CMON Limited — Proxy Solicitation & Information Statement 2014

Dec 10, 2014

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.

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) PROPOSED AMENDMENT OF THE TERMS AND CONDITIONS OF MAJOR DISPOSAL; (2) PROPOSED APPOINTMENT OF SUPERVISOR; AND (3) NOTICES OF EXTRAORDINARY GENERAL MEETING

A letter from the Board is set out on pages 3 to 11 of this circular.

A notice and a supplemental notice convening the extraordinary general meeting of the Company to be held at the Conference room, 3rd Floor, No. 498, Yanfang Road, Luohu, Shenzhen, the PRC at 3:00 p.m. on Monday, 29 December 2014 is set out on pages 27 to 30 of this circular. Whether or not you are able to attend such meeting, you are requested to complete the form of proxy in accordance with the instructions printed thereon and return the same to the Company’s H share registrar, the Hong Kong Registrars Limited, at Shops 1712–1716, 17/F, Hopewell Centre, 183 Queen’s Road East, Wan Chai, Hong Kong (for H Shareholders) or the Company’s principal place of business at 2/F, No. 498, Yanfang Road, Luohu, Shenzhen, the PRC (for Domestic Shareholders) as soon as possible and in any event not less than 24 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.

10 December 2014

CONTENTS

		Page
Definitions	. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	1
**Letter from **	the Board . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	3
Appendix I	— Project Valuation Report . . . . . . . . . . . . . . . . . . . . . . . . . .	12
Notices of the Extraordinary General Meeting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .		27

– i –

DEFINITIONS

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

• “Adjusted Consideration”

the adjusted consideration of the Disposal amounts to RMB230 million

• “Board”

the board of Directors

• “Company”

• Shenyang Public Utility Holdings Company Limited

• “connected person”

• has the meaning ascribed to it in the Listing Rules

• “Consideration”

• consideration of the Disposal amounted to RMB280 million

• “Deed of Amendment”

• the supplemental agreement dated 11 November 2014 entered into between the Purchaser and the Company in relation to be Proposed Reduction in Consideration

• “Director(s)”

• means the directors of the Company

• “Disposal”

• the disposal of the Disposal Company by the Company to the Purchaser pursuant to the Disposal Agreement

• “Disposal Agreement”

• the sale and purchase agreement dated 13 August 2013 entered into between the Company and the Purchaser in relation to the Disposal

• “Disposal Circular”

• the circular of the Company dated 24 September 2013 in relation to the Disposal

• “Disposal Company”

• Guangzhou Zhongzhan Investment Holdings Company Limited* (廣州市中展投資控股有限公司)

• “Domestic Share(s)”

• domestic share(s) with a nominal value of RMB1 each in the share capital of the Company which are subscribed for in RMB

• “EGM”

• an extraordinary general meeting of the Company to be convened and held to approve the Deed of Amendment and the transactions contemplated thereunder

• “Group”

• the Company and its subsidiaries

• For identification purposes only

– 1 –

DEFINITIONS

• “H-Share(s)”

• overseas listed foreign ordinary share(s) in share capital of the Company, with a nominal value of RMB1 each, all of which are listed on the main board of the Stock Exchange, and subscribed for and traded in Hong Kong dollars

• “Hong Kong”

• the Hong Kong Special Administrative Region of the People’s Republic of China

• “Independent Third Party(ies)”

• the independent third party(ies) who is/are, to the best of the Directors’ knowledge, information and belief having made all reasonable enquiry, independent of the Company and its connected persons (as defined under the Listing Rules)

• “Listing Rules” the Rules Governing the Listing of Securities on the Stock Exchange

• “PRC”

• the People’s Republic of China

• “Project”

• “Jinma Xiangsongju Project” (金馬香頌居項目), a comprehensive real estate development project engaged by the Disposal Company in the PRC

• “Proposed Reduction in Consideration”

• proposed reduction in Consideration of Disposal from RMB280 million to RMB230 million

• “Purchaser”

• Shenzhen Chengxin Xingye Trading Company Limited* 深圳市誠信興業貿易有限公司, being the purchaser of the Disposal Agreement

• “RMB”

• Renminbi, the lawful currency of the PRC

• “Shareholder(s)”

• holder(s) of the H-Shares and the Domestic Shares

• “Stock Exchange”

• the Stock Exchange of Hong Kong Limited

• “Supplemental Agreement”

• the supplemental agreement entered between the Company and the Purchaser on 26 November 2013

• “%”

per cent.

* For identification purposes only

– 2 –

LETTER FROM THE BOARD

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

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

(Stock code: 747)

Executive Directors: Registered office: Mr. Ma Zhong Hong (Chairman) No.1–4, 20A, Central Street, Mr. Deng Xiao Gang Shenyang Economic and Mr. Huang Zhen Kun Technological Development Zone, the PRC

Non-executive Directors:

Ms. Zhang Lei Lei Principal place of business in the PRC: Mr. Yin Zong Chen 14/F., Jinmao International Apartment, No. 1 Xiao Dong Road, Independent Non-executive Directors: Da Dong District, Shenyang, Mr. Wong Kai Tat the PRC Mr. Yu Guan Jian Mr. Wei Jie Sheng Principal place of business in Hong Kong: 3rd Floor, Alliance Building, 130–136 Connaught Road Central, Hong Kong 10 December 2014

To the Shareholders

Dear Sir or Madam,

(1) PROPOSED AMENDMENT OF THE TERMS AND CONDITIONS OF MAJOR DISPOSAL; (2) PROPOSED APPOINTMENT OF SUPERVISOR; AND (3) NOTICES OF EXTRAORDINARY GENERAL MEETING

• (1) PROPOSED AMENDMENT OF THE TERMS AND CONDITIONS OF MAJOR DISPOSAL

INTRODUCTION

References are made to the announcements dated 13 August 2013, 26 November 2013, 6 January 2014 and 24 July 2014 and the circular dated 24 September 2013 of the

– 3 –

LETTER FROM THE BOARD

Company in relation to the disposal of the entire issued share capital and the shareholder’s loan of Guangzhou Zhongzhan Investment Holdings Company Limited* (廣州市中展投資控股有限公司).

Pursuant to the Disposal Agreement entered into between the Company and the Purchaser on 13 August 2013, it is agreed that the Consideration of RMB280 million shall be satisfied in the following manner:–

• (a) a deposit of RMB41 million shall be paid in cash by the Purchaser to the Company within 5 days upon entering into the Disposal Agreement;

• (b) a consideration of RMB120 million shall be paid in cash by the Purchaser to the Company within 1 month upon the completion of the change of the particulars of the Disposal Company in the Administration For Industry and Commerce Bureau; and

• (c) a remaining balance of RMB119 million shall be paid in cash by the Purchaser to the Company within 50 days upon the final acceptance of the first phase of the Project.

As at the Latest Practicable Date, the Purchaser has paid to the Company a total consideration of RMB161 million and a late payment penalty of RMB1.8 million in accordance with the Disposal Agreement and the Supplemental Agreement. It is agreed that the remaining balance of RMB119 million (the “ Final Payment ”) shall be paid in accordance with the above payment schedule.

On 22 July 2014, the Company received a notice from the Purchaser pursuant to which the Purchaser requested the Company to reduce the Final Payment from RMB119 million to RMB69 million. The reason for such request is due to the increasing financial pressure of the Purchaser as a result of the unsatisfactory pre-sale performance of the Project. The Board has entered into lengthy negotiations with the Purchaser for the Proposed Reduction in Consideration and have reach an agreement on 11 November 2014.

THE DEED OF AMENDMENT RELATING TO THE DISPOSAL

The Board announces that on 11 November 2014 (after trading hours), the Company entered into the Deed of Amendment with the Purchaser pursuant to which the Company and the Purchaser agreed to amend certain terms and conditions of the Disposal.

Details of the Deed of Amendment are set out below:

Date:

11 November 2014

• For identification purposes only

– 4 –

LETTER FROM THE BOARD

Parties:

• (a) The Company

• (b) The Purchaser

Terms of the Disposal as amended by the Deed of Amendment

Pursuant to the Deed of Amendment, the Consideration for the Disposal will be adjusted from RMB280 million to RMB230 million. The adjusted amount of RMB50 million was determined after arm’s length negotiations among the parties to the Disposal Agreement with reference to (i) the unaudited management accounts of the Disposal Company for the nine months ended 30 September 2014; (ii) the pre-sale performance of the Project; and (iii) the valuation of the Project as at 31 October 2014.

It is agreed that the outstanding consideration of RMB69 million shall be paid in cash within 10 days upon the Deed of Amendment become effective. If the Purchaser fails to make the payment within the aforesaid period, daily interest of 0.03% will be charged on the outstanding amount as penalty.

It is also agreed that upon the Deed of Amendment become effective, the Purchaser shall take the overall responsibility to the construction and the acceptance of the Project, the Purchase will make no claim against the Company or any of its associates in connection with the liabilities or indemnities arising from the construction and the acceptance of the Project.

Save as disclosed above, all other terms of the Disposal Agreement remain unchanged and continue to be in full force and effect.

Conditions Precedent to the Deed of Amendment

The Deed of Amendment will become effective upon the satisfaction of the following conditions:

1. the Company having convened a EGM of which an ordinary resolution shall be duly passed by the Shareholders to approve the Deed of Amendment and the transaction contemplated thereunder; and

2. the Deed of Amendment and the transaction contemplated thereunder having been approved by the Board.

UPDATES ON THE DISPOSAL COMPANY

The Disposal Company is currently engaged into the real estate development project currently engaged by is situated in Zengcheng, Guangzhou, the PRC namely “Jinma Xiangsongju Project” (金馬香頌居項目).

– 5 –

LETTER FROM THE BOARD

The Project comprises commercial properties and residential apartments with a total site area of approximately 102,095.42 sq.m. As mentioned in the Disposal Circular, it was expected that the Project will be completed by 2014. However, due to the delay in construction, the completion date of the Project is postponed for around 1.5 years. The delay is mainly caused by i) the poor weather condition in the rainy season and ii) the additional time used for screening and appoint of the Project constructor at the preliminary stage of the Project. The pre-sale of the Project is also delayed accordingly.

It is expected that the construction of phase I will be completed by 2014 while the construction of phase II is scheduled for completion in June 2015.

Latest financial results of the Disposal Company

According to the unaudited management accounts of the Disposal Company for the nine months ended 30 September 2014, the Group has reported loss of approximately RMB13,703,730 during the period, representing an increase in loss of approximately RMB7,300,000 as compared with the loss recorded for the year ended 31 December 2013.

The net asset value of the Disposal Company has also decreased from RMB9,570,495 to RMB3,158,148 during the period from 31 December 2013 to 30 September 2014.

Table below summarized the unaudited financial results of together with the financial figures for the nine months ended 30 September 2014 and the year ended 31 December 2013:

	For the nine	For the year
	months ended	ended
	30 September	31 December
	2014	2013
	(RMB)	(RMB)
Net loss before and after taxation and
extraordinary items	13,703,730	6,412,347
	As at	As at
	30 September	31 December
	2014	2013
	(RMB)	(RMB)
Net Asset Value	3,158,148	9,570,495

Pre-sale performance of the Project

Phase I of the Project provides 250 residential apartments and 34 commercial units with a total gross floor area of approximately 27,223.42 sq.m.

As at the Latest Practicable Date, a total gross floor area of approximately 26,470.38 sq.m. of phase I (including 248 residential apartments and 29 commercial units) have been sold.

– 6 –

LETTER FROM THE BOARD

Phase II has a total gross floor area of approximately 48,855.82 sq.m. providing 306 town house and 80 villas. As at the Latest Practicable Date, a total gross floor area of approximately 31,188.45 sq.m. (including 222 town houses and 47 villas) have been sold.

				Percentage
			Gross floor	of gross
		Total gross	area being	floor area
		floor area	sold	sold
		(sq. meter)	(sq. meter)	%
Phase	I	27,223.42	26,359.30	96.80
Phase	II	48,780.00	31,188.45	63.94

The percentage of gross floor area sold in phase I is approximately 96.8% while the percentage of gross floor area sold in phase II is approximately 63.94%. The percentage of gross floor area sold in phase II is relatively less than phase I.

Apart from the sale volume, the actual selling price is lower than the expected selling price. The comparison of the actual selling price and the expected selling price for phase I and phase II is shown in the table below:

			Approximate
			percentage
	Expected	Actual selling	increase/
	selling price	price	decrease
	(RMB/sq. meter)	(RMB/sq. meter)
Phase I
low-rise house	7,800 to 8,000	7,757	–1.80%
commercial unit	18,000	18,300	+1.67%
Phase II
low-rise house	9,500	8,500	–10.53%
villa	18,000 to 20,000	15,000	–21.05%

Updated valuation on Project

With reference to the valuation report conducted by independent qualified valuer, the fair market value of the Project as at 31 October 2014 was RMB402,000,000 (the “ New Valuation ”).

As the Project is still under development after the Disposal, the New Valuation has included the further investments made by the Purchaser in the Project. In order to assess the net value of Project, the New Valuation is therefore adjusted by deducting the investment cost and other cost incurred in the Project since the completion of Disposal.

– 7 –

LETTER FROM THE BOARD

The net value of the Project is estimated to be approximately RMB232,440,000 after deducting (i) the investment cost of approximately RMB122,320,000 contributed by the Purchaser and (ii) the penalty charge of approximately RMB47,240,000 from the government due to the delay in the delivery schedule of the government resettlement homes after the Disposal.

Having considered the net value of the Project, the Directors consider that the Adjusted Consideration is fair and reasonable. The new valuation report of the Project has been included in Appendix I of this Circular.

FINANCIAL IMPACT ON THE GROUP AS A RESULT OF PROPOSED REDUCTION IN CONSIDERATION

As a result of the Proposed Reduction in Consideration, it is estimated that the estimated gain before taxation from Disposal will be adjusted from approximately RMB90 million to RMB45.68 million with reference to (i) the Adjusted Consideration of RMB230 million; (ii) the net asset value of the Disposal Company as at the Completion Date of approximately RMB34.02 million and (iii) the shareholder’s loan due from the Disposal Company to the Company as at the Completion Date of approximately RMB150.3 million.

It is expected that the Proposed Reduction in Consideration would not have material adverse impact to the Group’s operation and financial position.

REASONS FOR PROPOSED REDUCTION IN CONSIDERATION

As mentioned in the Company’s 2013 annual report, the Disposal has been completed in January 2014. The Disposal Company has ceased to be a subsidiary of the Company. Due to delay in the project schedule and the unfavorable real estate market condition in the PRC, the pre-sale performance of the Project was unsatisfactory. The actual price per square meter for the properties was 10% to 15% lower than the expected price in average. In this regard, the Purchaser requested the Company to reduce the Consideration.

In determining whether to accept the Purchaser’s request, the Directors have considered the benefits of Proposed Reduction in Consideration and the possible consequences arising from rejection of the Purchaser’s request.

Pursuant to the Deed of Amendment, the Purchaser has agreed to settle the outstanding consideration of RMB69 million in cash within 10 days upon the Deed of Amendment become effective. And the Purchaser will take the overall responsibility to the construction and the acceptance of the Project upon the Deed of Amendment become effective, the Purchase will make no claim against the Company or any of its associates in connection with the liabilities or indemnity arising from the construction and the acceptance of the Project. In this regard, the payment schedule will become more certain and it minimizes the chance of the Purchaser’s default in final payment. Furthermore, the additional term could protect the Company from any claim or legal proceedings in relation to the Project afterwards.

– 8 –

LETTER FROM THE BOARD

On the other hand, if the Company does not agree with the Proposed Reduction in the Consideration, the Purchaser might refuse to settle the outstanding consideration and further delay the final payment as the Disposal Company is encountering financial pressure due to the delay in the project schedule and the unsatisfactory pre-sale performance of the Project. As a result, the payment schedule will become uncertain. In the event that the Disposal Company became insolvent, the Company might not able to collect any of the outstanding consideration. Furthermore, the Purchaser has right to initiate legal proceedings to the Company as the delay in schedule was caused by the Company.

Having considered the above, the Directors agreed to reduce the Consideration as requested by the Purchaser and consider that the terms and conditions of the Deed of Amendment are on normal commercial terms, fair and reasonable and are in the interests of the Company and the Shareholders as a whole.

LISTING RULES IMPLICATION

Pursuant to Rule 14.36, where a transaction previously announced pursuant to Chapter 14 of the Listing Rules is terminated or there is any material variation of its terms or material delay in the completion of the agreement, the listed issuer must as soon as practicable announce this fact by means of an announcement published in accordance with rule 2.07C. As the transaction is a major transaction as classified under Chapter 14 of the Listing Rules, the Proposed Reduction in Consideration represents a material change to the terms of the Disposal, and should be made conditional on shareholders’ approval at general meeting under Rules 14.36 and 14.40.

(2) PROPOSED APPOINTMENT OF SUPERVISOR

Pursuant to the relevant regulations under the Company Law of the PRC, the articles of association and the rules of shareholders’ meeting, when the Company convenes a general meeting, Shareholder(s) individually or collectively holding more than 3% of the Company’s shares can make a temporary motion and submit in writing to the convener 10 days before the date of the general meeting. Shenzhen Jinma Asset Management Company Limited (“ Jinma Asset ”) is a shareholder of the Company which beneficially owns approximately 58.80% of the total issued share capital of the Company.

On 8 December 2014, the Company received a written notice from Jinma Asset for proposing the resolution in respect of the appointment of Mr. He Song Xi 何松溪先生 (“ Mr. He ”) as the shareholder representative supervisor of the fifth session of the supervisory committee of the Company. According to the articles of association of the Company, the appointment of shareholder representative supervisor is subject to approval by the shareholders of the Company at the general meeting of the Company. The relevant resolution will be put forward to the EGM for the shareholders’ consideration and approval by way of ordinary resolution. Biographical details of Mr. He are set out as below:

He Song Xi, 59, graduated from Guangdong Puning Jianin Secondary School* 廣東普 寧市建新中學 with a high-school education level. He was a member of the second Youth

– 9 –

LETTER FROM THE BOARD

Federation of Puning City. Since 2004 to 2014, Mr. Ho has successively held positions as the deputy general manager of Shenzhen An Ye Real Estate Group Company Limited 深圳 市安業地產集團有限公司 and the deputy general manager of Shenzhen Si Ji Wan Jia Department Store Company Limited 深圳市四季萬家百貨有限公司. He is currently served as the deputy general manager of Shenzhen Xing Fu Hotel Management Company Limited* 深圳市幸福酒店管理有限公司. Mr. Ho has extensive experience in corporate management and business culture.

Mr. He does not have any interest, deemed interest or short positions in any shares, underlying shares or debentures of the Company or any of its associated corporations (within the meaning of Part XV of the Securities and Futures Ordinance).

Mr. He did not hold any other positions in the Company or any of its subsidiaries, or any directorship in other listed companies in the last three years, or has any relationships with any directors, senior management members and substantial shareholders of the Company. There is no information relating to Mr. He that is required to be disclosed pursuant to Rules 13.51(2)(h) to (v) of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited. Save as disclosed above, there is no other matter in relation to his appointment that needs to be brought to the attention of the shareholders.

Upon the appointment of Mr. He being approved by the shareholders of the Company on the EGM, Mr. He will enter into a service contract with the Company. The terms of office of Mr. He will be from the date of their appointments being approved at the EGM until the date of an annual general meeting of the Company for the financial year ending 31 December 2014 to be convened in 2015. His remuneration as supervisor will be determined by the Remuneration Committee of the Company with reference to his duties and responsibility in the Company and the market benchmark.

EGM

A notice and a supplemental notice convening the EGM with the resolutions, among other matters, is set out on page 27 to page 30 in this circular.

Whether or not the Shareholders are able to attend the meeting or any adjourned meeting, they are requested to complete the form of proxy and return it to the Company’s H share registrar in Hong Kong, the Hong Kong Registrars Limited at Rooms 1712–1716, 17/F, Hopewell Centre, 183 Queen’s Road East, Wan Chai, Hong Kong (for H Shareholders only) or the Company’s office at 2nd Floor, No. 498, Yanfang Road, Luohu, Shenzhen, the PRC (for the Domestic Shareholders only) as soon as possible and in any event not later than 24 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.

To the best of the Directors’ knowledge, information and belief, having made all reasonable enquiries, no Shareholder is required to abstain from voting on the resolutions to be proposed at the EGM. The resolutions proposed to be approved at the EGM will be taken by poll and an announcement regarding the poll results of the EGM will be made by the Company after the EGM.

– 10 –

LETTER FROM THE BOARD

RESPONSIBILITY STATEMENT

This circular, for which the Directors collectively and individually accept full responsibility, includes particulars given in compliance with the Listing Rules for the purpose of giving information with regard to the Company. The Directors, having made all reasonable enquiries, confirm that to the best of their knowledge and belief the information contained in this circular is accurate and complete in all material respects and not misleading or deceptive, and there are no other matters the omission of which would make any statement herein or this circular misleading.

RECOMMENDATION

The Board considers that (i) the Proposed Reduction in Consideration; and (ii) the proposed appointment of supervisor are on normal commercial terms, fair and reasonable and are in the interests of the Company and the Shareholders as a whole. Accordingly, the Board recommends the Shareholders to vote in favour of the resolutions to be proposed at the EGM.

By order of the Board

Shenyang Public Utility Holdings Company Limited Ma Zhong Hong Chairman

– 11 –

APPENDIX I

PROJECT VALUATION REPORT

The following is the text of a report prepared for the purpose of incorporation in this circular received from BMI Appraisals Limited, an independent valuer, in connection with its valuation as at 31 October 2014 of the market value of 100% interest in Jinma Xiangsongju Project ( 金馬香頌 居項目 ).

==> picture [226 x 77] intentionally omitted <==

10 December 2014

The Directors

Shenyang Public Utility Holdings Company Limited

No. 1-4, 20A, Central Street Shenyang Economic and Technological Development Zone The People’s Republic of China

Dear Sirs,

INSTRUCTIONS

We refer to the instructions from Shenyang Public Utility Holdings Company Limited (referred to as the “Company”) for us to provide our opinion on the market value of the 100% interest in Jinma Xiangsongju Project (金馬香頌居項目) (referred to as the “Project”) as at 31 October 2014.

This report presents the purpose and the basis of valuation, the date of valuation, the background of the Company and the Project, an industry overview, the source of information, the scope of work and the valuation assumptions. It also explains the valuation methodology utilized and presents our conclusion of value.

PURPOSE OF VALUATION

The purpose of our valuation is to value the Project for your acquisition reference purposes only.

BASIS OF VALUATION

Our valuation has been carried out on the basis of market value. Market value is defined as “the estimated amount for which an asset 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”.

– 12 –

APPENDIX I

PROJECT VALUATION REPORT

DATE OF VALUATION

The date of valuation is 31 October 2014.

BACKGROUND OF THE COMPANY

The Company is a publicly listed company with limited liability. It was incorporated and headquartered in the People’s Republic of China (referred to as the “PRC”) and has been listed on the Main Board of the Hong Kong Stock Exchange (stock code: 747) since 16 December 1999. The Company is an investment holding company principally engaged in the construction of infrastructure and development of properties.

BACKGROUND OF THE PROJECT

The Project is a real estate development project situated in Zengcheng District (增城 區), Guangzhou City (廣州市), Guangdong Province (廣東省), the PRC with a total gross floor area of approximately 102,751 square meters. It was planned that, among other things, the government resettlement homes, residential apartments and commercial properties will be built on the site.

INDUSTRY OVERVIEW

The PRC Economy

The national economy of the People’s Republic of China kept stable and comparatively fast growth in 2013. The gross domestic product (GDP) of the year was RMB56,884.5 billion, up by 7.7 % over the previous year. Of this total, the value added of the primary industry was RMB5,695.7 billion, up by 4.0%, that of the secondary industry was RMB24,968.4 billion, up by 7.8% and the tertiary industry was RMB26,220.4 billion, up by 8.3%. The value added of the primary industry accounted for 10.0% of the GDP, that of the secondary industry accounted for 43.9%, and that of the tertiary industry accounted for 46.1%. For the first time, the share of the value added of the tertiary industry surpassed that of the second industry.

– 13 –

APPENDIX I

PROJECT VALUATION REPORT

Gross Domestic Product, 2009-2013

==> picture [370 x 163] intentionally omitted <==

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

RMB100 million
600,000 30%
500,000 25%
400,000 20%
GDP
300,000 15%
Growth Rate
200,000 10%
100,000 5%
0 0%
2009 2010 2011 2012 2013
----- End of picture text -----

Source: National Bureau Statistics of China

The consumer price was basically stable. The consumer price in 2013 went up by 2.6% over the previous year. Of this total, the prices for food went up by 4.7%. The prices for investment in fixed assets increased by 0.3%. The producer prices and the purchasing prices for manufactured goods were down by 1.9% and 2.0% respectively. The producer prices for farm products were up by 3.2%.

Monthly Changes in Consumer Prices, 2013

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

3.5%
3.0%
2.5%
2.0%
1.5%
Year-on-Year
1.0%
Month-on-Month
0.5%
0.0%
-0.5%
-1.0%
-1.5%
Jan Feb Mar Apr May Jun Jul Aug Sept Oct Nov Dec
----- End of picture text -----

Source: National Bureau Statistics of China

– 14 –

APPENDIX I

PROJECT VALUATION REPORT

By the end of 2013, the total population in the mainland reached 1,360.72 million, an increase of 6.68 million over that at the end of 2012. Of this total, urban permanent residents numbered 731.11 million, accounting for 53.73%, or 1.16% higher than that at the end of the previous year. The year 2013 saw 16.40 million births, a crude birth rate of 12.08 per thousand, and 9.72 million deaths, or a crude death rate of 7.16 per thousand. The natural growth rate was 4.92 per thousand. The number of people that are separated from their household registration reached 289 million, of which 245 million were floating population.

Population Age Composition, 2013

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

14.9%
17.5%
Aged 0-15
Aged 16-59
Aged 60 and over
67.6%
----- End of picture text -----

Source: National Bureau Statistics of China

The employment continued to grow. At the end of 2013, the number of employed people in the PRC was 769.77 million, and that in urban areas was 382.40 million. The newly increased employed people in urban areas numbered 13.10 million. The urban unemployment rate registered was 4.05% at the year end, slightly lower than last year’s 4.09%. The total number of migrant workers in 2013 was 268.94 million, up by 2.4% over that of 2012. The number of migrant workers who left hometowns and worked in other places was 166.10 million, increased by 1.7%, and those who worked in their own localities reached 102.84 million, up by 3.6%.

– 15 –

APPENDIX I

PROJECT VALUATION REPORT

Newly Increased Employed People in Urban Areas, 2009-2013

==> picture [241 x 193] intentionally omitted <==

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

10,000 Persons
1,400
1,310
1,300
1,266
1,221
1,200
1,168
1,102
1,100
1,000
2009 2010 2011 2012 2013
----- End of picture text -----

Source: National Bureau Statistics of China

The imports and exports was stable and on the rise. The total value of imports and exports of goods in 2013 reached RMB25,826.7 billion, or US$4,160.0 billion, up by 7.6% over the previous year. Of this total, the value of goods exported was RMB13,717.0 billion, or US$2,209.6 billion, increased by 7.9%, and the value of goods imported was RMB12,109.7 billion, or US$1,950.4 billion, up by 7.3%.

Imports and Exports of Goods, 2013

==> picture [347 x 195] intentionally omitted <==

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

US$100 million
25,000 7,000
6,000
20,000
5,000
Imports
15,000
4,000
Exports
3,000 Trade Surplus
10,000
2,000
5,000
1,000
0 0
2009 2010 2011 2012 2013
----- End of picture text -----

Source: National Bureau Statistics of China

– 16 –

APPENDIX I

PROJECT VALUATION REPORT

The PRC’s Real Estate Market

According to “2014年三季度中國房地產政策盤點” published by China Index Academy (中國指數研究院), the PRC’s real estate market remains weak, that there is a slowdown on the growth rate of real estate investment as well as a downward trend in both real estate selling price and transaction volume. Many cities relaxed their house purchase restrictions. Moreover, at the end of September, the PRC’s Central Bank and China Banking Regulatory Commission (中國銀行業監督管理委員會) jointly announced a relaxation on mortgage restrictions.

Based on the China Real Estate Index System (中國房地產指數系統), in November, average newly-built residential property price in 100 cities in China witnessed a decline on both month-on-month and year-on-year basis. The average price was RMB10,589 per m[2] , which represents a 0.38% decline on month-on-month basis and is the seventh consecutive month declining, although the rate of decline narrowed to 0.02%.

100 City Price Index (百城價格指數), 2014

Month	Value	**M-o-M **	Change (%)
June	10,923		–0.50
July	10,835		–0.81
August	10,771		–0.59
September	10,672		–0.92
October	10,629		–0.40
November	10,589		–0.38

Source: China Index Academy

On 29 October 2014, Premier Li Keqiang (李克強) chaired a State Council Executive Meeting. During the meeting, he emphasized the promotion of consumption in six areas, one of which is housing. Specifically, he aimed to stabilize housing consumption, strengthen the construction of affordable housing, and relax the requirement to pay for rental using provident fund. As the real estate market in the PRC is undergoing an in-depth reform, it is expected that it will face more opportunities as well as challenges during the process of marketization in the future.

SOURCE OF INFORMATION

We have been furnished with information provided by the senior management of the Company. The valuation required the consideration of pertinent factors, including, but not limited to, the following:

• The nature of the Project including the industry sector and geographical location;

• The information provided by the senior management of the Company; and

• Other factors that will materially affect the operation of the Project.

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APPENDIX I

PROJECT VALUATION REPORT

Besides the information provided by the senior management of the Company, our valuation also relied on market data, industrial information and statistical figures obtained from Bloomberg Terminal, various databases and other publicly available sources.

SCOPE OF WORK

The following processes have been conducted by us in order to sufficiently support our conclusion of value:

• Conducted an on-site inspection to investigate the core operation of the Project;

• Interviewed with the senior management of the Company in order to have an in-depth understanding of the core operation of the Project;

• Obtained relevant financial and operational information in respect of the Project from the senior management of the Company;

• Examined the basis and assumptions of the financial and operational information in respect of the Project provided by the senior management of the Company;

• Conducted appropriate research to obtain sufficient market data, industrial information and statistical figures from Bloomberg Terminal, various databases and other publicly available sources; and

• Prepared the valuation and this report in accordance with generally accepted valuation procedures and practices.

VALUATION ASSUMPTIONS

Due to the changing economic and market conditions, a number of assumptions have to be adopted in order to sufficiently support our conclusion of value. The major assumptions adopted in our valuation are:

• All licenses, permits, certificates and consents issued by any local, provincial or national government or other authorized entity or organization that will affect the operation of the Project have been obtained or can be obtained upon request with an immaterial cost;

• There will be no material change in the existing political, legal, fiscal, technological, economic and market conditions in the jurisdiction where the Project is exposed to;

• There will be no material change in the taxation laws and regulations in the jurisdiction where the Project is exposed to, that the tax rates will remain unchanged and that all applicable laws and regulations will be complied with;

– 18 –

APPENDIX I

PROJECT VALUATION REPORT

• The market return, market risk, interest rates and exchange rates will not differ materially from those of present or expected;

• The market data, industrial information and statistical figures obtained from Bloomberg Terminal, databases and other public sources are true and accurate;

• The core operation of the Project will not differ materially from those of present or expected;

• The financial and operational information in respect of the Project have been prepared on a reasonable basis, reflecting estimates that have been arrived at after due and careful consideration by the senior management of the Company;

• The management of the Project will implement only those prospective financial and operational strategies that will maximize the efficiency of the operation of the Project;

• The management of the Project has sufficient knowledge and experience in respect of the operation of the Project, and the turnover of any director, management or key person will not affect the operation of the Project;

• The management of the Project has acquired, or will acquire, adequate financial capital for the investments in projected capital expenditure and working capital from time to time, and any scheduled interest or repayment of loan and payable will be paid on time;

• The management of the Project has adopted reasonable and appropriate contingency measures against any human disruption such as fraud, corruption and strike, and the occurrence of any human disruption will not affect the operation of the Project; and

• The management of the Project has adopted reasonable and appropriate contingency measures against any natural disaster such as fire, flood and hurricane, and the occurrence of any natural disaster will not affect the operation of the Project;

– 19 –

APPENDIX I

PROJECT VALUATION REPORT

VALUATION METHODOLOGY

The Valuation Approaches

The following generally accepted valuation approaches have been considered in the course of our valuation: (1) the income approach; (2) the market approach; and (3) the cost approach.

The income approach provides an indication of value based on the principle that an informed buyer would pay no more than the present value of anticipated future economic benefits generated by the subject asset.

The anticipated future cash flows were discounted using a discount rate, or the cost of capital, to determine the present value of the expected cash flows. The present value of the expected cash flows was computed using the following formula:

PVFCF = FCF1 / (1 + r)[1] + FCF2 / (1 + r)[2] +...+ FCFn / (1 + r)[n]

Where:

PVFCF = present value of free cash flows

FCF = free cash flow r = discount rate n = number of year of projections

The market approach provides an indication of value by comparing the subject asset to similar assets that have been sold in the market, with appropriate adjustments for the differences between the subject asset and the assets that are considered to be comparable to the subject asset.

Under the market approach, the guideline company method computes a price multiple for publicly listed companies that are considered to be comparable to the subject asset and then applies the result to a base of the subject asset. The sales comparison method computes a price multiple using recent sales and purchase transactions of assets that are considered to be comparable to the subject asset and then applies the result to a base of the subject asset.

The cost approach provides an indication of value based on the principle that an informed buyer would pay no more than the cost of producing the same or a substitute asset with equal utility as the subject asset.

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APPENDIX I

PROJECT VALUATION REPORT

Under the cost approach, the historical cost method measures the cost incurred throughout the development of the subject asset at the time it was developed. The replication cost method measures the amount of investment that would be required to develop an asset similar to the subject asset. The replacement cost method measures the amount of investment that would be required to develop the subject asset as it currently exists.

The Selected Valuation Approach

The income approach was considered to be the most appropriate valuation approach in the valuation, as it takes the future growth potential and asset-specific issues of the Project into consideration.

The discounted cash flow (DCF) method is the most fundamental and prominent method of the income approach. In applying the DCF method, the free cash flows of the subject asset in future years were determined from the net income after tax plus non-cash expenses, such as depreciation and amortization expenses, and after-tax interest expense; the result was then less non-cash incomes, investment in capital expenditure and investment in net working capital.

The free cash flows were computed using the following formula:

_FCF = NI + NCE _	_+ _	Int (1 – Tint) – NCI – InvFA – InvNWC
Where:
FCF	=	free cash flow
NI	=	net income after tax
NCE	=	non-cash expenses
Int	=	interest expenses
Tint	=	tax rate applied to interest expense
Int (1 – Tint)	=	after-tax interest expense
NCI	=	non-cash incomes
InvFA	=	investment in capital expenditure
InvNWC	=	investment in net working capital

– 21 –

APPENDIX I

PROJECT VALUATION REPORT

The Comparable Companies

The market value of the Project was determined with reference to the information in respect of publicly listed companies that are considered to be comparable to the Project (referred to as the “Comparable Companies”). The Comparable Companies are listed as follows:

Bloomberg Ticker Name of Company 1. 000567 CH Hainan Haide Industry Company Limited 2. 002016 CH Guangdong Shirongzhaoye Company Limited 3. 600185 CH Xi’An Gree Real Estate Company Limited 4. 600325 CH Huafa Industrial Company Limited 5. 600393 CH Guangzhou Donghua Enterprise Company Limited 6. 600684 CH Guangzhou Pearl River Industrial Development Company Limited

The Selection Criteria of the Comparable Companies

The selection of the Comparable Companies was based on the comparability of the overall industry sector and geographical location.

The selection criteria of the Comparable Companies are as follows:

• The principal activities of the company is located in the southern part of the PRC;

• The company is principally engaged in the residential property development and the related operation;

• Shares of the company are listing in a major stock exchange and are actively trading in a reasonable period of time; and

• Detailed financial and operational information in respect of the company are available at Bloomberg Terminal, databases or other publicly available sources.

Given the abovementioned selection criteria, the Comparable Companies were considered to be fair and representative samples.

The Discount Rate

The Weighted Average Cost of Capital (WACC) was adopted as the discount rate for the valuation. It is the required return on the capital investment of a company. The cost of capital will be different for each source of capital and class of securities a company has, reflecting the different risks. The WACC is the weighted average of the costs of each of the different types of capital, and the weights are proportion of the company’s capital that comes from each source.

– 22 –

APPENDIX I

PROJECT VALUATION REPORT

The WACC was computed using the following formula:

WACC = Re (E / V) + Rd (D / V) (1 – Tc)

Where:

WACC = weighted average cost of capital Re = cost of equity Rd = cost of debt E = value of the firm’s equity D = value of the firm’s debt V = sum of the values of the firm’s equity and debt Tc = corporate tax rate

The WACC comprises two components: the cost of equity and the cost of debt. The cost of equity was determined using the Capital Asset Pricing Model (CAPM). The CAPM describes the relationship between the risk of a particular asset, its market price and the expected return to the investor, that investors required additional return to compensate additional risk associated.

The cost of equity under the CAPM was computed using the following formula:

Re = Rf + � * MRP

Where:

Re = cost of equity R = risk-free rate f � = beta coefficient MRP = market risk premium

The risk-free rate represents the time value of money. The yield rate of the 10-year Central Government Bond of the PRC as at the date of valuation of 3.83%, as extracted from Bloomberg Terminal, was adopted as the risk-free rate in the valuation.

– 23 –

APPENDIX I

PROJECT VALUATION REPORT

The market risk premium is the implied risk premium expected from the market using forecasted growth rates, earnings, dividends, payout ratios and current values. It represents the additional return required by an investor as compensation for investing in equities rather than a risk-free instrument. The market risk premium of the PRC of 8.76% was determined by the market risk premium of the United States and the country risk premium of the PRC.

The beta coefficient measures the risk of an asset relative to the overall market. It reflects the sensitivity of an asset’s value to economic variables or risks that affect the values of all risky assets, including economic growth rates, interest rates, exchange rates and inflation rates. The beta coefficient of 1.158 was determined by the average of the unlevered betas of the Comparable Companies, then being relevered based on the specific corporate tax rate and the weight of debt applied to the Project.

The illiquidity premium of 4.00% represents the premium that investors would require for less liquid assets. By considering the size of the Project, a size premium of 3.81% was adopted. As a result, the cost of equity was calculated as 21.78%.

The cost of debt of 6.55% was determined by the expected lending rate of the Project. Since the interest paid on debts are tax-deductible expense for a company, the cost of the company of obtaining debt funds is less than the required rate of return of the suppliers of the debt capital. The after-tax cost of debt of 4.91% was calculated by multiplying one minus the corporate tax rate of the PRC of 25.00% by the cost of debt.

The weight of debt of 38.44% was determined by the average of the weights of debt of the Comparable Companies.

The weights of debt of the Comparable Companies are as follows:

Comparable Company Hainan Haide Industry Company Limited Guangdong Shirongzhaoye Company Limited Xi’An Gree Real Estate Company Limited Huafa Industrial Company Limited Guangzhou Donghua Enterprise Company Limited Guangzhou Pearl River Industrial Development Company Limited Average of Weight of Debt:	Weight of Debt 0.00% 14.39% 52.73% 78.92% 44.94% 39.65%
	38.44%

The weight of equity of 61.56% was determined by the average of the weights of equity of the Comparable Companies, or calculated as one minus the weight of debt of the Project.

– 24 –

APPENDIX I

PROJECT VALUATION REPORT

The weights of equity of the Comparable Companies are as follows:

Comparable Company Hainan Haide Industry Company Limited Guangdong Shirongzhaoye Company Limited Xi’An Gree Real Estate Company Limited Huafa Industrial Company Limited Guangzhou Donghua Enterprise Company Limited Guangzhou Pearl River Industrial Development Company Limited Average of Weight of Equity:	Weight of Equity 100.00% 85.61% 47.27% 21.08% 55.06% 60.35%
	61.56%

As a result, the WACC of the Project was calculated as 15.30%.

REMARKS

For the purpose of our valuation, we have been furnished with information provided by the senior management of the Company. We have had no reason to doubt the truth and accuracy of the information provided to us by the Company. We have also sought and received confirmation from the Company that no material facts have been omitted from the information supplied.

To the best of our knowledge, all data set forth in this report are true and accurate. Although gathered from reliable sources, no guarantee is made or liability assumed for the accuracy of any data, opinions or estimates identified as being furnished by others, which have been used in formulating our analysis.

Unless otherwise stated, all money amounts stated herein are in Renminbi (RMB).

CONCLUSION OF VALUE

Our conclusion of value is based on accepted valuation procedures and practices that rely on the use of numerous assumptions and the consideration of a lot of uncertainties, not all of which can be easily ascertained or quantified.

Further, whilst the assumptions and consideration of such matters are considered to be reasonable, they are inherently subject to uncertainties and contingencies that are beyond the control of the Company or us.

Based on our investigation and analysis outlined in this report, it is our opinion that the market value of the 100% interest in Jinma Xiangsongju Project (金馬香頌居項目) (i.e. the “Project”) as at 31 October 2014 was RMB402,000,000 (RENMINBI FOUR HUNDRED AND TWO MILLION ONLY) .

– 25 –

APPENDIX I

PROJECT VALUATION REPORT

We hereby certify that we have neither present nor prospective interest in the Company, the Project or the result reported.

Yours faithfully, For and on behalf of

BMI APPRAISALS LIMITED

Dr. Tony C. H. Cheng

BSc., MUD, MBA(Finance), MSc.(Eng), PhD(Econ), FSOE, FIPlantE, CEnv, SIFM, FCIM, CPA UK, MCIArb MASCE, MIET, MIEEE, MASME, MIIE Managing Director

Note:

Dr. Tony C. H. Cheng has various engineering and accounting & finance qualifications. He is currently the Chairman of the Institute of Mechanical Engineers, China. He is also a Fellow member of the Society of Operations Engineers and the Institution of Plant Engineers, and a member of the Institute of Industrial Engineers and the American Society of Mechanical Engineers. Besides, Dr. Cheng is a member of the Institute of Public Accountants. He has extensive experience in valuing similar assets in different industries in Hong Kong and the PRC.

– 26 –

NOTICES OF THE EXTRAORDINARY GENERAL MEETING

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 EXTRAORDINARY GENERAL MEETING

NOTICE IS HEREBY GIVEN that the extraordinary general meeting (“ EGM ”) of Shenyang Public Utility Holdings Company Limited (the “ Company ”) will be held at Conference room, 3rd Floor, No. 498, Yanfang Road, Luohu, Shenzhen, the People’s Republic of China at 3:00 p.m. on 29 December 2014 (Monday) for the purpose of considering and, if thought fit, passing the following resolution:

ORDINARY RESOLUTION

1. “ THAT

2. (a) the deed of amendment dated 11 November 2014 (the “ Deed of Amendment ”) entered into between the Company and Shenzhen Chengxin Xingye Trading Company Limited 深圳市誠信興業貿易有限 公司, (a copy of which has been produced to the EGM marked “A” and signed by the chairman of the EGM for the purpose of identification) in relation to the proposed amendment of certain terms and conditions of the disposal agreement dated 13 August 2013 for the disposal of the entire issued share capital and the shareholder’s loan of Guangzhou Zhongzhan Investment Holdings Company Limited 廣州市中展投資控 股有限公司 which in substance relates to the consideration amount being adjusted from RMB280 million to RMB230 million and all transactions contemplated thereunder be and are hereby approved, confirmed and ratified;

3. (b) any one or more of the directors of the Company be and are hereby authorised to exercise all the powers of the Company and take all steps as might in their opinion be desirable, necessary or expedient to give effect to or in connection with the Deed of Amendment including without limitation to the execution, amendment, ratification, delivery, submission and/or implementation of any further documents or agreements in relation to the Deed of Amendment; the taking of all necessary actions to implement the transactions contemplated under the Deed of Amendment.”

By Order of the Board

Shenyang Public Utility Holdings Company Limited Ma Zhong Hong

Chairman

Shenyang, the PRC, 14 November 2014

• For identification purpose only

– 27 –

NOTICES OF THE EXTRAORDINARY GENERAL MEETING

Notes:

1. A member of the Company (“ Member ”) entitled to attend and vote at the EGM is entitled to appoint a proxy or proxies to attend and vote in his stead. A proxy need not be a Member. In the case of joint holders of any Share, only the person whose name appears first in the register of Members shall be entitled to receive this notice, to attend and exercise all the voting powers attached to such Share at the EGM, and this notice shall be deemed to be given to all joint holders of such Share.

2. To be valid, the form of proxy together with any power of attorney or other authority (if any) under which it is signed or a notarially certified copy of that power of attorney or authority must be deposited with the Company’s H share registrar, Hong Kong Registrars Limited, at Shops 1712–1716, 17/F, Hopewell Centre, 183 Queen’s Road East, Wanchai, Hong Kong, and in case of the Domestic Shareholders, with the Company’s office at 2nd Floor, No. 498,Yanfang Road, Luohu, Shenzhen, the PRC not later than 24 hours before the time appointed for holding the EGM or the time appointed for passing the resolutions or any adjournment thereof. Delivery of the form of proxy shall not preclude a Member from attending and voting in person at the EGM and, in such event, the instrument appointing a proxy shall be deemed to be revoked.

3. The registration in the register of Members will be closed from 29 November 2014 to 29 December 2014, both days inclusive, during which period no transfer of shares of the Company will be effected. For the identification of Members who are qualified to attend and vote at the EGM, all transfer documents accompanied by the relevant H share certificates must be lodged with the Company’s H share registrar, Hong Kong Registrars Limited, at Shops 1712–1716, 17/F, Hopewell Centre, 183 Queen’s Road East, Wanchai, Hong Kong not later than 4:30 p.m. on 28 November 2014. Shareholders whose names appear on the register of Members on 28 November 2014 will be entitled to attend the EGM.

4. Whether or not H Shareholders intend to attend the EGM, they are requested to complete the reply slip for the EGM and return it, by hand or by post, to the Company’s H share registrar, Hong Kong Registrars Limited, at Shops 1712–1716, 17/F, Hopewell Centre, 183 Queen’s Road East, Wanchai, Hong Kong on or before 9 December 2014.

5. Whether or not Domestic Shareholders intend to attend to the EGM, they are requested to complete the reply slip for the EGM and return it, by hand or by post, to the Company’s office at 2nd Floor, No. 498, Yanfang Road, Luohu, Shenzhen, the PRC on or before 9 December 2014.

6. Shareholders or their proxies attending the EGM shall produce their identification documents.

– 28 –

NOTICES OF THE EXTRAORDINARY GENERAL MEETING

SUPPLEMENTAL NOTICE OF EXTRAORDINARY GENERAL MEETING

Reference is made to the notice (the “ Notice ”) of the extraordinary general meeting (“ EGM ”) of Shenyang Public Utility Holdings Company Limited (the “ Company ”) dated 14 November 2014 which set out the extraordinary general meeting to be held at Conference room, 3rd Floor, No. 498, Yanfang Road, Luohu, Shenzhen, the People’s Republic of China at 3:00 p.m. on 29 December 2014 (Monday) for the purpose of considering the resolutions to be proposed, if thought fit, passing at the EGM. Unless otherwise defined, capitalized items used herein have the same meanings as those defined in the Notice.

Subsequent to the issuance of the Notice, the Company received a written notice on 8 December 2014 from Shenzhen Jinma Asset Management Company Limited (“ Jinma Asset ”) for proposing the resolution in respect of the appointment of Mr. He Song Xi 何松 溪先生 (“ Mr. He ”) as the shareholder representative supervisor of the fifth session of the supervisory committee of the Company. According to the articles of association of the Company, the appointment of shareholder representative supervisor is subject to approval by the shareholders of the Company at the general meeting of the Company. The relevant resolution will be put forward to the EGM for the shareholders’ consideration and approval by way of ordinary resolution.

Jinma Asset is a shareholder of the Company which beneficially owns approximately 58.80% of the total issued share capital of the Company. According to the relevant regulations under the Company Law of the PRC, the articles of association and the rules of shareholders’ meeting, when the Company convenes a general meeting, Shareholders individually or collectively holding more than 3% of the Company’s shares can make a temporary motion and submit in writing to the convener ten (10) days before the date of Shareholders’ general meeting. Biographical details of Mr. He are set out in the circular of the Company dated 10 December 2014.

SUPPLEMENTAL NOTICE IS HEREBY GIVEN that the EGM, which will be held on the same date, at the same time and at the same place as originally scheduled in the Notice, will consider and, if thought fit, pass the following supplemental resolution as ordinary resolution in addition to the resolution set out in the Notice:

ORDINARY RESOLUTION

“To consider and approve the appointment of Mr. He Song Xi 何松溪先生 as the shareholder representative supervisor of the fifth session of the supervisory committee of the Company.”

By Order of the Board Shenyang Public Utility Holdings Company Limited Ma Zhong Hong Chairman

Shenyang, PRC, 10 December 2014

– 29 –

NOTICES OF THE EXTRAORDINARY GENERAL MEETING

Notes:

• (1) This supplemental notice should be read in conjunction with the Notice and the Circular.

• (2) Save for the inclusion of the newly submitted resolution, there are no other changes to the resolution set out in the Notice.

• (3) PROXY FORM

Since the First Proxy Form released on 14 November 2014 for use at the EGM does not contain the proposed additional ordinary resolution as set out in this supplemental notice, the Second Proxy Form has been prepared and is enclosed with this supplemental notice.

• (i) Each Shareholder entitled to attend and vote at the EGM may appoint one or more proxies to attend and vote on his/her behalf. A proxy need not be a shareholder of the Company.

• (ii) Shareholders can appoint a proxy by an instrument in writing (i.e. by using the Second Proxy Form enclosed). The Second Proxy Form shall be signed by the appointor or his/her attorney duly authorised in writing, or if the appointor is a body corporate, either under the common seal or signed by a director or a duly authorised attorney of the body corporate. If the Second Proxy Form is signed by an attorney of the appointor, the power of attorney authorising that attorney to sign or other document of authorisation must be notarized.

• (iii) To be valid, for H Shareholders, the Second Proxy Form and notarized power of attorney or other documents of authorisation (if applicable), must be delivered to the Company’s H Share registrar, Hong Kong Registrars Limited not less than 24 hours before the time for holding the EGM or any adjournment thereof.

• (iv) Shareholders who have lodged the First Proxy Form with the Company should note that:

  • (i) If the Second Proxy Form is lodged with the Company’s H Share registrar 24 hours prior to the time designated for convening the EGM (the “ Closing Time ”), the Second Proxy Form will revoke and supersede the First Proxy Form previously lodged by him/her. The Second Proxy Form will be treated as a valid form of proxy lodged by the Shareholder if correctly completed and signed and returned in accordance with the instructions printed thereon.

  • (ii) If no Second Proxy Form is lodged with the Company’s H Share registrar as at the Closing Time, the First Proxy Form will be treated as a valid form of proxy lodged by him/her if correctly completed. The proxy so appointed by the Shareholder will be entitled to vote at his/her discretion or to abstain from voting on any resolution properly put to the EGM including the proposed resolution in relation to appointment of new supervisors as set out in this supplemental notice.

• (v) Completion and return of the First Proxy Form or the Second Proxy Form will not preclude you from attending and voting in person at the EGM or any adjournment thereof should you so wish.

• (4) All resolutions at the meeting will be taken by poll except where the chairman, in good faith, decides to allow a resolution which relates to a procedural or administrative matter to be voted on by a show of hands pursuant to the Hong Kong Listing Rules. The results of the poll will be published on the websites of the Hong Kong Stock Exchange and the Company in accordance with the Hong Kong Listing Rules.

• (5) Shareholders or their proxies must present proof of their identities upon attending the EGM. Should a proxy be appointed, the proxy must also present copies of his/her proxy form, or copies of appointing instrument and power of attorney, if applicable.

– 30 –