the shares of the Company will remain suspended until further notice.

Beijing Mingde Guangye has indicated in a letter to the Company on 26 February 2009 that it fully supports the resumption of trading of H-shares of the Company.

40. CONNECTED TRANSACTIONS

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

The identified connected parties of the Group are as follows:

Name of company

Relationships with the Company

SPU Beida Hi-Tech

The parent company of the Company A shareholder of SPU

Weifang Beida Jade Bird Huaguang Technology Company Limited (“Jade Bird Huaguang”)

The holding company of Beida Hi-Tech

Beida Jade Bird

Beijing Tianqiao Beida Jade Bird Technology Company Limited (“Beijing Tianqiao”)

A shareholder of Jade Bird Huaguang A shareholder of Jade Bird Huaguang

Beijing Beida Education Investment Company Limited (“Beida Education Investment”)

A subsidiary of Beida Jade Bird

Zhuhai School

珠海科教

北京特利投資管理有限公司

深圳青鳥光電有限公司(“深圳青鳥光電”)

Huajin Company

Beijing Peking University Resource Group Co., Ltd. (“Peking University Resource”)

A branch of Beida Education Investment A subsidiary of Beida Education Investment A subsidiary of Beida Jade Bird A subsidiary of Beida Jade Bird Other state-owned enterprise Other state-owned enterprise

– II-64 –

APPENDIX II

FINANCIAL INFORMATION OF THE GROUP

Apart from the guarantees provided by certain connected parties for bank borrowings of the Group as stated in Note 30, principal connected party transactions in the ordinary course of business between the Group and connected parties are as follows:

(a) During the year, the Group received rental income of RMB3,000,000 (2007: RMB3,000,000) from Zhuhai School for leasing of campus with related equipment. The lease period was from January 2003 to December 2013. Rents have been determined until December 2009 and the subsequent rents would be otherwise negotiated by the parties.
(b) As at balance sheet date, the balances of connected parties are as follows:

Name of connected party Other payables and accrual expenses Beida Jade Bird 北京特利 Huajin Company Beijing Tianqiao Zhuhai School (c) Non-current liabilities Beida Jade Bird (d) Compensation for the key management Short term benefits	2008 RMB’000 – – – – 3,999 2008 RMB’000 82,998 2008 RMB’000 –	2007 RMB’000 126,924 23,729 78,155 5,400 20,328

		2007 RMB’000 –

		2007 RMB’000 226

Remuneration of directors and the key management is determined by the Administrative Resources and the Remuneration Committee based on personal performance and market trend.

– II-65 –

APPENDIX II

FINANCIAL INFORMATION OF THE GROUP

41. PRINCIPAL SUBSIDIARIES

Particulars of the principal subsidiaries, as at 31 December 2008 are as follows:

			Percentage of	Percentage of
	Class of	Paid-up	effective equity
	shares	registered	interest held by		Principal
Name of subsidiary	held	capital	the Company		activities
		RMB’000	Directly	Indirectly
Shenyang Development	Ordinary	250,000	100%	–	Development
Real Estate	share				and sale of
					properties
Beijing Diye	Ordinary	30,000	–	100%	Development
	share				and sale of
					properties
Shanghai Beida Jade	Ordinary	100,000	80%	20%	Closed
Bird Education	share
Investment Company
Limited
Zhuhai Beida Education	Ordinary	20,000	70%	–	investment
Science Park Company	share				and
Limited					management
					of education
					projects

(a) The above list only includes the information about principal subsidiaries which are considered by the directors of the Company to be able to affect results or assets of the Group. In the opinion of the directors, to present the information about all the subsidiaries would be too redundant.
(b) All subsidiaries of the Group are companies with limited liabilities incorporated in PRC and are operated in PRC.
(c) None of the subsidiaries owned any debt securities that were intermittently effective as at balance sheet date or any time during the year.

– II-66 –

APPENDIX II

FINANCIAL INFORMATION OF THE GROUP

42. BALANCE SHEET OF THE COMPANY

NON CURRENT ASSETS Property and equipment Investment in subsidiaries Available-for-sale financial assets Other long term receivable CURRENT ASSETS Amount due from parent company Amounts due from subsidiaries Other receivables Other current assets Bank balances and cash CURRENT LIABILITIES Other payables and accrued charges Amounts due to subsidiaries NET CURRENT ASSET TOTAL ASSETS LESS CURRENT LIABILITIES CAPITAL AND RESERVES Share capital Reserves TOTAL EQUITY NON CURRENT LIABILITY Other non-current liabilities TOTAL EQUITY AND NON CURRENT LIABILITIES	2008 RMB’000 283 95,151 20,000 32,744	2007 RMB’000 531 598,622 20,000 –
	148,178 – 405,152 80,474 – 171	619,153
		58,224 745,505 44,660 1,000 3,264
	485,797	852,653

	29,238 93,486 122,724	142,760 272,324
		415,084
	363,073 511,251	437,569

		1,056,722

	1,020,400 (592,147)	1,020,400 36,322
	428,253 82,998 511,251	1,056,722

		–

		1,056,722

– II-67 –

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 2009. 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 2009 which are included in the 2009 interim report dated 31 August 2009.

Condensed Consolidated Income Statement

For the six months ended 30th June 2009

Note Turnover 3 Cost of properties sold Taxes on sales of properties Gross Profit Other operating expenses Finance costs Profit/loss before taxation Taxation 4 Profit/loss after taxation Gain on disposal of subsidiaries Total profit Of which: Profit/loss attributable to shareholders of the Company Profit/loss attributable to minority interests Earnings per share – basic 6	Six months ended 30th June 2009 2008 (Unaudited) (Unaudited) RMB’000 RMB’000 2,167 38,117 (793) (38,866) (83) (83) 1,291 (832) (2,492) (7,376) (524) (13,739) (1,725) (19,837) – – (1,725) (19,837) – 157,909 (1,725) 138,072 (1,788) 138,094 63 (22) (1,725) 138,072 (RMB0.002) RMB0.135	Six months ended 30th June 2009 2008 (Unaudited) (Unaudited) RMB’000 RMB’000 2,167 38,117 (793) (38,866) (83) (83) 1,291 (832) (2,492) (7,376) (524) (13,739) (1,725) (19,837) – – (1,725) (19,837) – 157,909 (1,725) 138,072 (1,788) 138,094 63 (22) (1,725) 138,072 (RMB0.002) RMB0.135
	1,291 (2,492) (524) (1,725) –	(832 (7,376 (13,739
		(19,837 –
	(1,725) – (1,725)
	(1,788) 63	138,094 (22
	(1,725) (RMB0.002)

– II-68 –

APPENDIX II

FINANCIAL INFORMATION OF THE GROUP

Condensed Consolidated Comprehensive Income Statement

	Six months ended	Six months ended	Six months ended
	30th	June
	2009		2008
	(Unaudited)	(Unaudited)
	RMB’000	RMB’000
Profit for the Period	(1,725)		138,072
Other consolidated income	–		–
Total comprehensive income for the Period	(1,725)		138,072
Of which:
Profit/loss attributable to shareholders
of the Company	(1,788)		138,094
Profit/loss attributable to minority interests	63		(22)

– II-69 –

APPENDIX II

FINANCIAL INFORMATION OF THE GROUP

Condensed Consolidated Balance Sheet

As at 30th June 2009

Note Non-current assets Plant and equipment Investment properties Prepaid lease payments on land use rights Available-for-sale financial assets Other non-current assets Current assets Properties held for sale Inventories Accounts receivable 7 Amount due from the holding company Prepaid lease payments on land use rights Prepayments Other receivables 8 Bank balances and cash Current liabilities Accounts payable 9 Receipts in advance Other payables and accrued charges Income tax payable Bank loans – due within one year 10 Expected liabilities Net current assets Total assets less current liabilities	As at 30th June 2009 (Unaudited) RMB’000 17,769 248,342 – 20,000 44,244	As at 31st December 2008 (Audited) RMB’000 19,200 248,342 – 20,000 32,745
	330,355 193,941 – 759 – 2,095 60,574 7,149 264,518 5,956 14,359 31,831 – 14,000 1,041 67,187 197,331	320,287
		205,735 – – – 1,572 80,692 6,803
		294,802
		5,875 12,759 33,333 – 14,000 1,041
		67,008
		227,794
	527,686	548,081

– II-70 –

APPENDIX II

FINANCIAL INFORMATION OF THE GROUP

Note Equity Share capital Reserves Shareholders’ equity Minority interests Total equity Non-current liabilities Deferred taxation 11 Long-term liabilities	As at 30th June 2009 (Unaudited) RMB’000 1,020,400 (607,762) 412,638 28,778 441,416 21,942 64,328 527,686	As at 31st December 2008 (Audited) RMB’000 1,020,400 (605,974) 414,426 28,715 443,141 21,942 82,998 548,081

– II-71 –

APPENDIX II

FINANCIAL INFORMATION OF THE GROUP

Condensed Consolidated Statement of Changes in Equity

For the six months ended 30th June 2009

Equity attributable to shareholders of the Company

At 1st January 2008 Loss for the Period At 30th June 2008 At 1st January 2009 Profit for the Period At 30th June 2009	Share capital RMB’000 1,020,400 – 1,020,400 1,020,400 – 1,020,400	Share premium RMB’000 323,258 – 323,258 323,258 – 323,258	Statutory surplus reserve RMB’000 103,582 – 103,582 103,231 – 103,231	Statutory public welfare reserve Accumulated profits RMB’000 RMB’000 – (977,824) – 138,072 – (839,752) – (1,032,463) – (1,788) – (1,034,251)	Minority interests RMB’000 34,357 (22) 34,335 28,715 63 28,778	Total RMB’000 503,773 138,050
						641,823

						443,141 (1,725)
						441,416

– II-72 –

APPENDIX II

FINANCIAL INFORMATION OF THE GROUP

Condensed Consolidated Cash Flow Statement

For the six months ended 30th June 2009

	30th June		30th June
	2009		2008
	(Unaudited)	(Unaudited)
	RMB’000		RMB’000
Net cash generated from (used in)
operating activities	(1,213)		702
Net cash generated from (used in)
investing activities	2,000		108,980
Net cash (used in) generated from
financing activities	(441)		(110,987)
Increase (decrease) in cash and
cash equivalents	(346)		(1,305)
Cash and cash equivalents at the
beginning of the Period	6,803		1,685
Cash and cash equivalents at the end of the Period	7,149		380

Analysis of cash and cash equivalents at
the end of the Period as follow:
Bank balances and cash	7,149		380

– II-73 –

APPENDIX II

FINANCIAL INFORMATION OF THE GROUP

Notes to the Condensed Financial Statements

For the six months ended 30th June 2009

1. ACCOUNTING POLICIES AND BASIS OF PREPARATION

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

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

2. ADOPTION OF GOING CONCERN BASIS

The Group recorded a net profit for the year of RMB(1,725,000) for the half year ended 30th June 2009. The management of the Company has taken the following measures:

(i) Carry out debt restructuring with its creditors. Up to the date of approval of these consolidated financial statements, the Group has reached agreements with its creditors in respect of debt restructuring and the court litigations have been discharged. Therefore, these consolidated financial statements have been prepared on the assumption that the Group will continue to operate as a going concern;
(ii) The management of the Company is considering to strengthen the capital base of the Company and provide immediate cash flow through various financing activities and capital restructuring, including, but not limited to, private placement of the Company’s shares;
(iii) The management of the Company continues to take action to strengthen cost control in respect of various administrative and other operating expenses, and is actively seeking new investment and business opportunities to pursue profitable businesses that would bring positive cash flow.

The management of the Company believes that, in light of the measures taken to date, together with the expected results of other measures in progress, the Group will have sufficient working capital to finance its operations and remain as a going concern in the foreseeable future. The management of the Company is of the opinion that it is appropriate to prepare these consolidated financial statements on a going concern basis.

– II-74 –

APPENDIX II

FINANCIAL INFORMATION OF THE GROUP

3. TURNOVER AND SEGMENT INFORMATION

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

Principal activities are as follows:

– Property development Education projects –

development, sale, rental and management of properties.

leasing of campus and equipment.

There was no significant sales or other transactions between the segments for both periods.

For the six months ended 30th June 2009 (Unaudited)

Property development RMB’000 Turnover 667 Segment results (313) Unallocated corporate expenses Profit/loss from operations Finance costs Gain on disposal of a subsidiary Profit before taxation Taxation Profit after taxation	Education projects Cemetery development RMB’000 RMB’000 1,500 – 209 –	Others Consolidated RMB’000 RMB’000 – 2,167 – (104)	Others Consolidated RMB’000 RMB’000 – 2,167 – (104)

			(104)
			(1,097)
			(1,201) (524) –
			(1,725) –
			(1,725)

For the six months ended 30th June 2008 (Unaudited)

Property development RMB’000 Turnover 36,617 Segment results (843) Unallocated corporate expenses Operating loss Finance costs Gain on disposal of a subsidiary Loss before taxation Taxation Loss after taxation	Education projects Cemetery development RMB’000 RMB’000 1,500 – (2,367) –	Others Consolidated RMB’000 RMB’000 – 38,117 – (3,210)	Others Consolidated RMB’000 RMB’000 – 38,117 – (3,210)

			(3,210)
			(3,248)
			(6,458) (13,379) 157,909
			138,072 –
			138,072

– II-75 –

APPENDIX II

FINANCIAL INFORMATION OF THE GROUP

4. TAXATION

Six months ended 30th June 2009 2008 (Unaudited) (Unaudited) RMB’000 RMB’000 Taxation comprises The Company and its subsidiaries - PRC enterprise income tax – – - Deferred taxation – – – –

“PRC” represents the People’s Republic of China.

No provision for Hong Kong Profits Tax had been made as the Group’s income neither arose in nor was derived from Hong Kong.

5. DIVIDENDS

The Board resolved not to declare any dividend for the current interim 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 RMB(1,788,000) (profit for the six months ended 30th June 2008: RMB138,072,000) and 1,020,400,000 shares in issue during the Period.

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

7. ACCOUNTS RECEIVABLE

As at the balance sheet date, the Group’s accounts receivables mainly represent the rental receivable for leasing of campus and equipment. The Group normally allows a credit period of 30 days (2008: 30 days) for leasing of campus and equipment.

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

0-30 days 31-60 days 61-365 days 1-2 years Over 2 years Provision for bad debts Net amount of accounts receivables	At 30th June 2009 RMB’000 – – 759 – –	At 31st December 2008 RMB’000 – – – – –
	–	–
	759	–

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

– II-76 –

APPENDIX II

FINANCIAL INFORMATION OF THE GROUP

8. OTHER RECEIVABLES

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

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

9. ACCOUNTS PAYABLE

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

0-90 days 91-180 days 180-365 days 1-2 years Over 2 years	At 30th June 2009 RMB’000 – – – – 5,956 5,956	At 31st December 2008 RMB’000 – – – – 5,875
		5,875

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

10. BANK LOANS

During the period, the Group has no new bank loans. The remaining amount was loan provided to Zhuhai Education amounting to RMB14,000,000.

11. DEFERRED TAXATION

At 1st January 2008 Credited to income statement for the Period At 30th June 2008 Credited to income statement for the Period At 1st January 2009 Credited to income statement At 30th June 2009	Fair value adjustment on business combination RMB’000 22,555 –
	22,555 (613
	21,942 –
	21,942

– II-77 –

APPENDIX II

FINANCIAL INFORMATION OF THE GROUP

12. SHARE CAPITAL

Registered, issued and fully paid: 600,000,000 State-owned shares of RMB1.00 each 420,400,000 H shares of RMB1.00 each	At 30th June 2009 RMB’000 600,000 420,400 1,020,400	At 31st December 2008 RMB’000 600,000 420,400
		1,020,400

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

13. CONNECTED TRANSACTIONS

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

The principal identified connected parties of the Group or identified connected parties that have entered into transaction with the Group during the Period are as follows:

Name of company

Relationships with the Company

Beijing Mingde Guangye Investment Consultant Company Limited (“Beijing Mingde Guangye”)

The holding company of the Company

Beijing Mingyude Business and Trade Company Limited (“Mingyude”)

A shareholder of Beijing Mingde Guangye

Shenyang Public Utility Group Company Limited (“SPU”)

The former holding company of the Company

Beijing Beida Hi-Tech Industry Investment Company Limited (“Beida Hi-Tech”)

A shareholder of SPU

Beida Jade Bird Company Limited (“Beida Jade Bird”)

An indirect shareholder of Beida Hi-Tech

Beijing Beida Education Investment Company Limited (“Beida Education Investment”)

A shareholder of Zhuhai School

Zhuhai Beida Subsidary Experiment School (“Zhuhai School”)

A branch of Beida Education Investment

Beijing Teli Investment Management Company Limited (“Beijing Teli”)

A subsidiary of Beida Jade Bird

– II-78 –

APPENDIX II

FINANCIAL INFORMATION OF THE GROUP

Apart from the connected parties disclosed in the unaudited condensed combined financial statements, the significant connected transactions between the Group and the connected parties and the balance arising therefrom are summariesd as follows:

(a) During the Period, the Group received rental income of RMB1,500,000 (2008: RMB3,000,000) from Zhuhai School for leasing of campus and equipments. The rental was received for leasing of campus and equipments to Zhuhai School pursuant to the non-cancellable leasing agreement for a term of 20 years.
(b) As at balance sheet date, the balances of connected parties are as follows:

Name of connected party Trade receivables Zhuhai School Other payables and accrual expenses Beida Jade Bird SPU (c) Compensation for the key management Short term benefits Post employment benefits	At 30th June 2009 RMB’000 759 – 64,328 At 30th June 2009 RMB’000 0 0	At 31st December 2008 RMB’000 –

		82,998 –

		At 31st December 2008 RMB’000 0
		0

Remuneration of directors and the key management is determined by the Administrative Resources and the Remuneration Committee based on personal performance and market trend.

14. CONTINGENT LIABILITIES

During the period under review, there was no new contingent liability.

15. ASSETS SECURED/PLEDGED

During the period under review, there was no new asset secured/pledged.

– II-79 –

APPENDIX II

FINANCIAL INFORMATION OF THE GROUP

5. INDEBTEDNESS STATEMENT

As at the close of business on 31 August 2009, being the latest practicable date for the purpose of this indebtedness statement prior to the printing of this Composite Document, the Group had an aggregate outstanding indebtedness of approximately RMB58,328,000. The indebtedness comprised (i) other current liablities of approximately RMB44,328,000 which were unsecured, non-interest bearing and should be repaid within one year and (ii) bank borrowings amounting to approximately RMB14,000,000 which were unsecured, interest charging on floating rates and should be repaid within one year.

Save as aforesaid and apart from intra-group liabilities and normal trade and other payables in the normal course of business, totaling approximately RMB77,784,000, as at the close of business on 31 August 2009, the Group did not have any outstanding mortgages, charges, debentures, loan capital, debt securities, term loans and overdrafts or other similar indebtedness, finance lease or hire purchase commitments, liabilities under acceptances (other than normal trade bills) or acceptance credits, other borrowings or indebtedness in the nature of borrowings or any guarantees or other material contingent liabilities.

Apart from the above paragraph and as at the Latest Practicable Date, the Directors were not aware of any material change in respect of the indebtedness or other contingent liabilities of the Group since 31 August 2009.

6. MATERIAL CHANGE

Save as disclosed below, there has been no material changes in the financial or trading position or outlook of the Group since 31 December 2008, the date to which the latest published audited consolidated accounts of the Group were made, up to the Latest Practicable Date:

(i) the entering into of the acquisition agreement dated 5 January 2009 for the acquisition of the entire equity interests in Shenzhen Jade Bird Optoelectronic Company Limited by the Company at a consideration of RMB80,000,000, details of which were set out in the announcement of the Company dated 16 September 2009;
(ii) the entering into of the disposal agreement dated 31 December 2008 (as supplemented by an agreement dated 15 May 2009) for the disposal of the Company’s entire 80% equity interest in Beijing Diye at a cash consideration of RMB200 million, details of which were set out in the announcement of the Company dated 10 August 2009;

– II-80 –

APPENDIX II

FINANCIAL INFORMATION OF THE GROUP

(iii) the information as disclosed in the 2009 interim report of the Company for the six months ended 30 June 2009, including (a) the decrease of profit for the six month ended 30 June 2009 as compared with that of the corresponding period for the six month ended 30 June 2008, which the profit of the Group for the six month ended 30 June 2008 was mainly attributable by the one-off gain on disposal of subsidiaries of approximately HK$157.9 million; (b) the decrease of other receivables and long-term liabilities as compared to 31 December 2008; and (c) the continuing adoption of going concern basis by the Company; and
(iv) the updated information for the progress of resumption of trading in the H Shares as disclosed in the paragraph headed “Resumption proposal” in the Letter from the Board of this Composite Document.

– II-81 –

APPENDIX III

PROPERTY VALUATION

Set out below is the text of the letter, summary of values and valuation certificates received from Malcolm & Associates Appraisal Limited, an independent property valuer, prepared for the purpose of incorporation in this Composite Document, in connection with its valuations as at 31 August 2009 of the properties located in the PRC.

==> picture [211 x 87] intentionally omitted <==

19 October 2009

The Directors

Shenyang Public Utility Holdings Company Limited 14/F, Jin Mao International Apartment, No. 1 Xiao Dong Road, Da Dong District, Shenyang, Liaoning Province, The People’s Republic of China

Dear Sirs,

Re: Valuations of various properties located in the People’s Republic of China (the “PRC”) (the “Properties”)

1. INSTRUCTIONS

In accordance with your instructions for us to value the Properties held by Shenyang Public Utility Holdings Company Limited (the “Company”) and/or its subsidiaries (hereinafter referred to as the “Group”) located in the PRC, we confirm that we have performed inspections, made relevant enquiries and obtained such further information as we consider necessary for the purpose of providing you with our opinion of the market values of the Properties as at 31 August 2009 (the “date of valuation”).

2. BASIS OF VALUATION

Our valuations of the concerned properties have been based on the Market Value, which is defined as “the estimated amount for which a property should exchange on the date of valuation between a willing buyer and a willing seller in an arm’s-length transaction after proper marketing wherein the parties had each acted knowledgeably, prudently and without compulsion”.

– III-1 –

APPENDIX III

PROPERTY VALUATION

3. VALUATION METHODOLOGIES

In valuing Property No. 1, we have adopted the Depreciated Replacement Cost Approach. 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 new replacement cost of the buildings and other site works, from which deductions are then made to allow for the age, condition, economic or functional obsolescence and environmental factors etc; all of these might result in the existing property being worth less than a new replacement. This basis has been used due to the lack of an established market upon which to base comparable transactions. However, this approach generally furnishes the most reliable indication of value for assets without a known used market.

We have attributed no commercial value to Property No. 2 due to the legal title of the property being held and administered by the government.

4. TITLE INVESTIGATION

We have been provided with copies of title/legal documents relating to the Properties. We have not, however, searched the original documents to verify ownership or to ascertain any amendments, which do not appear on the copies handed to us. Therefore, in the course of our valuations, we have relied on the advice and information given by the Group and its PRC legal adviser, Beijing Kaiwen Law Firm (北京凱文律師事務所) regarding the title of the Properties. All documents have been used for reference only.

In valuing the Properties, we have relied on the advice given by the Group and its PRC legal adviser that the Group has valid and enforceable titles to the Properties which are freely transferable, and has free and uninterrupted rights to use the same, for the whole of the unexpired terms granted subject to the payment of annual government rent/land use fees and all requisite land premium/purchase consideration payable have been fully settled.

5. VALUATION ASSUMPTIONS

Our valuations have been made on the assumption that the Properties are sold in the open market without the benefit of deferred terms contract, leaseback, joint venture, management agreement or any similar arrangement which would serve to affect the values of the Properties.

In addition, no account has been taken of any option or right of pre-emption concerning or affecting the sales of the Properties and no forced sale situation in any manner is assumed in our valuations.

– III-2 –

APPENDIX III

PROPERTY VALUATION

6. VALUATION CONSIDERATIONS

We have inspected the exterior and wherever possible, the interior of the Properties. However, no structural surveys have been made nor have any tests been carried out on any of the services provided in the Properties. In the course of our inspections, we did not note any serious defects. We are not, therefore, able to report that the Properties are free from rot, infestation or any other structural defects.

In the course of our valuations, we have relied to a considerable extent on the information provided by the Group and have accepted advice given to us by the Group in such matters as approvals, statutory notices, easements, tenures, completion dates of buildings, particulars of occupancy, site/floor areas, identification of the Properties and all other relevant matters.

Except otherwise stated, all dimensions, measurements and areas included in the valuation certificates are based on information contained in the documents provided to us by the Group and are therefore approximations.

Unless otherwise stated, we have not been able to carry out detailed on-site measurements to verify the correctness of the site/floor areas in respect of the Properties but have assumed that the site/floor areas shown on the documents handed to us are correct.

We have no reason to doubt the truth and accuracy of the information provided to us by the Group. The Group has also advised us that no material facts have been omitted from the information so supplied. We consider that we have been provided with sufficient information for us to reach an informed view.

No allowance has been made in our valuations for any charges, mortgages or amounts owing on the Properties or for any expenses or taxation, which may be incurred in effecting a sale or purchase.

Unless otherwise stated, it is assumed that the Properties are free from encumbrances, restrictions and outgoings of an onerous nature, which could affect their values.

Our valuations are prepared in accordance with the “First Edition of The HKIS Valuation Standards on Properties” published by The Hong Kong Institute of Surveyors and in compliance with the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited.

Based on the prevailing rules and regulations as at the Latest Practicable Date and the information provided by the PRC legal advisor, the potential tax liabilities upon disposal of the properties in the PRC include City Development Tax (城建稅), Education Charge (教育開支) and Business Tax (營業稅) all of which are at 5.5% of the contracted sales amount, together with Stamp Duty (印花稅) at 0.05% of the contracted sales amount, Enterprise Income Tax (企業所得稅) at 25% on net profits gained as well as Land

– III-3 –

APPENDIX III

PROPERTY VALUATION

Appreciation Tax (土地增值稅) which is based on progressive tax rate between 30% and 60% of the appreciation value. The exact amount of tax payable upon realization of the relevant properties in the PRC will be subject to the formal tax advice issued by the relevant tax authorities at the time of disposal of the relevant properties upon presentation of the relevant transaction documents.

However, as advised by the Group, the Group will continue to occupy Property No. 1 in its existing use as an education park, and the likelihood of any tax liabilities being crystallized is, therefore, remote.

As advised by the Group, the disposal method of Property No. 2 is by means of transfer of equity of the company holding the property instead of direct disposal of the property. Under such circumstances, realization of the property would be subject to Stamp Duty (印花稅) at 0.05% of the contracted sales amount and Enterprise Income Tax (企業所得稅) at 25% on net profits gain.

7. REMARKS

We hereby certify that we neither have any present nor any prospective interest in the Group or the appraised properties or the values reported.

Unless otherwise stated, all monetary amounts stated are in Renminbi (RMB) and no allowances have been made for any exchange transfer.

Our summary of values and the valuation certificates are attached herewith.

Yours faithfully, For and on behalf of

Malcolm & Associates Appraisal Limited

Li Wing Kang

BSc.(Est Man), MRICS, MHKIS, RPS(GP)

Associate Director

Note: Mr. Li Wing Kang MHKIS, MRICS, RPS(GP) is a qualified valuer and has over 27 years’ experience in valuations of properties in Hong Kong and over 11 years’ experience in valuations of properties in the People’s Republic of China.

– III-4 –

APPENDIX III

PROPERTY VALUATION

SUMMARY OF VALUES

No.
Property
Market Value in
existing state as at
31 August 2009
Interest
attributable
to the Group
RMB
Group I – Property occupied by the Group in the PRC
1.
An education park
located at Nan Mang Wan,
Qi Ao, Zhuhai,
Guangdong Province,
The PRC
中國廣東省
珠海市淇澳島
南芒灣之北大教育學園
297,000,000
70%
Group II – Property to be disposed of by the Group in the PRC
2.
A parcel of land located
at Districts C & D,
Guan Zhuang Xin Cun,
Chaoyang District,
Beijing,
The PRC
中國北京市
朝陽區管莊新村C、D區
之一塊土地
No Commercial Value
80%
Total:
297,000,000

Value
attributable to
the Group as at
31 August 2009
RMB
207,900,000
Nil

207,900,000

– III-5 –

APPENDIX III

PROPERTY VALUATION

VALUATION CERTIFICATE

Group I – Property occupied by the Group in the PRC

				Market Value
			Particulars of	in existing state
No.	Property	Description and tenure	occupancy	as at 31 August 2009
				RMB
1.	An education park	As per information	As at the date of	297,000,000
	located at	provided by the Group,	valuation, the property
	Nan Mang Wan,	the property comprises a	was occupied by the	(70% interest
	Qi Ao, Zhuhai,	parcel of land with a site	Group as an	attributable to
	Guangdong Province,	area of approximately	education park.	the Group:
	The PRC	420,002 sq.m. upon which		207,900,000)
		15 buildings and
	中國廣東省	structures with a total
	珠海市淇澳島	gross floor area (“GFA”)
	南芒灣之北大教育學園	of approximately
		53,440.17 sq.m.
		completed in about 2004,
		were erected.
		The major buildings
		include a composite
		building, a music & arts
		centre, teaching towers, a
		canteen, halls of
		residence, a stadium, a
		corridor, teaching halls,
		etc. (Please refer to Note
		3 for details.)
		The land use rights of the
		property have been
		granted for a term
		expiring on 13 June 2051.

Notes:-

Pursuant to a State-owned Land Use Rights Grant Contract entered into between Planning and Land Bureau of Zhuhai and Zhuhai Beida Education Science Park Company Limited (“Zhuhai Beida”) dated 22 July 2001, the land use rights of the property with a site area of approximately 420,002 sq.m. have been agreed to be transferred to Zhuhai Beida for education & science park and ancillary uses.
Pursuant to a Real Estate Ownership Certificate, Yue Fang Di Zheng Zi Di No. C0587330 (粵房地證字第 C0587330號) dated 19 September 2001, the ownership of the land of the property with a site area of 420,002 sq.m. have been granted to Zhuhai Beida for a term expiring on 13 June 2051.
Pursuant to 14 Real Estate Ownership Certificates, the building ownership rights of the property with a total developable GFA of approximately 53,440.17 sq.m have been granted to Zhuhai Beida. Details of which are summarized as in the overleaf:

– III-6 –

APPENDIX III

PROPERTY VALUATION

No.
Document No.
Usage
1.
Yue Fang Di Zheng Zi Di
No. C3940410
Stadium
2.
Yue Fang Di Zheng Zi Di
No. C3940411
Composite Building
3.
Yue Fang Di Zheng Zi Di
No. C3940412
Teaching Tower 1
4.
Yue Fang Di Zheng Zi Di
No. C3940413
Teaching Tower 2
5.
Yue Fang Di Zheng Zi Di
No. C3940414
Teaching Tower 3
6.
Yue Fang Di Zheng Zi Di
No. C3940415
Teaching Tower 4
7.
Yue Fang Di Zheng Zi Di
No. C3940416
Canteen
8.
Yue Fang Di Zheng Zi Di
No. C3940417
Hall of residence Tower 4
9.
Yue Fang Di Zheng Zi Di
No. C3940418
Hall of residence Tower 3
10.
Yue Fang Di Zheng Zi Di
No. C3940419
Hall of residence Tower 2
11.
Yue Fang Di Zheng Zi Di
No. C3940420
Hall of residence Tower 1
12.
Yue Fang Di Zheng Zi Di
No. C3940421
Music & Arts Center
13.
Yue Fang Di Zheng Zi Di
No. C3940422
Teaching Hall 1
14.
Yue Fang Di Zheng Zi Di
No. C3940423
Teaching Hall 2
Total:

GFA
(sq.m.)
2,958.28
5,847.99
3,300.71
3,300.71
6,022.23
4,520.76
7,650.62
3,928.30
3,928.30
3,928.30
3,928.30
4,048.75
282.81
272.42

53,440.17

The status of title and grant of major approvals and licenses in accordance with the information provided by the Group are as follows:

State-owned Land Use Rights Certificate	Yes
Real Estate Ownership Certificates	Yes

The opinion of the PRC legal adviser to the Group contains, inter-alia, the following:
a. The property is legally vested in Zhuhai Beida;
b. All land premium have been settled in full;
c. The existing use of the property is in compliance with the local planning regulations;
d. The property is not subject to mortgage or any other material encumbrances; and
e. Zhuhai Beida is entitled to mortgage, lease and dispose the property.
Zhuhai Beida Education Science Park Company Limited is a 70%-owned subsidiary of the Group.

– III-7 –

APPENDIX III

PROPERTY VALUATION

VALUATION CERTIFICATE

Group II – Property to be disposed of by the Group in the PRC

				Market Value in
				existing state as
No.	Property	Description and tenure	Particulars of occupancy	at 31 August 2009
				RMB
2.	A parcel of land	As per information	As advised by the Group,	No Commercial
	located at	provided by the Group,	the property was vacant	Value
	Districts C & D,	the property comprises a	and held and
	Guan Zhuang Xin Cun,	parcel of land with a site	administered by the	(80% interest
	Chaoyang District,	area of approximately	Government as at the	attributable to the
	Beijing,	12.9178 hectares or about	date of valuation.	Group: Nil)
	The PRC	129,178 sq.m.
				(Please refer to
	中國北京市朝陽區			Note No. 2)
	管莊新村C、D區
	之一塊土地

Notes:

As advised by the Group, the property was administered by the Government as at the date of valuation. Therefore, we have attributed no commercial value to the property.
As advised by the Group, the amount of land reserve development cost paid by Beijing Diye Real Estate Development Company Limited 北京地業房地產開發有限公司 (“Beijing Diye”) for the property up to the date of valuation was approximately RMB400,000,000.
Since the Planning & Development Schemes have not been announced by the relevant government authorities, we cannot provide our comments on the reference value of the property.
Pursuant to a Disposal Agreement entered into between the Company and Beijing Zhong Yi Chong Yi Technology Development Company (“Zhong Yi”) dated 31 December 2008, Zhong Yi has agreed to purchase and the Company has agreed to sell the Company’s entire 80% equity interest in Beijing Diye at a cash consideration of RMB200,000,000.
Pursuant to a Supplemental Agreement entered into between the Company and Zhong Yi dated 15 May 2009, both parties agreed to extend the long stop date of the disposal as stated in Note 4 from 30 June 2009 to 31 December 2009.
Pursuant to a Business License (企業法人營業執照), Registration No. 110000002971198 dated 18 August 2008 issued by Industrial and Commercial Administration Bureau of Beijing (北京市工商行政管理局), 北京地業房地產開發有限公司 was incorporated with a registered capital of RMB30,000,000 and the operation period is effective for a period from 16 July 2001 to 15 July 2021 for the business of real estate development and sales.
The opinion of the PRC legal adviser to the Group contains, inter-alia, the following:
a. The property was jointly developed by Beijing Deyi and the Government of Chaoyang Village. However, the land use right certificate of the property has not yet been obtained;
b. According to a 政府儲備土地和入市交易土地聯席會議紀要 dated 8 May 2005, the property is subject to land listing procedure for land auction;
c. According to the relevant PRC rules and regulation, the land reserve development cost of the property paid by the Beijing Deyi will be reimbursed in full to the Beijing Deyi upon the disposal of the property in the land auction;
d. The land reserve development cost to be reimbursed in Note 7c includes land resumption fee, compensation fee, land listing and auction fee, interest, professional fee, contingency fee and all other relevant costs incurred which are approved by the Land Management Department.
Beijing Diye is a 80%-owned subsidiary of the Group.

– III-8 –

APPENDIX IV

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 such 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 information in relation to the Offer and 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 directors of the Offeror, who accept full responsibility for the accuracy of the information contained in this Composite Document (other than information in relation to the Group) and confirm, having made all reasonable enquiries, that to the best of their knowledge, opinions expressed in this Composite Document (other than information in relation to 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. MARKET PRICE

Trading in the H Shares on the Stock Exchange has been suspended since 15 December 2004 and will remain suspended until further notice. In this regard, no reference is made to the closing prices per H Share as quoted on the Stock Exchange on the last business day in each of the calendar months during the Relevant Period. The closing price per H Share as at 15 December 2004 immediately prior to the suspension of trading in H Shares on the Stock Exchange was HK$0.60.

3. DISCLOSURE OF INTERESTS

(a) Disclosure of interests and short positions in the securities of the Company and its associated corporations

As at the Latest Practicable Date, none of the Directors and chief executive of the Company was interested in any Shares, underlying Shares and debentures of the Company or any of its associated corporation (within the meaning of Part XV of the SFO), which were notified to the Company and the Stock Exchange 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 which were required, pursuant to section 352 of the SFO, to be entered in the register referred to therein, or which were required, pursuant to the required standard of dealings by Directors as referred to in the Listing Rules, to be notified to the Company and the Stock Exchange.

– IV-1 –

APPENDIX IV

GENERAL INFORMATION

(b) Substantial Shareholders and other person’s interests and short position in the Shares, underlying Shares and 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 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 circumstance at general meetings of any other member of the Company (if any) or had any options in respect of such capital:

		No./Amount
Name	Class of Shares	of Shares
Beijing Mingde Guangye Investment	Domestic Shares	600,000,000
Consultant Company Limited
(i.e. the Controlling Shareholder)
Beijing Mingyude Business and Trade	Domestic Shares	600,000,000
Company Limited (Note 1) (i.e.
Beijing Mingyude)
Li Peng (Note 2)	Domestic Shares	600,000,000
Shen Yun Xie (Note 3)	Domestic Shares	600,000,000
HKSCC Nominees Limited (Note 4)	H Shares	418,749,990

Note 1: Beijing Mingyude is a limited company established in the PRC which holds 90% equity interest in the Controlling Shareholder. Pursuant to SFO, Beijing Mingyude is regarded as holding interests in the shares of the Company held by the Controlling Shareholder.
Note 2: Li Peng is a PRC legal person who holds 10% equity interest in the Controlling Shareholder and 60% equity interest in Beijing Mingyude, which holds 90% equity interest in the Controlling Shareholder. Pursuant to SFO, Li Peng is deemed to be interested in the shares of the Company held by the Controlling Shareholder.
Note 3: Shen Yun Xie is a PRC legal person who holds 40% interest in Beijing Mingyude, which holds 90% equity interest in the Controlling Shareholder. Pursuant to SFO, Shen Yun Xie is deemed to be interested in the shares of the Company held by the Controlling Shareholder.
Note 4: As notified by HKSCC Nominees Limited, as at 30 June 2009, the following participants in the central clearance system have interests amounting to 5% or more of the total issued H Shares of the Company as shown in the securities accounts in the central clearance system:
(a) Tai Fook Securities Company Limited holds 103,964,000 H Shares, representing 24.73% of the issued H Shares of the Company, of which Sino-French Water Development (Liaoning) Company Limited beneficially owned 88,146,000 H Shares, representing 20.97% of the issued H Shares of the Company;
(b) The Hong Kong and Shanghai Banking Corporation Limited as nominee holds 50,955,000 H Shares, representing 12.12% of the issued H Share of the Company; and
(c) Shenyin Wanguo Securities (H.K.) Limited as nominee holds 28,346,000 H Shares, representing 6.74% of the issued H Shares of the Company.

– IV-2 –

APPENDIX IV

GENERAL INFORMATION

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 Company (if any) or who had any option in respect of such capital.

(c) Other interests in the Company

As at the Latest Practicable Date,

(i) none of the Directors held any interest in the securities of the Company;
(ii) neither the Company nor any of the Directors held any interest in the securities 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 by 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) save as disclosed in the paragraph headed “Put Option Deed” in the “Letter from Kingston Securities” in this Composite Document, 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) save as disclosed in the paragraph headed “Put Option Deed” in the “Letter from Kingston Securities” in this Composite Document, 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 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 or parties acting in concert with it has borrowed or lent any Shares; and

– IV-3 –

APPENDIX IV

GENERAL INFORMATION

(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.

4. DEALINGS IN SECURITIES

(i) The Offeror and parties acting in concert with it were interested in 600,000,000 Domestic 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 or parties acting in concert with it 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.
(ii) Save for the Transfer as disclosed in the “Letter from Kingston Securities” in this Composite Document, none of the Offeror or parties acting in concert with it had dealt for value of any Shares or other securities (as defined under Note 4 to Rule 22 of the Takeovers Code) in Company or the Offeror during the Relevant Period.
(iii) As at the Latest Practicable Date, none of the directors of the Offeror 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 had dealt for value in any shares or other securities (as defined under Note 4 to Rule 22 of the Takeovers Code) in the Company or the Offeror during the Relevant Period.
(v) Save as disclosed in the paragraph headed “Put Option Deed” in the “Letter from Kingston Securities” in this Composite Document, as at the Latest Practicable Date, there was no arrangement of the kind referred to in the third paragraph of Note 8 to Rule 22 of the Takeovers Code between the Offeror or their respective associates, or any person acting in concert with it 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) in 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) in 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.

– IV-4 –

APPENDIX IV

GENERAL INFORMATION

(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 which was managed on a discretionary basis by the fund manager connected with the Company.
(x) Save for the Transfer 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 or any person acting in concert with it had dealt for value in any securities in the Company.

5. 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) Save as disclosed in the paragraph headed “Put Option Deed” in the “Letter from Kingston Securities” in this Composite Document, there was no agreement, arrangement or understanding (including any compensation arrangement) between the Offeror or any person acting in concert with it 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 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 3(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 is a party which relates to the circumstances in which it may or may not invoke or seek to invoke a condition to the Offer as at the Latest Practicable Date.
(vii) Save as disclosed in the paragraph headed “Put Option Deed” in the “Letter from Kingston Securities” in this Composite Document, 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.

– IV-5 –

APPENDIX IV

GENERAL INFORMATION

6. SERVICE CONTRACTS

The previous service contracts between the Company and the Directors expired on 12 February 2009. Subsequent to the expiry of the previous service contracts, each of the Directors entered into a new service contract with the Company for a term of 3 years commencing on 12 February 2009. The terms of the new service contracts are substantially identical with the previous service contracts. The new service contracts, which are to be expired on the date of the 2012 annual general meeting, are subject to termination in certain circumstances as stipulated in the relevant service contracts.

On 9 July 2009, it was approved at the 2008 annual general meeting that the annual emoluments of Mr. Chow Ka Wo Alex, Mr. Wong Kai Tat, and Mr. Chan Ming Sun Jonathan under the new service contracts shall be increased materially from RMB30,000 to RMB120,000 since the commencement of such contracts on 12 February 2009.

Fixed remuneration of the Directors as set out in their respective existing service contract with the Company are as follows:

	Annual
Director	emoluments
	(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. Deng Yan Bin	30,000
Mr. Lin Dong Hui	30,000
Mr. Cai Lian Jun	30,000
Mr. Wong Kai Tat	120,000
Mr. Chan Ming Sun Jonathan	120,000

The Company may, at its sole discretion, pay a year end bonus of not exceeding 10% of the audited net profit shown in the audited financial statement for the corresponding year after deduction of taxation, non-controlling shareholders’ interests and such bonus; but before taking into account any unusual and extraordinary items, to the Executive Directors, subject to the approval by the Board and the Shareholders in general meeting.

Save as disclosed above, there is no service contract with the Company or its subsidiaries or associated companies in force for the Directors (i) which (including both continuous and fixed term contracts) have been entered into or amended within 6 months before the commencement of the Offer period; (ii) which is continuous contract with a notice period of 12 months or more; or (iii) which is fixed term contract with more than 12 months to run irrespective of the notice period.

– IV-6 –

APPENDIX IV

GENERAL INFORMATION

7. 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 settlement agreement dated 17 October 2007 entered into between the Company, Beijing Jade Bird, Shenyang Public Utility Group, Beijing Mingyude, Shenyang Pollon Finance Building Management Company Limited (瀋陽江勝金融大廈管理有限公司) (“ Shenyang Pollon* ”) and Hua Jin Hua Gong in relation to the settlement of debt owed by the Company to Hua Jin Hua Gong totaling RMB140,000,000;
(ii) the debt transfer and shares subscription agreement dated 18 February 2008 entered into between the Company, Shenyang Development Real Estate Development Company Limited (瀋陽發展房產開發有限公司) (“ Shenyang Real Estate ”), Shenyang Pollon, Shenyang Development Property management Company Limited (瀋陽發展物業管理有限公司) (“ Shenyang Property ”), Shanghai Hanhua Property Management Company Limited (上海瀚華物業管理有限公司) (“ Shanghai Hanhua ”) and Shenyang Development Beida Education Science Park Company Limited (瀋陽發展北大教育科學園有限公司) (“ Shenyang Education ”), pursuant to which Shanghai Hanhua shall purchase the debt of Shenyang Education due to the Company, Shenyang Real Estate, Shenyang Pollon and Shenyang Property totalling RMB256,638,760.49; and the remaining 30% equity interest in Shenyang Education held by the Company at a consideration of RMB2,514,062.24;
(iii) the equity interest transfer agreement dated 8 March 2008 entered into between the Company, Shenyang Real Estate, a subsidiary of the Company, and an independent third party in relation to the disposal of 100% equity interest in Shenyang Property held by the Company and Shenyang Real Estate to the independent third party at a consideration of RMB600,000;
(iv) the agreement of settlement of debts by properties dated 20 June 2008 entered into between the Company, Hua Jin Hua Gong, Shenyang Pollon, Beijing Jade Bird and Shenyang Public Utility Group in relation to the sequestration of 69 residential units of Cosmo International Mansion owned by Shenyang Pollon with a value of RMB24,300,000 to settle the debts owed to Hua jin Hua Gong by the Company;
(v) the restructuring agreement dated 28 August 2008 (the “ Restructuring Agreement ”), entered into between Shenyang Public Utility Group, Mr. Cheung Tsun Yung Thomas and the Company in relation to the restructuring of the Company which is intended to assist the resumption of trading in the H Shares on the Stock Exchange, whereby Mr. Cheung Tsun Yung Thomas shall

– IV-7 –

APPENDIX IV

GENERAL INFORMATION

procure the sale of 51% interest in the property situated at 3 Dongwei Road, Chaoyang District, Beijing, PRC (the “ Beijing Building ”) to the Company at a tentative consideration of RMB306,000,000 including a gross rental guarantee of RMB10,000,000 for the year 2009 and Shenyang Public Utility Group shall in return transfer 29.3% equity interest in the Company to Mr. Cheung Tsun Yung Thomas at a consideration of HK$14,950,000;

(vi) the supplemental agreement dated 14 October 2008 (the “ First Supplemental Agreement ”) entered into between Shenyang Public Utility Group, Mr. Cheung Tsun Yung Thomas and the Company in relation to the amendment of the Restructuring Agreement, whereby Mr. Cheung Tsun Yung Thomas shall procure the sale of 100% interest rather than 50% interest in the Beijing Property to the Company at a tentative consideration of RMB600,000,000;
(vii) the share transfer agreement dated 31 December 2008 entered into between Beijing Zhong Yi Chong Yi Technology Development Company (北京中億創一科技發展有限公司) (“ Zhong Yi Chong Yi* ”), Beijing Diye and the Company in relation to the disposal of 80% equity interest in Beijing Diye, including the receivable owed to the Group by Beijing Diye, from the Company to Zhong Yi Chong Yi at a consideration of RMB200,000,000;
(viii) the supplemental agreement dated 2 January 2009 (the “ Second Supplemental Agreement ”) entered into between Shenyang Public Utility Group, Mr. Cheung Tsun Yung Thomas and the Company in relation to the cancellation of the First Supplemental Agreement and the amendment of the Restructuring Agreement, whereby the Company shall acquire 100% interest in the CY Property from Zhong Yi Chong Yi at a consideration of RMB93,000,000 and 100% equity interest in SJBO from Beijing Jade Bird and Shenzhen Beida Jade Bird Sci-Tech Company Limited (深圳市北大青鳥科技有限公司) (“ Shenzhen Jade Bird* ”) at a consideration of RMB80,000,000 rather than 100% interest in the Beijing Property;
(ix) the asset purchase agreement dated 5 January 2009 entered into between Zhong Yi Chong Yi and the Company in relation to the purchase of the CY Property by the Company from Zhong Yi Chong Yi at a consideration of RMB93,000,000;
(x) the share transfer agreement dated 5 January 2009 entered into between Beijing Jade Bird, Shenzhen Jade Bird, Beijing Tianqiao Beida Jade Bird Sci-tech Company Limited* (北京天橋北大青鳥科技股份有限公司) (now known as Cinda Real Estate Co. Ltd. (信達地產股份有限公司), a company established in the PRC with limited liability and whose shares are listed on The Shanghai Stock Exchange) and the Company in relation to the acquisition of the entire equity interest in SJBO by the Company at a consideration of RMB80,000,000;

– IV-8 –

APPENDIX IV

GENERAL INFORMATION

(xi) the deed of termination dated 14 May 2009 entered into between Shenyang Public Utility Group, Mr. Cheung Tsun Yung Thomas and the Company in relation to the termination of the Restructuring Agreement, the First Supplemental Agreement and the Second Supplemental Agreement, and there is no consideration involved under this deed of termination; and
(xii) the supplemental agreement dated 15 May 2009 entered into between Zhong Yi Chong Yi, Beijing Diye and the Company in relation to the amendment of the long stop date stipulated under the share transfer agreement dated 31 December 2008 aforesaid.

8. 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.

9. QUALIFICATIONS AND CONSENT OF EXPERTS

The following is the qualification of the 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
Cinda International	a licensed corporation under the SFO to carry out
Capital Limited	Type 1 (dealing in securities) and Type 6 (advising on
	corporate finance) regulated activities
Malcolm Associates	property valuer
Appraisal Limited
Beijing Kaiwen Law Firm	registered law firm in the PRC
(北京凱文律師事務所)

Each of Kingston Securities, Kingston Corporate Finance, the Independent Financial Adviser, Malcolm Associates Appraisal Limited and Beijing Kaiwen Law Firm (北京凱文律師事務所) 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.

– IV-9 –

APPENDIX IV

GENERAL INFORMATION

As at the Latest Practicable Date, each of the above experts was not beneficially interested in the share capital of the Company nor did it has any right (whether legally enforceable or not) to subscribe for or to nominate persons to subscribe for securities in the Company nor did it have any interest, either direct or indirect, in any asset which has been, since the date to which the latest published audited consolidated financial statements of the Company were made up, acquired, disposed of by or leased to or are proposed to be acquired or disposed of by or leased to the Company.

10. 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 31 August 2009.

11. MISCELLANEOUS

(i) The registered address of the Company is at No.1-4, 20A, Central Street, Shenyang Economic and Technological Development Zone, the PRC.
(ii) The principal place of business of the Company in the PRC is at 14/F., Jinmao International Apartment, Da Dong District, Shenyang, the PRC.
(iii) The principal place of business of the Company in Hong Kong is at Suite 06-12, 33/F, Shui On Centre, 6-8 Harbour Road, Wanchai, Hong Kong.
(iv) The registered address of the Offeror and the correspondence address of its directors is at Quastisky Building, PO Box 4389, Road Town, Tortola, British Virgin Islands and Suite 802, Harcourt House, 39 Gloucester Road, Wanchai, Hong Kong, respectively.
(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 registered address of the Independent Financial Adviser is at 45/F, COSCO Tower, 183 Queen’s Road Central, Hong Kong.
(viii) 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.
(ix) Unless otherwise stated, in the event of inconsistency, the English text of this Composite Document and the Form of Acceptance shall prevail over the Chinese text.

– IV-10 –

APPENDIX IV

GENERAL INFORMATION

12. DOCUMENTS AVAILABLE FOR INSPECTION

Copies of the following documents are available for inspection during normal business hours from 9:00 a.m. to 5:00 p.m. (other than Saturdays, Sundays and public holidays) (i) at Suite 06-12, 33/F, Shui On Centre, 6-8 Harbour Road, Wanchai, Hong Kong; (ii) on the website of the SFC at www.sfc.hk; and (iii) on the Company website at www.sygyfz.com.cn during the period 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 15 of this Composite Document;
(iv) the “Letter from the Board”, the text which is set out on pages 16 to 28 of this Composite Document;
(v) the “Letter from the Independent Board Committee”, the text of which is set out on pages 29 to 30 of this Composite Document;
(vi) the “Letter from the Independent Financial Adviser”, the text of which is set out on pages 31 to 47 of this Composite Document;
(vii) the letter, summary of values and valuation certificates prepared by Malcolm & Associates Appraisal Ltd, the text of which is set out in Appendix III to this Composite Document;
(viii) the written consents referred to in the section headed “Qualifications and Consent of Experts” in this Appendix;
(ix) the annual reports of the Company for the two years ended 31 December 2007 and 2008;
(x) the interim report of the Company for the six months ended 30 June 2009;
(xi) the material contracts referred to in the section headed “Material Contracts” in this Appendix;
(xii) the service contracts referred to in the section headed “Service Contracts” in this Appendix; and
(xiii) the letter from Kingston Corporate Finance confirming the financial resources available to the Offeror for the Offer.

– IV-11 –

AI assistant

CMON Limited — Merger & Acquisition 2009

50172_rns_2009-10-19_be0882e8-bfe1-4286-96cc-983059eba224.pdf

AMAZING WEALTH DEVELOPMENT LIMITED

MANDATORY UNCONDITIONAL CASH OFFER BY

ON BEHALF OF AMAZING WEALTH DEVELOPMENT LIMITED FOR ALL THE ISSUED H SHARES IN SHENYANG PUBLIC UTILITY HOLDINGS COMPANY LIMITED

Financial adviser to Amazing Wealth Development Limited

Independent financial adviser to the Independent Board Committee

Announcement of the results of the Offer and

DEFINITIONS

MANDATORY UNCONDITIONAL CASH OFFER BY KINGSTON SECURITIES LIMITED ON BEHALF OF AMAZING WEALTH DEVELOPMENT LIMITED FOR ALL THE ISSUED H SHARES IN SHENYANG PUBLIC UTILITY HOLDINGS COMPANY LIMITED

INTRODUCTION

SHAREHOLDING STRUCTURE OF THE COMPANY

MANDATORY UNCONDITIONAL CASH OFFER

Principal terms of the Offer

Basis of the Offer

Put Option Deed

Comparisons of value

Highest and lowest prices

Total consideration

Effects of accepting the Offer

Stamp duty

Payment

COMPULSORY ACQUISITION

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

MAINTAINING THE LISTING STATUS OF THE COMPANY

FURTHER TERMS OF THE OFFER

GENERAL

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 AMAZING WEALTH DEVELOPMENT LIMITED FOR ALL THE ISSUED H SHARES IN SHENYANG PUBLIC UTILITY HOLDINGS COMPANY LIMITED

INTRODUCTION

RESUMPTION PROPOSAL

Conditions in the Decision Letter

Condition

Status

Condition

Status

Condition

Status

SHAREHOLDING STRUCTURE OF THE COMPANY

MANDATORY UNCONDITIONAL CASH OFFER

Further details of the Offer

INFORMATION OF 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

MANDATORY UNCONDITIONAL CASH OFFER BY KINGSTON SECURITIES LIMITED ON BEHALF OF AMAZING WEALTH DEVELOPMENT LIMITED FOR ALL THE ISSUED H SHARES IN SHENYANG PUBLIC UTILITY HOLDINGS COMPANY LIMITED

MANDATORY UNCONDITIONAL CASH OFFER BY KINGSTON SECURITIES LIMITED ON BEHALF OF AMAZING WEALTH DEVELOPMENT LIMITED FOR ALL THE ISSUED H SHARES IN SHENYANG PUBLIC UTILITY HOLDINGS COMPANY LIMITED

INTRODUCTION

BASIS OF OUR ADVICE

PRINCIPAL FACTORS TAKEN INTO ACCOUNT

1. Principal terms of the Offer

For each H Share . . . . . . . . . . . HK$0.1939 (equivalent to RMB0.171) in cash

2. Financial performance of the Group

Disclaimer of auditor’s opinion

The six months ended 30 June 2009 versus the six months ended 30 June 2008

The year ended 31 December 2008 versus the year ended 31 December 2007

The year ended 31 December 2007 versus the year ended 31 December 2006

Financial position of the Group

3. Industry outlook

4. Conditions for resumption of trading in the H Shares

5. Historical H Share price performance and trading liquidity of the H Shares

(a) The Offer Price

(b) Price performance of the H Shares

(c) Liquidity

6. Price/earnings multiples and dividend yields

CMON Limited Merger & Acquisition 2009