China Literature Limited — Proxy Solicitation & Information Statement 2015

Feb 26, 2015

THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION

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

If you have sold or transferred all your shares in China Gas Holdings Limited (the ‘‘Company’’), you should at once hand this circular to the purchaser or the transferee or to the bank, licensed securities dealer or registered institution in securities or other agent through whom the sale or transfer was effected for transmission to the purchaser or transferee.

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

This circular is for information purposes only and does not constitute an invitation or offer to acquire, purchase or subscribe for any securities nor is it calculated to invite any such offer.

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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)

DISCLOSEABLE AND CONNECTED TRANSACTION RELATING TO

PROPOSED ACQUISITION OF THE ENTIRE ISSUED SHARE CAPITAL OF BEIJING GAS DEVELOPMENT LIMITED

AND

ISSUE OF CONSIDERATION SHARES UNDER SPECIFIC MANDATE AND

RE-ELECTION OF MR. ARUN KUMAR MANCHANDA AS NON-EXECUTIVE DIRECTOR

Independent financial adviser to

the Independent Board Committee and the Independent Shareholders

ING Bank N.V., Hong Kong Branch

A letter from the Board is set out on pages 7 to 23 of this circular. A letter from the Independent Board Committee is set out on pages IBC-1 to IBC-2 of this circular. A letter from ING Bank N.V., Hong Kong Branch containing its advice to the Independent Board Committee and the Independent Shareholders is set out on pages IFA-1 to IFA-25 of this circular.

A notice convening the special general meeting (‘‘SGM’’) of the Company to be held at Renaissance Harbour View Hotel Hong Kong, Boardroom 8, Lower Lobby, 1 Harbour Road, Wanchai, Hong Kong at 10:00 a.m. on Tuesday, 17 March 2015 is set out on pages N-1 to N-3 of this circular. Whether or not you wish to attend the SGM in person, you are requested to complete the form of proxy in accordance with the instructions printed thereon and return the same to the Company’s branch share registrar, Computershare Hong Kong Investor Services Limited at 17M Floor, Hopewell Centre, 183 Queen’s Road East, Wan Chai, Hong Kong, as soon as practicable but in any event not later than 48 hours before the time appointed for holding the SGM or any adjournment thereof. Completion and return of the form of proxy will not prevent you from attending and voting in person at the SGM should you so wish.

• For identification purposes only

27 February 2015

CONTENTS

	Page
DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	1
LETTER FROM THE BOARD . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	7
LETTER FROM THE INDEPENDENT BOARD COMMITTEE . . . . . . . . . . . . . . . . . . . . .	IBC-1
LETTER FROM THE INDEPENDENT FINANCIAL ADVISER . . . . . . . . . . . . . . . . . . . .	IFA-1
APPENDIX I — BIOGRAPHICAL DETAILS OF
MR. ARUN KUMAR MANCHANDA . . . . . . . . . . . . . . . . . . . . . . . . . . .	I-1
APPENDIX II — GENERAL INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	II-1
NOTICE OF SPECIAL GENERAL MEETING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	N-1

– i –

DEFINITIONS

In this circular, the following definitions shall have the meanings set out below unless the context requires otherwise. Also, where terms are defined and used in only one section of this circular, these defined terms are not included in the table below:

• ‘‘Adjusted Consideration Shares’’

• has the meaning as ascribed to it in the section headed ‘‘Letter from the Board — Details of the Share Purchase Agreement — Consideration and Consideration Shares — Possible Adjustments to Consideration’’ of this circular, individually an ‘‘Adjusted Consideration Share’’

• ‘‘AMB’’

• Anti-Monopoly Bureau of the Ministry of Commerce of the PRC

• ‘‘AML’’

• Anti-Monopoly Law of the PRC

• ‘‘AML Filings’’

• means all filings required to be made by the Purchaser (with the assistance provided by the Seller) to the AMB in relation to the Proposed Acquisition pursuant to the AML

• ‘‘Announcement’’ the announcement of the Company dated 26 November 2014 in relation to, among other things, the Proposed Acquisition

• ‘‘associates’’ has the meaning as prescribed to it under the Listing Rules

• ‘‘BEHL’’/‘‘Guarantor’’

• Beijing Enterprises Holdings Limited (北京控股有限公司), a company incorporated under the laws of Hong Kong with limited liability and the issued shares of which are listed on the main board of the Stock Exchange (stock code: 392)

• ‘‘Benchmark Share Price’’ has the meaning as ascribed to it in the section headed ‘‘Letter from the Board — Details of the Share Purchase Agreement — Consideration and Consideration Shares — Consideration Shares’’ of this circular

• ‘‘Board’’ the board of Directors

‘‘Business Days’’ a day (other than a Saturday, Sunday or public holiday) on which banks are open for business in the PRC and Hong Kong

• ‘‘Bye-laws’’ the bye-laws of the Company

– 1 –

DEFINITIONS

• ‘‘Circular 698’’

• ‘‘CNG’’

• ‘‘Company’’

• ‘‘Completion’’

• ‘‘Completion Date’’

• ‘‘Conditions’’

• ‘‘connected person(s)’’

• ‘‘Consideration’’

• ‘‘Consideration Shares’’

• ‘‘Directors’’

• ‘‘Group’’

• ‘‘HK$’’

• ‘‘Hong Kong’’

• the tax notice issued by the PRC State Administration of Taxation titled ‘‘Strengthening of Administration of Corporate Income Tax Liability on Income of Non-Resident Enterprises from Transfer of Equity Interests’’, Guo Shui Han [2009] No. 698 as may be amended or supplemented and including any similar or replacement law on the tax treatment of offshore indirect transfer of companies established in the PRC including but not limited to any applicable laws in the PRC against the avoidance of PRC tax

• compressed natural gas

• China Gas Holdings Limited, a company incorporated in Bermuda with limited liability and the issued shares of which are listed on the main board of the Stock Exchange (stock code: 384)

• the completion of the Proposed Acquisition

• the date of Completion

• the conditions to the Completion, which are set out in the section headed ‘‘Letter from the Board — Details of the Share Purchase Agreement — Conditions to the Completion of the Share Purchase Agreement’’ of this circular

• has the meaning as prescribed to it under the Listing Rules

• has the meaning as ascribed to it in the section headed ‘‘Letter from the Board — Details of the Share Purchase Agreement — Consideration and Consideration Shares’’ of this circular

• has the meaning as ascribed to it in the section headed ‘‘Letter from the Board — Details of the Share Purchase Agreement — Consideration and Consideration Shares — Consideration Shares’’ of this circular, individually a ‘‘Consideration Share’’

• the directors of the Company

• the Company and its subsidiaries

• Hong Kong dollars, the lawful currency of Hong Kong

• The Hong Kong Special Administrative Region of the PRC

– 2 –

DEFINITIONS

• ‘‘Independent Board Committee’’

• ‘‘Independent Financial Adviser’’

• ‘‘Independent Shareholders’’

• ‘‘June Audited Accounts’’

• ‘‘Latest Practicable Date’’

• ‘‘Listing Committee’’

• ‘‘Listing Rules’’

• ‘‘LNG’’

• ‘‘LPG’’

• ‘‘Material Adverse Change’’

• the independent board committee comprising Mr. Zhao Yuhua, Dr. Mao Erwan, Ms. Wong Sin Yue, Cynthia, Mr. Ho Yeung and Ms. Chen Yanyan, being all the independent nonexecutive directors of the Company, established to advise the Independent Shareholders in respect of the Proposed Acquisition and the transactions contemplated under the Share Purchase Agreement and the Specific Mandate

• ING Bank N.V., Hong Kong Branch, being the independent financial adviser to the Independent Board Committee and the Independent Shareholders of the Company in relation to the Proposed Acquisition and the transactions contemplated under the Share Purchase Agreement and the Specific Mandate

• Shareholders other than BEHL, Hong Mao Developments Limited and their respective associates

• (i) the combined audited pro forma statement of financial position of the Target Group as at 30 June 2014 and (ii) the combined audited pro forma statement of profit or loss for the six months ended 30 June 2014 of the Target Group to be prepared by Deloitte Touche Tohmatsu, the auditors appointed by the Purchaser

• 17 February 2015, being the latest practicable date prior to the printing of this circular for ascertaining certain information contained herein

• the listing sub-committee of the board of the Stock Exchange

• the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited

• liquefied natural gas

• liquefied petroleum gas

any change, event, circumstance or other matter that has, or would reasonably be expected to have, either individually or in the aggregate, a material adverse change on: (a) the ability of the Seller to perform its obligations under the Transaction Documents; or (b) the business, assets and liabilities, condition (financial or otherwise), results of operations or near prospects of the Target Group as a whole

– 3 –

DEFINITIONS

‘‘Mr. MANCHANDA’’

Mr. Arun Kumar MANCHANDA

• ‘‘Mr. LIU’’

• Mr. LIU Ming Hui, the Executive Chairman, Managing Director and President of the Company

• ‘‘Net Asset Value’’ has the meaning as ascribed to it in the section headed ‘‘Letter from the Board — Details of the Share Purchase Agreement — Consideration and Consideration Shares — Possible Adjustments to Consideration’’ of this circular

• ‘‘PRC’’ The People’s Republic of China

• ‘‘Proposed Acquisition’’ the proposed acquisition of the Sale Shares by the Purchaser from the Seller as contemplated under the Share Purchase Agreement

• ‘‘Purchaser’’ Fresh Goal Limited, a company incorporated and registered under the laws of the British Virgin Islands and a whollyowned subsidiary of the Company

• ‘‘Purchaser Group’’ the group of companies comprising the Purchaser and its affiliates (including, following Completion, the Target Group Companies)

• ‘‘Reorganisation’’ the transfer by three affiliates of the Seller to the Target Company or its wholly-owned subsidiary of the legal and/or beneficial interest in certain Target Group Companies

• ‘‘RMB’’ Renminbi, the lawful currency of the PRC

• ‘‘Sale Shares’’ the entire issued share capital of Target Company

• ‘‘Seller’’ Beijing Gas Group (BVI) Co., Ltd., a company incorporated in the British Virgin Islands with limited liability and a whollyowned subsidiary of BEHL

• ‘‘Seller Group’’ the group of companies comprising the Seller and its affiliates (excluding the Target Group Companies)

• ‘‘SFO’’ Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong)

– 4 –

DEFINITIONS

‘‘SGM’’ a special general meeting to be convened by the Company to consider and approve the Proposed Acquisition, the transactions contemplated under the Share Purchase Agreement, the Specific Mandate and the re-election of Mr. MANCHANDA as a non-executive director of the Company ‘‘Share Purchase Agreement’’ the share purchase agreement dated 26 November 2014 entered into among the Purchaser, the Company, the Seller and the Guarantor in relation to the Proposed Acquisition (as supplemented by a side agreement dated 7 January 2015

• ‘‘Shareholders’’ holders of Shares

• ‘‘Shareholders Loans’’ means the outstanding loans owed by three Target Group Companies to the Seller Group as at the date of the Share Purchase Agreement, the total amount of which is RMB276,490,900 (equivalent to approximately HK$349,484,162)

• ‘‘Shares’’ the ordinary shares of the Company with par value of HK$0.01 each, and each a ‘‘Share’’

• ‘‘Specific Mandate’’ the specific mandate proposed to be granted to the Directors by the Independent Shareholders to allot and issue the Consideration Shares at the SGM

• ‘‘Stock Exchange’’ The Stock Exchange of Hong Kong Limited

• ‘‘Takeovers Code’’ the Hong Kong Code on Takeovers and Mergers ‘‘Target Company’’ Beijing Gas Development Limited, a company incorporated in the British Virgin Islands with limited liability and a whollyowned subsidiary of the Seller as of the Latest Practicable Date

• ‘‘Target Group’’ the Target and 12 project companies established in the PRC principally engaged in the holding, management and operations of PRC projects and business relating to natural gas, details of which are set out in the section headed ‘‘Information of the Group, the Purchaser, the Seller, the Guarantor and the Target Group — The Target Group’’ in this circular and ‘‘Target Group Companies’’ shall be construed accordingly

– 5 –

DEFINITIONS

‘‘Transaction	Documents’’	the Share Purchase Agreement, the disclosure letter provided
		by the Seller to the Purchaser and any other document entered
		into pursuant to the Share Purchase Agreement
‘‘US$’’		US dollars, the lawful currency of the United States of
		America
‘‘%’’		per cent

For the purpose of this circular, unless otherwise indicated, conversion of RMB into HK$ is calculated at the exchange rate of HK$1=RMB0.79114 (being the median rate between the buying rate and the selling rate of HK$ to RMB or RMB to HK$ (as the case may be) as announced by the People’s Bank of China as at the date of the Share Purchase Agreement). This exchange rate is for illustration purposes only and does not constitute a representation that any amounts have been, could have been, or may be exchanged at this or any other rate at all.

– 6 –

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. ZHOU Si (Chairman)

• Mr. LIU Ming Hui (Executive Chairman, Managing Director and President)

• Mr. HUANG Yong (Executive President)

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

• Mr. ZHU Weiwei (Vice President)

• Mr. MA Jinlong (Vice President)

• Mr. CHEN Xinguo (Vice President) Ms. LI Ching

Non-executive Directors:

Mr. YU Jeong Joon (Vice Chairman) Mr. KIM Yong Joong (Vice President, alternate to Mr. YU Jeong Joon)

Head office and principal place of business in Hong Kong: Room 1601 16th Floor AXA Centre 151 Gloucester Road Wanchai Hong Kong

Mr. LIU Mingxing Mr. Arun Kumar MANCHANDA

Independent non-executive Directors:

Mr. ZHAO Yuhua

Dr. MAO Erwan

Ms. WONG Sin Yue, Cynthia Mr. HO Yeung Ms. CHEN Yanyan

27 February 2015

To the Shareholders

Dear Sir/Madam,

DISCLOSEABLE AND CONNECTED TRANSACTION RELATING TO

PROPOSED ACQUISITION OF THE ENTIRE ISSUED SHARE CAPITAL OF BEIJING GAS DEVELOPMENT LIMITED AND

ISSUE OF CONSIDERATION SHARES UNDER SPECIFIC MANDATE AND

RE-ELECTION OF MR. ARUN KUMAR MANCHANDA AS NON-EXECUTIVE DIRECTOR

• For identification purposes only

– 7 –

LETTER FROM THE BOARD

INTRODUCTION

Reference is made to the announcement of the Company dated 26 November 2014 in relation to, among other things, the Proposed Acquisition (‘‘Announcement’’).

On 26 November 2014, the Company, the Purchaser (being a wholly-owned subsidiary of the Company), the Seller and the Guarantor entered into the Share Purchase Agreement (subsequently supplemented by a side agreement dated 7 January 2015 regarding the audit logistics), pursuant to which the Purchaser has conditionally agreed to acquire from the Seller the Sale Shares (being the entire issued share capital of the Target Company) for a consideration of RMB1,632,795,828 (equivalent to approximately HK$2,063,851,945), subject to adjustments.

Pursuant to Bye-law 86(2) of the Bye-Laws, Mr. MANCHANDA, being a non-executive Director of the Company appointed by the Board, shall hold office only until the next following general meeting of the Company (i.e., the SGM). As such, the Board proposes that an ordinary resolution to be passed at the SGM to re-elect Mr. MANCHANDA as a non-executive Director of the Company. The biographical details of Mr. MANCHANDA are set out in Appendix I.

The purpose of this circular is to provide you with (i) further details of the Proposed Acquisition, the transactions contemplated under the Share Purchase Agreement and the Specific Mandate; (ii) the recommendation of the Independent Board Committee to the Independent Shareholders in respect of the Proposed Acquisition, the transactions contemplated under the Share Purchase Agreement and the Specific Mandate; (iii) a letter of advice of the Independent Financial Adviser to the Independent Board Committee and the Independent Shareholders in respect of the Proposed Acquisition; (iv) the re-election of Mr. MANCHANDA as a non-executive director of the Company; (v) certain information as required by the Listing Rules; and (vi) the notice of the SGM.

DETAILS OF THE SHARE PURCHASE AGREEMENT

Date:	26 November 2014
Parties
The Seller:	Beijing Gas Group (BVI) Co., Ltd., being
	a wholly-owned subsidiary of the Guarantor
The Guarantor:	Beijing Enterprises Holdings Limited
The Purchaser:	Fresh Goal Limited, being a wholly-owned subsidiary
	of the Company
The Company:	China Gas Holdings Limited

– 8 –

LETTER FROM THE BOARD

Subject matter of Proposed Acquisition

Pursuant to the Share Purchase Agreement, the Purchaser has conditionally agreed to purchase, and the Seller has conditionally agreed to sell, the Sale Shares in accordance with the terms and conditions of the Share Purchase Agreement.

As at the date of the Share Purchase Agreement, the Target Group principally engages in the downstream distribution of city gas and natural gas for vehicle use. Further, one of the Target Group Companies engages in construction and operation of long-distance natural gas pipelines in the PRC. Further details of the Target Group are set out in the section headed ‘‘Information of the Group, the Purchaser, the Seller, the Guarantor and the Target Group’’ in this circular.

Consideration and Consideration Shares

The consideration (the ‘‘Consideration’’) for the Proposed Acquisition of the Sale Shares is RMB1,632,795,828 (equivalent to approximately HK$2,063,851,945), subject to adjustments the exact amount of which shall be ascertained prior to the allotment and issue of the Consideration Shares (as defined below), or the Adjusted Consideration Shares (as defined below), as the case may be.

Consideration Shares

The aggregate consideration for the Sale Shares shall be satisfied by the Company allotting and issuing 149,122,250 new Shares of the Company (the ‘‘Consideration Shares’’) at the Benchmark Share Price to the Seller (or a wholly-owned subsidiary of the Guarantor) at or after Completion, subject to adjustments. The issue price per Consideration Share is HK$13.84 (the ‘‘Benchmark Share Price’’), which represents a premium of approximately 3.10% over the average closing price per Share for the last five consecutive trading days as quoted on the Stock Exchange up to and including the day immediately prior to the date of the Share Purchase Agreement.

Possible Adjustments to Consideration

Based on the information provided by the Seller, the unaudited net asset value of the Target Group attributable to the Seller Group (‘‘Net Asset Value’’) as at 30 June 2014 was RMB1,166,282,734[(1)] . After the signing of the Share Purchase Agreement, the Purchaser has appointed auditors to prepare the June Audited Accounts. The independent auditor appointed by the Seller shall review the June Audited Accounts and raise any objections within 30 days of receipt of the accounts. If any objection is received, the Seller and the Purchaser and their respective auditors shall promptly thereafter in good faith seek to resolve any differences within 20 days, and the result so agreed between the Seller and the Purchaser shall be final and binding on the parties.

– 9 –

LETTER FROM THE BOARD

The Consideration is subject to the following adjustments based on the Net Asset Value as at 30 June 2014 to be set out in the June Audited Accounts multiplied by 1.4:

• (a) if the Net Asset Value multiplied by 1.4 (referred to as the ‘‘P/B Multiple’’) is more than RMB1,632,795,828 (equivalent to approximately HK$2,063,851,945), there shall be added to the Consideration an amount equal to such excess amount, and the Purchaser shall pay such amount in cash to the Seller; and

• (b) if the Net Asset Value multiplied by 1.4 is less than RMB1,632,795,828 (equivalent to approximately HK$2,063,851,945), there shall be deducted from the Consideration an amount equal to such shortfall amount, and the Seller shall receive, instead of the Consideration Shares, such adjusted number of new Shares (the ‘‘Adjusted Consideration Shares’’) which shall be calculated as follows:

Adjusted Consideration Shares = Consideration Shares – Reduced Shares

where:

• Reduced Shares = (RMB1,632,795,828 (equivalent to approximately HK$2,063,851,945) – Net Asset Value x 1.4)/Benchmark Share Price.

For the avoidance of doubt, the number of Reduced Shares shall be rounded to the nearest integer.

Basis of Determination

The consideration for the Proposed Acquisition was agreed between the Purchaser and the Seller after arm’s length negotiations with reference to the unaudited Net Asset Value as at 31 December 2013 and as at 30 June 2014, and having considered the future prospects of the Target Group. The P/B Multiple of 1.4 times of the Net Asset Value is considered fair and reasonable, taking into account the financial information of the Target Group and the fact that some of the city gas projects/assets are at initial development stage where the full potential is yet to be realised, as well as some comparable market cases[(2)] where the relevant companies are primarily engaged in similar gas project business as the Target Group Companies.

The Board (including the independent non-executive Directors, after taking into consideration the advice and recommendation of the Independent Financial Adviser) considers that the consideration for the Proposed Acquisition is fair and reasonable.

Notes:

(1) Based on the majority interest held by the Seller Group in 8 project companies and the minority interest in 4 project companies.

(2) The comparable market cases include 20 transactions in relation to the city gas project acquisitions in China from 2006 to 2014 based on market intelligence.

– 10 –

LETTER FROM THE BOARD

The Specific Mandate

Assuming no adjustment will be made to the Consideration, pursuant to the Share Purchase Agreement, 149,122,250 Consideration Shares will be allotted and issued by the Company to the Seller (or a wholly-owned subsidiary of the Guarantor) under the Specific Mandate to be approved by the Independent Shareholders at the SGM.

The Consideration Shares will, upon issue and credited as fully paid, rank pari passu in all respect with all the existing Shares then in issue. An application will be made by the Company to the Stock Exchange for the approval for the listing of, and permission to deal in, the Consideration Shares.

Effect of the issue of the Consideration Shares on the shareholding structure of the Company

For illustrative purposes only, assuming there is no change to the issued share capital of, and the shareholding in, the Company from the Latest Practicable Date to the Completion Date, being the day on which the Consideration Shares will be issued to the Seller (or a wholly-owned subsidiary of the Guarantor), the shareholding structure of the Company, to the best of the Directors’ knowledge, information and belief having made all reasonable enquiry: (a) as at the Latest Practicable Date and (b) immediately after the allotment and issue of the Consideration Shares (assuming no adjustment will be made to the Consideration) will be as follows:

Name of Shareholders The Seller(1) The parties acting in concert with it (as defined in the Hong Kong Code on Takeovers and Mergers) (excluding the Seller) Sub-total for the Seller and parties acting in concert with it Other Substantial Shareholders Mr. LIU Ming Hui(2 and 3) Joint Coast Alliance Market Development Limited(2 and 3) Mr. CHIU Tat Jung, Daniel(4) CHEY Taewon(5) Public Shareholders Total	As at the Latest Practicable Date Number of Shares Approximate %(6) 0 0 1,126,840,132 22.52 1,126,840,132 22.52 1,035,300,000 20.69 744,602,000 14.88 941,973,463 18.83 778,042,500 15.55 1,856,138,466 37.10 5,002,704,561 100	Immediately after the allotment and issue of the Consideration Shares Number of Shares Approximate %(7) 149,122,250 2.89 1,126,840,132 21.87 1,275,962,382 24.77 1,035,300,000 20.10 744,602,000 14.45 941,973,463 18.28 778,042,500 15.10 1,856,138,466 36.03 5,151,826,811 100	Immediately after the allotment and issue of the Consideration Shares Number of Shares Approximate %(7) 149,122,250 2.89 1,126,840,132 21.87 1,275,962,382 24.77 1,035,300,000 20.10 744,602,000 14.45 941,973,463 18.28 778,042,500 15.10 1,856,138,466 36.03 5,151,826,811 100
			24.77
			20.10 14.45 18.28 15.10 36.03
			100

– 11 –

LETTER FROM THE BOARD

Notes:

• (1) The Seller is a wholly-owned subsidiary of BEHL. Beijing Enterprises Group Company Limited (‘‘BE Group’’), Beijing Enterprises Group (BVI) Company Limited (‘‘BE Group BVI’’) and BEHL, each of which is deemed to be interested in 1,126,840,132 Shares, 72,752,000 of which were directly and beneficially owned by BEHL and 1,054,088,132 of which were directly and beneficially owned by Hong Mao Developments Limited (‘‘Hong Mao’’). Hong Mao was wholly-owned by BEHL which was deemed to be owned as to 60.65% by BE Group BVI. BE Group BVI was wholly-owned by BE Group.

• (2) Mr. LIU Ming Hui (‘‘Mr. LIU’’) was deemed to be interested in a total of 1,035,300,000 Shares, comprising:

• (i) 290,698,000 Shares beneficially owned by him; and

• (ii) 744,602,000 Shares beneficially owned by China Gas Group Limited (‘‘CGGL’’). CGGL was owned as to 50% by Joint Coast Alliance Market Development Limited (‘‘Joint Coast’’) which, in turn, is wholly owned by Mr. LIU.

• (3) Joint Coast was deemed to be interested in 744,602,000 Shares beneficially owned by CGGL. CGGL is owned as to 50% by Joint Coast which, in turn, is wholly owned by Mr. LIU.

• (4) Mr. CHIU Tat Jung Daniel (‘‘Mr. CHIU’’) was deemed to be interested in a total of 941,973,463 Shares, comprising:

• (i) 744,602,000 Shares beneficially owned by CGGL. CGGL was owned as to 50% by Fortune Oil PRC Holdings Limited (‘‘Fortune Oil PRC’’);

• (ii) 156,501,544 Shares beneficially owned by Fortune Oil PRC which is a wholly-owned subsidiary of Fortune Oil PLC. Fortune Oil PLC is owned as to 51.2% by First Level Holdings Limited which, in turn, is owned as to 99% by Mr. CHIU;

• (iii) 27,617,919 Shares beneficially owned by First Marvel Investment Limited which is a wholly-owned subsidiary of Fortune Oil PLC; and

• (iv) 13,252,000 Shares beneficially owned by Fortune Oil Holdings Limited which is a wholly-owned subsidiary of Fortune Oil PLC.

• (5) Mr. CHEY Taewon (‘‘Mr. CHEY’’) was deemed to be interested in a total of 778,042,500 Shares, comprising:

• (a) 705,034,500 Shares beneficially owned by SK E&S Co., Ltd. (‘‘SK E&S’’). SK E&S is owned as to 94.13% by SK Holdings Co., Ltd. (‘‘SK Holdings’’). SK Holdings is owned as to 41.77% by SK C&C Co., Ltd. which, in turn, is owned as to 37.40% by Mr. CHEY; and

• (b) 73,008,000 Shares held by Pusan City Gas Co., Ltd. which is owned as to 74.04% by SK E&S.

• (6) The percentage was calculated on the basis of 5,002,704,561 Shares in issue as at the Latest Practicable Date and is rounded to nearest 2 decimal places.

• (7) The percentage was calculated on the enlarged issued share capital of the Company as a result of the issue of the Consideration Shares comprising of a total of 5,151,826,811 Shares and is rounded to nearest 2 decimal places.

– 12 –

LETTER FROM THE BOARD

Conditions to the Completion of the Share Purchase Agreement

Completion of the Proposed Acquisition is conditional upon:

• (a) completion of the due diligence in respect of the Target Group by the Purchaser;

• (b) the passing by the Independent Shareholders of the resolutions to approve the Share Purchase Agreement and the transactions contemplated thereunder and the allotment and issuance of the Consideration Shares at the SGM;

• (c) completion of the Reorganisation;

• (d) no obligation for a general offer in respect of the Shares (other than those held by or to be issued to the Seller (or the Guarantor’s wholly-owned subsidiary) pursuant to the Share Purchase Agreement and any party acting in concert with it) shall arise for the Seller or any party acting in concert with it pursuant to Rule 26 of the Takeovers Code as a result of the Completion;

• (e) the Seller shall (to the extent required or applicable to it): (a) file or cause to be filed a notice to the relevant PRC tax authority within 30 days after the date of the Share Purchase Agreement to fully disclose the existence of the Share Purchase Agreement and all other information relating to the Share Purchase Agreement otherwise contemplated by Circular 698; and (b) fully and promptly discharge all PRC tax liabilities assessed on it, or levied, charged or required to be withheld by the Purchaser or any Target Group Company in relation to or otherwise arising from the sale of the Sale Shares by it provided that nothing in this paragraph shall preclude the Seller from filing appeals or objections to any assessment levy or charge in accordance with applicable laws and rules;

• (f) all permits, consents, approvals, filings and clearances (including AML Filings) that are required for the Seller, the Seller Group, the Purchaser, the Purchaser Group or any of the Target Group Companies in connection with the execution, delivery and performance of the Transaction Documents and the consummation of the Proposed Acquisition having been obtained in accordance with the applicable laws or from any third parties, and such permits, consents, approvals, filings and clearances (including AML Filings) not having been withdrawn;

• (g) the Listing Committee having granted the approval for the listing of, and permission to deal in, the Consideration Shares or, if any adjustment is applied in the manner set out in the section headed ‘‘Consideration and Consideration Shares’’ above, the Adjusted Consideration Shares;

• (h) since the date of the Share Purchase Agreement, there not having been a Material Adverse Change;

– 13 –

LETTER FROM THE BOARD

• (i) any Seller’s Warranties, to the extent a breach would or would reasonably likely to result in a Material Adverse Change, remaining true and accurate and not misleading at Completion by reference to the facts and circumstances existing at the relevant time; and

• (j) the Seller having materially complied with pre-Completion obligations set out in the Share Purchase Agreement and otherwise performed in all material respects all of the covenants and agreements required to be performed by it under the Share Purchase Agreement.

The Purchaser may at its sole discretion waive, either in whole in part, all or any of the Conditions set out in paragraphs (a), (h), (i) and (j) above (but shall not waive any of the Conditions set out in paragraphs (b) to (g) above) at any time by notice in writing to the Seller. In the event that any of the Conditions shall not have been fulfilled or waived on or before 30 June 2015 (or such later date as the Purchaser and the Seller may agree in writing), then neither the Purchaser nor the Seller shall be bound to proceed with the purchase and sale of the Sale Shares, and the Share Purchase Agreement shall terminate immediately upon written notice by either the Purchaser or the Sellers to the other parties, save for certain clauses which shall survive such termination and save in respect of claims arising out of any breach prior to the termination of the Share Purchase Agreement.

Guarantee

Pursuant to the Share Purchase Agreement, the Guarantor has irrevocably and unconditionally:

• (a) guaranteed to the Purchaser punctual performance by the Seller of all its obligations under the Transaction Documents to which it is a party; and

• (b) undertaken with the Purchaser that whenever the Seller does not pay any amount when due under or in connection with the Transaction Documents, the Guarantor shall immediately on demand and without deduction or withholding pay that amount as if it was the principal obligor.

Completion

Completion will take place within 10 Business Days after all of the Conditions have been satisfied or waived (or such later date as the Seller and the Purchaser may agree in writing). Upon Completion, the Target Company will become a wholly-owned subsidiary of the Company.

Within three months after the date of Completion, the Purchaser shall procure the repayment of the Shareholders Loans owed by three Target Group Companies to the Seller Group, the total amount of which is RMB276,490,900 (equivalent to approximately HK$349,484,162) as at the date of the Share Purchase Agreement.

– 14 –

LETTER FROM THE BOARD

Post-completion undertakings

Each of the Seller and the Guarantor has undertaken that, following Completion, it will procure the repayment in the ordinary and usual course of business by the Seller Group of all sums owed by any member of the Seller Group to any Target Group Company in respect of intra-group trading activities as at Completion. Based on the information provided by the Seller, none of the members of the Seller Group owes any sum to any Target Group Company in respect of any intragroup trading activities as at the Latest Practicable Date.

The Purchaser has undertaken that, within three months following Completion, it will procure the repayment of the Shareholders Loans by certain Target Group Companies to the Seller Group.

Non-competition

Each of the Seller and the Guarantor has undertaken with the Purchaser that, for a period of 3 years from the date of Completion, it will not (and will procure its affiliated companies will not), without prior written consent of the Purchaser, directly or indirectly, among other things, (i) engage or carry on any business which competes with the Target Group in the geographical areas where any Target Group Company has business operations as at the date of Completion; (ii) canvass, solicit or accept any business similar to that of the Target Group from any client or customer, potential client or customer, representative or agent of the Target Group; (iii) interfere with the continuance of supply of goods or services to the Target Group; or (iv) solicit or entice away or offer employment to (other than as a result any individual taking initiative to apply for employment without any interference by or on behalf of any member of the Seller Group) any employee in a managerial, supervisory, technical or sales capacity employed by, or engaged as a consultant to, the Target Group in the manner set out in the Share Purchase Agreement.

– 15 –

LETTER FROM THE BOARD

FINANCIAL INFORMATION OF TARGET GROUP

A summary of the unaudited annual combined financial information and unaudited 6-month combined financial information of the Target Group, as provided by the Seller, is as follows:

			For the
	For the	For the	six months
	year ended	year ended	ended
	31 December	31 December	30 June
	2012	2013	2014
	RMB’000	RMB’000	RMB’000
	Unaudited	Unaudited	Unaudited
Net profit before taxation(a)	10,179	52,128	54,244
Net profit/(loss) after taxation(b)	(12,127)	11,976	31,421
Combined net asset value(c)	2,200,520	2,254,984	2,418,589
Combined total asset value(d)	3,520,837	3,824,878	4,111,075

Taking into account the majority interest held by the Seller Group in 8 project companies and the minority interest in 4 project companies, the net profit after tax for the year ended 31 December 2013 and for the six months ended 30 June 2014 attributable to the Seller Group were RMB15,042,959 and RMB45,851,090 respectively, and the net asset value as at 30 June 2014 attributable to the Seller Group was RMB1,166,282,734.

LISTING RULES IMPLICATIONS OF THE PROPOSED ACQUISITION FOR THE COMPANY

As at the Latest Practicable Date, BEHL directly and indirectly owns 1,126,840,132 Shares, representing approximately 22.52% of the issued share capital of the Company. As such, BEHL is a connected person of the Company. The Seller is a wholly-owned subsidiary of BEHL. Therefore, the Seller is a connected person of the Company and the Proposed Acquisition will constitute a connected transaction of the Company pursuant to Chapter 14A of the Listing Rules.

As the highest applicable percentage ratio (as defined in Rule 14.07 of the Listing Rules) of the Proposed Acquisition exceeds 5% but is less than 25%, the Proposed Acquisition will constitute a discloseable and a connected transaction for the Company which is subject to the reporting, announcement and independent shareholder’ approval requirements under the Listing Rules.

Notes:

(a) This refers to the sum of the net profit before taxation for all 12 project companies.

(b) This refers to the sum of the net profit/(loss) after taxation for all 12 project companies.

(c) This refers to the sum of the combined net asset value for all 12 project companies.

(d) This refers to the sum of the combined total asset value of all 12 project companies.

– 16 –

LETTER FROM THE BOARD

BEHL and its wholly-owned subsidiary Hong Mao Developments Limited (which holds a 21.07% shareholding interest in the Company as at the Latest Practicable Date) shall be regarded as having a material interest in the Proposed Acquisition, and therefore BEHL, Hong Mao Developments Limited and their respective associates will abstain from voting on the resolution at the SGM to approve the Proposed Acquisition. As Mr. Zhou Si, being a Director of the Company, is also a director of the Seller and the Guarantor, he has abstained from voting on the board resolution to approve the Proposed Acquisition. Save as disclosed above, none of the Directors had a material interest in the Proposed Acquisition and no Director was required to abstain from voting on the board resolution to approve the Proposed Acquisition.

REASONS FOR AND BENEFITS OF THE PROPOSED ACQUISITION

The Directors consider that the Proposed Acquisition is in line with the business strategies and the expansion plan of the Group.

The business of the Target Group in the PRC focuses on the downstream distribution of city gas, natural gas for vehicle use and the investment in construction and operation of long-distance natural gas pipelines. The Target Group has 12 city gas projects involving (1) the operation of piped city gas, (2) operation of compressed natural gas and liquefied natural gas stations and (3) the investment in construction and operation of long-distance natural gas pipelines. The coverage of the Target Group principally includes Liaoning, Hebei, Heilongjiang, Shandong, Anhui and Hainan.

The Group also runs various projects in these areas. Jinzhou of Liaoning has long been known as an industrial city while Tangshan of Hebei is also one of the crucial industrial areas in the PRC. As a result, these areas have a considerable number of industrial users which presents great market potential. The business of the Target Group is expected to complement and generate synergy with the Group’s existing business. Given that the Target Group has completed the connection of most of its long-distance natural gas pipelines, together with the increasing demand for winter heating supply and the growing prevalence of the ‘‘coal-to-gas’’ policy, it is believed that the Proposed Acquisition will greatly enhance the Group’s performance and offer a better roadmap for the Group’s future business development. In addition, the Target Group’s operations which are secured under various concession agreements and government permission for exclusive operation through joint venture cooperation will provide new impetus to business growth of the Group.

The Directors believe that Proposed Acquisition will expand the urban population coverage of the Group’s projects, increase the number of gas users and boost the natural gas sales, therefore generating new momentum for the continuing growth of the Group’s business.

The Directors (including members of the Independent Board Committee) consider that the Proposed Acquisition, the transactions contemplated under the Share Purchase Agreement and the Specific Mandate are on normal commercial terms after arm’s length negotiations between the parties, fair and reasonable and are in the interests of the Company and the Shareholders as a whole.

– 17 –

LETTER FROM THE BOARD

INFORMATION OF THE GROUP, THE PURCHASER, THE SELLER, THE GUARANTOR AND THE TARGET GROUP

The Group

The Group is a natural gas services operator, principally engaged in the investment, construction and management of city gas pipeline infrastructure, distribution of natural gas and LPG to residential, industrial and commercial users, construction and operation of natural gas refilling stations for vehicles and vessels, and development and application of oil, natural gas and LPG related technologies in Mainland China.

The Purchaser

The Purchaser is a wholly-owned subsidiary of the Company. Its principal activity is investment holding.

The Seller

The Seller is a wholly-owned subsidiary of BEHL and is an investment holding company which holds the entire issued share capital of the Target Company.

The Guarantor

The Guarantor is a company incorporated under the laws of Hong Kong with limited liability and the issued shares of which are listed on the main board of the Stock Exchange (stock code: 392). The Guarantor and its subsidiaries principally engage in the distribution and sale of piped natural gas, the provision of natural gas transmission, gas technology consultation and development services, surveying and plotting of underground construction projects, the construction and installation of gas pipelines and related equipment and the provision of repair and maintenance services in Beijing, the PRC, the production, distribution and sale of beer in Beijing and other provinces in the PRC, the construction of sewage and water treatment plants and other infrastructural facilities and the provision of construction services for comprehensive renovation projects in the PRC and Malaysia, sewage treatment, water treatment and distribution in the PRC and the Portuguese Republic, and the provision of consultancy services and the licensing of technical know-how that are related to sewage treatment in the PRC.

– 18 –

LETTER FROM THE BOARD

The Target Group

The Target Company is a special purpose vehicle for holding interest in 12 PRC project companies subject to completion of Reorganisation principally engaging in downstream distribution of city gas, natural gas for vehicle use and the construction and operation of long-distance natural gas pipelines. The 12 project companies are established in the PRC of which the Seller Group holds majority interest in 8 of them and minority interest in 4 of them (as more particularly shown in the chart below).

==> picture [450 x 233] intentionally omitted <==

Further information of the 12 project companies, as provided by the Seller, is set out in the table below.

							Asset value as at	30 June 2014
							(rounded to nearest RMB’000)
				Long				Net assets
			Gas	distance				attributable
		City gas	vehicle	pipeline	Commencement	Location of		to Seller
Name of project company		business	business	business	of operations	operations	Total assets	Group
							RMB’000	RMB’000
1.	北京燃氣集團山東	✓			Since late 1990s	Shandong	721,090,712	383,331,851
	有限公司Beijing Gas Group					Province
	Shandong Co., Ltd.*
2.	唐山市燃氣集團有限公司	✓			Since 1990s	Hebei Province	1,634,962,914	291,741,162
	Tangsan Gas Group Co., Ltd.*
3.	山東省天然氣管網投資			✓	Since 2011	Shandong	906,236,602	197,389,176
	有限公司Shandong Province					Province
	Natural Gas Pipeline Network
	Investment Co., Ltd.*
4.	中石油北燃(錦州)燃氣	✓			Since 2010	Liaoning	441,646,862	120,785,808
	有限公司Petro China Beiran					Province
	Jinzhou Gas Co., Ltd.*

– 19 –

LETTER FROM THE BOARD

							Asset value as at	30 June 2014
							(rounded to nearest RMB’000)
				Long				Net assets
			Gas	distance				attributable
		City gas	vehicle	pipeline	Commencement	Location of		to Seller
Name of project company		business	business	business	of operations	operations	Total assets	Group
							RMB’000	RMB’000
5.	北京安華恒泰投資有限公司	✓			Since 2009	Beijing	63,819,817	42,115,250
	Beijing Anhua Hengtai
	Investment Co., Ltd.*
6.	鶴崗聚源煤層氣有限責任公司	✓			Since 2007	Heilongjiang	145,880,814	31,773,389
	Hegang Juyuan Coalbed					Province
	Methane Corporation, Ltd.*
7.	山東省天然氣利用有限	✓	✓		Operations yet	Shandong	106,327,629	26,457,300
	公司Shandong Province				to be	Province
	Natural Gas Utilization Co.,				commenced
	Ltd.*
8.	錦州北燃公交車用天然氣有限		✓		Since 2013	Liaoning	36,599,834	25,410,754
	責任公司Jinzhou Beiran					Province
	Vehicle Use Natural Gas
	Corporation, Ltd.*
9.	北京燃氣集團海南有限	✓			Operations yet	Hainan Province	19,954,041	19,912,917
	公司Beijing Gas Group Hainan				to be
	Co., Ltd.*				commenced
10.	北京燃氣錦州大有燃氣	✓			Since 2013	Liaoning	16,205,148	13,323,791
	有限公司Beijing Gas Jinzhou					Province
	Dayou Gas Co., Ltd*
11.	北京市燃氣集團慶安有限公司	✓			Operations yet	Heilongjiang	9,585,821	9,571,247
	Beijing Gas Group Qingan Co.,				to be	Province
	Ltd*				commenced
12.	營口渤海燃氣發展有限	✓			Operations yet	Liaoning	8,764,880	4,470,089
	公司Yingkou Bohai Gas				to be	Province
	Development Co., Ltd.*				commenced

*Note: The English names of these PRC incorporated companies are English translations of the corresponding official Chinese names and are provided for identification purposes only.

As shown above, the principal business of the 12 project companies are holding, managing and operating 12 gas projects in various provinces in the PRC, including Liaoning, Hebei, Heilongjiang, Shandong, Anhui and Hainan provinces involving (1) operation of piped city gas, (2) operation of compressed natural gas and liquefied natural gas stations and (3) investment in construction of long-distance natural gas pipelines. As at 31 May 2014, the connectable urban population covered by the Target Group’s gas projects was 10,348,000 (approximately 2,900,000 households).

– 20 –

LETTER FROM THE BOARD

1. City Gas

As at 31 May 2014, the Target Group has accumulated a total of 1,230,463 installed users, including 1,219,077 residential users, 11,089 commercial users and 297 industrial users. The Target Group has also accumulated 1,059,798 connected gas users, comprising 1,049,849 residential users, 9,667 commercial users and 282 industrial users.

For the year of 2012 and 2013, the Target Group has reported natural gas sales of 535 million cubic metres and 618 million cubic metres respectively. For the period from January to the end of May 2014, the aggregated natural gas sales amount to 277 million cubic metres.

2. Gas for Vehicles

The 3 CNG gas stations in downtown Jinzhou operated by the Target Group provides refueling services for city public services vehicle. The Target Company also indirectly invests in a company which has built a LNG gas station in Jinan.

3. Long-distance Pipelines

The Target Group, through the minority interest in Shandong Province Natural Gas Pipeline Network Investment Co. Ltd., invests in the construction and operation of the Taian-QingdaoWeihai main pipeline and the surrounding city- and county-level pipeline network branches. Based on the information provided by the Seller, the total length of the pipeline amounts to approximately 873 kilometers, and approximately 90% of the construction has been completed.

The Target Group has established a sound management and operating system for its gas business, with full licences for its gas operations, as well as reasonable management and human resources allocation, and has attained strong economics of scale.

GENERAL INFORMATION

Mr. ZHOU Si, an executive Director of the Company and the vice chairman, executive director and chief executive officer of BEHL, was deemed to be interested in the Proposed Acquisition, the transactions contemplated under the Share Purchase Agreement and the Specific Mandate, abstained from voting in the meeting of the Board approving the Proposed Acquisition, the transactions contemplated under the Share Purchase Agreement and the Specific Mandate.

RECOMMENDATIONS

Your attention is drawn to the letter from the Independent Board Committee set out on pages IBC-1 to IBC-2 of this circular in connection with the Proposed Acquisition, the transactions contemplated under the Share Purchase Agreement and the Specific Mandate. Your attention is also drawn to the letter of advice from ING Bank N.V., Hong Kong Branch as the Independent Financial Adviser to the Independent Board Committee and the Independent Shareholders in connection with the Proposed Acquisition, the transactions contemplated under the Share Purchase Agreement and the Specific Mandate, as well as the principal factors and reasons considered by it in arriving at such advice set out on pages IFA-1 to IFA-25 of this circular.

– 21 –

LETTER FROM THE BOARD

The Independent Board Committee, having taken into account the advice of the Independent Financial Adviser, considers that the Proposed Acquisition, the transactions contemplated under the Share Purchase Agreement and the Specific Mandate are on normal commercial terms after arm’s length negotiations between the parties, fair and reasonable and are in the interests of the Company and the Shareholders as a whole. Accordingly, the Independent Board Committee recommends the Independent Shareholders to vote in favour of the ordinary resolutions for approving the Proposed Acquisition, the transactions contemplated under the Share Purchase Agreement and the Specific Mandate at the SGM.

RE-ELECTION OF MR. ARUN KUMAR MANCHANDA AS A NON-EXECUTIVE DIRECTOR

Pursuant to Bye-law 86(2), the Directors shall have power from time to time and at any time to appoint any person as a Director either to fill a causal vacancy on the Board or, subject to authorisation by the Shareholders, as an addition to the Board. Any Director so appointed by the Board shall hold office only until the next following general meeting (in the case of filling a vacancy) or annual general meeting (in the case of an addition to their number) of the Company and shall then be eligible for re-election at that meeting.

Pursuant to Bye-law 86(2), Mr. Arun Kumar MANCHANDA will offer himself for re-election as a non-executive Director of the Company at the SGM. The biographical details of Mr. Arun Kumar MANCHANDA is set out in Appendix I to this circular.

SPECIAL GENERAL MEETING

A notice of the SGM is set out on pages N-1 to N-3 of this circular.

A form of proxy for use at the SGM is enclosed herewith. To be valid, the form of proxy must be completed in accordance with the instructions printed thereon and deposited, together with the power of attorney or other authority (if any) under which it is signed or a notarially certified copy of such power of attorney or authority at the Company’s branch share registrar in Hong Kong, Computershare Hong Kong Investor Services Limited at 17M Floor, Hopewell Centre, 183 Queen’s Road East, Wanchai, Hong Kong not less than 48 hours before the time appointed for holding the SGM or any adjournment thereof. Completion and delivery of the form of proxy will not preclude you from attending and voting in person at the SGM should you so wish and in such event, the instrument appointing a proxy shall be deemed to be revoked.

BEHL (which holds 72,752,000 Shares representing 1.45% of the total issued Shares as at the Latest Practicable Date) and Hong Mao Developments Limited (which holds 1,054,088,132 Shares representing 21.07% of the total issued Shares as at the Latest Practicable Date) and their respective associates, and other persons that have a material interest in the Proposed Acquisition are required to abstain from voting on the resolutions in respect of the Proposed Acquisition, the transactions contemplated under the Share Purchase Agreement and the Specific Mandate at the SGM.

– 22 –

LETTER FROM THE BOARD

GENERAL

If any of the Conditions is not fulfilled or waived pursuant to the Share Purchase Agreement, the Proposed Acquisition will not proceed. Shareholders and potential investors of the Company should exercise caution when dealing in the Shares or any other securities of the Company.

The Company will publish further announcement(s) to provide updates on the Proposed Acquisition as and when appropriate, including the Net Asset Value set out in the June Audited Accounts, as well as the final amount of Consideration, if any adjustment is made.

Yours faithfully, For and on behalf of China Gas Holdings Limited ZHOU Si

Chairman

– 23 –

LETTER FROM THE INDEPENDENT BOARD COMMITTEE

==> picture [27 x 55] intentionally omitted <==

==> picture [57 x 41] intentionally omitted <==

CHINA GAS HOLDINGS LIMITED 中 國 燃 氣 控 股 有 限 公 司[*]

(Incorporated in Bermuda with limited liability)

(Stock Code: 384)

27 February 2015

To the Independent Shareholders

Dear Sir/Madam,

DISCLOSEABLE AND CONNECTED TRANSACTION RELATING TO

PROPOSED ACQUISITION OF THE ENTIRE ISSUED SHARE CAPITAL OF BEIJING GAS DEVELOPMENT LIMITED AND

ISSUE OF CONSIDERATION SHARES UNDER SPECIFIC MANDATE

We refer to the circular issued by the Company to its shareholders dated 27 February 2015 (the ‘‘Circular’’) of which this letter forms part. Capitalised terms defined in the Circular shall have the same meanings in this letter unless the context otherwise requires.

We have been appointed by the Board to advise the Independent Shareholders on whether the terms of the Proposed Acquisition, the transactions contemplated under the Share Purchase Agreement and the Specific Mandate are on normal commercial terms after arm’s length negotiations between the parties, fair and reasonable so far as the Independent Shareholders are concerned and whether they are in the interest of the Company and the Shareholders taken as a whole.

ING Bank N.V., Hong Kong Branch has been appointed as the Independent Financial Adviser to advise us and the Independent Shareholders in this respect.

We wish to draw your attention to the (i) letter from the Board and (ii) the letter from the Independent Financial Adviser set out in the Circular. Having considered the principal factors and reasons considered by, and the opinion and advice of, the Independent Financial Adviser as set out in its letter of advice contained in the Circular, we consider that the Proposed Acquisition, the transactions contemplated under the Share Purchase Agreement and the Specific Mandate are on

• For identification purposes only

– IBC-1 –

LETTER FROM THE INDEPENDENT BOARD COMMITTEE

normal commercial terms after arm’s length negotiations between the parties, fair and reasonable so far as the Independent Shareholders are concerned and are in the interests of the Company and the Shareholders as a whole.

Accordingly, we recommend the Independent Shareholders to vote in favour of the ordinary resolutions approving the Proposed Acquisition and transactions contemplated under the Share Purchase Agreement and the Specific Mandate at the SGM.

Yours faithfully, For and on behalf of the Independent Board Committee Mr. ZHAO Yuhua Dr. MAO Erwan Ms. WONG Sin Yue, Cynthia Mr. HO Yeung Ms. CHEN Yanyan Independent Non-executive Directors

– IBC-2 –

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

The following is the text of the letter prepared by ING Bank N.V., Hong Kong Branch setting out its advice to the Independent Board Committee and the Independent Shareholders for inclusion in this circular.

36/F One International Finance Centre, 1 Harbour View Street, Central, Hong Kong

27 February 2015

To the Independent Board Committee and Independent Shareholders of China Gas Holdings Limited

Dear Sirs,

DISCLOSEABLE AND CONNECTED TRANSACTION PROPOSED ACQUISITION OF THE ENTIRE ISSUED SHARE CAPITAL OF BEIJING GAS DEVELOPMENT LIMITED AND ISSUE OF CONSIDERATION SHARES UNDER SPECIFIC MANDATE

You, the Independent Board Committee (as defined herein) of China Gas Holdings Limited (‘‘you’’, ‘‘China Gas’’ or the ‘‘Company’’, together with its subsidiaries, the ‘‘Group’’), have asked us, the Corporate Finance Division of ING Bank N.V., Hong Kong Branch, pursuant to an engagement (the ‘‘Engagement’’) set out in an Engagement letter dated 8 December 2014, to give our opinion (the ‘‘Opinion’’) with respect to the fairness and reasonableness of the terms of Share Purchase Agreement (as defined herein) and the transactions contemplated under the Share Purchase Agreement (as defined herein) (the ‘‘Transactions’’).

In arriving at our Opinion, we have reviewed and considered China Gas’s circular to its shareholders dated 27 February 2015 (‘‘Circular’’), the annual and interim reports of China Gas. We have also discussed with the management of China Gas in respect of the business operation and future prospects of the company.

We have also compared the data provided to us with similar publicly available data for various other companies in your business sector, and we have considered, to the extent publicly available, the financial terms of certain other business combinations and other transactions which have recently been effected by such companies. We also considered such other information, financial studies, analyses and investigations and financial, economic and market criteria which we deemed relevant for the purposes of producing our Opinion.

– IFA-1 –

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

INTRODUCTION

On 26 November 2014, China Gas, Fresh Goal Limited (the ‘‘Purchaser’’, being a whollyowned subsidiary of the Company), Beijing Gas Group (BVI) Co., Ltd. (the ‘‘Seller’’) and Beijing Enterprises Holdings Limited (the ‘‘Guarantor’’ or the ‘‘BEHL’’) entered into the share purchase agreement (the ‘‘Share Purchase Agreement’’) pursuant to which the Purchaser will acquire from the Seller the entire share capital (the ‘‘Sale Shares’’) of Beijing Gas Development Limited (‘‘Beijing Gas Development’’ or the ‘‘Target Company’’, together with its subsidiaries and associates, the ‘‘Target Group’’) for a total consideration of approximately RMB1,632,795,828 (the ‘‘Consideration’’) (equivalent to approximately HK$2,063,851,945), subject to adjustments (the ‘‘Proposed Acquisition’’). The Consideration shall be satisfied by the Company allotting and issuing up to 149,122,250 shares of the Company (‘‘Consideration Shares’’) under the Specific Mandate (as defined herein).

As at the Latest Practicable Date, BEHL directly and indirectly owns 1,126,840,132 shares of China Gas (‘‘Shares’’ or ‘‘China Gas Shares’’), representing approximately 22.52% of the issued share capital of the Company. As such, BEHL is a connected person of the Company. The Seller is a wholly-owned subsidiary of BEHL. Therefore, the Seller is a connected person of the Company and the Proposed Acquisition will constitute a connected transaction of the Company pursuant to Chapter 14A of the Listing Rules and is subject to the Independent Shareholders’ approval and the reporting and announcement requirements thereunder.

China Gas has appointed ING Bank N.V., Hong Kong Branch (‘‘ING’’) as the independent financial adviser (‘‘IFA’’) to the independent committee of the board established on 26 November 2014 (‘‘Independent Board Committee’’) and shareholders of the Company other than BEHL, Hong Mao Developments Limited and their respective associates (the ‘‘Independent Shareholders’’) in connection with Transactions.

This letter forms part of the Circular which provides, inter alia, further details of the Transactions, the recommendation of the Independent Board Committee to the Independent Shareholders in relation to the Transactions and the notice of the special general meeting to be convened by the Company to consider the Transactions (‘‘SGM’’). Unless otherwise defined or where the context otherwise requires, capitalised terms used in this letter shall have the same meaning as defined in the Circular.

– IFA-2 –

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

TERMS OF REFERENCE

In accordance with the terms of our Engagement, in formulating our Opinion and recommendation with regards to the Transactions:

1. We have not assumed any responsibility for independent verification of, and we have not independently verified, any of the foregoing information and have relied on all such information as being sufficient, complete and accurate and not misleading in all material respects, without any additional check being undertaken to verify the completeness and accuracy of such disclosure. For the avoidance of doubt, we have assumed that no information has been withheld from us that could have an impact on this Opinion;

2. We have not assumed any responsibility for any aspect of the work that any professional advisors have produced regarding the Transactions and we have assumed as true and accurate and not misleading any work produced by such advisors, although we have not relied upon any such work produced by such advisers for the purposes of producing our Opinion. We have not provided, obtained or reviewed any legal, tax, regulatory, accounting, actuarial or other advice and as such assume no liability or responsibility in connection therewith. Accordingly, in providing this Opinion, we have not taken into account the possible implications of any such advice;

3. We have assumed that all corporate and other action required by the Group to complete the Transactions and carry out your obligations thereunder has been or will be duly taken, that the Transactions documentation will constitute a valid and legally binding obligation of you, that you have sufficient financial resources to honour all of your financial obligations in respect of the Transactions without any breach of covenants or other negative financial impact, and that the execution, delivery and performance by you of the Transactions will not violate or be prohibited by either your internal constitution or by any provision of any existing law applicable to you or any agreement or instrument binding on you or any of your assets or constitute a default or termination event (however described) under any such agreement or instrument;

4. In addition, we have not been requested to make (and therefore have not made) an independent evaluation or appraisal of your assets and liabilities (contingent or otherwise), nor have we been furnished with any such evaluations or appraisals. Our Opinion is necessarily based upon publicly available information collated by us up to the Latest Practicable Date, and the financial, economic, political and social market and other relevant conditions to the Opinion as they exist and can be evaluated, as at the Latest Practicable Date;

5. We have not obtained from China Gas any projection of the future performance or forecast of China Gas and/or the Group and we did not have access to any business plan, budget, forecast and financial projections of China Gas and/or the Group. We also do not express an opinion herein as to the prices at which the shares of China Gas may trade or the future value, financial performance or condition of China Gas and/or the Group, upon

– IFA-3 –

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

or after completion of the Transactions. ING has not conducted due diligence with respect to China Gas other than its review of certain publicly available information related to China Gas. Accordingly, for the purposes of its Opinion, ING has assumed that there is no non-public information with respect to China Gas and/or the Group made available to ING that would, or would reasonably be likely to, have an adverse impact on the price of the China Gas Shares.

1. We have assumed that you are complying in all material respects with all relevant applicable laws and regulations and promptly disclose to the extent required under applicable laws and regulations any price sensitive information to the public;

2. We have assumed that all consents and approvals of regulatory bodies, shareholders, exchanges, creditors and others which are required under any applicable law, regulation, agreement or instrument to consummate the Transactions will be obtained with no detriment in any aspect which may be material for our analysis. Subsequent developments may affect this Opinion and the assumptions made in its preparation;

3. We have assumed that the Transactions will not constitute an event of default or a potential event of default under any of your debt obligations and that, following completion of the Transactions, you will continue to be able to meet all of your debts and other obligations as they fall due; and

4. We have no reason to doubt the truth, accuracy and completeness of the information and representations provided to us by the Group, the Directors and the Company’s management, and have been advised by the Directors that no material facts have been omitted from the information provided by or referred to in the Circular.

We consider that we have reviewed sufficient information to reach an informed view, to justify our reliance on the accuracy of the information contained in the Circular and to provide a reasonable basis for our recommendation. We also consider that we have performed all reasonable steps as required under Rule 13.80 of the Listing Rules (including the notes thereto) to formulate our opinion and recommendation.

We have been engaged by China Gas to act as IFA for the purpose of producing this Opinion and recommendation and we will receive a fee from China Gas for our services. This fee is not contingent on the consummation of the Transactions.

In the ordinary course of business, ING Bank N.V. (of which we, the Corporate Finance Division of ING Bank N.V., Hong Kong Branch forms part) and its affiliates may actively trade your debt and equity securities for its own account and for the accounts of clients and accordingly, may at any time hold a long or short position in such securities.

– IFA-4 –

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

This Opinion and recommendation is supplied to you, the Independent Board Committee and Independent Shareholders, on the understanding that it has been produced solely for your benefit as part of the information you require in your contemplation of the Transactions. Save as to matters specifically mentioned in this Opinion, we do not otherwise express any views on the Transactions, or its effect on China Gas’ business or any part of it.

This Opinion and recommendation exclusively focuses on the fairness and reasonableness and does not address any other issues such as the underlying business decision to recommend the Transactions or its commercial merits, which are matters solely for the management. Subsequent developments in the aforementioned conditions may affect this Opinion and recommendation and the assumptions made in preparing this Opinion.

This Opinion is confidential and may not be quoted or referred to, in whole or in part, in any registration statement, prospectus or proxy statement, or in any other document used in connection with the Transactions or Engagement, nor shall this Opinion be used for any other purposes, without our prior written consent.

This Opinion is issued in the English language and reliance may only be placed on this Opinion as issued in the English language. If any translations of this Opinion are delivered they are provided only for ease of reference, have no legal effect and ING makes no representation as to (and accepts no liability in respect of) the accuracy of any such translation.

Our responsibility for the contents of this Opinion and recommendation to China Gas is subject to the terms of the Engagement and the Listing Rules. In addition, our liability to China Gas will be limited and in particular, we shall not have any direct or indirect liability of any kind to China Gas, or to any of China Gas’s Directors, employees, shareholders or creditors, arising out of or in connection with the Engagement, except for losses, claims, damages or liabilities incurred by China Gas to the extent they are found in a final judgment by a court to have resulted from a deliberate omission or gross negligence on the part of us or our affiliates and sub-contractors.

This Opinion, the recommendation and ING’s contractual and non-contractual obligations to China Gas hereunder shall be governed by and construed in accordance with Hong Kong law and any claims or disputes arising out of, or in connection with, this letter shall be subject to the exclusive jurisdiction of the Hong Kong courts.

– IFA-5 –

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

PRINCIPAL FACTORS AND REASONS CONSIDERED

In formulating our opinion and recommendation regarding the Transactions, we have taken into account the following principal factors and reasons:

1. Overview of the Transactions

A. The Transactions

According to the announcement of the Company dated 26 November 2014 in relation to the Transactions (the ‘‘Announcement’’), on 26 November 2014, China Gas, the Purchaser, the Seller and the Guarantor entered into the Share Purchase Agreement pursuant to which the Purchaser has conditionally agreed to acquire from the Seller the entire issued share capital of Beijing Gas Development (‘‘Sale Shares’’). The aggregate consideration for the Sale Shares payable to the Sellers shall be RMB1,632,795,828 (equivalent to approximately HK$2,063,851,945), subject to adjustments.

B. China Gas and the Group

The Group is a natural gas services operator, principally engaged in the investment, construction and management of city gas pipeline infrastructure, distribution of natural gas and liquefied petroleum gas (‘‘LPG’’) to residential, industrial and commercial users, construction and operation of natural gas refilling stations for vehicles and vessels as well as development and application of oil, natural gas and LPG related technologies in Mainland China.

As of 30 September 2014, the Group had secured 243 city piped gas projects (with exclusive concession rights), 13 long distance natural gas pipeline projects, 434 compressed/liquefied natural gas (‘‘CNG/LNG’’) refilling stations for vehicles, one natural gas development project, two coal bed methane development projects and 98 LPG distribution projects in 24 provinces (including autonomous regions and municipalities). As at 30 September 2014, the connectable urban population covered by the Group’s gas projects was 84,759,000 (approximately 25,586,000 households).

C. The Target Group

Business overview

The Target Company is a special purpose vehicle for holding interest in 12 project companies subject to completion of Reorganisation[1] principally engaging in downstream distribution of city gas and natural gas for vehicle use. Further, one of the Target Group Companies engages in construction and operation of long-distance natural gas pipelines. The 12 project companies are established in The People’s

1 The transfer by three affiliates of the Seller to the Target Company or its wholly-owned subsidiary of the legal and/ or beneficial interest in certain Target Group Companies

– IFA-6 –

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Republic of China (the ‘‘PRC’’) of which the Target Group holds majority interest in eight of them and minority interest in four of them. The project companies hold, manage and operate 12 gas projects in various provinces in the PRC, including Liaoning, Hebei, Heilongjiang, Shandong, Anhui and Hainan provinces involving (a) the operation of piped city gas, (b) the operation of compressed natural gas and liquefied natural gas stations and (c) the investment in construction and operation of long-distance natural gas pipeline. As at 31 May 2014, the connectable urban population covered by the Target Group’s gas projects was 10,348,000 (approximately 2,900,000 households).

(a) City gas distribution business

The city gas distribution business is involved in the operation, sales and distribution of piped natural gas. Set out below is total gas sales volume in 2012, 2013 and for the first five months of 2014.

Chart 1: Total gas sales volume in 2012, 2013 and for the first five months of 2014

==> picture [322 x 171] intentionally omitted <==

Source: China Gas

As at 31 May 2014, the business had secured an aggregate of 1,230,463 installed users across the projects, including 1,219,077 residential users, 11,089 commercial users and 297 industrial users. As at 31 May 2014, the business had also accumulated 1,059,798 connected gas users, comprising 1,049,849 residential users, 9,667 commercial users and 282 industrial users.

(b) Natural gas for vehicle use

The 3 CNG gas stations in downtown Jinzhou operated by the Target Group provides refueling services for city public services vehicle. The Target Company indirectly invests in a company which has built a LNG gas station in Jinan.

– IFA-7 –

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

(c) Investment in construction and operation of natural gas pipelines

The Target Group, through the minority interest in Shandong Province Natural Gas Pipeline Network Investment Co, Ltd., invests in the construction and operation of the Taian-Qingdao-Weihai main pipeline and the surrounding city- and county-level pipeline network branches. Based on the information provided by the Seller, the total length of the pipeline amounts to approximately 873 kilometers, and approximately 90% of the construction has been completed.

Target Group Constituents

The Target Group comprises 12 PRC project companies of which the Target Group owns majority interest ranging from 51% to 100% in eight project companies and minority interest ranging from 21.79% to 49% in four project companies. Amongst the 12 PRC project companies, nine project companies are involved in city gas projects mainly in Liaoning, Hebei, Heilongjiang and Shandong provinces, one project company is involved in the operation of natural gas stations, one project company is involved in both city gas project and operation of natural gas station and one project company is involved in construction and operation of long distance pipeline network in Shandong. Further details on the Target Group constituents are set out in the section headed ‘‘The Target Group’’ in the “Letter from the Board” in the Circular.

– IFA-8 –

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Financial information

A summary of the unaudited consolidated financial information of the Target Group, as provided by the Seller, is as follows:

Table 1: Unaudited consolidated financial information of the Target Group

	For the year ended 31	For the year ended 31	For the six
	December		months ended
	2012	2013	30 June 2014
	(RMB’000)	(RMB’000)	(RMB’000)
	Unaudited	Unaudited	Unaudited
Net profit before taxation2	10,179	52,128	54,244
Net profit/(loss) after taxation3	(12,127)	11,976	31,421
Combined net asset value4	2,200,520	2,254,984	2,418,589
Combined total asset value5	3,520,837	3,824,878	4,111,075

Source: The ‘‘Letter from the Board’’ in the Circular

Taking into account the majority interest held by the Seller Group in eight project companies and minority interest in four project companies, the net profit after tax for the year ended 31 December 2013 and for the six months ended 30 June 2014 attributable to the Seller Group were RMB15,042,959 and RMB45,851,090 respectively and the net asset value as at 30 June 2014 attributable to the Seller Group was RMB1,166,282,734. We note that the net profit after tax for the full year ended 31 December 2013 attributable to the Seller Group of RMB15,042,959 was higher than the net profit after taxation for the full year ended 31 December 2013 for all 12 project companies of RMB11,976,000 due to minority interests’ share of losses in some non-wholly owned project companies. We note that the net profit after tax for the six months ended 30 June 2014 attributable to the Seller Group of RMB45,851,090 was higher than the net profit after taxation for the six months ended 30 June 2014 for all 12 project companies of RMB31,421,000 due to minority interests’ share of losses in some non-wholly owned project companies.

2 This refers to the sum of the net profit before taxation for all 12 project companies.

3 This refers to the sum of the net profit/(loss) after taxation for all 12 project companies.

4 This refers to the sum of the combined net asset value for all 12 project companies.

5 This refers to the sum of the combined total asset value of all 12 project companies.

– IFA-9 –

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Repayment of shareholder loans

We note that within three months after the date of completion of the Transactions, which will take place within 10 business days after all the conditions of the Transactions have been satisfied or waived (or such later date as the Seller and the Purchaser may agree in writing), the Purchaser shall procure the repayment of the shareholders loans owed by the three Target Group Companies to the Seller Group. The total amount of the shareholders loans is RMB276,490,900 as at the date of the Share Purchase Agreement.

2. Reasons for the Transactions

Reasons for and benefits of the Transactions to the Company are set out in the ‘‘Letter from the Board’’ in the Circular. As stated in ‘‘Letter from the Board’’, the Directors consider that the Transactions are in line with the business strategies and the expansion plan of the Group.

We note that as at 30 September 2014, the Group has secured 243 city piped gas projects (with exclusive concession rights), 13 long distance natural gas pipeline projects, 434 CNG/ LNG refilling stations for vehicles, one natural gas development projects, two coal bed methane development projects and 98 LPG distribution projects in 24 provinces (including autonomous regions and municipalities). We note that as at 30 September 2014, the Group’s 243 city piped gas projects are located in Anhui, Hubei, Hunan, Jiangsu, Zhejiang, Hebei, Guangxi Zhuang Autonomous Region, Shaanxi, Guangdong, Liaoning, Chongqing, Shandong, Shanxi, Tianjin, Jilin, Inner Mongolia Autonomous Region, Heilongjiang, Ningxia Hui Autonomous Region, Fujian, Jiangxi, Gansu, Henan, Guizhou and Yunnan. The Target Group comprises 12 project companies which hold, manage and/or operate 12 gas projects in various provinces in the PRC, including Liaoning, Hebei, Heilongjiang, Shandong, Anhui and Hainan provinces involving (a) the operation of piped city gas, (b) the operation of compressed natural gas and liquefied natural gas stations and (c) the investment in construction and operation of long-distance natural gas pipeline. Given the similar business operations and geographical exposure, the business of the Target Group is expected to complement and generate synergy with the Group’s existing business and potentially increase the Group’s existing market share in areas where the Group is also currently operating.

The Proposed Acquisition will also provide future business development and growth for the Group. The Target Group has operations in Jinzhou of Liaoning and Tangshan of Hebei, which are areas with considerable number of industrial users with great market potential. We note that the Target Group has completed the connection of most of its long-distance natural gas pipelines which will provide a better roadmap for future business development. The Group shall leverage on the Target Group’s operations which have been secured under various concession agreements and government permission for exclusive operation through joint venture cooperation. The Proposed Acquisition will also expand the urban population coverage of the Group’s projects, enlarging the user base and increasing natural gas sales.

– IFA-10 –

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

The Group will benefit from the Proposed Acquisition given the enlarged business as we note that there are supportive policy and plans which will lead to continual growth in natural gas consumption. On 14 October 2012, The National Development and Reform Commission of the PRC (‘‘NDRC’’) promulgated the Natural Gas Utilization Policy, which came into effect from 1 December 2012. Taking into consideration the social, environment and economic benefits of natural gas utilization and gas consumption characteristics of different users, the NDRC categorises natural gas users as ‘‘prioritised’’, ‘‘allowed’’, ‘‘restricted’’ and ‘‘prohibited’’ to strategically optimise the consumption structure and enhance the utilisation efficiency of natural gas. Urban development as well as vehicles and inland river, lake and coastal shipping vessels were among the prioritised fields for the utilisation of natural gas. As mentioned in the Company’s 2014/2015 interim report, in March 2014, the NDRC, the National Energy Administration and the Ministry of Environmental Protection of the PRC jointly issued the Working Scheme on Strengthening Prevention and Control of Air Pollution in Energy Industry (能源行業加強大氣污染防治工作方案), which set out the goals for proportion of natural gas (excluding coal gas) to primary energy consumption at 7% for 2015 and over 9% for 2017. According to BP Statistical Review of World Energy June 2014, the consumption of natural gas in China for 2013 was 161.6 billion cubic metres. In November 2014, Plan to Cope with Climate Changes (2014–2020) (國家應對氣候變化規劃 (2014–2020 年)) was issued by the NDRC. The plan looks to increase consumption of domestic natural gas to 360 billion cubic metres by 2020, representing a compounded annual growth rate of 12.1% from 2013.

3. Consideration

The aggregate consideration for the Sale Shares payable to the Seller shall be RMB1,632,795,828, subject to adjustments the exact amount of which shall be ascertained prior to the allotment and issue of the Consideration Shares (as defined below), or the Adjusted Consideration Shares (as defined below), as the case may be, which shall be settled by the Purchaser in the following manner:

The Company will allot and issue 149,122,250 new Shares (the ‘‘Consideration Shares’’) at the Benchmark Share Price to the Seller (or a wholly-owned subsidiary of the Guarantor) at or after Completion, subject to adjustments. The issue price per Consideration Share is HK$13.84 (the ‘‘Benchmark Share Price’’).

– IFA-11 –

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Based on the information provided by the Seller, the unaudited net asset value (‘‘Net Asset Value’’) of the Target Group attributable to the Seller Group as at 30 June 2014 was RMB1,166,282,734[6] . After the signing of the Share Purchase Agreement, the Purchaser has appointed auditors to prepare the June Audited Accounts. We note that the independent auditor appointed by the Seller shall review the June Audited Accounts and raise any objections within 30 days of receipt of the accounts. We note that if any objection is received, the Seller and the Purchaser and their respective auditors shall promptly thereafter in good faith seek to resolve any differences within 20 days, and the result so agreed between the Seller and the Purchaser shall be final and binding on the parties.

As set out in the Share Purchase Agreement, the consideration is subject to the following adjustments based on the Net Asset Value as at 30 June 2014 to be set out in the June Audited Accounts[7] multiplied by 1.4:

• (a) If the Net Asset Value multiplied by 1.4 (referred to as the ‘‘P/B Multiple’’) is more than RMB1,632,795,828, there shall be added to the Consideration an amount equal to such excess amount, and the Purchaser shall pay such amount in cash to the Seller; and

• (b) If the Net Asset Value multiplied by 1.4 is less than RMB1,632,795,828, there shall be deducted from the Consideration an amount equal to such shortfall amount, and the Seller shall receive, instead of the Consideration Shares, such adjusted number of new Shares (the ‘‘Adjusted Consideration Shares’’) which shall be calculated as follows:

Adjusted Consideration Shares = Consideration Shares – Reduced Shares

where:

Reduced Shares = (RMB1,632,795,828 – Net Asset Value x 1.4)/ Benchmark Share Price

According to the ‘‘Letter from the Board’’ in the Circular, the P/B Multiple of 1.4 times of the Target Group’s net asset value takes into account the financial information of the Target Group and the fact that some of the city gas projects/assets are at initial development stage where the full potential is yet to be realized, as well as some comparable market cases where the relevant companies are primarily engaged in similar gas project business as the Target Group Companies.

6 Based on the majority interest held by the Seller Group in eight project companies and the minority interest in four project companies

7 (i) the combined audited pro forma statement of financial position of the Target Group as at 30 June 2014 and (ii) the combined audited pro forma statement of profit or loss for the six months ended 30 June 2014 of the Target Group to be prepared by Deloitte Touche Tohmatsu, the auditors appointed by the Purchaser

– IFA-12 –

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

A. Comparable companies

In our assessment of the valuation of the Transactions, we have considered the following commonly used valuation multiples:

• . Price-to-earnings ratio (‘‘P/E’’); and

• . Price-to-book ratio (‘‘P/B’’).

We have considered P/E multiple which provides guidance on the relative earnings potential of the companies and P/B multiple which provides guidance on the relative premium of the companies’ market capitalisation versus net asset value as the valuation ratios.

We have selected a list of comparable companies (the ‘‘Comparable Companies’’) of the Target Group for our comparison analysis based on the selection criteria that these companies are primarily engaged in city gas sales and distribution, sales of vehicular gas, and/or construction of pipelines in PRC. The selection criteria have provided us with reasonably sufficient samples for comparison purpose. Although the Comparable Companies have principal operations in different parts of the country, we consider them to be operating in similar business environment given that PRC adopts a similar and consistent natural gas policy throughout the country. As the Consideration is approximately US$266 million, we have also compared P/E and P/B multiples of the Target Group with the P/E and P/B multiples, respectively, of Comparable Companies with market capitalisation below US$1 billion, which are not significantly larger than the Consideration for the acquisition of the Target Group.

While comparable companies analysis reflect current market sentiments towards the sector and provide guidance on valuation, our analysis does not take into account differences in accounting policies and standards, different interim financial reporting periods as well as differences in business models and/or tax treatments, nor does it take into account any possible unique characteristic(s) of different companies and no adjustments have been made to account for such differences. We note the financial information of all the Comparable Companies, which are all listed on Stock Exchange of Hong Kong, is prepared on the basis of Hong Kong Financial Reporting Standards (‘‘HKFRS’’) in all material respects.

We have conducted our analysis and identified 11 companies based on the abovementioned selection criteria which we consider to be the closest comparables (after taking into consideration the factors as set out in our selection criteria) to the Target Group’s business. We set out in the table below these Comparable Companies. The valuation multiples of the Comparable Companies are based on their respective share prices as at 17 February 2015 (the ‘‘Latest Practicable Date’’), their respective financial

– IFA-13 –

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

positions of balance sheet items as at 30 June 2014, unless otherwise noted, and the financial information for the 12-month period ended 31 December 2013 and six-month period ended 30 June 2014 for all Comparable Companies, unless otherwise noted.

Table 2: Comparable Companies

Market capitalisation (US$ million)(1)(7) Beijing Enterprises Holdings Limited 9,650 Binhai Investment Company Limited 484 China Gas Holdings Limited 8,046 China Oil and Gas Group Limited 676 China Resources Gas Group Limited 5,618 China Tian Lun Gas Holdings Limited 880 ENN Energy Holdings Limited 5,834 Kunlun Energy Company Limited 8,021 Tianjin Jinran Public Utilities Company Limited 294 Towngas China Company Limited 2,355 Zhongyu Gas Holdings Limited 748 For companies with market capitalisation below US$1,000 million Average Median Overall Average Median The Target Group Sources: Bloomberg, Company filings Notes:	2013 P/E(2) 17.9x 27.7x 24.2x 13.1x 20.2x 32.0x 28.6x 9.1x 21.4x 16.5x 22.1x 23.2x 22.1x 21.2x 21.4x 108.5x	2014 Annualized P/E(3) 13.3x 22.7x 18.6x(5) 12.5x 17.4x 26.1x 14.7x 9.8x 24.7x 19.5x 22.8x 21.8x 22.8x 18.4x 18.6x 17.8x	P/B(4) 1.3x 4.1x 3.7x(6) 1.4x 2.9x 5.2x 3.5x 1.2x 1.1x 1.5x 3.3x 3.0x 3.3x 2.7x 2.9x 1.4x

• (1) Market capitalisation of the Comparable Companies are based on the closing share prices on the Latest Practicable Date.

• (2) P/E multiples are calculated based on the market capitalisation (using the respective share prices as at the Latest Practicable Date in the case of the Comparable Companies), divided by the respective consolidated profit attributable to shareholders for the 12-month period ended 31 December 2013 except China Gas Holdings Limited P/E multiple which is calculated based on the market capitalisation divided by the respective consolidated profit attributable to shareholders for the 12-month period ended 31 March 2014.

• (3) P/E multiples are calculated based on the market capitalisation (using the respective share prices as at the Latest Practicable Date in the case of the Comparable Companies), divided by the respective annualized (derived by multiplying consolidated profit attributable to shareholders for the six-month period ended 30 June 2014 by two) consolidated profit attributable to shareholders for the six-month period ended 30 June 2014, unless noted otherwise.

– IFA-14 –

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

• (4) P/B multiples are calculated based on market capitalisation (using the respective share prices as at the Latest Practicable Date in the case of the Comparable Companies), divided by the respective shareholders’ equity as at 30 June 2014 unless noted otherwise.

• (5) P/E multiple is calculated based on the market capitalisation, divided by the respective annualized (derived by multiplying consolidated profit attributable to shareholders for the six-month period ended 30 September 2014 by two) consolidated profit attributable to shareholders for the six-month period ended 30 September 2014.

• (6) P/B multiple is calculated based on shareholders’ equity as at 30 September 2014.

• (7) Foreign exchange assumptions: as at the Latest Practicable Date US$/RMB: 6.133 published by the People’s Bank of China; US$/HK$: 7.7596 as published on Bloomberg.

(1) P/E Approach

The Consideration is approximately 108.5 times the net profit after taxation for the year ended 31 December 2013 attributable to the Seller Group, which was approximately US$2.4 million[8] , and 17.8 times, on an annualized basis[9] , the net profit after taxation for the half-year ended 30 June 2014 attributable to the Seller Group, which was approximately US$7.5 million[10] . We note that some of the city gas projects/assets are at initial development stage and net profit after taxation attributable to the Seller Group has shown improvement in the six months ended 30 June 2014 as compared to the full year ended 31 December 2013. We note that there is insufficient information to determine the seasonality factor affecting the profit throughout the year given that some of the city gas projects/assets are at initial development stage.

The average and median P/E multiples of the Comparable Companies are 21.2 times and 21.4 times for the year ended 31 December 2013. The P/E multiple of the Target Group implied by the Consideration is higher than both the average and median P/E multiples of the Comparable Companies.

The average and median P/E multiples of the Comparable Companies with market capitalisation below US$1 billion are 23.2 times and 22.1 times for the year ended 31 December 2013. The P/E multiple of the Target Group implied by the Consideration is higher than both the average and median P/E multiples of the Comparable Companies with market capitalisation below US$1 billion.

• 8 Derived using US$/RMB: 6.193 which is the average exchange rate for the full year ended 31 December 2013.

9 Annualized figure is derived by multiplying the net profit after taxation attributable to the Seller Group for the sixmonth period ended 30 June 2014 by two. We note that net profit after taxation attributable to the Seller Group for the six-month period ended 30 June 2014 is not representative of the net profit after taxation attributable to the Seller Group for the six-month period ended 31 December 2014 and the annualized figure does not represent our forecast of net income after taxation attributable to the Seller Group for the full-year ended 31 December 2014.

• 10 Derived using US$/RMB: 6.139 which is the average exchange rate for the six-month ended 30 June 2014.

– IFA-15 –

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

The average and median P/E multiples of the Comparable Companies are 18.4 times and 18.6 times, on an annualized basis[11] for the six-month period ended 30 June 2014, except for China Gas Holdings Limited which is for the six-month period ended 30 September 2014. The P/E multiple of the Target Group implied by the Consideration is lower than both the average and median P/E multiples of the Comparable Companies.

The average and median P/E multiples of the Comparable Companies with market capitalisation below US$1 billion are 21.8 times and 22.8 times, on an annualized basis, for the six-month period ended 30 June 2014. The P/E multiple of the Target Group implied by the Consideration is lower than both the average and median P/E multiples of the Comparable Companies with market capitalisation below US$1 billion.

(2) P/B Approach

We note that a P/B approach is a more relevant approach as compared to a P/E approach as the Consideration is determined based on a P/B approach using a multiple of 1.4 times the Net Asset Value of the Target Group attributable to the Seller Group as at 30 June 2014 to be set out in the June Audited Accounts. According to the ‘‘Letter from the Board’’, the P/B Multiple takes into account the financial information of the Target Group and the fact that some of the city gas projects/assets are at initial development stage where the full potential is yet to be realized, as well as some comparable market cases where the relevant companies are primarily engaged in similar gas project business as the Target Group Companies.

The Consideration is approximately 1.4 times the Net Asset Value of the Target Group attributable to the Seller Group as at 30 June 2014 to be set out in the June Audited Accounts.

The average and median P/B multiples of the Comparable Companies are 2.7 times and 2.9 times respectively as at 30 June 2014 (except for China Gas Holdings Limited, which is as at 30 September 2014). The P/B multiple of the Target Group is lower than both the average and median P/B multiples of the Comparable Companies. The average and median P/B multiples of the Comparable Companies with market capitalisation below US$1 billion are 3.0 times and 3.3 times respectively as at 30 June 2014. The P/B multiple of the Target Group is lower than both the average and median P/B multiples of the Comparable Companies with market capitalisation below US$1 billion.

11 Annualized figures are derived by multiplying the consolidated net profits attributable to the Comparable Companies for the six-month period ended 30 June 2014 by two, unless noted otherwise. We note that net profits attributable to the Comparable Companies for the six-month period ended 30 June 2014 are not representative of the net profits attributable to the Comparable Companies for the six-month period ended 31 December 2014 and the annualized figures do not represent our forecast of net profits attributable to the Comparable Companies for the full-year ended 31 December 2014.

– IFA-16 –

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

B. Comparable Transactions

Regarding the comparable transactions, we have considered the following commonly used valuation multiples in our assessment of the valuation of the Transactions:

. P/E; and

. P/B.

We have selected a list of comparable transactions (the ‘‘Comparable Transactions’’) of the Transactions between 2012 and 2014, during which global production and consumption trends for natural gas remain relatively stable, for our comparison analysis based on the selection criteria that these transaction targets: (a) were primarily engaged in the distribution of natural gas and/or operation of natural gas pipelines, based on the historical published annual report or other regulatory filings; (b) at least 50% stake acquisition; (c) deal value of at least US$100 million, which we consider as a sensible benchmark as the business of the respective companies are similar to the business of the Target Group and the Comparable Transactions involve substantial stake acquisition. The benchmark also gives reasonably sufficient samples for comparison purpose.

Whilst comparable transactions analysis can reflect historical market sentiment towards the sector and provide guidance on valuation, we note that the analysis does not take into account differences in accounting policies and standards, different interim financial reporting periods as well as differences in business models and/or tax treatments, nor does it take into account any possible unique characteristic(s) of different companies and no adjustments have been made to account for such differences.

We have conducted our analysis and identified 12 completed transactions based on the abovementioned selection criteria that we consider to be the closest comparables (after taking into consideration the factors as set out in our selection criteria) to the Target Group’s business. We note that the target companies of eight of 12 Comparable Transactions were located in other countries, which are different from the Target Group’s business environment. The Comparable Transactions are for illustration of valuation multiples of transactions of companies with businesses similar to that of the Target Group. We set out in the table below these Comparable Transactions and their relevant valuation multiples based on their respective transaction values.

– IFA-17 –

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Table 3: Comparable Transactions

Completion Date Acquiror Target Target Nationality 26-November-14 Kinder Morgan, Inc. El Paso Pipeline Partners, L.P. United States 26-November-14 Kinder Morgan, Inc. Kinder Morgan Energy Partners, L.P. United States 4-September-14 Cheung Kong (Holdings) Limited; Power Assets Holdings Limited; Cheung Kong Infrastructure Holdings Limited Envestra Limited Australia 20-December-13 Shanghai Lian Hua Fibre Corporation Shanxi Natural Gas Company Limited China 12-November-13 China Gas Holdings Limited Fortune Gas Investment Holdings Limited China 12-June-13 Gujarat State Petroleum Corporation Limited Gujarat Gas Company Limited India 1-May-13 Kinder Morgan, Inc. Copano Energy LLC United States 6-November-12 Cosan S.A. Indústria E Comércio Companhia de Gás de São Paulo SA – Comgas Brazil 16-October-12 China Resources Gas Group Limited China Resources Petrochem Gas Group Limited China 3-July-12 China Resources Gas Group Limited AEI China Gas Limited China 24-May-12 Kinder Morgan, Inc. El Paso Corporation United States 26-March-12 Energy Transfer Equity, L.P. Southern Union Company United States Average Median PRC Transactions(18) Average Median The Target Group

Implied Equity Value P/E(1) P/B(2) (US$ million) 10,318 27.0x 2.3x 33,993(3) n.m.(4) 3.4x 2,215 16.9x 2.9x 570 17.6x(5) 3.8x(6) 400 19.7x(7) 2.3x(8) 725 15.8x 4.5x(9) 3,721 (26.8x)(10) 3.8x 2,962(11) 20.9x 4.1x 311 86.6x(12) 1.8x(13) 238 18.5x(14) 0.9x(15) 22,954 44.2x(16) 4.9x(17) 5,461 22.7x 2.1x 22.6x 3.1x 19.7x 3.2x 18.6x 2.2x 18.5x 2.0x 108.5x (2013 P/E) 17.8x (2014 annualized P/E) 1.4x

Sources: Dealogic, Company filings

– IFA-18 –

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Notes:

• (1) P/E multiples are calculated based on the implied market value, divided by the respective profit attributable to shareholders from continuing operations for the previous 12-month period prior to the transactions, unless otherwise stated.

• (2) P/B multiples are calculated based on the implied market value, divided by the respective shareholders equity as at the previous period end prior to the transactions, unless otherwise stated.

• (3) Derived based on company filing.

• (4) ‘‘n.m.’’ represents not meaningful. Not included in the calculation of average and median as the transaction was specific to a specific class of unitholders and there was no available breakdown in net income which was specific to the corresponding class of unitholders.

• (5) P/E multiple is calculated based on the implied market value, divided by the profit attributable to shareholders for the full-year ended 31 December 2012.

• (6) P/B multiple is calculated based on the implied market value divided by the shareholders equity as at 31 December 2012.

• (7) P/E multiple is calculated based on the implied market value divided by the net profit attributable to shareholders for the full year ended 31 December 2011.

• (8) P/B multiple is calculated based on the implied market value divided by the shareholders equity as at 30 June 2012.

• (9) P/B multiple is calculated based on the implied market value divided by the shareholders equity as of 30 June 2012.

• (10) Not included in the calculation of average and median as the P/E multiple is negative.

• (11) Derived based on company filing.

• (12) P/E multiple is calculated based on the implied market value divided by the net profit attributable to shareholders for the full year ended 31 December 2011; it is not included in the calculation of average and median as the multiple is significantly deviated from those shown by other Comparable Transactions.

• (13) P/B multiple is calculated based on the implied market value divided by the shareholders equity as at 31 July 2012.

• (14) P/E multiple is calculated based on the implied market value divided by the net profit attributable to shareholders for the full year ended 31 December 2011.

• (15) P/B multiple is calculated based on the implied market value divided by the shareholders equity as at 31 December 2011.

• (16) P/E multiple is calculated based on the implied market value divided by the net profit attributable to shareholder for the 12-month period prior to 30 June 2011 as there was a substantial loss on deconsolidation of subsidiary for the previous 12-month period prior to the transaction.

• (17) P/B multiple is calculated based on the implied market value divided by the shareholders equity as at 30 June 2011.

• (18) PRC transactions refer to transactions involving Target whose nationality is Chinese.

– IFA-19 –

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

(1) P/E Approach

The Consideration is approximately 108.5 times the net profit after taxation for the year ended 31 December 2013 attributable to the Seller Group, which was approximately US$2.4 million[12] .

The average and median P/E multiples of the Comparable Transactions are 22.6 times and 19.7 times respectively. The P/E multiple of the Target Group implied by the Consideration for the year ended 31 December 2013 is higher than both the average and median P/E multiples of the Comparable Transactions.

The average and median P/E multiple of the PRC Transactions are 18.6 times and 18.5 times respectively. The P/E multiple of the Target Group implied by the Consideration for the year ended 31 December 2013 is higher than both the average and median P/E multiples of the PRC Transactions.

We note that some of the city gas projects/assets are at initial development stage and net profit after taxation attributable to the Seller Group has shown improvement in the six months ended 30 June 2014 as compared to the full year ended 31 December 2013. The Consideration is approximately 17.8 times, on an annualized basis[13] , the net profit after taxation for the halfyear ended 30 June 2014 attributable to the Seller Group, which was approximately US$7.5 million[14] .

The average and median P/E multiple of the Comparable Transactions are 22.6 times and 19.7 times respectively. The P/E multiple of the Target Group implied by the Consideration, on an annualized basis for the six-month period ended 30 June 2014, is lower than both the average and median P/E multiples of the Comparable Transactions.

The average and median P/E multiple of the PRC Transactions are 18.6 times and 18.5 times respectively. The P/E multiple of the Target Group implied by the Consideration, on an annualized basis for the six-month period ended 30 June 2014, is lower than both the average and median P/E multiples of the PRC Transactions.

• 12 Derived using US$/RMB: 6.193 which is the average exchange rate for the full year ended 31 December 2013.

13 Annualized figure is derived by multiplying the net profit after taxation attributable to the Seller Group for the sixmonth period ended 30 June 2014 by two. We note that net profit after taxation attributable to the Seller Group for the six-month period ended 30 June 2014 is not representative of the net profit after taxation attributable to the Seller Group for the six-month period ended 31 December 2014 and the annualized figure does not represent our forecast of net income after taxation attributable to the Seller Group for the full-year ended 31 December 2014.

• 14 Derived using US$/RMB: 6.139 which is the average exchange rate for the six-month ended 30 June 2014.

– IFA-20 –

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

(2) P/B Approach

We note that a P/B approach is a more relevant approach as compared to a P/E approach as the Consideration is determined based on a P/B approach using a multiple of 1.4 times the Net Asset Value of the Target Group attributable to the Seller Group as at 30 June 2014 to be set out in the June Audited Accounts. According to the ‘‘Letter from the Board’’, the P/B Multiple takes into account the financial information of the Target Group and the fact that some of the city gas projects/assets are at initial development stage where the full potential is yet to be realized, as well as some comparable market cases[15] where the relevant companies are primarily engaged in similar gas project business as the Target Group Companies.

The Consideration is approximately 1.4 times the Net Asset Value of the Target Group attributable to the Seller Group as at 30 June 2014 to be set out in the June Audited Accounts.

The average and median P/B multiples of the Comparable Transactions are 3.1 times and 3.2 times respectively. The P/B multiple of the Target Group implied by the Consideration is lower than both the average and median P/B multiples of the Comparable Transactions.

The average and median P/B multiples of the PRC Transactions are 2.2 times and 2.0 times respectively. The P/B multiple of the Target Group implied by the Consideration is lower than both the average and median P/B multiples of the PRC Transactions.

4. Specific Mandate

A. Issue price of the Consideration Shares

As set out in the Share Purchase Agreement, the Consideration Shares shall be issued by the Company to the Seller (or a wholly-owned subsidiary of the Guarantor) under the condition that the resolution to approve the Share Purchase Agreement and the transactions contemplated thereunder and the allotment and issuance of the Consideration Shares at the SGM is passed by the Independent Shareholders (the ‘‘Specific Mandate’’). The Benchmark Share Price shall be HK$13.84. The Consideration is RMB1,632,795,828, subject to adjustments.

15 The comparable market cases include 20 transactions in relation to the city gas project acquisitions in China from 2006 to 2014. We have reviewed the comparable market cases taken into account by the Board. The comparable market cases involved stake acquisition of between 6% and 100% for considerations ranging between approximately RMB27 million and approximately RMB2.5 billion and an average consideration of approximately RMB425 million. We note that majority of the comparable market cases were transacted at a premium to the targets’ net asset values and the P/B multiple of 1.4 times the Net Asset Value of the Target Group attributable to the Seller Group is within the range of P/B multiples of the comparable market cases.

– IFA-21 –

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

We compare the Benchmark Share Price to the closing price on 25 November 2014, being the last trading day prior to the Announcement Date (the ‘‘Last Trading Day’’), 5- day, 10-day, 30-day, 90-day, 180-day, one-year and two-year volume weighted average prices (‘‘VWAPs’’) prior to the Announcement date on 26 November 2014 as follows:

Table 4: China Gas Shares market price on The Stock Exchange of Hong Kong Limited

		Premium/
		(discount)
	China Gas	implied by the
	Shares market	Benchmark
	price (HK$)	Share Price
Closing price prior to the Announcement date	13.98	(1.0%)
5-day VWAP prior to the Announcement date	13.58	1.9%
10-day VWAP prior to the Announcement date	13.36	3.6%
30-day VWAP prior to the Announcement date	13.47	2.8%
90-day VWAP prior to the Announcement date	14.19	(2.5%)
180-day VWAP prior to the Announcement date	13.80	0.3%
One-year VWAP prior to the Announcement date	13.06	6.0%
Two-year VWAP prior to the Announcement date	10.21	35.6%
Closing price on the Latest Practicable Date	12.48	10.9%
Benchmark Share Price (HK$)	13.84
Sources: Bloomberg, ING’s computation

Based on the above statistics, we note that the Benchmark Share Price is at 2.5% discount to 3.6% premium compared to the closing price on the Last Trading Day, and 5- day, 10-day, 30-day, 90-day and 180-day China Gas VWAPs prior to the Announcement date and at 6.0% to 35.6% premium compared to one-year and two-year China Gas VWAPs prior to the Announcement date and at 10.9% premium compared to the closing price on the Latest Practicable Date. We note that the Benchmark Share Price is close to the historical share prices of China Gas in the last 180-day period prior to the Announcement date.

– IFA-22 –

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Set out below is a chart illustrating the historical closing price, 30-day moving average closing price and daily trading volume of the shares between 26 November 2012, being two years prior to the Last Trading Day, and the Latest Practicable Date (both dates inclusive):

Chart 2: Historical closing price, 30-day moving average closing price and trading volume of the Shares

==> picture [329 x 214] intentionally omitted <==

Source: Bloomberg

We note that China Gas’ share price has risen by approximately 174% over the last two years to the Last Trading Day and the Benchmark Share Price is near the high end of the historical share price of the period.

– IFA-23 –

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

B. Dilution effect arising from the issue of the Consideration Shares

Assuming that (a) there is no change in the issued share capital of the Company from the Latest Practicable Date, and up to the day of the issue of the Consideration Shares and (b) no adjustment is made to the Consideration, the maximum number of Consideration Shares to be issued shall be 149,122,250 new Shares of the Company, representing:

• (a) approximately 2.98% of the issued share capital of the Company as at the Latest Practicable Date; and

• (b) approximately 2.89% of the enlarged issued share capital of the Company as a result of the issuance of the Consideration Shares.

The shareholding structure of the Company (a) as at the Latest Practicable Date; and (b) immediately after the issue of the Consideration Shares is set out in ‘‘Letter from the Board’’ in the Circular.

CONCLUSIONS AND RECOMMENDATION

Having considered and analysed the principal factors as set out in this letter, we would like to draw your attention to the following key factors, which should be read in conjunction with, and interpreted in, the full context of the Circular, in arriving at our conclusion:

• China Gas is a gas operator and service provider in China. The Target Group is a special purpose vehicle for holding interest in 12 PRC project companies subject to completion of Reorganisation. The 12 project companies are established in the PRC of which the Target Group holds majority interest in eight of them and minority interest in four of them. The project companies hold, manage and operate 12 gas projects in various provinces in the PRC, including Liaoning, Hebei, Heilongjiang, Shandong, Anhui and Hainan provinces involving (a) the operation of piped city gas, (b) the operation of compressed natural gas and liquefied natural gas stations and (c) the investment in construction and operation of long-distance natural gas pipeline. The Transactions are in line with the business strategies and the expansion plan of China Gas;

— The P/E multiple of the Target Group implied by the Consideration for the 12-month period ended 31 December 2013 is higher than the average P/E multiple of the Comparable Companies for the 12-month period ended 31 December 2013 and the average P/E multiple of Comparable Transactions. The P/E multiple, on an annualized basis, of the Target Group implied by the Consideration for the six-month period ended 30 June 2014 is lower than the average P/E multiple, on an annualized basis, of the Comparable Companies for the six-month period ended 30 June 2014 and the average P/ E multiple of Comparable Transactions. Based on a P/B approach, the P/B multiple of the Target Group implied by the Consideration is lower than the average P/B multiple of the Comparable Companies and the average P/B multiple of Comparable Transactions;

– IFA-24 –

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

• we note that the Benchmark Share Price is at 2.5% discount to 3.6% premium compared to the closing price on the Last Trading Day, and 5-day, 10-day, 30-day, 90-day, 180-day VWAPs prior to the Announcement date and at 6.0% to 35.6% premium compared to one-year and two-year China Gas VWAPs prior to the Announcement date and at 10.9% premium compared to the closing price on the Latest Practicable Date. We note that the Benchmark Share Price is close to the historical share prices of China Gas over the last 180-day period prior to the Announcement date and at the high end of the historical prices over the last two-year period prior to the Announcement date; and

• shareholding dilution is limited due to the enlarged share capital post the issuance of the Consideration Shares.

Based on the above, we are of the opinion that the Transactions are on normal commercial terms and the terms of the Transactions are fair and reasonable and in the interests of China Gas and the Shareholders as a whole so far as the Independent Shareholders are concerned. Therefore, we advise the Independent Shareholders and the Independent Board Committee to recommend the Independent Shareholders to vote in favour of the ordinary resolutions to be proposed at the SGM in relation to the Transactions.

Yours faithfully, For and on behalf of ING Bank N.V., Hong Kong Branch

Thiam Kit Lee Andrew Lau Managing Director Director

Note: Messrs Thiam Kit Lee and Andrew Lau are relevant individuals registered with the Hong Kong Monetary Authority to carry out Type 6 (advising on corporate finance) regulated activity under the SFO and have over 18 and 27 years, respectively, of experience in corporate finance industry.

– IFA-25 –

APPENDIX I BIOGRAPHICAL DETAILS OF MR. ARUN KUMAR MANCHANDA

1. BIOGRAPHICAL DETAILS OF MR. ARUN KUMAR MANCHANDA

Mr. MANCHANDA, aged 56, was appointed as a non-executive Director and a member of the corporate governance and risk control committee on 26 November 2014 and is currently the Executive Director of Marketing with GAIL (India) Limited (‘‘GAIL’’). His assignments include International Gas Sourcing, Gas Trading, Regulatory Affairs & Joint Ventures. As head of the International Gas Sourcing Group, he is responsible for import of LNG for meeting the energy requirements of the country and booking of requisite regasification infrastructure to facilitate these imports; as an overall executive-in-charge of marketing is responsible for managing people and profits through sales and marketing of Natural Gas Trading, Gas Transmission; as an in-Charge Regulatory Affairs department ensuring adherence to regulatory framework. As head of Joint Ventures Group, he is responsible for GAlL’s City Gas Distribution (‘‘CGD’’) business in India and expansion of CGD networks for supply gas to households, transport sector & commercial consumers in various cities. Prior to this, Mr. MANCHANDA was heading GAlL’s Liquid Hydrocarbon division and also responsible for marketing of natural gas and Polymers during 2012– 2014.

Earlier to his stint at GAlL, Mr. MANCHANDA was Joint Director (MC&ES) at Oil Coordination Committee (OCC) under the Ministry of Petroleum & Natural Gas, Government of India during 1996–2002. He was responsible for planning, operations, and Marketing of LPG across India through Oil Marketing Companies.

Mr. MANCHANDA is a Chemical Engineer from Punjab University with Management Degree in Sales & Marketing Management and has put in over 35 years of broad experience in the marketing of Natural gas, Petrochemicals and Petroleum products.

GAIL is a shareholder of the Company, holding, directly and indirectly, 150,000,000 shares of the Company (the ‘‘GAIL Shares’’), representing 3.00% of the issued share capital of the Company as at the Latest Practicable Date.

As at the Latest Practicable Date, there is no service agreement between the Company and Mr. MANCHANDA, but Mr. MANCHANDA is entitled to a director’s fee as may be approved by the Board with reference to his roles and responsibilities and the prevailing market conditions. Currently, Mr. MANCHANDA, as a non-executive Director is entitled to a director’s fee in the amount of HK$20,000 per month and an annual remuneration of HK$60,000 as a member of the corporate governance and risk control committee. He has no designated length of service but he is subject to retirement by rotation and re-election in accordance with the Bye-laws of the Company.

– I-1 –

APPENDIX I BIOGRAPHICAL DETAILS OF MR. ARUN KUMAR MANCHANDA

Save as disclosed in this circular, Mr. MANCHANDA has not held any other directorship in any other publicly listed companies, whether in Hong Kong or overseas, during the last three years. Mr. MANCHANDA does not have any relationship with any directors or senior management or substantial or controlling shareholders of the Company. As at the Latest Practicable Date, Mr. MANCHANDA does not hold any other position with the Company and its subsidiaries and he does not have any interests in the shares of the Company within the meaning of Part XV of the Securities and Futures Ordinance (Cap. 571, Laws of Hong Kong). Mr. MANCHANDA does not hold any shares in GAIL and he is not interested in the GAIL Shares.

Save as disclosed above, the Company is not aware of other information in relation to the appointment of Mr. MANCHANDA which is required to be disclosed pursuant to any of the requirements under Rule 13.51(2)(h) to (v) of the Listing Rules or any other matter which needs to be brought to the attention of the shareholders of the Company.

– I-2 –

GENERAL INFORMATION

APPENDIX II

RESPONSIBILITY STATEMENT

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

All the Directors jointly and severally accept full responsibility for the accuracy of the information contained in this circular and confirm, having made all reasonable inquiries, that to the best of their knowledge, opinions expressed in this circular have been arrived at after due and careful consideration and there are no other facts not contained in this circular, the omission of which would make any statement in this circular misleading.

1. INTERESTS AND SHORT POSITIONS OF DIRECTORS AND CHIEF EXECUTIVE IN THE SHARES, UNDERLYING SHARES AND DEBENTURES OF THE COMPANY AND ASSOCIATED CORPORATIONS

(a) Interest of Directors and Chief Executives of the Company

Save as disclosed below, as at the Latest Practicable Date, none of the Directors or chief executive of the Company had any interests or short positions in any shares, underlying shares and debentures of the Company or any of its associated corporations (as defined in Part XV of the SFO) which are 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 they were taken or deemed to have under such provisions of the SFO), or are required to be entered in the register maintained in accordance with Section 352 of the SFO, or are required to be notified to the Company and the Stock Exchange pursuant to the Model Code for Securities Transactions by Directors of Listed Issuers set out in Appendix 10 to the Listing Rules.

– II-1 –

GENERAL INFORMATION

APPENDIX II

		Number of	Shares & Nature of Interest	Shares & Nature of Interest
			Number of		Approximate
	Personal	Corporate	Share	Aggregate	percentage
Name of Directors	Interest	Interest	options(4)	interest	(%)(1)
Mr. ZHOU Si	—	—	4,000,000	4,000,000	0.08
Mr. LIU Ming Hui (2 and 3)	290,698,000	744,602,000	—	1,035,300,000	20.69
Mr. HUANG Yong	117,278,000	—	—	117,278,000	2.34
Mr. ZHU Weiwei	7,000,000	—	2,000,000	9,000,000	0.18
Mr. MA Jinlong	1,216,000	—	2,000,000	3,216,000	0.06
Mr. CHEN Xinguo	—	—	2,000,000	2,000,000	0.04
Ms. LI Ching	—	—	2,000,000	2,000,000	0.04
Mr. YU Jeong Joon	—	—	4,000,000	4,000,000	0.08
Mr. KIM Yong Joong	—	—	2,000,000	2,000,000	0.04
Mr. ZHAO Yuhua	1,400,000	—	1,000,000	2,400,000	0.05
Dr. MAO Erwan	2,400,000	—	1,000,000	3,400,000	0.07
Ms. WONG Sin Yue, Cynthia	3,400,000	—	1,000,000	4,400,000	0.09
Mr. HO Yeung	—	—	1,000,000	1,000,000	0.02
Ms. CHEN Yanyan	—	—	1,000,000	1,000,000	0.02

Notes:

1. The percentage was calculated on the basis of 5,002,704,561 Shares in issue as at the Latest Practicable Date and is rounded to nearest 2 decimal places.

2. Mr. LIU Ming Hui (‘‘Mr. LIU’’) was deemed to be interested in a total of 1,035,300,000 Shares, comprising:

3. (i) 290,698,000 Shares beneficially owned by him; and

4. (ii) 744,602,000 Shares beneficially owned by China Gas Group Limited (‘‘CGGL’’). CGGL was owned as to 50% by Joint Coast Alliance Market Development Limited (‘‘Joint Coast’’) which, in turn, is wholly owned by Mr. LIU.

5. Joint Coast was deemed to be interested in 744,602,000 Shares beneficially owned by CGGL. CGGL is owned as to 50% by Joint Coast which, in turn, is wholly owned by Mr. LIU.

6. Those share options were granted by the Company on 16 April 2014 pursuant to the share option scheme adopted by the Company on 20 August 2013.

– II-2 –

GENERAL INFORMATION

APPENDIX II

(b) Interest of substantial Shareholders and other persons

Save as disclosed below, as at the Latest Practicable Date, the Directors were not aware of any person (other than the Directors or Chief Executives of the Company) who had any interest or short position in the shares or 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 was, directly or indirectly, interested in 10% or more of the nominal value of any class of share capital carrying rights to vote in all circumstances at general meetings of any member of the Group.

		Number of	Approximate
		Shares held/	percentage
Name	Nature of interest	interested	(%)(1)
Beijing Enterprises Group Company Limited(2)	Controlled Corporation	1,126,840,132	22.52
Beijing Enterprises Group (BVI) Company Limited(2)	Controlled Corporation	1,126,840,132	22.52
BEHL(2)	Beneficial and Controlled	1,126,840,132	22.52
	Corporation
Hong Mao Developments Limited(2)	Beneficial	1,054,088,132	21.07
Mr. LIU Ming Hui(3) and (4)	Beneficial and Controlled	1,035,300,000	20.69
	Corporation
Joint Coast Alliance Market Development	Controlled Corporation	744,602,000	14.88
Limited(3) and (4)
China Gas Group Limited(3) and (4)	Beneficial	744,602,000	14.88
Mr. CHIU Tat Jung, Daniel(5)	Controlled Corporation	941,973,463	18.83
First Level Holdings Limited(5)	Controlled Corporation	941,973,463	18.83
Fortune Oil PLC(5)	Controlled Corporation	941,973,463	18.83
Mr. CHEY Taewon(6)	Controlled Corporation	778,042,500	15.55
SK C&C Co., Ltd.(6)	Controlled Corporation	778,042,500	15.55
SK Holdings Co., Ltd.(6)	Controlled Corporation	778,042,500	15.55
SK E&S Co., Ltd.(6)	Beneficial and Controlled	778,042,500	15.55
	Corporation

Notes:

1. The percentage was calculated on the basis of 5,002,704,561 Shares in issue as at the Latest Practicable Date and is rounded to nearest 2 decimal places.

2. Beijing Enterprises Group Company Limited (‘‘BE Group’’), Beijing Enterprises Group (BVI) Company Limited (‘‘BE Group BVI’’) and BEHL, each of which is deemed to be interested in 1,126,840,132 Shares, 72,752,000 of which were directly and beneficially owned by BEHL and 1,054,088,132 of which were directly and beneficially owned by Hong Mao Developments Limited (‘‘Hong Mao’’). Hong Mao was wholly-owned by BEHL which was deemed to be owned as to 60.65% by BE Group BVI. BE Group BVI was wholly-owned by BE Group. According to the Part XV of the SFO form filed by BE Group, as at 26 November 2014, each of BE Group, BE Group BVI and BEHL was deemed to be interested in 1,275,962,382 Shares as a result of the allotment and issue of 149,122,250 Consideration Shares assuming that all of the Conditions have been satisfied or waived (as the case may be) and Completion had already taken place. As at the date of this circular, Completion has not taken place, and no Consideration Shares have been issued.

3. Mr. LIU Ming Hui (‘‘Mr. LIU’’) was deemed to be interested in a total of 1,035,300,000 Shares, comprising:

4. (i) 290,698,000 Shares beneficially owned by him; and

– II-3 –

GENERAL INFORMATION

APPENDIX II

• (ii) 744,602,000 Shares beneficially owned by China Gas Group Limited (‘‘CGGL’’). CGGL was owned as to 50% by Joint Coast Alliance Market Development Limited (‘‘Joint Coast’’) which, in turn, is wholly owned by Mr. LIU.

• Joint Coast was deemed to be interested in 744,602,000 Shares beneficially owned by CGGL. CGGL is owned as to 50% by Joint Coast which, in turn, is wholly owned by Mr. LIU.

• Each of Mr. CHIU Tat Jung Daniel (‘‘Mr. CHIU’’), First Level Holdings Limited (‘‘First Level’’) and Fortune Oil PLC was deemed to be interested in a total of 941,973,463 Shares, comprising:

• (i) 744,602,000 Shares beneficially owned by CGGL. CGGL was owned as to 50% by Fortune Oil PRC Holdings Limited (‘‘Fortune Oil PRC’’);

• (ii) 156,501,544 Shares beneficially owned by Fortune Oil PRC which is a wholly-owned subsidiary of Fortune Oil PLC. Fortune Oil PLC is owned as to 51.2% by First Level which, in turn, is owned as to 99% by Mr. CHIU;

• (iii) 27,617,919 Shares beneficially owned by First Marvel Investment Limited which is a whollyowned subsidiary of Fortune Oil PLC; and

• (iv) 13,252,000 Shares beneficially owned by Fortune Oil Holdings Limited (‘‘Fortune Oil Holdings’’) which is a wholly-owned subsidiary of Fortune Oil PLC.

• Each of Mr. CHEY Taewon (‘‘Mr. CHEY’’), SK C&C Co., Ltd. (‘‘SK C&C’’), SK Holdings Co., Ltd. (‘‘SK Holdings’’) and SK E&S Co., Ltd. (‘‘SK E&S’’) was deemed to be interested in a total of 778,042,500 Shares, comprising:

• (a) 705,034,500 Shares beneficially owned by SK E&S. SK E&S is owned as to 94.13% by SK Holdings. SK Holdings is owned as to 41.77% by SK C&C which, in turn, is owned as to 37.40% by Mr. CHEY; and

• (b) 73,008,000 Shares held by Pusan City Gas Co., Ltd. which is owned as to 74.04% by SK E&S.

As at the Latest Practicable Date, (i) Mr. ZHOU Si was a director of each of BE Group and BE Group BVI, and the vice chairman, executive director and chief executive officer of BEHL; (ii) Mr. LIU Ming Hui was a director of Joint Coast and CGGL; (iii) Ms. LI Ching was a director of Fortune Oil PRC and Fortune Oil Holdings; (iv) Mr. YU Jeong Joon was the representative director of SK E&S; and (v) Mr. KIM Yong Joong was the vice president, China Business Unit of SK E&S. Save as disclosed in this circular, as at the Latest Practicable Date, none of the Directors or proposed Directors was a director or employee of a company which had an interest or short position in the shares and underlying shares of the Company which would fall to be disclosed to the Company under the provisions of Divisions 2 and 3 of Part XV of the SFO.

2. SERVICE CONTRACTS

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

– II-4 –

GENERAL INFORMATION

APPENDIX II

3. MATERIAL ADVERSE CHANGE

As at the Latest Practicable Date, the Directors were not aware of any material adverse change in the financial or trading position of the Group since 31 March 2014, being the date to which the latest published audited financial statements of the Group have been made up.

4. INTEREST IN ASSETS

As at the Latest Practicable Date, none of the Directors had any interest, direct or indirect, in any assets which had been since 31 March 2014, being 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 Enlarged Group or are proposed to be acquired or disposed of by or leased to any member of the Enlarged Group.

5. MATERIAL INTEREST IN CONTRACTS

As at the Latest Practicable Date, none of the Directors was materially interested in any contracts or arrangement subsisting as at the Latest Practicable Date which was significant in relation to the business of the Enlarged Group.

6. COMPETING INTERESTS

As at the Latest Practicable Date, none of the Directors or their respective associates had any interest in any business apart from the Company’s business which competes or is likely to compete, either directly or indirectly, with the Company’s business.

7. EXPERT

• (a) The following are the qualifications of the expert who has given an opinion or advice which is contained in this circular:

Name Qualification

ING Bank N.V. A registered institution under the Securities and Futures Ordinance, registered to conduct Type 1 (dealing in securities), Type 4 (advising on securities) and Type 6 (advising on corporate finance) regulated activities

• (b) As at the Latest Practicable Date, the above expert held 305,000 Shares, representing approximately 0.006% of the issued share capital of the Company. Save as disclosed above, the above expert did not have any shareholding directly or indirectly in any member of the Group or any right, whether legally enforceable or not, to subscribe for or to nominate persons to subscribe for securities in any member of the Group and it had no interest, either directly or indirectly, in any assets which have been, since 31 March 2014

– II-5 –

GENERAL INFORMATION

APPENDIX II

(being the date to which the latest published audited financial statements of the Company were made up), acquired or disposed of by or leased to or are proposed to be acquired or disposed of by or leased to any member of the Group.

• (c) The above expert has given and has not withdrawn its written consent to the issue of this circular with the inclusion herein of their reports and reference to their names in the form and context in which they appear.

8. DOCUMENTS AVAILABLE FOR INSPECTION

Copies of the following documents will be available for inspection at the Company’s principal place of business, Room 1601, 16th Floor, AXA Centre, 151 Gloucester Road, Wanchai, Hong Kong during normal business hours (public holidays excepted) from the date of this circular up to and including the date of the SGM:

• (a) the letter from the Independent Board Committee to the Independent Shareholders, the text of which is set out on pages IBC-1 to IBC-2 of this circular;

• (b) the letter from the Independent Financial Adviser to the Independent Board Committee and the Independent Shareholders, the text of which is set out on pages IFA-1 to IFA-25 of this circular;

• (c) the Share Purchase Agreement;

• (d) the annual reports of the Company for the three years ended 31 March 2014;

• (e) the memorandum of association and bye-laws of the Company;

• (f) the written consent referred to in the paragraph headed ‘‘EXPERT’’ in this appendix; and

• (g) this circular.

9. GENERAL

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

– II-6 –

NOTICE OF SPECIAL GENERAL MEETING

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

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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 (the ‘‘SGM’’) of China Gas Holdings Limited (the ‘‘Company’’) will be held at Renaissance Harbour View Hotel Hong Kong, Boardroom 8, Lower Lobby, 1 Harbour Road, Wanchai, Hong Kong on Tuesday, 17 March 2015 at 10:00 a.m. for the purposes of considering and, if thought fit, passing the following resolutions as ordinary resolutions. Unless otherwise indicated, capitalized terms used in this notice and the following resolutions shall have the same meanings as those defined in the circular of the Company dated 27 February 2015 (the ‘‘Circular’’) :

ORDINARY RESOLUTIONS

1. ‘‘THAT:

2. (a) the Proposed Acquisition and the transactions contemplated under the Share Purchase Agreement (a copy of which has been produced to the SGM marked ‘‘A’’ and signed by the chairman of the SGM for the purpose of identification) be and hereby approved, confirmed and ratified; and

3. (b) any one of the directors of the Company be and is hereby authorized to do all such acts and things and to sign all documents and to take any steps as he may consider necessary, desirable or expedient for the purpose of implementing and/or giving effect to the Proposed Acquisition and the transactions contemplated under the Share Purchase Agreement.’’

4. For identification purposes only

– N-1 –

NOTICE OF SPECIAL GENERAL MEETING

2. ‘‘THAT:

subject to completion of the Share Purchase Agreement, to the fulfilment of the conditions relating to the allotment and issue of the Consideration Shares and conditional upon the Listing Committee of the Stock Exchange granting the listing of, and the permission to deal in, the Consideration Shares, the Directors be and are hereby specifically authorized to allot and issue the Consideration Shares (or the Adjusted Consideration Shares, as the case may be), credited as fully paid, to the Seller (or a wholly-owned subsidiary of the Guarantor) in accordance with the terms and conditions of the Share Purchase Agreement.’’

3. ‘‘THAT:

Mr. Arun Kumar MANCHANDA be and is hereby re-elected as a non-executive director of the Company with immediate effect.’’

By order of the Board China Gas Holdings Limited ZHOU Si Chairman

Hong Kong, 27 February 2015

Head office and principal Place of Business in Hong Kong:

Room 1601 16th Floor AXA Centre 151 Gloucester Road Wanchai Hong Kong

Registered office:

Clarendon House 2 Church Street Hamilton HM11 Bermuda

Notes:

1. Any member entitled to attend and vote at the SGM is entitled to appoint one or, if he is a holder of more than one Share, more proxies to attend and vote instead of him. A proxy need not be a member of the Company.

2. A form of proxy for use in connection with the SGM is enclosed with the Circular. To be valid, the form of proxy, together with the power of attorney or other authority (if any) under which it is signed or a notarially certified copy of that power of attorney or authority must be deposited at the Company’s branch share registrar, Computershare Hong Kong Investor Services Limited, 17M Floor, Hopewell Centre, 183 Queen’s Road East, Wanchai, Hong Kong not less than 48 hours before the time appointed for holding the meeting.

– N-2 –

NOTICE OF SPECIAL GENERAL MEETING

1. Where there are joint registered holders of any Shares, any one of such persons may vote at the meeting, either personally or by proxy, in respect of such Shares as if he were solely entitled thereto, but if more than one of such joint holders is present at the meeting, 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.

2. As of the date of this notice, Mr. ZHOU Si, Mr. LIU Ming Hui, Mr. HUANG Yong, Mr. ZHU Weiwei, Mr. MA Jinlong, Mr. CHEN Xinguo and Ms. LI Ching are the executive Directors; Mr. YU Jeong Joon (his alternate being Mr. KIM Yong Joong), Mr. LIU Mingxing and Mr. Arun Kumar MANCHANDA are the non-executive Directors; and Mr. ZHAO Yuhua, Dr. MAO Erwan, Ms. WONG Sin Yue, Cynthia, Mr. HO Yeung and Ms. CHEN Yanyan are the independent non-executive Directors.

– N-3 –