THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION

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

If you have sold or transferred all your shares in China Gas Holdings Limited (the “ Company ”), you should at once hand this circular and the accompanying form of proxy to the purchaser or the transferee or to the bank, licensed securities dealer or other agent through whom the sale or transfer was effected for transmission to the purchaser or the transferee.

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

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CHINA GAS HOLDINGS LIMITED （中國燃氣控股有限公司）[*]

(incorporated in Bermuda in limited liability)

CONNECTED TRANSACTION: PLACING OF EXISTING SHARES AND SUBSCRIPTION OF NEW SHARES AND PROPOSED GRANT OF GENERAL MANDATES TO ISSUE AND REPURCHASE SHARES

Placing Agent DBS Vickers (Hong Kong) Limited

Independent financial adviser to the independent board committee of the Company

A notice convening a special general meeting of the Company to be held at 10:00 a.m. on 19 December 2003 at Room 1601, 16th Floor, AXA Centre, No.151 Gloucester Road, Wanchai, Hong Kong is set out on pages 29 to 33 of this circular. Whether or not you are able to attend the special general meeting, you are requested to complete the accompanying form of proxy, in accordance with the instructions printed thereon and deposit the same at the offices of the Company’s branch share registrar in Hong Kong, Computershare Hong Kong Investor Services Limited at Rooms 1901-1905, 19th Floor, Hopewell Centre, 183 Queen’s Road East, Hong Kong as soon as possible and in any event not less than 48 hours before the time appointed for the holding of the special general meeting or any adjournment thereof. Completion and return of the form of proxy will not preclude you from attending and voting in person at the special general meeting or any adjournment thereof should you so wish.

A letter from the independent board committee of the Company containing its recommendation to the independent shareholders of the Company is set out on page 16 of this circular. A letter of advice from Hercules Capital Limited to the independent board committee of the Company is set out on pages 17 to 21 of this circular.

3 December 2003

* For identification purpose only

	Page
Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	1
Letter from the Board . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	5
Letter from the Independent Board Committee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	16
Letter from Hercules Capital. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	17
Appendix I – Explanatory Statement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	22
Appendix II – General Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	25
Notice of the SGM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	29

DEFINITIONS

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

“Announcement”	the press announcement issued by the Company dated 11
	November 2003 regarding the Placing and the Subscription
“associates”	has the meaning ascribed to this term under the Listing Rules
“Board”	the board of Directors
“Bonds”	together, Tranche 1 Bonds, Tranche 2 Bonds, Tranche 3 Bonds,
	Tranche 4 Bonds and Tranche 5 Bonds
“Bonds Subscription Agreements”	the two agreements dated 29 October 2003 entered into between
	the Company and Merrill Lynch relating to, among other things,
	the subscription of the Bonds
“business day”	a day (other than a Saturday) on which licensed banks in Hong
	Kong are generally open for business throughout their normal
	business hours
“Company”	China Gas Holdings Limited, a company incorporated in
	Bermuda with limited liability and the issued Shares of which
	are listed on the main board of the Stock Exchange
“connected person(s)”	has the meaning ascribed to this term under Chapters 1 and 14
	of the Listing Rules
“Convertible Preference Share(s)”	convertible preference share(s) of HK$1.00 each in the share
	capital of the Company
“Directors”	directors (including the independent non-executive directors)
	of the Company
“General Mandate”	the general mandate proposed to be granted to the Directors at
	the SGM to issue further new Shares not exceeding 20% of the
	issued share capital of the Company as enlarged by the
	allotment and issue of the Subscription Shares
“Group”	the Company and its subsidiaries
“Hercules Capital”	Hercules Capital Limited, a licensed corporation to carry on
	business in type 6 (advising on corporate finance) regulated
	activity under the SFO

	DEFINITIONS
“Hong Kong”	the Hong Kong Special Administrative Region of the PRC
“Independent Board Committee”	an independent board committee, comprising Mr. Zhao Yu Hua,
	Dr. Mao Er Wan and Ms. Wong Sin Yue, Cynthia, being all the
	independent non-executive Directors, which has been formed
	to advise the Independent Shareholders as to the fairness and
	reasonableness of the Subscription and the transactions
	contemplated thereunder including but not limited to the
	allotment and issue of the Subscription Shares
“Independent Shareholders”	Shareholders other than the Vendor and its associates
“Latest Practicable Date”	28 November 2003, being the latest practicable date prior to
	the printing of this circular for the purpose of ascertaining
	certain information contained in this circular
“Listing Rules”	the Rules Governing the Listing of Securities on the Stock
	Exchange
“Merrill Lynch”	Merrill Lynch International, an unlimited liability company
	established under the laws of England and Wales
“Placing”	the placing of the Placing Shares by the Placing Agent pursuant
	to the Placing and Subscription Agreement
“Placing Agent”	DBS Vickers (Hong Kong) Limited, a licensed corporation to
	carry on business in types 1 (dealing in securities), 2 (dealing
	in futures contracts) and 4 (advising on securities) regulated
	activities under the SFO
“Placing and Subscription Agreement”	the placing and subscription agreement dated 8 November 2003
	and entered into between the Company, the Vendor and the
	Placing Agent in respect of the Placing and the Subscription,
	as supplemented by a supplemental agreement dated 11
	November 2003
“Placing Price”	the placing price of HK$0.84 per Placing Share
“Placing Shares”	an aggregate of 160,000,000 Shares placed by the Placing Agent
	pursuant to the Placing and Subscription Agreement
“PRC”	the People’s Republic of China, which for the purpose of this
	circular, excludes Hong Kong, the Macau Special
	Administrative Region of the PRC and Taiwan

DEFINITIONS

“Repurchase Mandate”	the repurchase mandate proposed to be granted to the Directors
	at the SGM to repurchase up to 10% of the issued share capital
	of the Company as enlarged by the allotment and issue of the
	Subscription Shares
“SFO”	the Securities and Futures Ordinance (Chapter 571 of the Laws
	of Hong Kong)
“SGM”	the special general meeting of the Company to be convened
	and held to consider and, if thought fit, to approve, among
	other things, the Subscription and the transactions contemplated
	thereunder including but not limited to the allotment and issue
	of the Subscription Shares and the grant of the General Mandate
	and the Repurchase Mandate
“Share(s)”	ordinary share(s) of HK$0.01 each in the share capital of the
	Company
“Shareholder(s)”	holder(s) of Share(s)
“Shenzhen Natural Gas”	中亞燃氣實業(深圳)有限公司(Central Asia Natural Gas
	(Shenzhen) Company Limited), a wholly foreign owned
	enterprise established in the PRC and a wholly owned
	subsidiary of the Company
“Stock Exchange”	The Stock Exchange of Hong Kong Limited
“Subscription”	the subscription for the Subscription Shares by the Vendor
	pursuant to the Placing and Subscription Agreement
“Subscription Shares”	an aggregate of 160,000,000 new Shares, for which the Vendor
and each a “Subscription Share”	has conditionally agreed to subscribe pursuant to the Placing
	and Subscription Agreement, being the actual number of the
	Placing Shares placed under the Placing
“Takeovers Code”	the Hong Kong Code on Takeovers and Mergers
“Tranche 1 Bonds”	convertible bonds with an aggregate principal amount of
	US$6,000,000 due 2008 issued by the Company to Merrill
	Lynch pursuant to the Bonds Subscription Agreements
“Tranche 2 Bonds”	convertible bonds with an aggregate principal amount of up to
	US$7,000,000 which are to be issued by the Company to Merrill
	Lynch pursuant to an option granted by the Company to Merrill
	Lynch under the Bonds Subscription Agreements

DEFINITIONS

“Tranche	3	Bonds”	convertible bonds with an aggregate principal amount of up to
			US$8,000,000 which are to be issued by the Company to Merrill
			Lynch pursuant to an option granted by the Company to Merrill
			Lynch under the Bonds Subscription Agreements
“Tranche	4	Bonds”	convertible bonds with an aggregate principal amount of up to
			US$10,000,000 which are to be issued by the Company to
			Merrill Lynch pursuant to an option granted by the Company
			to Merrill Lynch under the Bonds Subscription Agreements
“Tranche	5	Bonds”	convertible bonds with an aggregate principal amount of up to
			US$10,000,000 which are to be issued by the Company to
			Merrill Lynch pursuant to an option granted by the Company
			to Merrill Lynch under the Bonds Subscription Agreements
“Vendor”			Heng Fung Holdings Limited, a substantial Shareholder
“HK$”			Hong Kong dollars, the lawful currency for the time being of
			Hong Kong
“US$”			United States dollars, the lawful currency for the time being of
			the United States of America
“%”			per cent.

LETTER FROM THE BOARD

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CHINA GAS HOLDINGS LIMITED （中國燃氣控股有限公司）[*]

(incorporated in Bermuda in limited liability)

Executive Directors: Mr. Li Xiaoyun (Chairman) Mr. Xu Ying (Vice Chairman) Mr. Liu Ming Hui (Managing Director) Mr. Ma Jin Long Mr. Zhu Wei Wei

Non-executive Director:

Mr. Wu Bangjie

Independent non-executive Directors: Mr. Zhao Yu Hua Dr. Mao Er Wan Ms. Wong Sin Yue, Cynthia

Registered office: Clarendon House 2 Church Street Hamilton HM 11 Bermuda

Head office and principal place of business in Hong Kong: Room 1601, 16th Floor AXA Centre No. 151 Gloucester Road Wanchai Hong Kong 3 December 2003

To the Shareholders and,

for information only, the holders of Convertible Preference Shares

Dear Sir or Madam,

CONNECTED TRANSACTION: PLACING OF EXISTING SHARES AND SUBSCRIPTION OF NEW SHARES AND PROPOSED GRANT OF GENERAL MANDATES TO ISSUE AND REPURCHASE SHARES

INTRODUCTION

On 11 November 2003, the Directors announced that the Company entered into the Placing and Subscription Agreement with the Vendor and the Placing Agent. Pursuant to the Placing and Subscription Agreement: (i) the Vendor has agreed to place, through the Placing Agent, an aggregate of 160,000,000 Shares to not less than six independent investors at a placing price of HK$0.84 per Placing Share; and (ii) the Vendor has conditionally agreed to subscribe for and the Company has conditionally agreed to allot and issue, an aggregate of 160,000,000 Shares in cash at a subscription price equal to the Placing Price. The Placing Shares were placed by the Placing Agent on a “best efforts” basis. All the Placing Shares have been placed under the Placing and completion of the Placing took place on 14 November 2003.

* For identification purpose only

LETTER FROM THE BOARD

Since the Vendor is a substantial Shareholder and the Subscription Shares will be allotted and issued to the Vendor more than 14 days after the date of the Placing and Subscription Agreement, the Subscription constitutes a connected transaction on the part of the Company under Rule 14.26(3) of the Listing Rules and will be subject to, among other things, the approval of the Independent Shareholders at the SGM.

The Independent Board Committee comprising Mr. Zhao Yu Hua, Dr. Mao Er Wan and Ms. Wong Sin Yue, Cynthia, being all the independent non-executive Directors, has been formed to advise the Independent Shareholders as to the fairness and reasonableness of the Subscription and the transactions contemplated thereunder including but not limited to the allotment and issue of the Subscription Shares. Hercules Capital has been appointed as an independent financial adviser to advise the Independent Board Committee in this regard.

The purpose of this circular is to provide you with details of the Subscription, the proposed grant of the General Mandate and the Repurchase Mandate, the letter from the Independent Board Committee to the Independent Shareholders containing its recommendation to the Independent Shareholders on the Subscription, the letter from Hercules Capital containing its advice to the Independent Board Committee on the Subscription and the notice of the SGM.

PLACING AND SUBSCRIPTION AGREEMENT

On 8 November 2003, the Company entered into the Placing and Subscription Agreement with the Vendor and the Placing Agent. Pursuant to the Placing and Subscription Agreement: (i) the Vendor has agreed to place, through the Placing Agent, an aggregate of 160,000,000 Shares to not less than six independent investors at a placing price of HK$0.84 per Placing Share; and (ii) the Vendor has conditionally agreed to subscribe for and the Company has conditionally agreed to allot and issue, an aggregate of 160,000,000 Shares in cash at a subscription price equal to the Placing Price. The Placing Shares were placed by the Placing Agent on a “best efforts” basis.

(A) Placing

The Vendor

The Vendor is a substantial Shareholder. As at the date of the Announcement, the Vendor held in total approximately 23.61% of the existing issued share capital of the Company. Immediately after completion of the Placing, the total shareholding of the Vendor has been reduced to approximately 11.13% of the existing issued share capital of the Company.

The Placing Agent

DBS Vickers (Hong Kong) Limited was appointed by the Vendor to place the Placing Shares on a “best efforts” basis. The Placing Agent is not a connected person of the Company and is independent of and not connected with the directors, chief executive and substantial shareholders of the Company or any of its subsidiaries or any of their respective associates. The Placing Agent received a placing commission of 1.5% of the aggregate Placing Price of the Placing Shares.

LETTER FROM THE BOARD

The Placees

The Placing Shares have been placed to not fewer than six professional, institutional or private investors. The placees and their ultimate beneficial owners are not connected persons of the Company and are independent of and not connected with and not acting in concert with any directors, chief executive and substantial shareholders of the Company or any of its subsidiaries or any of their respective associates. The placees and their ultimate beneficial owners are also independent of and not connected with and not acting in concert with the Vendor or any party connected or acting in concert with it. None of the placees has become a substantial Shareholder immediately after completion of the Placing.

Number of Placing Shares

The Placing Shares represent approximately 12.48% of the existing issued share capital of the Company and approximately 11.09% of the issued share capital of the Company as enlarged by the allotment and issue of the Subscription Shares.

Placing Price

The placing price of HK$0.84 per Placing Share represents:

(i) a discount of approximately 22.94% to the closing price of HK$1.09 per Share as quoted on the Stock Exchange on 6 November 2003, being the last trading day before the date of the Announcement;
(ii) a discount of approximately 12.50% to the average closing price of approximately HK$0.96 per Share as quoted on the Stock Exchange for the last 10 consecutive trading days up to and including 6 November 2003;
(iii) a premium of approximately 3.70% over the closing price of HK$0.81 per Share as quoted on the Stock Exchange on the Latest Practicable Date; and
(iv) a premium of approximately 3.70% over the average closing price of HK$0.81 per Share as quoted on the Stock Exchange for the last 10 consecutive trading days up to and including the Latest Practicable Date.

The Placing Price was arrived at after arm’s length negotiations between the Company, the Vendor and the Placing Agent with reference to the closing prices as shown in (i) and (ii) above. The Directors consider that the Placing Price and the terms of the Placing and Subscription Agreement are fair and reasonable and are in the interests of the Shareholders as a whole.

Rights

The Placing Shares were sold free of any third party rights.

LETTER FROM THE BOARD

Completion of the Placing

The Placing was unconditional and completion has taken place on 14 November 2003.

(B) The Subscription

The Issuer

The Company

The Subscriber

The Vendor, which is interested in approximately 11.13% of the existing issued share capital of the Company immediately after completion of the Placing, will subscribe for 160,000,000 Shares under the Subscription. The Subscription will increase the total shareholding of the Vendor to approximately 20.99% of the issued share capital of the Company as enlarged by the allotment and issue of the Subscription Shares.

Number of Subscription Shares

The number of Subscription Shares equals to the actual number of Placing Shares placed under the Placing. The Subscription Shares represent approximately 12.48% of the existing issued share capital of the Company and approximately 11.09% of the issued share capital of the Company as enlarged by the allotment and issue of the Subscription Shares.

Subscription Price

The subscription price is HK$0.84 per Subscription Share, which is equivalent to the Placing Price.

Rights

The Subscription Shares, when allotted and issued, will rank equally in all respects among themselves and with the Shares in issue on the date of allotment and issue of the Subscription Shares.

Mandate to issue the Subscription Shares

The SGM will be convened and held at 10:00 a.m. on 19 December 2003 at Room 1601, 16th Floor, AXA Centre, No. 151 Gloucester Road, Wanchai, Hong Kong to consider and, if thought fit, to approve, among other things, the Subscription and the transactions contemplated thereunder including but not limited to the allotment and issue of the Subscription Shares to the Vendor pursuant to the Placing and Subscription Agreement.

LETTER FROM THE BOARD

Conditions of the Subscription

The Subscription is conditional upon the following conditions having been fulfilled by 5 January 2004 (or such other date as may be agreed between the Company and the Vendor):

(i) the passing of the necessary resolution by the Independent Shareholders at the SGM to approve the Subscription and the transactions contemplated thereunder including but not limited to the allotment and issue of the Subscription Shares pursuant to the Placing and Subscription Agreement;
(ii) the completion of the Placing pursuant to the Placing and Subscription Agreement;
(iii) the Listing Committee of the Stock Exchange granting or agreeing to grant the listing of, and permission to deal in, the Subscription Shares;
(iv) (if so required) the Bermuda Monetary Authority granting permission for the allotment and issue of the Subscription Shares; and
(v) (if so required) the Subscriber having obtained all regulatory approvals.

In the event that the conditions of the Subscription are not fulfilled in full by the date stipulated, neither the Company nor the Subscriber shall have any obligations and liabilities under the Subscription. As at the Latest Practicable Date, condition (ii) above have been fulfilled.

Completion of the Subscription

Completion of the Subscription will take place on the third business day after all the conditions of the Subscription are fulfilled (or such other date as may be agreed between the Company and the Subscriber).

Application for listing

Application has been made by the Company to the Listing Committee of the Stock Exchange for the listing of, and permission to deal in, the Subscription Shares.

LETTER FROM THE BOARD

CHANGES OF SHAREHOLDING STRUCTURE

The changes of the shareholding structure of the Company as a result of the Placing and the Subscription are as follows:

Shareholders The Vendor_(Note)_ The placees Public Total	At the date At the Latest of the Announcement Practicable Date and immediately and immediately after before completion completion of the Placing Immediately after of the Placing and but before completion completion of the Placing the Subscription of the Subscription and the Subscription Approximately 23.61% Approximately 11.13% Approximately 20.99% – Approximately 12.48% Approximately 11.09% Approximately 76.39% Approximately 76.39% Approximately 67.92% 100% 100% 100%	At the date At the Latest of the Announcement Practicable Date and immediately and immediately after before completion completion of the Placing Immediately after of the Placing and but before completion completion of the Placing the Subscription of the Subscription and the Subscription Approximately 23.61% Approximately 11.13% Approximately 20.99% – Approximately 12.48% Approximately 11.09% Approximately 76.39% Approximately 76.39% Approximately 67.92% 100% 100% 100%
		100%

Note: The Company has been informed by the Vendor that it has granted a call option to EnerSave Holdings Limited to acquire up to 300,000,000 Shares from the Vendor, details of which are set out in the Company’s announcement dated 5 September 2003.

REASONS FOR THE PLACING AND SUBSCRIPTION AGREEMENT

The Group is principally engaged in investment in, among other things, natural gas/energy and property projects.

By entering into the Placing and Subscription Agreement, the Group can raise capital for the Group to further strengthen its financial position. The net proceeds of the Subscription of about HK$130,000,000 will be applied as to approximately HK$78,000,000 for the contribution of the enlarged registered capital of Shenzhen Natural Gas and as to the remaining balance as the general working capital of the Group. The Directors consider that the Placing and Subscription Agreement was entered into upon normal commercial terms following arm’s length negotiations between the Company, the Placing Agent and the Vendor and that the terms of the Subscription Agreement are fair and reasonable so far as the interests of the Shareholders as a whole are concerned.

Shenzhen Natural Gas, a wholly owned subsidiary of the Company, is a wholly foreign owned enterprise established in the PRC on 22 November 2002. As at the Latest Practicable Date, the registered capital of Shenzhen Natural Gas was US$29,800,000 and would be fully contributed by the Company. Shenzhen Natural Gas is an investment holding company principally engaged in investment in natural gas projects in the PRC. As at the Latest Practicable Date, Shenzhen Natural Gas has invested in natural gas projects in Huainan, Suizhou, Yichang and Wuhu in the PRC. Since it is the Group’s objective to participate in the natural gas industries in the PRC, the Group would continue to invest in natural gas projects in the PRC through Shenzhen Natural Gas. As such, the registered capital of Shenzhen Natural Gas would be enlarged in order to facilitate the investment. The Directors confirm that no such investment opportunities have been identified yet. Further announcement will be made as and when appropriate in accordance with the Listing Rules.

10 -

LETTER FROM THE BOARD

The following table summarises the fund raising activities of the Group for the 12 months immediately preceding the Latest Practicable Date:

				Actual use of
Date of			Intended use	proceeds as at the
announcement	Event	Net proceeds	of proceeds	Latest Practicable Date
10 June 2003	Issue of convertible	About	As investment	The net proceeds of
	note in the	HK$46,800,000	in natural gas	about HK$46,800,000
	principal amount		projects in	have been applied as
	of US$6,000,000		the PRC	the Group’s contribution
				to the registered capital
				of Yichang China Gas
				& City Gas Company
				Limited.(Note 1)
9 October 2003	Placing of an	About	As general	The net proceeds of
	aggregate of	HK$50,000,000	working capital	about HK$6,000,000
	70,000,000		of the Group	have been applied as
	new Shares			the Group’s general
				working capital and
				the remaining balance
				of about HK$44,000,000
				remains unutilised and
				is currently placed on
				deposits with banks
				in Hong Kong.
30 October 2003	Issue of	Up to	(Note 2)	The Tranche 1 Bonds
	convertible bonds	US$41,000,000		were issued on
	due 2008 in up	(Note 2)		13 November 2003.
	to five tranches			The Company will apply
				the net proceeds derived
				from the issue of the
				Bonds in accordance with
				the intended use as set out
				in the Company’s
				announcement dated
				30 October 2003.

Notes:

Yichang China Gas & City Gas Company Limited is a Chinese-foreign equity joint venture established in the PRC by Shenzhen Natural Gas, Wuhan China Natural Gas Investment Company Limited and Yichang City Natural Gas Company Limited. The registered capital of Yichang China Gas & City Gas Company Limited is contributed as to 49% by Shenzhen Natural Gas, as to 21% by Wuhan China Natural Gas Investment Company Limited and as to 30% by Yichang City Natural Gas Company Limited.

11 -

LETTER FROM THE BOARD

Yichang China Gas & City Gas Company Limited is principally engaged in the design, construction and operation of natural gas pipeline network and ancillary facilities as well as provision of piped natural gas in Yichang, Hubei Province, the PRC. For details of the formation of Yichang China Gas & City Gas Company Limited, please refer to the Company’s announcement dated 10 December 2002.

The net proceeds of about HK$45,000,000 derived from the issue of the Tranche 1 Bonds, will be used entirely as second stage capital contribution in the Group’s natural gas projects in Huainan and Wuhu, the PRC, through Shenzhen Natural Gas. The net proceeds derived from the Tranche 2 Bonds, the Tranche 3 Bonds, the Tranche 4 Bonds and the Tranche 5 Bonds (if issued) will, depending on the extent those Bonds are issued, be used for capital contribution in the Group’s existing or future natural gas projects and/or for working capital purposes. Details regarding the issue of the Bonds are set out in the Company’s announcement dated 30 October 2003.

The net proceeds of about HK$50,000,000 derived from the placing of an aggregate of 70,000,000 Shares in October 2003 had been earmarked as the general working capital of the Group. Although a balance of about HK$44,000,000 of such net proceeds remained unutilised as at the Latest Practicable Date, the Company has no intention to alter the intended use of such unutilised proceeds.

The Board had considered and explored other methods of funding other than the Placing and the Subscription. The Board was of the view that the Placing and the Subscription were an ideal opportunity for the Company to raise additional capital because:

(i) they would enhance the capital base of the Company, thereby giving it greater flexibility in the funding of its existing and future projects;
(ii) they would increase the shareholders’ base of the Company;
(iii) they would increase the marketability of the Shares;
(iv) a rights issue or open offer would take too long to arrange compared with the Placing and the Subscription and would be much more costly; and
(v) the net asset value and the gearing position of the Group will be improved and the financial position of the Group will be further strengthened.

Taking into account the market conditions and the performance of the trading prices of the Shares, and in order to raise further funds for the Group’s investment in natural gas projects in the PRC, the Directors consider that the Placing and the Subscription and their timing to be in the interests of the Group and the Shareholders as a whole. Since no such investment opportunities have been identified yet as at the Latest Practicable Date, the Directors do not consider that there would be material adverse effect on the performance of the Group should the Subscription cannot proceed.

GENERAL MANDATE AND REPURCHASE MANDATE

At the SGM, the Directors also propose to seek the approval of the Shareholders to grant to the Directors the General Mandate and the Repurchase Mandate.

12 -

LETTER FROM THE BOARD

General Mandate

At the SGM, an ordinary resolution will be proposed that the Directors be given an unconditional general mandate to allot, issue and deal with unissued Shares or securities convertible into Shares, options, warrants or similar rights to subscribe for any Shares (other than by way of rights or pursuant to a share option scheme for employees or directors of the Company and/or any of its subsidiaries or pursuant to any scrip dividend scheme or similar arrangements providing for the allotment and issue of Shares in lieu of whole or part of the dividend on Shares in accordance with the bye-laws of the Company or upon the exercise of rights of subscription or conversion under the terms of any securities or bonds convertible into Shares) or make or grant offers, agreements, options and warrants which might require the exercise of such power, of an aggregate nominal amount of up to 20% of the aggregate nominal amount of the issued Shares as enlarged by the allotment and issue of the Subscription Shares.

As at the Latest Practicable Date, the Company had an aggregate of 1,282,407,116 issued Shares. Assuming the Subscription has been completed and the Subscription Shares are allotted and issued, the Company will have an aggregate of 1,442,407,116 Shares.

Subject to the passing of the resolution for the approval of the General Mandate and on the basis that no further Shares are issued or repurchased between the Latest Practicable Date and the date of the SGM and that the Subscription Shares are duly allotted and issued pursuant to the Subscription, the Company would be allowed under the General Mandate to allot, issue and deal with a maximum of 288,481,423 Shares.

Repurchase Mandate

At the SGM, an ordinary resolution will also be proposed that the Directors be given an unconditional general mandate to repurchase Shares on the Stock Exchange or any other stock exchange on which the Shares may be listed and recognised by the Securities and Futures Commission of Hong Kong and the Stock Exchange for such purpose, of an aggregate nominal amount of up to 10% of the aggregate nominal amount of the issued Shares as enlarged by the allotment and issue of the Subscription Shares.

The General Mandate and the Repurchase Mandate shall continue in force during the period from the date of passing of the resolutions for the approval of the General Mandate and the Repurchase Mandate up to (i) the conclusion of the next annual general meeting of the Company; (ii) the expiration of the period within which the next annual general meeting of the Company is required by the bye-laws of the Company, the Companies Act 1981 of Bermuda or any applicable laws of Bermuda to be held; or (iii) the revocation or variation of the General Mandate or the Repurchase Mandate (as the case may be) by ordinary resolution of the Shareholders in general meeting, whichever occurs first.

13 -

LETTER FROM THE BOARD

An explanatory statement in connection with the Repurchase Mandate is set out in Appendix I to this circular. The explanatory statement contains all the requisite information required under the Listing Rules to be given to the Shareholders to enable them to make an informed decision on whether to vote for or against the resolution approving the Repurchase Mandate.

SGM

(i) the Subscription and the transactions contemplated thereunder including but not limited to the allotment and issue of the Subscription Shares;
(ii) the grant of the General Mandate; and
(iii) the grant of the Repurchase Mandate.

The Vendor and its associates will abstain from voting in respect of the resolution approving the Subscription and the transactions contemplated thereunder including but not limited to the allotment and issue of the Subscription Shares.

A form of proxy for use at the SGM is enclosed with this circular. Whether or not you are able to attend the SGM, you are requested to complete the accompanying form of proxy in accordance with the instructions printed thereon and deposit the same at the offices of the Company’s branch share registrar in Hong Kong, Computershare Hong Kong Investor Services Limited at Rooms 1901-1905, Hopewell Centre, 183 Queen’s Road East, Hong Kong as soon as possible and in any event not less than 48 hours before the time appointed for the holding of the SGM or any adjournment thereof. Completion and return of the form of proxy will not preclude you from attending and voting in person at the SGM or any adjournment thereof should you so wish.

RECOMMENDATIONS

Hercules Capital has been appointed to advise the Independent Board Committee with regard to the terms of the Subscription. Hercules Capital considers that the terms of the Subscription are in the interests of the Shareholders as a whole and are fair and reasonable insofar as the Independent Shareholders are concerned. The text of the letter of advice from Hercules Capital containing its advice and the principal factors and reasons it has taken into consideration in arriving at its advice are set out on pages 17 to 21 of this circular.

The Independent Board Committee, having taken into account the advice of Hercules Capital, considers the terms of the Subscription and the transactions contemplated thereunder including but not limited to the allotment and issue of the Subscription Shares to be fair and reasonable so far as the Independent Shareholders are concerned. Accordingly, the Independent Board Committee recommends

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LETTER FROM THE BOARD

the Independent Shareholders to vote in favour of the ordinary resolution to be proposed at the SGM to approve the Subscription and the transactions contemplated thereunder including but not limited to the allotment and issue of the Subscription Shares. The text of the letter from the Independent Board Committee is set out on page 16 of this circular.

The Directors consider the proposed grant of the General Mandate and the Repurchase Mandate is fair and reasonable and is in the interests of the Company and the Shareholders as a whole. Accordingly, the Directors recommend the Shareholders to vote in favour of the relevant ordinary resolutions to be proposed at the SGM.

FURTHER INFORMATION

Your attention is also drawn to the letter of advice from Hercules Capital, which contains its advice to the Independent Board Committee in connection with the Subscription, the letter from the Independent Board Committee which sets outs its recommendation to the Independent Shareholders in relation to the Subscription and the transactions contemplated thereunder including but not limited to the allotment and issue of the Subscription Shares, and the additional information set out in the Appendices to this circular.

Yours faithfully For and on behalf of the Board China Gas Holdings Limited Liu Ming Hui Managing Director

15 -

LETTER FROM THE INDEPENDENT BOARD COMMITTEE

The following is the text of a letter from the Independent Board Committee setting out its recommendation to the Independent Shareholders in relation to the Subscription and the transactions contemplated thereunder including but not limited to the allotment and issue of the Subscription Shares:

==> picture [22 x 46] intentionally omitted <==

==> picture [47 x 33] intentionally omitted <==

CHINA GAS HOLDINGS LIMITED （中國燃氣控股有限公司）[*]

(incorporated in Bermuda in limited liability)

3 December 2003

To the Independent Shareholders

Dear Sir or Madam,

CONNECTED TRANSACTION:

SUBSCRIPTION OF NEW SHARES

We have been appointed to advise you in respect of the Subscription and the transactions contemplated thereunder including but not limited to the allotment and issue of the Subscription Shares. Details of the Subscription are set out in the letter from the Board on pages 5 to 15 of this circular (the “ Circular ”), of which this letter forms part. Capitalised terms used in this letter shall have the same meanings as those defined in the Circular unless specified otherwise.

We wish to draw your attention to the letter from the Board as set out on pages 5 to 15 of the Circular and the letter of advice from Hercules Capital as set out on pages 17 to 21 of the Circular.

Having taken into account the advice and recommendation of Hercules Capital, we consider the terms of the Subscription and the transactions contemplated thereunder including but not limited to the allotment and issue of the Subscription Shares to be fair and reasonable so far as the Independent Shareholders are concerned. Accordingly, we recommend the Independent Shareholders to vote in favour of the resolution to be proposed at the SGM to approve the Subscription and the transactions contemplated thereunder including but not limited to the allotment and issue of the Subscription Shares.

Yours faithfully Independent Board Committee Zhao Yu Hua Mao Er Wan Wong Sin Yue, Cynthia

* For identification purpose only

16 -

LETTER FROM HERCULES CAPITAL

The following is the text of a letter of advice prepared by Hercules Capital to the Independent Board Committee in relation to the Subscription for the purpose of incorporation in this circular:

1503 Ruttonjee House 11 Duddell Street Central Hong Kong

3 December 2003

To the Independent Board Committee of China Gas Holdings Limited

Dear Sirs,

CONNECTED TRANSACTION

SUBSCRIPTION OF NEW SHARES

We refer to the Subscription, details of which are set out in the “Letter from the Board” contained in this circular dated 3 December 2003 to the Shareholders (the “Circular”) of which this letter forms part. Hercules Capital has been appointed as the independent financial adviser to advise the Independent Board Committee as to whether the terms of the Subscription insofar as the Independent Shareholders are concerned are fair and reasonable. Terms used in this letter have the same meanings as defined elsewhere in the Circular unless the context otherwise requires and specifies.

The Vendor is a substantial shareholder of the Company and the Subscription Shares will be allotted and issued to the Vendor more than 14 days after the date of the Placing and Subscription Agreement, accordingly, under the Listing Rules the Subscription will constitute a connected transaction for the Company and will be subject to approval by the Independent Shareholders.

In formulating our recommendations, we have relied on the information and representations supplied, and the opinions expressed, by the Directors and management of the Company and have assumed that all statements and representations made to us by the Directors and management of the Company or made or referred to in the Circular are true and accurate at the time they were made and as at the date of the Circular and will continue to be true at the date of the SGM. We have also sought and received confirmation from the Directors that all material relevant information has been supplied to us and no material facts have been omitted from the information supplied and opinions expressed. We have discussed with the Directors with respect to the terms and reasons of the Subscription and relied on such information and consider that we have been provided with and have reviewed sufficient information to reach an informed view on the terms of the Subscription and to justify our reliance on the accuracy of the information contained in the Circular in order to provide a reasonable basis for our recommendation. We have no

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LETTER FROM HERCULES CAPITAL

reason to suspect that any material information has been withheld by the Directors or is misleading, untrue or inaccurate. We have not, however, for the purpose of this exercise, conducted any independent detailed investigation or audit into the businesses or affairs of the Group and the related subjects and parties of the Subscription.

PRINCIPAL FACTORS AND REASONS CONSIDERED

The principal factors and reasons we have taken into consideration in assessing the Subscription and arriving at our opinion to the Independent Board Committed are set out below:

(1) Background and reasons

The Group is principally engaged in investment in, among other things, natural gas/energy and property projects. The Directors are of the view that by entering into the Placing and Subscription Agreement, the Group can raise capital for the Group to further strengthen its financial position.

Pursuant to the Placing and Subscription Agreement, the net proceeds of the Subscription of about HK$130,000,000 will be applied as to approximately HK$78,000,000 for the contribution of the enlarged registered capital of Shenzhen Natural Gas and as to the remaining balance as the general working capital of the Group.

Shenzhen Natural Gas, a wholly owned subsidiary of the Company, is a wholly foreign owned enterprise established in the PRC on 22 November 2002. As at the Latest Practicable Date, the registered capital of Shenzhen Natural Gas was US$29,800,000 and would be fully contributed by the Company. Shenzhen Natural Gas is an investment holding company principally engaged in investment in natural gas projects in the PRC. As at the Latest Practicable Date, Shenzhen Natural Gas has invested in natural gas projects in Huainan, Suizhou, Yichang and Wuhu in the PRC. Since it is the Group’s objective to participate in the natural gas industries in the PRC, the Group would continue to invest in natural gas projects in the PRC through Shenzhen Natural Gas. As such, the registered capital of Shenzhen Natural Gas will be enlarged in order to facilitate the investment.

(i) they would enhance the capital base of the Company, thereby giving it greater flexibility in the funding of its existing and future projects;
(ii) they would increase the shareholders’ base of the Company;
(iii) a rights issue or open offer would take too long to arrange compared with the Placing and the Subscription and would be much more costly; and
(iv) the net asset value and the gearing position of the Group will be improved and the financial position of the Group will be further strengthened.
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LETTER FROM HERCULES CAPITAL

Taking into account the market conditions and the performance of the trading prices of the Shares, and in order to raise further funds for the Group’s investment in natural gas projects in the PRC, the Directors consider that the Placing and the Subscription and their timing to be in the interests of the Group and the Shareholders as a whole. We concur with the Directors that the Subscription is a less costly and time consuming way for the Group to further strengthen its financial position and to improve its net asset value and gearing position.

(2) Completion of the Subscription

Completion of the Subscription is expected to take place on the third business date following the fulfilment of all the conditions set out in the section headed “Conditions of the Subscription” on page 9 of the Circular but limited by the deadline of 5 January 2004 (or such later date as may be agreed by the Company and the Vendor). The Subscription Shares will be allotted and issued to the Vendor more than 14 days after the date of the Placing and Subscription Agreement as the limit of the general mandate (to issue or otherwise deal in 20% of the issued ordinary share capital of the Company) granted to the Directors by the Shareholders pursuant to an ordinary resolution passed at the general meeting held on 27 August 2003, for the allotment and issuance of a maximum of 172,481,423 new shares has been reached after the Company placed an aggregate of 70,000,000 shares on 9 October 2003 and issued the Tranche 1 Bonds and the relevant subscription rights, as set out in the table that summaries the fund raising activities of the Group for the 12 months immediately preceding the Latest Practicable Date on page 11 of the Circular. The balance of the general mandate limit is not sufficient for the Subscription and, as a result, the Company has to seek Shareholders’ approval for the allotment and issuance of new shares for the Subscription. In addition, as the Vendor is a substantial shareholder of the Company and the Subscription Shares will be allotted and issued to the Vendor more than 14 days after the date of the Placing and Subscription Agreement, the Subscription will constitute a connected transaction for the Company under Rule 14.26(3) and will be subject to approval by the Independent Shareholders. An ordinary resolution regarding the Subscription will be proposed at the SGM to be approved by the Independent Shareholders. The Vendor and its associates will abstain from voting in respect of the resolution approving the Subscription.

(3) Basis of the subscription price and expenses

According to the Placing and Subscription Agreement, the Vendor will subscribe for the same number of Placing Shares in cash at HK$0.84 per Subscription Share which is equivalent to the Placing Price, and the Company will be responsible for all the expenses of the Placing Agent and the Vendor incurred in connection with the Subscription and the Placing.

The Subscription price of HK$0.84 per Subscription Share represents:

(i) a discount of approximately 22.94% to the closing price of HK$1.09 per Share as quoted on the Stock Exchange on 6 November 2003, being the last trading day before the date of the Announcement;
(ii) a discount of approximately 12.50% to the average closing price of approximately HK$0.96 per Share as quoted on the Stock Exchange for the last 10 consecutive trading days up to and including 6 November 2003;
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LETTER FROM HERCULES CAPITAL

(iii) a premium of approximately 3.70% over the closing price of HK$0.81 per Share as quoted on the Stock Exchange on the Latest Practicable Date; and
(iv) a premium of approximately 3.70% over the average closing price of HK$0.81 per Share as quoted on the Stock Exchange for the last 10 consecutive trading days up to and including the Latest Practicable Date; and
(v) a premium of approximately 277.51% over the net asset value per Share of HK$0.22 per Share as of 31 March, 2003, being the date on which the latest financial statements are made.

In assessing the fairness and reasonableness of the Subscription price, we have identified two recent share transactions involving two listed companies in the gas industry (the “Comparable Companies”) to compare the pricing of their shares with that of the Subscription Shares. We have made principal references to the discount to closing price, discount to average 10 days closing price and premium/discount to the net asset value (NAV) per share of the Comparable Companies as follows:

					Discount to	Premium/discount
Comparable	Transaction	Announcement	Transaction	Discount to	average 10 days	to NAV
Companies	Type	Date	Price (HK$)	closing price	closing price	per share
NewOcean	Share placement	28-Nov-03	0.120	6.98% (to the closing	8.4% discount (to	219.38% premium (to
Energy (#342)				price of HK$0.129 on	average closing price	the NAV per share of
				26-Nov-03)	of HK$0.131 for the	HK$0.038 as of
					10 trading days up to	30-Jun-03)
					and including 26-Nov-03)
China City Gas	Sale of old shares	15-Sep-03	0.052	7.14% (to the closing	1.5% discount (to	30.48% discount (to
(#603)	by substantial			price of HK$0.056	average closing price	the NAV per share of
	shareholder			on 11-Sep-03)	of HK$0.0528 for the	HK$0.075 as of
					10 trading days up to	31-Jan-03)
					and including 11-Sep-03)
The Company	Share placement	11-Nov-03	0.840	22.94% discount (to	12.50% discount (to	277.51% premium (to
				the closing price of	average closing price	the NAV per share of
				HK$1.09 on 6-Nov-03)	of HK$0.96 for the	HK$0.22 as of
					10 trading days up to	31-Mar-03)
					and including 6-Nov-03)

As demonstrated above, although the 22.94% discount to the closing price and the 12.50% discount to the 10 days average closing price of the Company are the highest amongst the three companies, the 277.51% premium to the NAV per share is also the highest amongst the three companies. The Independent Shareholders, however, should note that the Subscription price of HK$0.84 represents a premium of approximately 3.70% over the closing price of HK$0.81 per

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LETTER FROM HERCULES CAPITAL

Share as quoted on the Stock Exchange on the Latest Practicable Date, and a premium of approximately 3.70% over the average closing price of HK$0.81 per Share as quoted on the Stock Exchange for the last 10 consecutive trading days up to and including the Latest Practicable Date. Taking the above into consideration, we concur with the Directors that the Placing and the Subscription and their timing are in the interest of the Group and the Shareholders as a whole, and accordingly, we are of the view that the Subscription price is fair and reasonable.

(4) Shareholding Dilution

Prior to the Placing, as at the date of the announcement (11 November 2003), the Vendor held in total approximately 23.61% of the issued share capital of the Company. The Vendor was interested in approximately 11.13% of the existing issued share capital of the Company immediately after completion of the Placing on 14 November 2003. Following completion of the Subscription, the total shareholding of the Vendor will be approximately 20.99% of the issued share capital of the Company as enlarged by the allotment and issuance of the Subscription Shares. Both the Vendor and all the Independent Shareholders will be subject to an approximately 11.23% dilution to their existing shareholdings. In view of the substantial premium of approximately 277.51% over the net asset value per Share of HK$0.22 per Share as of 31 March, 2003, and the Subscription will enable the Group to raise capital to further strengthen its financial position, we are of the view that the Subscription is fair and reasonable and in the interest of the Shareholders as a whole.

(5) Possible effects if the Subscription is not approved

In the event that the ordinary resolution regarding the Subscription proposed at the SGM is not approved, the Company will not obtain the funding required to enlarge the registered capital of Shenzhen Natural Gas and the general working capital as described under the section headed “Background and reasons” of this letter, but will still be responsible for all the expenses incurred by the Placing Agent and the Vendor in connection with the Placing.

RECOMMENDATION

Having considered the abovementioned principal factors and reasons, we consider the terms of the Subscription are fair and reasonable insofar as the Independent Shareholders are concerned and in the interest of the Shareholders as a whole. Accordingly, we recommend the Independent Board Committee to advise the Independent Shareholders to vote in favour of ordinary resolution no.1 to be proposed at the upcoming special general meeting.

Yours faithfully, For and on behalf of Hercules Capital Limited Louis Koo Warren Cheung Managing Director Managing Director

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EXPLANATORY STATEMENT

APPENDIX I

This appendix serves as an explanatory statement, as required by the Listing Rules, to provide the requisite information to you for your consideration of the Repurchase Mandate.

1. SHARE CAPITAL

As at the Latest Practicable Date, the Company had an aggregate of 1,282,407,116 Shares. Assuming the Subscription has been completed and the Subscription Shares are allotted and issued, the Company will have an aggregate of 1,442,407,116 Shares.

Subject to the passing of the resolution for the approval of the Repurchase Mandate and on the basis that no further Shares are issued or repurchased between the Latest Practicable Date and the date of the SGM and that the Subscription Shares are duly allotted and issued pursuant to the Subscription, the Company would be allowed under the Repurchase Mandate to repurchase a maximum of 144,240,711 Shares during the period from the date of passing of the resolution for the approval of the Repurchase Mandate up to (i) the conclusion of the next annual general meeting of the Company; (ii) the expiration of the period within which the next annual general meeting of the Company is required by the bye-laws of the Company, the Companies Act 1981 of Bermuda or any other applicable laws of Bermuda to be held; or (iii) the revocation or variation of the Repurchase Mandate by ordinary resolution of the Shareholders in general meeting, whichever occurs first.

2. REASONS FOR REPURCHASES

The Directors believe that it is in the best interests of the Company and the Shareholders for the Directors to have general authority from Shareholders to enable the Company to repurchase Shares in the market. Repurchases of Shares will only be made when the Directors believe that such repurchases will benefit the Company and the Shareholders. Such repurchases may, depending on market conditions and funding arrangements at the time, lead to an enhancement of the net asset value per Share and/or earnings per Share.

3. FUNDING OF REPURCHASES

In repurchasing Shares, the Company may only apply funds legally available for such purpose in accordance with its memorandum of association and bye-laws, the Listing Rules and the applicable laws of Bermuda. The Company may not repurchase its own Shares on the Stock Exchange for a consideration other than cash or for settlement otherwise than in accordance with the trading rules of the Stock Exchange from time to time.

4. GENERAL

There might be a material adverse impact on the working capital or gearing position of the Company (as compared with the position disclosed in the audited consolidated financial statements contained in the annual report of the Company for the year ended 31 March 2003) in the event that the Repurchase Mandate is exercised in full. However, the Directors do not propose to exercise the Repurchase Mandate to such an extent as would, in the circumstances, have a material adverse effect on the working capital requirements of the Company or on the gearing levels which in the opinion of the Directors are from time to time appropriate for the Company.

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EXPLANATORY STATEMENT

APPENDIX I

5. SHARE PRICES

The highest and lowest closing prices at which the Shares were traded on the Stock Exchange during each of the twelve months immediately preceding the date of this circular and up to the Latest Practicable Date are as follows:

Month	Highest	Lowest
	HK$	HK$
2002
November	1.12	0.97
December	1.05	0.87
2003
January	1.18	0.91
February	1.03	0.90
March	1.00	0.80
April	0.90	0.73
May	0.81	0.70
June	0.80	0.67
July	0.81	0.67
August	0.92	0.69
September	1.05	0.72
October	0.99	0.79
November (up to the Latest Practicable Date)	1.22	0.70

6. DIRECTORS’ UNDERTAKING

The Directors have undertaken to the Stock Exchange that, so far as the same may be applicable, they will exercise the Repurchase Mandate in accordance with the Listing Rules, the memorandum of association and bye-laws of the Company and the applicable laws of Bermuda.

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EXPLANATORY STATEMENT

APPENDIX I

7. TAKEOVERS CODE CONSEQUENCE

If as a result of a repurchase of Shares, a Shareholder’s proportionate interest in the voting rights of the Company increases, such increase will be treated as an acquisition for the purposes of Rule 32 of the Takeovers Code. As a result, a Shareholder, or a group of Shareholders acting in concert (within the meaning under the Takeovers Code), depending on the level of increase in the Shareholder’s interests, could obtain or consolidate control of the Company and become(s) obliged to make a mandatory offer in accordance with Rule 26 of the Takeovers Code.

Immediately after completion of the Placing and as at the Latest Practicable Date, the Vendor and parties acting in concert with it held approximately 11.13% of the existing issued share capital of the Company. Assuming the Subscription has been completed and the Subscription Shares are allotted and issued, the Vendor and parties acting with it will hold approximately 20.99% of the issued share capital of the Company as enlarged by the allotment and issue of the Subscription Shares. In the event that the Directors exercise in full the power to repurchase Shares in accordance with the Repurchase Mandate, the shareholding of the Vendor and parties acting in concert with it in the Company would be increased to approximately 23.32% of the then issued share capital of the Company.

On the basis of the current shareholding of the Vendor and parties acting in concert with it and on the assumption that the Subscription has been completed as aforesaid, an exercise of the Repurchase Mandate in full will not result in them becoming obliged to make a mandatory offer under Rule 26 of the Takeover Code.

Save as aforesaid, the Directors are not aware of any other consequences which may arise under the Takeover Code if the Repurchase Mandate is exercised in full. However, the Company may not repurchase Shares which would result in the amount of Shares held by the public being reduced to less than 25%.

None of the Directors nor, to the best of their knowledge having made all reasonable enquiries, any of their respective associates have notified the Company of any present intention, if the Repurchase Mandate is approved by the Shareholders at the SGM, to sell Shares to the Company or its subsidiaries.

No connected person of the Company has notified the Company that it has a present intention to sell Shares to the Company, or has undertaken not to do so, in the event that the Repurchase Mandate is approved by the Shareholders at the SGM.

8. SHARES REPURCHASE MADE BY THE COMPANY

No repurchases of Shares have been made by the Company (whether on the Stock Exchange or otherwise) during the six months prior to the Latest Practicable Date.

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GENERAL INFORMATION

APPENDIX II

1. RESPONSIBILITY STATEMENT

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

2. SHARE CAPITAL OF THE COMPANY

The authorised and issued share capital of the Company as at the Latest Practicable Date and on completion of the Subscription were and will be as follows:

(a) (b)	Shares Authorised 9,000,000,000 Shares Issued and to be issued, fully paid or credited as fully paid 1,282,407,116 Shares in issue as at the Latest Practicable Date 160,000,000 Subscription Shares to be issued upon completion of the Subscription 1,442,407,116 Shares Convertible Preference Shares Authorised 124,902,477 Convertible Preference Shares Issued, fully paid or credited as fully paid 124,902,477 Convertible Preference Shares in issue as at the Latest Practicable Date_(Note)_	HK$ 90,000,000

		12,824,071.16 1,600,000.00
		14,424,071.16

		HK$ 124,902,477.00

		124,902,477.00

Note: The Company has issued an aggregate of 124,902,477 Convertible Preference Shares, of which 118,603,906 Convertible Preference Shares have been converted into Shares and 6,298,571 Convertible Preference Shares remained unconverted.

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GENERAL INFORMATION

APPENDIX II

The Subscription Shares, when allotted and issued, will rank equally in all respects among themselves and with the Shares in issue on the date of allotment and issue of the Subscription Shares, including but not limited to the right to receive all dividends, distributions or entitlements declared, paid or made in respect of the Shares, the record date for which shall fall on or after the date of allotment and issue of the Subscription Shares.

3. DISCLOSURE OF INTERESTS

(a) Director’s interests and short positions in the securities of the Company and its associated corporations

As at the Latest Practicable Date, none of the Directors nor the chief executive of the Company had or was deemed to have any interests or short positions in the shares, underlying shares or debentures of the Company and its associated corporations (within the meaning of Part XV of the SFO) (i) which were required to be notified to the Company and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO (including interests or short positions which they were taken or deemed to have under such provisions of the SFO); or (ii) which were required, pursuant to section 352 of the SFO, to be entered in the register referred to therein; or (iii) which were required to be notified to the Company and the Stock Exchange pursuant to the Model Code for Securities Transactions by Directors of Listed Companies contained in the Listing Rules.

(b) Persons who have an interest or short position which is discloseable under Divisions 2 and 3 of Part XV of the SFO and substantial Shareholders

So far as is known to the Directors, as at the Latest Practicable Date, the following persons (not being Directors or chief executive of the Company) had, or were deemed to have, interests or short positions in the Shares or underlying Shares which would fall to be disclosed to the Company and the Stock Exchange under the provisions of Divisions 2 and 3 of Part XV of the SFO or who were directly or indirectly interested in 10% or more of the nominal value of any class of share capital carrying rights to vote in all circumstances at general meetings of any member of the Group:

Number or attributable	Number or attributable	Approximate
number of Shares held or		percentage or attributable
Name of Shareholder	short position	percentage of shareholding
		(%)
The Vendor	302,728,157 (L)	23.61
	(Note 1)
	300,000,000 (S)
	(Note 2)
EnerSave Holdings Limited	300,000,000(L)	23.39
	(Note 2)
Hai Xia Finance Holdings Limited	101,549,457(S)	7.92

L: Long Position S: Short Position

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GENERAL INFORMATION

APPENDIX II

Notes:

These Shares are held as to 84,100,700 Shares by Sure World Capital Limited, as to 10,104,000 Shares by Rasa Sayang Limited, as to 3,388,000 Shares by Heng Fung Capital Company Limited and as to 200,000 Shares by Heng Fung Underwriter Limited, all of which are wholly-owned subsidiaries of the Vendor, and as to the remaining 204,935,457 Shares by the Vendor.
Pursuant to the Placing and Subscription Agreement, the Vendor placed its 160,000,000 Shares under the Placing and conditionally agreed to subscribe for 160,000,000 Shares under the Subscription. As at the Latest Practicable Date, the Vendor was interested, directly or indirectly, in 142,728,157 Shares and had an interest in 160,000,000 Shares under the Placing and Subscription Agreement.
The Company has been informed by the Vendor that it has granted a call option to EnerSave Holdings Limited to acquire up to 300,000,000 Shares from the Vendor, details of which are set out in the Company’s announcement dated 5 September 2003.

Save as disclosed above, as at the Latest Practicable Date, the Directors were not aware of any other person (other than the Directors and the chief executive of the Company) who had, or was deemed to have, interests or short positions in the Shares or underlying Shares (including any interests in options in respect of such share capital), which would fall to be disclosed to the Company and the Stock Exchange under the provisions of Divisions 2 and 3 of Part XV of the SFO, or who was directly or indirectly interested in 10% or more of the nominal value of any class of share capital carrying rights to vote in all circumstances at general meetings of any member of the Group.

4. DIRECTORS’ SERVICE CONTRACTS

As at the Latest Practicable Date, none of the Directors had any existing or proposed service contract with any member of the Group (excluding contracts expiring or determinable by the employer within one year without payment of compensations (other than statutory compensation)).

5. EXPERT

Hercules Capital is a licensed corporation under the SFO to carry out type 6 (advising on corporate finance) regulated activity.

Hercules Capital has given and has not withdrawn its written consent to the issue of this circular with the inclusion herein of its letter and the references to its name in the form and context in which it appears.

6. LITIGATION

The Group is involved in legal actions with two former staff of the Group in respect of claims for wrongful dismissal and compensation of approximately HK$1,862,000 plus interest and related costs. The trials are expected to take place in February 2004. The Directors, having taken legal advice, consider that the Group has meritorious defence for the claims.

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GENERAL INFORMATION

APPENDIX II

Save as disclosed above, no member of the Group is engaged in any litigation or arbitration of material importance and no litigation, arbitration or claim of material importance is known to the Directors to be pending or threatened against any member of the Group as at the Latest Practicable Date.

7. MISCELLANEOUS

(a) As at the Latest Practicable Date, the Directors were not aware of any material adverse change in the financial or trading position of the Group since 31 March 2003, the date to which the latest published audited consolidated financial statements of the Group were made up;
(b) There is no contract or arrangement entered into by any member of the Group subsisting at the Latest Practicable Date in which any Director is materially interested and which is significant to the business of the Group;
(c) As at the Latest Practicable Date, Hercules Capital did not have any shareholding, directly or indirectly, in any member of the Group or any right (whether legally enforceable or not) to subscribe for or to nominate persons to subscribe for any securities in any member of the Group; and
(d) As at the Latest Practicable Date, none of Hercules Capital nor any Directors had any direct or indirect interest in any assets which had been acquired, disposed of by or leased to, or which were proposed to be acquired, disposed of by or leased to, any member of the Group since 31 March 2003, the date to which the latest published audited consolidated financial statements of the Group were made up.

8. DOCUMENTS AVAILABLE FOR INSPECTION

Copies of the following documents will be made available for inspection during normal business hours at the office of Michael Li & Co. at 14th Floor, Printing House, 6 Duddell Street, Central, Hong Kong from the date of this circular up to and including 20 December 2003 and at the SGM:

(a) the memorandum of association and bye-laws of the Company;
(b) the Placing and Subscription Agreement;
(c) the annual reports of the Company for the two financial years ended 31 March 2003;
(d) the letter from the Independent Board Committee to the Independent Shareholders, the text of which is set out on page 16 of this circular;
(e) the letter of advice from Hercules Capital to the Independent Board Committee, the text of which is set out on pages 17 to 21 of this circular; and
(f) the consent letter from Hercules Capital referred to in the paragraph headed “Expert” in this appendix.
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NOTICE OF THE SGM

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CHINA GAS HOLDINGS LIMITED （中國燃氣控股有限公司）[*]

(incorporated in Bermuda in limited liability)

NOTICE OF SPECIAL GENERAL MEETING

NOTICE IS HEREBY GIVEN that a special general meeting of China Gas Holdings Limited (the “ Company ”) will be held at 10:00 a.m. on 19 December 2003 at Room 1601, 16th Floor, AXA Centre, No.151 Gloucester Road, Wanchai, Hong Kong for the purpose of considering and, if thought fit, passing the following resolutions as ordinary resolutions:

ORDINARY RESOLUTIONS

“ THAT the subscription (the “ Subscription ”) of 160,000,000 ordinary shares (each a “Share”) of HK$0.01 each in the capital of the Company in cash at a subscription price of HK$0.84 per Share by Heng Fung Holdings Limited (the “ Subscriber ”) pursuant to a placing and subscription agreement dated 8 November 2003 as supplemented by a supplemental agreement dated 11 November 2003 (together, the “ Placing and Subscription Agreement ”, a copy of the Placing and Subscription Agreement has been produced at the meeting marked “ A ” and signed by the chairman of the meeting for the purpose of identification) and entered into between the Company, the Subscriber and DBS Vickers (Hong Kong) Limited, and the transactions contemplated thereunder including but not limited to the allotment and issue by the Company of the 160,000,000 Shares to the Subscriber pursuant thereto, be and are hereby approved and that the board of directors of the Company (the “ Board ”) be and is hereby authorised to take such action as may in the opinion of the Board be necessary or desirable to give effect to the Subscription.”
“ THAT subject to the ordinary resolution no.1 above being duly passed:
(a) subject to paragraph (c) below, pursuant to the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited, the exercise by the directors (the “ Directors ”) of the Company during the Relevant Period (as defined below) of all the powers of the Company to allot, issue and deal with the unissued Shares or securities convertible into Shares, options, warrants or similar rights to subscribe for any Shares and to make or grant offers, agreements, options and warrants, which might require the exercise of such powers be and is hereby generally and unconditionally approved;

* For identification purpose only

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NOTICE OF THE SGM

(b) the approval in paragraph (a) above shall authorise the Directors during the Relevant Period to make or grant offers, agreements and options which might require the exercise of such powers after the end of the Relevant Period;
(c) the aggregate nominal amount of share capital allotted or agreed conditionally or unconditionally to be allotted (whether pursuant to options or otherwise), issued or dealt with by the Directors pursuant to the approval in paragraph (a) above, otherwise than pursuant to (i) a Rights Issue (as defined below); or (ii) the exercise of any options granted under the share option scheme of the Company; or (iii) any scrip dividend or similar arrangements providing for the allotment and issue of Shares in lieu of the whole or part of a dividend on Shares in accordance with the bye-laws of the Company in force from time to time; or (iv) any issue of Shares upon the exercise of rights of subscription or conversion under the terms of any warrants of the Company or any securities which are convertible into Shares, shall not exceed the aggregate of:
(aa) 20% of the aggregate nominal amount of the issued Shares on the date of the passing of this resolution as enlarged by the allotment and issue of the Subscription Shares; and
(bb) (if the Directors are so authorised by a separate ordinary resolution of the shareholders of the Company) the nominal amount of any share capital of the Company repurchased by the Company subsequent to the passing of this resolution (up to a maximum equivalent to 10% of the aggregate nominal amount of the issued Shares on the date of the passing of resolution no. 3 as enlarged by the allotment and issue of the Subscription Shares),

and the authority pursuant to paragraph (a) of this resolution shall be limited accordingly; and

(d) for the purposes of this resolution:

“ Relevant Period ” means the period from the date of the passing of this resolution until whichever is the earliest of:

(i) the conclusion of the next annual general meeting of the Company;
(ii) the expiration of the period within which the next annual general meeting of the Company is required by the bye-laws of the Company, the Companies Act 1981 of Bermuda (the “ Companies Act ”) or any other applicable law of Bermuda to be held; or
(iii) the passing of an ordinary resolution by the shareholders of the Company in general meeting revoking or varying the authority given to the Directors by this resolution;
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NOTICE OF THE SGM

“ Rights Issue ” means an offer of Shares, or offer or issue of warrants, options or other securities giving rights to subscribe for Shares open for a period fixed by the Directors to eligible holders of Shares on the register on a fixed record date in proportion to their then holdings of Shares (subject to such exclusion or other arrangements as the Directors may deem necessary or expedient in relation to fractional entitlements, or having regard to any restrictions or obligations under the laws of, or the requirements of, or the expense or delay which may be involved in determining the existence or extent of any restrictions or obligations under the laws of, or the requirements of, any jurisdiction outside Hong Kong or any recognised regulatory body or any stock exchange outside Hong Kong).”

“ THAT subject to the ordinary resolution no.1 above being duly passed:
(a) subject to paragraph (b) below, the exercise by the Directors during the Relevant Period (as defined below) of all powers of the Company to repurchase the Shares on The Stock Exchange of Hong Kong Limited or any other stock exchange on which the Shares may be listed and recognised by the Securities and Futures Commission of Hong Kong and The Stock Exchange of Hong Kong Limited for such purpose, and otherwise in accordance with the rules and regulations of the Securities and Futures Commission of Hong Kong, The Stock Exchange of Hong Kong Limited, the byelaws of the Company, the Companies Act and all other applicable laws in this regard, be and is hereby generally and unconditionally approved;
(b) the aggregate nominal amount of Shares which may be repurchased by the Company pursuant to the approval in paragraph (a) during the Relevant Period shall not exceed 10 per cent. of the aggregate nominal amount of the issued Shares as at the date of the passing of this resolution as enlarged by the allotment and issue of the Subscription Shares and the authority pursuant to paragraph (a) of this resolution shall be limited accordingly; and
(c) for the purposes of this resolution, “ Relevant Period ” means the period from the date of the passing of this resolution until whichever is the earliest of:
- (i) the conclusion of the next annual general meeting of the Company;
- (ii) the expiration of the period within which the next annual general meeting of the Company is required by the bye-laws of the Company, the Companies Act or any other applicable law of Bermuda to be held; or
- (iii) the passing of an ordinary resolution by the shareholders of the Company in general meeting revoking or varying the authority given to the Directors by this resolution.”
31 -

NOTICE OF THE SGM

“ THAT subject to the ordinary resolution nos. 2 an 3 above being duly passed, the unconditional general mandate granted to the Directors to exercise the powers of the Company to allot, issue and deal with unissued Shares pursuant to resolution no. 2 above be and is hereby extended by the addition thereon of an amount representing the aggregate nominal amount of the share capital of the Company repurchased by the Company subsequent to the passing of this resolution, provided that such amount shall not exceed 10% of the aggregate nominal amount of the issued Shares on the date of the passing of resolution no. 3 as enlarged by the allotment and issue of the Subscription Shares.”

By order of the Board China Gas Holdings Limited Liu Ming Hui Managing Director

Hong Kong, 3 December 2003

Registered office:

Clarendon House 2 Church Street Hamilton HM 11 Bermuda

Head office and principal place of business in Hong Kong:

Room 1601, 16th Floor AXA Centre No. 151 Gloucester Road Wanchai Hong Kong

Notes:

A member of the Company entitled to attend and vote at the meeting convened by the above notice is entitled to appoint one or more proxy to attend and, subject to the provisions of the bye-laws of the Company, to vote on his behalf. A proxy need not be a member of the Company but must be present in person at the meeting to represent the member. If more than one proxy is so appointed, the appointment shall specify the number and class of Shares in respect of which each such proxy is so appointed.
32 -

NOTICE OF THE SGM

A form of proxy for use at the meeting is enclosed. In order to be valid, the form of proxy must be duly completed and signed in accordance with the instructions printed thereon and deposited together with a power of attorney or other authority, if any, under which it is signed, or a notarially certified copy of such power or authority, at the offices of the Company’s branch share registrar in Hong Kong, Computershare Hong Kong Investor Services Limited at Rooms 1901-1905, 19th Floor, Hopewell Centre, 183 Queen’s Road East, Hong Kong not less than 48 hours before the time appointed for holding the meeting or any adjournment thereof. Completion and return of a form of proxy will not preclude a member from attending in person and voting at the above meeting or any adjournment thereof, should he so wish.
In the case of joint holders of Shares, any one of such holders may vote at the meeting, either personally or by proxy, in respect of such Shares as if he was solely entitled thereto, but if more than one of such joint holders are present at the meeting personally or by proxy, that one of the said persons so present whose name stands first in the register of members of the Company in respect of such Shares shall alone be entitled to vote in respect thereof.
In relation to proposed resolutions nos. 2 and 4 above, approval is being sought from the shareholders of the Company for the grant to the Directors of a general mandate to authorise the allotment and issue of Shares under the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited. The Directors have no immediate plans to issue new Shares other than the Shares to be issued under the Subscription and Shares which may fall to be issued upon conversion of the convertible preference shares or other securities convertible into Shares in issue or under the share option schemes of the Company or any scrip dividend scheme or similar arrangement providing for the allotment and issue of Shares in lieu of whole or part of a dividend which may be approved by shareholders of the Company.
In relation to proposed resolution no. 3 above, the Directors wish to state that they will exercise the powers conferred thereby to repurchase Shares in circumstances which they deem appropriate for the benefit of the shareholders of the Company. An explanatory statement containing the information necessary to enable the shareholders of the Company to make an informed decision to vote on the proposed resolution as required by the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited is set out in Appendix I to this circular.
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AI assistant

China Literature Limited — Proxy Solicitation & Information Statement 2003

49460_rns_2003-12-03_d8c8a29c-e53b-4f0d-b577-f9d37ed19d47.pdf

CHINA GAS HOLDINGS LIMITED （中國燃氣控股有限公司）[*]

Placing Agent DBS Vickers (Hong Kong) Limited

Independent financial adviser to the independent board committee of the Company

CONTENTS

DEFINITIONS

DEFINITIONS

DEFINITIONS

CHINA GAS HOLDINGS LIMITED （中國燃氣控股有限公司）[*]

CONNECTED TRANSACTION: PLACING OF EXISTING SHARES AND SUBSCRIPTION OF NEW SHARES AND PROPOSED GRANT OF GENERAL MANDATES TO ISSUE AND REPURCHASE SHARES

INTRODUCTION

LETTER FROM THE BOARD

PLACING AND SUBSCRIPTION AGREEMENT

(A) Placing

The Vendor

The Placing Agent

The Placees

Number of Placing Shares

Placing Price

Rights

(B) The Subscription

Number of Subscription Shares

Subscription Price

Rights

Completion of the Subscription

CHANGES OF SHAREHOLDING STRUCTURE

REASONS FOR THE PLACING AND SUBSCRIPTION AGREEMENT

GENERAL MANDATE AND REPURCHASE MANDATE

General Mandate

Repurchase Mandate

LETTER FROM THE BOARD

SGM

RECOMMENDATIONS

LETTER FROM THE BOARD

FURTHER INFORMATION

CHINA GAS HOLDINGS LIMITED （中國燃氣控股有限公司）[*]

CONNECTED TRANSACTION:

SUBSCRIPTION OF NEW SHARES

LETTER FROM HERCULES CAPITAL

CONNECTED TRANSACTION

SUBSCRIPTION OF NEW SHARES

LETTER FROM HERCULES CAPITAL

PRINCIPAL FACTORS AND REASONS CONSIDERED

(1) Background and reasons

LETTER FROM HERCULES CAPITAL

(2) Completion of the Subscription

(3) Basis of the subscription price and expenses

LETTER FROM HERCULES CAPITAL

(4) Shareholding Dilution

(5) Possible effects if the Subscription is not approved

RECOMMENDATION

1. SHARE CAPITAL

2. REASONS FOR REPURCHASES

3. FUNDING OF REPURCHASES

4. GENERAL

5. SHARE PRICES

6. DIRECTORS’ UNDERTAKING

7. TAKEOVERS CODE CONSEQUENCE

8. SHARES REPURCHASE MADE BY THE COMPANY

1. RESPONSIBILITY STATEMENT

2. SHARE CAPITAL OF THE COMPANY

3. DISCLOSURE OF INTERESTS

(a) Director’s interests and short positions in the securities of the Company and its associated corporations

(b) Persons who have an interest or short position which is discloseable under Divisions 2 and 3 of Part XV of the SFO and substantial Shareholders

4. DIRECTORS’ SERVICE CONTRACTS

5. EXPERT

6. LITIGATION

7. MISCELLANEOUS

8. DOCUMENTS AVAILABLE FOR INSPECTION

CHINA GAS HOLDINGS LIMITED （中國燃氣控股有限公司）[*]

NOTICE OF SPECIAL GENERAL MEETING

ORDINARY RESOLUTIONS

NOTICE OF THE SGM

NOTICE OF THE SGM

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China Literature Limited Proxy Solicitation & Information Statement 2003