09:28 CATIC INT'L<00232> - Announcement (2) THE SUBSCRIPTION Information relating to the Undertaking Date: 30 May 2005 Parties: the Company as the covenantor; and Sino Gas and the Underwriter as the covenantees Number of shares to be subscribed: 1,770,000,000 Offer Shares Subscription Price: HK$0.02 per Offer Share Payment of Subscription Monies: in accordance with the terms of the Prospectus Documents by no later than 4:00 p.m. on the Acceptance Date Pursuant to the Undertaking, the Company has irrevocably undertaken to take up or procure to take up all the Entitlement Shares. Based on the subscription price of HK$0.02 per Offer Share, the aggregate consideration for the Subscription amounts to approximately HK$35,400,000. The Directors intend to fund the consideration by the Company's internal resources. As at the date of this announcement, the Company is indirectly holding approximately 26.42% interest in Sino Gas. Upon completion of the Subscription and assuming no new Sino Gas Shares are to be issued by Sino Gas from the date of this announcement to the Record Date, the Company's interest in Sino Gas is expected to remain at approximately 26.42%. INFORMATION ON SINO GAS Sino Gas and its subsidiaries are principally engaged in trading of conversion parts and gas station equipment and operation of gas station. According to the audited consolidated accounts of Sino Gas, the Sino Gas Group recorded a loss before tax and a net loss of approximately HK$24,769,000 and approximately HK$20,326,000 respectively for the year ended 30 June 2003, and a net asset value of approximately HK$253,327,000 as at 30 June 2003. The Sino Gas Group recorded a loss before tax and a net loss of approximately HK$5,757,000 and approximately HK$7,028,000 respectively for the year ended 30 June 2004 and recorded a net asset value of approximately HK$297,472,000 as at 30 June 2004. According to the unaudited consolidated accounts of Sino Gas for the six months ended 31 December 2004, the Sino Gas Group recorded a loss before tax and a net loss of approximately HK$7,043,000 and approximately HK$8,220,000 respectively for the period, and a net asset value of approximately HK$305,633,000 as at 31 December 2004. REASONS FOR AND BENEFITS OF THE SUBSCRIPTION The principal activities of the Company and its subsidiaries are undertaking building facade projects, generation and sale of electricity and steam power, and investments in aero-technology based businesses including helicopter manufacturing and aero-photographic operations. As at the date of this announcement, the Company is indirectly holding approximately 26.42% interest in Sino Gas. The use of LPG and CNG in the PRC is becoming more popular, partly due to government policies in the PRC in promoting natural gas as a more environmental friendly energy source and partly due to the fact that natural gas is more cost-efficient than other energy sources such as petroleum. In addition to the use of LPG and CNG in households and for industrial purposes, LPG and CNG have also become increasingly popular energy sources for motor vehicles. The Sino Gas Board believes that the consumption of LPG and CNG will grow together with the growth of car ownership and gross domestic product in the PRC. In light of the growth in car ownership due to the improving living standards in the PRC, the Sino Gas Group intends to expand its natural gas business, through its subsidiaries, by constructing more LPG/CNG refueling gas stations in various cities in the PRC. The Directors consider that the entering into of the Undertaking to subscribe for the Entitlement Shares will facilitate the completion of the Open Offer which will strengthen the financial position of Sino Gas and the Company will be benefited accordingly by virtue of its shareholding in Sino Gas. The Directors consider that the Subscription will prevent the Company's interest in Sino Gas from being diluted and hence, the Company will maintain the same shareholding percentage in Sino Gas upon completion of the Open Offer. Taking into account of the above, the Directors consider that the Subscription is in the interest of the Company and the Shareholders as