Raymond Industrial Limited - Proxy Solicitation & Information Statement 2009

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 you should take, you should consult your stockbroker or other registered dealer in securities, bank manager, solicitor, professional accountant or other professional adviser.

If you have sold or transferred all your shares in CNPC (Hong Kong) Limited (the “Company”), you should at once hand this circular to the purchaser or the transferee or to the bank, stockbroker or other agent through whom the sale was effected for transmission to the purchaser or the 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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CNPC (HONG KONG) LIMITED
(incorporated in Bermuda with limited liability)
(Stock Code: 0135)
CNPC (HONG KONG)
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CONNECTED TRANSACTION IN RELATION TO THE XINJIANG XINJIE ACQUISITIONS

Independent Financial Adviser to the Independent Board Committee and Independent Shareholders

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This circular gives you further information of the Xinjiang Xinjie Acquisitions. A letter from the Board is set out on pages 5 to 17 of this circular and a letter from the Independent Board Committee, containing its recommendation to the Independent Shareholders of the Company, is set out on page 18 of this circular. A letter from Guangdong Securities containing its advice to the Independent Board Committee and Independent Shareholders is set out on pages 19 to 31 of this circular.

A notice of SGM to be held at McKinley Room, Pacific Place Conference Centre, Level 5, One Pacific Place, 88 Queensway, Hong Kong on 12 February 2009 at 11:00 a.m. is set out on pages 38 to 39 of this circular. A proxy form for use by the Shareholders at the SGM is enclosed with this circular. Whether or not you intend to attend and vote at the SGM in person, you are requested to complete the form of proxy enclosed in accordance with the instructions printed thereon and return it to the principal office of the Company at Room 3907 – 3910, 39th Floor, 118 Connaught Road West, Hong Kong as soon as practicable but in any event not later than 48 hours before the time for holding the SGM or adjourned meeting (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 SGM should you so wish.

For identification purpose only

22 January 2009

		Pages
DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .		1
LETTER	FROM THE BOARD
1.	INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	5
2.	THE XINJIANG XINJIE ACQUISITIONS . . . . . . . . . . . . . . . . . . . . . . . . . .	7
3.	INFORMATION ON XINJIANG XINJIE . . . . . . . . . . . . . . . . . . . . . . . . . . .	13
4.	COMPLETION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	14
5.	REASONS FOR THE XINJIANG XINJIE ACQUISITIONS. . . . . . . . . . . . .	14
6.	RELATIONSHIP AMONG THE PARTIES, CONNECTED TRANSACTION
	AND CONTINUING CONNECTED TRANSACTIONS . . . . . . . . . . . . . .	15
7.	INFORMATION ON THE COMPANY, CNPC AND
	THE XINJIANG XINJIE VENDORS . . . . . . . . . . . . . . . . . . . . . . . . . . . .	16
8.	SGM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	17
9.	RECOMMENDATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	17
10.	ADDITIONAL INFORMATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	17
LETTER	FROM THE INDEPENDENT BOARD COMMITTEE. . . . . . . . . . . . . . .	18
LETTER	FROM GUANGDONG SECURITIES . . . . . . . . . . . . . . . . . . . . . . . . . . . .	19
APPENDIX I – GENERAL INFORMATION. . . . . . . . . . . . . . . . . . . . . . . . . . . .		32
NOTICE	OF SPECIAL GENERAL MEETING. . . . . . . . . . . . . . . . . . . . . . . . . . . . .	38

– i –

DEFINITIONS

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

“Announcement” means the announcement in respect of the Xinjiang Xinjie Acquisitions dated 9 January 2009 published by the Company
“associate(s)” has the meaning ascribed to it under the Listing Rules
“Board” means the board of directors of the Company
“CNPC” means (China National Petroleum Corporation*), a State-owned enterprise established under the PRC laws
“Company” means CNPC (Hong Kong) Limited, a company incorporated with limited liability in Bermuda and the shares of which are listed on the Stock Exchange
“Companies Ordinance” means the Companies Ordinance (Chapter 32 of the Laws of Hong Kong)
“connected persons” has the meaning ascribed to it under the Listing Rules “controlling shareholder” has the meaning ascribed to it under the Listing Rules
“Deposit”
means a refundable deposit of RMB40,000,000 (equivalent to approximately HK$45,332,000)
“Director(s)” means directors of the Company
“Effective Date” means the date on which the new Certificate of Approval for the Establishment of Foreign-funded Enterprises ( ) in respect of Xinjiang Xinjie is issued by the relevant PRC authorities
“Group” means the Company and its subsidiaries
“HK$” means Hong Kong dollars, the lawful currency of Hong Kong

– 1 –

DEFINITIONS

“Independent Financial Adviser” or “Guangdong Securities”
“Independent Shareholders”
“Independent Board Committee”
“Latest Practicable Date”
“Lead Source”
“Listing Rules”
“PetroChina”
“PRC”
“PRC GAAP”
“RMB”
“SFO”
means Guangdong Securities Limited, a licensed corporation carry out type 1 (dealing in securities), type 4 (advising on securities), type 6 (advising on corporate finance) and type 9 (asset management) regulated activities as defined under the SFO and the independent financial adviser to the Independent Board Committee and the Independent Shareholders in respect of the Xinjiang Xinjie Acquisitions
means the Shareholders other than CNPC and PetroChina and their respective associates
means the independent committee of the Board, comprising Dr. Lau Wah Sum, Mr. Li Kwok Sing Aubrey and Dr. Liu Xiao Feng, the independent non-executive Directors of the Company, established for the purpose of, among other things, making recommendation to the Independent Shareholders in respect of the Xinjiang Xinjie Acquisitions
19 January 2009, being the latest practicable date prior to the printing of this circular for ascertaining certain information contained herein
means (Lead Source Limited), a limited company incorporated in Hong Kong and one of the Xinjiang Xinjie Vendors
means The Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited
PetroChina Company Limited, a joint stock limited company incorporated in the PRC under the laws of the PRC, and listed on the Shanghai Stock Exchange and the Stock Exchange with American Depositary Shares listed on the New York Stock Exchange, one of the Xinjiang Xinjie Vendors and a non-wholly owned subsidiary of CNPC
means the People’s Republic of China
means the generally accepted accounting principles in the PRC
means Renminbi, the lawful currency of the PRC
means the Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong)

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DEFINITIONS

“SGM” means a special general meeting of the Company to be held on 12 February 2009, including any adjournment thereof, notice of which is set out on pages 38 to 39 of this circular to approve the Xinjiang Xinjie Acquisitions “Share(s)” means ordinary share(s) of HK$0.01 each in the share capital of the Company “Shareholder(s)” means holder(s) of Shares of the Company “Stock Exchange” means The Stock Exchange of Hong Kong Limited “subsidiaries” has the meaning ascribed to it under the Listing Rules “substantial shareholder” has the meaning ascribed to it under the Listing Rules “Tongyu” means (Xinjiang Tongyu Co., Ltd.), a company established under the PRC laws and one of the Xinjiang Xinjie Vendors “Tongyuan” means (Xinjiang Tongyuan Co., Ltd.), a company established under the PRC laws and one of the Xinjiang Xinjie Vendors “Valuation Date” means 31 August 2008 “Xinjiang Xinjie” means (Xinjiang Xinjie Co., Ltd.*), a company established under the PRC laws “Xinjiang Xinjie Acquisitions” means the Xinjiang Xinjie Tranche A Acquisition, Xinjiang Xinjie Tranche B Acquisition, Xinjiang Xinjie Tranche C Acquisition and Xinjiang Xinjie Tranche D Acquisition collectively

“Xinjiang Xinjie Acquisitions”
“Xinjiang Xinjie Acquisition Agreements”

means the Xinjiang Xinjie Tranche A Agreement, Xinjiang Xinjie Tranche B Agreement, Xinjiang Xinjie Tranche C Agreement and Xinjiang Xinjie Tranche D Agreement collectively

“Xinjiang Xinjie Tranche A Acquisition”

means the acquisition of 89,525,100 shares of Xinjiang Xinjie by the Company from PetroChina

“Xinjiang Xinjie Tranche A Agreement”

means the agreement entered into between the Company and PetroChina dated 9 January 2009 in respect of the acquisition of 89,525,100 shares of Xinjiang Xinjie

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DEFINITIONS

“Xinjiang Xinjie Tranche B Acquisition”

means the acquisition of 87,685,000 shares of Xinjiang Xinjie by the Company from Lead Source

“Xinjiang Xinjie Tranche B Agreement”
means the agreement entered into between the Company and Lead Source dated 9 January 2009 in respect of the acquisition of 87,685,000 shares of Xinjiang Xinjie
“Xinjiang Xinjie Tranche C Acquisition”
means the acquisition of 8,660,500 shares of Xinjiang Xinjie by the Company from Tongyu
“Xinjiang Xinjie Tranche C Agreement”
means the agreement entered into between the Company and Tongyu dated 9 January 2009 in respect of the acquisition of 8,660,500 shares of Xinjiang Xinjie
“Xinjiang Xinjie Tranche D Acquisition”
means the acquisition of 8,660,500 shares of Xinjiang Xinjie by the Company from Tongyuan
“Xinjiang Xinjie Tranche D Agreement”
means the agreement entered into between the Company and Tongyuan dated 9 January 2009 in respect of the acquisition of 8,660,500 shares of Xinjiang Xinjie

“Xinjiang Xinjie Vendors” means PetroChina, Lead Source, Tongyu and Tongyuan collectively

Note:

(1) For the purpose of this circular, unless otherwise indicated, the exchange rate at RMB1.00=HK$1.1333 has been used, where applicable, for purpose of illustration only and does not constitute a representation that any amount have been, could have been or may be exchanged.
(2) If there is any discrepancy or inconsistency between the Chinese names of the PRC entities and their English translations in this circular, the Chinese version shall prevail.

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LETTER FROM THE BOARD

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CNPC (HONG KONG)
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CNPC (HONG KONG) LIMITED

(incorporated in Bermuda with limited liability)

(Stock Code: 0135)

Directors:

Mr. Li Hualin (Chairman)

Mr. Zhang Bowen (Chief Executive Officer) Mr. Cheng Cheng

Dr. Lau Wah Sum, GBS, LLD, DBA, JP[#] Mr. Li Kwok Sing Aubrey[#]

Dr. Liu Xiao Feng[#]
# Independent Non-executive Directors

Registered office: Clarendon House Church Street Hamilton HM11 Bermuda

Principal office in Hong Kong: Rooms 3907 -3910 39th Floor 118 Connaught Road West Hong Kong

22 January 2009

To the Shareholders

Dear Sir or Madam,

CONNECTED TRANSACTION IN RELATION TO THE XINJIANG XINJIE ACQUISITIONS

1. INTRODUCTION

Reference is made to the Announcement at which the Company announced, among other things, that it had on the same day entered into the following Xinjiang Xinjie Acquisition Agreements:

(i) pursuant to the Xinjiang Xinjie Tranche A Agreement, the Company has conditionally agreed to purchase, and PetroChina has conditionally agreed to sell 89,525,100 shares, representing 44.76% interest in Xinjiang Xinjie at a consideration of RMB150,975,100 (equivalent to approximately HK$171,100,000);
(ii) pursuant to the Xinjiang Xinjie Tranche B Agreement, the Company has conditionally agreed to purchase, and Lead Source has conditionally agreed to sell 87,685,000 shares, representing 43.84% interest in Xinjiang Xinjie at a consideration of RMB147,871,900 (equivalent to approximately HK$167,583,000);

* For identification purpose only

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LETTER FROM THE BOARD

(iii) pursuant to the Xinjiang Xinjie Tranche C Agreement, the Company has conditionally agreed to purchase, and Tongyu has conditionally agreed to sell, 8,660,500 shares, representing 4.33% interest in Xinjiang Xinjie at a consideration of RMB14,605,000 (equivalent to approximately HK$16,552,000); and
(iv) pursuant to the Xinjiang Xinjie Tranche D Agreement, the Company has conditionally agreed to purchase, and Tongyuan has conditionally agreed to sell, 8,660,500 shares, representing 4.33% interest in Xinjiang Xinjie at a consideration of RMB14,605,000 (equivalent to approximately HK$16,552,000).

Completion of the Xinjiang Xinjie Tranche A Acquisition is not conditional upon the completion of the Xinjiang Xinjie Tranches B, C and D Acquisitions, or vice versa. However, the Xinjiang Xinjie Tranches B, C and D Acquisitions are interconditional. Upon completion of the Xinjiang Xinjie Acquisitions, Xinjiang Xinjie will be owned as to 97.26% by the Company and will become its non-wholly owned subsidiary.

As at the Latest Practicable Date, PetroChina indirectly owned 2,513,917,342 Shares, representing approximately 56.66% of the issued share capital of the Company. CNPC, the ultimate shareholder of PetroChina and the Company, was deemed to be interested in 2,522,417,342 Shares, representing approximately 56.86% of the issued share capital of the Company. Both CNPC and PetroChina are the controlling shareholders of the Company. To the best of the Directors’ knowledge, both PetroChina and CNPC are entitled to control all voting rights in respect of their respective Shares as at the Latest Practicable Date. Each of Lead Source, Tongyu and Tongyuan and their ultimate beneficial owners are third parties independent of the Company and its connected persons.

With respect to the Xinjiang Xinjie Tranche A Acquisition, pursuant to the Listing Rules, each of CNPC and PetroChina is a connected person of the Company and the Xinjiang Xinjie Tranche A Acquisition constitutes a connected transaction of the Company. With respect to the Xinjiang Xinjie Tranches B, C and D Acquisitions, PetroChina is a substantial shareholder of Xinjiang Xinjie and is also a controller of the Company as defined in the Listing Rules by virtue of its being a controlling shareholder of the Company. Pursuant to Rule 14A.13(1)(b)(i) of the Listing Rules, as each of the Xinjiang Xinjie Tranches B, C and D Acquisitions involves the Company acquiring an interest in Xinjiang Xinjie, a substantial shareholder of which is also a controller of the Company, each of the Xinjiang Xinjie Tranches B, C and D Acquisitions constitutes a connected transaction of the Company.

Since the applicable percentage ratio referred to in Chapter 14A of the Listing Rules for the Xinjiang Xinjie Acquisitions (when aggregated) is more than 2.5%, the Xinjiang Xinjie Acquisitions constitute a connected transaction of the Company, conditional upon, among other things, the approval by the Independent Shareholders at the SGM by way of poll.

The purposes of this circular are:

(i) to provide you with further details of each of the Xinjiang Xinjie Acquisitions;

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LETTER FROM THE BOARD

(ii) to set out the recommendation of the Independent Board Committee regarding each of the Xinjiang Xinjie Acquisitions to the Independent Shareholders;
(iii) to set out the letter of advice from Guangdong Securities containing its advice to the Independent Board Committee on each of the Xinjiang Xinjie Acquisitions; and
(iv) to set out the notice of the SGM.

2. THE XINJIANG XINJIE ACQUISITIONS

2.1 Introduction

As at the Latest Practicable Date, Xinjiang Xinjie was owned as to 44.76%, 43.84%, 4.33%, 4.33% and 2.74% by PetroChina, Lead Source, Tongyu, Tongyuan and an independent third party respectively. A simplified organisation chart of Xinjiang Xinjie as at the Latest Practicable Date is as follows:

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CNPC
86.29%
Independent
PetroChina Lead Source Tongyu Tongyuan
Third Party
44.76% 43.84% 4.33% 4.33% 2.74%
Xinjiang Xinjie
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2.2 Xinjiang Xinjie Acquisition Agreements

2.2.1 Xinjiang Xinjie Tranche A Agreement

PetroChina, which indirectly owns approximately 56.66% of the issued share capital of the Company, is the controlling shareholder of the Company. PetroChina owned 89,525,100 shares, representing 44.76% interest in Xinjiang Xinjie. On 5 December 2008, PetroChina has arranged to sell the 89,525,100 shares of Xinjiang Xinjie through open tender on the China Beijing Equity Exchange ( ) pursuant to the relevant PRC laws and regulations governing disposal of State-owned assets. The Deposit (a refundable deposit of RMB40,000,000 (equivalent to approximately HK$45,332,000)), was paid by the Company on 30 December 2008. The Company submitted an application to acquire and bid for the 44.76% interest in Xinjiang Xinjie on 4 January 2009. The open tender was closed on 4 January 2009 and the Company was informed that it is the sole bidder.

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LETTER FROM THE BOARD

The Board announced that the Company entered into the Xinjiang Xinjie Tranche A Agreement with PetroChina dated 9 January 2009 and the details are set out below.

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(b) Parties:

(i) Purchaser: The Company (ii) Vendor: PetroChina

(c) Transfer of shares from PetroChina to the Company

Pursuant to the Xinjiang Xinjie Tranche A Agreement, the Company has conditionally agreed to purchase, and PetroChina has conditionally agreed to sell, 89,525,100 shares, representing 44.76% interest in Xinjiang Xinjie at a consideration of RMB150,975,100 (equivalent to approximately HK$171,100,000). The legal counsel to the Company as to PRC laws, Kaiwen Law Firm, advised that according to the PRC laws and regulations and the requirements of the relevant PRC authorities, the Xinjiang Xinjie Tranche A Agreement shall take effect on the date on which the new Certificate of Approval for the Establishment of Foreign-funded Enterprises ( ) in respect of Xinjiang Xinjie is issued by the relevant PRC authorities (the “Effective Date”). Among other things, the purchaser’s internal approval (including the Independent Shareholders’ approval) is required prior to the issue of the certificate. The consideration shall be paid in cash within five working days from the Effective Date. PetroChina shall, or shall procure the China Beijing Equity Exchange to, refund the Deposit to the Company within five working days from the date of payment of the consideration. The Company intends to pay the consideration out of its internal resources. For the basis of determination of the consideration, please refer to the paragraph headed “Consideration in respect of the Xinjiang Xinjie Acquisition Agreements” below.

(d) Conditions Precedent

Completion of the Xinjiang Xinjie Tranche A Acquisition is subject to the satisfaction or waiver by the Company of certain conditions precedent, including:

(i) the Company, Xinjiang Xinjie and PetroChina having obtained all necessary governmental and internal authorisations, consents and approvals and having completed all registrations and/ or filings required by laws in relation to the transfer of 89,525,100 shares of Xinjiang Xinjie, unless otherwise provided for in the Xinjiang Xinjie Tranche A Agreement;

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LETTER FROM THE BOARD

(ii) none of the governmental authorities in the PRC has taken any pending actions or steps or will take any possible actions or steps which might restrict or prohibit the completion of any transactions contemplated under the Xinjiang Xinjie Tranche A Agreement or any transactions ancillary to the aforesaid transactions, or might obstruct or restrict the operation of Xinjiang Xinjie;
(iii) none of the governmental authorities in the PRC has enacted any laws, rules or regulations which might render the completion of the Xinjiang Xinjie Tranche A Acquisition unlawful;
(iv) the Company is satisfied with the results of the due diligence carried on Xinjiang Xinjie (including but not limited to legal, financial or taxation aspects);
(v) the tender process conducted via China Beijing Equity Exchange has completed and the Company is the successful bidder;
(vi) the Company having obtained the approval at the general meeting of the Shareholders pursuant to the Listing Rules and the articles of association of the Company (if required); and
(vii) the representations, warranties and undertakings given by PetroChina in the Xinjiang Xinjie Tranche A Agreement being true and accurate from the date of the Xinjiang Xinjie Tranche A Agreement to the date of the Company being registered as a shareholder of Xinjiang Xinjie as shown on the documents issued by the relevant industry and commerce authorities.

(e) Other terms of the Xinjiang Xinjie Tranche A Agreement

Pursuant to the Xinjiang Xinjie Tranche A Agreement, the Company has agreed, upon obtaining the new industry and commerce registration in respect of the transfer of 44.76% interest in Xinjiang Xinjie, to procure Xinjiang Xinjie to complete the procedures required for transferring certain of its assets used for transmission of oil and gas to PetroChina at a fair price and on terms to be determined within one year from the date on which Xinjiang Xinjie is issued with the new industry and commerce registration. As such transaction will constitute a connected transaction of the Company, the Company will comply with the relevant requirements of Chapter 14 and Chapter 14A of the Listing Rules as and when necessary.

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LETTER FROM THE BOARD

2.2.2 Xinjiang Xinjie Tranches B, C and D Agreements

The Company has also entered into the Xinjiang Xinjie Tranches B, C and D Agreements with the respective Xinjiang Xinjie Vendors (Vendors B, C and D respectively), all dated 9 January 2009 and the details are set out below:

(a) Date: 9 January 2009

(b) Parties:

(i) Purchaser: The Company (ii) Vendors B, C and D: Lead Source, Tongyu and Tongyuan

(c) Transfers of shares from Lead Source, Tongyu and Tongyuan to the Company

The details of transfers of shares of Xinjiang Xinjie from Lead Source, Tongyu and Tongyuan are set out below:

(i) pursuant to the Xinjiang Xinjie Tranche B Agreement, the Company has conditionally agreed to purchase, and Lead Source has conditionally agreed to sell, 87,685,000 shares, representing 43.84% interest in Xinjiang Xinjie at a consideration of RMB147,871,900 (equivalent to approximately HK$167,583,000). The consideration shall be paid in cash within five working days from the date of the Effective Date;
(ii) pursuant to the Xinjiang Xinjie Tranche C Agreement, the Company has conditionally agreed to purchase, and Tongyu has conditionally agreed to sell, 8,660,500 shares, representing 4.33% interest in Xinjiang Xinjie at a consideration of RMB14,605,000 (equivalent to approximately HK$16,552,000). The consideration shall be paid in cash within five working days from the date of the setting up of a foreign exchange account designated for asset realisation of Tongyu; and
(iii) pursuant to the Xinjiang Xinjie Tranche D Agreement, the Company has conditionally agreed to purchase, and Tongyuan has conditionally agreed to sell, 8,660,500 shares, representing 4.33% interest in Xinjiang Xinjie at a consideration of RMB14,605,000 (equivalent to approximately HK$16,552,000). The consideration shall be paid in cash within five working days from the date of the setting up of a foreign exchange account designated for asset realisation of Tongyuan.

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LETTER FROM THE BOARD

The consideration in respect of the Xinjiang Xinjie Tranches B, C and D Acquisitions are determined by reference to the consideration of the Xinjiang Xinjie Tranche A Agreement. According to the PRC laws and regulations and the requirements of the relevant PRC authorities, the Xinjiang Xinjie Tranches B, C and D Agreements shall take effect on the Effective Date, being the date on which the new Certificate of Approval for the Establishment of Foreign-funded Enterprises in respect of Xinjiang Xinjie is issued by the relevant PRC authorities. Among other things, the purchaser’s internal approval (including the Independent Shareholders’ approval) is required prior to the issue of the certificate. Furthermore, the legal counsel to the Company as to PRC laws, Kaiwen Law Firm, also advised that in cases of transfer of shares of or equity interests in enterprises in the PRC held by domestic individuals or entities to foreign investors, the consideration payable in foreign currency shall be paid to the vendors’ foreign exchange account designated for asset realisation. In respect of the Xinjiang Xinjie Tranches C and D Acquisitions, such accounts can only be set up after the new Certificate of Approval for the Establishment of Foreign-funded Enterprises in respect of Xinjiang Xinjie is issued.

The Company intends to pay the consideration of the respective Xinjiang Xinjie Acquisition Agreements out of its internal resources. For the basis of determination of the consideration of the respective Xinjiang Xinjie Acquisition Agreements, please refer to the paragraph headed “Consideration in respect of the Xinjiang Xinjie Acquisition Agreements” below.

(d) Conditions Precedent

Completion of each of the Xinjiang Xinjie Tranches B, C and D Acquisitions is subject to the satisfaction or waiver by the Company of certain conditions precedent, including:

(i) the Company, Xinjiang Xinjie and the respective Xinjiang Xinjie Vendors having obtained all necessary governmental and internal authorisations, consents and approvals and having completed all registrations and/or filings required by laws in relation to the respective transfers of shares of Xinjiang Xinjie, unless otherwise provided for in the respective Xinjiang Xinjie Agreements;
(ii) none of the governmental authorities in the PRC has taken any pending actions or steps or will take any possible actions or steps which might restrict or prohibit the completion of any transactions contemplated under the Xinjiang Xinjie Tranches B, C and D Agreements or any transactions ancillary to the aforesaid transactions, or might obstruct or restrict the operation of Xinjiang Xinjie;

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LETTER FROM THE BOARD

(iii) none of the governmental authorities in the PRC has enacted any laws, rules or regulations which might render the completion of the Xinjiang Xinjie Tranches B, C and D Acquisitions unlawful;
(iv) the Company having obtained the approval at the general meeting of the Shareholders pursuant to the Listing Rules and the articles of association of the Company (if required);
(v) the Company is satisfied with the results of the due diligence carried on Xinjiang Xinjie (including but not limited to legal, financial or taxation aspects); and
(vi) the representations, warranties and undertakings given by the respective Xinjiang Xinjie Vendors in the Xinjiang Xinjie Tranches B, C and D Agreements respectively being true and accurate from the date of the respective Xinjiang Xinjie Acquisition Agreements to the date of the Company being registered as a shareholder of Xinjiang Xinjie as shown on the documents issued by the relevant industry and commerce authorities.

2.2.3 Consideration in respect of the Xinjiang Xinjie Acquisition Agreements

The consideration payable in respect of the Xinjiang Xinjie Tranche A Agreement was determined based on the base price of the 89,525,100 shares, representing 44.76% interest in Xinjiang Xinjie put on open tender set by PetroChina. The base price was set at RMB150,975,100 (equivalent to approximately HK$171,100,000) and the Company understands that such base price was based on the appraised net asset value of Xinjiang Xinjie as at the Valuation Date, being 31 August 2008, amounted to approximately RMB337,299,100 (equivalent to approximately HK$382,261,000) as set out in a valuation report of Xinjiang Xinjie prepared by an independent qualified PRC valuer. The appraised net asset value of Xinjiang Xinjie was computed based on the cost approach. Each of the Xinjiang Xinjie Tranches B, C and D Agreements were determined after arm’s length negotiation among the Company and the respective Xinjiang Xinjie Vendors and was based on the consideration payable in respect of the Xinjiang Xinjie Tranche A Agreement. Other than the net asset value of Xinjiang Xinjie as at the Valuation Date, the Company has also considered a number of other factors including Xinjiang Xinjie’s gas station network and the growth potential of Xinjiang Xinjie in arriving at the consideration of the Xinjiang Xinjie Acquisitions. The Company considers it fair and reasonable to adopt the consideration payable in respect of the Xinjiang Xinjie Tranche A Agreement as a reference to the Xinjiang Xinjie Tranches B, C and D Agreements as it involved the same subject matter, namely shares of Xinjiang Xinjie, which was determined in open market and was in turn based on the net asset value of Xinjiang Xinjie appraised by an independent qualified PRC valuer.

– 12 –

LETTER FROM THE BOARD

According to the audited reports prepared by a PRC certified public accounting firm, as at the Valuation Date, the consolidated audited net book value (prepared based on the PRC GAAP and adjusted according to the International Accounting Standards) of Xinjiang Xinjie was approximately RMB258,272,687 (equivalent to approximately HK$292,700,000).

The audited net profit before and after tax of Xinjiang Xinjie for the eight months ended 31 August 2008 amounted to approximately RMB45,721,204 (equivalent to approximately HK$51,816,000) and approximately RMB36,931,824 (equivalent to approximately HK$41,855,000) respectively. The audited net profit before and after tax of Xinjiang Xinjie for the financial year ended 31 December 2007 amounted to approximately RMB79,265,728 (equivalent to approximately HK$89,832,000) and approximately RMB68,932,018 (equivalent to approximately HK$78,121,000) respectively. The audited net profit before and after tax of Xinjiang Xinjie for the financial year ended 31 December 2006 amounted to approximately RMB18,080,910 (equivalent to approximately HK$20,491,000) and approximately RMB11,963,117 (equivalent to approximately HK$13,558,000) respectively.

3. INFORMATION ON XINJIANG XINJIE

Xinjiang Xinjie, its subsidiaries and associates are principally engaged in the city-gas related businesses, operation of natural gas stations, transmission and storage of refined products, the sale and transmission of natural gas, as well as the development of the technology of natural gas utilisation in the PRC. There are around 300 employees of Xinjiang Xinjie. Upon completion of the Xinjiang Xinjie Acquisitions, the Company expects that Xinjiang Xinjie will further develop its natural gas-related businesses. Xinjiang Xinjie, its subsidiaries and associates provide natural gas for domestic, industrial and vehicular uses. They operate around 40 gas stations in the PRC, both in Xinjiang and other parts of the PRC.

Xinjiang Xinjie is a company jointly established by (the predecessor of (CNPC Xinjiang Petroleum*)) and two other independent third parties in 1995. Subsequently, became a subsidiary of CNPC and upon restructuring of CNPC, the 89,525,100 shares, representing 44.76% interest in Xinjiang Xinjie held by CNPC Xinjiang Petroleum was transferred to PetroChina together with other main oilfield related businesses and there is no individual consideration for the transfer of the interest in Xinjiang Xinjie. Accordingly, the original purchase cost of Xinjiang Xinjie to CNPC and PetroChina is not available.

As at the Latest Practicable Date, Xinjiang Xinjie is owned as to 44.76%, 43.84%, 4.33%, 4.33% and 2.74% by PetroChina, Lead Source, Tongyu, Tongyuan and an independent third party respectively.

Upon completion of the Xinjiang Xinjie Acquisitions, Xinjiang Xinjie will be owned as to 97.26% and 2.74% by the Company and an independent third party respectively. Xinjiang Xinjie will become a non-wholly owned subsidiary of the Company and its results will be

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LETTER FROM THE BOARD

consolidated into the financial statements of the Company after the Company obtains effective control of Xinjiang Xinjie, i.e. when the Company has the power to govern the financial and operating polices of Xinjiang Xinjie so as to obtain benefits from its activities.

A simplified chart of the structure of Xinjiang Xinjie upon completion of the Xinjiang Xinjie Acquisitions is set out below:

==> picture [271 x 190] intentionally omitted <==

----- Start of picture text -----

CNPC
86.29%
0.20%
PetroChina
56.66%
Independent Third
Company
Party
97.26% 2.74%
Xinjiang Xinjie
----- End of picture text -----

4. COMPLETION

Completion of each of the Xinjiang Xinjie Acquisitions shall take place on the dates on which all the respective conditions precedent of each of the Xinjiang Xinjie Acquisition Agreements are satisfied, or waived by the Company (as the case may be).

5. REASONS FOR THE XINJIANG XINJIE ACQUISITIONS

The Board considers that the Xinjiang Xinjie Acquisitions are in line with the development strategies of the Group as a whole. The Company will explore new business growth opportunities in city gas, vehicle fuel gas and related businesses following the restructuring pursuant to which PetroChina has become the controlling shareholder of the Company on 18 December 2008. Further details of the restructuring of the Company were set out in the joint announcements published by the Company and PetroChina on 27 August 2008 and 18 December 2008.

The Board believes that the Xinjiang Xinjie Acquisitions would enable the Company to further leverage on its economy of scale, improve its efficient allocation of resources, enhance its competitiveness, bring new development opportunities and strengthen the ability to generate yield to Shareholders.

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LETTER FROM THE BOARD

6. RELATIONSHIP AMONG THE PARTIES, CONNECTED TRANSACTION AND CONTINUING CONNECTED TRANSACTIONS

As at the Latest Practicable Date, PetroChina indirectly owns 2,513,917,342 Shares, representing approximately 56.66% of the issued share capital of the Company. CNPC, the ultimate shareholder of PetroChina and the Company, is deemed to be interested in 2,522,417,342 Shares, representing approximately 56.86% of the issued share capital of the Company. Both CNPC and PetroChina are the controlling shareholders of the Company. To the best of the Directors’ knowledge, both CNPC and PetroChina are entitled to control all voting rights in respective of their respective Shares as at the Latest Practicable Date. Both CNPC and PetroChina are the controlling shareholders of the Company. Each of Lead Source, Tongyu and Tongyuan and their ultimate beneficial owners are third parties independent of the Company and its connected persons.

Since the applicable percentage ratio referred to in Chapter 14A of the Listing Rules for the Xinjiang Xinjie Acquisitions (when aggregated) is more than 2.5%, the Xinjiang Xinjie Acquisitions constitute a connected transaction of the Company conditional upon, among other things, the approval by the Independent Shareholders at the SGM by way of poll.

As each of CNPC and PetroChina is considered to have a material interest in each of the Xinjiang Xinjie Acquisitions, CNPC and PetroChina and their respective associates shall abstain from voting on the resolution approving the Xinjiang Xinjie Tranche A Acquisition and the resolution approving the Xinjiang Xinjie Tranches B, C and D Acquisitions. As far as the Company is aware of, none of Lead Source, Tongyu and Tongyuan has any shareholding in the Company. An Independent Board Committee comprising all the independent non-executive Directors has been established to advise the Independent Shareholders, among other things, in relation to the Xinjiang Xinjie Acquisitions. Guangdong Securities has been appointed to advise the Independent Board Committee and the Independent Shareholders in this regard.

Currently, Xinjiang Xinjie acquires natural gas and related services from one or more of the subsidiaries of CNPC. Upon the completion of the Xinjiang Xinjie Acquisitions, the transactions between Xinjiang Xinjie and the subsidiaries of CNPC will constitute

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LETTER FROM THE BOARD

continuing connected transactions of the Company. The Company will comply with the relevant reporting, announcement and other applicable requirements in Chapter 14A of the Listing Rules as soon as the details of the transactions can be ascertained.

The Board (including the independent non-executive Directors), are of the view that the terms of each of the Xinjiang Xinjie Acquisition Agreements are fair and reasonable and in the interest of the Shareholders and the Group as a whole.

7. INFORMATION ON THE COMPANY, CNPC AND THE XINJIANG XINJIE VENDORS

(a) Information on the Company

The Company acts as an investment holding company. The principal activities of its subsidiaries, the associate and jointly controlled entities are the exploration and production of crude oil and natural gas in the PRC, the Republic of Kazakhstan, the Sultanate of Oman, Peru, the Kingdom of Thailand, the Azerbaijan Republic and the Republic of Indonesia.

(b) Information on CNPC

CNPC is the controlling shareholder of the Company and PetroChina. CNPC is a petroleum and petrochemical conglomerate that was formed in the wake of the restructuring launched by the State Council to restructure the predecessor of CNPC, China National Petroleum Company ( ). CNPC is also a state-authorised investment company and state-owned enterprise. CNPC is an integrated energy corporation with businesses covering oil and gas exploration and development, refining and petrochemical, oil product marketing, oil and gas storage and transportation, oil trading, engineering and technical services and petroleum equipment manufacturing.

(c) Information on PetroChina

PetroChina and its subsidiaries are mainly engaged in petroleum and natural gas-related activities, including:

(i) the exploration, development, production and sale of crude oil and natural gas;
(ii) the refining, transportation, storage and marketing of crude oil and petroleum products;
(iii) the production and sale of basic petrochemical products, derivative chemical products and other petrochemical products; and
(iv) the transmission of natural gas, crude oil and refined products, and the sale of natural gas.

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LETTER FROM THE BOARD

(d) Information on Lead Source

Lead Source is an investment holding company.

(e) Information on Tongyu

Tongyu is principally engaged in the maintenance of pipelines for transmission of refined oil in the PRC.

(f) Information on Tongyuan

Tongyuan is principally engaged in property development and management in the PRC.

8. SGM

The notice convening the SGM to be held at McKinley Room, Pacific Place Conference Centre, Level 5, One Pacific Place, 88 Queensway, Hong Kong on 12 February 2009 at 11:00 a.m., at which ordinary resolutions will be proposed to approve the Xinjiang Xinjie Acquisitions, is set out on pages 38 to 39 of this circular.

A proxy form for use at the SGM is enclosed. Whether or not you intend to attend and vote at the SGM in person, you are requested to complete the form of proxy enclosed in accordance with the instructions printed thereon and return it to the principal office of the Company at Room 3907-3910, 39th Floor, 118 Connaught Road West, Hong Kong as soon as practicable but in any event not later than 48 hours before the time for holding the SGM or adjourned meeting (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 SGM should you so wish.

9. RECOMMENDATION

Your attention is drawn to the letter from the Independent Board Committee set out on page 18 of this circular which contains its recommendation to the Independent Shareholders in relation to the Xinjiang Xinjie Acquisitions. Your attention is also drawn to the letter of advice from Guangdong Securities set out on pages 19 to 31 of this circular which contains its advice to the Independent Board Committee and the Independent Shareholders in relation to the Xinjiang Xinjie Acquisitions and the principal factors and reasons taken into account in arriving at its recommendation.

10. ADDITIONAL INFORMATION

Your attention is also drawn to the general information set out in Appendix I of this circular.

By Order of the Board Li Hualin Chairman

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LETTER FROM THE INDEPENDENT BOARD COMMITTEE

==> picture [69 x 53] intentionally omitted <==

----- Start of picture text -----

CNPC (HONG KONG)
----- End of picture text -----

CNPC (HONG KONG) LIMITED

(incorporated in Bermuda with limited liability)

(Stock Code: 0135)

22 January 2009

To the Independent Shareholders

Dear Sir or Madam,

CONNECTED TRANSACTION IN RELATION TO THE XINJIANG XINJIE ACQUISITIONS

We refer to the circular dated 22 January 2009 of the Company (the “Circular”) of which this letter forms part. Terms defined in the Circular shall have the same meanings herein unless the context otherwise requires.

We have been appointed as members of the Independent Board Committee to advise the Independent Shareholders in respect of each of the Xinjiang Xinjie Acquisitions, details of which are set out in the “Letter from the Board” in the Circular to the Shareholders.

Having taken into account the advice of the Independent Financial Adviser, we consider that the terms of each of the Xinjiang Xinjie Acquisition Agreements are fair and reasonable and in the interests of the Company and the Shareholders as a whole. Accordingly, we recommend the Independent Shareholders to vote in favour of the ordinary resolutions to approve the Xinjiang Xinjie Acquisitions as set out in the notice of the SGM to be held on 12 February 2009.

Yours faithfully, Independent Board Committee Lau Wah Sum Li Kwok Sing Aubrey Liu Xiao Feng

* For identification purpose only

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LETTER FROM GUANGDONG SECURITIES

Set out below is the text of a letter received from Guangdong Securities, the Independent Financial Adviser to the Independent Board Committee and the Independent Shareholders regarding the Xinjiang Xinjie Acquisition Agreements and the respective transactions contemplated thereunder for the purpose of inclusion in this circular.

==> picture [170 x 27] intentionally omitted <==

Units 2505-06, 25/F. Low Block of Grand Millennium Plaza 181 Queen’s Road Central Hong Kong 22 January 2009

To: The independent board committee and the independent shareholders of CNPC (Hong Kong) Limited

Dear Sirs,

CONNECTED TRANSACTION IN RELATION TO THE XINJIANG XINJIE ACQUISITIONS

INTRODUCTION

We refer to our appointment as the Independent Financial Adviser to advise the Independent Board Committee and the Independent Shareholders in relation to the Xinjiang Xinjie Acquisition Agreements and the respective transactions contemplated thereunder, details of which are set out in the letter from the Board (the “ Board Letter ”) contained in the circular dated 22 January 2009 issued by the Company to the Shareholders (the “ Circular ”), of which this letter forms part. Terms used in this letter shall have the same meanings as defined in the Circular unless the context requires otherwise.

On 4 January 2009, the Company submitted an application of a bid of RMB150,975,100 (equivalent to approximately HK$171,100,000) to the China Beijing Equity Exchange to acquire for 89,525,100 shares of Xinjiang Xinjie (the “ Sale Shares ”), representing approximately 44.76% of its total equity interest, from PetroChina. The open tender regarding the Sale Shares was closed on 4 January 2009 and the Company was the sole bidder. Subsequently on 9 January 2009, the Company entered into the Xinjiang Xinjie Tranche A Agreement with PetroChina, pursuant to which the Company has conditionally agreed to purchase and PetroChina has conditionally agreed to sell the Sale Shares at a consideration of RMB150,975,100 (equivalent to approximately HK$171,100,000) (the “ Xinjiang Xinjie Tranche A Consideration ”).

On even date, the Company entered into the Xinjiang Xinjie Tranches B, C and D Agreements with Lead Source, Tongyu and Tongyuan respectively, pursuant to which the Company has conditionally agreed to purchase, and each of Lead Source, Tongyu and Tongyuan has conditionally agreed to sell their respective approximate 43.84%, 4.33% and 4.33% equity interests in Xinjiang Xinjie for the considerations of RMB147,871,900 (equivalent to approximately HK$167,583,000), RMB14,605,000 (equivalent to approximately HK$16,552,000) and RMB14,605,000 (equivalent to approximately

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LETTER FROM GUANGDONG SECURITIES

HK$16,552,000) (altogether, the “ Xinjiang Xinjie Tranches B, C and D Considerations ”) respectively. Upon completion of the Xinjiang Xinjie Acquisitions, Xinjiang Xinjie will be owned as to approximately 97.26% by the Company and thus become a non wholly-owned subsidiary of the Company.

PetroChina indirectly owned approximately 56.66% of the issued share capital of the Company as at the Latest Practicable Date. CNPC, the ultimate shareholder of PetroChina and the Company, was deemed to be interested in approximately 56.86% of the issued share capital of the Company as at the Latest Practicable Date. Both CNPC and PetroChina are the controlling shareholders of the Company. Accordingly, the Xinjiang Xinjie Tranche A Acquisition constitutes a connected transaction for the Company under Chapter 14A of the Listing Rules. With respect to the Xinjiang Xinjie Tranches B, C and D Acquisitions, since each of them involves the Company acquiring an interest in Xinjiang Xinjie, a substantial shareholder of which (being PetroChina) is also a controller of the Company, each of the Xinjiang Xinjie Tranches B, C and D Acquisitions also constitutes a connected transaction for the Company pursuant to Rule 14A.13(1)(b)(i) of the Listing Rules.

Since the applicable percentage ratio(s) as referred to in Chapter 14A of the Listing Rules for the Xinjiang Xinjie Acquisitions (when aggregated) is more than 2.5%, the Xinjiang Xinjie Acquisitions are conditional upon, among other things, the approval of the Independent Shareholders at the SGM by way of poll. As each of CNPC and PetroChina is considered to have a material interest in each of the Xinjiang Xinjie Acquisitions, CNPC, PetroChina and their respective associates shall abstain from voting on the resolution approving the Xinjiang Xinjie Tranche A Acquisition and the resolution approving the Xinjiang Xinjie Tranches B, C and D Acquisitions.

An Independent Board Committee comprising Dr. Lau Wah Sum, Mr. Li Kwok Sing Aubrey and Dr. Liu Xiao Feng (all being independent non-executive Directors) has been established to advise the Independent Shareholders on (i) whether the terms of each of the Xinjiang Xinjie Acquisition Agreements are on normal commercial terms and are fair and reasonable so far as the Independent Shareholders are concerned; (ii) whether the Xinjiang Xinjie Acquisitions are conducted in the ordinary and usual course of business of the Company and are in the interests of the Company and the Shareholders as a whole; and (iii) how the Independent Shareholders should vote in respect of the resolutions to approve each of the Xinjiang Xinjie Acquisition Agreements and the respective transactions contemplated thereunder at the SGM. We, Guangdong Securities Limited, have been appointed as the Independent Financial Adviser to advise the Independent Board Committee and the Independent Shareholders in this respect.

BASIS OF OUR OPINION

In formulating our opinion to the Independent Board Committee and the Independent Shareholders, we have relied on the statements, information, opinions and representations contained or referred to in the Circular and the information and representations as provided to us by the Directors. We have assumed that all information and representations that have been provided by the Directors, for which they are solely and wholly responsible, are true and accurate at the time when they were made and continue to be so as at the date hereof. We have also assumed that all statements of belief, opinion, expectation and intention made

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LETTER FROM GUANGDONG SECURITIES

by the Directors in the Circular were reasonably made after due enquiry and careful consideration. We have no reason to suspect that any material facts or information have been withheld or to doubt the truth, accuracy and completeness of the information and facts contained in the Circular, or the reasonableness of the opinions expressed by the Company, its advisers and/or the Directors, which have been provided to us. We consider that we have taken sufficient and necessary steps on which to form a reasonable basis and an informed view for our opinion in compliance with Rule 13.80 of the Listing Rules.

The Directors have collectively and individually accepted full responsibility for the accuracy of the information contained in the Circular and have confirmed, having made all reasonable enquiries, which to the best of their knowledge and belief, there are no other facts the omission of which would make any statement in the Circular misleading.

We consider that we have been provided with sufficient information to reach an informed view and to provide a reasonable basis for our opinion. We have not, however, conducted any independent in-depth investigation into the business and affairs of the Company, CNPC, PetroChina, Xinjiang Xinjie, Lead Source, Tongyu, Tongyuan or their respective subsidiaries or associates, nor have we considered the taxation implication on the Group or the Shareholders as a result of the Xinjiang Xinjie Acquisitions. In addition, we have no obligation to update this opinion to take into account events occurring after the issue of this letter. Nothing contained in this letter should be construed as a recommendation to hold, sell or buy any Shares or any other securities of the Company.

Lastly, where information in this letter has been extracted from published or otherwise publicly available sources, the sole responsibility of Guangdong Securities is to ensure that such information has been correctly extracted from the relevant sources.

PRINCIPAL FACTORS AND REASONS CONSIDERED

In arriving at our opinion in respect of the Xinjiang Xinjie Acquisitions, we have taken into consideration the following principal factors and reasons:

(1) Background of the Xinjiang Xinjie Acquisitions

On 5 December 2008, PetroChina put the Sale Shares to open tender on the China Beijing Equity Exchange (the relevant tender notice is available at the website of the China Beijing Equity Exchange at www.cbex.com.cn) pursuant to the relevant PRC laws and regulations governing disposal of State-owned assets. On 4 January 2009, the Company submitted an application of a bid of RMB150,975,100 (equivalent to approximately HK$171,100,000) to the China Beijing Equity Exchange to acquire for the Sale Shares from PetroChina. The open tender was closed on 4 January 2009 and the Company was the sole bidder.

Subsequently on 9 January 2009, the Company entered into the Xinjiang Xinjie Tranche A Agreement with PetroChina pursuant to which the Company has conditionally agreed to purchase and PetroChina has conditionally agreed to sell the Sale Shares at the Xinjiang Xinjie Tranche A Consideration.

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LETTER FROM GUANGDONG SECURITIES

On even date, the Company entered into the Xinjiang Xinjie Tranches B, C and D Agreements with Lead Source, Tongyu and Tongyuan respectively pursuant to which the Company has conditionally agreed to purchase, and each of Lead Source, Tongyu and Tongyuan has conditionally agreed to sell their respective approximate 43.84%, 4.33% and 4.33% equity interests in Xinjiang Xinjie for the considerations of RMB147,871,900 (equivalent to approximately HK$167,583,000), RMB14,605,000 (equivalent to approximately HK$16,552,000) and RMB14,605,000 (equivalent to approximately HK$16,552,000) respectively. Upon completion of the Xinjiang Xinjie Acquisitions, Xinjiang Xinjie will be owned as to approximately 97.26% by the Company and thus become a non wholly-owned subsidiary of the Company.

Completion of the Xinjiang Xinjie Tranche A Acquisition and each of the Xinjiang Xinjie Tranches B, C and D Acquisitions is conditional upon certain conditions precedent, being satisfied or waived by the Company (as the case may be), which are detailed under the sections headed “Xinjiang Xinjie Tranche A Agreement” and “Xinjiang Xinjie Tranches B, C and D Agreements” of the Board Letter respectively. Besides that, completion of the Xinjiang Xinjie Tranche A Acquisition is not conditional upon completion of the Xinjiang Xinjie Tranches B, C and D Acquisitions, or vice versa. Nevertheless, the Xinjiang Xinjie Tranches B, C and D Acquisitions are inter-conditional.

As referred to in the Board Letter, each of the Xinjiang Xinjie Acquisition Agreements shall take effect upon the date on which the new Certificate of Approval for the Establishment of Foreign-funded Enterprises ( ) in respect of Xinjiang Xinjie is issued by the relevant PRC authorities.

As confirmed by the Directors, the terms of each of the Xinjiang Xinjie Acquisition Agreements were negotiated on arm’s length basis between the parties thereto and the Directors (excluding the independent non-executive Directors who shall form their opinion after reviewing this letter of advice) are of the view that the terms and conditions of the each of the Xinjiang Xinjie Acquisition Agreements are on normal commercial terms, fair and reasonable so far as the Independent Shareholders are concerned and are in the interests of the Company and the Shareholders as a whole.

Business and financial overview of the Group

The Company is an investment holding company. The principal activities of its subsidiaries, associates and jointly controlled entities are the exploration and production of crude oil and natural gas in the PRC, the Republic of Kazakhstan, the Sultanate of Oman, Peru, the Kingdom of Thailand, the Azerbaijan Republic and the Republic of Indonesia.

As disclosed in the joint announcements of the Company and PetroChina dated 27 August 2008 and 18 December 2008, PetroChina agreed to acquire for 2,513,917,342 Shares from CNPC. Such acquisition was completed on 18 December 2008. PetroChina has become the controlling shareholder of the Company thereafter and the Company continues to engage in its current oil and

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LETTER FROM GUANGDONG SECURITIES

gas exploration and production businesses. According to the Directors, the Company will also explore into the new business growth opportunities in city gas, vehicle fuel gas and related businesses leveraging on the support of PetroChina.

As further disclosed in the announcement of the Company dated 19 December 2008, the Company has conditionally agreed to acquire for approximately 50.98% equity interest in CNPC Shennan Oil Technology Development Co., Ltd., which was a then wholly-owned subsidiary of CNPC, by way of capital injection (the “ Shennan Oil Acquisition ”). CNPC Shennan Oil Technology Development Co., Ltd. is principally engaged in the supply of compressed natural gas as well as the construction and operation of compressed natural gas stations in the PRC.

Tabularised below is a summary of the audited consolidated financial information on the Group for the two years ended 31 December 2007 as extracted from the Company’s annual report for the year ended 31 December 2007 (the “ 2007 Annual Report ”) and the unaudited consolidated financial information on the Group for the six months ended 30 June 2008 as extracted from the Company’s interim report for the six months ended 30 June 2008 (the “ 2008 Interim Report ”):

	For the year	For the year		For the six
	ended 31	ended 31		months
Consolidated Income	December	December	Year on	ended 30
Statement	2007	2006	year change	June 2008
	(audited)	(audited)		(unaudited)
	HK$’000	HK$’000	%	HK$’000
Turnover	3,842,723	3,893,732	(1.31)	2,838,677
Gross profit	1,523,783	1,793,071	(15.02)	1,261,632
Net profit attributable to
shareholders of the
Company	1,367,302	1,714,513	(20.25)	1,284,201
	As at 31	As at 31
Consolidated	December	December	Year on	As at 30
Balance Sheet	2007	2006	year change	June 2008
Net asset value (“NAV”)	20,479,924	19,081,705	7.33	21,787,221
Equity attributable to
shareholders of the
Company	15,294,329	13,816,122	10.70	16,235,911

As depicted by the above table, the Group recorded an audited total turnover of approximately HK$3,843 million for the year ended 31 December 2007, representing a slight decline of approximately 1.31% as compared to the prior year. With reference to the 2007 Annual Report, the Group’s sales of crude oil had dropped from 17,209,000 barrels in 2006 to 16,488,000 barrels in 2007 and

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LETTER FROM GUANGDONG SECURITIES

its new oilfield in the Republic of Indonesia and the Azerbaijan Republic were still in exploration stage and had not yet commenced production in 2007. Given that the accounting policies of the Group stipulated that exploration costs related to oilfields with no discovery of commercial reserves within one year shall be accounted for as expenses, the Group’s profitability in 2007 had been hindered. In addition, we noted from the 2008 Interim Report that the Group’s turnover and net profit after taxation and minority interest had both increased substantially as compared to the corresponding period in the prior year. According to the 2008 Interim Report and as further confirmed by the Directors, such increase was mainly due to the extensive rise of the weighted average realized selling price of crude oil from 2006 to 2007. In this relation, we have researched over the Bloomberg and the Bloomberg revealed that the Brent crude oil price has been sliding from its peak of US$146 per barrel in July 2008 to the recent trench of around US$35 to US$50 per barrel. In view of that the price of crude oil is likely to remain volatile and unpredictable, the Directors expected that the Group’s turnover and profitability will continue to be affected by the fluctuation of crude oil price in the future.

Information on Xinjiang Xinjie

As extracted from the Board Letter, Xinjiang Xinjie, its subsidiaries and associates are principally engaged in the city-gas related businesses, operation of natural gas stations, transmission and storage of refined products, the sales and transmission of natural gas, as well as the development and application of the technology of natural gas utilization in the PRC. Upon completion of the Xinjiang Xinjie Acquisitions, the Company expected that Xinjiang Xinjie will further develop its natural gas-related businesses.

As aforementioned, Xinjiang Xinjie will be owned as to approximately 97.26% by the Company and thus become a non wholly-owned subsidiary of the Company upon completion of the Xinjiang Xinjie Acquisitions. As further confirmed by the Directors, the remaining equity interest in Xinjiang Xinjie is held by an independent third party.

According to the audited reports prepared by a PRC certified public accounting firm as provided by the Company, the audited consolidated net book value (being prepared based on the PRC GAAP and adjusted according to the International Accounting Standards) of Xinjiang Xinjie was approximately RMB258,272,687 (equivalent to approximately HK$292,700,000) as at the Valuation Date. As at the Valuation Date, the audited total assets and the total liabilities of Xinjiang Xinjie were approximately RMB1,339,455,319 (equivalent to approximately HK$1,518,005,000) and RMB1,081,182,632 (equivalent to approximately HK$1,225,304,000) respectively.

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LETTER FROM GUANGDONG SECURITIES

Moreover, the audited net profits before and after tax of Xinjiang Xinjie for the year ended 31 December 2007 were amounted to approximately RMB79,265,728 (equivalent to approximately HK$89,832,000) and RMB68,932,018 (equivalent to approximately HK$78,121,000) respectively. Whereas the audited net profits before and after tax of Xinjiang Xinjie for the year ended 31 December 2006 were amounted to approximately RMB18,080,910 (equivalent to approximately HK$20,491,000) and RMB11,963,117 (equivalent to approximately HK$13,558,000) respectively. We noted that the financial performance of Xinjiang Xinjie had been persistently improving for the two years ended 31 December 2007.

For the eight months ended 31 August 2008, the audited net profits before and after tax of Xinjiang Xinjie were amounted to approximately RMB45,721,204 (equivalent to approximately HK$51,816,000) and RMB36,931,824 (equivalent to approximately HK$41,855,000) respectively.

Information on PetroChina

As extracted from the Board Letter, PetroChina and its subsidiaries are mainly engaged in petroleum and natural gas-related activities, including:

(i) the exploration, development, production and sales of crude oil and natural gas;
(ii) the refining, transportation, storage and marketing of crude oil and petroleum products;
(iii) the production and sales of basic petrochemical products, derivative chemical products and other petrochemical products; and
(iv) the transmission of natural gas, crude oil and refined products, and the sales of natural gas.

Information on Lead Source

As extracted from the Board Letter, Lead Source is an investment holding company.

Information on Tongyu

As extracted from the Board Letter, Tongyu is principally engaged in the maintenance of pipelines for transmission of refined oil in the PRC.

Information on Tongyuan

As extracted from the Board Letter, Tongyuan is principally engaged in property development and management in the PRC.

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LETTER FROM GUANGDONG SECURITIES

(2) Reasons for the Xinjiang Xinjie Acquisitions

As aforementioned and as confirmed by the Directors, it is the business strategy of the Company to continue to engage in its current oil and gas exploration and production businesses, and to explore into the new business growth opportunities in city gas, vehicle fuel gas and related businesses leveraging on the support of PetroChina. The Group initiated such business strategy through the Shennan Oil Acquisition. To further implement the said strategy, the Board further entered into the Xinjiang Xinjie Acquisition Agreements in respect of the Xinjiang Xinjie Acquisitions. In light of the above, we consider that the Xinjiang Xinjie Acquisitions are conducted in the ordinary and usual course of business of the Company.

With reference also to the Board Letter, the Board believes that the Xinjiang Xinjie Acquisitions would enable the Company to further leverage on its economy of scale, improve its efficient allocation of resources, enhance its competiveness, bring new development opportunities and strengthen the ability to generate yield to the Shareholders.

As referred to in the 2008 Interim Report, natural gas is a clean and efficient source of energy which has gained the attention and interest of the PRC government and enterprises, and has become one of the most rapidly growing sectors in the PRC energy industry. Furthermore, we noted from the 2008 Interim Report that PetroChina is the PRC’s largest enterprise in the production, transportation and sales of natural gas and is in the process of constructing the Second West-East Gas Pipeline and other long distance gas pipelines with the aim to further integrate the northern China and western China with the important consumer markets in central China, eastern China, southern China and other areas. Given the foregoing, the Directors believe that the cooperation between the Company and PetroChina would allow the Group to share the competitive advantage of PetroChina in the PRC’s natural gas market and create a new business growth area for the Group.

In order for us to form a better understanding on the future outlook of the natural gas market in the PRC, we have searched and found from an article issued by the National Development and Reform Commission of the PRC dated 5 February 2007 regarding the 11th five-year plan of the PRC that the PRC government has decided (i) to improve the efficiency of energy utilization by developing natural gas, hydraulic power, renewable energy, new energy and other forms of clean energy; and (ii) to advocate additional investments in natural gas infrastructure. In addition, based on the statistics released by BP p.l.c., the production and consumption of natural gas in the PRC jumped by approximately 18.4% and 19.9% from 2006 to 2007 respectively. The said figures demonstrated a general expanding trend of the natural gas market in the PRC.

Having taken into account the possible support of PetroChina (being the likely supply of natural gas by PetroChina in the future as represented by the Directors) and the potential positive outlook of the natural gas market in the PRC, together with the improving financial performance of Xinjiang Xinjie for the two years ended 31

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LETTER FROM GUANGDONG SECURITIES

December 2007 as outlined under the paragraph headed “Information on Xinjiang Xinjie” of this letter, we consider that the Xinjiang Xinjie Acquisitions are in the interests of the Company and the Shareholders as a whole.

(3) Terms of the Xinjiang Xinjie Tranche A Agreement and the Xinjiang Xinjie Tranches B, C and D Agreements

Basis of the Xinjiang Xinjie Tranche A Consideration

According to the Board Letter, the base price of the Sale Shares in the open tender is RMB150,975,100 (equivalent to approximately HK$171,100,000) (the “ Base Price ”). The Base Price was determined based on the appraised NAV of Xinjiang Xinjie as at the Valuation Date which was amounted to approximately RMB337,299,100 (equivalent to approximately HK$382,261,000) as set out in the valuation report prepared by an independent qualified PRC valuer as provided by the Company.

The Xinjiang Xinjie Tranche A Consideration is the same as the Base Price and the Directors confirmed that the Company will finance the Xinjiang Xinjie Tranche A Consideration by the internal resources of the Group.

Basis of the Xinjiang Xinjie Tranches B, C and D Considerations

According to the Board Letter, the Xinjiang Xinjie Tranches B, C and D Considerations were determined after arm’s length negotiation among the Company and the respective Xinjiang Xinjie Vendors and were based on the Xinjiang Xinjie Tranche A Consideration. The Company considered that it is fair and reasonable to adopt the consideration payable in respect of the Xinjiang Xinjie Tranche A Agreement as a reference to the Xinjiang Xinjie Tranches B, C and D Agreements as they all involved the same subject matter, namely shares of Xinjiang Xinjie, which was determined in open market and was in turn based on the NAV of Xinjiang Xinjie appraised by an independent qualified PRC valuer.

The Directors also confirmed that the Company will finance the Xinjiang Xinjie Tranches B, C and D Considerations by the internal resources of the Group.

Trading multiples analysis for the Xinjiang Xinjie Acquisitions

In order to assess the fairness and reasonableness of the Xinjiang Xinjie Tranche A Consideration and the Xinjiang Xinjie Tranches B, C and D Considerations, we have performed a trading multiples analysis which includes the price to book ratio (“ PBR ”) and the price to earnings ratio (“ PER ”).

– 27 –

LETTER FROM GUANGDONG SECURITIES

Implied PBR and PER for the Xinjiang Xinjie Acquisitions

We have searched for companies listed on the Stock Exchange which are in similar lines of business to Xinjiang Xinjie, i.e. the sales and distribution of natural gas and natural gas related businesses (the “ Market Comparables ”). To the best of our knowledge and as far as we are aware of, there are five companies which met the said criteria. Set out below are the implied PBRs and PERs of the Market Comparables based on their closing prices as at 9 January 2009, being the date of the Xinjiang Xinjie Acquisition Agreements, and their latest published financial information:

Company name		Year end	Market
(Stock code)	Principal business	date	capitalization	PBR	PER
			(HK$ million)
			(Note 4)
Sino Gas Group Ltd.	Operation of petroleum,	31/12/2007	218.69	0.45	N/A
(260)	compressed natural gas and				(Note 3)
	liquefied petroleum gas
	refuelling stations, and trading
	of motor vehicles conversion
	parts and gas station
	equipment.
China Gas Holdings	Property investment, financial	31/3/2008	4,073.36	0.87	32.44
Ltd. (384)	and securities investment, gas
	pipeline construction, sales of
	piped gas.
Towngas China Co.	Sales and distribution of gas fuel	31/12/2007	3,073.36	0.45	18.78
Ltd. (1083)	and related products and gas
	pipelines.
Zhengzhou Gas Co.	Sales of natural gas, pressure	31/12/2007	424.01	0.52	6.60
Ltd. (3928)	control equipments and gas
	appliances to customers and
	construction of gas pipelines
	and the provision of
	renovation services of gas
	pipelines to local customers.
Zhongyu Gas	Gas pipeline construction, sales	31/12/2007	842.88	1.07	N/A
Holdings Ltd.	of piped gas, liquefied				(Note 3)
(8070)	petroleum gas, stoves and
	related equipment.
Minimum				0.45	6.60
Maximum				1.07	32.44
Median				0.52	18.78
The Xinjiang Xinjie				1.31	4.89
Acquisitions				*(Note 1)*	*(Note 2)*

Source: the Stock Exchange web-site (www.hkex.com.hk)

– 28 –

LETTER FROM GUANGDONG SECURITIES

Notes:

(1) Calculated based on (i) the aggregate of the Xinjiang Xinjie Tranche A Consideration and the Xinjiang Xinjie Tranches B, C and D Considerations; and (ii) the attributable 97.26% audited consolidated net book value of Xinjiang Xinjie of approximately RMB251,196,016 as at the Valuation Date.
(2) Calculated based on (i) the aggregate of the Xinjiang Xinjie Tranche A Consideration and the Xinjiang Xinjie Tranches B, C and D Considerations; and (ii) the total attributable 97.26% audited net profit after tax of Xinjiang Xinjie of approximately RMB67,043,281 for the year ended 31 December 2007.
(3) These companies recorded net losses for their respective latest financial year.
(4) As at 9 January 2009, being the date of the Xinjiang Xinjie Acquisition Agreements.

As depicted by the above table, the implied PBRs and PERs of the Market Comparables ranged from approximately 0.45 times to 1.07 times and approximately 6.60 times to 32.44 times respectively; while the implied PBR and the PER of the Xinjiang Xinjie Acquisitions are approximately 1.31 times and 4.89 times respectively. Thus, the implied PBR of the Xinjiang Xinjie Acquisitions is above the said market range and their implied PER is lower than the market range. As represented by the Directors, the audited consolidated net book value of Xinjiang Xinjie of approximately RMB258,272,687 (equivalent to approximately HK$292,700,000) as at the Valuation Date (being the basis for the aforesaid implied PBR calculation) is different from the appraised NAV of Xinjiang Xinjie of approximately RMB337,299,100 (equivalent to approximately HK$382,261,000) as at the Valuation Date, which is the basis for determining the considerations for the Xinjiang Xinjie Acquisitions. As such, the aforesaid implied PBR of the Xinjiang Xinjie Acquisitions might have been overstated. With this being the case and given also the potential positive outlook of the natural gas market in the PRC, together with the improving financial performance of Xinjiang Xinjie for the two years ended 31 December 2007, we are of the view that the higher implied PBR of the Xinjiang Xinjie Acquisitions is acceptable.

It should be noted that the businesses, operations and prospects of Xinjiang Xinjie are not exactly the same as the Market Comparables and we have not conducted any in-depth investigation into the businesses and operations of the Market Comparables. The Market Comparables are hence only used for illustrative purpose.

In addition, we have also reviewed the other major terms of the Xinjiang Xinjie Tranche A Agreement and the Xinjiang Xinjie Tranches B, C and D Agreements and are not aware of any terms which are uncommon. Consequently, we consider that the terms of the Xinjiang Xinjie Tranche A Agreement and the Xinjiang Xinjie Tranches B, C and D Agreements are on normal commercial terms and are fair and reasonable so far as the Independent Shareholders are concerned.

– 29 –

LETTER FROM GUANGDONG SECURITIES

(4) Possible financial effects of the Xinjiang Xinjie Acquisitions

Xinjiang Xinjie will be owned as to approximately 44.76%, 52.50% and 97.26% by the Company upon completion of the Xinjiang Xinjie Tranche A Acquisition, the Xinjiang Xinjie Tranches B, C and D Acquisitions and the Xinjiang Xinjie Acquisitions respectively. In this regard, the Directors further confirmed that the Company will fully consolidate the financial results of Xinjiang Xinjie into the financial statements of the Group under all of the aforementioned three scenarios..

Effect on NAV

As extracted from the 2008 Interim Report, the unaudited consolidated NAV of the Group was approximately HK$21,787 million as at 30 June 2008. The Directors expected that the Group’s NAV would be increased upon completion of (i) the Xinjiang Xinjie Tranche A Acquisition or (ii) the Xinjiang Xinjie Tranches B, C and D Acquisitions or (iii) both of the Xinjiang Xinjie Tranche A Acquisition and the Xinjiang Xinjie Tranches B, C and D Acquisitions, due to the minority interests from Xinjiang Xinjie being consolidated into the financial statements of the Group.

Effect on earnings

In light of the future business prospects of Xinjiang Xinjie, the Directors are of the view that the Xinjiang Xinjie Acquisitions would likely to have a positive impact on the future earnings of the Group.

Effect on gearing and working capital

As at 30 June 2008, the Group’s gearing level (being calculated as total borrowings divided by the shareholders’ funds according to the 2008 Interim Report) was approximately 5.44%. As confirmed by the Directors, the gearing level of the Group would be increased upon completion of (i) the Xinjiang Xinjie Tranche A Acquisition or (ii) the Xinjiang Xinjie Tranches B, C and D Acquisitions or (iii) both of the Xinjiang Xinjie Tranche A Acquisition and the Xinjiang Xinjie Tranches B, C and D Acquisitions. Based on our discussion with the Directors, we understand from the Directors that the Directors expected such increase in the gearing level of the Group to be immaterial.

Regarding the working position of the Group, given that the Company will satisfy the Xinjiang Xinjie Tranche A Consideration and the Xinjiang Xinjie Tranches B, C and D Considerations by the internal resources of the Group, the Group’s working capital would be reduced upon completion of (i) the Xinjiang Xinjie Tranche A Acquisition or (ii) the Xinjiang Xinjie Tranches B, C and D Acquisitions or (iii) both of the Xinjiang Xinjie Tranche A Acquisition and the Xinjiang Xinjie Tranches B, C and D Acquisitions.

– 30 –

LETTER FROM GUANGDONG SECURITIES

It should be noted that the aforementioned analyses are for illustrative purpose only and does not purport to represent how the financial position of the Group will be upon completion of the Xinjiang Xinjie Acquisitions.

RECOMMENDATION

Having considered the above factors and reasons, we are of the opinion that (i) the terms of each of the Xinjiang Xinjie Acquisition Agreements are on normal commercial terms and are fair and reasonable so far as the Independent Shareholders are concerned; and (ii) the Xinjiang Xinjie Acquisitions are conducted in the ordinary and usual course of business of the Company and are in the interests of the Company and the Shareholders as a whole. Accordingly, we recommend the Independent Board Committee to advise the Independent Shareholders to vote in favour of the resolutions to be proposed at the SGM to approve each of the Xinjiang Xinjie Acquisition Agreements and the respective transactions contemplated thereunder and we recommend the Independent Shareholders to vote in favour of the resolutions in this regard.

Yours faithfully, For and on behalf of Guangdong Securities Limited Graham Lam Managing Director

– 31 –

GENERAL INFORMATION

APPENDIX I

1. RESPONSIBILITY STATEMENT

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

2. DIRECTORS’ INTERESTS

As at the Latest Practicable Date, the interests or short positions of the Directors and chief executive of the Company in the Shares, underlying Shares and debentures of the Company or any associated corporation (within the meaning of Part XV of the SFO) which (a) 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 or short positions which any such Director and chief executive of the Company is taken or deemed to have under such provisions of the SFO); or which (b) were required to be entered into the register maintained by the Company, pursuant to Section 352 of the SFO; or which (c) were required to be notified to the Company and the Stock Exchange, pursuant to the Model Code for Securities Transactions by Directors of Listed Companies contained in the Listing Rules are set out below.

2.1 Ordinary Shares of HK$0.01 each of the Company

		Capacity
		and
	Number	Nature of	Percentage of
Name	of Shares	Interests	Issued Shares
		Beneficial
Li Kwok Sing Aubrey (1)	1,000,000	owner	0.02%

Notes:

(1) The interests held by Mr. Li Kwok Sing Aubrey represent long position in the Shares of the Company.

– 32 –

GENERAL INFORMATION

APPENDIX I

2.2 Share Options

Shares options were granted to the Directors and chief executives of the Company under the executive share option scheme approved by the Board on 3 June 2002, details of which are set out below:

Name Date of Grant Exercise Period Exercise Price HK$ Lau Wah Sum 08/01/04 08/04/04 – 07/01/09 1.362 Li Kwok Sing Aubrey 08/01/04 08/04/04 – 07/01/09 1.362 Cheng Cheng 25/06/04 25/09/04 – 24/06/09 0.940 08/01/07 08/04/07 – 07/01/12 4.186 26/05/08 26/08/08 – 25/05/13 4.240 Li Hualin 27/04/05 27/07/05 – 26/04/10 1.224 08/01/07 08/04/07 – 07/01/12 4.186 26/05/08 26/08/08 – 25/05/13 4.240 Liu Xiao Feng 27/04/05 27/07/05 – 26/04/10 1.224 Zhang Bowen 08/01/07 08/04/07 – 07/01/12 4.186 26/05/08 26/08/08 – 25/05/13 4.240	Outstanding at 01/01/08 3,500,000 3,500,000 20,000,000 10,000,000 – 20,000,000 25,000,000 – 1,600,000 20,000,000 – 103,600,000	Number of Share Options Granted Exercised – 3,500,000 – 3,500,000 – 4,360,000 – – 1,500,000 – – – – – 3,200,000 – – – – – 2,400,000 – 7,100,000 11,360,000	Outstanding at the Latest Practicable Date – – 15,640,000 10,000,000 1,500,000 20,000,000 25,000,000 3,200,000 1,600,000 20,000,000 2,400,000
			99,340,000

Save as disclosed above, as at the Latest Practicable Date, none of the Directors, the chief executive of the Company nor their associates, had any other interests or short positions in the Shares, underlying Shares and debentures of the Company or any associated corporations (within the meaning of Part XV of the SFO) which (a) 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 or short positions which any such Director or the chief executive of the Company is taken or deemed to have under such provisions of the SFO); or which (b) were required to be entered into the register maintained by the Company, pursuant to Section 352 of the SFO; or which (c) were required to be notified to the Company or the Stock Exchange, pursuant to the Model Code for Securities Transaction by Directors of

– 33 –

GENERAL INFORMATION

APPENDIX I

Listed Companies contained in the Listing Rules, and none of the Directors, nor their spouse or children under the age of 18, had any right to subscribe for securities of the Company, or had exercised any such right since 31 December 2007 (being the date of the Company’s latest published audited accounts).

2.3 Competing Business

As at the Latest Practicable Date, none of the Directors and their respective associates had any interest in a business which competes or may compete with the businesses of the Group (as would be required to be disclosed under Rule 8.10 of the Listing Rules if each of them were a controlling shareholder).

2.4 Additional Disclosure of Interest

There is no contract or arrangement subsisting as at the Latest Practicable Date, in which any of the Directors was materially interested and which was significant in relation to the businesses of the Group.

Save as disclosed herein, none of the Directors, directly or indirectly, has had any interest in any assets which had since 31 December 2007 (being the date to which the latest published audited financial statements of the Company were made up) been 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.

3. SUBSTANTIAL SHAREHOLDERS

As at the Latest Practicable Date, the register of substantial shareholders maintained under section 336 of the SFO, showed that the Company has been notified of the following interests, being 5% or more of the Company’s issued share capital. These interests are in addition to those disclosed above in respect of the Directors and the chief executive of the Company.

		Number of Shares	Number of Shares	Percentage of the total number of
Name	Direct	Interest	Indirect Interest	Shares in issue
Sun World Limited (1)	2,513,917,342(L)		–	56.66%
PetroChina Hong Kong (BVI)
Ltd. (1)	–		2,513,917,342(L)	56.66%
PetroChina Hong Kong Ltd. (1)	–		2,513,917,342(L)	56.66%
PetroChina Company Limited
(“PetroChina”) (1)			2,513,917,342(L)	56.66%
CNPC Finance (HK) Ltd. (2)	8,500,000(L)		–	0.20%
China Petroleum Finance
Company Ltd. (2)	–		8,500,000(L)	0.20%
China National Petroleum
Corporation (“CNPC”) (1) (2)			2,522,417,342(L)	56.86%

– 34 –

GENERAL INFORMATION

APPENDIX I

Notes:

(1) Sun World Limited is a wholly-owned subsidiary of PetroChina Hong Kong (BVI) Ltd., which in turn is wholly owned by PetroChina Hong Kong Ltd.. PetroChina Hong Kong Ltd. is wholly owned by PetroChina, which is in turn owned as to 86.29% by CNPC. Accordingly, CNPC is deemed to have interest in the 2,513,917,342 Shares held by Sun World Limited. Mr. Li Hualin, the chairman of the Company and Mr. Zhang Bowen, the chief executive officer of the Company are also directors of Sun World Limited, which is a substantial shareholder of the Company (within the meaning of Part XV of the SFO).
(2) CNPC Finance (HK) Ltd. is a wholly-owned subsidiary of China Petroleum Finance Company Ltd., which is in turn owned as to 98.97% by CNPC. Accordingly, CNPC is deemed to have interest in the 8,500,000 Shares held by CNPC Finance (HK) Ltd.

Save as disclosed above, as at the Latest Practicable Date, the Directors and the chief executive of the Company were not aware of any person (other than a Director or chief executive of the Company) who had any interest or short position in the Shares or underlying Shares of the Company which would fall to be disclosed to the Company under Divisions 2 and 3 of Part XV of the SFO

As at the Latest Practicable Date, the Directors and the chief executive of the Company were not aware of any person (other than a Directors or chief executive of the Company) who was, directly or indirectly, interested in 10% or more of the nominal value of any class of share capital carrying rights to vote in all circumstances at general meetings of any other member of the Group, or any options in respect of such capital.

4. SERVICE CONTRACT

As at the Latest Practicable Date, none of the Directors or proposed directors had any existing service contract or proposed service contract with the Company or any of its subsidiaries which was not terminable by the Company within one year without payment of consideration.

5. 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 to which the latest published financial statements of the Company have been made up) and up to the Latest Practicable Date.

– 35 –

GENERAL INFORMATION

APPENDIX I

6. QUALIFICATION AND CONSENT OF EXPERTS

The following are the qualifications of the experts who have given opinion or advice which is contained in this circular:

Name Qualification Guangdong Securities a licensed corporation for type 1 (dealing in securities), type 4 (advising on securities), type 6 (advising on corporate finance) and type 9 (asset management) regulated activities under the SFO Kaiwen Law Firm PRC lawyers

Each of the experts referred to above has given and has not withdrawn its written consent to the issue of this circular with the inclusion of its letter and/ or reference to its name in the form and context in which it appears.

As at the Latest Practicable Date, Guangdong Securities and Kaiwen Law Firm were not beneficially interested in the share capital of any member of the Group nor did they have any right (whether legally enforceable or not) to subscribe for or to nominate persons to subscribe for securities in any member of the Group.

Neither Guangdong Securities nor Kaiwen Law Firm, directly or indirectly, has had any interest in any assets which had since 31 December 2007 (being the date to which the latest published audited financial statements of the Company were made up) been 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.

7. LITIGATION

None of the members of the Group is engaged in any litigation or arbitration of material importance and no litigation or claim of material importance is known to the Directors to be pending or threatened by or against any member of the Group.

8. MISCELLANEOUS

(i) The registered office of the Company is Clarendon House, Church Street, Hamilton HM11, Bermuda.
(ii) The principal office of the Company in Hong Kong is at Room 3907 – 3910, 39th Floor, 118 Connaught Road West, Hong Kong.
(iii) The share registrar of the Company in Hong Kong is Tricor Secretaries Limited at 26/F., Tesbury Centre, 28 Queen’s Road East, Hong Kong.

– 36 –

GENERAL INFORMATION

APPENDIX I

(iv) The secretary of the Company is Mr. Lau Hak Woon, member of Hong Kong Institute of Certified Public Accountants in Hong Kong, fellow member of The Chartered Association of Certified Accountants in the UK and Certified Management Accountant of the Society of Management Accountants of Ontario in Canada.
(v) In the event of any inconsistency, the English text of this circular shall prevail over the Chinese text.

9. DOCUMENTS AVAILABLE FOR INSPECTION

Copies of the following documents will be available for inspection during business hours at the registered office of the Company at Room 3907 – 3910, 39 Floor, 118 Connaught Road West, Hong Kong from the date of this circular up to and including 12 February 2009:

(i) the memorandum and articles of association of the Company;
(ii) the audited accounts of the Company for the two financial years ended 31 December 2007;
(iii) the “Letter from the Independent Board Committee” as set out in this circular;
(iv) the “Letter from Guangdong Securities” as set out in this circular;
(v) each of the Xinjiang Xinjie Acquisition Agreements;
(vi) the written consents of each of Guangdong Securities and Kaiwen Law Firm referred to under the section headed “Qualification and Consent of Experts” in this appendix; and
(vii) this circular.

– 37 –

NOTICE OF THE SGM

==> picture [235 x 53] intentionally omitted <==

----- Start of picture text -----

CNPC (HONG KONG) LIMITED
(incorporated in Bermuda with limited liability)
CNPC (HONG KONG)
----- End of picture text -----

CNPC (HONG KONG) LIMITED

(Stock Code: 0135)

NOTICE OF THE SPECIAL GENERAL MEETING

NOTICE IS HEREBY GIVEN that the Special General Meeting of CNPC (Hong Kong) Limited (the “Company”) will be convened at McKinley Room, Pacific Place Conference Centre, Level 5, One Pacific Place, 88 Queensway, Hong Kong on 12 February 2009 at 11:00 a.m. for the purpose of considering and, if thought fit, passing with or without modifications, the following resolutions as an ordinary resolution of the Company:–

“ THAT :
(a) the transactions contemplated under the Xinjiang Xinjie Tranche A Agreement (as defined in the circular of the Company dated 22 January 2009 (the “Circular”)) (a copy of which is tabled at the meeting and marked “A” and initialled by the chairman of the meeting for identification purposes) be and are hereby generally and unconditionally approved; and
(b) any one director (if execution under the common seal of the Company is required, any two directors) of the Company be and is/ are hereby authorised for and on behalf of the Company to sign, and where required, to affix the common seal of the Company to any documents, instruments or agreements, and to do any acts and things deemed by him to be necessary or expedient in order to give effect to the Xinjiang Xinjie Tranche A Acquisition (as defined in the Circular).”
“ THAT :
(a) the transactions contemplated under each of the Xinjiang Xinjie Tranches B, C and D Agreements (as defined in the Circular) (copies of which are tabled at the meeting and marked “B”, “C” and “D” respectively and initialled by the chairman of the meeting for identification purposes) be and are hereby generally and unconditionally approved; and

– 38 –

NOTICE OF THE SGM

(b) any one director (if execution under the common seal of the Company is required, any two directors) of the Company be and is/ are hereby authorised for and on behalf of the Company to sign, and where required, to affix the common seal of the Company to any documents, instruments or agreements, and to do any acts and things deemed by him to be necessary or expedient in order to give effect to the Xinjiang Xinjie Tranches B, C and D Acquisitions (as defined in the Circular).”

By Order of the Board Lau Hak Woon Company Secretary

Hong Kong, 22 January 2009

Notes:

A member entitled to attend and vote at the meeting is entitled to appoint one or more proxies to attend and vote in his/ her stead. A proxy need not be a member of the Company. Completion and return of the form of proxy will not preclude a member from attending and voting in person at the meeting or any adjourned meeting should he so wish.
To be valid, the form of proxy, together with a power of attorney or other authority (if any) under which it is signed or a notarially certified copy of such power of attorney or authority, must be deposited at the Company’s principal office at Room 3907 – 3910, 39th Floor, 118 Connaught Road West, Hong Kong not less than 48 hours before the time appointed for holding the meeting or adjourned meeting. The form of proxy must be completed strictly in accordance with the instructions set out therein.
CNPC, PetroChina (both as defined in the Circular) and their respective associates will abstain from voting in respect of Resolutions Nos. 1 and 2.
For identification only

– 39 –

AI assistant

Raymond Industrial Limited — Proxy Solicitation & Information Statement 2009

49052_rns_2009-01-22_6ada73c7-5c3e-4539-9d7c-1eb73879b05f.pdf

CONNECTED TRANSACTION IN RELATION TO THE XINJIANG XINJIE ACQUISITIONS

CONTENTS

DEFINITIONS

DEFINITIONS

DEFINITIONS

DEFINITIONS

CNPC (HONG KONG) LIMITED

(Stock Code: 0135)

To the Shareholders

CONNECTED TRANSACTION IN RELATION TO THE XINJIANG XINJIE ACQUISITIONS

1. INTRODUCTION

2. THE XINJIANG XINJIE ACQUISITIONS

2.1 Introduction

2.2 Xinjiang Xinjie Acquisition Agreements

2.2.1 Xinjiang Xinjie Tranche A Agreement

(b) Parties:

(c) Transfer of shares from PetroChina to the Company

(d) Conditions Precedent

LETTER FROM THE BOARD

(e) Other terms of the Xinjiang Xinjie Tranche A Agreement

2.2.2 Xinjiang Xinjie Tranches B, C and D Agreements

(a) Date: 9 January 2009

(b) Parties:

(c) Transfers of shares from Lead Source, Tongyu and Tongyuan to the Company

LETTER FROM THE BOARD

(d) Conditions Precedent

2.2.3 Consideration in respect of the Xinjiang Xinjie Acquisition Agreements

3. INFORMATION ON XINJIANG XINJIE

4. COMPLETION

5. REASONS FOR THE XINJIANG XINJIE ACQUISITIONS

6. RELATIONSHIP AMONG THE PARTIES, CONNECTED TRANSACTION AND CONTINUING CONNECTED TRANSACTIONS

7. INFORMATION ON THE COMPANY, CNPC AND THE XINJIANG XINJIE VENDORS

(a) Information on the Company

(b) Information on CNPC

(c) Information on PetroChina

(d) Information on Lead Source

(e) Information on Tongyu

(f) Information on Tongyuan

8. SGM

9. RECOMMENDATION

10. ADDITIONAL INFORMATION

CNPC (HONG KONG) LIMITED

CONNECTED TRANSACTION IN RELATION TO THE XINJIANG XINJIE ACQUISITIONS

CONNECTED TRANSACTION IN RELATION TO THE XINJIANG XINJIE ACQUISITIONS

INTRODUCTION

BASIS OF OUR OPINION

LETTER FROM GUANGDONG SECURITIES

PRINCIPAL FACTORS AND REASONS CONSIDERED

(1) Background of the Xinjiang Xinjie Acquisitions

LETTER FROM GUANGDONG SECURITIES

Business and financial overview of the Group

LETTER FROM GUANGDONG SECURITIES

Information on Xinjiang Xinjie

LETTER FROM GUANGDONG SECURITIES

Information on PetroChina

Information on Lead Source

Information on Tongyu

Information on Tongyuan

(2) Reasons for the Xinjiang Xinjie Acquisitions

(3) Terms of the Xinjiang Xinjie Tranche A Agreement and the Xinjiang Xinjie Tranches B, C and D Agreements

Basis of the Xinjiang Xinjie Tranche A Consideration

Basis of the Xinjiang Xinjie Tranches B, C and D Considerations

Trading multiples analysis for the Xinjiang Xinjie Acquisitions

Implied PBR and PER for the Xinjiang Xinjie Acquisitions

(4) Possible financial effects of the Xinjiang Xinjie Acquisitions

Effect on NAV

Effect on earnings

Effect on gearing and working capital

RECOMMENDATION

1. RESPONSIBILITY STATEMENT

2. DIRECTORS’ INTERESTS

2.1 Ordinary Shares of HK$0.01 each of the Company

2.2 Share Options

2.3 Competing Business

2.4 Additional Disclosure of Interest

3. SUBSTANTIAL SHAREHOLDERS

4. SERVICE CONTRACT

Raymond Industrial Limited Proxy Solicitation & Information Statement 2009