JY GAS LIMITED - Proxy Solicitation & Information Statement 2005

THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION

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

If you have sold all your securities in Nippon Asia Investments Holdings Limited, you should at once hand this circular and the accompanying form of proxy to the purchaser or to the bank manager, stockbroker or other agent through whom the sale was effected for transmission to the purchaser.

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

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

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PROPOSED CAPITAL REORGANISATION, CHANGE IN BOARD LOT SIZE AND ISSUE OF CONVERTIBLE NOTES

Placing Agent

A notice convening a special general meeting of Nippon Asia Investments Holdings Limited to be held at Garden Rooms, 2/F, The Royal Garden, 69 Mody Road, Tsimshatsui East, Kowloon, Hong Kong on Monday, 4 April 2005 at 10:00 a.m. is set out on pages 28 to 30 of this circular. If you do not intend to attend the meeting, you are requested to complete and return the enclosed form of proxy to the Hong Kong branch registrar of the Company, Computershare Hong Kong Investor Services Limited of 46/F, Hopewell Centre, 183 Queen’s Road East, Wanchai, Hong Kong in accordance with the instructions printed thereon as soon as practicable and in any event not less than 48 hours before the time appointed for holding the meeting or any adjournment thereof. Completion and return of the form of proxy will not preclude you from attending and voting in person at the meeting or any adjournment thereof should you so wish.

11 March 2005

* for identification purposes only

	Page
Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	1
Expected Timetable. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	5
Letter from the Board
Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	6
Capital Reorganisation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	7
Change in board lot size . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	9
Proposed issue of Convertible Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	10
Conditional Subscription Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	10
Conditions of the Subscription Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	11
Completion of the Subscription Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	11
Conditional Placing Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	12
Conditions of the Placing Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	12
Termination and force majeure for the Placing Agreement . . . . . . . . . . . . . . . . . . . . .	13
Completion of the Placing Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	14
Terms of the Convertible Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	14
Effect on shareholding structure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	16
Reasons for the proposed issue of the Convertible Notes and use of proceeds . . . . .	16
Funds raised by the Company during the 12 months period immediately
before the date of the Announcement and up to the Latest Practicable Date . . . . .	18
Information on the Group . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	20
Procedures by which a poll may be demanded . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	20
General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	21
Recommendation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	21
Appendix – General information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	22
Notice of SGM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	28

– i –

DEFINITIONS

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

“Announcement”
the announcement of the Company dated 17 February 2005 in respect of the proposals for the Capital Reorganisation, change in board lot size and issue of Convertible Notes
“associate(s)” has the meaning ascribed thereto under the Listing Rules
“Board”
the board of Directors
“Business Day”
any day (excluding a Saturday) on which banks generally are open for business in Hong Kong
“Capital Reduction”
the proposed reduction of the nominal value of each issued Share from HK$0.025 to HK$0.001 by canceling paid-up capital to the extent of HK$0.024 on each issued Share
“Capital Reorganisation” the reorganisation of the capital of the Company consisting of the Capital Reduction, the Unissued Share Subdivision and the Share Consolidation
“CCASS”
the Central Clearing and Settlement System established and operated by HKSCC
“Companies Act”

the Companies Act 1981 of Bermuda

“Company”
Nippon Asia Investments Holdings Limited, a company incorporated in Bermuda with limited liability and the Shares of which are listed on the main board of the Stock Exchange
“Convertible Notes”
collectively, the GC Convertible Note and the Underwritten Convertible Notes
“Conversion Shares”
the New Shares to be issued upon exercise of the conversion rights attaching to the Convertible Notes
“Director(s)”

the director(s) of the Company

“GC Convertible Note”
the 1-year 1% convertible loan note to be issued by the Company to the Subscriber under the Subscription Agreement in the principal amount of JPY290,000,000 (i.e. equivalent to HK$21,750,000)
“Group”

the Company and its subsidiaries

– 1 –

DEFINITIONS

“HKSCC”

Hong Kong Securities Clearing Company Limited

“Hong Kong” Hong Kong Special Administrative Region of the People’s Republic of China
“Initial Conversion Price” HK$0.18 per Conversion Share, subject to adjustment
“Issue Date”
the date of issue of the Convertible Notes, which will be the date of completion of the Subscription Agreement and the Placing Agreement
“Latest Practicable Date” 9 March 2005, being the latest practicable date prior to the printing of this circular for ascertaining certain information contained in this circular
“Listing Rules” the Rules Governing the Listing of Securities on the Stock Exchange
“Maturity Date” the date falling on the 365th day from and including the Issue Date
“New Share(s)” ordinary shares of HK$0.01 each in the share capital of the Company following the Capital Reorganisation
“Placing of Shares”
the placing of 1,000,000,000 new Shares to independent investors, details of which are set out in the announcement of the Company dated 23 December 2004 and the circular of the Company dated 17 January 2005
“Placees”
any institutional, corporate or individual investors or any of their respective subsidiaries or associates procured by the Placing Agent to subscribe for the Underwritten Convertible Notes pursuant to the Placing Agreement
“Placing Agent” Kingston Securities Limited, a licensed corporation to carry on business in type 1 regulated activity (dealing in securities) under the Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong)
“Placing Agreement”
the conditional placing agreement dated 28 January 2005 entered into between the Company and the Placing Agent in respect of the placing of the Underwritten Convertible Notes which was supplemented by a supplemental agreement dated 4 February 2005 between the parties

– 2 –

DEFINITIONS

“Possible Acquisition” the possible acquisition of a majority stake in Shanghai Holdfast Science & Technology Co., Ltd., details of which are set out in the announcement of the Company dated 20 October 2004 pursuant to rule 13.09 of the Listing Rules
“SGM” the special general meeting of the Company to be convened to approve, among others, the proposed Capital Reorganisation and the creation and issue of the Convertible Notes
“SGM Notice” the notice convening the SGM set out on pages 28 to 30 of this circular
“Share(s)” ordinary shares of HK$0.025 each in the share capital of the Company prior to the Capital Reorganisation
“Shareholder(s)” holders of the Shares “Share Options” the options to subscribe for 384,800,000 Shares granted under the share option scheme adopted by the Company on 31 January 2002
“Share Consolidation” the consolidation of every 10 shares of HK$0.001 each into 1 New Share of HK$0.01 each immediately upon the Capital Reduction and the Unissued Share Subdivision becoming effective, such that the authorised share capital of the Company will be changed from HK$1,250,000,000 comprising 50,000,000,000 Shares to HK$1,250,000,000 comprising 125,000,000,000 New Shares
“Stock Exchange” The Stock Exchange of Hong Kong Limited
“Subscriber” Global Capital Management Inc., a company incorporated in Japan
“Subscription Agreement” the conditional subscription agreement dated 26 January 2005 entered into between the Company and the Subscriber in respect of the subscription of the GC Convertible Note which was supplemented by a supplemental agreement dated 4 February 2005 between the parties
“Underwritten Convertible Notes”
the 1-year 1% convertible loan notes to be issued by the Company to the Placees under the Placing Agreement in the principal amount of HK$40,000,000

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	DEFINITIONS
“Unissued Share Subdivision”	the subdivision of every unissued Share into 25 shares of
	HK$0.001 each immediately upon the Capital Reduction
	becoming effective
“HK$”	Hong Kong dollars, the lawful currency of Hong Kong
“JPY”	Japanese Yen, the lawful currency of Japan
“US$”	United States dollars, the lawful currency of United
	States of America
“%”	per cent.

– 4 –

2005

EXPECTED TIMETABLE

Latest time for lodging the form
of proxy for the SGM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10:00 a.m. on Saturday, 2 April
Date of SGM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10:00 a.m. on Monday, 4 April
Effective date of the Capital Reorganisation
and Share Consolidation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9:00 a.m. on Wednesday, 6 April
Existing counter for trading in the Shares in board lots
of 2,000 Shares temporarily closes . . . . . . . . . . . . . . . . . . . . . 9:30 a.m. on Wednesday, 6 April
Temporary counter for trading in the New Shares
in board lots of 200 New Shares
(in the form of existing share certificates) opens . . . . . . . . . 9:30 a.m. on Wednesday, 6 April
Existing counter for trading in the New Shares
in board lots of 20,000 New Shares
(in the form of new share certificates) re-opens . . . . . . . . . 9:30 a.m. on Wednesday, 20 April
Parallel trading of the New Shares (in the form
of existing and new share certificates) commences. . . . . . . 9:30 a.m. on Wednesday, 20 April
Parallel trading of the New Shares (in the form
of existing and new share certificates) ends. . . . . . . . . . . . . . . 4:00 p.m. on Thursday, 12 May
Temporary counter for trading in the New Shares
in board lots of 200 New Shares
(in the form of existing share certificates) closes . . . . . . . . . . 4:00 p.m. on Thursday, 12 May
Free exchange of new share certificates from 9:30 a.m. on Wednesday, 6 April
for the New Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . to 4:00 p.m. on Wednesday, 18 May
Service for the sale and purchase of odd from 9:30 a.m. on Wednesday, 6 April
lots of the New Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . to 4:00 p.m. on Thursday, 12 May

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LETTER FROM THE BOARD

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

Executive Directors: Registered Office: WONG Kui Shing, Danny Clarendon House Masanori SUZUKI 2 Church Street Eiji SATO Hamilton HM 11 WONG King Shiu, Daniel Bermuda KAN Kwok Shu LIN Che Chu, George Head Office and Principal Place of Business in Hong Kong: Independent Non-executive Directors: Room 2703-2704, 27/F CHEUNG Man Yau, Timothy Nine Queen’s Road Central CHUK Che Shing Central KIM Kwi Nam, Takao Hong Kong 11 March 2005

To the Shareholders of the Company,

and for information only, holders of the convertible notes

Dear Sir or Madam

PROPOSED CAPITAL REORGANISATION, CHANGE IN BOARD LOT SIZE AND ISSUE OF CONVERTIBLE NOTES

INTRODUCTION

The purpose of this circular is to provide you with the information in relation to the details of (i) the Capital Reorganisation and the change in board lot size; (ii) the issue of the Convertible Notes pursuant to the Subscription Agreement and the Placing Agreement, and the issue of Conversion Shares upon exercise of the conversion rights attaching to the Convertible Notes; and (iii) the notice of the SGM at which resolutions will be proposed to the Shareholders to consider and, if thought fit, approve (a) the Capital Reorganisation; (b) the Subscription Agreement, the creation and issue of the GC Convertible Note in the principal amount of JPY290,000,000 (i.e. equivalent to HK$21,750,000) and the issue of Conversion Shares upon exercise of the conversion rights attaching to the GC Convertible Note; and (c) the Placing Agreement, the creation and issue of the Underwritten Convertible Notes in the principal amount of HK$40,000,000 and the issue of Conversion Shares upon exercise of the conversion rights attaching to the Underwritten Convertible Notes.

* for identification purposes only

– 6 –

LETTER FROM THE BOARD

CAPITAL REORGANISATION

On 17 February 2005, the Directors announced that the Company had proposed to put forward the Capital Reorganisation for approval by the Shareholders, by way of Capital – Reduction, Unissued Share Subdivision and Share Consolidation as follows:

(a) Capital Reduction

The nominal value of each issued Share will be reduced from HK$0.025 to HK$0.001.

(b) Unissued Share Subdivision

Immediately upon the Capital Reduction becoming effective, each of the unissued Shares of HK$0.025 each will be subdivided into 25 unissued shares of HK$0.001 each.

(c) Share Consolidation

Immediately upon the Capital Reduction and the Unissued Share Subdivision becoming effective, every 10 shares of HK$0.001 each in the capital of the Company will be consolidated into one New Share of HK$0.01 such that immediately upon the Share Consolidation becoming effective, the authorised share capital of the Company will be changed from HK$1,250,000,000 comprising 50,000,000,000 Shares to HK$1,250,000,000 comprising 125,000,000,000 New Shares.

The credit amount of HK$416,322,291.19 arising from the Capital Reduction will be used to eliminate the accumulated losses of the Company of HK$1,116,902,000 as at 31 July 2004.

As at the Latest Practicable Date, the authorised share capital of the Company is HK$1,250,000,000 divided into 50,000,000,000 Shares, and its issued share capital is HK$433,669,053.325 divided into 17,346,762,133 Shares, which comprise the Shares issued subsequent to the completion of the Placing of Shares on 18 February 2005 and details of the Placing of Shares are set out in the Company’s announcement and circular dated 23 December 2004 and 17 January 2005 respectively. Immediately after the Capital Reorganisation, the Company’s authorised share capital will become HK$1,250,000,000 divided into 125,000,000,000 New Shares, and its issued share capital will be HK$17,346,762.13 divided into 1,734,676,213 New Shares. The New Shares will rank pari passu in all respects with each other.

As at the Latest Practicable Date, there are outstanding convertible notes in an aggregate amount of HK$16,000,000 convertible into 640,000,000 Shares at the conversion price of HK$0.025 per Share (subject to adjustments) (before completion of Capital Reorganisation) under CPC and icoupon Convertible Notes (“Outstanding CN”), representing approximately 3.69% of the existing issued share capital of the Company. Upon the Capital Reorganisation becoming effective, adjustment will be made to the conversion price of the Outstanding CN pursuant to its terms and conditions, the number of New Shares subject to the Outstanding CN will then be 64,000,000 New Shares at the adjusted conversion price of HK$0.25 per New Share, representing approximately 2.99% of the enlarged issued share capital of the Company of 2,141,731,768 New Shares after the Capital Reorganisation, by the 64,000,000 conversion shares to be issued for the exercise in full of the conversion rights attaching to the Outstanding CN, by the 343,055,555 Conversion Shares to be issued for the exercise in full of the conversion rights attaching to the Convertible Notes.

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LETTER FROM THE BOARD

As at the Latest Practicable Date, there are outstanding Share Options granted under the share option scheme adopted by the Company on 31 January 2002, entitling the holders thereof to subscribe for 384,800,000 Shares. Upon the Capital Reorganisation becoming effective, adjustment will be made to the exercise price and the number of option shares in accordance with the share option scheme, details of such adjustment are set out in the paragraph headed “Adjustment to Share Options” of this circular.

Save for the Outstanding CN (for further details please refer to note 2 of the paragraph headed “Funds raised by the Company during the 12 months period immediately before the date of the Announcement and up to the Latest Practicable Date” of this circular) and the outstanding Share Options, the Company has no other convertible debts, options or warrants in issue or outstanding as at the Latest Practicable Date.

Fractional entitlements of New Shares arising from and upon the Share Consolidation will and be aggregated and sold for the benefit of the Company.

Conditions of the Capital Reorganisation

The completion of the Capital Reorganisation will be conditional upon:

(a) the passing of a special resolution by the Shareholders at the SGM to approve the Capital Reorganisation;
(b) the Listing Committee of the Stock Exchange granting the listing of, and permission to deal in, the New Shares; and
(c) the publication of a notice in relation to the Capital Reduction in accordance with the Companies Act.

Further announcement will be made by the Company on 4 April 2005 to inform the Shareholders of the effective date of the Capital Reorganisation.

Listing

Application has been made to the Stock Exchange for the listing of and permission to deal in the New Shares arising from the Capital Reorganisation.

Subject to the granting of the listing of, and permission to deal in, the New Shares on the Stock Exchange, the New Shares will be accepted as eligible securities by HKSCC for deposit, clearance and settlement in CCASS with effect from the commencement date of dealings in the New Shares on the Stock Exchange or such other date as determined by HKSCC. Settlement of transactions between participants of the Stock Exchange on any trading day is required to take place in CCASS on the second trading day thereafter. All activities under CCASS are subject to the General Rules of CCASS and CCASS Operational Procedures in effect from time to time.

Reasons for the Capital Reorganisation

As stated in the financial statements of the Company for the year ended 31 July 2004, the Company had accumulated losses of HK$1,116,902,000 as at 31 July 2004. The Capital Reduction will allow the Company to eliminate the accumulated losses and as a result, will enable the Company to declare dividends to the Shareholders at an earlier opportunity than by generating profits to offset such losses. The proposed Share Consolidation will increase the

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LETTER FROM THE BOARD

nominal value of the Shares and reduce the total number of Shares currently in issue. As such, along with the change in board lot size, the proposed Share Consolidation will reduce the overall transaction costs for dealings in the New Shares. Hence, the Directors believe that the Capital Reorganisation is beneficial to the Company and the Shareholders as a whole. As at the Latest Practicable Date, the Company does not have any intention to make any distribution of dividends.

Implementation of the Capital Reorganisation will not of itself have any impact on the Group’s underlying assets, business operations, management or financial position, other than the expenses incurred in relation to the exercise.

CHANGE IN BOARD LOT SIZE

The Directors also announced that upon completion of the Capital Reorganisation, the board lot size for trading in the Shares would be changed from 2,000 Shares to 20,000 New Shares.

Trading Arrangement

(i) From 9:30 a.m. on 6 April 2005, the original counter for trading in the existing Shares in board lots of 2,000 existing Shares will be temporarily removed. A temporary counter for trading in the New Shares in the board lots of 200 New Shares will be established. Only existing certificate(s) for existing Shares may be traded at this counter. Certificates for every 10 existing Shares will be deemed to represent one New Share.
(ii) With effect from 9:30 a.m. on 20 April 2005, the original counter will be re-opened for trading in New Shares in board lots of 20,000 New Shares. Only new certificate(s) for New Shares may be traded at this counter.
(iii) During the period from 20 April 2005 to 12 May 2005 (both dates inclusive), there will be parallel trading at the above counters.
(iv) The temporary counter for trading in the certificates of the existing Shares in board lots of 200 New Shares will be removed after the close of trading on 12 May 2005 and thereafter, trading will be in board lots of 20,000 New Shares only and existing certificates for existing Shares will cease to be marketable and will not be acceptable for trading and settlement purposes. However, such certificate will remain effective as documents of legal title to New Shares on the basis of 10 existing Shares for one New Share and may be lodged with the share registrar of the Company in exchange for a new share certificate(s) (see the paragraph below “Free Exchange of Share Certificates”).

The reason for the change in board lot size is to increase the value of each board lot of Shares and reduce trading and registration costs incurred by the Shareholders and investors of the Company. The Directors are of the opinion that the change in board lot size is in the best interest of the Company and the Shareholders. The change in board lot size will not result in any change in the relative rights of the Shareholders.

– 9 –

LETTER FROM THE BOARD

Free Exchange of Share Certificates

Upon the Capital Reorganisation becoming effective, Shareholders may submit share certificates in light red for the Shares to the branch share registrar of the Company in Hong Kong, Computershare Hong Kong Investor Services Limited of Shops 1712-1716, 17th Floor, Hopewell Centre, 183 Queen’s Road East, Wanchai, Hong Kong in exchange for the new share certificates in light blue for New Shares, at the expenses of the Company during the period from 6 April 2005 to 18 May 2005. Thereafter, certificates for the Shares will be accepted for exchange on payment of a fee of the higher of: (i) HK$2.50 multiplied by the number of new share certificates issued; or (ii) HK$2.50 multiplied by the number of existing certificates cancelled (or such amount as may from time to time be allowed by the Stock Exchange whichever is higher).

All the existing share certificates will continue to be effective as documents of legal title and may be exchanged for certificates for the New Shares at any time on the basis of 10 existing Shares for one New Share.

Matching Service

In order to alleviate the difficulties in trading odd lots of New Shares arising from the Capital Reorganisation, the Company has appointed Kingston Securities Limited (the “Agent”) to match the sale and purchase of odd lots of the New Shares on a best effort basis. The Agent will provide the service for the sale and purchase of odd lots of the New Shares during the period from 6 April 2005 to 12 May 2005, both days inclusive. Holders of the New Shares in odd lots who wish to take advantage of this facility either to dispose of or top up their odd lots to a board lot of 20,000 New Shares may, directly or through their brokers, contact the Agent during such period. The address of the Agent is Suite 2801, 28th Floor, One International Finance Centre, 1 Harbour View Street, Central, Hong Kong and the contact person is Ms Rosita Kiu at (852) 2298–6215. Shareholders should note that successful matching of the sale and purchase of odd lots of the New Shares is not guaranteed. The Shareholders are advised to consult their professional advisers if they are in doubt about the above procedures.

PROPOSED ISSUE OF CONVERTIBLE NOTES

The Company entered into the Subscription Agreement on 26 January 2005 which was supplemented by a supplemental agreement dated 4 February 2005. The Company also entered into the Placing Agreement on 28 January 2005 which was supplemented by a supplemental agreement dated 4 February 2005.

CONDITIONAL SUBSCRIPTION AGREEMENT

Date : 26 January 2005 and 4 February 2005

Issuer : the Company

– 10 –

LETTER FROM THE BOARD

Subscriber : Global Capital Management Inc., is a company incorporated in Japan on 20 June 2000, and its ultimate beneficial owner is Mr Shigeta Yasumitsu who is a Japanese investor. To the best of the Directors’ knowledge, information, belief and having made all reasonable enquiry, Global Capital Management Inc. and Mr Shigeta Yasumitsu (i) are not connected persons (as defined in the Listing Rules) of the Company and are third parties independent of and not connected with the Company and its connected persons; and (ii) are independent of and not connected with any of the Placees, the Placing Agent and their respective ultimate beneficial owners.

Pursuant to the Subscription Agreement, the Company will issue the GC Convertible Note to the Subscriber in the principal amount of JPY290,000,000 (i.e. equivalent to HK$21,750,000) with the exchange rate fixed at JPY1=HK$0.075.

CONDITIONS OF THE SUBSCRIPTION AGREEMENT

Completion of the Subscription Agreement is conditional on:

(1) the completion of the Capital Reorganisation;
(2) the passing of resolution(s) at the SGM approving the creation and the issue of the GC Convertible Note in the principal amount of JPY290,000,000 (i.e. equivalent to HK$21,750,000) and the issue of Conversion Shares for the GC Convertible Note;
(3) (if required) the Bermuda Monetary Authority having granted its permission for the issue of the GC Convertible Note and the free transferability of the New Shares which may fall to be issued upon exercise of the conversion rights attaching to the GC Convertible Note; and
(4) the Listing Committee of the Stock Exchange having granted listing of and permission to deal in the Conversion Shares for the GC Convertible Note.

None of the above conditions can be waived by the Company and the Subscriber. In the event that the conditions are not fulfiled within 3 months from the date of the Subscription Agreement (or such other period as the parties to the Subscription Agreement may agree in writing), the Subscription Agreement shall lapse.

COMPLETION OF THE SUBSCRIPTION AGREEMENT

Completion of the Subscription Agreement shall take place within five Business Days following the date on which the above conditions are fulfiled. Further announcement will be made if the completion of the Subscription Agreement does not proceed or the above conditions are not fulfiled on 25 April 2005.

– 11 –

LETTER FROM THE BOARD

CONDITIONAL PLACING AGREEMENT

Date : 28 January 2005 and 4 February 2005 Issuer : the Company

Placing Agent : Kingston Securities Limited

The Placing Agent has conditionally agreed with the Company to place, on a fully underwritten basis, to not fewer than six independent, corporate and/or individual investors the Underwritten Convertible Notes in the principal amount of HK$40,000,000. The Placing Agent will receive a placing commission of 2.5% on the gross proceeds of the placing of the Underwritten Convertible Notes in accordance with the aggregate amount underwritten by the Placing Agent, which was arrived at after arm’s length negotiations between the Company and the Placing Agent.

The Placing Agent and its ultimate beneficial owners (i) are not connected persons (as defined in the Listing Rules) of the Company and are third parties independent of and not connected with the Company; and (ii) are independent of and not connected with the Subscriber and its ultimate beneficial owner.

Placees

The Placing Agent will place the Underwritten Convertible Notes to not fewer than six Placees, each of whom and whose ultimate beneficial owners (i) will not be connected persons (as defined in the Listing Rules) of the Company; and (ii) is independent of and not connected with the Company and its connected persons, the other Placees, the Subscriber and their respective ultimate beneficial owners. The Conversion Shares will be issued pursuant to the passing of the relevant resolutions at the SGM. No Placees will become substantial shareholders upon full conversion of the Convertible Notes.

CONDITIONS OF THE PLACING AGREEMENT

Completion of the Placing Agreement is conditional on:

(a) the completion of the Capital Reorganisation;
(b) the passing of the relevant resolution(s) by the Shareholders at the SGM to be convened to approve the Placing Agreement, the creation and issue of the Underwritten Convertible Notes in the principal amount of HK$40,000,000 and the issue of Conversion Shares for the Underwritten Convertible Notes;
(c) (if required) the Bermuda Monetary Authority having granted its permission for the issue of the Underwritten Convertible Notes and the free transferability of the New Shares which may fall to be issued upon exercise of the conversion rights attaching to the Underwritten Convertible Notes; and
(d) the Listing Committee of the Stock Exchange granting (either unconditionally or subject to conditions to which the Company objects) listing of and permission to deal in the Conversion Shares for the Underwritten Convertible Notes.

– 12 –

LETTER FROM THE BOARD

None of the above conditions can be waived by the Company and the Placing Agent. If the conditions are not fulfiled on or prior to 3 months from the date of the Placing Agreement or such later date as may be agreed between the Placing Agent and the Company, the Placing Agreement will lapse and become null and void.

TERMINATION AND FORCE MAJEURE FOR THE PLACING AGREEMENT

The Placing Agreement may be terminated by the Placing Agent if at any time prior to 12:00 noon on the date for completion of the Placing Agreement, there occurs:

(i) the introduction of any new law or regulation or any change in existing laws or regulations or change in the interpretation or application thereof, or other occurrence of any nature whatsoever which may, in the reasonable opinion of the Placing Agent, materially and adversely affect the business or the financial or trading position or prospects of the Group as a whole; or
(ii) the occurrence of any event, development or change (whether or not local, national or international or forming part of a series of events or changes occurring or continuing before, on and/or after the date of the Placing Agreement and including an event or change in relation to or a development of an existing state of affairs) of a political, military, industrial, financial, economic or other nature, whether or not sui generis with any of the foregoing, resulting in a material adverse change in, or which might be expected to result in a material adverse change in political, economic or stock market conditions; or
(iii) the imposition of any moratorium, suspension or material restriction on trading in securities generally on the Stock Exchange occurring due to exceptional financial circumstances or otherwise; or
(iv) a change or development involving a prospective change in taxation or the implementation of exchange controls which shall or might materially and adversely affect the Company or its present or prospective shareholders in their capacity as such; or
(v) any change or deterioration in the conditions of local, national or international securities markets occurs,

then and in any such case, the Placing Agent may terminate this Agreement without liability to the Company by giving notice in writing to the Company, provided that such notice is received prior to 10:00 a.m. on the date for completion of the Placing Agreement.

Upon giving of notice pursuant to the paragraph above, all obligations of each of the parties under the Placing Agreement shall cease and determine and no party shall have any claim against any other parties in respect of any matter arising out of or in connection with the Placing Agreement, except for any breach arising prior to such termination.

The Directors are not aware of the occurrence of any of such events as at the Latest Practicable Date.

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LETTER FROM THE BOARD

COMPLETION OF THE PLACING AGREEMENT

Completion of the Placing Agreement shall take place on the third Business Day following the date on which the conditions thereto are fulfiled. Further announcement will be made if the completion of the Placing Agreement does not proceed or the conditions thereto are not fulfiled on 27 April 2005.

The completion of the Subscription Agreement and the Placing Agreement are not interconditional.

TERMS OF THE CONVERTIBLE NOTES

Initial Conversion Price:

HK$0.18 per New Share, subject to adjustment by reason of any consolidation or subdivision such that the par value of a Share becomes of a different nominal amount.

The Initial Conversion Price (taking into account of the Share Consolidation becoming effective) was determined on an arm’s length basis between the Company and the Subscriber, and between the Company and the Placing Agent, with reference to the trading price of the Shares.

The initial conversion price (before taking into account of the Share Consolidation becoming effective) of HK$0.018 represents: (i) the closing price of HK$0.018 per Share as quoted on the Stock Exchange on 26 January 2005, being the last trading day prior to the date of the Announcement; (ii) a premium of approximately 1.11% to the average closing price of the Shares of HK$0.0178 per Share as quoted on the Stock Exchange for the 5 trading-day period ended on 26 January 2005 (inclusive); (iii) a discount of 10% over the net asset value of HK$0.02 per Share as at 31 July 2004; and (iv) a premium of 20% to the closing price of HK$0.015 per Share as quoted on the Stock Exchange as at the Latest Practicable Date.

Interest:

The Convertible Notes bear an annual interest of 1%, which will be payable on the Maturity Date.

Maturity Date:

The maturity of the Convertible Notes will be the date falling on the last day of a period of 365 days from and including the Issue Date. Any outstanding principal amount of the Convertible Notes together with interest accrued thereon will be repaid by the Company on maturity.

Conversion provisions:

The Convertible Notes are convertible in whole or in part representing JPY50,000,000 (for the GC Convertible Note) and HK$100,000 (for the Underwritten Convertible Notes) an integral multiple thereof at any time after the Issue Date at the Initial Conversion Price, subject to adjustment. The exchange rate for translation of JPY to HK$ is fixed at JPY1 to HK$0.075.

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LETTER FROM THE BOARD

Transferability:

The Convertible Notes may not be assigned or transferred to a connected person (as defined in the Listing Rules) of the Company.

Voting rights:

The Convertible Notes do not confer any voting rights at general meetings of the Company on the holders.

Redemption:

The Company shall, at any time before the Maturity Date, have the option to redeem the Convertible Notes in whole or in part at its principal amount outstanding together with accrued interest thereon.

Listing:

No application will be made for the listing of the Convertible Notes on the Stock Exchange or any other stock exchange.

Application has been made by the Company for the listing of and permission to deal in the New Shares to be issued pursuant to the exercise of the conversion rights attaching to the Convertible Notes.

Based on the Initial Conversion Price:

(1) the maximum number of Conversion Shares which may be issued upon full –
conversion of the GC Convertible Note is 120,833,333 New Shares, representing:
(i) approximately 6.97% of the existing issued share capital of the Company comprising 1,734,676,213 New Shares (taking into account of the Capital Reorganisation becoming effective);
(ii) approximately 6.51% of the Company’s issued share capital comprising 1,855,509,546 New Shares (taking into account of the Capital Reorganisation becoming effective) as enlarged by the full conversion of the GC Convertible Note; and
(iii) approximately 5.82% of the Company’s issued share capital comprising 2,077,731,768 New Shares (taking into account of the Capital Reorganisation becoming effective) as enlarged by the full conversion of the Convertible Notes
(2) the maximum number of Conversion Shares which may be issued upon full conversion of the Underwritten Convertible Notes is 222,222,222 New Shares, –
representing:
(i) approximately 12.81% of the existing issued share capital of the Company comprising 1,734,676,213 New Shares (taking into account of the Capital Reorganisation becoming effective);
(ii) approximately 11.36% of the Company’s issued share capital comprising 1,956,898,435 New Shares (taking into account of the Capital Reorganisation becoming effective) as enlarged by the full conversion of the Underwritten Convertible Notes; and
(iii) approximately 10.70% of the Company’s issued share capital comprising 2,077,731,768 New Shares (taking into account of the Capital Reorganisation becoming effective) as enlarged by the full conversion of the Convertible Notes.

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LETTER FROM THE BOARD

EFFECT ON SHAREHOLDING STRUCTURE

The effect on the shareholding structure of the Company upon full conversion of the Convertible Notes are as follows:–

Noble Islands Int’l Limited (Note 1) Wong Kui Shing, Danny Subscriber Placees Public Shareholders Total	Existing shareholding as at the Latest Practicable Date % to the total Number of issued Shares Shares 3,270,183,000 18.85 23,100,000 0.13 – – – – 14,053,479,133 81.02 17,346,762,133 100.00	Assume after completion of the Capital Reorganisation % to the total Number of issued New Shares Shares 327,018,300 18.85 2,310,000 0.13 – – – – 1,405,347,913 81.02 1,734,676,213 100.00	Assume immediately after full conversion of GC Convertible Note at the conversion price of HK$0.18 but before conversion of Underwritten Convertib Notes at the conversion price of HK$0.18 % to the total Number of issued New Shares Shares 327,018,300 17.62 2,310,000 0.12 120,833,333 6.51 – – 1,405,347,913 75.75 1,855,509,546 100.00	Assume immediately after full conversion of Underwritten Convertible Notes at the conversion price of HK$0.18 but before conversion le of GC Convertible Note at the conversion price of HK$0.18 % to the total Number of issued New Shares Shares 327,018,300 16.71 2,310,000 0.12 – – 222,222,222 11.36 1,405,347,913 71.81 1,956,898,435 100.00	Assume full conversion of the Convertible Notes % to the total Number of issued New Shares Shares 327,018,300 15.74 2,310,000 0.11 120,833,333 5.82 222,222,222 10.70 1,405,347,913 67.63 2,077,731,768 100.00

Note:

Noble Islands Int’l Limited is wholly-owned by Power Honest Holdings Limited which in turn is wholly owned by Mr Wong Kui Shing, Danny, a Director.

REASONS FOR THE PROPOSED ISSUE OF THE CONVERTIBLE NOTES AND USE OF PROCEEDS

The estimated net proceeds from the issue of the Convertible Notes will be approximately HK$60.7 million, which is, together with the unutilised proceeds from previous fund raising activities of approximately HK$47.9 million (HK$15.5 million from the issue of ICP Convertible Notes, the remaining HK$2.9 million from the issue of CPC and icoupon Convertible Notes, and the remaining HK$29.5 million from the issue of 2,048,368,284 rights shares), intended to be utilised for the Possible Acquisition of a majority stake (51%) in Shanghai Holdfast Science & Technology Co., Ltd. (“Shanghai Holdfast”). Founded for 8 years, Shanghai Holdfast is a company engaged in system integration, software development and solutions provision whose business covers over 20 provinces in China, Its services range from IT infrastructure to network application system, and from the basic www hardware construction to www based business applications for customers, including ISP, government and enterprises. The Board considers that, given the expertise it has, and the provision of great variety of products and services to its solid customers base through a well established business network in China, Shanghai Holdfast can act as a strategic platform to the Group for the integration and investments of further technology business, and expects the Possible

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LETTER FROM THE BOARD

Acquisition can bring potential growth to the Group in the long run. Shanghai Holdfast and its ultimate beneficial owners, Mr Zhu Kun and Mr Li Li Jun, are not connected persons (as defined in the Listing Rules) of the Company and independent of and not connected with the Company and its connected persons. A non-legally binding Memorandum of Understanding in relation to the Possible Acquisition was executed on 20 October 2004, details of which are set out in the Company’s announcement dated 20 October 2004 pursuant to rule 13.09 of the Listing Rules. The due diligent exercises on Shanghai Holdfast are still carrying on, providing the due diligent results are satisfied, the consideration will be based on the estimated business value as at 31 December 2004 for the 2004 financial year calculated by applying a P/E ratio ranging from 8 to 15 to the net profit of Shanghai Holdfast for the financial year ended 31 December 2004. The final terms and conditions of the Possible Acquisition (including the final consideration and settlement of the consideration) will be subject to further negotiation. Should the final terms and conditions for the Possible Acquisition be concluded which is expected to be in March 2005, a final and definitive agreement will be entered into which may result in a notifiable transaction under the Listing Rules, further announcement will be made as and when appropriate. If the existing available fund is not sufficient for the Possible Acquisition, the Directors may consider further fund raising activities.

In case that the Possible Acquisition does not proceed, or there is proceeds remained thereafter, the proceeds/remaining proceeds will be preserved, and the application may be firstly for investments projects in relation to Internet and information technology or secondly for other suitable investments projects which are generally in line with the Group’s existing business, and/or thirdly for general working capital. The Directors are unable to decide on whether the further investments of the Group will be active or passive investments which will depend on many factors like amount invested, percentage of interest acquired, the nature of business invested, whether the Company has the expertise in that specific business, and the negotiation of terms between the parties. As at the Latest Practicable Date, no other potential investments except Shanghai Holdfast are identified or targeted. Where the Possible Acquisition does not proceed, further announcement in respect of the intended use of the proceeds will be made.

Adjustment to Outstanding CN

As at the Latest Practicable Date, an aggregate of 640,000,000 Shares are subject to the Outstanding CN at the conversion price of HK$0.025 each. Upon the Capital Reorganisation becoming effective, the number of New Shares subject to Outstanding CN will be 64,000,000 New Shares at the adjusted conversion price of HK$0.25 each.

Adjustment to Share Options

As at the Latest Practicable Date, 384,800,000 Shares are subject to the outstanding Share Options. Adjustments will be made to the exercise price and the number of shares subject to the Share Options in accordance with the terms of the share option scheme as a result of the Capital Reorganisation becoming effective and the details are as follows:

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LETTER FROM THE BOARD

				Number of		Adjusted number
				Shares		of New Shares	Adjusted
			Exercise	subject to the		subject to the	exercise
Category of		Date of	price	outstanding		outstanding	price per
participant		grant	per Share	Share Options	Exercise period	Share Options	New Share
			HK$				HK$
(i)	Employees	06.01.2003	0.0604	24,800,000	01.07.2003	2,480,000	0.604
					to 30.06.2005
(ii)	Consultants	28.04.2004	0.0250	360,000,000	29.04.2004	36,000,000	0.250
					to 11.05.2005

FUNDS RAISED BY THE COMPANY DURING THE 12 MONTHS PERIOD IMMEDIATELY BEFORE THE DATE OF THE ANNOUNCEMENT AND UP TO THE LATEST PRACTICABLE DATE

The following table summarises the capital raising activities of the Group for the 12 months period immediately before the date of the Announcement and up to the Latest Practicable Date:

	Gross	Date of mandate	Completion date of	Intended use of proceeds		Date of relevant
Description	amount raised	granted	capital raising activities	as announced	Actual use of proceeds	announcement
Issue of the ICP Convertible Notes	US$2 million	Granted at annual	27.10.2004	Net proceeds of approximately	Intended for the Possible Acquisition	7.10.2004
in principal amount of US$2 million	(equivalent to	general meeting held		HK$15.5 million for future	but not yet utilised_(Note 1)_
at conversion price of HK$0.025	approximately	on 23.12.2003		investment or development of
per Share (assuming full conversion,	HK$15.6 million)			suitable projects related to the
the maximum no. of Shares to be				principal business of the
issued is 624 million)				Company when opportunities
(Note 1)				are identified and the Directors
				think appropriate
Issue of the CPC and icoupon	HK$25 million	Granted at annual	1.11.2004	Net proceeds of approximately	HK$6 million was utilised for the	11.10.2004
Convertible Notes in principal amount		general meeting held		HK$24.9 million for future	acquisition of a company
of HK$25 million at conversion price		on 23.12.2003		investment or development of	engaged in information technology
of HK$0.025 per Share (assuming full				natural gas projects or other	business, HK$3.7 million was utilised
conversion, the maximum no. of Shares				suitable projects	in existing business, and
to be issued is 1,000 million)					HK$12.3 million was utilised for
(Note 2)					securities investments, and the
					remaining HK$2.9 million has
					not yet been applied which will
					be utilised for the Possible Acquisition
					(Notes 2 & 3)
Issue of 2,048,368,284 rights Shares at	HK$51.2 million	Approved at special	28.12.2004	Net proceeds of approximately	HK$20.5 million was utilised	25.10.2004
HK$0.025 per Share on the basis of two		general meeting held		HK$50 million is intended to be	on 24 December 2004 to
rights Shares for every ten existing Shares		on 1.12.2004		fully applied for the	redeem the FHL CN, and the
with bonus Shares issued with rights				Possible Acquisition	balance of HK$29.5 million
Shares on the basis of three bonus Shares					is remained for the intended
for every two fully paid rights Shares					usage for the Possible Acquisition
					but not yet utilised_(Note 4)_
Placing of 1,000 million new Shares	HK$25 million	Granted at special	18.2.2005	Net proceeds of approximately	Intended to be used for	23.12.2004
at a price of HK$0.025		general meeting held		HK$24.6 million is intended	general working capital
per Placing Shares		on 2.2.2005		to be utilised for general	but not yet utilised
				working capital

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LETTER FROM THE BOARD

Notes:

The ICP Convertible Notes are the 1-year 1% convertible notes in an aggregate principal amount of US$2 million (HK$15.6 million) (“ICP Proceeds”) issued by the Company to ICP Inc. on 27 October 2004, entitling the holder to convert up to 624,000,000 Shares during the period from 27 October 2004 to 27 October 2005 at the conversion price of HK$0.025 per Share. ICP Inc. and its beneficial owners are not connected persons (as defined in the Listing Rules) of the Company. The net ICP Proceeds of HK$15.5 million was originally kept in a finance company in the name of the Company and charged by the Company as a security to ICP Inc. pursuant to the terms and conditions of ICP Convertible Notes, details of which are set out in the Company’s announcement dated 7 October 2004. The ICP Convertible Notes were fully converted into 624,000,000 Shares at the conversion price of HK$0.025 on 22 December 2004, as such, the security over the ICP Proceeds was released and the net ICP Proceeds is freely usable by the Company. The market value of the total Shares converted was HK$15.6 million based on the closing price of HK$0.025 per Share on 21 December 2004, being the last trading day immediately prior to the suspension of trading of Shares on 22 December 2004.
CPC and icoupon Convertible Notes refer to the convertible notes in an aggregate principal amount of HK$25,000,000 issued by the Company to Cross Profit Capital Limited, icoupon Limited and the placees procured by the Placing Agent on 1 November 2004, entitling the holders thereof to convert into 1,000,000,000 Shares during the period from 1 November 2004 to 1 November 2005 at an initial conversion price of HK$0.025 per Share (subject to adjustments for share consolidation and subdivision), details of which are set out in the Company’s announcement dated 11 October 2004. Neither of them are connected persons (as defined in the Listing Rules) of the Company. A total number of 360,000,000 Shares were issued on 22 December 2004 as a result of conversion of the convertible notes by icoupon Limited and certain placees procured by Placing Agent at the conversion price of HK$0.025 per Share. Accordingly, there are outstanding convertible notes in an aggregate amount of HK$16,000,000 convertible into 640,000,000 Shares (before completion of Capital Reorganisation) under CPC and icoupon Convertible Notes (“Outstanding CN”), representing approximately 3.69% of the existing share capital of the Company, and approximately 2.99% of the enlarged issued share capital of the Company after the completion of the Capital Reorganisation, by the conversion shares to be issued for the exercise in full of the conversion rights attaching to the Outstanding CN, by the Conversion Shares to be issued for the exercise in full of the conversion rights attaching to the Convertible Notes.
On 2 November 2004, HK$6 million was utilised for the acquisition of an information technology company (“IT Company Acquisition”) which holds a protocol to provide solution/tool to automatically convert the contents of a web page for display on different wireless access protocol (WAP) enabled products. The IT Company Acquisition does not constitute a notifiable transaction under the Listing Rules, and the Directors consider the IT Company Acquisition is not of price sensitive nature which requires disclosure under rule 13.09 of the Listing Rules. The HK$12.3 million was invested in listed securities in Hong Kong for the period from November to December 2004 which can be easily liquidated to release the resources for suitable investments projects. The HK$3.7 million was utilised on the Company’s existing business for the period from November to December 2004 for the relocation and setting up of the new factory for the silicon rubber business. The remaining HK$2.9 million is intended to be used for the Possible Acquisition. Please see the paragraphs below for further details of the changes in the usage of the proceeds.
The FHL CN is the 3% interest convertible notes in an aggregate principal amount of HK$20,000,000 convertible into Shares at the conversion price of HK$0.04 per Share issued by the Company to Feishang Holdings Limited on 14 January 2004, details of which are set out in the Company’s announcement dated 6 January 2004, Redemption of the FHL CN enables the Company to save interest expenses, while the proposed issue of the Convertible Notes, which is of 1% interest, provides alternative capital of lower costs.

Save for the Outstanding CN and the Share Options, the Company has no other convertible note in issue or outstanding as at the Latest Practicable Date.

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LETTER FROM THE BOARD

Among the net proceeds of approximately HK$24.9 million raised from the issue of the CPC and icoupon Convertible Notes stated in notes 2 and 3 above which are intended to be applied for future investment or development of natural gas projects or other suitable projects, the Company had used approximately HK$3.7 million for the existing business and approximately HK$12.3 million on securities investment in Hong Kong listed securities. The usage of HK$3.7 million was for the relocation and set up of the Company’s new manufacturing factory for its silicon rubber business, whereas the Directors considers that the fund was spent on the existing business. The Directors considered the usage of HK$12.3 million on securities investment in Hong Kong listed securities was a temporary relocation of fund. When fund is needed for any suitable projects identified, the listed securities investments can be easily convertible into cash for reallocation of the resources for the intended usage. No announcement has been made in relation to the changes in the usage of the proceeds.

Among the net proceeds of approximately HK$50 million raised from the issue of 2,048,368,284 rights Shares at HK$0.025 per Share on the basis of two rights Shares for every ten existing Shares with bonus Shares issued with rights Shares on the basis of three bonus Shares for every two fully paid rights Shares which are intended to be fully applied for the Possible Acquisition, the Company had utilised HK$20.5 million on redemption of FHL CN and the balance of the net proceeds is remained for the intended usage but not yet utilised. The redemption of the FHL CN has been disclosed in the Company’s circular dated 17 January 2005 in relation to the placing of 1,000 million new Shares. No announcement has been made in relation to the changes in the usage of the proceeds.

In view of the above changes in the usage of the proceeds without making any announcement for disclosure by the Company, the Stock Exchange considers that the Company might have breached the Listing Rules and reserves the rights to take appropriate action against the Company and its Directors.

INFORMATION ON THE GROUP

The principal activity of the Company is investment holding and the Group is principally engaged in investments in Internet, information technology, investment in natural gas business, investment in securities, and manufacturing and trading of silicone rubber products. For the natural gas business, the Group, through its 50% equity interest in a jointly-controlled entity, China City Natural Gas Co., Ltd. (“CCNGL”), a joint venture with China Petroleum Pipeline Bureau, holds joint-venture natural gas companies in various cities and areas in China. As the Group only holds 50% equity interest in the joint venture, no consolidation of the result of CCNGL was made to the Group’s account, whereas equity accounting is adopted for the profit/ loss of CCNGL.

PROCEDURES BY WHICH A POLL MAY BE DEMANDED

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

(a) by the chairman of such meeting; or
(b) by 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

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LETTER FROM THE BOARD

(c) by 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) by 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 one-tenth of the total sum paid up on all Shares conferring that right.

GENERAL

Relevant resolutions will be proposed at the SGM to consider, among other things, if thought fit, to approve (i) the Capital Reorganisation; (ii) the Subscription Agreement, the creation and issue of the GC Convertible Note in the principal amount of JPY290,000,000 (i.e. equivalent to HK$21,750,000) and the issue of Conversion Shares for the GC Convertible Note; and (iii) the Placing Agreement, the creation and issue of the Underwritten Convertible Notes in the principal amount of HK$40,000,000 and the issue of Conversion Shares for the Underwritten Convertible Notes. To the best of the Directors’ knowledge, information, belief and having made all reasonable enquires, no Shareholders and their associates have any interests in the Capital Reorganisation, the Subscription Agreement, the Placing Agreement and the Possible Acquisition which are different from other Shareholders and none of the Subscriber, the Placees, the Placing Agent and Shanghai Holdfast and their respective ultimate beneficial owners hold any shares of the Company. Hence, no Shareholders are required to abstain from voting in respect of the above resolutions at the SGM.

RECOMMENDATION

The Directors consider that the terms of the Subscription Agreement, Placing Agreement and Convertible Notes are fair and reasonable based on the favourable market sentiment and that the proposed Capital Reorganisation, change in board lot size and issue of the Convertible Notes are in the best interest of the Company and the Shareholders as a whole, where such proposals would eliminate the accumulated losses and reduce the overall transaction costs for dealings in the Company’s New Shares. The issue of Convertible Notes would provide lower cost of capital to the Company and the net proceeds from which will strengthen the financial position and enhance the capital base of the Company, and enable the Company to proceed with the Possible Acquisition. The Directors recommend that the Shareholders vote in favour of the resolutions to be proposed at the SGM.

Your attention is also drawn to the Appendix to this circular and the SGM Notice set out in this circular.

By Order of the Board Nippon Asia Investments Holdings Limited Wong Kui Shing, Danny Chairman

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GENERAL INFORMATION

APPENDIX

1. 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.

2. SHARE CAPITAL AND SHARE OPTIONS

(a) Share Capital

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

Shares of HK$0.025 each

Authorised: 50,000,000,000 Shares Issued and fully paid: 17,346,762,133 Shares	HK$ 1,250,000,000

	433,669,053

Subject to the fulfilment of all the conditions as set out in the section headed “Conditions of Capital Reorganisation” and immediately after full conversion of Convertible Notes, the authorised and issued share capital will be as follows:

New Shares of HK$0.01 each

Authorised: 125,000,000,000 New Shares Issued and to be issued (fully paid): 1,734,676,213 New Shares 120,833,333 Conversion Shares falling to be issued from the GC Convertible Note 222,222,222 Conversion Shares falling to be issued from the Underwritten Convertible Notes 64,000,000 conversion shares falling to be issued from the Outstanding CN 2,141,731,768	Authorised: 125,000,000,000 New Shares Issued and to be issued (fully paid): 1,734,676,213 New Shares 120,833,333 Conversion Shares falling to be issued from the GC Convertible Note 222,222,222 Conversion Shares falling to be issued from the Underwritten Convertible Notes 64,000,000 conversion shares falling to be issued from the Outstanding CN 2,141,731,768	HK$ 1,250,000,000

		17,346,762 1,208,333 2,222,222 640,000
	2,141,731,768	21,417,317

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GENERAL INFORMATION

APPENDIX

All the Shares presently in issue and New Shares rank pari passu in all respects as regards voting, dividends and return of capital. The Conversion Shares (when allotted, fully paid and issued) will rank pari passu in all respects with the existing or the New Shares.

No part of the share capital of the Company is listed or dealt in on any stock exchange other than the Stock Exchange and no application is being made or is currently proposed or sought for the Shares to be listed or dealt in on any other stock exchange.

(b) Share Options

Details of the outstanding Share Options as at the Latest Practicable Date are as follows:

			Number of
Category of	Date of		Option Shares		Exercise price
participant	grant		granted	Exercise period	per Share
					HK$
(i) Employees	06.01.2003		24,800,000	01.07.2003 - 30.06.2005	0.0604
(ii) Consultants	28.04.2004		360,000,000	29.04.2004 - 11.05.2005	0.0250
		Total:	384,800,000

Note: Subsequent to the Capital Reorganisation becoming effective, the exercise price and the number of option shares will be adjusted, details of which are set out in the section headed “Adjustments to Share Options”.

As at the Latest Practicable Date, save for the aforesaid Share Options and convertible notes, there are no outstanding convertible debts, options or warrants of the Company.

3. DISCLOSURE OF INTERESTS

(a) Directors’ and Chief Executive’s interests and short positions in Shares and underlying Shares

As at the Latest Practicable Date, the interests or short positions of each Director and chief executive of the Company in the Shares, underlying Shares and debentures of the Company or any of its associated corporations (within the meaning of Part XV of the SFO) which were required to be notified to the Company and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO (including interests and short positions which he is taken or deemed to have under such provisions of the SFO), or which were required, pursuant to Section 352 of the SFO, to be entered in the register maintained by the Company referred to therein, or which were required, pursuant to the Model Code for Securities Transactions by Directors of Listed Issuers contained in the Listing Rules, to be notified to the Company and the Stock Exchange, were as follows:

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GENERAL INFORMATION

APPENDIX

Nature Name of Director Capacity of Interest Wong Kui Shing, Danny Having an interest in Corporation (Note) a controlled corporation Being a beneficial owner Personal Total:	Number % of Issued of Shares Shares 3,270,183,000 18.85 23,100,000 0.13 3,293,283,000 18.98	Number % of Issued of Shares Shares 3,270,183,000 18.85 23,100,000 0.13 3,293,283,000 18.98
		18.98

Note: Please refer to Note 1 of part (b) below.

Save as aforesaid, none of the Directors or chief executive of the Company had any interests or short position in the Shares, underlying Shares or debentures of the Company or any of its associated corporations (within the meaning of the SFO) which were required to be notified to the Company and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO (including any interests and short positions which he was taken or deemed to have under such provisions of the SFO) or which were required, pursuant to section 352 of the SFO, to be entered in the register referred to therein, or which were required, pursuant to the Model Code for Securities Transactions by Directors of Listing Companies in the Listing Rules, to be notified to the Company and the Stock Exchange.

(b) Persons who have interests or short positions which are discloseable under Divisions 2 and 3 of Part XV of the SFO and substantial shareholders

As at the Latest Practicable Date, so far as is known to the Directors or chief executive of the Company, the following persons (other than a Director or chief executive of the Company) had, or were deemed or taken to have interests or short positions in the Shares or underlying Shares which would fall to be disclosed to the Company and the Stock Exchange under the provisions of Division 2 and 3 of Part XV of the SFO or, who were, directly or indirectly, interested in 5% 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 or had any option in respect of such capital:

			Number	% of Issued
Name	Notes	Capacity	of Shares	Shares
Noble Islands Int’l Limited	1	Being a beneficial owner	3,270,183,000	18.85
(“Noble Islands”)
Power Honest Holdings	1	Having an interest in	3,270,183,000	18.85
Limited (“Power Honest”)		a controlled corporation
Wong Kui Shing, Danny	1	Having an interest in	3,293,283,000	18.98
		a controlled corporation
		and being a beneficial owner
Kingston Finance Limited	1, 2	Having a security interest	2,067,722,000	11.92
Kingston Securities Limited	3	Being Placing Agent	2,222,222,222	12.81
Chu Yuet Wah	1, 2, 3, 4	Having an interest in	4,289,944,222	24.73
		a controlled corporation
Ma Siu Fong	1, 2, 3, 4	Having an interest in	4,289,944,222	24.73
		a controlled corporation

– 24 –

GENERAL INFORMATION

APPENDIX

Notes:

Out of the 3,270,183,000 Shares held by Noble Islands, 2,067,722,000 Shares are registered in the name of Kingston Finance Limited and are charged. The entire issued share capital of Noble Islands is held by Power Honest which is in turn held by Mr Wong Kui Shing, Danny, a Director. Hence, each of Mr Wong Kui Shing, Danny and Power Honest is deemed to be interested in the 3,270,183,000 Shares owned by Noble Islands. Other than the deemed interest of 3,270,183,000 Shares, Mr Wong Kui Shing, Danny also has a personal interest of 23,100,000 Shares and accordingly, is aggregately interested in 3,293,283,000 Shares.
As at the Latest Practicable Date, Kingston Finance Limited has a security interest in the 2,067,722,000 Shares owned by Noble Islands, which relate to the same block of Shares held by Noble Islands as mentioned in Note 1 above.
Based on the initial conversion price of HK$0.018 (before taking into account of Share Consolidation), the Conversion Shares which may be issued pursuant to the Underwritten Convertible Notes is equivalent to 2,222,222,222 Shares. After the Share Consolidation becoming effective, the relevant Conversion Shares amount to 222,222,222 New Shares.
Ms Chu Yuet Wah and Ms Ma Siu Fong are controlling shareholders of Kingston Finance Limited and Kingston Securities Limited. As at the Latest Practicable Date, each of Ms Chu and Ms Ma is deemed to be interested in the 2,067,722,000 Shares interested by Kingston Finance Limited and the derivative of 2,222,222,222 Shares interested by Kingston Securities Limited as mentioned in Notes 2 and 3 above.
As at the Latest Practicable Date, Global Capital Management Inc., being the Subscriber, and its controlling shareholders are deemed to be interested in 120,833,333 New Shares representing approximately 0.7% of the existing issued Shares of 17,346,762,133. After the Share Consolidation becoming effective, such derivative of 120,833,333 New Shares will represent 6.97% of the issued New Shares of 1,734,676,213.

Save as disclosed above, none of the Directors knows of any person (not being a Director or chief executive of the Company) who had interests or short positions in Shares or underlying Shares which would fall to be disclosed to the Company under the provisions of Divisions 2 and 3 of Part XV of the SFO, or who was, directly or indirectly, interested in 5% 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 or held any option in respect of such capital.

4. DIRECTORS’ SERVICE CONTRACTS

As at the Latest Practicable Date, no Director has an unexpired service contract with any member of the Group which is not determinable within one year without payment of compensation (other than normal statutory obligations).

– 25 –

GENERAL INFORMATION

APPENDIX

5. LITIGATION

As previously disclosed in the Company’s circular dated 18 August 2003 and various subsequent circulars, on 11 August 2003, legal proceedings were brought by GP Batteries International Limited and its subsidiary, Geewin Industrial Limited (collectively the “GP Group”) against the Company for an alleged breach of an arrangement relating to a proposed sale and purchase of certain subsidiaries of the Company including an exclusivity arrangement as set out in the Company’s announcement dated 25 July 2003. The amount claimed by GP Group against the Company are damages of (i) the opportunity to acquire HK$120 million worth of assets being the combined net asset value of those disposed subsidiaries as at 31 March 2003 at the consideration of HK$40 million; and (ii) breach of terms in the relevant agreements for a sum of HK$3 million. Based on legal advice, the Directors consider that the probable maximum future outflow of resources as a result of the claim is HK$3 million, and a provision has been made to the accounts where the Directors consider that the potential claim of HK$3 million will not have any material impact on the Group. As at the Latest Practicable Date, the case is in the process of taking witness statements, and there is no further development in relation to this case.

Golite International Limited (“Golite”) is a wholly-owned subsidiary of the Group engaged in the manufacturing and trading of silicone rubber products, where manufacturing operation is carried out in Qishi, Qongguan, Guangdong, PRC together with Golden Power Industries Limited (“Golden Power”), an ex-subsidiary of the Company engaged in the manufacturing of batteries which was disposed on 23 July 2003, by virtue of a feeding processing arrangement made between Dongguan Qishi Micro Battery Factory (東莞企石微型電池廠 ) (“Micro Battery Factory”) and Golden Power. When Golden Power was the subsidiary of the Group, both Golite and Golden Power were operating by virture of the feeding processing arrangement made between Golden Power and Micro Battery Factory which is an independent third party of the Group. Since the disposal of Golden Power, Golite has no relationship with Mico Battery Factory and decided to detach its operation from Micro Battery Factory. Requests were made to Golden Power on releasing the plants and machineries and related trading records, but such requests were unreasonably rejected by Golden Power. Golite has taken legal action against Golden Power and as at the Latest Practicable Date, most of the trading records were returned to Golite whilst for the plants and machineries, further legal advice as being sought. A new factory was set up for the silicone rubber business in July 2004 by Golite, there is impact on Golite’s operation, due to the relocation and setting up of the new factory, but the impact will be temporary and yet to be quantified.

Save as the above, none of the Company nor any of its subsidiaries is engaged in any litigation or arbitration of material importance and no other litigation or claim of material importance is known to the Directors to be pending or threatened against either the Company or any of its subsidiaries.

– 26 –

GENERAL INFORMATION

APPENDIX

6. MISCELLANEOUS

(a) The principal place of business of the Company in Hong Kong is Room 2703-2704, 27/F, Nine Queen’s Road Central, Central, Hong Kong.
(b) The Hong Kong branch share registrar of the Company is Computershare Hong Kong Investor Services Limited of 46/F, Hopewell Centre, 183 Queen’s Road East, Wanchai, Hong Kong.
(c) The qualified accountant of the Company is Mr To Kwan, CPA Australia .
(d) The secretary of the Company is Miss Man Tsz Sai, Lavender who is an associate member of The Institute of Chartered Secretaries and Administrators.
(e) The English text of the circular shall prevail over the Chinese text.

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NOTICE OF SPECIAL GENERAL MEETING

==> picture [348 x 36] intentionally omitted <==

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

NOTICE IS HEREBY GIVEN THAT a special general meeting of Nippon Asia Investments Holdings Limited (the “Company”) will be held at Garden Rooms, 2/F, The Royal Garden, 69 Mody Road, Tsimshatsui East, Kowloon, Hong Kong on Monday, 4 April 2005 at 10:00 a.m. to consider and, if thought fit, pass with or without modifications, the following resolutions:

SPECIAL RESOLUTION

“ THAT , conditional upon the Listing Committee of The Stock Exchange of Hong Kong Limited approving the listing of, and granting the permission to deal in, shares of HK$0.01 each in the issued share capital of the Company upon the Capital Reorganisation (as defined below) becoming effective, with effect from 9:30 a.m. on the next Business Day (not being a Saturday) following the date on which this resolution is passed (the “Effective Date”):
(a) the issued share capital of the Company be reduced by canceling paid up capital to the extent of HK$0.024 on each of the shares of HK$0.025 in the capital of the Company in issue on the Effective Date (the “Capital Reduction”) so that each issued share in the capital of the Company shall be treated as one fully-paid up share of HK$0.001 each in the capital of the Company (the “Reduced Share(s)”) and any liability of the holders of Reduced Shares to make any further contribution to the capital of the Company on each such Reduced Share shall be treated as satisfied;
(b) subject to and forthwith upon the Capital Reduction taking effect, the credit amount arising from the Capital Reduction be credited to the contributed surplus account of the Company where it may be utilised in accordance with the bye-laws of the Company and all applicable laws, including to eliminate the accumulated losses of the Company (the “Application of Credit”);
(c) subject to and forthwith upon the Capital Reduction taking effect, all of the authorised but unissued shares of HK$0.025 each in the capital of the Company (including those authorised but unissued shares arising from the Capital Reduction) be sub-divided into twenty-five (25) Reduced Shares (the “Subdivision”);
(d) subject to and forthwith upon the Capital Reduction and the Subdivision taking effect, every ten Reduced Shares in the authorised share capital of the Company on the Effective Date be consolidated into one (1) share of HK$0.01 each in the authorised share capital of the Company (the “Consolidation”); and

* for identification purposes only

– 28 –

NOTICE OF SPECIAL GENERAL MEETING

(e) the directors of the Company be and are hereby authorised generally to do all such acts, deeds and things as they shall, in their absolute discretion, deem appropriate to effect and implement the Capital Reduction, the Application of Credit, the Subdivision and the Consolidation (collectively, the “Capital Reorganisation”).”

ORDINARY RESOLUTIONS

“ THAT subject to the passing of resolution numbered 1 as set out in this notice:
(a) the execution of the conditional subscription agreement dated 26 January 2005 which was supplemented by a supplemental agreement dated 4 February 2005 between the Company and Global Capital Management Inc. (the “Subscriber”) in relation to the subscription of 1-year 1% convertible loan note (the “GC Convertible Note”) by the Subscriber in the principal amount of JPY290,000,000 (i.e. equivalent to HK$21,750,000) (the “Subscription Agreement”), copies of which have been produced to this meeting and marked “A” and initialed by the chairman of the meeting for identification purpose and the transactions contemplated under the Subscription Agreement and the performance by the Company thereof be and are hereby ratified, confirmed and approved;
(b) the directors of the Company be and are hereby authorised to issue the GC Convertible Note and allot and issue New Shares of HK$0.01 each upon exercise of the conversion right attaching to the GC Convertible Note; and
(c) any one director of the Company be and is hereby authorised to do such act or execute such other documents by hand, or, in case of execution of documents under seal, to do so jointly with either the secretary of the Company or duly appointed representative of the directors of the Company or a second director of the Company so as to give effect to any or all other transactions contemplated in this resolution.”
“ THAT subject to the passing of resolution numbered 1 as set out in this notice:
(a) the execution of the conditional placing agreement dated 28 January 2005 which was supplemented by a supplemental agreement dated 4 February 2005 between the Company and Kingston Securities Limited (the “Placing Agent”) in relation to the placing of, on a fully underwritten basis, by the Placing Agent in the principal amount of HK$40,000,000 (the “Placing Agreement”), copies of which have been produced to this meeting and marked “B” and initialed by the chairman of the meeting for identification purpose and the transactions contemplated under the Placing Agreement and the performance by the Company thereof be and are hereby ratified, confirmed and approved;
(b) the directors of the Company be and are hereby authorised to issue the Underwritten Convertible Notes and allot and issue New Shares of HK$0.01 each upon exercise of the conversion right attaching to the Underwritten Convertible Notes; and

– 29 –

NOTICE OF SPECIAL GENERAL MEETING

(c) any one director of the Company be and is hereby authorised to do such act or execute such other documents by hand, or, in case of execution of documents under seal, to do so jointly with either the secretary of the Company or duly appointed representative of the directors of the Company or a second director of the Company so as to give effect to any or all other transactions contemplated in this resolution.”

By Order of the Board Nippon Asia Investments Holdings Limited Wong Kui Shing, Danny Chairman

Hong Kong, 11 March 2005

Notes:

Any member of the Company entitled to attend and vote at the meeting convened by this notice shall be entitled to appoint one or more proxies 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 but must be present in person to represent the member.
A form of proxy for use at the above meeting is enclosed.
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 lodged with the Company’s branch share registrar in Hong Kong, Computershare Hong Kong Investor Services Limited of 46/F., Hopewell Centre, 183 Queen’s Road East, Wanchai, Hong Kong not less than 48 hours before the time appointed for holding the meeting or any adjournment thereof. Completion and return of the form of proxy will not preclude members from attending and voting in person at the meeting or any adjourned meeting should they so wish.
As at the date of this notice, the Board comprises six executive Directors, namely Mr Wong Kui Shing, Danny, Mr Masanori Suzuki, Mr Eiji Sato, Mr Wong King Shiu, Daniel, Mr Kan Kwok Shu and Mr Liu Che Chu, George; and three independent non-executive Directors, namely Mr Cheung Man Yau, Timothy, Mr Chuk Che Shing and Mr Kim Kwi Nam, Takao.

– 30 –

AI assistant

JY GAS LIMITED — Proxy Solicitation & Information Statement 2005

49905_rns_2005-03-11_8c042bc8-bcc2-4cf4-a513-8f319021ed26.pdf

PROPOSED CAPITAL REORGANISATION, CHANGE IN BOARD LOT SIZE AND ISSUE OF CONVERTIBLE NOTES

Placing Agent

CONTENTS

DEFINITIONS

DEFINITIONS

DEFINITIONS

EXPECTED TIMETABLE

PROPOSED CAPITAL REORGANISATION, CHANGE IN BOARD LOT SIZE AND ISSUE OF CONVERTIBLE NOTES

INTRODUCTION

CAPITAL REORGANISATION

(a) Capital Reduction

(b) Unissued Share Subdivision

(c) Share Consolidation

Conditions of the Capital Reorganisation

Listing

Reasons for the Capital Reorganisation

CHANGE IN BOARD LOT SIZE

Trading Arrangement

Free Exchange of Share Certificates

Matching Service

PROPOSED ISSUE OF CONVERTIBLE NOTES

CONDITIONAL SUBSCRIPTION AGREEMENT

CONDITIONS OF THE SUBSCRIPTION AGREEMENT

COMPLETION OF THE SUBSCRIPTION AGREEMENT

CONDITIONAL PLACING AGREEMENT

Placees

CONDITIONS OF THE PLACING AGREEMENT

TERMINATION AND FORCE MAJEURE FOR THE PLACING AGREEMENT

COMPLETION OF THE PLACING AGREEMENT

TERMS OF THE CONVERTIBLE NOTES

LETTER FROM THE BOARD

EFFECT ON SHAREHOLDING STRUCTURE

REASONS FOR THE PROPOSED ISSUE OF THE CONVERTIBLE NOTES AND USE OF PROCEEDS

LETTER FROM THE BOARD

Adjustment to Outstanding CN

Adjustment to Share Options

LETTER FROM THE BOARD

FUNDS RAISED BY THE COMPANY DURING THE 12 MONTHS PERIOD IMMEDIATELY BEFORE THE DATE OF THE ANNOUNCEMENT AND UP TO THE LATEST PRACTICABLE DATE

LETTER FROM THE BOARD

LETTER FROM THE BOARD

INFORMATION ON THE GROUP

PROCEDURES BY WHICH A POLL MAY BE DEMANDED

GENERAL

RECOMMENDATION

1. RESPONSIBILITY STATEMENT

2. SHARE CAPITAL AND SHARE OPTIONS

(a) Share Capital

Shares of HK$0.025 each

New Shares of HK$0.01 each

(b) Share Options

3. DISCLOSURE OF INTERESTS

APPENDIX

(b) Persons who have interests or short positions which are discloseable under Divisions 2 and 3 of Part XV of the SFO and substantial shareholders

4. DIRECTORS’ SERVICE CONTRACTS

5. LITIGATION

6. MISCELLANEOUS

SPECIAL RESOLUTION

ORDINARY RESOLUTIONS

Notes:

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JY GAS LIMITED Proxy Solicitation & Information Statement 2005