China Energy Development Holdings Limited — Proxy Solicitation & Information Statement 2012

Jun 29, 2012

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 a licensed securities dealer, bank manager, solicitor, professional accountant or other professional adviser.

If you have sold or otherwise transferred all your shares in China Energy Development Holdings Limited, you should at once hand this circular, together with the enclosed form of proxy, to the purchaser(s) or transferee(s) or to the bank, licensed securities dealer or other agent through whom the sale or transfer was effected for transmission to the purchaser or transferee.

Hong Kong Exchanges and Clearing Limited and The Stock Exchange of Hong Kong 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 the Cayman Islands with limited liability)

(Stock Code: 228)

MAJOR TRANSACTION AND

NOTICE OF EXTRAORDINARY GENERAL MEETING

A letter from the board of directors of China Energy Development Holdings Limited is set out on pages 3 to 11 of this circular.

A notice convening the extraordinary general meeting (the ‘‘EGM’’) is set out on pages 18 to 19 of this circular. The EGM is to be held at the Conference Room, 3/F., Nexxus Building, 77 Des Voeux Road Central, Hong Kong on Friday, 20 July 2012 at 2:30 p.m. to approve matters referred to in this circular. Whether or not you are able to attend the EGM, you are requested to complete and return the enclosed form of proxy in accordance with the instructions printed thereon to the Hong Kong branch share registrar and transfer office of the Company, Tricor Tengis Limited, 26/F., Tesbury Centre, 28 Queen’s Road East, Wanchai, Hong Kong as soon as possible and in any event, not less than 48 hours before the respective time appointed for holding the meeting or any adjournment thereof (as the case may be). Completion and return of the form of proxy will not preclude you from attending and voting in person at the EGM or any adjourned meeting thereof should you so wish.

• For identification purposes only

29 June 2012

CONTENTS

	Page
DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	1
LETTER FROM THE BOARD . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	3
APPENDIX I — FINANCIAL INFORMATION OF THE GROUP . . . . . . . . . . . . . . . . . . . . . .	12
APPENDIX II — GENERAL INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	13
NOTICE OF EXTRAORDINARY GENERAL MEETING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	18

– i –

DEFINITIONS

In this circular, the following expressions have the meanings respectively set opposite them unless the context otherwise requires:

‘‘Agreement’’	the agreement dated 28 December 2011 entered into	between
	HPIL and the Purchaser for the sale and purchase of the OGIT
	Sale Shares and OGIT Sale Loan
‘‘Announcement’’	the announcement dated 28 December 2011 issued	by the
	Company in relation to the Disposal
‘‘Board’’	the board of Directors
‘‘Company’’	China Energy Development Holdings Limited, a	company
	incorporated in the Cayman Islands with limited liability, the
	Shares of which are listed on the Stock Exchange (stock code:
	00228)
‘‘Completion’’	the completion of the sale and purchase of the Sale Shares and
	Sale Loan under the Agreement
‘‘Completion Date’’	the third business day after fulfillment or waiver (if applicable) of
	all the conditions precedent immediately prior to Completion) or
	such other date as the Vendor and the Purchaser may	agree in
	writing
‘‘Consideration’’	the consideration payable by the Purchaser to the Vendor for the
	Disposal
‘‘Directors’’	the directors of the Company
‘‘Disposal’’	the disposal of the OGIT Sale Shares and the OGIT Sale	Loan by
	the Vendor to the Purchaser pursuant to the Agreement
‘‘Disposed Company’’/‘‘OGIT’’	Ocean Grace Investments Limited, a company incorporated in
	Hong Kong and wholly owned by the Vendor
‘‘EGM’’	the extraordinary general meeting to be held by the Company to
	consider and, if thought fit, approve the Agreement
‘‘Group’’	the Company and its subsidiaries
‘‘HK$’’	Hong Kong dollars, the lawful currency for the time	being of
	Hong Kong
‘‘Hong Kong’’	the Hong Kong Special Administrative Region of the	People’s
	Republic of China

– 1 –

DEFINITIONS

‘‘Independent Third Party(ies)’’ any person who himself is, and (in the case of corporate entity) its ultimate beneficial owners are, to the best of the Directors’ knowledge, information and belief, having made all reasonable enquiries, third parties independent of the Company and the connected person (as defined in the Listing Rules) of the Company

• ‘‘Latest Practicable Date’’ 26 June 2012 being the latest practicable date for the purpose of ascertaining certain information contained herein

• ‘‘Listing Rules’’ the Rules Governing the Listing of Securities on the Stock Exchange

• ‘‘Long Stop Date’’ on or before 31 July 2012 or such other date as may be agreed in writing between the Purchaser and the Vendor

‘‘OGIT Sale Loan’’ all the interests, benefits and rights of and in the shareholder’s loan owed by the OGIT to the Vendor as at the Completion Date, the amount of which as at the date of the Agreement is HK$5,900,000 ‘‘OGIT Sale Shares’’ 2 shares in the issued share capital of OGIT, representing its entire issued share capital, to be sold by the Vendor to the Purchaser pursuant to the Agreement

• ‘‘Parties’’ the parties to the Agreement and ‘‘Party’’ shall mean any one of them

• ‘‘Purchaser’’ Speedy Fortune Limited, an Independent Third Party

• ‘‘SFO’’ the Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong)

• ‘‘Shareholder(s)’’ holder(s) of the Share(s)

• ‘‘Shares’’ ordinary shares of HK$0.05 each in the capital of the Company

• ‘‘Stock Exchange’’ The Stock Exchange of Hong Kong Limited ‘‘Vendor’’ or ‘‘HPIT’’ Hon Po International Limited, a company incorporated in the British Virgin Island and a wholly-owned subsidiary of the Company

• ‘‘%’’ per cent.

– 2 –

LETTER FROM THE BOARD

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(Incorporated in the Cayman Islands with limited liability)

(Stock Code: 228)

Executive Directors: Mr. Zhao Guoqiang Mr. Chui Kwong Kau Mr. Liu Baohe Mr. Zhang Zhenming Mr. Huang Changbi

Registered Office: Cricket Square Hutchins Drive P.O. Box 2681 Grand Cayman KY1-1111 Cayman Islands

Independent Non-executive Directors:

Mr. Fu Wing Kwok, Ewing Mr. Sun Xiaoli Mr. Fu Dali

Head office and principal place of business in Hong Kong: Units 5611–12, 56/F., The Center, 99 Queen’s Road Central Central, Hong Kong

29 June 2012

To the Shareholders

Dear Sir or Madam,

MAJOR TRANSACTION AND NOTICE OF EXTRAORDINARY GENERAL MEETING

INTRODUCTION

Reference is made to the Announcement whereby the Board announces that on 28 December 2011 (after trading hours), the Vendor, entered into the Agreement with the Purchaser, an Independent Third Party, whereby the Vendor has agreed to sell, and the Purchaser has agreed to purchase, the OGIT Sale Shares and the OGIT Sale Loan for an aggregate consideration of HK$5,900,000, which shall be settled in cheque or cash upon Completion. The OGIT Sale Shares represent the entire issued ordinary shares of the Disposed Company and the OGIT Sale Loan represents all amounts due to the Vendor by the Disposed Company as at the date of the Agreement.

The Disposal constitutes a major transaction for the Company under Chapter 14 of the Listing Rules and is therefore subject to the approval of the Shareholders at the EGM. As no Shareholder has any interest in the Disposal which is different from other Shareholders, no Shareholder is required to abstain from voting in respect of the proposed ordinary resolution to approve the Agreement at the EGM.

The purpose of this circular is to provide you with details of the Agreement and a notice of EGM.

• For identification purposes only

– 3 –

LETTER FROM THE BOARD

THE AGREEMENT

• Date 28 December 2011 (after trading hours)

• Parties Vendor: Hon Po International Limited Purchaser: Speedy Fortune Limited

The Purchaser is principally engaged in investment holding. To the best of the information, knowledge and belief of the Directors having made all reasonable enquiry, some of the ultimate beneficial shareholders of the Purchaser are also the directors of the Disposed Company. However, as each of them together with their respective concert parties individually holds not more than 30% of the issued share capital of the Purchaser and has no shareholding interest or directorship in the Company (save for being directors of the Disposed Company), the Purchaser is an Independent Third Party. None of the ultimate beneficial owners of the Purchases has any shareholding or directorship in the Company. Some of the beneficial owners of the Purchaser are directors of subsidiaries of the Company.

Assets to be disposed

The assets to be disposed comprise of the OGIT Sale Shares, representing the entire issued ordinary shares of the Disposed Company, and the OGIT Sale Loan, representing all amounts due to the Vendor by the Disposed Company as at the Completion Date. The major assets held by the Disposal Company are property, plant and equipment and the cash and cash equivalents derived in the ordinary course of its business in an aggregate amount of approximately HK$4,235,000.

Consideration

The aggregate Consideration of HK$5,900,000 shall be paid by the Purchaser to the Vendor in cheque or cash upon Completion.

The Consideration was arrived at after arm’s length negotiations between the parties with reference to (a) the audited net liabilities of the Disposed Company as at 31 December 2011 of approximately HK$7,323,000; and (b) the face value of the OGIT Sale Loan of HK$5,900,000 as at 31 December, 2011.

In the event that the aggregate amount of the OGIT Sale Loan as at the Completion Date is more than or less than HK$5,900,000, the Consideration shall be adjusted by increasing or reducing (as the case may be) the amount of the Consideration payable by the Purchaser to the Vendor upon Completion on a dollar-for-dollar basis. As at the Latest Practicable Date, the Sale Loan is approximately HK$5,900,000 and the maximum value of the Consideration will be approximately HK$5,900,000.

In light of the above, the Directors (including the independent non-executive Directors) consider that the Consideration is fair and reasonable.

– 4 –

LETTER FROM THE BOARD

Conditions Precedent

Completion is conditional upon the following conditions being fulfilled and remaining fulfilled by the Purchaser as at Completion:

• (a) the warranties in the Agreement remaining true and accurate in all material respects and not misleading in any material respect at Completion as if repeated at Completion and at all times between the date of the Agreement and Completion; and

• (b) all necessary statutory governmental and regulatory obligations having been complied with and all necessary regulatory authority in Hong Kong, governmental and third party consents and approvals (including those person entitled to any pre-emption rights) and waivers for the purposes of the transactions contemplated under the Agreement having been obtained without any conditions (or subject to other conditions reasonably acceptable to the Parties).

If any of the above conditions precedent has not been fulfilled (or waived by the Purchaser) on or before the Long Stop Date, either the Vendor or the Purchaser shall be entitled to rescind the Agreement by giving written notice to the other and the provisions of the Agreement shall from such date have no further force and effect and no party to the Agreement shall have any liability (without prejudice to the rights of the parties in respect of any antecedent breaches).

All conditions precedent (save for shareholders’ approval requirement) are waivable and the Purchaser has confirmed to the Company that it will not waive any such requirements/conditions relating to shareholders’ approval. As at the Latest Practicable Date, none of the above conditions precedent has been fulfilled by the Purchaser.

Completion

Completion shall take place on or before the Completion Date or such other date as may be agreed by Vendor and the Purchaser in writing subject to the satisfaction or waiver of the above conditions precedent.

INFORMATION ON THE COMPANY AND THE GROUP

The Company is principally engaged in investment holding. The current principal activities of the Group include (i) sales of food and beverages from operation of one Chinese restaurant and sales of food to other restaurants in Hong Kong and (ii) exploration and production of natural gas in People’s Republic of China.

INFORMATION ON THE DISPOSED COMPANY

The Disposed Company is a company incorporated in Hong Kong and is wholly and beneficially owned by the Vendor. The Disposed Company is principally engaged in operating a restaurant in Hong Kong.

– 5 –

LETTER FROM THE BOARD

FINANCIAL INFORMATION ON THE DISPOSED COMPANY

The following are the audited financial information on the Disposed Company for the two years ended 31 December 2010 and 2011 which were prepared in accordance with the accounting policies of Hong Kong Financial Reporting Standards and are extracted from the audited financial statements of the Disposed Company:

	For the twelve	For the twelve	For the twelve	For the twelve
	months ended		months ended
	31 December 2011		31 December 2010
		(audited)		(audited)
		(HK$’000)		(HK$’000)
Turnover		46,567		42,022
Loss before taxation		(150)		(805)
Loss after taxation		(150)		(805)
Net liabilities		(7,323)		(7,173)
Total assets		5,711		5,284

As at 31 December 2011, the audited net liabilities of the Disposed Company were approximately HK$7,323,000.

REASONS FOR AND BENEFITS OF THE DISPOSAL

The Chinese restaurant in Hong Kong has been facing the high rent costs and high inflation, together with the persistent increase in raw materials costs and labour costs pose challenges to the Group. Having considered the uncertain market environment in the Chinese restaurant in Hong Kong, the Board considers that (i) the Disposal would provide a good opportunity to exit the Chinese restaurant market in Hong Kong; (ii) no further capital injection will be required for the OGIT; and (iii) the Company can reallocate its resource to the other investment opportunities.

The Company believes it is in the interest of the Company and Shareholders to dispose of the loss making business and also to dispose of the Disposed Company when there is still a viable purchaser for these types of loss making businesses.

• (i) Around the end of September 2011, after being approached by the Purchaser, the Directors changed their intention on the Chinese restaurant business;

• (ii) The circumstances in operating Chinese restaurant business became more and more difficult especially with the persistent increase in operating costs. The Directors are of the view that taking into account current rental market trends, the rental expenses for the Tokwawan restaurant will be substantially increased by at least 50% when the rental agreement expires in August 2012, other costs such as salaries and food and beverages are also rising, therefore these factors led to the change in the Director’s intention. As mentioned above, this is in the best interest of the Company and Shareholders as a whole;

– 6 –

LETTER FROM THE BOARD

• (iii) The minimum wages legislation launched in 1 May 2011 and the persistent increase in raw materials costs are the major factors for increasing costs. The rising selling price of food and beverages of the restaurant cannot match the increasing cost, leading to the deteriorating profit of the remaining restaurant;

• (iv) Only the Purchaser approached the Company and no other parties were interested in all of its five Chinese restaurants; and

• (v) No other potential buyers being located by Directors and terms of the Disposal were negotiated on an arm’s length commercial basis.

In the past years, the Group had entered into four disposal agreements dated 22 May 2009 and 23 July 2010 with the Purchaser, whereby the Group disposed of four restaurants to the Purchaser. Details of information were set out in the Company’s circulars dated 15 June 2009 and 13 August 2010 respectively.

The reasons for disposing the Disposal Company to the Purchaser instead of to other parties is because (i) the Purchaser had initiated the transaction with the Company; and (ii) no other parties appear to have any interest in the Disposal Company based on rumors in the industry. The Board is aware of the current tough financial climate and given the opportunity to sell at a reasonable price and on reasonable terms, the Board did not believe it was appropriate to ‘‘shop around’’ and lose the chance to dispose of the Disposed Companies especially to willing buyers who were already familiar with the business and thereby minimal due diligence would be required.

After completion of the Disposal, the Group will continue to operate the sales of food and beverages business. The audited revenue from the remaining operation for the year ended 31 December 2011 derived from related companies in which directors of certain subsidiaries have a beneficial interest was approximately HK$27,000,000. The Company expects that it can still generate stable revenue in the foreseeable future.

The Board is therefore of the opinion that the Disposal can strengthen the overall financial position and concentrate its resource on existing or further potential investments of the Group.

The Board is of the view that the terms of the Agreement are on normal commercial terms, which are fair and reasonable and, taking into account the factors above, the entering into of the Agreement is in the interests of the Company and the Shareholders as a whole.

FINANCIAL EFFECT OF THE DISPOSAL

The Directors estimate that upon the Completion, the Group will record a gain from the Disposal of approximately HK$7,291,000, representing the difference between the proceeds of the value of the OGIT Sale Shares and the OGIT Sale Loan in aggregate of approximately HK$5,900,000 plus the amount due to the Group of approximate HK$3,100,000 by OGIT and the disposed net assets of the OGIT as at 31 December 2011 attributable to the Group of approximately HK$1,709,000. The Group’s total assets would increase by approximately HK$3,289,000 and the total liabilities would decrease by approximately HK$4,002,000 respectively subsequent to the Disposal. In addition, turnover and earnings of the Group will decrease and increase respectively as a result of the Disposal.

– 7 –

LETTER FROM THE BOARD

Upon Completion, the Disposed Company will cease to be a subsidiary of the Company and its financial results will not be consolidated into the Group’s financial statements. The Company will cease to hold any shares in the Disposed Company following Completion.

USE OF PROCEEDS

The Directors expect that the net proceeds from the Disposal of approximately HK$5,750,000 (after deducting all relevant fees and expenses) will be used for general working capital such as reducing the account payable and increase the inventory on the sales of food and beverages business segment of the Group.

FINANCIAL AND TRADING PROSPECTS OF THE GROUP

The Chinese restaurant in Hong Kong has been facing the high rental costs increase and high inflation, together with the persistent increase in raw materials costs and labour costs pose challenges to the Group. The Directors consider that the Disposal will strengthen the overall financial and cash position of the Group. The Company will continue to concentrate its resources and implement a tighter cost control on the remaining sales of food and beverages operation in Hong Kong.

The related companies will become the major customers in food and beverages segment of the Company subsequent to the disposal of OGIT. The sales of food and beverages will be a trading business with related companies as major customers. The Directors will continue to keep track of the profitability of the remaining trading business and imply tight costs control to it.

The Group has, through Hon Po (China) Catering Management Limited (‘‘HP Catering’’), been engaged in the sourcing and selling of foods and beverage business since 2005. Before the disposal of certain restaurants in the past few years, HP Catering is the company which mainly provided catering services for the Group. The turnover from external customers and related companies of HP Catering with HP Catering amounted to approximately HK$19,377,000 and HK$27,000,000 in 2010 and 2011 respectively. The Company intends to maintain the sales of foods and beverage operations because it has made steady contribution to the Group in the past. The sustainability of the business depends on the demands by restaurants and the economic environment especially the high staff costs and rental fee. Currently, there are five major customers of HP Catering. Four of them were former subsidiaries of the Group and one named Twin Star Investments Limited located at Windsor House in Causeway Bay and which commenced business around two years ago, is a new customer. Due to the competitive edge in supply logistics, competitive costs structure and solid experience in food and beverage business, management believes that it can continue to respond to its customer’s needs and maintain a successful business relationship with them in the future. Finally, HP Catering has the ability to source reliable suppliers and created a long term relationship with them and for them to support the Group by introducing customers to the Group.

The related companies have commitment to make purchase of foods from the Company at least one year for an amount of not less than in aggregate of HK$20,000,000. The management is of the view that the sale of food and beverages business would be sustainable in the foreseeable future.

– 8 –

LETTER FROM THE BOARD

For the exploration and production segment, the Group has successfully completed the Acquisition of the Totalbuild Investments Group in 2011 which has entered into petroleum contract with China National Petroleum Corporation (‘‘CNPC’’) for the drilling, exploration, exploitation and production of oil and/or natural gas within the specified site located in North Kashi Block, Tarim Basin, Xinjiang, PRC. The term of the Petroleum Contract is for a term of 30 years commencing 1 June 2009.

Under the Petroleum Contract, the Group shall apply its appropriate and advanced technology and management expertise and assign its competent experts to perform exploration, development, and production of natural gas and/or oil within the site. Under the Petroleum Contract, in the event that any oil field and/or gas field is discovered within the site, the development costs shall be borne by CNPC and the Group in the proportion of 51% and 49%, respectively. The oil/gas produced therefrom shall from the date of commencement of production in such oil/gas field, be allocated by CNPC and the Group in the proportion of 51% and 49%, respectively, after deducting the exploration costs, development costs and the operating costs.

The Petroleum Contract covers an exploration period (maximum of 6 years), a development period and production period in which the Group is the operator. The development period of any oil/gas field will start from the date of the completion of the Overall Development Program (‘‘ODP’’). ODP is a document that is required to be approved by the relevant government authorities before the development can commence. ODP comprises a formal development engineering plan, backed up by survey results and relevant studies, together with a full economic analysis and time schedule of the development operations. The approval of the ODP was previously expected to be ready by mid-2011 and the Petroleum Contract also stated that production should start by 31 December 2011. However, there was delay in the approval of ODP by the relevant government authorities and the preparation of formal reserve report. Base on current information available to the Directors, the Directors expected that the ODP should be ready by the ended of 2012 and the production should start immediately after obtaining relevant government approval.

As at 31 December 2011, the exploration and evaluation assets and the intangible assets in relation to the oil and gas exploration amounted to HK$602,105,000 and HK$2,946,388,000, respectively. No impairment provision was made on these assets for the year ended 31 December 2011. The management will closely monitor the progress of the oil and gas production in Xinjiang and will reassess the carrying value of these assets if there is any impairment indication exists.

As at 31 December 2011, the acquired oil/gas field has approximately estimated contingent resources of 47.4 million barrels oil and 12,086 million m[3] natural gas (based on Group’s share of participated interests). These contingent resources are quantities of oil and gas estimated, to be potentially recoverable from known accumulations by application of development projects, but which are not currently considered to be commercially recoverable due to one or more contingencies. The risks associated with these contingent resources included, (i) no definitive Gas Sales Agreement (‘‘GSA’’) nor accurate information on likely future sales prices; (ii) the future overall development program is still to be developed and approved and; (iii) the field is situated in a remote location. The impairment testing in accordance with Hong Kong Accounting Standard 36 involves the determination of the recoverable amount of the intangible assets, being the higher of its fair value less costs to sell and its value in use. Based on the acquired oil/gas field having approximately an estimated contingent resources of 47.4

– 9 –

LETTER FROM THE BOARD

million barrels oil and 12,086 million m[3] natural gas and the Group’s share of participated interests therein, the Directors have estimated the value in use and determined that there was no impairment necessary on the intangible assets and exploration and evaluation assets.

The GSA with CNPC covers a number of provisions, such as terms of the GSA, quantity of volume commitments, gas quality, price terms, delivery obligations and delivery point etc. The major point is that the Group is yet to agree with CNPC on pricing terms. The Group is still trying to negotiate with CNPC with terms which are more favorable to the Group.

During the year 2011 and up to now, the Group has been carrying out exploration activities at the site. Latest data and information about the petroleum resources were obtained as a result of these exploration activities, these updated petroleum resources information are required to be submitted to relevant government authorities. Further studies were being carried out with CNPC and other professional parties on such information. The Group is now working with these professional parties to prepare and revise the reserve report. The preparation of the formal reserve report is a part of the ODP which required government approval before full production could be started. The delay in finalizing the formal reserve report together with the ODP is the major reason for the delay in government approval. The Directors are expected that the revised reserve report would be ready in the latter part of 2012.

Since the government approval was delayed the production has also been delayed, therefore production cannot start without first obtaining government approval.

The delay in the production of oil/gas in Xinjiang will delay the return of those capital investment in the oil and gas business. There is no material adverse effect on the funding plan of the natural gas business.

The Group has been seeking investment opportunities from time to time to broaden the Group’s source of income. In natural resources industries, the Group is still negotiating with China National Petroleum Corporation regarding the price on the natural gas and the operations of these gas wells. The natural gas and oil industries will broaden the revenue stream of the Group in the future. The Company has no intention, negotiation, agreement, arrangement and understanding (concluded or otherwise) about any disposal, scaling-down and/or termination of its existing businesses as at the Latest Practicable Date. Upon Completion, the Company has no intention to change the composition of the Board.

At the Lastest Practicable Date, the Company has no intention for further acquisition or investment and it has not identified any suitable investment opportunities.

LISTING RULES IMPLICATIONS

The Disposal constitutes a major transaction for the Company under Chapter 14 of the Listing Rules and is therefore subject to the approval of the Shareholders at the EGM. As no Shareholder has any interest in the Disposal which is different from other Shareholders, no Shareholder is required to abstain from voting in respect of the proposed ordinary resolution to approve the Agreement at the EGM.

– 10 –

LETTER FROM THE BOARD

EGM

Set out on pages 18 to 19 of this circular is a notice convening the EGM to consider and, if thought fit, to approve the Agreement and the transactions contemplated thereunder. A form of proxy for use at the EGM is enclosed herewith.

Whether or not you intend to attend and vote at such meeting, you are requested to complete and return the enclosed form of proxy to the Hong Kong branch share registrar of the Company, Tricor Tengis Limited, 26/F., Tesbury Centre, 28 Queen’s Road East, Wanchai, Hong Kong in accordance with the instructions printed thereon as soon as possible and in any event not less than 48 hours before the time appointed for holding the EGM or any adjournment thereof. Completion and return of the form of proxy will not preclude you from attending and voting in person at the EGM or any adjournment thereof should you so wish.

RECOMMENDATION

The Directors believe that the Disposal contemplated under the Agreement is in the interests of the Group and the Shareholders as a whole and, accordingly, the Directors recommend the Shareholders to vote in favour of the ordinary resolution to be proposed at the EGM.

ADDITIONAL INFORMATION

Your attention is also drawn to the additional information set out in the appendices to this circular.

By Order of the Board China Energy Development Holdings Limited Zhao Guoqiang

Chief Executive Officer and Executive Director

– 11 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

1. INDEBTEDNESS STATEMENT

At the close of business on 31 May 2012, being the latest practicable date for the purpose of ascertaining certain information relating to this indebtedness statement, the Group had unsecured borrowing due to a shareholder of approximately HK$42,409,464 and outstanding liability component of convertible notes of approximately HK$104,034,096. Such convertible notes have a principal amount of approximately HK$1,958,670,000.

Save as aforesaid or as otherwise disclosed herein, and apart from intra-group liabilities and normal trade and others payables in the ordinary course of business, the Group did not have any other loan capital issued or agreed to be issued, bank overdrafts, loans, debt securities issued and outstanding, and authorised or otherwise created but unissued and term loans or other borrowings, indebtedness in the nature of borrowings, liabilities under acceptance (other than normal trade bills) or acceptance credits, debentures, mortgages, charges, finance lease or hire purchase commitments, which are either guaranteed, unguaranteed, secured or unsecured, guarantees or other material contingent liabilities outstanding on 31 May 2012.

The Directors are not aware of any material adverse change in the Group’s indebtedness position and contingent liabilities since 31 May 2012.

2. WORKING CAPITAL

After due and careful enquiry and taking into account the internal resources of the Group and the estimated net proceeds of approximately HK$5,750,000 (after deducting all relevant fees and expenses) from the Disposal, the Directors are of the opinion that the Group has sufficient working capital for its present requirements, that is for at least the next 12 months from the date of this circular.

3. SUFFICIENT OPERATIONS

As at 31 December 2011, the Group had total assets of approximately HK$4,048,378,000 including intangible assets of approximately HK$2,946,388,000 and total liabilities of approximately HK$604,235,000. The net assets excluding the intangible assets were approximately HK$497,755,000.

Therefore, taking into account of the commitment of the purchasing of food from the Group by the related companies and the tangible assets/intangible assets of the operation of exploration and production segment, the Company has a sufficient level of operations and/or tangible assets of sufficient value to warrant the continued listing of the Company’s securities on the Stock Exchange.

4. MATERIAL ADVERSE CHANGE

The Directors are not aware of any material adverse change in the financial or trading position of the Group since 31 December 2011, being the date to which the latest published audited financial statements of the Group were made up.

– 12 –

GENERAL INFORMATION

APPENDIX II

1. RESPONSIBILITY STATEMENT

This circular, for which the Directors collectively and individually accept full responsibility, includes particulars given in compliance with the Rules Governing the Listing of Securities on the Stock Exchange for the purpose of giving information with regard to the Company. The Directors, having made all reasonable enquiries, confirm that to the best of their knowledge and belief the information contained in this circular is accurate and complete in all material respects and not misleading or deceptive, and there are no other matters the omission of which would make any statement herein or this circular misleading.

2. DIRECTORS’ INTERESTS IN SECURITIES

As at the Latest Practicable Date, the interests or short positions of the Directors and chief executives and their associates in the shares, underlying shares and debentures of the Company or any of its associated corporations (within the meaning of Part XV of the Securities and Futures Ordinance (the ‘‘SFO’’)) which were required to be notified to the Company and the Stock Exchange pursuant to Divisions 7 & 8 of Part XV of the SFO (including interests which they are taken or deemed to have under Section 344 of the SFO) or which are required, pursuant to Section 352 of the SFO, to be entered in the register referred to therein,or which are required to be notified to the Company and the Stock Exchange pursuant to the Model Code for Securities Transactions by Directors of Listed Companies (the ‘‘Model Code’’) were as follows:

		Number of		Approximate
		Ordinary		% of
Name of Directors	Nature of interest	shares Held	Total	Shareholdings
Zhao Guoqiang	Beneficial owner	10,200,000	10,200,000	0.13%

Save as disclosed above, none of the Directors or chief executives of the Company had, as at the Latest Practicable Date, any interests or short positions 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 would have to be notified to the Company and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO (including interests or short positions which they were taken or deemed to have under such provisions of the SFO), or which were recorded in the register required to be kept by the Company under Section 352 of the SFO, or which were required to be notified to the Company and the Stock Exchange pursuant to the Model Code.

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GENERAL INFORMATION

APPENDIX II

3. SUBSTANTIAL SHAREHOLDERS’ INTERESTS

So far as we, the Directors are aware, as at the Latest Practicable Date, the interests or short positions of the persons, other than a director or chief executive of the Company, in the shares and underlying shares of the Company as recorded in the register required to be kept by the Company pursuant to section 336 of the SFO were as follows:

Long Positions in the Shares and Underlying Shares of the Company

					Approximate
			Interest in		percentage of
		Interest in	underlying	Aggregate	issued share
Name of Shareholder	Nature of interests	shares	shares	interest	capital
U.K. Prolific	Beneficial Owner	1,860,000,000	11,658,750,000	13,518,750,000	170.67%
Petroleum Group
Company
Limited (note)

Wang Hanning (note) Interest of controlled 1,860,000,000 11,658,750,000 13,518,750,000 170.67% corporation

• Note: U.K. Prolific Petroleum Group Company Limited owned 1,860,000,000 shares of the Company and convertible notes (the ‘‘Convertible Note’’) in the principal amount of HK$1,958,670,000 due in 2041 not carrying any interest with right to convert the Convertible Note into shares of the Company at a conversion price of HK$0.168 per share. Based on the conversion price of HK$0.168 per share, a maximum number of 11,658,750,000 shares may be allotted and issued upon exercise of the conversion rights attached to the Convertible Note in full. The Convertible Note gave rise to an interest in 11,658,750,000 underlying shares of the Company of U.K. Prolific Petroleum Group Company Limited. U.K. Prolific Petroleum Group Company Limited is wholly and beneficially owned by Mr. Wang Hanning and such Mr. Wang Hanning deemed to be interested in shares and the underlying shares of the company held by U.K. Prolific Petroleum Group Company Limited.

All the interests stated above represented long positions and as at the Latest Practicable Date, there were no short position interests recorded in the register.

4. SERVICE CONTRACT

As at the Latest Practicable Date, none of the Directors had any existing or proposed service contract with any member of the Group which does not expire or is not terminable by such member of the Group within one year without payment of compensation (other than statutory compensation).

5. DIRECTORS’ INTERESTS IN COMPETING BUSINESS

As at the Latest Practicable Date, none of the Directors and their respective associates was considered to have interests in businesses apart from the Group’s businesses which compete, or are likely to compete, either directly or indirectly, with the businesses of the Group pursuant to Rule 8.10 of the Listing Rules.

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GENERAL INFORMATION

APPENDIX II

6. LITIGATION

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

7. DIRECTORS’ INTEREST IN CONTRACTS AND ASSETS

No contract or arrangement in which any of the Directors is materially interested and which is significant in relation to the business of the Group subsisted as at the Latest Practicable Date. As at the Latest Practicable Date, none of the Directors had any direct or indirect interest in any assets which have been, since 31 December 2011 (the date to which the latest published audited consolidated accounts of the Group were made up), acquired or disposed of by or leased to any member of the Group, or are proposed to be acquired or disposed of by or leased to any member of the Group.

8. MATERIAL CONTRACTS

Within the two years immediately preceding the date of this circular, the following are contracts (not being contracts entered into in the ordinary course of business) entered into by the members of the Group which are or may be material:

• (a) the supplemental agreement dated 13 July 2010 and entered into among the Company, Totalbuild Investments Holdings Limited (‘‘Totalbuild’’), China Era Energy Power Investment (Hong Kong) Limited (‘‘China Era Energy’’) and Mr. Wang Guoju (‘‘Mr. Wang’’) regarding to vary certain terms of and condition of the agreement of the Very Substantial Acquisition as (i) the Company has agreed to acquire the Sale Loan; and (ii) the Consideration shall be divided into the Trache I Consideration and Trache II Consideration and determined by the First Valuation Report and the Final Valuation Report. Details of information were set out in the announcement of the Company dated 13 July 2010;

• (b) the supplemental agreement dated 28 September 2010 and entered into among the Company, Totalbuild, China Era Energy and Mr. Wang regarding to vary certain terms of and condition of the agreement of the Very Substantial Acquisition as (i) the Trache I Consideration payable for the Sale Share shall be HK$2,558 million; (ii) the Shortfall Amount; (iii) the Escrow Certificate and (iv) the net entitlement interest in the First Designated Area being no less than HK$2.56 billion. Details of information were set out in the announcement of the Company dated 28 September 2010;

• (c) the supplemental agreement dated 20 October 2010 and entered into among the Company, Totalbuild, China Era Energy and Mr. Wang regarding to vary certain terms of and condition of the agreement of the Very Substantial Acquisition as (i) the subject conditions being fulfilled in the Trache II Consideration payable to the Vendor; and (ii) the Sican claim that the Vendor and Mr. Wang have agreed to enter a deal of indemnity in favour of the Target Group upon Completion. Details of information were set out in the announcement of the Company dated 20 October 2010;

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GENERAL INFORMATION

APPENDIX II

the above agreements (a) to (c) being the acquisition of the business in the exploration, development, production and sales of natural gas. The agreements and the transactions were approved by the Shareholders at the extraordinary general meeting held on 20 December 2010;

• (d) the supplemental agreement dated 31 December 2010 and entered into among the Company, Totalbuild, China Era Energy and Mr. Wang regarding to vary certain terms of and condition of the agreement of the Very Substantial Acquisition as (i) the change of the Long Stop Date; and (ii) the Company shall not required to pay the balance of the further refundable deposit of HK$41,000,000 to the Vendor by no later than 31 December 2010. Details of information were set out in the announcement of the Company dated 31 December 2010;

• (e) the agreement dated 23 July 2010 and entered into between Speedy Fortune Limited and Hon Po International Limited in relation to the disposal of the entire issued share capital of Metropolis Harbour View Chinese Cuisine Limited (‘‘Metropolis’’) and shareholders’ loan owed by Metropolis to Hon Po International Limited at an aggregate consideration of HK$4,410,105 where Metropolis is principally engaged in operating a Chinese restaurant in Hong Kong;

• (f) the Agreement.

9. MISCELLANEOUS

• (a) The registered office of the Company is at Cricket Square, Hutchins Drive, P.O. Box 2681, Grand Cayman KY1-1111, Cayman Islands and the head office and principal place of business of the Company in Hong Kong is at Units 5611–12, 56/F., The Center, 99 Queen’s Road Central, Central, Hong Kong.

• (b) The secretary of the Company is Mr. Ho Ka Yiu Simon, who is a member of Hong Kong Institute of Certified Public Accountants and a fellow member of the Association of Chartered Certified Accountants.

• (c) The principal share registrar and transfer office of the Company is Butterfield Fulcrum Group (Cayman) Limited at Butterfield House, 68 Fort Street, P.O. Box 705, Grand Cayman KY11107, Cayman Islands.

• (d) The Hong Kong branch share registrar and transfer office of the Company is Tricor Tengis Limited at 26/F., Tesbury Centre, 28 Queen’s Road East, Wanchai, Hong Kong.

• (e) The English text of this circular shall prevail over the Chinese text in the event of any inconsistency between the English and the Chinese text.

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GENERAL INFORMATION

APPENDIX II

10. DOCUMENTS AVAILABLE FOR INSPECTION

Copies of the following documents are available for inspection during normal business hours at the head office and principal place of business of the Company in Hong Kong at Units 5611–12, 56/F., The Center, 99 Queen’s Road Central, Central, Hong Kong up to and including the date of the EGM:

• (a) the memorandum of association and articles of association of the Company;

• (b) the annual report of the Company for the three financial years ended 31 December 2011;

• (c) the material contracts referred to in the paragraph headed ‘‘Material Contracts’’ in this appendix;

• (d) a copy of each of the circulars issued by the Company pursuant to the requirements set out in Chapter 14 and/or 14A of the Listing Rules since 31 December 2011 (being the date to which the latest published audited consolidated financial statement of the Company was made);

• (e) the Agreement; and

• (f) this circular.

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NOTICE OF EXTRAORDINARY GENERAL MEETING

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(Incorporated in the Cayman Islands with limited liability)

(Stock Code: 228)

NOTICE IS HEREBY GIVEN that an extraordinary general meeting of China Energy Development Holdings Limited (the ‘‘Company’’) will be held at the Conference Room 3/F., Nexxus Building, 77 Des Voeux Road Central, Hong Kong on Friday, 20 July 2012 at 2:30 p.m. to consider and, if thought fit, transact the following ordinary business:

ORDINARY RESOLUTION

‘‘THAT the conditional sale and purchase agreement dated 28 December 2011 and entered into between Speedy Fortune Limited (the ‘‘Purchaser’’) and Hon Po International Limited (the ‘‘Vendor’’) in relation to the disposal of the entire issued ordinary shares of Ocean Grace Investments Limited (the ‘‘Disposed Company’’) and all the interests, benefits and rights of and in the shareholders’ loan owed by the Disposed Company to the Vendor as at the Completion Date at an aggregate consideration of HK$5,900,000 (the ‘‘Agreement’’) (a copy of which has been produced to the meeting marked ‘‘A’’ and signed by the Chairman of the meeting for the purpose of identification) be and is hereby approved, ratified and confirmed in all respects and that all transactions contemplated under the Agreement be and is hereby approved and that any one director of the Company be and is hereby authorised to do or execute all such acts or such other documents which the director may deem to be necessary, desirable or expedient to carry into effect or to give effect to the Agreement and all transactions contemplated under the Agreement.’’

By order of the Board China Energy Development Holdings Limited Zhao Guoqiang Chief Executive Officer and Executive Director

Hong Kong, 29 June 2012

Registered office:

Cricket Square Hutchins Drive P.O. Box 2681 Grand Cayman KY1-1111 Cayman Islands

Principal place of business in Hong Kong: Units 5611–12, 56/F., The Center, 99 Queen’s Road Central, Central, Hong Kong

• For identification purposes only

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NOTICE OF EXTRAORDINARY GENERAL MEETING

Notes:

1. A form of proxy to be used for the meeting is enclosed.

2. Where there are joint holders of any share any one of such joint holder may vote, either in person or by proxy, in respect of such share as if he were solely entitled thereto, but if more than one of such joint holders be present at any meeting the vote of the senior who tenders a vote, whether in person or by proxy, shall be accepted to the exclusion of the votes of the other joint holders, and for this purpose seniority shall be determined by the order in which the names stand in the share register of the Company in respect of the joint holding. Several executors or administrators of a deceased member in whose name any share stands shall for the purposes of the articles of the Company be deemed joint holders thereof.

3. Any member entitled to attend and vote at a meeting of the Company shall be entitled to appoint another person as his proxy to attend and vote instead of him. A member who is the holder of two or more shares may appoint more than one proxy to represent him and vote on his behalf at a general meeting of the Company or at a class meeting. A proxy need not be a member. In addition, a proxy or proxies representing either a member who is an individual or a member which is a corporation shall be entitled to exercise the same powers on behalf of the member which he or they represent as such member could exercise.

4. The instrument appointing a proxy shall be in writing under the hand of the appointor or of his attorney duly authorised in writing or, if the appointor is a corporation, either under its seal or under the hand of an officer, attorney or other person authorised to sign the same. In the case of an instrument of proxy purporting to be signed on behalf of a corporation by an officer thereof it shall be assumed, unless the contrary appears, that such officer was duly authorised to sign such instrument of proxy on behalf of the corporation without further evidence of the fact.

5. The instrument appointing a proxy and (if required by the board of directors (the ‘‘Board’’) of the Company) the power of attorney or other authority (if any) under which it is signed, or a certified copy of such power or authority, shall be delivered to the Hong Kong branch share registrar and transfer office of the Company, Tricor Tengis Limited at 26/F., Tesbury Centre, 28 Queen’s Road East, Wanchai, Hong Kong not less than forty-eight (48) hours before the time appointed for holding the special general meeting or adjourned meeting.

6. As at the date of this notice, the board of directors of the Company comprises Mr. Zhao Guoqiang, Mr. Chui Kwong Kau, Mr. Liu Baohe, Mr. Zhang Zhenming and Mr. Huang Changbi as executive directors; and Mr. Fu Wing Kwok, Ewing, Mr. Sun Xiaoli and Mr. Fu Dali as independent non-executive directors.

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