THIRD QUARTERLY RESULTS ANNOUNCEMENTFOR THE NINE MONTHS ENDED 30TH SEPTEMBER, 2007 1

(incorporated in the Cayman Islands with limited liability)

(Stock Code : 8070)

THIRD QUARTERLY RESULTS ANNOUNCEMENT

FOR THE NINE MONTHS ENDED 30TH SEPTEMBER, 2007

CHARACTERISTICS OF THE GROWTH ENTERPRISE MARKET (“GEM”) OF THE

STOCK EXCHANGE OF HONG KONG LIMITED (THE “STOCK EXCHANGE”)

GEM has been established as a market designed to accommodate companies

to which a high investment risk may be attached. In particular, companies

may list on GEM with neither a track record of profitability nor any

obligation to forecast future profitability. Furthermore, there may be risks

arising out of the emerging nature of companies listed on GEM and the

business sectors or countries in which the companies operate. Prospective

investors should be aware of the potential risks of investing in such

companies and should make the decision to invest only after due and

careful consideration. The greater risk profile and other characteristics

of GEM mean that it is a market more suited to professional and other

sophisticated investors.

Given the emerging nature of companies listed on GEM, there is a risk

that securities traded on GEM may be more susceptible to high market

volatility than securities traded on the Main Board and no assurance is

given that there will be a liquid market in the securities traded on GEM.

The principal means of information dissemination on GEM is publication

on the internet website at www.hkgem.com operated by the Stock

Exchange. Listed companies are not generally required to issue paid

announcements in gazetted newspapers. Accordingly, prospective

investors should note that they need to have access to the GEM website in

order to obtain up-to-date information on GEM-listed issuers.

This announcement, for which the directors of Zhongyu Gas Holdings Limited

(the “Company”) collectively and individually accept responsibility, includes

particulars given in compliance with the Rules Governing the Listing of

Securities on the Growth Enterprise Market of The Stock Exchange of Hong Kong

Limited (the “GEM Listing Rules”) for the purpose of giving information with

regard to the Company and its subsidiaries (collectively the “Group”). The

directors of the Company (the “Directors”), having made all reasonable

enquiries, confirm that, to the best of their knowledge and belief: (1) the

information contained in this announcement is accurate and complete in all

material respects and not misleading; (2) there are no other matters the omission

of which would make any statement in this announcement misleading; and

(3) all opinions expressed in this announcement have been arrived at after

due and careful consideration and are founded on bases and assumptions that

are fair and reasonable.

2
HIGHLIGHTS

— During the period under review, the Group’s turnover increased
approximately 158.6%, to HK$120,104,000.
— Loss attributable to equity holders of the parent for the period under
review decreased to approximately HK$4,133,000.
— The Board does not recommend the payment of any interim dividend for
the nine months ended 30th September, 2007.

3
The board of Directors (the “Board”) is pleased to announce the unaudited
condensed consolidated results of the Group for the nine months ended 30th
September, 2007, together with the comparative figures for the correeponding
period in 2006 are set out as follows:
CONDENSED CONSOLIDATED INCOME STATEMENT

For the nine months ended 30th September, 2007
Three months ended Nine months ended
30th September, 30th September,
2007 2006 2007 2006

Notes HK$’000 HK$’000 HK$’000 HK$’000
(unaudited) (unaudited (unaudited) (unaudited
and restated) and restated)
CONTINUING OPERATIONS

Revenue 2 77,244 19,007 120,104 46,439
Cost of sales (50,363) (11,511 ) (78,328 ) (32,850 )
GROSS PROFIT 26,881 7,496 41,776 13,589

Other income 5,225 78 5,804 170
Selling and distribution costs (2,067) (554 ) (3,592 ) (1,647)
Administrative expenses (16,314) (3,903 ) (31,541 ) (11,876 )
Fair value changes on
convertible bonds 436 — 436 —
Other expenses — (48 ) (9,051 ) (2,455)
Finance costs (4,372) (1,074 ) (6,821 ) (2,956)
PROFIT (LOSS) BEFORE TAXATION 9,789 1,995 (2,989 ) (5,175)
Taxation 4 (168) — (168) —
PROFIT (LOSS) FOR THE PERIOD
FROM CONTINUING OPERATIONS 9,621 1,995 (3,157 ) (5,175)
DISCONTINUED OPERATIONS

Profit (Loss) for the period from
discontinued operations — 291 435 (73 )
Loss on disposal of subsidiaries — — (838) —
PROFIT (LOSS) FOR THE PERIOD 9,621 2,286 (3,560 ) (5,248)
Attributable to:
Equity holders of the parent 8,460 2,217 (4,133 ) (5,208)
Minority interests 1,161 69 573 (40 )
9,621 2,286 (3,560 ) (5,248)
Interim dividend 5 — — — —
EARNINGS (LOSS) PER SHARE 6
From continuing and
discontinued operations:
Basic HK0.452 cent HK0.167 cent HK(0.221) cent HK(0.393) cent
Diluted HK0.449 cent HK0.166 cent HK(0.216) cent HK(0.388) cent
From continuing operations:
Basic HK0.452 cent HK0.145 cent HK(0.199) cent HK(0.387) cent
Diluted HK0.449 cent HK0.144 cent HK(0.195) cent HK(0.383) cent

4
Notes:
1. BASIS OF PREPARATION AND SIGNIFICANT ACCOUNTING POLICIES

The unaudited condensed consolidated income statement have been prepared under
the historical cost basis and in accordance with Hong Kong Financial Reporting
Standards issued by the Hong Kong Institute of Certified Public Accountants. In addition,
the unaudited condensed consolidated income statement include applicable disclosures
required by the GEM Listing Rules and by the Hong Kong Companies Ordinance. The
significant accounting policies adopted are the same as those adopted in the audited
consolidated financial statements of the Company for the year ended 31st December,
2006.
2. REVENUE

Revenue represents the net amounts received and receivable for goods sold and services
rendered by the Group to outside customers, less returns and allowances. An analysis
of the Group’s revenue for the nine months ended 30th September, 2007 is as follows:
Three months ended Nine months ended
30th September, 30th September,
2007 2006 2007 2006

HK$’000 HK$’000 HK$’000 HK$’000
Sales of piped natural gas and
coal gas 42,260 4,244 60,137 8,813
Connection revenue from gas
pipeline construction 27,690 10,313 43,808 21,851
Sales of liquefied
petroleum gas 6,826 4,408 15,493 15,601
Sales of stoves and
related equipment 468 42 666 174
77,244 19,007 120,104 46,439

5
3. BUSINESS AND GEOGRAPHICAL SEGMENTS

Business segments
For management purpose, the Group is currently organised into three major operating
divisions: Sales of piped natural gas and coal gas, gas pipeline construction and sales of
liquefied petroleum gas. These divisions are the basis on which the Group reports its
primary segment information. The Group’s software business including development
and sale of software and software maintenance services has permanently ceased since
10th May, 2007.
Segment information about these divisions is presented below:
Income statement for the nine months ended 30th September, 2007
Discontinued
Continuing operations operations
Sales of
Sales of piped Gas liquefied
natural gas pipeline petroleum Other Software
and coal gas construction gas operations Total business Consolidated
HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000
Revenue 60,137 43,808 15,493 666 120,104 1,952 122,056
Segment results 11,394 28,289 1,902 191 41,776 1,022 42,798
Unallocated
corporate income 6,252
Unallocated
corporate expenses (45,621 )
Finance costs (6,821)
Loss before taxation (3,392)
Taxation (168 )
Loss for the period (3,560)

6
3. BUSINESS AND GEOGRAPHICAL SEGMENTS (Continued)
Income statement for the nine months ended 30th September, 2006
Discontinued
Continuing operations operations
Sales of
Sales of piped Gas liquefied
natural gas pipeline petroleum Other Software
and coal gas construction gas operations Total business Consolidated
HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000
Revenue 8,813 21,851 15,601 174 46,439 3,531 49,970
Segment results (213 ) 13,483 (1,365 ) 38 11,943 1,580 13,523
Unallocated
corporate income 173
Unallocated
corporate expenses (15,988 )
Finance costs (2,956 )
Loss before taxation (5,248 )
Taxation —
Loss for the period (5,248 )
4. TAXATION

The statutory tax rates for Hong Kong Profits Tax and the PRC Enterprise Income Tax
are 17.5% (2006: 17. 5%) and 33% (2006: 33%) respectively.
No provision for Hong Kong Profits Tax has been made as the Group had no assessable
profits arising in Hong Kong during the periods.
Pursuant to the relevant laws and regulations in the People’s Republic of China (“PRC”),
the Company’s PRC subsidiaries and jointly controlled entity are exempted from PRC
income tax for two years starting from their first profit-making year, followed by a 50%
reduction for the next three years. Jiyuan Zhongyu Gas Co, Ltd., an indirect non wholly-
owned subsidiary of the Company, is entitled to a 50% reduction in income of PRC for
the year ended 31st December, 2006 and two years ending 31st December, 2008. Also,
Jiyuan Zhongyu Gas Co, Ltd. is fully exempted from the 3% attributable to local
municipal income tax. Accordingly, Jiyuan Zhongyu Gas Co. Ltd. is subject to PRC
corporate income tax at an applicable income tax rate of 15% for the year ending 31st
December, 2007. Save as disclosed herein, no provision for PRC income tax has been
made as all of the Group’s PRC subsidiaries and jointly controlled entity either had no
assessable profits arising in the PRC or were exempted from PRC income tax during
the periods.

7
5. INTERIM DIVIDEND

The Board does not recommend the payment of any interim dividend for the nine
months ended 30th September, 2007 (2006: Nil).
6. EARNINGS (LOSS) PER SHARE
From continuing and discontinued operations
The calculation of the basic and diluted earnings (loss) per share from continuing and
discontinued operations attributable to the ordinary equity holders of the parent is
based on the following data:
Three months ended Nine months ended
30th September, 30th September,
2007 2006 2007 2006

HK$’000 HK$’000 HK$’000 HK$’000
Profit (Loss) for the period from
continuing and discontinued
operations attributable to
equity holders of the parent 8,460 2,217 (4,133) (5,208)
2007 2006 2007 2006

’000 ’000 ’000 ’000
Number of shares
Weighted average number of
ordinary shares for the
purposes of basic earnings
(loss) per share 1,871,682 1,325,186 1,871,682 1,325,186
Effect of dilutive potential
ordinary shares
Share options 13,969 12,752 43,755 15,676
Weighted average number
of ordinary shares for
the purposes of diluted
earnings (loss) per share 1,885,651 1,337,938 1,915,437 1,340,862

8
6. EARNINGS (LOSS) PER SHARE (Continued)
From continuing operations
The calculation of the basic and diluted earnings (loss) per share from continuing
operations attributable to the ordinary equity holders of the parent is based on the
following data:
Three months ended Nine months ended
30th September, 30th September,
2007 2006 2007 2006

HK$’000 HK$’000 HK$’000 HK$’000
Profit (Loss) for the period
attributable to equity holders
of the parent 8,460 2,217 (4,133) (5,208)
Less: Profit (Loss) for the period
from discontinued operations — 291 (403) (73)
Profit (Loss) for the period from
continuing operations attributable
to equity holders of the parent 8,460 1,926 (3,730) (5,135)
2007 2006 2007 2006

’000 ’000 ’000 ’000
Number of shares
Weighted average number of
ordinary shares for the
purposes of basic earnings
(loss) per share 1,871,682 1,325,186 1,871,682 1,325,186
Effect of dilutive potential
ordinary shares
Share options 13,969 12,752 43,755 15,676
Weighted average number
of ordinary shares for
the purposes of diluted
earnings (loss) per share 1,885,651 1,337,938 1,915,437 1,340,862

9
7. RESERVES

Attributable to equity holders of the parent
Share Accumulated
Share Option Merger Other Translation profits Total
premium reserve reserve reserve reserve losses equity
HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000
At 1st January, 2006 145,901 2,408 3,740 7,607 607 (6,284 ) 153,979
Recognition of
equity-settled
share based payment — 2,408 — — — — 2,408
Los fr the priod ———— (5,208)(5,)
At 30th September,
2006 145,901 4,816 3,740 7,607 607 (11,492 ) 151,179
At 1st January,
2007 145,901 4,816 3,740 7,607 7,436 572 170,072

Issue of shares 430,895 — — — — — 430,895
Share issue expenses (16,715 ) — — — — — (16,715 )
Issue of shares on exercise
of share options 948 (199 ) — — — — 749
Recognition of
equity-settled
share based payment — 9,051 — — — — 9,051
Disposal of subsidiaries — — (3,740 ) — — 3,740 —
Exchange differences arising
on translation of foreign
operations recognised
directly in equity ————(1,046)—(1,046)
Los fr the priod —(4,13)(4,13)
At 30th
September, 2007 561,029 13,668 — 7,607 6,390 179 588,873
The merger reserve of the Group represents the difference between the nominal value
of the share capital of a subsidiary acquired pursuant to the group reorganisation
completed on 21st May, 2001 and the nominal value of the share capital of the Company
issued in exchange thereof.

10
8. ACQUISITIONS, DISPOSAL, SIGNIFICANT INVESTMENTS AND FUND RAISING
ACTIVITIES

On 22nd January, 2007, the Group and &i4;\"! (Henan Province
Coalbed Methane Development and Utilisation Company Limited) (“Henan Methane”)
entered into a joint venture agreement (the “JV Agreement”), pursuant to which&
i4;\"! (Henan Zhongyu Coalbed Methane Development and
Utilisation Company Limited) (“Zhongyu Coalbed Methane”) is jointly established.
Zhongyu Coalbed Methane engages principally in the exploration, exploitation,
development and production of coalbed methane in Henan Province, the PRC. Upon
establishment, the Group holds 75% equity interests in Zhongyu Coalbed Methane with
the remaining 25% equity interests in Zhongyu Coalbed Methane being held by Henan
Methane. Zhongyu Coalbed Methane has been accounted for as an indirect non wholly-
owned subsidiary of the Company. On 9th April, 2007, a supplementary joint venture
agreement (the “Supplementary JV Agreement “) to the JV Agreement was entered into
between the Group and Henan Methane, pursuant to which the joint development
area of coalbed methane by Zhongyu Coalbed Methane would be extended from Jiaozuo,
Henan Province, the PRC to the mine areas legally owned and controlled by Henan
Methane situated at Jiaozuo, Zhengzhou, Pingdingshan (including Yuzhou and Ruzhou),
Hebi, Yima, Yongxia. All of these areas are located at Henan Province, the PRC. According
to the Supplementary JV Agreement, the Group is the exclusive sole joint venture
partner of Henan Methane in these areas and without prior written consent from the
Group, Henan Methane will not form any joint venture engaging in similar business
with other third parties. The details of above had been disclosed in the announcements
of the Company dated 22nd January, 2007 and 11th April, 2007 respectively and the
circular of the Company dated 12th February 2007.
On 1st March, 2007, Hezhong Investment Holding Company Limited (“Hezhong”), the
substantial shareholder of the Company, entered into the placing and subscription
agreement with First Shanghai Securities Limited, being the placing agent and the
Company, pursuant to which Hezhong agreed to place, through the placing agent,
265,000,000 shares of the Company (the “Shares”) beneficially owned by Hezhong to
not less than six placees at a price of HK$0.42 per Share (the “Placement A”). On the
same date, the Company has conditionally agreed to allot and issue, and Hezhong has
agreed to subscribe for 265,000,000 new Shares at a price of HK$0.42 per Share. The
Placement A was completed on 8th March, 2007 and the total proceeds raised as a
result of the Placement A were HK$111,300,000. The details of above had been disclosed
in the announcement of the Company dated 1st March, 2007.
On 30th April, 2007, the Company and an independent third party entered into the sale
and purchase agreement, pursuant to which the Company agreed to sell and the
purchaser agreed to purchase 10,311 shares of US$1.00 in the issued share capital of
Cyber Dynamic Enterprise Limited, the then wholly-owned subsidiary of the Company
and the shareholder’s loan owed by Cyber Dynamic Enterprise Limited and its
subsidiaries to the Company for a total consideration of HK$40,000 payable in cash.
The completion of the aforesaid sale and purchase agreement was held on 10th May,
2007. Upon completion of the aforesaid sale and purchase agreement, the Group ceased
to be interested on the software business including the development and distribution
of HRM software system and provision of maintenance and consulting service. The
details of above had been disclosed in the announcement and the circular of the
Company dated 30th April, 2007 and 21st May, 2007 respectively.

11
On 7th May, 2007 and 16th May, 2007 respectively, the Group and Hezhong entered
into the sale and purchase agreement and supplement deed respectively, pursuant to
which Hezhong agreed to sell and the Group agreed to purchase five gas projects,
namely Jiazuo China-Gas City Gas Development Co. Ltd., Jiaozuo China-Gas Gas Project
Install Co. Ltd., Jiyuan Zhongyu Gas Co. Ltd., Luohe Zhongyu Gas Co. Ltd. and Luohe
Zhongyu Gas Project Install Co. Ltd. (collectively “Acquired Projects”) for a total
consideration of RMB300,000,000 payable by cash and by allotment and issue of Shares.
Out of the total consideration for the aforesaid acquisition, RMB222,504,384 was paid
by cash and the remaining RMB77,495,616 was settled by allotment and issue of
72,480,000 Shares at a price of HK$1.08 each. The aforesaid sale and purchase
agreement and the transactions contemplated thereunder was completed on 17th
August, 2007. Upon completion, the Acquired Projects have become indirectly non
wholly-owned subsidiaries of the Company. The details of above had been disclosed in
the announcements dated 7th May, 2007, 16th May, 2007 and 9th August,2007
respectively and the circular of the Company dated 24th July, 2007.
On 25th May, 2007, Hezhong entered into the placing and subscription agreement with
Morgan Stanley & Co. International plc, the placing agent and the Company, pursuant
to which Hezhong agreed to place, through the placing agent, 279,000,000 Shares
beneficially owned by Hezhong to not less than six placees at a price of HK$1.165 per
Share (the “Placement B”). On the same date, the Company has conditionally agreed to
allot and issue, and Hezhong has agreed to subscribe for 279,000,000 new Shares at a
price of HK$1.165 per Share. The Placement B was completed on 7th June, 2007 and
the total proceeds raised as a result of the Placement B were HK$325,035,000. The
details of above had been disclosed in the announcements of the Company dated 28th
May, 2007 and 7th June, 2007 respectively.
On 28th May, 2007, the Company entered into a bond subscription agreement with
five independent subscribers who have conditionally agreed to subscribe and pay for
convertible bonds issued by the Company in an aggregate principal amount of
US$40,000,000. The aforesaid bond subscription agreement and the transactions
contemplated thereunder were completed on 26th June, 2007.The details of above
had been disclosed in the announcements dated 28th May, 2007 and 26th June, 2007
respectively and the circular of the Company dated 4th June, 2007.
Save as disclosed above, the Group had no acquisitions, disposals, significant investments
nor fund raising activities for the nine months ended 30th September, 2007.

12
COMPETING INTEREST

During the period under review, none of the directors, the management
shareholders or substantial shareholders of the Company or their respective
associates (as defined in the GEM Listing Rules) had any interest in a business
which competed with or might compete with the business of the Group.
OPERATIONAL AND FINANCIAL REVIEW

Continuing Operations
Revenue
Revenue increased by 158.6% to approximately HK$120,104,000

for the nine
months ended 30th September, 2007 from approximately HK$46,439,000 in the
corresponding period in 2006. The increase in revenue was mainly attributable to
an increase in (i) Connection revenue from gas pipeline construction; and (ii)
Sales of piped natural gas and coal gas. The increase in Connection revenue from
gas pipeline construction was mainly attributable to the increase in the number
of households connected to the existing gas pipeline networks resulting from the
efforts of the Group’s sales and marketing teams and the expansion of the Group’s
gas business by acquiring the Acquired Projects in August 2007. During the period
under review, the number of new gas pipeline connection made to residential
households and industrial/commerical customers was 15,599 households (2006:
9,531 households) and 47 customers (2006: 13 customers) respectively. The
increase in Sales of piped natural gas and coal gas was mainly attributable to the
increase in the number of households and industrial/commercial users connected
as well as the increase in the total gas consumption both resulting from the
expansion of the Group’s gas business by acquiring the Acquired Projects in August
2007. During the period under review, the total unit of piped natural gas and coal
gas provided to residential households and industrial/commercial customers was
approximately 7,796,000m
3
and 31,608,000m
3
respectively (2006: 375,000m
3
and
3,661,000m
3
respectively) and liquified petroleum gas sold by the Group to its
customers was approximately 3,048 tons (2006: 3:027 tons). During the period
under review, the Group did not record any revenue derived from coalbed methane
(“CBM”) projects, which are the Group’s upstream business. The CBM project in
Jiaozuo, Henan Province, the PRC has commenced its operations. For the nine
months ended 30th September, 2007, the Group has successfully completed drilling
of 22 vertical wells and has commenced to drill additional 13 vertical wells in
Jiaozuo. Fracturing process, which is the second phase in CBM extraction, for the
aforesaid 22 completed vertical wells had been started in September 2007. It is
expected the commercial production of CBM will start by the mid of 2008.

13
Gross profit margin
The overall gross profit margin amounted to approximately 34.8% for the nine
months ended 30th September, 2007 from approximately 29.3% in the
corresponding period in 2006. The increase was mainly attributable to the increase
in the proportion of turnover derived from connection revenue from gas pipeline
construction which has a relatively high gross profit margin, partially offset by
the increase in proportion of the turnover derived from Sales of piped natural gas
and coal gas which has a relatively low gross profit margin.
Other income
Other income increased to approximately HK$5,804,000 for the nine months
ended 30th September, 2007 from approximately HK$170,000 in the
corresponding period in 2006. The increase in other income was mainly
attributable to the increase in (i) other interest income from interest bearing loan
granted to independent third parties and (ii) bank interest income.
Selling and distribution costs
Selling and distribution costs increased by 118.1% to approximately HK$3,592,000
for the nine months ended 30th September, 2007 from approximately
HK$1,647,000 in the corresponding period in 2006. The increase in selling and
distribution costs was mainly attributable to the increase in (i) salaries; and (ii)
transportation expenses for distribution of gas, both resulting from the expansion
of the piped gas business by the acquisition of Acquired Projects in August 2007.
Administrative expenses
Administrative expenses increased by 165.6% to approximately HK$31,541,000
for the nine months ended 30th September, 2007 from approximately
HK$11,876,000 in the corresponding period in 2006. The increase in administrative
expenses was mainly attributable to the formation of a joint venture company,
namely Zhongyu Coalbed Methane, the establishment of a wholly-owned subsidiary,
namely Zhongyu (Henan) Energy Holdings Limited (“Zhongyu Energy”) in Henan
Province, the PRC in April 2007 and the expansion of the piped gas business by
acquiring the Acquired Projects in August 2007. Zhongyu Energy is principally
engaged in investment holding and provision of management services to the
Group.
Other expenses
Other expenses increased by 268.7% to approximately HK$9,051,000 for the nine
months ended 30th September, 2007 from approximately HK$2,455,000 in the
corresponding period in 2006. Other expenses for the period under review was
one-off recognition of equity-settled share based payments resulting from the
issuance of share options by the Company on 29th March, 2007.

14
Finance costs
Finance costs increased by 130.8% to approximately HK$6,821,000 for the nine
months ended 30th September, 2007 from approximately HK$2,956,000 for the
corresponding period in 2006. The increase was mainly attributable to the increase
in interest paid on bank borrowings resulting from the increase in the bank
borrowings and the bank interest rate.
Taxation
For the nine months ended 30th September, 2007, the taxation was approximately
HK$168,000 (2006: Nil) derived from Jiyuan Zhongyu Gas Co. Ltd,, one of the
Acquired Projects. Jiyuan Zhongyu Gas Co. Ltd. is entitled to a 50% reduction in
income of the PRC for the year ended 31st December, 2006 and two years ending
31st December, 2008. Also, Jiyuan Zhongyu Gas Co, Ltd. is fully exempted from
the 3% attributable to local municipal income tax. Accordingly, the applicable
income tax rate of Jiyuan Zhongyu Gas Co. Ltd. is 15% for the year ending 31st
December, 2007.
Save as disclosed herein, no provision for the PRC income tax was made for nine
months ended 30th September, 2006 and 2007. This was because all of the PRC
subsidiaries either have no assessable profits arising in the PRC or were exempted
from PRC income tax during 2006 and 2007.
Discontinued Operations
In view of the growing business opportunity in relation to the Group’s coalbed
methane and natural gas businesses, the Directors consider to streamline the
principal businesses of the Group to focus mainly on the coalbed methane and
natural gas businesses. Further, the Group recorded a consistence unaudited
consolidated net losses in relation to its software operations, including
development and sale of software and software maintenance services for the two
years ended 31 December 2006 of approximately HK$1,672,000 and HK$480,000
respectively. Considering that there are no signs of rebound and the software
operations not making any significant contribution to the Group, the Directors
consider that the disposing of the software operations will cut further losses for
the Group. On the other hand, the Board had recently approached by an
independent third party who has indicated to the Group that he is willing to
acquire software operations. Accordingly, the Group disposed of its software
operations on 30th April, 2007. Upon completion of the aforesaid disposal on 10th
May, 2007, the software operations has permanently ceased. For the nine months
ended 30th September, 2007, the Group recorded a profit from discontinued
operations of approximately HK$435,000 and a loss on disposal of subsidiaries of
approximately HK$838,000.
Profit attributable to equity holders
As a result of the above, loss attributable to equity holders of the parent decreased
to approximately HK$4,133,000 for nine months ended 30th September, 2007
from approximately HK$5,208,000 for the corresponding period in 2006.

15
Prospects
Due to the growing prosperity, population and annual gross domestic production
per capita in the PRC as well as the increasing awareness of environment protection
in the PRC, we believe that the demand for the natural gas in the PRC would increase
as natural gas is considered to be an environmentally clean source of energy.
Accordingly, we are still positive about the boom of the natural gas market in the PRC
in the near future.
To secure its gas supply, the Group tapped into the upstream CBM business in
early 2007 by acquiring exclusive rights in eight coal blocks located at Henan
Province, the PRC to explore, exploit, develop and produce CBM. As CBM is a
substitute for natural gas, we believe tapping into the upstream CBM business
could facilitate the development of the Group’s downstream gas distribution
business in Henan Province so as to boost the Group’s revenue derived from both
gas pipeline construction and sales of piped gas.
In respect of the Group’s downstream gas distribution operations, the Group will
devote much effort to connecting more users to the Group’s gas pipeline networks
in order to increase the Group’s turnover derived from connection revenue from gas
pipeline construction and sales of piped gas and in turn, improve its financial results.
The Group will continue to focus on the exploration and the development of gas
related business. The Group will strive to obtain more exclusive gas operations in the
PRC in order to enhance its market position and to improve its financial performance.
In order to improve the Group’s operating results, the Group will continue to
implement stringent cost control measures, such as combining procurement
volumes of construction materials and consolidating back-office operations such
as accounting and administration.

16
DISCLOSURE OF INTERESTS

(a) Directors’ and chief executives’ interests and short positions in the
securities of the Company and its associated corporations
As at 30th September, 2007, the interests and short positions of the Directors
and the chief executive of the Company in the shares, underlying shares or
debentures of the Company and its associated corporations (within the
meaning of Part XV of the SFO) which were required (i) to be notified to the
Company and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV
of the SFO (including interests and short positions which they were taken
or deemed to have under such provisions of the SFO); or (ii) pursuant to
section 352 of the SFO, to be entered in the register referred to therein; or
(iii) pursuant to Rule 5.46 to 5.67 of the GEM Listing Rules, to be notified to
the Company and the Stock Exchange, were as follows:
Long positions in the Shares
Nature of Approximate
Shares and/or percentage of
underlying Type of issued share
Name of Directors Notes Shares Interests capital
Mr. Wang Wenliang 1 954,987,542 Beneficial and 49.09%
interested in
corporation
Mr. Hao Yu 2 1,009,989,542 Beneficial and 51.90%
interested in
corporation
Mr. Lu Zhaoheng 3 5,004,000 Beneficial 0.26%
Mr. Xu Yongxuan 3 5,004,000 Beneficial 0.26%
Notes:
1. Among these Shares and/or underlying Shares, 944,985,542 Shares are held by
Hezhong. Mr. Wang Wenliang is beneficially interested in 60% of the issued share
capital of Hezhong. The remaining 10,002,000 underlying Shares are to be allotted
and issued upon exercise the rights attaching to the share options granted under
the share option scheme adopted by the Company on 24th October, 2003.
2. Among these Shares and/or underlying Shares, 944,985,542 Shares are held by
Hezhong. Mr. Hao Yu is interested in 40% of the issued share capital of Hezhong.
The remaining 65,004,000 underlying Shares are to be allotted and issued upon
exercise the rights attaching to the share options granted under the share option
scheme adopted by the Company on 24th October, 2003.
3. These underlying Shares are to be allotted and issued upon exercise the rights
attaching to the share options granted under the share option scheme adopted
by the Company on 24th October, 2003.

17
Save as disclosed above, as at 30th September, 2007, none of the Directors
nor the chief executive of the Company had or was deemed to have any
interests and short positions in the shares, underlying shares or debentures
of the Company or its associated corporations (within the meaning of Part
XV of the SFO) which were required (i) to be notified to the Company and
the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO
(including interests and short positions which they were taken or deemed
to have under such provisions of the SFO); or (ii) are required, pursuant to
section 352 of the SFO, to be entered in the register referred to therein; or
(iii) are required, pursuant to Rules 5.46 to 5.67 of the GEM Listing Rules, to
be notified to the Company and the Stock Exchange.
(b) Persons who have an interest or short position which is discloseable
under Divisions 2 and 3 of Part XV of the SFO
So far as is known to the Directors and the chief executive of the Company,
as at 30th September, 2007, the following person (not being Directors or
chief executive of the Company) or corporation had, or was deemed to have,
interests or short positions in the shares or underlying shares of the Company
which would fall to be disclosed to the Company and the Stock Exchange
under the provisions of Divisions 2 and 3 of Part XV of the SFO or who were
directly or indirectly interested in 10% or more of the nominal value of any
class of share capital carrying rights to vote in all circumstances at general
meetings of any member of the Group:
Long positions in the Shares
Approximate
Number of percentage
Name of Shareholder Type of interests Shares of interests
Hezhong Beneficial 944,985,542 48.56%
Perry Capital (Asia) Limited Deemed/Beneficial 230,501,475 11.84%
Perry Capital LLC Deemed/Beneficial 230,501,475 11.84%
Perry Corp. Deemed/Beneficial 230,501,475 11.84%
Perry Richard Cayne Deemed/Beneficial 230,501,475 11.84%
Perry Partners International, Inc. Deemed/Beneficial 194,573,314 10.00%
Note:
1. Hezhong is beneficially interested in 944,985,542 Shares. Mr. Wang Wenliang and
Mr. Hao Yu is beneficially interested in 60% and 40% of the issued share capital
of Hezhong respectively.

18
2. According to the disclosure of interests pages as shown in the website of the
Stock Exchange, Perry Richard Cayne holds as to 100% equity interests of Perry
Corp, Perry Corp. holds as to 40% equity interest of Perry Capital LLC. Perry
Capital LLC holds as to 100% equity interest of Perry Capital (Asia) Limited. Apart
from the information ascertained in the disclosure of interests pages as shown
in the website of the Stock Exchange, the Company has no further information.
Save as disclosed above, as at 30th September, 2007, the Directors and the
chief executive of the Company were not aware of any other person (other
than the Directors and the chief executive of the Company) who had, or
was deemed to have, interests or short positions in the shares or underlying
shares of the Company (including any interests in options in respect of such
capital), which would fall to be disclosed to the Company and the Stock
Exchange under the provisions of Divisions 2 and 3 of Part XV of the SFO, or,
who was directly or indirectly interested in 10% or more of the nominal
value of any class of share capital carrying rights to vote in all circumstances
at general meetings of any member of the Group.
CODE OF CORPORATE GOVERNANCE PRACTICES

The Company has complied with all the code provisions set out in the Code on
Corporate Governance Practices contained in Appendix 15 of the GEM Listing
Rules with deviation as mentioned below.
Code provision A.4.1 provides that non-executive directors should be appointed
for specific term, subject to re-election. The Company has deviated from this
provision in that all non-executive Directors are not appointed for specific term.
They are, however, subject to retirement by rotation at each annual general meeting
of the Company and eligible for re-election according to the Company’s articles
of association.
AUDIT COMMITTEE

The Company’s Audit Committee, comprising Mr. Wang Shunlong, Dr. Luo Yongtai
and Mr. Hung, Randy King Kuen, as the independent non-executive Directors, has
reviewed with the Company’s management the accounting principles and practices
adopted by the Group and discussed internal controls and financial reporting
matters including a review of the unaudited results of the Group for the nine
months ended 30th September, 2007.
BOARD PRACTICE AND PROCEDURES

The Company has complied with the requirement of Board Practices and
Procedures as set out in Rules 5.34 to 5.45 of the GEM Listing Rules during the
nine months ended 30th September, 2007.

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PURCHASE, SALE OR REDEMPTION OF SHARES

During the nine months ended 30th September, 2007, the Company has purchased
a total of 2,730,000 Shares on the Stock Exchange at a price range from HK$0.90
to HK$0.97 per Share.
Save as disclosed above, neither the Company nor any of its subsidiaries has
purchased, sold or redeemed any of the Shares during the nine months ended
30th September, 2007.
BOARD OF DIRECTORS

As at the date of this announcement, the Board comprises Mr. Wang Wenliang
(Chairman), Mr. Hao Yu (Chief Executive Officer), Mr. Lu Zhaoheng and Mr. Lui
Siu Keung (Chief Financial Officer), as the executive Directors, Mr. Xu Yongxuan
(Vice-Chairman), Mr. Wang Lei and Mr. Nicholas John Ashley Rigg, as the non-
executive Directors and Mr. Wang Shunlong, Dr. Luo Yongtai and Mr. Hung, Randy
King Kuen, as the independent non-executive Directors.
By Order of the Board
Wang Wenliang
Chairman
Hong Kong, 13th November, 2007
This announcement will remain on the GEM website at www.hkgem.com on
the “Latest Company Announcements” page for at least 7 days from the date of
its posting.