CR Construction Group Holdings Limited — Proxy Solicitation & Information Statement 2006

Nov 15, 2006

THIS DOCUMENT IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION

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

If you have sold or transferred all your shares and options in Chinese People Gas Holdings Company Limited (the “Company” ), you should at once hand this circular to the purchaser or the transferee or to the bank, stockbroker or other agent through whom the sale was effected for transmission to the purchaser or the transferee.

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

This circular is published for information purposes only and does not constitute an invitation or offer to acquire, purchase or subscribe for securities.

CHINESE PEOPLE GAS HOLDINGS COMPANY LIMITED

---

(incorporated in Bermuda with limited liability)

(Stock Code: 681)

DISCLOSEABLE TRANSACTION INVOLVING ISSUE OF NEW SHARES

ACQUISITION OF THE ENTIRE INTEREST IN A COMPANY OPERATING A NATURAL GAS BUSINESS AT FUZHOU, FUJIAN

A letter from the board of directors of the Company is set out on pages 4 to 14 of this circular.

* For identification only

15 November, 2006

CONTENTS

		Page
Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .		1
Letter from the Board
I	Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	4
II	The Tian An Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	5
III	The Lian Dong Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	7
IV	The Completion of the Tian An Agreement and the Lian Dong Agreement . . . . .	9
V	Management Rights Transfer Agreement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	9
VI	Information on the Target Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	12
VII	Reasons for the Acquisition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	12
VIII	Financial Effect . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	13
IX	Listing Rules Implications . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	14
X	Additional information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	14
Appendix I – Profit Forecast. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .		15
Appendix II – Valuation Report. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .		17
Appendix III – General Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .		25

– i –

DEFINITIONS

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

• “Acquisition”

• the acquisition by the Purchaser from Tian An and Lian Dong of their respective 60% and 40% equity interests in the Target Company pursuant to the terms of the Tian An Agreement and the Lian Dong Agreement, respectively and the transfer of the Management Rights pursuant to the terms of the Management Rights Transfer Agreement

• “Announcement”

• the announcement issued by the Company dated 9 October, 2006 in relation to, among other things, the Acquisition

• “associate(s)” has the meaning ascribed to this term under the Listing Rules

• “Board”

• the board of Directors or a duly authorized committee of the board of Directors

• “Company”

• Chinese People Gas Holdings Company Limited, an exempted company incorporated in Bermuda with limited liability, the shares of which are listed on the Main Board of the Stock Exchange

• “connected person(s)”

• has the meaning ascribed to it under the Listing Rules

• “Consideration Shares”

• the 200,000,000 Shares to be issued and allotted by the Company to Mr. Ma at an issue price of HK$0.40 each pursuant to the terms of the Management Rights Transfer Agreement

• “Directors”

• the directors of the Company

• “General Mandate”

• the general mandate granted to the Directors by the shareholders of the Company to issue Shares representing not more than 20% of the nominal issued share capital of the Company as at the date of passing of the relevant ordinary resolution at the annual general meeting of the Company held on 3 October, 2006 (which has not been utilized as at the Latest Practicable Date)

• “Group” the Company and its subsidiaries

• “Hong Kong”

• the Hong Kong Special Administrative Region of the People’s Republic of China

– 1 –

DEFINITIONS

• “Independent Third Party(ies)”

• third party(ies) (and its ultimate beneficial owner(s)) who are independent of, and not connected with, the Company or any connected persons of the Company and who are not connected person(s) of the Company

• “Latest Practicable Date”

• 9 November, 2006 being the latest practicable date prior to the printing of this circular for ascertaining certain information included in this circular

• “Lian Dong”

  • (Fuzhou Lian Dong

• Economic Development Co. Ltd*), a limited liability company established in the PRC and an Independent Third Party

• “Lian Dong Agreement”

• the agreement dated 29 September, 2006 entered into between the Purchaser and Lian Dong in relation to the acquisition of 40% equity interest in the Target Company

• “Listing Rules” the Rules Governing the Listing of Securities on the Stock Exchange

• “Management Rights”

• the rights to manage the operations of the Target Company (including to implement the decisions of the board, advise on strategic developments and human resources policies, design management system and draft corporate memorandum) for a term of 20 years from 10 August, 2002 and to be entitled to 30% of the distributable profit of the Target Company

• “Management Rights Transfer Agreement”

• the agreement dated 29 September, 2006 entered into between the Company and Mr. Ma in relation to the transfer of the Management Rights and the payment of an introduction fee for the aggregate consideration of HK$80,000,000

• “Mr. Ma”

• Mr. Dong Bing Ma, a director of the Target Company and a controlling shareholder of Lian Dong, and an Independent Third Party

• “PRC”

• the People’s Republic of China (for the purpose of this circular excluding Hong Kong, the Macau Special Administrative Region and Taiwan)

• “Purchaser”

• (Hefei Tian An Trading Co

• Ltd*), a wholly foreign-owned enterprise established in the PRC and an indirect wholly-owned subsidiary of the Company

– 2 –

DEFINITIONS

“SFO” Securities and Futures Ordinance (Cap. 571 of the Laws of Hong Kong)

• “Share(s)” share(s) of HK$0.07 each in the share capital of the Company

• “Shareholder(s)” holder(s) of Share(s)

• “SHINEWING” SHINEWING (HK) CPA Limited, certified public accountants

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

• “Target Company” (Fujian Province An Ran Gas Investment Co. Ltd*), a limited liability company incorporated in the PRC which is owned as to 60% by Tian An and 40% by Lian Dong

• “Tian An” (Hefei Tian An Group Co Ltd*), a limited liability company established in the PRC and an Independent Third Party

• “Tian An Agreement” the agreement dated 29 September, 2006 entered into between the Purchaser and Tian An in relation to the acquisition of 60% equity interest in the Target Company

• “Valuer” BMI Appraisals Limited, a firm of professional surveyors and valuers independent from and not connected with the Company and its connected persons

• “Valuation Report”

• a valuation report dated 15 November, 2006 prepared by the Valuer to appraise the fair value of the Target Company as at 30 September, 2006 a copy of which is contained in Appendix II to this circular

• “HK$”

• Hong Kong dollars, the lawful currency of Hong Kong

• “RMB” Renminbi, the lawful currency of the PRC

• “%” per cent.

• “*” the English name of the relevant companies are given for identification purposes only

For the purpose of this circular and for reference only, the following exchange rate has been used for converting Renminbi to Hong Kong dollars:

RMB101.5 = HK$100

– 3 –

LETTER FROM THE BOARD

CHINESE PEOPLE GAS HOLDINGS COMPANY LIMITED

---

(incorporated in Bermuda with limited liability)

(Stock Code: 681)

Executive Directors:

Mr. Xu Ruixin Mr. Liu Jing Mr. Mo Shikang Mr. Zhu Peifeng Mr. Zhang Hesheng Mr. Jin Song Mr. Yan Wing Cheung

Independent non-executive Directors: Mr. Liu Junmin Mr. Tan Qinglian Mr. Chan Chuk Cheung, Ivan

Registered office: Canon’s Court 22 Victoria Street Hamilton HM12 Bermuda

Head office and principal place of business in Hong Kong: Unit 2113, 21st Floor, China Merchants Tower, Shun Tak Centre, 168-200 Connaught Road Central, Hong Kong

15 November, 2006

To the Shareholders

Dear Sirs

DISCLOSEABLE TRANSACTION INVOLVING ISSUE OF NEW SHARES

ACQUISITION OF THE ENTIRE INTEREST IN A COMPANY OPERATING A NATURAL GAS BUSINESS AT FUZHOU, FUJIAN

I. INTRODUCTION

The Board announced on 9 October, 2006 that the Purchaser (a wholly-owned subsidiary of the Company) entered into two equity interest transfer agreements on 29 September, 2006 to acquire from Tian An and Lian Dong their respective 60% and 40% equity interests in the Target Company, at a total consideration of RMB104,320,000 (approximately HK$102,778,325). The Target Company will become a wholly-owned subsidiary of the Company upon completion.

* For identification only

– 4 –

LETTER FROM THE BOARD

The Company also entered into the Management Rights Transfer Agreement with Mr. Ma, an Independent Third Party and a controlling shareholder of Lian Dong, on 29 September, 2006, pursuant to which Mr. Ma conditionally agreed to transfer the Management Rights to the Company for a consideration of HK$60,000,000 and, in addition, the Company conditionally agreed to pay Mr. Ma an introduction fee of HK$20,000,000. The aggregate consideration of HK$80,000,000 will be satisfied by the issue and allotment by the Company of 200,000,000 Consideration Shares to Mr. Ma at an issue price of HK$0.40 per Share. Upon issue at completion, the Consideration Shares will represent approximately 6.11% of the existing issued share capital of the Company and approximately 5.76% of the issued share capital of the Company as enlarged by the issue and allotment of the Consideration Shares. Completion of the Tian An Agreement, the Lian Dong Agreement and the Management Rights Transfer Agreement are inter-conditional.

The Acquisition constitutes a discloseable transaction for the Company under Chapter 14.06 of the Listing Rules. The purpose of this circular is to provide you with further details of the Acquisition.

II. THE TIAN AN AGREEMENT

Date: 29 September, 2006

Parties:

• (i) Tian An, which is principally engaged in the business of bowling halls, snookers rooms and gymnasium operations, and in interior and external design; and

• (ii) the Purchaser (a wholly-owned subsidiary of the Company), which is principally engaged in the business of sales and distribution of construction materials, household appliances, stationeries, office equipments and textile materials.

To the best of the Directors’ knowledge, information and belief having made all reasonable enquiries, each of Tian An and its beneficial owners is an Independent Third Party. The Company had acquired from Tian An and Ma Chun Sheng (then holder of 45% equity interest in Tian An) their respective 8.8% and 91.2% equity interests in (Hefei Tian An Trading Co Ltd*) (being the Purchaser) on 25 September, 2006. (Such transaction did not constitute a notifiable transaction under the Listing Rules) and had been entered into because the Directors were of the view that using a PRC incorporated domestic company to acquire the Target Company would expedite the administrative process for the proposed Acquisition. Upon completion of that transaction, the Purchaser became a wholly-owned subsidiary of the Company. Save as disclosed herein, Tian An has no prior relationship with the Company and its connected persons. Ma Chun Sheng and Mr. Ma are independent from and not connected with each other.

Conditions

The completion of the Tian An Agreement is conditional upon the completion of the Lian Dong Agreement and the Management Rights Transfer Agreement.

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LETTER FROM THE BOARD

Consideration

Pursuant to the Tian An Agreement, the Purchaser agreed to acquire 60% equity interest in the Target Company from Tian An at a consideration of RMB64,320,000 (approximately HK$63,369,458). Such consideration was paid in cash by the Purchaser to Tian An in the following manner:

• (i) RMB26,320,000 (approximately HK$25,931,034) was paid on 30 September, 2006;

• (ii) RMB31,000,000 (approximately HK$30,541,872) was paid on 16 October, 2006; and

• (iii) RMB7,000,000 (approximately HK$6,896,552) being the remaining part of the consideration, was paid on 16 October, 2006.

The consideration of RMB64,320,000 (approximately HK$63,369,458) for the 60% equity interest in the Target Company represents a slight premium of 7.2% to the consideration for the 40% equity interest in the Target Company of RMB40,000,000 (approximately HK$39,408,867).

Under the Tian An Agreement, if the transfer of the 60% equity interest transfer had not been registered on or before 25 October, 2006, the payments under (i) and (ii) above would have been required to be returned to the Purchaser without interest. The said 60% equity interest transfer has been registered as at the Latest Practicable Date. The consideration for the 60% of the equity interest in the Target Company of RMB64,320,000 (approximately HK$63,369,458) was arrived at after arm’s length negotiations between Tian An and the Purchaser. At the time of the Announcement, the Directors (including the independent non-executive Directors) were of the view that the Tian An Agreement was on normal commercial terms based on the fair value of the Target Company of RMB346,386,600 (approximately HK$341,267,586) as at 31 December, 2005 as appraised, using the discounted income method, by Chengdu Ruifeng Certified Public Value Co Ltd (“Chengdu Ruifeng”), a PRC qualified valuer engaged by the Target Company which is independent from the Company and its connected persons, and the number of licences held by the Target Company to operate a natural gas business in 8 cities within the Fujian province and the growth potential of natural gas business in the PRC and that such terms were fair and reasonable and in the interests of the shareholders of the Company as a whole. However, since a business valuation to be included in a circular for a notifiable transaction under the Listing Rules is required by the Stock Exchange to be prepared by a valuer who is a fellow or associate member of The Hong Kong Institute of Surveyors possessing sufficient knowledge and experience to value the appraised assets, the Company has appointed BMI Appraisals Limited to prepare the Valuation Report and a copy of it, including the basis and assumptions, is set out in Appendix II to this circular. As the Valuer has applied the income approach (also known as the discounted cash flow method) in the Valuation Report, such valuation is deemed to amount to a profit forecast of the Group under Rule 14.62 of the Listing Rules and the information required thereunder has been included in this circular.

– 6 –

LETTER FROM THE BOARD

Based on the information available to the Directors following discussions with Tian An, Lian Dong and the board of directors of the Target Company, and taking into account the growth potential of the business of the Target Company, the number of licences currently held by the Target Company to operate the natural gas business and the prospects of the economy of the Fujian province, the Directors are of the view that the Valuation Report has been made after due and careful enquiry.

The payment for the consideration has been funded by the Group out of its existing internal cash resources including those available from the net proceeds from the issues of convertible bonds for a total of HK$ 442,000,000 (which were the subject of announcements dated 8 September, 2005 and 10 May, 2006, respectively).

If either Tian An or the Purchaser defaults in the performance or observance of any of its obligations under the Tian An Agreement (including the non payment of the consideration and the non registration of the equity transfer) which results in the non-completion of the Tian An Agreement, the defaulting party shall pay a termination fee of RMB24,000,000 (approximately HK$23,645,320) to the non-defaulting party.

III. THE LIAN DONG AGREEMENT

Date: 29 September, 2006

Parties:

• (i) Lian Dong, which is principally engaged in the production of petrochemical machinery and equipments, chemical products, fuel oil, ferrous metal, nonferrous metal, building materials, textile, household appliances, and related consultation services; and

• (ii) the Purchaser (a wholly-owned subsidiary of the Company).

To the best of the Directors’ knowledge, information and belief having made all reasonable enquiries, each of Lian Dong and its beneficial owners is an Independent Third Party. Lian Dong and its beneficial owners have no prior relationship with the Company and its connected persons.

Conditions

The completion of the Lian Dong Agreement is conditional upon the completion of the Tian An Agreement and the Management Rights Transfer Agreement.

– 7 –

LETTER FROM THE BOARD

Consideration

Pursuant to the Lian Dong Agreement, the Purchaser agreed to acquire the remaining 40% equity interest in the Target Company from Lian Dong at a consideration of RMB40,000,000 (approximately HK$39,408,867). Such consideration was paid in cash by the Purchaser to Lian Dong in the following manner:

• (i) RMB18,000,000 (approximately HK$17,733,990) was paid on 30 September, 2006;

• (ii) RMB18,000,000 (approximately HK$17,733,990) was paid on 16 October, 2006; and

• (iii) RMB4,000,000 (approximately HK$3,940,887) being the remaining part of the consideration, was paid on 16 October, 2006.

Under the Lian Dong Agreement, if the transfer of the 40% equity interest transfer had not been registered on or before 25 October, 2006, the payments under (i) and (ii) above would have been required to be returned to the Purchaser without interest. The said 40% equity interest transfer has been registered as at the Latest Practicable Date. The consideration for the 40% of the equity interest in the Target Company of RMB40,000,000 (approximately HK$39,408,867) was arrived at after arm’s length negotiations between Lian Dong and the Purchaser. At the time of the Announcement, the Directors (including the independent non-executive Directors) were of the view that the Lian Dong Agreement was on normal commercial terms based on the fair value of the Target Company of RMB346,386,600 (approximately HK$341,267,586) as at 31 December, 2005 as appraised, using the discounted income method, by Chengdu Ruifeng, and the number of licences held by the Target Company to operate a natural gas business in 8 cities within the Fujian province and the growth potential of natural gas business in the PRC, and that such terms were fair and reasonable and in the interests of the shareholders of the Company as a whole. However, since a business valuation to be included in a circular for a notifiable transaction under the Listing Rules is required by the Stock Exchange to be prepared by a valuer who is a fellow or associate member of The Hong Kong Institute of Surveyors possessing sufficient knowledge and experience to value the appraised assets, the Company has appointed BMI Appraisals Limited to prepare the Valuation Report and a copy of it, including the basis and assumptions, is set out in Appendix II to this circular. As the Valuer has applied the income approach (also known as the discounted cash flow method) in the Valuation Report, such valuation is deemed to amount to a profit forecast of the Group under Rule 14.62 of the Listing Rules and the information required thereunder have been contained in this circular.

Based on the information available to the Directors following discussions with Tian An, Lian Dong and the board of directors of the Target Company, and taking into account the growth potential of the business of the Target Company, the number of licences currently held by the Target Company to operate the natural gas business and the prospect of the economy of the Fujian province, the Directors are of the view that the Valuation Report has been made after due and careful enquiry.

– 8 –

LETTER FROM THE BOARD

The payment for the consideration has been funded by the Group out of its existing internal cash resources including those available from the net proceeds from the issues of convertible bonds of a total of HK$442,000,000 (which were the subject of announcements dated 8 September, 2005 and 10 May, 2006, respectively).

If either Lian Dong or the Purchaser defaults in the performance or observance of any of its obligations under the Lian Dong Agreement (including the non payment of the consideration and the non registration of the equity transfer) which results in the non-completion of the Lian Dong Agreement, the defaulting party shall pay a termination fee of RMB16,000,000 (approximately HK$15,763,547) to the non-defaulting party.

As at the Latest Practicable Date, Lian Dong is owned as to 18%, 30% and 52% equity interests by Chen Xiao Rong, Chen Dong Lin and Mr. Ma, respectively. Chen Xiao Run and Chen Dong Lin (each is an Independent Third Party) previously held a combined 60% equity interest in the Target Company which was transferred to Tian An on 21 September, 2006. Save as disclosed herein, Tian An and Lian Dong have no other relationship with each other.

IV. COMPLETION OF THE TIAN AN AGREEMENT AND THE LIAN DONG AGREEMENT

Upon completion of the Tian An Agreement and the Lian Dong Agreement which is expected to be on or before 15 November, 2006 (as amended), the Target Company shall become a wholly-owned subsidiary of the Company and will be consolidated into the accounts of the Group. Completion of the Tian An Agreement, the Lian Dong Agreement and the Management Rights Transfer Agreement are inter-conditional. Accordingly, completion of the Acquisition is subject to the fulfillment of the requirements under Rule 14.62 of the Listing Rules and the grant of the listing approval of the Consideration Shares under the terms of the Management Rights Transfer Agreement.

V. MANAGEMENT RIGHTS TRANSFER AGREEMENT

Date: 29 September, 2006

Parties:

• (i) Mr. Ma, a director of the Target Company, a controlling shareholder of Lian Dong and a general manager of Tian An; and

• (ii) the Company.

To the best of the Directors’ knowledge, information and belief having made all reasonable enquiries, Mr. Ma is an Independent Third Party. Upon completion of the Tian An Agreement and the Lian Dong Agreement, the Target Company will become a wholly-owned subsidiary of the Company and Mr. Ma will become a connected person of the Company pursuant to his continuing directorship in the Target Company. Upon

– 9 –

LETTER FROM THE BOARD

completion, Mr. Ma will not become a director of the Company. There are three directors on the board of the Target Company, namely, Chen Yu, Wang Wai and Mr. Ma. Mr. Ma has no prior relationship with the Company and its connected persons.

Mr. Ma was introduced to the Group’s management on or about January 2006. Mr. Ma is experienced in the management and operations of crude oil and related petroleum trading business. Mr. Ma is the founder of Lian Dong in 1994 and became a general manager of the Target Company in 2001. Under his leadership, the operations of the Target Company grew rapidly to cover 8 cities in the Fujian province.

The Management Rights were first granted by Chen Dong Lin and Chen Xiao Run (the then 60% equity holders of the Target Company) to Mr. Ma in 2002. When Tian An acquired the 60% equity interest in the Target Company from Chen Dong Lin and Chen Xiao Run, Tian An entered into a new agreement with Mr. Ma on 21 September, 2006 to acknowledge and confirm that the Management Rights were held by Mr. Ma and that Tian An would be obliged to procure any subsequent purchaser of the 60% equity interest to accept and be bound by the terms of the agreement governing the Management Rights.

Conditions

The completion of the Management Rights Transfer Agreement will be subject to (i) the listing of, and permission to deal in, the Consideration Shares being granted by the Listing Committee of the Stock Exchange; and (ii) the completion of the Tian An Agreement and the Lian Dong Agreement. On 30 October, 2006 a supplemental agreement was entered into between the respective parties to extend the long-stop date for the fulfillment of the above conditions from 30 October, 2006 to 15 November, 2006. Apart from the said amendment, all the terms of the Management Rights Transfer Agreement remain unchanged.

Consideration

Pursuant to the Management Rights Transfer Agreement, Mr. Ma conditionally agreed to transfer the Management Rights to the Company for a consideration of HK$60,000,000 and, in addition, the Company conditionally agreed to pay to Mr. Ma a sum of HK$20,000,000 being an introduction fee. The aggregate consideration of HK$80,000,000 will be satisfied by the issue and allotment by the Company of the 200,000,000 Consideration Shares to Mr. Ma at an issue price of HK$0.40 per Share upon completion of the Acquisition.

The Directors consider that the aggregate consideration of HK$80,000,000 was arrived at after arm’s length negotiations between Mr. Ma and the Company on normal commercial terms and is fair and reasonable to the shareholders of the Company. The Directors are of the view that the transfer of the Management Rights form part and parcel of the entire equity transfer of the Target Company, accordingly they are unable to value the consideration for each of the transfer of the Management Rights and the introduction fee separately from the equity transfer of the Target Company.

– 10 –

LETTER FROM THE BOARD

The issue price of HK$0.40 for each Consideration Share represents (i) a premium of approximately 5.26% to the closing price of HK$0.38 per share as quoted on the Stock Exchange on 29 September, 2006, being the latest trading day on the Stock Exchange prior to the suspension in the trading of the Shares pending the issue of the Announcement, (ii) a premium of approximately 8.11% to the average closing price of HK$0.37 for the last 5 trading days up to and including 29 September, 2006, (iii) a premium of approximately 11.11% to the average closing price of HK$0.36 for the last 10 trading days up to and including 29 September, 2006; and (iv) a premium of approximately 5.26% to the closing price of HK$0.38 as at the Latest Practicable Date.

The Consideration Shares, when issued and allotted upon completion of the Acquisition, will rank pari passu in all respects with each other and with the existing issued Shares. At completion, the Consideration Shares will represent approximately 6.11% of the existing issued share capital of the Company and (assuming no additional Shares are issued in the interim period) approximately 5.76% of the issued share capital of the Company as enlarged by the issue and allotment of the Consideration Shares. The Board has no present intention to appoint Mr. Ma as a director of the Company upon completion of the issue and allotment of the Consideration Shares.

Details of the shareholding structure of the Company before and after the Acquisition are set out as below:

Name of shareholders Super Win Development Limited (“Super Win”) Mr. Ma Public Total	Number of Shares held before the Acquisition 1,050,798,538 – 2,222,561,408 3,273,359,946	Approximate percentage of the Company’s issued share capital 32.10% – 67.90% 100%	Number of Shares held after the Acquisition 1,050,798,538 200,000,000 2,222,561,408 3,473,359,946	Approximate percentage of the Company’s issued share capital 30.25% 5.76% 63.99%
				100%

Note: Super Win is a wholly-owned subsidiary of Asian Allied Limited. Asian Allied Limited is 42.75% owned by Mr. Mo Shikang (Managing Director), 22.39% owned by Mr. Zhu Peifeng (Deputy Chairman and Executive Director), 22.39% owned by Mr. Zhang Hesheng (Deputy Chairman and Executive Director) and 12.47% owned by Mr. Yuan Yakang (who is not a Director and does not have any management role in the Group).

The Consideration Shares will be issued and allotted pursuant to the General Mandate. An application has been made to the Stock Exchange for the listing of and permission to deal in the Consideration Shares.

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LETTER FROM THE BOARD

VI. INFORMATION ON THE TARGET COMPANY

The Target Company was established in the PRC in 1999 as a limited liability company, with a registered capital of RMB41,330,000 (approximately HK$40,719,212), and is principally engaged in the manufacture of natural gas related equipment; consultation of natural gas related technology; construction and maintenance of gas pipeline, property development, agricultural, industrial, and logistics investments and sales and distribution of construction materials. The Target Company supplies liquefied petroleum gas (“LPG”) to the residential users and liquefield natural gas (“LNG”) to industrial users, in the Fujian province, the PRC.

The audited net loss before/after taxation and extraordinary items of the Target Company for the two years ended 31 December, 2004 and 31 December, 2005 prepared in accordance with the accounting principles generally accepted in the PRC, are as follows:

	Year ended
	31.12.2004	31.12.2005
Net loss before taxation and	RMB8,966,893	RMB12,705,962
extraordinary items	(approximately	(approximately
	HK$8,834,377)	HK$12,518,189)
Net loss after taxation and	RMB9,097,656	RMB12,716,042
extraordinary items	(approximately	(approximately
	HK$8,963,208)	HK$12,528,120)

The audited total assets, total liabilities and net asset value of the Target Company as at 31 December, 2005 was RMB186,226,808, RMB162,228,134 and RMB23,998,674 respectively (approximately HK$183,474,688, HK$159,830,674 and HK$23,644,014 respectively).

VII. REASONS FOR THE ACQUISITION

The principal activities of the Group include the distribution and supplies of piped natural gas and the installation of natural gas pipes, and cooperative investigation and exploitation of petroleum and natural gas. The Directors envisage that there is a vast market for natural gas in the PRC and natural gas will become one of the best energy sources in light of its ability to reduce environmental pollution and serve as a supplement to petroleum supplies.

As the Target Company has been operating in the natural gas industry in the Fujian province, the Acquisition provides an invaluable opportunity for the Group to participate in the LNG business and to facilitate the Group’s development of its natural gas business in the south-east coastal areas of the PRC.

Fujian province, located on the Southeastern coast of China, has a population of approximately 35 million. Fujian province is one of the most developed provinces in the PRC having a gross domestic product in 2005 of approximately RMB655 billion

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LETTER FROM THE BOARD

(approximately HK$ 645.3 billion) with an increase of 11.3% compared with the previous year. As disclosed above, the Target Company supplies LPG to residential users, and LNG to industrial users, in the Fujian province in the PRC. As LNG is safe, clean, highly-efficient, and cheap to use, the Directors believe that LNG will gradually replace LPG as one of the main energy sources for the residential, industrial and commercial users in the Fujian Province. The Directors are of the view that driven by the continuous economic growth of the Fujian province, the number of residential LNG users and commercial LNG users in the Fujian province will continue to grow and the Acquisition is likely to contribute considerable return to the shareholders of the Company and cashflow to the Group.

As any investment in the Target Company would be subject to the Management Rights, it is necessary for the Group to also enter into the Management Rights Transfer Agreement in order to obtain full benefit of the Acquisition. Given the Group’s experience in the operations of the natural gas business in the PRC, the Directors are of the view that the business of the Target Company would provide synergy to the Group’s existing natural gas business and thereby further enhance the potential of the Group’s natural gas business in the PRC.

Based on the above reasons for the Acquisition, the Directors (including the independent non-executive Directors) are of the view that the Tian An Agreement, the Lian Dong Agreement and the Management Rights Transfer Agreement are on normal commercial terms which are reasonable and fair and in the interests of the shareholders of the Company as a whole.

VIII. FINANCIAL EFFECT

Upon completion of the Acquisition, the financial results of the Target Company will be consolidated into the Group’s financial statements. The consideration for the Acquisition represents a premium of approximately RMB80,321,326 (approximately HK$79,134,311) as at 31 December, 2005 (determined on the audited financial statements of the Target Company prepared in accordance with the accounting principles generally accepted in the PRC) to the audited net asset value of the Target Company as at 31 December, 2005 of RMB23,998,674 (approximately HK$23,644,014). Such premium upon confirmation with the valuer in the preparation of the Group’s consolidated financial statements will be recognised as goodwill and will be tested for impairment annually. The Directors have confirmed with SHINEWING that such treatment is consistent with the Group’s accounting policies. The Group’s fixed assets, current assets, current liabilities and long term liabilities will increase as a result of the consolidation of financial statements of the Target Company. The Group’s cash will decrease in portion to the amount of the cash consideration funded from internal resources, and the shareholders’ equity will increase by the amount of the Consideration Shares issued for the Acquisition. The Directors expect there will be a positive impact on the profit attributable to shareholders of the Company in the long term. The Directors confirm that in view of the existing financial and operation conditions of the Company and taking into account payments of the cash consideration mentioned above for the Acquisition, the Group will have sufficient working capital for the operation of its business after making such payments.

– 13 –

LETTER FROM THE BOARD

IX. LISTING RULES IMPLICATIONS

Under the Listing Rules, the Acquisition constitutes a discloseable transaction for the Company.

X. ADDITIONAL INFORMATION

Your attention is also drawn to the additional information set out in the appendices to this circular including the letters from the Valuer and the Directors.

Yours faithfully For and on behalf of the Board Mo Shikang Managing and Executive Director

– 14 –

PROFIT FORECAST

APPENDIX I

Set out below are texts of the letter, prepared for inclusion in this circular, received by the Stock Exchange from the Board and received by the Directors from the Company’s reporting accountants, SHINEWING in connection with the valuation of the business of the Target Company as at 31 December, 2005 using a methodology which is deemed to be a profit forecast under Rule 14.62 (1) of the Listing Rules.

(i) Letter from the Board

The Stock Exchange of Hong Kong Limited 11th Floor One International Finance Centre 1 Harbour View Street Hong Kong

15 November, 2006

Dear Sir/Madam,

Profit Forecast of the Target Company

We, the undersigned, being the directors of the Company, hereby confirm that, in compliance with the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited, have reviewed the calculations for forecast in the valuation report issued by BMI Appraisals Limited (the “Valuer”) regarding the fair value of the Target Company as at 30 September, 2006 (the “Valuation Report”) for which the Valuer is solely responsible for, which details are set out on pages 17 to 24 of the circular of the Company dated 15 November, 2006 (the “Circular”).

We hereby confirm that the forecast made pursuant to the Valuation Report as set out in the Circular is made after due and careful enquiry.

Yours faithfully, Board of directors of

Chinese People Gas Holdings Company Limited Xu Ruixin Liu Jing Mo Shikang Zhu Peifeng Zhang Hesheng Jin Song Yan Wing Cheung Liu Junmin Tan Qinglian Chan Chuk Cheung, Ivan

– 15 –

PROFIT FORECAST

APPENDIX I

(ii) Letter from SHINEWING

==> picture [109 x 62] intentionally omitted <==

15 November, 2006

Board of Directors Chinese People Gas Holdings Company Limited Unit 2113, 21st Floor China Merchants Tower Shun Tak Centre 168-200 Connaught Road Central Hong Kong

Dears Sirs,

We have reviewed the accounting policies and calculations for the forecast (the “Profit Forecast”) contained in the valuation report regarding the valuation on Fujian Province An Ran Gas Investment Ltd (the “Target Company”) in connection with the proposed acquisition of the entire equity interests in the Target Company by Chinese People Gas Holdings Company Limited (the “Company”) for which BMI Appraisals Limited (the “Valuer”) as the valuer is solely responsible, which details are set out on pages 17 to 24 of the circular (the “Circular”) of the Company dated 15 November, 2006.

The Directors of the Company and the Target Company are solely responsible for the Profit Forecast. As the forecast and relevant assumptions relate to the future, we express no opinion on how close such forecast would respond to the actual future profit achieved.

In our opinion, so far as the aforesaid accounting policies and calculations are concerned, the Profit Forecast has been properly compiled in accordance with the assumptions made by the Valuer as set out in Appendix II to the Circular and is presented on a basis consistent in all material respects with the accounting policies currently adopted by the Company.

Yours faithfully,

SHINEWING (HK) CPA Limited Certified Public Accountants IP Yu Chak

Practising Certificate Number P04798

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VALUATION REPORT

APPENDIX II

The following is the text of a letter prepared for the purpose of incorporation in this circular received from BMI Appraisals Limited, an independent valuer, in connection with its valuation as at 30 September, 2006 of the 100 per cent equity interest in “ ” (Fujian Province An Ran Gas Investment Co. Ltd*).

==> picture [225 x 79] intentionally omitted <==

15 November, 2006

Chinese People Gas Holdings Company Limited

Unit 2113, 21st Floor China Merchants Tower Shun Tak Centre 168-200 Connaught Road Centre Hong Kong

Dear Sirs,

INSTRUCTIONS

We refer to the instructions from Chinese People Gas Holdings Company Limited (referred to as the “Company”) for us to provide our opinion on the market value of the 100 per cent equity interest in “ ” (Fujian Province An Ran Gas Investment Co. Ltd*) (referred to as “An Ran”) in Fujian Province, the People’s Republic of China (referred to as the “PRC”) as at 30 September, 2006 (the “date of valuation”).

This report describes the background of “An Ran”, the basis of valuation & assumptions, explains the valuation methodology utilized and presents our conclusion of value.

PURPOSE OF VALUATION

We understand that the purpose of our valuation is to express an independent opinion on the market value of the 100 per cent equity interest in “An Ran” as at 30 September, 2006 for your acquisition reference purposes only.

BASIS OF VALUATION

Our valuation was carried out on the basis of market value. Market value is defined as “the estimated amount for which an asset should exchange on the date of valuation between a willing buyer and a willing seller in an arm’s length transaction after proper marketing wherein the parties had each acted knowledgeably, prudently and without compulsion”.

– 17 –

VALUATION REPORT

APPENDIX II

BACKGROUND OF “AN RAN”

“An Ran” was founded in August 1999. It focuses on investment of pipeline fuel gas operation and a supplier of the high efficient energy in Fujian Province.

“An Ran” provides local pipeline fuel gas services in 21 cities in Fujian Province, including (Fuzhou City Jinshan District), (Ma Wei District), (Changle City), (Minqing County), (Luoyuan County), (Lianjiang County), (Xiamen Jimei District), (Quanzhou City), (Jinjiang City), (Dehua County), (Zhangzhou City), (Longhai City), (Zhangpu County), (Nanjing County), (Longyan City), (Nanping City), (Yong’an City), (Shaxian County), (Jiangle County), (Ningde City) and (Fuding City*).

The principal businesses of “An Ran” include: building pipelines of natural gas, exploring natural gas resources, usage and technical services, technical consultancy and maintenance. It also sells gas-related equipment and facilities, construction materials, electronic products and equipment leasing.

Currently, “An Ran” mainly engages in selling pipeline gas, liquefied natural gas, liquefied gas in cylinders and gas-related products. It also undertakes designs and construction of gas pipelines as well as property leasing.

BRIEF OVERVIEW OF FUJIAN PROVINCE

Geographical Location and Economy

Fujian Province, with its capital Fuzhou, is on China’s southeastern coast. It faces the island province of Taiwan across Taiwan Strait to the east. Neighboring provinces are Zhejiang to the north, Jiangxi to the west, and Guangdong to the south.

Fujian is one of the wealthier provinces of China. Xiamen was one of the first cities in China to be classified as a special economic zone. Because of the closeness both geographically and culturally with Taiwan, Fujian receives much investment from there. In 2005, Fujian’s nominal GDP was 648.7 billion yuan (US$81 billion), a rise of 11% from the previous year.

Fujian has formed a complete industrial system, with the petrochemical, electronics, machinery, construction, building material, forestry, fishery and aquiculture, and light and textile sectors as its pillar industries.

Population

Fujian occupies an area of around 120,000 square kilometers (about 46,335 square miles). Its permanent resident population is about 35.3 million as at 31 December, 2005.

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VALUATION REPORT

APPENDIX II

SOURCE OF INFORMATION

For the purpose of our valuation, we were furnished with the financial and operational data related of “An Ran”, which was given by the management of the Company.

The valuation of 100 per cent equity interest in “An Ran” required consideration of all pertinent factors affecting the economic benefits of “An Ran” and its abilities to generate future investment returns. The factors considered in the valuation included, but were not limited to the following:

• The business nature of “An Ran”;

• The financial information of “An Ran”;

• The specific economic environment and competition for the market in which “An Ran” operates;

• Market-derived investment returns of entities engaged in similar lines of business; and

• The financial and business risks of “An Ran”, including the continuity of income and the projected future results.

The financial information of “An Ran” provided by the management of the Company includes the audited financial statements of the headquarters of “An Ran” from 2002 to 2005 and the unaudited financial statements of five of its branches for 2005. The audited financial statements have been prepared under the PRC accounting standards. As we relied considerably on both the audited and the unaudited financial statements in our valuation, any future revision of the unaudited financial statements will probably affect the result of our valuation. In other words, our concluded valuation result is subject to any change in the unaudited financial statements.

SCOPE OF WORKS

In the course of our valuation work for “An Ran”, we have conducted the following steps to evaluate the reasonableness of the adopted bases and assumptions provided by the Company:

• A site visit was carried out in May 2006;

• Interviewed with the management of the Company;

• Obtained all relevant operational and financial information of “An Ran”;

• Performed market research and obtained statistical figures from public sources;

– 19 –

VALUATION REPORT

APPENDIX II

• Examined all relevant bases and assumptions of both the financial and operational information of “An Ran”, which were provided by the management of the Company;

• Prepared a business financial model to derive the indicated value of “An Ran”; and

• Presented all relevant information on the background of “An Ran”, valuation methodology, source of information, scope of works, major assumptions, comments and our conclusion of value in this report.

VALUATION ASSUMPTIONS

Given the changing environment in which “An Ran” is exposed to, a number of assumptions have to be established in order to sufficiently support our concluded opinion of value of “An Ran”. The major assumptions adopted in our valuation are:

• There will be no major changes in the existing political, legal, and economic conditions in the jurisdiction where “An Ran” operates;

• There will be no major changes in the current taxation law in the jurisdiction where “An Ran” operates, that the rates of tax payable remain unchanged and that all applicable laws and regulations will be complied with;

• The financial information in respect of “An Ran” has been prepared on a reasonable basis, reflecting estimates that have been arrived at after due and careful considerations by the management of the Company;

• Exchange rates and interest rates will not differ materially from those presently prevailing; and

• Economic conditions will not deviate significantly from economic forecasts.

VALUATION METHODOLOGY

Three generally accepted valuation methodologies have been considered in valuing the 100 per cent equity interest in “An Ran”. They are the market approach, the cost approach and the income approach.

The Market approach provides indications of value by comparing the subject to similar assets that have been sold in the market.

The Cost approach provides indications of value by studying the amounts required to recreate the assets for which a value conclusion is desired. This approach seeks to measure the economic benefits of ownership by quantifying the amount of fund that would be required to replace the future service capability of the business.

– 20 –

VALUATION REPORT

APPENDIX II

The Income approach is the conversion of expected periodic benefits of ownership into an indication of value. It is based on the principle that an informed buyer would pay no more for the project than an amount equal to the present worth of anticipated future benefits from the same or a substantially similar assets with a similar risk profile.

We considered that the market approach was not appropriate to value “An Ran”, as there are insufficient comparable transactions in the market. The Cost Approach was also regarded not adequate in this valuation, as this approach does not take future growth potential of “An Ran” into consideration. Thus, we determined that the income approach was the most appropriate valuation approach for this valuation.

In the valuation, we applied the income approach also known as the discounted cash flow (referred to as “DCF”) method. We determined the market value by applying a discount rate (i.e. the cost of capital) in the DCF model to determine the net present value of “An Ran”’s future expected cash flows. The expected cash flows were determined from the net profits after tax plus non-cash expenses such as depreciation and amortization expenses, and after-tax interest expenses and less non-cash incomes, capital expenditures and changes in working capital.

The discount rate takes into account two different types of risks −systematic and non-systematic risks. Risks that are correlated with the return from the stock market are referred to as systematic risks. Other risks that are company-specific are referred to as non-systematic risks. We determined the rate of return for systematic risks based on the Capital Asset Pricing Model (“CAPM”). The CAPM states that an investor requires excess returns to compensate systematic risks without excess return for non-systematic risks.

Under the CAPM, the appropriate rate of return is the sum of the risk-free rate and a related beta times the market risk premium. We adopted the yield rate of the 10-year Hong Kong Exchange Fund Note as at the date of valuation as the risk-free rate, which was 3.92%. Besides, the market risk premium we adopted in the DCF model was 7.22%. The beta was determined as the weighted-average of betas of publicly listed comparable companies that are in the same industry. In working out the weighted-average beta, we took into consideration the difference in market capitalization of each selected company. The estimated beta for the Company is 0.94. The five selected companies are shown in Table 1.

Table 1: The five selected companies for estimating the Company’s beta

Stock code	Name of Company
600333	Changchun Gas Co LTD
600635	Shanghai Dazhong Public Utilities Group Co LTD
1083	Panva Gas Holdings LTD
8099	Zhengzhou Gas Company LTD - H shares
2688	Xinao Gas Holdings LTD

– 21 –

APPENDIX II

VALUATION REPORT

In respect of non-systematic risks, we considered the size difference (a company-specific risk) between the Company and the selected comparable companies (with reference to “Risk Premia over Time Report: 2006”, published by Ibbotson Associates), and determined that a size premium of 3.95% was adopted. As a result, the discount rate was calculated as 14.65%.

One of the parameters playing a crucial role in the valuation is the penetration rate. The penetration rate indicates how many existing energy users (by percentage) in Fujian Province change its existing fuel source (other than natural gas) to natural gas. The penetration rate significantly affects the turnover of the Company between 2006 and 2010. We determined that an ultimate penetration rate of 75% was appropriate for the valuation.

The determination of the 75% was based on the 2005 annual report of Xinao Gas Holdings Limited (referred to as “Xinao Gas”) that the penetration rate in the covered areas (more than 40 cities) in China can reach 70% to 80%. More than half of the cities served by Xinao Gas are mainly located in the provinces in the eastern China (the same region as the cities covered by “An Ran”), including Zhejiang Province, Anhui Province, Guangdong Province and Jiangsu Province. Xinao Gas even covers a city (Quanzhou) in Fujian. As both Xinao Gas and “An Ran” basically serve the same region (i.e. the eastern China), we considered a penetration rate of 75% would be appropriate and no adjustment is needed.

Based on a penetration rate of 75%, the expected annual increased rates of turnover between 2006 and 2010 and between 2011 and 2031 are 68.51% and 4.04 % respectively. The relatively large annual increased rate of 68.51% is mainly attributed to an estimated substantial change in fuel source (i.e. from diesel oil, coal, liquefied petroleum gas, etc to natural gas) by the existing energy users (including residential users commercial users and industrial users) in Fujian Province.

The concept of marketability deals with the liquidity of an ownership interest, that is, how quickly and easily it can be converted to cash if the owner chooses to sell. The lack of marketability discount reflects the fact that there is no ready market for shares in a closely held company. Ownership interests in closely held companies are typically not readily marketable compared to similar interests in publicly listed companies. Therefore, a share of stock in a privately held company is usually worth less than an otherwise comparable share in a publicly listed company. In the valuation, 30% was used as the discount for lack of marketability.

VALUATION COMMENTS

For the purpose of this valuation and in arriving at our opinion of value, we have referred to the information provided by the management of the Company to estimate the value of “An Ran”. We have also sought and received confirmation from the Company that no material facts have been omitted from the information supplied.

To the best of our knowledge, all data set forth in this report are true and accurate. Although gathered from reliable sources, no guarantee is made nor liability assumed for the accuracy of any data, opinions, or estimates identified as being furnished by others, which have been used in formulating this analysis.

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VALUATION REPORT

APPENDIX II

REMARKS

Neither the whole nor any part of this report nor any reference thereto may be included in any document, circular or statement without our written approval of the form and context in which it will appear.

Finally and in accordance with our standard practice, we must state that this report is for the exclusive use of the addressee and for the purpose stated herein. No responsibility is accepted to any third party for the whole or any part of its contents.

Unless otherwise stated, all money amounts stated are in Renminbi (RMB).

CONCLUSION OF VALUE

Our conclusion of value is based on accepted valuation procedures and practices that rely substantially on the use of numerous assumptions and the consideration of a lot of uncertainties, not all of which can be easily ascertained or quantified.

Further, whilst the assumptions and consideration of such matters are considered by us to be reasonable, they are inherently subject to significant business, economic and competitive uncertainties and contingencies, many of which are beyond the control of the Company or us.

Based on our investigation and analysis outlined in this report, it is of our opinion that the market value of the 100 per cent equity interest in “An Ran” as at 30 September, 2006 was RMB234,000,000 (Renminbi Two Hundred and Thirty-four Million Only) .

We hereby certify that we have neither present nor prospective interest in the Company, “An Ran” or the value reported.

This report is subject to the limiting conditions attached.

Yours faithfully For and on behalf of

BMI APPRAISALS LIMITED

Marco T.C. Sze Lowell W.W. Lo

B. Eng(Hon) MBA(Acct) BBA(Hons) MSc(NJIT) CPA AICPA SIFM Senior Manager Director

Notes:

1. Mr. Marco Sze holds a Master’s Degree of Business Administration in Accountancy from the City University of New York −Baruch College and has passed all qualifying examinations of Chartered Financial Analyst. He has about 3 years’ experience in valuing businesses and intangible assets in Hong Kong, China and the Asia-Pacific Regions.

2. Mr. Lowell Lo is a practicing member of the Hong Kong Institute of Certified Public Accountants, a member of the American Institute of Certified Public Accountants. He has over 5 years of experience in valuing businesses and intangible assets in Hong Kong, Macao, China and various locations in the Asia-Pacific Region.

– 23 –

VALUATION REPORT

APPENDIX II

LIMITING CONDITIONS

1. As part of our analysis, we have reviewed financial and business information from public sources together with such financial information, project documentation and other pertinent data concerning the project as has been made available to us. We have assumed the accuracy of, and have relied on, such information. We have relied to a considerable extent on such information provided in arriving at our opinion of value.

2. BMI Appraisals Limited shall not be required to give testimony or attendance in court or to any government agency by reason of this valuation, with reference to the project described herein, unless prior arrangements have been made.

3. No opinion is intended to be expressed for matters which require legal or other specialized expertise or knowledge, beyond that customarily employed by valuers.

4. Our conclusions assume continuation of prudent management policies over whatever period of time is reasonable and necessary to maintain the character and integrity of the assets valued.

5. We assume that there are no hidden or unexpected conditions associated with the assets valued that might adversely affect the reported value. Further, we assume no responsibility for changes in market conditions which may require an adjustment in the valuation.

– 24 –

GENERAL INFORMATION

APPENDIX III

A. RESPONSIBILITY STATEMENT

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

B. DISCLOSURE OF INTERESTS

• (i) Save as disclosed below, as at the Latest Practicable Date, none of the Directors and chief executive of the Company had any interest or short position in the Shares, underlying Shares or debentures of the Company or any associated corporations (within the meaning of Part XV of the SFO) which will have to be notified to the Company and the Stock Exchange pursuant to the provisions under Divisions 7 and 8 of Part XV of the SFO (including the interests and short positions which he would be deemed or taken to have under Sections 344 and 345 of the SFO) or the Model Code for Securities Transactions by Directors of Listed Companies, or which will have to be, pursuant to Section 352 of the SFO, entered in the register referred to herein:

Long positions in the Shares

			Approximate
			percentage of
			the Company’s
		Number of	issued share
Name	Capacity	Shares	capital
Asian Allied Limited	Through a controlled	1,050,798,538	32.10%
(“Asian Allied”) (Note 1)	corporation
Super Win Development	Beneficial owner	1,050,798,538	32.10%
Limited (“Super Win”)
(Note 1)
Mr. Mo Shikang	Through controlled	1,050,798,538	32.10%
(Notes 1 and 2)	corporations

Notes:

1. Asian Allied is interested in the same block of 1,050,798,538 Shares registered under the name of Super Win, its wholly-owned subsidiary.

2. Mr. Mo Shikang is the beneficial owner of 42.75% of the issued share capital of Asian Allied. Pursuant to the provisions of Part XV of the SFO, Mr. Mo Shikang is deemed to be interested in the same block of 1,050,798,538 Shares in which Asian Allied has an attributable interest.

– 25 –

GENERAL INFORMATION

APPENDIX III

Long positions in the underlying Shares of the Company

		Number of		Exercise price
Name	Capacity	Options	Exercise period	Per share
				HK$
Liu Jing	Beneficial owner	26,000,000	12 October, 2005	0.365
			to 3 April, 2007
Zhu Peifeng	Beneficial owner	2,600,000	12 October, 2005	0.365
			to 3 April, 2007
Zhang Hesheng	Beneficial owner	2,600,000	12 October, 2005	0.365
			to 3 April, 2007
Mo Shikang	Beneficial owner	2,600,000	12 October, 2005	0.365
			to 3 April, 2007
Jin Song	Beneficial owner	26,000,000	12 October, 2005	0.365
			to 3 April, 2007
Yan Wing Cheung	Beneficial owner	26,000,000	17 May, 2006 to	0.400
			3 April, 2007

• (ii) Save as disclosed below and Section (B)(i) above, the Directors or chief executive of the Company are not aware of any other person who, as at the Latest Practicable Date, had an interest or short position in the Shares or the 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 will be interested, directly or indirectly, 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 other member of the Group:

Long positions in the Shares or underlying Shares

			Number of		Percentage
			underlying Shares		of the
			(under equity		Company’s
	Capacity and nature	Number of	derivatives of the	Aggregate	issued share
Name of shareholder	of interest	Shares held	Company)	interest	capital
Asian Allied	Through a controlled	1,050,798,538	–	1,050,798,538	32.10%
	corporation (Note 1)
Super Win	Directly beneficially	1,050,798,538	–	1,050,798,538	32.10%
	owned (Note 1)
Merrill Lynch & Co., Inc.	Through controlled	–	522,943,147	522,943,147	15.98%
(“Merrill Lynch”)	corporations (Note 2)
Indopark Holdings Ltd	Directly beneficially	–	522,943,147	522,943,147	15.98%
(“Indopark”)	owned (Note 2)

– 26 –

GENERAL INFORMATION

APPENDIX III

Notes:

1. Super Win holds 1,050,798,538 Shares of the Company. By virtue of Super Win being a wholly-owned subsidiary of Asian Allied, Asian Allied is deemed to be interested in the 1,050,798,538 Shares held by Super Win.

2. Indopark entered into a subscription agreement with the Company on 30 May 2006 to subscribe for US$40,000,000 convertible bonds (“Convertible Bonds”) from the Company. The Convertible Bonds were issued to Indopark on 15 June 2006 and can be converted into Shares of the Company from 15 December 2006. By virtue of Indopark being an indirect wholly-owned subsidiary of Merrill Lynch. Merrill Lynch is deemed to be interested in the 522,943,147 underlying Shares of the Company held by Indopark.

C. COMPETING INTEREST

None of the Directors or their respective associates has, as at the Latest Practicable Date, any interest in a business which competes or is likely to compete, either directly or indirectly, with the business of the Group.

D. SERVICE CONTRACTS

As at the Latest Practicable Date, none of the Directors or proposed Directors has entered into any existing or proposed service contracts with the Company or any other member of the Group save for those expiring or determinable by the relevant employer within one year without payment of compensation (other than statutory compensation).

E. MATERIAL LITIGATION

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

F. EXPERTS

• (a) The followings are the qualifications of the experts who have given opinions or advice which are contained in this circular.

Name	Qualification	Date
BMI Appraisals Limited	Professional surveyors	15 November, 2006
(the “Valuer”)	and valuers
SHINEWING (HK) CPA	Certified public	15 November, 2006
Limited (“SHINEWING”)	accountants

• (b) As at the Latest Practicable Date, none of the Valuer and SHINEWING had any shareholding directly or indirectly in any member of the Group or any right (whether legally enforceable or not) to subscribe for or to nominate persons to subscribe for any securities in any member of the Group.

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GENERAL INFORMATION

APPENDIX III

• (c) As at the Latest Practicable Date, none of the Valuer and SHINEWING had any direct or indirect interest in any assets which had been acquired or disposed of by, or leased to, or which were proposed to be acquired or disposed of by, or leased to, any member of the Group since 31 March, 2006, the date to which the latest published audited consolidated financial statements of the Group were made up.

• (d) Each of Valuer and SHINEWING has given and has not withdrawn their respective written consents to the issue of this circular with inclusion of their respective letters or reports (as the case may be) and references to their names in the form and context in which they respectively appear.

G. GENERAL

• (i) Mr. Yan Wing Cheung is the qualified accountant and the secretary of the Company. Mr. Yan is a qualified accountant, a fellow member of the Association of Chartered Certified Accountants and the Hong Kong Institute of Certified Public Accountants and an associate member of the Chartered Institute of Management Accountants.

• (ii) The Company’s registered office is at Canon’s Court, 22 Victoria Street, Hamilton HM12, Bermuda. The principal place of business of the Company in Hong Kong is at Unit 2113, 21st Floor, China Merchants Tower, Shun Tak Centre, 168-200 Connaught Road Central, Hong Kong. The branch share registrar and transfer office of the Company in Hong Kong is Tengis Limited at 26th Floor, Tesbury Centre, 28 Queen’s Road East, Hong Kong.

• (iii) The English text of this circular shall prevail over the Chinese text.

– 28 –