Tencent Holdings Limited — Proxy Solicitation & Information Statement 2004

Oct 27, 2004

THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION

If you are in any doubt about this circular, 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 Daqing Petroleum and Chemical Group Limited 大慶石油化工集團有限公司 , you should at once hand this circular to the purchaser or transferee or to the bank, stockbroker or other agent through whom the sale or transfer was effected for transmission to the purchaser or transferee.

The Stock Exchange of Hong Kong Limited takes no responsibility for the contents of this circular, makes no representation as to its accuracy or completeness and expressly disclaims 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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DAQING PETROLEUM AND CHEMICAL GROUP LIMITED 大慶石油化工集團有限公司

(Incorporated in the Cayman Islands with limited liability)

(Stock Code: 362)

PROPOSED RE-ELECTION OF DIRECTORS AND

GENERAL MANDATES TO ISSUE SHARES AND TO PURCHASE ITS OWN SHARES AND REFRESHMENT OF THE LIMIT OF THE EXISTING SHARE OPTION SCHEME AND AMENDMENTS TO THE ARTICLES OF ASSOCIATION AND NOTICE OF ANNUAL GENERAL MEETING

A notice convening the annual general meeting of Daqing Petroleum and Chemical Group Limited to be held at Victoria Room, 2/F, Mandarin Oriental, Hong Kong, 5 Connaught Road Central, Hong Kong on 24 November 2004, Wednesday at 3:30 p.m. is set out on pages 14 to 21 of this circular. If you are not able to attend the meeting in person, you are requested to complete and return the enclosed proxy form in accordance with the instructions printed thereon and lodge the same with the Branch Share Registrar in Hong Kong of Daqing Petroleum and Chemical Group Limited, Tengis Limited at Ground Floor, Bank of East Asia Harbour View Centre, 56 Gloucester Road, Wanchai, Hong Kong not less than 48 hours before the time fixed for holding the meeting or any adjournment thereof.

Completion and delivery of the form of proxy will not preclude you from attending and voting at the meeting or any adjournment thereof if you so wish.

27 October 2004

CONTENTS

	Page
Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	1
Letter from the Board
– Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	3
– Re-election of Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	4
– General Mandate to Issue Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	4
– General Mandate to Repurchase Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	4
– Refreshment of the Existing Scheme Mandate Limit . . . . . . . . . . . . . . . . . . . . . . . .	4
– Amendments to the Articles of Association . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	6
– Annual General Meeting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	6
– Responsibility Statement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	6
– Recommendation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	7
– Procedure to Demand a Poll at the Annual General Meeting . . . . . . . . . . . . . . . . . .	7
Appendix I – Details of Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	8
Appendix II – Explanatory Statement on the Repurchase Mandate . . . . . . . . . . . . .	11
Notice of Annual General Meeting. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	14

DEFINITIONS

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

• “AGM” the annual general meeting of the Company to be held at Victoria Room, 2/F, Mandarin Oriental, Hong Kong, 5 Connaught Road Central, Hong Kong on 24 November 2004, Wednesday at 3:30 p.m., notice of which is set out on pages 14 to 21 of this circular

• “Annual Report” the annual report of the Company for the year ended 30 June 2004

• “Articles of Association” the articles of association of the Company

• “associates” has the meaning as defined in the Listing Rules

• “Board” the board of directors of the Company

• “Cayman Islands Companies Law” the Companies Law (Law 3 of 1961, as consolidated and revised) of the Cayman Islands

• “Company” Daqing Petroleum and Chemical Group Limited 大慶石 油化工集團有限公司 , a company incorporated in the Cayman Islands with limited liability, the Shares of which are listed on the Stock Exchange

• “connected person(s)” has the meaning as ascribed to it in the Listing Rules

• “Director(s)” the director(s) of the Company

• “Eligible Participants”

• any employee or executive (including executive director, non-executive director and independent non-executive director of the Group or any Invested Entity), supplier of goods or services, customer, any person or entity that provides research, development or other technological support, Shareholders, advisers or consultants relating to business development, and joint venture partner or counterparty to business transactions to the Group or any Invested Entity

• “Existing Scheme Mandate Limit”

• 10% of the issued share capital of the Company as at the date of adoption of the Existing Share Option Scheme which may be issued upon exercise of all options granted/to be granted under the Existing Share Option Scheme and any other share option schemes of the Group

• “Existing Share Option Scheme”

• the existing share option scheme of the Company approved by the Shareholders of the Company at the extraordinary general meeting held on 18 November 2002

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DEFINITIONS

• “Group”

the Company and its subsidiaries

• “Heng Tai”

• Heng Tai Consumables Group Limited, a company whose shares are listed on the Stock Exchange

• “Hong Kong”

• the Hong Kong Special Administrative Region of the People’s Republic of China

• “Issue Mandate”

• the general and unconditional mandate proposed to be granted to the Directors to allot, issue and deal with Shares with an aggregate nominal amount not exceeding 20% of the aggregate nominal amount of the share capital of the Company in issue as at the date of passing of the relevant resolution approving this issue mandate at the AGM, which is extended by the addition of the number of Shares repurchased under the Repurchase Mandate

• “Invested Entity” any entity in which any member of the Group holds any equity interest

• “Latest Practicable Date”

• 20 October 2004, being the latest practicable date prior to the printing of this circular for ascertaining certain information of this circular

• “Listing Rules”

• the Rules Governing the Listing of Securities on the Stock Exchange of Hong Kong Limited

• “Repurchase Mandate”

• the general and unconditional mandate proposed to be granted to the Directors to repurchase Shares with an aggregate amount of which shall not exceed 10% of the aggregate nominal amount of the share capital of the Company in issue as at the date of passing of the relevant resolution approving this repurchase mandate at the AGM

• “Revised Listing Rules”

• the amended provisions of Appendix 3 and other provisions to the Listing Rules

• “SFO”

the Securities and Futures Ordinance

• “Share(s)”

• ordinary share(s) of HK$0.01 each in the share capital of the Company

• “Shareholder(s)”

the holder(s) of Shares

• “Stock Exchange”

the Stock Exchange of Hong Kong Limited

• “Takeovers Code”

• the Hong Kong Code on Takeovers and Mergers

• “HK$”

Hong Kong dollars, the lawful currency of Hong Kong

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LETTER FROM THE BOARD

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DAQING PETROLEUM AND CHEMICAL GROUP LIMITED 大慶石油化工集團有限公司

(Incorporated in the Cayman Islands with limited liability)

Executive Directors:

Chan Yuk Foebe Wang Hailou Chu Ki Peng Zhanrong

Independent Non-Executive Directors:

Ma Wing Yun Bryan Meng Fanxi Wong Kai Tat

Registered Office:

Century Yard Cricket Square Hutchins Drive P.O. Box 2681 GT George Town Grand Cayman British West Indies

Principal Place of Business:

Room 1818, 18/F. Hutchison House 10 Harcourt Road Hong Kong

27 October 2004

To the Shareholders of the Company

Dear Sir or Madam,

PROPOSED RE-ELECTION OF DIRECTORS

AND

GENERAL MANDATES TO ISSUE SHARES AND TO PURCHASE ITS OWN SHARES AND

REFRESHMENT OF THE LIMIT OF THE EXISTING SHARE OPTION SCHEME AND AMENDMENTS TO THE ARTICLES OF ASSOCIATION AND NOTICE OF ANNUAL GENERAL MEETING

INTRODUCTION

The purpose of this circular is to provide you with information regarding the resolutions to be proposed at the AGM which, upon approval, would enable the Company to :-

• (a) re-elect the retiring Directors;

• (b) grant the Issue Mandate;

• (c) grant the Repurchase Mandate;

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LETTER FROM THE BOARD

• (d) extend the Issue Mandate set out in (b) above by an amount representing the aggregate amount of the Shares repurchased by the Company pursuant to the Repurchase Mandate set out in (c) above;

• (e) refresh the Existing Scheme Mandate Limit; and

• (f) amend the Articles of Association.

RE-ELECTION OF DIRECTORS

In accordance with Articles 108 and 112 of the Company’s Articles of Association, Mr. Meng Fanxi, Ms. Chan Yuk Foebe, Mr. Chu Ki, Mr. Peng Zhanrong and Mr. Wong Kai Tat will retire from office by rotation and be eligible for re-election at the AGM. Details of Mr. Meng Fanxi, Ms. Chan Yuk Foebe, Mr. Chu Ki, Mr. Peng Zhanrong and Mr. Wong Kai Tat required to be disclosed by the Listing Rules are set out in the Appendix I of this circular.

GENERAL MANDATE TO ISSUE SHARES

At the AGM, it will be proposed, by way of ordinary resolution, that the Directors of the Company be given a general and unconditional mandate to allot, issue and deal with Shares with an aggregate nominal amount up to 20% of the aggregate nominal amount of the share capital of the Company in issue as at the date of passing of such resolution. Such mandate will give the Director greater flexibility to issue new Shares when it is in the interests of the Group and the Shareholders as a whole. In addition, it will be further proposed, by way of a separate ordinary resolution, that the Issue Mandate be extended by adding to it the number of Shares repurchased under the Repurchase Mandate referred to below. Any issue of new Shares in the Company is subject to approval from the Stock Exchange for the listing of and permission to deal such new Shares.

GENERAL MANDATE TO REPURCHASE SHARES

At the AGM, it will also be proposed, by way of ordinary resolution, that the Directors of the Company be given a general and unconditional mandate to repurchase Shares of the Company with an aggregate nominal amount not exceeding 10% of the aggregate nominal amount of the share capital of the Company in issue as at the date of passing such resolution.

Pursuant to the Listing Rules, the Company is required to provide you with the requisite information which is reasonably necessary to enable you to make an informed decision on whether to vote for or against the resolution relating to the Repurchase Mandate. An explanatory statement for such purpose is contained in the Appendix II to this circular.

REFRESHMENT OF THE EXISTING SCHEME MANDATE LIMIT

The Existing Share Option Scheme was adopted by the Shareholders of the Company on 18 November 2002. The purpose of the Existing Share Option Scheme is to enable the Company to provide incentives or rewards to the Eligible Participants for their contribution to the Group.

Under the Existing Share Option Scheme, the Directors were authorized to grant options to subscribe for Shares thereunder and to allot, issue and deal with Shares pursuant to the

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LETTER FROM THE BOARD

exercise of options granted under the Existing Share Option Scheme. The Company may grant options of up to Existing Scheme Mandate Limit, i.e. 10% (equivalent to 87,300,000 Shares) of the issued share capital of the Company as at the date of adoption of the Existing Share Option Scheme.

As at the Latest Practicable Date, there remain 19,500,000 share options outstanding and unexercised under the Existing Share Option Scheme, which entitle their respective holders to subscribe for a total of 19,500,000 share options (representing approximately 1.35% of the issued share capital of the Company as at the Latest Practicable Date).

Apart from the Existing Share Option Scheme, the Company has no other share option scheme currently in force. The Directors consider that the Company should refresh the Existing Scheme Mandate Limit so that the Company could have more flexibility to provide incentives to those Eligible Participants of the Existing Share Option Scheme by way of granting share options to them. If the refreshment of the Existing Scheme Mandate Limit is approved at the AGM, based on the 1,449,600,000 Shares in issue as at the Latest Practicable Date and assuming no further Shares will be allotted and issued and no Shares will be repurchased after the Latest Practicable Date and up to the date of the AGM, the Company will be allowed to grant options under the Existing Share Option Scheme and any other schemes of the Company for subscription of up to a total of 144,960,000 Shares, representing 10% of the issued share capital of the Company as at the date of the AGM.

The maximum number of Shares to be issued upon exercise of all outstanding options granted and yet to be exercised under the Existing Share Option Scheme and any other schemes of the Group must not in aggregate exceed 30% of the issued share capital of the Company from time to time. The Directors consider that the refreshment of the Existing Scheme Mandate Limit is in the interests of the Group and the Shareholders as a whole because it enables the Company to reward and motivate the Eligible Participants under the Existing Share Option Scheme.

The refreshment of the Existing Scheme Mandate Limit is conditional upon:

(i) the passing of the ordinary resolution at the AGM;

• (ii) the Listing Committee of the Stock Exchange granting the listing of, and permission to deal in any new Shares which may fall to be allotted and issued upon the exercise of the subscription rights attaching to the options that may be granted under the refreshed limit of the Existing Share Option Scheme and any other schemes of the Company up to 10% of the issued share capital of the Company as at the date of passing of the ordinary resolution at the AGM; and

(iii) the submission of the application Form C1 by the Company to the Stock Exchange.

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LETTER FROM THE BOARD

AMENDMENTS TO THE ARTICLES OF ASSOCIATION

The Directors wish to propose a special resolution at the AGM to amend the Articles of Association of the Company to ensure its compliance with the Revised Listing Rules. In principle, the Articles of Association must conform with the following:

• (1) The minimum seven-day period for lodgment by the Shareholders of the notice to nominate a Director shall commence no earlier than the day after the dispatch of the notice of the meeting appointed for such election and end no later than seven days before the date of such meeting;

• (2) The Directors shall abstain from voting at and being counted towards the quorum of the board meeting on any matter in which he or any of his associates has a material interest; and

• (3) Where any Shareholder is, under the Revised Listing Rules, required to abstain from voting on any particular resolution or restricted to voting only for or only against any particular resolution, any votes cast by or on behalf of such Shareholder in contravention of such requirement or restriction shall not be counted.

A full text of the proposed amendments to the Articles of Association is contained in the resolution no. 4E of the notice of AGM as set out on pages 17 to 21 of this circular.

ANNUAL GENERAL MEETING

A notice of the AGM is set out on pages 14 to 21 of this circular. A form of proxy for use at the AGM is enclosed with this circular. To be valid, the form of proxy must be completed in accordance with the instructions printed thereon and deposited, together with the power of attorney or other authority, if any, under which it is signed, or a notarially certified copy of such power of attorney or other authority, must be lodged with the Company’s branch share registrar in Hong Kong, Tengis Limited at Ground Floor, Bank of East Asia Harbour View Centre, 56 Gloucester Road, Wanchai, Hong Kong not less than 48 hours before the time fixed for holding the AGM or any adjournment thereof. Completion and delivery of the form of proxy will not preclude Shareholders from attending and voting at the AGM or any adjournment thereof if they so wish.

RESPONSIBILITY STATEMENT

This circular includes 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.

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LETTER FROM THE BOARD

RECOMMENDATION

The Directors consider that the proposed re-election of Directors, the granting of the Issue Mandate and Repurchase Mandate, the extension of the Issue Mandate, refreshment of the Existing Scheme Mandate Limit and amendments to the Articles of Association are in the best interests of the Company and its Shareholders as a whole. Accordingly, the Directors recommend the Shareholders to vote in favour of all the relevant resolutions to be proposed at the AGM.

PROCEDURE TO DEMAND A POLL AT THE ANNUAL GENERAL MEETING

In accordance with Article 72 of the Company’s Articles of Association, at any general meeting a resolution put to the vote of the meeting shall be decided on a show of hands unless a poll is (before or on the declaration of the result of the show of hands or on the withdrawal of any other demand for a poll) demanded:-

• (i) by the chairman of the meeting; or

• (ii) by at least three Shareholders present in person (or, in the case of a Shareholder being a corporation, by its duly authorised representative) or by proxy for the time being entitled to vote at the meeting; or

• (iii) by any Shareholder or Shareholders present in person (or, in the case of a Shareholder being a corporation, by its duly authorized representative) or by proxy and representing not less than one-tenth of the total voting rights of all the Shareholders having the right to vote at the meeting; or

• (iv) by any Shareholder or Shareholders present in person (or, in the case of a Shareholder being a corporation, by its duly authorised representative) or by proxy and holding Shares in the Company conferring a right to vote at the meeting being Shares on which an aggregate sum has been paid up equal to not less than one-tenth of the total sum paid up on all the Shares conferring that right.

Yours faithfully, For and on behalf of the Board

Daqing Petroleum and Chemical Group Limited Chan Yuk Foebe

Executive Director

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DETAILS OF DIRECTORS

APPENDIX I

Details of the Directors proposed to be re-elected are as follows:–

Mr. Meng Fanxi , aged 65, is an Independent Non-executive Director of the Company. He is currently engaged in the consultancy business of corporate management. He joined the Group in 2001 and is also a member of the Audit Committee of the Company. Mr. Meng was a director and the deputy general manger of China International Trust Investment Corporation from 1990 to 2000 and he was responsible for the corporate planning and import and export business. Before joining China International Trust Investment Corporation in 1985, he was the chief of 中國物資部油品局 (Oil Product Bureau of Ministry of Material Supply of the PRC) and was responsible for sales activities of oil products. Mr. Meng graduated from ShanDong Province Metallurgy Institute in metallurgy.

As at the Latest Practicable Date, Mr. Meng does not have any interests in the Shares of the Company within the meaning of Part XV of the SFO. He is entitled to a director’s fee of HK$12,500 per annum which is determined by the Board by reference to his duties and responsibilities with the Company and the market rate, and will be reviewed by the Board from time to time. He is not entitled to any other emoluments. The terms of appointment of Mr. Meng as the Independent Non-executive Director was renewed for a further two years commencing from 28 February 2003.

Save as disclosed above, in the last three years, Mr. Meng did not hold any director positions in other listed companies. Also, he does not hold any other positions with the Company or any member of the Group and has no relationships with any Directors, senior management or substantial or controlling shareholders (as defined in the Listing Rules) of the Company.

Ms. Chan Yuk Foebe , aged 35, is an Executive Director of the Company and joined the Group in January 2004. She is also a Director of Success Eagle Investment Limited, STB Company Limited, Ombudsman Developments Limited, Pun Mun Agents Limited, Seng Lai Services Limited and Tsai Hong Properties Limited, wholly owned subsidiaries of the Company. Ms. Chan is responsible for overall management and business development of the Group.

Ms. Chan holds a Bachelor Degree in Accountancy from the Queensland University of Technology in Australia. Ms. Chan has over 10 years’ experience in corporate finance and management.

As at the Latest Practicable Date, Ms. Chan does not have any interests in the Shares of the Company within the meaning of Part XV of the SFO. There is no service contract entered into between the Company and Ms. Chan. Ms. Chan will hold office until she retires from the Board and will be eligible for re-election at the AGM in accordance with the Articles of Association of the Company. Ms. Chan is not entitled to any emoluments (director’s fee, bonus or other benefits) payable by the Group during her term as an Executive Director of the Company expiring on the date of AGM.

Ms. Chan is also an Executive Director of Heng Tai, substantial shareholder (as defined in the Listing Rules) of the Company. As at the Latest Practicable Date, she does not have any interests in the shares of Heng Tai within the meaning of Part XV of the SFO. Ms. Chan has no relationships with any directors, senior management or substantial or controlling shareholders (as defined in the Listing Rules) of the Company and Heng Tai.

Save as disclosed above, Ms. Chan did not hold any director positions in other listed companies in the last three years.

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DETAILS OF DIRECTORS

APPENDIX I

Mr. Chu Ki , aged 51, is an Executive Director of the Company and joined the Group in January 2004. He has over 25 years’ managerial experience in the food and beverage and the transportation industries, both in Hong Kong and PRC. Mr. Chu is responsible for overall business development of the Group.

As at the Latest Practicable Date, Mr. Chu does not have any interests in the Shares of the Company within the meaning of Part XV of the SFO. There is no service contract entered into between the Company and Mr. Chu. Mr. Chu will hold office until he retires from the Board and will be eligible for re-election at the AGM in accordance with the Articles of Association of the Company. Mr. Chu is not entitled to any emoluments (director’s fee, bonus or other benefits) payable by the Group during his term as an Executive Director of the Company expiring on the date of AGM.

Mr. Chu is also an Executive Director of Heng Tai, substantial shareholder (as defined in the Listing Rules) of the Company. As at the Latest Practicable Date, he has director’s interests in the shares of Heng Tai within the meaning of Part XV of the SFO. Mr. Chu has no relationships with any directors, senior management or substantial or controlling shareholders (as defined in the Listing Rules) of the Company and Heng Tai.

Save as disclosed above, Mr. Chu did not hold any director positions in other listed companies in the last three years.

Mr. Peng Zhanrong , aged 34, is an Executive Director of the Company and joined the Group in February 2004. Mr. Peng is responsible for overseeing the operation of the Group’s investment in Mudanjiang, Heilungjiang Province, the PRC.

Mr. Peng graduated from South China University of Technology (華南理工大學 ) in chemical engineering in the PRC. Mr. Peng has over 10 years’ experience in the auto and petroleum industries in the PRC.

As at the Latest Practicable Date, Mr. Peng does not have any interests in the Shares of the Company within the meaning of Part XV of the SFO. There is no service contract entered into between the Company and Mr. Peng. Mr Peng will hold office until he retires from the Board and will be eligible for re-election at the AGM in accordance with the Articles of Association of the Company. Mr. Peng is entitled to receive from the Group (a) a director’s fee at the rate of HK$15,000 per month which is determined by the Board by reference to his duties and responsibilities with the Company and the market rate, and will be reviewed by the Board from time to time and (b) all reasonable out of pocket expenses properly incurred by Mr. Peng in connection with the performance of his duties as an executive Director of the Company. Mr Peng is not entitled to any emoluments (bonus or other benefits) payable by the Group during his term as an Executive Director of the Company expiring on the date of AGM.

Mr. Peng is also an Executive Director of Heng Tai, substantial shareholder (as defined in the Listing Rules) of the Company. As at the Latest Practicable Date, he does not have any interests in the shares of Heng Tai within the meaning of Part XV of the SFO. Mr. Peng has no relationships with any directors, senior management or substantial or controlling shareholders (as defined in the Listing Rules) of the Company and Heng Tai.

Save as disclosed above, Mr. Peng did not hold any director positions in other listed companies in the last three years.

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DETAILS OF DIRECTORS

APPENDIX I

Mr. Wong Kai Tat , aged 51, is an independent non-executive Director and an Audit Committee member of the Company. He joined the Group in September 2004.

Mr. Wong is a member of The Institute of Chartered Accountants in Australia and the Hong Kong Institute of Certified Public Accountants. He is also a senior associate with the Australasian Institute of Banking & Finance. Mr. Wong is also a barrister in Hong Kong. Currently, Mr. Wong is an executive director of TS Telecom Technologies Limited, a company listed on the Growth Enterprise Market of the Stock Exchange. Mr. Wong is a director of a Certified Public Accountants firm. He has over 20 years experience in auditing and accounting services.

As at the Latest Practicable Date, Mr. Wong does not have any interest in the Shares of the Company within the meaning of Part XV of the SFO. There is no service contract entered into between the Company and Mr. Wong. Mr Wong will hold office until he retires from the Board and will be eligible for re-election at the AGM in accordance with the Articles of Association of the Company. Mr. Wong is entitled to receive from the Company (a) a director’s fee at the rate of HK$10,000 per month which is determined by the Board by reference to his duties and responsibilities with the Company and the market rate, and will be reviewed by the Board from time to time and (b) all reasonable out of pocket expenses properly incurred by Mr. Wong in connection with the performance of his duties as an Independent Non-executive Director of the Company. He is not entitled to any other emoluments.

Save as disclosed above, in the last three years, Mr. Wong did not hold any director positions in other listed companies. Also, he does not hold any other positions with the Company or any member of the Company’s group and has no relationships with any Directors, senior management or substantial or controlling shareholders (as defined in the Listing Rules) of the Company.

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APPENDIX II EXPLANATORY STATEMENT ON THE REPURCHASE MANDATE

This appendix serves as an explanatory statement, as required by the Listing Rules, to provide you with the requisite information relating to the Repurchase Mandate to be proposed at the AGM.

1. REASONS FOR REPURCHASE MANDATE

Although the Directors have no present intention of repurchasing any Shares, they believe that the flexibility afforded by the Repurchase Mandate would be beneficial to the Company and its Shareholders. Trading conditions on the Stock Exchange have sometimes been volatile in recent years. At any time in the future when Shares are trading at a discount to their underlying value, the ability of the Company to repurchase Shares will be beneficial to those Shareholders who retain their investment in the Company since their percentage interest in the assets of the Company would increase in proportion to the number of Shares repurchased by the Company and thereby resulting in an increase in net assets and/or earnings per Share of the Company. Such repurchases will only be made when the Directors believe that such repurchases will benefit the Company and its Shareholders.

2. SHARE CAPITAL

As at the Latest Practicable Date, the issued share capital of the Company comprised 1,449,600,000 Shares.

Subject to the passing of the Repurchase Mandate (ordinary resolution no. 4B), the Company would be allowed under the Repurchase Mandate to repurchase Shares up to a maximum of 144,960,000 Shares on the basis that no further Shares will be issued or repurchased prior to the date of the AGM.

3. FUNDING OF REPURCHASE

In repurchasing Shares, the Company may only apply funds legally available for such purpose in accordance with the memorandum and Articles of Association of the Company, the Cayman Islands Companies Law and the Listing Rules, including but not limited to profits of the Company or the proceeds of a fresh issue of Shares made for the purpose of the repurchase.

There might be material adverse impact on the working capital or gearing position of the Company (as compared with the position disclosed in the audited accounts contained in the Annual Report) in the event that the Repurchase Mandate was to be carried out in full at any time during the proposed repurchase period (i.e. the “Relevant Period” as defined in the resolution no. 4B of the notice of AGM). However, the Directors do not propose to exercise the Repurchase Mandate to such extent as would, in the circumstances, have a material adverse effect on the working capital requirements of the Company or the gearing levels which in the opinion of the Directors are from time to time appropriate for the Company. The number of Shares to be repurchased on any occasion and the price and other terms upon which the same are purchased will be decided by the Directors at the relevant time having regard to the circumstances then pertaining.

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APPENDIX II EXPLANATORY STATEMENT ON THE REPURCHASE MANDATE

4. MARKET PRICES

The highest and lowest prices at which the Shares have been traded on the Stock Exchange during each of the previous twelve months prior to the Latest Practicable Date are as follows:

		Shares
	Highest		Lowest
	HK$		HK$
2003
October	0.5320		0.4300
November	0.5600		0.4870
December	0.5470		0.4930
2004
January	0.5930		0.4400
February	0.4800		0.4470
March	0.4670		0.4000
April	0.4800		0.4170
May	0.4300		0.3330
June	0.3800		0.3430
July	0.3730		0.3400
August	0.3570		0.2750
September	0.3700		0.2900
October (up to the Latest Practicable Date)	0.4000		0.3350

5. SHARE REPURCHASE MADE BY THE COMPANY

No purchase of Shares has been made by the Company during the last six months preceding the Latest Practicable Date (whether on the Stock Exchange or otherwise).

6. UNDERTAKING

The Directors have undertaken to the Stock Exchange to exercise the powers of the Company to make purchases under the Repurchase Mandate in accordance with the Listing Rules, the memorandum and Articles of Association of the Company and the Cayman Islands Companies Law.

None of the Directors nor, to the best of their knowledge having made all reasonable enquiries, any of their associates, presently intends to sell Shares to the Company under the Repurchase Mandate in the event that Repurchase Mandate is approved by the Shareholders.

No connected persons of the Company has notified to the Company that they have a present intention to sell any Shares, or that they have undertaken not to sell any Shares held by them to the Company in the event that the Repurchase Mandate is approved by its Shareholders.

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APPENDIX II EXPLANATORY STATEMENT ON THE REPURCHASE MANDATE

7. TAKEOVERS CODE

If on the exercise of the Repurchase Mandate, a Shareholder’s proportionate interest in the voting rights of the Company increases, such increase will be treated as an acquisition for the purposes of Rule 32 of the Takeovers Code. As a result, a Shareholder or group of Shareholders acting in concert could obtain or consolidate control of the Company and become obliged to make a mandatory offer in accordance with rules 26 and 32 of the Takeovers Code.

As at the Latest Practicable Date, Heng Tai Consumables Group Limited and Mr. Chan Yuen Tung were beneficially interest in 263,340,000 and 177,145,488 Shares representing 18.17% and 12.22% of the issued share capital of the Company respectively. In the event that the Directors exercise in full the Repurchase Mandate, the shareholding of Heng Tai Consumables Group Limited and Mr. Chan Yuen Tung in the Company will be increased to approximately 20.18% and 13.58% of the issued share capital of the Company respectively.

The Directors are not aware of any consequences which may arise under the Takeovers Code as a result of any repurchases made under the proposed resolution.

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NOTICE OF ANNUAL GENERAL MEETING

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DAQING PETROLEUM AND CHEMICAL GROUP LIMITED 大慶石油化工集團有限公司

(Incorporated in the Cayman Islands with limited liability)

NOTICE OF ANNUAL GENERAL MEETING

NOTICE IS HEREBY GIVEN THAT an annual general meeting of Daqing Petroleum and Chemical Group Limited (the “Company”) will be held at Victoria Room, 2/F, Mandarin Oriental, Hong Kong, 5 Connaught Road Central, Hong Kong on 24 November 2004, Wednesday at 3:30 p.m. for the purpose of considering and, if thought fit, passing the following resolutions:

ORDINARY RESOLUTIONS

1. to receive and consider the audited consolidated financial statements and the reports of the directors and the auditors for the year ended 30 June 2004;

2. (a) to re-elect the following persons as directors:

   • (i) Mr. Meng Fanxi

   • (ii) Ms. Chan Yuk Foebe

   • (iii) Mr. Chu Ki

   • (iv) Mr. Peng Zhanrong

   • (v) Mr. Wong Kai Tat

3. (b) to authorise the board of directors to fix the directors’ remuneration;

4. to re-appoint Messrs. RSM Nelson Wheeler as auditors of the Company for the ensuing year and to authorise the board of directors to fix their remuneration; and

5. as special business, to consider and, if thought fit, pass with or without amendments, the following resolutions as Ordinary Resolutions and Special Resolution respectively:

ORDINARY RESOLUTIONS

• A. “ THAT :

• (a) subject to paragraph (c) below, the exercise by the directors during the Relevant Period (as hereinafter defined) of all the powers of the Company to allot, issue and deal with additional shares of HK$0.01 each in the capital of the Company and to make or grant offers, agreements and options which might require the exercise of such powers be and is hereby generally and unconditionally approved;

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NOTICE OF ANNUAL GENERAL MEETING

• (b) the approval in paragraph (a) shall authorise the directors during the Relevant Period to make or grant offers, agreements and options which would or might require the exercise of such powers, after the end of the Relevant Period;

• (c) the aggregate nominal amount of share capital allotted or agreed conditionally or unconditionally to be allotted (whether pursuant to an option or otherwise) by the directors pursuant to the approval in paragraph (a), otherwise than pursuant to the following events (the “Relevant Events”):

• (i) a Rights Issue (as hereinafter defined); or

• (ii) any scrip dividend or similar arrangement providing for the allotment of shares in lieu of the whole or part of a dividend on shares of the Company in accordance with the articles of association of the Company; or

• (iii) the exercise of any share option scheme of the Company; or

• (iv) any adjustment of rights to subscribe for shares of the Company under options; or

• (v) a specific authority granted by the shareholders of the Company,

shall not exceed 20% of the aggregate nominal amount of the share capital of the Company in issue at the date of the passing of this resolution and the Relevant Events and the said approval shall be limited accordingly; and

• (d) for the purpose of this resolution:

“Relevant Period” means the period from the passing of this resolution until whichever is the earlier of:

• (i) the conclusion of the next annual general meeting of the Company;

• (ii) the expiration of the period within which the next annual general meeting of the Company is required by the articles of association of the Company or any applicable law to be held; or

• (iii) the revocation or variation of the authority given under this resolution by an ordinary resolution of the shareholders in general meeting; and

“Rights Issue” means an offer of shares open for a period fixed by the directors to holders of shares of the Company or any class thereof on the register of members on a fixed record date in proportion to their then holdings of such shares or class thereof (subject to such exclusions or other arrangements as the directors may deem necessary or expedient in relation to fractional entitlements or having regard to any restrictions or obligations under the laws of, or the requirements of any recognised regulatory body or any stock exchange in any territory outside Hong Kong).”;

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NOTICE OF ANNUAL GENERAL MEETING

• B. “ THAT :

• (a) subject to paragraph (b) below, the exercise by the directors during the Relevant Period (as hereinafter defined) of all the powers of the Company to purchase shares of HK$0.01 each in the capital of the Company be and is hereby generally and unconditionally approved;

• (b) the aggregate nominal amount of the shares to be purchased pursuant to the approval in paragraph (a) above shall not exceed 10% of the aggregate nominal amount of the share capital of the Company in issue on the date of the passing of this resolution and the said approval shall be limited accordingly; and

• (c) for the purpose of this resolution, “Relevant Period” means the period from the passing of this resolution until whichever is the earlier of:

  • (i) the conclusion of the next annual general meeting of the Company;

  • (ii) the expiration of the period within which the next annual general meeting of the Company is required by the articles of association of the Company or any applicable law to be held; or

  • (iii) the revocation or variation of the authority given under this resolution by an ordinary resolution of the shareholders in general meeting.”;

• C. “ THAT the general mandate granted to the directors of the Company pursuant to resolutions nos. 4A and 4B as above and for the time being in force to exercise the powers of the Company to allot shares and to make or grant offers, agreements and options which might require the exercise of such powers referred to in resolution no. 4A be and is hereby extended by the total nominal amount of shares in the capital of the Company repurchased by the Company since the granting of such general mandate pursuant to the exercise by the directors of the Company of the powers of the Company to purchase such shares pursuant to resolution no. 4B, provided that such amount shall not exceed 10% of the aggregate nominal amount of the share capital of the Company in issue at the date of the passing of this resolution.”;

• D. “ THAT the existing scheme limit under the share option scheme adopted by a resolution of the shareholders of the Company on 18 November 2002 (“Share Option Scheme”) be refreshed so that the aggregate nominal amount of the share capital of the Company to be allotted and issued pursuant to the grant or exercise of the options under the Share Option Scheme (excluding options previously granted, outstanding, cancelled, lapsed or exercised under the Share Option Scheme) shall not exceed 10% of the aggregate nominal amount of the share capital of the Company in issue at the date of the passing of this resolution (“Refreshed Scheme Limit”) and that the directors of the Company be and are hereby authorized, subject to compliance with the Rules Governing the Listing of Securities on the Stock Exchange (as amended from time to time), to grant options under the Share Option Scheme up to the Refreshed Scheme Limit and to exercise all the powers of the Company to allot, issue and deal with shares of the Company pursuant to the exercise of such options.”; and

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NOTICE OF ANNUAL GENERAL MEETING

SPECIAL RESOLUTION

• E. “ THAT the articles of association of the Company be and are hereby amended as follows:–

Article 1(A)

• (i) deletion of the definition of “associates” and replacing with the following:

• ““associate” the meaning attributed to it in the Listing Rules.”

• (ii) deletion of the words “a recognised clearing house within the meaning of section 2 of the Securities and Futures (Clearing Houses) Ordinance (Cap. 420 of the Laws of Hong Kong) or” in the definition of “clearing house”

• (iii) deletion of the definition of “holding company” and “subsidiary” and insertion of the following definition immediately after the definition of “Statutes”:

• ““Subsidiary and the meanings attributed to them in the Listing Holding Company” Rules.”

• (iv) insertion of the following definition immediately after the definition of “HK$”:

• ““Listing Rules” shall mean the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited.”

Article 84

By deleting the existing Article 84 in its entirety and replacing therewith the following new Articles 84(A) and 84(B):–

• “84. (A) Subject to paragraph (B) of this Article 84, no objection shall be raised to the qualification of any person exercising or purporting to exercise a vote or the admissibility of any vote except at the meeting or adjourned meeting at which the vote objected to is given or tendered, and every vote not disallowed at such meeting shall be valid for all purposes. Any such objection made in due time shall be referred to the Chairman, whose decision shall be final and conclusive.

• (B) At all times during the Relevant Period (but not otherwise), where any shareholder is, under the Listing Rules, required to abstain from voting on any particular resolution or restricted to voting only for or only against any particular resolution, any votes cast by or on behalf of such shareholder (whether by way of proxy or, as the case may be, corporate representative) in contravention of such requirement or restriction shall not be counted.”

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NOTICE OF ANNUAL GENERAL MEETING

Article 107

By deleting paragraphs (D), (E), (G), (H), (I), (J) and (K) of the existing Article 107 in their entirety and replacing therewith the following new paragraphs respectively:

• “(D) A Director shall not vote or be counted in the quorum on any resolution of the Directors concerning his own appointment or the appointment of any of his associates as the holder of any office or place of profit with the Company or any other company in which the Company is interested (including the arrangement or variation of the terms thereof, or the termination thereof).

• (E) Where arrangements are under consideration concerning the appointment (including the arrangement, remuneration or variation of the terms thereof, or the termination thereof) of two or more Directors or any of the associate(s) of any such Directors to offices or places of profit with the Company or any other company in which the Company is interested, a separate resolution may be put in relation to each Director or, as the case may be, the associate(s) of such Director and in such case each of the Directors concerned shall be entitled to vote (and be counted in the quorum) in respect of each resolution except that concerning his own appointment or the appointment of any of his associates (or the arrangement or variation of the terms thereof, or the termination thereof) and (in the case of an office or place of profit with any such other company as aforesaid) where the other company is a company in which the Director and his associates in aggregate own five (5) per cent. or more of the issued shares of any class of the voting equity share capital of such company or of the voting rights of any class of shares of such company (other than shares which carry no voting rights at general meetings and no or nugatory dividend and return of capital rights).

• (G) If to the knowledge of a Director, he or any of his associates, is in any way, whether directly or indirectly, interested in a contract or arrangement or proposed contract or arrangement with the Company, he shall declare the nature of his or, as the case may be, his associate(s)’ interest at the meeting of the Directors at which the question of entering into the contract or arrangement is first taken into consideration, if he knows his interest or that of his associate(s) then exists, or in any other case at the first meeting of the Directors after he knows that he or his associate(s) is or has become so interested. For the purposes of this Article, a general notice to the Directors by a Director to the effect that (a) he or his associates is a shareholder of a specified company or firm and is to be regarded as interested in any contract or arrangement which may after the date of the notice be made with that company or firm or (b) he or his associates is to be regarded as interested in any contract or arrangement which may after the date of the notice be made with a specified person who is connected

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NOTICE OF ANNUAL GENERAL MEETING

with him or any of his associates, shall be deemed to be a sufficient declaration of interest under this Article in relation to any such contract or arrangement; provided that no such notice shall be effective unless either it is given at a meeting of the Directors or the Director takes reasonable steps to secure that it is brought up and read at the next meeting of the Directors after it is given.

• (H) A Director shall not vote (nor be counted in the quorum) on any resolution of the Directors approving any contract or arrangement or proposal in which he or his associates is to his knowledge materially interested, and if he shall do so his vote shall not be counted (nor is he counted in the quorum for that resolution), but this prohibition shall not apply to any of the following matters namely:

• (i) any contract or arrangement for the giving by the Company of any security or indemnity to the Director or his associates in respect of money lent or obligations incurred or undertaken by him or any of them at the request of or for the benefit of the Company or any of its subsidiaries;

• (ii) any contract or arrangement for the giving by the Company of any security or indemnity to a third party in respect of a debt or obligation of the Company or any of its subsidiaries which the Director or his associates has himself/themselves assumed responsibility in whole or in part and whether alone or jointly under a guarantee or indemnity or by the giving of security;

• (iii) any contract or arrangement concerning an offer of the shares or debentures or other securities of or by the Company or any other company which the Company may promote or be interested in for subscription or purchase where the Director or his associates is/are or is/are to be interested as a participant in the underwriting or subunderwriting of the offer;

• (iv) any contract or arrangement in which the Director or his associates is/ are interested in the same manner as other holders of shares or debentures or other securities of the Company by virtue only of his/ their respective interest in shares or debentures or other securities of the Company;

• (v) any contract or arrangement concerning any other company in which the Director or his associates is/are interested only, whether directly or indirectly or as an officer or an executive or a shareholder or in which the Director or his associates is/are beneficially interested in shares of that company provided that, he and his associates, are not in aggregate beneficially interested in five (5) per cent. or more of the issued shares of any class of such company (or any third company through which his interest or that of any of his associates is derived) or of the voting rights;

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NOTICE OF ANNUAL GENERAL MEETING

• (vi) any proposal or arrangement for the benefit of employees of the Company or its subsidiaries including the adoption, modification or operation of a pension fund or retirement, death or disability benefit scheme which relates both to Directors, associate(s) of Directors and employees of the Company or of any of its subsidiaries and does not give the Director or his associates any privilege or advantage and not generally accorded to the class of persons to whom such scheme or fund relates;

• (vii) any proposal or arrangement concerning the benefit of employees of the Company or its subsidiaries including the adoption, modification or operation of any employees’ share scheme or any share incentive or share option scheme under which the Director or his associates may benefit; and

• (viii)any contract, transaction or proposal concerning the purchase and/or maintenance of any insurance policy for the benefit of any Director, his associate(s), officer or employee pursuant to these Articles.

• (I) A company shall be deemed to be a company in which a Director and his associates own five (5) per cent. or more of any class of the voting equity share capital of such company or of the voting rights of any class of shares of such company if and so long as (but only if and so long as) he and his associates are (either directly or indirectly) the holder of or beneficially interested in five (5) per cent. or more of any class of the issued voting equity share capital of such company (or of any third company, other than the Company or any of its subsidiaries, through which his interest is derived) or of the voting rights of any class of shares of the company. For the purpose of this paragraph there shall be disregarded any shares held by a Director or any of his associate(s) as bare or custodian trustee and in which he or such associate(s) has/have no beneficial interest, any shares comprised in a trust in which the interest of the Director or any of his associates is in reversion or remainder if and so long as some other person is entitled to receive the income thereof, any shares comprised in an authorised unit trust scheme in which the Director or any of his associates is interested only as a unit holder, and shares which carry no voting right at general meetings and no or nugatory dividend and return of capital rights.

• (J) Where a company (other than a company which is a wholly owned subsidiary of the Company or a subsidiary or associated company of the Company in the voting equity capital of which neither the Director nor any of his associates has any interests) in which a Director and any of his associates hold five (5) per cent. or more of any class of the voting equity share capital of such company or of the voting rights of any class of shares available to shareholders of the company is materially interested in a transaction, then that Director shall also be deemed materially interested in such transaction.

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NOTICE OF ANNUAL GENERAL MEETING

• (K) If any question shall arise at any meeting of the Directors as to the materiality of the interest of a Director or any of his associates as to the entitlement of any Director to vote or be counted in the quorum and such question is not resolved by his voluntarily agreeing to abstain from voting or not to be counted in the quorum, such question (unless it relates to the Chairman) shall be referred to the Chairman and his ruling in relation to such Director shall be final and conclusive except in a case where the nature or extent of the interest of the Director concerned or his associates as known to such Director has not been fairly disclosed to the other Directors. If any question as aforesaid shall arise in respect of the Chairman such question shall be decided by a resolution of the Directors (for which purpose the Chairman shall not be counted in the quorum and shall not vote thereon) and such resolution shall be final and conclusive except in a case where the nature or extent of the interest of the Chairman or his associates as known to him has not been fairly disclosed to the other Directors.”

Article 113

By inserting “and the period for lodgement of such notices shall commence no earlier than the day immediately after the dispatch of the notice of the general meeting and end no later than seven days before the date of such general meeting” after the last sentence of Article 113.”

By Order of the Board Daqing Petroleum and Chemical Group Limited Kwok Yuen Ying, Riki Secretary

Hong Kong, 18 October 2004

Notes:

• (a) The register of members of the Company will be closed from 18 November 2004, Thursday to 24 November 2004, Wednesday, both days inclusive, during which period no transfer of shares will be registered. In order to qualify for attending and voting at the annual general meeting, all transfer documents accompanied by the relevant share certificates must be lodged with the Company’s branch share registrar in Hong Kong, Tengis Limited at Ground Floor, Bank of East Asia Harbour View Centre, 56 Gloucester Road, Wanchai, Hong Kong for registration not later than 4:00 p.m. on 17 November 2004, Wednesday.

• (b) A member entitled to attend and vote at the meeting is entitled to appoint one or more proxies to attend and vote on his behalf. A proxy need not be a member of the Company.

• (c) The instrument appointing a proxy and the power of attorney or other authority, if any, under which it is signed, or a notarially certified copy of such power of attorney or other authority, must be lodged with the Company’s branch share registrar in Hong Kong, Tengis Limited at Ground Floor, Bank of East Asia Harbour View Centre, 56 Gloucester Road, Wanchai, Hong Kong not less than 48 hours before the time fixed for holding the meeting or at any adjournment thereof.

• (d) A circular containing an explanatory statement regarding items (4A) to (4E) above will be sent to members of the Company together with the 2004 Annual Report.

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