JY GAS LIMITED — Proxy Solicitation & Information Statement 2004

May 13, 2004

THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION

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

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

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

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(Incorporated in Bermuda with limited liability) (Stock code: 603)

PROPOSAL TO

REFRESH THE 10% GENERAL LIMIT ON GRANT OF OPTIONS

UNDER THE SHARE OPTION SCHEME

AND

PROPOSED AMENDMENTS TO THE BYE-LAWS

A notice of the Special General Meeting to be held at Garden Rooms, 2/F, The Royal Garden, 69 Mody Road, Tsimshatsui East, Kowloon, Hong Kong on Wednesday, 9 June 2004 at 9:00 a.m. is set out in this circular. A form of proxy for use by the Shareholders at the Special General Meeting is enclosed with this circular. Whether or not you intend to attend and vote at the Special General Meeting in person, you are requested to complete the form of proxy enclosed with this circular in accordance with the instructions printed thereon and return it to the branch share registrar and transfer office of the Company in Hong Kong, Computershare Hong Kong Investor Services Limited at Rooms 1712-1716, 17/F, Hopewell Centre, 183 Queen’s Road East, Hong Kong as soon as practicable but in any event, not less than 48 hours before the time appointed for holding the Special General Meeting or any adjourned meeting, otherwise such form of proxy will not be treated as valid. Such form of proxy for use at the Special General Meeting would also be published on the website of the Stock Exchange (www.hkex.com.hk). Completion and return of the form of proxy will not preclude you from attending and voting in person at the Special General Meeting or any adjourned meeting should you so wish.

13 May 2004

* For identification purposes only

CONTENT

	Page
Responsibility statement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	ii
Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	iii
Letter from the Board . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	1
Appendix – Explanatory statement for the amendments to the Bye-laws . . . . . . . . . . . . . . . . . .	5
Notice of Special General Meeting. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	6

– i –

RESPONSIBILITY STATEMENT

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

– ii –

DEFINITIONS

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

“associate” has the same meaning as ascribed to it under the Listing Rules “Board” the board of Directors “Bye-laws” the bye-laws of the Company “Company” China City Natural Gas Holdings Limited, a company incorporated in Bermuda with limited liability, and the securities of which are listed on the main board of the Stock Exchange “Director(s)” the director(s) of the Company “Group” the Company and its subsidiaries “HK$” Hong Kong dollars, the lawful currency of Hong Kong “Hong Kong” the Hong Kong Special Administrative Region of the People’s Republic of China “Latest Practicable Date” 10 May 2004, being the latest practicable date prior to the printing of this circular for the purpose of ascertaining certain information contained herein “Listing Rules” the Rules Governing the Listing of Securities on the Stock Exchange “Refreshment” the proposed refreshment of the 10% general limit on grant of options under the Share Option Scheme “Share(s)” the ordinary share(s) of HK$0.025 each in the share capital of the Company “Shareholder(s)” the holder(s) of the Share(s)

• “Share Option Scheme” the share option scheme adopted by the Company on 31 January 2002 “Special General Meeting” the special general meeting of the Company to be held at Garden Rooms, 2/F, The Royal Garden, 69 Mody Road, Tsimshatsui East, Kowloon, Hong Kong on Wednesday, 9 June 2004 at 9:00 a.m., to consider and, if thought fit, to approve the Refreshment and to amend the Bye-laws

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

• “1993 Scheme”

the share option scheme adopted by the Company on 11 May 1993 which was terminated on 31 January 2002

• “%” per cent.

– iii –

LETTER FROM THE BOARD

*

(Incorporated in Bermuda with limited liability)

Executive Directors: Mr WONG King Shiu, Daniel (Chairman) Mr WONG Kui Shing, Danny (Chief Executive Officer) Mr ZHOU Weirong Mr KAN Kwok Shu Mr LIN Che Chu, George

Non-executive Director: Mr SUZUKI Masanori

Independent Non-executive Directors: Mr CHEUNG Man Yau, Timothy Mr CHUK Che Shing

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

Head office and principal place of business in Hong Kong: 31/F Shui On Centre 6-8 Harbour Road Wanchai Hong Kong

13 May 2004

To the Shareholders

Dear Sir or Madam

PROPOSAL TO REFRESH THE 10% GENERAL LIMIT ON GRANT OF OPTIONS UNDER THE SHARE OPTION SCHEME AND PROPOSED AMENDMENTS TO THE BYE-LAWS

INTRODUCTION

The purpose of this circular is to provide you with information regarding the ordinary and special resolutions to be proposed at the Special General Meeting to enable you to make an informed decision on whether to vote for or against those resolutions.

At the Special General Meeting, resolutions will be proposed for the Company to approve the Refreshment and the amendments to the Bye-laws to align with the amended Listing Rules which became effective on 31 March 2004.

REFRESHMENT OF THE 10% GENERAL LIMIT ON GRANT OF OPTIONS UNDER THE SHARE OPTION SCHEME

The Company adopted the Share Option Scheme in compliance with the amendments to the Listing Rules in respect of the share option schemes of a listed company.

As at 31 January 2002, being the date on which the Share Option Scheme was adopted, the maximum number of Shares which may be issued upon exercise of all options to be granted under the Share Option Scheme was 466,378,562 Shares, being 10% of the Shares in issue on such date.

* For identification purposes only

– 1 –

LETTER FROM THE BOARD

The 10% general limit (“First Refreshed Limit”) under the Share Option Scheme was subsequently refreshed by the Shareholders at the special general meeting of the Company held on 14 August 2002. Under the First Refreshed Limit, the Company may grant options to eligible participants to subscribe for a maximum of 810,486,142 Shares, being 10% of the Shares in issue as at 14 August 2002.

As at the Latest Practicable Date, out of the total of 1,754,364,704 options granted under the Share Option Scheme and the 1993 Scheme (including exercised, outstanding, cancelled or lapsed), 941,340,000 options have been exercised, 466,000,000 options were outstanding, and 880,538,000 options have lapsed. None of the options were cancelled. Out of the lapsed options which became options available for grant under the Share Option Scheme, 533,513,296 options have been granted to eligible participants under the Share Option Scheme.

Unless the 10% general limit on grant of options under the Share Option Scheme is “refreshed”, only up to 1,664,704 Shares may be issued pursuant to the grant of further options under the Share Option Scheme.

The Refreshment will enable the Company to grant further options to eligible participants, being employees, executives or officers of the Group (including executive and non-executive directors of the Group) and any suppliers, consultants or advisers who will provide or have provided services to the Group as incentives or rewards for their contribution to the Group.

Proposal

It is therefore proposed that subject to (a) the approval of the Shareholders at the Special General Meeting; and (b) such other requirements prescribed under the Listing Rules, the general limit on grant of options under the Share Option Scheme will be refreshed to 10% of the Shares in issue as at the date of the approval by the Shareholders at the Special General Meeting and options previously granted under the Share Option Scheme and the 1993 Scheme (including those outstanding, cancelled, lapsed in accordance with such schemes or exercised options) will not be counted for the purpose of calculating the limit as refreshed.

Pursuant to the Listing Rules, the Shares which may be issued upon exercise of all outstanding options granted and yet to be exercised under the Share Option Scheme and any other share option scheme(s) of the Company at any time will not exceed 30% of the Shares in issue from time to time. No options shall be granted under any share option scheme(s) of the Company or any of its subsidiaries if this will result in the 30% limit being exceeded. The Shares which may fall to be issued upon exercise of all outstanding options granted and yet to be exercised under the Share Option Scheme represent approximately 4.9% of the total number of Shares in issue as at the Latest Practicable Date.

As at the Latest Practicable Date, there were 9,521,841,423 Shares in issue. Assuming that no further Shares will be issued prior to the date of approval of the refreshed general limit by the Shareholders, the maximum number of options that can be granted by the Company under the refreshed limit would be 952,184,142 Shares.

The 1993 Scheme was terminated on 31 January 2002 and no further options may be granted thereunder. All the options that have been granted under the 1993 Scheme have lapsed and are no longer exercisable.

– 2 –

LETTER FROM THE BOARD

Set out below are the particulars of the outstanding options granted to eligible participants under the Share Option Scheme as at the Latest Practicable Date:

Name/Category of grantee a Mr Wong King Shiu, Daniel, Director Mr Cheung Man Yau, Timothy, Director Employees of the Group Consultants of the Group Total	Percentage of Shares to be issued upon the exercise of the options granted in relation to the Number of issued share capital of share options the Company as at the granted that Latest Practicable Date re exercisable (approximate %) 46,600,000 0.49 4,600,000 0.05 54,800,000 0.58 360,000,000 3.78 466,000,000 4.90	Percentage of Shares to be issued upon the exercise of the options granted in relation to the Number of issued share capital of share options the Company as at the granted that Latest Practicable Date re exercisable (approximate %) 46,600,000 0.49 4,600,000 0.05 54,800,000 0.58 360,000,000 3.78 466,000,000 4.90
		4.90

Conditions

As required by the Share Option Scheme and the Listing Rules, an ordinary resolution will be proposed at the Special General Meeting to approve the “refreshed” general limit of the Share Option Scheme such that the total number of Shares which may be issued upon exercise of all options to be granted under the refreshed general limit will be increased subject to 10% of the total number of Shares in issue as at the date of approval of the refreshed general limit.

The adoption of the refreshed general limit of the Share Option Scheme is conditional upon:

• (a) the Shareholders passing an ordinary resolution to approve the refreshment of the 10% general limit on grant of options under the Share Option Scheme at the Special General Meeting; and

• (b) the Stock Exchange granting the approval of the listing of, and permission to deal in, the Shares to be issued pursuant to the exercise of any options to be granted under the refreshed general limit of the Share Option Scheme.

Application for Listing

Application will be made to the Listing Committee of the Stock Exchange for the listing of, and permission to deal in, the Shares which may fall to be issued upon the exercise of any options that may be granted under the Refreshment.

AMENDMENTS TO THE BYE-LAWS

The Stock Exchange has revised the Listing Rules and the amended Listing Rules became effective on 31 March 2004. The Board therefore proposes to make certain amendments to the Bye-laws in compliance with the amended Listing Rules.

It is proposed that a new definition of “associate” will be added to bring the Bye-laws up to date with the Listing Rules.

– 3 –

LETTER FROM THE BOARD

The corporate governance issues including, amongst other things, disclosure of information on proposed director(s) before election at general meeting and notices to be given in relation thereto, and voting of shareholders at general meeting and of directors at board meeting on any matter in which the director(s) and/or his/her/their associate(s) have a material interest as required under Appendix 3 to the Listing Rules will also be incorporated in the proposed amendments to the Bye-laws.

A summary of the proposed amendments to the Bye-laws is set out in the Appendix of this circular and the full text of the proposed amendments to the Bye-laws is set out in the notice of the Special General Meeting in this circular.

SPECIAL GENERAL MEETING AND PROXY ARRANGEMENT

A notice of the Special General Meeting is set out in this circular. At the Special General Meeting, resolutions will be proposed to approve the Refreshment and the amendments to the Bye-laws.

A form of proxy for use by the Shareholders at the Special General Meeting is also enclosed with this circular. Whether or not you intend to attend and vote at the Special General Meeting in person, you are requested to complete the form of proxy in accordance with the instructions printed thereon and return it to the branch share registrar and transfer office of the Company in Hong Kong, Computershare Hong Kong Investor Services Limited at Rooms 1712-1716, 17/F, Hopewell Centre, 183 Queen’s Road East, Hong Kong, as soon as practicable but in any event, not less than 48 hours before the time appointed for holding the Special General Meeting or any adjourned meeting, otherwise such form of proxy will not be treated as valid. Such form of proxy for use at the Special General Meeting is also published on the website of the Stock Exchange (www.hkex.com.hk). Completion and return of the form of proxy will not preclude you from attending and voting in person at the Special General Meeting or any adjourned meeting should you so wish.

Pursuant to Bye-law 66 of the Bye-laws, a poll may be demanded by:

• (a) the chairman of such meeting; or

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

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

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

RECOMMENDATION

The Directors consider that the proposed Refreshment and the proposed amendments to the Byelaws are in the best interests of the Company and the Shareholders as a whole and, accordingly, the Directors recommend all Shareholders to vote in favour of the relevant resolutions to be proposed at the Special General Meeting in respect thereof.

Yours faithfully For and on behalf of

China City Natural Gas Holdings Limited Wong King Shiu, Daniel Chairman

– 4 –

APPENDIX EXPLANATORY STATEMENT FOR THE AMENDMENTS TO THE BYE-LAWS

This appendix summarises the proposed amendments to the Bye-laws to incorporate the changes that are required under the revised Listing Rules which became effective on 31 March 2004.

Bye-law 1 – Interpretation

New definition of “associate” will be added to bring the Bye-laws up to date with the Listing Rules.

Bye-law 3(1) – Amendment of the par value of the shares in the Company

Bye-law 3(1) will be amended to reflect the existing par value of the Shares resulting from the share subdivision referred to in the joint announcement of the Company under its former name “Hikari Tsushin International Limited” and Hikari Tsushin, Inc. dated 3 April 2000. The subdivision was approved by Shareholders at the special general meeting of the Company held on 14 February 2000 and took effect on 10 April 2000.

Bye-law 76 – Voting restrictions under Listing Rules

Bye-law 76(2) will be added pursuant to the Listing Rules so that where any Shareholder is subject to voting restrictions under the Listing Rules, any votes cast by or on behalf of such Shareholder in contravention of such restriction shall not be counted.

Bye-law 88 – Appointment of Directors

Bye-law 88 will be amended to specify the lodgment period of the nomination of Directors by the Shareholders, which will commence no earlier than the day after the despatch of the notice of the meeting appointed for such election and end no later than 7 days prior to the date of such general meeting.

Bye-law 103 – Director’s interests

Bye-law 103 will be amended to provide that the Director/Directors shall not vote for transactions in which he/she/they or his/her/their associate(s) has/have a material interest. The new interpretation of “associate” under the Listing Rules will also be adopted. Bye-law 103 will also be amended to provide that a Director’s vote shall not be counted in the quorum present at a meeting at which any contract or arrangement in which he/she or his/her associate(s) is materially interested is considered and to provide resolutions when questions relating to material interest of a Director or his/her associate(s) arise.

Bye-laws 153A and 153B – Summary financial report

Bye-law 153A will be added to take advantage of the amendments to the Listing Rules to permit the Shareholders to choose to receive summary financial report (“Summary Financial Report”) which is derived from and summarises the annual report and accounts of the Company in place of a full annual report and accounts of the Company. The Company wishes to be more environmental friendly in conducting its business and also to take advantage of the potential cost savings resulting from the amendments of the Listing Rules for the benefit of the Shareholders and hence the Company wishes to add Bye-law 153B to increase flexibility by allowing the Company to offer the choice to Shareholders of receiving the Summary Financial Report by electronic means in due course.

– 5 –

NOTICE OF SPECIAL GENERAL MEETING

*

(Incorporated in Bermuda with limited liability)

NOTICE IS HEREBY GIVEN that a special general meeting of the shareholders of China City Natural Gas Holdings Limited (“ Company ”) will be held at Garden Rooms, 2/F, The Royal Garden, 69 Mody Road, Tsimshatsui East, Kowloon, Hong Kong on Wednesday, 9 June 2004 at 9:00 a.m. for the following purposes:

ORDINARY RESOLUTION

To consider and, if thought fit, pass with or without amendments, the following resolution as an ordinary resolution of the Company:

1. “ THAT subject to and conditional upon the Listing Committee of The Stock Exchange of Hong Kong Limited granting the listing of, and permission to deal in, the shares of HK$0.025 each (“ Shares ”) in the share capital of the Company to be issued pursuant to the exercise of options which may be granted under the New Scheme Limit (as defined below), the refreshment of the scheme limit of the Company’s share option scheme adopted on 31 January 2002, up to 10 per cent. of the number of Shares in issue as at the date of passing this resolution (“ New Scheme Limit ”) be and is hereby approved and any director of the Company be and is hereby authorised to do such act and execute such document to effect the New Scheme Limit.”

SPECIAL RESOLUTION

To consider and, if thought fit, pass the following resolution as a special resolution of the Company:

1. “ THAT the bye-laws of the Company (“ Bye-laws ”) be and are hereby amended by:

2. (a) inserting the following new definition of “associate” immediately after the definition of “Act” in Bye-law 1:

   • ““associate” the meaning attributed to it in the rules of the Designated Stock Exchange.”;

3. (b) deleting the existing Bye-law 3(1) in its entirety and replacing therewith the following new Bye-law 3(1):

   • “3. (1) Unless otherwise determined by the Company in general meeting, the share capital of the Company shall be divided into shares of a par value of $0.025 each.”;

4. (c) re-numbering existing Bye-law 76 as Bye-law 76(1);

5. (d) inserting the following as new Bye-law 76(2):

   • “(2) Where the Company has knowledge that any Member is, under the rules of the Designated Stock Exchange, required to abstain from voting on any particular resolution of the Company or restricted to voting only for or only against any particular resolution of the Company, any votes cast by or on behalf of such Member in contravention of such requirement or restriction shall not be counted.”;

* For identification purposes only

– 6 –

NOTICE OF SPECIAL GENERAL MEETING

• (e) deleting the existing Bye-law 88 in its entirety and replacing therewith the following new Bye-law 88:

• “88. No person other than a Director retiring at the meeting shall, unless recommended by the Directors for election, be eligible for election as a Director at any general meeting unless a notice signed by a Member (other than the person to be proposed) duly qualified to attend and vote at the meeting for which such notice is given of his intention to propose such person for election and also a notice signed by the person to be proposed of his willingness to be elected shall have been lodged at the head office or at the Registration Office provided that the minimum length of the period, during which such notice(s) is/are given, shall be at least seven (7) days and that the period for lodgment of such notice(s) shall commence on the day after the dispatch of the notice of the general meeting appointed for such election and end no later than seven (7) days prior to the date of such general meeting.”;

• (f) deleting the existing Bye-law 103 in its entirety and replacing therewith the following new Bye-law 103:

• “103.(1) A Director shall not vote (nor be counted in the quorum) on any resolution of the Board approving any contract or arrangement or any other proposal in which he or any of his associate(s) is materially interested, but this prohibition shall not apply to any of the following matters namely:

  • (i) any contract or arrangement for the giving to such Director or his associate(s) any security or indemnity in respect of money lent by him or any of his associate(s) or obligations incurred or undertaken by him or any of his associate(s) at the request of or for the benefit of the Company or any of its subsidiaries;

  • (ii) any contract or arrangement for the giving of any security or indemnity to a third party in respect of a debt or obligation of the Company or any of its subsidiaries for which the Director or his associate(s) has himself/themselves assumed responsibility in whole or in part whether alone or jointly under a guarantee or indemnity or by the giving of security;

  • (iii) any contract or arrangement concerning an offer of shares or debentures or other securities of or by the Company or any other company which the Company may promote or be interested in for subscription or purchase, where the Director or his associate(s) is/are or is/are to be interested as a participant in the underwriting or sub-underwriting of the offer;

  • (iv) any contract or arrangement in which the Director or his associate(s) is/are interested in the same manner as other holders of shares or debentures or other securities of the Company by virtue only of his/their interest in shares or debentures or other securities of the Company;

  • (v) any contract or arrangement concerning any other company in which the Director or his associate(s) is/are interested only, whether directly or indirectly, as an officer or executive or a shareholder or in which the Director and any of his associate(s) are not in aggregate beneficially interested in five (5) per cent. or more of the issued shares or of the voting rights of any class of shares of such company (or of any third company through which his interest or that of any of his associate(s) is derived); or

– 7 –

NOTICE OF SPECIAL GENERAL MEETING

     - (vi) any proposal or arrangement concerning the adoption, modification or operation of a share option scheme, a pension fund or retirement, death or disability benefits scheme or other arrangement which relates both to directors, his associate(s) and employees of the Company or of any of its subsidiaries and does not provide in respect of any Director, or his associate(s), as such any privilege or advantage not accorded generally to the class of persons to which such scheme or fund relates.

  - (2) A company shall be deemed to be a company in which a Director and/or his associate(s) owns five (5) per cent. or more if and so long as (but only if and so long as) he and/or his associate(s), (either directly or indirectly) are the holders of or beneficially interested in five (5) per cent. or more of any class of the equity share capital of such company or of the voting rights available to members of such company (or of any third company through which his interest or that of any of his associate(s) is derived). For the purpose of this paragraph there shall be disregarded any shares held by a Director or his associate(s) as bare or custodian trustee and in which he or any of them has no beneficial interest, any shares comprised in a trust in which the interest of the Director or his associate(s) is/are in reversion or remainder if and so long as some other person is entitled to receive the income thereof, and any shares comprised in an authorised unit trust scheme in which the Director is interested only as a unit holder.

  - (3) Where a company in which a Director and/or his associate(s) holds five (5) per cent. or more is materially interested in a transaction, then that Director and/or his associate(s) shall also be deemed materially interested in such transaction.

  - (4) If any question shall arise at any meeting of the Board as to the materiality of the interest of a Director (other than the chairman of the meeting) or as to the entitlement of any Director (other than such chairman) to vote and such question is not resolved by his voluntarily agreeing to abstain from voting, such question shall be referred to the chairman of the meeting and his ruling in relation to such other Director shall be final and conclusive except in a case where the nature or extent of the interest of the Director concerned as known to such Director has not been fairly disclosed to the Board. If any question as aforesaid shall arise in respect of the chairman of the meeting such question shall be decided by a resolution of the Board (for which purpose such chairman shall not vote thereon) and such resolution shall be final and conclusive except in a case where the nature or extent of the interest of such chairman as known to such chairman has not been fairly disclosed to the Board.”;

• (g) inserting the words “and Bye-law 153A” after the words “the Act” in the first line of Bye-law 153;

• (h) inserting the following paragraphs immediately after Bye-law 153 as new Bye-laws 153(A) and 153(B):

• “153(A). To the extent permitted by and subject to due compliance with all applicable Statutes, rules and regulations, including, without limitation, the rules of the Designated Stock Exchange, and to obtaining all necessary consents, if any, required thereunder, the requirements of Bye-law 153 shall be deemed satisfied in relation to any person by sending to the person in any manner not prohibited by the Statutes, a summary financial statement derived from the Company’s annual accounts and the directors’ report which shall be in the form and containing the information required by applicable laws and regulations, provided that any person

– 8 –

NOTICE OF SPECIAL GENERAL MEETING

who is otherwise entitled to the annual financial statements of the Company and the directors’ report thereon may, if he so requires by notice in writing served on the Company, demand that the Company sends to him, in addition to a summary financial statement, a complete printed copy of the Company’s annual financial statement and the directors’ report thereon.

• 153(B). The requirement to send to a person referred to in Bye-law 153 the documents referred to in that provision or a summary financial report in accordance with Bye-law 153(A) shall be deemed satisfied where, in accordance with all applicable Statutes, rules and regulations, including, without limitation, the rules of the Designated Stock Exchange, the Company publishes copies of the documents referred to in Bye-law 153 and, if applicable, a summary financial report complying with Bye-law 153(A), on the Company’s computer network or in any other permitted manner (including by sending any form of electronic communication), and that person has agreed or is deemed to have agreed to treat the publication or receipt of such documents in such manner as discharging the Company’s obligation to send to him a copy of such documents.”;

and THAT any director of the Company be and is hereby authorised to take such further action as he may, at his sole and absolute discretion, think fit for and on behalf of the Company to implement the aforesaid amendments to the existing Bye-laws.”

By Order of the Board China City Natural Gas Holdings Limited Wong King Shiu, Daniel Chairman

Hong Kong, 13 May 2004

Notes:

1. A member of the Company entitled to attend and vote at the above meeting is entitled to appoint one proxy to attend and vote in his stead in accordance with the Bye-laws of the Company. A proxy need not be a member of the Company.

2. A form of proxy for use at the special general meeting is enclosed.

3. 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 certified copy thereof), must be deposited with the Company’s branch share registrar and transfer office in Hong Kong, Computershare Hong Kong Investor Services Limited at Rooms 1712-1716, 17/F, Hopewell Centre, 183 Queen’s Road East, Hong Kong as soon as practicable but in any event not less than 48 hours before the time of the special general meeting or any adjourned meeting (as the case may be). Completion and return of the form of proxy will not preclude shareholders from attending and voting in person at the meeting or any adjourned meeting should they so wish.

4. The Bye-laws of the Company are written in English and there is no official translation thereof in the Chinese language. The Chinese version of the proposed resolution no. 2 above on amendments to Bye-laws is for reference only. If there are any discrepancies between the meaning of the English and the Chinese versions of the proposed resolution no. 2 above, the English version will prevail.

– 9 –