CMON Limited - Proxy Solicitation & Information Statement 2009

THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION

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

If you have sold or transferred all your shares in Shenyang Public Utility Holdings Company Limited (the “Company”), you should at once hand this circular together with the accompanying form of proxy to the purchaser or the transferee, or to the bank, stockbroker or other agent through whom the sale or the transfer was effected for transmission to the purchaser or transferee.

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

(Stock code: 747)

(1) VERY SUBSTANTIAL DISPOSAL (2) MAJOR AND CONNECTED TRANSACTION (3) MAJOR ACQUISITION

Financial adviser to the Company

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Independent financial adviser to the Independent Board Committee

CSC ASIA LIMITED

A notice convening an extraordinary general meeting of the Company to be held at the Conference Room of the Lexington Shenyang Rich Gate Hotel, 128 Harbin Road, Shenyang, the People’s Republic of China at 9:00 a.m. on 12 February 2010, is set out on pages 235 to 237 of this circular. Whether or not you are able to attend such meeting, you are requested to complete the accompany form of proxy in accordance with the instructions printed thereon and return the same to the Company’s branch share registrar in Hong Kong Registrars Limited at Rooms 1806-7, 18/F, Hopewell Centre, 183 Queen’s Road East, Wan Chai, Hong Kong as soon as possible and in any event not less than 48 hours before the time appointed for holding such meeting or any adjourned meeting (as the case may be).

Completion and return of the form of proxy will not preclude you from attending and voting in person at the meeting or at any adjourned meeting should you so wish.

28 December 2009

CONTENTS

						Page
Definitions	. . . . . . . .		. . . . . . . . . . . . . . . . . . . . . . .	. . . . . . . .	. . . . . . . . . . . . . . . . .	1
Letter from the Board			. . . . . . . . . . . . . . . . . . . . . . .	. . . . . . . .	. . . . . . . . . . . . . . . . .	5
Letter from the Independent Board Committee . . .				. . . . . . . .	. . . . . . . . . . . . . . . . .	24
Letter from CSC Asia			. . . . . . . . . . . . . . . . . . . . . . .	. . . . . . . .	. . . . . . . . . . . . . . . . .	25
Appendix I		–	Financial information of the Group		. . . . . . . . . . . . . . . . .	44
Appendix II		–	Financial information of JBMOE . . .		. . . . . . . . . . . . . . . . .	123
Appendix III		–	Financial information of the CY Property . . . . . . . . . . . . .			158
Appendix IV		–	Management discussion and analysis
			of the Group and JBMOE	. . . . . . .	. . . . . . . . . . . . . . . . .	160
Appendix V		–	Unaudited pro forma financial information
			of the Resulting Group .	. . . . . . . .	. . . . . . . . . . . . . . . . .	185
Appendix VI		–	Property valuation report	. . . . . . . .	. . . . . . . . . . . . . . . . .	214
Appendix VII		–	General information . . . .	. . . . . . . .	. . . . . . . . . . . . . . . . .	227
Notice of EGM		. . . . .	. . . . . . . . . . . . . . . . . . . . . . .	. . . . . . . .	. . . . . . . . . . . . . . . . .	235

DEFINITIONS

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

“Beijing Diye”
Beijing Diye Real Estate Development Company Limited* (北京地業房地產開發有限公司), a company incorporated in the PRC with limited liability of which 80% equity interest is held by the Company
“Beijing Jade Bird”
Beijing Beida Jade Bird Company Limited (北京北大青鳥有限責任公司), a company established in the PRC with limited liability, which holds 94.84% equity interest in JBMOE
“Beijing Mingde Guangye”
Beijing Mingde Guangye Investment Consultant Company Limited* (北京明德廣業投資咨詢有限公司)
“Beijing ShenFa”
Beijing ShenFa Property Management Company Limited* (北京瀋發物業管理有限公司)
“Beijing Tianqiao”
Beijing Tianqiao Beida Jade Bird Sci-tech Company Limited* (北京天橋北大青鳥科技股份有限公司) (currently named as Cinda Real Estate Co. Ltd.), a company established in the PRC with limited liability and whose shares are listed on the Shanghai Stock Exchange
“Board”
board of directors of the Company
“Business Day(s)”
any day(s) (other than a Saturday or Sunday or public holiday) on which licensed banks in Hong Kong are generally open for business throughout their normal business hour
“CAGR”
compound annual growth rate, a method of assessing the average growth of a value overtime
“Company”
Shenyang Public Utility Holdings Company Limited Limited, a company incorporated in the PRC with limited liability and the H-shares of which are listed on the Stock Exchange
For identification purpose only

– 1 –

DEFINITIONS

“CSC Asia”
“CY Acquisition”
“CY Acquisition Agreement”
“CY Property”
“Director(s)”
“Disposal”
“Disposal Agreement”
“Due Diligence Review”
“EGM”
“GDP”
“GFA”
CSC Asia Limited, a licensed corporation under the SFO licensed to carry out type 6 regulated activity (advising on corporate finance) under the SFO and the independent financial adviser appointed by the Company to advise the Independent Board Committee on the Disposal Agreement, the JBMOE Acquisition Agreement, the CY Acquisition Agreement and the transactions contemplated thereunder
the acquisition of the CY Property by the Company pursuant to the CY Acquisition Agreement at a consideration of RMB93,000,000
the asset transfer agreement (as amended by a supplemental agreement dated 20 October 2009) entered into between the Company and Zhong Yi dated 5 January 2009 in relation to the CY Acquisition
1st floor and 2nd floor, Huipu Building, No.112, Jianguo Road, Chaoyang District, Beijing, the PRC
the director(s) of the Company
the disposal of 80% equity interest in Beijign Diye
the agreement dated 31 December 2008 (as supplemented by two agreements dated 15 May 2009 and 17 December 2009) entered into between the Company, Zhong Yi and Beijing Diye in relation to the Disposal
the agreed 6-week period of due diligence review conducting on the business affairs (excluding the contents relating to the land use rights of Scenic Bay located at District C of Guang Zhuang Xin Cun) and assets and liabilities of Beijing Diye
the extraordinary general meeting of the Company to be convened for the purposes of considering and if thought fit, to approve, the Disposal Agreement, the JBMOE Acquisition Agreement, the CY Acquisition Agreement and the transactions contemplated thereunder
gross domestic product
gross floor area

– 2 –

DEFINITIONS

“Group”
the Company and its subsidiaries
“Independent Board Committee”
an independent committee of the Board constituted to advise the Shareholders on the terms of the Disposal Agreement, the JBMOE Acquisition Agreement, the CY Acquisition Agreement and the transactions contemplated thereunder
“Independent Shareholder(s)”
Shareholder(s) except for any person, company and their respective associates that has material interest in the Disposal, the JBMOE Acquisition and the CY Acquisition
“JBMOE”
Shenzhen Jade Bird Optoelectronic Co., Ltd. (深圳青鳥光電有限公司), a company established in the PRC with limited liability
“JBMOE Acquisition”
the proposed acquisition of entire equity interest in JBMOE by the Company from the JBMOE Vendors subject to the terms and conditions set out in the JBMOE Acquisition Agreement
“JBMOE Acquisition Agreement”
the agreement dated 5 January 2009 entered into between the Company, Beijing Tianqiao and the JBMOE Vendors in relation to the JBMOE Acquisition
“JBMOE Vendors”
Beijing Jade Bird and Shenzhen Jade Bird
“Latest Practicable Date”
24 December 2009, being the latest practicable date for the purpose of ascertaining certain information contained in this circular prior to its publication
“Listing Rules”
The Rules Governing the Listing of Securities on the Stock Exchange
“National Bureau of Statistics of National Bureau of Statistics of China (中華人民共和 China” 國國家统計局)
“PRC”
The People’s Republic of China which for the purpose of this circular excludes Hong Kong, the Macau Special Administrative Region and Taiwan
“Registrar”
Hong Kong Registrars Ltd., the share registrar of the Company
“Resulting Group”
the Group immediately after completion of the Disposal, JBMOE Acquisition and CY Acquisition

– 3 –

DEFINITIONS

“Scenic Bay”
the residential development project of a vacant site in Beijing as described in the section headed “Information on Scenic Bay”
“Share(s)” ordinary share(s) of RMB1.00 each in the share capital of the Company
“Shareholder(s)” Shareholder(s) of the Company
“Shenyang Education”
Shenyang Development Beida Education Science Park Company Limited* (瀋陽發展北大教育科學園有限公司), the shareholder of 20% equity interest in Beijing Diye and is previously a subsidiary of the Company. The transaction for the disposal of Shenyang Education has been stated in the announcement of the Company dated 5 February 2009
“Shenyang Real Estate” Shenyang Development Real Estate Development Company Limited* (瀋陽發展房產開發有限公司), a subsidiary of the Company in which 99.86% of the equity interest is directly held by the Company
“Shenzhen Jade Bird” Shenzhen Beida Jade Bird Sci-tech Company Limited (深圳市北大青鳥科技有限公司), a company established in the PRC with limited liability, which holds 5.16% equity interest in JBMOE
“Stock Exchange”
The Stock Exchange of Hong Kong Limited
“SZ Property”
a property located in Nanshan District of Shenzhen and is owned by JBMOE
“Zhong Yi”
Beijing Zhong Yi Chong Yi Technology Development Company* (北京中億創一科技發展有限公司)
“HK$”
Hong Kong dollars, the lawful currency of Hong Kong
“RMB” Renminbi, the lawful currency of the PRC
“sq.m.” square metres
“%” per cent.

For the purpose of this circular, all amounts denominated in RMB have been translated (for information only) into HK$ using the exchange rate of RMB1.00:HK$1.13. Such translation shall not be construed as a representation that amount of RMB was or may have been converted.

For identification purpose only

– 4 –

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)

(Stock code: 747)

Executive Directors: Registered office: Mr. An Mu Zong (Chairman) No.1-4, 20A, Central Street, Mr. Wang Zai Xing Shenyang Economic and Mr. Chow Ka Wo Alex Technological Development Zone Mr. Wang Hui the PRC Non-executive Directors: Principal place of business in the PRC: Mr. Deng Yan Bin 14/F., Jinmao International Apartment Mr. Lin Dong Hui Da Dong District, Shenyang the PRC

Independent Non-executive Directors: Mr. Cai Lian Jun Principal place of business in Hong Kong: Mr. Wong Kai Tat Suite 06-12, 33/F, Mr. Chan Ming Sun Jonathan Shui On Centre, 6-8 Harbour Road, Wanchai, Hong Kong 28 December 2009

To the Shareholders

Dear Sir or Madam,

(1) VERY SUBSTANTIAL DISPOSAL (2) MAJOR AND CONNECTED TRANSACTION (3) MAJOR ACQUISITION

INTRODUCTION

Reference is made to the announcements of the Company dated 10 August 2009, 16 September 2009 and 9 November 2009 in relation to the Disposal, the JBMOE Acquisition and CY Acquisition respectively.

The purpose of this circular is to give you (i) further information in respect of the Disposal, the JBMOE Acquisition and the CY Acquisition; (ii) the recommendation of the Independent Board Committee regarding the Disposal Agreement, the JBMOE Acquisition Agreement and the CY Acquisition Agreement and the transactions contemplated thereunder; (iii) a letter from CSC Asia containing its advice to the Independent Board Committee and the Independent Shareholders in respect of the Disposal Agreement, the JBMOE Acquisition Agreement, the CY Acquisition Agreement and the transactions contemplated thereunder; and (iv) the notice of EGM and the proxy form.

– 5 –

LETTER FROM THE BOARD

I. THE DISPOSAL

On 31 December 2008, the Company, Zhong Yi and Beijing Diye entered into the Disposal Agreement, pursuant to which, Zhong Yi has conditionally agreed to purchase and the Company has conditionally agreed to sell the Company’s entire 80% equity interest in Beijing Diye at a cash consideration of RMB200 million. The Level 1 Development Qualification of Scenic Bay owned by Beijing Diye contributes the principal asset of Beijing Diye. Such consideration would also include the Group’s receivable from Beijing Diye as at 31 December 2008.

On 15 May 2009, the Company, Zhong Yi and Beijing Diye entered into a supplemental agreement for the purpose of extending the long stop date of the Disposal from 30 June 2009 to 31 December 2009.

On 17 December 2009, the Company, Zhong Yi and Beijing Diye entered into another supplemental agreement for the purpose of further extending the long stop date of the Disposal from 31 December 2009 to 30 June 2010.

(i) The Disposal Agreement

Date : 31 December 2008 (as supplemented by two agreements dated 15 May 2009 and 17 December 2009) Vendor : The Company Purchaser : Zhong Yi

To the best of the Directors’ knowledge, information and belief and having made all reasonable enquiries, Zhong Yi and its ultimate beneficial owners are third parties independent of the Company and connected persons of the Company (as defined in the Listing Rules).

Asset to be disposed

Pursuant to the Disposal Agreement, Zhong Yi has conditionally agreed to purchase and the Company has conditionally agreed to sell (i) the 80% equity interest of Beijing Diye; and (ii) the Group’s receivable from Beijing Diye in the amount of RMB461,184,000 as at 31 December 2008.

At the date of the Disposal Agreement, both parties confirmed that Scenic Bay would still be required to proceed with the formal registration procedures through tender, auction and offering. Upon Completion of the Disposal, Zhong Yi shall be responsible for all the registration matters, follow up, development, construction and marketing works of Scenic Bay, including the daily operations and management of Beijing Diye. In the event that Scenic Bay fails to launch its offering, following the full payment of consideration for the Disposal by Zhong Yi to the Company, Zhong Yi will be entitled to any compensation as stated in the government provisions. The Company is also given to understand from the relevant government provisions that the Company will not be liable for the said compensation.

– 6 –

LETTER FROM THE BOARD

Consideration

The consideration for the Disposal is RMB200,000,000 which was determined after arm’s length negotiations between the Company and Zhong Yi, and taking into account the fact that:

(i) the valuation report as at 30 November 2008 prepared by Malcolm & Associates Appraisal Limited indicated that the properties held by Beijing Diye did not possess any commercial value;
(ii) The Company has approached some potential investors in relation to the disposal of 80% equity interest in Beijing Diye. However, due to the fact that Beijing Diye is unable to obtain the relevant land use right, many potential investors withdraw from negotiation;
(iii) As at present the Group does not have sufficient resources to proceed with the formal registration procedures through tender, auction and offering for Scenic Bay. As such, it is expected that the relevant land will be sold to other third party and compensation will be provided to the Group by the government. However, it is difficult for the Group to predict the time for the said auction and the amount of compensation to be provided by the government. The amount of receivable owed to Group from Beijing Diye is RMB461,184,000, and expected to be settled by the said compensation;
(iv) If the proposed sale to Zhong Yi be proceed, there will be an immediate cash inflow of RMB200,000,000 to the Group, despite the reduction of the said receivable of RMB461,184,000;
(v) Due to the fact that the Company is urgently required to reduce its liability and increase its net cash flow for the purpose of resumption of trading of the shares, in view of the said uncertainties concerning the time of auction and amount of compensation, the Directors are of the view that under such urgent need of cash, in such oblique circumstances, the consideration of RMB200,000,000 in cash for the Disposal is fair and reasonable; and
(vi) In determining the basis for the consideration, Zhong Yi has taken into account the profit attributable to the operation of Scenic Bay to be realized by Zhong Yi after obtaining the land use right of the land under Scenic Bay, but subject to the risk of not obtaining the said land use right.

The Directors represent that it is possible that the compensation provided by the government will not be more than RMB461,184,000.

– 7 –

LETTER FROM THE BOARD

The consideration of RMB200,000,000 is approximately the same as the net asset value of the Group after reduction of the receivables of RMB461,184,000 from the net liabilities of Beijing Diye of RMB261,184,000 as at 31 December 2008.

According to the property valuation report prepared by Malcolm & Associates Appraisal Limited, as Appendix VI to this circular, the valuation of the properties held by Beijing Diye did not possess any commercial value as at 30 November 2009.

Payment terms

The consideration of RMB200 million for the Disposal would be payable by Zhong Yi to the Company in the following manner:

(i) as to RMB2 million in cash as refundable deposit within 10 days upon signing of the Disposal Agreement. As at the Latest Practicable Date, the said refundable deposit has been fully paid;
(ii) as to RMB25 million in cash within 5 Business Days upon the date on which the Due Diligence Review has been completed and the assets and liabilities of Beijing Diye have been confirmed by both parties to the Disposal Agreement, or the date on which the conditions precedent are fulfilled (whichever is later); and
(iii) the remaining balance of RMB173 million shall be fully paid within 3 Business Days following the approval and issuance of new business licence by the administration for industry and commerce authority.

Conditions precedent

Completion of the Disposal is subject to the following conditions precedent:

(i) the Shareholders having in general meeting to be held on or before the long stop date (ie. 30 June 2010) approved the Disposal Agreement and all transactions contemplated thereunder in accordance with the requirements of memorandum and articles of association of the Company and the Listing Rules; and
(ii) the Stock Exchange having granted or agreeing to grant the approval for resumption of trading of H shares of the Company, whether subject to conditions or not.

– 8 –

LETTER FROM THE BOARD

For the avoidance of doubt, the Company will not be in breach of any terms pursuant to the Disposal Agreement in the case of condition (i) above cannot be fulfilled. The Company also has the right to terminate the Disposal and refund the deposit paid by Zhong Yi in the case of condition (ii) above cannot be fulfilled.

As at the Latest Practicable Date, condition (ii) has been fulfilled.

Completion of the Disposal

Completion of the Disposal is subject to the fulfillment of all conditions mentioned above on or before the long stop date (ie. 30 June 2010). After completion of the Disposal, the Company will cease to have any interest in Beijing Diye and accordingly, Beijing Diye will cease to be a subsidiary of the Company.

Termination of the Disposal Agreement

The Disposal Agreement shall be terminated in the event of the followings:

(i) each party agrees unanimously to terminate the Disposal Agreement;
(ii) the representations and warranties made by a party in the Disposal Agreement are inaccurate or in breach of the representations and warranties made, resulting in failure of the other party to fulfill its purpose of signing the Disposal Agreement. In such case, the other party has the right to terminate the Disposal Agreement;
(iii) the Disposal Agreement and all transactions contemplated thereunder cannot be approved by the Shareholders at the general meeting; or
(iv) both parties fail to perform the major obligations of the Disposal Agreement.

Upon termination of the Disposal Agreement, all rights and obligations of the parties shall cease and terminate save for claim (if any) in respect of any antecedent breach thereof.

(ii) Gain or loss on the Disposal

It is estimated that there will be no gain and loss for the Disposal at a consideration of RMB200,000,000 and with reference to the net liabilities of Beijing Diye of approximately RMB261,184,000 as at 31 December 2008 and its amount due to the Group of approximately RMB461,184,000 as at 31 December 2008.

– 9 –

LETTER FROM THE BOARD

(iii) Intended use of proceeds

The sale proceeds from the Disposal would be applied (i) for the JBMOE Acquisition and the CY Acquisition pursuant to the resumption proposal; and (ii) as working capital of the Company. Up to the Latest Practicable Date, none of the refundable deposit of RMB2 million from the Disposal had been utilized.

(iv) Information on Beijing Diye

Overview

Beijing Diye is a limited liability company incorporated at No.6 Guan Zhuang, Jianguo Road, Chaoyang District, Beijing, the PRC in July 2001. It is a real estate developer in Beijing with a registered capital of RMB30,000,000. As at the Latest Practicable Date, Beijing Diye is owned as to 80% by the Company and as to 20% by Shenyang Education which the Company ceased to have any interest since August 2008.

It was disclosed in the annual report of the Company for the year ended 31 December 2008 that from June to November 2007, the Company, Shenyang Real Estate and Beijing Mingyude Business and Trade Company Limited (“ Mingyude ”) have entered into two Assumption and Equity Pledge Agreements and Extension of Credit and Equity Pledge Supplementary Agreement, pursuant to which the 80% equity interest in Beijing Diye held by Shenyang Real Estate was pledged as security, and Mingyude (now is a shareholder of Beijing Mingde Guangye) was the guarantor and paid the claim of RMB12,870,000 from Shenyang Tianbei Construction Installation Work Company (“ Tianbei Construction ”) for Shenyang Real Estate for the dispute of a construction contract (details of the dispute have been stated in the announcement of the Company dated 15 October 2008) and paid the debt due to Hua Jin Hua Gong Group Company Limited (“ Hua Jin ”) which acted as the guarantor of RMB32,160,000 for the Company from the claim of Guangdong Development Bank.

On 31 July 2008, the Company and Shenyang Real Estate have entered into the Debt Repayment and Equity Pledge Release Agreement with Mingyude, pursuant to which the parties determined the schedule of repayment and equity pledge release. As at 31 August 2008, the Company and Shenyang Real Estate have fully repaid the amounts paid by Mingyude and interest thereof to Mingyude, and the 80% equity interest in Beijing Diye was recovered by the Company.

– 10 –

LETTER FROM THE BOARD

Financial Information

During the years ended 31 December 2007 and 2008, Beijing Diye recorded a loss (both before and after taxation and extraordinary items) of approximately RMB2,149,000 and RMB211,083,000 respectively and according to the annual report of the Company for the years ended 31 December 2007 and 2008, particulars of Beijing Diye’s assets and liabilities as at 31 December 2007 and 2008 are as follows:

As at 31 August 2009 RMB’000 357 193,941 230 17,865 4,669 217,062	As at 31 December 2008 2007 RMB’000 RMB’000 427 535 193,941 407,148 – 523 17,865 – 6,532 29 218,765 408,235	As at 31 December 2008 2007 RMB’000 RMB’000 427 535 193,941 407,148 – 523 17,865 – 6,532 29 218,765 408,235
		408,235

20 923 17 44,059 434,274	20 880 – 44,059 434,990	20 51,103 – 13,784 393,429
479,293	479,949	458,336

Note: The management of the Company has made approximately RMB216,438,000 impairment provision on the properties held for sale for the year ended 31 December 2008.

(v) Information on Scenic Bay

The Group acquired the residential project “Scenic Bay” (formerly name as “Water-Flowers City”) in Beijing through the acquisition of 100% indirect interest in Beijing Diye on 21 April 2003. The project site is a vacant land located at Districts C & D, Guang Zhuang Xin Cun, Chaoyang District, Beijing, the PRC, which occupies an area of approximately 129,000 square metres, and the planned gross floor area is approximately 195,000 square metres. During the year 2003, the project was under the preliminary planning phase and its phase one development was estimated to be roofed by August 2004.

– 11 –

LETTER FROM THE BOARD

In the years 2004 and 2005, the project of “Scenic Bay” in Beijing had not yet officially commenced construction, as affected by the policy adjustments regarding suspension of the application, approval and construction of all real estate development projects in Beijing, but had obtained approval for land requisition from relevant government authorities, and the subsequent work was under planning.

In the year 2006, the project of “Scenic Bay” in Beijing has obtained the certificate of land approval in addition to the approval for land requisition obtained in year 2005. However, it was required to sale by listing in the market due to the suspension of the “Green Belt” construction project policy of Beijing Municipal Government. Under the active negotiation of Beijing Diye, the Level 1 Development Qualification of “Scenic Bay” has been obtained.

In the year 2007, the project of “Scenic Bay” in Beijing did not make significant progress. Owing to the promulgation of Property Law, the resettlement problem of the land purposed for “Scenic Bay” cannot accomplish completely. As a result, the land failed to meet the requirements for sale. Beijing Diye was under negotiation with local authorities to seek a resolution.

In the year 2008, the construction of “Scenic Bay” in Beijing has not yet commenced but the Company was actively planning to realize the project for adjusting the business structure of the Group.

(vi) Information on the Group

Trading in the H shares of the Company has been suspended since 15 December 2004. Prior to the suspension, the Group was principally engaged in property development, educational investment and cemetery development in the PRC. The Group encountered financial distress in the last few years and has been downsizing the scale of operations since its suspension of trading in H shares. Most of the Group’s assets had been sold through auctions as ordered by the courts in the PRC. As at the Latest Practicable Date, the principal activity of the Group is the rental operation of a property in Zhuhai which is currently leased to Zhuhai Subsidiary Experimental School of Beijing University.

The Directors confirm that the Company does not have any present agreement, arrangement, negotiation and/or plan to (i) carry out business other than development and sale of real estate and investment in and management of education; (ii) acquire other businesses/assets; and (iii) dispose its existing businesses/assets or the businesses & assets to be acquired under the resumption proposal, after resumption.

(vii) Information on Zhong Yi

Zhong Yi is a limited liability company incorporated at Room 2006, Qingyun Dangdai Mansion, District 9 Manting Fangyuan, Qingyun Lane, Haidian District, Beijing, the PRC on 8 January 2004. It is principally engaged in investment holding with a registered capital of RMB2,000,000. As at the Latest Practicable Date, Zhong Yi is owned by three PRC individuals.

– 12 –

LETTER FROM THE BOARD

(viii) Reasons for entering into the Disposal Agreement

Pursuant to the resumption proposal for the purpose of resumption of trading in the H shares of the Company, the Disposal is expected to (i) enhance the cash position and thus the working capital of the Group; and (ii) as the status of the title of Beijing Diye is unclear, after the Disposal, all the status of title of the properties held by the Group will be clear.

In light of the above, the Directors (including the independent non-executive Directors) consider that the Disposal is fair and reasonable and is in the interests of the Company and the Shareholders as a whole.

II. THE JBMOE ACQUISITION

On 5 January 2009, the Company and Beijing Tianqiao entered into the JBMOE Acquisition Agreement with the JBMOE Vendors, pursuant to which the Company agreed to purchase and the JBMOE Vendors agreed to sell their entire equity interests in JBMOE, which owns the SZ Property, at a consideration of RMB80,000,000. The JBMOE Acquisition Agreement stipulates that a guarantee shall be provided by the JBMOE Vendors that the annual rental income to be generated by JBMOE for two years following the JBMOE Acquisition shall be no less than RMB3,500,000.

The Company will publish an announcement in accordance with Rule 2.07C of the Listing Rules if the profits of JBMOE are less than the amount guaranteed and will include details in its next published annual report and accounts.

The independent non-executive directors of the Company will provide an opinion in the Company’s next published annual report and accounts as to whether the JBMOE Vendors have fulfilled their obligations under the guarantee.

(i) The JBMOE Acquisition Agreement

Date : 5 January 2009 Transferor : Beijing Tianqiao Vendors : (i) Beijing Jade Bird; and (ii) Shenzhen Jade Bird Purchaser : The Company

Asset to be acquired

The entire equity interest in JBMOE, which owns the SZ Property.

– 13 –

LETTER FROM THE BOARD

Consideration

The consideration for the JBMOE Acquisition was RMB80,000,000 payable in cash after arm’s length negotiation between the Company, Beijing Tianqiao and the JBMOE Vendors. According to the valuation report issued by Malcolm & Associates Appraisal Limited, an independent and professional valuer, the market value of the SZ Property was RMB90,000,000 as at 30 November 2008. Since the book value of the total assets other than the SZ Property was approximately the same as the book value of the total liabilities of JBMOE as at 31 December 2008, the market value of JBMOE was approximately the same as the market value of the SZ Property. The consideration for the JBMOE Acquisition of RMB80,000,000 is at a discount of approximately 11.11% to the said market value provided in the valuation report.

According to the property valuation report prepared by Malcolm & Associates Appraisal Limited, as Appendix VI to this circular, the valuation of the properties held by JBMOE is approximately RMB87,200,000 as at 30 November 2009.

The funding of RMB80,000,000 for the JBMOE Acquisition will be sourced from part of the sale proceeds of the Disposal.

Payment terms

The consideration for the JBMOE Acquisition shall be payable by the Company at approximately RMB75,840,000 and RMB4,160,000 to Beijing Jade Bird and Shenzhen Jade Bird respectively in the following manner:

(i) as to RMB1,000,000 in cash as deposit to Beijing Jade Bird within 10 days upon signing of the JBMOE Acquisition Agreement. As at the Latest Practicable Date, the said cash deposit has already been paid by the Company;
(ii) as to 50% of the consideration in cash to each of the JBMOE Vendors on the date on which the Stock Exchange having granted the approval for resumption of trading of H shares of the Company; and
(iii) the remaining balance shall be fully paid to each of the JBMOE Vendors on the completion date of the change of industry and commerce registration in the PRC in respect of the share transfer of JBMOE to the Company.

Conditions precedent

Completion of the JBMOE Acquisition is subject to the following conditions precedent:

(i) the JBMOE Acquisition Agreement is duly signed by the parties or their respective authorized representatives;

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LETTER FROM THE BOARD

(ii) the Shareholders having in the EGM approved the JBMOE Acquisition Agreement and all the transactions contemplated thereunder in accordance with the requirements of memorandum and articles of association of the Company and the Listing Rules;
(iii) the Stock Exchange having granted or agreeing to grant the approval for resumption of trading of H shares of the Company;
(iv) the completion of disposal in 80% equity interest of Beijing Diye by the Company; and
(v) the issue of business registration licence by the Administration for Industry and Commerce authority showing the Company’s ownership of the entire equity interest in JBMOE.

In the event that any one of the conditions mentioned above has not been satisfied, the Company shall have the right to terminate the JBMOE Acquisition Agreement. In this case, the JBMOE Vendors shall return to the Company the deposit paid. In the event that all the conditions precedent have been satisfied, the Company shall have no right to cancel the JBMOE Acquisition and the JBMOE Vendors may refuse to refund the deposit paid by the Company. There is no long stop date for completion of the JBMOE Acquisition.

As at the Latest Practicable Date, conditions (i) and (iii) have been fulfilled.

The profit guarantee

Pursuant to the JBMOE Acquisition Agreement, the JBMOE Vendors have jointly undertaken and guaranteed that the annual rental income to be generated by JBMOE shall be no less than RMB3,500,000 for two years following the completion of the JBMOE Acquisition.

In the event that the annual rental income generated by JBMOE is less than RMB3,500,000, the JBMOE Vendors shall make up for the shortfall within 30 days from the issue of written notice by the Company. In the event that JBMOE suffers losses, the JBMOE Vendors shall make up for the part of losses within 30 days from the issue of written notice by the Company and pay RMB3,500,000 to the Company as compensation.

The Directors and the JBMOE Vendors also confirmed that pursuant to the JBMOE Acquisition Agreement, the JBMOE Vendors and the Company also agreed that the profits generated by JBMOE since 1 January 2009 will be treated as retained earnings and no dividend will be distributed to the JBMOE Vendors before the completion of JBMOE Acquisition. After the share transfer of JBMOE becoming effective, the Company will be entitled to the relevant interest in JBMOE.

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LETTER FROM THE BOARD

(ii) Information on Beijing Tianqiao

Beijing Tianqiao is a limited liability company listed on the Shanghai Stock Exchange and incorporated in Beijing, the PRC in July 1984. It is principally engaged in development, operation, investment and management of property with a registered capital of RMB497,034,936. On 14 July 2008, Beijing Tianqiao announced its asset restructuring, inter alia, (i) the transfer of 44,883,200 shares of Weifang Beida Jade Bird Huaguang Technology Company Limited and approximately RMB72 million debts to a Beijing-based technology development company; (ii) the transfer of approximately RMB519 million assets (including the transfer of 94.84% equity interest in JBMOE at approximately RMB74,668,000) and RMB341 million debts to Beijing Jade Bird; and (iii) the private placement of 1,050,287,232 Beijing Tianqiao’s shares to five investors at a price of RMB6 per share for acquisition of the equity interests in a group of companies. Further details of the abovementioned can be found at http://www.sse.com.cn.

(iii) Information on Beijing Jade Bird

Beijing Jade Bird is a limited liability company incorporated in Beijing, the PRC in November 1994. It is principally engaged in technological development, provision of technology services and sale of computer products and electronic appliances with a registered capital of RMB140 million.

The Directors represent that Beijing Jade Bird, the indirect substantial shareholder before the change of controlling shareholder of the Company, was also the controlling shareholder of Beijing Tianqiao before February 2007.

As at the date of the JBMOE Acquisition Agreement, Beijing Jade Bird ceased to be the controlling shareholder of Beijing Tianqiao as a result of transfer of shares of Beijing Tianqiao held by Beijing Jade Bird to a Beijing-based company by an auction held by Higher People’s Court of Liaoning Province on 20 December 2006 and the said transfer was completed in February 2007.

The Directors represent that, as at the date of the JBMOE Acquisition Agreement, one of the directors of Beijing Jade Bird was also the director of Beijing Tianqiao.

(iv) Information on Shenzhen Jade Bird

Shenzhen Jade Bird is a limited liability company incorporated in Shenzhen, the PRC in February 1999. It is principally engaged in technological development of computer products and electronic appliances, and trading of consumer products in the PRC with a registered capital of RMB50 million. As at the date of the JBMOE Acquisition Agreement, Shenzhen Jade Bird was owned as to 90% by Beijing Jade Bird.

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LETTER FROM THE BOARD

(v) Information on JBMOE

Overview

JBMOE is a limited liability company incorporated in Shenzhen, the PRC in 1992. It is principally engaged in leasing of real estate, property management, research and development of computer software and hardware with a registered capital of RMB10,650,000. The registered capital of JBMOE was contributed as to RMB10,100,000 by Beijing Tianqiao and RMB550,000 by Shenzhen Jade Bird. Accordingly, JBMOE was owned as to 94.84% by Beijing Tianqiao and as to 5.16% by Shenzhen Jade Bird as at the date of the JBMOE Acquisition Agreement.

As a result of the asset restructuring previously conducted by Beijing Tianqiao, Beijing Tianqiao and Beijing Jade Bird entered into an agreement, pursuant to which the capital contribution of RMB10,100,000 made by Beijing Tianqiao to JBMOE shall be transferred to Beijing Jade Bird. As at the Latest Practicable Date, the Company is given to understand from JBMOE that the industry and commerce registration regarding the 94.84% interest in JBMOE has been changed from Beijing Tianqiao to Beijing Jade Bird.

Financial Information

According to the financial information of JBMOE as set out in Appendix II to this circular, during the years ended 31 December 2007 and 2008 and the eight months ended 31 August 2009, JBMOE recorded a profit (both before and after taxation and extraordinary items) of approximately RMB3,150,000 and RMB3,350,000 and RMB2,621,000. The JBMOE’s assets and liabilities are extracted from Appendix II to this circular and summarized as follows:

As at 31 August 2009 RMB’000 34,546 11,457 46,003	As at 31 December 2008 2007 RMB’000 RMB’000 35,495 36,908 7,135 12,624 42,630 49,532	As at 31 December 2008 2007 RMB’000 RMB’000 35,495 36,908 7,135 12,624 42,630 49,532
		49,532

– 10,492	– 9,740	– 19,992
10,492	9,740	19,992

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LETTER FROM THE BOARD

(vi) Information on SZ Property

The SZ Property (named as Beida Jade Bird Building ) is located in Keyuan Road East, Jingsi Road West, South Avenue of High-tech Industrial Park, Nanshan District, Shenzhen, the PRC. It comprises a land parcel with a site area of approximately 7,116.94 square metres upon which a 7-storey building completed in about 2006 is erected. The gross floor area of the SZ Property is approximately 12,508.18 square metres, and subject to multiple tenancies for technological research and commercial purposes. Based on the information provided by JBMOE in August 2009, the period of tenancies ranges from 1 to 5 years with the latest one expiring on 19 April 2014 and the gross monthly rental income under the current tenancy agreements in aggregate is approximately RMB780,000.

The land use rights and building ownership rights of the SZ Property for high-tech development use have been granted to JBMOE for a term expiring on 8 January 2051.

(vii) Reasons for entering into the JBMOE Acquisition Agreement

The JBMOE Acquisition is considered to be one of the actions taken by the Company pursuant to the resumption proposal submitted by the Company for resumption of trading in H shares of the Company. It is expected that the implementation of the JBMOE Acquisition is able to improve the financial position of the Company.

The Directors consider that the terms of the JBMOE Acquisition Agreement and the transactions contemplated thereunder are fair and reasonable and are in the interests of the Company and the Shareholders as a whole.

III. THE CY ACQUISITION

On 5 January 2009, the Company entered into the CY Acquisition Agreement with Zhong Yi, pursuant to which the Company agreed to purchase and Zhong Yi agreed to sell the CY Property at a consideration of RMB93,000,000. Subsequently on 20 October 2009, parties to the CY Acquisition Agreement entered into a supplemental agreement of which the Company will purchase the CY Property through its wholly-owned subsidiary, Beijing ShenFa, to be established before the EGM.

(i) The CY Acquisition Agreement (as amended by the supplemental agreement dated 20 October 2009)

Date : 5 January 2009 Vendor : Zhong Yi Purchaser : The Company (including its subsidiary, Beijing ShenFa, to be established before the EGM)

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LETTER FROM THE BOARD

Asset to be acquired

The CY Property.

Consideration

The consideration for the CY Acquisition was RMB93,000,000 payable in cash after arm’s length negotiation between the Company and Zhong Yi. According to a valuation report of the CY Property as at 30 April 2009 issued by Malcolm & Associates Appraisal Limited, an independent and professional valuer, the market value of the CY Property was RMB120,000,000 as at 30 November 2008. The consideration of the CY Acquisition of RMB93,000,000 is at a discount of 22.5% to the said valuation.

According to the property valuation report prepared by Malcolm & Associates Appraisal Limited, as Appendix VI to this circular, the valuation of the CY Property is approximately RMB121,000,000 as at 30 November 2009.

The funding of RMB93,000,000 for the CY Acquisition will be sourced from part of the sale proceeds of the Disposal.

Payment terms

The consideration for the CY Acquisition would be payable by the Company to Zhong Yi in the following manner:

(i) as to RMB1,000,000 in cash on the date of the CY Acquisition Agreement as deposit;
(ii) as to RMB46,500,000 in cash on the date the Stock Exchange having granted or agreeing to grant the approval for resumption of trading of H shares of the Company; and
(iii) the remaining balance shall be fully paid in cash within seven Business Days from the completion of all legal procedures for the transfer and registration of the CY Property.

As at the Latest Practicable Date, the Company has paid the cash deposit of RMB1,000,000 to Zhong Yi.

Conditions precedent

Completion of the CY Acquisition is subject to the following conditions precedent:

(i) the Shareholders having in EGM approved the CY Acquisition Agreement and all transactions contemplated thereunder in accordance with the memorandum and articles of association and the Listing Rules;

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LETTER FROM THE BOARD

(ii) the Stock Exchange having conditionally granted or agreeing to grant the approval for resumption of trading of H shares of the Company;
(iii) the completion of disposal in 80% equity interest of Beijing Diye by the Company; and
(iv) Zhong Yi shall process the legal documents including the building ownership certificate and land use right certificate for the Company.

If any of the conditions precedent is unable to be satisfied, the Company holds the right to terminate the CY Acquisition Agreement and Zhong Yi shall refund the deposit within 30 days from the date of notice served by the Company.

There is no long stop date for the CY Acquisition Agreement.

As at the Latest Practicable Date, condition (ii) has been fulfilled.

The profit guarantee

Pursuant to the CY Acquisition Agreement, Zhong Yi has guaranteed the annual rental to be generated by the CY Property shall be no less than RMB8,500,000 for two years following the completion of the CY Acquisition.

In the event that the annual rental income generated by the CY Property is underpaid or less than RMB8,500,000, Zhong Yi shall make up for the shortfall within 30 days from the issue of written notice by the Company.

(ii) Information on Beijing ShenFa

Beijing ShenFa is a limited company to be incorporated in the PRC and will be wholly-owned by the Company with a registered capital of RMB500,000. Beijing ShenFa will principally engage in property leasing and management.

The business registration of Beijing ShenFa is expected to be completed before the EGM.

(iii) Information on CY Property

The CY Property is a 2-floor office of an 18-storey commercial building (named as Huipu Building ) completed in about 1998. The gross floor area of the CY Property is approximately 3,808.27 sq.m.. According to Malcolm & Associates Appraisal Limited, the independent professional valuer, the CY Property is subject to two tenancies, a bank and a telecom company, with a total annual rent of approximately RMB5,341,000 and RMB5,200,000 respectively, and was preliminarily valued at RMB120,000,000 as at 30 November 2008.

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LETTER FROM THE BOARD

(iv) Reasons for entering into the CY Acquisition Agreement

The CY Acquisition is considered to be one of the actions taken by the Company pursuant to the resumption proposal submitted by the company for the resumption of the trading in the H shares of the Company. It is expected that the implementation of the CY Acquisition is able to improve the financial position of the Company.

In light of the above, the Directors consider that the terms of the CY Acquisition Agreement and the transactions contemplated thereunder are fair and reasonable and are in the interests of the Company and the Shareholders as a whole.

IV. FINANCIAL EFFECTS OF THE DISPOSAL, THE JBMOE ACQUISITION AND THE CY ACQUISITION

Following the completion of the Disposal, JBMOE Acquisition and CY Acquisition, JBMOE will become a wholly-owned subsidiary of the Group and its financial statements would be consolidated into the accounts of the Group. Assuming the Disposal, JBMOE Acquisition and CY Acquisition had been completed on 31 August 2009 and according to the unaudited pro forma financial information of the Resulting Group as set out in Appendix V to this circular, the total assets of the Group would increase from approximately RMB611.93 million to approximately RMB632.34 million and the total liabilities of the Group would increase from approximately RMB115.58 million to approximately RMB125.11 million.

Basing on the profit guarantee provided by JBMOE Vendors and Zhong Yi, the JBMOE Acquisition and CY Acquisition are expected to have positive effects on the revenue and earnings of the Resulting Group.

V. FINANCIAL AND TRADING PROSPECTS OF THE GROUP

In the second half of the year, the Group’s operation will focus on the following:

(i) To reorganize existing assets and businesses, increase its efforts in receivables recovering, and maximize the use of assets;
(ii) To seek new investors for the Company and introduce new businesses with development potential;
(iii) To actively accelerate the reorganization of the Company, so as to lay a solid foundation for the sustainable and healthy development of the Company.

As the Stock Exchange had approved the resumption proposal of the Company in June 2009, the Company will focus on implementing the reorganization stated in the resumption proposal, resumption of trading of the Company’s H shares, so as to create favorable conditions for the sustainable and healthy development of the Company.

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LETTER FROM THE BOARD

VI. GENERAL

The Disposal Agreement and the transactions contemplated thereunder constitute a very substantial disposal as defined under the Listing Rules and are subject to announcement and shareholders’ approval requirements under the Listing Rules. None of the shareholders of the Company has a material interest in the transaction and none of them shall abstain from voting at the EGM. The controlling shareholder of the Company, Beijing Mingde Guangye, holding 58.8% of the issued share capital of the Company at the Latest Practicable Date, undertakes to vote in favour of the resolution concerning the Disposal Agreement and the transactions contemplated thereunder.

As the applicable percentage ratio as defined under the Listing Rules of the JBMOE Acquisition is more than 25% but less than 100%, the JBMOE Acquisition constitutes a major transaction under the Listing Rules.

As Beijing Jade Bird, being one of the JBMOE Vendors, was an indirect substantial shareholder of the Company on the date of signing the JBMOE Acquisition Agreement (prior to the change of controlling shareholder of the Company), the JBMOE Acquisition also constitutes a connected transaction of the Company under the Listing Rules. Details of the change of the controlling shareholder of the Company are stated in the announcements of the Company dated 24 March, 27 April, 1 June, 3 July, 4 August and 8 September 2009 respectively. As at the Latest Practicable Date, Beijing Jade Bird is no longer an indirect shareholder of the Company.

An EGM will be convened and held to seek approval from the Independent Shareholders. Any shareholders of the Company that has a material interest in the JBMOE Acquisition will be required to abstain from voting in respect of the resolutions at the EGM. As at the Latest Practicable Date, to the best of the Directors’ knowledge, information and belief and having made all reasonable enquiries, none of the shareholders of the Company has a material interest in the JBMOE Acquisition and none of them shall abstain from voting at the EGM. The Controlling Shareholder undertakes to vote in favour of the resolution concerning the JBMOE Acquisition.

The CY Acquisition constitutes a major acquisition on the part of the Company under the Listing Rules and is subject to Shareholders’ approval requirements under the Listing Rules. None of the Shareholders has a material interest in the transaction and none of them shall abstain from voting at the EGM. The controlling shareholder of the Company, Beijing Mingde Guangye, holding 58.8% of the issued share capital of the Company as at the Latest Practicable Date, undertakes to vote in favour of the resolution concerning the CY Acquisition.

Given that the Disposal, the JBMOE Acquisition and the CY Acquisition are part and parcel of the resumption proposal, the sale proceeds from the Disposal will be applied for the JBMOE Acquisition and the CY Acquisition and the JBMOE Acquisition is a connected transaction under the Listing Rules, the Disposal and the CY Acquisition will be subject to the same Listing Rule requirements as the JBMOE Acquisition.

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LETTER FROM THE BOARD

The Independent Board Committee comprising Messrs. Cai Lian Jun, Wong Kai Tat and Chan Ming Sun Jonathan, all being the independent non-executive Directors, has been formed to advise the Independent Shareholders regarding the Disposal Agreement, the JBMOE Acquisition Agreement, the CY Acquisition Agreement and the transactions contemplated thereunder. CSC Asia has been appointed to advise the Independent Board Committee and the Independent Shareholders on whether the terms of the Disposal Agreement, the JBMOE Acquisition Agreement and the CY Acquisition Agreement and the transactions contemplated thereunder are fair and reasonable and in the interests of the Company, the Shareholders as a whole.

VII. EGM

A notice convening the EGM with the resolutions, among other matters, is set out in this circular. Whether or not the Shareholders are able to attend the meeting or any adjourned meeting, they are requested to complete the accompany form of proxy and return it to the Company’s branch share registrar in Hong Kong, Hong Kong Registrars Limited at Rooms 1806-7, 18/F, Hopewell Centre, 183 Queen’s Road East, Wan Chai, Hong Kong as soon as possible and in any event not later than 48 hours before the time of the meeting or any adjourned meeting. Completion and return of the form of proxy will not preclude the Shareholders from attending and voting at the meeting or at any adjourned meeting should they wish to do so.

VIII. RECOMMENDATION

The Directors consider that the Disposal Agreement, the JBMOE Acquisition Agreement, the CY Acquisition Agreement and the transactions contemplated thereunder are fair and reasonable to the Company and in the interest of the Shareholders as a whole. Accordingly, the Directors recommend the Shareholders to vote in favour of the ordinary resolutions to be proposed at the EGM to approve the Disposal Agreement, the JBMOE Acquisition Agreement, the CY Acquisition Agreement and the transactions contemplated thereunder.

IX. ADDITIONAL INFORMATION

Your attention is drawn to the additional information set out in the appendices to this circular.

By order of the Board

Shenyang Public Utility Holdings Company Limited An Mu Zong Chairman

– 23 –

LETTER FROM THE INDEPENDENT BOARD COMMITTEE

The following is the text of a letter from the Independent Board Committee setting out its recommendation to the Independent Shareholders in respect of the Disposal Agreement, the JBMOE Acquisition Agreement, the CY Acquisition Agreement and the transactions contemplated thereunder.

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

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

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

(Stock code: 747)

28 December 2009

To the Independent Shareholders

Dear Sir or Madam,

(1) VERY SUBSTANTIAL DISPOSAL (2) MAJOR AND CONNECTED TRANSACTION (3) MAJOR ACQUISITION

We refer to the circular issued by the Company to its shareholders dated 28 December 2009 of which this letter forms part. Capitalised terms defined in the said circular shall have the same meanings in this letter unless the context otherwise requires.

We have been appointed by the Board to consider the Disposal Agreement, the JBMOE Acquisition Agreement, the CY Acquisition Agreement and the transactions contemplated thereunder. CSC Asia has been appointed as an independent financial adviser to advise us and the Independent Shareholders in this respect.

We wish to draw your attention to the letter from the Board and the letter from CSC Asia set out in the said circular. Having considered the principal factors and reasons considered by, and the advice of, CSC Asia set out in its letter of advice set out in the said circular, we consider that the terms of the Disposal Agreement, the JBMOE Acquisition Agreement, the CY Acquisition Agreement are fair and reasonable so far as the Independent Shareholders are concerned and the Disposal Agreement, the JBMOE Acquisition Agreement, the CY Acquisition Agreement and the transactions contemplated thereunder are in the interests of the Company and the Shareholders as a whole. Accordingly, we recommend the Independent Shareholders to vote in favour of the ordinary resolutions in relation to the above which are set out in the notice of the EGM at the end of the circular.

Yours faithfully,

For and on behalf of the Independent Board Committee

Cai Lian Jun Wong Kai Tat Chan Ming Sun, Jonathan

Independent Non-executive Directors

– 24 –

LETTER FROM CSC ASIA

The following is the text of a letter of advice from CSC Asia which has been prepared for the purpose of incorporation into this circular, setting out its advice to the Independent Board Committee in respect of the Disposal Agreement, the JBMOE Acquisition Agreement and the CY Acquisition Agreement and the transactions contemplated thereunder.

28 December 2009

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

Dear Sirs,

1) VERY SUBSTANTIAL DISPOSAL 2) MAJOR AND CONNECTED TRANSACTION 3) MAJOR ACQUISITION

INTRODUCTION

We refer to our appointment as the independent financial adviser to the Independent Board Committee in relation to the Disposal Agreement, the JBMOE Acquisition Agreement and the CY Acquisition Agreement and the transactions contemplated thereunder (together the “ Proposed Transactions ”) and to give an opinion as to whether the terms of the Proposed Transactions are fair and reasonable so far as the Independent Shareholders are concerned. Details of the Proposed Transactions are contained in the Letter from the Board (the “ Letter from the Board ”) of this circular dated 28 December 2009 to the Shareholders (the “ Circular ”), of which this letter forms part. Terms used in this letter shall have the same meanings as defined in the Circular unless the context requires otherwise.

As disclosed in the announcement of the Company dated 10 August 2009, on 31 December 2008 (supplemented by two agreements dated 15 May 2009 and 17 December 2009 respectively), the Disposal Agreement was entered into between the Company, Zhong Yi and Beijing Diye, pursuant to which Zhong Yi agreed to purchase and the Company agreed to sell its entire 80% equity interest in Beijing Diye at a cash consideration of RMB200 million. Up to the Latest Practicable Date, RMB2 million refundable cash deposit has been paid by Zhong Yi to the Company. The remaining balances of RMB25 million cash consideration and RMB173 million cash consideration will be payable by Zhong Yi to the Company upon the completion date of Due Diligence Review or the date on which the conditions, as set out in the Letter from the Board, for the completion of the Disposal are fulfilled (whichever is later but not later than 30 June 2010) and following the approval and issuance date of new business licence by the administration for industry and commerce authority respectively. After completion of the Disposal, the Company will cease to have any interest in Beijing Diye and accordingly, Beijing Diye will cease to be a subsidiary of the Company.

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LETTER FROM CSC ASIA

As disclosed in the announcement of the Company dated 16 September 2009, on 5 January 2009, the JBMOE Acquisition Agreement was entered into between the Company, Beijing Tianqiao and JBMOE Vendors, pursuant to which the Company agreed to purchase and JBMOE Vendors agreed to sell their entire equity interest in JBMOE, which owns the SZ Property, at a cash consideration of RMB80 million. Such consideration for the JBMOE Acquisition will be sourced from part of the sale proceeds of the Disposal. Up to the Latest Practicable Date, RMB1 million cash deposit has been paid by the Company to Beijing Jade Bird. The remaining balances at cash considerations of RMB40 million and RMB39 million will be payable by the Company to each of the JBMOE Vendors upon the resumption date for trading of the H Shares and upon the completion date for the share transfer of JBMOE to the Company respectively. Completion of the JBMOE Acquisition is subject to all conditions as set out in the Letter from the Board and there is no long stop date for the completion of the JBMOE Acquisition.

As disclosed in the announcement of the Company dated 9 November 2009, on 5 January 2009 (supplemented by an agreement dated 20 October 2009), the CY Acquisition Agreement was entered into between the Company and Zhong Yi, pursuant to which the Company agreed to purchase through its wholly-owned subsidiary Beijing ShenFa (to be established before the EGM) and Zhong Yi agreed to sell the CY Property at a cash consideration of RMB93 million. Up to the Latest Practicable Date, RMB1 million cash deposit has been paid by the Company to Zhong Yi upon signing of the CY Acquisition Agreement. The remaining balances at cash considerations of RMB46.5 million and RMB45.5 million will be payable by the Company to Zhong Yi upon the resumption date for trading the H Shares and upon the completion date for the transfer and registration of CY Property respectively.

The Disposal Agreement and the transactions contemplated thereunder constitute a very substantial disposal for the Company, the JBMOE Acquisition constitutes a major and connected transaction for the Company and the CY Acquisition constitutes a major acquisition for the Company under the Listing Rules and are therefore subject to the approval of Independent Shareholders at the EGM. None of the Shareholders has a material interest in the Proposed Transactions, therefore, none of them is required to abstain from voting at the EGM. As at the Latest Practicable Date, Beijing Mingde Guangye, is interested in approximately 58.8% of the issued share capital of the Company and is a controlling shareholder of the Company, undertakes to vote in favour of the resolutions concerning the Proposed Transactions.

The Independent Board Committee (comprises Messrs. Cai Lian Jun, Wong Kai Tat and Chan Ming Sun Jonathan, all being the independent non-executive Directors) has been formed to advise the Independent Shareholders on the terms of Proposed Transactions. We have been appointed as the independent financial adviser to advise the Independent Board Committee in this regard.

CSC Asia is independent from, and not connected with the directors, chief executive and substantial shareholders of the Company or any of their respective associate and therefore is considered suitable to give independent advice to the Independent Board Committee.

– 26 –

LETTER FROM CSC ASIA

BASIS OF OUR OPINION

In formulating our opinion and recommendation, we have relied on the statements, information and facts supplied by, the opinions expressed by and the representations of the Directors concerning the Proposed Transactions, including those facts, opinions and representations set out in the Circular. We have discussed the bases and assumptions made by the Directors in relation to the Proposed Transactions and we have assumed that all such information and all statements, information, opinions, reports and representations contained or referred to in the Circular were true, complete and accurate in all material respects at the time they were made and given and continue to be so in all material respects as at the date of despatch of the Circular. We have assumed that all statements of beliefs, opinions and intentions made by the Directors in the Circular were reasonably made after due and careful enquiry and were based on honestly held opinions. The Directors have confirmed that they take full responsibility for the contents of the Circular.

We consider that we have been provided with, and have reviewed sufficient information to enable us to reach an informed view and to provide a reasonable basis for our recommendation regarding the Proposed Transactions. We have no reason to suspect that such information is inaccurate or that any material facts have been omitted or withheld from the information and representation provided or opinions expressed in the Circular. We also consider that we have performed all reasonable steps as required under Rule 13.80 of the Listing Rules (including the notes thereto) to formulate our opinion and recommendation. In line with normal practice, we have not, however, conducted a verification of the information and representations provided to us by the Directors, nor have we conducted any independent in-depth investigation into the business and affairs and prospects of the Group. The Directors have confirmed that no material facts have been omitted from the information supplied to us.

Our opinion with regard to the terms of the Proposed Transactions has been made on the assumption that all obligations to be performed by each of the parties to the Proposed Transactions will be fully performed in accordance with the terms thereof. Our opinion is necessarily based upon market, economic and other conditions as they existed and could be evaluated on, and on the information publicly available to us as at the Latest Practicable Date. We have no obligation to update this opinion to take into account events occurring after the Latest Practicable Date. As a result, circumstances could develop prior to completion of the Proposed Transactions that, if known at the time we rendered our opinion, would alter our opinion.

This letter is for the information of the Independent Board Committee solely in connection with their consideration of the Proposed Transactions and, except for its inclusion in the Circular and for references thereto in the letter from the Independent Board Committee set out in the Circular, is not to be quoted or referred to, in whole or in part, nor shall this letter be used for any other purpose, without prior written consent.

– 27 –

LETTER FROM CSC ASIA

PRINCIPAL FACTORS AND REASONS CONSIDERED

In arriving at our opinion in relation to the terms of the Proposed Transactions is in the ordinary and usual course of business of the Group, whether the terms of the Proposed Transactions are fair and reasonable so far as the Independent Shareholders are concerned and whether the Disposal is in the interests of the Company and the Shareholders as a whole, we have considered the following principal factors and reasons:

A. Background of and reasons for the Disposal, the JBMOE Acquisition and the CY Acquisition

On 22 June 2009, the Stock Exchange informed the Company in writing that it was granted an approval from the Listing Appeals Committee (the “ LAC ”) of the Stock Exchange to resume in its H Shares on the Stock Exchange subject to certain conditions as set out in the announcement of the Company dated 26 June 2009. These conditions include, among other things, the completion of the Disposal, the JBMOE Acquisition and the CY Acquisition. All conditions for the resumption of trading in the H Shares imposed by the LAC must be fulfilled prior to the deadline on 28 February 2010 (the “ Deadline ”). Based on our discussion with the Directors, we understand that the entering of the Disposal Agreement, the JBMOE Acquisition Agreement and the CY Acquisition Agreement are considered to be one of the actions taken by the Company pursuant to the resumption proposal submitted by the Company for the resumption of the trading in the H Shares. The Company is in the process of preparing relevant documents for the compliance of conditions and the Directors will try their best efforts and endeavor to fulfill the conditions before the Deadline and hence the trading of H Shares may be resumed.

Prior to the suspension of trading in the H Shares on 15 December 2004, the Company was principally engaged in the development, sales and leasing of real estate, and the investment and management of education projects through its subsidiaries. Most of the Group’s assets had been sold through auctions as ordered by the courts in the PRC. As at the date of the Circular, the principal activity of the Group is the rental operation of a property in Zhuhai, which is currently leased to Zhuhai Subsidiary Experimental School of Beijing University.

As set out in the 2009 interim report of the Company, the Group encountered operations and funding difficulties due to the deterioration of the Group’s property related business. As such, the Group downsized its real estate development business, save for two remaining projects on hand and Scenic Bay is one of the projects intended to be disposed of by the Company. Up to the Latest Practicable Date, the Group has no new real estate development businesses.

The Directors consider that the Disposal represents a good opportunity for the Group to dispose of its loss-making property business and reduce its capital commitment as no operational cash flow will be required to support the Scenic Bay. Following the completion of the Disposal, the Group will have sufficient cash to look for other investment opportunities with greater earnings potential. The Directors also expressed that the Group will continue to identify and pursue quality real estate development projects in first-tier cities and second-tier cities in the PRC to enhance its real estate project portfolio and to maintain business growth.

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LETTER FROM CSC ASIA

According to the National Bureau of Statistics of China, in the past few years, there has been a significant increase in transaction volume in the property market in many cities in the PRC. The increase may be attributable to a series of factors including certain PRC government initiatives such as tax reductions, interest rate cuts, increased liquidity and greater consumer confidence in the general economy. The total floor area sold in the PRC for the ten months period ended October 2009 increased by approximately 3.6% over that for the nine months period ended September 2009. Certain market analysts believed that the surge in selling price and transaction volume in October 2009 was due to the market’s anticipation of the withdrawal of preferential mortgage rate by the PRC government before the end of 2009.

In addition to the above-mentioned announced government initiatives and healthy growth of the real estate market in the PRC, the JBMOE Acquisition and the CY Acquisition will generate stable rental income to the Group and expand its real estate portfolio in the PRC. As this is in line with the Group’s principal activities, together with the financial and trading prospects of the Group as stated in the Letter from the Board, and thus is in the interests of the Company and the Shareholders as a whole. We concur with this view.

1. Financial performance of the Group and the Beijing Diye

Set out below is a summary of the operating results of the Group for the two years ended 31 December 2008 and for the six months period ended 30 June 2009 as extracted from the Company’s 2008 annual report and 2009 interim report respectively:

(Audited) For the year ended 31 December 2007 2008 HK$’000 HK$’000 3,905 36,617 3,211 3,000	(Audited) For the year ended 31 December 2007 2008 HK$’000 HK$’000 3,905 36,617 3,211 3,000	(Unaudited) For the six months ended 30 June 2008 2009 HK$’000 HK$’000 36,617 667 1,500 1,500	(Unaudited) For the six months ended 30 June 2008 2009 HK$’000 HK$’000 36,617 667 1,500 1,500
7,116 2,832	39,617 –	38,117 –	2,167 –
9,948 115,657	39,617 (54,638)	38,117 138,094	2,167

			(1,788)

Note: The Group disposed its cemetery business at the end of 2007 as set out in the Company’s 2007 annual report.

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LETTER FROM CSC ASIA

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

As set out above, the Group’s property development business accounted for approximately 92.4% of the Group’s total revenue generated from continuing operations for the year ended 31 December 2008 (2007: 0.4%). The Group recorded turnover of approximately RMB39.6 million for the year ended 31 December 2008, which represents more than four times to the Group’s turnover recorded for the year ended 31 December 2007 of approximately RMB7.1 million. The increase was mainly attributable the improvement in the property related business from which the turnover contributed amounted to approximately RMB36.6 million for the year ended 31 December 2008 as compared to approximately RMB3.9 million for the respective period in 2007. Nevertheless, the Group recorded loss attributable to the Shareholders of approximately RMB54.6 million for the year ended 31 December 2008, which represented a decrease of approximately RMB170.3 million from the profit attributable to the Shareholders of approximately RMB115.7 million for the year ended 31 December 2007. The Group recorded a profit from discontinued operations of the cemetery development business of approximately RMB166.9 million for the year ended 31 December 2007, including a operating loss of approximately RMB31.6 million and a profit from disposal of cemetery development business of RMB198.4 million respectively, which constituted the substantial increase in profit attributable to the Shareholders for the year ended 31 December 2007.

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

As set out above, the Group’s property development business accounted for approximately 96.1% of the Group’s total revenue generated from continuing operations for the six months ended 30 June 2008 (2007: 30.8%). For the six months ended 30 June 2009, the Group recorded an unaudited turnover of approximately RMB2.2 million, which represented a substantial decrease of approximately 94.3% comparing with the unaudited turnover of approximately RMB38.1 million for the six months ended 30 June 2008. The decrease was mainly attributable to the drop in turnover from property related business from approximately RMB36.6 million for the six months ended 30 June 2008 to approximately RMB667,000 for the respective period in 2009. The deterioration of the Group’s property related business was mainly due to operations and funding difficulties the Group faced during the period. The unaudited loss attributable to the Shareholders for the six months ended 30 June 2009 amounted to approximately RMB1.8 million, which represented a drop of approximately RMB139.9 million from approximately RMB138.1 million for the respective period in 2008. The significant gain of the Group for the six months ended 30 June 2008 was attributable to a one-off gain on disposal of subsidiaries of approximately RMB157.9 million.

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LETTER FROM CSC ASIA

Further, according to the management accounts of the Beijing Diye, net losses after tax, net liabilities and amounts due to the Group’s companies of Beijing Diye for the two years ended 31 December 2008 and for the eight months ended 31 August 2009 are as follows:

	(Audited)
	For the
	eight months	(Audited)
	ended	For the year ended
	31 August	31 December
	2009	2007	2008
	RMB’000	RMB’000	RMB’000
Net losses after tax	1,047	2,149	211,083
	(Audited)
	As at	(Audited)
	31 August	As at 31 December
	2009	2007	2008
	RMB’000	RMB’000	RMB’000
Net liabilities	262,231	50,101	261,184
Amounts due to the
Group’s companies	460,468	407,213	461,184

Beijing Diye recorded net losses after tax of approximately RMB2.1 million and approximately RMB211.1 million for the two years ended 31 December 2008 respectively. Net liabilities increased from approximately RMB50.1 million as at 31 December 2007 to approximately RMB261.2 million as at 31 December 2008. The substantial surge of the net losses after tax and net liabilities was mainly due to approximately RMB216.4 million impairment provision made by the Group on the held-for-sale property for the year ended 31 December 2008. For the eight months ended 31 August 2009, Beijing Diye continued to make a net loss after tax of approximately RMB1.0 million. As at 31 August 2009, net liabilities of Beijing Diye amounted to approximately RMB262.2 million. In addition, we noted that amounts due from Beijing Diye to the Group’s companies amounted to approximately RMB460.5 million as at 31 August 2009.

Given that Beijing Diye continued to accumulate losses and liabilities for the two years ended 31 December 2008 and for the eight months ended 31 August 2009, the Directors consider that it is difficult to estimate the time required for Beijing Diye to start to generate profit and thus to repay the outstanding borrowings. In addition, the Directors consider that the prospects and future profitability of Beijing Diye are of great uncertainties as Beijing Diye had not yet obtained the land use right and relevant licenses from the government authorities.

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LETTER FROM CSC ASIA

Accordingly, the Directors are of the view that the Disposal is in the ordinary and usual course of business of the Company and is in the interests of the Company and the Shareholders as a whole and we concur with this view.

2. Positive outlook of the property market in the PRC

We believe that the economic growth of the PRC, increase in disposable income and savings, emergence of the mortgage lending market and increase in urbanization rate are the key factors in sustaining the growth of the PRC property market. Government housing reforms continue to encourage private ownership and it is expected that an increasing proportion of urban residents who will own private properties will continue to increase over the coming years. Amid at a favorable environment that has been characterized by strong GDP per capita growth and an increasing demand for higher living standards, investments in real estate development in the PRC rose from approximately RMB1,015 billion in 2003 to approximately RMB3,058 billion in 2008, reflecting a CAGR of 24.7%.

							CAGR
	2003	2004	2005	2006	2007	2008	(%)
Total population
(million)	1,292	1,300	1,308	1,314	1,321	1,328	0.6
Urban population
(million)	523	542	562	577	593	606	3.0
Urbanization rate (%)	40	42	43	44	45	46	2.8
Total savings
(RMB billion)	10,362	11,956	14,105	16,159	17,253	21,789	16.0
Investments in real
estate development
(RMB billion)	1,015	1,316	1,591	1,942	2,529	3,058	24.7

Sources: National Bureau of Statistics of China; China Statistics Yearbook for 2009

According to data published by the National Bureau of Statistics of China, the average price per square meter for the property market in the PRC was approximately RMB3,800 in 2008 as compared to approximately RMB2,359 in 2003. Supply of properties in the PRC also increased from approximately 415 million square meters in 2003 to approximately 665 million square meters in 2008.

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LETTER FROM CSC ASIA

	2003	2004	2005	2006	2007	2008
Total GFA completed
(in million sq. m.)	415	425	534	558	606	665
Total GFA sold (in million sq.m.)	337	382	555	619	774	660
GFA of residential properties
sold (in million sq.m.)	298	338	496	554	701	593
GFA of office buildings sold
(in million sq.m.)	6	7	11	12	15	12
Average price of properties
(in RMB per sq. m.)	2,359	2,778	3,168	3,367	3,864	3,800
Average price of residential
properties (in RMB per sq. m.)	2,197	2,608	2,937	3,119	3,645	3,576
Average price of office buildings
(in RMB per sq. m.)	4,196	5,744	6,923	8,053	8,667	8,378

Sources: National Bureau of Statistics of China; China Statistics Yearbook for 2009

Property market in Beijing

Beijing is located in the northern China and borders Hebei province to the north, west, south and for a small section in the east with an area of approximately 17,900 square kilometers. It had a population of approximately 17.0 million in 2008, representing an approximately 3.8% increase as compared to that of 2007.

Beijing has experienced GDP growth in recent years from approximately RMB502 billion in 2003 to approximately RMB1,049 billion in 2008, representing a CAGR of approximately 15.9%. In line with the economic growth of Beijing, property price has increased significantly in recent years. According to data published by the Beijing Bureau of Statistics, the selling price index of houses increased from 100.3 in 2003 to 109.5 in 2008 with a CAGR of approximately 1.8%.

	2003	2004	2005	2006	2007	2008
Total GFA sold
(in million sq. m.)	19	25	28	26	22	13
Selling price index of
houses	100.3	103.7	106.7	108.8	111.4	109.5
Investment in properties
(in RMB billions)	120	147	153	172	200	191

Sources: Beijing Bureau of Statistics; Beijing Statistics Yearbook for 2009

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LETTER FROM CSC ASIA

Property market in Shenzhen

Shenzhen is located in the southern part of Guangdong Province and borders Hong Kong with an area of approximately 1,953 square kilometers. According to data published by the National Bureau of Statistics of China, the population of Shenzhen as of 31 December 2008 was approximately 8.8 million, representing an increase of approximately 1.8% as compared to that of the previous year 2007. For the year 2008, the recorded GDP of Shenzhen amounted to approximately RMB780.7 billion, representing a growth of approximately 12.1% as compared to that of the year 2007 and a CAGR of approximately 16.8% as compared to approximately RMB358.6 billion in 2003. In line with the economic growth of Shenzhen, property price has increased in general in recent years, which, the selling price index of houses in Shenzhen increased from 102.2 in 2003 to 116.3 in 2007 and decreased to 98.1 in 2008.

	2003	2004	2005	2006	2007	2008
Total GFA sold
(in million sq. m.)	4	4	11	8	6	5
Selling price index of
houses	102.2	104.6	107.2	112.3	116.3	98.1
Investment in properties
(in RMB billions)	41	43	42	46	46	44

Sources: National Bureau of Statistics of China; China Statistics Yearbook for 2009

As shown in the above tables, the property market in the PRC including both Beijing and Shenzhen is generally in an upward trend though, in 2008, the property market has generally slowed down mainly due to the global financial crisis beginning in the second half of 2008. However, as mentioned in the section headed “Background of and reasons for the Disposal, the JBMOE Acquisition and the CY Acquisition” in our letter, the PRC government had announced the fiscal stimulus package to boost the PRC economy which we believe that the Group may be benefited in this regard with an opportunity to wider its earning base so as to improve its overall financial performance in the long run.

3. Information of JBMOE

As stated in the Letter from the Board, the SZ Property (named as Beida Jade Bird Building) is located at Keyuan Road East, Jignsi Road West, South Avenue of High-tech Industrial Park, Nanshan District, Shenzhen, the PRC. As advised by the Directors, the SZ Property is an advanced technology research centre and the location is at a district with exclusive competitive advantage and comprehensive facilities which vacancies can be refilled easily.

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LETTER FROM CSC ASIA

Most tenants of the SZ Property are companies with high scientific innovation skills which rental payments can be guaranteed. In addition, the SZ Property is subject to various tenancy agreements and the earliest expiring term on 10 June 2010. For the eight months ended 31 August 2009, the aggregate rental income from the SZ Property was approximately RMB5.2 million. The land use rights and building ownership rights of the SZ Property for high-tech development use have been granted to JBMOE for a term expiring on 8 January 2051.

The financial information of the JBMOE (including the SZ Property) is extracted from Appendix II in the Circular and is set out as follows:

	(Unaudited)	(Audited)	(Audited)
	For the eight months	For the year	ended
	ended 31 August	31 December
	2008 2009	2007		2008
	RMB’000 RMB’000	RMB’000	RMB’000
Turnover	5,917 6,126	8,611		8,543
Profit after tax	2,404 2,621	3,150		3,350

As shown in the table above, turnover of the JBMOE for the year ended 31 December 2008 amounted to approximately RMB8.5 million, representing a slight decrease of approximately 0.8% as compared to that of the corresponding year in 2007. Notwithstanding this, we note that the JBMOE recorded an increase in net profit for the two years ended 31 December 2008. Profit after tax for the year ended 31 December 2008 amounted to approximately RMB3.4 million, representing an increase of approximately 6.3% as compared to that of the year ended 31 December 2007. For the eight months ended 31 August 2009, turnover and profit after tax of the JBMOE amounted to approximately RMB6.1 million and approximately RMB2.6 million, representing an increase of approximately 3.5% and approximately 9.0% as compared to the respective items for the same period in 2008.

Based on the above in particular that i) the economic growth in Shenzhen; ii) the competitive location of the SZ Property which strengthens the stable rental income stream of the SZ Property; and iii) the JBMOE recorded net profit for the two years ended 31 December 2008 and the eight months ended 31 August 2008 and 31 August 2009, we concur with the view of the Directors that the JBMOE Acquisition is in the interests of the Company and the Shareholders as a whole.

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LETTER FROM CSC ASIA

4. Information on the CY Property

As stated in the Letter from the Board, the CY Property (named as Huipu Building) is located at No.112, Jianguo Road, Chaoyang District, Beijing, the PRC. The CY Property is currently subject to two tenancies, a bank and a telecom company with an aggregate annual rent of approximately RMB9.7 million and the earliest expiring term on 14 August 2011. As advised by the Directors, both tenants are reliable on providing stable rental income to the Company given their respective reputation and strong financial background.

The financial information of the CY Property is extracted from its unaudited management account and is set out as follows:

	(unaudited)	(unaudited)	(unaudited)
	For the eight months	For the year	ended
	ended 31 August	31 December
	2009 2008	2008		2007
	RMB’000 RMB’000	RMB’000	RMB’000
Turnover	6,487 6,624	9,867		6,864
Net income	5,603 5,740	8,543		6,009

As shown in the table above, we note that the CY Property recorded net income for the two years ended 31 December 2008 and the eight months ended 31 August 2008 and 31 August 2009. Both the turnover of approximately RMB9.9 million and the net income of approximately RMB8.5 million for the year ended 31 December 2008 representing a substantial increase of approximately 43.8% and approximately 42.2% increment as compared to that of the year 2007 respectively. The net income for the eight months ended 31 August 2009 was approximately RMB5.6 million, representing a slight decrease of 2.4% as compared to that for the eight months ended 31 August 2008.

Based on the above, in particular that i) the economic growth in Beijing; ii) strong tenant base which strengthens the stable rental income stream of the CY Property; and iii) the CY Property recorded net income for the two years ended 31 December 2008 and the eight months ended 31 August 2008 and 31 August 2009, we concur with the view of the Directors that the CY Acquisition is in the interests of the Company and the Shareholders as a whole.

B. Basis of consideration

The Disposal Agreement

Pursuant to the Disposal Agreement, the consideration payable in cash by Zhong Yi for the Disposal is RMB200 million. Such consideration was determined after arm’s length negotiations between the Company and Zhong Yi and taking into account of the factors as disclosed under section headed “Consideration” in the Letter from the Board which includes, but not limited to, the profit attributable to the operation of Scenic Bay, which contributes the principal asset of Beijing Diye, and the Group’s receivable from Beijing Diye in the amount of approximately RMB461.2 million as at 31 December 2008.

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LETTER FROM CSC ASIA

Based on the property valuation report contained in the Appendix VI to the Circular (the “ Valuation Report ”), prepared by Malcolm & Associates Appraisal Limited (“ MAAL ”), an independent property valuer of the Group, the land for the operation of Scenic Bay as at 30 November 2009 has no commercial value due to the fact that the land use right and relevant licenses of Beijing Diye has not been obtained. Given that the land use right and relevant licenses of Beijing Diye has not been obtained as at the date of the Disposal Agreement, such land has no commercial value.

In attempting to estimate the land value of Scenic Bay, we have discussed with MAAL on the alternative ways by taking the historical transaction figures of similar lands or buildings located in the same area of the Scenic Bay as reference. However, as advised by MAAL, the land for the operation of Scenic Bay cannot be developed without the legal title and land use right, which has been pending for over two years, not to mention the future purpose of land, the storeys and size of the properties allowed to be developed. Based on the above, the valuation of the land of Scenic Bay by using the historical transaction figures of similar lands or buildings as reference would not be applicable, and there is no basis to assess the consideration for the Disposal by the property valuation. Therefore, we have reviewed and based on the historical financial performance of Beijing Diye as an alternative reference for the valuation of the land of Scenic Bay. We note that the consideration represents a premium over net liabilities of Beijing Diye as at 31 December 2008 and compensates the difference between the net liabilities of Beijing Diye of approximately RMB261.2 million and the amount due from Beijing Diye of approximately RMB461.2 million as at 31 December 2008. Accordingly, there will be no gain and loss for the Disposal. Further, Beijing Diye continued to incur net loss of approximately RMB1.0 million for the eight months ended 31 August 2009, at which, net liabilities was approximately RMB262.4 million.

As advised by the Directors, the Company has been looking for opportunities to dispose of its entire 80% equity interest in Beijing Diye since mid 2008, but was unsuccessful. During the negotiation process, the potential purchasers backed out from the acquisition, mainly due to the lack of land use right and relevant licenses for Scenic Bay, which reveals that the unclear title of Scenic Bay project and the substantial amount due from Beijing Diye to the Group were an obstacle to completion of the potential disposal in relation to Beijing Diye. Further, the Directors advise that the land use right must be obtained through tender, auction and offering which is hard for the Company to proceed with due to its limited financial resources. Though the Company will be entitled to a certain amount of compensation from the government in case of failure of getting the land use right, the time of auction and the final amount of compensation are of high uncertainties. The Directors consider that the status of title of Beijing Diye will be cleared upon completion of the Disposal. Following that, the Group will have sufficient cash for financing potential acquisition and hence subject to other conditions as set out in the announcement of the Company dated 26 June 2009, to resume the trading of H

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LETTER FROM CSC ASIA

Shares before the Deadline. Based on the above, we are of the view that the consideration for the Disposal is on normal commercial terms, fair and reasonable so far as the Independent Shareholders are concerned and is in the interests of the Company and the Shareholders as a whole.

The JBMOE Acquisition Agreement

Pursuant to the JBMOE Acquisition Agreement, the consideration payable in cash by the Company for the JBMOE Acquisition is RMB80 million. Such consideration was determined after arm’s length negotiations between the Company, Beijing Tianqiao and the JBMOE Vendors and with reference to the market value of the SZ Property as at 30 November 2008.

In accessing the fairness and reasonableness of the valuation of the SZ Property, we have reviewed the Valuation Report. We have also discussed with MAAL on the methodology adopted and assumptions used in arriving at its valuation of the SZ Property in the Valuation Report. MAAL valued the SZ Property on an open market basis by the comparison approach assuming sales in the existing states with the benefit of vacant possession and by making reference to comparable sales evidence as available in the relevant markets (i.e. sales transactions of offices in Nanshan District, Shenzhen). MAAL also adopted the investment approach by taking into account the current rents passing of the constituent units of the properties being held under existing tenancies and the reversionary potential of the tenancies if they have been or would be let to tenants.

As advised by MAAL, the above approach is in accordance with the “First Edition of The HKIS Valuation Standards on Properties” published by The Hong Kong Institute of Surveyors and in compliance with the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited.

As stated in the Valuation Report, MAAL has valued the SZ Property based on the assumption that the SZ Property is sold in the open market without the benefit of deferred terms contract, leaseback, joint venture, management agreement or any similar arrangement which would serve to affect the values of the SZ Property.

In the course of our discussion with MAAL, nothing material has come to our attention that would lead us to believe that the valuation of the SZ Property was not prepared on a reasonable basis nor reflect the methodology and assumption which have been adopted and arrived at after due and careful consideration. We have no reason to doubt the fairness and appropriateness of the methodology adopted and assumptions used by MAAL in arriving at the valuation of the SZ Property.

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LETTER FROM CSC ASIA

The consideration represents a discount of approximately 11.1% and 8.3% to the market value of SZ Property of RMB90.0 million as at 30 November 2008 and RMB87.7 million as at 31 August 2009 respectively. Further, JBMOE recorded a net profit of approximately RMB1.6 million, RMB2.3 million, RMB3.3 million and RMB2.6 million for the three years ended 31 December 2008 and for the eight months ended 31 August 2009 respectively. As such, we consider that the consideration for the JBMOE Acquisition which is at a discount to the market value as at 30 November 2008 and 31 August 2009 is favourable to the Group. Thus we are of the view that the consideration for the JBMOE Acquisition is on normal commercial terms, fair and reasonable so far as the Independent Shareholders are concerned and is in the interests of the Company and the Shareholders as a whole.

The CY Acquisition Agreement

Pursuant to the CY Acquisition Agreement, the consideration payable in cash by the Company for the CY Acquisition is RMB93 million. Such consideration was determined after arm’s length negotiations between the Company and Zhong Yi and with reference to the market value of the CY Property as at 30 November 2008. The original purchase cost for the CY Property acquired by Zhong Yi through auction in December 2006 was approximately RMB93.5 million (including commission of approximately RMB1.6 million).

We have discussed with MAAL and note that they valued the CY Property on an open market basis by the comparison approach assuming sales in the existing states with the benefit of vacant possession and by making reference to comparable sales evidence as available in the relevant markets (i.e. sales transactions of offices in Chaoyang District, Beijing). MAAL also adopted the investment approach by taking into account the current rents passing of the constituent units of the properties being held under existing tenancies and the reversionary potential of the tenancies if they have been or would be let to tenants.

As stated in the Valuation Report, MAAL has valued the CY Property based on the assumption that the CY Property is sold in the open market without the benefit of deferred terms contract, leaseback, joint venture, management agreement or any similar arrangement which would serve to affect the values of the CY Property.

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LETTER FROM CSC ASIA

In the course of our discussion with MAAL, nothing material has come to our attention that would lead us to believe that the valuation of the CY Property was not prepared on a reasonable basis nor reflect the methodology and assumption which have been adopted and arrived at after due and careful consideration. We have no reason to doubt the fairness and appropriateness of the methodology adopted and assumptions used by MAAL in arriving at the valuation of the CY Property.

The consideration represents a discount of approximately 22.5% and 23.1% to the market value of CY Property of RMB120.0 million as at 30 November 2008 and RMB121.0 million as at 31 August 2009 respectively. Further, CY Property recorded a net profit of approximately RMB6.0 million, RMB8.5 million and RMB5.6 million for the two years ended 31 December 2008 and for the eight months ended 31 August 2009 respectively. As such, we consider that the consideration for the CY Acquisition which is at a discount to the market value as at 30 November 2008 and 31 August 2009 is favourable to the Group. Thus we are of the view that the consideration for the CY Acquisition is on normal commercial terms, fair and reasonable so far as the Independent Shareholders are concerned and is in the interests of the Company and the Shareholders as a whole.

C. Profit guarantee

The JBMOE Acquisition Agreement

Pursuant to the terms of the JBMOE Acquisition Agreement, the Company has been guaranteed with minimum annual rental income of RMB3.5 million for each of the two years following the completion of the JBMOE Acquisition. In the event that the annual rental income generated by JBMOE is less than the guaranteed amount of RMB3.5 million, the JBMOE Vendors shall make up for the shortfall within 30 days from the issue of written notice by the Company and pay RMB3.5 million to the Company as compensation. In addition, the SZ Property is subject to various tenancy agreements and the earliest expiring term on 10 June 2010. For the eight months ended 31 August 2009, the aggregate rental income from the SZ Property was approximately RMB5.2 million. The land use rights and building ownership rights of the SZ Property for high-tech development use have been granted to JBMOE for a term expiring on 8 January 2051.

The CY Acquisition Agreement

Pursuant to the terms the CY Acquisition Agreement, Zhong Yi has guaranteed that the annual rental income to be generated by the CY Property will be no less than RMB8.5 million for the two years following the completion of the CY Acquisition. In the event that the annual rental income generated by the CY Property is underpaid or less than the guaranteed amount of RMB8.5 million, Zhong Yi shall make up for the shortfall within 30 days from the issue of written notice by the Company. Furthermore, as advised by the Company, the CY Property is currently subject to two tenancy agreements with an aggregate annual rent of approximately RMB9.7 million, and the earliest expiring term on 14 August 2011.

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LETTER FROM CSC ASIA

Having considered the terms of profit guarantees contemplated under the JBMOE Acquisition Agreement and the CY Acquisition Agreement and the leasing conditions of the SZ Property and the CY Property, we are of the view that the respective profit guarantees are fair and reasonable and is in the interests of the Company and the Shareholders as a whole, in particular of ensuring stable rental income to the Group for at least the two years following completion of the respective acquisitions.

(E) Financial Impacts

Based on the Unaudited Pro Forma Financial Information of the Resulting Group contained in Appendix V of the Circular and on the assumption that the Proposed Transactions have been completed, the financial impacts on the Group are discussed as follows:

Net asset value

The audited consolidated net asset value of the Group as at 31 August 2009 was approximately RMB440.8 million. Upon completion of the Proposed Transactions, the net impact on the net asset value of the Group will be improved by approximately RMB2.9 million.

Earnings

The Group recorded a net loss of approximately RMB48.6 million for the year ended 31 December 2008. Upon completion of the Proposed Transactions, the Group will achieve a turnaround to a net profit of approximately RMB78.4 million in its profit and loss account, which is favourable to the Group.

Gearing ratio

Based on the audited financial statements of the Group as at 31 August 2009, the gearing ratio (being total liabilities to net asset) of the Group was 0.30 time. Upon completion of the Proposed Transactions, the pro forma gearing ratio of the Group will be 0.34 time.

Cash flow

Based on the audited financial statements of the Group, bank balances and cash as at 31 August 2009 was approximately RMB4.9 million. Upon completion of the Proposed Transactions, the Group would recognize a gain of approximately RMB34.9 million, which was primarily resulted from the sales of Disposal, partially offset by the purchases of the SZ Property and the CY Property. We are of the opinion that with sufficient cash on hand allows the Group to be in a better position to look for investment opportunities which are beneficial to the Group and the Shareholders as a whole.

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LETTER FROM CSC ASIA

Taking into account the nominal financial effects upon completion of the Proposed Transactions, we concur with the view of the Directors that the entering of the Disposal Agreement, the JBMOE Acquisition Agreement and the CY Acquisition Agreement are favorable to the Company and the Independent Shareholders and is in the interests of the Company and the Shareholders as a whole.

RECOMMENDATION

Having taken into account the principal factors and reasons in respect of the Proposed Transactions, in particular:

prolonged suspension of trading in H Shares since 15 December 2004;
resumption of trading in H Shares is subject to, among other conditions, as set out in the announcement of the Company dated 26 June 2009, the completion of the Disposal, the JBMOE Acquisition and the CY Acquisition must be fulfilled before the Deadline;
Beijing Diye continued to incur net losses after tax for the two years ended 31 December 2008 and for the eight months ended 31 August 2009;
the uncertainty to obtain land use right and relevant licenses for Scenic Bay;
the consideration of the Disposal represents a premium over net liabilities of Beijing Diye as at 31 December 2008;
optimistic outlook of the PRC property market;
JBMOE recorded net profit for the two years ended 31 December 2008 and the eight months ended 31 August 2008 and 31 August 2009;
the consideration of the JBMOE Acquisition represents a discount of approximately 11.1% and 8.3% to the market value of SZ Property of RMB90.0 million as at 30 November 2008 and RMB87.7 million as at 31 August 2009 respectively;
the CY Property recorded net income for the two years ended 31 December 2008 and the eight months ended 31 August 2009;
the consideration of the CY Acquisition represents a discount of approximately 22.5% and 23.1% to the market value of CY Property of RMB120.0 million as at 30 November 2008 and RMB121.0 million as at 31 August 2009 respectively;
guaranteed annual rental income to be generated from the SZ Property and the CY Property of no less than RMB3.5 million and RMB8.5 million respectively for the two years following the completion of the JBMOE Acquisition and the CY Acquisition respectively; and

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LETTER FROM CSC ASIA

an increase of approximately RMB2.9 million and approximately RMB34.9 million in net asset value and cashflow respectively and a turnaround from a net loss of approximately RMB48.6 million to a net profit of approximately RMB78.4 million upon completion of the Proposed Transactions.

We consider that the entering into the Disposal Agreement, the JBMOE Acquisition Agreement and the CY Acquisition Agreement are on normal commercial terms and is in the interests of the Company and the Shareholders as a whole and the terms and conditions of the Disposal Agreement, the JBMOE Acquisition Agreement and the CY Acquisition Agreement are fair and reasonable so far as the Independent Shareholders are concerned. Accordingly, we advise the Independent Board Committee to recommend the Independent Shareholders to vote in favour of the resolutions relating to the Proposed Transactions at the EGM.

Yours faithfully, For and on behalf of CSC Asia Limited Bernard Wu Andrew Chiu Director and Head of Executive Director Investment Banking

– 43 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

INDEPENDENT AUDITOR’S REPORT

==> picture [154 x 37] intentionally omitted <==

Lo and Kwong C.P.A. Company Limited Certified Public Accountants Suites 216–218, 2/F, Shui On Centre 6–8 Harbour Road, Wanchai Hong Kong Tel: (852) 3188 6200 Fax: (852) 2824 4091

TO THE MEMBERS OF SHENYANG PUBLIC UTILITY HOLDINGS COMPANY LIMITED INCORPORATED IN PEOPLE’S REPUBLIC OF CHINA WITH LIMITED LIABILITY

We were engaged to audit the consolidated financial statements of Shenyang Public Utility Holdings Company Limited (the “Company”) and its subsidiaries (collectively referred to as the “Group”) set out on page 48 to 122, which comprise the consolidated statement of financial position as at 31 August 2009, and the consolidated statement of comprehensive income, the consolidated statement of change in equity and the consolidated cash flow statement for the period then ended, and a summary of significant accounting policies and other explanatory notes.

DIRECTORS’ RESPONSIBILITY FOR THE CONSOLIDATED FINANCIAL STATEMENTS

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

AUDITOR’S RESPONSIBILITY

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

An audit involves performing procedures to obtain evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of

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APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

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

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

BASIS FOR DISCLAIMER OF OPINION

As disclosed in note 26 to the consolidated financial statements, the Company’s subsidiary, Beijing Diye Real Estate Development Company Limited (“Beijing Diye”), had a held-for-sale property under development project in Beijing with a carrying value of RMB193,941,000 as at 31 December 2008 and 31 August 2009. According to a sale and purchase agreement dated 31 December 2008, the entire interest, that is 80% of Beijing Diye, will be disposed to a third party for a total consideration of RMB200,000,000 upon reaching several conditions. The management has then made approximately RMB216,438,000 impairment provision on the held-for-sale property for the year ended 31 December 2008. Due to insufficient evidence, we were not able to confirm, whether the Group could successfully dispose the Beijing Diye at the captioned consideration of RMB200,000,000 and whether impairment provision of approximately RMB216,438,000 was properly made in respect of the cost of the held-for-sale property of approximately RMB410,379,000 for the year ended 31 December 2008 and whether the held for sale property with the carrying values of RMB193,941,000 as at 31 December 2008 and 31 August 2009 are fairly stated.

Nevertheless, if the sale and purchase agreement is not completed, the land use right of the land used for such property development project must be obtained by way of public tender as a result of the change in the related land policy. If the Group ultimately succeeded in winning the tender of the land and completing the development, the recoverable amount of such project shall depend on the realisable value of the completed property in the future. If the Group did not participate in the public tender or it failed to obtain the land use right of the land in the tender, the recoverable amount of such project shall depend on the amount invested by the Group and such amount should be confirmed by the relevant authorities of the People’s Republic of China (“PRC”). Based on our on-site investigation, no buildings were erected on the land nor had it been put on a public tender up to the date of this report. Due to insufficient evidence, we were not able to confirm whether the Group could successfully recover the development cost invested in such project in full or in the amount net of provision, and whether impairment provision of approximately RMB216,438,000 should be made in respect of the development cost of approximately RMB410,379,000 is sufficient.

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APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

Any adjustment to the abovementioned figures could have a consequential and significant effect on the Group’s net asset value as at 31 August 2009 and its operating loss for the year then ended.

MATERIAL FUNDAMENTAL UNCERTAINTY RELATING TO THE GOING CONCERN BASIS

In forming our opinion, we have considered the adequacy of the disclosures made in the consolidated financial statements concerning the adoption of the going concern basis in preparing such consolidated financial statements. As set out in note 2 to the consolidated financial statements, the consolidated financial statements have been prepared on a going concern basis, the validity of which depends upon the successful implementation of certain financing and share capital restructuring plans and the debt restructuring result reached with the creditors including, the successful disposal of Beijing Diye for the total consideration of RMB200,000,000 and, among other things, the Group will be able to meet it full its financial obligations as they fall due for the foreseeable future. We consider that appropriate disclosures have been made in such consolidated financial statements concerning the relevant material uncertainty, but the inherent uncertainties surrounding the circumstances under which the Company might successfully continue to adopt the going concern basis are so extreme, we have disclaimed our opinion on material uncertainty relating to the going concern basis.

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

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

Because of the significance of the matters described in the basis for disclaimer of opinion paragraph and the material fundamental uncertainty relating to going concern basis paragraph, we do not express an opinion on the consolidated financial statements as to whether they give a true and fair view of the financial position of the Group as at 31 August 2009 and of its loss and cash flows for the year then ended in accordance with Hong Kong Financial Reporting Standards. In all other respects, in our opinion, the consolidated financial statements have been properly prepared in accordance with the disclosure requirements of the Hong Kong Companies Ordinance.

LO AND KWONG C.P.A. COMPANY LIMITED

Certified Public Accountants Lo Wah Wai

Practising Certificate Number: P02693

Suites 216–218, 2/F, Shui On Centre 6–8 Harbour Road, Wanchai Hong Kong 28 December 2009

– 46 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

COMPARATIVE FINANCIAL INFORMATION

The comparative consolidated statement of comprehensive income, consolidated statement of changes in equity and the consolidated statement of cash flow of the Group for the eight months ended 31 August 2008 together with the notes thereto have been extracted from the Group’s financial information for the same period (the “31 August 2008 Financial Information”), which was prepared by the directors of the Company solely for the purpose of this report. We have reviewed the 31 August 2008 Financial Information in accordance with the Hong Kong Standard on Review Engagements 2400 “Engagements to Review Financial Statements” issued by the HKICPA.

A review consists principally of making enquiries of the Company’s management and applying analytical procedures to the 31 August 2008 Financial Information and based thereon, assessing whether the accounting policies and presentation have been consistently applied unless otherwise disclosed. A review excludes audit procedures such as tests of controls and verification of assets, liabilities and transactions. It is substantially less in scope than an audit and therefore provides a lower level of assurance than an audit. Accordingly, we do not express an audit opinion on the 31 August 2008 Financial Information.

REVIEW CONCLUSION

On the basis of our review which does not constitute an audit, we are not aware of any material modification that should be made to the 31 August 2008 Financial Information.

– 47 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

For eight months ended 31 August 2009 2008 RMB’000 RMB’000 (unaudited) 2,651 2,000 12 8 211 16,257 (100) (100) (110) (110) (1,751) (3,528) (942) (1,122) – (216,438) (1,000) 1,000 (187) (852) – – – 4,290 400 – – – – – (533) (3,166) – (200) (4,744) (14,104) – – (604) (17,164)	For eight months ended 31 August 2009 2008 RMB’000 RMB’000 (unaudited) 2,651 2,000 12 8 211 16,257 (100) (100) (110) (110) (1,751) (3,528) (942) (1,122) – (216,438) (1,000) 1,000 (187) (852) – – – 4,290 400 – – – – – (533) (3,166) – (200) (4,744) (14,104) – – (604) (17,164)	For the year ended 31 December 2008 2007 2006 RMB’000 RMB’000 RMB’000 (restated) (restated) (restated) 39,617 7,116 16,465 33 21 2,971 16,296 555 137 (40,237) (3,889) (7,328) (2,179) (436) (1,126) (4,359) (5,545) (6,681) (2,061) (7,461) (8,748) (216,438) – – (483) (6,496) 17,086 (852) – (408) – – 12,938 204,123 – – – – – – – (3,179) – – (968) (4,034) (94) (9,159) (200) – – (20,685) (11,084) (13,074) – – 19,575 (17,876) (23,577) (34,149)	For the year ended 31 December 2008 2007 2006 RMB’000 RMB’000 RMB’000 (restated) (restated) (restated) 39,617 7,116 16,465 33 21 2,971 16,296 555 137 (40,237) (3,889) (7,328) (2,179) (436) (1,126) (4,359) (5,545) (6,681) (2,061) (7,461) (8,748) (216,438) – – (483) (6,496) 17,086 (852) – (408) – – 12,938 204,123 – – – – – – – (3,179) – – (968) (4,034) (94) (9,159) (200) – – (20,685) (11,084) (13,074) – – 19,575 (17,876) (23,577) (34,149)	For the year ended 31 December 2008 2007 2006 RMB’000 RMB’000 RMB’000 (restated) (restated) (restated) 39,617 7,116 16,465 33 21 2,971 16,296 555 137 (40,237) (3,889) (7,328) (2,179) (436) (1,126) (4,359) (5,545) (6,681) (2,061) (7,461) (8,748) (216,438) – – (483) (6,496) 17,086 (852) – (408) – – 12,938 204,123 – – – – – – – (3,179) – – (968) (4,034) (94) (9,159) (200) – – (20,685) (11,084) (13,074) – – 19,575 (17,876) (23,577) (34,149)
(6,697) 2,178 (4,519) –	(233,229) (1,943) (235,172) –	(49,335) (73) (49,408) –	(50,890) 492 (50,398) 114,418	(15,648) (13,518)
				(29,166)
				(9,293)

– 48 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

	For eight months	For the year ended	For the year ended	For the year ended
	ended 31 August		31 December
	2009 2008	2008	2007	2006
Notes	RMB’000 RMB’000	RMB’000	RMB’000	RMB’000
	(unaudited)	(restated)	(restated)	(restated)

(Loss) profit for the period/ year and total comprehensive (loss) income for the period/ year, net of tax

(Loss) profit for the period/ year and total comprehensive (loss) income for the period/ year,
net of tax Attributable to: Owners of the Company Non-controlling interests (Loss) earnings per share (RMB cents) 18 From continuing and discontinuing operations – Basic – Diluted From continuing operations – Basic – Diluted From discontinuing operations – Basic – Diluted	(4,519) (4,179) (340) (4,519) (0.01) N/A (0.01) N/A N/A N/A	(235,172) (235,369) 197 (235,172) (0.23) N/A (0.23) N/A N/A N/A	(49,408) (48,553) (855) (49,408) (0.05) N/A (0.05) N/A N/A N/A	64,020 66,219 (2,199) 64,020 0.06 N/A (0.05) N/A 0.11 N/A	(38,459)

					(45,861) 7,402
					(38,459)

					(0.04) N/A (0.03) N/A (0.01) N/A

– 49 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

At 31 August 2009 RMB’000 18,061 297,000 – – 20,000 – –	At 31 December 2008 2007 2006 RMB’000 RMB’000 RMB’000 (restated) (restated) (restated) 7,256 133,227 156,752 298,000 297,000 483,000 – 86,752 89,316 – – – 20,000 20,000 20,000 – – – 32,745 – –	At 31 December 2008 2007 2006 RMB’000 RMB’000 RMB’000 (restated) (restated) (restated) 7,256 133,227 156,752 298,000 297,000 483,000 – 86,752 89,316 – – – 20,000 20,000 20,000 – – – 32,745 – –	At 31 December 2008 2007 2006 RMB’000 RMB’000 RMB’000 (restated) (restated) (restated) 7,256 133,227 156,752 298,000 297,000 483,000 – 86,752 89,316 – – – 20,000 20,000 20,000 – – – 32,745 – –
335,061 193,941 – – – – 1,201 – 3,572 73,255 4,898 276,867 5,836 36,665 13,708 – – 1,041 14,000 44,328 115,578 161,289	358,001 205,735 – – – – – – 1,572 80,692 6,803 294,802 5,875 33,333 12,759 – – 1,041 14,000 – 67,008 227,794	536,979 484,987 341 – – 54,268 – 2,564 3,039 31,914 4,478 581,591 43,080 411,821 44,089 1,168 – 2,043 62,000 – 564,201 17,390	749,068
			495,715 469 1,192 – 55,296 – 2,564 2,518 185,615 9,444
			752,813
			58,249 540,283 65,356 1,159 62,096 18,502 181,344 –
			926,989
			(174,176)
496,350	585,795	554,369	574,892

– 50 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

Notes CAPITAL AND RESERVES Share capital 36 Reserves Equity attributable to owners of the Company Non-controlling interests Total equity NON-CURRENT LIABILITIES Deferred taxation 37 Other non-current liabilities	At 31 August 2009 RMB’000 1,020,400 (579,502) 440,898 39,688 480,586 15,764 – 15,764 496,350	At 31 December 2008 2007 2006 RMB’000 RMB’000 RMB’000 (restated) (restated) (restated) 1,020,400 1,020,400 1,020,400 (575,323) (526,419) (592,638) 445,077 493,981 427,762 40,028 42,769 84,541 485,105 536,750 512,303 17,692 17,619 62,589 82,998 – – 100,690 17,619 62,589 585,795 554,369 574,892	At 31 December 2008 2007 2006 RMB’000 RMB’000 RMB’000 (restated) (restated) (restated) 1,020,400 1,020,400 1,020,400 (575,323) (526,419) (592,638) 445,077 493,981 427,762 40,028 42,769 84,541 485,105 536,750 512,303 17,692 17,619 62,589 82,998 – – 100,690 17,619 62,589 585,795 554,369 574,892
			427,762 84,541
			512,303
			62,589 –
			62,589
			574,892

– 51 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

	Equity attributable to shareholders of the Company	Equity attributable to shareholders of the Company	Equity attributable to shareholders of the Company	Equity attributable to shareholders of the Company	Equity attributable to shareholders of the Company
Share capital RMB’000 1,020,400 – – 1,020,400 – – 1,020,400 – – 1,020,400 –	Share premium RMB’000 (Note a) 323,258 – – 323,258 – – 323,258 – – 323,258 –	Statutory surplus reserve RMB’000 (Note b) 69,054 – 34,528 103,582 – – 103,582 – (351) 103,231 –	Statutory public welfare reserve Accumulated losses RMB’000 RMB’000 (Note c) 34,528 (973,617) – (45,861) (34,528) – – (1,019,478) – 66,219 – – – (953,259) – (48,553) – – – (1,001,812) – (4,179)		Total RMB’000 (restated) 473,623 (45,861) – 427,762 66,219 – 493,981 (48,553) (351) 445,077 (4,179)	Minority interests RMB’000 77,139 7,402 – 84,541 (2,199) (39,573) 42,769 (855) (1,886) 40,028 (340)	Total equity RMB’000 550,762 (38,459 –
							512,303 64,020 (39,573
							536,750 (49,408 (2,237
							485,105 (4,519
1,020,400	323,258	103,231	–	(1,005,991)	440,898	39,688	480,586

8 (unaudited) 1,020,400 323,258 – – – –		103,582 – (351)	– – –	(953,259) (235,369) –	493,981 (235,369) (351)	42,769 197 (1,886)	536,750 (235,172 (2,237
1,020,400	323,258	103,231	–	(1,188,628)	258,261	41,080	299,341

Notes:

(A) SHARE PREMIUM

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

(B) STATUTORY SURPLUS RESERVE

The Group is required to set aside 10 % of their profit after taxation prepared in accordance with the PRC accounting regulations to the statutory surplus reserve until the balance reaches 50% of their respective paid up capital or registered capital, where further appropriation will be at the Directors’ recommendation. Such reserve can be used to reduce any losses incurred or to increase the capital. As the Group recorded an operating loss for the period/year, no appropriation was made.

– 52 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

The Company is not required to make appropriation since 2006 onwards according to PRC relevant financial regulations. The amount of appropriation which had been made in prior year was transferred to statutory surplus reserve during the year ended 31 December 2006.

(C) STATUTORY PUBLIC WELFARE RESERVE

The Group is required to transfer 5% to 10% of their profit after taxation prepared in accordance with the PRC accounting regulations to the statutory public welfare reserve. The use of this reserve is restricted to capital expenditure for staff collective welfare facilities which are owned by the Group. The statutory public welfare reserve is not available for distribution to the shareholders (except upon liquidation of the Company). Once the capital expenditure on staff welfare facilities has been made, an equivalents amount must be transferred from the statutory public welfare reserve to discretionary surplus reserve. No such capital expenditure was incurred for the year ended 31 December 2006, 2007, 2008 and period ended 31 August 2009.

DISTRIBUTABLE RESERVE

Pursuant to the relevant PRC regulations, distributable reserve shall be the lower of the accumulated distributable profits determined in accordance with PRC accounting standards and regulations as stated in the PRC statutory audited financial statements and the accumulated distributable profits determined in accordance with accounting principles generally accepted in Hong Kong. The Company did not have reserve available for distribution as at 31 December 2006, 31 December 2007 and 31 December 2008 and 31 August 2009.

Pursuant to the relevant PRC regulations, the retained profits of school operations are non-distributable, As such, the retained profits of the Group’s subsidiaries, Shenyang Beida Jade Bird School (“Jade Bird School”) and Shenyang Beida Jade Bird Foreign Language Training School (“Shenyang Traininng School”) shall not be used for dividend distribution. As at 31 December 2007, Shenyang Training School has been written off and Jade Bird School did not have any retained profit. Jade Bird School had been disposal during the year ended 31 December 2008. Details are set out in notes 38(c).

– 53 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

CONSOLIDATED STATEMENT OF CASH FLOW

For the eight months ended 31 August 2009 2008 RMB’000 RMB’000 (unaudited) (6,697) (233,229) – –	For the eight months ended 31 August 2009 2008 RMB’000 RMB’000 (unaudited) (6,697) (233,229) – –	For the year ended 31 December 2008 2007 2006 RMB’000 RMB’000 RMB’000 (49,335) (50,890) (15,648) – 115,513 (4,708)	For the year ended 31 December 2008 2007 2006 RMB’000 RMB’000 RMB’000 (49,335) (50,890) (15,648) – 115,513 (4,708)	For the year ended 31 December 2008 2007 2006 RMB’000 RMB’000 RMB’000 (49,335) (50,890) (15,648) – 115,513 (4,708)
(6,697) – (12) 942 – – – – 1,000 (400) 604 – 187 – 533 – (3,843) – – – 32,745 (2,000) – (1,201) 44,328 (39) (79,416) – 949 – (8,477) – (8,477)	(233,229) – (8) 1,122 – – 216,438 200 (1,000) – 17,164 – 852 – 3,166 – 4,705 1,110 – – – (23,551) 54,268 – – 34,064 (42,532) – 25,455 – 53,519 – 53,519	(49,335) – (33) 2,061 – – 216,438 200 483 – 17,876 – 852 – 4,034 (204,123) (11,547) 42,789 – – – 1,467 54,268 – – (18,318) 60,897 (1,002) 2,706 – 131,260 – 131,260	64,623 – (21) 8,307 2,564 – – – 6,496 – 27,688 – – – 94 (145,978) 36,227 10,728 128 1,192 – (521) – – – (11,932) 55,539 (16,459) (19,525) 50,434 33,357 (613) 32,744	(20,356) (19,575) (2,982) 9,585 2,564 3,179 – – (29,086) – 36,570 (12,938) 595 968 9,159 –
				(22,317) (228,947) (108) (573) – 100,043 – – – (495) 112,940 (3,388) (166,692) 28,201
				(181,336) 2,050
				(179,286)

– 54 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

For the eight months ended 31 August 2009 2008 RMB’000 RMB’000 (unaudited) 12 8 – – – – (140) (1,207) – – – – 7,304 (45,836) – – – – – – – –	For the eight months ended 31 August 2009 2008 RMB’000 RMB’000 (unaudited) 12 8 – – – – (140) (1,207) – – – – 7,304 (45,836) – – – – – – – –	For the year ended 31 December 2008 2007 2006 RMB’000 RMB’000 RMB’000 33 21 2,982 – – 5,720 8,502 (6,490) – (1,521) (7,730) (9,545) – (107) (6,729) – 1,028 212,898 (112,073) 149,299 (6,750) – – 71,598 – – 297 – – 58,993 – – (39,512)	For the year ended 31 December 2008 2007 2006 RMB’000 RMB’000 RMB’000 33 21 2,982 – – 5,720 8,502 (6,490) – (1,521) (7,730) (9,545) – (107) (6,729) – 1,028 212,898 (112,073) 149,299 (6,750) – – 71,598 – – 297 – – 58,993 – – (39,512)	For the year ended 31 December 2008 2007 2006 RMB’000 RMB’000 RMB’000 33 21 2,982 – – 5,720 8,502 (6,490) – (1,521) (7,730) (9,545) – (107) (6,729) – 1,028 212,898 (112,073) 149,299 (6,750) – – 71,598 – – 297 – – 58,993 – – (39,512)
7,176 – – (604) – (604) (1,905) 6,803	(47,035) – – – – – 6,484 4,478	(105,059) 14,000 (20,000) (17,876) – (23,876) 2,325 4,478	136,021 – (118,554) (27,688) (27,489) (173,731) (4,966) 9,444	289,952
				65,000 (235,146) (16,970) 76,841
				(110,275)
				391 9,053
4,898	10,962	6,803	4,478	9,444

– 55 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

1. GENERAL INFORMATION

Shenyang Public Utility Holdings Company Limited (the “Company”) is a joint stock limited company incorporated in the People’s Republic of China (the “PRC”). The addresses of the registered office and principal place of business of the Company are Jinmao International Apartment, 14/F, Da Dong District, Shenyang, the PRC.

The Company is an investment holding company. On 24 February 2009, its ultimate holding company changed from Shenyang Public Utility Group Company Limited (“SPUG”) to Beijing Mingde Guangye Investment Consultant Company Limited (“Beijing Mingde”), both are limited company incorporated in the PRC. Details are set out in note 43.

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

The Company and its subsidiaries are collectively referred to as the Group.

The principle activity of the Company is investment holding and the principal activities of its subsidiaries are set out in note 45.

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

2. ADOPTION OF GOING CONCERN BASIS

The Group suffered a operating loss of approximately RMB6,697,000 for the period ended 31 August 2009 and two short term bank loans amounting to RMB14,000,000 has to be repaid in November 2009. The management of the Company has taken the following measures:

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

The management of the Company believes that, in the light of the measures taken to date, together with the expected results of other measures in progress, the Group will have sufficient working capital to finance its operations and remain as a going concern in the foreseeable future. Accordingly, notwithstanding that the Group had recorded a significant amount of operating loss for the period and had overdue debts as at 31 August 2009, the management of the Company is of the opinion that it is appropriate to prepare these consolidated financial statements on a going concern basis.

– 56 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

3. APPLICATION OF NEW AND REVISED HONG KONG FINANCIAL REPORT STANDARD (“HKFRS”)

In the current period, the Group has applied all of the new Hong Kong Financial Reporting Standards, Hong Kong Accounting Standards, amendments and interpretations (hereinafter collectively referred to as “New HKFRSs”) issued by the Hong Kong Institute of Certified Public Accountants (“HKICPA”) that are effective for accounting periods beginning on 1 January 2009. The directors of the Company anticipate that the application of those new HKFRSs has had no material effect on how the results for the current and prior accounting periods are prepared and presented. Accordingly, no prior period adjustments are required.

The Group has not early applied the following new and revised standards, amendments or interpretations that have been issued but are not yet effective.

HKFRSs (Amendments)	Improvement to HKFRSs May 20081
HKFRSs (Amendments)	Improvements to HKFRSs April 20092
HKAS 27 (Revised)	Consolidated and Separate Consolidated Financial
	Statements3
HKAS 39 (Amendments)	Eligable hedged items3
HKFRS 1 (Revised)	First-time Adoptions of HKFRS3
HKFRS 1 (Amendment)	First-time Adoption of HKFRS4
HKFRS 2 (Amendments)	Share-based Payments – Company Cash-Settled Share
	based Payment Transactions6
HKFRS 3 (Revised)	Business Combinations3
HK(IFRIC)-INT 9 (Amendments) and	Embedded Derivatives4
HKAS 39 (Amendments)
HK(IFRIC)-INT 17	Distributions of Non- cash Assets to Owners3
HK(IFRIC)-INT 18	Transfer of Assets from Customers5

1 Amendments to HKFRS 5, effective for annual periods beginning on or after 1 July 2009
2 Effective for annual periods beginning on or after 1 July 2009 and 1 January 2010 as appropriate. 3 Effective for annual periods beginning on or after 1 July 2009.
4 Effective for annual periods beginning on or after 1 January 2010.
5 Effective for annual periods ending on or after 30 June 2009.
6 Effective for transfers of assets from customers received on or after 1 July 2009

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APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

4. CHANGES IN ACCOUNTING POLICIES AND SUMMARY OF THE EFFECT OF THE CHANGES IN ACCOUNTING POLICIES

The effect of changes in accounting policies resulted from adoption of Hong Kong Accounting Standard 40- Investment Property to measure investment properties from cost model to fair value model for current and prior years by lines items are as follow:

Decrease in depreciation for investment properties (Decrease) Increase on fair value changes of investment properties Increase in gain on disposal of investment properties Increase in impairment loss recognsied in respect of property and equipment Increase (decrease) in deferred tax expenses Increase in profit (loss) for the year on discontinued operations Increase (decrease) in profit for the year	At 31 December 2008 2007 RMB’000 RMB’000 10,155 10,293 (483) (6,496) – – – – (686) 362 – (52,458) 8,986 (48,299)	2006 RMB’000 13,902 17,086 19,916 (3,179) (13,613) 8,040
		42,152

The cumulative effect of the changes of accounting policies as at 31 December 2008, 31 December 2007 and 31 December 2006 is summarised below:

At 31 December 2008 (originally stated) RMB’000 19,200 248,342 (21,942) 245,600	Adjustment RMB’000 (11,944) 49,658 4,250 41,964	At 31 December 2008 (restated) RMB’000 7,256 298,000 (17,692)
		287,564

(1,032,463) 28,715	30,651 11,313	(1,001,812) 40,028
(1,003,748)	41,964	(961,784)

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APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

At 31 December 2007 (originally stated) RMB’000 146,795 255,390 (22,555) 379,630	Adjustment RMB’000 (13,568) 41,610 4,936 32,978	At 31 December 2007 (restated) RMB’000 133,227 297,000 (17,619
		412,608

(977,825) 34,357	24,566 8,412	(953,259 42,769
(943,468) At 31 December 2006 (originally stated) RMB’000 159,931 317,786 (23,168) 454,549	32,978 Adjustment RMB’000 (3,179) 165,214 (39,421) 122,614	(910,490

		At 31 December 2006 (restated) RMB’000 156,752 483,000 (62,589
		577,163

(1,093,482) 35,931	74,004 48,610	(1,019,478 84,541
(1,057,551) At 1 January 2006 (originally stated) RMB’000 390,931 (23,781) 367,150	122,614 Adjustment RMB’000 102,310 (21,848) 80,462	(934,937

		At 1 January 2006 (restated) RMB’000 493,241 (45,629
		447,612

(1,016,776) 39,836	43,159 37,303	(973,617 77,139
(976,940)	80,462	(896,478

– 59 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

5. SIGNIFICANT ACCOUNTING POLICIES

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

The consolidated financial statements have been prepared in accordance with HKFRS issued by the HKICPA. In addition, the consolidated financial statements include applicable disclosures required by the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited and by the Hong Kong Companies Ordinance.

Basis of consolidation

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

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

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

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

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

Goodwill

Goodwill arising on acquisitions prior to 1 January 2005

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

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

Goodwill arising on acquisitions on or after 1 January 2005

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

Capitalised goodwill arising on an acquisition of a business is presented separately in the consolidated statement of financial position.

For the purposes of impairment testing, goodwill arising from an acquisition is allocated to each of the relevant cash-generating units, or groups of cash-generating units, that are expected to benefit from the synergies of the acquisition. A cash-generating unit to which goodwill has been allocated is tested for

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APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

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

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

Investment in an associates

An associate is an entity over which the investor has significant influence and that is neither a subsidiary nor an interest in a joint venture.

The results and assets and liabilities of associate are incorporated in these consolidated financial statements using the equity method of accounting. Under the equity method, investments in associates are carried in the consolidated statement of financial position at cost as adjusted for post-acquisition changes in the Group’s share of the net assets of the associates, less any identified impairment loss. When the Group’s share of losses in an associate (which includes any long term interests that, in substance, form a part of Group’s net investment in the associate), the Group discontinues recognizing its share of further losses. An additional share of losses is provided for and a liabilities is recognised only to the extent that the Group has incurred legal or constructive obligations or made payments on behalf of that associate.

Where a group entity transacts with an associate of the Group, profits and losses are eliminated to the extent of the Group’s interest in the relevant associate.

Revenue recognition

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

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

Revenue from sales of goods are recognised when goods are delivered and title has passed.

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

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

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

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

Property and equipment

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

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APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

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

Construction in progress represents property and equipment under development or installment for production or for its own use purposes is stated at cost less any identified impairment loss. Upon completion of construction, the relevant costs are transferred to appropriate category of property and equipment when they are ready for intended use. No depreciation or amortisation is provided on construction in progress until the asset is completed and put into use.

Property that is being constructed or developed for future use as an investment property is classified as property and equipment and carried at cost less recognised impairment loss until construction or development is complete, at which time it is reclassified to and subsequently accounted for as investment property. Any different between the fair value of the property at that date and its previous carrying amount is recognised in profit and loss.

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

Investment properties

Investment properties are properties held to earn rentals or for capital appreciation.

On initial recognition, investment properties are measured at cost, including any directly attributable expenditure. Subsequent to initial recognition, investment properties are measured using the fair value model and are stated in the consolidated statement of financial positions at fair value, unless they are still in the course of construction or development at the end of reporting period and their fair value cannot be reliably determined at that time. Gains or losses arising from changes in the fair value of investment property are included in profit or loss for the period in which they arise.

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

Land use rights

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

Properties under development for sale

Properties under development are stated at the lower of cost and net realisable value and comprise construction costs, land costs, professional fees, interest capitalised and other costs directly attributable to such properties incurred during the construction period. Net realisable value is determined by reference to management estimated based on prevailing market conditions. On completion, the properties are transferred to properties held for sale.

Properties under development expected to be completed within 12 months from the end of the reporting period are classified as current assets.

Properties under development expected to be completed beyond 12 months from the end of reporting period are classified as non-current assets.

Properties held for sale

Properties held for sale are stated at the lower of cost and net realisable value.

– 62 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

Inventories

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

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

Financial instruments

Financial assets and financial liabilities are recognised on the consolidated statement of financial position when the Group becomes a party to the contractual provisions of the instrument. Financial assets and financial liabilities are initially measured at fair value. Transaction costs that are directly attributable to the acquisition or issue of financial assets and financial liabilities (other than financial assets and financial liabilities at fair value through profit or loss) are added to or deducted from the fair value of the financial assets or financial liabilities, as appropriate, on initial recognition. Transaction costs directly attributable to the acquisition of financial assets or financial liabilities at fair value through profit or loss are recognised immediately in profit or loss.

Financial assets

The Group’s financial assets are classified into loans and receivables and available-for-sale financial assets. All regular way purchases or sales of financial assets are recognised and derecognised on a trade date basis. Regular way purchases or sales are purchases or sales of financial assets that require delivery of assets within the time frame established by regulation or convention in the marketplace. The accounting policies adopted in respect of each category of financial assets are set out below.

Effective interest method

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

Interest income is recognised on an effective interest basis.

Loans and receivables

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. At the end of each reporting period subsequent to initial recognition, loans and receivables (including other long term receivables, trade receivables, amount due from former customers, amount due from parent company, amount due from related company, other receivables and bank balances and cash) are carried at amortised cost using the effective interest method, less any identified impairment losses. (See accounting policy on impairment loss on financial assets below)

Available-for-sale financial assets

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

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

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APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

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

Impairment of financial assets

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

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

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

significant financial difficulty of the issuer or counterparty; or
default or delinquency in interest or principal payments; or
it becoming probable that the borrower will enter bankruptcy or financial re-organisation.

For certain categories of financial asset, such as trade receivables and other receivables that are assessed not to be impaired individually are subsequently assessed for impairment on a collective basis. Objective evidence of impairment for a portfolio of receivables could include the Group’s past experience of collecting payments, an increase in the number of delayed payments in the portfolio past the average credit period of 90 days, observable changes in national or local economic conditions that correlate with default on receivables.

For financial assets carried at amortised cost, an impairment loss is recognised in profit or loss when there is objective evidence that the asset is impaired, and is measured as the difference between the asset’s carrying amount and the present value of the estimated future cash flows discounted at the original effective interest rate.

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

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

For financial assets measured at amortised cost, if, in a subsequent period, the amount of impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment losses was recognised, the previously recognised impairment loss is reversed through profit or loss to the extent that the carrying amount of the asset at the date the impairment is reversed does not exceed what the amortised cost would have been had the impairment not been recognised.

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

– 64 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

Financial liabilities and equity instrument

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

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

Effective interest method

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

Interest expenses are recognised on an effective interest basis.

Other financial liabilities

Other financial liabilities including trade payables, other payables and accruals, provision for potential liabilities, bank loans and amount due to a former shareholder are subsequently measured at amortised cost, using the effective interest rate method.

Equity instruments

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

Derecognition

Financial assets are derecognised when the rights to receive cash flows from the assets expire or, the financial assets are transferred and the Group has transferred substantially all the risks and rewards of ownership of the financial assets. On derecognition of a financial asset, the difference between the asset’s carrying amount and the sum of the consideration received and receivable and the cumulative gain or loss that had been recognised directly in equity is recognised in profit or loss.

Financial liabilities are derecognised when the obligation specified in the relevant contract is discharged, cancelled or expires. The difference between the carrying amount of the financial liability derecognised and the consideration paid and payable is recognised in profit or loss.

Impairment on tangible assets other than goodwill (see the accounting policies in respect to goodwill

above)

At the end of each reporting period, the Group reviews the carrying amounts of its tangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If the recoverable amount of an asset is less than its carrying amount, the carrying amount of the asset is reduced to its recoverable amount. An impairment loss is recognised as an expense immediately.

When reverses an impairment loss subsequently, the carrying amount of the asset is increased to its revised recoverable amount, such that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset in prior years. A reversal of an impairment loss is recognised as income immediately.

Borrowings costs

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

All other borrowing costs are recognised as in profit or loss in the period/ year in which they are incurred.

– 65 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

Foreign currencies

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

Exchange differences arising on the settlement of monetary items, and on the translation of monetary items, are recognised in profit or loss in the period/year in which they arise, except for exchange differences arising on a monetary item that forms part of the Company’s net investment in a foreign operation, in which case, such exchange differences are recognised in equity in the consolidated financial statements. Exchange differences arising on the retranslation of non-monetary items carried at fair value are included in profit or loss for the period.

For the purposes of presenting the consolidated financial statements, the assets and liabilities of the Group’s foreign operations are translated into the presentation currency of the Group (i.e. Renminbi) at the rate of exchange prevailing at the end of reporting period, and their income and expenses are translated at the average exchange rates for the year, unless exchange rates fluctuate significantly during the period/year, in which case, the exchange rates prevailing at the dates of transactions are used. Exchange differences arising, if any, are recognised as a separate component of equity (the exchange reserve). Such exchange differences are recognised in profit or loss in the period in which the foreign operation is disposed of.

Taxation

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

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

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

Deferred tax liabilities are recognised for taxable temporary differences arising on investments in subsidiaries, except where the Group is able to control the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future.

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

Deferred tax is calculated at the tax rates that are expected to apply in the period/ year when the liability is settled or the asset is realised. Deferred tax is charged or credited to the profit or loss, except when it relates to items charged or credited directly to equity, in which case the deferred tax is also dealt with in equity.

– 66 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

Leasing

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

The Group as lessor

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

The Group as lessee

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

Retirement benefit costs

Payments to defined contribution retirement benefit schemes, state-managed retirement benefit schemes and mandatory provident fund are charged to profit or loss as an expense when employees have rendered service entitling them to the contributions.

Provision

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

6. CRITICAL ACCOUNTING JUDGEMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY

In the application of the Group’s accounting policies, which are described in Note 5, the directors of the Company are required to make judgements, estimates and assumptions about the carrying amounts of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates.

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

The following is the critical judgment, apart from those involving estimations (see below), that the directors of the Company have made in the process of applying the entity’s accounting policies and that have the most significant effect on the amounts recognised in the consolidated financial statements.

Going concern basis

Although the Group has net loss of approximately RMB4,519,000 for the period ended 31 August 2009, the Group manages it liquidity risk by monitoring it current and expected liquidity requirements regularly and ensuring sufficient liquid cash to meet the Group’s liquidity requirements in the short and long term. The directors of the Company consider that the Group has no significant liquidity risk.

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

– 67 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

Depreciation of property and equipment

The carrying values of the Group’s property and equipment as at 31 December 2006, 2007 and 2008 and 31 August 2009 was approximately RMB156,752,000, RMB133,227,000, RMB7,256,000 and RMB18,061,000 respectively. The Group depreciates the property and equipment on a straight line basis at 2% to 20%, after taking into account their estimated residual values, commencing from the date the property and equipment available for use. The estimated useful life represents the number of years which the Group places the property and equipment into production, reflecting the directors’ estimate of the periods/ years that the Group intends to derive future economic benefits from the use of the Group’s property and equipment. The Group assesses annually the residual value and the useful life of the property and equipment and if the expectation differs from the original estimate, such a difference may impact the depreciation in the year and the estimate will be changed in the future period.

Impairment loss recognised in respect of property and equipment

The impairment loss for property and equipment are recognised for the amounts by which the carrying amounts exceeds its recoverable amount, in accordance with the Group’s accounting policy. The recoverable amount is the higher of an asset’s fair value less cost to sell and value in use. The Group has assessed and reviewed annually for impairment loss whenever events or changes in circumstances indicate that the carrying amount of the net asset exceed its recoverable amount. No impairment loss was provided for period/years.

Impairment loss recognised in respect of trade receivables and other receivables

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

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

Estimated net realisable value on properties held for sale

The Group’s properties under development and properties held for sale are stated at the lower of cost and net realisable value. Based on the Group’s historical experience and the nature of the subject properties, the Group make estimates of the selling prices, the costs of completion of properties under development, and costs to be incurred in selling the properties based on prevailing market conditions.

If there is an increase costs to completion or a decrease in net realisable value will decrease and this may result in a provision for properties held for sale. Such provision requires the use of judgments and estimates. Where the expectation is different from the original estimate, the carrying value and provision for properties in the period in which such estimate is changed will be adjusted accordingly.

Estimate of fair value of investment properties

Investment properties are stated at fair value based on the valuation performed by an independent professional valuer. In determining the fair value, the valuer has based on a method of valuation which involves certain estimates of market condition. In relying on the valuation report, the directors of the Company have exercised their judgment and are satisfied that the assumptions used in the valuation are reflective of the current market conditions. Changes to these assumptions would result in changes in the fair values of the Group’s investment properties and the corresponding adjustments to the amount of gain or loss reported in the consolidated statement of comprehensive income.

– 68 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

Provision for potential liabilities

During the current and prior years, the Group had been involved in certain litigation and claims in respect of dispute on construction contract and default payments for sales of properties (Note 42). The directors of the Company determine the provision for potential liabilities based on their best estimated according to their understanding of legal advice. Where the final outcome is different from the estimation made by the directors of the Company, such difference will impact the provision for potential liabilities in the year in which such determination is recognised.

7. CAPITAL RISK MANAGEMENT

The Group manages its capital to ensure that entities in the Group will be able to continue as a going concern while recognise the return to shareholders through the recognise of the debt and equity balance.

The capital structure of the Group consists of debt, which includes bank borrowings (Note 35), bank balance and cash and equity attributable to owners of the Company, comprising issued share capital and reserves.

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

8. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES

The Group’s major financial instruments include trade receivables, amount due from a former customer, amount due from parent company, amounts due from related companies, other receivables, bank balances and cash, trade payable, other payables and accruals, bank loans and amount due to a former shareholder. Details of these financial instruments are disclosed in respective notes. The risks associated with these financial instruments and the policies on how to mitigate these risks are set out below. The management manages and monitors these exposures to ensure appropriate measures are implemented on a timely and effective manner.

Currency risk

Currency risk refers to the risk associated with movements in foreign currency rates which affect Group’s financial results and its cashflow. The management considers the Group are not exposed to significant foreign currency risk as the majority of its operations and transactions are in the PRC with their functional currency of RMB.

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

Interest rate risk

The Group’s interest rate risk relates primarily to variable-rate borrowings. (See note 35 for details of these borrowings.) It is the Group’s policy to keep its borrowings at floating rate of interests so as to minimise the fair interest rate risk.

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

The sensitivity analyses below have been determined based on the exposure to interest rates for derivatives and non-derivative financial liabilities. The analysis is prepared assuming the financial liabilities outstanding at the end of reporting date were outstanding for the relevant periods. As at 31 December 2006, 2007, 2008 and 31 August 2009, a 100, 100, 200, 200 basis point respectively, increase or decrease in interest rates of the Peoples’ Bank of China is used when reporting interest rate risk internally to key management personnel and represents management’s assessment of the reasonably possible change in interest rates.

The management adjusted the sensitivity rate from 100 basis points to 200 basis points for assessing interest rate risk after considering the impact of the volatile financial market conditions after the third quarter of 2009.

– 69 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

As at 31 December 2006, 2007, 2008 and 31 August 2009, if interest rates had been 100,100,200 and 200 basis points higher or lower and all other variables were held constant, the Group’s after-tax loss for year ended 31 December 2006, 2007, 2008 and the eight months ended 31 August 2009 would increase or decrease by approximately RMB855,000, RMB502,000, RMB280,000 and RMB280,000 respectively. This is mainly attributable to the Group’s exposure to interest rates on its variable-rate bank borrowings.

Credit risk

The Group’s maximum exposure to credit risk in the event of the counterparties failure to perform their obligations as at 31 December 2006, 2007, 2008 and 31 August 2009 in relation to each class of recognised financial assets is the carrying amount of the respective recognised financial assets as stated in the consolidated statement of financial position.

The credit risk on liquid funds is limited because the counterparties are banks with high credit ratings.

Other than concentration of credit risk on liquid funds which are deposited with several banks with high credit ratings, the Groups does not have any other significant concentration of credit risk. The Group concentrate credit risk by geographical locations is mainly in the PRC, trade receivables consist of a large number of customers spreading across of the PRC.

In order to minimise the credit risk, the management of the Group has delegated a team responsible for determination of credit limits, credit approvals and other monitoring procedures to ensure that follow-up action is taken to recover overdue debts. In addition, the Group reviews regularly the recoverable amount of each individual trade receivable at the end of each reporting period to ensure that adequate impairment losses are made for irrecoverable amounts. In this regard, the directors of the Company consider that the Group’s credit risk is significantly reduced.

Liquidity risk

As the Group suffered a loss before taxation on approximately RMB6,697,000 for the eight months ended 31 August 2009, the management has carefully considered the present policy applied by the Group on liquidity.

Regarding the present policy in the management of the liquidity risk, the Group monitors and maintains a level of cash and cash equivalents deemed adequate by the management to finance the Group’s operations and mitigate the effects of fluctuations in cash flows. The management monitors the utilisation of bank borrowings and ensures compliance with loan covenants. As disclosed in note 2, the management believes the Group will perform financial duties in the future.

The following table details the Group’s remaining contractual maturity for its financial liabilities. For non-derivative financial liabilities, the table has been drawn up based on the undiscounted cash flows of financial liabilities based on the earliest date on which the Group can be required to pay. The table includes both interest and principal cash flows.

Liquidity risk tables

Weighted average interest rate At 31 August 2009 Non-derivative financial liabilities Trade payable – Other payables and accruals – Bank loans-repayable within one year 6.37% Amount due to a former shareholder –	Within 1 year or demand Undiscounted cash flows within 1 year RMB’000 RMB’000 5,836 5,836 36,665 36,665 14,892 14,892 44,328 44,328 101,721 101,721	Carrying amounts at 31 August 2009 RMB’000 5,836 36,665 14,000 44,328
		100,829

– 70 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

Weighted average interest rate At 31 December 2008 Non-derivative financial liabilities Trade payables Other payables and accruals Bank loans-repayable within one year 6.90% Weighted average interest rate At 31 December 2007 Non-derivative financial liabilities Trade payables Other payables and accruals Bank loans-repayable within one year 8.10% Weighted average interest rate At 31 December 2006 Non-derivative financial liabilities Trade payables Other payables and accruals Bank loans- repayable within one year 7.05%	Within 1 year or demand Undiscounted cash flows within 1 year RMB’000 RMB’000 5,875 5,875 33,333 33,333 14,996 14,996 54,204 54,204 Within 1 year or demand Undiscounted cash flows within 1 year RMB’000 RMB’000 43,080 43,080 411,821 411,821 67,022 67,022 521,923 521,923 Within 1 year or demand Undiscounted cash flows within 1 year RMB’000 RMB’000 58,249 58,249 540,283 540,283 194,129 194,129 792,661 792,661	Carrying amounts at 31 December 2008 RMB’000 5,875 33,333 14,000
		53,208

		Carrying amounts at 31 December 2007 RMB’000 43,080 411,821 62,000
		516,901

		Carrying amounts at 31 December 2006 RMB’000 58,249 540,283 181,344
		779,876

Fair value

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

the fair value of financial assets and financial liabilities (including derivate instruments) with standard terms and conditions and traded in active liquid markets are determined with reference to quoted market bid prices and ask prices respectively.
the fair value of other financial assets and financial liabilities (excluding derivate instruments) is determined in accordance with generally accepted pricing models based on discounted cash flow analysis using prices or rates from observable current market transactions and dealer quotes for similar instruments.

– 71 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

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

The directors of the Company also consider that the carrying amounts of the long-term portion of liability approximate to their fair value as the impact of discounting is not significant.

Categories of financial instruments

At 31 August 2009 RMB’000 – 1,201 – 73,255 4,898 79,354	At 31 December 2008 2007 RMB’000 RMB’000 – – – – – 54,268 80,692 31,914 6,803 4,478 87,495 90,660	At 31 December 2008 2007 RMB’000 RMB’000 – – – – – 54,268 80,692 31,914 6,803 4,478 87,495 90,660	2006 RMB’000 1,192 – 55,296 185,615 9,444
			251,547

5,836 36,665 14,000 44,328	5,875 33,333 14,000 –	43,080 411,821 62,000 –	58,249 540,283 181,344 –
100,829	53,208	516,901	779,876

9. TURNOVER

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

Eight months ended 2009 2008 RMB’000 RMB’000 (unaudited) 651 – 2,000 2,000 – – 2,651 2,000	Eight months ended 2009 2008 RMB’000 RMB’000 (unaudited) 651 – 2,000 2,000 – – 2,651 2,000	Year ended 31 December 2008 2007 2006 RMB’000 RMB’000 RMB’000 36,617 3,905 9,521 3,000 3,211 6,370 – – 574 39,617 7,116 16,465	Year ended 31 December 2008 2007 2006 RMB’000 RMB’000 RMB’000 36,617 3,905 9,521 3,000 3,211 6,370 – – 574 39,617 7,116 16,465	Year ended 31 December 2008 2007 2006 RMB’000 RMB’000 RMB’000 36,617 3,905 9,521 3,000 3,211 6,370 – – 574 39,617 7,116 16,465
				16,465

–	–	–	2,832	1,602
2,651	2,000	39,617	9,948	18,067

– 72 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

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

10. SEGMENT INFORMATION

Business segments

For management purposes, the Group is currently operating into two operating divisions: property development and education projects during the period/ year. These divisions are the basis on which the Group reports its primary segment information.

Principal activities are as follows:

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

The Group was also involved in the cemetery development, which development and lease of tomb sets and niches for cremation urns during the year ended 31 December 2007. This operation was discontinued on 29 December 2007 (see note 16).

– 73 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

(a) For the eight months ended 31 August 2009

Continuing	operations
Education projects RMB’000 2,000 1,901 298,083 30,436 – 561 – –	Other RMB’000 – –	Total RMB’000 2,651

		2,552
		12 (7,657 (604 (1,000
		(6,697 2,178
	– – – – – –	(4,519

		516,497 95,431
		611,928

		52,258 79,084
		131,342

		– 140 905 37 – 187 88 445

– 74 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

(b) For the year ended 31 December 2008

Continuing	operations
Education projects RMB’000 3,000 2,552 304,695 32,709 1,521 1,825 852 –	Other RMB’000 – –	Total RMB’000 39,617

		(8,992
		33 (9,502 (17,876 (216,438 204,123 (483 (200
		(49,335 (73
	– – – – – –	(49,408

		518,932 133,871
		652,803

		55,743 111,955
		167,698

		1,521 – 1,939 122 852 – 2,987 1,047

– 75 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

(c) For the year ended 31 December 2007

Continuing operations Property development, sale, rental and management Education projects Other RMB’000 RMB’000 RMB’000 3,905 3,211 – (5,113) (8,169) – 482,546 433,398 193 173,865 111,785 2,590 49 5,878 – 386 6,949 – – – – 94 –	Continuing operations Property development, sale, rental and management Education projects Other RMB’000 RMB’000 RMB’000 3,905 3,211 – (5,113) (8,169) – 482,546 433,398 193 173,865 111,785 2,590 49 5,878 – 386 6,949 – – – – 94 –	Continuing operations Property development, sale, rental and management Education projects Other RMB’000 RMB’000 RMB’000 3,905 3,211 – (5,113) (8,169) – 482,546 433,398 193 173,865 111,785 2,590 49 5,878 – 386 6,949 – – – – 94 –	Discontinued operations	Discontinued operations	Discontinued operations
Property development, sale, rental and management RMB’000 3,905 (5,113) 482,546 173,865 49 386 –	Education projects RMB’000 3,211 (8,169) 433,398 111,785 5,878 6,949 – 94		Sub-total RMB’000 7,116 (13,282)	Cemetery development RMB’000 2,832 (26,354)	Total RMB’000 9,948

					(39,636
			21 (7,556) (23,577) – – (6,496) (50,890) 492	– – (4,111) – 145,978 – 115,513 (1,095)	21 (7,556 (27,688 – 145,978 (6,496
					64,623 (603
		193 2,590 – – – –	(50,398)	114,418	64,020

			916,137 148,165 54,268	– – –	916,137 148,165 54,268
			1,118,570	–	1,118,570

			288,240 293,580	– –	288,240 293,580
			581,820 5,927 – 7,335 126 – – 94	– 1,910 846 –	581,820

					7,837 8,181 126 – – 94

– 76 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

(d) For the year ended 31 December 2006

Continuing operations Property development, sale, rental and management Education projects Other RMB’000 RMB’000 RMB’000 9,521 6,370 574 (17,178) (9,264) (172) 649,992 448,278 193 178,594 165,485 2,990 1 16,089 – 321 7,061 11 14,736 (1,773) – 968 – 9,096 –	Continuing operations Property development, sale, rental and management Education projects Other RMB’000 RMB’000 RMB’000 9,521 6,370 574 (17,178) (9,264) (172) 649,992 448,278 193 178,594 165,485 2,990 1 16,089 – 321 7,061 11 14,736 (1,773) – 968 – 9,096 –	Continuing operations Property development, sale, rental and management Education projects Other RMB’000 RMB’000 RMB’000 9,521 6,370 574 (17,178) (9,264) (172) 649,992 448,278 193 178,594 165,485 2,990 1 16,089 – 321 7,061 11 14,736 (1,773) – 968 – 9,096 –	Discontinued operations	Discontinued operations	Discontinued operations
Property development, sale, rental and management RMB’000 9,521 (17,178) 649,992 178,594 1 321 14,736 968 9,096	Education projects RMB’000 6,370 (9,264) 448,278 165,485 16,089 7,061 (1,773) –		Sub-total RMB’000 16,465 (26,614)	Cemetery development RMB’000 1,602 (14,298)	Total RMB’000 18,067

					(40,912
			2,971 12,120 (34,149) – 12,938 17,086 (15,648) (13,518)	11 – (2,421) – – 12,000 (4,708) (4,585)	2,982 12,120 (36,570 – 12,938 29,086
					(20,356 (18,103
		193 2,990 – 11 – –	(29,166)	(9,293)	(38,459

			1,098,463 126,563 55,296	218,012 3,547 –	1,316,475 130,110 55,296
			1,280,322	221,559	1,501,881

			347,069 517,840	104,365 20,304	451,434 538,144
			864,909 16,090 – 7,393 1,355 12,963 433 968 – 9,096 63	124,669 184 837 (187)	989,578

					16,274 8,230 1,355 12,776 433 968 – 9,096 63

– 77 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

For the year ended 31 December 2006, 2007, 2008 and for the eight months ended 31 August 2008 and 2009, all of the Group’s businesses were taken place in the PRC. All of the Group’s turnover and operating results were originated in the PRC. In addition, all of the Group’s assets were located in the PRC, accordingly no geographical segment information is presented.

11. FINANCE COSTS

Interest expenses on bank loans wholly repayable within one year Attributable to : Continuing operations Discontinued operations	For the eight months ended 31 August 2009 2008 RMB’000 RMB’000 (unaudited) 604 17,164 604 17,164 – – 604 17,164	For the year ended 31 December 2008 2007 2006 RMB’000 RMB’000 RMB’000 17,876 27,688 36,570 17,876 23,577 34,149 – 4,111 2,421 17,876 27,688 36,570	For the year ended 31 December 2008 2007 2006 RMB’000 RMB’000 RMB’000 17,876 27,688 36,570 17,876 23,577 34,149 – 4,111 2,421 17,876 27,688 36,570

			34,149 2,421
			36,570

– 78 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

			2006	RMB’000				405	6,351	1,198	7,954	1,100	–	256	9,585		2,564		–	(29,086)		3,179		968		9,159	–
Total	For the year ended	31 December	2008 2007	RMB’000 RMB’000				195 203	3,492 6,164	672 1,318	4,359 7,685	1,000 1,100	800 –	– –	2,061 8,307		– 2,564		216,438 –	483 6,496		– –		– –		4,034 94	200 –
	For the eight months	ended 31 August	2009 2008	RMB’000 RMB’000	(Unautited)			484 130	1,267 3,528	308 448	2,059 4,106	786 525	– 500	– –	942 1,122		– –		– 216,438	1,000 (1,000)		– –		– –		533 3,166	– 200
			2006	RMB’000				–	1,258	15	1,273	–	–	–	837		–		–	(12,000)		–		–		–	–
Discontinued operations operations	For the eight months For the year ended	ended 31 August 31 December	2009 2008 2008 2007	RMB’000 RMB’000 RMB’000 RMB’000	(Unautited)			– – – –	– – – 1,956	– – – 184	– – – 2,140	– – – –	– – – –	– – – –	– – – 846		– – – –		– – – –	– – – –		– – – –		– – – –		– – – –	– – – –
			2006	RMB’000				405	5,093	1,183	6,681	1,100	–	–	8,748		2,564		–	(17,086)		3,179		968		9,159	–
Continuous operations	For the eight months For the year ended	ended 31 August 31 December	2009 2008 2008 2007	RMB’000 RMB’000 RMB’000 RMB’000	(Unaudited)			484 130 195 203	959 2,950 3,492 4,208	308 448 672 1,134	1,751 3,528 4,359 5,545	786 525 1,000 1,100	– 500 800 –	– – – 256	942 1,122 2,061 7,461		– – – 2,564		– 216,438 216,438 –	1,000 (1,000) 483 6,496		– – – –		– – – –		533 3,166 4,034 94	– 200 200 –
						Loss before taxation is arrived at after charging	(crediting):	Directors’ and supervisors’ emoluments_(note 13)_	Staff salaries, allowances and bonuses	Contributions to retirement and other benefits schemes		Auditor’s remuneration	Under provision on auditor’s remuneration	Inventory cost recognised as expenses	Depreciation of property and equipment	Amortisation for prepaid lease payment for	land use right	Impairment loss recognised in respect of	properties held for sales	Change in fair value of investment properties	Impairment loss recognised in respect of	property and equipment	Impairment loss recognised in respect of	trade receivable	Impairment loss recognised in respect of	other receivable	Impairment loss recognised in respect of an associate

– 79 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

13. DIRECTORS’, SUPERVISORS’ AND EMPLOYEES’ EMOLUMENTS

(a) Directors’ and supervisors’ emoluments

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

Fees : Executive directors Non-executive directors Independent non-executive directors Supervisors Other emoluments: Salary allowances and benefits in kind Contributions to retirement benefits schemes	For the year ended 31 August 2009 2008 RMB’000 RMB’000 (Unaudited) 140 40 40 60 180 20 20 10 380 130 104 – – – 104 – 484 130	For the year ended 31 December 2008 2007 2006 RMB’000 RMB’000 RMB’000 60 45 150 90 – 150 30 135 60 15 23 45 195 203 405 – – – – – – – – – 195 203 405	For the year ended 31 December 2008 2007 2006 RMB’000 RMB’000 RMB’000 60 45 150 90 – 150 30 135 60 15 23 45 195 203 405 – – – – – – – – – 195 203 405
			405
			– –
			–
			405

– 80 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

The emoluments paid or payable to each of the directors and supervisors were disclosed as below:

For the eight months ended 31 August 2009

Name Fees RMB’000 Executive directors: An Mu Zong 20 Wang Zai Xing 20 Zhou Jia He 80 Wang Hui 20 140 Non-executive directors: Deng Yan Bin 20 Lin Dong Hu 20 Wang Hui – 40 Independent non-executive directors: Cai Lian Jun 20 Wang Qi Da 80 Chen Ming Shen 80 180 Supervisors: Wang Xing Ye 10 Lu Ming 10 20 Total 380	Other emoluments	Other emoluments	Total emoluments Appointment/ resignation date RMB’000 20 20 80 Appointed on 12 February 2009 20 Appointed on 23 June 2009 140 20 124 – Resigned on 12 February 2009 144 20 80 Appointed on 12 February 2009 80 Appointed on 12 February 2009 180 10 10 Appointed on 12 February 2009 20 484
	Salary allowances and benefits in kind RMB’000 – – – – – – 104 – 104 – – – – – – –	Contributions to retirement benefits schemes RMB’000 – – – – – – – – – – – – – – – –	Total emoluments RMB’000 20 20 80 20
			140
			20 124 –
40			144
20 80 80			20 80 80
180			180
10 10			10 10
20			20
380	104	–

– 81 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

For the year ended 31 August 2008 (unaudited)

Fees RMB’000 20 20 40 20 20 20 60 20 10	Other emoluments	Other emoluments	Other emoluments
	Salary allowances and benefits in kind Contributions to retirement benefits schemes Total emoluments RMB’000 RMB’000 RMB’000 – – 20 – – 20 – – 40 – – 20 – – 20 – – 20 – – 60 – – 20 – – 10
40			40
20 20 20			20 20 20
60			60
20			20
10			10
130	–	–	130

For the year ended 31 December 2008

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

– 82 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

For the year ended 31 December 2007

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

– 83 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

For the year ended 31 December 2006

Other emoluments

		Other emoluments	Other emoluments	Other emoluments	Other emoluments

Name Executive Directors: Xu Er Hui Wang Se An Mu Zong Liu Chang Lin Wang Zai Xing Non-executive directors: Dr. Michel P. Detay Deng Yan Bin Lin Dong Hu Wang Hui Shi Jian Hing Independent non-executive directors: Choy Shu Kwan Cui Yan Cai Lian Jun Supervisors: Yang Zhi An Wang Xing Ye Wan Lina Total	Fees RMB’000 30 30 30 30 30	Salary allowances and benefits in kind Contributions to retirement benefits schemes Total emoluments RMB’000 RMB’000 RMB’000 – – 30 – – 30 – – 30 – – 30 – – 30 – – 150 – – 30 – – 30 – – 30 – – 30 – – 30 – – 150 – – 30 – – – – – 30 – – 60 – – 15 – – 15 – – 15 – – 45
	150				150
	30 30 30 30 30				30 30 30 30 30
	150				150
	30 – 30				30 – 30
	60				60
	15 15 15				15 15 15
	45				45
	405		–	–	405

None of the directors of the Company waived or agreed to waive any emoluments paid by the Group and no incentive payment for joining the Group or compensation for loss of office was paid or payable to any director of the company for the three years ended 31 December 2006, 2007, 2008 and the eight months ended 31 August 2008 and 2009.

– 84 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

(b) Five highest employee

None of the five highest employee for the year ended 31 December 2006,2007 and 2008, and for the eight months ended 31 August 2008 and 2009 were directors of the Company, whose emoluments are included in the disclosures in above. The emoluments of the remaining, five (2006), five (2007) and, five (2008) individual for the three years ended 31 December 2006, 2007 and 2008, and for the eight months ended 31 August (five) 2008 and (five) 2009 were as follows:

Salaries, allowance and other benefits Retirement benefit scheme contributions	For the eight months ended 31 August 2009 2008 RMB’000 RMB’000 (unaudited) 481 510 – – 481 510	For the year ended 31 December 2008 2007 2006 RMB’000 RMB’000 RMB’000 679 1,082 940 – – – 679 1,082 940	For the year ended 31 December 2008 2007 2006 RMB’000 RMB’000 RMB’000 679 1,082 940 – – – 679 1,082 940
			940

No emolument have been paid by the Company to the five highest paid individuals as inducement to join the Company, or as compensation for loss of office during the year ended 31 December 2006, 31 December 2007, 31 December 2008, and the period ended 31 August 2008 and 31 August 2009.

The emoluments of the above five highest paid for the year ended 31 December 2006, 31 December 2007, 31 December 2008, and for the eight months ended 31 August 2008 and 31 August 2009 respectively, highest paid employees fall within the Nil to RMB1,000,000 bands.

14. RETIREMENT BENEFITS SCHEME

The employees of the Group are members of state-managed retirement benefits schemes operated by the PRC government. The Group is required to contribute at a certain percentage on the total compensation paid to the Group’s employees for the year to fund the retirement benefits. The rate of contributions for the three years ended 31 December 2006, 2007, 2008 and the eight months ended 31 August 2008 and 2009 is 25.5%. The only obligation of the Group with respect to the retirement benefits schemes is to make such specified contributions.

15. INCOME TAX CREDIT (EXPENSES)

For the eight months ended 31 August 2009 2008 RMB’000 RMB’000 (unaudited) – – 2,178 (1,943) 2,178 (1,943)	For the eight months ended 31 August 2009 2008 RMB’000 RMB’000 (unaudited) – – 2,178 (1,943) 2,178 (1,943)	For the year ended 31 December 2008 2007 2006 RMB’000 RMB’000 RMB’000 – 1,095 4,585 (73) (492) 13,518 (73) 603 18,103	For the year ended 31 December 2008 2007 2006 RMB’000 RMB’000 RMB’000 – 1,095 4,585 (73) (492) 13,518 (73) 603 18,103	For the year ended 31 December 2008 2007 2006 RMB’000 RMB’000 RMB’000 – 1,095 4,585 (73) (492) 13,518 (73) 603 18,103
				18,103

2,178 –	(1,943) –	(73) –	(492) 1,095	13,518 4,585
2,178	(1,943)	(73)	603	18,103

– 85 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

No provision for Hong Kong profits tax has been made as the Group’s income neither arises in, nor is derived from Hong Kong for each of the three years ended 31 December 2006, 2007, 2008 and the eight months ended 31 August 2008 and 2009.

The taxation rates applicable to the Group in the PRC are 15%–25% for the year ended 31 December 2008 and for the eight months period ended 31 August 2009 and 2008 and 15%–33% for the year ended 31 December 2007 and 2006.

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

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

For the eight months ended 31 August 2009 2008 RMB’000 RMB’000 (Unaudited) (6,697) (233,229) – –	For the eight months ended 31 August 2009 2008 RMB’000 RMB’000 (Unaudited) (6,697) (233,229) – –	For the year ended 31 December 2008 2007 2006 RMB’000 RMB’000 RMB’000 (49,335) (50,890) (15,648) – 115,513 (4,708)	For the year ended 31 December 2008 2007 2006 RMB’000 RMB’000 RMB’000 (49,335) (50,890) (15,648) – 115,513 (4,708)	For the year ended 31 December 2008 2007 2006 RMB’000 RMB’000 RMB’000 (49,335) (50,890) (15,648) – 115,513 (4,708)
(6,697) 316 1,862 –	(233,229) (59,372) 57,429 –	(49,335) (13,914) 5,682 8,159	64,623 23,391 76,961 (99,749)	(20,356)
				1,997 15,171 (6,593) 7,528
2,178	(1,943)	(73)	603	18,103

16. DISCONTINUED OPERATIONS

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

– 86 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

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

For the eight months ended 31 August 2009 2008 RMB’000 RMB’000 (Unaudited) – – – – – –	For the eight months ended 31 August 2009 2008 RMB’000 RMB’000 (Unaudited) – – – – – –	For the year ended 31 December 2008 2007 2006 RMB’000 RMB’000 RMB’000 – (31,560) (9,293) – 145,978 – – 114,418 (9,293)	For the year ended 31 December 2008 2007 2006 RMB’000 RMB’000 RMB’000 – (31,560) (9,293) – 145,978 – – 114,418 (9,293)	For the year ended 31 December 2008 2007 2006 RMB’000 RMB’000 RMB’000 – (31,560) (9,293) – 145,978 – – 114,418 (9,293)
				(9,293)

– –	– –	– –	114,918 –	(9,293) –
–	–	–	114,418	(9,293)

The cemetery development business has been included into the consolidated statement of comprehensive income for the years ended 31 December 2006 and 2007 as follow:

Notes Turnover Interest income Staff costs Depreciation and amortisation Loss on disposal of property and equipment Net change in fair value of investment properties Other operating expenses Finance costs Loss before taxation Income tax expenses Loss for the year	For the eight months ended 31 August 2009 2008 RMB’000 RMB’000 (Unaudited) – – – – – – – – – – – – – – – –	For the eight months ended 31 August 2009 2008 RMB’000 RMB’000 (Unaudited) – – – – – – – – – – – – – – – –	For the year ended 31 December 2008 2007 2006 RMB’000 RMB’000 RMB’000 – 2,832 1,602 – – 11 – (2,140) (1,273) – (846) (837) – – (187) – – 12,000 – (26,200) (13,603) – (4,111) (2,421)	For the year ended 31 December 2008 2007 2006 RMB’000 RMB’000 RMB’000 – 2,832 1,602 – – 11 – (2,140) (1,273) – (846) (837) – – (187) – – 12,000 – (26,200) (13,603) – (4,111) (2,421)	For the year ended 31 December 2008 2007 2006 RMB’000 RMB’000 RMB’000 – 2,832 1,602 – – 11 – (2,140) (1,273) – (846) (837) – – (187) – – 12,000 – (26,200) (13,603) – (4,111) (2,421)
	– –	– –	– –	(30,465) (1,095)	(4,708) (4,585)
	–	–	–	(31,560)	(9,293)

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

17. DIVIDENDS

No dividend was paid or proposed during the years ended 31 December 2006, 2007, 2008 and for the eight months ended 31 August 2009.

– 87 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

18. (LOSS) EARNINGS PER SHARE

For continuing and discontinued operations

The calculation of the basic (loss) earnings per share attributable to the owner of the Company is based on the following data:

Numbers of shares

	At 31 August		At 31 December
	2009	2008	2007	2006
Number of shares:
Weighted average number of
ordinary shares for the purpose
of basic loss per share	1,020,400,000	1,020,400,000	1,020,400,000	1,020,400,000

No diluted loss per share have been presented as there was no dilutive potential ordinary share for the year ended 31 December 2006, 31 December 2007, 31 December 2008 and for the eight months ended 31 August 2009.

Earnings (loss)

	At 31 August		At 31 December
	2009	2008	2007	2006
	RMB’000	RMB’000	RMB’000	RMB’000
(Loss) earnings for the purposes of
basic (loss) earnings per share
((loss) earnings for the period/
year attributable to owner of
the Company)	(4,519)	(49,408)	64,020	(38,459)

From continuing operations

The calculation of the basis (loss) earnings per share from continuing operations attributable to the ordinary owners of he Company is based on the following data:

(Loss) earnings for the purposes of basis (loss) earnings per share ((loss) earnings for the period/ year attributable to owner of the Company) Less: Profit (loss) for the period/year of discontinued operations	At 31 August 2009 RMB’000 (4,519) – (4,519)	At 31 December 2008 2007 RMB’000 RMB’000 (49,408) 64,020 – (114,418) (49,408) (50,398)	2006 RMB’000 (38,459) 9,293
			(29,166)

The weighted average number of ordinary shares for the year ended 31 December 2006, 31 December 2007, and 31 December 2008 and for the eight months ended 31 August 2009 has stated as above.

– 88 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

From discontinued operation

The computation of basic (loss) earnings per share for the discontinued operation is based on the profit of approximately RMB 114,418,000 and a loss of RMB 9,293,000for the year ended 31 December 2007 and 31 December 2006 respectively and on the weighted average number ordinary shares stated as above.

19. PROPERTY AND EQUIPMENT

Buildings Leasehold improvement RMB’000 RMB’000 265,690 5,962 36 – – – – (5,962)	Buildings Leasehold improvement RMB’000 RMB’000 265,690 5,962 36 – – – – (5,962)	Furniture, fixtures and office equipment RMB’000 22,148 – 196 (1,765)	Motor vehicles Construction in progress RMB’000 RMB’000 5,374 996 – (36) 136 9,213 (932) –	Motor vehicles Construction in progress RMB’000 RMB’000 5,374 996 – (36) 136 9,213 (932) –	Total RMB’000 300,170 – 9,545 (8,659)
265,726 – 2,336 1,760 (14,460) 255,362 – – (701) (254,661) – 11,794 – – 11,794 8,191 7,106 – 15,297 7,404 (3,101)	– – – – – – – – – – – – – – – 4,570 1,192 (5,762) – – –	20,579 – 114 125 (825) 19,993 – 38 – (3,526) 16,505 – 140 – 16,645 9,836 652 (1,544) 8,944 616 (460)	4,578 – – – (1,297) 3,281 – – (872) (1,127) 1,282 – – (1,078) 204 2,281 635 (461) 2,455 287 (462)	10,173 (10,389) (2,450) 5,845 – 3,179 (1,483) 1,483 – – 3,179 – – – 3,179 – – – – – –	301,056 (10,389) – 7,730 (16,582)
					281,815 (1,483) 1,521 (1,573) (259,314)
					20,966 11,794 140 (1,078)
					31,822
					24,878 9,585 (7,767)
					26,696 8,307 (4,023)

– 89 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

Buildings Leasehold improvement RMB’000 RMB’000 19,600 – – – – – (19,600) –	Buildings Leasehold improvement RMB’000 RMB’000 19,600 – – – – – (19,600) –	Furniture, fixtures and office equipment RMB’000 9,100 1,959 – (1,390)	Motor vehicles Construction in progress RMB’000 RMB’000 2,280 – 102 – (722) – (798) –	Motor vehicles Construction in progress RMB’000 RMB’000 2,280 – 102 – (722) – (798) –	Total RMB’000 30,980 2,061 (722) (21,788)
– 274 – 274 114,429 – 114,429 (114,429)	– – – – – – – –	9,669 603 – 10,272 – – – –	862 65 (891) 36 – – – –	– – – – – 3,179 3,179 –	10,531 942 (891)
					10,582
					114,429 3,179
					117,608 (114,429)
– 11,520 – 121,333 136,000	– – – – –	– 6,373 6,836 10,893 11,635	– 168 420 1,001 2,123	3,179 – – – 6,994	3,179

					18,061

					7,256

					133,227

					156,752

– 90 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

The above property and equipment are depreciated over their estimated useful lives on a straight-line basis, after taking into account their estimated residual values, at the following rates:

Buildings	2 – 10%
Leasehold improvement	20%
Furniture, fixtures and office equipment	8 – 16%
Motor vehicles	8 – 16%

All buildings are situated in the PRC and are situated on land under medium term land use rights.

As at 31 December 2007, the Group failed to obtain the Real Estate Title Certificates of he building, and the carrying value was approximately, RMB136,000,000 and 121,333,000 as at 31 December 2006 and 2007 respectively. In the opinion of the directors of the company, the value of the buildings will be impaired for being lack of the Real Estate Title Certificates.

20. INVESTMENT PROPERTIES

FAIR VALUE At 1 January 2006 Additions Change in fair value Disposal At 31 December 2006 and 1 January 2007 Additions Transferred from construction in progress Change in fair value Disposal of subsidiaries At 31 December 2007 and 1 January 2008 Transferred from construction in progress Change in fair value At 31 December 2008 and 1 January 2009 Change in fair value At 31 August 2009	RMB’000 493,241 6,729 29,086 (46,056
	483,000 107 10,389 (6,496 (190,000
	297,000 1,483 (483
	298,000 (1,000
	297,000

– 91 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

(a) The carrying value of investment properties classified by their nature were as follows:

At 31 August 2009 RMB’000 Campus 297,000 Cemetery – 297,000	At 31 December 2008 2007 RMB’000 RMB’000 298,000 297,000 – – 298,000 297,000	2006 RMB’000 293,000 190,000
		483,000

(b) All the investment properties represent land and buildings located in the PRC under medium terms.
(c) All of the Group’s property interests held under operating lease to earn rentals or for capital appreciation purposes are measured using the fair value model and are classified and accounted for as investment properties.
(d) The fair value of the Group’s investment properties at 31 December 2006, 31 December 2007 and 31 December 2008 and 31 August 2009 have been arrived at on the basis of a valuation carried out on that date by Dudley Surveyors Limited and Malcolm & Associated Appraisal Limited respectively, both are independent qualified professional valuers not connected with the Group. Both valuers have appropriate qualifications and recent experiences in the valuation of similar properties in the relevant locations. The valuation was arrived at by reference to market evidence of transaction prices for similar properties in the same locations and conditions.

21. PREPAID LEASE PAYMENTS ON LAND USE RIGHTS

At 31 August 2009 RMB’000 Prepaid lease payments on land use rights of leasehold land in the PRC held under medium terms – Analysed for reporting purposes as: Non-current assets – Current assets – –	At 31 December 2008 2007 RMB’000 RMB’000 – 89,316	At 31 December 2008 2007 RMB’000 RMB’000 – 89,316	2006 RMB’000 91,880

– –	– –	86,752 2,564	89,316 2,564
–	–	89,316	91,880

The above amount was the prepaid lease payment for a piece of land located in Shenyang PRC used for education project purpose. The prepaid lease payments on land use right had been disposed during the year ended 31 December 2007. Details please refer to note 38(c) of the notes to the consolidated financial statements.

– 92 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

22. GOODWILL

Cost At 1 January 2006, 31 December 2006 and 1 January 2007 Disposal of subsidiaries At 31 December 2007, 1 January 2008, 31 December 2008, 1 January 2009 and 31 August 2009 Impairment At 1 January 2006, 31 December 2006 and 1 January 2007 Eliminated on disposal of subsidiaries At 31 December 2007, 1 January 2008, 31 December 2008, 1 January 2009 and 31 August 2009 Carrying amounts At 31 August 2009 At 31 December 2008 At 31 December 2007 At 31 December 2006	RMB’000 609,372 (549,996
	59,376
	609,372 (549,996
	59,376
	–

	–

	–

	–

During the year ended 2005, the Group recognised impairment losses of approximately RMB609,372,000 in relation to the goodwill arising from the acquisition of Shenzhen Jinmei and Shanghai Beida Jade Bird Education Investment Company Limited (“Shanghai Beida”).

Shenzhen Jinmei

In view of the operating landscape of cemetery business, the directors of the Company is seriously assessing the future viability of Shenzhen Jinmei and considers that the carrying amount of the goodwill arising from acquisition of Shenzhen Jinmei was fully impaired for the year ended 31 December 2005. On 29 December 2007, the Group disposed Shenzhen Jinmei. Details are set out in notes 38(e).

Shanghai Beida

Shanghai Beida ceased the business during the year ended 31 December 2005. The directors of the Company considered that the carrying amount of goodwill arising from acquisition of Shanghai Beida was fully impaired for the year ended 31 December 2005.

23. AVAILABLE-FOR-SALE FINANCIAL ASSETS

					31 August		At 31 December
					2009	2008	2007	2006
					RMB’000	RMB’000	RMB’000	RMB’000
Unlisted	equity	securities,	at	cost	20,000	20,000	20,000	20,000

– 93 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

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

24. INVESTMENT IN AN ASSOCIATE

At 31 August 2009 RMB’000 Cost of investment in an unlisted associate 200 Less: disposal (200) – Accumulated impairment loss 200 Less: elimination due to disposal (200) Carrying values – Share of post-acquisition profit – –	At 31 December 2008 2007 RMB’000 RMB’000 200 – – –	At 31 December 2008 2007 RMB’000 RMB’000 200 – – –	2006 RMB’000 – –
– 200 (200) – –	200 200 – – –	– – – – –	–
			–
			–
			–
			–
–	–	–	–

As at 31 December 2008, the Group had interests in the following associate:

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

The summarised financial information in respect of the Company’s associate is set out below:

	At 31 December 2008
	RMB’000
Total assets	2,240
Total liabilities	(4,177)
Net assets	(1,937)
Group’s share of net liabilities of associate	–

Turnover	3,904
Loss for the year	(895)
Group’s share of result of associate for the year	–

– 94 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

During the eight months ended 31 August 2009, the Company and Shenyang Real Estate entered the equity interest transfer agreement with an independent third party to dispose of 40% equity interest in Shenyang Property held by the Company and Shenyang Real Estate in a total consideration of RMB400,000.

25. OTHER LONG TERM RECEIVABLES

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

26. PROPERTIES HELD FOR SALE

At 31 August 2009 RMB’000 Properties under development At cost 410,379 Less: Accumulated impairment loss (216,438) Net realisable value 193,941 Completed properties At cost – Less: Accumulated impairment loss – Net realisable value – 193,941	At 31 December 2008 2007 RMB’000 RMB’000 410,379 407,148 (216,438) –	At 31 December 2008 2007 RMB’000 RMB’000 410,379 407,148 (216,438) –	2006 RMB’000 405,014 –
193,941 – – –	193,941 11,794 – 11,794	407,148 143,727 (65,888) 77,839	405,014
			163,448 (72,747)
			90,701
193,941	205,735	484,987	495,715

(a) The Group’s properties held for sale were all located in PRC and under medium-term leases.
(b) As at 31 August 2009, included in properties under development was development cost of a property development project in Beijing of RMB193,941,000 (2008: RMB193,941,000, 2007: RMB407,148,000, 2006: RMB405,014,000). The development right for the land was acquired from the Municipal Government of Zhaoyang District of Beijing in previous years.

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

(c) Included in the completed properties was a project of ‘Jinmao Tower’ located in Shenyang, the PRC with book value of RMB36,302,000 and RMB23,257,000 as at 31 December 2006 and 31 December 2007 respectively. The properties have been started to pre-sales in 2003. Due to the delay in the construction, the properties were unable to hand over to the customers on schedule. Consequently, some of the customers demanded for refund of deposit paid.

During the year 2006 and 2007, some customers have occupied the units they purchased. But since the Group has not completed the procedures of obtaining Real Estates Title certificate for purchase as at 31 December 2006 and 31 December 2007, the sales amount of RMB14,721,000 and RMB14,325,000 received respectively was not recognised as income but stated as receipts in advance under current liabilities.

– 95 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

On 30 October 2008, the project of ‘Jinmao Tower’ located in Shenyan, the PRC with the book value of approximately RMB23,257,000 was disposal along with the disposal of the entity interest in Shenyang Pollon Finance Building Management Company Limited. Details are set out in notes 38(a).

(d) Included in completed properties was a project of ‘Water- Flowers City’ located in Shenyang, the PRC with the book value of approximately RMB54,399,000, RMB54,582,000 and RMB11,794,000, as at 31 December 2006, 31 December 2007 and 31 December 2008 respectively. The properties have been started to pre-sales in 2003. Up to 31 December 2005, all the units were subscribed. Due to the delay in the construction, the properties were unable to hand-over to customers on schedule. Consequently, some of the customers demanded for refund of deposits paid.

During the year 2006, 2007 and 2008, some customers have occupied the units they purchased. But since the Group has not completed the procedures of obtaining Real Estates Title Certificate for purchases as of at the respective end of the reporting period, the sales amount received of approximately RMB30,579,000, RMB29,622,000 and RMB12,759,000 for the year ended 31 December 2006, 31 December 2007 and 31 December 2008 respectively was not recognised as income but stated as receipts as advance under current liabilities.

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

27. TRADE RECEIVABLES

At 31 August 2009 RMB’000 Trade receivables 12,518 Less: Impairment loss recognised (12,518) Trade receivables, net –	At 31 December 2008 2007 RMB’000 RMB’000 12,518 12,518 (12,518) (12,518) – –	2006 RMB’000 13,780 (12,588)
		1,192

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

(a) The following is an aged analysis of trade receivables, net of impairment loss recognised at the end of reporting period:

At 31 August 2009 RMB’000 61 – 365 days – 1 – 2 years – –	At 31 December 2008 2007 RMB’000 RMB’000 – – – – – –	2006 RMB’000 1,171 21
		1,192

– 96 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

(b) Movement in provision for impairment losses of trade receivables is as follows:

At 31 August 2009 RMB’000 Balance at beginning of the period/year 12,518 Eliminated on disposal of subsidiaries – Recognised during the year – Balance at end of the period/year 12,518	At 31 December 2008 2007 RMB’000 RMB’000 12,518 12,588 – (70) – – 12,518 12,518	2006 RMB’000 11,620 – 968
		12,588

The impairment recognised in respect of trade receivables is individually impaired. Impairment is made for debtors who are either been placed under liquidation or in severe financial difficulties.

(c) As at the respective reporting period, the analysis of trade receivables that were past due but not impaired are as follows:

At 31 August 2009 RMB’000 61 – 365 days – 1 – 2 years – –	At 31 December 2008 2007 RMB’000 RMB’000 – – – – – –	2006 RMB’000 1,171 21
		1,192

Trade receivables that were neither past due nor impaired related to a wide range of customers for whom there was no recent history of default.

Trade receivables that were past due but not impaired relate to a number of independent customers that have a good track record with the Group. Based on past experience, management believes that no impairment allowance is necessary in respect of these balances as there has not been a significant change in credit quality and the balances are still considered fully recoverable. The Group does not hold any collateral over these balances.

28. AMOUNT DUE FROM A FORMER CUSTOMER

At 31 August 2009 RMB’000 Shenyang Water General Corporation (“SWGC”) 96,656 Less: impairment loss recognised (96,656) –	At 31 December 2008 2007 RMB’000 RMB’000 96,656 96,656 (96,656) (96,656) – –	2006 RMB’000 96,656 (96,656)
		–

– 97 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

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

29. AMOUNTS DUE FROM PARENT COMPANY/RELATED COMPANIES

The amounts due from parent company represent the amount due from Shenyang Public Utility Group Company Limited (“SPUG”) which is the ultimate holding company of the Company for the year ended 31 December 2006, 2007 and 2008. The amounts are unsecured, interest free and payable on demand.

The amounts due from related companies are unsecured, interest free and payable on demand.

30. OTHER RECEIVABLES

At 31 August 2009 RMB’000 Other receivables 87,075 Less: Impairment loss recognised (13,820) Other receivables, net 73,255	At 31 December 2008 2007 RMB’000 RMB’000 93,979 41,167 (13,287) (9,253) 80,692 31,914	2006 RMB’000 194,774 (9,159)
		185,615

Movement in provision for impairment losses of other receivables is as follows:

At 31 August 2009 RMB’000 Balance at beginning of the period/year 13,287 Recognised during the period/year 533 Balance at end of the period/year 13,820	At 31 December 2008 2007 RMB’000 RMB’000 9,253 9,159 4,034 94 13,287 9,253	2006 RMB’000 – 9,159
		9,159

31. BANK BALANCES AND CASH

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

The bank balances carry interest at average market rates ranged from 0.36% to 0.81% for the year ended 31 December 2006, 2007, 2008 and 31 August 2009.

– 98 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

32. TRADE PAYABLES

An age analysis of trade payables at the end of reporting period is set out as follows:

			31 August		At 31 December
			2009	2008	2007	2006
			RMB’000	RMB’000	RMB’000	RMB’000
Over	2	years	5,836	5,875	43,080	58,249

The Group has financial risk management policies in place to ensure that all payable within the credit timeframe.

33. RECEIPTS IN ADVANCE

At 31 August 2009 RMB’000 Sales of properties (Note26(c) and 26(d)) 12,108 Deposit for leasing of tombs sets and niches – Others 1,600 13,708	At 31 December 2008 2007 RMB’000 RMB’000 12,759 43,947 – – – 142 12,759 44,089	2006 RMB’000 45,300 17,515 2,541
		65,356

34. PROVISION FOR POTENTIAL LIABILITIES

At 31 August 2009 RMB’000 Default payments for sales of properties 1,041 Loss arising from litigation (Note) – 1,041	At 31 December 2008 2007 RMB’000 RMB’000 1,041 2,043 – – 1,041 2,043	2006 RMB’000 2,448 16,054
		18,502

Note: The amount was payable by Shenzhen Jingmei which was involved in a dispute on construction contract before it was acquired by the Group. In 2002, the Court judged that Shenzhen Jingmei and another party shall make a compensation amounted to approximately RMB16,054,000 jointly. Shenzhen Jingmei and the party had appealed to higher court in respect of the judgement, and the former had made a full provision for the dispute. The litigation loss was released as Shenxhen Jingmei’s equity were transferred during the year ended 31 December 2007.

– 99 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

35. BANK LOANS

At 31 August 2009 RMB’000 Borrowings due within one year: Secured 14,000 Unsecured – 14,000 Details of above-mentioned secured loans are as follows: At 31 August 2009 RMB’000 Shenyang Public Utility Holdings Company Limited – Beijing Beida Jade Bird Company Limited (“Beida Jade Bird”) – Zhuhai Beida Education Science Park Company Limited (“Zhuhai Beida”) 14,000 14,000	At 31 December 2008 2007 RMB’000 RMB’000 14,000 62,000 – – 14,000 62,000 At 31 December 2008 2007 RMB’000 RMB’000 – 42,000 – 20,000 14,000 – 14,000 62,000	2006 RMB’000 83,067 98,277
		181,344

		2006 RMB’000 48,540 34,527 –
		83,067

The weighted average effective interest rates on the Group’s variable rate bank loans were 7.05%, 8.10% and 6.90%, for three year ended at 31 December 2006, 2007, 2008 respectively and 6.37% for the eight months ended at 31 August 2009.

36. SHARE CAPITAL

Authorised: At 31 August 2009 and at 31 December 2008, 2007, 2006 Domestic shares of RMB1 each H shares of RMB1 each Issued and fully paid: At 31 August 2009 and at 31 December 2008, 2007, 2006 Domestic shares of RMB1 each H shares of RMB1 each	Number of shares 600,000,000 420,400,000 1,020,400,000	Amount RMB’000 600,000 420,400
		1,020,400

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

– 100 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

37. DEFERRED TAXATION

The following are the major deferred tax liabilities recognised and the movements thereon during the years/period:

As at 1 January 2006 Charge to consolidated statement of comprehensive income As at 31 December 2006 and 1 January 2007 Credit to consolidated statement of comprehensive income As at 31 December 2007 and 1 January 2008 Charge to consolidated statement of comprehensive income As at 31 December 2008 and 1 January 2009 Credit to consolidated statement of comprehensive income As at 31 August 2009	RMB’000 (45,629) (16,960)
	(62,589) 44,970
	(17,619) (73)
	(17,692) 1,928
	(15,764)

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

– 101 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

38. DISPOSAL AND DEREGISTRATION OF SUBSIDIARIES

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

The net assets of the Shenyang Pollon on the disposal date were as follows:

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

	200

	1,842

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

The net assets of the Shenyang Property on the disposal date were as follows:

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

	600

	(1,691)

– 102 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

(c) The Group disposed its all equity and debts interests in Shenyang Development Beida Education Science Park Company Limited (“Shenyang Education”), Shenyang Jade Bird School Foreign Language School (“Jade Bird School”) and Shenyang Beida Jade Bird Business Information System Co. Ltd. (“Shenyang Business Information”) at a total consideration of approimately RMB8,380,000 on 25 September 2008.

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

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

	8,380

	8,359

– 103 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

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

The net assets of the Shenzhen Grand Secne on the disposal date were as follows:

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

(e) The Group disposed its all equity interests to Shenzhen Jinmei and Xili Cemetery at a total consideration of RMB110,000,000 on 29 December 2007.

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

Net value of disposed assets: Property and equipment Investment properties Other receivables Bank balances and cash Trade payables Other payables and accrual Receipts in advance Tax payable Deferred income Bank overdrafts Deferred tax liabilities Non-controlling interests Gain on disposal Total consideration Payment manner: Bank and cash Net amount of cash inflows arising from disposal Disposed bank overdrafts and sales proceed received	Shenzhen Jinmei and Xili Cemetery RMB’000 12,559 190,000 4,308 6,490 (3,237) (46,512) (1,742) (956) (112,530) (790) (43,995)
	3,595 (39,573) 145,978
	110,000

	110,000

	6,490

– 104 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

39. OPERATION LEASE COMMITTMENTS

As a lessor

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

				the eight months
				ended 31 August	For the year ended 31		December
				2009	2008	2007	2006
				RMB’000	RMB’000	RMB’000	RMB’000
Schoolhouse	and	equipment	(Note)	2,000	3,000	3,000	4,000

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

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

As at the end of reporting period, the Group had contracted with tenants for the following minimum lease payments (excluding the rents for leasing schoolhouse and equipments):

At 31 August 2009 RMB’000 Within one year 1,000 Two to five years – 1,000	At 31 December 2008 2007 RMB’000 RMB’000 3,000 3,000 – – 3,000 3,000	2006 RMB’000 3,000 3,000
		6,000

– 105 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

40. POST BALANCE SHEET EVENT

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

The financial information of Beijing Diye are as follows:

(i) Statement of Comprehensive Income

Interest income Other income Staff costs Depreciation Impairment loss recognised in respect of properties held for sale Impairment loss recognised in respect of trade and other receivables Other operating expenses (Loss) profit before taxation Income tax credit (expenses) (Loss) profit for the period/year and total comprehensive (loss) income for the period/year, net of tax	For the eight months ended 31 August 2009 2008 RMB’000 RMB’000 (Unaudited) 12 7 – 10,132 (746) (2,826) (70) (72) – – – (525) (243) (667)	For the eight months ended 31 August 2009 2008 RMB’000 RMB’000 (Unaudited) 12 7 – 10,132 (746) (2,826) (70) (72) – – – (525) (243) (667)	For the year ended 31 December 2008 2007 2006 RMB’000 RMB’000 RMB’000 20 17 5 10,132 – – (3,255) (1,549) (952) (108) (108) (108) (216,438) – – (525) – (19,963) (909) (509) (1,030)	For the year ended 31 December 2008 2007 2006 RMB’000 RMB’000 RMB’000 20 17 5 10,132 – – (3,255) (1,549) (952) (108) (108) (108) (216,438) – – (525) – (19,963) (909) (509) (1,030)	For the year ended 31 December 2008 2007 2006 RMB’000 RMB’000 RMB’000 20 17 5 10,132 – – (3,255) (1,549) (952) (108) (108) (108) (216,438) – – (525) – (19,963) (909) (509) (1,030)
	(1,047) –	6,049 –	(211,083) –	(2,149) –	(22,048) –
	(1,047)	6,049	(211,083)	(2,149)	(22,048)

– 106 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

(ii) Statement of Financial Position

At 31 August 2009 RMB’000 NON-CURRENT ASSET Property and equipment 357 CURRENT ASSETS Property held for sale 193,941 Other receivables 230 Amount due from a fellow subsidiary 17,865 Bank balances and cash 4,669 216,705 CURRENT LIABILITIES Trade payables 20 Other payables and accruals 940 Amount due to fellow subsidiaries 44,059 Amount due to a immediate holding company 434,274 479,293 NET CURRENT LIABILITIES (262,588) TOTAL ASSETS LESS CURRENT LIABILITIES (262,231) CAPITAL AND RESERVE Share capital 30,000 Reserve (292,231) (262,231)	At 31 December 2008 2007 RMB’000 RMB’000 427 535	At 31 December 2008 2007 RMB’000 RMB’000 427 535	2006 RMB’000 643
193,941 230 17,865 4,669 216,705 20 940 44,059 434,274 479,293 (262,588)	193,941 – 17,865 6,532 218,338 20 880 44,059 434,990 479,949 (261,611)	407,148 523 – 29 407,700 20 51,103 13,784 393,429 458,336 (50,636)	405,014 244 – 1,667
			406,925
			20 39,234 10,000 406,266
			455,520
			(48,595
(262,231)	(261,184)	(50,101)	(47,952

30,000 (292,231)	30,000 (291,184)	30,000 (80,101)	30,000 (77,952
(262,231)	(261,184)	(50,101)	(47,952

– 107 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

(iii) Statement of Changes in Equity

Equity attributable to shareholders of the Company Share capital Accumulated losses Total equity RMB’000 RMB’000 RMB’000 30,000 (55,904) (25,904 – (22,048) (22,048	Equity attributable to shareholders of the Company Share capital Accumulated losses Total equity RMB’000 RMB’000 RMB’000 30,000 (55,904) (25,904 – (22,048) (22,048	Equity attributable to shareholders of the Company Share capital Accumulated losses Total equity RMB’000 RMB’000 RMB’000 30,000 (55,904) (25,904 – (22,048) (22,048
30,000 – 30,000 – 30,000 –	(77,952) (2,149) (80,101) (211,083) (291,184) (1,047)	(47,952 (2,149
		(50,101 (211,083
		(261,184 (1,047
30,000	(292,231)	(262,231

30,000 –	(80,101) 6,049	(50,101 6,049
30,000	(74,052)	(44,052

– 108 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

(iv) Statement of Cash Flow

For the eight months ended 31 August 2009 2008 RMB’000 RMB’000 (Unaudited) (1,047) 6,049	For the eight months ended 31 August 2009 2008 RMB’000 RMB’000 (Unaudited) (1,047) 6,049	For the year ended 31 December 2008 2007 2006 RMB’000 RMB’000 RMB’000 (211,083) (2,149) (22,048)	For the year ended 31 December 2008 2007 2006 RMB’000 RMB’000 RMB’000 (211,083) (2,149) (22,048)	For the year ended 31 December 2008 2007 2006 RMB’000 RMB’000 RMB’000 (211,083) (2,149) (22,048)
(12) 70 – – (989) – (230) – – 60 – (716) – (1,875)	(7) 72 525 – 6,639 (3,232) (262) – – (50,223) 18,735 35,496 – 7,153	(20) 108 525 216,438 5,968 (3,231) (2) (17,865) – (50,223) 30,275 41,561 – 6,483	(17) 108 – – (2,058) (2,134) (279) – – 11,869 3,784 (12,837) – (1,655)	(5) 108 – –
				(21,945) (269,242) 45,528 – (10) 33,130 – 212,613
				–
				74

– 109 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

For the eight months ended 31 August 2009 2008 RMB’000 RMB’000 12 7	For the eight months ended 31 August 2009 2008 RMB’000 RMB’000 12 7	For the year ended 31 December 2008 2007 2006 RMB’000 RMB’000 RMB’000 20 17 5	For the year ended 31 December 2008 2007 2006 RMB’000 RMB’000 RMB’000 20 17 5	For the year ended 31 December 2008 2007 2006 RMB’000 RMB’000 RMB’000 20 17 5
12 (1,863) 6,532	7 7,160 29	20 6,503 29	17 (1,638) 1,667	5
				79 1,588
4,669	7,189	6,532	29	1,667

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

41. CONTINGENT LIABILITIES

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

– 110 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

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

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

42. LITIGATIONS AND SEQUESTRATION OF ASSETS

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

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

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

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

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

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

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

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

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

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

– 111 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

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

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

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

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

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

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

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

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

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

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

– 112 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

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

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

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

(ii)

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

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

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

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

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

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

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

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

– 113 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

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

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

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

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

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

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

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

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

The Company was liable to repay RMB32,160,000 before 30th November 2007 and to repay RMB24,300,000 before 25 December 2007; (3) Beida Jade Bird and SPUG continue to jointly guaranteed the debt of RMB56,460,000 payable by the Company to Hua Jin, and in the event that Hua Jin was unable to recover the sum, each of the Beida Jade Bird and SPU would pay one-third of the outstanding amount; (4) Mingyude guaranteed the debt of RMB32,160,000 payable by the Company, and pledged the time deposit certificate of RMB32,000,000 as a guarantee; Shenyang Pollon guaranteed the debt of 24,300,000 payable by the Company; (5) If the Company did not implemented the repayment on time and Mingyude and Shenyang Pollon did not fulfilled the guarantee responsibility on the agreed term, the Company shall be liable to repay the plaintiff Hua Jin based on the aggregate debt of RMB56,462,000; (6) after above-mentioned guarantors fulfilled the guarantee responsibility, they are entitled to recover the debt from the Company at the amount they made repayment on behalf of the Company; (7) each of Hua Jin and the Company was liable to pay for the legal fee of RMB162,000 and a custody fee of RMB5,000.

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

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

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

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

According to the Agreement signed by the Company and Shenyang Pollon, Shenyang Pollon and the Company agreed unanimously to settle the debts by eliminating debts by properties in respect of the situation that Shenyang Pollon repaid the debt of 24,300,000 to Hua Jin Hua Gong for the Company by settlement of debts by properties, and Shenyang Pollon guaranteed not to recover the above amounts through law or other ways compulsorily.

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

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

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

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FINANCIAL INFORMATION OF THE GROUP

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

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

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

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

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

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FINANCIAL INFORMATION OF THE GROUP

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

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

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

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

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

43. CHANGE OF SHAREHOLDER

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

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

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

Trading in the H Shares was suspended with effect on 23 December 2004 and has remained suspended pending the release of announcement relating to the outstanding financial statements of the Company and the submission of a viable resumption proposal to demonstrate, among other things, that the Company (i) complies with Rule 13.24 of the Listing Rules; (ii) has in place adequate financial reporting

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FINANCIAL INFORMATION OF THE GROUP

system and internal control procedures; and (iii) has sufficient working capital for the operation to seek its approval for the resumption of trading in the H Shares. Further announcement will be made in this regard in compliance with the Listing Rules. Trading in the shares of the Company will remain suspended until further notice.

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

44. CONNECTED TRANSACTIONS

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

The identified connected parties of the Group are as follows:

Name of the Company	Relationships with the Company
Beijing Mingde Guangye Investment	The parent company of the Company
Consultant Company Limited
SPUG	The former parent company of the Company
Beida Hi-Tech	A shareholder of SPU
Weifang Beida Jade Bird Huaguang Technology	The holding company of Beida Hi-Tech
Company Limited(“Jade Bird Huaguang”)
Beida Jade Bird	A shareholder of Jade Bird Huaguang
Beijing Tianqiao Beida Jade Bird Technology	A shareholder of Jade Bird Huaguang
Company Limited(“Beijing Tianqiao”)
Beijing Beida Education Investment Company	A subsidiary of Beida Jade Bird
Limited (“Beida Education Investment”)
Zhuhai School	A branch of Beida Education Investment
珠海科教	A subsidiary of Beida Education Investment
北京特利投資管理有限公司(“北京特利”)	A subsidiary of Beida Jade Bird
深圳青鳥光電有限公司(“深圳青鳥光電”)	A subsidiary of Beida Jade Bird
Huajin Company	Other state-owned enterprise
Beijing Peking University Resource Group Co.,	Other state-owned enterprise
Ltd. (“Peking University Resource”)

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

(a) During the year ended 31 December 2006, 31 December 2007, 31 December 2008 and eight months ended 31 August 2009, the Group received rental income of RMB4,000,000 (RMB3,000,000, RMB3,000,000, RMB2,000,000 respectively) from Zhuhai School for leasing of campus with related equipment. The lease period was from January 2003 to December 2013. Rents have been determined until December 2009 and the subsequent rents would be otherwise negotiated by the parties.

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FINANCIAL INFORMATION OF THE GROUP

(b) As at respective end of reporting period, the balances of connected parties are as follows:

At 31 August Name of connected party 2009 RMB’000 Amount due to former shareholder: SPUG 44,328 Amount due from parent company: SPUG – Other receivables: 深圳桑夏 – 北京特利 – Other payables and accrual: Beida Jade Bird – 北京特利 – Huajin Company – Beijing Tianqiao – Zhuhai School 1,047 (c) Non-current liabilities At 31 August Name of connected party 2009 RMB’000 Beida Jade Bird –	At 31 December 2008 2007 RMB’000 RMB’000 – – – 54,268 – 2,125 – 22,880 – 126,924 – 23,729 – 78,155 – 5,400 3,999 20,328 At 31 December 2008 2007 RMB’000 RMB’000 82,998 –	2006 RMB’000 – 55,296 2,125 24,030 66,088 109,130 72,455 5,400 23,577

		2006 RMB’000 –

45. PRINCIPAL SUBSIDIARIES

Particulars of the principal subsidiaries, as at 31 August 2009 are as follows:

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

(a) The above list only includes the information about principal subsidiaries which are considered by the directors of the Company to be able to affect results or assets of the Group. In the opinion of the directors, to present the information about all the subsidiaries would be too redundant.

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FINANCIAL INFORMATION OF THE GROUP

(b) All subsidiaries of the Group are companies with limited liabilities incorporated in PRC and are operated in PRC.
(c) None of the subsidiaries owned any debt securities that were intermittently effective as at balance sheet date or any time during the year.

46. STATEMENT OF FINANCIAL POSITION OF THE COMPANY

At 31 August 2009 RMB’000 NON CURRENT ASSETS Property and equipment 58 Investment in subsidiaries 95,300 Investment in a associate – Available-for-sale financial assets 20,000 Other long term receivable – 115,358 CURRENT ASSETS Amounts due from related parties 79 Amount due from parent company – Amounts due from subsidiaries 403,424 Other receivables 73,148 Prepayments 2,000 Other current assets – Bank balances and cash 204 478,855 CURRENT LIABILITIES Investment cost payable – Receipts in advance 2,000 Other payables and accrual 32,268 Amounts due to subsidiaries 93,477 Amount due to former parent company 44,328 Bank -loans repayables within one year – 172,073 NET CURRENT ASSETS 306,782 TOTAL ASSETS LESS CURRENT LIABILITIES 422,140 CAPITAL AND RESERVES Share capital 1,020,400 Reserves (598,260) TOTAL EQUITY 422,140 NON CURRENT LIABILITY Other non-current liabilities – 422,140	At 31 December 2008 2007 RMB’000 RMB’000 283 531 95,151 598,622 – – 20,000 20,000 32,744 –	At 31 December 2008 2007 RMB’000 RMB’000 283 531 95,151 598,622 – – 20,000 20,000 32,744 –	2006 RMB’000 653 626,646 – 20,000 –
115,358 79 – 403,424 73,148 2,000 – 204 478,855 – 2,000 32,268 93,477 44,328 – 172,073 306,782	148,178 – – 405,152 80,474 – – 171 485,797 – – 29,238 93,486 – – 122,724 363,073	619,153 – 58,224 745,505 44,660 – 1,000 3,264 852,653 – – 142,760 272,324 – – 415,084 437,569	647,299
			– 59,264 833,635 69,351 – 1,000 2,226
			965,476
			39,512 – 177,796 275,697 – 49,975
			542,980
			422,496
422,140	511,251	1,056,722	1,069,795

1,020,400 (598,260) 422,140 –	1,020,400 (592,147) 428,253 82,998	1,020,400 36,322 1,056,722 –	1,020,400 49,395
			1,069,795
			–
422,140	511,251	1,056,722	1,069,795

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APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

INDEBTEDNESS STATEMENT

Borrowings and securities

As at the close of business 31 October 2009, being the latest practicable date for the purpose of this indebtedness statement prior to the printing of this Circular, the Resulting Group had aggregate outstanding indebtedness of approximately RMB60,091,000. The indebtedness comprised (i) amount due to former shareholders of the Group after disposal of 80% equity interests of Beijing Diye of approximately RMB44,328,000 which were interest-free, unsecured and repayable one to two years, (ii) other payable approximately RMB8,101,000 which were interest-free, unsecured and repayable on demand and (iii) other payable approximately RMB7,662,000 which were interest-free, unsecured and repayable within one year.

As at the close of business on 31 October 2009, the Resulting Group had banking facilities from a bank for the amount limited to RMB30,000,000.

At 6 November 2009, short-term bank loan totaling RMB9,000,000 was drawn from the bank. The bank loan was secured by a corporate guarantee from a company, bearing interests charged on floating rate and should be repaid within one year.

Provision for potential liabilities

As at the close of business on 31 October 2009, the Resulting Group had provision of potential liabilities in respect of default payments for sales of properties of approximately RMB1,041,000.

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

Save as aforesaid and apart from intra-group liabilities, normal trade and other payables, receipt in advance and other non-current liabilities as at 31 October 2009, the Resulting Group did not have any loan capital issued or agreed to be issued, bank overdrafts, loans, debt securities issued and outstanding, and authorized or otherwise created but unissued term loans or other borrowings, indebtedness in nature of borrowings, liabilities under acceptances (other than trade bills) or acceptance credits, debentures, mortgages, charges, finance lease or hire purchase commitments, which are either guaranteed, unguaranteed, secured, or unsecured, guarantees or other material contingent liabilities outstanding at the close of business on 31 October 2009.

WORKING CAPITAL

The Directors, are of the opinion that, taking into account its internal resources and the existing available credit facilities of the Resulting Group, the Resulting Group will have sufficient working capital for its present requirements up to 31 December 2010.

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FINANCIAL INFORMATION OF THE GROUP

MATERIAL CHANGES

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

(i) the entering into of JBMOE Acquisition Agreement;
(ii) the entering into of the Disposal Agreement;
(iii) the change of controlling shareholder as a result of the transfer of 600,000,000 domestics shares to Beijing Mingde Guangye under an auction ordered by the Intermediate People’s Court of Beijing, the PRC, on 13 February 2009, details of which was included in the announcement of the Company dated 24 March 2009;
(iv) the information as disclosed in the 2009 interim report of the Company for the six months ended 30 June 2009, including (a) the decrease of profit for the six month ended 30 June 2009 as compared with that of the corresponding period for the six month ended 30 June 2008, which the profit of the Group for the six month ended 30 June 2008 was mainly attributable by the one-off gain on disposal of subsidiaries of approximately HK$157.9 million; (b) the decrease of other receivables and long-term liabilities as compared to 31 December 2008; and (c) the continuing adoption of going concern basis by the Company;
(v) the mandatory unconditional cash offer made by Kingston Securities Limited on behalf of Amazing Wealth Development Limited for all the H Shares not already owned or agreed to be acquired by Beijing Mingde Guangye or parties acting in concert with it in accordance with the Code on the Takeovers and Merges; and
(vi) the updated information for the progress of resumption of trading in the H Shares as disclosed in the paragraph headed “Resumption proposal” in the Letter from the Board of the composite document dated 19 October 2009 jointly issued by the Company and Amazing Wealth Development Limited.

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APPENDIX II

FINANCIAL INFORMATION OF JBMOE

The following is the text of a report, prepared for the purpose of inclusion in this circular, received from the independent reporting accountants, Lo and Kwong C.P.A. Company Limited, Certified Public Accountants, Hong Kong. As described in the section headed “Documents available for inspection” in Appendix II, a copy of the following accountants’ report is available for inspection.

==> picture [154 x 37] intentionally omitted <==

Lo and Kwong C.P.A. Company Limited Certified Public Accountants Suite 216-218, 2/F, Shui On Centre, 6-8 Harbour Road, Wanchai, Hong Kong. Tel: (852) 3188 6200 Fax: (852) 2824 4091

28 December 2009

To the Board of Directors

Shenyang Public Utility Holdings Company Limited Jinmao International Apartment 14/F, Da Dong District Shenyang The People’s Republic of China

Dear Sirs,

We set out below our report on the financial information of 深圳青鳥光電有限公司 Shenzhen Jade Bird Optoelectronic Co., Ltd (the “Target”) including the statement of financial position as at 31 December 2006, 2007, 2008 and at 31 August in 2009, the statement of comprehensive income, the statement of cash flow and the statement of changes in equity for the three years ended 31 December 2006, 2007, 2008 and the eight months ended 31 August 2009 (the “Relevant Periods”), and the notes thereto (the “Financial Information”) prepared for inclusion in the circular (the “Circular”) issued by Shenyang Public Utility Holdings Company (“the Company”) dated 28 December 2009 in connection with proposed acquision of 100% equity interest in the Target by the Company (the “Proposed Acquisition”).

The Target was established in the People’s Republic of China (the “PRC”) on 9 November 1992 with limited liability. It is principally engaged manufacture, development and sales computer productions and AI system and property investment in the PRC.

The financial year end date of the Target is 31 December.

The statutory financial statements of the Target were prepared in accordance with the relevant accounting principles and financial regulations applicable to enterprises established in the PRC(“PRC GAAP”).

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APPENDIX II

FINANCIAL INFORMATION OF JBMOE

The statutory financial statement of the Target for the year ended 31 December 2006 had been audited by 廣東羊城會計師事務所有限公司, registered in the PRC whereby the statutory financial statement of the Target for the year ended 31 December 2007 had been audited by 中磊會計師事務所有限公司, registered in the PRC. There is no statutory financial statement have been made up since 31 December 2007.

For the purpose of this report, the directors of the Target have prepared the financial statements of the Target in accordance with the Hong Kong Financial Reporting Standards (“HKFRSs”) issued by the Hong Kong Institute of Certified Public Accountants (“HKICPA”) for the Relevant Periods (the “Underlying Financial Statements”).

We have undertaken an independent audit of the Underlying Financial Statements in accordance with the Hong Kong Standards on Auditing issued by the HKICPA.

The Financial Information of the Target for the Relevant Periods set out in this report has been prepared from the Underlying Financial Statements for the purpose of preparing our report for inclusion in the Circular. No adjustment was considered necessary to the Underlying Financial Statements in preparing our report for inclusion in the Circular.

We have examined the Underlying Financial Statements for the Relevant Periods in accordance with the Auditing Guideline 3.340 “Prospectuses and the Reporting Accountant” as recommended by the HKICPA.

Respective responsibility of directors and reporting accountants

The directors of the Target are responsible for the preparation of the Underlying Financial Statements and the Financial Information of the Target which gives a true and fair view. It is fundamental that appropriate accounting policies are selected and applied consistently, that the judgments and estimates made are prudent and reasonable and that the reasons for any significant departure from applicable accounting standards are stated.

The directors of the Company are responsible of the contents of the Circular in which this report is included. It is our responsibility to compile the Financial Information set out in this report from the Underlying Financial Statements, to form an independent opinion, based on examination, on the Financial Information and to report our opinion to you.

Opinion

In our opinion, the Financial Information together with the notes thereon gives, for the purpose of this report, gives a true and fair view of the state of affairs of the Target as at 31 December 2006, 2007 and 2008 and at 31 August 2009 and of these results and cash flows of the Target for each of the Relevant Periods.

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APPENDIX II

FINANCIAL INFORMATION OF JBMOE

Emphasis of matter

Without qualifying our opinion, we draw attention to note 2 in the financial information which indicates that the Target reported net current liabilities of approximately RMB11,175,000, RMB7,368,000 and RMB2,605,000 as at 31 December 2006, 31 December 2007 and 31 December 2008 respectively. In forming our opinion, we have considered the adequacy of disclosures made in the financial information concerning he adoption of the going concern basis for the preparation of the Financial Information. As set out in note 2 to the Financial Information, after considering the positive cash flows for future operations, the directors of the Company are satisfied that the Target will have sufficient working capital to meet in full its financial obligations as and when they fall due for the next twelve months from 31 August 2009. Accordingly, the Financial Information have been prepared on a going concern basis. The Financial Information do not include any adjustments that would result from a failure of the Target to operates on going concern basis. We consider that the fundamental uncertainty has been adequately disclosed in the Financial Information and our opinion is not qualified in this respect.

Comparative financial information

The comparative income statement, statement of comprehensive income, statement of changes in equity and the statement of cash flow of the Target for the eight months ended 31 August 2008 together with the notes thereto have been extracted from the Target’s financial information for the same period (the “31 August 2008 Financial Information”), which were prepared by the directors of the Target solely for the purpose of this report. We have reviewed the 31 August 2008 Financial Information in accordance with the Hong Kong Standard on Review Engagements 2400 “Engagements to Review Financial Statements” issued by the HKICPA.

A review consists principally of making enquiries of the Target’s management and applying analytical procedures to the 31 August 2008 Financial Information and based thereon, assessing whether the accounting policies and presentation have been consistently applied unless otherwise disclosed. A review excludes audit procedures such as tests of controls and verification of assets, liabilities and transactions. It is substantially less in scope than an audit and therefore provides a lower level of assurance than an audit. Accordingly, we do not express an audit opinion on the 30 June 2008 Financial Information.

Review conclusion

On the basis of our review which does not constitute an audit, we are not aware of any material modification that should be made to the 31 August 2008 Financial Information.

– 125 –

APPENDIX II

FINANCIAL INFORMATION OF JBMOE

STATEMENT OF COMPREHENSIVE INCOME

For the eight months ended 31 August 2009 2008 RMB’000 RMB’000 (unaudited) 6,126 5,917 (1,291) (1,188)	For the eight months ended 31 August 2009 2008 RMB’000 RMB’000 (unaudited) 6,126 5,917 (1,291) (1,188)	For the year ended 31 December 2008 2007 2006 RMB’000 RMB’000 RMB’000 8,543 8,611 8,245 (1,763) (1,625) (1,612)	For the year ended 31 December 2008 2007 2006 RMB’000 RMB’000 RMB’000 8,543 8,611 8,245 (1,763) (1,625) (1,612)	For the year ended 31 December 2008 2007 2006 RMB’000 RMB’000 RMB’000 8,543 8,611 8,245 (1,763) (1,625) (1,612)
4,835 31 (2,245) – 2,621 – 2,621 –	4,729 83 (2,406) (2) 2,404 – 2,404 –	6,780 105 (3,535) – 3,350 – 3,350 –	6,986 651 (4,483) (4) 3,150 – 3,150 (801)	6,633 84 (5,402) (216)
				1,099 –
				1,099 522
2,621 2,621	2,404 2,404	3,350 3,350	2,349 2,349	1,621

				1,621

– 126 –

APPENDIX II

FINANCIAL INFORMATION OF JBMOE

STATEMENT OF FINANCIAL POSITION

At 31 August 2009 RMB’000 950 33,596 34,546	At 31 December 2008 2007 RMB’000 RMB’000 1,064 1,225 34,431 35,683 35,495 36,908	At 31 December 2008 2007 RMB’000 RMB’000 1,064 1,225 34,431 35,683 35,495 36,908	2006 RMB’000 1,431 36,935
			38,366

– 2,364 325 8,768	– 3,273 325 3,537	– 11,413 – 1,211	687 7,236 – 21,032
11,457	7,135	12,624	28,955

2,391 8,101	1,639 8,101	1,610 18,382	1,698 38,432
10,492 965 35,511	9,740 (2,605) 32,890	19,992 (7,368) 29,540	40,130

			(11,175

			27,191

10,650 24,861	10,650 22,240	10,650 18,890	10,650 16,541
35,511	32,890	29,540	27,191

– 127 –

APPENDIX II

FINANCIAL INFORMATION OF JBMOE

STATEMENT OF CHANGES IN EQUITY

Paid-up capital RMB’000 10,650 –	Retained earnings RMB’000 14,920 1,621	Total RMB’000 25,570 1,621
10,650 – 10,650 – 10,650 –	16,541 2,349 18,890 3,350 22,240 2,621	27,191 2,349
		29,540 3,350
		32,890 2,621
10,650	24,861	35,511

For the eight months ended 31 August 2008 (unaudited)

At 1 January 2008 Profit for the period and total comprehensive income At 31 August 2008	Paid-up capital RMB’000 10,650 – 10,650	Retained earnings RMB’000 18,890 2,404 21,294	Total RMB’000 29,540 2,404
			31,944

– 128 –

APPENDIX II

FINANCIAL INFORMATION OF JBMOE

CASH FLOW STATEMENTS

For the eight months ended 31 August 2009 2008 RMB’000 RMB’000 (Unaudited) 2,621 2,404 – –	For the eight months ended 31 August 2009 2008 RMB’000 RMB’000 (Unaudited) 2,621 2,404 – –	For the year ended 31 December 2008 2007 2006 RMB’000 RMB’000 RMB’000 3,350 3,150 1,099 – (801) 522	For the year ended 31 December 2008 2007 2006 RMB’000 RMB’000 RMB’000 3,350 3,150 1,099 – (801) 522	For the year ended 31 December 2008 2007 2006 RMB’000 RMB’000 RMB’000 3,350 3,150 1,099 – (801) 522
2,621 117 835 – (31) 3,542 – 909 751 – 5,202 – 5,202	2,404 132 835 – (83) 3,288 – 7,762 (206) (10,280) 564 – 564	3,350 193 1,252 – (105) 4,690 – 8,140 29 (10,280) 2,579 (325) 2,254	2,349 199 1,252 101 (185) 3,716 686 (4,278) (87) (20,050) (20,013) – (20,013)	1,621 73 1,252 49 (84)
				2,911 (686) (7,285) 1,698 23,629
				20,267 –
				20,267

– 129 –

APPENDIX II

FINANCIAL INFORMATION OF JBMOE

For the eight months ended 31 August 2009 2008 RMB’000 RMB’000 (Unaudited) (2) (33) – – – – – – 31 83	For the eight months ended 31 August 2009 2008 RMB’000 RMB’000 (Unaudited) (2) (33) – – – – – – 31 83	For the year ended 31 December 2008 2007 2006 RMB’000 RMB’000 RMB’000 (33) – (1,319) – – (1,392) – 7 145 – – 456 105 185 84	For the year ended 31 December 2008 2007 2006 RMB’000 RMB’000 RMB’000 (33) – (1,319) – – (1,392) – 7 145 – – 456 105 185 84	For the year ended 31 December 2008 2007 2006 RMB’000 RMB’000 RMB’000 (33) – (1,319) – – (1,392) – 7 145 – – 456 105 185 84
29 5,231 3,537	50 614 1,211	72 2,326 1,211	192 (19,821) 21,032	(2,026)
				18,241 2,791
8,768	1,825	3,537	1,211	21,032

– 130 –

APPENDIX II

FINANCIAL INFORMATION OF JBMOE

I. NOTES TO THE FINANCIAL INFORMATION

1. GENERAL INFORMATION

Shenzhen Jade Bird Optoelectronic Co., Ltd (“the Target”) was established in the People’s Republic of China (the “PRC”) on 9 November 1992 with limited liability. The addresses of the registered office and principle of business of the Target are No. 506, Beda Jade Bird Building, South of High-tech District, Nanshan District, Shenzhen city, China. It is principally engaged manufacture,development and sales computer productions, AI system and property investment in the PRC. The directors consider that Beijing Beida Jade Bird Limited Company, a state-owned enterprise in the PRC, is the Target’s holding company.

The Financial Information for the Relevant Periods are prepared in Renminbi (“RMB”), which is same as the functional currency of the Target.

2. ADOPTION OF GOING CONCERN BASIS

The financial information have been prepared on a going concern basis notwithstanding the Target reported net current liabilities of approximately RMB11,175,115, RMB7,367,923 and RMB2,605,822 as at 31 December 2006, 31 December 2007 and 31 December 2008 respectively. In the opinion of the directors of he Target, the Target should be able to maintain itself as going concern by taking into consideration the factors which include, but are limited to, the following:

(i) the directors of the Target anticipates that the Target will generate positive cash flows from its future operations;
(ii) the Target reported net current asset of approximately RMB964,714 as at 31 August 2009.

In the opinion of the directors of the Target, the Target will be able to meet is financial obligations as and they fall due for the foreseeable future and have sufficient working capital to meet its financial obligations as and when they fall due for the next twelve months from 31 August 2009. Accordingly, the directors of the Target are satisfied that it is appropriate to prepare the Financial Information for the year ended 31 August 2009 on a going concern basis. The Financial Information do not include any adjustments relating to the carrying amount and reclassification of assets and liabilities that might be necessary should the Target be unable to continue as a going concern.

3. APPLICATION OF NEW AND REVISED HONG KONG FINANCIAL REPORTING STANDARDS (“HKFRSs”)

For the purpose of preparing and presenting the Financial Information of the Target during the Relevant Periods, the Target has consistently applied all the new and revised HKFRSs, Hong Kong Accounting Standards (“HKASs”) and interpretation (hereinafter collectively referred to as “New HKFRSs”) issued by the Hong Kong Institute of Certified Public Accountants (“HKICPA”) which are effective for the Target’s financial year beginning on 1 January 2009 throughout the Relevant Periods.

The application the New HKFRSs had no material effect on how the results and financial position for the current or prior accounting periods have been prepared and presented. Accordingly, no prior period adjustment has been required.

As at the date of this report, the HKICPA issued the following New HKFRSs that have not been effective.

The Target has not early applied these new and revised standards or interpretations (“HK(IFRIC)-INTs”) that have been issued but are not yet effective at the date of the report. The directors of the Target anticipate the application of these New HKFRSs will have no material impact on the Target’s results and financial position.

– 131 –

APPENDIX II

FINANCIAL INFORMATION OF JBMOE

HKFRSs (Amendments) Improvement to HKFRSs May 2008[1] HKFRSs (Amendments) Improvements to HKFRSs April 2009[2] HKAS 27 (Revised) Consolidated and Separate Consolidated Financial Statements[3] HKAS 39 (Amendments) Eligible hedged items[3] HKFRS 1 (Revised) First-time Adoptions of HKFRS[3] HKFRS 2 (Amendments) Share-based Payments – Company Cash-Settled Share based Payment Transactions[6] HKFRS 3 (Revised) Business Combinations[3] HK(IFRIC)-INT 9 Reassessment of Embedded Derivatives[4] (Amendments) HK(IFRIC)-INT 17 Distributions of Non- cash Assets to Owners[3] HK(IFRIC)-INT 18 Transfer of Assets from Customers[5]

1 Amendments to HKFRS 5, effective for annual periods beginning on or after 1 July 2009 2 Effective for annual periods beginning on or after 1 July 2009 and 1 January 2010 as appropriate
3 Effective for annual periods beginning on or after 1 July 2009
4 Effective for annual periods ending on or after 30 June 2009
5 Effective for transfers of assets from customers received on or after 1 July 2009 6 Effective for annual periods beginning on or after 1 January 2010

These policies have been consistently applied to all the Relevant Periods and are materially consistent with the accounting policies adopted by the Target, unless, otherwise stated.

4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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

Revenue recognition

Revenue from sale of goods is recognised when goods are delivered and title has been passed.

Rental income is recognised on a straight line bases over the term of leases.

Reimbursement of electricity charges is recognised when the services are provided.

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

Plant and equipment

Plant and equipment are stated at cost less accumulated depreciation and any accumulated impairment loss.

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

– 132 –

APPENDIX II

FINANCIAL INFORMATION OF JBMOE

Depreciation is provided to write off the cost of items of plant and equipment over their estimated useful lives, using the straight line method, at the following rates per annum:

Furniture, fixtures and office equipment 5 years Motor vehicles 10 – 12 years

Investment properties

Investment properties are properties held to earn rentals and/or for capital appreciation. On initial recognition, investment properties are measured at cost, including any directly attributable expenditure. Subsequent to initial recognition, investment properties are stated at cost less subsequent accumulated depreciation and any accumulated impairment losses.

Depreciation is provided on investment properties over their estimated useful lives and residual value, using the straight-line method over the lease term.

Inventories

Inventories are stated at lower of cost and net realisable value. Cost is calculated using weighted average cost method.

Financial instruments

Financial assets and financial liabilities are recognised on the statement of financial position when the Target becomes a party to the contractual provisions of the instrument. Financial assets and financial liabilities are initially measured at fair value. Transaction costs that are directly attributable to the acquisition or issue of financial assets and financial liabilities are added to or deducted from the fair value of the financial assets or financial liabilities, as appropriate, on initial recognition.

Financial assets

The Target’s financial assets are mainly loans and receivable. All regular way purchases or sales of financial assets are recognised and derecognised on a trade date basis. Regular way purchases or sales are purchases or sales of financial assets that require delivery of assets within the time frame established by regulation or convention in the marketplace. The accounting policy adopted is set out below.

Effective interest method

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

Interest income is recognised on an effective interest basis for debt instruments.

Loans and receivables

Loans and receivables are non-derivative financial assets with fixed or determined payments that are not quoted in an active market. At the end of each reporting period subsequent to initial recognition, loans and receivables (including trade and other receivables and bank balances and cash) carried at amortised cost using the effective interest method, less any identified impairment losses (see accounting policy on impairment loss on financial assets below).

Impairment loss on financial assets

– 133 –

APPENDIX II

FINANCIAL INFORMATION OF JBMOE

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

significant financial difficulty of the issuer or counterparty; or
default or delinquency in interest or principal payments; or
it becoming probable that the borrower will enter bankruptcy or financial re-organisation.

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

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

Financial liabilities and equity

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

An equity instrument is any contract that evidences a residual interest in the assets of the Target after deducting all of its liabilities. The Target’s financial liabilities are mainly other financial liabilities.

Effective interest method

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

Interest expense is recognised on an effective interest basis.

Other financial liabilities

Other financial liabilities including trade and other payables and amount due to shareholder are initially measured at fair value, and are subsequently measured at amortised cost, using the effective interest method.

Equity instruments

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

– 134 –

APPENDIX II

FINANCIAL INFORMATION OF JBMOE

Derecognition

Financial assets are derecognised when the rights to receive cash flows from the assets expire or, the financial assets are transferred and the Target has transferred substantially all the risks and rewards of ownership of the financial assets. On derecognition of a financial asset, the difference between the asset’s carrying amount and the sum of the consideration received and receivable and the cumulative gain or loss that had been recognised directly in equity is recognised in profit or loss. If the Target retains substantially all the risks and rewards of ownership of a transferred asset, the Target continues to recognise the financial asset and recognise a collateralised borrowing for proceeds received.

Impairment losses on tangible assets

At the end of each reporting period, the Target reviews the carrying amounts of its tangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If the recoverable amount of an asset is estimated to be less than its carrying amount, the carrying amount of the asset is reduced to its recoverable amount. An impairment loss is recognised as an expense immediately.

Where an impairment loss subsequently reverses, the carrying amount of the asset is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset in prior years. A reversal of an impairment loss is recognised as income immediately.

Taxation

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

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

Deferred tax is recognised on differences between the carrying amounts of assets and liabilities in the financial information and the corresponding tax bases used in the computation of taxable profit, and is accounted for using the balance sheet liability method. Deferred tax liabilities are generally recognised for all taxable temporary differences and deferred tax assets are recognised to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilised. Such assets and liabilities are not recognised if the temporary difference arises from goodwill or from the initial recognition of assets and liabilities in a transaction that affects neither the taxable profit nor the accounting profit.

Deferred tax is calculated at the tax rates that are expected to apply in the period/ year when the liability is settled or the asset realised. Deferred tax is charged or credited in the profit or loss, except when it relates to items charged or credited directly to equity, in which case the deferred tax is also dealt with in equity.

Borrowing costs

All borrowing costs are recognised as and included in finance costs in the statement of comprehensive income in the period/ year in which they are incurred.

– 135 –

APPENDIX II

FINANCIAL INFORMATION OF JBMOE

Retirement benefits costs

The Target comprising the operating in the PRC participate in the central pension scheme (the “CPS”) operated by the PRC government for all of their staff. The Target is required to contribute a certain percentage of their covered payroll to the CPS to fund the benefits. The only obligation of the Target will respect to CPS is to pay the ongoing required contributions under the CPS. Payments to the CPS are charged as expenses as they fall due in accordance with the rules of the CPS.

Foreign currencies

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

Exchange differences arising on the settlement of monetary items, and on the translation of monetary items, are recognised in profit or loss in the period/year in which they arise. Exchange differences arising on the retranslation of non-monetary items carried at fair value are included in profit or loss for the period/year except for differences arising on the retranslation of non-monetary items in respect of which gains and losses are recognised directly in equity, in which cases, the exchange differences are also recognised directly in equity.

Leases

The Target as lessor

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

5. CRITICAL ACCOUNTING JUDGEMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINLY

In the application of the Target’s accounting policies, which are described in note 4, the directors of the Target are required to make judgments, estimates and assumptions about the carrying amounts of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates.

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

– 136 –

APPENDIX II

FINANCIAL INFORMATION OF JBMOE

Depreciation of plant and equipment

Plant and equipment are depreciated on a straight-line basis over their estimated useful lives, after taking into account their estimated residual value. The Target assesses annually the residual value and the useful life of the plant and equipment and if the expectation differs from the original estimates, such differences from the original estimates will affect the depreciation charges in the year/period in which the estimates change and will be changed in the future period.

Impairment of plant and equipment

The impairment loss for plant and equipment is recognised for the amounts by which the carrying amounts exceeds its recoverable amount, in accordance with the Target’s accounting policy. The recoverable amount is the higher of an asset’s fair value less costs to sell and value in use.

The Target tests annually whether plant and equipment are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount exceeds its recoverable amount. The recoverable amount of an asset or a cash-generating unit is determined based on value-in-use calculations prepared on the basis of management’s assumptions and estimates such as the future revenue and discount rates, taking into account the existing business expansion plan going forward, the current sales orders on hand and other strategic new business development. No impairment has been provided during the Relevant periods.

Impairment of trade and other receivables

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

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

6. CAPITAL RISK MANAGEMENT

The Target manages its capital to ensure that the Target will be able to continue as a going concern while maximising the return to shareholders through optimisation of the debt and equity balance.

The capital structure of the Target consists of cash and cash equivalents and equity attributable to owners of the Target, comprising paid-up capital and retained earnings. The directors of the Target review the capital structure on a regular basis. As a part of this review, the directors of the Target consider the cost of capital and the associated risks and take appropriate actions to adjust the Target’s capital structure. The overall strategy of the Target remained unchanged during the Relevant Periods.

7. FINANCIAL INSTRUMENTS

a. Financial risk management objectives and policies

The Company’s major financial instruments include trade and other receivables, bank balances and cash, trade and other payables and amounts due to shareholders. Details of these financial instruments are disclosed in respective notes. The risks associated with these financial instruments and the policies on how to mitigate these risks are set out below. The management manages and monitors these exposures to ensure appropriate measures are implemented on a timely and effective manner.

– 137 –

APPENDIX II

FINANCIAL INFORMATION OF JBMOE

Credit risk

The Target maximum exposure to credit risk in the event of the counterparties’ failure to perform their obligations in relation to each class of recognised financial assets is the carrying amount of those assets as stated in the statement of financial position.

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

Other then concentration of credit risk on liquid funds which are deposited with several banks with high credit ratings, the Target does not have any other significant concentration of credit risk. Trade receivables consist of a large number of customers, spreading across of the PRC.

The Target has polices in place to ensure that sale of products or service provided are made to customers with an appropriate credit history. The Target also performs periodic credit evaluations of it customers and believes that adequate impairment loss on trade and other receivables have been made in the Financial Information.

Interest rate risk

The Target has interest bearing assets which were mainly in the form of bank balances (see Note 18 for details of these balances), but the Target’s income and operating cash flows are substantially independent of changes in market interest rates. The Target currently does not have an interest rate hedging policy. However, management monitors interest rate exposure and will consider hedging significant interest rate exposure should the need arise.

Foreign currency risk

Currency risk refers to the risk that movement in foreign currency rate which will affect the Target’s financial results and its cashflow. The management considers the Target does not expose to significant foreign currency risk as majority of its operations and transactions are denominated in the functional currencies of the Target.

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

Liquidity risk

In the management of the Target’s liquidity risk, the Target monitors and maintains a sufficient level of cash and cash equivalents considered adequate by management to finance the Target’s operations and mitigate the effects of fluctuation in cash flows. Management reviews and monitors its working capital requirements regularly.

The following table details the contractual maturities at the end of reporting period of the Target’s non-derivative financial liabilities, which are based on contractual undiscounted cash flows (including interest payments computed using contractual rates) and the earliest date the Target can be required to pay. The tables includes both interest and principal cash flows.

At 31 August 2009 Non-derivative financial liabilities Trade and other payables Amount due to shareholders	On demand or within one year Total undiscounted cash flow RMB’000 RMB’000 2,391 2,391 8,101 8,101 10,492 10,492	Carrying amounts RMB’000 2,391 8,101
		10,492

– 138 –

APPENDIX II

FINANCIAL INFORMATION OF JBMOE

At 31 December 2008 Non-derivative financial liabilities Trade and other payables Amount due to shareholders At 31 December 2007 Non-derivative financial liabilities Trade and other payables Amount due to shareholders At 31 December 2006 Non-derivative financial liabilities Trade and other payables Amount due to shareholders	On demand or within one year Total undiscounted cash flow RMB’000 RMB’000 1,639 1,639 8,101 8,101 9,740 9,740 On demand or within one year Total undiscounted cash flow RMB’000 RMB’000 1,610 1,610 18,382 18,382 19,992 19,992 On demand or within one year Total undiscounted cash flow RMB’000 RMB’000 1,698 1,698 38,432 38,432 40,130 40,130	Carrying amounts RMB’000 1,639 8,101
		9,740

		Carrying amounts RMB’000 1,610 18,382
		19,992

		Carrying amounts RMB’000 1,698 38,432
		40,130

b. Fair value

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

the fair value of financial assets and financial liabilities with standard terms and conditions and traded on active liquid markets are determined with reference to quoted market bid prices and ask prices respectively;
the fair value of other financial assets and financial liabilities is determined in accordance with generally accepted pricing models based on discounted cash flow analysis using prices or rates from observable current market transactions and dealer quotes for similar instrument.

The directors consider that the fair values of financial assets and financial liabilities recorded at amortised cost in the Financial Information approximate to the corresponding fair values due to their immediate or short-term maturities.

– 139 –

APPENDIX II

FINANCIAL INFORMATION OF JBMOE

c. Categories of financial instruments

At 31 August 2009 RMB’000 2,364 8,768 11,132	At 31 December 2008 2007 2006 RMB’000 RMB’000 RMB’000 3,273 11,413 7,236 3,537 1,211 21,032 6,810 12,624 28,268	At 31 December 2008 2007 2006 RMB’000 RMB’000 RMB’000 3,273 11,413 7,236 3,537 1,211 21,032 6,810 12,624 28,268	At 31 December 2008 2007 2006 RMB’000 RMB’000 RMB’000 3,273 11,413 7,236 3,537 1,211 21,032 6,810 12,624 28,268
			28,268

2,391 8,101	1,639 8,101	1,610 18,382	1,698 38,432
10,492	9,740	19,992	40,130

8. TURNOVER

Turnover represents the net amounts received and receivable for goods and services provided by the Target to outside customers, less returns and discounts and sales related taxes.

An analysis of the Target’s turnover for the period/year, for both continuing and discontinued operations, is as follow:

Continuing operations Property investment Rental income Reimbursement of electricity charges Discontinuing operation Sale of computer productions and AI system	For the eight months ended 31 August 2009 2008 RMB’000 RMB’000 (Unaudited) 5,200 5,024 926 893	For the eight months ended 31 August 2009 2008 RMB’000 RMB’000 (Unaudited) 5,200 5,024 926 893	For the year ended 31 December 2008 2007 2006 RMB’000 RMB’000 RMB 7,176 7,175 6,913 1,367 1,436 1,332	For the year ended 31 December 2008 2007 2006 RMB’000 RMB’000 RMB 7,176 7,175 6,913 1,367 1,436 1,332	For the year ended 31 December 2008 2007 2006 RMB’000 RMB’000 RMB 7,176 7,175 6,913 1,367 1,436 1,332
	6,126 –	5,917 –	8,543 –	8,611 3	8,245 22,957
	6,126	5,917	8,543	8,614	31,202

– 140 –

APPENDIX II

FINANCIAL INFORMATION OF JBMOE

9. SEGMENTAL INFORMATION

Primary reporting format – business segments

For management purposes, the Target is organised into property investment for earning rental income and reimbursement of electricity charges during the year ended 31 December 2008 and eight month ended 31 August 2009. The Target also involved in the manufacture, development and sales computer productions during the year ended 31 December 2006 and 2007. That operation was discontinued during the year ended 31 December 2007.

For the year ended 31 August 2009

Turnover Segment results Other income Administrative expenses Profit before taxation Income tax expense Profit for the period/year and total comprehensive income for the year, net of tax As at 31 August 2009 Segment assets Unallocated assets Total assets Segment liabilities Unallocated liabilities Total liabilities Other segment information Capital expenditure Depreciation on plant and equipment Depreciation on investment properties	Continuing operations Property investment RMB’000 6,126

	4,835 31 (2,245
	2,621 –
	2,621

	46,003 –
	46,003

	10,492 –
	10,492

	2 117 834

– 141 –

APPENDIX II

FINANCIAL INFORMATION OF JBMOE

For the year ended 31 August 2008 (unaudited)

Turnover Segment results Other income Administrative expenses Other operating expenses Profit before taxation Income tax expense Profit for the period/year and total comprehensive income for the year, net of tax As at 31 August 2008 (unaudited) Segment assets Unallocated assets Total assets Segment liabilities Unallocated liabilities Total liabilities Other segment information Capital expenditure Depreciation on plant and equipment Depreciation on investment properties	Continuing operations Property investment RMB’000 5,917

	4,729 83 (2,406 (2
	2,404 –
	2,404

	41,775 –
	41,775

	8,718 –
	8,718

	33 132 835

– 142 –

APPENDIX II

FINANCIAL INFORMATION OF JBMOE

For the year ended 31 December 2008

Turnover Segment results Other income Administrative expenses Other operating expenses Profit before taxation Income tax expense Profit for the period/year and total comprehensive income for the year, net of tax As at 31 December 2008 Segment assets Unallocated assets Total assets Segment liabilities Unallocated liabilities Total liabilities Other segment information Depreciation on plant and equipment Depreciation on investment properties	Continuing operations Property investment RMB’000 8,543

	6,780 105 (3,535 –
	3,350 –
	3,350

	42,630 –
	42,630

	9,740 –
	9,740

	193 1,252

– 143 –

APPENDIX II

FINANCIAL INFORMATION OF JBMOE

For the year ended 31 December 2007

Continuing operations Discontinued operation Property investment Sale of computer productions and AI system RMB’000 RMB’000 8,611 3	Continuing operations Discontinued operation Property investment Sale of computer productions and AI system RMB’000 RMB’000 8,611 3	Total RMB’000 8,614

6,986 651 (4,483) (4)	(801) – – –	6,185 651 (4,483 (4
3,150 49,486 19,637 199 1,252	(801)	2,349
		–
	46 355 – –	2,349

		49,532 –
		49,532

		19,992 –
		19,992

		199 1,252

– 144 –

APPENDIX II

FINANCIAL INFORMATION OF JBMOE

For the year ended 31 December 2006

Continuing operations Discontinued operation Property investment Sale of computer productions and AI system RMB’000 RMB’000 8,245 22,958	Continuing operations Discontinued operation Property investment Sale of computer productions and AI system RMB’000 RMB’000 8,245 22,958	Total RMB’000 31,202

6,633 84 (5,402) (216)	522 – – –	7,155 84 (5,402 (216
1,099 65,896 38,392 1,319 73 1,252	522	1,621
		–
	1,425 1,738 – – –	1,621

		67,321 –
		67,321

		40,130 –
		40,130

		1,319 73 1,252

– 145 –

APPENDIX II

FINANCIAL INFORMATION OF JBMOE

10. OTHER INCOME

For the eight months ended 31 August 2009 2008 RMB’000 RMB’000 (Unaudited) 31 83 – –	For the eight months ended 31 August 2009 2008 RMB’000 RMB’000 (Unaudited) 31 83 – –	For the year ended 31 December 2008 2007 2006 RMB’000 RMB’000 RMB’000 105 185 84 – 466 –	For the year ended 31 December 2008 2007 2006 RMB’000 RMB’000 RMB’000 105 185 84 – 466 –	For the year ended 31 December 2008 2007 2006 RMB’000 RMB’000 RMB’000 105 185 84 – 466 –
31 –	83 –	105 –	651 –	84
				–
31	83	105	651	84

11. INCOME TAX EXPENSE

Continuing operations The amount comprises: Taxation arising in the PRC Current year Discontinued operation The amount comprises: Taxation arising in the PRC Current year	For the eight months ended 31 August 2009 2008 RMB’000 RMB’000 (Unaudited) – – – –	For the eight months ended 31 August 2009 2008 RMB’000 RMB’000 (Unaudited) – – – –	For the year ended 31 December 2008 2007 2006 RMB’000 RMB’000 RMB’000 – – – – – –	For the year ended 31 December 2008 2007 2006 RMB’000 RMB’000 RMB’000 – – – – – –	For the year ended 31 December 2008 2007 2006 RMB’000 RMB’000 RMB’000 – – – – – –
	– –	– –	– –	– –	– –
	–	–	–	–	–

No provision for Hong Kong profits tax has been made in the Financial Information as the Target’s income neither arose in, nor is derived from Hong Kong for the Relevant Periods.

No provision for PRC income tax had been made in the Financial Information as the Target has sufficient taxation losses brought forward for offsetting assessable profits for the Relevant Periods.

The Target enjoyed a reduced tax rate of 15% in year 2006, 15% in year 2007, the transitional tax rates are 18%, 20%,22%,24% and 25% in year 2008, 2009, 2010, 2011 and 2012 onwards, respectively.

The taxation for the Relevant Periods can be reconciled to the profit per the statement of comprehensive income as follows:

– 146 –

APPENDIX II

FINANCIAL INFORMATION OF JBMOE

For the eight months ended 31 August 2009 2008 RMB’000 RMB’000 (Unaudited) 2,621 2,404 – – 2,621 2,404	For the eight months ended 31 August 2009 2008 RMB’000 RMB’000 (Unaudited) 2,621 2,404 – – 2,621 2,404	For the year ended 31 December 2008 2007 2006 RMB’000 RMB’000 RMB’000 3,350 3,150 1,099 – (801) 522 3,350 2,349 1,621	For the year ended 31 December 2008 2007 2006 RMB’000 RMB’000 RMB’000 3,350 3,150 1,099 – (801) 522 3,350 2,349 1,621	For the year ended 31 December 2008 2007 2006 RMB’000 RMB’000 RMB’000 3,350 3,150 1,099 – (801) 522 3,350 2,349 1,621
				1,621

655 47 (571) (131)	619 5 (451) (173)	860 5 (625) (240)	1,112 153 (659) (606)	796 31 (393 (434
–	–	–	–	–

12. PROFIT FOR THE PERIOD/YEAR

For the eight months ended 31 August 2009 2008 RMB’000 RMB’000 (Unaudited) 467 501 18 56	For the eight months ended 31 August 2009 2008 RMB’000 RMB’000 (Unaudited) 467 501 18 56	For the year ended 31 December 2008 2007 2006 RMB’000 RMB’000 RMB’000 749 994 1,500 42 79 223	For the year ended 31 December 2008 2007 2006 RMB’000 RMB’000 RMB’000 749 994 1,500 42 79 223	For the year ended 31 December 2008 2007 2006 RMB’000 RMB’000 RMB’000 749 994 1,500 42 79 223
485	557	791	1,073	1,723
– 117 835 – –	– 132 835 – –	– 193 1,252 – –	10 199 1,252 101 804	10 73 1,252 49

				22,435

– 147 –

APPENDIX II

FINANCIAL INFORMATION OF JBMOE

13. DISCONTINUED OPERATION

During the year ended 31 December 2008, the Target ceased operation of its manufacture, development and sales of computer productions operation in order to focus the Target’s resources in its remaining businesses. The (loss) profit for the year from the discontinued operation is analysed as follows:

	For the eight months	For the eight months
	ended 31 August		For the year	ended 31	December
	2009	2008	2008	2007	2006
	RMB’000	RMB’000	RMB’000	RMB’000	RMB’000
		(Unaudited)
(Loss) profit from manufacture,
development and sales of computer
productions	–	–	–	(801)	522

The results of manufacture, development and sales of computer productions business for the year ended 31 December 2006, 2007, 2008 and the eight months ended 31 August 2009, which have been included in the statement of comprehensive income, were as follows:

For the eight months ended 31 August 2009 2008 RMB’000 RMB’000 (Unaudited) – – – –	For the eight months ended 31 August 2009 2008 RMB’000 RMB’000 (Unaudited) – – – –	For the year ended 31 December 2008 2007 2006 RMB’000 RMB’000 RMB’000 – 3 22,957 – (804) (22,435)	For the year ended 31 December 2008 2007 2006 RMB’000 RMB’000 RMB’000 – 3 22,957 – (804) (22,435)	For the year ended 31 December 2008 2007 2006 RMB’000 RMB’000 RMB’000 – 3 22,957 – (804) (22,435)
– – – – – –	– – – – – –	– – – – – –	(801) – – – (801) –	522 – – –
				522 –
–	–	–	(801)	522

14. DIVIDEND

No dividend was paid or proposed during the Relevant Periods.

– 148 –

APPENDIX II

FINANCIAL INFORMATION OF JBMOE

15. DIRECTORS’ AND EMPLOYEES’ EMOLUMENTS

a. Directors’ emoluments

Detailed of emoluments paid by the Target to the directors during the Relevant Periods as follows:

For the eight months ended 31 August 2009 Name of directors 徐衹祥劉為民焦倩薛麗趙旭崔濤張永利 For the eight months ended 31 August 2008 (Unaudited) Name of directors 徐衹祥劉為民焦倩薛麗趙旭崔濤張永利 For the year ended 31 December 2008 Name of directors 徐衹祥劉為民焦倩薛麗趙旭崔濤張永利	Fees Salaries, allowance and benefits in kind Retirement benefit scheme contributions RMB’000 RMB’000 RMB’000 – – – – 117 – – 62 – – – – – – – – – – – – – – 179 – Fees Salaries, allowance and benefits in kind Retirement benefit scheme contributions RMB’000 RMB’000 RMB’000 – – – – 117 – – 62 – – – – – – – – – – – – – – 179 – Fees Salaries, allowance and benefits in kind Retirement benefit scheme contributions RMB’000 RMB’000 RMB’000 – – – – 175 – – 94 – – – – – – – – – – – – – – 269 –	Total RMB’000 – 117 62 – – – –
		179

		Total RMB’000 – 117 62 – – – –
		179

		Total RMB’000 – 175 94 – – – –
		269

– 149 –

APPENDIX II

FINANCIAL INFORMATION OF JBMOE

Detailed of emoluments paid by the Target to the directors during the Relevant Periods as follows:

For the year ended 31 December 2007 Name of directors 徐衹祥_(Note a) 劉為民焦倩(Note a) 薛麗(Note a) 趙旭(Note a) 崔濤張永利 For the year ended 31 December 2006 Name of directors 鄭重(Note b) 崔濤黃志萍(Note b) 李立新(Note b) 王建平(Note b) 張永利李小平(Note b)_ 劉為民	Fees Salaries, allowance and benefits in kind Retirement benefit scheme contributions RMB’000 RMB’000 RMB’000 – – – – 138 – – 94 – – – – – – – – – – – – – – 232 – Fees Salaries, allowance and benefits in kind Retirement benefit scheme contributions RMB RMB RMB – – – – – – – – – – – – – – – – – – – – – – – 125 125	Total RMB’000 – 138 94 – – – –
		232

		Total RMB – – – – – – – 125
		125

Notes:

(a) Appointed on 12 November 2007.

(b) Resigned on 12 November 2007.

No directors waived or agreed to waive any emolument paid by the Target during the Relevant Periods. No emoluments were paid by the Target to any directors as an incentive payment for joining the Target or as compensation for loss of office during the Relevant Periods.

– 150 –

APPENDIX II

FINANCIAL INFORMATION OF JBMOE

b. Employees’ emoluments

	For the eight months	For the eight months
	ended 31 August		For the year	ended 31	December
	2009	2008	2008	2007	2006
		(Unaudited)
Number of five highest paid
individuals excluding directors	3	3	4	3	3

The emoluments of the five highest paid individuals (excluding directors) were as follows:

Salaries, allowances and benefits in kind Retirement benefit scheme contributions	For the eight months ended 31 August 2009 2008 RMB’000 RMB’000 (Unaudited) 338 338 37 41 375 379	For the year ended 31 December 2008 2007 2006 RMB’000 RMB’000 RMB’000 507 502 481 45 35 34 552 537 515	For the year ended 31 December 2008 2007 2006 RMB’000 RMB’000 RMB’000 507 502 481 45 35 34 552 537 515
			515

No emoluments have been paid by the Target to any of the remaining five highest paid individuals as an inducement to join the Target, or as compensation for loss of office during the Relevant Periods and eight months ended 31 August 2008.

During the Relevant Periods, the emoluments for each of the above employees were below RMB1,000,000 per annum.

– 151 –

APPENDIX II

FINANCIAL INFORMATION OF JBMOE

16. PLANT AND EQUIPMENT

Motor vehicles RMB’000 – 1,319 –	Furniture, fixtures and office equipment RMB’000 580 – (274)	Total RMB’000 580 1,319 (274)
1,319 – 1,319 – 1,319 – 1,319 – – – – 157 – 157 156 313 104 417	306 (126) 180 33 213 2 215 250 73 (129) 194 42 (119) 117 37 154 13 167	1,625 (126)
		1,499 33
		1,532 2
		1,534
		250 73 (129)
		194 199 (119)
		274 193
		467 117
		584
1,319 1,162 1,005 902	112 63 59 48	1,431

		1,225

		1,064

		950

– 152 –

APPENDIX II

FINANCIAL INFORMATION OF JBMOE

17. INVESTMENT PROPERTIES

COSTS At 1 January 2006 Additions Disposal At 31 December 2006, 1 January 2007, 31 December 2007, 1 January 2008, 31 December 2008 and 31 August 2009 ACCUMULATED DEPRECIATION At 1 January 2006 Provided for the year Eliminated on disposal At 31 December 2006 and 1 January 2007 Provided for the year At 31 December 2007 and 1 January 2008 Provided for the year At 31 December 2008 Provided for the period At 31 August 2009 CARRYING VALUES At 31 December 2006 At 31 December 2007 At 31 December 2008 At 31 August 2009	RMB’000 38,766 1,392 (620)
	39,538
	1,514 1,252 (163)
	2,603 1,252
	3,855 1,252
	5,107 835
	5,942
	36,935

	35,683

	34,431

	33,596

The fair value of the Target’s investment properties at 31 December 2008 and 31 August 2009 was RMB90,000,000 and RMB87,200,000 respectively. The fair value has been arrived at based on a valuation carried out by Malcolm & Associates Appraisal Limited, independent valuers not connected with the Target. The valuation was determined by reference to recent market prices for similar properties in the same locations and conditions.

As at 31 December 2006 and 31 December 2007, the directors of the Target have carried out impairment review and have considered the carrying amount of investment properties in the PRC approximates its fair value. All the Target’s investment properties shown above comprise medium-term leasehold land and building situated in PRC.

18. INVENTORIES

The amounts represent consumables parts for computer productions and AI system.

– 153 –

APPENDIX II

FINANCIAL INFORMATION OF JBMOE

19. TRADE AND OTHER RECEIVABLES

Trade receivables Less: Impairment losses recognised Trade receivables – net Other receivables Trade and other receivables	At 31 August 2009 RMB’000 315 (315)	At 31 December 2008 2007 RMB’000 RMB’000 315 315 (315) (315)	At 31 December 2008 2007 RMB’000 RMB’000 315 315 (315) (315)	2006 RMB 953 (214
	– 2,364	– 3,273	– 11,413	739 6,497
	2,364	3,273	11,413	7,236

The Target has a policy of allowing an average credit period of 60 days to its trade customers. The following is an aged analysis of trade receivables net of impairment loss at the end of reporting period:

			At
			31 August		At 31 December
			2009	2008	2007	2006
			RMB’000	RMB’000	RMB’000	RMB’000
Over	365	days	–	–	–	739

Receivables that were past due but not impaired relate to a number of independent customers that have a good track record with the Target. Based on past experience, management believes that no impairment allowance is necessary in respect of these balances as there has not been a significant change in credit quality and the balance are still considered fully recoverable. The Target does not hold any collateral over these balances.

Movements in the impairment of trade receivable are as follows:

Balance at beginning of the period/ year Impairment losses recognised Balance at end of the period/year	At 31 August 2009 RMB’000 315 – 315	At 31 December 2008 2007 RMB’000 RMB’000 315 214 – 101 315 315	2006 RMB’000 165 49
			214

20. BANK BALANCES AND CASH

The bank balances carry interest at average market rates ranged from 0.36% to 0.81% per annum during the Relevant Periods.

– 154 –

APPENDIX II

FINANCIAL INFORMATION OF JBMOE

21. TRADE AND OTHER PAYABLES

Trade and other payables Accrued charges	At 31 August 2009 RMB’000 2,300 91 2,391	At 31 December 2008 2007 RMB’000 RMB’000 1,621 1,610 18 – 1,639 1,610	2006 RMB’000 1,698 –
			1,698

An aging analysis of the trade payables as at the end of reporting period is as follows:

0 – 90 days 181 – 365 days Over 365 days	At 31 August 2009 RMB’000 – – 269 269	At 31 December 2008 2007 RMB’000 RMB’000 – – – – 269 269 269 269	2006 RMB’000 236 236 19
			491

The Target has financial risk management policies in place to ensure that all payables within the credit timeframe.

22. AMOUNTS DUE TO SHAREHOLDERS

Amounts due to shareholders are unsecured, interest-free and are repayable on demand.

23. PAID-UP CAPITAL

	At
	31 August		At 31 December
	2009	2008	2007	2006
	RMB’000	RMB’000	RMB’000	RMB’000
Registered and paid-up capital:
At 1 January 2006, 31 December
2006, 2007 and 2008 and
31 August 2009	10,650	10,650	10,650	10,650

24. DEFERRED TAX

As at 31 December 2006, 31 December 2007, 31 December 2008 and 31 August 2009, the Target has unused tax losses of approximately RMB11,291,000, RMB7,922,000, RMB4,480,000 and RMB1,622,000 respectively available to offset against future profits. No deferred tax asset has been recognised in respect of the remaining tax losses due to the unpredictability of future profits streams.

Included in the above unused tax losses, approximately RMB8,118,000, RMB4,020,000, RMB3,543,000 and RMB686,000 in respect of the year ended 31 December 2006, 31 December 2007, 31 December 2008 and 31 August 2009 will expire after five years from the year of assessment to which they relate. Other losses may be carried forward indefinitely.

– 155 –

APPENDIX II

FINANCIAL INFORMATION OF JBMOE

As at 31 December 2006, 31 December 2007, 31 December 2008 and 31 August 2009, the Target has no deductible temporary differences. No deferred tax assets has been recognised in relation to such deductible temporary different as it is not probable that profit will be available against which the deductible temporary different can be utilised.

25. RETIREMENT BENEFIT SCHEMES

The employees of the Target in the PRC are members of the state-managed retirement benefit scheme operated by the government of the PRC. The Target is required to contribute a certain percentage of the relevant portion of its employees’ basic salaries to the pension to fund the benefits. The only obligation of the Target in the PRC with respect to the state-managed retirement benefit scheme is the required contributions under the scheme.

The retirement benefits costs charged to statement of comprehensive income during the year ended 31 December 2006, 31 December 2007, 31 December 2008, eight months ended 31 August 2008 and 31 August 2009 amounted to approximately RMB515,000, RMB538,000, RMB553,000, RMB379,000 and RMB75,048 respectively. The retirement benefits costs charged to statement of comprehensive income represent contributions payable to the schemes by the Target at rates specified in the rules of the schemes.

26. RELATED PARTY TRANSACTION

(a) Compensation of key management personnel

The remuneration of directors are disclosed in Note 13. The emoluments of the key management other than directors were as follows:

Salaries, allowance and benefit in kind Contributions to retirement benefit schemes	For the eight months ended 2009 RMB’000 338 37 375	For the year ended 31 December 2008 2007 2006 RMB’000 RMB’000 RMB’000 507 502 481 40 35 34 547 537 515	For the year ended 31 December 2008 2007 2006 RMB’000 RMB’000 RMB’000 507 502 481 40 35 34 547 537 515
			515

27. OPERATING LEASES

Investment properties rental income earned during 31 December 2006, 31 December 2007, 31 December 2008, 31 August 2008 and 31 August 2009 was approximately RMB6,913,000, RMB7,175,000, RMB7,176,000, RMB5,024,000 and RMB5,200,000 respectively. The investment properties are expected to generate rental yields of 21%, 23%, 31% and 48% on an ongoing basis for the year ended 31 December 2006, 2007, 2008 and for the eight months ended 31 August 2009, all properties held were committed tenants for one and half year.

– 156 –

APPENDIX II

FINANCIAL INFORMATION OF JBMOE

The Target as lessor

As at the respective end of reporting period, the Target’s future rental income receivables under various non-cancellable operating leases in respect of investment properties are analysed as follows:

Within one year In the second to fifth year inclusive	At 31 August 2009 RMB’000 9,222 7,048 16,270	At 31 December 2008 2007 RMB’000 RMB’000 6,482 4,583 4,147 3,533 10,629 8,116	2006 RMB’000 5,411 1,603
			7,014

II. SUBSEQUENT FINANCIAL EVENTS

No significant subsequent events took place subsequent to 31 August 2009.

III. SUBSEQUENT FINANCIAL STATEMENTS

No audited financial statements have been prepared by the Target in respect of any period subsequent to 31 August 2009.

Yours faithfully, LO AND KWONG C.P.A. COMPANY LIMITED

Certified Public Accountants

Lo Wah Wai

Practising Certificate Number: P02693 Hong Kong

Suites 216-218, 2/F Shui On Centre, 6-8 Harbour Road, Wanchai, Hong Kong

– 157 –

APPENDIX III

FINANCIAL INFORMATION OF THE CY PROPERTY

UNAUDITED PROFIT AND LOSS STATEMENTS ATTRIBUTABLE TO THE CY PROPERTY

Turnover Cost of sales Gross profit Administrative expenses Fair value change of investment property Net income	For the eight months ended 31 August 2009 RMB’000 6,487 (835)	For the year ended 31 December 2008 2007 RMB’000 RMB’000 9,867 6,864 (1,259) (855) 8,608 6,009 (65) – – – 8,543 6,009	For the year ended 31 December 2008 2007 RMB’000 RMB’000 9,867 6,864 (1,259) (855) 8,608 6,009 (65) – – – 8,543 6,009
	5,652 (49) –	8,608 (65) –	6,009 – –
	5,603	8,543

The unaudited profit and loss statement attributable to the CY Property (the “Unaudited Profit and Loss Statements”) for two year ended 31 December 2007 and 2008 and the eight months ended 31 August 2009 (the “Reporting Periods”) as set out above have been prepared based on the financial and other information provided by the management of Beijing Zhong Yi Chong Yi Technology Development Company (“Zhong Yi”), which is the vendor of CY Property. The Unaudited Profit and Loss Statements have been properly complied and prepared by management of Zhong Yi form the underlying books and records of the CY Property, using the accounting policies which are materially consistent with those of the Group in all material respects. The reporting accountants have performed limited procedures of (i) enquired and discussed with the management of the Zhong Yii in respect of the accounting policies adopted in preparing the Profit and Loss Statement; (ii) reviewed the Unaudited Profit and Loss Statements; and (iii) ensured that the Unaudited Profit and Loss Statements have been complied and derived from the underlying books and records of the Zhong Yi. The management of Zhong Yi has emphasised that the Unaudited Profit and Loss Statements do not purport to predict the future actual financial contributions to be derived from the CY Property after completion of the acquisition.

– 158 –

APPENDIX III

FINANCIAL INFORMATION OF THE CY PROPERTY

Notes

1 The revenue for each of the Reporting Period represented the revenue generated from the CY Property, as provided by Zhong Yi.
2 The costs of sales for each of the Reporting Periods represented the costs incurred by the CY Property in generating such revenue, as provided by Zhong Yi.
3 The administrative expenses for each of the Reporting Periods represented the operating costs incurred by the CY Property, as provided by Zhong Yi.
4 The fair value changes on investment property represent the fair value changed for the end of each reporting periods. The fair value have been arrived at on the basis of a valuation carried out on that date by Malcolm & Associated Appraisal Limited. which is independent qualified professional valuers not connected with the Group. The valuation was arrived at by reference to market evidence of transaction prices for similar properties in the same locations and conditions.

– 159 –

APPENDIX IV MANAGEMENT DISCUSSION AND ANALYSIS OF THE GROUP AND JBMOE

1. MANAGEMENT DISCUSSION AND ANALYSIS OF THE GROUP

(i) Set out below is the management discussion and analysis of the Group for the year ended 31 December 2006.

1. SUMMARY OF THE RESULTS

(1) Summary of income statement

The Group’s profits

2006 RMB’000 Turnover 18,067 (Loss) profit after taxation (80,611) (Loss) profit attributable to shareholders (76,705) (Loss) earnings per share (RMB) (0.08) (2) Analysis of segment results 2006 Amount Consolidated (loss) profit before Taxation (80,599) Of which: Property development (24,477) Education Investment (19,666) Cemetery development and lease (14,298) Shenhai Electricity and Heat – Shenyang Water –	2005 RMB’000 91,221 (1,249,512) (1,229,130) (1.20) 2005 Amount (1,288,602) (301,109) (307,451) (35,047) – –	2004 RMB’000 35,312 (200,046) (197,559) (0.19) 2004 Amount (200,831) (76,040) (14,148) (38,546) – –	2003 RMB’000 169,116 17,454 17,833 0.02 2003 Amount 31,834 28,434 (2,711) – 24,288 –	2002 RMB’000 451,620 93,193 92,791 0.09

				2002 Amount 156,280 12,865 – – 20,388 158,816

– 160 –

APPENDIX IV

MANAGEMENT DISCUSSION AND ANALYSIS OF THE GROUP AND JBMOE

(3) Analysis of segment turnover

	2006	% on total	2005	% on total	2004	% on total	2003	% on total	2002	% on total
	Turnover	turnover	Turnover	turnover	Turnover	turnover	Turnover	turnover	Turnover	turnover
	RMB’000	RMB’000	RMB’000	RMB’000	RMB’000	RMB’000	RMB’000	RMB’000	RMB’000	RMB’000
Total turnover	18,067	100	91,221	100	35,312	100	169,116	100	451,620	100
Of which:
Property development	9,521	52.70	77,040	84.45	21,128	59.83	165,762	98.02	125,820	27.90
Education Investment	6,370	35.26	6,472	7.09	10,658	30.18	2,500	1.48	–	–
Cemetery development
and lease	1,602	8.87	926	1.02	494	1.40	–	–	–	–
Other operations	574	3.17	6,783	7.44	3,032	8.59	854	0.50	400	0.05
Shenyang Water	–	–	–	–	–	–	–	–	325,400	72.05

2. ANALYSIS OF REAL ESTATE DEVELOPMENT BUSINESS

Summary of operating results

	2006	2005
Turnover (RMB’000)	9,521	77,040
Profit before taxation (RMB’000)	(24,477)	(301,109)

During the Period, the sales and the occupation arrangement of the phase two project of Shenyang Real Estate “Water-Flowers City” was completed in early section, with the last stage improvement of construction, completion and inspection and certificate registration are still under progress. Based on the ongoing effort of the Group, the relevant registration of the phase two project of “Water-Flowers City” was finished in September 2008 and the registration of property title certificate was started.

The project “Cosmo International Mansion” in Shenyang is the reconstruction of an incomplete project, with gross floor area of approximately 30,000 square metres. In December 2006, the Higher People’s Court of Liaoning Province held an auction in which the shops in 1-5F and 95 apartments of Cosmo International Mansion were disposed of. The sale proceeds were used to settle the debt of the Company.

The “Scenic Bay” of Beijing Diye has obtained the approval for land requisition and certificate of land approval. However, it was required to sale by listing in the market due to the suspension of the “Green Belt” construction project policy of Beijing Municipal Government. Under the active negotiation of Beijing Diye, the Level 1 Development Qualification of “Scenic Bay” has been obtained.

– 161 –

APPENDIX IV

MANAGEMENT DISCUSSION AND ANALYSIS OF THE GROUP AND JBMOE

3. ANALYSIS OF EDUCATION INVESTMENT BUSINESS

The site area of phase one of Shenyang Education Park, a project invested by Shenyang Education, was 128,600 square metres. Shenyang School was officially opened in September 2004 and ended in the fall semester of 2006. Since the number of student was much less than expectation, the Group shut down Shenyang Beida Jade Bird School at the end of 2006 to lower the operation cost. Students at school have been properly accepted by other schools in Shenyang.

Zhuhai School has paid Zhuhai Education a rental fee amounting to RMB4,000,000 during the Year. During the Year, Zhuhai School was honoured City-Level School by Education Bureau of Zhuhai. The students of Zhuhai School amounted to approximately 600 at present.

During the Period, the commencement of the project construction of Shanghai Beida Education Science Park (“Shanghai Education Park”) invested by Shanghai Education was delayed as a result of the Shanghai Municipal Government’s adjustment to the land use policy of substantial projects. Shanghai Education actively negotiated with Shanghai Municipal Government about the change of the land. The parties, however, did not reach an agreement on conditions such as the price of land and planning, and the change of the land did not work out.

4. ANALYSIS OF CEMETERY DEVELOPMENT BUSINESS

During the Year, Xili Cemetery realized rental income of approximately RMB1,521,000.

5. CLOSE OF SHENYANG BEIDA JADE BIRD SCHOOL

Since the number of student was much less than expectation, the Group shut down Shenyang Beida Jade Bird School at the end of 2006 to lower the operation cost. Students at school have been properly accepted by other schools in Shenyang.

6. ANALYSIS OF THE GROUP’S ASSETS AND FINANCIAL POSITION

(1) Financial statistics of the Group

		As at	As at
		31 December	31 December
Items	Basis	2006	2005
Gearing ratio	Total liabilities/total assets x 100%	70.92%	70.27%
Current ratio	Current assets/current liabilities	0.81	0.85
Quick ratio	(Current assets – inventories
	– properties held for
	sale)/current liabilities	0.28	0.61
Earnings/net assets ratio	Net profit/net assets x 100%	(19.68%)	(261.35%)
Sales profit margin	Net profit/sales x 100%	(424.56%)	(1,347.42%)
Debt equity ratio	Total liabilities/shareholders’
	equity x 100%	243.82%	236.42%

– 162 –

APPENDIX IV

MANAGEMENT DISCUSSION AND ANALYSIS OF THE GROUP AND JBMOE

(2) Overall position of the Group’s assets

During the Year, there was a decrease in the total assets of the Group when compared with that of the Previous Year. The total assets of the Group decreased to approximately RMB1,339,846,000 from approximately RMB1,582,162,000, representing a decrease of approximately RMB242,316,000 or 15.32%.

	As at	As at
	31 December	31 December	Change in
Items	2006	2005	amounts
	RMB’000	RMB’000	RMB’000
Total assets	1,339,846	1,582,162	(242,316)
Of which:
Property and equipment	159,931	160,863	(932)
Investment properties	317,786	390,930	(73,144)
Prepaid lease payment on
land use right	89,316	91,880	(2,564)
Available-for-sale financial
assets	20,000	20,000	–
Current assets	752,813	918,489	(165,676)

(3) Current assets of the Group

During the Year, the current assets of the Group decreased by approximately RMB165,676,000 to RMB752,813,000 as compared with RMB918,489,000 in the Previous Year, representing a decrease of approximately 18.04%.

	As at	As at
	31 December	31 December	Change in
Items	2006	2005	amounts
	RMB’000	RMB’000	RMB’000
Current assets	752,813	918,489	(165,676)
Of which:
Properties held for sale	495,715	266,768	228,947
Inventories	469	361	108
Accounts receivables	1,192	674	518
Other receivables and
prepaid expenses	190,697	299,782	(109,085)
Amount due from parent
company	55,296	268,194	(212,898)
Tax prepaid	–	2,059	(2,059)
Pledged bank deposits	–	71,598	(71,598)
Bank balances and cash	9,444	9,053	391

– 163 –

APPENDIX IV

MANAGEMENT DISCUSSION AND ANALYSIS OF THE GROUP AND JBMOE

(4) Bank borrowings of the Group

As at 31 December 2006, the Group’s bank borrowings totalled RMB181,344,000 (2005: RMB351,490,000). The abovementioned borrowings bear interest at 4.70% to 7.97% per annum.

Bank borrowings repayable in the following periods Overdue Within one year Within one to two years	As at 31 December 2006 (RMB’000) 49,977 131,367 – 181,344	As at 31 December 2005 (RMB’000) 29,000 309,290 13,200
		351,490

As at 31 December 2006, the Group’s overdue bank borrowings were RMB49,977,000.

(5) Currency risks

According to the “Quotations of the Exchange Rates for Converting Renminbi to Foreign Currencies by the Head Office of Designated Banks” periodically promulgated by the State Administration of Foreign Exchange of the PRC in 2006, the exchange rates of Renminbi to US dollar and to Hong Kong dollar were stable as a whole, and the exchange rate of the Hong Kong dollar to Renminbi experienced slight fluctuations during the Year. Accordingly, the Company has no currency risk.

(6) Land reserves

During the Year, the Group has two parcels of land in its reserves with a total area of 613,000 square metres as follows:

Portion of land at 10th Road in Shenyang Economic and Technological Development Zone with an area of approximately 484,000 square metres already paid up, in which the Group holds 99.9% interests;
A parcel of land in Guan Zhuang Xin Cun, Chaoyang District, Beijng with an area of approximately 129,000 square metres already paid up, in which the Group holds 99.89% interests.

– 164 –

APPENDIX IV

MANAGEMENT DISCUSSION AND ANALYSIS OF THE GROUP AND JBMOE

(7) Contingent liabilities

Save as disclosed in notes 42 and 43 to the financial statements of the Company for the year ended 31 December 2006, as at the balance sheet date, the Group did not have any other contingent liabilities.

(8) Analysis of equity and profits

			Change in
	31 December 2006	31 December 2005	amounts
	RMB’000	RMB’000	RMB’000
Share capital	1,020,400	1,020,400	–
Share premium	323,258	323,258	–
Statutory surplus reserve	103,582	69,054	34,528
Statutory public welfare
reserve	–	34,528	(34,528)
Accumulated losses	(1,093,482)	(1,016,777)	(76,705)

7. EMPLOYEES

As at 31 December 2006, the Group had 106 employees.

During the Year, the aggregate salaries and allowances and termination compensation paid to the employees amounted to RMB7,686,200 (2005: RMB12,442,000) and RMB267,800. The Group has not established any share option scheme for any of its senior management or employees.

8. FUTURE PLANS FOR MATERIAL INVESTMENTS AND CAPITAL ASSETS

During the year of 2006, the Group continued to speed up the last stage improvement of construction and completion and inspection of uncompleted projects, and has made some progress. Meanwhile, the Group discontinued the projects that failed to meet the revenue expectation, so as to improve its operation condition.

– 165 –

APPENDIX IV

MANAGEMENT DISCUSSION AND ANALYSIS OF THE GROUP AND JBMOE

(ii) Set out below is the management discussion and analysis of the Group for the year ended 31 December 2007.

1. SUMMARY OF THE RESULTS

(1) Summary of income statement

The Group’s profits

	2007	2006	2005	2004	2003
	RMB’000	RMB’000	RMB’000	RMB’000	RMB’000
Turnover	7,116	16,465	91,221	35,312	169,116
Profit (loss) after taxation	112,319	(80,611)	(1,249,512)	(200,046)	17,454
Profit (loss) attributable to
shareholders	115,657	(76,705)	(1,229,130)	(197,559)	17,833
Earnings (loss) per share
(RMB)	0.11	(0.08)	(1.2)	(0.19)	0.02

(2) Analysis of segment results

	2007	2006	2005	2004	2003
	Amount	Amount	Amount	Amount	Amount
Consolidated profit (loss)
before Taxation	112,801	(80,599)	(1,288,602)	(200,831)	31,834
Of which:
Property development	(5,113)	(24,477)	(301,109)	(76,040)	28,434
Education Investment	(18,461)	(19,666)	(307,451)	(14,148)	–
Shenhai Electricity and
Heat	–	–	–	–	24,288
Discontinued operation
– Cemetery development
and lease	(26,354)	(14,298)	(35,047)	(38,546)	–

– 166 –

APPENDIX IV

MANAGEMENT DISCUSSION AND ANALYSIS OF THE GROUP AND JBMOE

(3) Analysis of segment turnover

	2007	% on total	2006	% on total	2005	% on total	2004	% on total	2003	% on total
	Turnover	turnover	Turnover	turnover	Turnover	turnover	Turnover	turnover	Turnover	turnover
	RMB’000	RMB’000	RMB’000	RMB’000	RMB’000	RMB’000	RMB’000	RMB’000	RMB’000	RMB’000
Total turnover	9,948	100	18,067	100	91,221	100	35,312	100	169,116	100
Of which:
Property development	3,905	39.25	9,521	52.70	77,040	84.45	21,128	59.83	165,762	98.02
Education Investment	3,211	32.28	6,370	35.26	6,472	7.09	10,658	30.18	2,500	1.48
Other operations	–	–	574	3.17	6,783	7.44	3,032	8.59	854	0.50
Discontinued operation
– Cemetery development
and lease	2,832	28.47	1,602	8.87	926	1.02	494	1.40	–	–

2. ANALYSIS OF REAL ESTATE DEVELOPMENT BUSINESS

Summary of operating results

	2007	2006
Turnover (RMB’000)	3,905	9,521
Profit before taxation (RMB’000)	(5,113)	(24,477)

During the period, the sales and the occupation arrangement of the phase two project of Shenyang Real Estate “Water-Flowers City” was completed in early section, with the completion and inspection and certificate registration are still under progress. Based on the ongoing effort of the Group, the relevant registration of the phase two project of “Water-Flowers City” was finished in September 2008 and the registration of property title certificate was started.

During the Period, the last stage improvement of construction, completion and inspection and sales of Building Management Company “Cosmo International Mansion” was the primary focus.

The “Scenic Bay” of Beijing Diye did not make significant progress during the Year. Owing to the promulgation of Property Law, the resettlement problem of the land purposed for “Scenic Bay” cannot accomplish completely. As a result, the land failed to meet the requirements for sale. Beijing Diye is under negotiation with local authorities to seek a resolution.

– 167 –

APPENDIX IV

MANAGEMENT DISCUSSION AND ANALYSIS OF THE GROUP AND JBMOE

3. ANALYSIS OF EDUCATION INVESTMENT BUSINESS

During the Year, the construction of new teaching and administrative staff dormitory and foreign teachers’ apartment of Zhuhai Education has completed. The students of Zhuhai School amounted to approximately 600 at present. Zhuhai School has paid Zhuhai Education a rental fee amounting to RMB3,000,000 during the Year.

4. ANALYSIS OF CEMETERY DEVELOPMENT BUSINESS

Owing to the fact that the 95% equity interest in Shenzhen Jingmei held by the Company has been auctioned by the Railway Transport Intermediate Court of Shenyang in December 2007, Jingmei Industrial and Xili Cemetery ceased to be the subsidiaries of the Company with effect from 31 December 2007.

5. THE COMPANY RECOVERED 80% EQUITY INTEREST OF BEIJING DIYE

From June to November 2007, the Company and Shenyang Real Estate have entered Assumption and Equity Pledge Agreement and Extension of Credit and Equity Pledge Supplementary Agreement with Mingyude, pursuant to which the 80% equity interest in Beijing Diye held by Shenyang Real Estate was pledged as security, and Mingyude paid the construction payment of RMB12,870,000 to Shenyang Tianbei Construction Installation Work Company (“Tianbei Construction”) for Shenyang Real Estate and paid the debt due to Liaoning Hua Jin Hua Gong Group Company Limited (“Hua Jin”) of RMB32,160,000 for the Company.

On 31 July 2008, the Company and Shenyang Real Estate have entered Debt Repayment and Equity Pledge Release Agreement with Mingyude, pursuant to which the parties determined the schedule of repayment and equity pledge release. As at 31 August 2008, the Company and Shenyang Real Estate have fully repaid the assistance and interest thereof to Mingyude, and the 80% equity interest in Beijing Diye was recovered by the Company.

6. ANALYSIS OF THE GROUP’S ASSETS AND FINANCIAL POSITION

(1) Financial statistics of the Group

		As at	As at
		31 December	31 December
Items	Basis	2007	2006
Gearing ratio	Total liabilities/total assets x 100%	53.80%	70.92%
Current ratio	Current assets/current liabilities	1.03	0.81
Quick ratio	(Current assets – inventories
	– properties under development
	– properties held for sale)/
	current liabilities	0.17	0.28
Earnings (loss)/net assets
ratio	Net profit/net assets x 100%	22.96%	(19.68%)
Sales profit margin	Net profit/sales x 100%	1,625.31%	(424.56%)
Debt equity ratio	Total liabilities/shareholders’
	equity x 100%	116.47%	243.82%

– 168 –

APPENDIX IV

MANAGEMENT DISCUSSION AND ANALYSIS OF THE GROUP AND JBMOE

(2) Overall position of the Group’s assets

During the Year, there was a decrease in the total assets of the Group when compared with that of the Previous Year. The total assets of the Group decreased to approximately RMB1,090,528,000 from approximately RMB1,339,846,000, representing a decrease of approximately RMB249,318,000 or 18.61%.

	As at	As at
	31 December	31 December	Change in
Items	2007	2006	amounts
	(RMB’000)	(RMB’000)	(RMB’000)
Total assets	1,090,528	1,339,846	(249,318)
Of which:
Property and equipment	146,795	159,931	(13,136)
Investment properties	255,390	317,786	(62,396)
Prepaid lease payment on
land use right	86,752	89,316	(2,564)
Available-for-sale financial
assets	20,000	20,000	0.00
Current assets	581,591	752,813	(171,222)

(3) Current assets of the Group

During the Year, the current assets of the Group decreased by approximately RMB171,222,000 to RMB581,591,000 as compared with RMB752,813,000 in the Previous Year, representing a decrease of approximately 22.74%.

	As at	As at
	31 December	31 December	Change in
Items	2007	2006	amounts
	(RMB’000)	(RMB’000)	(RMB’000)
Current assets	581,591	752,813	(171,222)
Of which:
Properties held for sale	484,987	495,715	(10,728)
Inventories	341	469	(128)
Account receivables	–	1,192	(1,192)
Other receivables and
prepaid expenses	37,517	190,697	(153,180)
Amount due from parent
Company	54,268	55,296	(1,028)
Bank balances and cash	4,478	9,444	(4,966)

(4) Bank borrowings of the Group

As at 31 December 2007, the Group’s bank borrowings totalled RMB62,000,000 (2006: RMB181,344,000). Borrowings repayable within one year bear interest at 4.70% to 7.97% per annum.

– 169 –

APPENDIX IV

MANAGEMENT DISCUSSION AND ANALYSIS OF THE GROUP AND JBMOE

Bank borrowings repayable in the following periods Overdue Within one year	As at 31 December 2007 (RMB’000) – 62,000 62,000	As at 31 December 2006 (RMB’000) 49,977 131,367
		181,344

(5) Currency Risks

According to the “Quotations of the Exchange Rates for Converting Renminbi to Foreign Currencies by the Head Office of Designated Banks” periodically promulgated by the State Administration of Foreign Exchange of the PRC in 2007, the exchange rates of Renminbi to US dollar and to Hong Kong dollar were stable as a whole, and the exchange rate of the Hong Kong dollar to Renminbi experienced slight fluctuations during the Year. Accordingly, the Company has no currency risk.

(6) Land reserves

During the Year, the Group has two parcels of land in its reserves with a total area of 613,000 square metres as follows:

Portion of land at 10th Road in Shenyang Economic and Technological Development Zone with an area of approximately 484,000 square metres already paid up, in which the Group holds 99.9% interests;
A parcel of land in Guan Zhuang Xin Cun, Chaoyang District, Beijng with an area of approximately 129,000 square metres already paid up, in which the Group holds 99.89% interests.

(7) Contingent liabilities

Save as disclosed in note 42 to the financial statements of the Company for the year ended 31 December 2007, as at the balance sheet date, the Group did not have any other contingent liabilities.

– 170 –

APPENDIX IV

MANAGEMENT DISCUSSION AND ANALYSIS OF THE GROUP AND JBMOE

(8) Analysis of equity and profits

			Change in
	31 December 2007	31 December 2006	amounts
	(RMB’000)	(RMB’000)	(RMB’000)
Share capital	1,020,400	1,020,400	–
Share premium	323,258	323,258	–
Statutory surplus reserve	103,582	103,582	–
Accumulated losses	(977,825)	(1,093,482)	115,657

7. EMPLOYEES

As at 31 December 2007, the Group had 118 employees.

During the Year, the aggregate salaries and allowances and termination compensation paid to the employees amounted to RMB7,440,000 (2006: RMB7,686,000) and RMB245,000 (2006: 268,000). The Group has not established any share option scheme for any of its senior management or employees.

8. FUTURE PLANS FOR MATERIAL INVESTMENTS AND CAPITAL ASSETS

During the year of 2007, the Group continued to speed up the last stage improvement of construction and completion and inspection of uncompleted projects, and has made some progress.

During the year of 2007, the Group strived to resume the trading in the H shares of the Company and engaged a financial adviser to accelerate the preparation of the resumption proposal.

– 171 –

APPENDIX IV

MANAGEMENT DISCUSSION AND ANALYSIS OF THE GROUP AND JBMOE

(iii) Set out below is the management discussion and analysis of the Group for the year ended 31 December 2008.

1. SUMMARY OF THE RESULTS

(1) Summary of income statement

The Group’s profits

	2008	2007	2006	2005	2004
	RMB’000	RMB’000	RMB’000	RMB’000	RMB’000
Turnover	39,617	7,116	16,465	91,221	35,312
(Loss) profit after taxation	(58,394)	112,319	(80,611)	(1,249,512)	(200,046)
(Loss) profit attributable to
equity holders	(54,638)	115,657	(76,705)	(1,229,130)	(197,559)
(Loss) earning per share
(RMB)	RMB(0.06)	RMB0.11	RMB(0.08)	RMB(1.20)	RMB(0.19)

(2) Analysis of segment results

	2008	2007	2006	2005	2004
	Amount	Amount	Amount	Amount	Amount
	RMB’000	RMB’000	RMB’000	RMB’000	RMB’000
Consolidated (loss) profit
before Taxation	(59,007)	112,801	(80,599)	(1,288,602)	(200,831)
Of which:
Property development	(11,544)	(5,113)	(24,477)	(301,109)	(76,040)
Education Investment	(7,603)	(18,461)	(19,666)	(307,451)	(14,148)

(3) Analysis of segment turnover

Total turnover
Of which:
Property development
Education Investment
Other operations

2008
Turnover
% on total
turnover
2007
Turnover
% on total
turnover
2006
Turnover
% on total
turnover
2005
Turnover
% on total
turnover
2004
Turnover
% on total
turnover
RMB’000
RMB’000
RMB’000
RMB’000
RMB’000
RMB’000
RMB’000
RMB’000
RMB’000
RMB’000
39,617
100
9,948
100
18,067
100
91,221
100
35,312
100
36,617
92.43
3,905
39.25
9,521
52.70
77,040
84.45
21,128
59.83
3,000
7.57
3,211
32.28
6,370
35.26
6,472
7.09
10,658
30.18
–
–
–
–
574
3.17
6,783
7.44
3,032
8.59

– 172 –

APPENDIX IV

MANAGEMENT DISCUSSION AND ANALYSIS OF THE GROUP AND JBMOE

2. ANALYSIS OF THE REAL ESTATE DEVELOPMENT BUSINESS

Summary of operating results

	2008	2007
Turnover (RMB’000)	36,617	3,905
Profit before taxation (RMB’000)	(11,544)	(5,113)

During the year, the sales and the occupation arrangement of the phase two project of Shenyang Real Estate “Water-Flowers City” was completed in early section, with the completion and inspection and certificate registration are still under progress. Based on the ongoing effort of the Group, the relevant registration procedure of the phase two project of “Water-Flowers City” was completed in August 2008 and the registration procedure for property ownership certificate has been commenced.

During the year, Building Management Company entered into the Agreement of Settlement of Debts by Properties with relevant parties, pursuant to which the liabilities of certain parties, including the Company, amounted to RMB24,300,000 will be settled by the properties in Cosmo International Mansion with a value of RMB24,300,000. The procedures of obtaining ownership certificates of these properties are under progress. (Details please refer to the announcement of the Company dated 24 December 2008).

During the year, in order to adjust the business structure of the Group and reduce the amount of debts, the Group has disposed of all shareholdings in Building Management Company.

The construction of the “Scenic Bay” project in Beijing has not yet commenced during the Year. In order to adjust the business structure of the Group, the Company is actively planning to realize this project.

3. ANALYSIS OF THE EDUCATION INVESTMENT BUSINESS

During the period, the existing gross floor area of Zhuhai Education Park exceeded 70,000 sq. meters. In June 2008, Zhuhai Beida Subsidiary Experiment School (“Zhuhai School”) entered into a co-operative agreement for the operation of school with the Bureau of Education of Zhuhai Municipality. Accordingly, the Bureau of Education of Zhuhai Municipality has engaged Zhuhai School to provide education to public high school students with Zhuhai city household registration. Zhuhai School enrolled approximately 360 public school students for the 2008 autumn school term, while the total number of all students in Zhuhai School was approximately 987. Zhuhai School has paid Zhuhai Education a rental fee amounting to RMB3,000,000 during the Year.

– 173 –

APPENDIX IV

MANAGEMENT DISCUSSION AND ANALYSIS OF THE GROUP AND JBMOE

During the period, the Group disposed of the debt receivable from Shenyang Education amounting to RMB256.6 million and 30% shareholding in Shenyang Education in order to retrieve the preliminary investment and recover funds for the operation of the Company. The Group ceased to hold any equity interest in Shenyang Education. (Details please refer to the announcement of the Company dated 5 February 2009).

4. ANALYSIS OF THE SYSTEM INTEGRATION BUSINESS

During the year of 2008, Shenyang Business Information was deregistered.

5. OTHER INVESTMENTS

The Company made an investment in Unisplendour Venture Capital in May 2000. Its registered capital is RMB250,000,000. The Company invested RMB20,000,000 and holds 8.00% equity interest in it. During the year of 2008, no debt securities were issued by it.

6. DISPOSAL OF THE DEBT RECEIVABLE TOTALING RMB256,600,000 FROM AND THE 30% EQUITY INTEREST IN, SHENYANG EDUCATION

In February 2008, the Company, Shenyang Real Estate, Building Management Company, Shenyang Property and Shanghai Hanhua Property Management Company Limited (“Shanghai Hanhua”) entered into the Debt Transfer and Shares Subscription Agreement, pursuant to which the Group transferred its debt receivable totaling RMB256,638,760 from Shenyang Education to Shanghai Hanhau, and transferred 30% equity interest in Shenyang Education to Shanghai Hanhua at a consideration of RMB2,514,060. (Details please refer to the Company’s announcement dated 5 February 2009)

7. DISPOSAL OF THE 100% EQUITY INTEREST IN BUILDING MANAGEMENT COMPANY

In November 2008, the Group disposed of its 100% equity interest in Building Management Company in order to adjust the business structure of the Company and reduce the amount of its debts. As Building Management Company has substantially completed the disposal of the remaining residential units and properties of Cosmo International Mansion in previous periods, Building Management Company did not effectively possess any material asset. Meanwhile, Building Management Company still owes a significant amount of liabilities, which includes construction fees payable and presales payments, and has net liabilities in the amount of several ten million RMB. Since the assets, revenue, earnings and consideration involved in the disposal of the equity interest in Building Management Company were insignificant, the disposal did not constitute a discloseable transaction.

– 174 –

APPENDIX IV

MANAGEMENT DISCUSSION AND ANALYSIS OF THE GROUP AND JBMOE

8. DISPOSAL OF THE 60% EQUITY INTEREST IN SHENYANG PROPERTY

In March 2008, the Group disposed of its 60% equity interest in Shenyang Property. Since the total investment amount in Shenyang Property and the transaction consideration were relatively low, the disposal did not constitute a discloseable transaction.

9. RELEASE OF THE PLEDGE OVER THE 80% EQUITY INTEREST IN BEIJING DIYE

From June to November 2007, the Company, Shenyang Real Estate and Beijing Mingyude Business and Trade Company Limited (“Mingyude”) have entered into the Assumption and Equity Pledge Agreement, Extension of Credit and Equity Pledge Supplementary Agreement and the Assumption and Equity Pledge Agreement, pursuant to which the 80% equity interest in Beijing Diye held by Shenyang Real Estate was pledged as security, and Mingyude paid the construction payment of RMB12,870,000 to Shenyang Tianbei Construction Installation Work Company (“Tianbei Construction”) for Shenyang Real Estate and paid the debt due to Hua Jin of RMB32,160,000 for the Company.

On 31 July 2008, the Company and Shenyang Real Estate have entered into the Debt Repayment and Equity Pledge Release Agreement with Mingyude, pursuant to which the parties determined the schedule of repayment and equity pledge release. As at 31 August 2008, the Company and Shenyang Real Estate have fully repaid the assistance and interest thereof to Mingyude, and the 80% equity interest in Beijing Diye was recovered by the Company.

10. ANALYSIS OF THE GROUP’S ASSETS AND FINANCIAL POSITION

(1) Financial statistics of the Group

		As at	As at
		31 December	31 December
Items	Basis	2008	2007
Gearing ratio	Total liabilities/total assets x 100%	27.95%	53.80%
Current ratio	Current assets/current liabilities	4.40	1.03
Quick ratio	(Current assets – inventories
	– properties under development
	– properties held for sale)/
	current liabilities	1.33	0.17
Return on net assets ratio	Net loss/net assets x 100%	(13.18%)	22.96%
Sales profit margin	Net loss/sales x 100%	(137.92%)	1,625.31%
Debt equity ratio	Total liabilities/shareholders’
	equity x 100%	41.49%	116.47%

– 175 –

APPENDIX IV

MANAGEMENT DISCUSSION AND ANALYSIS OF THE GROUP AND JBMOE

(2) Overall position of the Group’s assets

During the year of 2008, there was a decrease in the total assets of the Group when compared with that of the Previous Year. The total assets of the Group decreased to approximately RMB615,089,000 from approximately RMB1,090,528,000 representing a decrease of approximately RMB475,439,000 or 43.60%.

	As at	As at
	31 December	31 December	Change in
Items	2008	2007	amounts
	RMB’000	RMB’000	RMB’000
Total assets	615,089	1,090,528	(475,439)
Of which:
Property and equipment	19,200	146,795	(127,595)
Investment properties	248,342	255,390	(7,048)
Prepaid lease payment on
land use right	–	86,752	(86,752)
Available-for-sale financial
assets	20,000	20,000	–
Other long term receivables	32,745	–	32,745
Current assets	294,802	581,591	(286,789)

(3) Current assets of the Group

During the Year, the current assets of the Group decreased by approximately RMB286,789,000 to RMB294,802,000 as compared with RMB581,591,000 in the Previous Year, representing a decrease of approximately 49.31%.

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APPENDIX IV

MANAGEMENT DISCUSSION AND ANALYSIS OF THE GROUP AND JBMOE

	As at	As at
	31 December	31 December	Change in
Items	2008	2007	amounts
	RMB’000	RMB’000	RMB’000
Current assets	294,802	581,591	(286,789)
Of which:
Properties held for sale	205,735	484,987	(279,252)
Inventories	–	341	(341)
Other receivables and
prepaid expenses	82,264	37,517	44,747
Amount due from parent
Company	–	54,268	(54,268)
Bank balances and cash	6,803	4,478	2,325

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APPENDIX IV

MANAGEMENT DISCUSSION AND ANALYSIS OF THE GROUP AND JBMOE

(4) Bank borrowings of the Group

As at 31 December 2008, the Group’s bank borrowings totalled RMB14,000,000 (2007: RMB62,000,000). Borrowings repayable within one year bear average interest at 6.9% per annum.

Bank borrowings repayable in the following periods Within one year	As at 31 December 2008 (RMB’000) 14,000	As at 31 December 2007 (RMB’000) 62,000

(5) Notes Payable

As at 31 December 2008, the Group did not have any balance of bank acceptance.

(6) Currency Risks

According to the “Quotations of the Exchange Rates for Converting Renminbi to Foreign Currencies by the Head Office of Designated Banks” periodically promulgated by the State Administration of Foreign Exchange of the PRC in 2008, the exchange rates of Renminbi to US dollar and to Hong Kong dollar were stable as a whole, and the exchange rate of the Hong Kong dollar to Renminbi experienced slight fluctuations during the Year. Besides, the balance of deposit denominated in Hong Kong dollar is not substantial. Accordingly, the Company has no currency risk.

(7) Contingent liabilities

Save as disclosed in note 37 to the financial statements of the Company for the year ended 31 December 2008, as at the balance sheet date, the Group did not have any other contingent liabilities.

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APPENDIX IV

MANAGEMENT DISCUSSION AND ANALYSIS OF THE GROUP AND JBMOE

(8) Analysis of equity and profits

			Change in
	31 December 2008	31 December 2007	amounts
	RMB’000	RMB’000	RMB’000
Share capital	1,024,000	1,020,400	–
Share premium	323,258	323,258	–
Statutory surplus reserve	103,231	103,582	(351)
Accumulated losses	(1,032,463)	(977,825)	(54,638)

11. EMPLOYEES AND EMPLOYEES’ EDUCATION LEVEL

As at 31 December 2008, the Group had 45 employees.

During the Year, the aggregate salaries and allowances and termination compensation paid to the employees amounted to RMB4,242,000 (2007: RMB7,440,000) and RMB117,000 (2007: 245,000). The Group has not established any share option scheme for any of its senior management or employees.

12. FUTURE PLANS FOR MATERIAL INVESTMENTS AND CAPITAL ASSETS

During the year of 2008, the Group continued to speed up the final stage improvement works and completion and inspection of uncompleted projects, and has achieved encouraging results. For example, we were ready to apply for the property ownership certificate of the “Water-Flowers City” project of Shenyang Real Estate.

2. MANAGEMENT DISCUSSION AND ANALYSIS OF JBMOE

Set out below is the management discussion and analysis of JBMOE for the three years ended 31 December 2008 and the period ended 31 August 2009 (“Review Period”).

Financial Review

Turnover

Turnover of JBMOE was primarily arising from rental income and reimbursement of electricity charges. During the Review Period, JBMOE recorded turnover of approximately RMB8,245,000, RMB8,611,000, RMB8,543,000 and RMB6,126,000 for the year ended 31 December 2006, 2007 and 2008 and the period ended 31 August 2009 respectively.

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APPENDIX IV

MANAGEMENT DISCUSSION AND ANALYSIS OF THE GROUP AND JBMOE

Profit/loss

During the Review Period, JBMOE recorded a profit after tax of approximately RMB1,621,000, RMB2,349,000, RMB3,350,000 and RMB2,621,000 for the year ended 31 December 2006, 2007 and 2008 and the period ended 31 August 2009 respectively. The increase in net profits was primarily due to the decrease in administrative expenses for the Review Period.

Liquidity, Financial Resources and Capital Resources

Credit Risk

JBMOE’s maximum exposure to credit risk in the event of the counterparties’ failure to perform their obligations in relation to each class of recognised financial assets is the carrying amount of those assets as stated in the statement of financial position in Appendix II of this circular.

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

Other then concentration of credit risk on liquid funds which are deposited with several banks with high credit ratings, JBMOE does not have any other significant concentration of credit risk. Trade receivables consist of a large number of customers, spreading across of the PRC.

JBMOE has polices in place to ensure that sale of products or service provided are made to customers with an appropriate credit history. JBMOE also performs periodic credit evaluations of it customers and believes that adequate impairment loss on trade and other receivables have been made.

Liquidity risk

In the management of JBMOE’s liquidity risk, JBMOE monitors and maintains a sufficient level of cash and cash equivalents considered adequate by management to finance the JBMOE’s operations and mitigate the effects of fluctuation in cash flows. Management reviews and monitors its working capital requirements regularly.

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APPENDIX IV

MANAGEMENT DISCUSSION AND ANALYSIS OF THE GROUP AND JBMOE

The following table details the contractual maturities at the end of reporting period of JBMOE’s non-derivative financial liabilities, which are based on contractual undiscounted cash flows (including interest payments computed using contractual rates) and the earliest date JBMOE can be required to pay. The tables include both interest and principal cash flows.

At 31 August 2009 Non-derivative financial liabilities Trade and other payables Amount due to shareholders At 31 December 2008 Non-derivative financial liabilities Trade and other payables Amount due to shareholders	On demand or within one year Total undiscounted cash flow RMB RMB 2,391,304 2,391,304 8,101,162 8,101,162 10,492,466 10,492,466 On demand or within one year Total undiscounted cash flow RMB RMB 1,639,672 1,639,672 8,101,162 8,101,162 9,740,834 9,740,834	Carrying amounts RMB 2,391,304 8,101,162
		10,492,466

		Carrying amounts RMB 1,639,672 8,101,162
		9,740,834

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APPENDIX IV

MANAGEMENT DISCUSSION AND ANALYSIS OF THE GROUP AND JBMOE

At 31 December 2007 Non-derivative financial liabilities Trade and other payables Amount due to shareholders At 31 December 2006 Non-derivative financial liabilities Trade and other payables Amount due to shareholders	On demand or within one year Total undiscounted cash flow RMB RMB 1,610,543 1,610,543 18,382,112 18,382,112 19,992,655 19,992,655 On demand or within one year Total undiscounted cash flow RMB RMB 1,697,979 1,697,979 38,432,112 38,432,112 40,130,091 40,130,091	Carrying amounts RMB 1,610,543 18,382,112
		19,992,655

		Carrying amounts RMB 1,697,979 38,432,112
		40,130,091

Financial resources and capital resources

JBMOE had bank balances and cash of approximately RMB21,032,000, RMB1,211,000, RMB3,537,000 and RMB8,768,000 as at 31 December 2006, 2007 and 2008 and 31 August 2009 respectively. The amounts due to shareholders were approximately RMB38,432,000, RMB18,382,000, RMB8,101,000 and RMB8,101,000 as at 31 December 2006, 2007 and 2008 and 31 August 2009 respectively and were unsecured, interest-free and repayable on demand. There was no bank loan as at 31 December 2006, 2007 and 2008 and 31 August 2009 respectively.

Gearing Ratio

The gearing ratio of JBMOE, calculated as the total long term liabilities to the capital and reserves, was zero as at 31 December 2006, 2007 and 2008 and 31 August 2009.

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APPENDIX IV

MANAGEMENT DISCUSSION AND ANALYSIS OF THE GROUP AND JBMOE

Foreign Currency Risk

Currency risk refers to the risk that movement in foreign currency rate which will affect JBMOE’s financial results and its cashflow. The management considers that JBMOE does not expose to significant foreign currency risk as majority of its operations and transactions are denominated in the functional currencies of JBMOE.

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

Charges on Assets

As at 31 December 2006, 2007 and 2008 and 31 August 2009, no asset of JBMOE has been pledged.

Capital commitment

JBMOE had no capital commitment during the Review Period.

Capital Risk Management

JBMOE manages its capital to ensure that JBMOE will be able to continue as a going concern while maximising the return to shareholders through optimisation of the debt and equity balance.

The capital structure of JBMOE consists of cash and cash equivalents and equity attributable to equity holders of JBMOE, comprising paid-up capital and retained earnings. The directors of JBMOE review the capital structure on a regular basis. As a part of this review, the directors of JBMOE consider the cost of capital and the associated risks and take appropriate actions to adjust JBMOE’s capital structure. The overall strategy of JBMOE remained unchanged during the Review Period.

Significant Investments, Material Acquisition and Disposals

JBMOE did not have any significant investment, material acquisition and disposal during the Review Period.

Future plans for material investments and capital assets

During the Review Period, JBMOE did not have any future plans for material investments or capital assets.

Contingent Liabilities

JBMOE did not have any significant contingent liabilities during the Review Period.

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APPENDIX IV

MANAGEMENT DISCUSSION AND ANALYSIS OF THE GROUP AND JBMOE

Employee and Remuneration Policies

As at 31 December 2006, 2007 and 2008 and 31 August 2009, JBMOE had 17, 13, 10 and 10 employees respectively. Staff costs, including directors’ emoluments, other staff costs and contributions to retirement benefit scheme, was approximately RMB1,723,000, RMB1,073,000, RMB791,000 and RMB485,000 for the year ended 31 December 2006, 2007 and 2008 and period ended 31 August 2009 respectively. The PRC Mining Company remunerates its employees based on their performance, experience and the prevailing industry practice.

– 184 –

APPENDIX V

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE RESULTING GROUP

ACCOUNTANTS’ REPORT ON UNAUDITED PRO FORMA FINANCIAL INFORMATION

==> picture [154 x 37] intentionally omitted <==

Lo and Kwong C.P.A. Company Limited Certified Public Accountants Suit 216-218, 2/F Shui On Centre 6-8 Harbour Road Wanchai Hong Kong

28 December 2009

The Directors Shenyang Public Utility Holdings Company Limited Jinmao International Apartment 14/F, Du Dong District Shenyang The People’s Republic of China

Dear Sirs,

We report on the unaudited pro forma financial information of Shenyang Public Utility Holdings Company Limited (the “Company”) and its subsidiaries (hereinafter collectively referred to as the “Group”) set out in Appendix V of the circular dated 28 December 2009 (the “Circular”) in connection with the disposal of 80% equity interest in Beijing Diye Real Estate Development Company Limited (“Beijing Diye”), the acquisition of the 100% equity interest of Shenzhen Jade Bird Optoelectronic Co., Ltd. (“JBMOE”), and acquisition of CY Property (collectively referred to as the “Proposed Transactions”), the Group immediately after the completion of the Proposed Transaction is referred to as the “Resulting Group”, which has been prepared by the directors of the Company (the “Directors”), for illustrative purpose only, to provide information about how the Proposed Transaction might have affected the financial information presented.

Respective responsibilities of Directors and reporting accountants

It is the responsibility solely of the Directors to prepare the unaudited pro forma financial information in accordance with paragraph 29 of Chapter 4 of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (the “Listing Rules”) and with reference to Accounting Guideline 7 “Preparation of Pro Forma Financial Information for Inclusion in Investment Circulars” issued by the Hong Kong Institute of Certified Public Accountants (the “HKICPA”).

It is our responsibility to form an opinion, as required by paragraph 29(7) of Chapter 4 of the Listing Rules, on the unaudited pro forma financial information and to report our opinion to you. We do not accept any responsibility for any reports previously given by us on any financial information used in the compilation of the unaudited pro forma financial information beyond that owed to those to whom those reports were addressed by us at the dates of their issue.

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APPENDIX V

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE RESULTING GROUP

Basis of opinion

We conducted our engagement in accordance with Hong Kong Standard on Investment Circular Reporting Engagements 300 “Accountants’ Reports on Pro Forma Financial Information in Investment Circulars” issued by the Hong Kong Institute of Certified Public Accountants. Our work consisted primarily of comparing the unadjusted financial information with the source documents, considering the evidence supporting the adjustments and discussing the unaudited pro forma financial information with the Directors. This engagement did not involve independent examination of any of the underlying financial information.

We planned and performed our work so as to obtain the information and explanations we considered necessary in order to provide us with sufficient evidence to give reasonable assurance that the unaudited pro forma financial information has been properly compiled by the Directors on the basis stated, that such basis is consistent with the accounting policies of the Group and that the adjustments are appropriate for the purpose of the unaudited pro forma financial information as disclosed pursuant to paragraph 29(1) of Chapter 4 of the Listing Rules.

The unaudited pro forma financial information is for illustrative purpose only, based on the judgments and assumptions of the Directors, and, because of its hypothetical nature, does not provide any assurance or indication that any event will take place in the future and may not be indicative of

the financial position of the Resulting Group as at 31 August 2009 or any future date; and
the results and cash flows of the Resulting Group for the year ended 31 December 2008 or any future date.

Opinion

In our opinion:

a) the unaudited pro forma financial information has been properly compiled by the Directors on the basis stated;
b) such basis is consistent with the accounting policies of the Group; and
c) the adjustments are appropriate for the purposes of the unaudited pro forma financial information as disclosed pursuant to paragraph 29(1) of Chapter 4 of the Listing Rules.

Yours faithfully, Lo and Kwong C.P.A Company Limited Certified Public Accountants Lo Wah Wai Practising Certificate Number: P02693 Suit 216-218, 2/F Shui On Centre, 6-8 Habour Road, Wanchai, Hong Kong 28 December 2009

– 186 –

APPENDIX V UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE RESULTING GROUP

A. UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

The following is an illustrative unaudited pro forma consolidated financial information (the “Unaudited Pro Forma Financial Information”) which has been prepared in accordance with the Listing Rules for the purposes of illustrating the effect of the disposal of 80% equity interest in Beijing Diye Real Estate Development Company Limited (“Beijing Diye”), acquisition of the 100% equity interest of Shenzhen Jade Bird Optoelectronic., Ltd (“JBMOE”), and acquisition of CY Property as at 31 August 2009 (collectively referred to as the “Proposed Transactions”), the Group immediately after the completion of the Proposed Transaction is referred to as the “Resulting Group”, and the results and cash flows of the Resulting Group for the year ended 31 December 2008. As it is prepared for illustrative purpose only, and because of its nature, it may not give a true picture of the financial position, results and cash flows of the Resulting Group following completion of the Proposed Transaction.

The unaudited pro forma consolidated statement of financial position of the Resulting Group as at 31 August 2009 is prepared based on (i) the audited consolidated statement of financial position of the Group as extracted from the audited financial statements of the Group as of 31 August 2009 as set out in Appendix I to this circular; (ii) the audited statement of financial position of JBMOE as at 31 August 2009 as set out in Appendix II to this circular; as if the Proposed Transactions had been completed on 31 August 2009.

The unaudited pro forma consolidated statement of comprehensive income and unaudited pro forma consolidated cash flow statement of the Resulting Group are prepared based on (i) the audited consolidated statement of comprehensive income of the Group for the year ended 31 December 2008 as extracted from the audited financial statement of the Group as of 31 December 2008 as set out in the Appendix I to this Circular; (ii) the audited statement of comprehensive income and audited cash flow statement of JBMOE for the year ended 31 December 2008 as set out in Appendix II to this Circular, as if the Proposed Transactions had been completed on 31 December 2008.

The Unaudited Pro Forma Financial Information of the Resulting Group is presented in four scenarios as follows:

(1) Assume the disposal 80% equity interest in Beijing Diye have been completed;
(2) Assume the disposal 80% equity interest in Beijing Diye and acquisition of the 100% equity interest of JBMOE by the Shenyang Public Utility Holdings Company Limited have been completed;
(3) Assume the disposal 80% equity interest in Beijing Diye and the acquisition of CY Property have been completed;
(4) Assume the disposal 80% equity interest in Beijing Diye, acquisition of the 100% equity interest of JBMOE by the Shenyang Public Utility Holdings Company Limited and the acquisition of CY Property have been completed.

– 187 –

APPENDIX V UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE RESULTING GROUP

UNADUITED PRO FORMA CONSOLIDATED STATEMENT OF FINANCIAL POSITION OF THE RESULTING GROUP

Scenarios 1: Assume the disposal 80% equity interest in Beijing Diye have been completed on 31 August 2009

NON-CURRENT ASSETS Property and equipment Investment properties Available-for sale financial assets CURRENT ASSETS Properties held for sale Amount due from related companies Prepayments Other receivables Bank balances and cash CURRENT LIABILITIES Trade payables Other payables and accruals Receipts in advance Provision for potential liabilities Bank loans – repayable within one year Amount due to inter companies Amount due to a former shareholder NET CURRENT ASSETS TOTAL ASSETS LESS CURRENT LIABILITIES	Audited consolidated statement of financial postion of the Group as at 31 August 2009 Pro forma adjustments RMB’000 RMB’000 Note b (i) 18,061 (357) 297,000 20,000	Unaudited pro forma consolidated statement of financial position of the Group as at 31 August 2009 after disposal 80% equity interest of Beijing Diye RMB’000 17,704 297,000 20,000
	335,061 193,941 (193,941) 1,201 3,572 73,255 (230) 4,898 195,331 276,867 5,836 (20) 36,665 (940) 13,708 1,041 14,000 – 44,328 115,578 161,289	334,704
		– 1,201 3,572 73,025 200,229
		278,027
		5,816 35,725 13,708 1,041 14,000 – 44,328
		114,618
		163,409
	496,350	498,113

– 188 –

APPENDIX V UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE RESULTING GROUP

UNADUITED PRO FORMA CONSOLIDATED STATEMENT OF FINANCIAL POSITION OF THE RESULTING GROUP

Scenarios 1: Assume the disposal 80% equity interest in Beijing Diye have been completed on 31 August 2009 (continued)

CAPITAL AND RESERVES Share capital Reserves Equity attributable to owners of the Company Non-controlling interests Total equity NON-CURRENT LIABILITIES Deferred taxation	Audited consolidated statement of financial postion of the Group as at 31 August 2009 Pro forma adjustments RMB’000 RMB’000 Note b (i) 1,020,400 (579,502) 1,763	Unaudited pro forma consolidated statement of financial position of the Group as at 31 August 2009 after disposal 80% equity interest of Beijing Diye RMB’000 1,020,400 (577,739)
	440,898 39,688 480,586 15,764	442,661 39,688
		482,349
		15,764
	496,350	498,113

– 189 –

APPENDIX V UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE RESULTING GROUP

UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME OF THE RESULTING GROUP

Scenarios 1: Assume the disposal 80% equity interest in Beijing Diye have been completed for the year ended 31 December 2008

Turnover Interest income Other income Cost of properties sold Taxes on sales of properties Staff costs Depreciation and amortisation Impairment loss recognised in respect of property held for sales Net change on fair value on investment properties Loss on disposal of investment property Gain (loss) on disposal of subsidiaries Impairment loss recognised in respect of other receivables Impairment loss recognised in respect of investment in associate Other operating expenses Finance costs (Loss) profit before taxation Income tax expense (Loss) profit for the year (Loss) profit for the year and total comprehensive (loss)/income for the year, net of tax Attributable to: Owners of the Company Non-controlling interests	Audited consolidated statement of comprehensive income of the Group for the year ended 31 December 2008 Pro forma adjustments RMB’000 RMB’000 Note b (ii) 39,617 33 (20) 16,296 (10,132) (40,237) (2,179) (4,359) 3,255 (2,061) 108 (216,438) 216,438 (483) (852) 204,123 (157,112) (4,034) 525 (200) (20,685) 909 (17,876)	Unaudited consolidated statement of comprehensive income of the Group after disposal 80% equity interest of Beijing Diye RMB’000 39,617 13 6,164 (40,237 (2,179 (1,104 (1,953 – (483 (852 47,011 (3,509 (200 (19,776 (17,876
	(49,335) (73) (49,408)	4,636 (73
		4,563
	(49,408)	4,563

	(48,553) 53,971 (855)	5,418 (855
	(49,408)	4,563

– 190 –

APPENDIX V UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE RESULTING GROUP

UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF CASH FLOWS OF THE RESULTING GROUP

Scenarios 1: Assume the disposal 80% equity interest in Beijing Diye have been completed for the year ended 31 December 2008

Audited consolidated cash flow statement of the Group for the year ended 31 December 2008 RMB’000 (49,335)	Pro forma adjustments RMB’000 Note b (iii) 211,083	Unaudited pro forma consolidated cash flow statement of the Group for the year ended 31 December 2008 after disposal 80% equity interest of Beijing Diye RMB’000 161,748
(33) 2,061 216,438 200 483 17,876 852 (204,123) 4,034 (11,547) 42,789 1,467 54,268 – (18,318) 60,897 (1,002) 2,706 131,260	20 (108) (216,438) – (525) 3,231 1,048 50,223	(13) 1,953 – 200 483 17,876 852 (204,123) 3,509
		(17,515) 46,020 2,515 54,268 – (18,318) 111,120 (1,002) 2,706
		179,794

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APPENDIX V UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE RESULTING GROUP

UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF CASH FLOWS OF THE RESULTING GROUP

Scenarios 1: Assume the disposal 80% equity interest in Beijing Diye have been completed for the year ended 31 December 2008 (continued)

INVESTING ACTIVITIES Bank interest received Net Cash inflow from disposal of subsidiaries Purchase of property and equipment Purchase of investment properties Increase in other receivables NET CASH (USED IN) GENERATED FROM INVESTING ACTIVITIES FINANCING ACTIVITIES New Bank loans raised Repayment of bank loans borrowed Interests payment NET CASH USED IN FINANCING ACTIVITIES NET INCREASE IN CASH AND CASH EQUIVALENTS CASH AND CASH EQUIVALENTS AT THE BEGINNING OF THE YEAR CASH AND CASH EQUIVALENTS AT THE END OF THE YEAR	Audited consolidated cash flow statement of the Group for the year ended 31 December 2008 Pro forma adjustments RMB’000 RMB’000 Note b (iii) 33 (20) 8,502 199,971 (1,521) – (112,073)	Unaudited pro forma consolidated cash flow statement of the Group for the year ended 31 December 2008 after disposal 80% equity interest of Beijing Diye RMB’000 13 208,473 (1,521) – (112,073)
	(105,059) 14,000 (20,000) (17,876) (23,876) 2,325 248,485 4,478	94,892
		14,000 (20,000) (17,876)
		(23,876)
		250,810 4,478
	6,803	255,288

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APPENDIX V UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE RESULTING GROUP

UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF FINANCIAL POSITION OF THE RESULTING GROUP

Scenarios 2: Assume the disposal 80% equity interest in Beijing Diye and acquisition of the 100% equity interest of JBMOE by the Shenyang Public Utility Holdings Company Limited have been completed on 31 August 2009

Audited consolidated statement of financial postion of the Group as at 31 August 2009 Pro forma adjustments RMB’000 RMB’000 Note b (i) 18,061 (357) 297,000 20,000	Unaudited pro forma consolidated statement of financial position of the Group as at 31 August 2009 after disposal 80% equity interest of Beijing Diye RMB’000 17,704 297,000 20,000	Audited financial position of JBMOE as at 31 August 2009 Pro forma adjustments Pro forma adjustments RMB’000 RMB’000 RMB’000 Note c (i) Note c (x) 950 33,596 53,604 –	Unaudited pro forma consolidated statement of financial position of the Group as at 31 August 2009 after disposal 80% equity interest of Beijing Diye and acquisition of the 100% equity interest of JBMOE RMB’000 18,654 384,200 20,000
335,061 193,941 (193,941) – 1,201 3,572 73,255 (230) – 4,898 195,331 276,867 5,836 (20) 36,665 (940) 13,708 1,041 14,000 – – 44,328 115,578 161,289	334,704 – – 1,201 3,572 73,025 – 200,229 278,027 5,816 35,725 13,708 1,041 14,000 – – 44,328 114,618 163,409	34,546 – 2,364 – – (1,000) – 325 8,768 (79,000) 11,457 – 2,391 8,101 – – – – 8,101 (8,101) – 10,492 965	422,854
			– 2,364 1,201 2,572 73,025 325 129,997
			209,484
			5,816 46,217 13,708 1,041 14,000 – – 44,328
			125,110
			84,374
496,350	498,113	35,511	507,228

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APPENDIX V UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE RESULTING GROUP

UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF FINANCIAL POSITION OF THE RESULTING GROUP

Audited consolidated statement of financial postion of the Group as at 31 August 2009 Pro forma adjustments RMB’000 RMB’000 Note b (i) 1,020,400 (579,502) 1,763	Unaudited pro forma consolidated statement of financial position of the Group as at 31 August 2009 after disposal 80% equity interest of Beijing Diye RMB’000 1,020,400 (577,739)	Audited financial position of JBMOE as at 31 August 2009 Pro forma adjustments Pro forma adjustments RMB’000 RMB’000 RMB’000 Note c (i) Note c (x) 10,650 (10,650) 24,861 (23,786)	Unaudited pro forma consolidated statement of financial position of the Group as at 31 August 2009 after disposal 80% equity interest of Beijing Diye and acquisition of the 100% equity interest of JBMOE RMB’000 1,020,400 (576,664)
440,898 39,688 480,586 15,764	442,661 39,688 482,349 15,764	35,511 35,511 – 8,040	443,736 39,688
			483,424
			23,804
496,350	498,113	35,511	507,228

– 194 –

APPENDIX V UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE RESULTING GROUP

UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME OF THE RESULTING GROUP

Audited consolidated statement of comprehensive income of the Group for the year ended 31 December 2008 Pro forma adjustments Unaudited consolidated statement of comprehensive income of the Group after disposal 80% equity interest of Beijing Diye Audited statement of comprehensive income of JBMOE for the year ended 31 December 2008 Pro forma adjustments Pro forma adjustments Unaudited consolidated statement of comprehensive income of the Group after disposal 80% equity interest of Beijing Diye and acquisition of the 100% equity interest of JBMOE RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 Note b (ii) Note c (v) Note c (vi) Turnover 39,617 39,617 8,543 48,160 Cost of good solds – – (1,763) (1,763 Interest income 33 (20) 13 – 13 Other income 16,296 (10,132) 6,164 105 6,269 Cost of properties sold (40,237) (40,237) – (40,237 Taxes on sales of properties (2,179) (2,179) – (2,179 Staff costs (4,359) 3,255 (1,104) – (1,104 Depreciation and amortisation (2,061) 108 (1,953) – (1,953 Impairment loss recognised in respect of property held for sales (216,438) 216,438 – – – Net change on fair value on investment properties (483) (483) – 55,569 55,086 Loss on disposal of investment property (852) (852) – (852 Gain (loss) on disposal of subsidiaries 204,123 (157,112) 47,011 – 47,011 Impairment loss recognised in respect of other receivables (4,034) 525 (3,509) – (3,509 Impairment loss recognised in respect of investment in associate (200) (200) – (200 Other operating expenses (20,685) 909 (19,776) – (19,776 Administrative expenses – – (3,535) (3,535 Written off a negative goodwill on purchase of a subsidiary – – (124) (124 Finance costs (17,876) (17,876) – (17,876 (Loss) profit before taxation (49,335) 4,636 3,350 63,641 Income tax expense (73) (73) – (8,335) (8,408 (Loss) profit for the year (49,408) 4,563 3,350 55,023 (Loss) profit for the year and total comprehensive (loss) income for the year, net of tax (49,408) 4,563 3,350 55,023 Attributable to: Owners of the Company (48,553) 53,971 5,418 3,350 (124) 47,234 55,878 Non-controlling interests (855) (855) – (855 (49,408) 4,563 3,350 55,023	Audited consolidated statement of comprehensive income of the Group for the year ended 31 December 2008 Pro forma adjustments Unaudited consolidated statement of comprehensive income of the Group after disposal 80% equity interest of Beijing Diye Audited statement of comprehensive income of JBMOE for the year ended 31 December 2008 Pro forma adjustments Pro forma adjustments Unaudited consolidated statement of comprehensive income of the Group after disposal 80% equity interest of Beijing Diye and acquisition of the 100% equity interest of JBMOE RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 Note b (ii) Note c (v) Note c (vi) Turnover 39,617 39,617 8,543 48,160 Cost of good solds – – (1,763) (1,763 Interest income 33 (20) 13 – 13 Other income 16,296 (10,132) 6,164 105 6,269 Cost of properties sold (40,237) (40,237) – (40,237 Taxes on sales of properties (2,179) (2,179) – (2,179 Staff costs (4,359) 3,255 (1,104) – (1,104 Depreciation and amortisation (2,061) 108 (1,953) – (1,953 Impairment loss recognised in respect of property held for sales (216,438) 216,438 – – – Net change on fair value on investment properties (483) (483) – 55,569 55,086 Loss on disposal of investment property (852) (852) – (852 Gain (loss) on disposal of subsidiaries 204,123 (157,112) 47,011 – 47,011 Impairment loss recognised in respect of other receivables (4,034) 525 (3,509) – (3,509 Impairment loss recognised in respect of investment in associate (200) (200) – (200 Other operating expenses (20,685) 909 (19,776) – (19,776 Administrative expenses – – (3,535) (3,535 Written off a negative goodwill on purchase of a subsidiary – – (124) (124 Finance costs (17,876) (17,876) – (17,876 (Loss) profit before taxation (49,335) 4,636 3,350 63,641 Income tax expense (73) (73) – (8,335) (8,408 (Loss) profit for the year (49,408) 4,563 3,350 55,023 (Loss) profit for the year and total comprehensive (loss) income for the year, net of tax (49,408) 4,563 3,350 55,023 Attributable to: Owners of the Company (48,553) 53,971 5,418 3,350 (124) 47,234 55,878 Non-controlling interests (855) (855) – (855 (49,408) 4,563 3,350 55,023	Audited consolidated statement of comprehensive income of the Group for the year ended 31 December 2008 Pro forma adjustments Unaudited consolidated statement of comprehensive income of the Group after disposal 80% equity interest of Beijing Diye Audited statement of comprehensive income of JBMOE for the year ended 31 December 2008 Pro forma adjustments Pro forma adjustments Unaudited consolidated statement of comprehensive income of the Group after disposal 80% equity interest of Beijing Diye and acquisition of the 100% equity interest of JBMOE RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 Note b (ii) Note c (v) Note c (vi) Turnover 39,617 39,617 8,543 48,160 Cost of good solds – – (1,763) (1,763 Interest income 33 (20) 13 – 13 Other income 16,296 (10,132) 6,164 105 6,269 Cost of properties sold (40,237) (40,237) – (40,237 Taxes on sales of properties (2,179) (2,179) – (2,179 Staff costs (4,359) 3,255 (1,104) – (1,104 Depreciation and amortisation (2,061) 108 (1,953) – (1,953 Impairment loss recognised in respect of property held for sales (216,438) 216,438 – – – Net change on fair value on investment properties (483) (483) – 55,569 55,086 Loss on disposal of investment property (852) (852) – (852 Gain (loss) on disposal of subsidiaries 204,123 (157,112) 47,011 – 47,011 Impairment loss recognised in respect of other receivables (4,034) 525 (3,509) – (3,509 Impairment loss recognised in respect of investment in associate (200) (200) – (200 Other operating expenses (20,685) 909 (19,776) – (19,776 Administrative expenses – – (3,535) (3,535 Written off a negative goodwill on purchase of a subsidiary – – (124) (124 Finance costs (17,876) (17,876) – (17,876 (Loss) profit before taxation (49,335) 4,636 3,350 63,641 Income tax expense (73) (73) – (8,335) (8,408 (Loss) profit for the year (49,408) 4,563 3,350 55,023 (Loss) profit for the year and total comprehensive (loss) income for the year, net of tax (49,408) 4,563 3,350 55,023 Attributable to: Owners of the Company (48,553) 53,971 5,418 3,350 (124) 47,234 55,878 Non-controlling interests (855) (855) – (855 (49,408) 4,563 3,350 55,023	Audited consolidated statement of comprehensive income of the Group for the year ended 31 December 2008 Pro forma adjustments Unaudited consolidated statement of comprehensive income of the Group after disposal 80% equity interest of Beijing Diye Audited statement of comprehensive income of JBMOE for the year ended 31 December 2008 Pro forma adjustments Pro forma adjustments Unaudited consolidated statement of comprehensive income of the Group after disposal 80% equity interest of Beijing Diye and acquisition of the 100% equity interest of JBMOE RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 Note b (ii) Note c (v) Note c (vi) Turnover 39,617 39,617 8,543 48,160 Cost of good solds – – (1,763) (1,763 Interest income 33 (20) 13 – 13 Other income 16,296 (10,132) 6,164 105 6,269 Cost of properties sold (40,237) (40,237) – (40,237 Taxes on sales of properties (2,179) (2,179) – (2,179 Staff costs (4,359) 3,255 (1,104) – (1,104 Depreciation and amortisation (2,061) 108 (1,953) – (1,953 Impairment loss recognised in respect of property held for sales (216,438) 216,438 – – – Net change on fair value on investment properties (483) (483) – 55,569 55,086 Loss on disposal of investment property (852) (852) – (852 Gain (loss) on disposal of subsidiaries 204,123 (157,112) 47,011 – 47,011 Impairment loss recognised in respect of other receivables (4,034) 525 (3,509) – (3,509 Impairment loss recognised in respect of investment in associate (200) (200) – (200 Other operating expenses (20,685) 909 (19,776) – (19,776 Administrative expenses – – (3,535) (3,535 Written off a negative goodwill on purchase of a subsidiary – – (124) (124 Finance costs (17,876) (17,876) – (17,876 (Loss) profit before taxation (49,335) 4,636 3,350 63,641 Income tax expense (73) (73) – (8,335) (8,408 (Loss) profit for the year (49,408) 4,563 3,350 55,023 (Loss) profit for the year and total comprehensive (loss) income for the year, net of tax (49,408) 4,563 3,350 55,023 Attributable to: Owners of the Company (48,553) 53,971 5,418 3,350 (124) 47,234 55,878 Non-controlling interests (855) (855) – (855 (49,408) 4,563 3,350 55,023
(49,335) (73) (49,408)	4,636 (73) 4,563	3,350 – (8,335) 3,350	63,641 (8,408
			55,023
(49,408)	4,563	3,350	55,023

(48,553) 53,971 (855)	5,418 (855)	3,350 (124) 47,234 –	55,878 (855
(49,408)	4,563	3,350	55,023

– 195 –

APPENDIX V UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE RESULTING GROUP

UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF CASH FLOWS OF THE RESULTING GROUP

OPERATING ACTIVITIES (Loss) profit before taxation Adjustments for: Bank interest received Depreciation on property and equipment Depreciation on investment properties Impairment loss recognised in respect of properties held for sale Impairment loss recognised in respect of associate Net change in fair value on investment property Finance costs Loss on disposal of property and equipment Written off a negative goodwill on purchase of a subsidiary Gain on disposal of subsidiaries Impairment loss recognised in respect of other receivables Operating cash flows before movements in working capital Decrease (increase) in properties held for sale Decrease in accounts receivables and other receivalbes Decrease in prepayments Increase in amount due from holding company Decrease internal amount due to the Group Companies Decrease in trade payable Increase in other payables and accrued charges Decrease in provision for potential liabilities Increase in receipts in advance Decrease in amount due to shareholders	Audited consolidated cash flow statement of the Group for the year ended 31 December 2008 Pro forma adjustments RMB’000 RMB’000 Note b (v) (49,335) 211,083	Unaudited pro forma consolidated cash flow statement of the Group for the year ended 31 December 2008 after disposal 80% equity interest of Beijing Diye RMB’000 161,748	Audited statement of cash flows of JBMOE for the year ended 31 December 2008 Pro forma adjustments Pro forma adjustments Pro forma adjustments Pro forma adjustments RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 Note c (v) Note c (vi) Note c (ix) Note c (x) 3,350 (124) 55,569	Unaudited pro forma consolidated cash flow statement of the Group for the year ended 31 December 2008 after disposal 80% equity interest of Beijing Diye and acquisition of the 100% equity interest of JBMOE RMB’000 220,543
	(33) 20 2,061 (108) – 216,438 (216,438) 200 483 17,876 852 (204,123) 4,034 (525) (11,547) 42,789 3,231 – 1,467 1,048 54,268 – (18,318) 60,897 50,223 (1,002) 2,706 –	(13) 1,953 – – 200 483 17,876 852 – (204,123) 3,509	(105) 193 – 1,252 – (55,569) – 124 – – 4,690 – 8,140 – – – – 29 (10,280) – (10,280) 10,280	(118) 2,146 1,252 – 200 (55,086) 17,876 852 124 (204,123) 3,509
		(17,515) 46,020 – 2,515 54,268 – (18,318) 111,120 (1,002) 2,706 –		(12,825) 46,020 8,140 2,515 54,268 – (18,318) 100,869 (1,002) 2,706 –

– 196 –

APPENDIX V UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE RESULTING GROUP

UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF CASH FLOWS OF THE RESULTING GROUP

Audited consolidated cash flow statement of the Group for the year ended 31 December 2008 Pro forma adjustments RMB’000 RMB’000 Note b (v) 131,260 –	Unaudited pro forma consolidated cash flow statement of the Group for the year ended 31 December 2008 after disposal 80% equity interest of Beijing Diye RMB’000 179,794 –	Audited statement of cash flows of JBMOE for the year ended 31 December 2008 Pro forma adjustments Pro forma adjustments Pro forma adjustments Pro forma adjustments RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 Note c (v) Note c (vi) Note c (ix) Note c (x) 2,579 (325)	Unaudited pro forma consolidated cash flow statement of the Group for the year ended 31 December 2008 after disposal 80% equity interest of Beijing Diye and acquisition of the 100% equity interest of JBMOE RMB’000 182,373 (325)
131,260 33 (20) 8,502 199,971 (1,521) – (112,073) – (105,059) 14,000 (20,000) (17,876) (23,876) 2,325 248,485 4,478	179,794	2,254 105 – (33) – – – (78,789) 72 – – – – 2,326 – (78,789) – 1,211	182,048
	13 208,473 (1,521) – (112,073) –		118 208,473 (1,554) – (112,073) (78,789)
	94,892		16,175
	14,000 (20,000) (17,876)		14,000 (20,000) (17,876)
	(23,876)		(23,876)
	250,810 4,478		174,347 5,689
6,803	255,288	3,537	180,036

– 197 –

APPENDIX V UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE RESULTING GROUP

UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF FINANCIAL POSITION OF THE RESULTING GROUP

Scenarios 3: Assume the disposal 80% equity interest in Beijing Diye and the acquisition of CY Property have been completed on 31 August 2009

Audited consolidated statement of financial position of the Group as at 31 August 2009 Pro forma adjustments RMB’000 RMB’000 Note b (i) 18,061 (357) 297,000 20,000	Unaudited pro forma consolidated statement of financial position of the Group as at 31 August 2009 after disposal 80% equity interest of Beijing Diye Pro forma adjustments RMB’000 RMB’000 Note d (i) 17,704 297,000 90,234 20,000	Unaudited pro forma consolidated statement of financial position of as at 31 August 2009 after disposal 80% equity interest of Beijing Diye and acquisition of CY Property RMB’000 17,704 387,234 20,000
335,061 193,941 (193,941) 1,201 3,572 73,255 (230) 4,898 195,331 276,867 5,836 (20) 36,665 (940) 13,708 1,041 14,000 – 44,328 115,578 161,289	334,704 – 1,201 3,572 73,025 200,229 (90,234) 278,027 5,816 35,725 13,708 1,041 14,000 – 44,328 114,618 163,409	424,938
		– 1,201 3,572 73,025 109,995
		187,793
		5,816 35,725 13,708 1,041 14,000 – 44,328
		114,618
		73,175
496,350	498,113	498,113

– 198 –

APPENDIX V UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE RESULTING GROUP

UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF FINANCIAL POSITION OF THE RESULTING GROUP

Scenarios 3: Assume the disposal 80% equity interest in Beijing Diye and the acquisition of CY Property have been completed on 31 August 2009 (continued)

Audited consolidated statement of financial position of the Group as at 31 August 2009 Pro forma adjustments RMB’000 RMB’000 Note b (i) 1,020,400 (579,502) 1,763	Unaudited pro forma consolidated statement of financial position of the Group as at 31 August 2009 after disposal 80% equity interest of Beijing Diye Pro forma adjustments RMB’000 RMB’000 Note d (i) 1,020,400 (577,739)	Unaudited pro forma consolidated statement of financial position of as at 31 August 2009 after disposal 80% equity interest of Beijing Diye and acquisition of CY Property RMB’000 1,020,400 (577,739)
440,898 39,688 480,586 15,764	442,661 39,688 482,349 15,764	442,661 39,688
		482,349
		15,764
496,350	498,113	498,113

– 199 –

APPENDIX V UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE RESULTING GROUP

UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME OF THE RESULTING GROUP

Scenarios 3: Assume the disposal 80% equity interest in Beijing Diye and the acquisition of CY Property have been completed for the year ended 31 December 2008

Scenarios 3: Assume the disposal 80% equity interest in Beijing Diye and the acquisition of CY Property have been completed for the year ended 31 December 2008	Scenarios 3: Assume the disposal 80% equity interest in Beijing Diye and the acquisition of CY Property have been completed for the year ended 31 December 2008	Scenarios 3: Assume the disposal 80% equity interest in Beijing Diye and the acquisition of CY Property have been completed for the year ended 31 December 2008	Scenarios 3: Assume the disposal 80% equity interest in Beijing Diye and the acquisition of CY Property have been completed for the year ended 31 December 2008
Audited consolidated statement of comprehensive income of the Group for the year ended 31 December 2008 Pro forma adjustments Unaudited consolidated statement of comprehensive income of the Group for the year ended 31 December 2008 after disposal 80% equity interest of Beijing Diye Pro forma adjustments Unaudited pro forma consolidated statement of comprehensive income for the year ended 31 December 2008 after disposal 80% equity interest of Beijing Diye and acquisition of CY Property RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 Note b (ii) Note d (ii) Turnover 39,617 39,617 39,617 Cost of good sold – – 1,252 1,252 Interest income 33 (20) 13 13 Other income 16,296 (10,132) 6,164 6,164 Cost of properties sold (40,237) (40,237) (40,237 Taxes on sales of properties (2,179) (2,179) (2,179 Staff costs (4,359) 3,255 (1,104) (1,104 Depreciation and amortisation (2,061) 108 (1,953) (1,953 Impairment loss recognised in respect of property held for sales (216,438) 216,438 – – Net change on fair value on investment properties (483) (483) 28,000 27,517 Loss on disposal of investment property (852) (852) (852 Gain (loss) on disposal of subsidiaries 204,123 (157,112) 47,011 47,011 Impairment loss recognised in respect of other receivables (4,034) 525 (3,509) (3,509 Impairment loss recognised in respect of investment in associate (200) (200) (200 Other operating expenses (20,685) 909 (19,776) (19,776 Administrative expenses – – – Written off a negative goodwill on purchase of a subsidiary – – Finance costs (17,876) (17,876) (17,876 (Loss) profit before taxation (49,335) 4,636 33,888 Income tax expenses (73) (73) (6,750) (6,823 (Loss) profit for the year (49,408) 4,563 27,065 (Loss) profit for the year and total comprehensive (loss) income for the year, net of tax (49,408) 4,563 27,065 Attributable to: Owners of the Company (48,553) 53,971 5,418 22,502 27,920 Non-controlling interests (855) (855) (855 (49,408) 4,563 27,065
	(49,335) (73) (49,408)	4,636 (73) (6,750) 4,563	33,888 (6,823
			27,065
	(49,408)	4,563	27,065

	(48,553) 53,971 (855)	5,418 22,502 (855)	27,920 (855
	(49,408)	4,563	27,065

– 200 –

APPENDIX V UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE RESULTING GROUP

UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF CASH FLOWS OF THE RESULTING GROUP

Scenarios 3: Assume the disposal 80% equity interest in Beijing Diye and the acquisition of CY Property have been completed for the year ended 31 December 2008

Audited consolidated cash flow statement of the Group for the year ended 31 December 2008 Pro forma adjustments RMB’000 RMB’000 Note b (iii) (49,335) 211,083	Unaudited pro forma consolidated cash flow statement of the Group for the year ended 31 December 2008 after disposal 80% equity interest of Beijing Diye Pro forma adjustments Pro forma adjustments RMB’000 RMB’000 RMB’000 Note d (i) Note d (ii) 161,748 28,000	Unaudited consolidated cash flow statement of the Enlarged Group for the year ended 31 December 2008 RMB’000 189,748
(33) 20 2,061 (108) – 216,438 (216,438) 200 483 17,876 852 (204,123) 4,034 (525) (11,547) 42,789 3,231 1,467 1,048 54,268 – (18,318) 60,897 50,223 (1,002) 2,706 131,260	(13) 1,953 – (1,252) – 200 483 (28,000) 17,876 852 (204,123) 3,509 (17,515) 46,020 2,515 54,268 – (18,318) 111,120 (1,002) 2,706 179,794	(13) 1,953 (1,252) – 200 (27,517) 17,876 852 (204,123) 3,509
		(18,767) 46,020 2,515 54,268 – (18,318) 111,120 (1,002) 2,706
		178,542

– 201 –

APPENDIX V UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE RESULTING GROUP

UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF CASH FLOWS OF THE RESULTING GROUP

Scenarios 3: Assume the disposal 80% equity interest in Beijing Diye and the acquisition of CY Property have been completed for the year ended 31 December 2008 (continued)

Audited consolidated cash flow statement of the Group for the year ended 31 December 2008 Pro forma adjustments RMB’000 RMB’000 Note b (v) 33 (20) 8,502 199,971 (1,521) – (112,073) (105,059)	Unaudited pro forma consolidated cash flow statement of the Group for the year ended 31 December 2008 after disposal 80% equity interest of Beijing Diye Pro forma adjustments Pro forma adjustments RMB’000 RMB’000 RMB’000 Note d (i) Note d (ii) 13 208,473 (1,521) – (90,234) (112,073) 94,892	Unaudited consolidated cash flow statement of the Enlarged Group for the year ended 31 December 2008 RMB’000 13 208,473 (1,521) (90,234) (112,073) 4,658
14,000 (20,000) (17,876) (23,876) 2,325 248,485 4,478	14,000 (20,000) (17,876) (23,876) 250,810 (90,234) (1,252) 4,478	14,000 (20,000) (17,876)
		(23,876)
		159,324 4,478
6,803	255,288	163,802

– 202 –

APPENDIX V UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE RESULTING GROUP

UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF FINANCIAL POSITION OF THE RESULTING GROUP

Scenarios 4: Assume the disposal 80% equity interest in Beijing Diye, acquisition of the 100% equity interest of JBMOE by the Shenyang Public Utility Holdings Company Limited and the acquisition of CY Property have been completed on 31 August 2009

Audited consolidated statement of financial position of the Group as at 31 August 2009 Pro forma adjustments RMB’000 RMB’000 Note b (i) 18,061 (357) 297,000 20,000	Unaudited pro forma consolidated statement of financial position of the Group as at 31 August 2009 after disposal 80% equity interest of Beijing Diye RMB’000 17,704 297,000 20,000	Audited financial position of JBMOE as at 31 August 2009 Pro forma adjustments Pro forma adjustments RMB’000 RMB’000 RMB’000 Note c (i) Note c (x) 950 33,596 53,604 –	Unaudited pro forma consolidated statement of financial position of the Group as at 31 August 2009 after disposal 80% equity interest of Beijing Diye and acquisition of the 100% equity interest of JBMOE Pro forma adjustments RMB’000 RMB’000 Note d (i) 18,654 384,200 90,234 20,000	Unaudited pro forma consolidated statement of financial position of Resulting Group as at 31 August 2009 RMB’000 18,654 474,434 20,000
335,061 193,941 (193,941) – 1,201 3,572 73,255 (230) – 4,898 195,331 276,867 5,836 (20) 36,665 (940) 13,708 1,041 14,000 – – 44,328 115,578 161,289	334,704 – – 1,201 3,572 73,025 – 200,229 278,027 5,816 35,725 13,708 1,041 14,000 – – 44,328 114,618 163,409	34,546 – 2,364 – – (1,000) – 325 8,768 (79,000) 11,457 – 2,391 8,101 – – – – 8,101 (8,101) – 10,492 965	422,854 – 2,364 1,201 2,572 73,025 325 129,997 (90,234) 209,484 5,816 46,217 13,708 1,041 14,000 – – 44,328 125,110 84,374	513,088
				– 2,364 1,201 2,572 73,025 325 39,763
				119,250
				5,816 46,217 13,708 1,041 14,000 – – 44,328
				125,110
				(5,860)
496,350	498,113	35,511	507,228	507,228

– 203 –

APPENDIX V UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE RESULTING GROUP

UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF FINANCIAL POSITION OF THE RESULTING GROUP

Audited consolidated statement of financial position of the Group as at 31 August 2009 Pro forma adjustments RMB’000 RMB’000 Note b (i) 1,020,400 (579,502) 1,763	Unaudited pro forma consolidated statement of financial position of the Group as at 31 August 2009 after disposal 80% equity interest of Beijing Diye RMB’000 1,020,400 (577,739)	Audited financial position of JBMOE as at 31 August 2009 Pro forma adjustments Pro forma adjustments RMB’000 RMB’000 RMB’000 Note c (i) Note c (x) 10,650 (10,650) 24,861 (23,786)	Unaudited pro forma consolidated statement of financial position of the Group as at 31 August 2009 after disposal 80% equity interest of Beijing Diye and acquisition of the 100% equity interest of JBMOE Pro forma adjustments RMB’000 RMB’000 Note c (xi) Note d (i) 1,020,400 (576,664)	Unaudited pro forma consolidated statement of financial position of Resulting Group as at 31 August 2009 RMB’000 1,020,400 (576,664)
(440,898) 39,688 480,586 15,764	442,661 39,688 482,349 15,764	35,511 – 8,040	443,736 39,688 483,424 23,804	443,736 39,688
				483,424
				23,804
496,350	498,113	35,511	507,228	507,228

– 204 –

APPENDIX V UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE RESULTING GROUP

UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME OF THE RESULTING GROUP

Scenarios 4: Assume the disposal 80% equity interest in Beijing Diye, acquisition of the 100% equity interest of JBMOE by the Shenyang Public Utility Holdings Company Limited and the acquisition of CY Property have been completed for the year ended 31 December 2008	Scenarios 4: Assume the disposal 80% equity interest in Beijing Diye, acquisition of the 100% equity interest of JBMOE by the Shenyang Public Utility Holdings Company Limited and the acquisition of CY Property have been completed for the year ended 31 December 2008	Scenarios 4: Assume the disposal 80% equity interest in Beijing Diye, acquisition of the 100% equity interest of JBMOE by the Shenyang Public Utility Holdings Company Limited and the acquisition of CY Property have been completed for the year ended 31 December 2008	Scenarios 4: Assume the disposal 80% equity interest in Beijing Diye, acquisition of the 100% equity interest of JBMOE by the Shenyang Public Utility Holdings Company Limited and the acquisition of CY Property have been completed for the year ended 31 December 2008	Scenarios 4: Assume the disposal 80% equity interest in Beijing Diye, acquisition of the 100% equity interest of JBMOE by the Shenyang Public Utility Holdings Company Limited and the acquisition of CY Property have been completed for the year ended 31 December 2008	Scenarios 4: Assume the disposal 80% equity interest in Beijing Diye, acquisition of the 100% equity interest of JBMOE by the Shenyang Public Utility Holdings Company Limited and the acquisition of CY Property have been completed for the year ended 31 December 2008
Audited consolidated statement of comprehensive income of the Group for the year ended 31 December 2008 Pro forma adjustments Unaudited consolidated statement of comprehensive income of the Group for the year ended 31 December 2008 after disposal 80% equity interest of Beijing Diye Audited statement of comprehensive income of JBMOE for the year ended 31 December 2008 Pro forma adjustments Pro forma adjustments Unaudited consolidated statement of comprehensive income of the Group for the year ended 31 December 2008 after disposal 80% equity interest of Beijing Diye and acquisition of the 100% equity interest of JBMOE Pro forma adjustments Unaudited pro forma consolidated statement of comprehensive income of the Resulting Group for the year ended 31 December 2008 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 Note b (ii) Note c (v) Note c (vi) Note d (ii) Turnover 39,617 39,617 8,543 48,160 48,160 Cost of good sold – – (1,763) (1,763) 1,252 (511 Interest income 33 (20) 13 – 13 13 Other income 16,296 (10,132) 6,164 105 6,269 6,269 Cost of properties sold (40,237) (40,237) – (40,237) (40,237 Taxes on sales of properties (2,179) (2,179) – (2,179) (2,179 Staff costs (4,359) 3,255 (1,104) – (1,104) (1,104 Depreciation and amortisation (2,061) 108 (1,953) – (1,953) (1,953 Impairment loss recognised in respect of property held for sales (216,438) 216,438 – – – – Net change on fair value on investment properties (483) (483) – 55,569 55,086 28,000 83,086 Loss on disposal of investment property (852) (852) – (852) (852 Gain (loss) on disposal of subsidiaries 204,123 (157,112) 47,011 – 47,011 47,011 Impairment loss recognised in respect of other receivables (4,034) 525 (3,509) – (3,509) (3,509 Impairment loss recognised in respect of investment in associate (200) (200) – (200) (200 Other operating expenses (20,685) 909 (19,776) – (19,776) (19,776 Administrative expenses – – (3,535) (3,535) (3,535 Written off a negative goodwill on purchase of a subsidiary – – (124) (124) (124 Finance costs (17,876) (17,876) – (17,876) (17,876 (Loss) profit before taxation (49,335) 4,636 3,350 63,431 92,683 Income tax expense (73) (73) – (8,335) (8,408) (6,750) (15,158 (Loss) profit for the year (49,408) 4,563 3,350 55,023 77,525 (Loss) profit for the year operations and total comprehensive (loss) income for the period/year, net of tax (49,408) 4,563 3,350 55,023 77,525 Attributable to: Owners of the Company (48,553) 53,971 5,418 3,350 (124) 47,234 55,878 22,502 78,380 Non-controlling interests (855) (855) – (855) (855 (49,408) 4,563 3,350 55,023 77,525
	(49,335) (73) (49,408)	4,636 (73) 4,563	3,350 – (8,335) 3,350	63,431 (8,408) (6,750) 55,023	92,683 (15,158
					77,525
	(49,408)	4,563	3,350	55,023	77,525

	(48,553) 53,971 (855)	5,418 (855)	3,350 (124) 47,234 –	55,878 22,502 (855)	78,380 (855
	(49,408)	4,563	3,350	55,023	77,525

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APPENDIX V UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE RESULTING GROUP

UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF CASH FLOWS OF THE RESULTING GROUP

co 31 OPERATING ACTIVITIES (Loss) profit before taxation Adjustments for: Bank interest received Depreciation on property and equipment Depreciation on investment properties Impairment loss recognised in respect of properties held for sale Impairment loss recognised in respect of associate Net change in fair value on investment property Finance costs Loss on disposal of property and equipment Written off a negative goodwill on purchase of a subsidiary Gain on disposal of subsidiaries Impairment loss recognised in respect of other receivables	Audited nsolidated cash flow statement of the Group for the year ended December 2008 a RMB’000 (49,335)	Pro forma djustments c 3 B RMB’000 Note b (v) 211,083	Unaudited pro forma onsolidated cash flow statement of the Group for the year ended 1 December 2008 after disposal 80% equity interest of eijing Diye 3 RMB’000 161,748	Audited statement of cash flows of JBMOE for the year ended 1 December 2008 Pro forma adjustments Pro forma adjustments Pro forma adjustments Pro forma adjustments c RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 Note c (v) Note c (vi) Note c (ix) Note c (x) 3,350 (124) 55,569	Unaudited pro forma onsolidated cash flow statement of the Group for the year ended 31 December 2008 after disposal 80% equity interest of Beijing Diye and acquisition of the 100% equity interest of JBMOE Pro forma adjustments Pro forma adjustments c 3 RMB’000 RMB’000 RMB’000 Note d (i) Note d (ii) 220,543 28,000	Unaudited onsolidated cash flow statement of the Enlarged Group for the year ended 1 December 2008 RMB’000 248,543
	(33) 2,061 – 216,438 200 483 17,876 852 (204,123) 4,034	20 (108) (216,438) – (525)	(13) 1,953 – – 200 483 17,876 852 – (204,123) 3,509	(105) 193 – 1,252 – (55,569) – 124 – –	(118) 2,146 1,252 (1,252) – 200 (55,086) (28,000) 17,876 852 124 (204,123) 3,509	(118) 2,146 – – 200 (83,086) 17,876 852 124 (204,123) 3,509

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APPENDIX V UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE RESULTING GROUP

UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF CASH FLOWS OF THE RESULTING GROUP

co 31 Operating cash flows before movements in working capital Decrease (increase) in properties held for sale Decrease in accounts receivables and other receivables Decrease in prepayments Increase in amount due from holding company Decrease in amount due to the inter companies Decrease in trade payable Increase (decrease) in other payables and accrued charges Decrease in provision for potential liabilities Increase in receipts in advance (Decrease) increase in amount due to shareholders Cash generated from operations Income Tax paid NET CASH FROM OPERATING ACTIVITIES	Audited nsolidated cash flow statement of the Group for the year ended December 2008 Pro forma adjustments c 3 B RMB’000 RMB’000 Note b (v) (11,547) 42,789 3,231 – 1,467 1,048 54,268 – (18,318) 60,897 50,223 (1,002) 2,706 –	Unaudited pro forma onsolidated cash flow statement of the Group for the year ended 1 December 2008 after disposal 80% equity interest of eijing Diye 3 RMB’000 (17,515) 46,020 – 2,515 54,268 – (18,318) 111,120 (1,002) 2,706 –	Audited statement of cash flows of JBMOE for the year ended 1 December 2008 Pro forma adjustments Pro forma adjustments Pro forma adjustments Pro forma adjustments c RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 Note c (v) Note c (vi) Note c (ix) Note c (x) 4,690 – 8,140 – – – – 29 (10,280) – (10,280) 10,280	Unaudited pro forma onsolidated cash flow statement of the Group for the year ended 31 December 2008 after disposal 80% equity interest of Beijing Diye and acquisition of the 100% equity interest of JBMOE Pro forma adjustments Pro forma adjustments c 3 RMB’000 RMB’000 RMB’000 Note d (i) Note d (ii) (12,825) 46,020 8,140 2,515 54,268 – (18,318) 100,869 (1,002) 2,706 –	Unaudited onsolidated cash flow statement of the Enlarged Group for the year ended 1 December 2008 RMB’000 (14,077) 46,020 8,140 2,515 54,268 – (18,318) 100,869 (1,002) 2,706 –
	131,260 – 131,260	179,794 – 179,794	2,579 (325) (2,254)	182,373 (325) 182,048	181,121 (325)
					180,796

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APPENDIX V UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE RESULTING GROUP

UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF CASH FLOWS OF THE RESULTING GROUP

Audited nsolidated cash flow statement of the Group for the year ended December 2008 Pro forma adjustments c 3 B RMB’000 RMB’000 Note b (v) 33 (20) 8,502 199,971 (1,521) – (112,073) –	Unaudited pro forma onsolidated cash flow statement of the Group for the year ended 1 December 2008 after disposal 80% equity interest of eijing Diye 3 RMB’000 13 208,473 (1,521) – (112,073) –	Audited statement of cash flows of JBMOE for the year ended 1 December 2008 Pro forma adjustments Pro forma adjustments Pro forma adjustments Pro forma adjustments c RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 Note c (v) Note c (vi) Note c (ix) Note c (x) 105 – (33) – – – (78,789)	Unaudited pro forma onsolidated cash flow statement of the Group for the year ended 31 December 2008 after disposal 80% equity interest of Beijing Diye and acquisition of the 100% equity interest of JBMOE Pro forma adjustments Pro forma adjustments c 3 RMB’000 RMB’000 RMB’000 Note d (i) Note d (ii) 118 208,473 (1,554) – (90,234) (112,073) (78,789)	Unaudited onsolidated cash flow statement of the Enlarged Group for the year ended 1 December 2008 RMB’000 118 208,473 (1,554) (90,234) (112,073) (78,789)
(105,059) 14,000 (20,000) (17,876) (23,876) 2,325 248,485 4,478	94,892 14,000 (20,000) (17,876) (23,876) 250,810 4,478	72 – – – – 2,326 – – (78,789) – 1,211	16,175 14,000 (20,000) (17,876) (23,876) 174,347 (90,234) (1,252) 5,689	(74,059)
				14,000 (20,000) (17,876)
				(23,876)
				82,861 5,689
6,803	255,288	3,537	180,036	88,550

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UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE RESULTING GROUP

Notes:

a The balances have been extracted without adjustment from the audited consolidation financial statement as at 31 August 2009 as set out in Appendix I to this Circular.
b On 31 December 2008, the Company and Beijing Zhong Yi Chong Yi Technology Development Company (“Zhong Yi”) entered into disposal agreement to disposal of 80% Equity Interest in Beijing Diye Real Estate Development Company Limited (“Beijing Diye”) at cash consideration RMB200,000,000. Such consideration would also include in the Group’s receivables from Beijing Diye as at 31 December 2008 (“Proposed Disposal”).
b (i) The adjustment represents the de-consolidation of the assets and liabilities attributable to the Beijing Diye as at 31 August 2009 from the consolidated statement of financial position of the Group as at 31 August 2009 and the estimated unaudited gain on Proposed Disposal of the Beijing Diye as if the Proposed Disposal had taken place on 31 August 2009. The calculation are show as follow:

Sale consideration Less: Net liabilities values of the Beijing Diye as at 31 August 2009 Waiver of net amount due from the Beijing Diye to the Remaining Group as at 31 August 2009 Gain on disposal	RMB’000 200,000 262,231 (460,468)
	1,763

The final amount of proceeds, assets and liabilities of Beijing Diye and the loss on the Proposed Disposal will be different from the amounts described above.

b (ii) The adjustment represents the de-consolidation of the income and expenses attributable to the Beijing Diye for the year ended 31 December 2008 from the consolidated statement of comprehensive income of the Group for the year ended 31 December 2008 and the estimated unaudited gain on Proposed Disposal of the Beijing Diye, as if the Proposed Disposal had taken place on 1 January 2008. The adjustment will not have continuing statement of comprehensive income effect to the Group or the Resulting Group. The calculation are show as follow:

Sale consideration Less: Net liabilities values of the Beijing Diye as at 1 January 2008 Waiver of net amount due from the Beijing Diye to the Remaining Group as at 1 January 2008 Loss on disposal	RMB’000 200,000 50,101 (407,213)
	(157,112)

The final amount of proceeds, assets and liabilities of Beijing Diye and the loss on the Proposed Disposal will be different from the amounts described above. The adjustment will not have continuing statement of comprehensive income effect to the Group or the Resulting Group.

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APPENDIX V UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE RESULTING GROUP

b (iii) The adjustment represents the de-consolidation of the cash flows attributable to the Beijing Diye for the year ended 31 December 2008 from the consolidated cash flow statement of the Group for the year ended 31 December 2008, as if the Proposed Disposal had taken place on 1 January 2008. The adjustment will not have continuing cash flow statement effect to the Group or the Resulting Group.

Assuming the Proposed Disposal had taken place on 1 January 2008, the adjustment of approximately RMB199,971,000 represented the net effect of the net cash inflow of approximately RMB29,000 of the disposal for the year ended 31 December 2008 and the cash inflow of consideration received of RMB200,000,000 on the disposal.

c On 5 January 2009, the Company and Beijing Tianqiao Beida Jade Bird Sci-tech Company Limited (“Beijing Tanqiao”) entered into acquisition agreement with Beijing Jade Bird Company Limited (“Beijing Jade Bird”) and Shenzhen Beida Jade Bird Sci-tech Company Limited (“Shenzhen Jade Bird”) (collectively referred as the “JBMOE Vendors”), to acquire 100% equity interests in Shenzhen Jade Bird Optoelectronic Co, Ltd (“JBMOE”) (“Proposed Acquisition”) for a total consideration of RMB80,000,000.

The consideration payable shall be payable by cash and at approximately RMB75,840,000 and RMB4,160,000 to Beijing Jade Bird and Shenzhen Jade Bird respectively.

c (i) Details of the goodwill arising from the abovementioned acquisition are as below as if was completed on 31 August 2009:

Notes Fair value of the consideration on 31 August 2009 Less: Fair value of net identifiable liabilities acquired c(ii) Discount on acquisition	RMB’000 80,000 (81,075)
	(1,075)

As at 31 August 2009, a cash deposit amounting to RMB1,000,000 has already paid by the Company to Beijing Jade Bird.

c (ii) The components of the reserves of the pro forma adjustment as if the Proposed Acquisition was completed on 31 August 209 are as below:

Discount on arising on acquisition Pre-acquisition reserves eliminated	RMB’000 (1,075) 24,861
	23,786

The pre-acquisition reserve of JBMOE of approximately RMB24,861,000 would be eliminated upon consolidated as if the Proposed Acquisition had been completed on 31 August 2009.

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APPENDIX V

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE RESULTING GROUP

c (ii) The fair value of net identifiable laibilities of JBMOE acquired in the above acquisition as at 31 August 2009 are as follows:

Net assets acquired Notes Plant and equipment Investment properties Trade and other receivables Bank balances and cash Trade and other payables Amount due to a shareholder Fair value adjustment of investment properties c(iii) Deferred tax liabilities c(iv)	Acquiree’s carrying value and fair value RMB’000 950 33,596 2,689 8,768 (2,391) (8,101)
	35,511 53,604 (8,040)
	81,075

c (iii) The fair value adjustment represented an increase in fair value of the investment properties owned by JBMOE of approximately RMB53,604,000, an excess of fair value of the investment properties over their carrying amounts as at 31 August 2009 as if the acquisition was completed on 31 August 2009. The fair value of JBMOE’s investment properties at 31 August 2009 was RMB87,200,000. The fair value has been arrived at based on a valuation carried out by Malcolm & Associates Appraisal Limited, independent valuers not connected with the Group. The valuation was determined by reference to recent market prices for similar properties in the same locations and conditions.
c (iv) The deferred tax liabilities represented the deferred tax raised from the fair value of the investment properties as if the acquisition was completed on 31 August 2009.

For the purposes of preparing the Unaudited Pro Forma Financial Information of the Resulting Group, it is assumed that the carrying values of JBMOE are recorded in the Unaudited Pro Forma Financial Information at their fair values as if the acquisition was completed on 31 August 2009.

c (v) Details of the goodwill arising from the abovementioned acquisition are as below as if Proposed Acquisition was completed on 31 December 2008:

Notes Fair value of the consideration on 31 December 2008 Less: Fair value of net identifiable liabilities acquired c(vi) Discount on acquisition	RMB’000 80,000 (80,124)
	(124)

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UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE RESULTING GROUP

c (vi) The fair value of net identifiable liabilities of JBMOE acquired in the above acquisition as at 31 December 2008 are as follows:

Net assets acquired Notes Plant and equipment Investment properties Trade and other receivables Tax receivable Bank balances and cash Trade and other payables Amount due to a shareholder Fair value adjustment of investment properties c(vii) Deferred tax liabilities c(viii)	Acquiree’s carrying value and fair value RMB’000 1,064 34,431 3,272 325 3,537 (1,638) (8,101)
	32,890 55,569 (8,335)
	80,124

c (vii) The fair value adjustment represented an increase in fair value of the investment properties owned by JBMOE of approximately RMB55,569,000, an excess of fair value of the investment properties over their carrying amounts as at 31 December 2008 as if the acquisition was completed on 31 December 2008. The fair value of JBMOE’s investment properties at 31 December 2008 was RMB90,000,000. The fair value has been arrived at based on a valuation carried out by Malcolm & Associates Appraisal Limited, independent valuers not connected with the Group. The valuation was determined by reference to recent market prices for similar properties in the same locations and conditions. No adjustment has been made to reflect fair value change of the investment properties owned by JBMOE of consolidated statement of financial position of the Group as at 31 August 2009 as if the Proposed Acquisition Completed on 1 January 2008.
c (viii) The deferred tax liabilities represented the deferred tax raised from the fair value of the investment properties as if the acquisition was completed on 31 December 2008.

In accordance with Hong Kong Financial Reporting Standard 3 “Business Combinations”, the Group applied the purchase method to account for the acquisition of JBMOE as subsidiary of the Group has the power, directly or indirectly, to govern the financial and operating policies of the JBMOE, so as to obtain benefits from its activities after the completion of the Proposed Acquisition. As of the date of this Circular, the directors of the Company consider that the Group will have control over JBMOE after the completion of the Proposed Acquisition.

Any goodwill arising on the acquisition will be determined as the excess of the cost of acquisition incurred by the Company over its interest in the fairs value of the identifiable assets, liabilities and contingent liabilities of JBMOE. Discount on acquisition resulting from the business combination is recognised immediately in the consolidated statement of comprehensive income.

In applying the purchase method, the identifiable assets, liabilities and contingent liabilities of JBMOE will be recorded in the consolidated statements of financial position of the Group at their fair values at the date of the completion of the Proposed Acquisition.

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APPENDIX V UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE RESULTING GROUP

On completion of the acquisition of JBMOE, the fair value of net identification assets, liabilities and contingent liabilities of JBMOE will have reassessed. As a result of the assessment, the goodwill or discount arising on the acquisition may be different from that estimated as stated above for the purpose of preparation of the unaudited pro forma financial information. Accordingly, the actual goodwill or discount arising on the acquisition may be different from that presented above.

The adjustment represented the elimination of the Group’s investment in JBMOE and the pre-acquisition reserves and the recognition of negative goodwill from acquisition.

c (ix) Assume the acquisition of the JBMOE had taken place on 1 January 2008, the adjustment of approximately RMB78,789,000 represented the net cash outflow from the acquisition of JBMOE, which represented the consideration paid for acquisition, RMB80,000,000 net of the bank balances and cash of approximately RMB1,211,000 acquired from the acquisition of JBMOE, as if the acquisition was completed on 1 January 2008. This unaudited pro forma adjustment will not have continuing effect on consolidated cash flow statement tot he Resulting Group.
c (x) The amount represented the reclassification of amount due to shareholder whose position within the Group changed upon the completion of the Proposed Acquisition.
d On 5 January 2009, the Company and Zhong Yi entered into the acquisition agreement to acquire CY Property at a total consideration RMB93,000,000 which payable in cash (“Proposed Acquisition of CY Property”).

The CY Property is situated in the central area of the Chaoyang District Beijing as commercial building for earning rental income. It is in the opinion of directors of the Company that CY Property will held as investment properties of the Group for the purpose of earning rental income.

d (i) The adjustment reflect the acquisition of CY property and recorded as investment properties of the Group which are measured at cost RMB93,000,000 on initial recognition, included directly attributable expenditure for purchased investment properties of approximately RMB2,837,000 as estimated by the directors of the Company and adjusted the relevant interest of CY Property since 1 January 2009 as if the Proposed Acquisition of CY Property completed on 31 December 2008. Pursuant to the agreement entered between the Company and Zhong Yi to acquire which is being the construction of completing the acquisition of CY property the CY Property, the Company entitle the relevant interest of CY Property since 1 January 2009, which is being the condition of completing the acquisition of CY Property as if the acquisition completed on 31 August 2009. Based on the information provided by the management of Zhong Yi, as set out in the Unaudited Profit and Loss Statements attributable to CY Property in Appendix III to this Circular. The total revenue attributable to CY Property was approximately RMB6,487,000 total cost of good sold was approximately RMB835,000, and total administrative expenses was approximately RMB49,000 for the period ended 31 August 2009. This unaudited pro forma adjustment will not have continuing effect on consolidated statement of comprehensive to the Group or Resulting Group.
d (ii) The adjustment reflect the acquisition of CY property and recorded as investment properties of the Group which are measure at cost on initial recognition and subsequent measured at their fair values using the fair value model, the elimination of depreciation on investment properties and the deferred tax liabilities rised from the fair value of investment properties, as if the Proposed Acquisition of CY Property completed on 1 January 2008. No adjustment has been made to reflect fair value change of CY Property of consolidated statement of financial position of the Group as at 31 August 2009, as if the Proposed Acquisition of CY Property completed on 1 January 2009.

The fair value adjustment represented an increase in fair value of the CY Property approximately RMB28,000,000, represented the excess of fair value of the investment properties over the initial recognised cost as at 1 January 2008 as if the Proposed Acquisition of CY Property was completed on 1 January 2008. The fair value of CY Property at 31 December 2008 was RMB121,000,000. The fair value has been arrived at based on a valuation carried out by Malcolm & Associates Appraisal Limited, independent valuers not connected with the Group. The valuation was determined by reference to recent market prices for similar properties in the same locations and conditions.

e No adjustment has been made to reflect any trading results and other transactions of the Group between Zhong Yi, Beijing Tanqiao and JBMOE Vendors entered into subsequent to 31 December 2008.

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APPENDIX VI

PROPERTY VALUATION REPORT

Set out below is the text of the letter, summary of values and valuation certificates received from Malcolm & Associates Appraisal Limited, an independent property valuer, prepared for the purpose of incorporation in this Circular, in connection with its valuations as at 30 November 2009 of the properties located in the PRC.

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

28 December 2009

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

Dear Sirs,

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

1. INSTRUCTIONS

In accordance with your instructions for us to value the Properties occupied, to be disposed of and to be acquired by Shenyang Public Utility Holdings Company Limited (the “Company”) and/ or its subsidiaries (hereinafter referred to as the “Group”) located in the PRC, we confirm that we have performed inspections, made relevant enquiries and obtained such further information as we consider necessary for the purpose of providing you with our opinion of the market values of the Properties as at 30 November 2009 (the “date of valuation”).

2. BASIS OF VALUATION

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

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APPENDIX VI

PROPERTY VALUATION REPORT

3. PROPERTY CATEGORIZATION

In the course of our valuations, the portfolio of the Properties is categorized into the following groups:

Group I – Property occupied by the Group in the PRC

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

Group III – Properties to be acquired by the Group in the PRC

4. VALUATION METHODOLOGIES

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

We cannot attribute any commercial value to Property No. 2 due to the legal title of the property being held and administered by the government.

In valuing Property Nos. 3 and 4, we have valued them on an open market basis by the Comparison Approach assuming sales in the existing states with the benefit of vacant possession and by making reference to comparable sales evidence as available in the relevant markets. Whenever applicable, we have also adopted the Investment Approach where appropriate by taking into account the current rents passing of the constituent units of the Properties being held under existing tenancies and the reversionary potential of the tenancies if they have been or would be let to tenants.

5. TITLE INVESTIGATION

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

In valuing the Properties, we have relied on the advice given by the Group and its PRC legal adviser that the Group and the owners of the corresponding properties have valid and enforceable titles to the corresponding properties which are freely transferable, and has free and uninterrupted rights to use the same, for the whole of the unexpired term

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APPENDIX VI

PROPERTY VALUATION REPORT

granted subject to the payment of annual government rent/ land use fees and all requisite land premium/ purchase consideration payable have been fully settled.

6. VALUATION ASSUMPTIONS

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

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

7. VALUATION CONSIDERATIONS

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

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

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

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

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

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

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

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APPENDIX VI

PROPERTY VALUATION REPORT

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

8. REMARKS

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

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

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

Yours faithfully, For and on behalf of

Malcolm & Associates Appraisal Limited Li Wing Kang

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

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

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PROPERTY VALUATION REPORT

SUMMARY OF VALUES

No. Property Market Value in existing state as at 30 November 2009 Interest attributable to the Group RMB Group I – Property occupied by the Group in the PRC 1. An education park located at Nan Mang Wan, Qi Ao, Zhuhai, Guangdong Province, The PRC 中國廣東省珠海市淇澳島南芒灣之北大教育學園 296,000,000 70% Total of Group I: 296,000,000 Group II – Property to be disposed of by the Group in the PRC 2. A parcel of land located at Districts C & D, Guan Zhuang Xin Cun, Chaoyang District, Beijing, The PRC 中國北京市朝陽區管莊新村C、D區之一塊土地 No Commercial Value 80% Total of Group II: No Commercial Value	No. Property Market Value in existing state as at 30 November 2009 Interest attributable to the Group RMB Group I – Property occupied by the Group in the PRC 1. An education park located at Nan Mang Wan, Qi Ao, Zhuhai, Guangdong Province, The PRC 中國廣東省珠海市淇澳島南芒灣之北大教育學園 296,000,000 70% Total of Group I: 296,000,000 Group II – Property to be disposed of by the Group in the PRC 2. A parcel of land located at Districts C & D, Guan Zhuang Xin Cun, Chaoyang District, Beijing, The PRC 中國北京市朝陽區管莊新村C、D區之一塊土地 No Commercial Value 80% Total of Group II: No Commercial Value	Value attributable to the Group as at 30 November 2009 RMB 207,200,000
		207,200,000

	of by the Group in the PRC No Commercial Value 80%	Nil
	No Commercial Value	Nil

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PROPERTY VALUATION REPORT

				Interest	Value
				attributable to	attributable to
			Market Value	the Group upon	the Group upon
			in existing state	completion of	completion of
No.	Property	as at 30 November 2009		Acquisition	Acquisition
			RMB		RMB
Group III – Properties to be acquired by the Group in the PRC
3.	Beida Jade Bird Building,		87,200,000	100%	87,200,000
	Keyuan Road East,
	Jingsi Road West,
	South Avenue of
	High-tech Industrial Park,
	Nanshan District,
	Shenzhen,
	The PRC
	中國深圳市南山區
	高新技術開發南區
	科苑路東經四路西
	北大青鳥樓
4.	1st and 2nd Floors,		121,000,000	100%	121,000,000
	Huipu Building,
	No. 112 Jianguo Road,
	Chaoyang District,
	Beijing,
	The PRC
	中國北京朝陽區
	建國路112號
	惠普大廈1層及2層
	Total of Group III:		208,200,000		208,200,000

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APPENDIX VI

PROPERTY VALUATION REPORT

VALUATION CERTIFICATE

Group I – Property occupied by the Group in the PRC

				Market Value
				in existing state
				as at 30 November
No.	Property	Description and tenure	Particulars of occupancy	2009
				RMB
1.	An education park	As per information	As at the date of	296,000,000
	located at	provided by the Group,	valuation, the property
	Nan Mang Wan,	the property comprises a	was occupied by the	(70% interest
	Qi Ao, Zhuhai,	parcel of land with a site	Group as an education	attributable to the
	Guangdong Province,	area of approximately	park.	Group:
	The PRC	420,002 sq.m. upon which		207,200,000)
		15 buildings and
	中國廣東省	structures with a total		(Please refer to
	珠海市淇澳島	gross floor area (“GFA”)		Note 4 for details)
	南芒灣之北大教育學園	of approximately
		53,440.17 sq.m.
		completed in about 2004,
		were erected.
		The major buildings with
		title certificates include a
		composite building, a
		music & arts centre,
		teaching towers, a
		canteen, halls of
		residence, a stadium, a
		corridor, teaching halls,
		etc. (Please refer to Note
		3 for details.)
		The land use rights of the
		property have been
		granted for a term
		expiring on 13 June 2051.

Notes:-

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

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PROPERTY VALUATION REPORT

Pursuant to 14 Real Estate Ownership Certificates, the building ownership rights of the property with a total developable GFA of approximately 53,440.17 sq.m. have been granted to Zhuhai Beida, details of which are summarized as follows:
No. Document No.
Yue Fang Di Zheng Zi Di No. C3940410 2. Yue Fang Di Zheng Zi Di No. C3940411 3. Yue Fang Di Zheng Zi Di No. C3940412 4. Yue Fang Di Zheng Zi Di No. C3940413 5. Yue Fang Di Zheng Zi Di No. C3940414 6. Yue Fang Di Zheng Zi Di No. C3940415 7. Yue Fang Di Zheng Zi Di No. C3940416 8. Yue Fang Di Zheng Zi Di No. C3940417 9. Yue Fang Di Zheng Zi Di No. C3940418 10. Yue Fang Di Zheng Zi Di No. C3940419 11. Yue Fang Di Zheng Zi Di No. C3940420 12. Yue Fang Di Zheng Zi Di No. C3940421 13. Yue Fang Di Zheng Zi Di No. C3940422 14. Yue Fang Di Zheng Zi Di No. C3940423

Usage Stadium Composite Building Teaching Tower 1 Teaching Tower 2 Teaching Tower 3 Teaching Tower 4 Canteen Hall of residence Tower 4 Hall of residence Tower 3 Hall of residence Tower 2 Hall of residence Tower 1 Music & Arts Center Teaching Hall 1 Teaching Hall 2 Total:	GFA (sq.m.) 2,958.28 5,847.99 3,300.71 3,300.71 6,022.23 4,520.76 7,650.62 3,928.30 3,928.30 3,928.30 3,928.30 4,048.75 282.81 272.42
	53,440.17

As at the date of valuations, no title documents were obtained for a staff dormitory and two residence halls of the property with a total GFA of 7,337 sq.m., we cannot attribute any commercial value of these buildings of the property. For your reference purpose, the market value of these buildings as the date of valuation is approximately RMB8,500,000 assuming that all title documents were obtained and these buildings can be disposed of freely in the open market.
The status of title and grant of major approvals and licenses in accordance with the information provided by the Group are as follows:

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

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

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APPENDIX VI

PROPERTY VALUATION REPORT

VALUATION CERTIFICATE

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

				Market Value
				in existing state
				as at 30 November
No.	Property	Description and tenure	Particulars of occupancy	2009
				RMB
2.	A parcel of land	As per information	As advised by the Group,	No Commercial
	located at	provided by the Group,	the property was vacant	Value
	Districts C & D,	the property comprises a	and held and
	Guan Zhuang Xin	parcel of land with a site	administered by the	(80% interest
	Cun,	area of approximately	Government as at the	attributable to
	Chaoyang District,	12.9178 hectares or about	date of valuation.	the Group: Nil)
	Beijing,	129,178 sq.m.
	The PRC			(Please refer to
				Note No. 2)
	中國北京市朝陽區
	管莊新村C、D區
	之一塊土地

Notes:

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

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APPENDIX VI

PROPERTY VALUATION REPORT

c. According to the relevant PRC rules and regulations, the land reserve development cost of the property paid by the Beijing Diye will be reimbursed in full to Beijing Diye upon the disposal of the property in the land auction;
d. The land reserve development cost to be reimbursed in Note 7c includes land resumption fee, compensation fee, land listing and auction fee, interest, professional fee, contingency fee and all other relevant costs incurred which are approved by the Land Management Department.
Beijing Diye is a 80%-owned subsidiary of the Group.

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APPENDIX VI

PROPERTY VALUATION REPORT

VALUATION CERTIFICATE

Group III – Properties to be acquired by the Group in the PRC

				Market Value
				in existing state
				as at 30 November
No.	Property	Description and tenure	Particulars of occupancy	2009
				RMB
3.	Beida Jade Bird	The property comprises a	As per the rental record	87,200,000
	Building,	land parcel with a site	up to July 2009 provided
	Keyuan Road East,	area of approximately	by the Group, portion of	(100% interest
	Jingsi Road West,	7,116.94 sq.m. upon	the property with a GFA	attributable to the
	South Avenue of	which a 7-storey building	of approximately	Group upon the
	High-tech Industrial	completed in about 2006	11,318.48 sq.m. was let	completion of
	Park,	is erected.	under various tenancies	acquisition:
	Nanshan District,		at a total monthly rent of
	Shenzhen,	The gross floor area of	approximately	87,200,000)
	The PRC	the property is	RMB780,000.
		approximately 12,508.18
	中國深圳市南山區	sq.m.	All monthly rents were
	高新技術開發南區		exclusive of management
	科苑路東經四路西	The land use rights of the	fee.
	北大青鳥樓	property have been
		granted for a term of 50	An office unit with a GFA
		years commencing on 9	of approximately 639.7
		January 2001 to 08	sq.m. was occupied by
		January 2051 for	the Group.
		high-tech development
		use.	An office unit with a GFA
			of approximately 550
			sq.m. was vacant and
			available for lease.

Notes:-

Pursuant to a Real Estate Ownership Certificate (房地產証), Shen Fang Di Zi No. 4000274368 (深房地字第 4000274368號), issued by Real Estate Title Registration Centre of Shenzhen (深圳房地產權登記中心) dated 19 May 2006, the land use rights and building ownership rights of the property have been granted to Shenzhen Jade Bird Optoelectronic Co., Ltd. (深圳青鳥光電有限公司) (“JBMOE”) for a term of 50 years commencing on 9 January 2001 to 8 January 2051 for high-tech development use.
Pursuant to a Business License (企業法人營業執照), Registration No. 440301102921390 (註冊號 440301102921390), issued by Industrial and Commercial Administrative and Management Bureau of Shenzhen (深圳市工商行政管理局) dated 28 February 2008, JBMOE was incorporated with a registered capital of RMB10,650,000 and was authorized to carry out the business of innovation and technology development for the period from 9 November 1992 to 9 November 2022.
The opinion of the PRC legal adviser to the Group contains, inter-alia, the following:
a. The property is legally vested in JBMOE;
b. According to the Real Estate Ownership Certificate, the land use rights and building ownership rights of the property have been granted to JBMOE for a term of 50 years commencing on 9 January 2001 and expiring on 8 January 2051;
c. The property is not subject to mortgage, seal up order or any material encumbrances; and
d. JBMOE is entitled to transfer, dispose of, lease or mortgage the property in the open market.

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APPENDIX VI

PROPERTY VALUATION REPORT

We have prepared our valuation based on the information advised by the Group as follows:
a. All land premium and other costs of ancillary utility services have been settled in full; and
b. The existing use of the property is in compliance with the local planning regulations and has been approved by the relevant government authorities.

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APPENDIX VI

PROPERTY VALUATION REPORT

VALUATION CERTIFICATE

No. Property Description and tenure 4. 1st and 2nd Floor, The property comprises Huipu Building, the 1st and 2nd Floors of No. 112 Jianguo Road, an 18-storey commercial Chaoyang District, building completed in Beijing, about 1998. The PRC The gross floor area
中國北京朝陽區 (“GFA”) of the property 建國路112號 is approximately 3,808.27 惠普大廈1層及2層 sq.m. The details are as follows:

No. Property

Market Value in existing state as at 30 November Particulars of occupancy 2009 RMB As at the date of 121,000,000 valuation, the property was subject to two (100% interest tenancy agreements with attributable to the a total annual rent of Group upon the approximately completion of RMB9,700,000 with the acquisition: latest term expiring on 31 121,000,000) December 2013 for commercial use.

Particulars of occupancy

All monthly rents were Floor Usage GFA exclusive of management (sq.m.) fee. 1/F Retail 1,535.9 2/F Retail 2,272.4

Notes:–

Pursuant to an Auction Transaction Contract (拍賣成交合同) dated 28 December 2006, entered into between 遼寧嘉欣拍賣有限公司 and Beijing Zhong Yi Chong Yi Technology Development Company (北京中億創一科技發展有限公司) (“Zhong Yi”), Zhong Yi successfully bid the property at a consideration of RMB91,901,000.
Pursuant to a Civil Order (民事裁定書 dated 23 April 2007, issued by the People’s Supreme Court of Liaoning Province, the real estate ownership rights of the property have been granted to Zhong Yi.
The opinion of the PRC legal adviser to the Group contains, inter-alia, the following:
a. Zhong Yi successfully bid the property in the auction which was legally held by the Peoples’ High Court of Liaoning Province (遼寧省高級人民法院). Subsequently, Zhong Yi entered into an Auction Transaction Contract with 遼寧嘉欣拍賣有限公司 dated 28 December 2006. On 25 April 2007, the Peoples’ High Court of Liaoning Province held that the property was legally vested in Zhong Yi.
b. According to the Opinion Letter (意見批複) issued by the People’s High Court of the PRC (中華人民共和國最高人民法院) dated 13 November 2009, the allocation of the property by the People’s High Court of Liaoning Province to Zhong Yi stated in Note 3a is legal;
c. Zhong Yi is entitled to lease, transfer, mortgage and freely disposed of the property;
d. The property was seized by The First Intermediate People’s Court of Beijing City for a period from 26 August 2009 to 25 August 2011. However, there exists no legal impediment for Zhong Yi to obtain the title of the property; and
e. The property is not subject to mortgage or any material encumbrances apart from the seizure order as stated in Note 3d.

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APPENDIX VII

GENERAL INFORMATION

1. RESPONSIBILITY STATEMENT

This circular includes particulars given in compliance with the Listing Rules for the purpose of giving information with regard to the Group. 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) Disclosure of interests and short positions in the securities of the Company and its associated corporations

As at the Latest Practicable Date, none of the Directors and chief executive of the Company was interested in any Shares, underlying Shares and debentures of the Company or any of its associated corporation (within the meaning of Part XV of the SFO), which were notified to the Company and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO (including any interests and short positions which they have taken or deemed to have taken under such provisions of the SFO), or which were required, pursuant to section 352 of the SFO, to be entered in the register referred to therein, or which were required, pursuant to the required standard of dealings by Directors as referred to in the Listing Rules, to be notified to the Company and the Stock Exchange.

(b) Substantial Shareholders and other person’s interests and short position in the Shares, underlying Shares and securities of the Company

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

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APPENDIX VII

GENERAL INFORMATION

of any other member of the Company (if any) or had any options in respect of such capital:

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

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

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

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APPENDIX VII

GENERAL INFORMATION

3. DIRECTORS’ INTERESTS IN ASSETS, CONTRACT OR ARRANGEMENT

As at the Latest Practicable Date, none of the Directors or proposed Directors had any direct or indirect interests in any assets which have since 31 December 2008 (being the date to which the latest published audited accounts of the Company were made up) been acquired or disposed of by or leased to any member of the Group (including any company which will become a subsidiary of the Company by reason of an acquisition which has been agreed or proposed since 31 December 2008, being the date to which the latest audited consolidated financial statements of the Company have been made up), or were proposed to be acquired or disposed of by or leased to any member of the Group (including any company which will become a subsidiary of the Company by reason of an acquisition which has been agreed or proposed since 31 December 2008, being the date to which the latest audited consolidated financial statements of the Company have been made up). As at the Latest Practicable Date, none of the Directors was materially interested in any contract or arrangement which was significant in relation to the business of the Group (including any company which will become a subsidiary of the Company by reason of an acquisition which has been agreed or proposed since 31 December 2008, being the date to which the latest audited consolidated financial statements of the Company have been made up).

4. SERVICE CONTRACTS

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

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

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APPENDIX VII

GENERAL INFORMATION

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

	Annual
Director	emoluments
	(RMB)
Mr. An Mu Zong	30,000
Mr. Wang Zai Xing	30,000
Mr. Chow Ka Wo Alex	120,000
Mr. Wang Hui	30,000
Mr. Deng Yan Bin	30,000
Mr. Lin Dong Hui	30,000
Mr. Cai Lian Jun	30,000
Mr. Wong Kai Tat	120,000
Mr. Chan Ming Sun Jonathan	120,000

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

Save as disclosed above, none of the Directors had entered or proposed to entered into other service contracts with amy member of the Group.

5. DIRECTORS’ INTERESTS IN COMPETING BUSINESS

To the best knowledge of the Directors, none of the Directors or their respective associates (within the meaning of the Listing Rules) had any interests in any business which competed or might compete with the business of the Group as at the Latest Practicable Date.

6. MATERIAL CONTRACTS

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

(i) the debt transfer and shares subscription agreement dated 18 February 2008 entered into between the Company, Shenyang Real Estate , Shenyang Pollon Finance Building Management Company Limited (“瀋陽江勝金融大廈管理有限公司”) (“Shenyang Pollon”), Shenyang Development Property management Company Limited (瀋陽發展物業管理有限公司) (“ Shenyang Property ”), Shanghai Hanhua Property Management Company Limited (上海瀚華物業管理有限公司) (“ Shanghai Hanhua ”) and Shenyang Development Beida Education Science Park Company Limited (瀋陽發展北大教育科學園有限公司)

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APPENDIX VII

GENERAL INFORMATION

(“ Shenyang Education ”), pursuant to which Shanghai Hanhua shall purchase the debt of Shenyang Education due to the Company, Shenyang Real Estate, Shenyang Pollon and Shenyang Property totalling RMB256,638,760.49; and the remaining 30% equity interest in Shenyang Education held by the Company at a consideration of RMB2,514,062.24;

(ii) the equity interest transfer agreement dated 8 March 2008 entered into between the Company, Shenyang Real Estate, and an independent third party in relation to the disposal of 100% equity interest in Shenyang Property held by the Company and Shenyang Real Estate to the independent third party at a consideration of RMB600,000;
(iii) the agreement of settlement of debts by properties dated 20 June 2008 entered into between the Company, Hua Jin Hua Gong, Shenyang Pollon, Beijing Jade Bird and Shenyang Public Utility Group Company Limited (“ Shenyang Public Utility Group ”) in relation to the sequestration of 69 residential units of Cosmo International Mansion owned by Shenyang Pollon with a value of RMB24,300,000 to settle the debts owed to Hua jin Hua Gong by the Company;
(iv) the restructuring agreement dated 28 August 2008 (the “ Restructuring Agreement ”), entered into between Shenyang Public Utility Group, Mr. Cheung Tsun Yung Thomas and the Company in relation to the restructuring of the Company which is intended to assist the resumption of trading in the H Shares on the Stock Exchange, whereby Mr. Cheung Tsun Yung Thomas shall procure the sale of 51% interest in the property situated at 3 Dongwei Road, Chaoyang District, Beijing, PRC (the “ Beijing Building ”) to the Company at a tentative consideration of RMB306,000,000 including a gross rental guarantee of RMB10,000,000 for the year 2009 and Shenyang Public Utility Group shall in return transfer 29.3% equity interest in the Company to Mr. Cheung Tsun Yung Thomas at a consideration of HK$14,950,000;
(v) the supplemental agreement dated 14 October 2008 (the “ First Supplemental Agreement ”) entered into between Shenyang Public Utility Group, Mr. Cheung Tsun Yung Thomas and the Company in relation to the amendment of the Restructuring Agreement, whereby Mr. Cheung Tsun Yung Thomas shall procure the sale of 100% interest rather than 50% interest in the Beijing Building to the Company at a tentative consideration of RMB600,000,000;
(vi) the Disposal Agreement;
(vii) the supplemental agreement dated 2 January 2009 (the “ Second Supplemental Agreement ”) entered into between Shenyang Public Utility Group, Mr. Cheung Tsun Yung Thomas and the Company in relation to the cancellation of the First Supplemental Agreement and the amendment of the Restructuring Agreement, whereby the Company shall acquire 100% interest in the CY Property from Zhong Yi at a consideration of RMB93,000,000 and 100% equity interest in JBMOE from Beijing Jade Bird and Shenzhen Jade Bird at a consideration of RMB80,000,000 rather than 100% interest in the Beijing Building;

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APPENDIX VII

GENERAL INFORMATION

(viii) the CY Acquisition Agreement;
(ix) the JBMOE Acquisition Agreement;
(x) the deed of termination dated 14 May 2009 entered into between Shenyang Public Utility Group, Mr. Cheung Tsun Yung Thomas and the Company in relation to the termination of the Restructuring Agreement, the First Supplemental Agreement and the Second Supplemental Agreement, and there is no consideration involved under this deed of termination;
(xi) the supplemental agreement dated 15 May 2009 entered into between Zhong Yi, Beijing Diye and the Company in relation to the amendment of the long stop date stipulated under the share transfer agreement dated 31 December 2008 aforesaid;
(xii) the supplemental agreement dated 20 October 2009 entered into between Zhong Yi and the Company in relation to the amendment of terms of the CY Acquisition Agreement; and
(xiii) the supplemental agreement dated 17 December 2009 entered into between Zhong Yi, Beijing Diye and the Company in relation to the amendment of the long stop date stipulated under the share transfer agreement dated 31 December 2008 aforesaid.

8. LITIGATION

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

9. QUALIFICATIONS AND CONSENT OF EXPERTS

The following is the qualification of the each of the experts who has given its opinion or advice which is contained in circular:

Name Qualifications CSC Asia a licensed corporation under the SFO, licensed to carry out type 6 regulated activity (advising on corporate finance) under the SFO Malcolm Associates property valuer Appraisal Limited Beijing Kaiwen Law Firm registered law firm in the PRC (北京凱文律師事務所) Lo and Kwong C.P.A. Certified Public Accountants Company Limited

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APPENDIX VII

GENERAL INFORMATION

Each of CSC Asia, Malcolm Associates Appraisal Limited, Beijing Kaiwen Law Firm (北京凱文律師事務所) and Lo and Kwong C.P.A. Company Limited has given and has not withdrawn its written consent to the issue of this circular with the inclusion of its letter and/or references to its name in the form and context in which they appear.

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

10. CONTINGENT LIABILITIES

Save as disclosed in the paragraph headed “Indebtedness Statement” in Appendix I to this circular, the Directors were not aware of any material changes in respect of the indebtedness or other contingent liabilities of the Group since 31 August 2009.

11. MISCELLANEOUS

(i) The registered address of the Company is at No.1-4, 20A, Central Street, Shenyang Economic and Technological Development Zone, the PRC.
(ii) The principal place of business of the Company in the PRC is at 14/F., Jinmao International Apartment, 1 Xiao Dong Road, Da Dong District, Shenyang, the PRC.
(iii) The principal place of business of the Company in Hong Kong is at Suite 06-12, 33/F, Shui On Centre, 6-8 Harbour Road, Wanchai, Hong Kong.
(iv) The registered address of CSC Asia is at Units 3204-7, 32/F, COSCO Tower, 183 Queen’s Road Central, Hong Kong.
(v) The H Share registrar and transfer office of the Company in Hong Kong is Hong Kong Registrars Limited at Rooms 1806-7, 18/F, Hopewell Centre, 183 Queen’s Road East, Wan Chai, Hong Kong.
(vi) Unless otherwise stated, in the event of inconsistency, the English text of this circular shall prevail over the Chinese text.

12. DOCUMENTS AVAILABLE FOR INSPECTION

Copies of the following documents are available for inspection during normal business hours from 9:00 a.m. to 5:00 p.m. (other than Saturdays, Sundays and public holidays) at 14/F., Jinmao International Apartment, 1 Xiao Dong Road, Da Dong District, Shenyang, the PRC and on the Company website at www.sygyfz.com.cn during normal business hours on any business day from the date of this circular up to and including the date of EGM:

(i) the memorandum and articles of association of the Company;

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APPENDIX VII

GENERAL INFORMATION

(ii) the “Letter from the Board”, the text of which is set out on pages 5 to 23 of this circular;
(iii) the “Letter from the Independent Board Committee”, the text of which is set out on pages 24 of this circular;
(iv) the “Letter from CSC Asia”, the text of which is set out on pages 25 to 43 of this circular;
(v) the accountants’ report of the Group from Lo & Kwong C.P.A. Company Limited, the text of which is set out in Appendix I to this circular;
(vi) the accountants’ report of JBMOE from Lo & Kwong C.P.A. Company Limited, the text of which is set out in Appendix II to this circular;
(vii) the accountants’ report of CY Property from Lo & Kwong C.P.A. Company Limited, the text of which is set out in Appendix III to this circular;
(viii) the letter from Lo & Kwong C.P.A. Company Limited regarding the unaudited pro forma financial information of the Resulting Group as set out in Appendix V to this circular;
(ix) the letter, summary of values and valuation certificates prepared by Malcolm & Associates Appraisal Ltd, the text of which is set out in Appendix VI to this circular;
(x) the written consents referred to in the section headed “Qualifications and Consent of Experts” in this Appendix;
(xi) the annual reports of the Company for the two years ended 31 December 2007 and 2008;
(xii) the interim report of the Company for the six months ended 30 June 2009;
(xiii) the material contracts referred to in the section headed “Material Contracts” in this Appendix; and
(xiv) the service contracts referred to in the section headed “Service Contracts” in this Appendix.

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NOTICE OF EGM

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

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

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

(Stock code: 747)

NOTICE OF THE FIRST EXTRAORDINARY GENERAL MEETING FOR 2010

NOTICE IS HEREBY GIVEN that the First Extraordinary General Meeting for 2010 (“EGM”) of Shenyang Public Utility Holdings Company Limited (the “Company”) will be held at the Conference Room of Lexington Shenyang Rich Gate Hotel, Shenyang, the People Republic of China at 9:00 a.m. on 12 February 2010 (Friday) for the following purposes:

I BY WAY OF ORDINARY RESOLUTIONS:

THAT
(a) the disposal agreement (“ Disposal Agreement ”) dated 31 December 2008 between the Company as the vendor, and Beijing Zhong Yi Chong Yi Technology Development Company (北京中億創一科技發展有限公司) as the purchaser regarding the disposal of the 80% equity interests in and the Group’s receivable from Beijing Diye Real Estate Development Company Limited (北京地業房地產開發有限公司), a copy of which has been produced to the Meeting marked “A” and signed by the chairman of the Meeting for the purpose of identification and the transactions contemplated thereunder, the details of which are provided in the Announcements and the Circular, be and are hereby approved, ratified and confirmed; and
(b) any one or more of the directors (“Directors”) of the Company be and is/are hereby authorized to sign, execute, perfect, deliver and do all such documents, deeds, acts, matters and things, as the case may be, as they may in their discretion consider necessary desirable or expedient to carry and implement the Disposal Agreement and all the transactions completed thereunder into full effect.

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NOTICE OF EGM

2. THAT

(a) the sale and purchase agreement (“ Sale and Purchase Agreement ”) dated 5 January 2009 between Beijing Beida Jade Bird Company Limited (北京北大青鳥有限責任公司) and Shenzhen Beida Jade Bird Sci-tech Company Limited (深圳市北大青鳥科技有限公司) collectively as the vendors, and the Company as the purchaser regarding the acquisition of the entire equity interests in Shenzhen Jade Bird Optoelectronic Co., Ltd.* (深圳青鳥光電有限公司), a copy of which has been produced to the Meeting marked “B” and signed by the chairman of the Meeting for the purpose of identification and the transactions contemplated thereunder, the details of which are provided in the Announcements and the Circular, be and are hereby approved, ratified and confirmed; and
(b) Directors of the Company be and is/are hereby authorized to sign, execute, perfect, deliver and do all such documents, deeds, acts, matters and things, as the case may be, as they may in their discretion consider necessary desirable or expedient to carry and implement the Sale and Purchase Agreement and all the transactions completed thereunder into full effect.

3. THAT

(a) the sale and purchase agreement (“ Acquisition Agreement ”) dated 5 January 2009 between Beijing Zhong Yi Chong Yi Technology Development Company (北京中億創一科技發展有限公司) as the vendor, and the Company as the purchaser (“ Parties ”) regarding the acquisition of the property (“ Property* ”) located at 1st floor and 2nd floor, HP Building, No.112, Jianguo Road, Chaoyang District, Beijing, the PRC, a copy of which has been produced to the Meeting marked “C” and signed by the chairman of the Meeting for the purpose of identification and the transactions contemplated thereunder, the details of which are provided in the Announcements and the Circular, be and are hereby approved, ratified and confirmed;
(b) the terms of the supplemental agreement (“ Supplemental Agreement ”) dated 20 October 2009 between the Parties regarding that the Company will indirectly hold the Property through its wholly-owned subsidiary, a copy of which has been produced to the Meeting marked “D” and signed by the chairman of the Meeting for the purpose of identification and the transactions contemplated thereunder, the details of which are provided in the Announcements and the Circular, be and are hereby approved, ratified and confirmed;

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NOTICE OF EGM

(c) Directors of the Company be and is/are hereby authorized to sign, execute, perfect, deliver and do all such documents, deeds, acts, matters and things, as the case may be, as they may in their discretion consider necessary desirable or expedient to carry and implement the Acquisition Agreement and the Supplemental Agreement and all the transactions completed thereunder into full effect.

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

Shenyang, the PRC, 28 December 2009

Notes:

Each shareholder entitled to attend and vote at the meeting is entitled to appoint in written form one or more proxies to attend and vote at the meeting on his/her behalf. A proxy need not be a member of the Company. Shareholders or their proxies are entitled to attend the meeting and vote.
To be valid, the proxy form together with the certified power of attorney or authority (if any) must be delivered to the Company’s H share registrar in Hong Kong, Hong Kong Registrars Limited at Rooms 1806-7, 18/F, Hopewell Centre, 183 Queen’s Road East, Hong Kong or the place of operation of the Company at 14/F, Jin Mao International Apartment, 1 Xiao Dong Road, Da Dong District, Shenyang, the People’s Republic of China not less than 24 hours before the time of the meeting.
Shareholders or their proxies shall produce their identity documents when attending the meeting.
The register of the members of the Company will be closed from 13 January 2010 to 12 February 2010 (both dates inclusive), during which period no transfers of H Shares will be effected.
Shareholders whose names appear on the register of members of the Company on 13 January 2010 will be entitled to attend and vote at the meeting.
Shareholders who intend to attend the meeting should complete the reply slip for attending the meeting and return it to the Company’s H Share registrar in Hong Kong, Hong Kong Registrars Limited at Rooms 1806-7, 18/F, Hopewell Centre, 183 Queen’s Road East, Hong Kong or the place of operation of the Company at 14/F, Jin Mao International Apartment, 1 Xiao Dong Road, Da Dong District, Shenyang, the People’s Republic of China on or before 22 January 2010. The reply slip may be delivered by hand, by post or by facsimile at facsimile number (852) 28650990. Completion and return of the reply slip shall not affect the shareholder’s right to attend the meeting pursuant to note 5 above.
The EGM is expected to last for less than one day. Shareholders and their proxies attending the EGM shall be responsible for their own traveling and accommodation expenses.

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

Executive directors:

Mr. An Mu Zong, Mr. Wang Zai Xing, Mr. Chow Ka Wo Alex, Mr. Wang Hui

Non executive directors: Independent non executive director:

Mr. Deng Yan Bin, Mr. Lin Dong Hui

Mr. Cai Lian Jun, Mr. Wong Kai Tat, Mr. Chan Ming Sun Jonathan

– 237 –

AI assistant

CMON Limited — Proxy Solicitation & Information Statement 2009

50172_rns_2009-12-28_bfd51620-d754-4348-b2f3-9ab516f0e01a.pdf

THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION

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)

(1) VERY SUBSTANTIAL DISPOSAL (2) MAJOR AND CONNECTED TRANSACTION (3) MAJOR ACQUISITION

Financial adviser to the Company

Independent financial adviser to the Independent Board Committee

CSC ASIA LIMITED

DEFINITIONS

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

(Stock code: 747)

(1) VERY SUBSTANTIAL DISPOSAL (2) MAJOR AND CONNECTED TRANSACTION (3) MAJOR ACQUISITION

INTRODUCTION

I. THE DISPOSAL

(i) The Disposal Agreement

Asset to be disposed

Consideration

Payment terms

Conditions precedent

Completion of the Disposal

Termination of the Disposal Agreement

(ii) Gain or loss on the Disposal

(iii) Intended use of proceeds

(iv) Information on Beijing Diye

Overview

Financial Information

(v) Information on Scenic Bay

(vi) Information on the Group

(vii) Information on Zhong Yi

(viii) Reasons for entering into the Disposal Agreement

II. THE JBMOE ACQUISITION

(i) The JBMOE Acquisition Agreement

Asset to be acquired

Consideration

Payment terms

Conditions precedent

The profit guarantee

(ii) Information on Beijing Tianqiao

(iii) Information on Beijing Jade Bird

(iv) Information on Shenzhen Jade Bird

(v) Information on JBMOE

Overview

Financial Information

(vi) Information on SZ Property

(vii) Reasons for entering into the JBMOE Acquisition Agreement

III. THE CY ACQUISITION

Asset to be acquired

Consideration

Payment terms

Conditions precedent

The profit guarantee

(ii) Information on Beijing ShenFa

(iii) Information on CY Property

(iv) Reasons for entering into the CY Acquisition Agreement

IV. FINANCIAL EFFECTS OF THE DISPOSAL, THE JBMOE ACQUISITION AND THE CY ACQUISITION

V. FINANCIAL AND TRADING PROSPECTS OF THE GROUP

VI. GENERAL

VII. EGM

VIII. RECOMMENDATION

IX. ADDITIONAL INFORMATION

By order of the Board

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

(1) VERY SUBSTANTIAL DISPOSAL (2) MAJOR AND CONNECTED TRANSACTION (3) MAJOR ACQUISITION

1) VERY SUBSTANTIAL DISPOSAL 2) MAJOR AND CONNECTED TRANSACTION 3) MAJOR ACQUISITION

INTRODUCTION

LETTER FROM CSC ASIA

BASIS OF OUR OPINION

PRINCIPAL FACTORS AND REASONS CONSIDERED

A. Background of and reasons for the Disposal, the JBMOE Acquisition and the CY Acquisition

1. Financial performance of the Group and the Beijing Diye

2. Positive outlook of the property market in the PRC

LETTER FROM CSC ASIA

Property market in Shenzhen

3. Information of JBMOE

LETTER FROM CSC ASIA

4. Information on the CY Property

B. Basis of consideration

The Disposal Agreement

The JBMOE Acquisition Agreement

CMON Limited Proxy Solicitation & Information Statement 2009