CMON Limited - Proxy Solicitation & Information Statement 2002

THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION

If you are in any doubt as to any aspect of this circular, you should consult a stockbroker or other registered dealer in securities, bank manager, solicitor, professional accountant or other professional adviser.

If you have sold or transferred all your securities in Shenyang Public Utility Holdings Company Limited, you should at once hand this circular and the accompanying form of proxy and reply slip to the purchaser or transferee or to the bank, stockbroker or other agent through whom the sale or transfer was effected for transmission to the purchaser or transferee.

The Stock Exchange of Hong Kong Limited takes no responsibility for the contents of this circular, makes no representation as to its accuracy or completeness and expressly disclaims any liability whatsoever for any loss howsoever arising from or in reliance upon the whole or any part of the contents of this circular.

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瀋陽公用發展股份有限公司 SHENYANG PUBLIC UTILITY HOLDINGS COMPANY LIMITED

(a joint stock limited company incorporated in the People’s Republic of China with limited liability)

DISCLOSEABLE AND CONNECTED TRANSACTIONS PROPOSED ACQUISITIONS OF

(1) 70% EQUITY INTEREST IN ZHUHAI EDUCATION; (2) 100% EQUITY INTEREST IN SHANGHAI EDUCATION; AND (3) 50% EQUITY INTEREST IN BEIDA ONLINE AND

ONGOING CONNECTED TRANSACTIONS

Financial adviser to Shenyang Public Utility Holdings Company Limited

Tai Fook Capital Limited

Independent financial adviser to the Independent Board Committee

A notice convening an extraordinary general meeting of Shenyang Public Utility Holdings Company Limited (the “Company”) to be held at 5/F., West PKU-HKUST Shenzhen-Hong Kong Institution Building, South Area, Hi-tech Industrial Park, Nanshan District, Shenzhen, the PRC on 10th February, 2003, at 10:00 a.m. is set out on pages 42 to 44 of this circular. Whether or not you are able to attend the meeting, please complete and return the enclosed reply slip and form of proxy in accordance with the instructions printed thereon to the office of the Company’s H share registrar in Hong Kong, Hong Kong Registrars Limited, at Rooms 1901-5, 19th Floor, Hopewell Centre, 183 Queen’s Road East, Hong Kong as soon as practicable but in any event for the reply slip, on or before 20th January, 2003, and for the form of proxy, not less than 24 hours before the time appointed for the holding of the extraordinary general meeting. Completion of the form of proxy will not preclude you from attending and voting at the extraordinary general meeting or any adjourned meeting or meetings thereof should you so wish.

23rd December, 2002

	Page
Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	1
Letter from the Board
Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	6
The Proposed Acquisitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	8
Information on Zhuhai Education, Shanghai Education and Beida Online . . . . . . . . . .	12
Reasons for the Proposed Acquisitions and source of internal fund
to finance the consideration for the Proposed Acquisitions . . . . . . . . . . . . . . . . . . . .	15
Zhuhai Lease Transactions and future ongoing connected transactions . . . . . . . . . . . . .	15
Waiver Application . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	18
General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	20
Extraordinary General Meeting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	20
Further information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	21
Letter from the Independent Board Committee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	22
Letter from DBS Asia . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	24
Appendix I – Property valuation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	32
Appendix II – General information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	38
Notice of Extraordinary General Meeting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	42

– i –

DEFINITIONS

In this circular, unless the context otherwise requires, the following expressions have the following meanings:

“associates”	has the meaning ascribed to it in the Listing Rules
“Beida Education Investment”	北京北大教育投資有限公司(Beijing Beida Education
	Investment Company Limited), a limited liability company
	incorporated in the PRC on 6th December, 2000 and is
	beneficially owned as to approximately 66% by Peking
	University
“Beida Hi-Tech”	北京北大高科技產業投資有限公司(Beijing Beida Hi-
	tech Industrial Investment Limited), a company incorporated
	in the PRC with limited liability and is over 50%
	beneficially owned by Peking University
“Beida Online”	北京北大在㵟網絡有限責任公司(Beijing Beida-Online
	Internet Company Limited), a limited liability company
	incorporated in the PRC on 22nd September, 2000 and is
	directly owned as to 50% by Peking University
“Beida Online Agreement”	the conditional sale and purchase agreement dated 28th
	November, 2002 and entered into between the Company
	and the Beida Online Vendors in relation to the acquisition
	of the 50% equity interest in Beida Online by the Company
	from the Beida Online Vendors
“Beida Online Transaction”	the proposed acquisition under the Beida Online Agreement
“Beida Online Business	the valuation prepared by the PRC Valuer on the business
Valuation”	value of Beida Online as at 31st October, 2002
“Beida Online Vendors”	Jade Bird Software, Mr. Xu Zhen Dong and Mr. Qi Li
	Feng
“Beida Public School”	北京北大公學教育投資有限公司(Beijing Beida Public
	School Education Investment Company Limited), a limited
	liability company incorporated in the PRC in April 2001
	and is beneficially owned as to approximately 54% by
	Peking University
“Board”	the board of Directors
“Company”	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 PRC with limited liability, the H Shares
	of which are listed on the Stock Exchange

– 1 –

DEFINITIONS

“Compulsory Education” primary and junior high school education in the PRC “DBS Asia” DBS Asia Capital Limited, the financial adviser to the Independent Board Committee and an investment adviser registered under the Securities Ordinance
“Directors” the directors of the Company “Extraordinary General Meeting” an extraordinary general meeting of the Company to be convened to consider and, if thought fit, approve, among other things, the Proposed Acquisitions, the Zhuhai Lease Transactions and the Waiver Application
“Group” the Company and its subsidiaries “Hong Kong” the Hong Kong Special Administrative Region of the PRC “H Share(s)” overseas listed foreign invested shares in the registered share capital of the Company with a Renminbi-denominated nominal value of RMB1.00 each, which are listed on the Stock Exchange and subscribed for and traded in Hong Kong dollars
“Independent Board Committee” an independent committee of the Board comprising Messrs. Choy Shu Kwan, Wilson and Cheng Wei
“Independent Shareholders” the Shareholders other than SPU and its associates and any connected persons having an interest in the Proposed Acquisitions and the Zhuhai Lease Transactions
“International Valuer” Vigers Hong Kong Limited, a professional valuer in Hong Kong which is independent of and not connected with the directors, the promoters, the supervisors, chief executive or substantial shareholders of the Company or any of its subsidiaries or an associate of any of them
“Jade Bird Software” 北京市北大青鳥軟件系統公司 (Beijing Beida Jade Bird Software System Company), a company incorporated in the PRC with limited liability on 19th November, 1994 and a wholly owned subsidiary of Peking University
“Latest Practicable Date” 17th December, 2002, being the latest practicable date prior to printing of this circular for the purpose of ascertaining certain information contained herein
“Listing Rules” The Rules Governing the Listing of Securities on the Stock Exchange
“Peking University” a comprehensive and a national key university in the PRC

– 2 –

DEFINITIONS

“PRC” or “China”	the People’s Republic of China which for the purpose of
	this circular, excludes Hong Kong, Macau Special
	Administrative Region and Taiwan
“PRC Valuer”	中資資產評估公司(China Assets Appraisal Corporation
	Limited) , a professional valuer in the PRC which is
	independent of and not connected with the directors, the
	promoters, the supervisors, chief executive or substantial
	shareholders of the Company or any of its subsidiaries or
	an associate of any of them
“Proposed Acquisitions”	the Zhuhai Transaction, the Shanghai Transaction and the
	Beida Online Transaction
“Real Estate Company”	瀋陽發展房產開發有限公司(Shenyang Development Real
	Estate Company Limited), a limited liability company
	incorporated in the PRC, the equity interest of which is
	owned as to approximately 99.86% by the Company and
	0.14% by Shenyang Hot Electricity Development Company
	Limited, a party independent of and not connected with the
	directors, the promoters, the supervisors, chief executive or
	substantial shareholders of the Company or any of its
	subsidiaries or an associate of any of them
“SDI Ordinance”	Securities (Disclosure of Interests) Ordinance, Chapter 396
	of the Laws of Hong Kong
“Securities Ordinance”	the Securities Ordinance, Chapter 333 of the Laws of Hong
	Kong
“Shanghai Agreement”	the conditional sale and purchase agreement dated 28th
	November, 2002 and entered into between the Company,
	the Real Estate Company and the Vendors in relation to the
	acquisition of the entire equity interest in Shanghai
	Education by the Company and the Real Estate Company
	from the Vendors
“Shanghai Education”	上海北大青鳥教育投資有限公司(Shanghai Beida Jade
	Bird Education Investment Company Limited), a limited
	liability company incorporated in the PRC on 24th October,
	2002
“Shanghai International	the valuation prepared by the International Valuer on the
Valuation”	property of Shanghai Education as at 31st October, 2002
“Shanghai Master Lease	the master lease agreement dated 28th November, 2002
Agreement”	entered into between the Company and Beida Education
	Investment setting out the broad major terms of the lease in
	relation to Phase I of the education park to be developed
	by Shanghai Education

– 3 –

DEFINITIONS

“Shanghai PRC Valuation”	the valuation prepared by the PRC Valuer on the assets and
	liabilities of Shanghai Education as at 31st October, 2002
“Shanghai Transaction”	the proposed acquisition under the Shanghai Agreement and
	the proposed lease arrangement under the Shanghai Master
	Lease Agreement
“Share(s)”	State Share(s) and H Share(s)
“Shareholder(s)”	the holder(s) of the Share(s)
“SPU”	瀋陽公用集團有限公司(Shenyang Public Utility Group
	Company Limited), a company established in the PRC with
	limited liability and the existing controlling shareholder of
	the Company with an interest of approximately 58.8% in
	the issued share capital of the Company
“State Share(s)”	ordinary shares with a nominal value of RMB1.00 each in
	the capital of the Company, issued by the Company to SPU
	credited as fully paid
“Stock Exchange”	The Stock Exchange of Hong Kong Limited
“Supervisor(s)”	member(s) of the supervisory committee of the Company
“Vendors”	Beida Education Investment and Beida Public School
“Waiver Application”	the application made by Tai Fook Capital Limited, on behalf
	of the Company, to the Stock Exchange for a waiver from
	strict compliance with the announcement and shareholders’
	approval requirements under Rule 14.26 of the Listing Rules
	in respect of the Zhuhai Lease Transactions for the three
	years ending 31 December, 2005
“Zhuhai Agreement”	the conditional sale and purchase agreement dated 28th
	November, 2002 and entered into between the Company
	and the Vendors in relation to the acquisition of 70% equity
	interest in Zhuhai Education by the Company from the
	Vendors
“Zhuhai Education”	珠海北大教育科學園有限公司(Zhuhai Beida Education
	Science Park Company Limited), a limited liability company
	incorporated in the PRC on 22nd May, 2001
“Zhuhai International Valuation”	the valuation prepared by the International Valuer on the
	property of Zhuhai Education as at 31st October, 2002
“Zhuhai Lease Transactions”	the transactions contemplated under the Zhuhai Master
	Lease Agreement and subsequently the Zhuhai Formal Lease
	Agreement

– 4 –

DEFINITIONS

“Zhuhai Master Lease the master lease agreement dated 28th November, 2002 Agreement” entered into between the Company and Beida Education Investment setting the major terms of the lease in relation to Phase I of the education park to be developed by Zhuhai Education “Zhuhai PRC Valuation” the valuation prepared by the PRC Valuer on the assets and liabilities of Zhuhai Education as at 31st October, 2002 “Zhuhai Transaction” the proposed acquisition under the Zhuhai Agreement and the proposed lease arrangement under the Zhuhai Master Lease Agreement and subsequently the Zhuhai Formal Lease Agreement

For the purpose of this circular, unless otherwise indicated, conversion of Renminbi into HK dollars is calculated at the approximate exchange rate of HK$0.9435 to RMB1.00. The use of such rates of exchange is not a representation that the Renminbi or HK dollars can be exchanged at this rate or at any other rates at all.

– 5 –

LETTER FROM THE BOARD

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瀋陽公用發展股份有限公司 SHENYANG PUBLIC UTILITY HOLDINGS COMPANY LIMITED (a joint stock limited company incorporated in the People’s Republic of China with limited liability)

Executive Directors:

Mr. Xu Er Hui

Mr. Zhang Jian Bo

Mr. Zhang Ying Jian

Mr. Wang Se

Mr. Geng Jian Wei

Mr. Chen Shu Xin

Legal Address:

No. 24-1 Mo Chou Hu Street Shenyang Economic and Technological Development Zone Shenyang the PRC

Mr. Chan Kam Ling

Place of business in the PRC:

Non-executive Directors:

Mr. Lin Wen Bin

Mr. Michel Detay

Mr. Zhang Wan Zhong

No. 14 Shisiwei Road Heping District Shenyang the PRC

Independent non-executive Directors:

Mr. Cheng Wei

Mr. Choy Shu Kwan, Wilson

23rd December, 2002

To the Shareholders

Dear Sir or Madam,

DISCLOSEABLE AND CONNECTED TRANSACTIONS PROPOSED ACQUISITIONS OF

(1) 70% EQUITY INTEREST IN ZHUHAI EDUCATION;

(2) 100% EQUITY INTEREST IN SHANGHAI EDUCATION; AND

(3) 50% EQUITY INTEREST IN BEIDA ONLINE AND ONGOING CONNECTED TRANSACTIONS

INTRODUCTION

On 28th November, 2002, the Company entered into:

(1) the Zhuhai Agreement with the Vendors, pursuant to which the Vendors agreed to sell, and the Company agreed to acquire the 70% equity interest held by the Vendors in Zhuhai Education at a cash consideration of approximately RMB166.6 million;
(2) the Shanghai Agreement with the Vendors, pursuant to which the Vendors agreed to sell, and the Company and its subsidiary, the Real Estate Company, agreed to acquire the 100% equity interest held by the Vendors in Shanghai Education at a cash consideration of approximately RMB194.4 million; and

– 6 –

LETTER FROM THE BOARD

(3) the Beida Online Agreement with the Beida Online Vendors, pursuant to which the Beida Online Vendors agreed to sell, and the Company agreed to acquire the 50% equity interest held by the Beida Online Vendors in Beida Online at a cash consideration of approximately RMB94.4 million.

The aggregate consideration of the Zhuhai Transaction, the Shanghai Transaction and the Beida Online Transaction pursuant to the Zhuhai Agreement, the Shanghai Agreement and the Beida Online Agreement respectively amounts to approximately RMB455.4 million and will be financed by the Company’s internal resources.

In connection with the Zhuhai Transaction and the Shanghai Transaction, on 28th November, 2002, the Company also entered into the Zhuhai Master Lease Agreement and the Shanghai Master Lease Agreement respectively with one of the Vendors, Beida Education Investment, and the transactions contemplated thereunder will constitute ongoing connected transactions of the Company under the Listing Rules.

Peking University beneficially owns over 50% interest in each of the Vendors. One of the Beida Online Vendors, Jade Bird Software, is a wholly owned subsidiary of Peking University. Peking University also has over 50% beneficial interest in Beida Hi-Tech, which in turn has a 50% equity interest in the total registered capital of SPU, the controlling shareholder of the Company. Pursuant to the Listing Rules, the Zhuhai Transaction and the Shanghai Transaction constitute discloseable and connected transactions of the Company and the Beida Online Transaction constitutes a connected transaction of the Company.

Each of the Proposed Acquisitions and the Zhuhai Lease Transactions are subject to, among other things, the approval of the Independent Shareholders. In view of the interest of Peking University and Beida Hi-Tech in the Proposed Acquisitions and the Zhuhai Lease Transactions, SPU and its associate will abstain from voting at the Extraordinary General Meeting.

The Independent Board Committee has been appointed by the Board to consider whether (i) the terms of the Proposed Acquisitions and the Zhuhai Lease Transactions; and (ii) the Waiver Application are fair and reasonable so far as the Independent Shareholders are concerned. DBS Asia has been appointed as the independent financial adviser to advise the Independent Board Committee on the same.

The purpose of this circular is to provide, among other things, information relating to the Proposed Acquisitions and the Zhuhai Lease Transactions and to set out the letter from the Independent Board Committee containing its advice to the Independent Shareholders in respect of the Proposed Acquisitions, the Zhuhai Lease Transactions and the Waiver Application and the letter from DBS Asia to advise the same.

Your attention is also drawn to page 42 of this circular where you will find a notice dated 23rd December, 2002 convening an extraordinary general meeting to be held at 5/F., West PKUHKUST Shenzhen-Hong Kong Institution Building, South Area, Hi-tech Industrial Park, Nanshan District, Shenzhen, the PRC at 10:00 a.m. on 10th February, 2003.

– 7 –

LETTER FROM THE BOARD

THE PROPOSED ACQUISITIONS

A. The Zhuhai Agreement dated 28th November, 2002

Parties:

Vendors: Beida Education Investment Beida Public School

Peking University has over 50% beneficial interest in each of Beida Education Investment and Beida Public School

Purchaser: the Company

Equity interest to be acquired:

Pursuant to the Zhuhai Agreement, the Company will acquire 35% equity interest in Zhuhai Education from each of Beida Education Investment and Beida Public School respectively. Upon completion of the Zhuhai Transaction, the Company will own an aggregate of 70% equity interest in Zhuhai Education. The remaining 30% equity interest in Zhuhai Education is owned by an independent third party not connected with the directors, the promoters, the supervisors, chief executive or substantial shareholders of the Company or any of its subsidiaries or an associate of any of them.

The consideration for the Zhuhai Transaction:

The consideration payable by the Company for the Zhuhai Transaction is approximately RMB166.6 million, which will be satisfied by cash from the Company’s internal resources. The consideration has been determined after arm’s length negotiation between the parties involved with reference to each of the Zhuhai PRC Valuation and the Zhuhai International Valuation prepared by the PRC Valuer and the International Valuer respectively. The PRC Valuer valued the net assets of Zhuhai Education as at 31st October, 2002 at approximately RMB238.0 million (including land and buildings of approximately RMB289 million). The International Valuer valued the land and buildings owned by Zhuhai Education as at 31st October, 2002 at approximately RMB289 million. The Directors consider that the terms of the Zhuhai Agreement are based on normal commercial terms and are fair and reasonable.

Pursuant to the Zhuhai Agreement, the Company will deposit the full consideration amount of approximately RMB166.6 million into an escrow account in a PRC bank to be agreed between the parties on or before 31st December, 2002 and such amount will remain in such escrow account until completion of the Zhuhai Transaction which is expected to be on or before the end of May 2003. Upon completion of the Zhuhai Transaction, the full amount of the consideration will be paid to the Vendors. Also pursuant to the Zhuhai Agreement, upon completion of the Zhuhai Transaction, the Company will become the sole beneficial owner of the economic benefits (including all rights and obligations) relating to the 70% equity interest in Zhuhai Education as from and including 1st January, 2003. The Directors consider that the terms of the Zhuhai Agreement are fair and reasonable so far as the Shareholders are concerned.

– 8 –

LETTER FROM THE BOARD

Conditions precedent to completion of the Zhuhai Transaction:

Completion of the Zhuhai Transaction is conditional upon, among other things, the following:

(1) the passing by the Independent Shareholders of an ordinary resolution to approve the Zhuhai Transaction at the Extraordinary General Meeting;
(2) filing being made to the relevant PRC authorities in relation to the Zhuhai PRC Valuation;
(3) approval being obtained by Zhuhai Education from relevant PRC authorities in relation to the Zhuhai Transaction and the corresponding amendments to the articles of association and business license of Zhuhai Education;
(4) approval being obtained by Zhuhai Education from relevant PRC authorities in relation to the proposed termination of the business relating to Compulsory Education and the proposed incorporation of property leasing business in the business activities of Zhuhai Education and the corresponding amendments to the articles of association and business license of Zhuhai Education; and
(5) waiver being obtained from the existing equity holder of Zhuhai Education other than the Vendors in respect of the pre-emptive rights to acquire the 70% equity interest in Zhuhai Education sold by the Vendors to the Company.

Pursuant to the Zhuhai Agreement, none of the above conditions may be waived by either party. In addition, the Zhuhai Agreement is independent of and not inter-conditional on either the Shanghai Agreement or the Beida Online Agreement.

B. The Shanghai Agreement dated 28th November, 2002

Parties:

Vendors: Beida Education Investment Beida Public School

Peking University has over 50% beneficial interest in each of Beida Education Investment and Beida Public School

Purchasers: the Company

the Real Estate Company

Equity interest to be acquired:

Pursuant to the Shanghai Agreement, the Company and its approximately 99.86% directly owned subsidiary, the Real Estate Company, will acquire 80% and 20% equity interest in Shanghai Education from Beida Education Investment and Beida Public School respectively. Upon completion of the Shanghai Transaction, the Company will directly own 80% equity interest in Shanghai Education with the remaining equity interest of 20% to be directly held by the Real Estate Company.

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LETTER FROM THE BOARD

The consideration for the Shanghai Transaction:

The consideration payable by the Company and the Real Estate Company for the Shanghai Transaction is approximately RMB155.5 million and approximately RMB38.9 million respectively, which will be satisfied by cash from the internal resources of the Company and the Real Estate Company respectively. The consideration has been determined after arm’s length negotiation between the parties involved with reference to each of the Shanghai PRC Valuation and the Shanghai International Valuation prepared by the PRC Valuer and the International Valuer respectively. The PRC Valuer valued the net assets of Shanghai Education as at 31st October, 2002 at approximately RMB194.4 million (including the land of approximately RMB95.6 million). The International Valuer valued the land owned by Shanghai Education as at 31st October, 2002 at approximately RMB95.6 million. The Directors consider that the terms of the Shanghai Agreement are based on normal commercial terms and are fair and reasonable.

Pursuant to the Shanghai Agreement, the Company will deposit the full consideration amount of approximately RMB194.4 million into an escrow account in a PRC bank to be agreed between the parties on or before 31st December, 2002 and such amount will remain in such escrow account until completion of the Shanghai Transaction which is expected to be on or before the end of May 2003. Upon completion of the Shanghai Transaction, the full amount of the consideration will be paid to the Vendors. Also pursuant to the Shanghai Agreement, upon completion of the Shanghai Transaction, the Company and the Real Estate Company will become the beneficial owner of the economic benefits (including all rights and obligations) relating to 80% and 20% equity interest respectively in Shanghai Education as from and including 1st January, 2003. The Directors consider that the terms of the Shanghai Agreement are fair and reasonable so far as the Shareholders are concerned.

Conditions precedent to completion of the Shanghai Transaction:

Completion of the Shanghai Transaction is conditional upon, among other things, the following:

(1) the passing by the Independent Shareholders of an ordinary resolution to approve the Shanghai Transaction at the Extraordinary General Meeting;
(2) filing being made to the relevant PRC authorities in relation to the Shanghai PRC Valuation;
(3) approval being obtained by Shanghai Education from relevant PRC authorities in relation to the Shanghai Transaction and the corresponding amendments to the articles of association and business license of Shanghai Education; and
(4) approval being obtained by Shanghai Education from relevant PRC authorities in relation to the proposed incorporation of property leasing business as the business activities of Shanghai Education and the corresponding amendments to the articles of association and business license of Shanghai Education.

Pursuant to the Shanghai Agreement, none of the above conditions may be waived by either party. In addition, the Shanghai Agreement is independent of and not inter-conditional on either the Zhuhai Agreement or the Beida Online Agreement.

– 10 –

LETTER FROM THE BOARD

C. The Beida Online Agreement dated 28th November, 2002

Parties:

Beida Online Vendors: Jade Bird Software Mr. Xu Zhen Dong Mr. Qi Li Feng

Jade Bird Software is a direct wholly owned subsidiary of Peking University. Mr. Qi Li Feng is independent of and not connected with the directors, the promoters, the supervisors, chief executive or substantial shareholders of the Company or any of its subsidiaries or an associate of any of them. Mr. Xu Zhen Dong is the Chairman of Beida Hi-Tech, which has a 50% equity interest in the registered capital of SPU, the controlling shareholder of the Company.

Purchaser: the Company

Equity interest to be acquired:

Pursuant to the Beida Online Agreement, the Company will acquire 30%, 18% and 2% equity interest in Beida Online from Jade Bird Software, Mr. Xu Zhen Dong and Mr. Qi Li Feng respectively. Upon completion of the Beida Online Transaction, the Company will own a 50% equity interest in Beida Online. The remaining 50% equity interest in Beida Online is owned by Peking University.

The consideration for the Beida Online Transaction:

The aggregate consideration payable by the Company for the Beida Online Transaction is approximately RMB94.4 million, which will be satisfied by cash from the Company’s internal resources. The consideration has been determined after arm’s length negotiation between the parties involved with reference to the Beida Online Business Valuation prepared by the PRC Valuer. The PRC Valuer valued the business value of Beida Online as at 31st October, 2002 at approximately RMB188.8 million. The Directors consider that the terms of the Beida Online Agreement are based on normal commercial terms and are fair and reasonable.

Pursuant to the Beida Online Agreement, the Company will deposit the full consideration amount of approximately RMB94.4 million into an escrow account in a PRC bank to be agreed between the parties on or before 31st December, 2002 and such amount will remain in such escrow account until completion of the Beida Online Transaction which is expected to be on or before the end of May 2003, upon which the full amount of the consideration will be paid to the Beida Online Vendors. Also pursuant to the Beida Online Agreement, upon completion of the Beida Online Agreement, the Company will become the sole beneficial owner of the economic benefits (including all rights and obligations) relating to the 50% equity interest in Beida Online, which will then become a subsidiary of the Company, as from and including 1st January, 2003. The Directors consider that the terms of the Beida Online Agreement are fair and reasonable so far as the Shareholders are concerned.

– 11 –

LETTER FROM THE BOARD

Conditions precedent to completion of the Beida Online Transaction:

Completion of the Beida Online Transaction is conditional upon, among other things, the following:

(1) the passing by the Independent Shareholders of an ordinary resolution to approve the Beida Online Transaction at the Extraordinary General Meeting;
(2) filing being made to the relevant PRC authorities in relation to the Beida Online Business Valuation prepared by the PRC Valuer;
(3) approval being obtained by Beida Online from the relevant PRC authorities (including but not limited to the Ministry of Information Industry) in relation to the Beida Online Transaction and the corresponding amendments to the articles of association and business license of Beida Online;
(4) waiver being obtained from Peking University in respect of the exercise of the pre-emptive rights to acquire the 50% equity interest in Beida Online sold by the Beida Online Vendors to the Company; and
(5) the collection of the other receivable of Beida Online due from Beijing Beida Jade Bird Company Limited in the amount of approximately RMB37.8 million as at 31st October, 2002 by Beida Online.

Pursuant to the Beida Online Agreement, none of the above conditions may be waived by either party. In addition, the Beida Online Agreement is independent of and not interconditional on either the Zhuhai Agreement or the Shanghai Agreement.

INFORMATION ON ZHUHAI EDUCATION, SHANGHAI EDUCATION AND BEIDA ONLINE

A. Information on Zhuhai Education:

Zhuhai Education is a limited liability company incorporated in the PRC on 22nd May, 2001 with a registered capital of RMB20 million. Zhuhai Education is engaged mainly in the provision of education services, education training, education project investment, education related software and hardware development, technology transfer, technology services, training and consultancy. At present, the major asset of Zhuhai Education is the land (the “Zhuhai Land”) acquired from Zhuhai Municipal Government pursuant to《珠海市國有土地使用權出讓合同書》 (State Owned Land Use Rights Sales Agreement) dated 22nd July, 2001, 《關於北大教育科學園用地面積的函》(Document in relation to the Area of Beida Education Science Park) and 《房地產權証》(Property Right Certificate) (collectively, the “Zhuhai Approvals”). The Zhuhai Land is located at Zhuhai, the PRC, with an area of approximately 420,000 square meters. As stipulated in the Zhuhai Approvals, the Zhuhai Land can only be developed for provision of education facilities and services. Based on the development plan of Zhuhai Education, an education park will be established on the Zhuhai Land (the “Zhuhai Education Park”) with facilities and buildings catered for multi-areas of education such as primary and secondary school, post graduate school and onthe-job training, etc. Generally speaking, an education park refers to projects which are built upon the concept of “education” i.e. constructed around school buildings, and normally comprise school buildings, commercial buildings and in some cases residential buildings. The business model of the Zhuhai Education Park is to capitalize on the commercial potential of its close association with Peking University.

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LETTER FROM THE BOARD

The construction plan of the Zhuhai Education Park is divided into three phases with an estimated total floor area of approximately 152,000 square meters. Phase I of the Zhuhai Education Park, which comprises facilities for primary and secondary education and includes 15 buildings with a total floor area of approximately 61,000 square meters, is expected to be completed by no later than August 2003. Phase II and Phase III of the Zhuhai Education Park will focus on education facilities other than facilities for Compulsory Education which include facilities for research and development, office buildings and training centres. It is estimated that the total construction cost for Phase II and Phase III of the Zhuhai Education Park will amount to approximately RMB152 million and will be completed by September 2004.

The land and the buildings relating to Phase I of the Zhuhai Education Park will be leased to Beida Education Investment (please refer to the section headed “Zhuhai Lease Transactions and Future Ongoing Connected Transactions” below for further details). It is currently intended that Phase II and Phase III of the Zhuhai Education Park, when completed, will either be leased to third parties (which may or may not be connected persons as defined under the Listing Rules) or used by the Company for provision of education services, such as professional training and corporate training. Based on the Zhuhai PRC Valuation, the value of the net assets (including the Zhuhai Land and the buildings relating to Phase I of approximately RMB289 million) of Zhuhai Education as at 31st October, 2002 amounted to approximately RMB238.0 million. In accordance with the Zhuhai International Valuation, the value of the Zhuhai Land and the buildings as at 31st October, 2002 amounted to approximately RMB289 million. Based on the unaudited management accounts of Zhuhai Education, the net tangible asset value of Zhuhai Education as at 31st October, 2002 amounted to approximately RMB78.0 million.

The Directors intend to finance the construction costs of Phase II and Phase III of Zhuhai Education Park by the internal resources of Zhuhai Education and external financing to be obtained by Zhuhai Education and therefore the Company is not expected to be required to provide financing for the completion of the project.

B. Information on Shanghai Education:

Shanghai Education is a limited liability company incorporated in the PRC on 24th October, 2002 with a registered capital of RMB100 million. Shanghai Education is engaged mainly in education project investment, computer software and hardware technology development, technology transfer, technology training and consultancy. At present, the major asset of Shanghai Education is the land (the “Shanghai Land”) acquired from Shanghai State Owned Land Planning Bureau pursuant to《土地權屬證明》(Proof of Land Ownership) dated 30th October, 2002 issued by 上海市青浦區房屋土地管理局 (Shanghai Qing Pu District Property and Land Administration Bureau) and 《建設用地規劃許可證》(Construction Land Planning Permit) issued by 上海市青浦區規劃管理局 (Shanghai Qing Pu District Planning Administration Bureau) (collectively, the “Shanghai Approvals”). The Shanghai Land is located at 青浦區 (Qing Pu District) of Shanghai, the PRC, with an area of approximately 318,400 square meters. As stipulated in the Shanghai Approvals, the Shanghai Land can only be developed for provision of education facilities and services. Based on the development plan of Shanghai Education, an education park will be established on the Shanghai Land (the “Shanghai Education Park”) with facilities and buildings catered for multi-areas of education such as primary and secondary school, post graduate school and on-the-job training, etc. The business model of the Shanghai Education Park is to capitalize on the commercial potential of its close association with Peking University. The construction plan of the Shanghai Education Park is divided into two phases with an estimated total floor area of approximately 137,000 square meters. It is estimated that the total construction cost for the Shanghai Education Park will amount

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LETTER FROM THE BOARD

to approximately RMB229 million, of which approximately RMB119 million and RMB110 million will be applied for the investment in Phase I and Phase II of the Shanghai Education Park respectively.

The construction work of Phase I and Phase II are expected to be completed by August 2004 and August 2005 respectively. The land and the buildings relating to Phase I of the Shanghai Education Park will be leased to Beida Education Investment (please refer to the section headed “Zhuhai Lease Transactions and Future Ongoing Connected Transactions” below for further details). It is currently intended that Phase II of the Shanghai Education Park, when completed, will either be leased to third parties (which may or may not be connected persons as defined under the Listing Rules) or used by the Company for provision of education services, such as professional training and corporate training. Based on the Shanghai Valuation prepared by the PRC Valuer, the value of the net assets (including the Shanghai Land having a value of approximately RMB95.6 million) of Shanghai Education as at 31st October, 2002 amounted to approximately RMB194.4 million. In accordance with the Shanghai International Valuation prepared by the International Valuer, the value of the Shanghai Land as at 31st October, 2002 amounted to approximately RMB95.6 million. Based on the unaudited management accounts of Shanghai Education, the net asset value of Shanghai Education as at 31st October, 2002 amounted to approximately RMB100 million.

The Directors intend to finance the construction costs of Phase I and Phase II of the Shanghai Education Park by the internal resources of Shanghai Education and external financing to be obtained by Shanghai Education and therefore the Company is not expected to be required to provide financing for the completion of the project.

C. Information on Beida Online:

Beida Online is a limited liability company incorporated in the PRC on 22nd September, 2000 with a registered capital of RMB70 million. Beida Online is engaged principally in provision of online post secondary education and business and career training. Beida Online has collaborated with a number of faculties of Peking University including 法學院 (Law Faculty), 經濟學院 (Economics Faculty) and 政府管理學院 (Government Management Faculty) to provide online specialized education. Also, Beida Online has collaborated with 最高人民法院 (The Supreme People’s Court of China), 最高人民檢察院 (The Supreme People’s Procuratorate of China) and 解放軍總參謀部 (The General Staff of the People Liberation Army) to provide online post secondary education. In respect of corporate training, as of August 2002, Beida Online has secured contracts to provide online business training courses to over 20 large-scale corporations in the PRC. Based on the Beida Online Business Valuation prepared by the PRC Valuer, the business value of Beida Online as at 31st October, 2002 amounted to approximately RMB188.8 million. Based on the unaudited management accounts of Beida Online, the net assets of Beida Online as at 31st October, 2002 amounted to approximately RMB40.8 million. Based on the unaudited accounts of Beida Online, the net loss of Beida Online for the year ended 31st December, 2001 was approximately RMB13.5 million.

The Directors intend to amortise the goodwill resulting from the Beida Online Transaction in the amount of approximately RMB74 million over a period of 7 to 10 years. Based on the proposed amortisation period ranging from 7 to 10 years, the annual amortisation will be in the range of approximately RMB7.4 million to approximately RMB10.6 million.

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LETTER FROM THE BOARD

REASONS FOR THE PROPOSED ACQUISITIONS AND SOURCE OF INTERNAL FUND TO FINANCE THE CONSIDERATION FOR THE PROPOSED ACQUISITIONS

Prior to the disposal of the water purification business, the Group was principally engaged in production and sale of purified water, the development and sale of real estate and the production and sale of electricity and heat through a joint venture. As stated in the circular of the Company dated 5th July, 2002 (the “Circular”) in relation to its disposal of the water purification business (the “Disposal”), the proceeds from the Disposal was RMB900 million, of which RMB590 million would be used to finance the property and education project in Shenyang. Therefore, there is an amount of RMB310 million which has not yet been utilised or designated for other uses. The aggregate consideration for the acquisitions under the Agreements amounts to approximately RMB455.4 million. The Directors intend to use the remaining proceeds from the Disposal of RMB310 million to partly finance the acquisitions and the remaining balance of approximately RMB145.4 million required for the acquisitions will be financed by the Group’s internal resources.

As explained in the Circular , the Company intends to form alliance with prestigious university in the PRC to jointly develop education projects which not only refer to development of properties for rental income but other education related projects e.g. development and sale of residential complexes built in large education parks, provision of non Compulsory Education services. In line with such intention, the Directors believe that the Zhuhai Transaction and the Shanghai Transaction would provide a valuable opportunity for the Company to further participate in the property development of education complexes with a close association with Peking University and located in prime cities of the PRC and benefit from steady rental income generated from leasing of properties on such education complexes. Peking University is one of the most famous universities in the PRC, having a long history. Being located in Beijing, the capital city of the PRC, Peking University is one of the most respected and well-known universities in the PRC. Therefore, jointly developing education projects in association with Peking University will definitely raise the profile and enhance the success of the education projects to be undertaken by the Company. Also, the Directors believe that the Beida Online Transaction would allow the Company to establish a foothold in the business of online education provision by investing in an established online education platform supported by Peking University.

ZHUHAI LEASE TRANSACTIONS AND FUTURE ONGOING CONNECTED TRANSACTIONS

A. Background:

According to existing PRC laws and regulations, provision of Compulsory Education in the PRC can only be conducted by enterprises incorporated in the PRC which has no direct or indirect foreign investor’s equity participation. Upon completion of the Zhuhai Transaction and the Shanghai Transaction, each of Zhuhai Education and Shanghai Education, each being a subsidiary of the Company, which is a H-share company listed on the main board of the Stock Exchange, will have some foreign investment in its equity. Given that Phase I of Zhuhai Education was designed and built for use relating to provision of Compulsory Education, Zhuhai Education cannot, by itself, utilise Phase I to provide Compulsory Education. Therefore, it will have to lease the properties of Phase I to an enterprise which is qualified to provide Compulsory Education. In this regard, the Company has entered into the Zhuhai Master Lease Agreement with Beijing Education Investment on 28th November, 2002, which sets out the major terms (including the contract term, the subject of the lease and the rental rates) to be incorporated into a formal lease agreement (the “Zhuhai Formal Lease Agreement”) to be entered into as soon as practicable after completion of the Zhuhai Agreement or completion of Phase I of the Zhuhai Education Park whichever is later.

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LETTER FROM THE BOARD

Similar to the Zhuhai Education Park, Phase I of the Shanghai Education Park is designed and built for use relating to provision of Compulsory Education. The Company has entered into the Shanghai Master Lease Agreement with Beijing Education Investment on 28th November, 2002, which sets out some of the broad terms of the lease. A formal lease agreement (the “Shanghai Formal Lease Agreement”) setting out all the details of the lease will be entered into as soon as practicable after completion of the Shanghai Agreement or completion of Phase I of the Shanghai Education Park whichever is later.

B. The Zhuhai Master Lease Agreement:

Pursuant to the Zhuhai Master Lease Agreement, as soon as practicable after completion of the Zhuhai Agreement or completion of Phase I of the Zhuhai Education Park whichever is later, Zhuhai Education and Beida Education Investment or its subsidiary or associate (the “Tenant”) will enter into the Zhuhai Formal Lease Agreement in relation to the leasing of Phase I of the Zhuhai Education Park. As stipulated in the Zhuhai Master Lease Agreement, the principal terms of the Zhuhai Formal Lease Agreement are stated below:

Landlord	:	Zhuhai Education
Tenant	:	Beida Education Investment or its subsidiary or associate
Premises	:	Phase I of the Zhuhai Education Park having an area of
		approximately 175,000 square meters and a total of 15 buildings
		with an aggregate gross floor area of approximately 61,000
		square meters
Tenancy period	:	20 years commencing on 1st September, 2003, renewable for
		further period subject to terms to be agreed between the parties
Annual rental	:	The annual rental will comprise a fixed amount only (the
		“Zhuhai Fixed Rent”) for the three years ending 31st August,
		2006 and from then onward, the Zhuhai Fixed Rent and a
		variable amount (the “Zhuhai Variable Rent”).

The Zhuhai Fixed Rent will be as follows:

RMB7.5 million for the year ending 31st August, 2004
– RMB15 million for the year ending 31st August, 2005
RMB25 million for the year ending 31st August, 2006 and each of the year thereafter

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LETTER FROM THE BOARD

The Zhuhai Variable Rent for each year during the remaining period of the lease under the Zhuhai Lease Transactions (i.e. commencing from 1st September, 2006) will equal to:

(Actual no. of students for the relevant year – Expected no. of students for the relevant year) Zhuhai Fixed Rent x x 30% Expected no. of students for the relevant year Condition : The Zhuhai Master Lease Agreement is conditional upon completion of the Zhuhai Agreement

C. The Shanghai Master Lease Agreement

Pursuant to the Shanghai Master Lease Agreement, as soon as practicable after completion of the Shanghai Agreement or completion of Phase I of the Shanghai Education Park whichever is later, Shanghai Education and Beida Education Investment or its subsidiary or associate will enter into the Shanghai Formal Lease Agreement in relation to the leasing of Phase I of the Shanghai Education Park. As stipulated in the Shanghai Master Lease Agreement, the broad terms of the Shanghai Formal Lease Agreement are stated below:

Landlord : Shanghai Education Tenant : Beida Education Investment or its subsidiary or associate Tenancy period : 20 years commencing on 1st September, 2004, renewable for further period subject to terms to be agreed between the parties Annual rental : The annual rent will be determined at the time by the two parties when entering into the Shanghai Formal Lease Agreement provided that the annual fixed rent will be no less than 5% of the sum of (i) the value of the Shanghai Land as at 31st October, 2002 used for Phase I of the Shanghai Education Park (calculated based on the area of the land occupied by Phase I of the Shanghai Education Park and the valuation of the Shanghai Land as at 31st October, 2002 as valued by the International Valuer); and (ii) the total construction cost for Phase I of the Shanghai Education Park. Condition : The Shanghai Master Lease Agreement is conditional upon completion of the Shanghai Agreement

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LETTER FROM THE BOARD

WAIVER APPLICATION

A. Reason for the application:

Subsequent to completion of the Zhuhai Transaction and the Shanghai Transaction, the leases contemplated under the Zhuhai Formal Lease Agreement and the Shanghai Formal Lease Agreement (the major terms of which are based on the Zhuhai Master Lease Agreement and the Shanghai Master Lease Agreement) will be entered into in the ordinary course of business of the Company and on a continuous basis. Peking University has an effective interest of approximately 66% in Beida Education Investment. Peking University also beneficially owns over 50% equity interest of Beida Hi-Tech which in turn owns 50% of the registered capital of SPU, the controlling shareholder of the Company with an approximate equity interest of 58.8% in the issued share capital of the Company. Given the fact that Beida Hi-Tech is a substantial shareholder of the Company and Beida Education Investment is an associate of Beida Hi-Tech, Beida Education Investment is a connected person of the Company pursuant to the Listing Rules. Accordingly, the transactions contemplated under the Zhuhai Master Lease Agreement and Shanghai Master Lease Agreement and subsequently, the Zhuhai Formal Lease Agreement and the Shanghai Formal Lease Agreement will constitute ongoing connected transactions of the Company pursuant to the Listing Rules.

Given that the Shanghai Master Lease Agreement only sets out some broad terms of the lease to be incorporated into the Shanghai Formal Lease Agreement, which in turn will not be entered into until sometime in future before 1st September, 2004, the Directors consider that it is not in the interest of the Shareholders and the Company as a whole to apply for a waiver application in respect of the proposed lease arrangement under the Shanghai Master Lease Agreement from strict compliance with the provision under Chapter 14 of the Listing Rules at this stage. The Company will strictly comply with the relevant provision under Chapter 14 of the Listing Rules when the Shanghai Formal Lease Agreement is entered into and may apply for waiver in this regard as and when it is appropriate.

In relation to the Zhuhai Master Lease Agreement, its terms are negotiated between the Company and Beida Education Investment on an arm’s length basis. The Directors consider that the terms under the Zhuhai Master Lease Agreement are based on normal commercial terms which are fair and reasonable so far as the Shareholders, taken as a whole, are concerned. The Directors consider that the strict compliance with the announcement or shareholders’ approval requirements under Rule 14.26 of the Listing Rules in respect of the Zhuhai Lease Transactions will be impracticable and onerous to the Company. Accordingly, Tai Fook Capital Limited, the financial adviser of the Company, has, on behalf of the Company, made the Waiver Application subject to the following conditions:

(i) the Zhuhai Lease Transactions will be entered into:
(a) in the ordinary and usual course of business of the Company;
(b) either on normal commercial terms or, if there are not sufficient comparable transactions to judge whether they are on normal commercial terms, on terms no less favourable than terms available to or from (as the case may be) independent third parties;
(c) in accordance with the relevant agreements governing the Zhuhai Lease Transactions on terms that are fair and reasonable and in the interests of the Shareholders as a whole; and

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LETTER FROM THE BOARD

(d) with the annual aggregate value of the receipts under the Zhuhai Lease Transactions not exceeding the relevant Annual Caps as defined below;
(ii) details of the Zhuhai Lease Transactions shall be disclosed in the Company’s annual report and accounts as set out in Rule 14.25(1)(A) to (D) of the Listing Rules;
(iii) the independent non-executive Directors shall review annually the Zhuhai Lease Transactions and confirm in the Company’s annual report and accounts for the financial year in question that the transactions have been conducted in the manner as stated in (i) (a) to (d) above;
(iv) each year the auditors of the Company shall review the Zhuhai Lease Transactions and provide a letter (the “Letter”) to the Board (with a copy to the Listing Division of the Stock Exchange) confirming that :
(a) the Zhuhai Lease Transactions have been entered into in accordance with terms of the relevant agreement governing the transaction;
(b) the Zhuhai Lease Transactions have received the approval of the Board;
(c) the receipts under the Zhuhai Lease Transactions have not exceeded the Annual Cap as defined below; and

where, for whatever reasons, the auditors of the Company decline to accept the engagement or are unable to provide the Letter, the Board should notify the Stock Exchange immediately;

(v) the Company and Beida Education Investment shall allow the auditors of the Company sufficient access to their records for the purpose of reporting on the Zhuhai Lease Transactions;
(vi) the Company shall promptly notify the Listing Division of the Stock Exchange if it knows or has reason to believe that the independent non-executive Directors and/or the auditors of the Company will not be able to confirm the matters set out in (iii) and (iv) above respectively, in which case the Company may have to seek re-approval from Independent Shareholders to re-comply with Rule 14.26 and any other conditions the Listing Division of the Stock Exchange considers appropriate in respect of the Zhuhai Lease Transactions; and
(vii) the Company shall comply with all disclosure and shareholders’ approval requirements of the Listing Rules upon expiry of the waiver unless a further waiver, if applied for by the Company, is granted by the Stock Exchange.

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LETTER FROM THE BOARD

B. The Cap Amounts:

Based on the terms of the Zhuhai Master Lease Agreement, it is expected that the annual cap amounts (the “Annual Caps”) in respect of the annual rent to be received from the Tenant in relation to the Zhuhai Lease Transactions for the three years ending 31st December, 2005 will be as follows:

Financial year ending	Annual Cap
	RMB
	(Note)
31st December, 2003	2,500,000
31st December, 2004	10,000,000
31st December, 2005	18,400,000

Note: Based on the Zhuhai Fixed Rent for the three years ending 31st August, 2006 in the amount of RMB7.5 million, RMB15 million and RMB25 million respectively.

GENERAL

Tai Fook Capital Limited acts as the financial adviser of the Company in respect of the Proposed Acquisitions and the Zhuhai Lease Transactions.

Peking University beneficially owns over 50% interest in each of the Vendors. One of the Beida Online Vendors, Jade Bird Software, is a wholly owned subsidiary of Peking University. Peking University also has over 50% beneficial interest in Beida Hi-Tech, which in turn has a 50% equity interest in the registered capital of SPU, the controlling shareholder of the Company. Pursuant to the Listing Rules, the Zhuhai Transaction and the Shanghai Transaction constitute discloseable and connected transactions of the Company and the Beida Online Transaction constitutes a connected transaction of the Company.

In connection with the Zhuhai Transaction and the Shanghai Transaction, on 28th November, 2002, the Company also entered into Zhuhai Master Lease Agreement and Shanghai Master Lease Agreement with one of the Vendors, Beijing Education Investment, and the transactions contemplated thereunder will constitute ongoing connected transactions of the Company under the Listing Rules.

EXTRAORDINARY GENERAL MEETING

The notice convening the Extraordinary General Meeting at which ordinary resolutions will be respectively proposed to the Independent Shareholders to consider and, if thought fit, to approve (i) the Proposed Acquisitions, (ii) the Zhuhai Lease Transactions and (iii) the Waiver Application, as set out on pages 42 to 44 of this circular.

A reply slip for attendance of the Extraordinary General Meeting to be held at 5/F., West PKU-HKUST Shenzhen-Hong Kong Institution Building, South Area, Hi-tech Industrial Park, Nanshan District, Shenzhen, the PRC at 10:00 a.m. on 10th February, 2003 is enclosed. Whether

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LETTER FROM THE BOARD

or not you intend to attend the Extraordinary General Meeting, you are requested to complete and return the reply slip to the Company’s H share registrar in Hong Kong, Hong Kong Registrars Limited, at Rooms 1901-5, 19th Floor, Hopewell Centre, 183 Queen’s Road East, Hong Kong on or before 20th January, 2003.

A proxy form for use at the Extraordinary General Meeting to be held at 5/F., West PKUHKUST Shenzhen-Hong Kong Institution Building, South Area, Hi-tech Industrial Park, Nanshan District, Shenzhen, the PRC at 10:00 a.m. on 10th February, 2003 is also enclosed. Whether or not you intend to attend the Extraordinary General Meeting, you are requested to complete and return the proxy form to the Company’s H share registrar in Hong Kong, Hong Kong Registrars Limited, at Rooms 1901-5, 19th Floor, Hopewell Centre, 183 Queen’s Road East, Hong Kong not less than 24 hours before the time appointed for the holding of the Extraordinary General Meeting. Completion and return of the proxy form will not preclude you from attending and voting in person at the Extraordinary General Meeting or at any adjourned meeting(s) thereof should you so wish.

FURTHER INFORMATION

As mentioned above, the Independent Board Committee has been appointed to consider the Proposed Acquisitions, the Zhuhai Lease Transactions and the Waiver Application and to advise how the Independent Shareholders should vote in relation to the same. DBS Asia has been appointed to advise the Independent Board Committee in relation to the Proposed Acquisitions, the Zhuhai Lease Transactions and the Waiver Application. Your attention is drawn to the letters from the Independent Board Committee and DBS Asia on pages 22 to 23 and pages 24 to 31 of this circular respectively, containing their recommendation and advice.

Your attention is also drawn to the property valuation and other information required to be disclosed under the Listing Rules set out in appendix I and II respectively, and the notice of Extraordinary General Meeting.

Yours faithfully,

For and on behalf of the Board of

Shenyang Public Utility Holdings Company Limited Xu Er Hui Chairman

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LETTER FROM THE INDEPENDENT BOARD COMMITTEE

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瀋陽公用發展股份有限公司 SHENYANG PUBLIC UTILITY HOLDINGS COMPANY LIMITED

(a joint stock limited company incorporated in the People’s Republic of China with limited liability)

23rd December, 2002

To the Independent Shareholders

Dear Sir or Madam,

DISCLOSEABLE AND CONNECTED TRANSACTIONS PROPOSED ACQUISITIONS OF (1) 70% EQUITY INTEREST IN ZHUHAI EDUCATION; (2) 100% EQUITY INTEREST IN SHANGHAI EDUCATION; AND (3) 50% EQUITY INTEREST IN BEIDA ONLINE AND ONGOING CONNECTED TRANSACTIONS

We refer to the circular issued by the Company on 23rd December, 2002, of which this letter forms part. Terms defined in the circular shall have the same meanings when used herein.

We have been appointed by the Board as the Independent Board Committee established to consider the Proposed Acquisitions and the Zhuhai Lease Transactions and to advise you as to whether (i) the terms of the Proposed Acquisitions and the Zhuhai Lease Transactions; and (ii) the Waiver Application are fair and reasonable so far as the Independent Shareholders are concerned.

DBS Asia has been appointed as the independent financial adviser to advise us regarding the Proposed Acquisitions, the Zhuhai Lease Transactions and the Waiver Application. Details of the advice of DBS Asia, together with the principal factors and reasons taken into consideration in arriving at such advice, are set out in its letter. Your attention is also drawn to the letter from the Board and the additional information set out in the appendices to this circular.

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LETTER FROM THE INDEPENDENT BOARD COMMITTEE

The Independent Board Committee considers the terms of the Proposed Acquisitions, the Zhuhai Lease Transactions and the Waiver Application to be fair and reasonable so far as the Independent Shareholders are concerned and has been so advised by DBS Asia, the independent financial adviser. The Independent Board Committee recommends you to vote in favour of the resolution to approve the Proposed Acquisitions, the Zhuhai Lease Transactions and the Waiver Application.

Yours faithfully, Independent Board Committee Choy Shu Kwan, Wilson Cheng Wei Independent Independent non-executive non-executive Director Director

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LETTER FROM DBS ASIA

16th Floor, Man Yee Building, 68 Des Voeux Road Central, Hong Kong

23 December 2002

The Independent Board Committee Shenyang Public Utility Holdings Company Limited

Dear Sirs,

DISCLOSEABLE AND CONNECTED TRANSACTIONS PROPOSED ACQUISITIONS OF

(1) 70% EQUITY INTEREST IN ZHUHAI EDUCATION; (2) 100% EQUITY INTEREST IN SHANGHAI EDUCATION; AND (3) 50% EQUITY INTEREST IN BEIDA ONLINE AND ONGOING CONNECTED TRANSACTIONS

We refer to our engagement as the independent financial adviser to the Independent Board Committee in relation to the Proposed Acquisitions, the Zhuhai Lease Transactions and the Waiver Application, details of which are contained in a circular (the “Circular”) to the Shareholders dated 23 December 2002, of which this letter forms part. Expressions used in this letter have the same meanings as defined in the Circular.

In formulating our recommendation, we have relied on the information and facts contained or referred to in the Circular. We have also assumed that the information and representations contained or referred to in the Circular were true and accurate at the time they were made and continue to be so at the date of the dispatch of the Circular. We have no reason to doubt the truth, accuracy and completeness of the information and representations provided to us by the Directors. We have also been advised by the Directors and believe that no material facts have been omitted from the Circular.

We consider that we have reviewed sufficient information to reach an informed view, to justify reliance on the accuracy of the information contained in the Circular and to provide a reasonable basis for our recommendation. We have not, however, conducted an independent verification of the information nor have we conducted any form of in-depth investigation into the businesses and affairs or the prospects of the Company or Zhuhai Education, Shanghai Education and Beida Online or any of their respective subsidiaries or associates.

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LETTER FROM DBS ASIA

PRINCIPAL FACTORS CONSIDERED

In arriving at our opinion in respect of the Proposed Acquisitions, the Zhuhai Lease Transactions and the Waiver Application, we have considered the following principal factors and reasons:

Background of and rationale for the Proposed Acquisitions

Following the disposal of the water purification business by the Group in August 2002 (the “Disposal”), the Group is now principally engaged in (i) the development and sale of real estate (ii) the production and sale of electricity and heat through a joint venture with independent third parties; and (iii) development of property and education project in the PRC.

As noted in the Company’s annual report for the year ended 31 December 2001 and the interim report for the six months ended 30 June 2002, contribution from property development business accounted for approximately 38% and 76% of the Group’s segment results (excluding discontinued operation) during these periods. The Directors believe that, the PRC property market is at a prosperous stage, and that revenues derived from property development activities would outweigh the associated business risks in the long term. Thus the Company intends to continue focusing on investment in PRC property projects. In view of the continuous development of the PRC economy and the gradual improvement of the overall living standard in the PRC, the demand for high quality housing would gradually increase, and with the experience gained and performance recorded by the Group in the property development market in the PRC in recent years, we would concur with the views of the Directors that it is in the interests of the Company to continue engaging in this business.

Apart from property investment business, the Directors also noted the business potential for the provision of high quality education services in major cities of the PRC, and it is the Company’s intention to form alliance with prestigious university in the PRC to jointly develop education projects. We noted that these business intentions were reiterated in the Company’s circular issued recently on the Disposal dispatched to Shareholders in July 2002.

Both Zhuhai Education and Shanghai Education are mainly engaged in, inter alia, the provision of education services, education training, education project investment, education related software and training and consultancy. We noted that the major assets of each of Zhuhai Education and Shanghai Education is the Zhuhai Land (as referred to on page 12 of the Circular) and the Shanghai Land (as referred to on page 13 of the Circular) respectively. The Directors consider that the development of education projects as an ancillary facility to the properties will enhance the overall value of the properties. Given the fact that the business model of each of the Zhuhai Education Park (as referred to on page 12 of the Circular) and the Shanghai Education Park (as referred to on page 13 of the Circular) is to capitalize on the commercial potential of its close association with Peking University, which is a prestigious and respected university in the PRC, and that certain portion of the Zhuhai Education Park as well as Shanghai Education Park will be leased to Beida Education Investment, we concur with the Directors’ belief that the Zhuhai Transaction and the Shanghai Transaction would provide a valuable opportunity for the Company to further participate in the property development of education complexes located in prime cities of the PRC and benefit from steady rental income generated from leasing of properties on such education complexes.

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LETTER FROM DBS ASIA

As for Beida Online, it is principally engaged in the online provision of post secondary education and business and career training. We noted that Beida Online has already collaborated with a number of faculties of Peking University to provide online specialised education services. In addition, Beida Online has also secured a number of contracts with various large-scale corporations in the PRC to provide them with online business training courses. We noted from the business valuation report conducted on Beida Online that emphasis has been placed by the PRC government on education as well as training for civil servants in the PRC. In 2000, the total spending on education accounted for approximately 4% of the total gross domestic product of the PRC in that year. Further, the number of students studying in postgraduate program increased by approximately 107% in 2000 as compared to those in 1999. Given the above, we concur with the belief of the Directors that Beida Online Transaction would allow the Company to establish a foothold in the business of provision of online education by investing in an established online education platform with a close association with Peking University.

Having considered the above factors, we consider that the Proposed Acquisitions is in line with the stated business focus of the Company and it is in the interests of the Company and the Independent Shareholders.

Consideration

Zhuhai Education

The cash consideration for the Zhuhai Transaction of approximately RMB166.6 million (the “Zhuhai Consideration”) has been determined after arm’s length negotiation between the parties involved with reference to each of the Zhuhai PRC Valuation and Zhuhai International Valuation prepared by the PRC Valuer and the International Valuer respectively. We noted that based on the net asset value of Zhuhai Education amounted to approximately RMB238.0 million, which has been adjusted to reflect the latest market value of land and buildings of approximately RMB289 million valued by the International Valuer as at 31 October 2002, the Zhuhai Consideration is equivalent to the 70% attributable interest in the net asset value of Zhuhai Education as at 31 October 2002.

Given the fact that the major asset of Zhuhai Education is the Zhuhai Land (as referred to on page 12 of the Circular) and that the future income of Zhuhai Education will principally comprise rental income, having taken account of the above, we consider that the Zhuhai Consideration is fair and reasonable so far as the Company and the Independent Shareholders are concerned.

Shanghai Education

The aggregate cash consideration payable by the Company and the Real Estate Company for the Shanghai Transaction of approximately RMB194.4 million (the “Shanghai Consideration”) has been determined after arm’s length negotiation between the parties involved with reference to each of the Shanghai PRC Valuation and Shanghai International Valuation prepared by the PRC Valuer and the International Valuer respectively. We noted that based on the net asset value of Shanghai Education amounted to approximately RMB194.4 million, which has taken into account the adjustment from the market value of land of approximately RMB95.6 million valued by the International Valuer as at 31 October 2002, the Shanghai Consideration equals the entire net asset value of Shanghai Education as at 31 October 2002. The respective consideration payable by each of the Company and the Real Estate Company has been determined on the same basis which represents their respective attributable interest underlying the net asset value of Shanghai Education as at 31 October 2002.

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LETTER FROM DBS ASIA

Given the fact that the major asset of Shanghai Education is the Shanghai Land (as referred to on page 13 of the Circular) and that the future income of Shanghai Education will principally comprise rental income, having taken account of the above, we also consider the Shanghai Consideration to be fair and reasonable so far as the Company and the Independent Shareholders are concerned.

Beida Online

The cash consideration for the Beida Online Transaction of approximately RMB94.4 million (the “Beida Consideration”) has been determined after arm’s length negotiation between the parties involved with reference to the Beida Online Business Valuation prepared by the PRC Valuer as at 31 October 2002. Apart from the PRC Valuer, we noted that the Company has also instructed the International Valuer to prepare a business valuation on Beida Online. The International Valuer valued Beida Online at approximately RMB183.3 million as at 31 October 2002 (the “Beida Online HK Valuation”), representing a discount of approximately 2.9% to the Beida Online Business Valuation prepared by the PRC Valuer as at the same date. We noted that both the PRC Valuer and the International Valuer adopted the same valuation methodology, discounted cashflow method, in arriving at their respective business valuation of Beida Online. In light of the fact that Beida Online only commenced operations in late 2000 and has yet to establish a track record, we noted that it is a common market approach for valuers to adopt the discounted cashflow method in valuing new start-up companies. We understand from the International Valuer that they have taken into consideration all relevant and pertinent factors including historic and projected market and financial information and market risks related to the business of Beida Online to arrive at the Beida Online HK Valuation. The Beida Consideration represents (i) 50% attributable interest of the Beida Online Business Valuation; and (ii) a premium of approximately 3.0% to the 50% attributable interest in the Beida Online HK Valuation. We understand that the two valuers conducted their separate business valuation on Beida Online based on the professional practices and guidelines used in their jurisdiction. Thus we consider the 3.0% premium (amounts to approximately RMB5.5 million) between the two business valuations for Beida Online to be acceptable.

Based on the unaudited management accounts of Beida Online as at 31 October 2002, the Beida Consideration represents a premium of approximately RMB74 million over the 50% attributable interests in the net asset value of Beida Online as at that date. However, given the fact that Beida Online is principally engaged in the provision of online education services whereby the common valuation benchmark relies more on the earnings potential and not the asset backing of the subject company, we consider that the existing premium between the Beida Consideration and the 50% attributable value in the net asset value of Beida Online would not have material weighting in our assessment of the fairness of the Beida Consideration.

Having taken account of the above, we consider the Beida Consideration to be fair and reasonable so far as the Company and the Independent Shareholders are concerned.

Pro forma financial effects

Earnings

For the year ended 31 December 2001, the audited net profit of the Group amounted to approximately RMB190.6 million. Zhuhai Education and Shanghai Education have yet to commence business operations whilst Beida Online recorded an unaudited loss for the year ended 31 December 2001 of approximately RMB13.5 million. Assuming a 7-year amortisation period, an estimated annual goodwill of approximately RMB10.6 million will arise as a result of the Proposed

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LETTER FROM DBS ASIA

Acquisitions. On that basis and assuming completion of the Proposed Acquisitions (after taking into account the share of loss of Beida Online and the annual goodwill) taking place on 1 January 2001, the pro forma net profit of the Group for the year ended 31 December 2001 would have adjusted to approximately RMB173.3 million, representing a decrease of approximately 9.1%. Despite this, when taking into account the overall long-term earnings potential underlying the Proposed Acquisitions, particularly the annual fixed rental under the Zhuhai Master Lease Agreement (the “Zhuhai Fixed Rent”) and the annual fixed rental under the Shanghai Master Lease Agreement (the “Shanghai Fixed Rent”), we consider the decrease in the historic pro forma net profit of the Group to be acceptable.

Net asset

For the year ended 31 December 2001, the audited consolidated net asset value of the Group amounted to approximately RMB1,747 million. Given that the Zhuhai Consideration and the Shanghai Consideration are equivalent to the respective attributable interest in the net asset value of such of Zhuhai Education and Shanghai Education, and that the annual goodwill amount to be amortised over an estimated 7-year period under the Beida Online Transaction of approximately RMB10.6 million represents approximately 0.6% of the Group’s net asset value as at 31 December 2001, the Acquisition would not have a material adverse impact on the net asset backing of the Group.

Working capital and gearing

The net cash outflow for the Proposed Acquisitions amounts to RMB455.4 million, representing approximately 32.4% of the Group’s unaudited aggregate bank and cash balances as at 31 December 2001 as adjusted by the cash proceeds from the Disposal of approximately RMB1,406.6 million. We have been advised by the Directors that despite such cash outflow, given the net proceeds of the Disposal, and the cash flow generating from the Group’s existing business, the Proposed Acquisitions would not adversely affect the existing business operations and working capital requirements of the Group following completion of the Proposed Acquisitions.

In terms of gearing, based on the Group’s audited accounts as at 31 December 2001, the Group was in a net cash position (no gearing). On that same basis and including the cash proceeds from the Disposal, the Group would still remain in a net cash position following completion of the Proposed Acquisitions.

Zhuhai Lease Transactions

Reasons

We noted that according to existing PRC laws and regulations, provision of Compulsory Education in the PRC can only be conducted by enterprises incorporated in the PRC which has no direct or indirect foreign investor’s equity participation. Upon completion of the Zhuhai Transaction and the Shanghai Transaction, each of Zhuhai Education (a 70% owned subsidiary of the Company, upon completion of the Proposed Acquisitions) and Shanghai Education (a 80% owned subsidiary of the Company upon completion of the Proposed Acquisitions), will be regarded as foreign invested enterprises. Given that Phase I of the Zhuhai Education was designed and built for use relating to provision of Compulsory Education, we understand that Zhuhai Education cannot, by itself, utilise Phase I to provide Compulsory Education. Therefore, it will have to lease the properties of Phase I to an enterprise which is qualified to provide Compulsory Education.

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LETTER FROM DBS ASIA

Given the above and the fact that the nature of the Zhuhai Lease Transactions falls within the Group’s scope of principal business, we concur with the views of the Directors that the entering into of the Zhuhai Lease Transactions would facilitate the business operation of Zhuhai Education and is in the interests of the Company and the Independent Shareholders.

Basis of determination

The annual rental underlying the Zhuhai Lease Transactions will comprise the Zhuhai Fixed Rent for the three years ending 31 August 2006 and from then onward, the Zhuhai Fixed Rent and the Zhuhai Variable Rent (as referred to on page 16 of the Circular). The Zhuhai Fixed Rent is fixed as follows:

RMB7.5 million for the year ending 31 August 2004
RMB15 million for the year ending 31 August 2005
RMB25 million for the year ending 31 August 2006 and each of the year thereafter

In addition to the Zhuhai Fixed Rent, the Company would also be entitled to receive the Zhuhai Variable Rent (as referred to on page 16 of the Circular) for each year during the remaining period of the Lease (i.e. commencing from 1 September 2006) which is determined as follows:

(Actual no. of students for the relevant Zhuhai Fixed Rent x year – Expected no. of students for the relevant year) x 30%

Expected no. of students for the relevant year

The International Valuer has confirmed that the Zhuhai Fixed Rent and the Zhuhai Variable Rent (as referred to on page 16 of the Circular) are fair and reasonable. Given this and having reviewed the basis of determination of the respective rents as stated above, we concur with the views of the Directors that the basis of determination of the Zhuhai Master Lease Agreement is fair and reasonable so far as the Company and the Independent Shareholders are concerned.

Annual cap

The annual cap amount (the “Annual Cap”) in respect of the annual rent to be received from the Tenant in relation to the Zhuhai Lease Transactions for the three years ending 31 December 2005 will be as follows:

Financial year ending	Annual Cap
31 December	RMB in million
	(Note)
2003	2.5
2004	10
2005	18.4

Note: Based on the Zhuhai Fixed Rent for the three years ending 31 August 2006 in the amount of RMB7.5 million, RMB15 million and RMB25 million respectively.

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LETTER FROM DBS ASIA

We noted that the Annual Cap has made reference to the Zhuhai Fixed Rent and equivalent to the annual rental receivable thereunder and that:

(i) the Zhuhai Lease Transactions will be entered into:
(a) in the ordinary and usual course of business of the Company;
(b) either on normal commercial terms or, if there are not sufficient comparable transactions to judge whether they are on normal commercial terms, on terms no less favourable than terms available to or from (as the case may be) independent third parties;
(c) in accordance with the Zhuhai Master Lease Agreement on terms that are fair and reasonable and in the interests of the Shareholders as a whole; and
(d) with the annual aggregate value of the receipts under the Zhuhai Lease Transactions not exceeding the Annual Cap as defined above;
(ii) details of the Zhuhai Lease Transactions shall be disclosed in the Company’s annual report and accounts as set out in Rule 14.25 (1) (A) to (D) of the Listing Rules;
(iii) the independent non-executive Directors shall review annually the Zhuhai Lease Transactions and confirm in the Company’s annual report and accounts for the financial year in question that the transactions have been conducted in the manner as stated in (i) (a) to (d) above;
(iv) each year the auditors of the Company shall review the Zhuhai Lease Transactions and provide a letter (the “Letter”) to the Board (with a copy to the Listing Division of the Stock Exchange) confirming that :
(a) the Zhuhai Lease Transactions have been entered into in accordance with terms of the relevant agreement governing the transaction;
(b) the Zhuhai Lease Transactions have received the approval of the Board;
(c) the receipts under the Zhuhai Lease Transactions have not exceeded the Annual Cap as defined above; and

where, for whatever reasons, the auditors of the Company decline to accept the engagement or are unable to provide the Letter, the Board should notify the Stock Exchange immediately;

(v) the Company and Beida Education Investment shall allow the auditors of the Company sufficient access to their records for the purpose of reporting on the Zhuhai Lease Transactions;
(vi) the Company shall promptly notify the Listing Division of the Stock Exchange if it knows or has reason to believe that the independent non-executive Directors and/or the auditors of the Company will not be able to confirm the matters set out in (iii) and (iv) above respectively, in which case the Company may have to seek re-approval

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LETTER FROM DBS ASIA

from Independent Shareholders to re-comply with Rule 14.26 and any other conditions the Listing Division of the Stock Exchange considers appropriate in respect of the Zhuhai Lease Transactions; and

(vii) the Company shall comply with all disclosure and Shareholders’ approval requirements of the Listing Rules upon expiry of the waiver unless a further waiver is granted by the Stock Exchange.

On the basis of the above, and the consideration that the Company will comply with the relevant requirements under Chapter 14 of the Listing Rules, we believe that the interests of the Independent Shareholders will be properly safeguarded and that the Annual Cap is fair and reasonable so far as the Company and the Independent Shareholders are concerned.

RECOMMENDATION

Having considered the principal factors and reasons referred to above, we consider that the Proposed Acquisitions, the Zhuhai Lease Transactions and the Waiver Application are in the interests of the Company and the terms thereof are fair and reasonable so far as the Independent Shareholders are concerned. Accordingly, we recommend the Independent Board Committee to advise the Independent Shareholders to vote in favour of the ordinary resolutions to be proposed at the Extraordinary General Meeting to approve the Proposed Acquisitions, the Zhuhai Lease Transactions and the Waiver Application.

Yours faithfully, For and on behalf of DBS ASIA CAPITAL LIMITED Alex Lau Flavia Hung Managing Director Director

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PROPERTY VALUATION

APPENDIX I

Vigers Hong Kong Limited International Property Consultants

Suites 1607-12 Miramar Tower 132 Nathan Road Tsimshatsui Kowloon

==> picture [47 x 146] intentionally omitted <==

23rd December, 2002

The Directors Shenyang Public Utility Holdings Company Limited No. 14 Shi Si Wei Road Heping District Shenyang Liaoning Province The PRC

Dear Sirs,

In accordance with your instructions for us to value the property interests which are to be acquired by Shenyang Public Utility Holdings Company Limited (the “Company”) and its subsidiaries (together referred to as the “Group”) in the People’s Republic of China (“the PRC”), we confirm that we have carried out inspection, made relevant enquiries and obtained such further information as we consider necessary for the purpose of providing you with our opinion of the open market value of such property interests as at 31st October, 2002.

Our valuation is our opinion of the open market value which we would define as intended to mean – “the best price at which the sale of an interest in property would have been completed unconditionally for cash consideration on the date of valuation assuming:–

(a) a willing seller;
(b) that, prior to the date of valuation, there had been a reasonable period (having regard to the nature of the property and the state of the market) for the proper marketing of the interest, for the agreement of price and terms and for the completion of the sale;
(c) that the state of the market, level of values and other circumstances were, on any earlier assumed date of exchange of contracts, the same as on the date of valuation;
(d) that no account is taken of any additional bid by a prospective purchaser with a special interest; and
(e) that both parties to the transaction had acted knowledgeably, prudently and without compulsion.”

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PROPERTY VALUATION

APPENDIX I

In valuing the properties which are to be acquired by the Group in the PRC, we have adopted a combination of the market and depreciated replacement cost approaches in assessing the land portions of the property and the buildings and structures standing on the land respectively. Hence, the sum of the two results represents the market value of the property as a whole. In valuation of the land portions, reference has been made to the standard land price in Guangdong Province and Shanghai City as well as the sales evidence as available to us in the locality. As the nature of the buildings and structures cannot be valued on the basis of open market value, they have therefore been valued on the basis of their depreciated replacement cost. The depreciated replacement cost approach considers the cost to reproduce or replace in new condition the property appraised in accordance with current construction costs for similar property in the locality, with allowance for accrued depreciation as evidenced by observed condition or obsolescence present, whether arising from physical, functional or economic causes. The depreciated replacement cost approach generally furnishes the most reliable indication of value for property in the absence of a known market based on comparable sales.

Our valuation has been made on the assumption that the owner sells the property interests on the open market in its existing state without the benefit of a deferred terms contract, leaseback, joint venture, management agreement or any similar arrangement which would serve to increase the value of the property interests.

We have been provided with extracts from title documents relating to such property interest. We have not, however, searched the original documents to verify ownership or to verify existence of any amendment which does not appear on the copies handed to us. All documents and leases have been used for reference only. All dimensions, measurements and areas are approximations.

In undertaking our valuation of the properties, we have relied on the legal opinion provided by the Group’s PRC legal adviser (“the PRC Legal Opinion”).

From the PRC Legal Opinion, we understand the current status of titles, grant of major approvals, licences and documents of the properties are as follows:–

	Property	1 in Shanghai	2 in Zhuhai
(a)	State-owned Land Use Rights Grant Contract	No	Yes
(b)	Real Estate Ownership Certificate	No	Yes

We have inspected the exterior and, where possible, the interior of the properties. However, we have not carried out a structural survey nor have we inspected woodwork or other parts of the structures which are covered, unexposed or inaccessible and we are therefore unable to report that any such parts of the property interests are free from defect.

No site investigation has been carried out to determine the suitability of the ground conditions or the services for any development. Our valuation is made on the basis that these aspects are satisfactory and that no extraordinary expenses or delays will be incurred during construction period.

We have relied to a considerable extent on information provided by the Group and have accepted advice given to us by the Group on such matters as planning approvals or statutory notices, easements, tenure, occupation, lettings, site and floor area.

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PROPERTY VALUATION

APPENDIX I

We have had no reason to doubt the truth and accuracy of the information provided to us by the Group. We were also advised by the Group that no material factors have been omitted from the information supplied. We consider that we have been provided with sufficient information to reach an informed view, and have no reason to suspect that any material information has been withheld.

No allowance has been made in our valuation for any charges, mortgages or amounts owing on the property nor for any expenses or taxation which may be incurred in effecting a sale. Unless otherwise stated, it is assumed that the property interests are free from encumbrances, restrictions and outgoings of an onerous nature which could affect their values.

Unless otherwise stated, all money amounts stated are in Renminbi. The exchange rate used in valuing the property interests in the PRC on 31st October, 2002 was HK$1=RMB1.06. There has been no significant fluctuation in exchange rate between that date and the date of this letter.

We enclose herewith a summary of our valuation and the valuation certificate.

Yours faithfully, For and on behalf of VIGERS HONG KONG LTD. Raymond Ho Kai Kwong Registered Professional Surveyor MRICS, AHKIS Director

Note: Raymond K. K. Ho, Chartered Surveyor, MRICS, AHKIS has extensive experience in undertaking valuation of properties in Hong Kong and Macau and has over nine years’ experience in the valuation of properties in the PRC.

– 34 –

PROPERTY VALUATION

APPENDIX I

SUMMARY OF VALUATION

Property

Capital value in existing state as at 31st October, 2002

Properties to be acquired by the Group in the PRC

A piece of land located in Zhu Jia Jiao Zhen, Qingpu District, Shanghai, the PRC
Nan Mang Wan, Qi Ao, Zhuhai, Guangdong Province, the PRC

RMB95,600,000 (equivalent to HK$90,200,000) RMB289,000,000 (equivalent to HK$272,600,000)

Total: RMB384,600,000 (equivalent to HK$362,800,000)

– 35 –

PROPERTY VALUATION

APPENDIX I

VALUATION CERTIFICATE

Properties to be acquired by the Group in the PRC

				Capital value in
			Particulars of	existing state as at
	Property	Description and Tenure	occupancy	31st October, 2002
1.	A piece of land	The property comprises a land	The property is	RMB95,600,000
	located in Zhu Jia	parcel with a site area of	currently a piece of	(equivalent to
	Jiao Zhen, Qingpu	approximately 318,400 sq.m..	vacant land.	HK$90,200,000)
	District, Shanghai
		The parcel of land was granted with
		land use rights with a term of 50
		years.

Notes:

Pursuant to an agreement entered into between Local Government of Zhu Jia Jiao Zhen, Qingpu District, Shanghai (Party A) and Shanghai Beida Sci-tech Industrial Company Limited and Shanghai Beida Jade Bird Education Investment Company Limited (hereafter known as “Shanghai Education”) dated 11th January, 2002, Party A has been appointed by Shanghai Education to process the leasing (transfer) of the land with a site area of approximately 396,000 sq. m. in order to obtain the land use rights, implement the removal, as well as to provide infrastructures and ancillary construction beyond the red-line of the site and etc.. The total consideration of the site is approximately RMB48,000,000.
Pursuant to a Construction Land Use Planning Permit (document no. 滬青地 (2002)0370號 ) dated 9th September, 2002 and issued by Planning Administration Bureau of Qingpu District, Shanghai City, the land of the subject property having a site area of approximately 318,400 sq.m. was planned as 北大附屬實驗學校 (known as “Shanghai Education Park”).
Pursuant to a land titleship notification issued by Property and Land Administration Bureau of Qingpu District, Shanghai City, the Real Estate Ownership Certificate of the subject property is in the process of application.
A Shanghai Formal Lease Agreement will be entered into between Shanghai Education and Beijing Beida Education Investment Company Limited or its subsidiary or associate in relation to Phase I of the Shanghai Education Park. The tenancy period is 20 years commencing on 1st September, 2004 renewable for further period to be agreed between the two parties whereas the annual rent will be determined when the Shanghai Formal Lease Agreement is signed.
In our course of valuation, the following assumptions have been adopted:
(a) The State-owned Land Use Rights Grant Contract will be signed and the corresponding land premium and other related payments will be paid within reasonable time.
(b) The Real Estate Ownership Certificate should be obtained within reasonable time.
(c) It is assumed that all consents, approvals and licences from relevant government authorities for development of the property will be granted without any onerous conditions or undue delay.
(d) The property can be freely transferred in the open market with the land use rights term of 50 years from the date of valuation for education purpose at no extra land premium or other onerous payment payable to the government.
Pursuant to the PRC Legal Opinion, we understand that the current status of titles, grant of major approvals, licences and documents of the subject property are as follows:–
(a) State-owned Land Use Rights Grant Contract No
(b) Real Estate Ownership Certificate No
The PRC legal opinion states that:
(a) Pursuant to a notification concerning the land titleship, the Real Estate Ownership Certificate is in the process of application.
(b) Shanghai Education has obtained the Construction Land Use Planning Permit formalities of the property.
(c) After the signing of the State-owned Land Use Rights Grant Contract, the payment of land premium, and the grant of Real Estate Ownership Certificate, Shanghai Education has the rights to occupy, use, mortgage and transfer the land according to the PRC Law. However, the transfer is still subject to the following conditions: (a) with regards to the development and investment as stated in the Grant Contract, the construction of buildings should exceed 25% of the total investment; (b) if there is an alteration of the land use as stated in the Land Use Rights Grant Contract as a result of transfer, consent of the vendor and administrative departments of the city planning has to be obtained as well as the land premium has to be adjusted accordingly.

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PROPERTY VALUATION

APPENDIX I

Capital value in Particulars of existing state as at Property Description and Tenure occupancy 31st October, 2002 2. Nan Mang Wan, The property comprises a land Phase I of the property RMB289,000,000 Qi Ao, Zhuhai, parcel with a site area of is near completion (equivalent to Guangdong approximately 420,002 sq.m. and 15 whereas Phases II and HK$272,600,000) Province, the PRC items of buildings and structures III are currently a piece with a total gross floor area of of vacant land. 60,924 sq.m. erected thereon. The major buildings and structures of Phase I are expected to be completed in mid of 2003. Major buildings include a composite building, a music and art centre, teaching towers, a canteen, halls of residence, a stadium, a corridor, teaching halls, etc..

The property has been granted with land use rights with an expiry date of 13th June, 2051.

Notes:

Pursuant to a State-owned Land Use Rights Grant Contract entered into between Planning and Land Bureau of Zhuhai City (Party A) and Zhuhai Beida Education Science Park Company Limited (hereafter known as “Zhuhai Education”) dated 22nd July, 2001, the land use rights of the property with a site area of approximately 420,002 sq. m. is granted to Zhuhai Education as education and science park as well as for ancillary purpose at a consideration of RMB6,300,000.
According to a Real Estate Ownership Certificate (document no.: 粵房地證字第 C0587330號 ) dated 19th September, 2001, the ownership of the land with a site area of 420,002 sq.m. and whose land use rights term will expire on 13th June, 2051 is vested in Zhuhai Education.
Pursuant to a Construction and Engineering Work Commencement Certificate (document no. 2002建施字第 8707號 ) dated 27th April, 2002, 15 items of buildings with a total gross floor area of 60,924 sq.m. were permitted to be constructed within Beida Education & Science Park (known as “Zhuhai Education Park”) which is located in Nan Mang Wan, Qi Ao Island, Zuhai City.
According to the information provided by the Group, the estimated outstanding development cost of Phase I of the property is approximately RMB6,300,000.
A Zhuhai Formal Lease Agreement will be entered into between Zhuhai Education and Beijing Beida Education Investment Company Limited or its subsidiary or associate in relation to Phase I of the Zhuhai Education Park. The tenancy period is 20 years commencing on 1st September, 2003 renewable for further period to be agreed between the two parties. The annual rent will comprise a fixed amount for the three years ending on 31st August 2006. Thereafter, an additional variable rent will be charged in accordance with an agreed formula.
In our course of valuation, the following assumption has been adopted:
(a) The Real Estate Ownership Certificate, which includes the ownership of the buildings, should be obtained within reasonable time.
Pursuant to the PRC Legal Opinion, we understand that the current status of titles, grant of major approvals, licences and documents of the subject property are as follows:–
(a) State-owned Land Use Rights Grant Contract Yes
(b) Real Estate Ownership Certificate Yes
The PRC legal opinion states that:
(a) During the land use rights term, Zhuhai Education can occupy, use, lease, mortgage and transfer the land in accordance with the Grant Contract, Real Estate Ownership Certificate and the PRC Law. Zhuhai Education also has the legal ownership of the construction in progress. Zhuhai Education has to satisfy the following conditions when it transfers the land: (a) with regards to the development and investment as stated in the Grant Contract, the construction of buildings should exceed 25% of the total investment; (b) if there is an alteration of the land use as stated in the Land Use Rights Grant Contract as a result of transfer, consent of the vendor and administrative departments of the city planning has to be obtained as well as the land premium has to be adjusted accordingly.

– 37 –

GENERAL INFORMATION

APPENDIX II

1. RESPONSIBILITY STATEMENT

This circular includes particulars given in compliance with the Listing Rules for the purpose of giving information with regard to the Company. The Directors collectively and individually accept full responsibility for the accuracy of the information contained in this circular and confirm, having made all reasonable enquiries, that to the best of their knowledge and belief there are no other facts the omission of which would make any statement herein misleading.

2. DISCLOSURE OF INTERESTS

(a) As at the Latest Practicable Date, none of the directors, the promoters, the supervisors or chief executive of the Company had any interest in the equity or debt securities of the Company or any associated corporations (within the meaning of the SDI Ordinance) which have to be notified to the Company and the Stock Exchange pursuant to section 28 of the SDI Ordinance (including interests which they are deemed or taken to have under section 31 or Part I of the Schedule to, the SDI Ordinance) or which are required, pursuant to section 29 of the SDI Ordinance, to be entered in the register referred to therein, or which are required, pursuant to the Model Code for Securities Transactions by Directors of Listed Companies, to have been notified to the Company and the Stock Exchange.
(b) Save as disclosed herein, as at the Latest Practicable Date, none of the Directors had any direct or indirect interest in any assets which had been acquired or disposed of by or leased to any member of the Group since 31st December, 2001 (the date to which the latest published audited consolidated financial statements of the Company were made up) or proposed to be so acquired, disposed of or leased.
(c) Save as disclosed herein, there is no contract or arrangement subsisting at the date of this circular in which any of the Directors is materially interested and which is significant in relation to the business of the Group.

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GENERAL INFORMATION

APPENDIX II

3. SUBSTANTIAL SHAREHOLDER

As at the Latest Practicable Date, the following interest of 10 per cent. or more in the issued share capital of the Company was recorded in the register of interests required to be kept by the Company pursuant to section 16(1) of the SDI Ordinance:

		Number of	Percentage of the
Name of Shareholder	State	Shares held	issued share capital
瀋陽公用集團有限公司		600,000,000	58.80%
(Shenyang Public Utility Group
Company Limited) (“SPU”)(Note i)
北京北大高科技產業投資有限公司		600,000,000	58.80%
(Beijing Beida Hi-tech Industrial
Investment Limited)
(“Beida Hi-tech”)(Note ii)
瀋陽市城市基礎設施建設投資發展
有限公司		600,000,000	58.80%
(Shenyang Urban Infrastructure Facility
Construction Investment Development
Company Limited)
(“Shenyang Construction Company”)(Note ii)
Note:
(i) SPU is the controlling shareholder of the Company having an equity interest			of approximately 58.80%.
(ii) SPU is owned as to 50% by Beida Hi-tech, approximately 42.23% by Shenyang Construction Company
and approximately 7.77% by瀋陽市國有資產經營有限公司(Shenyang Assets Management Company
Limited ) (“Shenyang Assets Management”). Shenyang		Construction Company and Shenyang Assets
Management are under the supervisory control	of瀋陽市政府(Shenyang Municipal Government). Beida
Hi-tech and Shenyang Construction Company were deemed to have interests in the 600,000,000 Shares by
virtue of section 8 of the SDI Ordinance.

Save as disclosed herein it is not known to the directors, supervisors, promoters or chief executive of the Company that there is any person who, as at the Latest Practicable Date, was directly or indirectly interested in 10% or more in the issued share capital of the Company or in any interests which was required to be recorded pursuant to section 16(1) of the SDI Ordinance.

4. QUALIFICATIONS OF EXPERTS

The following are the qualification of experts who have given opinion and/or advice which are contained in this circular:

Name

Qualifications

DBS Asia Capital Limited registered investment adviser under the Securities Ordinance (Chapter 333 of the Laws of Hong Kong)

Vigers Hong Kong Limited

professional property valuer

– 39 –

GENERAL INFORMATION

APPENDIX II

5. CONSENT

As at the Latest Practicable Date, each of DBS Asia and Vigers Hong Kong Limited has given and has not withdrawn its written consent to the issue of this circular, with the inclusion herein and reference to its name, in the form and context in which it appears.

As at the Latest Practicable Date, DBS Asia and Vigers Hong Kong Limited do not have any shareholding interest in any member of the Group on any right, whether legally enforceable or not, to subscribe or to nominate persons to subscribe for securities in any member of the Group.

6. LITIGATION

As at the Latest Practicable Date, neither the Company nor any of its subsidiaries was engaged in any litigation or arbitration of material importance and, as far as the Directors are aware, no litigation or claim of material importance is pending or threatened against the Company or any of its subsidiaries.

7. SERVICE CONTRACT

None of the Directors has entered or is proposing to enter into service contract with the Company or any member of the Group (excluding contracts expiring or determinable by the Company within one year without payment of compensation other than statutory compensation).

8. MATERIAL ADVERSE CHANGE

The Directors are not aware of any material adverse change in the financial or trading position of the Group since 31st December, 2001, the date to which the latest published audited consolidated financial statements of the Group were made up.

9. GENERAL

(i) The secretary of the Company is Mr. Wang Se. Mr. Wang Se is also an executive Director. Mr. Wang Se graduated from Northeast Heavy Machinery Institute in the PRC in 1982 with a bachelor’s degree in science and also obtained a master’s degree in economics in 1992 from Liaoning University. Mr. Wang Se has extensive experience in corporate reorganisation, assets management and investment.
(ii) The H share registrar of the Company in Hong Kong is Hong Kong Registrars Limited at Rooms 1901-5, 19th Floor, Hopewell Centre, 183 Queen’s Road East, Hong Kong.
(iii) The English text of this circular shall prevail over the Chinese text.

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GENERAL INFORMATION

APPENDIX II

10. DOCUMENTS AVAILABLE FOR INSPECTION

Copies of the following documents are available for inspection during normal business hours at the principal office in Hong Kong of the Company at Unit 3103, 31st Floor, Office Tower, Convention Plaza, 1 Harbour Road, Wanchai, Hong Kong from the date of this circular up to and including 10th January, 2003:

(a) the memorandum and articles of association of the Company;
(b) the annual reports of the Company for each of the two years ended 31st December, 2000 and 31st December, 2001;
(c) the Zhuhai Agreement;
(d) the Shanghai Agreement;
(e) the Beida Online Agreement;
(f) the Zhuhai Master Lease Agreement;
(g) the Shanghai Master Lease Agreement;
(h) the letter dated 23rd December, 2002 from the Independent Board Committee to the Independent Shareholders, the text of which is set out on pages 22 to 23 of this circular;
(i) the letter dated 23rd December, 2002 from DBS Asia to the Independent Board Committee, the text of which Independent Board Committee, the text of which is set out on pages 24 to 31 of this circular; and
(j) the written consent referred to in paragraph 5 of this appendix.

– 41 –

NOTICE OF EXTRAORDINARY GENERAL MEETING

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瀋陽公用發展股份有限公司 SHENYANG PUBLIC UTILITY HOLDINGS COMPANY LIMITED (a joint stock limited company incorporated in the People’s Republic of China with limited liability)

NOTICE IS HEREBY GIVEN that an extraordinary general meeting of the holders of State Shares and H Shares of 瀋陽公用發展股份有限公司 (Shenyang Public Utility Holdings Company Limited) (the “Company”) will be held at 5/F., West PKU-HKUST Shenzhen-Hong Kong Institution Building, South Area, Hi-tech Industrial Park, Nanshan District, Shenzhen, the PRC on Monday, 10th February, 2003 at 10:00 a.m. for the purpose of considering and, if thought fit, passing the following resolution numbered 1, 2, 3 and 4 as ordinary resolutions:

“ THAT the conditional sale and purchase agreement (the “Zhuhai Agreement”) dated 28th November, 2002 entered into between北京北大教育投資有限公司(Beijing Beida Education Investment Company Limited) and北京北大公學教育投資有限公司 (Beijing Beida Public School Education Investment Company Limited) as the vendors, and the Company, as the purchaser, in connection with the acquisition by the Company of an aggregate of 70% equity interest in 珠海北大教育科學園有限公司 (Zhuhai Beida Education Science Park Company Limited) from the vendors (being the acquisition of a 35% equity interest in珠海北大教育科學園有限公司 (Zhuhai Beida Education Science Park Company Limited) from each of the vendors) at a total cash consideration of approximately RMB166.6 million, a copy of the Zhuhai Agreement has been produced to this meeting marked “A” and signed by the Chairman of this meeting for the purpose of identification and the details of which are set out in the circular of the Company dated 23rd December, 2002 (the “Circular”), and the transactions contemplated under the Zhuhai Agreement, be and are hereby approved, ratified and confirmed and any director of the Company be and is hereby authorized to take such action, do such things and execute such further documents or deeds as such director may, in his opinion, deem necessary or desirable for the purpose of implementing the Zhuhai Agreement.”
“ THAT the conditional sale and purchase agreement (the “Shanghai Agreement”) dated 28th November, 2002 entered into between北京北大教育投資有限公司(Beijing Beida Education Investment Company Limited) and北京北大公學教育投資有限公司 (Beijing Beida Public School Education Investment Company Limited) as the vendors, and the Company and 瀋陽發展房地產開發有限公司 (Shenyang Development Real Estate Company Limited), an approximately 99.86% direct subsidiary of the Company, as the purchasers, in connection with the acquisition by the Company and瀋陽發展房地產開發有限公司(Shenyang Development Real Estate Company Limited) of an 80% and 20% equity interest (in aggregate equivalent to 100% equity interest) in上海北大青鳥教育投資有限公司(Shanghai Beida Jade Bird Education Investment Company Limited) from北京北大教育投資有限公司 (Beijing Beida Education Investment Company Limited) and北京北大公學教育投資有限公司 (Beijing Beida Public School Education Investment Company Limited) respectively at a cash consideration of approximately RMB155.5 million and approximately RMB38.9 million respectively, a copy of the Shanghai Agreement has been produced to this meeting marked “B” and signed by the Chairman of this meeting for the

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NOTICE OF EXTRAORDINARY GENERAL MEETING

purpose of identification and the details of which are set out in the Circular, and the transactions contemplated under the Shanghai Agreement including the entering into the Shanghai Master Lease Agreement, be and are hereby approved, ratified, and confirmed and any director of the Company be and is hereby authorized to take such action, do such things and execute such further documents or deeds as such director may, in his opinion, deem necessary or desirable for the purpose of implementing the Shanghai Agreement.”

“ THAT the conditional sale and purchase agreement (the “Beida Online Agreement”) dated 28th November, 2002 entered into between 北京市北大青鳥軟件系統公司 (Beijing Beida Jade Bird Software System Company), Mr. Xu Zhen Dong and Mr. Qi Li Feng, as the vendors, and the Company, as the purchaser, in connection with the acquisition by the Company of an aggregate of 50% equity interest in 北京北大在㵟網絡有限責任公司 (Beijing Beida-Online Internet Company Limited) from the vendors (being the acquisition of a 30%, 18% and 2% equity interest in 北京北大在㵟網絡有限責任公司 from 北京市北大青鳥軟件系統公司(Beijing Beida Jade Bird Software System Company), Mr. Xu Zhen Dong and Mr. Qi Li Feng respectively) at a total cash consideration of approximately RMB94.4 million, a copy of the Beida Online Agreement has been produced to this meeting marked “C” and signed by the Chairman of this meeting for the purpose of identification and the details of which are set out in the Circular, and the transactions contemplated under the Beida Online Agreement, be and are hereby approved, ratified, and confirmed and any director of the Company be and is hereby authorized to take such action, do such things and execute such further documents or deeds as such director may, in his opinion, deem necessary or desirable for the purpose of implementing the Beida Online Agreement.”
“ THAT conditional upon Ordinary Resolution no. 1 set out in the notice of the extraordinary general meeting of the Company dated 23rd December, 2002, of which this Resolution forms part, being passed, the master lease agreement (the “Zhuhai Master Lease Agreement”) dated 28th November, 2002 and entered into between the Company and北京北大教育投資有限公司 (Beijing Beida Education Investment Company Limited) in respect of the lease of properties of Phase I of the Zhuhai education park owned by珠海北大教育科學園有限公司 (Zhuhai Beida Education Science Park Company Limited) together with an application made by Tai Fook Capital Limited, the financial adviser of the Company, on behalf of the Company to The Stock Exchange of Hong Kong Limited for a waiver from strict compliance with the announcement and Shareholders’ approval requirements under Rule 14.26 of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited in respect of the Zhuhai Master Lease Agreement and the lease of the properties of Phase I of the Zhuhai Education Park owned by 珠海北大教育科學園有限公司 (Zhuhai Beida Education Science Park Company Limited) for the three years ending 31st December, 2005 (the “Waiver Application”), a copy of each of the Zhuhai Master Lease Agreement and the Waiver Application has been produced to this meeting marked “D” and “E” respectively signed by the Chairman of this meeting for the purpose identification and the details of which are set out in the Circular, and

– 43 –

NOTICE OF EXTRAORDINARY GENERAL MEETING

the transactions contemplated under the Zhuhai Master Lease Agreement and the content and the terms of the Waiver Application be and are hereby approved, ratified, and confirmed and any director of the Company be and is hereby authorized to take such action, do such things and execute such further documents or deeds as such director may, in his opinion, deem necessary or desirable for the purpose of implementing the Zhuhai Master Lease Agreement and the Waiver Application.”

By order of the Board Xu Er Hui Chairman

Hong Kong, dated 23rd December, 2002

Principal place of business in the PRC:

No. 14 Shisiwei Road Heping District Shenyang The PRC

Notes:

The register of holders of H Shares of the Company will be closed from Saturday, 11th January, 2003 to Sunday, 9th February, 2003 (both dates inclusive), during which period no transfer of H Shares will be registered. Transfer of H Shares must be lodged with the share registrar of the Company’s H Shares registrars in Hong Kong, Hong Kong Registrars Limited, the latest by 4:00p.m. on Friday, 10th January, 2003 in order to be entitled to attend and to vote at the meeting.
Any holder of the State Shares or H Shares of the Company entitled to attend and vote at the meeting convened by the above notice is entitled to appoint one or more proxies to attend and vote instead of him. A proxy need not be a holder of the State Shares or H Shares of the Company.
The instrument appointing a proxy and the power of attorney or other authority, if any, under which it is signed, or a notarially certified copy of such power or authority shall be deposited at the Company’s H Share registrars in Hong Kong, Hong Kong Registrars Limited, at Rooms 1901-5, 19th Floor, Hopewell Centre, 183 Queen’s Road East, Hong Kong not less than 24 hours before the time appointed for holding the meeting or adjourned meeting.
Holders of State Shares or H Shares of the Company who intend to attend the Extraordinary General Meeting should complete the enclosed “REPLY SLIP FOR EXTRAORDINARY GENERAL MEETING” and return it to the Company’s H share registrar in Hong Kong, Hong Kong Registrars Limited, at Rooms 1901-5, 19th Floor, Hopewell Centre, 183 Queen’s Road East, Hong Kong on or before 20th January, 2003. The reply slip may be delivered by hand, by post or by fax to the number (852) 2865 0990/2529 6087.

– 44 –

AI assistant

CMON Limited — Proxy Solicitation & Information Statement 2002

50172_rns_2002-12-23_cd9e7f3f-0d6e-42c6-9d17-32a13548a8a0.pdf

瀋 陽 公 用 發 展 股 份 有 限 公 司 SHENYANG PUBLIC UTILITY HOLDINGS COMPANY LIMITED

DISCLOSEABLE AND CONNECTED TRANSACTIONS PROPOSED ACQUISITIONS OF

CONTENTS

DEFINITIONS

DEFINITIONS

DEFINITIONS

DEFINITIONS

DEFINITIONS

瀋 陽 公 用 發 展 股 份 有 限 公 司 SHENYANG PUBLIC UTILITY HOLDINGS COMPANY LIMITED (a joint stock limited company incorporated in the People’s Republic of China with limited liability)

DISCLOSEABLE AND CONNECTED TRANSACTIONS PROPOSED ACQUISITIONS OF

(3) 50% EQUITY INTEREST IN BEIDA ONLINE AND ONGOING CONNECTED TRANSACTIONS

INTRODUCTION

THE PROPOSED ACQUISITIONS

A. The Zhuhai Agreement dated 28th November, 2002

B. The Shanghai Agreement dated 28th November, 2002

Conditions precedent to completion of the Shanghai Transaction:

C. The Beida Online Agreement dated 28th November, 2002

INFORMATION ON ZHUHAI EDUCATION, SHANGHAI EDUCATION AND BEIDA ONLINE

A. Information on Zhuhai Education:

B. Information on Shanghai Education:

C. Information on Beida Online:

REASONS FOR THE PROPOSED ACQUISITIONS AND SOURCE OF INTERNAL FUND TO FINANCE THE CONSIDERATION FOR THE PROPOSED ACQUISITIONS

ZHUHAI LEASE TRANSACTIONS AND FUTURE ONGOING CONNECTED TRANSACTIONS

A. Background:

B. The Zhuhai Master Lease Agreement:

C. The Shanghai Master Lease Agreement

WAIVER APPLICATION

A. Reason for the application:

B. The Cap Amounts:

GENERAL

EXTRAORDINARY GENERAL MEETING

FURTHER INFORMATION

瀋 陽 公 用 發 展 股 份 有 限 公 司 SHENYANG PUBLIC UTILITY HOLDINGS COMPANY LIMITED

DISCLOSEABLE AND CONNECTED TRANSACTIONS PROPOSED ACQUISITIONS OF (1) 70% EQUITY INTEREST IN ZHUHAI EDUCATION; (2) 100% EQUITY INTEREST IN SHANGHAI EDUCATION; AND (3) 50% EQUITY INTEREST IN BEIDA ONLINE AND ONGOING CONNECTED TRANSACTIONS

DISCLOSEABLE AND CONNECTED TRANSACTIONS PROPOSED ACQUISITIONS OF

(1) 70% EQUITY INTEREST IN ZHUHAI EDUCATION; (2) 100% EQUITY INTEREST IN SHANGHAI EDUCATION; AND (3) 50% EQUITY INTEREST IN BEIDA ONLINE AND ONGOING CONNECTED TRANSACTIONS

PRINCIPAL FACTORS CONSIDERED

Background of and rationale for the Proposed Acquisitions

Consideration

Zhuhai Education

Shanghai Education

Beida Online

Pro forma financial effects

Earnings

Net asset

Working capital and gearing

Zhuhai Lease Transactions

Reasons

LETTER FROM DBS ASIA

Basis of determination

Annual cap

RECOMMENDATION

Vigers Hong Kong Limited International Property Consultants

SUMMARY OF VALUATION

Property

Properties to be acquired by the Group in the PRC

VALUATION CERTIFICATE

Properties to be acquired by the Group in the PRC

1. RESPONSIBILITY STATEMENT

2. DISCLOSURE OF INTERESTS

3. SUBSTANTIAL SHAREHOLDER

4. QUALIFICATIONS OF EXPERTS

Name

Qualifications

5. CONSENT

6. LITIGATION

7. SERVICE CONTRACT

8. MATERIAL ADVERSE CHANGE

9. GENERAL

10. DOCUMENTS AVAILABLE FOR INSPECTION

瀋 陽 公 用 發 展 股 份 有 限 公 司 SHENYANG PUBLIC UTILITY HOLDINGS COMPANY LIMITED (a joint stock limited company incorporated in the People’s Republic of China with limited liability)

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