Rego Interactive Co., Ltd - Interim / Quarterly Report 2011

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I. IMPORTANT

(1) The board of directors (the “ Board ”) and supervisory committee (the “ Supervisory Committee ”) of Tianjin Capital Environmental Protection Group Company Limited (the “ Company ”) and its directors (the “ Directors ”), supervisors (the “ Supervisors ”) and senior management confirm that the information in this 2011 interim report (the “ Interim Report ”) does not contain any false information, misleading statements or material omissions, and accept joint and several responsibility for the truthfulness, accuracy and completeness of the contents of this report.
(2) The interim financial statements of the Company for the six months ended 30 June 2011 are unaudited.
(3) The person in charge of the Company Mr. Zhang Wenhui Officer in charge of the accounting work Ms. Shi Zhenjuan Officer in charge of the accounting department (the chief accountant) Ms. Shi Zhenjuan

Mr. Zhang Wenhui, the person in charge of the Company, and Ms. Shi Zhenjuan, the officer in charge of the accounting work and the accounting department (the chief accountant), have warranted the truthfulness and completeness of the financial reports contained in this Interim Report.

(4) Did the controlling shareholder of the Company and its connected persons misappropriate the Company’s funds?

No.

(5) Did the Company provide external guarantees in violation of any specified decision-making procedures?

No.

II. COMPANY PROFILE

(I) Information of the Company

Legal Chinese name 天津創業環保集團股份有限公司 Abbreviation of the legal Chinese name 創業環保 English name Tianjin Capital Environmental Protection Group Company Limited Abbreviation of the English name TCEPC Legal representative of the Company Mr. Zhang Wenhui

Tianjin Capital Environmental Protection Group Company Limited ◆ 2011 Interim Report

(II) Contact Persons and Contact Details

Company Secretary in Hong Kong

Secretary Secretary Securities to the Board in Hong Kong Name Ms. Fu Yana Mr. Lo Wai Keung, Eric Ms. Guo Fengxian Correspondence TCEP Building, 22/F, Worldwide House, TCEP Building, address 76 Weijin South Road, Central, Hong Kong 76 Weijin South Road, Nankai District, Tianjin, Nankai District, The People’s Republic Tianjin, the PRC of China (the “ PRC ”) Telephone number 86-22-23930128 852-22180920 86-22-23930128 Facsimile number 86-22-23930126 852-25010028 86-22-23930126 E-mail [email protected] [email protected] [email protected]

Securities Affairs Representative

Ms. Guo Fengxian TCEP Building, 76 Weijin South Road, Nankai District, Tianjin, the PRC

(III) Basic Information

Registered Address No. 45 Guizhou Road, Heping District, Tianjin, the PRC Postal Code 300051 Office Address TCEP Building, 76 Weijin South Road, Nankai District, Tianjin, the PRC Postal Code 300381 Website http://www.tjcep.com E-mail [email protected]

(IV) Information Disclosure and Places for Document Inspection

Newspaper designated for Shanghai Securities News information disclosure Website designated by http://www.sse.com.cn China Securities Regulatory Committee (“ CSRC ”) for uploading the Interim Report Place where the Interim Office of the Secretary to the Board at 18/F, TCEP Report is available Building, 76 Weijin South Road, Nankai District, Tianjin, for inspection the PRC

2 Tianjin Capital Environmental Protection Group Company Limited ◆ 2011 Interim Report

(V) Information of the Shares of the Company

Type of Shares Place of Listing Stock Short Name Stock Code Stock Short Name Before Change A shares Shanghai Stock Exchange (the “ SSE ”) 創業環保 600874 渤海化工 H shares The Stock Exchange of Hong Kong Tianjin Capital 1065 Tianjin Bohai Limited (the “ HKSE ”)

(VI) Other Basic Information of the Company

Date of first registration of the Company The first registered address of the Company

Last changes Date of change in registration of the Company Change in registered address of the Company Number of business licence of corporate legal person Tax registration number Organization structure code Name of PRC auditor engaged by the Company

Correspondence address of PRC auditor engaged by the Company

Name of Hong Kong auditor engaged by the Company
Correspondence address of Hong Kong auditor engaged by the Company

8 June 1993

No. 10 Hubei Road,

Heping District, Tianjin, the PRC 8 February 2010

No. 45 Guizhou Road, Heping District, Tianjin, the PRC 120000400079927

120114103065501 10306550-1

PricewaterhouseCoopers Zhong Tian Certified Public Accountants Limited Company

11th Floor,

PricewaterhouseCoopers Center 202 Hu Bin Road, Shanghai, the PRC

PricewaterhouseCoopers

22/F, Prince’s Building, Central, Hong Kong

Tianjin Capital Environmental Protection Group Company Limited ◆ 2011 Interim Report

III. PRINCIPAL ACCOUNTING DATA AND FINANCIAL HIGHLIGHTS (AS PREPARED IN ACCORDANCE WITH THE PRC ACCOUNTING STANDARDS)

1. Major accounting data and financial indicators

Unit: ’000 Currency: RMB

	As at the end of the current reporting period	As at the end of lastyear	Increase/Decrease as at the end of the current reporting period as compared to the end of lastyear (%)
Total assets	8,516,210	8,425,563	1.08
Equity interest attributable to the owners of the Company (or shareholders’ equity)	3,431,252	3,450,573	-0.56
Net assets per share (RMB/share) attributable to the shareholders of the Company	2.40	2.42	-0.83
	Reporting period (January – June)	Same period of lastyear	Increase/Decrease for the current reporting period as compared to the same period lastyear (%)
Operating profit	194,800	188,528	3.33
Total profit	185,698	177,434	4.66
Net profit attributable to the shareholders of the Company	137,674	129,701	6.15
Net profit after deduction of extraordinary items attributable to the shareholders of the Company	144,500	138,021	4.69
Basic earnings per share (RMB)	0.10	0.09	11.11
Basic earnings per share after deduction of extraordinary items (RMB)	0.10	0.10	—
Diluted earnings per share (RMB)	0.10	0.09	11.11
Return on net assets ratio (%)	4.00	4.00	—
Net cash flow from operating activities	355,697	56,723	527.08
Net cash flow per share from operating activities (RMB)	0.25	0.04	525

4 Tianjin Capital Environmental Protection Group Company Limited ◆ 2011 Interim Report

2. Extraordinary profit and loss items and amounts

Unit: ’000 Currency: RMB

Extraordinary items	Amount
Profit/loss from disposal of non-current assets	-13,468
Other non-operating income and expenses except for the above items	4,366
Income tax effect	2,276
Total	-6,826

3. Difference in accounting standards between the PRC and overseas

No differences exist in net profit and net assets.

IV. CHANGES IN SHARE CAPITAL AND SHAREHOLDERS

(I) Table of share changes

There were no changes in the total number of shares and share capital structure of the Company during the reporting period.

(II) Shareholders and actual controller

1. Number of shareholders and their shareholdings

Total number of shareholders as at the end of the reporting period

98,773 shareholders, including 108 shareholders holding H shares

Tianjin Capital Environmental Protection Group Company Limited ◆ 2011 Interim Report

Shareholdings of the top ten shareholders

				Increase/
				Decrease	Number of
			Total	during the	restricted	Number of
			number of	reporting	circulating	shares pledged
	Nature of	Percentage of	shares held	period	shares held	or frozen
Shareholders	shareholders	shareholding (%)	(shares)	(shares)	(shares)	(shares)
Tianjin Municipal Investment	State-owned	51.83	739,781,100	0	0	Pledged
Company Limited (“TMICL”)						251,940,000
HKSCC Nominees Limited	Others	23.36	333,406,900	-1,174,000	0	Unknown
Zhou Jun	Others	0.42	5,975,000	-202,700	0	Unknown
Shenyang Railway Coal	Others	0.21	3,000,000	0	0	Unknown
Dealing Co., Ltd.
Agricultural Bank of China -	Others	0.16	2,318,354	2,318,354	0	Unknown
Soochow CSI Emerging
Industry Index Fund
（中國農業銀行股份
有限公司－東吳中證新興
產業指數證券投資基金）
China Resources SZITIC Trust	Others	0.16	2,308,550	2,308,550	0	Unknown
Company Limited - 3rd Round
Sanyany Securities Investment
Collective Fund Trust Scheme
（華潤紳國投信託有限公司
—三羊卓越3期證券
集合資金信託計劃）
HO MAN PING	Others	0.14	2,014,000	0	0	Unknown
Wang Gen Yi	Others	0.11	1,536,147	1,536,147	0	Unknown
FUNG CHUN KIT	Others	0.08	1,130,000	0	0	Unknown
Chen Ceng	Others	0.07	1,005,000	-230,000	0	Unknown

6 Tianjin Capital Environmental Protection Group Company Limited ◆ 2011 Interim Report

Shareholdings of the top ten non-restricted circulating shares shareholders

	Number of
	non-restricted
	circulating
Shareholders	shares held	Type of shares
TMICL	739,781,100	RMB Ordinary Shares
HKSCC Nominees Limited	333,406,900	H Shares
Zhou Jun	5,975,000	RMB Ordinary Shares
Shenyang Railway Coal Dealing Co., Ltd.	3,000,000	RMB Ordinary Shares
Agricultural Bank of China -
Soochow CSI Emerging
Industry Index Fund
（中國農業銀行股份
有限公司－東吳中證新興
產業指數證券投資基金）	2,318,354	RMB Ordinary Shares
China Resources SZITIC Trust
Company Limited - 3rd Round
Sanyany Securities Investment
Collective Fund Trust Scheme
（華潤紳國投信託有限公司
—三羊卓越3期證券
集合資金信託計劃）	2,308,550	RMB Ordinary Shares
HO MAN PING	2,014,000	H Shares
Wang Gen Yi	1,536,147	RMB Ordinary Shares
FUNG CHUN KIT	1,130,000	H Shares
Chen Ceng	1,005,000	RMB Ordinary Shares
Notes on the connected relationship	It is not certain	whether there is any
or parties acting in concert among	connected relationship among the top ten
the above shareholders	shareholders. It is not certain whether
	there is any connected relationship
	between the top ten non-restricted
	circulating shares shareholders and the
	top ten shareholders.

(1) According to the register of members of the Company as provided by HKSCC Nominees Limited, those H shares held by it were held on behalf of various clients. There was no client who owned 5% or more interest in the total share capital of the Company.
(2) The top ten shareholders are not strategic investors of the Company.

Tianjin Capital Environmental Protection Group Company Limited ◆ 2011 Interim Report

2. Changes in controlling shareholder and actual controller of the Company

During the reporting period, there were no changes in controlling shareholder and actual controller of the Company.

3. Substantial shareholders’ and other persons’ interests and/or short positions in the shares and underlying shares of the Company

As at 30 June 2011, the following entity, other than the Directors, Supervisors or chief executive of the Company, had interests and/or short positions in the shares and underlying shares of the Company as recorded in the register required to be kept under section 336 of the Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong) (the “ SFO ”):

			Approximate	Approximate
			percentage in	percentage in
		Number and	the relevant	the total issued
		class of securities	class of	share capital of
Name of shareholder	Capacity	(Note)	securities	the Company
TMICL	Beneficial owner	739,781,100 Shares	68.04%	51.83%
		A Shares (L)
Edmond de Rothschild	Investment manager	33,900,000 Shares	9.97%	2.38%
Asset Management		H Shares (L)
Edmond de Rothschild	Investment manager	33,300,000 Shares	9.79%	2.33%
Asset Management		H Shares (L)
Hong Kong Limited
ISIS Asset Management Plc.	Investment manager	17,286,000 Shares	5.08%	1.21%
		H Shares (L)
HSBC Asset Management	Investment manager	20,000,000 Shares	5.88%	1.40%
(Hong Kong) Limited		H Shares (L)

Note: The letter “L” represents the entity’s long positions in the shares.

Save as disclosed above, there is no person (other than the Directors, Supervisors or chief executive of the Company) who, as at 30 June 2011, had an interest and/or a short position in the shares and underlying shares of the Company as recorded in the register required to be kept under section 336 of the SFO.

8 Tianjin Capital Environmental Protection Group Company Limited ◆ 2011 Interim Report

V. DIRECTORS, SUPERVISORS AND SENIOR MANAGEMENT

(I) Changes in the shareholding of the Directors, Supervisors and senior management

There was no change in the shareholding of the Directors, Supervisors and senior management during the reporting period.

(II) Directors’, Supervisors’ and the Company’s chief executives’ interests and/or short positions in the shares, underlying shares and debentures of the Company or its associated corporations

As at 30 June 2011, the interests and/or short positions of the Directors, Supervisors and chief executives of the Company in the shares, underlying shares and debentures of the Company or its associated corporations (within the meaning of Part XV of the SFO), which would have to be notified to the Company and the HKSE pursuant to Divisions 7 and 8 of Part XV of the SFO, or which were required, pursuant to section 352 of the SFO, to be entered in the register referred to therein, or otherwise, pursuant to the Model Code for Securities Transactions by Directors of Listed Issuers as set out in the Rules Governing the Listing of Securities on the HKSE (the “ Listing Rules ”), to be notified to the Company and the HKSE were as follows:

				Approximate
				percentage in
				the total issued
	The Company		Number and	share capital
	/ name of		class of	of the Company
	associated		securities	/ associated
Name	corporations	Capacity	(Note)	corporations
Supervisor
Nie Youzhuang	The Company	Beneficial	959 domestic shares	0.00007
		owner	(non-restricted
			circulating shares) (L)

Note: The letter “L” represents the person’s long positions in the shares, underlying shares and debentures of the Company or its associated corporations.

Save as disclosed above, none of the Directors, Supervisors or chief executives of the Company, who, as at 30 June 2011, had any interests or short positions in any shares, underlying shares and debentures of the Company or any of its associated corporations (within the meaning of Part XV of the SFO), which would have to be notified to the Company and the HKSE pursuant to Divisions 7 and 8 of Part XV of the SFO, or which were required, pursuant to section 352 of the SFO, to be entered in the register referred to therein, or otherwise, pursuant to the Model Code for Securities Transactions by Directors of Listed Issuers, to be notified to the Company and the HKSE.

Tianjin Capital Environmental Protection Group Company Limited ◆ 2011 Interim Report

(III) Recruitment or removal of the Directors, Supervisors and senior management of the Company

Due to work allocation, Ms. Zhong Huifang, the Director and deputy general manager of the Company, resigned as the deputy general manager of the Company on 8 April 2011. Ms. Zhong Huifang continues to be the Director of the Company.

VI. REPORT OF THE BOARD

(I) Discussion and analysis of the overall operations during the reporting period

The year 2011 is the commencement year of the Twelfth Five-year Plan for the Company and its subsidiaries (“ the Group ”). Facing development opportunities and challenges of the industry and under the economic background of inflation and macro-economic controls during the first half of 2011, the Group under the leadership of the Board had strengthened internal control management and increased technology research and development in accordance with the operation strategies and operational plans for 2011, to further enhance the competitive advantages and market position of the Group in the sewage water treatment area, and further drive the extension of the industrial chain in the Group’s construction business, energy business as well as the business of research and development, export and conversion of technologies. In the first half of 2011, the overall operations of the Group were as follows:

As at the end of the reporting period, the Group had total assets in the amount of RMB8.52 billion and net assets in the amount of RMB3.43 billion. During the reporting period, the operating income of the Group was RMB750.479 million, increased by 11% as compared to the same period last year. The operating profit was RMB194.80 million, increased by 3.3% as compared to the same period last year. The net profit was RMB137.674 million (excluding profit and loss attributable to minority shareholders), increased by 6.1% as compared to the same period last year. These were mainly attributable to the availability of business tax preferential policy on sewage water treatment for the Company in the current period and the increased profitability of some subsidiaries during the current period.

10 Tianjin Capital Environmental Protection Group Company Limited ◆ 2011 Interim Report

(II) Principal business of the Group and its operations

As at the end of the reporting period, the capacity of the sewage water treatment business of the Group was 3.145 million cubic metres per day (excluding entrusted operation projects), increased by 35,000 cubic metres per day as compared to the same period last year. During the reporting period, the Group had a total sewage water treatment volume of 406.786 million cubic metres, increased by 5.2% as compared to the same period last year. These were mainly attributable to an increase in the incoming volume of sewage water at the four sewage water treatment plants of the Company, namely in Jizhuangzi and the sewage water treatment plants of three subsidiaries in Qujing, Fuyang and Baoying. Income from sewage water treatment services during the reporting period was RMB552.514 million, increased by 6% as compared to the same period last year. The profit margin of the business had declined as costs increased by 14%.

During the reporting period, the Group continued to apply great efforts to boost the sewage water treatment plant operation services and technical services, and generated a revenue of RMB17.09 million, representing an increase of 11.92% as compared to the same period last year.

As at the end of the reporting period, the production capacity of recycled water business of the Group was 190,000 cubic metres per day, in line with the capacity for the same period last year. During the reporting period, the sales volume of recycled water of the Group was 5.955 million cubic metres, increased by 10.8% as compared to the same period last year. The increase in the sales volume was mainly attributable to the entry of the mature water usage period by the users of the Dongjiao recycled water plant with an increasing trend of water usage volume. Revenue from the recycled water pipeline connection business was RMB23.33 million, representing an increase of 112.99% as compared to the same period last year, which was mainly attributable to an increase in the volume of such business during the reporting period.

As at the end of the reporting period, the production capacity of tap water of the Group was 240,000 cubic metres per day, at the same level as the same period last year. During the reporting period, the sales volume of tap water business of the Group was 19.715 million cubic metres, increased by 10.6% as compared to the same period last year. This was mainly attributable to a significant increase in the water sales volume by the subsidiary in Anguo as compared to the same period last year. The tap water business generated a sales revenue of RMB19.836 million, representing an increase of 13% as compared to the same period last year. With further enhancement in operational management and more efforts to reduce operational costs, the operational costs only increased by approximately 2% as compared to last year, with an increase in operating profit margin as compared to the same period last year.

Tianjin Capital Environmental Protection Group Company Limited ◆ 2011 Interim Report

During the reporting period, the toll collection business of the Group realized RMB33.51 million in revenue, which was similar to the level recorded during the same period last year. According to the relevant national requirements, the collection of toll for Tianjin City Indebted Road ceased on 1 January 2010, and the toll collection from 6 toll stations in which the Company owned the rights of toll collection also ceased. According to the spirit of the Jin Zheng Ban (2010) No.51 Document “Opinions on the Implementation of Oil Prices and Tax Expenses Reforms and the Cancellation of Toll Collection on Government Indebted Tier 2 Roads” dated 19 May 2010, the Company was still able to recognize income from the road toll business based on the amount stated in the “Subcontracting Toll Collection Agreement” during the reporting period.

(III)New business of the Group

During the reporting period, in order to enhance the comprehensive competitiveness of the Group and create new spots for profit growth, the Company established Tianjin Jiayuanxing Innovative Energy Technology Company Limited (天津佳源興創新能源科技有限公司) in February 2011 out of its own funds, with a registered capital of RMB10 million, and the capital contribution ratio was 100%. This company has undertaken the construction work and operational management of the Tianjin Cultural Centre centralized energy station project. The Tianjin Cultural Centre centralized energy station project is the first non-water project operated by way of licensed operation by the Group, implying the successful expansion of the Group into new business areas.

During the reporting period, the Company had changed the name of Tianjin Kaiying Environmental Engineering Technology Consulting Limited to Tianjin Kaiying Technology Development Company Limited (天津凱英科技發展有限公司). After the capital injection of RMB3 million by the Company, the business scope of this company was changed, which mainly comprises the development of environmental protection technologies and products, mechanical equipment, and the development, consultancy services and transfer of computer software, etc.

12 Tianjin Capital Environmental Protection Group Company Limited ◆ 2011 Interim Report

1. Principal businesses by industry

Unit: ’000 Currency: RMB

By industry	Operating revenue	Operating cost	Operating profit margin (%)	Increase/ decrease in operating revenue as compared to the same period last year (%)	Increase/ decrease in operating cost as compared to the same period last year (%)	Increase/ decrease in operating profit margin as compared to the same period last year (%)
Sewage water treatment and sewage water treatment plant construction business	635,163	369,558	41.82	8.5	16.81	-4.14
Toll collection business	33,518	3,560	89.38	0.02	0	0
Tap water supply business	19,836	13,056	34.18	13.05	1.91	7.19
Recycled water pipeline connection and water supply business (Note (1))	33,856	24,905	26.44	57.14	43.68	6.89
Other business (Note(2))	2,862	2,097	26.75	—	—	—

Notes:

(1) There was a new additional project of pipeline connection business of Tianjin Water Recycling Company Limited, hence both revenue and costs increased year-on-year;
(2) This includes the revenue of ancillary engineering projects of Tianjin Kaiying Technology Development Company Limited and the revenue from integrated system and software technology services of Environmental Data Management System (Hong Kong) Company Limited (環境數據管理系統（香港）有限公司 ) newly acquired by Tianjin Capital Environmental Protection (Hong Kong) Company Limited in 2010.

Tianjin Capital Environmental Protection Group Company Limited ◆ 2011 Interim Report

2. Principal businesses by geographical regions

Unit: ’000 Currency: RMB

Region	Operating revenue	Increase/Decrease in operating revenue as compared to the same period lastyear (%)
Tianjin	515,577	10.08
Qujing	37,757	69.29(Note)
Guizhou	12,118	-1.58
Fuyang	17,034	-1.07
Baoying	6,082	20
Hangzhou	68,235	3.08
Hong Kong	385	—
Wendeng	11,446	-0.48
Xi’an	37,171	1.06
Anguo	6,244	2.18
Wuhan	13,186	8.2
Total	725,235	10.21

Note: Revenue from principal operations of Qujing Capital Water Company Limited increased by a larger extent as compared to the same period last year, which was mainly attributable to the water price adjustments for the sewage water business and the receipt of compensation for price differences, and revenue for the current period was also recognized according to the post-adjustment water price.

14 Tianjin Capital Environmental Protection Group Company Limited ◆ 2011 Interim Report

(IV) Explanation on significant changes in principal financial data as compared to the same period last year

As at 30 June 2011, the Group had total assets in the amount of RMB8.51621 billion, increased by 1.08% or RMB90.647 million as compared to the beginning of the year. Total liabilities were RMB4.957325 billion, increased by 2.23% or RMB107.931 million as compared to the beginning of the year. Equity interest attributable to the shareholders of the Company was RMB3.431252 billion, decreased by 0.56% or RMB19.321 million as compared to the beginning of the year. Net profit attributable to the Company for the first half of 2011 was RMB137.674 million, increased by 6.15% as compared to the same period last year. Analysis of items with more significant changes is set out below:

Unit: ’000 Currency: RMB

Items	As at 30 June 2011	As at 31 December 2010	Amount increased/ decreased	Change (%)	Explanation of change
Inventory	58,686	32,476	26,210	80.71	Increase in inventory was mainly new inventories added during the current period by the BT project of the subsidiary, Tianjin Zichuang Engineering Investment Company Limited.
Non-current liabilities due within one year	813,688	360,180	453,508	125.91	Were the medium to long term floating loans of the Company due within one year.
Items	Jan-Jun 2011	Jan-Jun 2010	Amount increased/ decreased	Change (%)	Explanation of change
Business tax and surcharge	3,608	20,010	-16,402	-81.97	A significant reduction in business tax and surcharge was attributable to the availability of sewage water treatment business tax preferential policy to the Company since 2011.
Non-operating income	4,422	2,120	2,302	108.59	Non-operating income mainly comprises income from government subsidies received during the current period by the Chibi subsidiary of the Wuhan subsidiary.

Tianjin Capital Environmental Protection Group Company Limited ◆ 2011 Interim Report

Items	Jan-Jun 2011	Jan-Jun 2010	Amount increased/ decreased	Change (%)	Explanation of change
Net cash flows from operating activities	355,697	56,723	298,974	527.08	Recovery of accounts receivables of the Company for the current period was better than the same period last year, as a result of the recovery of part of the outstanding sewage water treatment fees and construction and management fees carried forward from the previous year.
Net cash flows from investing activities	-209,666	-285,194	75,528	-26.48	The new construction and restructuring projects of the sewage water treatment plant and recycled water plant of the Group were close to completion during the current period, infrastructural expenditure incurred was less than the same period last year.
Net cash flows from financing activities	-175,322	168,960	-344,282	-203.77	Borrowings of the Group during the current period was less than the repayment amount, resulting in a net outflow from financing activities.
Net increase in cash and cash equivalents	-29,291	-59,511	30,220	-50.78	As a result of the cash flows from the above three activities, a net outflow of cash and cash equivalents was recorded for the current period.

(V) Investment of the Company

1. Use of proceeds from fund-raising

During the reporting period, the Group had not raised any funds nor used any proceeds raised in previous periods.

2. Projects funded by proceeds other than from fund-raising

(1) The upgrading and renovation projects of four sewage water treatment plants in Tianjin, namely, Xianyanglu, Beicang, Jizhuangzi and Dongjiao: The investor was the Company and the estimated total investment amount was approximately RMB1.178 billion. During the reporting period, an investment of RMB85 million in these projects was completed, and the cumulative completed investment amount was RMB716 million. During the reporting period, the project had completed test run and achieved target performance. Currently, the projects are in the stage of project finishing and settlement of project accounts.

16 Tianjin Capital Environmental Protection Group Company Limited ◆ 2011 Interim Report

(2) Jizhuangzi recycled water plant reconstruction and expansion project: The investor was the Group’s subsidiary, Tianjin Water Recycling Company Limited, and the estimated total investment amount of the project was RMB87.57 million. During the reporting period, an investment of RMB2.04 million in this project was completed, and the cumulative completed investment amount was RMB74.14 million. The project has been basically completed and is in the stage of joint testing and trial operation. Currently, the project is in the stage of project finishing and settlement of project accounts.
(3) Tianjin Cultural Centre centralized energy station project: The investor was the Group’s subsidiary, Tianjin Jiayuanxing Innovative Energy Technology Company Limited (天津佳源興創新能源科技有限公司), and the estimated total investment amount of the project was approximately RMB433 million. During the reporting period, an investment of RMB30 million was completed and the cumulative completed investment amount was RMB30 million.
(4) The Yongan sewage water system project under the Xianning City River Gan sewage water integrated treatment engineering project: The investor was the Group’s subsidiary, Wuhan Tianchuang Environmental Protection Company Limited, and the estimated total investment amount of the project was approximately RMB198 million. During the reporting period, an investment of RMB2.67 million was completed, and the cumulative completed investment amount was RMB85 million. The project has been basically completed and is currently in the stage of project finishing and settlement of project accounts.
(5) Wendeng City Gejia Town sewage water treatment plant project: The investor was the Group’s subsidiary, Wendeng Capital Water Company Limited, and the estimated total investment amount of the project was RMB18.10 million. During the reporting period, an investment of RMB4.70 million was completed, and the cumulative completed investment amount was RMB12.55 million. The project has been basically completed, and is currently in the test run and trial operation stage.
(6) Purchase and installation of equipment with capacity of 50,000 tonnes per day for Phase 1 of the Qige sewage water treatment plant project: The investor was the Group’s subsidiary, Hangzhou Tianchuang Water Company Limited, and the estimated total investment amount of the project was RMB22.99 million. During the reporting period, an investment of RMB10.34 million was completed and the cumulative completed investment amount was RMB11.69 million. It is currently in the testing stage for water connection and trial operation.
(7) Phase 2 of the Baoying Xianhe sewage water treatment plant project: The investor was the Group’s subsidiary, Baoying Capital Water Company Limited. The estimated total investment amount of the project was RMB44.68 million. During the reporting period, an investment of RMB7.33 million was completed and the cumulative completed investment amount was RMB7.33 million.

Tianjin Capital Environmental Protection Group Company Limited ◆ 2011 Interim Report

(8) Ninghe Modern Industrial Zone sewage water treatment plant project: The investor was the Group’s subsidiary, Jinning Capital Environmental Water Company Limited. The estimated total investment amount of the project was RMB46.61 million. During the reporting period, an investment of RMB650,000 was completed and the cumulative completed investment amount was RMB650,000.
(9) City water supply system of Anguo City reconstruction and expansion project: The investor was the Group’s subsidiary, Anguo Capital Water Company Limited. The estimated total investment amount of the project was RMB33.01 million. During the reporting period, an investment of RMB2.19 million was completed and the cumulative completed investment amount was RMB25.59 million. Currently, the project has been fully completed and is in the process of settlement of project accounts.
(10)Tianjin Ziya Circular Economy Industrial Zone sewage water treatment plant (Phase 1) project: The project was a BT project financed and constructed by the Group’s subsidiary, Tianjin Zichuang Engineering Investment Company Limited. The project investment (the winning bid price) was approximately RMB76.80 million. During the reporting period, an investment of RMB11.50 million was completed and the cumulative completed investment amount was RMB32.27 million.
(11)During the reporting period, the Group established Tianjin Jiayuanxing Innovative Energy Technology Company Limited (天津佳源興創新能源科技有限公司) out of its own funds, with a registered capital of RMB10 million, and the capital contribution ratio by the Group was 100%. In addition, capital injections were made by the Group to its subsidiaries, Wendeng Capital Water Company Limited, Tianjin Kaiying Technology Development Company Limited and Qujing Capital Water Company Limited according to their project operations. The amounts of capital injections were RMB4 million, RMB3 million and RMB25.2196 million, respectively. Subsequent to the capital injections, the registered capital of the above subsidiaries were RMB52 million, RMB5 million and RMB148 million, respectively. The Group’s capital contribution ratio remained unchanged. It is still holding 100% equity interest in Wendeng Capital Water Company Limited, 100% equity interest in Tianjin Kaiying Technology Development Company Limited and 90.07% equity interest in Qujing Capital Water Company Limited.
(12)During the reporting period, the Group completed the acquisition of equity interest in Tianjin Water Recycling Company Limited and Fuyang Capital Water Company Limited by acquiring the 2% equity interest in Tianjin Water Recycling Company Limited held by Tianjin Municipal Highway Assets Management Centre and 1.43% equity interest in Fuyang Capital Water Company Limited held by Guizhou Company. As a result, Tianjin Water Recycling Company Limited and Fuyang Capital Water Company Limited became wholly-owned subsidiaries of the Group.

18 Tianjin Capital Environmental Protection Group Company Limited ◆ 2011 Interim Report

(VI) Liquidity and financial resources

There were no seasonal changes in the Group’s borrowings requirement. As at 30 June 2011, there were no outstanding bank loans and interests not repaid upon maturity. Details of the bank borrowings of the Group are stated in the notes to the condensed consolidated financial statements of the Company as at 30 June 2011.

According to the accounting report prepared in accordance with the PRC Enterprise Accounting Standards, the gearing ratio was 58.21% as at 30 June 2011.

(VII) Foreign exchange risk

The operations and customers of the Group’s subsidiaries are located in the PRC. Most of the operating assets and transactions are settled in RMB, and all of the Group’s borrowings are denominated in RMB. Therefore, the Group has no significant foreign exchange risk. The sole foreign exchange exposure of the Group arises from long-term payables. Such long-term payables are resulted from the Asset Transfer Agreement signed between the Company and Tianjin Sewage Company on 9 November 2011 for the purchase of assets generated from foreign bank loans, involving mainly US dollars and Japanese Yen.

As at 30 June 2011, if RMB had weakened/strengthened by 5% against the US dollar, with all other variables held constant, the after tax profit for the year would have been RMB6 million (2010: RMB4 million) lower/higher, mainly as a result of the foreign exchange losses/gains on the translation of US dollar-denominated portion of long-term payables. As at 30 June 2011, if RMB had weakened/strengthened by 5% against Japanese Yen, with all other variables held constant, the after tax profit for the year would have been RMB12 million lower/higher (2010: RMB12 million).

(VIII) Employee and emolument policy

As at 30 June 2011, the Group had 1,355 employees. During the reporting period, total remuneration paid to employees of the Group was approximately RMB53,862,400. The Group adopted a wage system in accordance with post ranks. An employee’s income was also pegged with his own length of service, education, skills as well as the economic benefits to the Group.

Tianjin Capital Environmental Protection Group Company Limited ◆ 2011 Interim Report

(IV) Risk factors analysis

In July 2005, the Tianjin Municipal Government issued the “Administrative Measures on Licensed Operations of Public Utilities of Tianjin Municipality” (“ Administrative Measures ”). Under Rule 22, license rights for operating existing municipal public utility projects within the scope of regulation may be granted directly to the original operator after being reviewed by the municipal construction and administration authority and approved by the Municipal People’s Government, and a licensed operation agreement will be signed between the municipal construction and administration authority and the operator. The Group had submitted applications for the licensed operation of four sewage water treatment plants located at the Tianjin city central area to the Tianjin construction and administration authority after the implementation of the Administrative Measures (in November 2005).

The major provisions of the Administrative Measures in respect of licensed operation are as follows:

a. Licensed operators of new projects shall be ascertained by public tenders;
b. The municipal construction and administration authority shall be authorized to take charge of organizing and implementing licensed operations of municipal public utilities;
c. The licensed operators shall implement the municipal public utility product prices and service charge standards set by the State and the city;
d. The maximum term of licensed operation shall not exceed 30 years;
e. License rights for operating existing municipal public utility projects may be granted directly to the original operator after being reviewed by the municipal construction and administration authority and approved by the Municipal People’s Government, and a licensed operation agreement will be signed between the municipal construction and administration authority and the operator.

Currently, the Group is in the negotiation process with the relevant authority of Tianjin on the license rights.

(X) Contingent liabilities

The Group did not have any significant contingent liabilities as at 30 June 2011.

20 Tianjin Capital Environmental Protection Group Company Limited ◆ 2011 Interim Report

(XI) Rights of debt

As at 30 June 2011, pursuant to the “Sewage Water Processing Agreement”, “Sewage Water Processing Interim Service Agreement” and “Construction in Progress Fee Agreement” entered into between the Company and Tianjin Sewage Company, total receivables and long-term receivables of the Company from Tianjin Sewage Company amounted to RMB950,970,000, representing approximately 13.35% of the total market capitalization of the Company as at 30 June 2011.

During the reporting period, Tianjin Sewage Company repaid a total of approximately RMB172,410,000 of the outstanding sewage water treatment fees to the Group and repaid approximately RMB173,000,000 of construction fees of sewage water treatment plant to the Group.

(XII) Charge on assets

The Group did not charge any assets of the Company and its subsidiaries as at 30 June 2011.

(XIII) Acquisition and disposal of subsidiaries

During the reporting period, the Group did not acquire or dispose any of its subsidiaries.

VII. SIGNIFICANT MATTERS

(I) Corporate governance of the Company

During the reporting period, the Group strictly complied with the requirements under the Company Law and Securities Law of the PRC, the relevant rules and regulations of the CSRC, the provisions under the relevant listing rules of the SSE and the “Code on Corporate Governance Practices” as set out in the Appendix 14 to the Listing Rules. The Group devoted a lot of effort to improve its corporate governance structure and standardize the operation of the Group.

The Group had a sound system for the general meetings, the Board and the Supervisory Committee, and achieved a clear division of responsibility and authority, scientific decision-making procedures and an effective balance between its power authority, decisionmaking body, supervisory authority and management level. The organization and business of the Group were independent from its shareholders. The controlling shareholder of the Group acted in a regulated manner and did not misappropriate the Group’s funds. The Directors and Supervisors of the Group duly performed their duties.

Tianjin Capital Environmental Protection Group Company Limited ◆ 2011 Interim Report

As at the end of the reporting period, the Group had established a sound internal control system. The year 2011 was the first year of implementing the “Corporate internal control package guidelines”. The Group had formulated a detailed work plan at the beginning of the year which was followed strictly to facilitate better implementation of the internal control system in the Group. In the first half of 2011, the Group had completed all the improvements to various systems of the Group and the subsidiaries by reference to the “Package Guidelines” on existing basis.

In the second half of the year, the focus of internal control work in the Group will shift from system establishment to systems design and implementation appraisals. Through facilitating the implementation of the “Corporate internal control package guidelines” in the Group, the internal control system of the Group can enter into a good circulating cycle that will further enhance the building of the Group’s internal control system.

(II) Implementation of the profit appropriation plan during the reporting period

In the 2010 Annual General Meeting, the 2010 profit appropriation plan was considered and approved. The Company made a payment of RMB0.11 (including tax) in cash per share to holders of A shares and RMB0.11 (equivalent to HK$0.13157) (including tax) per share to holders of H shares. The Company published an announcement relating to dividend payment to A shares shareholders in the PRC on 30 June 2011. The shareholding registration date was 5 July 2011. The Company also published a notice of 2010 Annual General Meeting in Hong Kong on 24 March 2011. The shareholding registration date was 12 April 2011. Distribution of the dividends to the holders of A shares and H shares has been completed on 12 July 2011.

22 Tianjin Capital Environmental Protection Group Company Limited ◆ 2011 Interim Report

(III) Implementation of the cash dividend payment policy during the reporting period

1. The cash dividend payment policy of the Company:

Pursuant to Article 195 of the Articles of Association of the Company, the Company may distribute dividends by the following ways: the Company may, after making up any prior years’ losses and setting aside funds for statutory surplus reserve and discretionary common reserve, distribute dividends by cash or shares according to its actual profit and cash flow. The Company shall draw attention to reasonable return to investors when making distribution on profit. If the Board of the Company does not make a cash dividends distribution proposal, it shall disclose in its regular reports the reasons thereof and the independent non-executive Directors shall give their independent opinion thereon. In case the fund of the Company is appropriated by a shareholder illegally, the Company shall make a deduction to the cash dividend to be distributed to that shareholder in order to repay the fund appropriated thereby. If the Company records a profit in the reporting period but does not make a cash dividends distribution proposal, it shall disclose in its regular reports the detailed reasons thereof and how the undistributed profit be used by the Company. The Company shall maintain a continuous and stable profit distribution policy. The Company may distribute interim dividends in cash.

2. Implementation of the cash dividend payment during the reporting period

(IV) Significant litigation and arbitration

The Group had no significant litigation or arbitration during the reporting period.

Tianjin Capital Environmental Protection Group Company Limited ◆ 2011 Interim Report

(V) Bankruptcy and restructuring related matters

The Group had no bankruptcy and restructuring related matters during the reporting period.

(VI) Shareholdings of the Company in other listed companies and financial enterprises

The Group has no shareholdings in other listed companies and financial enterprises during the reporting period.

(VII) Asset transactions

On 9 November 2010, the Company and Tianjin Sewage Company (“ TSC ”) signed the “Agreement on the Transfer of Assets Generated from Foreign Bank Loans in relation to the Haihe Basin Tianjin Sewage Water Treatment Construction Project and the Beicang Sewage Water Treatment Project” (“ Asset Transfer Agreement ”) in Tianjin. The Haihe Basin Tianjin Sewage Water Treatment Construction Project refers to the Group’s Tianjin Jizhuangzi Sewage Water Treatment Plant and Xianyanglu Sewage Water Treatment Plant reconstruction and expansion project. Assets generated from foreign bank loans refer to the assets financed by Japan Bank for International Cooperation for the Xianyanglu Sewage Water Treatment Plant and the Jizhuangzi Sewage Water Treatment Plant and the assets financed by Asian Development Bank for the Beicang Sewage Water Treatment Plant.

The consideration of the above transaction was the sum of RMB261,578,056.76 and the total outstanding amount of principal and interests after the Asset Transfer Agreement came into effect under the loan agreement entered into between Japan Bank for International Cooperation and TSC for the asset financing of the Xianyanglu Sewage Water Treatment Plant and the Jizhuangzi Sewage Water Treatment Plant (“ Japan Bank Loan Agreement ”) and the loan agreement entered into by Asian Development Bank for the asset financing of the Beicang Sewage Water Treatment Plant (“ Asian Bank Loan Agreement ”). The consideration should be paid in the following ways:

a) RMB261,578,056.76 should be paid in cash within 5 business days after the Asset Transfer Agreement came into effect.
b) The remaining amount should be paid in cash to TSC before the repayment date in accordance with the repayment schedule of the Japan Bank Loan Agreement and the Asian Bank Loan Agreement.

24 Tianjin Capital Environmental Protection Group Company Limited ◆ 2011 Interim Report

The property rights of such assets were all transferred to the Company at the end of December 2010. During the reporting period, the Group paid the consideration of the transferred assets in accordance with the above payment method (b).

For details about this transaction, please see the Company’s announcement dated 9 November 2010.

(VIII) Major connected transactions

The Group did not have major connected transactions during the reporting period.

(IX) Major contracts and their implementation

1. Custody, subcontracting and leasing matters that contributed profits to the Company representing 10% or more of the total profit of the Company during the current period

(1) Custody

The Group did not provide any custody during the reporting period.

(2) Subcontracting

The Group did not provide any subcontracting during the reporting period.

(3) Leasing

The Group did not have any leasing matters during the reporting period.

Tianjin Capital Environmental Protection Group Company Limited ◆ 2011 Interim Report

2. Guarantee

Unit: 0’000 Currency: RMB

External guarantee granted by the Company

(excluding guarantee provided to the subsidiaries of the Company)

Total amount of guarantee granted during the reporting period
(excluding guarantee provided to the subsidiaries of the Company)	0
Total amount of outstanding guarantee as at the end of the reporting period (A)
(excluding guarantee provided to the subsidiaries of the Company)	0
Guarantee provided to the subsidiaries of the Company
Total amount of guarantee provided to the subsidiaries
of the Company during the reporting period	0
Total amount of outstanding guarantee provided
to the subsidiaries as at the end of the reporting period (B)	76,268
Total amount of guarantee granted by the Company
(including guarantee provided to the subsidiaries of the Company)
Total amount of guarantee (A+B)	76,268
Percentage of the total amount of guarantee to the
net assets of the Company (%)	22.23
Of which:
Amount of guarantee provided to the shareholders,
actual controller and other related parties (C)	0
Amount of guarantee provided directly or indirectly
to the borrowers with gearing ratio of over 70% (D)	0
Total amount of guarantee exceeds 50% of net assets (E)	0
Total amount of the above three guarantees (C+D+E)	0

3. Entrusted financial management and entrusted loans

(1) Entrusted financial management

The Group had no entrusted financial management matters during the reporting period.

(2) Entrusted loans

The Group did not have any entrusted loans during the reporting period.

26 Tianjin Capital Environmental Protection Group Company Limited ◆ 2011 Interim Report

4. Other major contracts

During the reporting period, there were no other major contracts entered into by the Group.

(X) Implementation of commitments

During the reporting period or until the reporting period, no commitments were made by the Company or shareholders who hold 5% or more of the shares.

(1) As at the date of disclosure of the Interim Report, was there any business results commitment not yet fully performed: No.
(2) As at the date of disclosure of the Interim Report, was there any commitment for asset injection or consolidation not yet fully performed: No.

(XI) Appointment and removal of the accountants

Does the Group change its accountants? No Present Appointment Name of the PRC accountants PricewaterhouseCoopers Zhong Tian Certified Public Accountants Limited Company Auditing services rendered by the PRC accountants 17 years Name of the Hong Kong accountants PricewaterhouseCoopers Auditing services rendered by the Hong Kong accountants 17 years

During the reporting period, the Group did not change its accountants. The PRC auditor of the Group is PricewaterhouseCoopers Zhong Tian Certified Public Accountants Limited Company. The Hong Kong auditor of the Group is PricewaterhouseCoopers. A total of approximately RMB4.2 million was paid to the two auditors for auditing services rendered in 2010. As at the end of the reporting period in 2010, the above two accountants have rendered auditing services to the Group for 17 years. During the past three years, the Group did not change its auditors.

(XII) Punishments and rectification to listed company and its directors, supervisors, senior management, shareholders and actual controllers

During the reporting period, the Group and its Directors, Supervisors, senior management, shareholders and actual controller were not subject to any investigation, administrative punishments and criticisms by the CSRC or public reprimand by any stock exchange.

(XIII) Explanation of other major events

The Group did not have any other major events during the reporting period.

Tianjin Capital Environmental Protection Group Company Limited ◆ 2011 Interim Report

(XIV) Information Disclosure Index

	Name and	Date of	Website and path of
Subject	page of newspaper	publication	publication
Announcement in	“Shanghai Securities	24 January 2011	SSE: www.sse.com.cn;
Relation to the	News” page B6		HKSE:www.hkex.com.hk;
Resolutions Passed			IFN Financial Press Ltd.:
at the 13th			http://www.ifn.com.hk/ir/tjcep/
Meeting of the
Fifth Board
Continuing Connected		4 March 2011	SSE: www.sse.com.cn;
Transactions			HKSE: www.hkex.com.hk;
			IFN Financial Press Ltd:
			http://ifn.com.hk/ir/tjcep/
Discloseable	“Shanghai Securities	16 March 2011	SSE: www.sse.com.cn;
Transaction	News” page B57		HKSE: www.hkex.com.hk;
in Relation to the			IFN Financial Press Ltd:
Project of the			http://ifn.com.hk/ir/tjcep/
Centralized Energy
Stations of
Tianjin Cultural
Centre
Announcement in	“Shanghai Securities	24 March 2011	SSE: www.sse.com.cn;
Relation to the	News” page B96		HKSE: www.hkex.com.hk;
Provision of			IFN Financial Press Ltd:
Guarantee for Loans			http://ifn.com.hk/ir/tjcep/
of Qujing Capital
Water Co., Ltd.
Social Responsibility		24 March 2011	SSE: www.sse.com.cn;
Report 2010			HKSE: www.hkex.com.hk;
			IFN Financial Press Ltd:
			http://ifn.com.hk/ir/tjcep/
Report on		24 March 2011	SSE: www.sse.com.cn;
Self-assessment of			HKSE: www.hkex.com.hk;
Internal Control 2010			IFN Financial Press Ltd:
			http://ifn.com.hk/ir/tjcep/

28 Tianjin Capital Environmental Protection Group Company Limited ◆ 2011 Interim Report

	Name and	Date of	Website and path of
Subject	page of newspaper	publication	publication
Notice of 2010	“Shanghai Securities	24 March 2011	SSE: www.sse.com.cn;
Annual General	News” pages B96		HKSE: www.hkex.com.hk;
Meeting			IFN Financial Press Ltd:
			http://ifn.com.hk/ir/tjcep/
Announcement of	“Shanghai Securities	24 March 2011	SSE: www.sse.com.cn;
Final Results	News” pages B95 and		HKSE: www.hkex.com.hk;
for the Year Ended	B96		IFN Financial Press Ltd:
31 December 2010			http://ifn.com.hk/ir/tjcep/
Announcement in	“Shanghai Securities	24 March 2011	SSE: www.sse.com.cn;
Relation to the	News” pages B96		HKSE: www.hkex.com.hk;
Resolutions Passed			IFN Financial Press Ltd:
at the 6thMeeting			http://ifn.com.hk/ir/tjcep/
of the Fifth
Supervisory
Committee
Announcement in	“Shanghai Securities	24 March 2011	SSE: www.sse.com.cn;
Relation to the	News” page B96		HKSE: www.hkex.com.hk;
Resolutions Passed			IFN Financial Press Ltd:
at the 16thMeeting			http://ifn.com.hk/ir/tjcep/
of the Fifth Board
Announcement in	“Shanghai Securities	8 April 2011	SSE: www.sse.com.cn;
Relation to the	News” page B23		HKSE: www.hkex.com.hk;
Resolution Passed			IFN Financial Press Ltd:
at the 17thMeeting			http://ifn.com.hk/ir/tjcep/
of the Fifth Board
Continuing Connected		15 April 2011	SSE: www.sse.com.cn;
Transaction			HKSE: www.hkex.com.hk;
			IFN Financial Press Ltd:
			http://ifn.com.hk/ir/tjcep/
Annual Report 2010		21 April 2011	SSE: www.sse.com.cn;
			HKSE: www.hkex.com.hk;
			IFN Financial Press Ltd:
			http://ifn.com.hk/ir/tjcep/
Connected Transactions		28 April 2011	SSE: www.sse.com.cn;
Management System			HKSE: www.hkex.com.hk;
			IFN Financial Press Ltd:
			http://ifn.com.hk/ir/tjcep/

Tianjin Capital Environmental Protection Group Company Limited ◆ 2011 Interim Report

	Name and	Date of	Website and path of
Subject	page of newspaper	publication	publication
Detailed Implementation		28 April 2011	SSE: www.sse.com.cn;
Rules of the			HKSE: www.hkex.com.hk;
Audit Committee			IFN Financial Press Ltd:
of the Board			http://ifn.com.hk/ir/tjcep/
Announcement in	“Shanghai Securities	28 April 2011	SSE: www.sse.com.cn;
Relation to the	News” page B67		HKSE: www.hkex.com.hk;
Provision of Guarantee			IFN Financial Press Ltd:
for Loans of Xi’an			http://ifn.com.hk/ir/tjcep/
Capital Water Co., Ltd.
First Quarterly	“Shanghai Securities	28 April 2011	SSE: www.sse.com.cn;
Report 2011	News” page B67		HKSE: www.hkex.com.hk;
			IFN Financial Press Ltd:
			http://ifn.com.hk/ir/tjcep/
Announcement in	“Shanghai Securities	28 April 2011	SSE: www.sse.com.cn;
Relation to the	News” page B67		HKSE: www.hkex.com.hk;
Resolutions Passed			IFN Financial Press Ltd:
at the 19thMeeting			http://ifn.com.hk/ir/tjcep/
of the Fifth Board
Work System of		13 May 2011	SSE: www.sse.com.cn;
the Company			HKSE: www.hkex.com.hk;
Secretary to the Board			IFN Financial Press Ltd:
			http://ifn.com.hk/ir/tjcep/
Announcement on	“Shanghai Securities	13 May 2011	SSE: www.sse.com.cn;
Resolutions Passed	News” page B29		HKSE: www.hkex.com.hk;
at the 2010 Annual			IFN Financial Press Ltd:
General Meeting			http://ifn.com.hk/ir/tjcep/
Announcement in	“Shanghai Securities	31 May 2011	SSE: www.sse.com.cn;
Relation to the	News” page B22		HKSE: www.hkex.com.hk;
Provision of			IFN Financial Press Ltd:
Guarantee for			http://ifn.com.hk/ir/tjcep/
Loans of Baoying
Capital Water Co., Ltd.
Announcement in	“Shanghai Securities	31 May 2011	SSE: www.sse.com.cn;
Relation to the	News” page B22		HKSE: www.hkex.com.hk;
Provision of			IFN Financial Press Ltd:
Guarantee for			http://ifn.com.hk/ir/tjcep/
Loans of Qujing
Capital Water Co., Ltd.

30 Tianjin Capital Environmental Protection Group Company Limited ◆ 2011 Interim Report

Name and Date of Website and path of Subject page of newspaper publication publication Announcement in “Shanghai Securities 31 May 2011 SSE: www.sse.com.cn; Relation to the News” page B22 HKSE: www.hkex.com.hk; Resolutions Passed IFN Financial Press Ltd: at the 21[st] Meeting http://ifn.com.hk/ir/tjcep/ of the Fifth Board Announcement on “Shanghai Securities 29 June 2011 SSE: www.sse.com.cn; the Implementation News” page B22 HKSE: www.hkex.com.hk; of 2010 Profit IFN Financial Press Ltd: Distribution for http://ifn.com.hk/ir/tjcep/ A Shares Announcement in 30 June 2011 SSE: www.sse.com.cn; Relation to the HKSE: www.hkex.com.hk; Resolutions Passed IFN Financial Press Ltd: at the 22[nd] Meeting http://ifn.com.hk/ir/tjcep/ of the Fifth Board Announcement in 30 June 2011 SSE: www.sse.com.cn; Relation to the HKSE: www.hkex.com.hk; Provision of Guarantee IFN Financial Press Ltd: for Loans and http://ifn.com.hk/ir/tjcep/ Performance Letters of Tianjin Jiayuanxing Innovative Energy Technology Company Limited Notice of 2011 30 June 2011 SSE: www.sse.com.cn; First Extraordinary HKSE: www.hkex.com.hk; General Meeting IFN Financial Press Ltd:

SSE: www.sse.com.cn; HKSE: www.hkex.com.hk; IFN Financial Press Ltd: http://ifn.com.hk/ir/tjcep/

Tianjin Capital Environmental Protection Group Company Limited ◆ 2011 Interim Report

VIII. FINANCIAL ACCOUNTING REPORT (UNAUDITED)

(I) Prepared in accordance with Hong Kong Financial Reporting Standards

CONDENSED CONSOLIDATED BALANCE SHEET

AS AT 30 JUNE 2011

(All amounts in Rmb thousand unless otherwise stated)

Note ASSETS Non-current assets Property, plant and equipment 7 Investment property Intangible assets 7 Land use rights Investment in an associate 8 Available-for-sale financial assets Trade receivables due after one year 9 Long-term receivables 10 Other non-current assets Current assets Inventories Trade receivables 9 Other receivables Prepayments Cash and cash equivalents Total assets	As at 30 June 31 December 2011 2010 Unaudited Audited 3,222,355 3,230,110 117,791 119,628 2,440,243 2,427,782 457,563 462,868 41,094 41,583 4,000 4,000 68,794 68,794 337,371 336,286 7,176 7,458 6,696,387 6,698,509 58,686 32,476 1,089,621 996,949 58,368 53,540 102,109 103,759 511,039 540,330 1,819,823 1,727,054 8,516,210 8,425,563	As at 30 June 31 December 2011 2010 Unaudited Audited 3,222,355 3,230,110 117,791 119,628 2,440,243 2,427,782 457,563 462,868 41,094 41,583 4,000 4,000 68,794 68,794 337,371 336,286 7,176 7,458 6,696,387 6,698,509 58,686 32,476 1,089,621 996,949 58,368 53,540 102,109 103,759 511,039 540,330 1,819,823 1,727,054 8,516,210 8,425,563
		6,698,509
		32,476 996,949 53,540 103,759 540,330 1,727,054
		8,425,563

32 Tianjin Capital Environmental Protection Group Company Limited ◆ 2011 Interim Report

Note EQUITY Capital and reserves attributable to the Company’s equity holders Share capital 11 Other reserves Retained earnings – Proposed final dividend – Undistributed Non-controlling interests Total equity LIABILITIES Non-current liabilities Borrowings 12 Deferred revenue Deferred income tax liabilities Current liabilities Trade payables 13 Advances from customers Wages payables Income tax payable Other taxes payable Dividend payable Other payables Borrowings 12 Total liabilities Total equity and liabilities Net current assests/(liabilities) Total assets less current liabilities Zhang Wenhui Lin Wenbo Director Director	As at 30 June 31 December 2011 2010 Unaudited Audited 1,427,228 1,427,228 685,343 685,343 1,318,681 1,338,002	As at 30 June 31 December 2011 2010 Unaudited Audited 1,427,228 1,427,228 685,343 685,343 1,318,681 1,338,002	As at 30 June 31 December 2011 2010 Unaudited Audited 1,427,228 1,427,228 685,343 685,343 1,318,681 1,338,002
	— 1,318,681		156,995 1,181,007
	3,431,252 127,633 3,558,885 2,263,778 288,169 42,547 2,594,494 24,685 350,719 5,339 11,408 2,801 157,982 302,469 1,507,428 2,362,831 4,957,325 8,516,210 (543,008) 6,153,379		3,450,573 125,596 3,576,169 2,838,538 284,974 38,427 3,161,939 22,729 310,478 7,374 8,757 7,674 1,056 274,991 1,054,396 1,687,455 4,849,394 8,425,563 39,599 6,738,108

The notes form an integral part of this condensed consolidated interim financial information.

Tianjin Capital Environmental Protection Group Company Limited ◆ 2011 Interim Report

CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

FOR THE SIX MONTHS ENDED 30 JUNE 2011

(All amounts in Rmb thousand unless otherwise stated)

Note
Revenue
6(a)
Business tax
Cost of sales
Gross profit
Other income - net
6(a)
Administrative expenses
Operating profit
14
Finance costs - net
15
Share of profits /(loss) of an associate
Profit before income tax
Income tax expense
16
Profit for the period
Other comprehensive income for the period, net of tax
Total comprehensive income for the period
Profit /Total comprehensive income attributable to:
– equity holders of the Company
– non-controlling interests
Earnings per share for profit attributable to the
equity holders of the Company (in Rmb per share)
– basic
– diluted
Interim dividends
17

Unaudited
Six months ended 30 June
2011
2010
725,235
658,029
(3,608)
(20,010)
(413,176)
(350,079)
308,451
287,940
4,237
12,465
(50,172)
(59,610)
262,516
240,795
(76,329)
(63,444)
(489)
83
185,698
177,434
(45,987)
(47,160)
139,711
130,274
—
—
139,711
130,274
137,674
129,701
2,037
573
139,711
130,274
Rmb0.10
Rmb0.09
Rmb0.10
Rmb0.09
—
—

The notes form an integral part of this condensed consolidated interim financial information.

34 Tianjin Capital Environmental Protection Group Company Limited ◆ 2011 Interim Report

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE SIX MONTHS ENDED 30 JUNE 2011

(All amounts in Rmb thousand unless otherwise stated)

Equity holders Share Other capital Reserves 1,427,228 685,343 — — — —	Equity holders Share Other capital Reserves 1,427,228 685,343 — — — —	Unaudited of the Company Retained Earnings Sub-total 1,338,002 3,450,573 137,674 137,674 137,674 137,674	Unaudited of the Company Retained Earnings Sub-total 1,338,002 3,450,573 137,674 137,674 137,674 137,674	Unaudited of the Company Retained Earnings Sub-total 1,338,002 3,450,573 137,674 137,674 137,674 137,674
— — 1,427,228	— — 685,343	(156,995) (156,995) — (156,995) (156,995) — 1,318,681 3,431,252 127,633
1,427,228	659,462	1,206,901	3,293,591	121,920
— —	— —	129,701 129,701	129,701 129,701	573 573
— —	— —	(114,178) (114,178) — (114,178) (114,178) —
1,427,228	659,462	1,222,424	3,309,114	122,493

The notes form an integral part of this condensed consolidated interim financial information.

Tianjin Capital Environmental Protection Group Company Limited ◆ 2011 Interim Report

CONDENSED CONSOLIDATED CASH FLOW STATEMENT

FOR THE SIX MONTHS ENDED 30 JUNE 2011

(All amounts in Rmb thousand unless otherwise stated)

Cash flows from operating activities
Cash generated from operation
PRC income tax paid
Interest received
Net cash flows from operating activities
Cash flows from investing activities
Cash paid to acquire fixed assets, intangible
assets and other long-term assets
Net cash received from disposal of fixed assets
Dividend received
Cash paid to acquire equity investment
Net cash flows from investing activities
Cash flows from financing activities
Payments of interest expenses and distribution of
dividends of profits
Repayments of bank borrowing
Proceeds of bank borrowing
Cash received/(paid) relating to other financing activities
Net cash flows from financing activities
Net decrease in cash
Add: Cash and bank balances at beginning of period
Cash and cash equivalents at end of period

Unaudited
Six months ended 30 June
2011
2010
389,246
81,840
(39,216)
(28,082)
5,667
2,965
355,697
56,723
(208,088)
(286,409)
658
1,215
200
—
(2,436)
—
(209,666)
(285,194)
(71,189)
(73,426)
(272,613)
(42,250)
161,200
286,000
7,280
(1,364)
(175,322)
168,960
(29,291)
(59,511)
539,430
592,261
510,139
532,750

The notes form an integral part of this condensed consolidated interim financial information.

36 Tianjin Capital Environmental Protection Group Company Limited ◆ 2011 Interim Report

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL INFORMATION

(All amounts in Rmb thousand unless otherwise stated)

1 Company profile and principal activities

Tianjin Capital Environmental Protection Group Company Limited (the “Company”) was established on 8 June 1993 in Tianjin, the People’s Republic of China (the “PRC”) as a joint stock limited liability company. The holding company and ultimate holding company of the Company is Tianjin Municipal Investment Company Limited (“TMICL”) and Tianjin City Infrastructure Construction and Investment Group Company Limited (“TICIG”) respectively.

This condensed consolidated interim financial information was approved for issue on 24 August 2011.

This condensed consolidated financial information has not been audited.

The principal activities of the Company and its subsidiaries (the “Group”) include processing of sewage water and construction and management of related facility, supply of tap water and recycled water as described below:

(a) Processing of sewage water

Pursuant to relevant agreements (“Sewage Processing Agreements”), the Group currently provides sewage water processing services via the following plants:

Plant Location	Agreement date	Customer
Dong Jiao, Tianjin	10 October 2000	Tianjin Sewage Company (“TSC”)
Ji Zhuang Zi, Tianjin	10 October 2000	TSC
Xian Yang Lu, Tianjin	10 October 2000	TSC
Bei Cang, Tianjin	10 October 2000	TSC
Gui Yang, Guizhou	16 September 2004	Guiyang City Administration Bureau
Bao Ying, Jiangsu	13 June 2005	Baoying Construction Bureau
Fu Yang, Anhui	18 December 2005	Anhui Fuyang Construction Committee
Qu Jing, Yunnan	25 December 2005	Qujing City Water General Company
Hong Hu, Hubei	29 December 2005	Honghu Construction Bureau
Hang Zhou, Zhejiang	12 November 2006	Hangzhou Sewage Company
Jing Hai, Tianjin	12 September 2007	Tianyu Science Technology Park
		Administration Committee of Tianjin
		New Technology Industry Area
Wen Deng, Shandong	19 December 2007	Wendeng Construction Bureau
Xi An, Shanxi	18 March 2008	Xi An Municipal Infrastructure
		Construction Investment General Company
An Guo, Hebei	14 October 2008	An Guo Municipal Government
Xian Ning, Hubei	16 October 2008	Xianning Construction Committee
Ying Dong, Anhui	10 August 2009	Fuyang Yingdong Construction Bureau

Except for four Tianjin plants including Dong Jiao, Ji Zhuang Zi, Xian Yang Lu and Bei Cang, all other plants above are governed by service concession arrangements which fall into the scope of HK(IFRIC) - Int 12.

Tianjin Capital Environmental Protection Group Company Limited ◆ 2011 Interim Report

The principal terms and the pricing formula as set out in the relevant agreements are briefly summarised below:

Dong Jiao:

The Group will have full recovery of actual operating costs, including depreciation of property, plant and equipment, excluding interest expenses and foreign exchange gains or losses and at minimum:

(i) earn a return of 15% per annum of the average balances of the monthly net book value of property, plant and equipment (as defined in the agreement) of the plants;
(ii) incentive pricing adjustments will be made for cost saving and/or when actual processing volume exceeds the minimum processing volume stipulated in the agreement.

Ji Zhuang Zi, Xian Yang Lu and Bei Cang:

Based on the supplementary agreement reached with TSC on 10 March 2006, the Company is entitled to a predetermined sewage processing fee from the completion date of construction to the completion date of inspection of the Ji Zhuang Zi, Xian Yang Lu and Bei Cang plants. After the inspection of these three plants is completed, processing fee will be collected from TSC using the same principle as for Dong Jiao plant as described above.

All other sewage water processing plants :

Initial sewage water processing prices are predetermined, thereafter processing prices may be revised after considering various factors including renovation of equipment, additional investment, power and energy and labour force, and other significant changes of government policy.

All sewage water processing plants outside Tianjin, except for the one in Guiyang, are guaranteed a minimum processing volume by their respective customers. If the actual volume is lower than the guaranteed volume, processing fee will be settled using the guaranteed volume.

Pursuant to the relevant agreement, Guiyang Price Bureau adjusts the sewage water processing price periodically, which will allow full recovery of all actual costs, including operating cost, depreciation, income tax and a return of 8% on budgeted net assets of the plant.

(b) Construction and management of sewage water facility

The Group provides design, construction and operations of sewage processing facility and financing, construction and transfer of sewage processing facility project services.

(c) Supply of tap water

Pursuant to relevant agreements, the Group provides tap water supply service initially at predetermined price and the processing prices as pre-determined may be revised after considering various cost factors based on contract terms.

38 Tianjin Capital Environmental Protection Group Company Limited ◆ 2011 Interim Report

(d) Recycled water and pipeline connection

The Group’s recycled water business includes developing, constructing and operating of recycled water projects, production and sale of recycled water and research, development and technical consultation of processing technology and equipment of recycled water.

2 Basis of preparation

This condensed consolidated interim financial information for the six months ended 30 June 2011 has been prepared in accordance with HKAS 34, ‘Interim financial reporting’. The condensed consolidated interim financial information should be read in conjunction with the annual financial statements for the year ended 31 December 2010, which have been prepared in accordance with HKFRSs.

2.1 Going concern basis

As at 30 June 2011, the Group’s current liabilities exceeded its current assets by approximately Rmb 543 million. Despite the forgoing, these interim financial information has been prepared on a going concern basis, because the directors of the Company believe that the undrawn banking facilities are sufficient to enable the Group and the Company to meet their respective liabilities as and when they fall due.

3 Accounting policies

Except as described below, the accounting policies applied are consistent with those of the annual financial statements for the year ended 31 December 2010, as described in those annual financial statements.

(a) New and amended standards adopted by the Group.

The following new standard and amendment to standard are mandatory for the first time for the financial year beginning 1 January 2011.

Amendment to HKAS 34 ‘Interim financial reporting’ is effective for annual periods beginning on or after 1 January 2011. It emphasises the existing disclosure principles in HKAS34 and adds further guidance to illustrate how to apply these principles. Greater emphasis has been placed on the disclosure principles for significant events and transactions. Additional requirements cover disclosure of changes to fair value measurement (if significant), and the need to update relevant information from the most recent annual report. The change in accounting policy only results in additional disclosures.

Tianjin Capital Environmental Protection Group Company Limited ◆ 2011 Interim Report

(b) Standards, amendments and interpretations to existing standards effective in 2011 but not relevant to the Group.

HKAS 32 (Amendment) Classification of rights issues HK(IFRIC)-Int 14 (Amendment) Prepayments of a minimum funding requirement HK(IFRIC)-Int 19 (Amendment) Extinguishing financial liabilities with equity instruments

(c) The following new standards and amendments to standards have been issued but are not effective for the financial year beginning 1 January 2011 and have not been early adopted:

HKFRS 9 Financial instruments (effective from 1 January 2013) HKAS 12 (Amendment) Deferred tax - Recovery of underlying assets (effective from 1 January 2012) HKFRS 7 (Amendment) Disclosures - Transfers of financial assets (effective from 1 July 2011)

4 Estimates

The preparation of interim financial statements requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities, income and expense. Actual results may differ from these estimates.

In preparing these condensed consolidated interim financial information, the significant judgements made by management in applying the Group’s accounting policies and the key sources of estimation uncertainty were the same as those that applied to the consolidated financial statements for the year ended 31 December 2010.

5 Financial risk management

The Group’s activities expose it to a variety of financial risks. The Group’s overall risk management programme seeks to minimise potential adverse effects on the financial performance of the Group.

The condensed interim consolidated financial information do not include all financial risk management information and disclosures required in the annual financial statements, and should be read in conjunction with the Group’s annual financial statements as at 31 December 2010.

There have been no changes in the risk management department since year end 2010 or in any risk management policies.

(a) Market risk:
(i) Foreign currency risk:

The Group has no significant foreign currency risk as the operations and customers of the Group are located in the PRC with most of the operating assets and transactions denominated and settled in RMB. All of the Group’s borrowings are denominated in RMB. The sole foreign currency exposure of the Group arises from fluctuation of US dollar and Japanese Yen (“JPY”) pursuant to the long-term payment scheme set out in the asset transfer agreement of foreign loan financed assets from TSC on 9 November 2010.

40 Tianjin Capital Environmental Protection Group Company Limited ◆ 2011 Interim Report

At 30 June 2011, if RMB had weakened/strengthened by 5% against the US dollar with all other variables held constant, post-tax profit for the period would have been Rmb6 million (2010: Rmb4 million) lower/higher, mainly as a result of foreign exchange losses/gains on translation of US dollar-denominated portion of long-term payable. Similarly, if RMB had weakened/strengthened by 5% against the JPY with all other variables held constant, posttax profit for the period would have been Rmb12 million (2010: Rmb12 million) lower/ higher.

(ii) Interest rate risk:

The Group’s interest rate risk arises mainly from cash and bank balances, long-term receivables, long-term borrowings and long-term payable.

The Group has significant borrowings and long-term payable. Those taken at variable rates expose the Group to cash flow interest-rate risk, whilst those taken at fixed rates expose the Group to fair value interest-rate risk.

The tables below set out the Group’s exposure to interest rate risks. Included in the tables are the assets and liabilities at carrying amounts, categorised by the maturity dates.

Fixed 900 337,371 16,364 98,181 24,581 287,847 600,000	Group Non-interest Floating bearing 510,139 — — — 858,526 1,320 1,767,091 9,123 6,637 — 101,536 — — —	Group Non-interest Floating bearing 510,139 — — — 858,526 1,320 1,767,091 9,123 6,637 — 101,536 — — —	Total 511,039 337,371
			876,210 1,874,395 31,218 389,383 600,000
900 336,286 16,364 148,181 24,371 299,043 600,000	539,430 — 405,526 2,280,140 6,339 100,561 —	— — 1,796 10,613 — — —	540,330 336,286
			423,686 2,438,934 30,710 399,604 600,000

Tianjin Capital Environmental Protection Group Company Limited ◆ 2011 Interim Report 41

At 30 June 2011, if interest rates on bank borrowings had been 1% higher/lower with all other variables held constant, profit for the period would have been lower/higher by Rmb26 million (2010:22.6 million)

The Group analyses its interest rate exposure monthly by considering refinancing, renewal of existing positions and alternative financing.

(b) Credit risk:

Credit risk arises from deposits with banks and credit exposures to customers.

The Group manages credit risk on bank deposits by placing the majority of its cash and bank balances with state owned/ listed banks in the PRC. The Group has not had any significant loss arising from non-performance by these parties in the past and management does not expect so in the future.

The credit risk on trade receivables is concentrated on a few customers, all of which are PRC government bodies. Thus, the management considers that the risk is limited.

The maximum credit risk of the Company includes the carrying value of its financial assets on books and is increased by the notional amount of financial guarantees issued for its subsidiaries.

(c) Liquidity risk:

Cash flow forecasting is performed in the operating entities and aggregated by Group finance. Group finance monitors rolling forecasts of the Group’s liquidity requirements to ensure it has sufficient cash to meet operational needs while maintaining sufficient headroom on its undrawn committed borrowing facilities at all times so that the Group does not breach borrowing limits or covenants (where applicable) on any of its borrowing facilities. Such forecasting takes into consideration the Group’s debt financing plans, covenant compliance, compliance with internal balance sheet ratio targets and, if applicable external regulatory or legal requirements - for example, currency restrictions.

42 Tianjin Capital Environmental Protection Group Company Limited ◆ 2011 Interim Report

The Group’s financial liabilities (inclusive of interests) are analysed into relevant maturity groupings based on the remaining period at the balance sheet date to the contractual maturity date, using the contracted undiscounted cash flows, as follows:

At 30 June 2011 Long-term bank borrowings Long-term payable Other non-current liabilities Trade and other payables Short-term borrowings Short-term debenture At 31 December 2010 Long-term bank borrowings Long-term payable Other non-current liabilities Trade and other payables Short-term borrowings Short-term debenture	Less than 1 year 899,308 32,149 23,573 327,154 77,146 600,458 471,626 32,038 22,091 297,720 76,902 612,180	Between 1 and 2 years 618,481 32,419 21,273 — — — 950,320 32,278 21,273 — — —	Between 2 and 5 years 892,872 99,393 53,473 — — — 1,064,759 98,809 53,473 — — —	Over 5 years 496,555 654,275 65,598 — — — 639,677 671,105 70,696 — — —	Total 2,907,216 818,236 163,917 327,154 77,146 600,458
					3,126,382 834,230 167,533 297,720 76,902 612,180

(d) Fair value estimation

Long-term borrowings, long-term payable, and debentures that are not traded in an active market, are estimated at fair value that is determined by discounting the future contractual cash flows at the current market interest rate that is available to the Group for similar cash flows.

During the reporting period there were no significant changes in the business or economic circumstances that affect the fair value of the Group’s financial assets and financial liabilities.

During the reporting period there were no reclassifications of financial assets.

6 Revenue and segment information

An analysis of sales and contributions to operating profit for the period by principal operations is as follows:

(a) Analysis of the Group’s turnover and other income

Revenue from principal operation (Note 6(b)) Other income - net	Unaudited For the six months ended 30 June 30 June 2011 2010 725,235 658,029 4,237 12,465 729,472 670,494	Unaudited For the six months ended 30 June 30 June 2011 2010 725,235 658,029 4,237 12,465 729,472 670,494
		670,494

Tianjin Capital Environmental Protection Group Company Limited ◆ 2011 Interim Report 43

(b) Operating segment analysis

Management has determined the operating segments based on the reports reviewed by the managers operating meeting that are used to make strategic decisions.

The meeting considers the business from both service and geographical perspective. From a service perspective, management assesses the performance of processing of sewage water, recycled water and pipeline connection and tap water operation. Processing of sewage water is further evaluated on a geographical basis (Tianjin plants, Hangzhou plant and other plants). Tianjin plants represent sewage water processing plants of downtown Tianjin located at Dong Jiao, Ji Zhuang Zi, Xian Yang Lu and Bei Cang respectively. Other services include tolls collection, lease of office building or apartments and other services. These are not included within the reportable operating segments, as they are not individually included in the reports provided to the managers operating meeting. The results of these operations are included in the ‘all other segments’ column.

The managers operating meeting assesses the performance of the operating segments based on a measure of net profit after tax, which is measured in a manner consistent with that in the financial statements.

(i) For the period ended 30 June 2011

Segment revenue Segment expense Results before share of profits of an associate Share of loss of an associate Profit before income tax Income tax expense Profit for the period Segment assets Investment in an associate Total assets Total liabilities Other information – Interest income – Interest expenses – Depreciation – Amortisation – Capital expenditures	Sewage water processing services Tianjin Hangzhou Other plants plant plants 448,259 68,371 118,533 (309,440) (63,759) (110,728) 138,819 4,612 7,805 4,660,648 808,660 1,356,119 — — — 4,660,648 808,660 1,356,119 2,967,130 503,933 531,825 2,493 171 738 (44,670) (12,727) (21,454) (60,060) — (1,038) (5,208) (18,124) (28,129) 59,291 9,649 20,319	Recycle water and pipeline connection 33,856 (30,396) 3,460 647,730 — 647,730 719,332 1,973 (2,928) (7,651) (57) 13,773	Tap water 19,836 (19,281) 555 334,922 — 334,922 160,224 37 (5,436) — (5,515) 2,175	All other segments 40,617 (9,681) 30,936 667,037 41,094 708,131 74,881 5,972 — (3,004) (40) 35,309	Group 729,472 (543,285)
					186,187 (489)
					185,698 (45,987)
					139,711
					8,475,116 41,094 8,516,210 4,957,325 11,384 (87,215) (71,753) (57,073) 140,516

44 Tianjin Capital Environmental Protection Group Company Limited ◆ 2011 Interim Report

(ii) For the period ended 30 June 2010

Segment revenue Segment expense Results before share of profits of an associate Share of profits of an associate Profit before income tax Income tax expense Profit for the period Segment assets Investment in an associate Total assets Total liabilities Other information – Interest income – Interest expenses – Depreciation – Amortisation – Capital expenditures	Sewage water processing services Tianjin Hangzhou Other plants plant plants 349,158 66,197 105,875 (216,141) (61,880) (94,347) 133,017 4,317 11,528 3,786,845 814,686 1,595,378 — — — 3,786,845 814,686 1,595,378 2,366,922 520,751 513,020 925 164 439 (31,396) (12,544) (20,343) (47,064) — (2,654) (4,554) (18,124) (24,612) 198,069 — 73,146	Recycle water and pipeline connection 21,545 (21,844) (299) 578,079 — 578,079 509,365 1,374 (3,083) (5,698) (12) 34,596	Tap water 17,546 (19,016) (1,470) 299,365 — 299,365 197,063 — (4,612) — (4,342) 6,139	All other segments 110,173 (79,915) 30,258 479,413 40,218 519,631 55,256 5696 — (2,384) (40) 958	Group 670,494 (493,143)
					177,351 83
					177,434 (47,160)
					130,274
					7, 553,766 40,218 7,593,984 4,162,377 8,598 (71,978) (57,800) (51,684) 312,908

Tianjin Capital Environmental Protection Group Company Limited ◆ 2011 Interim Report

7 Property, plant and equipment and intangible assets

Property, plant
Six months ended 30 June 2010
and equipment
Opening net book amount 1 January 2010
2,335,198
Additions
221,379
Disposals
(14,332)
Depreciation and amortisation
(56,233)
Closing net book amount 30 June 2010
2,486,012
Six months ended 30 June 2011
Opening net book amount as at 1 January 2011
3,230,110
Additions
76,287
Disposals
(14,126)
Depreciation and amortisation
(69,916)
Closing net book amount as at 30 June 2011
3,222,355

Intangible
assets
2,367,696
91,529
—
(47,587)
2,411,638
2,427,782
64,229
—
(51,768)
2,440,243

Certain of the concession rights with net book value of Rmb247million (31 December 2010: Rmb252 million) have been secured against loan facilities.

8 Investment in an associate

	Unaudited
	For the six months
	ended 30 June 2011
Beginning of the period	41,583
Share of loss	(489)
End of the period	41,094

Tianjin International Machinery Co., Ltd. (TIMC) is a sino-foreign joint venture registered in the Tianjin Economics Development Area. The principal activities of TIMC include research and development, production and sale of environment protection equipment; engineering technical consultation; trading; manufacturing and sale of general equipment.

46 Tianjin Capital Environmental Protection Group Company Limited ◆ 2011 Interim Report

9 Trade receivables and trade receivables due after one year

Details of the trade receivables are as follows:

Due from TSC for: – Water processing services – Construction of plants Toll road fee Due from others - current Less: Non-current portion	Unaudited Audited 30 June 31 December 2011 2010 882,176 691,168 68,794 241,792 950,970 932,960 62,790 38,200 144,655 94,583 1,158,415 1,065,743 (68,794) (68,794) 1,089,621 996,949	Unaudited Audited 30 June 31 December 2011 2010 882,176 691,168 68,794 241,792 950,970 932,960 62,790 38,200 144,655 94,583 1,158,415 1,065,743 (68,794) (68,794) 1,089,621 996,949
		932,960 38,200 94,583
		1,065,743 (68,794)
		996,949

(a) Aging of trade receivables prior to the reclassification is as follows:

Within one year One to two years Over two years 10 Long-term receivables Receivables from toll road concession	Unaudited 30 June 2011 921,426 168,195 68,794 1,158,415 Unaudited 30 June 2011 337,371	Audited 31 December 2010 785,601 38,350 241,792
		1,065,743
		Audited 31 December 2010 336,286

Receivables from toll road concession represent amortised cost using effective interest method, calculated with reference to future revenues from the toll road asset of the Company.

Tianjin Capital Environmental Protection Group Company Limited ◆ 2011 Interim Report

11 Share capital

The Company’s authorised, issued and fully paid up capital for the period is tabled below. All of the Company’s shares are ordinary shares with par value of one Renminbi.

At 31 December 2010 – Audited At 30 June 2011 – Unaudited	“A” Circulating shares 1,087,228 1,087,228	“H” Circulating shares 340,000 340,000	Total 1,427,228

			1,427,228

“A” shares represent shares listed on the Shanghai Securities Exchange and “H” shares represent shares listed on the Main Board of The Stock Exchange of Hong Kong. All the “A” and “H” shares rank pari passu in all respects.

12 Borrowings

Note Non-current: Long-term bank borrowings (a),(b) Less: Current portion (a),(b) Long-term payables (d) Other non-current liabilities Current: Current portion of long-term bank borrowings (a),(b) Current portion of long-term payables (d) Short-term bank borrowings (b) Short-term debentures (c) Other current liabilities	Unaudited 30 June 2011 2,528,980 (782,470) 1,746,510 389,383 127,885 2,263,778 782,470 31,218 73,000 600,000 20,740 1,507,428	Audited 31 December 2010 2,639,030 (329,470)
		2,309,560 399,604 129,374
		2,838,538
		329,470 30,710 73,000 600,000 21,216
		1,054,396

48 Tianjin Capital Environmental Protection Group Company Limited ◆ 2011 Interim Report

(a) Long-term bank borrowings

Movement of bank borrowings is analyzed as follows:

Unaudited

Six months ended 30 June 2010 Opening amount 1 January 2010 New borrowings Repayments of borrowings Closing amount as at 30 June 2010 Six months ended 30 June 2011 Opening amount as at 1 January 2011 New borrowings Repayments of borrowings Closing amount as at 30 June 2011	2,362,460 286,000 (42,250)
	2,606,210
	2,639,030 161,200 (271,250)
	2,528,980

These borrowings mature as follows:

At 30 June 2011 Long-term bank borrowings At 31 December 2010 Long-term bank borrowings	Less than 6 months 58,220 271,250	6-12 months 724,250 58,220	Between 1 and 2 years 537,720 841,720	Between 2 and 5 years 756,710 888,160	Over 5 years 452,080 579,680	Total 2,528,980
						2,639,030

Tianjin Capital Environmental Protection Group Company Limited ◆ 2011 Interim Report

(b) Summary of terms of bank borrowings:

Long-term bank borrowings: Secured – Pledge – Guarantee Unsecured Short-term bank borrowings: Secured – Guarantee Unsecured (c) Short-term debenture Par value Issuance date Short-term debenture 600,000 2010-7-8	Unaudited 30 June 2011 198,000 1,188,580 1,142,400 2,528,980 18,000 55,000 73,000 Maturity 1 year	Audited 31 December 2010 212,000 1,302,930 1,124,100
		2,639,030
		18,000 55,000
		73,000
		Balance 600,000

(i) On 8 July 2010, the Company issued a short-term debenture of Rmb600 million at par with maturity period of one year. The debenture bears interest rate at 3.48% per annum. Both the principal and interest will be repaid upon maturity of the debenture.

50 Tianjin Capital Environmental Protection Group Company Limited ◆ 2011 Interim Report

(d) Long-term payable and current portion of long-term payable

		Group	Group
	Unaudited		Audited
	30 June 2011		31 December 2010
		Unrecognized		Unrecognized
		financial		financial
	Payable	charges	Payable	charges
Payable to TSC for assets acquisition	818,236	(397,635)	834,230	(403,916)

(i) Summary of terms of long-term payable above:

			Effective
		Original	interest	Ending	Due within
	Duration	balance	rate	balance	1 year
TSC	30 years to	430,314	5.94%	389,383	31,218
	2041-3-20

Balance of the long-term payable to TSC is the consideration payable in respect of the acquisition of sewage processing assets from TSC, net of unrecognized financing charges.

Pursuant to “Assets transfer agreement from foreign banks loans about Haihe River Tianjin sewage processing project and Beicang sewage processing project” (the “Transfer Agreement”), TSC sold to the Company certain sewage processing assets at a consideration of 691 million. The Company has paid the first instalment of Rmb261 million in cash and the remaining balance will be settled in Renminbi translating at exchange rates prevailing on each repayment date over the next 30 years. The fair value of the initial recognition of the payable balance is based on discounting future cash payments using an effective interest rate of 5.94%.

(ii) The payable amounts of long-term payable (including interest) are denominated in the following currencies.

JPY US dollar	Group Unaudited Audited 30 June 31 December 2011 2010 644,357 656,952 173,879 177,278 818,236 834,230	Group Unaudited Audited 30 June 31 December 2011 2010 644,357 656,952 173,879 177,278 818,236 834,230
		834,230

The balance denominated in US dollar bears an interest rate at 6 month LIBOR p l u s 0.6%, whilst the balance denominated in JPY bears fixed interest rates at 1% and 1.55% per annum respectively.

Tianjin Capital Environmental Protection Group Company Limited ◆ 2011 Interim Report

13 Trade payables

As at 30 June 2011, the majority of trade payables are aged within one year. The carrying value of trade payables approximates their fair value due to their short-term maturities.

14 Operating profit

Operating profit is stated after (crediting)/ charging the following:

Crediting: Rental Charging: Depreciation and amortisation expenses Staff costs Raw materials and consumables used Repair and maintenance expenses Loss of disposal of property, plant and equipment	Unaudited For the six months ended 30 June 30 June 2011 2010 (5,217) (4,608) 128,826 109,484 72,637 56,588 19,773 17,041 21,192 19,032 13,468 13,117

15 Finance costs-net

Interest expenses of borrowings Less: Capitalised interest Less: Interest income – long-term receivables – bank deposits Others	Unaudited For the six months ended 30 June 30 June 2011 2010 96,528 78,544 (9,313) (6,566) 87,215 71,978 (11,384) (8,598) (5,717) (5,633) (5,667) (2,965) 498 64 76,329 63,444	Unaudited For the six months ended 30 June 30 June 2011 2010 96,528 78,544 (9,313) (6,566) 87,215 71,978 (11,384) (8,598) (5,717) (5,633) (5,667) (2,965) 498 64 76,329 63,444
		(5,633) (2,965)
		64 63,444

52 Tianjin Capital Environmental Protection Group Company Limited ◆ 2011 Interim Report

16 Income tax expense

No Hong Kong profits tax has been provided as the Group has no assessable profit in Hong Kong as at 30 June 2011 (2010: Nil). PRC income tax is calculated at the statutory rate of 25% (2010: 25%).

Tax charge comprises:

Current income tax Deferred income tax	Unaudited For the six months ended 30 June 30 June 2011 2010 41,867 42,692 4,120 4,468 45,987 47,160	Unaudited For the six months ended 30 June 30 June 2011 2010 41,867 42,692 4,120 4,468 45,987 47,160
		47,160

17 Interim dividends

No interim dividend was proposed by the Board of Directors of the Company for the six months ended 30 June 2011 (2010: Nil).

Tianjin Capital Environmental Protection Group Company Limited ◆ 2011 Interim Report

18 Commitments and contingent liabilities

(i) The Group’s commitments at the balance sheet date in respect of construction projects are as follows:

Contracted but not provided for Unaudited Audited 30 June 31 December 2011 2010 Rmb’ million Rmb’ million Sewage water processing plants in: – Bao Ying 30 — – Jin Ning 8 — – Ji Zhuang Zi (upgrade project) 41 59 – Xian Yang Lu (upgrade project) 21 29 – Bei Cang (upgrade project) 21 26 – Dong Jiao (upgrade project) 31 52 Water recycling plants in: – Ji Zhuang Zi (expansion project) — — Other Project – Jia Yuan Xing Chuang 102 — 254 166	Authorised but not contracted for Unaudited Audited 30 June 31 December 2011 2010 Rmb’ million Rmb’ million — — 17 — — — 1 2 1 1 68 69 — 35 287 — 374 107	Authorised but not contracted for Unaudited Audited 30 June 31 December 2011 2010 Rmb’ million Rmb’ million — — 17 — — — 1 2 1 1 68 69 — 35 287 — 374 107
		107

(ii) The group does not have any significant contingent liabilities as at the financial statement date.

54 Tianjin Capital Environmental Protection Group Company Limited ◆ 2011 Interim Report

19 Related party transactions

In addition to the related party information shown elsewhere in the financial statements, the following is a summary of significant related party transactions entered into in the ordinary course of the business between the Group and its related parties during the period.

Income:
		Unaudited
Related parties	Nature of transaction	For the six months	ended
		30 June	30 June
		2011	2010
TICIG	Rental income	1,912	3,230
Tianjin Zi Ya Recycled	Construction revenue
economy industry	from sewage water
Investment development	processing plant
Ltd.		26,069	—
Tianjin City Infrastructure	Rental income
Construction Project
Management & Consultant
Co., Ltd.		364	—
Tianjin City Resource	Rental income
Operation Co., Ltd.		344	—
Tianjin Zi Ya Recycled	Income from
economy industry	serving as
Investment development	construction agency
Ltd.		970	2,380

(ii) Key management compensation for the six months ended 30 June 2011 is summarized as follows:

Salaries and other short-term employee benefits Other long-term benefits	Unaudited For the six months ended 30 June 30 June 2011 2010 3,419 3,893 425 307 3,844 4,200	Unaudited For the six months ended 30 June 30 June 2011 2010 3,419 3,893 425 307 3,844 4,200
		4,200

Tianjin Capital Environmental Protection Group Company Limited ◆ 2011 Interim Report

(iii) Transactions/ balances with other state owned enterprises in the PRC

The Group operates in an economic environment currently predominated by enterprises directly or indirectly owned or controlled by the PRC government (hereinafter collectively referred to as “state-controlled entities”).

During the period, the Group’s significant transactions with these state controlled entities include processing of sewage water and construction and management of related facility and processing of tap water. As at period end, majority of the Group’s cash and bank balances and borrowings are with state controlled banks and listed banks.

56 Tianjin Capital Environmental Protection Group Company Limited ◆ 2011 Interim Report

(II) Prepared in accordance with PRC Accounting Standards

Balance Sheet

As at 30 June 2011

(All amounts in RMB thousand unless otherwise stated)

ASSETS Notes 6 CURRENT ASSETS Cash and bank balances (1) Trade receivables (2) Prepayments (3) Other receivables (4) Inventories (5) Other current assets Total current assets NON-CURRENT ASSETS Long-term receivables (6) Long-term equity investments (7) Investment properties (8) Fixed assets (9) Construction in progress (9) Intangible assets (10) Other non-current assets Total non-current assets TOTAL ASSETS	Group Unaudited Audited 30 June 31 December 2011 2010 511,039 540,330 1,089,621 996,949 102,109 103,759 58,368 53,540 58,686 32,476 — — 1,819,823 1,727,054 406,165 405,080 45,094 45,583 117,791 119,628 2,449,531 2,526,459 772,824 703,651 2,897,806 2,890,650 7,176 7,458 6,696,387 6,698,509 8,516,210 8,425,563	Company Unaudited Audited 30 June 31 December 2011 2010 143,951 161,861 956,845 913,618 13,034 55,106 146,406 145,280 3,966 3,977 100,000 50,000 1,364,202 1,329,842 406,165 405,080 1,207,037 1,155,881 93,243 94,827 2,210,871 2,279,506 706,361 649,964 440,872 446,079 33,288 26,290 5,097,837 5,057,627 6,462,039 6,387,469	Company Unaudited Audited 30 June 31 December 2011 2010 143,951 161,861 956,845 913,618 13,034 55,106 146,406 145,280 3,966 3,977 100,000 50,000 1,364,202 1,329,842 406,165 405,080 1,207,037 1,155,881 93,243 94,827 2,210,871 2,279,506 706,361 649,964 440,872 446,079 33,288 26,290 5,097,837 5,057,627 6,462,039 6,387,469
			1,329,842
			405,080 1,155,881 94,827 2,279,506 649,964 446,079 26,290
			5,057,627
			6,387,469

Tianjin Capital Environmental Protection Group Company Limited ◆ 2011 Interim Report

Liabilities and Shareholders’ equity Notes 6 CURRENT LIABILITIES Short-term borrowings (12) Short-term debenture (12) Trade payables (11) Advances (11) Wages payable Taxes payable (11) Dividend payable (16)(c) Other payables (11) Long-term borrowings due within one year (12) Other current liabilities (12) Total current liabilities NON-CURRENT LIABILITIES Long-term borrowings (12) Deferred revenue (13) Deferred income tax liabilities (14) Long-term payables (12) Other non-current liabilities (12) Total non-current liabilities TOTAL LIABILITIES SHAREHOLDERS’ EQUITY Share capital (15) Capital surplus (16)(a) General reserves (16)(b) Undistributed profits Equity attributable to owners of the parent Minority Interests (17) Total shareholders’ equity TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY	Group Unaudited Audited 30 June 31 December 2011 2010 73,000 73,000 600,000 600,000 24,685 22,729 350,719 310,478 5,339 7,374 14,209 16,431 157,982 1,056 302,469 274,991 813,688 360,180 20,740 21,216 2,362,831 1,687,455 1,746,510 2,309,560 288,169 284,974 42,547 38,427 389,383 399,604 127,885 129,374 2,594,494 3,161,939 4,957,325 4,849,394 1,427,228 1,427,228 383,338 383,338 302,005 302,005 1,318,681 1,338,002 3,431,252 3,450,573 127,633 125,596 3,558,885 3,576,169 8,516,210 8,425,563	Company Unaudited Audited 30 June 31 December 2011 2010 55,000 55,000 600,000 600,000 8,392 9,730 3,212 63,386 3,553 4,766 9,066 9,162 157,982 1,056 336,660 235,198 611,218 240,710 16,364 16,364 1,801,447 1,235,372 612,400 1,064,100 207,140 203,288 18,718 17,467 389,383 399,604 98,181 98,181 1,325,822 1,782,640 3,127,269 3,018,012 1,427,228 1,427,228 380,788 380,788 302,005 302,005 1,224,749 1,259,436 3,334,770 3,369,457 — — 3,334,770 3,369,457 6,462,039 6,387,469	Company Unaudited Audited 30 June 31 December 2011 2010 55,000 55,000 600,000 600,000 8,392 9,730 3,212 63,386 3,553 4,766 9,066 9,162 157,982 1,056 336,660 235,198 611,218 240,710 16,364 16,364 1,801,447 1,235,372 612,400 1,064,100 207,140 203,288 18,718 17,467 389,383 399,604 98,181 98,181 1,325,822 1,782,640 3,127,269 3,018,012 1,427,228 1,427,228 380,788 380,788 302,005 302,005 1,224,749 1,259,436 3,334,770 3,369,457 — — 3,334,770 3,369,457 6,462,039 6,387,469
			1,235,372
			1,064,100 203,288 17,467 399,604 98,181
			1,782,640
			3,018,012
			1,427,228 380,788 302,005 1,259,436
			3,369,457 —
			3,369,457
			6,387,469

The accompanying notes form an integral part of these financial statements.

Zhang Wenhui Shi Zhenjuan Shi Zhenjuan Company Representative Person in charge of Person in charge of accounting function accounting department

58 Tianjin Capital Environmental Protection Group Company Limited ◆ 2011 Interim Report

Income Statement

For the six months ended 30 June 2011

(All amounts in RMB thousand unless otherwise stated)

Notes 6 Income from operations (18) Less: Cost for operations (18) Business tax and surcharges (19) Administrative expenses Financial expenses - net (20) Add: Investment income Including: Share of profit of an associate (7) Operation profit Add: Non-operating income Less: Non-operating expenses (21) Including: Loss on disposal of non-current assets Total profit Less: Income tax (22) Net profit Attributable to owners of the parent Minority interests Earnings per share (in Rmb Yuan) (23) – Basic – Diluted Other comprehensive income Total comprehensive income Attributable to owners of the parent Minority interests	Group Unaudited Six months ended 30 June 2011 2010 750,479 675,524 (425,281) (357,229) (3,608) (20,010) (50,172) (46,396) (76,329) (63,444) (289) 83 (489) 83 194,800 188,528 4,422 2,120 (13,524) (13,214) (13,468) (13,117) 185,698 177,434 (45,987) (47,160) 139,711 130,274 137,674 129,701 2,037 573	Group Unaudited Six months ended 30 June 2011 2010 750,479 675,524 (425,281) (357,229) (3,608) (20,010) (50,172) (46,396) (76,329) (63,444) (289) 83 (489) 83 194,800 188,528 4,422 2,120 (13,524) (13,214) (13,468) (13,117) 185,698 177,434 (45,987) (47,160) 139,711 130,274 137,674 129,701 2,037 573	Company Unaudited Six months ended 30 June 2011 2010 466,452 458,475 (223,528) (204,505) (2,155) (19,292) (31,968) (27,358) (36,077) (24,182) 2,089 1,992 — — 174,813 185,130 446 1,613 (12,877) (13,111) (12,877) (13,082) 162,382 173,632 (40,074) (42,910) 122,308 130,722 122,308 130,722 — — — — 122,308 130,722 122,3081 130,722 — —
	0.10 0.10 — 139,711 137,674 2,037	0.09 0.09 — 130,274 129,701 573	— 122,308 122,3081 —

The accompanying notes form an integral part of these financial statements.

Zhang Wenhui Shi Zhenjuan Shi Zhenjuan Company Representative Person in charge of Person in charge of accounting function accounting department

Tianjin Capital Environmental Protection Group Company Limited ◆ 2011 Interim Report

Cash Flow Statement

For the six months ended 30 June 2011

(All amounts in RMB thousand unless otherwise stated)

Group
Unaudited
Six months ended 30 June
2011
2010
1. Cash flows from operating activities
Cash received from sales of goods and
rendering of services
668,853
361,349
Cash received relating to other operating
activities
99,720
87,342
Sub-total of cash inflows
768,573
448,691
Cash paid for goods and services
(208,189)
(174,668)
Cash paid to and on behalf of employees
(76,396)
(61,890)
Payments of taxes and levies
(56,013)
(55,008)
Cash payments relating to other
operating activities
(72,278)
(100,402)
Sub-total of cash outflows
(412,876)
(391,968)
Net cash flows from operating activities
355,697
56,723
2. Cash flows from investing activities
Cash received from returns on investments
200
—
Net cash received from disposal
of fixed assets
658
1,215
Sub-total of cash inflows
858
1,215
Cash paid to acquire fixed assets,
intangible assets and other long-term assets
(208,088)
(286,409)
Cash paid to acquire equity investments
(2,436)
—
Sub-total of cash outflows
(210,524)
(286,409)
Net cash flows from investing activities
(209,666)
(285,194)

Company
Unaudited
Six months ended 30 June
2011
2010
362,883
167,969
160,613
89,677
523,496
257,646
(85,399)
(89,764)
(44,034)
(36,009)
(45,879)
(45,652)
(116,316)
(91,226)
(291,628)
(262,651)
231,868
(5,005)
200
7,505
148
1,158
348
8,663
(84,722)
(186,329)
(51,156)
(5,000)
(135,878)
(191,329)
(135,530)
(182,666)

60 Tianjin Capital Environmental Protection Group Company Limited ◆ 2011 Interim Report

Group
Unaudited
Six months ended 30 June
2011
2010
3. Cash flows from financing activities
Cash received from borrowings
161,200
286,000
Cash received from investment
7,280
—
Sub-total of cash inflows
168,480
286,000
Repayments of amounts borrowed
(272,613)
(43,614)
Payments for distribution of dividends
or profits or payments for interest expenses
(71,189)
(73,426)
Sub-total of cash outflows
(343,802)
(117,040)
Net cash flows from financing activities
(175,322)
168,960
4. Effect of foreign exchange rate
changes on cash
—
—
5. Net increase/(decrease) in cash
(29,291)
(59,511)
Add: Cash and bank balances
at beginning of year
539,430
592,261
6. Cash and bank balances at end of year
510,139
532,750

Company
Unaudited
Six months ended 30 June
2011
2010
118,300
242,000
—
—
118,300
242,000
(200,000)
—
(32,548)
(28,554)
(232,548)
(28,554)
(114,248)
213,446
—
—
(17,910)
25,775
161,861
224,354
143,951
250,129

The accompanying notes form an integral part of these financial statements.

Zhang Wenhui Shi Zhenjuan Shi Zhenjuan Company Representative Person in charge of Person in charge of accounting function accounting department

Tianjin Capital Environmental Protection Group Company Limited ◆ 2011 Interim Report

Consolidated statement of changes in equity

For the six months ended 30 June 2011

(All amounts in RMB thousand unless otherwise stated)

Attributable to owners of the parent
Share
Capital
General
Undistributed
capital
surplus
reserve
profits
Balance at 1 January 2010
1,427,228
383,338
276,124
1,206,901
Changes in 2010
Net profit
—
—
—
271,160
Profit appropriation
– Appropriation to statutory
common reserve
—
—
25,881
(25,881)
– Dividend appropriation
to shareholders
—
—
—
(114,178)
Balance at 31 December 2010
1,427,228
383,338
302,005
1,338,002
Changes for six mounths
ended 30 June 2011
Net profit
—
—
—
137,674
Profit appropriation
- Dividend appropriation
to shareholders
—
—
—
(156,995)
Balance at 30 June 2011
1,427,228
383,338
302,005
1,318,681

Total
Minority
shareholders’
interests
equity
121,920
3,415,511
3,996
275,156
—
—
(320)
(114,498)
125,596
3,576,169
2,037
139,711
—
(156,995)
127,633
3,558,885

The accompanying notes form an integral part of these financial statements.

Zhang Wenhui Shi Zhenjuan Shi Zhenjuan Company Representative Person in charge of Person in charge of accounting function accounting department

62 Tianjin Capital Environmental Protection Group Company Limited ◆ 2011 Interim Report

Company statement of changes in equity

For the six months ended 30 June 2011

(All amounts in RMB thousand unless otherwise stated)

Share capital Balance at 1 January 2010 1,427,228 Changes in 2010 Net profit — Profit appropriation - Appropriation to statutory common reserve — - Dividend appropriation to shareholders — Balance at 31 December 2010 1,427,228 Changes for six mounths ended 30 June 2011 Net profit — Profit appropriation -Dividend appropriation to shareholders — Balance at 30 June 2011 1,427,228	Capital surplus 380,788 — — — 380,788 — — 380,788	Total General Undistributed shareholders’ reserve profits equity 276,124 1,140,686 3,224,826 — 258,809 258,809 25,881 (25,881) — — (114,178) (114,178) 302,005 1,259,436 3,369,457 — 122,308 122,308 — (156,995) (156,995) 302,005 1,224,749 3,334,770

The accompanying notes form an integral part of these financial statements.

Zhang Wenhui

Company Representative

Shi Zhenjuan

Person in charge of accounting function

Shi Zhenjuan

Person in charge of accounting department

Tianjin Capital Environmental Protection Group Company Limited ◆ 2011 Interim Report

Notes to the Financial Statements

For the six months ended 30 June 2011

(All amounts in Rmb thousand unless otherwise stated)

1 COMPANY PROFILE AND PRINCIPAL ACTIVITIES

Tianjin Capital Environmental Protection Group Company Limited (the “Company”) was established on 8 June 1993 in Tianjin City of the People’s Republic of China (the “PRC”) as a joint stock limited liability company. The holding company and ultimate holding company of the Company is Tianjin Municipal Investment Company Limited (“TMICL”) and Tianjin City Infrastructure Construction and Investment Group Company Limited (“TICIG”) respectively.

The principal activities of the Company and its subsidiaries (the “Group”) include processing of sewage water, construction and management of related facility, supply of tap water and recycled water as described below:

(a) Processing of sewage water

Pursuant to relevant agreements (“Sewage Water Processing Agreements”), the Group currently provides sewage processing services via the following plants:

Plant Location	Agreement date	Customer
Dong Jiao, Tianjin	10 October 2000	Tianjin Sewage Company(“TSC”)
Ji Zhuang Zi, Tianjin	10 October 2000	TSC
Xian Yang Lu, Tianjin	10 October 2000	TSC
Bei Cang, Tianjin	10 October 2000	TSC
Gui Yang, Guizhou	16 September 2004	Guiyang City Administration Bureau
Bao Ying, Jiangsu	13 June 2005	Baoying Construction Bureau
Chi Bi, Hubei	15 July 2005	Chibi Construction Bureau
Fu Yang, Anhui	18 December 2005	Anhui Fuyang Construction Committee
Qu Jing, Yunnan	25 December 2005	Qujing City Water General Company
Hong Hu, Hubei	29 December 2005	Honghu Construction Bureau
Hang Zhou, Zhejiang	20 November 2006	Hangzhou Sewage Company
Jing Hai, Tianjin	12 September 2007	Tianyu Science Technology Park
Wen Deng, Shandong	19 December 2007	Wendeng Construction Bureau
Xi An, Shanxi	18 March 2008	Xi’an Infrastructure Investment Group
An Guo, Hebei	14 October 2008	An Guo Municipal Government
Xian Ning, Hubei	16 October 2008	Xianning Construction Committee
Ying Dong, Anhui	10 August 2009	Fuyang Yingdong Construction Bureau

The principal terms and the pricing formula as set out in the relevant agreements are briefly summarised below:

64 Tianjin Capital Environmental Protection Group Company Limited ◆ 2011 Interim Report

Dong Jiao:

The Group will have full recovery of actual operating costs, including depreciation of fixed assets, excluding interest expenses and foreign exchange gains or losses and at minimum:

(i) earn a return of 15% per annum of the average balances of the monthly net book value of fixed assets (as defined in the agreement) of the plants;
(ii) incentive pricing adjustments will be made for cost saving and/or when actual processing volume exceeds the minimum processing volume stipulated in the agreement.

Ji Zhuang Zi, Xian Yang Lu and Bei Cang:

Based on the supplementary agreement reached with TSC on 10 March 2006, the Company is entitled to a pre-determined sewage processing fee from the completion date of construction to the completion date of inspection of the Ji Zhuang Zi, Xian Yang Lu and Bei Cang plants. After the inspection of these three plants is completed, processing fee will be collected from TSC using the same principle as for Dong Jiao plant as described above.

All other sewage processing plants:

All sewage processing plants except for the one in Guiyang, are guaranteed a minimum processing volume by their respective customers. If the actual volume is lower than the guaranteed volume, processing fee will be settled using the guaranteed volume.

(b) Construction and management of sewage water facility

The Group provides design, construction and operations of sewage processing facility and financing, construction and transfer of sewage processing facility project services.

(c) Supply of tap water

Pursuant to relevant agreements, the Group provides tap water supply service initially at predetermined pricing and the prices as pre-determined may be revised after considering various cost factors based on contract terms.

(d) Recycled water and pipeline connection

These consolidated financial statements were approved by the Directors of the Company on 24 Augest 2011.

Tianjin Capital Environmental Protection Group Company Limited ◆ 2011 Interim Report

2 BASIS OF PREPARATION OF FINANCIAL STATEMENTS

The Group adopted the Basic Standard and 38 specific standards of the Accounting Standards for Business Enterprises issued by the Ministry of Finance on 15 February 2006, the Application Guidance for Accounting Standard for Business Enterprises, Interpretation of Accounting Standards for Business Enterprises and other relevant regulations issued thereafter (hereafter referred to as “the Accounting Standard for Business Enterprises” or “CAS”) and No. 15 General Requirements of Financial Reporting of Information Disclosure Preparation Regulation of Company with Public Issuance Securities (Revised in 2010) stipulated by China Securities Regulatory Commission.

As at 30 June 2011, the Group and the Company’s current liabilities exceeded its current assets by to approximately RMB543 million and RMB437 million respectively. Despite the forgoing, these interim financial information has been prepared on a going concern basis, because the directors of the Company believe that the undrawn banking facilities are sufficient to enable the Group and the Company to meet their respective liabilities as and when they fall due.

3 STATEMENT OF COMPLIANCE WITH CAS

The financial statements of the Company for the six months ended 30 June 2011 truly and completely present the financial position as of 30 June 2011 and the operating results, cash flows and other information for the six months ended 30 June 2011 of the Group and the Company in compliance with the Accounting Standards for Business Enterprises.

4 SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES

(1) Accounting period

The accounting year starts on 1 January and ends on 31 December. These financial statements are prepared for the six-month period from 1 January to 30 June.

(2) Recording currency

The recording currency is Renminbi (“Rmb”).

(3) Preparation of consolidated financial statements

The consolidated financial statements comprise the financial statements of the Company and all its subsidiaries.

Subsidiaries are fully consolidated from the date on which the Group obtains control and are deconsolidated from the date that such control ceases.

The financial statements of subsidiaries are adjusted in accordance with the accounting policies and accounting period of the Company during the preparation of the consolidated financial statements, where the accounting policies and the accounting periods are inconsistent between the Company and subsidiaries.

66 Tianjin Capital Environmental Protection Group Company Limited ◆ 2011 Interim Report

All significant inter-group balances, transactions and unrealised profits are eliminated in the consolidated financial statements. The portion of a subsidiary’s equity and the portion of a subsidiary’s net profits and losses for the period not held by the Company are recognized as minority interests and presented separately in the consolidated balance sheet within equity and net profits respectively.

(4) Cash and cash equivalents

Cash and cash equivalents comprises cash in hand, deposits held at call with bank and shortterm and highly liquid investments that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value.

(5) Foreign currency translation

Foreign currency transactions are translated into Rmb using the exchange rates prevailing at the dates of the transactions.

At the balance sheet date, monetary items denominated in foreign currency are translated into Rmb using the spot exchange rate on the balance sheet date. Exchange differences arising from these translations are recognised in profit or loss for the current period, except for those attributable to foreign currency borrowings that have been taken out specifically for the acquisition, construction or production of qualifying assets, which are capitalised as part of the cost of those assets. Non-monetary items denominated in foreign currency that are measured in terms of historical cost are translated at the balance sheet date using the spot exchange rate at the date of the transaction. The effect of exchange rate changes on cash is presented separately in the cash flow statement.

(6) Financial instruments

(a) Financial assets

The Group’s financial assets represent receivables (Note 4(7)), which are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market.

(i) Recognition and measurement

Financial assets are recognised at fair value on the balance sheet when the Group becomes a party to the contractual provisions of the financial instrument. The related transaction cost of other financial assets is included in the initial recognition amounts.

Receivables are carried at amortised cost using the effective interest method.

Tianjin Capital Environmental Protection Group Company Limited ◆ 2011 Interim Report

(ii) Impairment of financial assets

The Group assesses the carrying amount of a financial asset at each balance sheet date. If there is objective evidence that the financial asset is impaired, the Group shall determine the amount of any impairment loss.

If an impairment loss on a financial asset carried at amortised cost has been incurred, the amount of loss is measured at the difference between the asset’s carrying amount and the present value of estimated future cash flows (excluding future credit losses that have not been incurred). If there is objective evidence that the value of the financial asset recovered and the recovery is related objectively to an event occurring after the impairment was recognised, the previously recognised impairment loss is reversed and the amount of reversal is recognised in profit or loss.

(iii) Derecognition of financial assets

A financial asset is derecognised where: (1) the contractual rights to receive cash flows from the asset have suspended; (2) the Group has transferred substantially all the risks and rewards associated with ownership of the asset to the transferee; (3) the Group has neither transferred nor retained substantially all the risks and rewards associated with ownership of the asset, but has waived control of the asset.

When a financial asset is derecognized, the differences between its carrying value and proceeds received and the cumulative amount of changes in fair value previously recorded in equity are recognized in profit and loss.

(b) Financial liabilities

The financial liabilities are classified initially as financial liabilities at fair value through profit and loss and other financial liabilities. The Group’s financial liabilities mainly represent other financial liabilities, including payables, borrowings and short-term debentures.

Payables include trade and other payables, which are initially recognized at fair value and subsequently measured at amortised cost using effective interest method. Payables due within one year (including one year) are included in current liabilities, the remaining portion are included in non-current liabilities.

Borrowings and debentures are initially recognized at its fair value net of transaction costs, and subsequently measured at amortised cost using effective interest method. Borrowings and debentures with maturity within one year (including one year) are included in short-term borrowings and short-term debentures. Borrowings with maturity over one year but due within one year (including one year) at balance sheet date are included in current portion of non-current liabilities, the remaining portion are included in long-term borrowings.

When the current obligation under a financial liability is completely or partially cancelled, the whole or relevant portion of the liability is derecognized. The differences between carrying value of derecognized portion and consideration paid are recognized in profit and loss.

68 Tianjin Capital Environmental Protection Group Company Limited ◆ 2011 Interim Report

(7) Receivables

Receivables comprise accounts receivable and other receivables. Accounts receivable arising from sale of goods or rendering of services are initially recognised at fair value of the contractual payments from the buyer.

Receivables that are individually significant are subject to separate impairment assessment. If there is objective evidence that the Group will not be able to collect the full amounts according to the original terms, a provision for impairment of the receivable is made.

Receivables that are not individually significant together with those receivables that have been individually evaluated for impairment and found not to be impaired are grouped on the basis of similar credit risk characteristics. The impairment losses are determined, considering the current conditions, on the basis of historical loss experience for the groups of receivables with the same or the similar credit risk characteristics of prior years.

(8) Inventories

Inventories include raw materials, finished goods, low cost consumables and construction in progress, and are stated at the lower of cost and net realisable value.

Except for construction in progress, cost for raw materials, finished goods and low cost consumables is determined using the weighted average method. The cost of finished goods comprises raw materials, direct labour, other direct costs and related production overheads (based on normal operating capacity). It excludes borrowing costs. Net realisable value is the estimated selling price in the ordinary course of business, less applicable variable selling expenses.

The amount of construction contract costs incurred, plus profits and less losses recognized and progress billings is determined on an individual contract basis. Where positive, this amount is recognized in assets as construction in progress. Where negative, it is recognized in liabilities.

(9) Long-term equity investments

Long-term equity investments comprise the Company’s long-term equity investments in its subsidiaries, the Group’s long-term equity investments in its joint ventures and associates as well as other long-term equity investments where the Group does not have control, joint control or significant influence over the investees, and which are not quoted in an active market and whose fair value cannot be reliably measured.

Subsidiaries are all investees over which the Company is able to control. Joint ventures are all investees over which the Group is able to control jointly with other parties. Associates are all investees that the Group has significant influence on their financial and operating policies.

Investments in subsidiaries are measured using the cost method in the Company’s financial statements, and adjusted using the equity method when preparing the consolidated financial statements. Investments in joint ventures and associates are accounted for using the equity method. Other long-term equity investments where the Group does not have control, joint control or significant influence over the investees, and which are not quoted in an active market and whose fair value cannot be reliably measured are accounted for using cost method.

Tianjin Capital Environmental Protection Group Company Limited ◆ 2011 Interim Report

(a) Recognition of investment cost

Long-term equity investments accounted for using the cost method are measured at the initial investment cost. Long-term equity investment accounted for using the equity method, where the initial investment cost exceeds the Group’s share of the fair value of the investee’s identifiable net assets at the time of acquisition, the investment is initially measured at cost. Where the initial investment cost is less than the Group’s share of the fair value of the investee’s identifiable net assets at the time of acquisition, the difference is included in profit or loss for the current period and the cost of the long-term equity investment is adjusted accordingly.

(b) Subsequent measurement and recognition method of income/loss

Long-term equity investments accounted for using the cost method, investment income is recognised in profit or loss for the cash dividends or profit declared by the investee.

Long-term equity investment accounted for using the equity method, the Group recognised the investment income based on its share of net profit or loss of the investee. The Group discontinues recognising its share of net losses of an investee after the carrying amount of the long-term equity investment together with any long-term interests that, in substance, form part of the investor’s net investment in the investee are reduced to zero. However, if the Group has obligations for additional losses and the conditions on recognition of provision are satisfied in accordance with the accounting standards on contingencies, the Group continues to recognise the investment losses and the provision. For changes in owner’s equity of the investee other than those arising from its net profit or loss, the Group record directly in capital surplus its proportion, provided that the Group’s proportion of shareholding in the investee remains unchanged. The carrying amount of the investment is reduced by the Group’s share of the profit or cash dividends declared by an investee. The unrealised profits or losses arising from the intra-group transactions between the Group and its investees are eliminated to the extent of the Group’s interest in the investees, on the basis of which the investment gain or losses are recognised. The loss on the intra-group transaction between the Group and its investees, of which the nature is asset impairment, is recognised in full amount, and the relevant unrealised gain or loss is not allowed to be eliminated.

Control is the power to govern the financial and operating policies so as to obtain benefits from their operating activities. The existence and effect of potential voting rights (including that derived from the convertible bonds and warrants that are currently convertible or exercisable) is considered to determine whether the Group has control over the investee.

Joint control is contractually agreed sharing of control over an economic activity, and exists only when the strategic financial and operating decisions relating to the activity require the unanimous consent of the parties sharing the control.

Significant influence is the power to participate the financial and operating policy decisions of the investee but is not control or joint control over those policies.

70 Tianjin Capital Environmental Protection Group Company Limited ◆ 2011 Interim Report

(d) Impairment of long-term equity investments

The carrying value of investments in subsidiaries, joint ventures and associates are written down to its recoverable amount when its recoverable amount is lower than the carrying value(Note 4(15)). When other equity investments which are not quoted in active market and whose fair value can not be reliably measured are impaired, the differences between its carrying value and its discounted present value of future cash flows using return rate of similar financial assets under current market. Once the impairment loss is recognised, it is not allowed to be reversed for the value recovered in the subsequent periods.

(10) Investment properties

Investment properties are buildings that held for the purpose of lease, is measured initially at cost. Subsequent expenditures incurred for an investment property is included in the cost of the investment property when it is probable that economic benefits associated with the investment property will flow to the Group and its cost can be reliably measured, otherwise the expenditure is recognised in profit and loss in the period in which they are incurred.

The Group adopts the cost model for subsequent measurement of the investment property. They are depreciated or amortised to their estimated net residual values over their estimated useful lives. The estimated useful lives, the estimated net residual values expressed as a percentage of cost and the annual depreciation (amortisation) rates of the investment properties are as follows:

			Annual
		Estimated	depreciation
	Estimated	residual	(amortisation)
	useful lives	value rate	rate
Buildings	40-50 years	5%	1.9%-2.4%

When an investment property is changed to an owner-occupied property, it is transferred to fixed asset at the date of the change. When an owner-occupied property is changed to be held to earn rentals or for capital appreciation, the fixed asset is transferred to investment property at the date of the change at the carrying amount of the property.

The estimated useful life, net residual value of the investment property and the depreciation (amortisation) method applied are reviewed, and adjusted as appropriate at each financial yearend.

An investment property is derecognised on disposal or when the investment property is permanently withdrawn from use and no future economic benefits are expected from its disposal. The amount of proceeds on sale, transfer, retirement or damage of an investment property less its carrying amount and related taxes and expenses is recognised in profit or loss for the current period.

When the recoverable amount of an investment property is lower than its carrying value, the carrying value shall be reduced to its recoverable amount (Note 4(15)).

Tianjin Capital Environmental Protection Group Company Limited ◆ 2011 Interim Report

(11) Fixed assets

Fixed assets comprise buildings, machinery and equipment, motor vehicles and others.

A fixed asset is recognised when it is probable that the economic benefits associated with the fixed asset will flow to the Group and its cost can be reliably measured. Fixed assets purchased or constructed by the Group are initially measured at cost at the time of acquisition.

Subsequent expenditures incurred for a fixed asset are included in the cost of the fixed asset when it is probable that the economic benefits associated with the fixed asset will flow to the Group and its cost can be reliably measured. The carrying amount of those parts that are replaced is derecognized and all the other subsequent expenditures are recognised in profit or loss in the period in which they are incurred

Fixed assets are depreciated using the straight-line method to allocate the cost of the assets to their estimated residual values over their estimated useful lives. For the fixed assets being provided for impairment loss, the related depreciation charge is prospectively determined based upon the adjusted carrying amounts over their remaining useful lives.

The estimated useful lives, the estimated residual values expressed as a percentage of cost and the annual depreciation rates of fixed assets are as follows:

		Estimated	Annual
	Estimated	residual	depreciation
	useful lives	value rate	rate
Buildings and structures	10-50 years	0%-5%	1.9%-10%
Machinery and equipment	10-20 years	0%-5%	4.8%-10%
Motor vehicles and others	5-10 years	0%-5%	9.5%-20%

Pipelines network laid outside the plant are included in structures and are depreciated over their estimated useful lives of 25 years.

The estimated useful life, the estimated net residual value of a fixed asset and the depreciation method applied to the asset are reviewed, and adjusted as appropriate at least at each financial year-end.

A fixed asset is derecognised on disposal or when no future economic benefits are expected from its use or disposal. The amount of proceeds on sale, transfer, retirement or damage of a fixed asset net of its carrying amount and related taxes and expenses is recognised in profit or loss for the current period.

When the recoverable amount of a fixed asset is lower than its carrying value, the carrying value shall be reduced to its recoverable amount (Note 6(9)).

72 Tianjin Capital Environmental Protection Group Company Limited ◆ 2011 Interim Report

(12) Construction in progress

Construction in progress is measured at actual cost. Actual cost comprises construction costs, installation costs, other costs necessary to bring the fixed assets ready for their intended use and borrowing costs that are eligible for capitalization. Construction in progress is transferred to fixed assets when the assets are ready for their intended use, and depreciation begins from the following month. When the recoverable amount of construction in progress is lower than its carrying value, the carrying value shall be reduced to its recoverable amount (Note 4(15)).

(13) Borrowing costs

The borrowing costs that are directly attributable to the acquisition and construction of a fixed asset that needs a substantially long period of time of acquisition and construction for its intended use commence to be capitalised and recorded as part of the cost of the asset when expenditures for the asset and borrowing costs have been incurred, and the activities relating to the acquisition and construction that are necessary to prepare the asset for its intended use have commenced. The capitalisation of borrowing costs ceases when the asset under acquisition or construction becomes ready for its intended use, the borrowing costs incurred thereafter are recognised in profit or loss for the current period. Capitalisation of borrowing costs is suspended during periods in which the acquisition or construction of a fixed asset is interrupted abnormally and the interruption lasts for more than 3 months, until the acquisition or construction is resumed.

For those specific borrowings relating to the acquisition and construction of fixed assets which meet capitalization conditions, the capitalization amount of borrowing costs of specific borrowings is the net amount of specific borrowings interest expense incurred for the period after deducting interest income of unused bank deposits or investment income arising from temporary investments.

For those general borrowings occupied relating to the acquisition and construction of fixed assets which meet capitalization conditions, the capitalization amount of borrowing costs of specific borrowings is calculated according to the weighted average amount of cumulative asset expenditures exceeded asset expenditures associated with specific borrowings and weighted average effective interest rate of general borrowings occupied. The effective interest rate is the interest rate used for discounting the future cashflow of borrowings during its expected using periods or its applicable shorter periods to its initial recognized amount.

(14) Intangible assets

Intangible assets including land use rights and concession rights are measured at cost.

(a) Land use rights

Land use rights are amortised on the straight-line basis over their estimated useful lives of 25 to 50 years. If the purchase costs of land use rights and attached buildings cannot be reliably allocated between the land use rights and buildings, all the purchase costs are recognised as fixed assets.

Tianjin Capital Environmental Protection Group Company Limited ◆ 2011 Interim Report

(b) Concession rights

As described in Note 1(a), the Group engages with government bodies and participates in the development, financing, operation and maintenance of infrastructure for concession services over a specified period of time (concession services period). The Group has access to operate the infrastructure to provide the concession services in accordance with the terms specified in the arrangement. The arrangement is governed by the relevant agreements that set out performance standards, mechanisms for adjusting prices. The concession services arrangement is within the scope of Accounting Standards interpretation No.2(CAS Int-No.2), and the Group recognise the related rights in the services concession arrangements as intangible assets or financial assets. The operator shall recognise an intangible asset to the extent that it receives a right (licence) to charge users of the public service and shall recognize a financial asset to the extent that it has an unconditional contractual right to receive a guaranteed minimum traffic volume from the grantor. Therefore intangible assets - concession rights are recognised for the rights under these service concession arrangements by the Group, which are amortized on a straight-line basis over the terms of operation ranging from 25 to 30 years.

For an intangible asset with a finite useful life, review and adjustment on useful life and amortization method are performed at each year-end. When the recoverable amount of an intangible asset is lower than its carrying value, the carrying value shall be reduced to its recoverable amount (Note 4(15)).

(15) Impairment of long-term assets

Fixed assets, construction in progress, intangible assets with finite useful lives, investment properties measured using the cost model and long-term equity investments in subsidiaries and associates are tested for impairment if there is any indication that an asset may be impaired at the balance date. If the result of the impairment test indicates that the recoverable amount of the asset is less than its carrying amount, a provision for impairment and an impairment loss are recognised for the amount by which the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs to sell and the present value of the future cash flows expected to be derived from the asset. A provision for asset impairment is determined and recognised on an individual asset basis. If it is not possible to estimate the recoverable amount of an individual asset, the recoverable amount of the group of assets to which the asset belongs is determined. A group of assets is the smallest group of assets that is able to generate independent cash inflows.

Once the asset impairment loss mentioned above is recognised, it is not allowed to be reversed for the value recovered in the subsequent periods.

74 Tianjin Capital Environmental Protection Group Company Limited ◆ 2011 Interim Report

(16) Employee benefits

Employee benefits mainly include wages or salaries, bonuses, allowances and subsidies, staff welfare, social security contributions, housing funds, labour union funds, employee education funds and other expenditures incurred in exchange for service rendered by employees.

Terminated benefits are recognized as provision and expensed in the income statement, when and only when, the Group demonstrably commits itself to terminate employment or provide benefits as a result of voluntary redundancy by having detailed formal plan which is without realistic possibility of withdrawal.

Except for the benefits paid to terminated employees, employee benefits are recognised as a liability in the accounting period in which an employee has rendered service, and as costs of assets or expenses to whichever the employee service is attributable.

(17) Deferred tax assets and deferred tax liabilities

Deferred tax assets and deferred tax liabilities are calculated and recognised based on the differences arising between the tax base of assets and liabilities and their carrying amount (temporary differences). Deferred tax asset is recognized for the deductible losses that can be carried forward to subsequent years for deduction of the taxable profit in accordance with the tax law. No deferred tax liability is recognised for a temporary difference arising from the initial recognition of goodwill. No deferred tax asset or deferred tax liability is recognized for the temporary differences resulting from the initial recognition of assets or liabilities due to a transaction other than a business combination, which affects neither accounting profit nor taxable profit (or deductible loss). At the balance sheet date, deferred tax assets and deferred tax liabilities are measured at the tax rates that are expected to apply to the period when the asset is realised or the liability is settled.

Deferred tax assets are only recognised for deductible temporary differences, deductible losses and tax credits to the extent that it is probable that taxable profit will be available in the future against which the deductible temporary differences, deductible losses and tax credits can be utilised.

Deferred tax liabilities are recognised for temporary differences arising from investments in subsidiaries and associates, except where the Group is able to control the timing of the reversal of the temporary difference, and it is probable that the temporary difference will not reverse in the foreseeable future. When it is probable that the temporary differences arising from investments in subsidiaries and associates will be reversed in the foreseeable future and that the taxable profit will be available in the future against which the temporary differences can be utilized, the corresponding deferred tax assets are recognized.

Deferred tax assets and liabilities are offset when:

The deferred taxes are relate to the same tax payer within the group and same fiscal authority, and;
That tax payer has a legally enforceable right to offset current tax assets against current tax liabilities.

Tianjin Capital Environmental Protection Group Company Limited ◆ 2011 Interim Report

(18) Revenue recognition

Revenue comprises the fair value of the consideration received or receivable for the sale of goods and services in the ordinary course of the Group’s activities. Revenue is shown net of value-added tax, returns, rebates and discounts.

The Group recognises revenue when the amount of revenue can be reliably measured, it is probable that future economic benefits will flow to the entity and when specific criteria have been met for each of the Group’s activities as described below.

(a) Sewage water processing

Revenue from sewage water processing is recognised when services are rendered.

(b) Construction contract

Where the outcome of a construction contract can be estimated reliably, revenue and costs are recognised by reference to the percentage of completion of the contract activity at the balance sheet date. The stage of completion is measured by reference to the contract costs incurred up to the end of the reporting period as a percentage of total estimated costs for each contract. Variations in contract work, claims and incentive payments are included to the extent that it is probable that they will result in revenue and they are capable of being reliably measured.

Where the outcome of a construction contract cannot be estimated reliably, contract revenue is recognised to the extent of contract costs incurred that it is probable will be recoverable. Contract costs are recognised as expenses in the period in which they are incurred. When it is probable that total contract costs will exceed total contract revenue, the expected loss is recognised as an expense immediately.

Revenue from the sale of tap water and recycled water is recognised on the transfer of risks and rewards of ownership, which generally coincides with the time when the tap water and recycled water are delivered to customers.

(d) Operating lease revenue

Revenue from operating lease is recognized on a straight-line basis over the period of the lease.

(e) Interest income

Interest income is recognised using the effective interest method.

(f) Dividend income

Dividend income is recognised when the right to receive payment is established.

76 Tianjin Capital Environmental Protection Group Company Limited ◆ 2011 Interim Report

(19) Dividend distribution

Proposed cash dividend is recognised as a liability in the period in which it is approved by the shareholders’ meeting.

(20) Government grants

Government grants represent monetary assets granted from government bodies for free, including financial subsidies.

Grants from the government are recognised where there is a reasonable assurance that the grant will be received and the Group will comply with all attached conditions. Government grants are measured at its received or receivable amount when they are in form of monetary assets.

Government grants relating to assets are recognized as deferred revenue and are allocated into income statement on straight-line basis over the useful lives of related assets.

Government grants relating to income, are recognized as deferred revenue when they are intended to compensate expenses or losses in subsequent periods, or credited to income statement when they are intended to compensate expenses or losses incurred.

(21) Segment information

The Group determines operating segments based on the internal organization structure, management requirement and internal reporting system, the reporting segments and disclosure information of segments are determined on the basis of operating segments.

Operating segments represent those components of the Group which meet conditions as follows: (1) the component can generate income and incur expenses from normal operating activities; (2) the operating results of the component can be evaluated by the management of the Group periodically, and a decision for allocation of resources and assessment of performance can be made; and (3)The Group can obtain the relevant accounting information of the financial position, operating results and cash flows of the component. Two or more operating segments can be combined into one operating segment, if they have similar economical characteristic and meet certain conditions.

Tianjin Capital Environmental Protection Group Company Limited ◆ 2011 Interim Report

(22) Critical accounting estimate and judgments

The Group continually evaluates the critical accounting estimates and key judgments applied based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances.

The critical accounting estimates and key assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are outlined below:

(i) Impairment for receivables

The Group determines the impairment of trade and other receivables based on objective evidence of impairment and historical loss experience of the respective individual balances. Management believes that trade and other receivables as at 30 June 2011 are not impaired.

(ii) Income Tax

The Group is subject to income taxes in numerous regions. There are many transactions and events for which the ultimate tax determination is uncertain during the ordinary course of business. Significant judgment is required from the Group in determining the provision for income taxes in each of these jurisdictions. The Group recognises income taxes in each regions based on estimates. Where the final tax outcome of these matters is different from the amounts that were initially recorded, such differences will impact the income tax and deferred tax provisions in the period in which such determination is made.

5 TAXATION

The applicable taxes and tax rates of the Group are mainly presented as follows:

Tax by category	Basis of Tax	Tax rate
Enterprise income tax	Taxable income	12.5% - 25%
Value Added Tax (VAT)	Taxable value added amount (Tax payable is
	calculated using the taxable sales amount
	multiplied by the effective tax rate less
	deductible VAT input of current period)	6%
Business tax	Gross service income	3%-5%
City construction and	The amount of business tax and VAT	7%
maintenance tax

78 Tianjin Capital Environmental Protection Group Company Limited ◆ 2011 Interim Report

6 NOTES TO THE FINANCIAL STATEMENTS

(1) CASH AND BANK BALANCES

Cash on hand and in bank Including: Special funds for construction in progress (note (a)) Restricted bank deposits due within one year (note (b))	Group Unaudited Audited 30 June 31 December 2011 2010 511,039 540,330 58,333 111,179 900 900	Company Unaudited Audited 30 June 31 December 2011 2010 143,951 161,861 34,004 102,883 — —	Company Unaudited Audited 30 June 31 December 2011 2010 143,951 161,861 34,004 102,883 — —
			102,883 —

(a) The special funds for construction in progress represent the unutilised balances of the special loans obtained for sewage processing projects and recycled water projects.
(b) The bank deposits represented deposits for project bids due within one year of Rmb 900 thousand (2010: Rmb 900 thousand).

(2) TRADE RECEIVABLES

Details of trade receivables are as follows:

Due from TSC for – Sewage processing service – Construction of sewage processing plants Toll road fee receivable Less: Non-current portion Individual items with significant amount Other items with insignificant amount	Group Unaudited Audited 30 June 31 December 2011 2010 882,176 691,168 68,794 241,792 950,970 932,960 62,790 38,200 (68,794) (68,794) 944,966 902,366 144,655 94,583 1,089,621 996,949	Company Unaudited Audited 30 June 31 December 2011 2010 882,176 691,168 68,794 241,792 950,970 932,960 62,790 38,200 (68,794) (68,794) 944,966 902,366 11,879 11,252 956,845 913,618	Company Unaudited Audited 30 June 31 December 2011 2010 882,176 691,168 68,794 241,792 950,970 932,960 62,790 38,200 (68,794) (68,794) 944,966 902,366 11,879 11,252 956,845 913,618
			932,960 38,200 (68,794)
			902,366 11,252
			913,618

Tianjin Capital Environmental Protection Group Company Limited ◆ 2011 Interim Report

(a) Aging of trade receivables prior to the classification to long-term receivables described as above is as follows:

Within one year One to two years Over two years	Group Unaudited Audited 30 June 31 December 2011 2010 921,426 785,601 168,195 38,350 68,794 241,792 1,158,415 1,065,743	Company Unaudited Audited 30 June 31 December 2011 2010 788,650 702,420 168,195 38,200 68,794 241,792 1,025,639 982,412	Company Unaudited Audited 30 June 31 December 2011 2010 788,650 702,420 168,195 38,200 68,794 241,792 1,025,639 982,412
			982,412

(b) As at 30 June 2011, there were no trade receivables from any of the shareholders of the Company who hold 5% or more of voting shares (31 December 2010: Nil).
(c) As at 30 June 2011, the trade receivables from the top five debtors is analysed as below:

relationship with the Group TSC – Sewage processing service customer – Construction of sewage processing plants customer Tianjin Municipal Highway Administration Burean agent Qujing City Water General Company customer Hangzhou Sewage Company customer Guiyang Construction Bureau customer	amount aging 882,176 within 2 year 68,794 over 2 years 62,790 within 2 years 53,639 within 1 year 14,182 within 1 year 10,018 within 1 year 1,091,599	% of total balance 75% 6% 5% 5% 1% 1%
		93%

80 Tianjin Capital Environmental Protection Group Company Limited ◆ 2011 Interim Report

(3) PREPAYMENTS

(a) The aging of prepayments is analysed as below:

For recycled water pipeline connection For purchase euipments For plant construction Others	Group Unaudited Audited 30 June 31 December 2011 2010 55,696 20,949 35,806 6,080 9,944 69,157 663 7,573 102,109 103,759	Company Unaudited Audited 30 June 31 December 2011 2010 — — 2,668 6,080 9,944 48,994 422 32 13,034 55,106	Company Unaudited Audited 30 June 31 December 2011 2010 — — 2,668 6,080 9,944 48,994 422 32 13,034 55,106
			55,106

As at 30 June 2011, there were no prepayments to any of the shareholders of the Company who hold 5% or more of voting shares (31 December 2010: Nil).

(4) OTHER RECEIVABLES

Other receivables include:

Project deposits Other receivables from customers Receivables from subsidiaries Others	Group Unaudited Audited 30 June 31 December 2011 2010 27,495 26,776 1,683 1,683 — — 29,190 25,081 58,368 53,540	Company Unaudited Audited 30 June 31 December 2011 2010 26,345 26,720 — — 114,942 111,346 5,119 7,214 146,406 145,280	Company Unaudited Audited 30 June 31 December 2011 2010 26,345 26,720 — — 114,942 111,346 5,119 7,214 146,406 145,280
			145,280

As at 30 June 2011, there were no receivables from any of the shareholders of the Company who hold 5% or more of voting shares (31 December 2010: Nil).

Tianjin Capital Environmental Protection Group Company Limited ◆ 2011 Interim Report

(5) INVENTORIES

Raw materials Finished goods Spare parts and low cost consumables Construction in progress Less: Provision for declines in the value of inventories	Group Unaudited Audited 30 June 31 December 2011 2010 10,307 10,127 3,682 3,682 718 756 46,979 20,911 61,686 35,476 (3,000) (3,000) 58,686 32,476	Company Unaudited Audited 30 June 31 December 2011 2010 3,606 3,570 — — 360 407 — — 3,966 3,977 — — 3,966 3,977	Company Unaudited Audited 30 June 31 December 2011 2010 3,606 3,570 — — 360 407 — — 3,966 3,977 — — 3,966 3,977
			3,977 —
			3,977

(6) LONG-TERM RECEVABLES

Receivables from toll road concession (note (a)) Receivables from TSC	Group Unaudited Audited 30 June 31 December 2011 2010 337,371 336,286 68,794 68,794 406,165 405,080	Company Unaudited Audited 30 June 31 December 2011 2010 337,371 336,286 68,794 68,794 406,165 405,080	Company Unaudited Audited 30 June 31 December 2011 2010 337,371 336,286 68,794 68,794 406,165 405,080
			405,080

(a) Receivables from toll road concession represent amortised cost using effective interest method, calculated with reference to a guaranteed future traffic flow over the concession period.

82 Tianjin Capital Environmental Protection Group Company Limited ◆ 2011 Interim Report

(7) LONG-TERM EQUITY INVESTMENTS

Investment in subsidiaries (note (a)) Less: Impairment provision for long-term investment (note (c)) Investment in an associate (note (b)) Other long-term equity investments	Group Unaudited Audited 30 June 31 December 2011 2010 — — — — — — 41,094 41,583 4,000 4,000 45,094 45,583	Company Unaudited Audited 30 June 31 December 2011 2010 1,229,537 1,178,381 (26,500) (26,500) 1,203,037 1,151,881 — — 4,000 4,000 1,207,037 1,155,881

Tianjin Capital Environmental Protection Group Company Limited ◆ 2011 Interim Report

(a) Investments in subsidiaries

Other than Tianjin Capital Environmental Protection (Hong Kong) Co., Ltd, which is registered in Hong Kong, all of the Company’s subsidiaries are registered and established in China

All subsidiaries are limited liability companies.

Carrying Value
Investment
31 December
cost
2010
Addition/
Xi’an Capital Water
Co., Ltd.
270,000
270,000
—
Hangzhou Tianchuang
Water Co., Ltd
180,212
180,212
—
Qujing Capital Water
Co., Ltd.
133,301
108,081
25,220
Tianjin Water Recycling
Co., Ltd.
100,436
98,000
2,436
Guizhou Capital Water
Co., Ltd.
95,000
95,000
—
Tianjin Capital
Environmental
Protection
(Hong Kong) Co., Ltd.
62,988
62,988
—
Wendeng Capital Water
Co., Ltd.
52,000
52,000
—
Wuhan Tianchuang
Environmental
Protection Co.,Ltd
98,500
98,500
—
Fuyang Capital Water
Co., Ltd.
62,100
62,100
—
Anguo Capital Water
Co., Ltd.
41,000
41,000
—
Baoying Capital Water
Co., Ltd.
37,100
26,600
10,500
Tianjin Capital New Materials
Co., Ltd.
26,500
26,500
—
Tianjin Jinghai Capital Water
Co., Ltd.
12,000
12,000
—
Tianjin Kaiying Environmental
Engineering Technology
Consultant Co., Ltd.
5,000
2,000
3,000
Tianjin Zichuang Project
Investment Co., Ltd.
23,400
23,400
—
Tianjin Jinning Capital Water
Co., Ltd.
15,000
15,000
—
Tianjin Capital Water Co., Ltd.
5,000
5,000
—
Tianjin Jiayuanxingchuang
New Energy Technology
Co.,Ltd
10,000
—
10,000
1,178,381
51,156

Interest held /
30 June
Voting shares
2011
%
270,000
100
180,212
70
133,301
90
100,436
100
95,000
95
62,988
100
52,000
100
98,500
100
62,100
99.9
41,000
100
37,100
70
26,500
71
12,000
100
5,000
100
23,400
100
15,000
100
5,000
100
10,000
100
1,229,537

The Group is not exposed to significant restriction on recovery or remittance of return on investment in subsidiaries.

84 Tianjin Capital Environmental Protection Group Company Limited ◆ 2011 Interim Report

(b) Investment in an associate

	Registered	Interest &	30 June	2011	Six months ended	30
	capital	voting shares	Total	Total	30 June 2011
		held	assets	liabilities	Revenue Net profit
Tianjin international
Machinery Co., Ltd.	120,000	27.5%	606,347	445,236	814,971	(489)

Tianjin International Machinery Co., Ltd. (TIMC) is a Sino-foreign joint venture registered in the Tianjin Economics Development Area. The principal activities of TIMC include research and development, production and sale of environment protection equipment; engineering technical consultation; trading; manufacturing and sale of general equipment.

The movements of the Group’s investment in TIMC are as follows:

				Share of
				profit
	Investment	31 December		in associated
	cost	2011	Disposal	company	30 June 2011
Tianjin
international
Machinery
Co., Ltd.	33,000	41,583	—	(489)	41,094

(c) Full provision has been made for the investment in Tianjin Capital New Materials Co., Ltd. of approximately Rmb26.5 million as at 30 June 2011 (31 December 2010: Rmb26.5 million).

(8) INVESTMENT PROPERTIES

Buildings Cost At 31 December 2010 and 30 June 2011 Accumulated depreciation At 31 December 2010 Charge for the year At 30 June 2011 Net book value At 30 June 2011 At 31 December 2010	Group 137,374 (17,746) (1,837) (19,583) 117,791 119,628	Company 110,648
		(15,821) (1,584)
		(17,405)
		93,243
		94,827

Tianjin Capital Environmental Protection Group Company Limited ◆ 2011 Interim Report

(9) FIXED ASSETS AND CONSTRUCTION IN PROGRESS

(a) Group

Cost At 1 January 2010 Reclassification Transfer from construction in progress Addition Transfer to intangible assets Disposal At 31 December 2010 Transfer from construction in progress Addition Disposal At 30 June 2011 Accumulated depreciation At 1 January 2010 Reclassification(note ii) Charge for the year Transfer to intangible assets (note 6(10)&note ii) Disposal At 31 December 2010 Charge for the year Disposal At 30 June 2011 Impairment At 31 December 2010 and 30 June 2011 Net book value At 30 June 2011 At 31 December 2010	Buildings & structure Machinery & (note (i)) equipment 2,421,274 339,507 (793,973) 748,562 35,198 89,581 49,322 599,751 (97,602) — (24,035) (86,703) 1,590,184 1,690,698 360 — 920 4,129 — (11,313) 1,591,464 1,683,514 (639,239) (188,709) 132,319 (113,882) (59,543) (43,296) 7,348 — 13,401 37,202 (545,714) (308,685) (24,207) (36,035) — 2,167 (569,921) (342,553) (11,000) (4,068) 1,010,543 1,336,893 1,033,470 1,377,945	Motor vehicles & others 99,107 45,411 1,221 64,070 — (11,797) 198,012 760 945 (9,149) 190,568 (55,546) (18,437) (11,314) — 3,261 (82,036) (9,674) 4,169 (87,541) (932) 102,095 115,044	Total 2,859,888 — 126,000 713,143 (97,602) (122,535) 3,478,894 1,120 5,994 (20,462) 3,465,546 (883,494) — (114,153) 7,348 53,864 (936,435) (69,916) 6,336 (1,000,015) (16,000) 2,449,531 2,526,459

86 Tianjin Capital Environmental Protection Group Company Limited ◆ 2011 Interim Report

(i) All of the Group’s buildings, structures and plants are located in the PRC.
(ii) For the six months ended 31 June 2011, the Group’s depreciation expense of Rmb54 million (From January to June in 2010:Rmb51 million) has been included in cost of revenue and Rmb16 million (From January to June in 2010: Rmb5 million) in administrative expenses.
(iv) Ownership of certain land and buildings included in property, plant and equipment, investment properties and land use rights with cost of Rmb332 million (31 December 2010: Rmb332million) has yet to be or is in the process of being transferred to the Group. As these assets are supported by legal sale and purchase agreements, the Directors believe that the titles will be received in due course without additional significant cost to the Group, if any.

Tianjin Capital Environmental Protection Group Company Limited ◆ 2011 Interim Report

(b) Company

Cost At 1 January 2010 Reclassification Transfer from construction in progress Addition Transfer to intangible assets Disposal At 31 December 2010 Transfer from construction in progress Addition Disposal At 30 June 2011 Accumulated depreciation At 1 January 2010 Reclassification Charge for the year Transfer to intangible assets Disposal At 31 December 2010 Charge for the year Disposal At 30 June 2011 Net book value At 30 June 2011 At 31 December 2010	Buildings & structure 2,304,152 (819,358) — 49,971 (92,850) (23,922) 1,417,993 360 — — 1,418,353 (621,213) 133,303 (54,419) 7,196 13,401 (521,732) (21,775) — (543,507) 874,846 896,261	Machinery & equipment 192,950 778,298 89,510 598,802 — (82,132) 1,577,428 — 1,330 (10,273) 1,568,485 (166,157) (115,594) (30,571) — 36,397 (275,925) (30,886) 877 (305,934) 1,262,551 1,301,503	Motor vehicles & others 68,230 41,060 359 55,670 — (11,074) 154,245 760 2,510 (7,650) 149,865 (48,523) (17,709) (9,587) — 3,316 (72,503) (7,492) 3,604 (76,391) 73,474 81,742	Total 2,565,332 — 89,869 704,443 (92,850) (117,128) 3,149,666 1,120 3,840 (17,923) 3,136,703 (835,893) — (94,577) 7,196 53,114 (870,160) (60,153) 4,481 (925,832) 2,210,871 2,279,506

88 Tianjin Capital Environmental Protection Group Company Limited ◆ 2011 Interim Report

31 December Budget 2010 Water recycling plants: – Bei Chen water recycling plants 97,000 57,218 Sewage water processing plants: – Dong Jiao (upgrade project) 350,490 219,656 – XianYang Lu (upgrade project) 184,130 132,696 – Bei Cang (upgrade project) 152,490 115,496 – Ji Zhuang Zi (upgrade project) 174,400 111,669 Others 13,229 Total - Company 649,964 Water recycling plants: – Ji Zhuang Zi (expansion project) 87,573 52,716 Others 971 Total - Group 703,651 Including: Capitalised borrowing costs 13,276	Transfer to fixed Addition assets — — 11,714 — 10,088 — 9,785 — 23,665 — 2,265 (1,120) 57,517 (1,120) 11,749 — 1,027 — 70,293 (1,120) 9,313 —	Incurred costs to budget 30 June Sources of costs ratio 2011 funds (%) 57,218 Self-raised fund 58.98% 231,370 Self-raised fund 66.01% 142,784 Self-raised fund 77.55% 125,281 Self-raised fund 82.16% 135,334 Self-raised fund 77.60% 14,374 Self-raised fund 706,361 64,465 Self-raised fund 73.61% 1,998 Self-raised fund 772,824 22,589

Borrowing costs have been capitalized for the six months ended 30 June 2011 at an average interest rate of 5.30% per annum (From Janurary to June in 2010: 5.35%).

Tianjin Capital Environmental Protection Group Company Limited ◆ 2011 Interim Report

(10) INTANGIBLE ASSETS

Group
Unaudited
Audited
30 June
31 December
2011
2010
Concession rights (note (a))
2,440,243
2,427,782
Land use rights (note (b))
457,563
462,868
2,897,806
2,890,650
(a)
The movements of concession rights are as follows:
Cost
At 31 December 2010
Addition
At 30 June 2011
Accumulated amortisation
At 31 December 2010
Charge for the year
At 30 June 2011
Net book value
At 30 June 2011
At 31 December 2010

Company
Unaudited
Audited
30 June
31 December
2011
2010
—
—
440,872
446,079
440,872
446,079
Group
2,744,864
64,229
2,809,093
(317,082)
(51,768)
(368,850)
2,440,243
2,427,782

As at 30 Jnue 2011, certain of concession rights with net book value of Rmb247 million (Cost: Rmb302 million) (31 December 2010: net book value: Rmb252 million; cost: Rmb302 million) have been secured against long-term borrowings of Rmb148 million (31 December 2010: Rmb162million) (Note 6(12)(a)(i)).

90 Tianjin Capital Environmental Protection Group Company Limited ◆ 2011 Interim Report

(b) The movements of land use rights are as follows:

Cost At 31 December 2010 and 30 June 2011 Accumulated amortisation At 31 December 2010 Charge for the year At 30 June 2011 Net book value At 30 June 2011 At 31 December 2010	Group 593,529 (130,661) (5,305) (135,966) 457,563 462,868	Company 567,266
		(121,187) (5,207)
		(126,394)
		440,872
		446,079

(11) TRADE PAYABLES, ADVANCES, TAXES PAYABLE AND OTHER PAYABLES

Trade payables (note (a)) Advances (note (b)) Other payables (note (c)) Taxes payable (note (d))	Group Unaudited Audited 30 June 31 December 2011 2010 24,685 22,729 350,719 310,478 302,469 274,991 14,209 16,431 692,082 624,629	Company Unaudited Audited 30 June 31 December 2011 2010 8,392 9,730 3,212 63,386 336,660 235,198 9,066 9,162 357,330 317,476	Company Unaudited Audited 30 June 31 December 2011 2010 8,392 9,730 3,212 63,386 336,660 235,198 9,066 9,162 357,330 317,476
			317,476

(a) As at 30 June 2011, there were no trade payables from any of the shareholders of the Company who hold 5% or more of voting shares (31 December 2010: Nil).

(b) Advances comprise:

For pipeline connection Received from project of Han Gu Other advances	Group Unaudited Audited 30 June 31 December 2011 2010 343,791 245,167 3,032 59,612 3,896 5,699 350,719 310,478	Company Unaudited Audited 30 June 31 December 2011 2010 — — 3,032 59,612 180 3,774 3,212 63,386	Company Unaudited Audited 30 June 31 December 2011 2010 — — 3,032 59,612 180 3,774 3,212 63,386
			63,386

As at 30 June 2011, there were no advances from any of the shareholders of the Company who hold 5% or more of voting shares (31 December 2010: Nil).

Tianjin Capital Environmental Protection Group Company Limited ◆ 2011 Interim Report

Group Unaudited Audited 30 June 31 December 2011 2010 Construction costs payable 181,549 168,316 Payable for purchase of fixed assets and concession rights of plants 96,140 67,337 Others 24,780 39,338 302,469 274,991	Company Unaudited Audited 30 June 31 December 2011 2010 107,551 109,499 — — 229,109 125,699 336,660 235,198	Company Unaudited Audited 30 June 31 December 2011 2010 107,551 109,499 — — 229,109 125,699 336,660 235,198
		235,198

As at 30 June 2011, there were no other payables from any of the shareholders of the Company who hold 5% or more of voting shares (31 December 2010: Nil).

(d) The balances of taxes payable mainly represent income tax payable and business tax payable.

Income tax payable Business tax payable Others	Group Unaudited Audited 30 June 31 December 2011 2010 11,408 8,757 1,602 5,931 1,199 1,743 14,209 16,431	Company Unaudited Audited 30 June 31 December 2011 2010 7,118 3,121 1,212 4,899 736 1,142 9,066 9,162	Company Unaudited Audited 30 June 31 December 2011 2010 7,118 3,121 1,212 4,899 736 1,142 9,066 9,162
			9,162

92 Tianjin Capital Environmental Protection Group Company Limited ◆ 2011 Interim Report

(12) LONG-TERM BORROWINGS, SHORT-TERM BORROWINGS, SHORT-TERM DEBENTURE, LONG-TERM PAYABLE AND OTHER LIABILITIES

Note Non-current: Long-term bank borrowings (a) Less: Current portion (a) Long-term payable (d) Other non-current liabilities (e) Current: Current portion of long-term bank borrowings (a) Current portion of long-term payable (d) Short-term borrowings (b) Short-term debenture (c) Other current liabilities (e)	Group Unaudited Audited 30 June 31 December 2011 2010 2,528,980 2,639,030 (782,470) (329,470) 1,746,510 2,309,560 389,383 399,604 127,885 129,374 2,263,778 2,838,538 782,470 329,470 31,218 30,710 73,000 73,000 600,000 600,000 20,740 21,216 1,507,428 1,054,396	Company Unaudited Audited 30 June 31 December 2011 2010 1,192,400 1,274,100 (580,000) (210,000) 612,400 1,064,100 389,383 399,604 98,181 98,181 1,099,964 1,561,885 580,000 210,000 31,218 30,710 55,000 55,000 600,000 600,000 16,364 16,364 1,282,582 912,074

Tianjin Capital Environmental Protection Group Company Limited ◆ 2011 Interim Report

(a) Long-term bank borrowings

Note Borrowings from: China Construction Bank (i) Industrial and Commercial Bank of China (ii) State Development Bank (iii) Shanghai Bank (iv) Shenzhen Development Bank (iv) Agricultural Bank of China (v) China CITIC Bank (iv) China Everbright Bank (vi) Industrial Bank (iv) Bank of China (vii) Shanghai Pudong Development Bank (viii)	Group Unaudited Audited 30 June 31 December 2011 2010 926,900 936,850 472,900 456,000 341,500 342,500 300,000 250,000 200,000 200,000 98,680 198,680 50,000 100,000 50,000 50,000 50,000 50,000 35,000 40,000 4,000 15,000 2,528,980 2,639,030	Company Unaudited Audited 30 June 31 December 2011 2010 377,400 367,100 — — 165,000 157,000 300,000 250,000 200,000 200,000 — 100,000 50,000 100,000 50,000 50,000 50,000 50,000 — — — — 1,192,400 1,274,100	Company Unaudited Audited 30 June 31 December 2011 2010 377,400 367,100 — — 165,000 157,000 300,000 250,000 200,000 200,000 — 100,000 50,000 100,000 50,000 50,000 50,000 50,000 — — — — 1,192,400 1,274,100
			1,274,100

(i) Includes Rmb148 million (31 December 2010: Rmb162 million) secured by the right to receive tap water and sewage processing fees (Note 6(10)(a)). Includes Rmb389 million (31 December 2010: Rmb389 million) and Rmb12.50 million (31 December 2010: Rmb18.75 million) secured by the guarantee of TICIG and the Company, respectively. The remaining balance of about Rmb377.4 million (31 December 2010: Rmb367.1 million) is unsecured.
(ii) Secured by the Company’s guarantee (31 December 2010: Rmb456 million).
(iii) Includes Rmb176.5 million secured by the Company’s guarantee and the remaining Rmb165 million is unsecured.
(iv) The borrowing is unsecured.
(v) Includes Rmb98.68 million (31 December 2010: Rmb98.68 million) secured by the guarantee of TICIG and the Company, respectively.
(vi) Secured by TSC’s right to receive sewage water processing fees.
(vii)Secured by the Company’s guarantee.
(viii)Secured by the Company’s holding company’s guarantee (31 December 2010: Rmb15 million).

94 Tianjin Capital Environmental Protection Group Company Limited ◆ 2011 Interim Report

(ix) Summary of terms of long-term bank borrowings:

Pledge Guarantee Unsecured	Group Unaudited Audited 30 June 31 December 2011 2010 198,000 212,000 1,188,580 1,302,930 1,142,400 1,124,100 2,528,980 2,639,030	Company Unaudited Audited 30 June 31 December 2011 2010 50,000 50,000 — 100,000 1,142,400 1,124,100 1,192,400 1,274,100	Company Unaudited Audited 30 June 31 December 2011 2010 50,000 50,000 — 100,000 1,142,400 1,124,100 1,192,400 1,274,100
			1,274,100

(x) These long term bank borrowings are all interest bearing with weighted average interest rate in the six months ended 30 June 2011 of 5.98% (2010: 5.4%).
(xi) These borrowings mature as follows:

Within one year In the second year In the third to fifth year After the fifth year	Group Unaudited Audited 30 June 31 December 2011 2010 782,470 329,470 537,720 841,720 756,710 888,160 452,080 579,680 2,528,980 2,639,030	Company Unaudited Audited 30 June 31 December 2011 2010 580,000 210,000 406,000 636,000 193,000 415,000 13,400 13,100 1,192,400 1,274,100	Company Unaudited Audited 30 June 31 December 2011 2010 580,000 210,000 406,000 636,000 193,000 415,000 13,400 13,100 1,192,400 1,274,100
			1,274,100

Tianjin Capital Environmental Protection Group Company Limited ◆ 2011 Interim Report

(xii)Current portion of top five long-term bank borrowings is analysed as follows:

Grant date Expiry date Currency Rate(%) China CITIC Bank 07/05/2009 06/05/2012 RMB 5.76% Shenzhen Development Bank 23/07/2010 25/04/2012 RMB 5.76% China CITIC Bank 20/03/2009 19/03/2012 RMB 6.4% Shenzhen Development Bank 23/03/2010 23/03/2012 RMB 6.08% Industrial and Commercial Bank of China 30/04/2003 30/04/2012 RMB 6.8% China Everbright Bank	Group Unaudited Audited 30 June 31 December 2011 2010 300,000 100,000 150,000 50,000 80,000 50,000 50,000 26,000 50,000 26,000 630,000 252,000	Group Unaudited Audited 30 June 31 December 2011 2010 300,000 100,000 150,000 50,000 80,000 50,000 50,000 26,000 50,000 26,000 630,000 252,000
		252,000

(b) Short-term borrowings

			Group			Company
		Unaudited		Audited	Unaudited		Audited
		30 June	31	December	30 June	31 December
	Note	2011		2010	2011		2010
Borrowings from:
Shanghai Pudong
Development
Bank	(i)	73,000		73,000	55,000		55,000

(i) Includes Rmb18 million (31 December 2010: Rmb18 million) secured by the Company’s holding company’s guarantee. The remaining balance of about Rmb55 million (31 December 2010: Rmb55 million) is unsecured. The weighted average interest rate of short-term bank borrowings for the six months ended 30 June 2011 is 6.12% (2010: 5.35%).
(ii) Summary of terms of short-term borrowings:

Guaranteed Unsecured	Group Unaudited Audited 30 June 31 December 2011 2010 18,000 18,000 55,000 55,000 73,000 73,000	Company Unaudited Audited 30 June 31 December 2011 2010 — — 55,000 55,000 55,000 55,000	Company Unaudited Audited 30 June 31 December 2011 2010 — — 55,000 55,000 55,000 55,000
			55,000

96 Tianjin Capital Environmental Protection Group Company Limited ◆ 2011 Interim Report

(c) Short-term debenture

Summary of terms of long-term bank borrowings:

	Par value	Issuance date	Maturity	Balance
Short-term debenture	600,000	2010-7-8	1 year	600,000

(d) Long-term payable and the current portion of long-term payable

			Group				Company	Company
			Unaudited		Audited		Unaudited		Audited
			30 June		31 December		30 June		31 December
			2011		2010		2011		2010
			unrecognized		unrecognized		unrecognized		unrecognized
		Payable	finance	Payable	finance	Payable	finance	Payable	finance
		amount	charge	amount	charge	amount	charge	amount	charge
Payables	for
assets	acquisition	818,236	(397,635)	834,230	(403,916)	818,236	(397,635)	834,230	(403,916)

(i) Summary of terms of long-term payable above:

			Effective		Due
		Original	Interest	Ending	within
	Duration	Balance	rate	Balance	one year
TSC	30 years to 2041-3-20	430,314	5.94%	389,383	31,218

Balance of the long-term payable to TSC is the consideration payable in respect of the acquisition of sewage processing assets from TSC, net of unrecognized financing charges.

(ii) The payable amounts of long-term payable (including interest) are denominated in the following currencies.

JPY US dollar	Group Unaudited Audited 30 June 31 December 2011 2010 644,357 656,952 173,879 177,278 818,236 834,230	Company Unaudited Audited 30 June 31 December 2011 2010 644,357 656,952 173,879 177,278 818,236 834,230	Company Unaudited Audited 30 June 31 December 2011 2010 644,357 656,952 173,879 177,278 818,236 834,230
			834,230

The balance denominated in US dollar bears an interest rate at 6 month LIBOR plus 0.6%, whilst the balance denominated in JPY bears fixed interest rates at 1% and 1.55% per annum respectively.

Tianjin Capital Environmental Protection Group Company Limited ◆ 2011 Interim Report

(e) Other liabilities

Group Unaudited Audited 30 June 31 December 2011 2010 Non-current: – Tianjin Municipal Engineering Bureau (“TMEB”) (note(i)) 98,181 98,181 – Others 29,704 31,193 127,885 129,374 Current: – TMEB Current portion of long- term loan (note(i)) 16,364 16,364 – Others 4,376 4,852 20,740 21,216	Company Unaudited Audited 30 June 31 December 2011 2010 98,181 98,181 — — 98,181 98,181 16,364 16,364 — — 16,364 16,364	Company Unaudited Audited 30 June 31 December 2011 2010 98,181 98,181 — — 98,181 98,181 16,364 16,364 — — 16,364 16,364
		98,181
		16,364 —
		16,364

(i) A loan was taken from TMEB during 2005 specifically for construction of sewage water processing plants. The current portion of the long-term loan is Rmb16 million at 30 June 2012 (2010: Rmb16 million). The loan is repayable in equal instalments over eleven years from 2007. The loan bears interest at 5% per annum for the first six years. From the seventh year to maturity, the interest will be based on the one-year deposit plus 0.3% premium.

(13) DEFERRED REVENUE

	Group	Group			Company
	Unaudited		Audited	Unaudited	Audited
	30 June	31	December	30 June	31 December
	2011		2010	2011	2010
Deferred revenue	288,169		284,974	207,140	203,288

Deferred revenue represents the subsidies received from governmental bodies in relation to Group‘s certain construction and research & development projects.

98 Tianjin Capital Environmental Protection Group Company Limited ◆ 2011 Interim Report

(14) DEFERRED INCOME TAX LIABILITIES

	Unaudited	Unaudited	Audited	Audited
	30 June	2011	31 December		2010
	Deferred	Taxable	Deferred		Taxable
	income tax	temporary	income tax		temporary
	liabilities	differences	liabilities	differences
Depreciation of fixed assets	42,547	170,188	38,427		153,708

(15) SHARE CAPITAL

Movement of the Company’s authorised, issued and fully paid up capital is tabled below. All of the Company’s shares are ordinary shares with par value of one Renminbi.

	A	shares		H shares	H shares
	Restricted
	circulating	Circulating		Circulating
	shares	shares	Subtotal	shares	Total
At 31 December 2010
and 30 June 2011	—	1,087,228	1,087,228	340,000	1,427,228

(16) RESERVES AND DIVIDEND

(a) Capital reserve principally comprises share premium arising from the issuance of shares. This reserve can be utilised to offset prior years’ losses or for issuance of bonus shares.
(b) According to the PRC Companies Law and the Company’s Articles of Association, a company is required to transfer 10% of its net profit for the year to the statutory common reserve, which can be ceased till the reserve reaches 50% of the registered capital. This reserve shall only be used to make up losses; or to increase the capital of the Company upon approval from the shareholders.
(c) Dividends

A dividend in respect of year ended 31 December 2010 of Rmb1.10 (gross tax) every 10 shares, total shares of 1,427 million shares on 5 July 2011, amounting to a total dividend of Rmb157 million, was approved at the Annual General Meeting on 13 May 2011 (2010: Rmb0.8 (gross tax) every 10 shares, amounting to a total dividend of Rmb114 million).

Tianjin Capital Environmental Protection Group Company Limited ◆ 2011 Interim Report

(17) MINORITY INTERESTS

Minority interests attributable to respective subsidiaries’ minority shareholders are set out as below:

						Group
					Unaudited	Audited
					30 June	31 December
					2011	2010
Hangzhou Tianchuang Capital Water Co., Ltd.					92,210	90,548
Baoying Capital Water Co., Ltd.					13,174	12,737
Qujing Capital Water Co., Ltd.					13,077	11,795
Guizhou Capital Water Co., Ltd.					7,274	6,853
Honghu Capital Water Co., Ltd.					1,876	2,150
Tianjin Water Recycling Co.,	Ltd.				—	1,409
Chibi Capital Water Co., Ltd.					—	85
Fuyang Capital Water Co., Ltd.					22	19
					127,633	125,596
INCOME FROM AND COST FOR OPERATIONS
			Group
			Unaudited
		For	the six	months ended
	30 June	2011			30 June 2010
	Income from	Cost of		Income from		Cost of
	operations	operations			operations	operations
Income from principal
operations (Note 7)	725,235	413,176			658,029	350,079
Other operating income	25,244		12,105		17,495	7,150
	750,479	425,281			675,524	357,229
			Company
			Unaudited
		For	the six	months ended
	30 June	2011			30 June 2010
	Income from	Cost of		Income from		Cost of
	operations	operations			operations	operations
Income from principal
operations	453,513	218,693			446,867	200,815
Other operating income	12,939		4,835		11,608	3,690
	466,452	223,528			458,475	204,505

(18) INCOME FROM AND COST FOR OPERATIONS

100 Tianjin Capital Environmental Protection Group Company Limited ◆ 2011 Interim Report

(19) BUSINESS TAX AND SURCHARGES

Business tax City construction and maintenance fee Education fee surcharge and others	Group Unaudited For the For the six months six months ended ended 30 June 30 June 2011 2010 3,093 19,844 280 105 235 61 3,608 20,010	Company Unaudited For the For the six months six months ended ended 30 June 30 June 2011 2010 1,908 19,292 134 — 113 — 2,155 19,292	Company Unaudited For the For the six months six months ended ended 30 June 30 June 2011 2010 1,908 19,292 134 — 113 — 2,155 19,292
			19,292

(20) FINANCIAL EXPENSES - NET

Interest expenses of borrowings Less: Capitalised interest Net interest expenses Less: Interest income - long-term receivables - bank deposits Others	Group Unaudited For the For the six months six months ended ended 30 June 30 June 2011 2010 96,528 78,544 (9,313) (6,566) 87,215 71,978 (11,384) (8,598) (5,717) (5,633) (5,667) (2,965) 498 64 76,329 63,444	Company Unaudited For the For the six months six months ended ended 30 June 30 June 2011 2010 52,781 36,087 (8,111) (4,691) 44,670 31,396 (8,620) (7,229) (5,717) (5,633) (2,903) (1,596) 27 15 36,077 24,182	Company Unaudited For the For the six months six months ended ended 30 June 30 June 2011 2010 52,781 36,087 (8,111) (4,691) 44,670 31,396 (8,620) (7,229) (5,717) (5,633) (2,903) (1,596) 27 15 36,077 24,182
			31,396 (7,229) (5,633) (1,596) 15
			24,182

Tianjin Capital Environmental Protection Group Company Limited ◆ 2011 Interim Report

101

(21) NON-OPERATING EXPENSES

Loss on disposal of fixed assets Others	For the six months ended 30 June 2011 13,468 56 13,524	For the six months ended 30 June 2010 13,117 97
		13,214

(22) INCOME TAX

Current income tax Deferred income tax	Group Unaudited For the For the six months six months ended ended 30 June 30 June 2011 2010 41,867 42,692 4,120 4,468 45,987 47,160	Company Unaudited For the For the six months six months ended ended 30 June 30 June 2011 2010 38,823 41,315 1,251 1,595 40,074 42,910	Company Unaudited For the For the six months six months ended ended 30 June 30 June 2011 2010 38,823 41,315 1,251 1,595 40,074 42,910
			42,910

102 Tianjin Capital Environmental Protection Group Company Limited ◆ 2011 Interim Report

Reconciliation between profit before income tax and the aggregate tax at the rates applicable to profits in the respective entities concerned is set below:

Profit before income tax Calculated at applicable income tax rates Effect of different income tax rates applicable to certain subsidiaries Income not subject to tax Expenses not deductible for taxation purposes Utilization of previously deductible tax losses for which no deferred income tax was recognised Current year tax losses for which no deferred income tax asset was recognised Income tax expenses	Group Unaudited For the For the six months six months ended ended 30 June 30 June 2011 2010 185,698 177,434 46,425 44,359 (163) — (50) (21) 165 — (2,500) (195) 2,110 3,017 45,987 47,160	Group Unaudited For the For the six months six months ended ended 30 June 30 June 2011 2010 185,698 177,434 46,425 44,359 (163) — (50) (21) 165 — (2,500) (195) 2,110 3,017 45,987 47,160
		44,359 — (21) — (195) 3,017
		47,160

(23) EARNINGS PER SHARE

Basic earnings per share is calculated based on the profit attributable to owners of the parent of Rmb138 million (2010: Rmb130 million) and weighted average number of ordinary shares of 1,427 million shares in issue during the year (2010: 1,427 million shares).

Diluted earnings per share are calculated using the same bases as described above for calculating basic earnings per share.

Profit attributable to owners of the parent Weighted average number of ordinary shares in issue (million shares) Basic earnings per share (Rmb Yuan)	Group Unaudited For the For the six months six months ended ended 30 June 30 June 2011 2010 137,674 129,701 1,427 1,427 0.10 0.09	Group Unaudited For the For the six months six months ended ended 30 June 30 June 2011 2010 137,674 129,701 1,427 1,427 0.10 0.09
		1,427
		0.09

Tianjin Capital Environmental Protection Group Company Limited ◆ 2011 Interim Report

103

(24) NOTES TO THE CASH FLOW STATEMENTS AND SUPPLEMENTARY INFORMATION

(a) Reconciliation of net profit to cash flows from operating activities

Group
Unaudited
For the
For the
six months
six months
ended
ended
30 June
30 June
2011
2010
Net profit
139,711
130,274
Adjustments for:
Depreciation of fixed assets
and investment properties
71,753
57,800
Amortisation of intangible
assets
57,073
51,684
Losses on disposal of
fixed assets
13,468
13,117
Financial expenses-net
87,215
71,978
Investment income
289
(83)
Amortisation of
deferred revenue
1,077
—
Increase in deferred
tax liabilities
4,120
4,468
Increase in inventories
(26,210)
(953)
(Increase)/decrease in
operating receivables
(156,945)
(258,258)
Increase/(decrease)
in operating payables
164,146
(13,304)
Net cash flows from
operating activities
355,697
56,723
Net changes in cash
and bank balances
Cash at end of year
510,139
532,750
Less: cash at beginning
of year
539,430
592,261
Net increase/(decrease)
in cash and
bank balances
(29,291)
(59,511)

Company
Unaudited
For the
For the
six months
six months
ended
ended
30 June
30 June
2011
2010
122,308
130,722
61,736
50,297
5,207
4,058
12,877
13,082
44,670
31,396
(2,089)
(1,992)
420
—
1,251
1,595
11
(662)
(33,197)
(208,226)
18,674
(25,275)
231,868
(5,005)
143,951
250,129
161,861
224,354
(17,910)
25,775

104 Tianjin Capital Environmental Protection Group Company Limited ◆ 2011 Interim Report

7 SEGMENT REPORTING

Reportable segment of the Group was identified as the business unit providing different products or services or operating in different regions. Considering the different requirements of technology and market strategy for different business and geographic segments, the Group managed the production and business activities of each segment independently and evaluated the operating results separately in order to determine resource allocation and assesses performance.

The Company considers the business from both service and geographical perspective. From a service perspective, management assesses the performance of processing of sewage water, recycled water and pipeline connection and tap water operation. Processing of sewage water is further evaluated on a geographical basis (Tianjin plants, Hangzhou plant and other plants).

(a) Segment information as at and for the year ended 30 June 2011 is as follows:

Recycle Sewage water processing services water and Tianjin Hangzhou Other pipeline plants plant plants connection Income from third parties (Note 6(18)) 448,259 68,371 118,533 33,856 Interest income (Note 6(20)) 2,493 171 738 1,973 Interest expenses (Note 6(20)) (44,670) (12,727) (21,454) (2,928) Investment profit from associate(Note 6(7)b) — — — — Depreciation & Amortisation (65,268) (18,124) (29,167) (7,708) Total profit 138,819 4,612 7,805 3,460 Income tax expense (34,494) (1,724) (637) (701) Net profit 104,325 2,888 7,168 2,759 Segment assets 4,660,648 808,660 1,356,119 647,730 Segment liabilities 2,967,130 503,933 531,825 719,332 Investment in associate — — — — Non-current assets addition other than related to long-term investment 59,291 9,649 20,319 13,773	Tap water 19,836 37 (5,436) — (5,515) 555 (34) 521 334,922 160,224 — 2,175	All other segments 61,624 5,972 — (489) (3,044) 30,447 (8,397) 22,050 708,131 74,881 45,094 35,309	Group 750,479
			11,384 (87,215)
			(489)
			(128,826)
			185,698 (45,987)
			139,711
			8,516,210
			4,957,325
			45,094
			140,516

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105

(b) Segment information as at and for the year ended 30 June 2010 is as follows:

Income from third parties (Note 6(18)) Interest income (Note 6(20)) Interest expenses (Note 6(20)) Investment profit from associate Depreciation & Amortisation Total profit Income tax expense Net profit Segment assets Segment liabilities Investment in associate Non-current assets addition other than related to long-term investment	Recycle Sewage water processing services water and Tianjin Hangzhou Other pipeline plants plant plants connection 349,158 66,197 105,875 21,545 925 164 439 1,374 (31,396) (12,544) (20,343) (3,083) — — — — (51,618) (18,124) (27,266) (5,710) 133,017 4,317 11,528 (299) (35,614) (1,079) (2,882) — 97,403 3,238 8,646 (299) 3,786,845 814,686 1,595,378 578,079 2,366,922 520,751 513,020 509,365 — — — — 198,069 — 73,146 34,596	Tap water 17,546 — (4,612) — (4,342) (1,470) — (1,470) 299,365 197,063 — 6,139	All other segments 115,203 5,696 — 83 (2,424) 30,341 (7,585) 22,756 519,631 55,256 44,218 958	Group 675,524 8,598 (71,978) 83 (109,484) 177,434 (47,160) 130,274 7,593,984 4,162,377 44,218 312,908

8 FINANCIAL INSTRUMENT AND RISK

(a) Market risk:

(i) Foreign currency risk:

The Group has no significant foreign currency risk as the operations and customers of the Group are located in the PRC with most of the operating assets and transactions denominated and settled in RMB. All of the Group’s borrowings are denominated in RMB. The sole foreign currency exposure of the Group arises from fluctuation of US dollar and Japanese Yen (ating pursuant to the long-term payment scheme set out in the asset transfer agreement of foreign loan financed assets from TSC on 9 November 2010 (note 6(12)(d)).

106 Tianjin Capital Environmental Protection Group Company Limited ◆ 2011 Interim Report

At 30 June 2011, if RMB had weakened/strengthened by 5 % against the US dollar with all other variables held constant, post-tax profit for the year would have been Rmb6 million (2010: Rmb4 million) lower/higher, mainly as a result of foreign exchange losses/gains on translation of US dollar-denominated portion of long-term payable. Similarly, if RMB had weakened/strengthened by 5 % against the JPY with all other variables held constant, posttax profit for the year would have been Rmb12 million (2010: Rmb12 million) lower/ higher.

(ii) Interest rate risk:

The Group’s interest rate risk arises mainly from cash and bank balances, long-term receivables, long-term borrowings and long-term payable.

The tables below set out the Group’s and the Company’s exposure to interest rate risks. Included in the tables are the assets and liabilities at carrying amounts, categorised by the maturity dates.

Group Non-interest Floating bearing 510,139 — — — 858,52 61,320 1,767,091 9,123 6,637 — 101,536 — — —	Group Non-interest Floating bearing 510,139 — — — 858,52 61,320 1,767,091 9,123 6,637 — 101,536 — — —	Total 511,039 337,371 876,210 1,874,395 31,218 389,383 600,000	Company Fixed Floating — 143,951 337,371 — 16,364 635,000 98,181 612,400 24,581 6,637 287,847 101,536 600,000 —	Company Fixed Floating — 143,951 337,371 — 16,364 635,000 98,181 612,400 24,581 6,637 287,847 101,536 600,000 —	Total 143,951 337,371
					651,364 710,581 31,218 389,383 600,000
539,430 — 405,526 2,280,140 6,339 100,561 —	— — 1,796 10,613 — — —	540,330 336,286 423,686 2,438,934 30,710 399,604 600,000	— 336,286 16,364 148,181 24,371 299,043 600,000	161,861 — 265,000 1,014,100 6,339 100,561 —	161,861 336,286
					281,364 1,162,281 30,710 399,604 600,000

Tianjin Capital Environmental Protection Group Company Limited ◆ 2011 Interim Report

107

At 30 June 2011, if interest rates on bank borrowings had been 1% higher/lower with all other variables held constant, profit for the year would have been lower/higher by Rmb26 million (2010: Rmb22.6 million).

The Group analyses its interest rate exposure by considering refinancing, renewal of existing positions and alternative financing resolution.

(b) Credit risk :

Credit risk arises from deposits with banks and credit exposures to customers.

The credit risk on trade receivables is concentrated on a few customers, all of which are PRC government bodies. Thus, the management considers that the risk is limited.

The maximum credit risk of the Company includes the carrying value of its financial assets on books and is increased by the notional amount of financial guarantees issued for its subsidiaries.

(c) Liquidity risk:

Cash flow forecasting is performed in the operating entities and aggregated by Group finance. Group finance monitors rolling forecasts of the Group’s liquidity requirements to ensure it has sufficient cash to meet operational needs while maintaining sufficient headroom on its undrawn committed borrowing facilities at all times so that the Group does not breach borrowing limits or covenants on any of its borrowing facilities. Such forecasting takes into consideration the Group’s debt financing plans, covenant compliance, compliance with internal balance sheet ratio targets and external regulatory or legal requirements ed borrowing facilities at all times

108 Tianjin Capital Environmental Protection Group Company Limited ◆ 2011 Interim Report

At 30 June 2011 Long-term bank borrowings Long-term payables Other non-current liabilities Trade and other payables Short-term borrowings Short-term debenture At 31 December 2010 (Restated) Long-term bank borrowings Long-term payables Other non-current liabilities Trade and other payables Short-term borrowings Short-term debenture	Less than 1 year 899,308 32,149 23,573 327,154 77,146 600,458 471,626 32,038 22,091 297,720 76,902 612,180	Between 1 and 2 years 618,481 32,419 21,273 — — — 950,320 32,278 21,273 — — —	Between 2 and 5 years 892,872 99,393 53,473 — — — 1,064,759 98,809 53,473 — — —	Over 5 years 496,555 654,275 65,598 — — — 639,677 671,105 70,696 — — —	Total 2,907,216 818,236 163,917 327,154 77,146 600,458
					3,126,382 834,230 167,533 297,720 76,902 612,180

(d) Capital risk management

The Group’s objectives when managing capital are to safeguard the Group’s ability to continue as a going concern in order to provide returns for shareholders and benefits for other stakeholders and to maintain an optimal capital structure to reduce the cost of capital.

In order to maintain or adjust the capital structure, the Group may adjust the amount of dividends paid to shareholders, return capital to shareholders, issue new shares or sell assets to reduce debt.

The Group monitors capital on the basis of the gearing ratio. This ratio is calculated as net debt divided by total capital. Net debt is calculated as total borrowings (including ‘current and noncurrent borrowings’ as shown in the consolidated balance sheet) less cash and cash equivalents. Total capital is calculated as ‘equity’ as shown in the consolidated balance sheet plus net debt.

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109

The Group’s strategy is to maintain a gearing ratio of about 40% - 60%. The gearing ratio of the Group is as follows:

	30 June	31 December
	2011	2010
Total borrowings	3,350,605	3,462,620
Less: Cash and cash equivalents	(510,139)	(539,430)
Net debt	2,840,466	2,923,190
Total equity	3,558,885	3,576,169
Total capital	6,399,351	6,499,359
Gearing ratio	44%	45%

(e) Fair value estimation

9 SIGNIFICANT RELATED PARTY RELATIONSHIPS AND TRANSACTIONS

(a) Related parties that have controlling relationship

			Relationship with	Type of	Legal
Name of related party	Registration address	Principal activities	the Company	enterprise	representative
Tianjin Municipal Investment	Tianjin, the PRC	Development,	Controlling	Limited company	Xiong Guang Yu
Company Limited (“TMICL”)		construction and	shareholder of
		management of	the Company
		municipal infrastructures
Tianjin Infrastructure	Tianjin, the PRC	Investment and construction of	Ultimate holding	Limited company	Wang Zhou Xi
Construction Investment Group		urban environmental	company
Co., Ltd. (“TICIG”)		infrastructure, market
		establishment and development
		services, lease of private properties,
		lease of infrastructures, and
		development and operation of
		public facilities projects
Qu Jing Capital Water Co., Ltd.	Qujing, the PRC	Sewage processing,	Subsidiary of the	Limited company	Zhao Yi
		tap water supply	Company
Gui Zhou Capital Water Co., Ltd.	Guizhou, the PRC	Sewage processing	Subsidiary of the	Limited company	Zhao Yi
			Company
Fu Yang Capital Water Co., Ltd.	Fuyang, the PRC	Sewage processing	Subsidiary of the	Limited company	Zhao Yi
			Company
Bao Ying Capital Water Co., Ltd.	Baoying, the PRC	Sewage processing	Subsidiary of the	Limited company	Zhao Yi
			Company
Chi Bi Capital Water Co., Ltd.	Chibi, the PRC	Sewage processing	Subsidiary of the	Limited company	Wang Hui
			Company

110 Tianjin Capital Environmental Protection Group Company Limited ◆ 2011 Interim Report

			Relationship with	Type of	Legal
Name of related party	Registration address	Principal activities	the Company	enterprise	representative
Hong Hu Capital Water Co., Ltd.	Honghu, the PRC	Sewage processing	Subsidiary of the	Limited company	Zhang Wen Hui
			Company
Tianjin Capital Environmental	Hong Kong,	Sewage processing	Subsidiary of the	Limited company	Lin Wen Bo
Protection (Hong Kong) Co., Ltd.	the PRC		Company
Hang Zhou Tianchuang	Hangzhou, the PRC	Sewage processing	Subsidiary of the	Limited company	Zhao Yi
Capital Water Co., Ltd.			Company
Wen Deng Capital Water Co., Ltd.	Wendeng, the PRC	Sewage processing	Subsidiary of the	Limited company	Zhao Yi
			Company
Tianjin Jing Hai Capital Water	Tianjin, the PRC	Sewage processing	Subsidiary of the	Limited company	Yang Guang
Co., Ltd.			Company
Tianjin Water Recycling Co., Ltd.	Tianjin, the PRC	Product ion and sales of	Subsidiary of the	Limited company	Tang Fu Sheng
		recycled water and Company
		technical consulting for
		water recycling business
Xi’an Capital Water Co., Ltd.	Xi’an, the PRC	Sewage processing	Subsidiary of the	Limited company	Zhao Yi
			Company
Tianjin Kaiying Environmental	Tianjin, the PRC	development and consultance of	Subsidiary of the	Limited company	Zhang Wen Hui
Engineering Technology		environmental product and	Company
Consultant Co., Ltd.		technology
Anguo Capital Water Co., Ltd.	Anguo, the PRC	Sewage and tap water	Subsidiary of the	Limited company	Li Yu Qing
			Company
Wuhan Tianchuang Environmental	Wuhan, the PRC	Sewage and tap water	Subsidiary of the	Limited company	Zhao Yi
Protection Co.,Ltd		processing	Company
Tianjin Capital New Materials	Tianjin, the PRC	Production and sales of	Subsidiary of the	Limited company	Fu Ya Na
Co., Ltd.		new types of construction	Company
Tianjin Capital Water Co., Ltd.	Tianjin, the PRC	Sewage processing,	Subsidiary of the	Limited company	Yang Guang
			Company
Tianjin Zichuang Project	Tianjin, the PRC	Construction project investment	Subsidiary of the	Limited company	Lin Wen Bo
Investment Co., Ltd.			Company
Tianjin Jinning Capital Water	Tianjin, the PRC	Sewage processing,	Subsidiary of the	Limited company	Li Yu Qing
Co., Ltd.			Company
Environmental Digital	Hongkong, the PRC	Sofeware development,	Subsidiary of the	Limited company	Zhong Wei Liang
Management System		environment monitoring	Company
(Hongkong) Co., Ltd.		and consultance &
		maintainance service
Tianjin Jiayuanxinchuang New	Tianjin, the PRC	development & consultance of	Subsidiary of the	Limited company	Tang Fu Sheng
Energy Technology Co., Ltd		new energy technology	company

Tianjin Capital Environmental Protection Group Company Limited ◆ 2011 Interim Report

111

(b) Registerred capital of related parties that has controlling relationship and their movements

31 December 2010 TMICL 1,820,000 TICIG 67,700,000 Qu Jing Capital Water Co., Ltd. 120,000 Gui Zhou Capital Water Co., Ltd. 100,000 Tianjin Water Recycling Co., Ltd. 100,000 Tianjin Capital New Materials Co., Ltd. 37,500 Fu Yang Capital Water Co., Ltd. 63,000 Bao Ying Capital Water Co., Ltd. 38,000 Chi Bi Capital Water Co., Ltd. 35,000 Hong Hu Capital Water Co., Ltd. 20,000 Hang Zhou Tianchuang Capital Water Co., Ltd. 257,445 Wen Deng Capital Water Co., Ltd. 52,000 Tianjin Jing Hai Capital Water Co., Ltd. 12,000 Xi’an Capital Water Co., Ltd. 270,000 Tianjin Kaiying Environmental Engineering Technology Consultant Co., Ltd. 2,000 Anguo Capital Water Co., Ltd. 41,000 Wuhan Tianchuang Environmental Protection Co., Ltd 103,240 Tianjin Capital Water Co., Ltd. 5,000 Tianjin Zichuang Project Investment Co., Ltd. 23,400 Tianjin Jinning Capital Water Co., Ltd. 15,000 Tianjin Jiayuanxingchuang Co,. Ltd — 31 December 2010 USD’000 Tianjin Capital Environmental Protection (Hong Kong) Co., Ltd. 7,840 HK$’000 Environmental Digital Management System (HongKong) Co., Ltd. 2,040	30 June Additions 2011 — 1,820,000 — 67,700,000 28,000 148,000 — 100,000 — 100,000 — 37,500 — 63,000 15,000 53,000 — 35,000 — 20,000 — 257,445 — 52,000 — 12,000 — 270,000 3,000 5,000 — 41,000 — 103,240 — 5,000 — 23,400 — 15,000 10,000 10,000 30 June Additions 2011 USD’000 USD’000 — 7,840 HK$’000 HK$’000 — 2,040	30 June Additions 2011 — 1,820,000 — 67,700,000 28,000 148,000 — 100,000 — 100,000 — 37,500 — 63,000 15,000 53,000 — 35,000 — 20,000 — 257,445 — 52,000 — 12,000 — 270,000 3,000 5,000 — 41,000 — 103,240 — 5,000 — 23,400 — 15,000 10,000 10,000 30 June Additions 2011 USD’000 USD’000 — 7,840 HK$’000 HK$’000 — 2,040
		30 June 2011 USD’000 7,840
		HK$’000 2,040

112 Tianjin Capital Environmental Protection Group Company Limited ◆ 2011 Interim Report

	31 December	2010	Reduction for	the year	31 December	2011
	Amount	%	Amount	%	Amount	%
TMICL	739,781	51.83	—	—	739,781	51.83

(d) Related party transactions

In addition to the related party information shown elsewhere in the financial statements, the following is a summary of significant related party transactions within the Group of TICIG entered into in the ordinary course of the business between the Group and its related parties during the year:

(i) Income

		Unaudited	Unaudited
		For the	For the
		six months	six months
		ended	ended
		30 June	30 June
Related party	Nature of transaction	2011	2010
Tianjin Ziya Recycling	Construction revenue from sewage
Economy Industry	water processing plant	26,069	—
Investment &
Development Co., Ltd.
TICIG	Rental income from TCEP building	1,912	3,230
Tianjin City Infrastructure	Rental income from TCEP building	364	—
Construction Project
Management &
Consultant Co., Ltd.
Tianjin City Resource	Rental income from TCEP building	344	—
Operation Co., Ltd.
Tianjin Ziya Recycling	Management fee from	970	2,380
Economy Industry	construction projects
Investment &
Development Co., Ltd.

The Group’s pricing on construction contract service with related parties is based on the reference price for construction market stipulated by government. Rental income from related parties are negotiated by both parties involved in the lease and by making reference to the market price.

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113

(ii) Key management compensation

	Unaudited	Unaudited
	For the	For the
	six months	six months
	ended	ended
	30 June	30 June
	2011	2010
Key management compensation	3,844	4,200

(e) Transactions/ balances with other state owned enterprises in the PRC

During the year, the Group’s significant transactions with these state controlled entities include processing of sewage water and construction and management of related facility and processing of tap water. As at year end, majority of the Group’s cash and bank balances and borrowings are with state controlled banks and listed banks.

10 COMMITMENTS

The Group’s capital commitments at the balance sheet date in respect of construction projects are as follows:

Contracted but not provided for 31 June 31 December 2011 2010 Rmb’ million Rmb’ million Sewage water processing plants in: – Bao Ying 30 — – Jin Ning 8 — – Ji Zhuang Zi (upgrade project) 41 59 – Xian Yang Lu (upgrade project) 21 29 – Bei Cang (upgrade project) 21 26 – Dong Jiao (upgrade project) 31 52 Water recycling plants in: – Ji Zhuang Zi (expansion project) — — Other Projects: – Jia Yuan Xing Chuang Culture Center energy station 102 — 254 166	Authorised but not contracted for 31 June 31 December 2011 2010 Rmb’ million Rmb’ million — — 17 — — — 1 2 1 1 68 69 — 35 287 — 374 107	Authorised but not contracted for 31 June 31 December 2011 2010 Rmb’ million Rmb’ million — — 17 — — — 1 2 1 1 68 69 — 35 287 — 374 107
		107

114 Tianjin Capital Environmental Protection Group Company Limited ◆ 2011 Interim Report

IX. PURCHASE, SALE OR REDEMPTION OF THE COMPANY’S LISTED SECURITIES

The Company and its subsidiaries did not purchase, sell or redeem any of the listed securities of the Company during the reporting period.

X. AUDIT COMMITTEE

On 31 July 2001, the Board approved the establishment of the Audit Committee to review and supervise the Company’s financial reporting procedure and internal controls. The Audit Committee comprises the independent non-executive Directors, Mr. Xie Rong, Mr. Di Xiaofeng and Ms. Lee Kit Ying, Karen. The Audit Committee, together with the management of the Group, have reviewed the accounting principles and practices adopted by the Group and discussed with the management of the Group the internal controls and financial reporting matters including the review of the unaudited interim results and the Interim Report. The Audit Committee agreed with the accounting principles, standards and methods adopted in the preparation of the Group’s unaudited interim accounts for the six months ended 30 June 2011.

XI. CODE ON CORPORATE GOVERNANCE PRACTICES

None of the Directors is aware of any information that would reasonably indicate that the Company is not or was not, for any part of the reporting period, in compliance with the code provisions of the Code on Corporate Governance Practices as set out in the Appendix 14 to the Listing Rules.

XII. MODEL CODE FOR SECURITIES TRANSACTIONS BY THE DIRECTORS

The Company has adopted a code of conduct regarding the securities transactions by the Directors and Supervisors on the terms exactly the same as the required standard as set out in the Model Code for Securities Transactions by Directors of Listed Issuers as set out in the Appendix 10 to the Listing Rules. The Company, having made specific enquiries to all the Directors and Supervisors, confirmed that all the Directors and Supervisors have complied with the code of conduct regarding the securities transactions by the Directors and Supervisors during the reporting period.

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115

XIII. DOCUMENTS AVAILABLE FOR INSPECTION

Financial statements signed and sealed by the legal representative, officer in charge of the accounting work (Chief Accountant) and officer in charge of the accounting department (person in charge of accounting) of the Company.
Original copies of the documents and announcements of the Company which were publicly disclosed on newspapers designated by the CSRC during the reporting period.
Interim Report 2011.

Tianjin Capital Environmental Protection Group Company Limited Zhang Wenhui

Chairman

24 August 2011

116 Tianjin Capital Environmental Protection Group Company Limited ◆ 2011 Interim Report

AI assistant

Rego Interactive Co., Ltd — Interim / Quarterly Report 2011

50588_rns_2011-09-02_408e70f2-bf93-4813-85a0-e8f1829d9b0c.pdf

I. IMPORTANT

II. COMPANY PROFILE

(I) Information of the Company

(II) Contact Persons and Contact Details

Company Secretary in Hong Kong

Securities Affairs Representative

(III) Basic Information

(IV) Information Disclosure and Places for Document Inspection

(V) Information of the Shares of the Company

(VI) Other Basic Information of the Company

III. PRINCIPAL ACCOUNTING DATA AND FINANCIAL HIGHLIGHTS (AS PREPARED IN ACCORDANCE WITH THE PRC ACCOUNTING STANDARDS)

1. Major accounting data and financial indicators

2. Extraordinary profit and loss items and amounts

IV. CHANGES IN SHARE CAPITAL AND SHAREHOLDERS

(I) Table of share changes

(II) Shareholders and actual controller

1. Number of shareholders and their shareholdings

Shareholdings of the top ten shareholders

Shareholdings of the top ten non-restricted circulating shares shareholders

2. Changes in controlling shareholder and actual controller of the Company

3. Substantial shareholders’ and other persons’ interests and/or short positions in the shares and underlying shares of the Company

V. DIRECTORS, SUPERVISORS AND SENIOR MANAGEMENT

(I) Changes in the shareholding of the Directors, Supervisors and senior management

(II) Directors’, Supervisors’ and the Company’s chief executives’ interests and/or short positions in the shares, underlying shares and debentures of the Company or its associated corporations

(III) Recruitment or removal of the Directors, Supervisors and senior management of the Company

VI. REPORT OF THE BOARD

(I) Discussion and analysis of the overall operations during the reporting period

(II) Principal business of the Group and its operations

(III)New business of the Group

1. Principal businesses by industry

2. Principal businesses by geographical regions

(IV) Explanation on significant changes in principal financial data as compared to the same period last year

(V) Investment of the Company

1. Use of proceeds from fund-raising

2. Projects funded by proceeds other than from fund-raising

(VI) Liquidity and financial resources

(VII) Foreign exchange risk

(VIII) Employee and emolument policy

(IV) Risk factors analysis

(X) Contingent liabilities

(XI) Rights of debt

(XII) Charge on assets

(XIII) Acquisition and disposal of subsidiaries

VII. SIGNIFICANT MATTERS

(I) Corporate governance of the Company

(II) Implementation of the profit appropriation plan during the reporting period

(III) Implementation of the cash dividend payment policy during the reporting period

1. The cash dividend payment policy of the Company:

2. Implementation of the cash dividend payment during the reporting period

(IV) Significant litigation and arbitration

(V) Bankruptcy and restructuring related matters

(VI) Shareholdings of the Company in other listed companies and financial enterprises

(VII) Asset transactions

(VIII) Major connected transactions

(IX) Major contracts and their implementation

(1) Custody

(3) Leasing

2. Guarantee

External guarantee granted by the Company

3. Entrusted financial management and entrusted loans

4. Other major contracts

(X) Implementation of commitments

(XI) Appointment and removal of the accountants

(XII) Punishments and rectification to listed company and its directors, supervisors, senior management, shareholders and actual controllers

(XIII) Explanation of other major events

(XIV) Information Disclosure Index

VIII. FINANCIAL ACCOUNTING REPORT (UNAUDITED)

(I) Prepared in accordance with Hong Kong Financial Reporting Standards

CONDENSED CONSOLIDATED BALANCE SHEET

AS AT 30 JUNE 2011

CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

FOR THE SIX MONTHS ENDED 30 JUNE 2011

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE SIX MONTHS ENDED 30 JUNE 2011

CONDENSED CONSOLIDATED CASH FLOW STATEMENT

FOR THE SIX MONTHS ENDED 30 JUNE 2011

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL INFORMATION

1 Company profile and principal activities

Rego Interactive Co., Ltd Interim / Quarterly Report 2011