China Literature Limited — Proxy Solicitation & Information Statement 2004

Nov 23, 2004

THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION

If you are in any doubt as to any aspect of this circular or as to the action to be taken, you should consult your 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 together with the enclosed form of proxy to the purchaser or the transferee or to the bank, stockbroker or other agent through whom the sale or the transfer was effected for transmission to the purchaser or the transferee.

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

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

(incorporated in Bermuda with limited liability)

(Stock Code: 384)

PLACING OF NEW SHARES

A notice convening an special general meeting of China Gas Holdings Limited to be held at 16th Floor, AXA Centre, No. 151 Gloucester Road, Wanchai, Hong Kong on Thursday, 9 December 2004 at 10:00 a.m. is set out on pages 15 to 16 of this circular. A form of proxy for use at the special general meeting is also enclosed with this circular.

Whether or not you are able to attend the meeting, you are requested to complete the form of proxy in accordance with the instructions printed thereon and return the same to the Company’s head office and principal place of business in Hong Kong at 16th Floor, AXA Centre, No. 151 Gloucester Road, Wanchai, Hong Kong as soon as possible but in any event not less than 48 hours before the time appointed for the holding of the meeting or any adjourned meeting. Completion and delivery of the form of proxy will not preclude you from attending and voting at the meeting if you so wish.

23 November 2004

* For identification purpose only

CONTENTS

	Page
Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	1
Letter from the Board . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	4
Appendix I – General Information. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	13
Appendix II – Procedures by which Shareholders may demand a poll at the SGM. . . . . . . . .	14
Notice of SGM. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	15

• i -

DEFINITIONS

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

• “Apollo Completion”

the completion of the subscription by Apollo Elite International Limited for a total number of 90,000,000 Shares pursuant to a subscription agreement entered into between the Company and Apollo Elite International Limited dated 30 September 2004

“Assumed Floating Conversion Price” HK$0.538714 per Share, being 90% of the average of the lowest	“Assumed Floating Conversion Price” HK$0.538714 per Share, being 90% of the average of the lowest
	eight closing prices per Share during the 30 consecutive business
	days up to and including 9 June 2004
“associates”	has the meaning ascribed to this term under the Listing Rules
“Board”	the board of Directors
“Business Day”	any day (not being a Saturday) on which licensed banks in Hong
	Kong are generally open for business throughout their normal
	business hours
“Company”	China Gas Holdings Limited, a company incorporated in Bermuda
	with limited liability the issued Shares of which are listed on the
	Stock Exchange
“Completion”	completion of the Subscription in accordance with the terms and
	conditions of the Subscription Agreement
“Directors”	the directors of the Company
“Exercise Price”	an initial exercise price of HK$0.66 per New Share (subject to
	adjustment) at which holders of the Warrants may subscribe for
	the New Shares
“Fixed Conversion Price”	HK$0.792 per Share
“Group”	the Company and its subsidiaries
“Hong Kong”	the Hong Kong Special Administrative Region of the PRC
“Latest Practicable Date”	17 November 2004, being the latest practicable date prior to the
	printing of this circular for ascertaining certain information
	contained in this circular
“Listing Rules”	the Rules Governing the Listing of Securities on the Stock
	Exchange

• 1 -

DEFINITIONS

• “Merrill Lynch”

• Merrill Lynch International, an unlimited liability company established under the Laws of England and Wales

• “New Share(s)” new Share(s) which fall to be allotted and issued upon the exercise of the subscription rights attaching to the Warrant(s)

“Options” the options granted under the share option scheme of the Company approved and adopted by the Shareholders at the special general meeting of the Company held on 6 February 2003

• “Original General Mandate” the general mandate granted to the Directors by the Shareholders pursuant to an ordinary resolution passed at the annual general meeting of the Company held on 27 August 2003, pursuant to which a maximum of 89,187,320 new Shares may be allotted and issued

• “PRC” the People’s Republic of China

• “SGM” the special general meeting of the Company to be convened and held at 10:00 a.m. on 9 December 2004 at 16th Floor, AXA Centre, No. 151 Gloucester Road, Wanchai, Hong Kong for the purpose of considering and, if thought fit, approving the allotment and issue of the Subscription Shares

• “Share(s)” share(s) of HK$0.01 each in the capital of the Company

• “Shareholders” holders of the Shares

• “Shenzhen Natural Gas” 中亞燃氣實業 (深圳 )有限公司 (Central Asia Natural Gas (Shenzhen) Company Limited), a wholly foreign owned enterprise established in the PRC and a wholly owned subsidiary of the Company

• “Stock Exchange” The Stock Exchange of Hong Kong Limited

• “Subscriber” Sinopec Corp., a company incorporated in the PRC the issued shares of which are listed on the Stock Exchange

• “Subscription” the subscription for the Subscription Shares by the Subscriber pursuant to the Subscription Agreement

• “Subscription Agreement” the conditional subscription agreement dated 31 October 2004 and entered into between the Company and the Subscriber in relation to the Subscription Shares

• “Subscription Price” the subscription price of HK$0.61 per Subscription Share

• 2 -

DEFINITIONS

“Subscription Rights”	the option granted by the Company to Merrill Lynch in respect of
	each of the Tranche 1 Bonds and the Tranche 2 Bonds for the
	subscription of further new Shares at the Fixed Conversion Price
“Subscription Share(s)”	a total number of 210,000,000 Share(s) for which the Subscriber
	has conditionally agreed to subscribe pursuant to the Subscription
	Agreement
“Tranche 1 Bonds”	convertible bonds with an aggregate principal amount of
	US$6,000,000 due 2008 issued by the Company to Merrill Lynch
	on 13 November 2003
“Tranche 2 Bonds”	convertible bonds with an aggregate principal amount of
	US$7,000,000 due 2008 issued by the Company to Merrill Lynch
	on 10 June 2004
“Warrant(s)”	260,000,000 unlisted warrants to be issued by the Company at the
	Warrant Issue Price, each entitles the holder thereof to subscribe
	for one New Share at the Exercise Price of HK$0.66 (subject to
	adjustment) at any time during a period of five years commencing
	from the date of issue of the Warrants
“Warrant Issue Price”	HK$0.01 per Warrant
“Warrant Placing”	a private placing of the Warrants at the Warrant Issue Price pursuant
	to the Warrant Placing Agreements
“Warrant Placing Agreements”	together (i) the conditional placing agreement dated 28 September
	2004 made between the Company and Mr. Kan Che Kin, Billy
	Albert in relation to the placing of 180,000,000 Warrants; and (ii)
	the conditional placing agreement dated 28 September 2004 made
	between the Company and Mr. Liu Zhi He in relation to the placing
	of 80,000,000 Warrants
“HK$”	Hong Kong dollars, the lawful currency of Hong Kong
“US$”	United States dollars, the lawful currency of the United States of
	America
“%”	per cent.

• 3 -

LETTER FROM THE BOARD

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

(incorporated in Bermuda with limited liability)

(Stock Code: 384)

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

Non-executive Director:

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

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

Head office and principal place of business in Hong Kong: 16th Floor AXA Centre No. 151 Gloucester Road Wanchai Hong Kong 23 November 2004

To the Shareholders,

Dear Sir or Madam,

PLACING OF NEW SHARES

INTRODUCTION

Reference is made to an announcement of the Company dated 1 November 2004. On 31 October 2004, the Company entered into the Subscription Agreement with the Subscriber, pursuant to which the Subscriber has conditionally agreed to subscribe for and the Company has conditionally agreed to allot and issue an aggregate of 210,000,000 Subscription Shares in cash at a subscription price of HK$0.61 per Subscription Share.

* For identification purpose only

• 4 -

LETTER FROM THE BOARD

THE SUBSCRIPTION AGREEMENT

Date: 31 October 2004

Parties: (i) Issuer: the Company

(ii) Subscriber: the Subscriber

Information on the Subscriber

The Subscriber is the first company in the PRC listed in all of the following places: Hong Kong (Stock Code: 386), New York, London and Shanghai and is also an integrated energy and chemical company with upstream, midstream and downstream operations. The principal operations of the Subscriber and its subsidiaries include (i) exploring for and developing, producing and trading crude oil and natural gas; (ii) processing crude oil into refined oil products, producing refined oil products and trading, transporting, distributing and marketing refined oil products; and (iii) producing, distributing and trading of petrochemical products.

The Subscriber is not connected person of the Company as defined under the Listing Rules. The Subscriber is independent of and not connected with the Company or its connected persons as defined in the Listing Rules.

Number of Subscription Shares

The Subscription Shares represent (i) approximately 11.87% of the issued share capital of the Company as at the Latest Practicable Date; and (ii) approximately 10.61% of the issued share capital of the Company as at the Latest Practicable Date as enlarged by the allotment and issue of the Subscription Shares.

The Subscriber undertakes that it will not dispose of any of the Subscription Shares within a period of 12 months from the date of Completion.

Subscription Price

The Subscription Price represents:

• (i) a discount of approximately 39.6% to the closing price of HK$1.01 per Share as quoted on the Stock Exchange on 28 October 2004, being the last trading day before the date of the Subscription Agreement;

• (ii) a discount of approximately 33.11% to the average closing price of approximately HK$0.912 per Share as quoted on the Stock Exchange for the last five consecutive trading days up to and including 28 October 2004;

• (iii) a discount of approximately 27.21% to the average closing price of approximately HK$0.838 per Share as quoted on the Stock Exchange for the last ten consecutive trading days up to and including 28 October 2004; and

• 5 -

LETTER FROM THE BOARD

• (iv) a discount of approximately 51.59% to the average closing price of approximately HK$1.26 per Share as quoted on the Stock Exchange on the Latest Practicable Date.

The Subscription Price was arrived at after arm’s length negotiations between the Company and the Subscriber with reference to the closing prices as shown above. The Subscriber shall pay for the Subscription Shares by way of a cashier order issued by a licensed bank in Hong Kong in favour of the Company or in such other manner as agreed by the Subscriber and the Company. Given that the Subscriber will be a valuable strategic business partner of the Group and the introduction of it as a strategic investor of the Company could strengthen the Group’s position as a leading natural gas investor in the PRC, the Directors consider that the Subscription Price and the terms of the Subscription Agreement including the payment terms are fair and reasonable and are in the interests of the Company and the Shareholders as a whole.

Rights

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

Mandate to issue the Subscription Shares

The Subscription Shares will be allotted and issued under the specific mandate to be granted to the Board to issue the Subscription Shares at the SGM.

Conditions of the Subscription

The Subscription is conditional upon the following conditions having been fulfilled by 31 December 2004 (or such other date as may be agreed between the Company and the Subscriber):

• (i) the passing of the necessary resolution by the Shareholders at the SGM to approve the allotment and issue of the Subscription Shares;

• (ii) the Listing Committee of the Stock Exchange granting the listing of, and permission to deal in, the Subscription Shares;

• (iii) (if so required) the relevant authority in the jurisdiction where the Company is incorporated granting permission for the allotment and issue of the Subscription Shares;

• (iv) the Subscriber having obtained all necessary consent, approval and permits from the relevant governmental authorities in respect of the Subscription; and

• (v) the receipt by the Company of the PRC legal opinion to be obtained by the Subscriber in form and content satisfactory to the Company in respect of the matters, including but not limited to the Subscription, contemplated under the Subscription Agreement.

• 6 -

LETTER FROM THE BOARD

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

Completion of the Subscription

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

Application for listing

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

REASONS FOR THE SUBSCRIPTION AND THE CO-OPERATION STRATEGIC AGREEMENT

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

By entering into the Subscription Agreement, the Group can raise further capital for future investment. The Board considered that the introduction of the Subscriber as a strategic investor of the Company could strengthen the Group’s position as a leading natural gas investor in the PRC. In addition, the Subscriber and the Company have entered into a co-operation strategic agreement (the “ Co-operation Strategic Agreement ”) on 1 November 2004. For the details of the Co-operation Strategic Agreement, please refer to the Company’s announcement dated 1 November 2004.

The net proceeds of the Subscription of about HK$128,000,000 will be applied as the Group’s general working capital. The Board considers that the Subscription Agreement is entered into upon normal commercial terms following arm’s length negotiations between the Company and the Subscriber and that the terms of the Subscription Agreement are fair and reasonable and in the interests of the Shareholders as a whole.

Immediately after Completion, there will be no change to the composition of the Board and the principal business engaged by the Group.

• 7 -

LETTER FROM THE BOARD

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

				Actual use of
Date of			Intended use	proceeds as at the Latest
announcement	Event	Net proceeds	of proceeds	Practicable Date
9 October 2003	Placing of an	About	As general	The net proceeds of about
	aggregate of	HK$50,000,000	working capital	HK$6,000,000 have been applied
	70,000,000		of the Group	as the Group’s general working
	new Shares			capital and the remaining balance
				of about HK$44,000,000 has been
				applied to repay the Group’s short
				term liabilities.
30 October 2003	Issue of	About	(Note)	The Tranche 1 Bonds in the principal
	convertible	HK$98,000,000		amount of US$6,000,000 were
	bonds due	(Note)		issued on 13 November 2003. The
	2008 in up to			Tranche 2 Bonds in the principal
	five tranches			amount of US$7,000,000 were
	(Note)			issued on 10 June 2004. The
				Company has applied the net
				proceeds derived from the issue of
				the Tranche 1 Bonds and the
				Tranche 2 Bonds in accordance
				with the intended use as set out in
				the Company’s announcement
				dated 30 October 2003.
11 November 2003	Top-up placing	About	As to	The net proceeds of approximately
	of 160,000,000	HK$130,000,000	approximately	HK$78,000,000 have been
	Shares		HK$78,000,000	applied as the Group’s
			for the	contribution to the enlarged
			contribution	registered capital of Shenzhen
			of the enlarged	Natural Gas, approximately
			registered	HK$45,000,000 have been
			capital of	applied to repay the Group’s short
			Shenzhen	term bank borrowings and
			Natural Gas	approximately HK$4,000,000 has
			and as to the	been applied to acquired the
			remaining	Group’s natural gas project in
			balance as the	Xiaogan. The remaining balance
			general	of about HK$3,000,000 was used
			working capital	as administration expenses.
			of the Group

• 8 -

LETTER FROM THE BOARD

				Actual use of	Actual use of
Date of			Intended use	proceeds as at the Latest
announcement	Event	Net proceeds	of proceeds	Practicable Date
21 January 2004	Placing of an	About	As the Group’s	The net proceeds of approximately
	aggregate of	HK$117,000,000	future		HK$68,000,000 have been applied
	180,000,000		investments in		to repay the Group’s short term
	new Shares		natural gas		bank borrowings, approximately
			projects in the		HK$13,000,000 have been applied
			PRC and/or the		as the Group’s contribution to the
			Group’s general		enlarged registered capital of
			working capital		Shenzhen Natural Gas,
					approximately HK$31,000,000 have
					been applied as the contribution in
					the Group’s natural gas projects in
					Yiyang and Suizhou and the
					remaining balance of approximately
					HK$5,000,000 was utilised as the
					Group’s administration expenses.
5 October 2004	Placing of a	About	As general	–
	total of	HK$2,500,000	working capital
	260,000,000		of the Group
	Warrants at an
	issue price of
	HK$0.01 per
	Warrant
	(pending for
	completion)
5 October 2004	Placing of a	About	As general	–
	90,000,000	HK$46,700,000	working capital
	new Shares at		of the Group
	HK$0.52 per
	new Share
	(pending for
	completion)

• 9 -

LETTER FROM THE BOARD

Note:

The net proceeds of about HK$45,000,000 derived from the issue of the Tranche 1 Bonds, have been used as the Group’s second stage capital contribution in the natural gas projects in Huainan and Wuhu, the PRC, through Shenzhen Natural Gas. The net proceeds of about HK$53,000,000 derived from the issue of the Tranche 2 Bonds has been used to repurchase a portion of the Tranche 2 Bonds in amount of US$6,725,000. For further details of the repurchase of the Tranche 2 Bonds, please refer to the announcement of the Company dated 8 October 2004.

Details regarding the issue of the bonds are set out in the Company’s announcements dated 30 October 2003, 13 November 2003, 17 December 2003, 19 December 2003, 10 June 2004 and 8 October 2004 and the Company’s circular dated 3 December 2003.

CHANGES OF SHAREHOLDING STRUCTURE

As at the date of the announcement, the Company had 1,769,432,338 Shares in issue. The shareholding structure of the Company before and after the Apollo Completion and the allotment and issue of the Subscription Shares, are as follows:

							Immediate after
							Completion and the
					Immediate after the		Apollo Completion
	As at the	Latest	Immediate	after the	Completion and the		and the exercise
Shareholder	Practicable Date		Apollo Completion		Apollo Completion		of the Warrants
	No. of	Approximate	No. of	Approximate	No. of	Approximate	No. of Approximate
	Shares	percentage	Shares	percentage	Shares	percentage	Shares percentage
Liu Ming Hui	385,000,000	21.76%	385,000,000	20.71%	385,000,000	18.60%	385,000,000	16.53%
(Note 1)
The Subscriber	Nil	Nil	Nil	Nil	210,000,000	10.15%	210,000,000	9.01%
Other public	1,384,432,338	78.24%	1,474,432,338	79.29%	1,474,432,328	71.25%	1,734,432,338	74.46%
Shareholders			(Note 2)		(Note 2)		(Note 3)
Total	1,769,432,338	100%	1,859,432,338	100%	2,069,432,338	100%	2,329,432,338	100%

Note 1:

These 385,000,000 Shares represent the Shares beneficially owned by, and agreed to be acquired by, Mr. Liu Ming Hui, an executive Director.

Pursuant to a sale and purchase agreement dated 16 January 2004 and entered into between Heng Fung Holdings Limited and its subsidiaries (together the “ Heng Fung Group ”) as vendor and Mr. Liu Ming Hui as purchaser, Heng Fung Group has agreed to sell and Mr. Liu as agreed to acquire an aggregate of 250,000,000 Shares. As at the date of the announcement, the sale and purchase of 90,000,000 Shares has been completed and Mr. Liu is beneficially interested in 225,000,000 Shares.

• 10 -

LETTER FROM THE BOARD

On 6 October 2004, the Board resolved to grant 130,000,000 Options to Mr. Liu Ming Hui and 90,000,000 Options to Mr.Xu Ying. As at the Latest Practicable Date, 135,000,000 Options and 95,000,000 Options have been granted to Mr. Liu Ming Hui and Mr. Xu Ying, respectively. Upon full exercise of the Options and taking into account the 385,000,000 Shares beneficially owned by and agreed to be acquired by Mr. Liu Ming Hui, Mr. Liu will be beneficially interested in 520,000,000 Shares, representing approximately 29.39% of the total issued share capital as at the Latest Practicable Date and approximately 26.01% of the total issued share capital as at the Latest Practicable Date as enlarged by the full exercise of Mr. Liu’s Options and Mr. Xu’s Options. Upon full exercise of the Options granted to him, i.e 95,000,000 Options, Mr. Xu will be beneficially interested in 95,000,000 Shares, representing approximately 4.75% of the total issued share capital as at the Latest Practicable Date as enlarged by the full exercise of Mr. Liu’s Options and Mr. Xu’s Options. For further details of the grant of Options to the Directors, including Mr. Liu, please refer to the announcement of the Company dated 8 October 2004 and the circular of the Company dated 6 November 2004.

Note 2:

90,000,000 Shares out of these Shares will be issued pursuant to a subscription agreement entered into between the Company and Apollo Elite International Limited dated 30 September 2004. For further details of the placing of these new Shares, please refer to the announcement of the Company dated 5 October 2004.

Note 3:

On 28 September 2004, the Company entered into the Warrant Placing Agreements with Mr. Liu Zhi He and Mr. Kan Che Kin, Billy Albert pursuant to which Mr. Liu Zhi He and Mr. Kan Che Kin, Billy Albert agreed to subscribe for and the Company agreed to issue 260,000,000 Warrants at the Exercise Price, as to 80,000,000 Warrants to Mr. Liu Zhi He and 180,000,000 Warrants to Mr. Kan Che Kin, Billy Albert. As at the Latest Practicable Date, the issue of Warrants has not been completed. For further details, please refer to the announcement of the Company dated 5 October 2004.

The above table has not taken into account the new Shares which fall to be allotted and issued upon conversion of the Tranche 2 Bonds and the exercise of the Subscription Rights relating to the Tranche 1 and the Tranche 2 Bonds.

As at the Latest Practicable Date, the Company has issued to Merrill Lynch the Tranche 1 Bonds and the Tranche 2 Bonds and the related Subscription Rights under the Original General Mandate. As at the Latest Practicable Date, the Tranche 1 Bonds have fully been converted by Merrill Lynch into 83,294,103 Shares, representing approximately 4.7% of the total issued share capital of the Company as at the Latest Practicable Date, and the Tranche 2 Bonds have been converted into by Merrill Lynch 14,780,573 Shares, representing approximately 0.84% of the total issued share capital of the Company as at the Latest Practicable Date. As to Tranche 2 Bonds, as at the Latest Practicable Date, the Company has repurchased a portion of Tranche 2 Bonds in the amount of US$6,725,000. The number of Shares which could be converted pursuant to the Subscription Rights relating to Tranche 1 Bonds and Tranche 2 Bonds are 7,431,319 Shares, representing approximately 0.4% of the total issued share capital of the Company as at the Latest Practicable Date Shares and 8,669,872 Shares, representing approximately 0.5% of the total issued share capital of the Company as at the Latest Practicable Date, respectively.

• 11 -

LETTER FROM THE BOARD

For further details relating to the issue of bonds by the Company to Merrill Lynch, please refer to the announcements of the Company dated 30 October 2003, 13 November 2003, 17 December 2003, 19 December 2003, 10 June 2004 and 8 October 2004 and the circular issued by the Company dated 3 December 2003.

SGM

The notice of the SGM is set out on pages 15 to 16 of this circular. A form of proxy for use at the SGM is enclosed. Whether or not you are able to attend the SGM, please complete and return the enclosed form of proxy in accordance with the instructions printed thereon to the Company’s head office and principal place of business in Hong Kong at 16th Floor, AXA Centre, No. 151 Gloucester Road, Wanchai, Hong Kong as soon as possible and in any event not less than 48 hours before the time appointed for the holding of the SGM or any adjournment thereof. Completion and return of the form of proxy will not preclude you from attending and voting in person at the SGM should you so wish.

RECOMMENDATION

The Board is of the opinion that the Subscription is in the best interests of the Company and the Shareholders and accordingly recommends the Shareholders to vote in favour of the resolution to be proposed at the SGM to approve the Subscription and the transactions contemplated thereby.

FURTHER INFORMATION

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

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

• 12 -

GENERAL INFORMATION

APPENDIX I

(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 in this circular misleading.

(2) DOCUMENTS AVAILABLE FOR INSPECTION

A copy of the Subscription Agreement and Co-operation Strategic Agreement are available for inspection at 16th Floor, AXA Centre, No. 151 Gloucester Road, Wanchai, Hong Kong.

• 13 -

PROCEDURES BY WHICH SHAREHOLDERS MAY DEMAND A POLL AT THE SGM

APPENDIX II

The following sets out the procedures by which the Shareholders may demand a poll at the SGM.

According to bye-law 66 of the bye-laws of the Company, a resolution put to the vote of a meeting shall be decided on a show of hands unless (before or on the declaration of the result of the show of hands or on the withdrawal of any other demand for a poll) a poll is demanded by:

• (i) the chairman of such meeting; or

• (ii) at least three Shareholders present in person (or, in the case of a Shareholder being a corporation, by its duly authorised representative) or by proxy for the time being entitled to vote at the meeting; or

• (iii) any Shareholder or Shareholders present in person (or, in the case of a Shareholder being a corporation, by its duly authorised representative) or by proxy and representing not less than one-tenth of the total voting rights of all Shareholders having the right to vote at the meeting; or

• (iv) any Shareholder or Shareholders present in person (or, in the case of a Shareholder being a corporation, by its duly authorised representative) or by proxy and holding Shares conferring a right to vote at the meeting being Shares on which an aggregate sum has been paid up equal to not less than one-tenth of the total sum paid up on all the Shares conferring that right.

A demand by a person as proxy for a Shareholder or in the case of a Shareholder being a corporation by its duly authorised representative shall be deemed to be the same as a demand by a Shareholder.

• 14 -

NOTICE OF THE SGM

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

(incorporated in Bermuda with limited liability) (Stock Code: 384)

NOTICE OF SPECIAL GENERAL MEETING

NOTICE IS HEREBY GIVEN that a special general meeting of the shareholders of China Gas Holdings Limited (the “ Company ”) will be held at 16th Floor, AXA Centre, No. 151 Gloucester Road, Wanchai, Hong Kong, on 9 December 2004 at 10:00 a.m. for the purpose of considering and, if thought fit, passing with or without amendments, the following resolution as an ordinary resolution of the Company:

ORDINARY RESOLUTION

“ THAT , subject to and conditional upon the Listing Committee of The Stock Exchange of Hong Kong Limited granting the listing of and permission to deal in the shares of HK$0.01 each in the Company (the “ Subscription Shares ”) to be subscribed by Sinopec Corp. pursuant to the subscription agreement dated 31 October 2004 (the “ Subscription Agreement ”) entered into between the Company and Sinopec Corp.;

• (A) the subscription of 210,000,000 Subscription Shares pursuant to the Subscription Agreement be and is hereby approved; and

• (B) the directors of the Company be and are hereby authorised to (i) allot and issue the Subscription Shares; and (ii) to do all such acts and things as they consider necessary, desirable or expedient to give effect to any or all other transactions contemplated in this resolution.”

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

Hong Kong, 23 November 2004

* For identification purpose only

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NOTICE OF THE SGM

Registered office: Head office and principal place Clarendon House of business in Hong Kong: 2 Church Street 16th Floor Hamilton HM 11 AXA Center Bermuda No. 151 Gloucester Road Wanchai Hong Kong

Notes:

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

2. A form of proxy for use at the SGM is enclosed. In order to be valid, the form of proxy must be duly completed and signed in accordance with the instructions printed thereon and deposited together with a power of attorney or other authority, if any, under which it is signed, or a certified copy of such power or authority, at the head office and principal place of business of the Company in Hong Kong at 16th Floor, AXA Centre, No. 151 Gloucester Road, Wanchai, Hong Kong not less than 48 hours before the time appointed for holding the SGM or any adjournment thereof. Completion and return of a form of proxy will not preclude a member from attending in person and voting at the SGM or any adjournment thereof, should he so wish.

3. In the case of joint holders of shares, any one of such holders may vote at the SGM, either personally or by proxy, in respect of such share as if he was solely entitled thereto, but if more than one of such joint holder are present at the SGM personally or by proxy, that one of the said persons so present whose name stands first on the register of members of the Company in respect of such shares shall alone be entitled to vote in respect thereof.

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