Liaoning Port Co., Ltd. — Proxy Solicitation & Information Statement 2009

Apr 8, 2009

THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION

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

If you have sold or transferred all your shares in Dalian Port (PDA) Company Limited, you should at once hand this circular to the purchaser or transferee or to the bank, stockbroker or other agent through whom the sale 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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Dalian Port (PDA) Company Limited[] 大連港股份有限公司*

(a sino-foreign joint stock limited company incorporated in the People’s Republic of China)

(Stock Code: 2880)

CONNECTED TRANSACTION AND DISCLOSEABLE TRANSACTION FORMATION OF A JOINT VENTURE

Independent Financial Adviser to the Independent Board Committee and the Shareholders

A letter from the Board is set out on pages 3 to 8 of this circular.

A letter from the Independent Board Committee to the Shareholders is set out on pages 9 to 10 of this circular.

A letter from Access Capital Limited, the Independent Financial Adviser, containing its advice to the Independent Board Committee and the Shareholders is set out on pages 11 to 19 of this circular.

• The Company is registered as an oversea company under Part XI of the Companies Ordinance (Chapter 32 of the Laws of Hong Kong) under the English name “Dalian Port (PDA) Company Limited”.

8 April 2009

CONTENTS

		Page
DEFINITIONS	. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	1
**LETTER FROM **	THE BOARD . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	3
**LETTER FROM **	THE INDEPENDENT BOARD COMMITTEE . . . . . . . . . . . . . . . .	9
**LETTER FROM **	THE INDEPENDENT FINANCIAL ADVISER . . . . . . . . . . . . . . .	11
APPENDIX – GENERAL INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .		20

DEFINITIONS

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

“associate(s)”	has the meaning ascribed to it under the Listing Rules;
“Board”	the Company’s board of Directors;
“Company”	大連港股份有限公司(Dalian Port (PDA) Company
	Limited), a sino-foreign joint stock limited company
	incorporated in the PRC with its H shares listed and
	traded on the main board of the Stock Exchange;
“connected person”	has the meaning ascribed to it under the Listing Rules;
“Dalian Construction	大連市建設投資公司(Dalian Construction Investment
Investment”	Company), a company incorporated in the PRC with
	limited liability;
“Directors”	the directors of the Company;
“Group”	the Company and its subsidiaries;
“HK$”	Hong Kong dollars, the lawful currency of Hong
	Kong;
“Hong Kong”	Hong Kong Special Administrative Region of the
	PRC;
“H Shares”	foreign shares in the share capital of the Company,
	with Renminbi-denominated par value of RMB1.00
	each which are listed and traded on the Stock
	Exchange;
“Independent Board	the independent board committee of the Company
Committee”	comprising all the independent non-executive
	Directors, namely, Mr. Zhang Xianzhi, Mr. Ng Ming
	Wah, Charles and Mr. Wang Zuwen;
“Independent Financial	Access Capital Limited, a licensed corporation under
Adviser”	the SFO which engages in type 1 (dealing in
	securities), type 4 (advising on securities), type 6
	(advising on corporate finance) and type 9 (asset
	management) regulated activities and the
	independent financial adviser to the Independent
	Board Committee and the Shareholders in respect of
	the terms of the JV Contract;

– 1 –

DEFINITIONS

“JV Contract”	the joint venture contract dated 18 March 2009 among
	the JV Parties in respect of the establishment of the JV
	Enterprise;
“JV Enterprise”	an equity joint venture enterprise which will be
	established in the PRC pursuant to the terms of the JV
	Contract;
“JV Parties”	PetroChina, the Company and Dalian Construction
	Investment;
“Latest Practicable Date”	3 April 2009, being the latest practicable date prior to
	the printing of this circular for ascertaining certain
	information contained in this circular;
“Listing Rules”	the Rules Governing the Listing of Securities on The
	Stock Exchange of Hong Kong Limited;
“LNG”	Liquefied Natural Gas;
“PetroChina”	中國石油天然氣股份有限公司(PetroChina Company
	Limited), a joint stock limited company incorporated
	in the PRC with its American Depositary Shares
	(ADS), H shares and A shares listed on the New York
	Stock Exchange, the Stock Exchange and Shanghai
	Stock Exchange, respectively;
“PRC”	the People’s Republic of China (for the purpose of this
	circular, excluding Hong Kong, Macau Special
	Administrative Region and Taiwan);
“RMB”	Renminbi, the lawful currency of the PRC;
“Shareholder(s)”	The shareholder(s) of the Company;
“Stock Exchange”	The Stock Exchange of Hong Kong Limited; and
“subsidiary”	has the meaning ascribed to it under the Listing Rules.

– 2 –

LETTER FROM THE BOARD

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Dalian Port (PDA) Company Limited[] 大連港股份有限公司*

(a sino-foreign joint stock limited company incorporated in the People’s Republic of China)

(Stock Code: 2880)

Directors:

Executive Directors: Mr. Sun Hong (Chairman) Mr. Zhang Fengge Mr. Jiang Luning Ms. Su Chunhua

Registered Office:

Xingang Commercial Building Dayao Bay Dalian Free Trade Zone PRC

Place of Business in PRC:

Non-executive Directors: Mr. Lu Jianmin Mr. Xu Jian

No. 1 Gangwan Street Zhongshan District Dalian, Liaoning PRC

Independent Non-executive Directors: Mr. Zhang Xianzhi Mr. Ng Ming Wah, Charles Mr. Wang Zuwen

8 April 2009

To the Shareholders,

Dear Sir or Madam,

CONNECTED TRANSACTION AND DISCLOSEABLE TRANSACTION FORMATION OF A JOINT VENTURE

INTRODUCTION

Reference is made to the Company’s announcement dated 18 March 2009, in which the Directors announced that, on 18 March 2009, the Company entered into the JV Contract with PetroChina and Dalian Construction Investment relating to the formation of the JV Enterprise for the purposes of investing in, constructing, managing and operating a LNG terminal in Xingang, Dalian, the PRC. The JV Enterprise will be owned as to 75% by PetroChina, 20% by the Company and the remaining 5% by Dalian Construction Investment. The purpose of this circular is to provide you with further information on the transaction.

• The Company is registered as an oversea company under Part XI of the Companies Ordinance (Chapter 32 of the Laws of Hong Kong) under the English name “Dalian Port (PDA) Company Limited”.

– 3 –

LETTER FROM THE BOARD

THE JV CONTRACT

The principal terms of the JV Contract are set forth below:

Date: 18 March 2009 Parties: PetroChina, the Company and Dalian Construction Investment. Purpose: To invest in, construct, manage and operate a LNG terminal in Xingang, Dalian, the PRC.

Name of the JV 中石油大連液化天然氣有限公司 (PetroChina Dalian Enterprise: LNG Co., Ltd.) Place of incorporation: The PRC.

Equity interest: The equity interests in the JV Enterprise to be held by the JV Parties are:

PetroChina 75% The Company 20% Dalian Construction Investment 5% Total 100%

Registered capital of the The registered capital of the JV Enterprise is RMB2.6 JV Enterprise: billion.

Any change to the registered capital is subject to unanimous approval of the JV Parties.

20% of the registered capital, which is RMB520 million (the “Initial Committed Capital Contribution”), shall be contributed by the Company. Such amount of registered capital shall be paid in two installments. The first installment of RMB200 million (the “First Installment”) shall be paid within 45 days from the signing date of the JV Contract and the second installment of RMB320 million (the “Second Installment”) shall be paid within 30 days after the first anniversary of establishment of the JV Enterprise.

– 4 –

LETTER FROM THE BOARD

Pursuant to the terms of the JV Contract, if the registered capital is to be increased, the JV Parties shall increase their capital contributions in the same proportion to their respective equity interests in the JV Enterprise. The difference between the Company’s increased capital contribution and the Initial Committed Capital Contribution shall be paid at the same time of payment of the Second Installment.

The estimated maximum investment for construction of the LNG Terminal (as defined below) is RMB6 billion. In accordance with the JV Contract, the difference between the estimated maximum investment for construction of the LNG Terminal and the registered capital of the JV Enterprise shall be funded by means of bank loan, shareholders’ loan or issuance of bonds, which shall be determined by the JV Parties at the shareholders’ meeting of the JV Enterprise. As at the Latest Practicable Date, neither the Company nor any of the other JV Parties has committed to provide any shareholders’ loan. In the event that the JV Parties are required to provide a guarantee to the JV Enterprise, the JV Parties shall provide the same in proportion to their respective interests in the JV Enterprise.

The First Installment to be contributed by the Company will be funded in cash from internal resources and the Second Installment will also be funded in cash from the proceeds of medium-term bonds proposed to be issued by the Company in the near future in accordance with the shareholders’ resolution at the extraordinary general meeting held on 23 January 2009.

Scope of business:

Construction, operation and management of LNG terminal; LNG receiving, storage, vaporising and related business.

The LNG terminal will include a berth for LNG carriers and an LNG receiving station with three LNG storage tanks and relevant vaporisers and other ancillary facilities (the “LNG Terminal”).

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LETTER FROM THE BOARD

Board of directors:

The board shall consist of five directors, three of whom shall be nominated by PetroChina and one by the Company and one shall be the representative of the labor union of the JV Enterprise.

Term:

50 years unless earlier termination by the JV Parties pursuant to the JV Contract.

The articles of association of the JV Enterprise were signed by the Company, PetroChina and Dalian Construction Investment at the same time as the JV contract. The LNG Terminal is expected to commence operations in 2011.

REASONS FOR AND BENEFIT OF ENTERING INTO THE JV CONTRACT

LNG is a relatively clean energy the consumption of which is encouraged by the PRC government. The LNG terminal business is relatively new in the PRC. With increasing demand of LNG in the PRC, the LNG terminal business has significant growth potential. The LNG Terminal to be operated by the JV Enterprise in Xingang, Dalian will mainly serve the LNG users in Liaoning Province, the PRC. The industrial and commercial users will account for a large proportion of the LNG consumers in the area. The Directors are of the view that investing in the JV Enterprise allows the Company to gain access to the LNG terminal business, diversify its income streams and increase the use of its port value-added services so as to generate additional profit for the Group and maximize returns for the Shareholders of the Company.

INFORMATION ON THE GROUP, PETROCHINA AND DALIAN CONSTRUCTION INVESTMENT

The principal activities of the Group are: (i) the provision of terminal and logistics services for oil products and liquefied chemicals; (ii) the provision of terminal and logistics services for containers; (iii) the provision of terminal and logistics services for automobile; and (iv) the provision of port value-added services including tugging and IT services.

PetroChina is the largest oil and gas producer and distributor in the PRC, who is a dominant player in the oil and gas industry in the PRC. It is one of the Company’s major customers for the Group’s oil terminal business segment and also the Company’s strategic co-operation partner.

Dalian Construction Investment, an investment company wholly-owned by 大連市 人民政府 (Dalian People’s Municipal Government), is mainly engaged in the investment in energy and transportation projects on behalf of 大連市人民政府 (Dalian People’s Municipal Government).

– 6 –

LETTER FROM THE BOARD

LISTING RULES IMPLICATIONS

Connected Transaction and Shareholders’ Meeting Waiver

As Dalian Construction Investment, being a substantial shareholder of a non wholly-owned subsidiary of the Company, is a connected person of the Company, the transaction contemplated under the JV Contract constitutes a connected transaction for the Company, as defined under Rule 14A.13 of the Listing Rules. As the percentage ratios applicable to the total capital commitment in respect of the JV Enterprise exceed 2.5% and the total consideration is more than HK$10,000,000, the transaction will be subject to the reporting, announcement and independent shareholders’ approval requirements under Chapter 14A of the Listing Rules.

To the best knowledge of the Directors, Dalian Construction Investment and its associates do not have any share in the Company and no Shareholder is required to abstain from voting if the Company were to convene a general meeting for approving the transaction contemplated under the JV Contract. The Company’s controlling shareholder, Dalian Port Corporation Limited which holds approximately 62.09% of the issued share capital of the Company, has given its written approval of the JV Contract. Pursuant to Rule 14A.43 of the Listing Rules, the transaction has been approved by the Shareholders by way of a written approval in lieu of a general meeting of the Company.

Discloseable Transaction

As the applicable percentage ratios exceed 5% but are less than 25%, the formation of the JV Enterprise also constitutes a discloseable transaction for the Company under Chapter 14 of the Listing Rules.

GENERAL

The Independent Board Committee, comprising all of the independent non-executive Directors, namely Mr. Zhang Xianzhi, Mr. Ng Ming Wah, Charles and Mr. Wang Zuwen, has been formed to advise the Shareholders in relation to the JV Contract and the transaction thereunder.

The Independent Financial Adviser has been appointed to make recommendations to the Independent Board Committee and the Shareholders as to whether the terms of the JV Contract are fair and reasonable.

The Independent Financial Adviser considers the JV Contract was entered into on normal commercial terms. The Independent Financial Adviser also considers the terms of the JV Contract are fair and reasonable and in the interest of the Company and the Shareholders as a whole.

– 7 –

LETTER FROM THE BOARD

VIEWS OF THE DIRECTORS

The Directors (including the independent non-executive Directors whose views are stated in the letter from the Independent Board Committee included in this circular) are of the view that the transaction contemplated under the JV Contract is in the ordinary and usual course of business of the Group and in the interests of the Company and the Shareholders as a whole, and the terms thereof were negotiated on arm’s length basis, on normal commercial terms and are fair and reasonable so far as the Shareholders are concerned.

ADDITIONAL INFORMATION

Your attention is also drawn to the letter from the Independent Board Committee and the letter from the Independent Financial Advisor, Access Capital Limited as respectively set out in this circular containing their respective advice to the Shareholders.

By Order of the Board SUN Hong Chairman

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LETTER FROM THE INDEPENDENT BOARD COMMITTEE

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Dalian Port (PDA) Company Limited[] 大連港股份有限公司*

(a sino-foreign joint stock limited company incorporated in the People’s Republic of China)

(Stock Code: 2880)

8 April 2009

Independent Board Committee:

Mr. Zhang Xianzhi Mr. Ng Ming Wah, Charles Mr. Wang Zuwen

To the Shareholders

Dear Sir or Madam,

CONNECTED TRANSACTION AND DISCLOSEABLE TRANSACTION FORMATION OF A JOINT VENTURE

We refer to the circular dated 8 April 2009 of the Company (the “Circular”) of which this letter forms part. Terms defined in the Circular have the same meanings herein unless the context otherwise requires.

We have been appointed to constitute the Independent Board Committee to consider the terms of the JV Contract and to advise the Shareholders whether, in our opinion, the terms of the JV Contract are fair and reasonable so far as the Shareholders are concerned and are in the interest of the Company and the Shareholders as a whole. Access Capital Limited has been appointed as the Independent Financial Adviser to advise the Independent Board Committee and the Shareholders in this respect.

As your Independent Board Committee, we have discussed with the management of the Company the reasons for entering into the JV Contract and the basis upon which its terms have been determined. We have also considered the key factors taken into account by the Independent Financial Adviser in arriving at its opinion regarding the terms of the JV Contract as set out in the letter from the Independent Financial Adviser contained in the Circular, which we urge you to read carefully.

• The Company is registered as an oversea company under Part XI of the Companies Ordinance (Chapter 32 of the Laws of Hong Kong) under the English name “Dalian Port (PDA) Company Limited”.

– 9 –

LETTER FROM THE INDEPENDENT BOARD COMMITTEE

Having considered the advice given by the Independent Financial Adviser in arriving at its advice, we consider that the terms of JV Contract are fair and reasonable so far as the Shareholders are concerned and the transaction are in the interests of the Company and the Shareholders as a whole.

Yours faithfully, Independent Board Committee Zhang Xianzhi Ng Ming Wah, Charles Wang Zuwen Independent Independent Independent non-executive Director non-executive Director non-executive Director

– 10 –

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

The following is the text of the letter of advice from Independent Financial Adviser to the Independent Board Committee and the Shareholders in relation to the transaction under the JV Contract for the purpose of incorporation in this circular.

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Suite 606, 6th Floor Bank of America Tower 12 Harcourt Road Central Hong Kong

8 April 2009

To: The Independent Board Committee

and the Shareholders of Dalian Port (PDA) Company Limited

Dear Sirs,

CONNECTED TRANSACTION AND DISCLOSEABLE TRANSACTION FORMATION OF A JOINT VENTURE

I. INTRODUCTION

We refer to our appointment as independent financial adviser to advise the Independent Board Committee and Shareholders with regard to the connected and discloseable transaction in relation to the formation of the JV Enterprise pursuant to the JV Contract, details of which are contained in the “Letter from the Board” of the circular to the Shareholders dated 8 April 2009 (the “Circular”), of which this letter forms part. Terms used in this letter shall have the same meanings as those defined in the Circular unless the context otherwise specifies.

On 18 March 2009, the Company entered into the JV Contract with PetroChina and Dalian Construction Investment relating to the formation of the JV Enterprise for the purposes of investing in, constructing, managing and operating an LNG terminal in Xingang, Dalian, the PRC. The JV Enterprise will be owned as to 75% by PetroChina, 20% by the Company, and the remaining 5% by Dalian Construction Investment.

PetroChina is the largest oil and gas producer and distributor in the PRC, who is a dominant player in the oil and gas industry in the PRC. It is one of the Company’s major customers for the Group’s oil terminal business segment and also the Company’s strategic co-operation partner.

Dalian Construction Investment, an investment company wholly-owned by 大連市 人民政府 (Dalian People’s Municipal Government), is mainly engaged in the investment in energy and transportation projects on behalf of 大連市人民政府 (Dalian People’s Municipal Government).

– 11 –

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

As Dalian Construction Investment, being a substantial shareholder of a non wholly-owned subsidiary of the Company, is a connected person of the Company, the transaction contemplated under the JV Contract constitutes a connected transaction for the Company, as defined under Rule 14A.13 of the Listing Rules. As the percentage ratios applicable to the total capital commitment in respect of the JV Enterprise exceed 2.5% and the total consideration being more than HK$10,000,000, the transaction is subject to the reporting, announcement and independent shareholders’ approval requirements under Chapter 14A of the Listing Rules. As the relevant percentage ratios exceed 5% but are less than 25%, the formation of the JV Enterprise therefore also constitutes a discloseable transaction for the Company under the Listing Rules.

To the best knowledge of the Directors, Dalian Construction Investment and its associates do not have any share in the Company and no Shareholder is required to abstain from voting if the Company were to convene a general meeting of Shareholders for approving the transaction contemplated under the JV Contract. The Company’s controlling shareholder, Dalian Port Corporation Limited which holds approximately 62.09% of the issued share capital of the Company, has given its written approval of the JV Contract. The Company has applied for, and the Stock Exchange has granted, a waiver of the requirement of holding a general meeting to approve the transaction contemplated under the JV Contract. Pursuant to Rule 14A.43 of the Listing Rules, the transaction has been approved by the Shareholders by way of a written approval in lieu of a general meeting of the Company.

II. THE INDEPENDENT BOARD COMMITTEE

The Board currently consists of four executive Directors, namely Mr. Sun Hong, Mr. Zhang Fengge, Mr. Jiang Luning and Ms. Su Chunhua, two non-executive Directors, Mr. Lu Jianmin and Mr. Xu Jian, and three independent non-executive Directors, namely Mr. Zhang Xianzhi, Mr. Ng Ming Wah, Charles and Mr. Wang Zuwen.

The Independent Board Committee comprising all of the independent non-executive Directors, namely Mr. Zhang Xianzhi, Mr. Ng Ming Wah, Charles and Mr. Wang Zuwen, has been established to consider the terms of the JV Contract.

We have been appointed to advise the Independent Board Committee and the Shareholders as to whether the terms of the JV Contract were agreed on normal commercial terms, in the ordinary and usual business of the Group and are fair and reasonable so far as the Shareholders are concerned and in the interests of the Company and Shareholders as a whole and to give our opinion in relation to the JV Contract for Independent Board Committee’s consideration when making their recommendation to the Shareholders.

III. BASIS AND ASSUMPTIONS OF THE ADVICE

In formulating our advice, we have relied solely on the statements, information, opinions and representations for matters relating to the Group contained in the Circular and the information and representations provided to us by the Group and/or its senior management staff and/or the Directors. We have assumed that all such statements,

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

information, opinions and representations for matters relating to the Group contained or referred to in the Circular or otherwise provided or made or given by the Group and/or its senior management staff and/or the Directors and for which it is/they are solely responsible were true and accurate and valid at the time they were made and given and continue to be true and valid as at the date of the Circular. We have assumed that all the opinions and representations for matters relating to the Group made or provided by the Directors and/or the senior management staff of the Group contained in the Circular have been reasonably made after due and careful enquiry. We have also sought and obtained confirmation from the Group and/or its senior management staff and/or the Directors that no material facts have been omitted from the information provided and referred to in the Circular.

We consider that we have reviewed all currently available information and documents to enable us to reach an informed view and to justify our reliance on the information provided so as to form a reasonable basis for our opinions. We have no reason to doubt the truth, accuracy and completeness of the statements, information, opinions and representations provided to us by the Group and/or its senior management staff and/or the Directors and their respective advisers or to believe that material information has been withheld or omitted from the information provided to us or referred to in the aforesaid documents. We have not, however, carried out any independent verification of the information provided, nor have we conducted any independent investigation into the business and affairs of the Group or any of its subsidiaries.

IV. PRINCIPAL FACTORS AND REASONS CONSIDERED

In formulating our recommendation, we have taken into consideration the following principal factors and reasons:

1. Background

• 1.1 Principal business and financial performance of the Group

The principal activities of the Group are: (i) the provision of terminal and logistics services for oil products and liquefied chemicals; (ii) the provision of terminal and logistics services for containers; (iii) the provision of terminal and logistics services for automobile; and (iv) the provision of port value-added services including tugging and IT services.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Set out below is a summary of the financial results of the Group extracted from the Company’s annual report for 2007 and interim report for the six months ended 30 June 2008 (“Interim Report”):

Oil/liquefied chemicals terminal and logistics services Container terminal and logistics services Port value-added services Automobile terminal and logistics services Total revenue Gross profit Profit before tax Profit attributable to equity holders of the Company	For the year ended 31 December 2006 2007 RMB’000 RMB’000 562,183 673,707 364,979 644,339 232,851 252,090 – – 1,160,013 1,570,136 584,558 696,856 685,444 749,516 631,567 611,368	For the six months ended 30 June 2007 2008 RMB’000 RMB’000 313,508 325,296 269,551 284,697 112,124 135,891 – – 695,183 745,884 348,738 393,946 392,663 675,684 314,930 534,185	For the six months ended 30 June 2007 2008 RMB’000 RMB’000 313,508 325,296 269,551 284,697 112,124 135,891 – – 695,183 745,884 348,738 393,946 392,663 675,684 314,930 534,185
			745,884 393,946 675,684 534,185

For the year ended 31 December 2007, the Group recorded an audited turnover of approximately RMB1,570.1 million, representing an increase of approximately 35.4% from approximately RMB1,160 million for the year ended 31 December 2006. The turnover generated from the oil/liquefied chemicals terminal and logistics services continued to be the main source of the Group’s revenue and represented about 42.9% of the Group’s total turnover for the year ended 31 December 2007. Compared with the previous financial year, the turnover generated from oil/liquefied chemicals terminal and logistics services increased 19.8% from approximately RMB562.2 million to approximately RMB673.7 million.

For the six months ended 30 June 2008, the Group recorded an unaudited turnover of approximately RMB745.9 million, representing an increase of approximately 7.3% from the unaudited turnover of approximately RMB695.2 million for the corresponding six-month period in 2007.

– 14 –

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

As noted in the Interim Report, in the first half of 2008, the Group handled a total oil/liquefied chemicals throughput of 17.2 million tonnes, a decrease of 1.2% from the same period in 2007. Despite the decrease in throughput volume, the turnover for oil and liquefied chemicals terminal and logistics services still recorded an increase of 3.8% over the corresponding period in 2007.

As noted in the Company’s annual report of 2007, the Group is the largest oil, container and automobile terminal operator in northeastern China. In order to achieve a higher operating efficiency to its oil terminals, the Group extended the cooperation with its business partners, accelerated the construction of oil storage tanks and ancillary facilities, and geared up its marketing efforts.

1.2 Reasons for, and benefits of entering into the JV Contract

The purpose of formation of the JV Enterprise pursuant to the JV Contract is to invest in, construct, manage and operate an LNG terminal in Xingang, Dalian, the PRC.

As stated in the “Letter from the Board”, LNG is a relatively clean energy the consumption of which is encouraged by the PRC government. The LNG terminal business is relatively new in the PRC. With the increasing demand of LNG in the PRC, the LNG terminal business has significant growth potential. The LNG terminal to be operated by the JV Enterprise in Xingang, Dalian will mainly serve the LNG users in Liaoning Province, the PRC. The industrial and commercial users will account for a large proportion of the LNG consumers in the area. The Directors are of the view that investing in the JV Enterprise allows the Company to gain access to the LNG terminal business, diversify its income streams and increase the use of its port value-added services so as to generate additional profit for the Group and maximize returns for the Shareholders.

The terms of the JV Contract were negotiated on an arm’s length basis. The Directors consider that the terms of the JV Contract are on normal commercial terms and in the ordinary and usual course of business of the Company. The Directors also consider that the terms of the JV Contract are fair and reasonable and in the interests of the Company and the Shareholders as a whole.

• 1.3 General overview of natural gas in the PRC

The growth in natural gas production and investment in the PRC continued in 2008. According to the National Bureau of Statistics of China, the output of natural gas in the PRC in 2008 was 76.1 billion cubic meters, representing a growth of approximately 9.9% from 2007. The total fixed assets investment in the extraction of petroleum and natural gas in 2008 was RMB271.5 billion, an increase of approximately 22% over 2007.

– 15 –

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

According to the 11th Five-Year Program for Energy Development promulgated by 中華人民共和國國家發展和改革委員會 (National Development and Reform Commission*), the usage of natural gas is encouraged by the PRC government. The PRC government set a target of raising the proportion of natural gas in total energy consumption to 5.3 percent by 2010 from 2.8 percent in 2005. The plan aimed to shift away from a heavy reliance on coal, which accounts for about 70 percent of total energy consumption.

1.4 Our view

Taking into account the background to, and reasons for, the formation of the JV Enterprise, including (i) the potential increase in the consumption of LNG as encouraged by the PRC government, (ii) the prospect of potential commercial benefit through the increase in throughput and use of port-value-added service, and (iii) the closer co-operation with one of the Group’s major customers, we concur with the view of the Directors that the entering into the JV Contract is consistent with the Group’s business strategy, in particular, to capture the potential market for the anticipated increase in the consumption of LNG in the PRC as well as to extend the cooperation with its business partners and is in the interests of the Company and Shareholders as a whole.

2. Terms of the JV Contract

The principal terms of the JV Contract are set forth below:

Date: 18 March 2009 Parties: PetroChina, the Company and Dalian Construction Investment. Purpose: To invest in, construct, manage and operate a LNG terminal in Xingang, Dalian, the PRC. Name of the JV 中石油大連液化天然氣有限公司 (PetroChina Dalian Enterprise: LNG Co., Ltd.) Place of The PRC. incorporation: Equity interest: The equity interests in the JV Enterprise to be held by the JV Parties are: PetroChina 75% The Company 20% Dalian Construction Investment 5% Total 100%

• For identification purpose only

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Registered capital of the JV Enterprise:

The registered capital of the JV Enterprise is RMB2.6 billion.

Any change to the registered capital is subject to unanimous approval of the JV Parties.

20% of the registered capital, which is RMB520 million (the “Initial Committed Capital Contribution”), shall be contributed by the Company. Such amount of registered capital shall be paid in two installments. The first installment of RMB200 million (the “First Installment”) shall be paid within 45 days from the signing date of the JV Contract and the second installment of RMB320 million (the “Second Installment”) shall be paid within 30 days after the first anniversary of establishment of the JV Enterprise.

Pursuant to the terms of the JV Contract, if the registered capital is to be increased, the JV Parties shall increase their capital contributions in the same proportion to their respective equity interests in the JV Enterprise. The difference between the Company’s increased capital contribution and the Initial Committed Capital Contribution shall be paid at the same time of payment of the Second Installment.

The estimated maximum investment for construction of the LNG Terminal (as defined below) is RMB6 billion. In accordance with the JV Contract, the difference between the estimated maximum investment for construction of the LNG terminal and the registered capital of the JV Enterprise shall be funded by means of bank loan, shareholders’ loan or issuance of bonds, which shall be determined by the JV Parties at the shareholders’ meeting of the JV Enterprise. As at the Latest Practicable Date, neither the Company nor any of the other JV Parties has committed to provide any shareholders’ loan. In the event that the JV Parties are required to provide a guarantee to the JV Enterprise, the JV Parties shall provide the same in proportion to their respective interests in the JV Enterprise.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

The First Installment to be contributed by the Company will be funded by cash from internal resources and the Second Installment will also be funded by cash from the proceeds of medium-term bonds proposed to be issued by the Company in the near future in accordance with the shareholders’ resolution at the extraordinary general meeting held on 23 January 2009.

Scope of business: Construction, operation and management of LNG terminal; LNG receiving, storage, vaporising and related business.

The LNG terminal will include a berth for LNG carriers and a LNG receiving station with three LNG storage tanks and relevant vaporisers and other ancillary facilities (the “LNG Terminal”).

Board of directors: The board shall consist of five directors, three of whom shall be nominated by PetroChina and one by the Company and one shall be the representative of the labor union of the JV Enterprise. Term: 50 years unless earlier termination by the JV Parties pursuant to the JV Contract.

The articles of association of the JV Enterprise were signed by the Company, PetroChina and Dalian Construction Investment at the same time as the JV Contract. The LNG terminal is expected to commence operations in 2011.

Our view

Taking into account that (i) the capital contribution was determined based on the expected initial capital requirement for the JV Enterprise, to be made by each of the shareholders to the JV Enterprise in proportion to their respective shareholdings in the JV Enterprise and with the same payments terms; (ii) the sharing of the JV Enterprise’s future profitability and/or risks is in proportion to their respective shareholding; (iii) the nomination of one director of the JV Enterprise (out of a total of 5 directors) by the Company is in line with the Company’s equity interest in the JV Enterprise; and (iv) the provision of port value-added services is one of the principal activities of the Group, we concur with the Directors’ view that the JV Contract was entered on normal commercial terms, in the ordinary and usual course of business of the Group and in the interests of the Company and its Shareholders as a whole.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

3. Financial effects to the Group

Based on the Interim Report, the Group has bank balances and cash in the amount of RMB662.2 million as at 30 June 2008. As the First Installment of RMB200 million to be contributed by the Company to the JV Enterprise will be satisfied by internal resources of the Group, there will be no material impact on the gearing ratio of the Group as a result.

As at 30 June 2008, the unaudited consolidated total equity of the Group was approximately RMB6,244.7 million and net debts (total interest bearing loans minus cash) was approximately RMB1,674.3 million. The gearing ratio (defined as net debts to equity) of the Group as at 30 June 2008 was approximately 26.8%.

Reference is made to the circular of the Company dated 8 December 2008 in respect of the issuance of medium-term notes of the Company (the “Notes”), the purpose of issuing the Notes is to meet the Company’s future business development needs and to lower its finance costs. On 23 January 2009, the shareholders of the Company approved the issue of the Notes. As stated in the “Letter from the Board”, the Second Installment will be funded by cash from the proceeds of the Notes.

For illustrative purpose only, the gearing ratio of the Company attributable to the Second Installment resulting from the issuance of the Notes for the JV Enterprise (calculated by adding the Second Installment payable under the JV Contract by the Company of RMB320 million to net debts divided by the total equity of the Company as at 30 June 2008) will increase to approximately 31.9%. After taking into account the relatively small increase of gearing ratio from 26.8% to 31.9%, we consider that the increase in gearing is acceptable.

We have discussed with the management of the Company and understand that in the event that the Company is unable to issue the medium-term notes due to unforeseeable reasons and/or fails to obtain other financing from equity or debt markets or other sources, the Group can still fulfil its obligation for the payment of the Second Installment from its internal resources after taking into account that the Group has remained profitable, the bank balances and cash available (approximately RMB662.2 million as at 30 June 2008 based on the Interim Report) and the unutilised banking facilities of the Group available (approximately RMB3,102 million based on the Interim Report).

V. RECOMMENDATION

Having considered the above mentioned factors, we are of the view that the terms of the JV Contract are on normal commercial terms, in the ordinary and usual course of business of the Group and are fair and reasonable so far as the Shareholders are concerned and that the entering into of the JV Contract is in the interests of the Company and Shareholders as a whole.

Yours faithfully For and on behalf of Access Capital Limited Jimmy Chung Principal Director

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APPENDIX

GENERAL INFORMATION

RESPONSIBILITY STATEMENT

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

DISCLOSURE OF INTERESTS

As at the Latest Practicable Date, as far as the Company was aware, none of the Directors, supervisors or chief executive of the Company had any interest or short position in the shares, underlying shares or debentures of the Company or any associated corporation (within the meaning of Part XV of the SFO) which were required to be notified to the Company and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO (including interests and short positions which they were taken or deemed to have under such provisions of the SFO); or which were required, pursuant to Section 352 of the SFO, to be entered in the register referred to therein; or which were required, pursuant to the Model Code for Securities Transactions by Directors of Listed Companies to be notified to the Company and the Stock Exchange.

SERVICE CONTRACT

As at the Latest Practicable Date, none of the Directors had any existing or proposed service contract with the Company or any member of the Group other than contracts expiring or determinable by the relevant employer within one year without payment of compensation (other than statutory compensation).

COMPETING INTEREST

As at the Latest Practicable Date, none of the Directors and their respective associates had any interest in a business which competes or is likely to compete directly or indirectly with any business of the Group.

DIRECTORS’ INTERESTS IN THE GROUP’S ASSETS OR CONTRACTS

As at the Latest Practicable Date, none of the Directors and supervisors of the Company had any interest in any assets which have been since 31 December 2007 (being the date to which the latest published audited accounts of the Company were made up) acquired or disposed of by or leased to any member of the Group, or were proposed to be acquired or disposed of by or leased to any member of the Group. As at the Latest Practicable Date, none of the Directors and supervisors is materially interested in any contract or arrangement subsisting at the Latest Practicable Date which is significant in relation to the business of the Group.

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APPENDIX

GENERAL INFORMATION

LITIGATION

As at the Latest Practicable Date, neither the Company nor any other members of the Group was engaged in any litigation or arbitration of material importance and, as far as the Directors were aware, no litigation or claim of material importance was pending or threatened against the Company or any other members of the Group.

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 2007, being the date of the latest published audited financial statements of the Company.

CONSENT

As at the date of this circular, Access Capital Limited has given and has not withdrawn its written consent to the issue of this circular with the inclusion of its letter and reference to its name and opinion in the form and context in which it appears in this circular.

As at the Latest Practicable Date, Access Capital Limited did not have any shareholding in any member of the Group or the right (whether legally enforceable or not) to subscribe for or to nominate persons to subscribe for securities in any member of the Group.

EXPERT’S QUALIFICATION AND INTERESTS IN THE GROUP’S ASSETS

The following is the qualification of the professional adviser who has given opinion or advice contained in this circular:

Name Qualification

Access Capital Limited

A licensed corporation under the SFO which engages in type 1 (dealing in securities), type 4 (advising on securities), type 6 (advising on corporate finance) and type 9 (asset management) regulated activities.

As at the Latest Practicable Date, Access Capital Limited had no interest in any assets which have been since 31 December 2007 (being the date to which the latest published audited accounts of the Company were made up) acquired or disposed of by or leased to any member of the Group, or were proposed to be acquired or disposed of by or leased to any member of the Group.

MISCELLANEOUS

• (a) The joint company secretaries of the Company are Ms. Ma Jinru and Mr. Lee, Kin Yu Arthur. Mr. Lee is a member of the American Institute of Certified Public Accountants and the Hong Kong Institute of Certified Public Accountants.

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APPENDIX

GENERAL INFORMATION

• (b) The registered office of the Company is situated at Xingang Commercial Building, Dayao Bay, Dalian Free Trade Zone, PRC. The place of business of the Company is at No. 1, Gangwan Street, Zhongshan District, Dalian, Liaoning Province, PRC. The branch share registrar of the Company in Hong Kong is Computershare Hong Kong Investor Services Limited at Rooms 1712–16 Hopewell Centre, 183 Queen’s Road East, Wanchai, Hong Kong.

• (c) The English text of this document shall prevail over the Chinese text in the case of inconsistency.

DOCUMENTS AVAILABLE FOR INSPECTION

Copies of the following documents will be available for inspection at the offices of Morrison & Foerster at Edinburgh Tower, 33/F, The Landmark, 15 Queen’s Road Central, Hong Kong during normal business hours on any business day from the date of this circular until 30 April 2009:

• (a) the JV Contract;

• (b) the letter from the Independent Board Committee, the text of which is set out on pages 9 to 10 of this circular;

• (c) the letter from Access Capital Limited, the text of which is set out on pages 11 to 19 of this circular; and

• (d) the consent letter from Access Capital Limited referred to in the paragraph headed “Consent” in this Appendix.

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