China Literature Limited - Proxy Solicitation & Information Statement 2003

THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION

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

If you have sold or transferred all your shares in China Gas Holdings Limited, you should at once hand this circular with the accompanying proxy form to the purchaser or transferee or to the bank, stockbroker or other agent through whom the sale or transfer was effected for transmission to the purchaser or transferee.

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

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

(Incorporated in Bermuda with limited liability)

MAJOR TRANSACTION

FORMATION OF A JV COMPANY

A notice convening a special general meeting of China Gas Holdings Limited to be held at 16th Floor, AXA Centre, No. 151 Gloucester Road, Wanchai, Hong Kong on 1 September 2003 at 10:00 a.m. or any adjournment thereof is set out on pages 66 to 67 of this circular.

Whether or not you intend to be present at the special general meeting, you are requested to complete and return the enclosed form of proxy in accordance with the instructions printed thereon as soon as practicable to the branch share registrar of China Gas Holdings Limited in Hong Kong, Computershare Hong Kong Investor Services Limited, located at Rooms 1901-1905, 19th Floor, Hopewell Centre, 183 Queen’s Road East, Hong Kong and in any event not later 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.

14 August 2003

* for identification purposes only

Page
Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Letter from the Board
Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Details of the JV Contract . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
The Proposed Investment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Additional Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Appendix I – Financial information on the Group. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Appendix II – Accountants’ Report on the JV Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
Appendix III – General information. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
Notice of SGM. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66

DEFINITIONS

In this circular, the following expressions have the meanings respectively set opposite them unless the context otherwise requires:

“Board” The board of Directors

“Central 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 incorporated in the PRC and is a wholly owned subsidiary of the Company

“China Natural Gas”

China Natural Gas Development Holdings Limited (中國天然氣開發集團有限公司 ), a company incorporated in the BVI with limited liability and a wholly owned subsidiary of the Company

“Company” China Gas Holdings Limited (中國燃氣控股有限公司 ), a company incorporated in Bermuda with limited liability, whose shares are listed on the Stock Exchange

“Directors” Directors of the Company “Gas Project” A series of projects to be carried out by the JV Company in Wuhu City of the Anhui Province in the PRC in the sale of natural gas, gas burning instruments and measurement equipment, the provision of testing and maintenance services, construction and operation of natural gas pipelines, development of natural gas business, design and implementation of natural gas project, operation of natural gas and liquefied gas station for vehicles

“Group” The Company and its subsidiaries “Hong Kong” Hong Kong Special Administrative Region of the People’s Republic of China

“HK$” Hong Kong dollars, the lawful currency of Hong Kong

“JV Company” 蕪湖中燃城市燃氣發展有限公司 (Wuhu City Natural Gas Development Company Limited), a sino-foreign equity joint venture set up in the PRC on 10 July 2003, which is owned as to 10% by Wuhu Natural Gas, 50% by Central Natural Gas and 40% by China Natural Gas, is principally engaged in the Gas Project “JV Contract” The contract entered into by Wuhu Natural Gas, Central Natural Gas and China Natural Gas on 25 June 2003, setting out the framework in relation to the establishment of the JV Company

DEFINITIONS

“Latest Practicable Date”	8 August 2003, being the latest practicable date prior to the printing
	of this circular for the purpose of ascertaining certain information
	for inclusion in this circular
“Listing Rules”	Rules Governing The Listing of Securities on the Stock Exchange
“PRC”	The People’s Republic of China
“RMB”	Renminbi yuan, the lawful currency of the PRC
“SFO”	Securities and Futures Ordinance (Cap. 571 of the Laws of Hong
	Kong)
“SGM”	The special general meeting of the Company to be held at 16th
	Floor, AXA Centre, No. 151 Gloucester Road, Wanchai, Hong
	Kong on 1 September 2003 at 10:00 a.m., notice of which is set
	out on page 66 of this circular
“Shareholder(s)”	Registered holder(s) of the Shares
“Share(s)”	Ordinary share(s) of HK$0.01 each in the issued share capital of
	the Company
“Stock Exchange”	The Stock Exchange of Hong Kong Limited
“Wuhu Natural Gas”	安徽省蕪湖市燃氣總公司(Anhui Province Wuhu City Natural
	Gas Head Company), an enterprise established in the PRC

Note: For the purpose of this circular, the exchange rate between HK$ and RMB is stated at HK$1 = RMB1.05.

LETTER FROM THE BOARD

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

(Incorporated in Bermuda with limited liability)

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

Executive Directors: Registered Office: Mr. Li Xiaoyun (Chairman) Clarendon House Mr. Xu Ying (Vice Chairman) 2 Church Street Mr. Liu Ming Hui (Managing Director) Hamilton HM 11 Mr. Ma Jin Long Bermuda Mr. Zhu Wei Wei Head office and principal place Non-Executive Director: of business in Hong Kong: Mr. Wu Bangjie 16th Floor AXA Centre Independent Non-Executive Directors: No. 151 Gloucester Road Mr. Zhao Yu Hua Wanchai Mr. Mao Er Wan Hong Kong 14 August 2003

To the Shareholders and, for information only, the holders of convertible preference shares of the Company

Dear Sir or Madam,

MAJOR TRANSACTION

FORMATION OF A JV COMPANY

INTRODUCTION

In the announcement of the Company dated 25 June 2003, the Board announced that Central Natural Gas and China Natural Gas, both being wholly owned subsidiaries of the Company, entered into the JV Contract with Wuhu Natural Gas on 25 June 2003 for the purposes of setting up the JV Company. Wuhu Natural Gas is a PRC enterprise set up in Wuhu City, Anhui Province, the PRC and is owned by the People’s government of Wuhu City. Wuhu Natural Gas and its ultimate beneficial owners are independent of and not connected with any of the Directors, chief executive or substantial Shareholders of the Company or any of its subsidiaries or their respective associates (as defined in the Listing Rules).

* for identification purposes only

LETTER FROM THE BOARD

Wuhu Natural Gas and its associates (as defined in the Listing Rules) do not own any Shares in the Company. Central Natural Gas is a wholly foreign owned enterprise set up in the PRC. China Natural Gas is a company incorporated in the BVI with limited liability.

Pursuant to the JV Contract, the JV Company was set up in the PRC on 10 July 2003, the date on which the business licence of the JV Company was issued. The JV Company has a registered capital of RMB100,000,000 (equivalent to approximately HK$95,238,095.24), which will be contributed as to 10% by Wuhu Natural Gas, 50% by Central Natural Gas and 40% by China Natural Gas. It has been agreed between the parties to the JV Contract that Wuhu Natural Gas will contribute RMB10,000,000 to pay up 10% of the registered capital by making an investment in kind (i.e. in the form of gas pipelines, land and buildings, plant and machinery with valuation thereof by independent valuer acceptable to and approved by Central Natural Gas and China Natural Gas), whilst Central Natural Gas will contribute RMB50,000,000 in cash to pay up 50% of the registered capital and China Natural Gas will contribute Hong Kong Dollars equivalent to RMB40,000,000 (using the exchange rate quoted by the State Administration of Foreign Exchange on the respective payment dates) to pay up 40% of the registered capital. In this regard, the Group will make a total investment of RMB90,000,000 (equivalent to approximately HK$85,714,285.71) in the JV Company (the “ Proposed Investment ”). As at the Latest Practicable Date, the parties to the JV Contract have not yet agreed upon the form of investment in kind to be contributed by Wuhu Natural Gas.

The JV Company will be principally engaged in the Gas Project. Upon establishment, the JV Company has become a non-wholly owned subsidiary of the Company, owned as to 10% by Wuhu Natural Gas, 50% by Central Natural Gas and 40% by China Natural Gas.

The Directors consider that the terms of the JV Contract and the Proposed Investment are fair and reasonable and are in interests of the Company and the Shareholders as a whole. The Proposed Investment constitutes a major transaction under the Listing Rules, which will be subject to the approval of the Shareholders at the SGM in accordance with Rule 14.10 of the Listing Rules.

The purpose of this circular is to provide you with further information relating to the JV Contract and the Proposed Investment contemplated thereunder.

DETAILS OF THE JV CONTRACT

Date of the JV Contract: 25 June 2003

Parties:

Wuhu Natural Gas, Central Natural Gas and China Natural Gas

Wuhu Natural Gas, Central Natural Gas and China Natural Gas entered into the JV Contract on 25 June 2003 for the purposes of setting up the JV Company to operate, manage and develop the Gas Project in Wuhu City, Anhui Province, the PRC.

Information on the JV Company

The JV Company is a limited company incorporated in the PRC pursuant to the JV Contract on 10 July 2003, the date on which the business licence of the JV Company was issued. The JV Company is owned as to 10% by Wuhu Natural Gas, 50% by Central Natural Gas and 40% by China Natural Gas. Wuhu Natural Gas is a PRC enterprise set up in Wuhu City, Anhui Province, the PRC and is owned by

LETTER FROM THE BOARD

the People’s government of Wuhu City. Wuhu Natural Gas and its ultimate beneficial owners are independent of and not connected with any of the directors, chief executive or substantial Shareholders of the Company or any of its subsidiaries or their respective associates (as defined in the Listing Rules). Wuhu Natural Gas and its associates (as defined in the Listing Rules) do not own any Shares in the Company. Central Natural Gas is a wholly foreign owned enterprise incorporated in the PRC and a wholly owned subsidiary of the Company. China Natural Gas is a company incorporated in the BVI with limited liability and a wholly owned subsidiary of the Company.

The JV Company has a tenure of 30 years from 10 July 2003, the date on which of the business licence of the JV Company was issued. The JV Company will be principally engaged in the Gas Project.

The board of directors of the JV Company comprises 5 directors, one of whom was appointed by Wuhu Natural Gas, two of whom were appointed by Central Natural Gas and the remaining two were appointed by China Natural Gas. The chairman of the board of directors of the JV Company was recommended by Central Natural Gas and the two deputy chairmen of the board of directors of the JV Company were recommended by Wuhu Natural Gas and China Natural Gas, respectively. In this regard, the persons appointed by the Group to the JV Company represent the majority of the board of the JV Company. Upon establishment, the JV Company has become a non-wholly owned subsidiary of the Company, with the Group holding in aggregate 90% equity interest of the JV Company.

As at the Latest Practicable Date, the audited/unaudited assets of the JV Company are not available since the JV Company has not yet commenced any business. Details in relation to operation, management and development of the Gas Project, source and allocation of funds have yet to be worked out between Wuhu Natural Gas, Central Natural Gas and China Natural Gas.

Contribution of registered capital

The registered capital of the JV Company is RMB100,000,000 (equivalent to approximately HK$95,238,095.24) which has yet to be paid up by Wuhu Natural Gas, Central Natural Gas and China Natural Gas in such amounts in proportion to their respective shareholdings in the JV Company (i.e., as to RMB10,000,000 in kind by Wuhu Natural Gas, RMB50,000,000 in cash by Central Natural Gas and Hong Kong Dollars equivalent to RMB40,000,000 (using the exchange rate quoted by the State Administration of Foreign Exchange on the respective payment dates) by China Natural Gas). According to the JV Contract, profits generated by the Gas Project will be distributed to Wuhu Natural Gas, Central Natural Gas and China Natural Gas in proportion to their respective shareholdings in the JV Company.

Upon signing of the JV Contract, Central Natural Gas has contributed an initial operation fees in the sum of RMB2,000,000 to embark on the Gas Project in Wuhu City, which amount will be offset against the total capital contribution in the JV Company to be made by Central Natural Gas.

Pursuant to the JV Contract, within two weeks from 10 July 2003, i.e., the date of establishment of the JV Company, Wuhu Natural Gas would contribute RMB10,000,000 in kind whilst Central Natural Gas and China Natural Gas would contribute in aggregate RMB40,000,000 in cash in proportion to their respective shareholding in the JV Company to pay up the registered capital of the JV Company. However, given that the business licence of the JV Company was issued much earlier than expected on 10 July 2003 and that the Proposed Investment, being a major transaction, will be subject to the approval of the

LETTER FROM THE BOARD

Shareholders at the SGM to be convened in accordance with Rule 14.10 of the Listing Rules whilst the despatch of this circular regarding the Proposed Investment and containing the notice of the SGM has been delayed pursuant to the Company’s announcements dated 15 July 2003 and 29 July 2003, respectively, Wuhu Natural Gas, Central Natural Gas and China Natural Gas have therefore reached a mutual understanding that instead of the initial contribution to the registered capital of the JV Company, they will pay up the registered capital of the JV Company in full within six months from 10 July 2003. It should be noted, however, that as at the Latest Practicable Date, the parties to the JV Contract have not yet agreed upon the form of investment in kind to be contributed by Wuhu Natural Gas.

The Gas Project

Wuhu Natural Gas has agreed in the JV Contract that Wuhu Natural Gas will be responsible to liaise with the People’s Government in Wuhu City for the implementation of the Gas Project and to procure the grant of the land use right, together with other infrastructure facilities (e.g., water, electricity and transportation, etc.), and the grant of certain tax benefits to the JV Company by the local government.

Wuhu City is under the direct governance of Anhui Province, having four administrative districts and three counties within its ambit, with a total urban area of 3,317 km[2] . Wuhu City has a population of approximately 2,180,000, approximately 640,000 of whom reside in the urban area. At present, residents living in the urban area mainly subscribe to boiler coal gas and liquefied gas as fuel, with approximately 60,000 subscribers for pipeline boiler coal gas and approximately 40,000 subscribers for bottle liquified gas. However, for safety and environmental protection reasons, there is an imminent need for the development of natural gas in Wuhu City. In addition, to cope with the State’s policy to facilitate the transfer of western gas to the eastern provinces, the Gas Project has met with great support from the local government.

Based on feasibility studies on the Gas Project, the JV Company targets that the volume of natural gas consumed by both industrial and domestic subscribers in Wuhu City will reach approximately 265,766,500 cubic metres in 2005, with approximately 154,500 subscribers for natural gas, which will go up to approximately 488,153,400 cubic metres in 2010, with approximately 266,700 subscribers for natural gas by then.

THE PROPOSED INVESTMENT

Pursuant to the terms of the JV Contract, the registered capital of the JV Company will be a sum of RMB100,000,000 (equivalent to approximately HK$95,238,095.24). The Group will make a total investment of RMB90,000,000 (equivalent to approximately HK$85,714,285.71) in the JV Company, of which RMB50,000,000 will be contributed by Central Natural Gas and Hong Kong Dollars equivalent to RMB40,000,000 (using the exchange rate quoted by the State Administration of Foreign Exchange on the respective payment dates) will be contributed by China Natural Gas. Both Central Natural Gas and China Natural Gas are wholly owned subsidiaries of the Company. The parties to the JV Contract estimate that the total investment for the Gas Project will be RMB200,000,000 (equivalent to approximately HK$190,476,190.48).

It has been agreed between the parties to the JV Contract (subject to the mutual understanding reached between the parties to the JV Contract as to the time for payment of the registered capital of the JV Company aforementioned) that Wuhu Natural Gas will make an investment in kind (i.e., in the form

LETTER FROM THE BOARD

of gas pipelines, land and buildings, plant and machinery with valuation thereof acceptable to and approved by Central Natural Gas) in the sum of RMB10,000,000 to pay up 10% of the registered capital of the JV Company whereas Central Natural Gas will contribute RMB50,000,000 in cash to pay up 50% of the registered capital of the Company and China Natural Gas will contribute Hong Kong Dollars equivalent to RMB40,000,000 (using the exchange rate quoted by the State Administration of Foreign Exchange on the respective payment dates) to pay up 40% of the registered capital of the JV Company. The funds to be contributed by Central Natural Gas and China Natural Gas to pay up the registered capital of the JV Company will be raised from the Group’s internal resources and bank borrowings. Apart from paying up the registered capital of the JV Company, the Group is not required to make any further capital contribution to the JV Company.

Wuhu Natural Gas, Central Natural Gas and China Natural Gas have agreed that the difference between the total investment amount of RMB200,000,000 and the registered capital of the JV Company for which they will be responsible will be paid up with funds drawn from the profits generated by the Gas Project in proportion to their respective shareholdings in the JV Company. According to the JV Contract, profits generated by the Gas Project will be distributed to Wuhu Natural Gas, Central Natural Gas and China Natural Gas in proportion to their respective shareholdings in the JV Company. The Directors consider that the cash flow generated by the Gas Project will be sufficient to meet the additional funding of the Gas Project, being the difference between the total investment amount of RMB200,000,000 and the registered capital of the JV Company. Notwithstanding the aforesaid, the Company will make further announcement and will comply with all requirements under the Listing Rules in the event that the financing arrangement on the difference between the total investment amount of RMB200,000,000 and the registered capital of the JV Company is changed.

Reasons for the Proposed Investment

The Group is principally engaged in investment in, among others, natural gas/energy and property projects. The Directors consider that the Proposed Investment represents a good opportunity for the Company to further invest in the natural gas business in the PRC which is in line with the Company’s strategy to participate in the natural gas industries in the PRC whereupon the JV Company has become a subsidiary of the Company upon establishment, with the Group holding in aggregate 90% equity interest of the JV Company.

In addition, formation of the JV Company with Wuhu Natural Gas, a PRC enterprise owned by the People’s government of Wuhu City, has the benefits of government support in various infrastructure facilities.

The Directors are of the view that given that the Gas Project will be operated, managed and developed by the JV Company on an exclusive basis and that natural gas is a household necessity, profits generated by the Gas Project will be certain and sufficient to cover the investment contribution, i.e., the difference between the total investment of RMB200,000,000 and the registered capital of the JV Company.

The Directors consider the terms of the JV Contract and the Proposed Investment contemplated thereunder are fair and reasonable, taking into account the prospects of development in the Gas Project in Wuhu City, the Anhui Province, the PRC.

LETTER FROM THE BOARD

General

The JV Contract and the Proposed Investment contemplated thereunder are required to comply strictly with the Listing Rules, including the passing of ordinary resolutions by the Shareholders at the SGM approving the same. In addition, the Group is in the course of obtaining a legal opinion from a firm of lawyers in the PRC on issues including but not limited to the legal status, validity of establishment and continued existence of the JV Company.

The Proposed Investment constitutes a major transaction under the Listing Rules, which will be subject to the approval of the Shareholders at the SGM in accordance with Rule 14.10 of the Listing Rules.

SGM

A notice convening the SGM to be held at 16th Floor, AXA Centre, No. 151 Gloucester Road, Wanchai, Hong Kong on 1 September 2003 at 10:00 a.m. or any adjournment thereof is set out on pages 66 to 67 of this circular.

You will find enclosed a form of proxy for use at the SGM. Whether or not you intend to be present at the meeting, you are requested to complete and return the form of proxy to the Company’s Hong Kong branch share registrar, Computershare Hong Kong Investor Services Limited, located at Rooms 1901-1905, 19th Floor, Hopewell Centre, 183 Queen’s Road East, Hong Kong and in any event not later 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.

ADDITIONAL INFORMATION

Your attention is also drawn to the information set out in the appendices and the notice of the SGM in the circular.

Yours faithfully, By Order of the Board China Gas Holdings Limited Liu Ming Hui Managing Director

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

A. SHARE CAPITAL

The authorised and issued share capital of the Company as at the Latest Practicable Date are as follows:–

Shares Authorised: 9,000,000,000 Shares as at the Latest Practicable Date Issued and fully paid: 1,212,407,116 Shares in issue as at the Latest Practicable Date convertible preference shares: Authorised: 124,902,477 convertible preference shares as at the Latest Practicable Date Issued and fully paid: 6,298,571 convertible preference shares in issue as at the Latest Practicable Date	HK$ 90,000,000

	12,124,071

	HK$ 124,902,477

	6,298,571

All the Shares in issue rank pari passu in all respects with each other including as regards to dividends, voting and return of capital.

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

B. AUDITED FINANCIAL INFORMATION

The following is a summary of the audited results of the Company for each of the three financial years ended 31 March 2003 extracted from the respective annual reports of the Company.

CONSOLIDATED INCOME STATEMENT

FOR THE THREE FINANCIAL YEARS ENDED MARCH 31, 2003

NOTES Turnover 5 Cost of sales Gross profit Other operating income 7 Distribution costs Administrative expenses Amortisation of goodwill Depreciation and amortisation of property, plant and equipment Deficit on revaluation of investment properties Impairment loss recognised in respect of property, plant and equipment Negative goodwill released to income statement 21 Impairment loss recognised in respect of investments in securities Unrealised holding gain (loss) on investments in securities Impairment loss recognised in respect of properties held for development Loss from operations 8 Finance costs 9 Share of results of associates Loss before taxation Taxation (charge) credit 12 Loss before minority interests Minority interests Net loss for the year Loss per share, basic and diluted 13	2003 *HK$’000* 85,537 (64,238) 21,299 343 (3,733) (34,176) (654) (4,232) (4,123) (8,797) 3,488 (28,060) – – (58,645) (6,169) (11) (64,825) (1,861) (66,686) (2,987) (69,673) (6.68 cents)	2002 HK$’000 4,827 (3,573) 1,254 509 (606) (6,943) – (403) (1,030) – – – 6,736 (6,900) (7,383) – – (7,383) 89 (7,294) – (7,294) (2.25 cents)	2001 HK$’000 4,169 (1,961) 2,208 878 (2,911) (4,648) – – – – – – (692) – (5,165) (7) – (5,172) – (5,172) – (5,172) (2.48 cents)

10 -

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

The following is extracted from the annual report of the Company for the financial year ended 31 March 2003.

CONSOLIDATED BALANCE SHEET

AT MARCH 31, 2003

NOTES Non-current assets Investment properties 14 Property, plant and equipment 15 Properties held for development 16 Interests in associates 18 Investments in securities 19 Goodwill 20 Negative goodwill 21 Current assets Inventories 22 Trade and other receivables 23 Amount due from an associate Investments in securities 19 Pledged bank deposits Bank balances and cash Current liabilities Trade and other payables 24 Amounts due to minority shareholders of subsidiaries Amount due to former ultimate holding company Amount due to a former fellow subsidiary Taxation Bank and other borrowings – due within one year 25 Net current assets Capital and reserves Share capital 26 Reserves Minority interests Non-current liabilities Bank and other borrowings – due after one year 25	2003 *HK$’000* 9,800 177,770 36,200 1,704 5,490 20,130 – 251,094 14,058 75,012 2,199 – 66,667 92,477 250,413 38,111 5,438 – – 6,695 159,361 209,605 40,808 291,902 18,423 126,303 144,726 59,732 87,444 291,902	2002 HK$’000 (restated) 13,923 10,255 36,200 – – – – 60,378 – 226 – 33,700 – 14,664 48,590 2,669 – 1,049 980 346 – 5,044 43,546 103,924 110,753 (6,829) 103,924 – – 103,924

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FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

BALANCE SHEET

AT MARCH 31, 2003

NOTES Non-current assets Interests in subsidiaries 17 Investment in an associate 18 Investments in securities 19 Current assets Investments in securities 19 Trade and other receivables Amount due from an associate Bank balances and cash Current liabilities Trade and other payables Amount due to former ultimate holding company Amount due to a former fellow subsidiary Bank and other borrowings – due within one year 25 Net current (liabilities) assets Capital and reserves Share capital 26 Reserves 27 Non-current liabilities Amounts due to subsidiaries 28 Bank and other borrowings – due after one year 25	2003 *HK$’000* 281,748 1 5,220 286,969 – 2,444 858 709 4,011 4,122 – – 56,996 61,118 (57,107) 229,862 18,423 126,278 144,701 2,612 82,549 229,862	2002 HK$’000 42,402 – – 42,402 31,900 38 – 13,528 45,466 1,730 460 980 – 3,170 42,296 84,698 110,753 (28,435) 82,318 2,380 – 84,698

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FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

FOR THE YEAR ENDED MARCH 31, 2003

Share capital HK$’000 At April 1, 2001 – as originally stated 125,985 – prior year adjustment for the change in accounting policy (Note 3) – – as restated 125,985 Deficit on revaluation of investment properties not recognised in the consolidated income statement – Net loss for the year – Exercise of share options 83 Private placements 1,300 Conversion of preference shares (16,615) At March 31, 2002 110,753 Exchange gain on translation of overseas operations not recognised in the consolidated income statement – Net loss for the year – Transfer – Exercise of share options 10 Private placement 334 Issue of shares for acquisition of subsidiaries 787 Conversion of preference shares (93,461) At March 31, 2003 18,423	Share premium account HK$’000 22,718 – 22,718 – – 827 42,500 16,615 82,660 – – – 100 29,666 78,403 93,461 284,290	Investment property revaluation reserve HK$’000 677 – 677 (677) – – – – – – – – – – – – –	Asset revaluation reserve HK$’000 3,822 (3,822 ) – – – – – – – – – – – – – – –	Translation reserve HK$’000 – – – – – – – – – 1,175 – – – – – – 1,175	Special reserve HK$’000 1,602 – 1,602 – – – – – 1,602 – – – – – – – 1,602	Statutory Accumulated funds losses HK$’000 HK$’000 – (84,384) – 587 – (83,797) – – – (7,294) – – – – – – – (91,091) – – – (69,673) 2,140 (2,140) – – – – – – – – 2,140 (162,904)	Total HK$’000 70,420 (3,235 ) 67,185 (677 ) (7,294 ) 910 43,800 – 103,924 1,175 (69,673) – 110 30,000 79,190 – 144,726

Note: The special reserve of the Group represents the difference between the nominal value of the shares of the acquired subsidiaries and the nominal value of the Company’s shares issued for the acquisition at the time of the group reorganisation prior to the listing of the Company’s shares in 1995.

The statutory funds are reserves required by the relevant laws of the People’s Republic of China (“PRC”) applicable to the Group’s PRC subsidiaries.

13 -

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

CONSOLIDATED CASH FLOW STATEMENT

FOR THE YEAR ENDED MARCH 31, 2003

NOTE OPERATING ACTIVITIES Loss from operations Adjustments for: Deficit on revaluation of investment properties Impairment loss recognised in respect of property, plant and equipment Impairment loss recognised in respect of investments in securities Unrealised holding gain on investments in securities Impairment loss recognised in respect of properties held for development Depreciation and amortisation of property, plant and equipment Amortisation of goodwill Negative goodwill released to income statement Loss on disposals of property, plant and equipment Loss on disposal of investments in securities Dividend income from listed investments Interest income Operating cash flows before movements in working capital Increase in inventories (Increase) decrease in trade and other receivables Increase in amount due from an associate Increase in investments in securities Increase in trade and other payables Increase in amounts due to minority shareholders of subsidiaries Decrease in amount due to former ultimate holding company (Decrease) increase in amount due to a former fellow subsidiary Cash used in operations Hong Kong Profits Tax (paid) refunded PRC income tax paid NET CASH USED IN OPERATING ACTIVITIES INVESTING ACTIVITIES Interest received Dividend received from investments in securities Investment in an associate (Increase) decrease in pledged bank deposits Purchase of property, plant and equipment Proceeds from disposals of investments in securities Purchase of subsidiaries, net of cash and cash equivalents acquired 30 NET CASH (USED IN) FROM INVESTING ACTIVITIES	2003 *HK$’000* (58,645) 4,123 8,797 28,060 – – 4,232 654 (3,488) 170 16 (2) (257) (16,340) (7,288) (46,077) (2,199) – 1,551 2,895 (1,049) (980) (69,487) (170) (195) (69,852) 257 2 (1) (57,143) (18,106) 134 (2,165) (77,022)	2002 HK$’000 (7,383) 1,030 – – (6,736) 6,900 403 – – 22 – (8) (59) (5,831) – 264 – (805) 416 – (532) 591 (5,897) 89 – (5,808) 59 8 – 1,051 – 2 – 1,120

14 -

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

FINANCING ACTIVITIES Interest paid Proceeds from issue of ordinary shares Proceeds from exercise of share options New bank and other borrowings raised Repayments of bank borrowings NET CASH FROM FINANCING ACTIVITIES NET INCREASE IN CASH AND CASH EQUIVALENTS CASH AND CASH EQUIVALENTS AT BEGINNING OF THE YEAR EFFECT OF FOREIGN EXCHANGE RATE CHANGES CASH AND CASH EQUIVALENTS AT END OF THE YEAR ANALYSIS OF THE BALANCES OF CASH AND CASH EQUIVALENTS Bank balances and cash	2003 *HK$’000* (6,169) 30,000 110 222,571 (23,000) 223,512 76,638 14,664 1,175 92,477 92,477	2002 HK$’000 – 18,000 910 – –
		18,910
		14,222 442 –
		14,664

		14,664

15 -

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED MARCH 31, 2003

1. GENERAL

The Company is incorporated in Bermuda as an exempted company with limited liability and its shares are listed on The Stock Exchange of Hong Kong Limited (the “Stock Exchange”).

The Company acts as an investment holding company. Its subsidiaries are principally engaged in the operation of natural gas and petroleum business, property investment and financial and securities investment.

Pursuant to a special resolution passed on 5 July 2002, the name of the Company was changed from Hai Xia Holdings Limited to China Gas Holdings Limited and adopted a Chinese translation of the Company’s name from 海峽集團有限公司 to 中國燃氣控股有限公司 for identification purpose.

2. ADOPTION OF STATEMENTS OF STANDARD ACCOUNTING PRACTICE

In the current year, the Group has adopted, for the first time, a number of new and revised Statements of Standard Accounting Practice (“SSAPs”) issued by the Hong Kong Society of Accountants, which has resulted in the adoption of the following new and revised accounting policies. The adoption of these Standards has resulted in a change in the format of presentation of the cash flow statement and the inclusion of statement of changes in equity, but has had no material effect on the results for the current or prior accounting periods. Accordingly, no prior period adjustments has been required.

Foreign currencies

The revisions to SSAP 11 “Foreign Currency Translation” have eliminated the choice of translating the income statements of overseas subsidiaries and associates at the closing rate for the period, the policy previously followed by the Group. They are now required to be translated at an average rate. This change in accounting policy has not had any material effect on the results for the current or prior accounting periods.

Cash flow statements

In the current year, the Group has adopted SSAP 15 (Revised) “Cash Flow Statements”. Under SSAP 15 (Revised), cash flows are classified under three headings – operating, investing and financing, rather than the previous five headings. Interest and dividend received, which were previously presented under a separate heading, are classified as investing cash flows. Interest paid is classified as financing cash flow. Cash flows arising from taxes on income are classified as operating activities, unless they can be separately identified with investing or financing activities.

16 -

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

Discontinuing operations

SSAP 33 “Discontinuing Operations” is concerned with the presentation of financial information regarding discontinuing operations and replaces the requirements previously included in SSAP 2 “Net Profit or Loss for the Period, Fundamental Errors and Changes in Accounting Policies”. Under SSAP 33, financial statement amounts relating to the discontinuing operation are disclosed separately from the point at which either a binding sale agreement is entered into or a detailed plan for the discontinuance is announced. The adoption of SSAP 33 has resulted in the identification of the Group’s fashion and apparel and accessories retailing activities as a discontinuing operation in the prior period, details of which are disclosed at note 6.

Employee benefits

In the current year, the Group has adopted SSAP 34 “Employee Benefits”, which introduces measurement rules for employee benefits, including retirement benefit plans. Because the Group participates only in defined contribution retirement benefit schemes, the adoption of SSAP 34 has not had any material impact on the financial statements.

3. CHANGE IN ACCOUNTING POLICY AND PRIOR YEAR ADJUSTMENTS

In previous years, the Group revalued its leasehold land and buildings and carried these leasehold land and buildings in its balance sheet on a valuation basis. Having considered the leasehold land and buildings are held for long term operating purposes, the Company’s directors in the current year considered that the adoption of the cost basis of measurement for the Group’s leasehold land and buildings and the change in the accounting policy to restate the previous valuation of its leasehold land and buildings to historical cost would result in a more appropriate presentation of the performance of the Group.

This change has the effect of reducing the net asset value of the Group as well as asset revaluation reserve of the Group. Following the adoption of the new accounting policy mentioned above, the asset revaluation reserve and accumulated losses of the Group at 1 April 2001 has been reduced by HK$3,822,000 and HK$587,000 respectively. The carrying value of property, plant and equipment at 31 March 2001 and 2002 has been decreased and increased respectively by HK$3,235,000 and HK$708,000.

4. SIGNIFICANT ACCOUNTING POLICIES

The financial statements have been prepared under the historical cost convention as modified for revaluation of investment properties.

The financial statements have been prepared in accordance with accounting principles generally accepted in Hong Kong. The principal accounting policies adopted are as follows:

17 -

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

Basis of consolidation

The consolidated financial statements incorporate the financial statements of the Company and its subsidiaries made up to March 31 each year.

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

All significant intercompany transactions and balances within the Group have been eliminated on consolidation.

Goodwill

Goodwill arising on consolidation represents the excess of the cost of acquisition over the Group’s interest in the fair value of the identifiable assets and liabilities of a subsidiary at the date of acquisition.

Goodwill is capitalised and amortised on a straight-line basis over its useful economic life. Goodwill arising on the acquisition of subsidiaries is presented separately in the balance sheet.

Negative goodwill

Negative goodwill represents the excess of the Group’s interest in the fair value of the identifiable assets and liabilities of a subsidiary at the date of acquisition over the cost of acquisition.

Negative goodwill is presented as a deduction from assets. To the extent that such negative goodwill is attributable to losses or expenses anticipated at the date of acquisition, it is released to income in the period in which those losses or expenses arise. The remaining negative goodwill is recognised as income on a straight-line basis over the remaining average useful life of the identifiable acquired depreciable assets. To the extent that such negative goodwill exceeds the aggregate fair value of the acquired identifiable non-monetary assets, it is recognised in income immediately.

Investments in subsidiaries

Investments in subsidiaries are included in the Company’s balance sheet at cost less any identified impairment loss.

18 -

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

Revenue recognition

Gas connection revenue is recognised when the outcome of a contract can be estimated reliably and the stage of completion at the balance sheet date can be measured reliably. Revenue from gas connection contracts is recognised on the percentage of completion method, measured by reference to the value of work carried out during the year. When the outcome of a gas connection contract cannot be estimated reliably, revenue is recognised only to the extent of contract cost incurred that it is probable to be recoverable.

Sales of petroleum, natural gas and gas appliances are recognised when goods are delivered and title has passed.

Rental income under operating leases is recognised on a straight-line basis over the terms of the relevant leases.

Sale proceeds on trading of securities are recognised on a trade date basis when a sale and purchase contract is entered into.

Interest income is accrued on a time basis by reference to the principal outstanding and at the interest rate applicable.

Dividend income from investments is recognised when the shareholders’ rights to receive payment have been established.

Interests in associates

The consolidated income statement includes the Group’s share of the post-acquisition results of its associates for the year. In the consolidated balance sheet, interests in associates are stated at the Group’s share of the net assets of the associates plus the premium paid less any discount on acquisition in so far as it has not already been amortised to the income statement, less any identified impairment loss.

The results of associates are accounted for by the Company on the basis of dividends received and receivable during the year. In the Company’s balance sheet, investment in an associate is stated at cost, as reduced by any identified impairment loss.

19 -

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

Investment properties

Investment properties are completed properties which are held for their investment potential, any rental income being negotiated at arm’s length.

Investment properties are stated at their open market value based on independent professional valuations at the balance sheet date. Any revaluation increase or decrease arising on the revaluation of investment properties is credited or charged to the investment property revaluation reserve unless the balance of this reserve is insufficient to cover a revaluation decrease, in which case the excess of the revaluation decrease over the balance on the investment property revaluation reserve is charged to the income statement. Where a decrease has previously been charged to the income statement and a revaluation increase subsequently arises, this increase is credited to the income statement to the extent of the decrease previously charged.

On disposal of an investment property, the balance on the investment property revaluation reserve attributable to that property is transferred to the income statement.

No depreciation is provided on investment properties except where the unexpired term of the relevant lease is 20 years or less.

Properties held for development

Properties held for development are stated at the cost of acquisition to the Group together with any attributable expenses less provision for anticipated losses, where appropriate.

Property, plant and equipment

Property, plant and equipment are stated at cost less depreciation and amortisation and accumulated impairment loss.

Depreciation is provided to write off the cost of items of property, plant and equipment over their estimated useful lives and after taking into account their estimated residual value, using the straight-line method, at the following rates per annum:

Land use rights	Over the shorter of the term of the lease or the
	operation period of the relevant company
Leasehold land	Over the remaining terms of the leases
Buildings	Over the shorter of the remaining terms of the leases
	or 50 years
Pipelines	Over the shorter of 30 years or the operation period
	of the relevant company
Machinery and equipment	10%
Furniture and fixtures	15% – 50%
Motor vehicles	25%

20 -

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

The gain or loss arising from disposal or retirement of an asset is determined as the difference between the sale proceed and the carrying amount of the asset and is recognised in the income statement.

Construction in progress

Construction in progress represents machinery and pipelines under construction and is stated at cost. Cost comprises direct and indirect costs of acquisition or construction. Completed items are transferred from construction in progress to proper categories of property, plant and equipment when they are ready for their intended use.

Investments in securities

Investments in securities are recognised on a trade-date basis and are initially measured at cost.

Investments other than held-to-maturity debt securities are classified as investment securities and other investments.

Investment securities, which are securities held for an identified long-term strategic purpose are measured at subsequent reporting dates at cost, as reduced by any impairment loss that is other than temporary.

Other investments are measured at fair value, with unrealised gains and losses included in net profit or loss for the year.

Inventories

Inventories, including construction materials, gas appliances and gas for sales, petroleum, consumables and spare parts, are stated at the lower of cost and net realisable value. Cost is calculated using the weighted average method. Net realisable value represents the estimated selling price in the ordinary course of business less estimated costs to completion and the estimated costs necessary to make the sale.

Impairment

At each balance sheet date, the Group reviews the carrying amounts of its assets to determine whether there is any indication that those assets have suffered an impairment loss. If the recoverable amount of an asset is estimated to be less than its carrying amount, the carrying amount of the asset is reduced to its recoverable amount. Impairment loss is recognised as an expense immediately.

21 -

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

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

Operating leases

Rentals payable under operating leases are charged to the income statement on a straight-line basis over relevant lease terms.

Construction contracts

When the outcome of a construction contract can be estimated reliably, contract costs are charged to the income statement by reference to the stage of completion of the contract activity at the balance sheet date, as measured by the proportion that costs incurred to date bear to estimated total costs for the contract.

When the outcome of a construction contract cannot be estimated reliably, contract costs are recognised as an expense 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.

Retirement benefit costs

Payments to the Mandatory Provident Fund Scheme (“MPF Scheme”) and other schemes are charged as an expense as they fall due.

Foreign currencies

Transactions in foreign currencies are initially recorded at the rates of exchange prevailing on the dates of the transactions or at the contracted settlement rate. Monetary assets and liabilities denominated in foreign currencies are re-translated at the rates prevailing on the balance sheet date. Profits and losses arising on exchange are included in net profit or loss for the year.

On consolidation, the assets and liabilities of the Group’s overseas operations are translated at exchange rates prevailing on the balance sheet date. Income and expense items are translated at the average exchange rates for the year. Exchange differences arising, if any, are classified as equity and transferred to the Group’s translation reserve. Such translation differences are recognised as income or as expenses in the period in which the operation is disposed of.

22 -

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

Taxation

The charge for taxation is based on the results for the year as adjusted for items which are non-assessable or disallowed. Timing differences arise from the recognition for tax purposes of certain items of income and expense in a different accounting period from that in which they are recognised in the financial statements. The tax effect of timing differences, computed using the liability method, is recognised as deferred taxation in the financial statements to the extent that it is probable that a liability or an asset will crystallise in the foreseeable future.

5. TURNOVER

Turnover represents the net amounts received and receivable for goods sold, sales of natural gas and petroleum, income from trading of securities, gas connection fees, dividend income and rental income received and receivable by the Group for the year and is analysed as follows:

Sales of petroleum Sales of natural gas Sales of goods Gas connection fees Rental income Income from trading of securities Dividend income Others	2003 *HK$’000* 58,140 15,975 3,658 2,838 2,263 134 2 2,527 85,537	2002 HK$’000 – – 76 – 1,266 3,477 8 –
		4,827

6. BUSINESS AND GEOGRAPHICAL SEGMENTS

Business segments

For management purposes, the Group is currently organised into five operating divisions – property investment, financial and securities investment, gas pipeline construction, sales of natural gas and petroleum. These principal operating activities are the basis on which the Group reports its primary segment information.

23 -

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

In prior year, the Group was also involved in the retailing of fashion and accessories. That operation was discontinued during the year ended 31 March 2002.

Segment information about these businesses is presented below:

2003

Property investment HK$’000 REVENUE Turnover 2,263 SEGMENT RESULT (3,836 ) Unallocated corporate revenue Unallocated corporate expenses Loss from operations Finance costs Share of results of associates – Loss before taxation Taxation Loss before minority interests Minority interests Net loss for the year ASSETS Segment assets 55,986 Interests in associates – Unallocated corporate assets Consolidated total assets LIABILITIES Segment liabilities 351 Unallocated corporate liabilities Consolidated total liabilities OTHER INFORMATION Additions to property, plant and equipment – Additions to property, plant and equipment (unallocated) Depreciation and amortisation 258 Depreciation and amortisation (unallocated) Deficit on revaluation of investment properties 4,123 Amortisation of goodwill – Impairment loss recognised in consolidated income statement – Negative goodwill released to income statement (unallocated)	Financial and securities investment HK$’000 136 (28,423 ) – 5,501 – 11 – – – – 28,060	Gas pipeline construction HK$’000 2,838 1,947 – 47,063 – 41,146 722 – – – –	Sales of natural gas HK$’000 15,975 5,432 (11 ) 107,450 1,704 7,069 26,960 1,112 – 447 –	Sales of petroleum HK$’000 58,140 4,940 – 146,720 – 46,635 103,960 2,037 – 207 –	Others HK$’000 6,185 612 – 5,032 – 2,277 – – – – –	Consolidated HK$’000 85,537 (19,328 ) 343 (39,660 ) (58,645 ) (6,169 ) (11 ) (64,825 ) (1,861 ) (66,686 ) (2,987 ) (69,673 ) 367,752 1,704 132,051 501,507 97,489 199,560 297,049 131,642 49,072 180,714 3,407 825 4,232 4,123 654 28,060 3,488

24 -

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

2002
	Retailing			Financial
	of fashion			and
apparel and		Property		securities
accessories		investment	investment		Consolidated
	HK$’000	HK$’000		HK$’000	HK$’000
	(Note)
REVENUE
Turnover	76	1,266		3,485	4,827

SEGMENT RESULT	(963)	(6,770)		7,097	(636)

Unallocated corporate revenue					509
Unallocated corporate expenses					(7,256)
Loss from operations					(7,383)
Taxation credit					89
Net loss for the year					(7,294)
ASSETS
Segment assets	65	60,720		34,582	95,367
Unallocated corporate assets					13,601
Consolidated total assets					108,968
LIABILITIES
Segment liabilities	25	916		11	952
Unallocated corporate liabilities					4,092
Consolidated total liabilities					5,044

25 -

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

OTHER INFORMATION

	Retailing		Financial
	of fashion		and
apparel and		Property	securities
	accessories	investment	investment	Unallocated	Consolidated
	HK$’000	HK$’000	HK$’000	HK$’000	HK$’000
	(Note)
Deficit on revaluation of
investment properties	–	1,030	–	–	1,030
Depreciation	15	386	1	1	403
Unrealised holding gain on
investments in securities	–	–	6,736	–	6,736
Impairment loss recognised in
consolidated income statement	–	6,900	–	–	6,900

Note: During the year ended 31 March 2002, the Group discontinued its retailing of fashion and accessories operations which contributed HK$76,000 to the Group’s turnover and HK$963,000 to the Group’s loss from operations. It also contributed HK$3,584,000 to the Group’s net operating cash outflows and received HK$1,075,000 in respect of investing activities during the year ended 31 March 2002.

Geographical segments

The Group’s operations are located in Hong Kong and the PRC. The Group’s property, financial and securities investment divisions are located in Hong Kong. Sales of natural gas and petroleum and gas pipeline construction are carried out in the PRC.

The following table provides an analysis of the Group’s sales by geographical market, irrespective of the origin of the goods/services:

Hong Kong The PRC	Sales revenue by geographical market 2003 2002 *HK$’000* HK$’000 1,482 4,827 84,055 – 85,537 4,827	Sales revenue by geographical market 2003 2002 *HK$’000* HK$’000 1,482 4,827 84,055 – 85,537 4,827
		4,827

26 -

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

Revenue from the Group’s discontinued retailing of fashion and accessories operations was derived principally from Hong Kong.

The following is an analysis of the carrying amount of segment assets, and additions to property, plant and equipment, analysed by the geographical area in which the assets are located:

Hong Kong The PRC	Carrying amount of segment assets 2003 2002 *HK$’000* HK$’000 99,812 108,968 401,695 – 501,507 108,968	Additions to property, plant and equipment 2003 2002 *HK$’000* HK$’000 44,481 – 136,233 – 180,714 –	Additions to property, plant and equipment 2003 2002 *HK$’000* HK$’000 44,481 – 136,233 – 180,714 –
			–

7. OTHER OPERATING INCOME

Other operating income includes interest income amounting to HK$257,000 (2002: HK$59,000).

8. LOSS FROM OPERATIONS

Loss from operations has been arrived at after charging (crediting): Auditors’ remuneration Loss on disposals of property, plant and equipment Minimum lease payments for operating leases in respect of: – rented premises – equipment Staff costs including directors’ emoluments and retirement benefit scheme contributions Rental income from investment properties less outgoings of HK$45,000 (2002: HK$106,000)	2003 *HK$’000* 750 170 870 340 9,257 (2,218)	2002 HK$’000 565 22 157 – 1,115 (1,160)

27 -

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

9. FINANCE COSTS

2003 *HK$’000* Interest on: Bank loans and other borrowings wholly repayable within five years 5,773 Bank loans not wholly repayable within five years 396 6,169 10. DIRECTORS’ EMOLUMENTS 2003 *HK$’000* Directors’ fees – executive 33 – non-executive 118 – independent non-executive 103 254 Other emoluments – executive 2,492 – non-executive 1,835 4,327 Total emoluments 4,581 The emoluments of the directors were within the following bands: 2003 No. of Directors Nil to HK$1,000,000 17 HK$1,500,001 to HK$2,000,000 2	2002 HK$’000 – –
	–

	2002 HK$’000 – 90 90
	180
	– –
	–
	180

	2002 No. of Directors 13 –

28 -

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

11. EMPLOYEES’ EMOLUMENTS

Of the five individuals with the highest emoluments in the Group, three (2002: None) were directors of the Company. The emoluments of the remaining two (2002: five) individuals were as follows:

Salaries and other benefits Retirement benefit scheme contributions	2003 *HK$’000* 574 20 594	2002 HK$’000 824 9
		833

Emoluments of each of the two (2002: five) individuals were below HK$1,000,000.

12. TAXATION (CHARGE) CREDIT

The (charge) credit comprises: Overprovision for Hong Kong Profits Tax in the previous year PRC income tax for the year	2003 *HK$’000* 18 (1,879) (1,861)	2002 HK$’000 89 –
		89

No provision for Hong Kong Profits Tax has been made in the financial statements as the Group has no assessable profit for the year.

Taxation arising in other jurisdiction is calculated at the rates prevailing in the relevant jurisdictions.

Certain subsidiaries operating in the PRC are eligible for tax holidays and concessions and were exempted from PRC income taxes for the year.

Details of unprovided deferred taxation are set out in note 29.

29 -

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

13. LOSS PER SHARE

The calculation of basic loss per share is based on the net loss for the year of HK$69,673,000 (2002: HK$7,294,000) and on 1,043,403,188 (2002: 324,461,902) weighted average number of ordinary shares outstanding during the year. No diluted loss per share is presented as the exercise of the potential dilutive ordinary shares would result in reduction in loss per share in both years.

14. INVESTMENT PROPERTIES

Valuation At beginning of the year Deficit on revaluation At end of the year	THE GROUP 2003 2002 *HK$’000* HK$’000 13,923 15,630 (4,123) (1,707) 9,800 13,923	THE GROUP 2003 2002 *HK$’000* HK$’000 13,923 15,630 (4,123) (1,707) 9,800 13,923
		13,923

Investment properties were revalued at their open market value at 31 March 2003 by LCH (Asia-Pacific) Surveyors Limited, a firm of independent professionally qualified valuers, on an open market existing use basis. This valuation gave rise to a deficit on revaluation of HK$4,123,000 of which nil (2002: HK$677,000) and HK$4,123,000 (2002: HK$1,030,000) have been charged to the investment property revaluation reserve and the consolidated income statement respectively.

Investment properties of the Group with a net book value of HK$9,800,000 (2002: HK$13,068,000) are rented out under operating leases.

The market value of investment properties shown above comprises:

Long lease in Hong Kong Medium term lease in Hong Kong	2003 *HK$’000* 8,020 1,780 9,800	2002 HK$’000 11,860 2,063
		13,923

30 -

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

15. PROPERTY, PLANT AND EQUIPMENT

THE GROUP COST At 1 April 2002 – as originally stated – prior year adjustment for the change in accounting policy (Note 3) – as restated Additions Acquired on acquisition of subsidiaries Reclassification Disposals At 31 March 2003 DEPRECIATION, AMORTISATION AND IMPAIRMENT At 1 April 2002 – as originally stated – prior year adjustment for the change in accounting policy (Note 3) – as restated Provided for the year Impairment loss recognised in the income statement (Note below) Eliminated on disposals At 31 March 2003 NET BOOK VALUES At 31 March 2003 At 31 March 2002	Land use rights under medium– term leases HK$’000 – – – – 29,310 – – 29,310 – – – 275 – – 275 29,035 –	Leasehold land and buildings HK$’000 12,600 (100) 12,500 4,817 101,267 – – 118,584 – 2,427 2,427 2,401 8,797 – 13,625 104,959 10,073	Construction in Pipelines progress HK$’000 HK$’000 – – – – – – – 7,649 9,843 9,860 3,357 (3,357) – – 13,200 14,152 – – – — – – 128 – – – – – 128 – 13,072 14,152 – –	Machinery and equipment HK$’000 – – – 3,578 7,171 – – 10,749 – — – 726 – – 726 10,023 –	Furniture and fixtures HK$’000 4,013 – 4,013 1,426 366 – (3,912) 1,893 3,831 – 3,831 112 – (3,742) 201 1,692 182	Motor vehicles HK$’000 152 – 152 636 4,791 – – 5,579 152 – 152 590 – – 742 4,837 –	Total HK$’000 16,765 (100)
							16,665 18,106 162,608 – (3,912)
							193,467
							3,983 2,427
							6,410 4,232 8,797 (3,742)
							15,697
							177,770

							10,255

31 -

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

The net book value of leasehold land and buildings shown above comprises.

In Hong Kong Long lease Medium-term lease Outside Hong Kong Medium-term lease	2003 *HK$’000* 34,577 9,679 60,703 104,959	2002 HK$’000 – 10,073 –
		10,073

Notes: (a) During the year, the directors determined that certain leasehold land and buildings held by the subsidiaries were impaired, due to the continued loss of those subsidiaries. Accordingly, impairment loss of HK$8,797,000 (2002: Nil) has been recognised in respect of these leasehold land and buildings.

(b) Certain land use rights and land and buildings with carrying amount of HK$4,070,000 and HK$11,619,000 respectively are in the process of obtaining the certificate of land use right and the certificates for real estate.

16. PROPERTIES HELD FOR DEVELOPMENT

Medium term lease in Hong Kong – at cost Less: Impairment loss recognised	THE GROUP 2003 2002 *HK$’000* HK$’000 43,100 43,100 (6,900) (6,900) 36,200 36,200	THE GROUP 2003 2002 *HK$’000* HK$’000 43,100 43,100 (6,900) (6,900) 36,200 36,200
		36,200

Properties held for development were reassessed at their open market value at 31 March 2003 on an open market existing use basis. The directors of the Company consider that no further impairment loss (2002: HK$6,900,000) was required to be charged to the consolidated income statement.

32 -

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

17. INTERESTS IN SUBSIDIARIES

Unlisted shares, at cost Less: Impairment losses recognised Amounts due from subsidiaries Less: Allowance	THE COMPANY 2003 2002 *HK$’000* HK$’000 129,504 51,504 (51,504) (51,504) 78,000 – 340,924 188,562 (137,176) (146,160) 203,748 42,402 281,748 42,402

The amounts are unsecured and interest-free. In the opinion of the directors, the amounts due from subsidiaries will not be repaid within twelve months from the balance sheet date. Accordingly, they are classified as non-current.

Particulars of the principal subsidiaries at 31 March 2003 are as follows:

			Paid up	Proportion of	Proportion of
	Place of		issued share	nominal	value
	incorporation	Form of	capital/	of issued capital/
	or registration/	business	registered	registered capital
Name of subsidiary	operations	structure	capital	held by the	Company	Principal activities
				Directly	Indirectly
				%	%
eglobaljob.com Limited	Hong Kong	Incorporated	Ordinary	100	–	Investment holding
			HK$2
Faith Profit Limited	Hong Kong	Incorporated	Ordinary	100	–	Property holding
			HK$10,000
Fronteer Securities (HK)	Hong Kong	Incorporated	Ordinary	–	100	Financial and
Limited			HK$2			securities
						investment

33 -

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

			Paid up	Proportion of	Proportion of
	Place of		issued share	nominal	value
	incorporation	Form of	capital/	of issued capital/
	or registration/	business	registered	registered capital
Name of subsidiary	operations	structure	capital	held by the	Company		Principal activities
				Directly	Indirectly
				%		%
Hai Xia Finance Limited	Hong Kong	Incorporated	Ordinary	–	100		Securities investment
			HK$2
Iwai’s Holdings	Hong Kong	Incorporated	Ordinary	–	100		Investment holding,
(Hong Kong) Limited			HK$1,000				property investment
			Non-voting	–		–	and provision of
			deferred shares				management services
			HK$1,000,000				to group companies
			(Note)
Iwai’s Investments	The British	Incorporated	Ordinary	100		–	Investment holding
Limited	Virgin		HK$10,000
	Islands
	(“BVI”)/
	Hong Kong
Luckford Enterprise	Hong Kong	Incorporated	Ordinary	100		–	Property development
Limited			HK$10,000
Wellgem Asia Limited	Hong Kong	Incorporated	Ordinary	100		–	Property development
			HK$10,000
York Winner Investment	Hong Kong	Incorporated	Ordinary	–	100		Financial and securities
Limited			HK$2				investment
中亞燃氣實業(深圳)	PRC	Wholly	Registered	100		–	Investment holding
有限公司		foreign–	US$10,000,000
(「中亞燃氣」)		owned
		enterprise
鄭州標準石化有限公司	PRC	Limited liability	Registered	–		55	Trading of petroleum
Zhengzhou Standard		company	RMB15,000,000				and operation of
Petrochemical							petrol stations
Company Limited
(“Zhengzhou
Standard”)

34 -

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

				Paid up	Proportion of	Proportion of
		Place of		issued share	nominal	value
	incorporation		Form of	capital/	of issued capital/
	or registration/		business	registered	registered capital
Name of subsidiary	operations		structure	capital	held by the	Company		Principal activities
					Directly	Indirectly
					%		%
北京中燃翔科油氣技術		PRC	Sino-foreign	Registered	–		60	Trading of natural gas
有限公司（前稱			equity joint	RMB20,000,000				and gas pipeline
北京翔科嘉華油氣			venture					construction
技術有限公司）
Beijing Zhongran Xiangke
Oil & Gas Technology
Company Limited*
(formerly known as
Beijing Xiangke Jiahua
Oil & Gas Technology
Company Limited
(“Beijing Xiangke”))
Elegant Cheer Limited	Hong Kong		Incorporated	Ordinary	–	100		Property holding
(“Elegant Cheer”)				HK$10,000
China Gas Corporate	Hong Kong		Incorporated	Ordinary	100		–	Provision of
Services Limited				HK$100				secretarial services
China Natural Gas		BVI	Incorporated	Ordinary	100		–	Investment holding
Investment Limited				US$100
China City Gas Investment		Samoa	Incorporated	Ordinary	100		–	Investment holding
Limited				US$1
China City Gas Development		Samoa	Incorporated	Ordinary	100		–	Investment holding
Limited				US$1
武漢中燃投資有限公司		PRC	Limited	Registered	–	100		Investment holding
Wuhan China Natural Gas			liability	RMB69,980,000
Investment Company Limited			company
中國城市燃氣建設投資有限公司		BVI	Incorporated	Ordinary	–		57	Investment holding
China City Gas Construction				US$100
Investment Company Limited

35 -

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

				Paid up	Proportion of	Proportion of
		Place of		issued share	nominal	value
	incorporation		Form of	capital/	of issued capital/
	or registration/		business	registered	registered capital
Name of subsidiary	operations		structure	capital	held by the	Company		Principal activities
					Directly	Indirectly
					%		%
焦作中燃城市燃氣發展有限公司		PRC	Sino-foreign	Registered	–		93	Not yet commence
Jiaozuo City Gas Development			equity joint	RMB84,800,000				business
Co., Ltd.			venture
China City Gas Construction		BVI	Incorporated	Ordinary	–		57	Investment holding
Development Company Limited				US$100
濟源中燃城市燃氣發展有限公司		PRC	Sino-foreign	Registered	–		93	Not yet commence
Jiyuan City Gas Development			equity joint	RMB40,280,000				business
Company Limited			venture
北京中油翔科科技		PRC	Limited	Registered	–		80	Trading of natural gas
有限公司			liability	RMB2,000,000				and gas pipeline
			company					construction
唐山翔科燃氣有限公司		PRC	Limited	Registered	–		70	Trading of natural gas
			liability	RMB1,000,000				and gas pipeline
			company					construction
廊坊市翔科危險貨物		PRC	Limited	Registered	-		80	Trading of natural gas
運輸有限公司			liability	RMB500,000				and gas pipeline
			company					construction
廊坊市翔科油氣技術		PRC	Limited	Registered	–		51	Trading of natural gas
有限公司			liability	RMB2,680,000				and gas pipeline
			company					construction
宣昌中燃城市燃氣發展		PRC	Limited	Registered	–		70	Not yet commence
有限公司			liability	RMB70,000,000				business
Yichang Zhongran City			company
Gas Development Limited
城翔科燃氣有限公司		PRC	Limited	Registered	–		70	Trading of natural gas
			liability	RMB2,000,000				and gas pipeline
			company					construction

English name is for identification purposes only.
36 -

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

The above table lists the principal subsidiaries of the Company which, in the opinion of the directors, principally affected the results or net assets of the Group. To give details of other subsidiaries would, in the opinion of the directors, result in particulars of excessive length.

Note: The deferred shares, which are not held by the Group, carry practically no rights to dividends or to receive notice of or to attend or vote at any general meeting of the company or to participate in any distribution on winding up.

None of the subsidiaries had any debt securities outstanding at the end of the year.

18. INTERESTS IN ASSOCIATES/INVESTMENT IN AN ASSOCIATE

Unlisted shares, at cost Share of net assets	THE GROUP 2003 2002 *HK$’000* HK$’000 – – 1,704 –	THE COMPANY 2003 2002 *HK$’000* HK$’000 1 – – –	THE COMPANY 2003 2002 *HK$’000* HK$’000 1 – – –

			–

As at 31 March 2003, the Group had interests in the following associates:

					Proportion of
		Place/			nominal value of
	Form of	country of	Principal		shares/registered
	business	incorporation/	place of	Class of	capital held
Name of entity	structure	registration	operation	shares held	by the Group	Nature of business
China Gas Development	Incorporated	BVI	Hong Kong	Ordinary	49%	Investment holding
Group Limited
北京城南之光燃氣	Limited liability	PRC	PRC	Registered	30%	Trading of natural gas
技術開發有限公司	company			capital		and gas pipeline
						construction

37 -

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

19. INVESTMENTS IN SECURITIES

Investment securities 2003 2002 *HK$’000* HK$’000 The Group Equity securities held in Hong Kong 5,490 – Market value 3,660 – Carrying amount analysed for reporting purpose as: Current – – Non-current 5,490 – 5,490 – The Company Equity securities held in Hong Kong 5,220 – Market value 3,480 – Carrying amount analysed for reporting purpose as: Current – – Non-current 5,220 – 5,220 –	Other investments 2003 2002 *HK$’000* HK$’000 – 33,700 – 33,700 – 33,700 – – – 33,700 – 31,900 – 31,900 – 31,900 – – – 31,900	Total 2003 2002 *HK$’000* HK$’000 5,490 33,700 3,660 33,700 – 33,700 5,490 – 5,490 33,700 5,220 31,900 3,480 31,900 – 31,900 5,220 – 5,220 31,900	Total 2003 2002 *HK$’000* HK$’000 5,490 33,700 3,660 33,700 – 33,700 5,490 – 5,490 33,700 5,220 31,900 3,480 31,900 – 31,900 5,220 – 5,220 31,900

			33,700

			33,700 –
			33,700

			31,900

			31,900

			31,900 –
			31,900

38 -

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

Notes:

(i) The investments represent approximately 8.8% and 8.4% equity interests in Greater China Holdings Limited (“Greater China”) held by the Group and the Company respectively.
(ii) In order to facilitate the exploration of business opportunities between the Group and Greater China with a focus in the cross strait business sectors and maintain good relationship, the directors considered that investment in Greater China is for strategic long-term purpose, accordingly, such investment was reclassified as non-current investment securities. An impairment loss of HK$6,100,000 was recognised in income statement for the six months ended 30 September 2002 in respect of the period prior to the change of classification.
(iii) Further, due to the continuous losses suffered by Greater China, the directors recognised impairment loss of HK$28,060,000 for the year ended 31 March 2003 (included HK$6,100,000 as mentioned in (ii) above) by reference to the latest net assets value of Greater China.

20. GOODWILL

	THE GROUP
	HK$’000
COST
Arising on acquisitions during the year and at 31 March 2003	20,784
AMORTISATION
Charge for the year and at 31 March 2003	(654)
NET BOOK VALUE
At 31 March 2003	20,130

The goodwill is amortised to the consolidated income statement on a straight-line basis over a period ranged from 11 to 20 years.

39 -

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

21. NEGATIVE GOODWILL

	THE GROUP
	HK$’000
GROSS AMOUNT
Arising on acquisitions during the year and at 31 March 2003	3,488
RELEASED TO INCOME STATEMENT
Released during the year	(3,488)
CARRYING AMOUNT
At 31 March 2003	–

The negative goodwill on the acquisition of a subsidiary of which its main asset was a leasehold land and building. The management has reassessed the value of this leasehold land and building by reference to a valuation report prepared by a firm of independent professional qualified valuers at the balance sheet date and recognised an impairment loss of HK$8,655,000. Accordingly, the directors released the negative goodwill to the income statement in full during the year.

22. INVENTORIES

The following is an analysis of inventories at the reporting date: Petroleum Construction materials Consumables and spare parts Natural gas	THE GROUP 2003 2002 *HK$’000* HK$’000 10,473 – 880 – 2,573 – 132 – 14,058 –	THE GROUP 2003 2002 *HK$’000* HK$’000 10,473 – 880 – 2,573 – 132 – 14,058 –
		–

The balance represents the finished goods and is stated at cost.

40 -

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

23. TRADE AND OTHER RECEIVABLES

The Group allows an average credit period of 30-60 days to its trade customers.

The following is an aged analysis of trade and other receivables at the reporting date:

0 – 60 days 61 – 90 days 91 – 120 days 121 – 180 days Over 180 days Trade receivables Deposit paid for construction materials Other receivables, deposits and prepayments Advance to a supplier – interest bearing (Note) Advances to other suppliers – non-interest bearing	THE GROUP 2003 2002 *HK$’000* HK$’000 3,502 99 290 – 1,331 2 1,793 – 1,565 – 8,481 101 38,095 – 10,939 125 8,524 – 8,973 – 75,012 226	THE GROUP 2003 2002 *HK$’000* HK$’000 3,502 99 290 – 1,331 2 1,793 – 1,565 – 8,481 101 38,095 – 10,939 125 8,524 – 8,973 – 75,012 226
		101 – 125 – –
		226

Note: Advance to a supplier was interest bearing at commercial rate, unsecured and repayable within twelve months.

24. TRADE AND OTHER PAYABLES

The following is an aged analysis of trade and other payables at the reporting date:

0 – 60 days 61 – 90 days 91 – 120 days 121 – 180 days Over 180 days Trade payables Other payables and accrued charges	THE GROUP 2003 2002 *HK$’000* HK$’000 1,439 447 32 197 1,217 2,025 422 – 4,292 – 7,402 2,669 30,709 – 38,111 2,669	THE GROUP 2003 2002 *HK$’000* HK$’000 1,439 447 32 197 1,217 2,025 422 – 4,292 – 7,402 2,669 30,709 – 38,111 2,669
		2,669 –
		2,669

41 -

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

25. BANK AND OTHER BORROWINGS

Short-term bank loans Mortgage loan Loan from a financial institution (Note a) Other unsecured loans_(Note b) Loans from employees(Note c)_ Secured Unsecured The maturity profile of the above loans is as follows: On demand or within one year More than one year, but not exceeding two years More than two years, but not exceeding five years More than five years Less: Amount due within one year shown under current liabilities Amount due after one year	THE GROUP 2003 2002 *HK$’000* HK$’000 57,143 – 22,029 – 55,590 – 107,148 – 4,895 – 246,805 – 134,762 – 112,043 – 246,805 – 159,361 – 68,815 – 7,108 – 11,521 – 246,805 – (159,361) – 87,444 –	THE COMPANY 2003 2002 *HK$’000* HK$’000 – – 22,029 – 55,590 – 61,926 – – – 139,545 – 77,619 – 61,926 – 139,545 – 56,996 – 64,396 – 6,632 – 11,521 – 139,545 – (56,996) – 82,549 –	THE COMPANY 2003 2002 *HK$’000* HK$’000 – – 22,029 – 55,590 – 61,926 – – – 139,545 – 77,619 – 61,926 – 139,545 – 56,996 – 64,396 – 6,632 – 11,521 – 139,545 – (56,996) – 82,549 –
			–

			– –
			–

			– – – –
			– –
			–

42 -

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

Notes:

a. Loan from a financial institution is secured, interest-bearing at commercial rates and repayable on 20 November 2003. The details of the assets pledged are set out in note 35.
b. Other loans are unsecured and not repayable within twelve months from the balance sheet date. Included in other loans is a loan of HK$61,926,000 which is interest-free (the related fund arrangement fee of HK$2,917,000 was included in consolidated income statement). The remaining balance of HK$45,222,000 bears interest at commercial rates.
c. Loans from employees represent advances from employees of Zhengzhou Standard. The amounts are unsecured, interest-free and are repayable during the period from May 2004 to September 2005.

26. SHARE CAPITAL

Ordinary shares No. of shares ’000 HK$’000 HK$0.01 each Authorised 9,000,000 90,000 Issued and fully paid: At 1 April 2001 208,292 2,083 Issue of new ordinary shares 130,000 1,300 Conversion of preference shares to ordinary shares 138,462 1,385 Exercise of share options 8,272 83 At 31 March 2002 485,026 4,851 Issue of new ordinary shares (Notes a and b) 112,050 1,121 Conversion of preference shares to ordinary shares (Note c) 614,331 6,143 Exercise of share options (Note d) 1,000 10 At 31 March 2003 1,212,407 12,125	Convertible preference shares No. of shares ’000 HK$’000 HK$1 each 124,902 124,902 123,902 123,902 – – (18,000) (18,000) – – 105,902 105,902 – – (99,604) (99,604) – – 6,298 6,298	Total HK$’000 214,902 125,985 1,300 (16,615) 83 110,753 1,121 (93,461) 10 18,423

43 -

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

Notes:

(a) In connection with the acquisition of subsidiaries during the year ended 31 March 2003, 10,000,000, 16,325,829 and 52,391,042 ordinary shares of HK$0.01 each of the Company were issued at issue prices of HK$1.08, HK$0.98 and HK$1.00 per share as consideration for acquisition of Beijing Xiangke, Zhengzhou Standard and Elegant Cheer, respectively.
(b) On 17 July 2002, the Company issued 33,333,333 ordinary shares of HK$0.01 each for a total consideration of HK$30,000,000 to raise additional working capital to the Company.
(c) During the year, the holders of preference shares have exercised the options to convert 56,402,477 and 43,201,429 Convertible Preference (“CP”) shares at HK$0.2 and HK$0.13 per share respectively into 614,331,070 ordinary shares of HK$0.01 each.
(d) During the year, one director has exercised the share options to subscribe 1,000,000 ordinary shares of HK$0.01 each at HK$0.11 per share.

The CP shares shall carry equal rights and rank pari passu with one another as follows:

(i) Holders of the CP shares issued during the year ended 31 March 1999 are entitled in priority to any dividend payable in respect of the ordinary shares of the Company at cumulative annual preferential dividend rates of 3 per cent. per annum on the principal amount of the CP shares which are specified in the subscription agreement dated 12 February 1999 and two supplement agreements dated 15 February 1999 and 9 March 1999 respectively. Subject to the Companies Act of Bermuda, the dividend is cumulative and payable semi-annually in arrears on 31 March and 30 September in each year during the conversion period which falls after the second anniversary from the date of issue of the CP shares and the first payment is due on 30 September 2001. No interest is payable for the first and second year in which the CP shares are outstanding. The conversion price of the CP shares is HK$0.13 each and the maturity date of the CP shares is 30 March 2004.
(ii) Dividend on CP shares issued on 4 January 2001 will only be payable commencing on the third year at 2.5 per cent. per annum on the principal amount of the respective CP shares outstanding. The conversion price of the CP shares is HK$0.20 each, subject to adjustments, and the maturity date of the CP shares is 3 January 2006.
(iii) The CP shares are convertible in multiples of 1,000,000 into ordinary shares of the Company.
(iv) The CP shares are also redeemable at the principal amounts on the maturity date or the earliest date permitted under the Companies Act of Bermuda, whichever is the later. The maturity date is the fifth anniversary of the issue date of the CP shares.
(v) The CP shares do not have any voting rights.
44 -

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

27. RESERVES

THE COMPANY At 1 April 2001 Private placement Exercise of share options Conversion of preference shares Net loss for the year At 31 March 2002 Private placement Exercise of share options Issue of shares for acquisition of subsidiaries Conversion of preference shares Net loss for the year At 31 March 2003	Share Contributed Accumulated premium surplus losses HK$’000 HK$’000 HK$’000 22,718 94,712 (191,093) 42,500 – – 827 – – 16,615 – – – – (14,714) 82,660 94,712 (205,807) 29,666 – – 100 – – 78,403 – – 93,461 – – – – (46,917) 284,290 94,712 (252,724)	Total HK$’000 (73,663) 42,500 827 16,615 (14,714) (28,435) 29,666 100 78,403 93,461 (46,917) (126,278)

Notes:

The contributed surplus of the Company represents the difference between the underlying net assets of the subsidiaries acquired by the Company as at the date of acquisition and the nominal amount of the Company’s share capital issued as consideration for the acquisition.

Under the Companies Act 1981 of Bermuda (as amended), the contributed surplus account of the Company is available for distribution. However, the Company cannot declare or pay a dividend, or make a distribution out of contributed surplus if

(a) it is, or would after the payment be, unable to pay its liabilities as they become due; or
(b) the realisable value of its assets would thereby be less than the aggregate of its liabilities and its issued share capital and share premium accounts.

At 31 March 2003, the Company had no reserve available for distribution.

28. AMOUNTS DUE TO SUBSIDIARIES

The amounts are unsecured, interest-free and have no fixed term of repayment. The subsidiaries have confirmed that repayment of the amounts will not be demanded within one year from the balance sheet date and accordingly, the amounts are classified as non-current.

45 -

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

29. UNPROVIDED DEFERRED TAXATION

At the balance sheet date, the Group and the Company had a net deferred tax asset of HK$13,004,000 (2002: HK$9,109,000) and HK$3,120,000 (2002: Nil) respectively not recognised in the financial statements as realisation of this asset in the foreseeable future is uncertain. Details of the unprovided deferred tax asset are as follows:

THE GROUP 2003 2002 *HK$’000* HK$’000 Tax effect of timing differences because of: Shortfall of tax allowances over depreciation 74 314 Other timing differences – (967) Tax losses 12,930 9,762 Net deferred tax asset 13,004 9,109	THE COMPANY 2003 2002 *HK$’000* HK$’000 – – – – 3,120 – 3,120 –	THE COMPANY 2003 2002 *HK$’000* HK$’000 – – – – 3,120 – 3,120 –
		–

The amount of unprovided deferred tax credit (charge) for the year is as follows:

(Excess) shortfall of tax allowances over depreciation Other timing differences Tax losses arising	THE GROUP 2003 2002 *HK$’000* HK$’000 (240) 265 967 (967) 3,168 1,658 3,895 956	THE COMPANY 2003 2002 *HK$’000* HK$’000 – – – – 3,120 – 3,120 –	THE COMPANY 2003 2002 *HK$’000* HK$’000 – – – – 3,120 – 3,120 –
			–

Deferred taxation has not been provided on the valuation surplus arising on the revaluation of investment properties as profits arising on the disposal of these assets would not be subject to taxation. Accordingly, the valuation does not constitute a timing difference for tax purposes.

46 -

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

30. ACQUISITION OF SUBSIDIARIES

During the year, the Group acquired 60%, 55% and 100% of Beijing Xiangke, Zhengzhou Standard and Elegant Cheer respectively at a total consideration of HK$98,024,000. These acquisitions have been accounted for by the purchase method of accounting and the goodwill and negative goodwill arising as a result of these acquisitions were HK$20,784,000 and HK$3,488,000 respectively.

NET ASSETS ACQUIRED Property, plant and equipment Investment in an associate Inventories Trade and other receivables Pledged bank deposits Bank balances and cash Trade and other payables Amount due to a minority shareholder Taxation Bank and other borrowings Minority interests Goodwill Negative goodwill SATISFIED BY Cash consideration Issuance of ordinary shares NET CASH OUTFLOW ARISING ON ACQUISITION Cash consideration paid Bank balances and cash acquired	2003 *HK$’000* 162,608 1,714 6,770 28,709 9,524 16,669 (33,891) (2,543) (4,853) (47,234) (56,745) 80,728 20,784 (3,488) 98,024 18,834 79,190 98,024 (18,834) 16,669 (2,165)	2002 HK$’000 – – – – – – – – – – –
		– – –
		–

		– –
		–

		– –
		–

The subsidiaries acquired during the year contributed HK$84,055,000 to the Group’s turnover, and a profit of HK$2,242,000 to the Group’s loss from operations.

47 -

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

31. DISPOSAL OF A SUBSIDIARY

On 7 August 2002, the Group disposed of the entire interest in Global Med Technologies Asia Limited to the former ultimate holding company without consideration. The net assets of the subsidiary as at the date of disposal is approximately HK$2,000 and has resulted a loss of disposal of approximately HK$2,000.

The subsidiary disposed of during the year did not contribute any material effect on the Group’s turnover and the Group’s loss from operations.

32. MAJOR NON-CASH TRANSACTIONS

During the year ended 31 March 2003, consideration for the acquisition of subsidiaries was settled by way of issuance of 78,716,871 ordinary shares of the Company.

33. OPERATING LEASE ARRANGEMENTS

The Group and the Company as lessee

At the balance sheet date, the Group and the Company had commitment for future minimum lease payments under non-cancellable operating leases in respect of rented premises and petrol stations which fall due as follows:

Within one year In the second to fifth year inclusive Over five years	THE GROUP 2003 2002 *HK$’000* HK$’000 1,572 179 2,299 75 17,724 – 21,595 254	THE COMPANY 2003 2002 *HK$’000* HK$’000 75 179 – 75 – – 75 254	THE COMPANY 2003 2002 *HK$’000* HK$’000 75 179 – 75 – – 75 254
			254

Operating lease payments represent rentals payable by the Group and the Company in respect of leasehold land and buildings. Leases for the petrol stations are negotiated for an average term of 10 to 32 years while leases for rented premises are negotiated for an average term of 2 years with fixed rental.

48 -

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

The Group as lessor

At the balance sheet date, the Group had contracted with tenants for the following future minimum lease payments under non-cancellable operating leases in respect of rented premises which fall due as follows:

Within one year In the second to fifth year inclusive	THE GROUP 2003 2002 *HK$’000* HK$’000 1,473 348 815 253 2,288 601	THE GROUP 2003 2002 *HK$’000* HK$’000 1,473 348 815 253 2,288 601
		601

Leases are negotiated for an average term of two years.

34. CAPITAL COMMITMENTS

(i) On 13 May 2002, Hai Xia Finance Limited (“Hai Xia FL”), a subsidiary of the Company entered into an agreement with Hong Kong Syndiscome Co., Limited (“HKSCo”) pursuant to which HKSCo and Hai Xia FL agreed to form a company to be incorporated in Samoa (the “Samoa Company”). The Samoa Company will be owned as to 55% by Hai Xia FL and 45% by HKSCo. The proposed total investment in the Samoa Company is approximately HK$120 million which will be funded as to HK$66 million by Hai Xia FL and HK$54 million by HKSCo. Of the amount to be funded by Hai Xia FL, HK$8.4 million will be contributed by Hai Xia Finance Holdings Limited (“Hai Xia Finance”) when Hai Xia FL assign 7% of its shareholding in the Samoa Company to Hai Xia Finance pursuant to an agreement as stated in note (ii) below. A summary of the terms of this agreement is set out in an announcement of the Company dated 16 May 2002.
(ii) On 16 May 2002, an agreement was entered into between Hai Xia FL and Hai Xia Finance pursuant to which Hai Xia FL agrees to assign 7% of its shareholding in the Samoa Company to Hai Xia Finance upon formation of the Samoa Company and Hai Xia Finance agreed to invest a total of HK$8.4 million to the Samoa Company. A summary of the terms of the agreement is set out in an announcement of the Company dated 16 May 2002.
49 -

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

(iii) On 8 June 2002, the Company entered into an agreement with Hai Xia Finance pursuant to which the Company and Hai Xia Finance agreed to form a company to be incorporated in the BVI (the “BVI Company”). The BVI Company will be owned as to 49% by the Company and 51% by Hai Xia Finance. The proposed issued share capital of the BVI Company is HK$10 million which will be funded by the Company and Hai Xia Finance as to HK$4.9 million and HK$5.1 million respectively. A summary of the terms of this agreement is set out in an announcement of the Company dated 10 June 2002.
(iv) On 12 November 2002, a subsidiary of the Company entered into an agreement with Mr. Yuan Yang to acquire 57% of the entire issued share capital of China City Gas Construction Investment Company Limited (“China City Gas”) held by Mr. Yuan Yang. China City Gas has not commenced any business since its incorporation and its 93.2% equity interest in the Jiaozuo City Gas Development Company Limited (“Jiaozuo JV”) constitutes its sole assets. Pursuant to the terms of agreement, the subsidiary will make a total investment of HK$42,499,200 in Jiaozuo JV by way of shareholder’s loan to China City Gas. A summary of the terms of the agreement is set out in the announcement of the Company dated 19 November 2002. As at 31 March 2003, the outstanding contribution by the Group to Jiaozuo JV amounted to HK$15,499,200.
(v) On 17 December 2002, a subsidiary of the Company entered into an agreement with Mr. Ji Xiangjun to acquire 57% of the entire issued share capital of China City Gas Construction Development Company Limited (“China City Development”) held by Mr. Ji Xiangjun. China City Development has not commenced any business since its incorporation and its 92.9% equity interest in the Jiyuan City Gas Development Co., Ltd. (“Jiyuan JV”) constitutes its sole assets.

Pursuant to the terms of the agreement, the subsidiary will make a total investment of HK$20,122,140 in Jiyuan JV by way of shareholder’s loan to China City Development. A summary of the terms of the agreement is set out in the announcement of the Company dated 17 December 2002.

(vi) On 12 March 2003, a subsidiary of the Company entered into an agreement with Suizhou Municipal Projects Company (“SMPC”) and Wuhan China Natural Gas Investment Company Limited (“Wuhan Natural Gas”) pursuant to which all parties have agreed to establish a Sino-foreign equity joint venture company (“Suizhou JV”) in the PRC which principally engages in the design, construction and operation of natural gas pipeline network and ancillary facilities as well as provision of piped natural gas in Suizhou. Pursuant to the terms of the agreement, the subsidiary will contribute HK$24,000,000 to Suizhou JV. Suizhou JV will be owned as to 49% by the Group, 10% by SMPC and 41% by Wuhan Natural Gas. Wuhan Natural Gas is, however, beneficially owned by the Group. Upon establishment, Suizhou JV will be a non-wholly owned subsidiary of the Company. A summary of the terms of the agreement is set out in the announcement of the Company dated 13 March 2003.
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FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

Save as disclosed, the Group has capital commitments in respect of the acquisition for property, plant and equipment contracted for but not provided in the financial statements amounting to approximately HK$58,002,000 (2002: nil).

35. PLEDGE OF ASSETS

THE GROUP

At the balance sheet date, the Group pledged a bank deposit of HK$66,667,000 (2002: nil) and land use rights having a net book value of HK$29,035,000 (2002: nil) to secure banking facilities granted to the Group.

The Group pledged land and buildings having a net book value of approximately HK$44,256,000 (2002: nil), investment properties having a net book value of approximately HK$9,800,000 (2002: nil), investments in securities having a carrying amount of HK$5,490,000 (2002: nil), properties held for development having a net book value of approximately HK$36,200,000 (2002: nil) and certain investment in subsidiaries to a financial institution to secure loan facilities granted to the Group.

36. CONTINGENT LIABILITIES

(a) Two former staff issued writs against the Company claiming for wrongful dismissal of approximately HK$1,862,000 (2002: HK$1,862,000). The directors are advised by the legal counsel of the Company that it is unlikely that the former staff will succeed in their claims. Accordingly, no provision has been made in these financial statements.
(b) The Group has given a guarantee to a bank for banking facilities amounted to approximately HK$19,048,000 (2002: nil) granted to a third party.

37. RETIREMENT BENEFITS SCHEMES

With effective from 1 December 2000, the Group has joined a Mandatory Provident Fund Scheme (“MPF Scheme”) for all employees in Hong Kong. The MPF Scheme is registered with the Mandatory Provident Fund Scheme Authority under the Mandatory Provident Fund Schemes Ordinance. The assets of the MPF Scheme are held separately from those of the Group in funds under the control of an independent trustee. Under the rule of the MPF Scheme, the employer and its employees are each required to make contributions to the scheme at rate specified in the rules. The only obligation of the Group with respect of MPF Scheme is to make the required contributions under the scheme. No forfeited contribution is available to reduce the contribution payable in the future years.

Employees located in the PRC are covered by the retirement and pension schemes defined by local practice and regulations and which are essentially defined contribution schemes.

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FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

The calculation of contributions for PRC eligible staff is based on certain percentage of the applicable payroll costs. The contribution to the MPF Scheme is calculated based on the rules set out in the MPF Ordinance which is 5% on the basic salary of the relevant employee subject to a specific ceiling.

During the year, the retirement benefit scheme contribution amounted to HK$58,000 (2002: HK$13,000).

38. SHARE OPTION SCHEMES

(a) Share Option Scheme adopted on 2 October 1995 (“Old Scheme”)

Under the terms of the Old Scheme which became effective on 2 October 1995 for the primary purpose of providing incentive to directors and eligible employees, the board of directors of the Company may offer to any directors or full time employees of the Company, or any of its subsidiaries, options to subscribe for shares in the Company at a price equal to the higher of the nominal value of the shares and 80 per cent. of the average of the closing prices of the shares on the Stock Exchange on the five trading days immediately preceding the date of the grant of the options, subject to a maximum of 10 per cents. of the issued share capital of the Company from time to time. No employee may be granted options which would enable him or her to subscribe for an aggregate of more than 25 per cent. of the aggregate number of shares under the Old Scheme. Upon acceptance of option, the grantee shall pay HK$1 to the Company as consideration.

The life of the Old Scheme was originally effective for 10 years until 2 October 2005. The Old Scheme was resolved by the shareholders of the Company to have been terminated thereon. However, the options granted under the Old Scheme are still exercisable in accordance with the terms of the Old Scheme.

(b) Share Option Scheme adopted on 6 February 2003 (“New Scheme”)

Pursuant to an ordinary resolution passed at the special general meeting of the Company held on 6 February 2003, the Company adopted the New Scheme to replace the Old Scheme. All the options granted under the Old Scheme shall remain valid and unchanged and shall be treated in accordance with the terms under the Old Scheme. No option was granted under the New Scheme since its adoption on 6 February 2003.

Under the terms of the New Scheme which became effective on 6 February 2003 for the primary purpose of providing incentive to any directors, any employees or any employee, partner or director of any business consultant, joint venture partner, financial adviser or legal adviser of the Group. The maximum number of shares in respect of which options might be granted under the New Scheme must not exceed 10% of the issued share capital of the Company as at the date of approval of the New Scheme

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FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

and such limit might be refreshed by shareholders in general meeting. The number of shares in respect of which options may be granted to any individual in any one year is not permitted to exceed 1% of the shares of the Company in issue at any point in time.

Options granted must be taken up within 28 days from the date of grant, upon payment of HK$10 per option. Options may be exercised at any time from the date of grant of the share option to the tenth anniversary of the date of grant. The exercise price is determined by the directors of the Company, and will not be less than the higher of (i) the closing price of the Company’s shares on the date of grant; (ii) the average closing price of the shares for the five business days immediately preceding the date of grant and (iii) the nominal value of a share.

The life of the New Scheme is effective for 10 years from the date of adoption until 6 February 2013.

The following table discloses details of the Company’s share options held by employees (including directors) and movements in such holding during the years.

				Number		Number		Number
			Exercise	of share	Exercised	of share	Exercised	of share
Name		Exercisable	price	options at	during	options at	during	options at
of schemes	Date of grant	period	per share	4.1.2001	the year	3.31.2002	the year	3.31.2003
			HK$
Directors
Old Scheme	2.10.1998	2.10.1998 to	0.11	9,272,000	(8,272,000)	1,000,000	(1,000,000)	–
		2.9.2008

Total consideration received during the year from the director for taking up the options granted amounted to HK$110,000 (2002: HK$910,000).

No share option was granted or cancelled during the year.

39. RELATED PARTY TRANSACTIONS

(i) Pursuant to an agreement dated 29 April 2002 entered into between the Company and Heng Fung Underwriter Limited (“Heng Fung Underwriter”), a former fellow subsidiary of the Group, the Group paid management service fee of HK$492,000 (2002: HK$900,000) to Heng Fung Underwriter for the provision of management and support services related to corporate services, capital raising and other support as requested by the Group during the year. The agreement has been terminated by the Group with effect from 30 September 2002.
(ii) During the year, the Group had disposed of the entire interest in a wholly owned subsidiary to the former ultimate holding company without consideration. Details of the disposal are set out in note 32.
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FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

40. POST BALANCE SHEET EVENTS

(i) On 10 June 2003, the Company entered into a sale and purchase agreement with Hai Xia Finance pursuant to which the Company agreed to acquire 51% equity interest in China Gas Development Group Limited (“China Gas Development”) from Hai Xia Finance. After the acquisition, China Gas Development will be a wholly-owned subsidiary of the Company. A summary of the terms of this agreement is set out in an announcement of the Company dated 10 June 2003.
(ii) On 10 June 2003, 中亞燃氣 , a subsidiary of the Company entered into an agreement with China Gas Development and Huainan City Gas Company (“Huainan Natural Gas”) to establish a Sino-foreign equity joint venture company (“Huainan JV”) in the PRC. The Huainan JV will be owned as to 40% by Shenzhen Natural Gas , 30% by China Gas Development and 30% by Huainan Natural Gas. The proposed total investment in Huainan JV is approximately RMB70 million which will be funded as to RMB28 million by Shenzhen Natural Gas , RMB21 million to be contributed by China Gas Development in cash and RMB21 million to be contributed by Huainan Natural Gas in assets. Upon establishment, Huainan JV will become a non-wholly owned subsidiary of the Company. A summary of the terms of this agreement is set out in an announcement of the Company dated 10 June 2003.
(iii) On 10 June 2003, the Group has entered into a subscription agreement to issue a convertible note (the “Note”) amounting to US$6 million to an independent third party, Eastern Linker Holdings Limited. The Note shall bear interest at the rate of 2% per annum on the outstanding principal amount of the Note. The conversion price would be HK$2 per share and would be matured for 24 months from the date of the issue of the Note. A summary of the terms of this agreement is set out in an announcement of the Company dated 10 June 2003.
(iv) On 12 June 2003, the Group entered into a conditional sale and purchase agreement with a third party to dispose of its property with carrying value of HK$9,679,000 at 31 March 2003 for a consideration of HK$9,850,000.
(v) On 25 June 2003, an agreement was entered into between Shenzhen Natural Gas , China Natural Gas Development Holdings Limited (“China Natural Gas”), both are wholly-owned subsidiaries of the Company and Anhui Province Wuhu City Natural Gas Head Company (“Wuhu Natural Gas”) pursuant to which all parties agreed to set up a Sino-foreign equity joint venture company (“Wuhu JV”) in the PRC. Wuhu JV will be owned as to 50% by Shenzhen Natural Gas , 40% by China Natural Gas and 10% by Wuhu Natural Gas. Upon establishment, Wuhu JV will be a non-wholly owned subsidiary of the Company.

Pursuant to the terms of the agreement, the Group will make a total investment of RMB90,000,000 in Wuhu JV. A summary of the terms of the agreement is set out in the announcement of the Company dated 25 June 2003.

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FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

C. FINANCIAL EFFECT OF THE JV COMPANY ON THE GROUP

Capital contribution to be made by the Group to the JV Company will not have any material effect on the earnings, assets and liabilities of the Group.

D. INDEBTEDNESS

As at the close of business on 30 June 2003, being the latest practicable date for the purpose of this indebtedness statement prior to the printing of this circular, the Group has outstanding borrowings of approximately HK$288.9 million, comprising short term bank loans of approximately HK$76.2 million, mortgage loan of approximately HK$21.7 million, loan from a financial institution of approximately HK$57.3 million, other loans of approximately HK$115.5 million, loans from directors of approximately HK$3.4 million, loans from employees of approximately HK$10.8 million and amounts due to minority shareholders of subsidiaries of approximately HK$4.0 million. The Group’s short term bank loans were secured by certain land use rights of the Group with net book value of approximately HK$19.1 million, inventories of the Group with net book value of approximately HK$5.2 million and bank deposits of the Group of approximately HK$57.1 million, mortgage loan was secured by certain leasehold land and buildings of the Group with net book value of approximately HK$34.4 million, loan from a financial institution was secured by leasehold land and buildings of the Group with net book value of approximately HK$9.6 million, investment properties of the Group with net book value of approximately HK$9.8 million, properties held for development of the Group with net book value of approximately HK$36.2 million, investments in securities of the Group with carrying amount of approximately HK$5.5 million and certain investment in subsidiaries of the Group.

As at the close of business on 30 June 2003, the Group has pledged its bank deposits of approximately HK$19.0 million as a security to a bank for banking facilities granted to a third party.

Save as aforesaid and disclosed under the section headed “Litigation” in Appendix III to this circular, and apart from intra-group liabilities, none of the companies in the Group had outstanding at the close of business on 30 June 2003 any mortgages, charges or debentures, loan capital, bank overdraft, loans, debt securities or other similar indebtedness or any hire purchase commitments, liabilities under acceptances or acceptances credits or any guarantees or other material contingent labilities.

For the purpose of the above indebtedness statement, foreign currency amounts have been translated into Hong Kong dollars at the approximate rates of exchange prevailing at the close of business on 30 June, 2003.

The Directors are not aware of any material adverse changes in the Group’s indebtedness and contingent liabilities since the close of business on 30 June, 2003.

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FINANCIAL INFORMATION ON THE GROUP

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E. WORKING CAPITAL STATEMENT

Taking into account the internal resources of the Group and the availability of banking facilities from various financial institutions, the Directors are of the opinion that the Group will have sufficient working capital for its present requirements.

F. MATERIAL ADVERSE CHANGES

The Directors are not aware of any material adverse changes in the financial or trading position of the Group since 31 March 2003, being the date to which the latest published audited accounts of the Group were made up.

G. PROSPECTS

Following the Proposed Investment, the Group will continue to be engaged in investment in natural gas/energy and property projects, which is in line with the Company’s strategy to participate in the natural gas industries in the PRC. In general, the Group will further identify opportunities to invest in natural gas industries in the PRC so as to bring in returns and contribute enhanced value to the Shareholders of the Company.

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ACCOUNTANTS’ REPORT ON THE JV COMPANY

APPENDIX II

Set out below is the text of a report, prepared for the purpose of incorporation in this circular, received from the auditors and reporting accountants of the Group, Deloitte Touche Tohmatsu in connection with the JV Company.

==> picture [114 x 67] intentionally omitted <==

==> picture [95 x 43] intentionally omitted <==

==> picture [87 x 56] intentionally omitted <==

14 August 2003

The Directors

China Gas Holdings Limited 16/F, AXA Centre No. 151 Gloucester Road Wanchai Hong Kong

Dear Sirs,

蕪湖中燃城市燃氣發展有限公司 , translated in English as “Wuhu City Natural Gas Development Company Limited” (the “JV Company”) was established in the People’s Republic of China on 10 July 2003 as a sino-foreign equity joint venture.

No audited accounts or management accounts of the JV Company have been prepared up to the date of this report. The JV Company has not yet commenced any business since 10 July 2003, the date on which the business licence of the JV Company was issued.

At the date of this report, the directors of the JV Company consider China Gas Holdings Limited, a company incorporated in Bermuda with its shares listed on The Stock Exchange of Hong Kong Limited, to be the ultimate holding company of the JV Company.

Yours faithfully, Deloitte Touche Tohmatsu

Certified Public Accountants

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GENERAL INFORMATION

APPENDIX III

1. RESPONSIBILITY STATEMENT

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

2. DISCLOSURE OF INTERESTS

(a) Interests or short positions of Directors in the share capital of the Company and its associated corporations

As at the Latest Practicable Date, none of Directors and chief executive of the Company is interested in the equity or debt securities and underlying Shares of the Company or any associated corporations (within the meaning of the SFO) which (a) 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 and short positions which the Director is taken or deemed to have under such provisions of the SFO); or (b) were required, pursuant to section 352 of the SFO, to be entered in the register referred to therein; or (c) were required, pursuant to the Model Code for Securities Transactions by Directors of Listed Companies to be notified to the Company and the Stock Exchange.

(b) Interests in the assets of the Group

As at the Latest Practicable Date, none of the Directors or Deloitte Touche Tohmatsu, certified public accountants, had any interest, direct or indirect, in any assets which had been, since 31 March 2003, the date to which the latest published audited accounts of the Company were made up, acquired or disposed of by or leased to any member of the Group, or were proposed to be acquired or disposed of by or leased to any member of the Group.

There is no contract or arrangement subsisting at the date of this circular in which any of the Directors is materially interested and which is significant in relation to the business of the Group.

(c) Persons who had an interest or short position which was discloseable under Divisions 2 and 3 of Part XV of the SFO and Substantial Shareholders (as defined under the Listing Rules)

As at the Latest Practicable Date, so far as was known to the Directors and the chief executive of the Company, the following persons, other than a Director or chief executive of the Company, had an interest or short position in the Shares and underlying Shares which would fall to be disclosed to the Company 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 meeting of the Company or any other member of the Group:

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GENERAL INFORMATION

APPENDIX III

		Number of	Approximate
	Name of	Shares held or	percentage of
Name of Shareholder	Group member	Short Position	shareholding
Hai Xia Finance Holdings Limited	the Company	101,549,457 (L)	8.38%
Sure World Capital Limited	the Company	101,557,700 (L)	8.38%
Rasa Sayang Limited	the Company	10,104,000 (L)	0.38%
Heng Fung Capital
Company Limited	the Company	3,388,000 (L)	0.28%
Heng Fung Underwriter Limited	the Company	200,000 (L)	0.016%
Heng Fung Holdings Limited	the Company	320,185,157 (L)	26.41%
		(note 1)
Greater China Holdings Limited	the Company	62,211,582 (L)	5.13%
		20,000,000 (S)	1.65%
		(note 2)

L: long position

S: short position

Notes:

These Shares are held, as to 101,557,700 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, as to 200,000 Shares by Heng Fung Underwriter Limited, all of which are wholly owned subsidiaries of Heng Fung Holdings Limited and the remaining balance of 204,935,457 Shares are held by Heng Fung Holdings Limited.
These Shares and the short position are held by Profit Capital Limited, a wholly owned subsidiary of Greater China Holdings Limited.

3. MATERIAL CONTRACTS

The following contracts, not being contracts entered into during the ordinary course of business carried on by the Group, have been entered into by members of the Group within the two years immediately preceding the date of this circular and are or may be material:–

(i) On 27 July 2001, Heng Fung Holdings Limited (“Heng Fung”), Hai Xia Finance Holdings Limited (“Hai Xia Holdings”) and the Company entered into an agreement whereby Heng Fung agreed to grant to Hai Xia Holdings an option to acquire up to 380,000,000 Shares of the Company at a price at HK$0.16 per Share, representing a total consideration of HK$60,800,000, within 12 months from the date of satisfaction of certain conditions. On 2 November 2001, Heng Fung, Hai Xia Holdings and the Company entered into a supplemental agreement to extend the time limit for the fulfillment of the conditions to 31 December 2001;
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GENERAL INFORMATION

APPENDIX III

(ii) On 14 August 2001, a subscription agreement was entered into between the Company and Optic Venture Holding Limited (“OVH”) pursuant to which the Company agreed to allot and issue to OVH and OVH agreed to subscribe for an aggregate of 30,000,000 new Shares at a price of HK$0.60 per Share, representing a total consideration of HK$18,000,000. A summary of the terms of the agreement was set out in the announcement of the Company dated 15 August 2001;
(iii) On 22 November 2001, an agreement was entered into between the Company and Greater China Holdings Limited (“Greater China”), pursuant to which the Company agreed to subscribe for 600,000,000 new ordinary shares of Greater China at a price of HK$0.10 each, representing a total consideration of HK$60,000,000, in consideration of the issue by the Company to Greater China of 100,000,000 new Shares at HK$0.60 each, representing a total consideration of HK$60,000,000. A summary of the terms of the agreement was set out in the announcement of the Company dated 26 November 2001;
(iv) On 28 November 2001, a subscription agreement (as amended by a supplemental agreement thereto dated 4 December 2001) was entered into between the Company and First Bullet Finance Limited (“FBF”), pursuant to which the Company agreed to allot and issue to FBF and FBF agreed to subscribe for an aggregate of 36,000,000 new Shares at a price of HK$0.60 per Share, representing a total consideration of HK$21,600,000. A summary of the terms of the agreement was set out in the announcement of the Company dated 4 December 2001;
(v) On 6 April 2002, a second supplemental agreement was entered into by Heng Fung, Hai Xia Holdings and the Company to amend certain terms and conditions of the option agreement dated 27 July 2001 as stated in paragraph (i) above. A summary of the terms of the second supplemental agreement was set out in the announcement of the Company dated 11 April 2002;
(vi) On 29 April 2002, a co-operative agreement was entered into by and between the Company and Hai Xia Holdings, pursuant to which Hai Xia Holdings would procure exclusive investment projects to the Company in the areas of natural gas pipelines installation and supply of natural gas. A summary of the terms of co-operative agreement was set out in the announcement of the Company dated 30 April 2002;
(vii) On 4 May 2002, the Group entered into three agreements , namely (a) the Group as purchaser and Mr. Liu Yuchuan (an independent third party) as vendor for the acquisition of 26% of the registered capital of a joint venture company (the “JV Co.”) in the first agreement, (b) the Group as purchaser and Mr. Liu Yuchuan as vendor for the acquisition of the entire issued share capital of Ample Wealth Investments Limited which in turn held 9% of the registered capital of the JV Co. in the second agreement, and (c) the Group as subscriber and the JV Co. as issuer for the subscription of 25% of the enlarged registered capital of the JV Co. in the third agreement, to acquire an aggregate of 60% interest in the JV Co. for an aggregate consideration of approximately HK$28,691,589. A summary of the terms of the three agreements was set out in the announcement of the Company dated 9 May 2002;
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GENERAL INFORMATION

APPENDIX III

(viii) On 7 May 2002, a placing agreement was entered into between the Company and SinoFinance Asset Management Limited, pursuant to which the Company agreed to allot and issue to Sino-Finance Asset Management Limited an aggregate of 33,333,333 new Shares at a price of HK$0.90 per Share, representing a total consideration of HK$29,999,999.7, subject to, among other things, the Stock Exchange granting the listing of, and permission to deal in the new Shares. A summary of the terms of the placing agreement was set out in the announcement of the Company dated 9 May 2002;
(ix) On 13 May 2002, Hai Xia Finance Limited (“Hai Xia Finance”), a wholly owned subsidiary of the Company, entered into an investment agreement with Hong Kong Syndisome Co. Limited, an indirectly wholly owned subsidiary of Shenzhen Nanshan Power Station Co. Ltd. for the proposed investment by Hai Xia Finance in 66% of the shareholding in a Samoa company (the “Samoa Company”) for an aggregate consideration of HK$66,000,000 (of which 7%, representing HK$8.4 million, will be assigned by Hai Xia Finance to Hai Xia Holdings pursuant to the assignment agreement stated in paragraph (x) below). A summary of the terms of the agreement was set out in the announcement of the Company dated 16 May 2002;
(x) On 16 May 2002, Hai Xia Finance, entered into an assignment agreement with Hai Xia Holdings in relation to the assignment of 7% shareholding in the Samoa Company from Hai Xia Finance to Hai Xia Holdings for a consideration of HK$8,400,000. A summary of the terms of the agreement was set out in the announcement of the Company dated 16 May 2002;
(xi) On 8 June 2002, the Company entered into an agreement with Hai Xia Holdings pursuant to which the Company and Hai Xia Holdings agreed to form a company to be incorporated in the British Virgin Islands (the “BVI Co.”). The Company would make an investment in the sum of HK$4,900,000 in the BVI Co. A summary of the terms of this agreement was set out in the announcement of the Company dated 10 June 2002;
(xii) On 15 July 2002, Timeslink Holding Limited (“Timeslink”), a wholly owned subsidiary of the Company, as purchaser, entered into a sale and purchase agreement with China Main Investment (H.K.) Company Limited (“China Main”) and Ma Xiao Ling (“Ms. Ma”) (both China Main and Ms. Ma were independent third parties), as vendors, in relation to the sale and purchase of the entire issued share capital of Elegant Cheer Limited and the shareholder’s loan at an aggregate consideration of HK$19,000,000. A summary of the terms of the agreement was set out in the announcement of the Company dated 15 July 2002;
(xiii) On 26 July 2002, Energy Valley Investment Limited, a wholly owned subsidiary of the Company, as purchaser, entered into a sale and purchase agreement with Standard Petrochemical Holdings Limited (“SPHL”) and Wang Wen Liang (“WWL”) (both SPHL and WWL were independent third parties), as vendors, in relation to the sale and purchase of the entire issued share capital of Standard Petrochemical Hong Kong Holdings Limited at a total consideration of HK$65,488,803. A summary of the terms of the agreement was set out in the announcement of the Company dated 30 July 2002;
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GENERAL INFORMATION

APPENDIX III

(xiv) On 13 September 2002, Timeslink, China Main and Ms. Ma entered into a supplemental agreement in respect of sale and purchase of the entire issued share capital of Elegant Cheer Limited to extend the completion date of the agreement dated 15 July 2002 as stated in paragraph (xii) above. A summary of the terms of the supplemental agreement was set out in the announcement of the Company dated 13 September 2002;
(xv) On 12 November 2002, Fun Track Worldwide Inc., a wholly owned subsidiary of the Company, as purchaser entered into a sale and purchase agreement with Yuan Yang as vendor in relation to the sale and purchase of 57% of the issued share capital of China City Gas Construction Investment Company Limited (“China City Gas”) which in turn held 93.2% equity interest in Jiaozuo City Gas Development Co., Ltd. The consideration for the sale and purchase of 57% of the issued share capital of China City Gas was US$57 whereupon the Group would make a total investment of HK$42,499,200 in Jiaozuo City Gas Development Co., Ltd. by way of shareholder’s loan to China City Gas. A summary of the terms of the agreement was set out in the announcement of the Company dated 19 November 2002;
(xvi) On 6 December 2002, Central Asia Natural Gas (Shenzhen) Company Limited and Wuhan China Natural Gas Investment Company Limited, both being wholly owned subsidiaries of the Company, entered into a co-operative agreement with Yichang City Natural Gas Company Limited in relation to the establishment of Yichang China Gas & City Gas Company Limited. The Group would make a total investment in the sum of RMB49,000,000 in Yichang China Gas & City Gas Company Limited. A summary of the terms of the agreement was set out in the announcement of the Company dated 10 December 2002;
(xvii) On 6 December 2002, Hai Xia Holdings and the Company entered into a cancellation agreement at nil consideration to deal with the issues relating to cancellation of the proposed investment in the gas project to be launched in Yichang, Hubei Province. A summary of the terms of the agreement was set out in the announcement of the Company dated 10 December 2002;
(xviii) On 17 December 2002, West Region International Limited, a wholly owned subsidiary of the Company, as purchaser, entered into a sale and purchase agreement with Ji Xiangjun (an independent third party), as vendor, in relation to the sale and purchase of 57% of the issued share capital of China City Gas Construction Development Company Limited which in turn held 92.9% equity interest in Jiyuan City Gas Development Co., Ltd. The consideration for the sale and purchase of 57% of the issued share capital of China City Gas Construction Development Company Limited was US$57 whereupon the Group would make a total investment of HK$20,122,140 in Jiyuan City Gas Development Co., Ltd. by way of shareholder’s loan to China City Gas Construction Development Company Limited. A summary of the terms of the agreement was set out in the announcement of the Company dated 17 December 2002;
(xix) On 12 March 2003, China Natural Gas Construction Limited and Wuhan China Natural Gas Investment Company Limited, both being wholly owned subsidiaries of the Company, entered into a joint venture contract with Suizhou Municpial Projects Company in relation to the setting up of Suizhou Central City Gas Development Company Limited. The Group would
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GENERAL INFORMATION

APPENDIX III

make a total investment in the sum of RMB25,200,000 in Suizhou Central City Gas Development Company Limited. A summary of the terms of the agreement was set out in the announcement of the Company dated 13 March 2002;
(xx) On 12 March 2003, Hai Xia Holdings and the Company entered into a cancellation agreement at nil consideration to deal with the issues relating to cancellation of the proposed investment in the gas project to be launched in Suizhou, Hubei Province. A summary of the terms of the agreement was set out in the announcement of the Company dated 13 March 2003;
(xxi) On 10 June 2003, Hai Xia Holdings and the Company entered into a sale and purchase agreement, pursuant to which the Company agreed to acquire 51% equity interest in China Gas Development Group Limited from Hai Xia Holdings at a consideration of US$51. A summary of the terms of the agreement was set out in the announcement of the Company dated 10 June 2003;
(xxii) On 10 June 2003, China Gas Development Group Limited (a wholly owned subsidiary of the Company upon completion of the sale and purchase agreement stated in paragraph (xxi) above) and Central Asia Natural Gas (Shenzhen) Company Limited, a wholly owned subsidiary of the Company, entered into a co-operative agreement with Huainan City Gas Company in relation to the setting up of Huainan China Gas & City Gas Company Limited. The Group would make a total investment in the sum of RMB49,000,000 in Huainan China Gas & City Gas Company Limited. A summary of the terms of the agreement was set out in the announcement of the Company dated 10 June 2003;
(xxiii) On 10 June 2003, the Company and Eastern Linker Holdings Limited entered into a subscription agreement for the issuance of US$6,000,000 convertible note to Eastern Linker Holdings Limited. A summary of the terms of the agreement was set out in the announcement of the Company dated 10 June 2003; and

(xxiv) The JV Contract.

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GENERAL INFORMATION

APPENDIX III

4. LITIGATION

Two former staff issued writs against the Company on 4 May 1998 and 13 May 1998, respectively, claiming for wrongful dismissal and compensation of approximately HK$1,862,000 plus interest and related costs. The trial is expected to take place between 11 and 18 February 2004. The Directors are advised by the legal counsel of the Company that it is unlikely that the two former staff will succeed in their claims.

Save as aforesaid, neither the Company nor any of its subsidiaries is engaged in litigation or arbitration of material importance and so far as the Directors are aware, no litigation or claims of material importance are pending or threatened by or against the Company or any of its subsidiaries nor could they have a material adverse effect on the Group’s financial condition or operations, taken as a whole.

5. SERVICE CONTRACTS

None of the Directors has entered or is proposing to enter into any service contract with the Company or any of its subsidiaries, save for contracts expiring or determinable within one year without payment of compensation other than statutory compensation.

6. QUALIFICATIONS OF EXPERTS AND CONSENTS

Deloitte Touche Tohmatsu, certified public accountants, has given and has not withdrawn its written consent to the issue of this circular, with the inclusion of its report as set out in this circular, and references to its name in the form and context in which they appear.

Deloitte Touche Tohmatsu does not have any shareholding interest in any member of the Group or any right, whether legally enforceable or not, to subscribe for or to nominate persons to subscribe for securities in any member of the Group.

7. MISCELLANEOUS

(i) The registered office of the Company is situated at Clarendon House, 2 Church Street, Hamilton HM 11, Bermuda.
(ii) The head office and principal place of business of the Company in Hong Kong is situated at 16th Floor, AXA Centre, No. 151 Gloucester Road, Wanchai, Hong Kong.
(iii) The company secretary of the Company is Ms. Yang Yan Tung, Doris, ACIS, ACS .
(iv) The principal share registrar and transfer office of the Company is Butterfield Corporate Services Limited, located at Rosebank Centre, 14 Bermudiana Road, Pembroke, Bermuda. The Hong Kong branch share registrar and transfer office of the Company is Computershare Hong Kong Investor Services Limited, located at Rooms 1901-1905, 19th Floor, Hopewell Centre, 183 Queen’s Road East, Hong Kong.
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GENERAL INFORMATION

APPENDIX III

(v) The English text of this circular shall prevail over the Chinese text in the case of inconsistency.

8. DOCUMENTS AVAILABLE FOR INSPECTION

Copies of the following documents are available for inspection at the office of China Gas Holdings Limited, at 16th Floor, AXA Centre, No. 151 Gloucester Road, Wanchai, Hong Kong, during normal business hours on any weekday (public holidays excepted) up to and including 1 September 2003:

(i) the material contracts, including the JV Contract, referred to in the paragraph headed “Materials Contracts” in this appendix;
(ii) the audited consolidated accounts of the Group for the two financial years ended 31 March 2002 and 31 March 2003;
(iii) the memorandum of association and bye-laws of the Company; and
(iv) the disclosable transaction circular dated 30 June 2003 despatched to the Shareholders in relation to the formation of Huainan China Gas & City Gas Company Limited.
65 -

NOTICE OF THE SGM

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

(Incorporated in Bermuda with limited liability)

NOTICE is hereby given that a special general meeting (the “SGM”) of China Gas Holdings Limited (the “Company”) will be held at 16th Floor, AXA Centre, No. 151 Gloucester Road, Wanchai, Hong Kong on 1 September 2003 at 10:00 a.m. or any adjournment thereof for the purpose of considering and, if thought fit, passing with or without modification the following resolutions as ordinary resolutions of the Company:

ORDINARY RESOLUTIONS

“ THAT

(a) the JV Contract (as defined in the announcement of the Company dated 25 June 2003 (the “Announcement”), a copy of which has been produced to the SGM marked “A” and signed by the chairman of the meeting for the purpose of identification), a copy of which has been produced to the SGM marked “B” and signed by the chairman of the SGM for the purpose of identification, be and is hereby approved, confirmed and ratified;
(b) the Proposed Investment (as defined in the Announcement) contemplated under the JV Contract be and is hereby approved, confirmed and ratified; and
(c) the directors of the Company be and are hereby authorized for and on behalf of the Company, amongst other matters, to sign, execute, perfect, deliver or to authorize signing, executing, perfecting and delivering all such documents and deeds, and to do or authorize doing all such acts, matters and things as they may in their discretion consider necessary, expedient or desirable to give effect to and implement the Proposed Investment pursuant to the JV Contract, and to waive compliance from or make and agree such variations of a non-material nature to any of the terms of the JV Contract as they may in their discretion consider to be desirable and in the interest of the Company.”

Yours faithfully, By Order of the Board China Gas Holdings Limited Liu Ming Hui Managing Director

Hong Kong, 14 August 2003

* for identification purposes only

66 -

NOTICE OF THE SGM

Principal place of business: Room 1601, 16th Floor AXA Centre No. 151 Gloucester Road

Wanchai Hong Kong

Notes:

(1) A member entitled to attend and vote at the SGM is entitled to appoint a proxy to attend and to vote on his/her/its behalf. A proxy need not be a member of the Company.
(2) A form of proxy of the SGM is enclosed. Whether or not a member intends to attend the SGM in person, he/she/it is urged to complete and return the form of proxy in accordance with the instructions printed thereon.
(3) To be valid, a form of proxy, together with a power of attorney or other authority, if any, under which it is signed, or a certified copy of such power or authority, must be deposited at the Company’s Hong Kong branch share registrar, Computershare Hong Kong Investor Services Limited, located at Rooms 1901-1905, 19th Floor, Hopewell Centre, 183 Queen’s Road East, Hong Kong and in any event not later than 48 hours before the time appointed for the holding of the SGM or any adjournment thereof.
(4) Where there are joint holders of a Share of the Company, any one of such holders may vote at the SGM either personally or by proxy in respect of such Share as if such holder were solely entitled thereto, but if more than one of such holders be present at the SGM personally or by proxy, that one of such holders so present whose name stands first on the register of members of the Company in respect of such Share shall alone be entitled to vote in respect thereof. Several executors or administrators of a deceased member in whose name any Share stands shall for this purpose be deemed joint holders thereof.
67 -

AI assistant

China Literature Limited — Proxy Solicitation & Information Statement 2003

49460_rns_2003-08-14_7d4871c5-6c7b-4665-8417-7eeaa44cc4e8.pdf

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

MAJOR TRANSACTION

FORMATION OF A JV COMPANY

CONTENTS

DEFINITIONS

DEFINITIONS

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

MAJOR TRANSACTION

FORMATION OF A JV COMPANY

INTRODUCTION

DETAILS OF THE JV CONTRACT

Parties:

Information on the JV Company

LETTER FROM THE BOARD

Contribution of registered capital

LETTER FROM THE BOARD

The Gas Project

THE PROPOSED INVESTMENT

LETTER FROM THE BOARD

Reasons for the Proposed Investment

General

SGM

ADDITIONAL INFORMATION

A. SHARE CAPITAL

B. AUDITED FINANCIAL INFORMATION

CONSOLIDATED INCOME STATEMENT

CONSOLIDATED BALANCE SHEET

BALANCE SHEET

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

CONSOLIDATED CASH FLOW STATEMENT

NOTES TO THE FINANCIAL STATEMENTS

1. GENERAL

2. ADOPTION OF STATEMENTS OF STANDARD ACCOUNTING PRACTICE

Foreign currencies

Cash flow statements

Discontinuing operations

Employee benefits

3. CHANGE IN ACCOUNTING POLICY AND PRIOR YEAR ADJUSTMENTS

4. SIGNIFICANT ACCOUNTING POLICIES

Basis of consolidation

Goodwill

Negative goodwill

Investments in subsidiaries

Revenue recognition

Interests in associates

Investment properties

Properties held for development

Property, plant and equipment

Construction in progress

Investments in securities

Inventories

Impairment

Operating leases

Construction contracts

Retirement benefit costs

Foreign currencies

Taxation

5. TURNOVER

6. BUSINESS AND GEOGRAPHICAL SEGMENTS

Business segments

2003

OTHER INFORMATION

Geographical segments

7. OTHER OPERATING INCOME

8. LOSS FROM OPERATIONS

9. FINANCE COSTS

11. EMPLOYEES’ EMOLUMENTS

12. TAXATION (CHARGE) CREDIT

13. LOSS PER SHARE

14. INVESTMENT PROPERTIES

15. PROPERTY, PLANT AND EQUIPMENT

16. PROPERTIES HELD FOR DEVELOPMENT

17. INTERESTS IN SUBSIDIARIES

18. INTERESTS IN ASSOCIATES/INVESTMENT IN AN ASSOCIATE

19. INVESTMENTS IN SECURITIES

20. GOODWILL

21. NEGATIVE GOODWILL

China Literature Limited Proxy Solicitation & Information Statement 2003

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

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

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