SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 6-K
REPORT OF FOREIGN ISSUER
PURSUANT TO RULE 13a-16 OR 15d-16 OF
THE SECURITIES EXCHANGE ACT OF 1934
For the month of September 2006
PETROCHINA COMPANY LIMITED
16 ANDELU, DONGCHENG DISTRICT
BEIJING, THE PEOPLE'S REPUBLIC OF CHINA, 100011
(Address of Principal Executive Offices)
(Indicate by check mark whether the registrant files or will file
annual reports under cover of Form 20-F or Form 40-F.)
Form 20-F X Form 40-F
--- ---
(Indicate by check mark whether the registrant by furnishing the
information contained in this Form is also thereby furnishing the information to
the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of
1934.)
Yes No X
--- ---
(If "Yes" is marked, indicate below the file number assigned to the
registrant in connection with Rule 12g3-2(b): 82-_________)
PetroChina Company Limited (the "Registrant") is furnishing under the
cover of Form 6-K the Registrant's circular with respect to revision of existing
caps and amendments to the articles of association.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
PetroChina Company Limited
Dated: September 15, 2006 By: /s/ Li Huaiqi
------------------------------------
Name: Li Huaiqi
Title: Company Secretary
THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION
If you are in any doubt as to any aspect of this circular, or as to the action
to be taken, you should consult your stockbroker or other registered dealer in
securities, bank manager, solicitor, professional accountant or other
professional advisor.
If you have sold or transferred all your shares in PetroChina Company Limited,
you should at once hand this circular, together with the enclosed form of proxy,
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.
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.
(PETROCHINA COMPANY LIMITED LOGO)
(Chinese Characters)
PETROCHINA COMPANY LIMITED
(a joint stock limited company incorporated in the People's Republic of China
with limited liability)
(Stock Code: 857)
REVISION OF EXISTING CAPS
AND
AMENDMENTS TO THE ARTICLES OF ASSOCIATION
Independent Financial Adviser to the Independent Board Committee
(ICEA LOGO) (Chinese Characters)
A subsidiary of ICBC (Chinese Characters)
A letter from the Independent Board Committee is set out on page 16 of this
circular. A letter from ICEA Capital Limited, the independent financial adviser,
containing its advice to the Independent Board Committee is set out on pages 17
to 29 of this circular.
An extraordinary general meeting of PetroChina Company Limited will be held at
Kempinski Hotel, No. 50 Liangmaqiao Road, Chaoyang District, Beijing 100016, the
People's Republic of China at 9:00 a.m. on 1 November 2006. A copy of the
notice convening the extraordinary general meeting is set out on pages 35 to 36
of this circular. Whether or not you are able to attend the meeting, you are
requested to complete and return the form of proxy, despatched together with
this circular, in accordance with the instructions printed thereon as soon as
possible to the registered office of PetroChina Company Limited at World Tower,
16 Andelu, Dongcheng District, Beijing, the People's Republic of China in any
event not less than 24 hours before the time appointed for holding of the
meeting. Completion and return of the form of proxy will not preclude you from
attending and voting at the meeting in person should you so wish.
14 September 2006
CONTENTS
Page
----
Definitions.............................................................. 1
Letter from the Board
1. The Acquisition.................................................... 4
2. Revision of the Existing Caps and Listing Rules Implications....... 5
3. The Amended Comprehensive Agreement................................ 6
4. The CRMSC Products and Services Agreement.......................... 6
5. Proposed Caps...................................................... 7
6. Amendments to the Articles......................................... 13
7. General............................................................ 14
8. Recommendation..................................................... 15
9. Further Information................................................ 15
Letter from the Independent Board Committee.............................. 16
Letter from the Independent Financial Adviser............................ 17
Appendix -- General Information.......................................... 30
Notice of Extraordinary General Meeting.................................. 35
-i-
DEFINITIONS
In this circular, the following expressions have the following meanings
unless the context requires otherwise:
"Acquirer" means Pervinage Holding B.V., a wholly-owned
subsidiary of the CNPC E&D incorporated in
Netherlands on 17 August 2006
"Acquisition" means the acquisition of a 67% interest in
PetroKazakhstan by the Acquirer from the Vendor
"Acquisition Agreement" means the share purchase agreement dated 23
August 2006, entered into between the Vendor
and the Acquirer in respect of the Acquisition
"Amended Comprehensive means the comprehensive products and services
Agreement" agreement between CNPC and PetroChina dated 10
March 2001, as amended on 9 June 2005 and 1
September 2005 respectively, the terms and
conditions of which were disclosed in detail in
the circular to the Shareholders dated 22
September 2005 and were approved by the
Independent Shareholders on 8 November 2005
"Announcement" means the announcement of PetroChina dated 23
August 2006 with respect to the Acquisition,
the Proposed Caps and the proposed amendments
to the Articles
"Articles" means the articles of association of
PetroChina, approved by the Shareholders on 26
May 2005
"Board" means the board of directors of PetroChina
"CNODC" means (Chinese Characters) (China National Oil
and Gas Exploration and Development
Corporation*), a state-owned enterprise
incorporated under the laws of the PRC, the
entire interest of which is owned by CNPC
"CNPC" means (Chinese Characters) (China National
Petroleum Corporation*), a state-owned
enterprise incorporated under the laws of the
PRC, and the controlling shareholder of
PetroChina, holding approximately 88.21% of the
issued share capital of PetroChina
"CNPC E&D" means (Chinese Characters) (CNPC Exploration
and Development Company Limited*), a company
incorporated under the laws of the PRC with
limited liability, having its previous English
name as Zhong You Kan Tan Kai Fa Company
Limited
"CNPC Group" means CNPC and its subsidiaries, associates and
affiliates, excluding the Group
"CRMSC" means (Chinese Characters) (China Railway
Materials and Suppliers Corporation*), a
state-owned enterprise established under the
laws of the PRC
-1-
DEFINITIONS
"CRMSC Products and between means the agreement dated 1 September 2005
Services Agreement" entered into PetroChina and CRMSC in relation
to the provision of certain products and
services
"CRMSC Transactions" means the transactions contemplated under the
CRMSC Products and Services Agreement
"Director(s)" means PetroChina's director(s)
"Dushanzi Refinery" means a refinery located at Dushanzi, Xinjiang
Uygur Autonomous Region, the PRC, operated by
PetroChina
"EGM" means an extraordinary general meeting of
PetroChina to be held at Kempinski Hotel, No.
50 Liangmaqiao Road, Chaoyang District, Beijing
100016, the PRC at 9:00 a.m. on 1 November
2006
"Existing Caps" means the existing caps of continuing connected
transactions under the Amended Comprehensive
Agreement and the CRMSC Products and Services
Agreement for the period from 1 January 2006 to
31 December 2008
"Group" means PetroChina and its subsidiaries
"Independent Board Committee" means the independent committee of the Board,
comprising Messrs Chee-Chen Tung, Liu Hongru
and Franco Bernabe, established on 23 August
2006 for the purpose of reviewing and advising
Independent Shareholders in respect of the
Proposed Caps
"Independent Financial means the independent financial adviser to the
Adviser" Independent Board Committee and the Independent
Shareholders. ICEA Capital Limited has been
retained by the Board as the Independent
Financial Adviser on 23 August 2006
"Independent Shareholder(s)" means the shareholder(s) of PetroChina other
than CNPC and its associates, as defined by the
Listing Rules
"Jointly-owned Companies" means a company in which both PetroChina and
the CNPC Group are shareholders, and where the
CNPC Group and/or its subsidiaries and/or
affiliates (individually or together) is/are
entitled to exercise, or control the exercise
of, 10% or more of the voting power at any
general meeting of such company
"Kazakhstan-China Pipeline" means the oil pipeline from Atasu, Republic of
Kazakhstan to Alashankou, the PRC, operated by
Kazakhstan-China Pipeline Limited Liability
Partnership
"KMG" means JSC National Company Kazmunaigaz, a state
owned oil company organised and existing under
the law of the Republic of Kazakhstan
"Latest Practicable Date" means 7 September 2006, being the latest
practicable date prior to the printing of this
circular for ascertaining certain information
contained herein
-2-
DEFINITIONS
"Listing Rules" means the Rules Governing the Listing of
Securities on the Stock Exchange
"PetroChina" means (Chinese Characters) (PetroChina Company
Limited*), a joint stock company limited by
shares incorporated in the PRC on 5 November
1999 under laws of the PRC, and listed on the
Stock Exchange with American Depository Shares
listed on the New York Stock Exchange
"PetroChina & CRMSC Oil
Marketing" means (Chinese Characters) (PetroChina & CRMSC
Oil Marketing Company Limited*), a company
established on 13 December 2004 under the laws
of the PRC with limited liability and an
indirect subsidiary of PetroChina
"PetroKazakhstan" means PetroKazakhstan Inc., a corporation
existing under the laws of the Province of
Alberta Canada.
"PetroKazakhstan Group" means PetroKazakhstan and its subsidiaries
"PRC" means the People's Republic of China
"Proposed Caps" means the proposed maximum annual aggregate
values of the relevant continuing connected
transactions under the Amended Comprehensive
Agreement and the CRMSC Products and Services
Agreement as set out in this circular
"Shareholder(s)" means the holder(s) of shares of PetroChina
"Stock Exchange" means The Stock Exchange of Hong Kong Limited
"Vendor" means 819 Luxembourg S.a r.l., an indirect
wholly owned subsidiary of CNODC incorporated
in Luxembourg
"Western Pipeline" means the oil pipeline from Dushanzi, Xinjiang
Uygur Autonomous Region to Lanzhou, Gansu
Province, the PRC, operated by China Petroleum
West Pipeline Co., Ltd.
* For identification purpose only.
-3-
LETTER FROM THE BOARD
(PETROCHINA COMPANY LIMITED LOGO)
(Chinese Characters)
PETROCHINA COMPANY LIMITED
(a joint stock limited company incorporated in the People's Republic of China
with limited liability)
(Stock Code: 857)
Board of Directors Legal address
Chen Geng (Chairman) World Tower, 16 Andelu
Jiang Jiemin Dongcheng District
Su Shulin Beijing 100011
Zheng Hu The People's Republic of China
Zhou Jiping
Duan Wende
Wang Yiling
Zeng Yukang
Gong Huazhang
Jiang Fan
Chee-Chen Tung*
Liu Hong Ru*
Franco Bernabe*
* Independent non-executive Director
14 September 2006
To the Shareholders
Dear Sir or Madam,
REVISION OF EXISTING CAPS
AND
AMENDMENTS TO THE ARTICLES
1. THE ACQUISITION
On 23 August 2006, the Board announced that CNPC E&D, a subsidiary of
PetroChina and a 50 : 50 joint venture between PetroChina and CNODC, entered
into the Acquisition Agreement through the Acquirer (a wholly owned subsidiary
of CNPC E&D) with the Vendor (a wholly owned subsidiary of CNODC), for the
acquisition by the Acquirer of CNODC's entire interest in PetroKazakhstan,
representing 67% of the issued share capital of PetroKazakhstan.
-4-
LETTER FROM THE BOARD
The Board believes that the Acquisition represents an important opportunity
for PetroChina to further enhance its overseas working interests of oil and gas
reserve, to expand PeroChina's overseas exploration and production assets in a
strategically important region, to derive synergies from the Kazakhstan-China
Pipeline, the Dushanzi Refinery and CNPC E&D's existing Kazakhstan exploration
and production operations and to further improve PetroChina's financial
performance.
CNODC is wholly owned by CNPC, the controlling shareholder of PetroChina.
As at the date of this circular, CNPC holds approximately 88.21% of the issued
share capital of PetroChina. Pursuant to the Listing Rules, CNODC and the Vendor
are connected persons of PetroChina. CNPC E&D is a connected person of
PetroChina pursuant to Listing Rule 14A.11(5). Upon the completion of the
Acquisition, PetroChina will, through CNPC E&D, hold 67% of PetroKazakhstan.
PetroKazakhstan will therefore become a non-wholly owned subsidiary of CNPC E&D
and PetroChina and a connected person of PetroChina pursuant to Rule 14A.11(6)
of the Listing Rules.
The Acquisition constitutes a connected transaction of PetroChina under the
Listing Rules. As the relevant percentage ratios involved in the Acquisition are
more than 0.1% but less than 2.5% for the Group, the Acquisition is only subject
to reporting and announcement requirements and exempted from the independent
shareholders' approval requirement under Rule 14A.32 of the Listing Rules.
Further details regarding the Acquisition, the Acquisition Agreement and
PetroKazakhstan were set out in the Announcement.
2. REVISION OF EXISTING CAPS AND LISTING RULES IMPLICATIONS
The Announcement also announced that PetroChina proposes to revise the
Existing Caps under the Amended Comprehensive Agreement and the CRMSC Products
and Services Agreement as previously approved by the Independent Shareholders
(or by the Shareholders in respect of the Existing Caps for the CRMSC
Transactions) on 8 November 2005. The Proposed Caps, for the three-year period
from 1 January 2006 to 31 December 2008, are the result of:
- continuing connected transactions arising as a result of the
completion of the Acquisition, which will fall within the scope of the
Amended Comprehensive Agreement; and
- changes to PetroChina's production and operational environment that
are expected to have an impact on the Existing Caps under the Amended
Comprehensive Agreement and the CRMSC Products and Services Agreement,
as explained in detail in this circular.
The Proposed Caps are subject to reporting, announcement and Independent
Shareholders' approval (or Shareholders' approval in respect of the Proposed
Caps for the CRMSC Transactions) requirements under the Listing Rules.
An Independent Board Committee has been appointed by the Board to consider
the Proposed Caps. ICEA Capital Limited has been retained as the Independent
Financial Adviser to advise the Independent Board Committee as to whether the
Proposed Caps are fair and reasonable so far as the Shareholders are concerned.
-5-
LETTER FROM THE BOARD
3. THE AMENDED COMPREHENSIVE AGREEMENT
The Amended Comprehensive Agreement was entered into by and between CNPC
and PetroChina on 10 March 2001, which was further amended on 9 June 2005 and 1
September 2005 respectively. The Amended Comprehensive Agreement is valid for
three years, commencing from 1 January 2006. Detailed information about the
terms and conditions of the Amended Comprehensive Agreement, including but not
limited to general principles, price and terms, price determination,
coordination of annual demand of products and services, rights and obligations,
term and termination and the annual caps in respect of the transactions under
the Amended Comprehensive Agreement were disclosed in the circular to the
Shareholders dated 22 September 2005 and were approved by the Independent
Shareholders at the extraordinary general meeting held on 8 November 2005.
The Amended Comprehensive Agreement applies to connected transactions
between the CNPC Group (including Jointly-owned Companies) and the Group.
Pursuant to the Amended Comprehensive Agreement, a Jointly-owned Company means a
company in which both PetroChina and the CNPC Group are shareholders, and where
the CNPC Group and/or its subsidiaries and/or affiliates (individually or
together) is/are entitled to exercise, or control the exercise of, 10% or more
of the voting power at any general meeting of such company.
As explained in the Announcement, PetroKazakhstan will be equity-accounted
for in PetroChina's consolidated financial statements since PetroChina and KMG
are considered as having joint control over PetroKazakhstan. At the same time,
PetroKazakhstan will be treated as a "subsidiary" of PetroChina for the purposes
of the Listing Rules because, among other things, PetroChina will hold more than
half of the issued share capital of PetroKazakhstan. Accordingly, upon the
completion of the Acquisition, PetroKazakhstan will become a non-wholly owned
subsidiary of PetroChina. It will also become a connected person of PetroChina
pursuant to Rule 14A.11(6) of the Listing Rules as well as a Jointly-owned
Company as defined by the Amended Comprehensive Agreement. Given that
PetroKazakhstan will be a subsidiary of PetroChina held through CNPC E&D,
connected transactions involving the PetroKazakhstan Group will be treated in
the same manner as transactions involving CNPC E&D and its subsidiaries, which
were approved by the Independent Shareholders on 8 November 2005. On this basis,
PetroChina has classified connected transactions between the PetroKazakhstan
Group and the Group as transactions between the CNPC Group (including
Jointly-owned Companies) and the Group, and connected transactions between the
PetroKazakhstan Group and the CNPC Group as transactions between the Group and
the CNPC Group.
4. THE CRMSC PRODUCTS AND SERVICES AGREEMENT
On 1 September 2005, PetroChina entered into the CRMSC Products and
Services Agreement with CRMSC, pursuant to which PetroChina should provide CRMSC
with products and services including, among other things, refined products (such
as gasoline, diesel and other petroleum products) on an ongoing basis. CRMSC,
being a substantial shareholder of PetroChina's subsidiary, PetroChina & CRMSC
Oil Marketing, is a connected person of PetroChina pursuant to the Listing
Rules. Detailed information regarding the terms and conditions of the CRMSC
Products and Services Agreement and the annual caps in respect of CRMSC
Transactions were disclosed in the circular to the Shareholders dated 22
September 2005 and were approved by the Shareholders at the extraordinary
general meeting held on 8 November 2005.
-6-
LETTER FROM THE BOARD
5. PROPOSED CAPS
(a) Revision due to continuing connected transactions arising as a result
of the Acquisition
(i) Production services to be provided by the CNPC Group to the Group
The Amended Comprehensive Agreement provides that the CNPC Group
(including Jointly-owned Companies such as PetroKazakhkstan) shall
supply crude oil, refined oil, chemical products, natural gas and
production services (including transportation) to the Group at the
government-prescribed price. Where there is no government-prescribed
price but market price is available, the price shall be determined
with reference to the market price.
The Board has considered and proposed the following increases to
the Existing Caps in respect of this category of transaction. Such
increases are attributable to the Group's proposed purchase of crude
oil from the PetroKazakhstan Group and transportation of such crude
oil via the Kazakhstan-China Pipeline and the Western Pipeline in
accordance with the Amended Comprehensive Agreement.
Proposed increase to the
Existing Caps
(RMB in millions)
------------------------
Category of Products and Services 2006 2007 2008
--------------------------------- ------ ------ ------
Production services to be provided by the
CNPC Group to the Group 13,040 36,000 34,720
The above proposed increases to the Existing Caps have been
determined with reference to the following: the estimated growth in
crude oil production and business of the PetroKazakhstan Group;
current market prices of crude oil; potential fluctuations and
increases in the prices of crude oil both in the international market
and in the domestic market; the estimated annual crude oil volume to
be purchased by the Group from the PetroKazakhstan Group; the
transportation capacities of the Kazakhstan-China Pipeline and the
Western Pipeline; and charges of the Kazakhstan-China Pipeline and the
Western Pipeline for oil transportation and the potential fluctuations
and increases in such charges. The significant increases of
transaction amount in 2007 and 2008 are due to the increases of the
Kazakhstan-China Pipeline's transportation capacity, which is 3.5
million tonnes in 2006 and expected to be 10 million tonnes in 2007
and 2008 when its construction is fully completed.
(ii) Construction and technical services to be provided by the CNPC
Group to the Group.
Prior to the Acquisition, the Group has obtained construction and
technical services from the CNPC Group. Given that the construction
and technical services provided to the Group by the CNPC Group are of
a high quality and on favourable pricing terms, the Group (including
the PetroKazakhstan Group) will continue to obtain construction and
technical services from the CNPC Group after the Acquisition.
The Board has considered and proposed the following increases to
the Existing Caps in respect of this category of transaction. Such
increases are attributable to the provision of services by the CNPC
Group to the PetroKazakhstan Group, including but not limited to
geophysical prospecting, well drilling, logging, well testing,
down-hole operations, oilfield surface facilities construction,
construction design and construction supervision. This category of
transaction will be charged on actual cost incurred basis.
-7-
LETTER FROM THE BOARD
Proposed increases to
the Existing Caps
(RMB in millions)
---------------------
Category of Products and Services 2006 2007 2008
--------------------------------- ----- ----- -----
Construction and technical services to be
provided by the CNPC Group to the Group 1,880 1,800 1,640
The above proposed increases to the Existing Caps have been
determined with reference to the following: historical transaction
price and transaction amounts for the construction and technical
services of the PetroKazakhstan Group; and the estimated business
growth of the PetroKazakhstan Group.
(iii) Material supply services to be provided by the CNPC Group to the
Group
Prior to the Acquisition, the Group has obtained material supply
services from the CNPC Group. Given that the material supply services
provided by the CNPC Group to the Group is of a high quality and on
favourable pricing terms, the Group (including the PetroKazakhstan
Group) will continue to obtain material supply services from the CNPC
Group after the Acquisition. This category of transaction will be
charged on actual cost incurred basis.
The Board has considered and proposed the following increases to
the Existing Caps in respect of this category of transaction. Such
increases are attributable to the provision of casing pipes, drill
heads, drilling liquid and lubricating oil and other raw materials or
equipment by the CNPC Group to the PetroKazakhstan Group.
Proposed increases
to the Existing
Caps
(RMB in millions)
------------------
Category of Products and Services 2006 2007 2008
--------------------------------- ---- ---- ----
Material supply services to be provided by
the CNPC Group to the Group 240 480 480
The above proposed increases to the Existing Caps have been
determined with reference to the following: historical transaction
prices and transaction amounts in respect of material supply
transactions of the PetroKazakhstan Group; estimated business growth
of the PetroKazakhstan Group; and estimated changes in the volume of
purchases by the PetroKazakhstan Group.
(b) Revision due to changes to PetroChina's production and operational
environment
(i) Products and services to be provided by the Group to the CNPC
Group
The Amended Comprehensive Agreement provides that the Group shall
provide products such as natural gas, crude oil and refined oil to the
CNPC Group at the government-prescribed price, or where there is no
government-prescribed price, the price shall be determined with
reference to the market price.
-8-
LETTER FROM THE BOARD
The reasons for applying for increases to the Existing Caps of this
transaction are:
- Natural gas
Natural gas is sold at government-prescribed price in the PRC.
The National Development and Reform Commission issued the Notice on
the Reform of the Mechanism for Determining the Ex-Factory Prices of
Natural Gas and Recent Appropriate Increase of the Ex-Factory Prices
of Natural Gas on 23 December 2005, which made adjustments to the
pricing mechanism and the ex-factory price of natural gas. Pursuant to
the notice, the ex-factory price of natural gas was increased from 26
December 2005. The notice also indicated that the PRC government would
increase the price of natural gas in the next five years and would
establish a system to link the price of natural gas to the price of
substitution products including crude oil, liquefied petroleum gas and
coal.
- Refined oil
Refined oil is sold at government-prescribed price in the PRC. In
the first half of 2006, the National Development and Reform Commission
has issued two notices on the adjustments to the prices of refined
oil, which increased the ex-factory prices of refined oil on 26 March
and 24 May 2006 respectively.
- Crude oil
Currently, the crude oil prices on the domestic market of the PRC
are adjusted with reference to the crude oil prices on the
international market. As there has been a substantial increase in the
crude oil price on the international market recently, the increase
with respect to domestic crude oil price has jumped well above its
level as at 8 November 2005 when Independent Shareholders' approval
for the Existing Caps was sought.
- Nephtha, solvent oil
The Ministry of Finance and the State Administration of Taxation
issued the Notice on Adjustments and Perfection of the Policy on
Consumer Taxes on 20 March 2006, which imposes consumer tax on
naphtha, solvent oil and other products, and the costs of raw
materials for chemical products have increased as a result.
- Transaction amount
As a result of business development, there is an increase of the
amount of transactions between the Group and the CNPC Group as
compared with the amount of 8 November 2005 when Independent
Shareholders' approval for the Existing Caps was sought.
-9-
LETTER FROM THE BOARD
The table below sets out the monthly average prices of natural
gas, refined oil, crude oil, naphtha and solvent oil of PetroChina for
April 2005 (when PetroChina performed its estimates for the Existing
Caps), September 2005 (when PetroChina announced and applied for the
Shareholders' approval on the Existing Caps) and July 2006 :
Monthly Average Prices
% increase % increase
than than
Products April 05 September 05 July 06 April 05 September 05
-------- -------- ------------ ------- ---------- ------------
(RMB Yuan/Ton)
Natural Gas 585 585 690 17.95% 17.95%
Refined Oil
Gasoline 3,277 4,062 4,800 46.48% 18.18%
Jet fuel 3,160 4,375 5,114 61.81% 16.88%
Diesel Oil 2,864 3,573 4,219 47.33% 18.09%
Crude Oil 2,332 3,616 4,056 73.59% 12.17%
Nephtha 2,396 3,844 4,657 94.40% 21.17%
Solvent oil 3,369 4,308 4,631 37.45% 7.5%
Due to the above reasons, the Board has considered and proposed
the following increases to the Existing Caps in respect of this
category of transaction.
Proposed increases to
the Existing Caps
(RMB in millions)
------------------------
Category of Products and Services 2006 2007 2008
--------------------------------- ------ ------ ------
Products and services to be provided by the
Group to the CNPC Group 17,536 21,498 23,219
The above proposed increases to the Existing Caps have been
determined with reference to the following: historical transaction
records for products and services provided by the Group to the CNPC
Group; the actual and estimated increases to the price of relevant
products; and the actual and estimated business growth of the Group
and the CNPC Group.
(ii) Products and services to be provided by the CNPC Group to the
Group
(a) Production services
The proposed increases to the Existing Caps of this category
of transaction are mainly attributable to the fact that due to
the PRC's increasing demand on crude oil, the Group intends to
purchase crude oil from CNPC E&D and its subsidiaries in addition
to the crude oil from the PetroKazakhstan Group as set out in
section 5 (a) (i) of this circular.
Other production services consist of water supply,
electricity generation and supply, gas supply, transportation,
etc. by the CNPC Group to the Group. Such increases are
attributable to the formal commencement of operation of the
Kazakhstan-China Pipeline and the Western Pipeline in the near
future and the internal integration of the CNPC Group, which will
increase its delivery capacity in the refined oil retail market
in the PRC, thus creating more opportunities of refined oil
delivery business for the Group.
The Board has considered and proposed the following
increases to the Existing Caps in respect of this category of
transaction.
-10-
LETTER FROM THE BOARD
Proposed increases to
the Existing Caps
(RMB in millions)
------------------------
Category of Products and Services 2006 2007 2008
--------------------------------- ------ ------ ------
Production services to be provided by
the CNPC Group to the Group 23,430 31,514 31,151
The above proposed increases have been determined with
reference to the following: historical transaction records for
the production services provided by the CNPC Group to the Group;
medium and long term development plan of the Group; the actual
and estimated business growth of the Group; and the potential
increase in the international and domestic market prices of crude
oil, petroleum and other petrochemical products.
(b) Construction and technical services
Due to expansion of the Group's businesses and the further
confirmation to the medium and long term development plan of the
Group, the Board has considered and proposed the following
increases to the Existing Caps in respect of this category of
transaction:
Proposed increases to
the Existing Caps
(RMB in millions)
------------------------
Category of Products and Services 2006 2007 2008
--------------------------------- ------ ------ ------
Construction and technical services to
be provided by the CNPC Group to the Group 21,187 24,959 24,385
The above proposed increases to the Existing Caps have been
determined with reference to the following: historical
transaction records for the construction and technical services
provided by the CNPC Group to the Group; the medium and long term
development plan of the Group; the actual and the estimated
business growth of the Group; the increases of prices of relevant
oil products; and the estimated relevant service price.
(c) Material supply services
Due to expansion of the Group's businesses and the further
confirmation to the medium and long term development plan of the
Group, the Board has considered and proposed the following
increases to the Existing Caps in respect of this category of
transaction.
Proposed increases
to the Existing Caps
(RMB in millions)
--------------------
Category of Products and Services 2006 2007 2008
--------------------------------- ---- ---- -----
Material supply services to be
provided by the CNPC Group to the Group 646 649 595
-11-
LETTER FROM THE BOARD
The above proposed increases to the Existing Caps have been
determined with reference to the following: historical
transaction records for the supply of materials services provided
by the CNPC Group to the Group; the medium and long term
development plan of the Group; the actual and the estimated
business growth of the Group; and the actual and estimated prices
of relevant materials.
(iii) Products and services to be provided by the Group to CRMSC
On 1 September 2005, PetroChina entered into the CRMSC Products
and Services Agreement with CRMSC, pursuant to which PetroChina should
provide CRMSC with products and services including, among other
things, refined products (such as gasoline, diesel and other petroleum
products) on an ongoing basis. Detailed information about the terms
and conditions of the CRMSC Products and Services Agreement and the
annual caps in respect of CRMSC Transactions were disclosed in the
circular to the Shareholders dated 22 September 2005 and were approved
by the Shareholders at the extraordinary general meeting held on 8
November 2005.
Due to the increase of the refined oil price, the Board has
considered and proposed the following increases to the Existing Caps
in respect of this category of transaction.
Proposed increases
to the Existing
Caps
(RMB in millions)
------------------
Category of Products and Services 2006 2007 2008
--------------------------------- ---- ---- ----
Products and services to be provided by the
Group to CRMSC 722 666 658
The above proposed increases have been determined with reference
to the following: the Group's historical transaction records with
CRMSC; the estimated business growth of the Group and CRMSC; and the
actual and estimated price of refined oil.
-12-
LETTER FROM THE BOARD
(c) Proposed Caps
The Board has proposed the following Proposed Caps for the
period from 1 January 2006 to 31 December 2008 after considering
the revisions described in the above sub-sections (a) and (b).
2006 2007 2008
------------------ ------------------ ------------------
Existing Proposed Existing Proposed Existing Proposed
Category of Products and Services Caps Caps Caps Caps Caps Caps
--------------------------------- -------- -------- -------- -------- -------- --------
(RMB in millions)
(i) Products and services to
be provided by the CNPC
Group to the Group
(a) Production services 27,513 63,983 28,923 96,437 32,647 98,518
(b) Construction and technical services 91,614 114,681 88,280 115,039 79,636 105,661
(c) Material supply services 4,471 5,356 4,331 5,459 4,500 5,574
(ii) Products and services to be provided
by the Group to the CNPC Group 19,134 36,670 23,472 44,970 26,910 50,129
(iii) Products and services to be provided
by the Group to CRMSC 10,326 11,048 11,359 12,025 12,495 13,152
6. AMENDMENTS TO THE ARTICLES
On 23 August 2006, the Board announced that due to the ongoing development
of PetroChina's businesses, the Board proposes to expand PetroChina's business
scope and to amend its Articles accordingly.
Article 10(2) of the Articles provides the following:
"The Company's [PetroChina's] scope of business includes: the
exploration, production and sale of onshore oil and natural gas; the
production and sale of refined, petrochemical and chemical products; the
operation of oil and natural gas pipelines; the research and development
for oil exploration and production technology and petrochemical technology;
the sale of materials, equipment and machines necessary for production and
construction of oil and gas, petrochemicals and pipelines (except those
items required to be specifically authorized by the State); the import and
export of crude oil and refined oil; the operation of, or to act as agent
in, the import and export of various commodities and technologies (except
the commodities or technologies which are required to be operated by
companies designated by the State or are prohibited to import or export),
the operation of processing with imported materials and the 'Three Types of
Processing plus Compensation Trade'; the operation of contra trade and
transit trade; the operation of the oil exploration, development and
production business under the overseas co-operation contracts of which
China National Petroleum Corporation has assigned its interests."
-13-
LETTER FROM THE BOARD
Article 10(2) shall be amended as follows:
"The Company's [PetroChina's] scope of business includes: the
exploration, production and sale of oil and natural gas; the production and
sale of refined, petrochemical and chemical products; the sale of chemical
fertilizers; warehousing and transportation of petroleum and petrochemical
products; the operation of convenient stores and other auxiliary facilities
affiliated to the service stations as well as the provision of the
ancillary services; the operation of oil and natural gas pipelines, and the
provision of relevant engineering and technological development and
consultancy services as well as the oil and gas related IT services; the
provision of services in connection with the lease of buildings and
equipment as well as the provision of water, electricity and heat supply;
the sale of materials, equipment and machines necessary for production and
construction of oil and gas, petrochemicals and pipelines (except those
items required to be specifically authorized by the State); the import and
export of crude oil and refined oil; the operation of, or to act as agent
in, the import and export of various commodities and technologies (except
the commodities or technologies which are required to be operated by
companies designated by the State or are prohibited to import or export),
the operation of processing with imported materials and the 'Three Types of
Processing plus Compensation Trade'; the operation of contra trade and
transit trade; the operation of the oil exploration, development and
production business under the overseas co- operation contracts of which
China National Petroleum Corporation has assigned its interests."
The Board be authorized, as proposed to be approved at the EGM, to make
such modifications to the above proposed amendments to the Articles as required
by the relevant regulatory bodies of the PRC.
The proposed amendments to the Articles will be subject to Shareholders'
approval at the EGM as a special resolution to be passed by votes representing
not less than two-thirds of the voting rights represented by the Shareholders
(including proxies) attending the EGM.
7. GENERAL
As CNPC directly owns approximately 88.21% of the issued share capital of
PetroChina as at the date of this circular, the Proposed Caps are subject to
approval from the Independent Shareholders (or Shareholders' approval in respect
of the Proposed Caps for the CRMSC Transactions) at the EGM by way of a poll. In
view of the interests of CNPC, CNPC and its associates will abstain from voting
in relation to the shareholders resolutions approving the Proposed Caps (except
the Proposed Caps for the CRMSC Transactions).
An EGM of PetroChina will be held at Kempinski Hotel, No. 50 Liangmaqiao
Road, Chaoyang District, Beijing 100016, the PRC at 9 : 00 a.m. on 1 November
2006 to consider and, if deemed appropriate, to approve the Proposed Caps by way
of ordinary resolutions and the proposed amendments to the Articles by way of a
special resolution. The EGM notice is set out in pages 35 to 36 of this
circular. A return slip is also enclosed.
A form of proxy for use at the EGM is enclosed herewith. Whether or not you
are able to attend the EGM in person, you are requested to complete and return
the form of proxy in accordance with the instructions printed thereon to the
registered office of PetroChina at World Tower, 16 Andelu, Dongcheng District,
Beijing, People's Republic of China as soon as possible but in any event no
later than 24 hours before the time appointed for the holding of EGM. In order
to be valid, for holders of H Shares, the above documents must be delivered to
Hong Kong Registrars Limited, 46/F Hopewell Centre, 183 Queen's Road East, Hong
Kong within the same period. Completion and return of the form of proxy will not
preclude you from attending and voting at the meeting should you so desire.
-14-
LETTER FROM THE BOARD
In accordance with the Listing Rules, the votes of the Independent
Shareholders at the EGM will be taken by a poll and CNPC, the controlling
shareholder of the PetroChina, will abstain from voting in respect of the
ordinary resolutions to approve the Proposed Caps (except the Proposed Caps for
CRMSC Transactions) at the EGM because of its interest in these transactions.
8. RECOMMENDATION
Your attention is drawn to the letter from the Independent Board Committee
set out on page 16 of this circular which contains the recommendation of the
Independent Board Committee to the Independent Shareholders concerning the
Proposed Caps.
The advice of the Independent Financial Adviser to the Independent Board
Committee on the fairness and reasonableness of the terms of the Proposed Caps
are set out from pages 17 to 29 of this circular. The Independent Financial
Adviser considers that the Proposed Caps are fair and reasonable so far as the
Shareholders are concerned and are in the interests of PetroChina and the
Shareholders as a whole.
The Board believes that the Proposed Caps and the proposed amendments to
the Articles are in the interests of PetroChina and its shareholders as a whole.
Accordingly, the Board recommends Shareholders to vote in favour of the
resolutions to be proposed at the EGM to approve the Proposed Caps and the
proposed amendments to the Articles.
9. FURTHER INFORMATION
Your attention is also drawn to the additional information set out in
Appendix to this circular.
----------------------------------------
Yours faithfully, By Order of the Board
PetroChina Company Limited Li Huaiqi
Secretary to the Board
-15-
LETTER FROM THE INDEPENDENT BOARD COMMITTEE
(PETROCHINA COMPANY LIMITED LOGO)
(Chinese Characters)
PETROCHINA COMPANY LIMITED
(a joint stock limited company incorporated in the People's Republic of China
with limited liability)
(Stock Code: 857)
14 September 2006
To the Independent Shareholders
REVISION OF EXISTING CAPS
We refer to the circular dated 14 September 2006 of PetroChina Company
Limited ("PetroChina") of which this letter forms a part. Terms defined in the
circular shall have the same meanings when used herein.
With respect to the Proposed Caps, CNPC is a connected person of PetroChina
and the continuing transactions between CNPC and PetroChina constitute
continuing connected transactions of PetroChina as defined under the Listing
Rules. The Proposed Caps are subject to reporting, announcement and Independent
Shareholders' approval (or Shareholders' approval in respect of the Proposed
Caps for the CRMSC Transactions) requirements under the Listing Rules.
We have been appointed by the Board to constitute the Independent Board
Committee to consider and advise the Independent Shareholders as to the fairness
and reasonableness in relation to the Proposed Caps, details of which are set
out in the Letter from the Board in the circular to the Shareholders. ICEA
Capital Limited has been retained as the Independent Financial Adviser to advise
the Independent Board Committee in this respect. We wish to draw your attention
to the letter from ICEA Capital Limited as set out on page 17 to 29 page of the
circular.
Having taken into account the information set out in the letter from the
Board, and the principal factors, reasons and recommendations set out in the
letter from ICEA Capital Limited, we consider the Proposed Caps to be fair and
reasonable as the Independent Shareholders are concerned and believe that the
Proposed Caps are in the interests of PetroChina and the Shareholders as a
whole. Accordingly, we recommend that the Independent Shareholders should vote
in favour of the resolutions to be proposed at the EGM to approve the Proposed
Caps.
Yours faithfully,
------------------------- ------------------------- ------------------------
Chee-Chen Tung Liu Hongru Franco Bernabe
Independent Non-Executive Independent Non-Executive Independent Non-Executive
Director Director Director
-16-
LETTER FROM THE INDEPENDENT FINANCIAL ADVISER
The following is the text of the letter of advice to the Independent Board
Committee and the Independent Shareholders (or the Shareholders for CRMSC
Transactions) from ICEA Capital Limited in relation to the revision of the
Existing Caps for the purpose of incorporation in this circular.
(ICEA LOGO) (Chinese Characters)
A subsidiary of ICBC (Chinese Characters)
ICEA CAPITAL LIMITED (Chinese Characters)
26/F., ICBC Tower (Chinese Characters)
3 Garden Road, Central, Hong Kong (Chinese Characters)
General Line: (852) 2231 8000 (Chinese Characters)
General Fax: (852) 2525 0967 (Chinese Characters)
14 September 2006
To the Independent Board Committee and the Shareholders
Dear Sirs,
REVISION OF EXISTING CAPS
We refer to our engagement as the Independent Financial Adviser to advise
the Independent Board Committee and the Independent Shareholders (or the
Shareholders for CRMSC Transactions) on the fair and reasonableness of the
Proposed Caps for each of the three years ending 31 December 2006, 2007 and
2008. Pursuant to the Listing Rules, the Proposed Caps are subject to, among
other things, the approval of the Independent Shareholders (or the approval of
the Shareholders for the CRMSC Transactions) at a general meeting of PetroChina
Company Limited ("Petrochina"). Details of the Proposed Caps are summarized in
PetroChina's circular to its Shareholders dated 14 September 2006 (the
"Circular"). This letter has been prepared for inclusion in the Circular and
capitalized terms used in this letter shall have the same meaning as defined in
the Circular unless the context otherwise requires.
On 23 August 2006, PetroChina announced that CNPC E&D, a subsidiary of
PetroChina and a 50 : 50 joint venture between PetroChina and CNODC, entered
into the Acquisition Agreement through the Acquirer (a wholly owned subsidiary
of CNPC E&D) with the Vendor (a wholly owned subsidiary of CNODC), for the
acquisition by the Acquirer of CNODC's entire interest in PetroKazakhstan,
representing 67% of the issued share capital of PetroKazakhstan. Please refer to
the announcement of PetroChina dated 23 August 2006 and "Letter from the Board"
in this Circular for details of the Acquisition.
As a result of (i) the completion of the Acquisition, certain continuing
connected transactions which will fall within the scope of the Amended
Comprehensive Agreement will arise; and (ii) changes to PetroChina's production
and operational environment that are expected to have an impact on the Existing
Caps, PetroChina proposes to revise the Existing Caps under the Amended
Comprehensive Agreement and the CRMSC Products and Services Agreement as
previously approved by the Independent Shareholders (or by the Shareholders for
the CRMSC Transactions) on 8 November 2005. The Proposed Caps for the three
years ending 31 December 2008 are subject to reporting, announcement and
independent shareholders' approval requirements under the Listing Rules.
Our opinion only applies to the Proposed Caps subject to Independent
Shareholders' approval (or the Shareholders' approval for the CRMSC
Transactions). All other connected transactions, continuing connected
transactions and their respective caps that are not subject to independent
shareholders' approval under the Listing Rules are not within the scope of our
work.
-17-
LETTER FROM THE INDEPENDENT FINANCIAL ADVISER
We, ICEA Capital Limited, have been retained as the Independent Financial
Adviser to advise the Independent Board Committee and the Independent
Shareholders (or Shareholders for the CRMSC Transactions) as to whether the
Proposed Caps are fair and reasonable so far as the Independent Shareholders (or
Shareholders for the CRMSC Transactions) are concerned.
In formulating our recommendation, we have relied, without assuming any
responsibility for independent verification, on the information, opinions and
facts supplied and representations made to us by the Directors, who have assumed
full responsibility for the accuracy of the information contained in the
Circular, and that any information and representations made to us are true,
accurate and complete in all material respects as at the date hereof and that
they may be relied upon. We have no reason to doubt the truth, accuracy and
completeness of the information and representation provided to us by PetroChina.
We have discussed with the management of PetroChina regarding their plans and
prospects of PetroChina. We have also relied on certain information available to
the public and have assumed such information to be accurate and reliable, and we
have not independently verified the accuracy of such information. We have
studied the relevant market and other conditions and trends relevant to the
Proposed Caps. We have also assumed that statements and representations made or
referred to in the Circular were accurate at the time they were made and
continue to be accurate at the date of the Circular.
We consider that we have reviewed sufficient information to reach an
informed view in order to provide a reasonable basis for our advice. We have
not, however, carried out any independent verification of the information
provided to us nor have we conducted any form of in-depth investigation into the
business affairs or assets and liabilities of PetroChina, the CNPC Group,
PetroKazakhstan or any of their respective subsidiaries or associated companies.
Additionally, we did not conduct any physical inspection of the properties or
facilities of PetroChina, the CNPC Group, PetroKazakhstan or any of their
respective subsidiaries or associated companies. It is not within our terms of
engagement to comment on the commercial feasibility of the continuing connected
transactions, which remains the responsibility of the Directors. As the
Independent Financial Adviser to the Independent Board Committee and the
Independent Shareholders (or to the Shareholders for CRMSC Transactions), we
have not been involved in the negotiations in respect of the terms of the
continuing connected transactions and the determination of the Proposed Caps.
Our opinion has been made on the assumption that all obligations to be performed
by each of the parties to the continuing connected transactions will be fully
performed in accordance with the terms thereof.
Our opinion is necessarily based upon the financial, economic, market,
regulatory, and other conditions as they exist on, and the facts, information,
and opinions made available to us as of the date of this letter. We have no
obligation to update this opinion to take into account events occurring after
the date that this opinion is delivered to the Independent Board Committee and
the Independent Shareholders (or to the Shareholders for CRMSC Transactions).
This letter is for the information of the Independent Board Committee and the
Shareholders solely in connection with their consideration of the Proposed Caps
and, except for its inclusion in the Circular, is not to be quoted or referred
to, in whole or in part, nor shall this letter be used for any other purpose,
without our prior written consent.
PRINCIPAL FACTORS CONSIDERED
In arriving at our opinion, we have taken into consideration the principal
factors and reasons set out below. In reaching our conclusion, we have
considered the results of the analyses in light of each other and ultimately
reached our opinion based on the results of all analyses taken as a whole.
-18-
LETTER FROM THE INDEPENDENT FINANCIAL ADVISER
1. Background of the continuing connected transactions under the Amended
Comprehensive Agreement and the CRMSC Products and Services Agreement
The Amended Comprehensive Agreement was initially entered into between
PetroChina and CNPC on 10 March 2001, which was amended on 9 June 2005 and
1 September 2005 respectively. On 1 September 2005, PetroChina and CRMSC
entered into the CRMSC Products and Services Agreement.
Detailed information about the terms and conditions of the continuing
connected transactions under the Amended Comprehensive Agreement and the
CRMSC Products and Services Agreement were disclosed in the circular of
PetroChina to the Shareholders dated 22 September 2005.
2. Reasons for revision of the Existing Caps
As stated in the Letter from the Board in the Circular, PetroChina
proposes to revise the Existing Caps under the Amended Comprehensive
Agreement and the CRMSC Products and Services Agreement as previously
approved by the then Independent Shareholders (or by the then Shareholders
for the CRMSC Transactions) on 8 November 2005. The revision of the
Existing Caps to the Proposed Caps for the three years ending 31 December
2006, 2007 and 2008 are the result of:
(i) continuing connected transactions arising as a result of the
completion of the Acquisition, which will fall within the scope
of the Amended Comprehensive Agreement; and
(ii) changes to PetroChina's production and operational environment
that are expected to have an impact on the Existing Caps under
the Amended Comprehensive Agreement and the CRMSC Products and
Services Agreement.
3. Revision of the Existing Caps
3.1 Revision due to the continuing connected transactions arising as
a result of the Acquisition
Given the business size of the PetroKazakhstan Group and the fact
that the transactions between the PetroKazakhstan Group and the CNPC
Group will fall within the scope of the Amended Comprehensive
Agreement upon completion of the Acquisition, we considered that
revision of the Existing Caps to the Proposed Caps is fair and
reasonable and in the interest of PetroChina and the Shareholders.
The proposed increases to the Existing Caps as a result of the
Acquisition are summarized as follows:
Proposed increases to
the Existing Caps
------------------------
Category of Products and Services 2006 2007 2008
--------------------------------- ------ ------ ------
(RMB in millions)
3.1.1 Production services to be provided by
the CNPC Group to the Group 13,040 36,000 34,720
3.1.2 Construction and technical services to
be provided by the CNPC Group to the
Group 1,880 1,800 1,640
3.1.3 Material supply services to be
provided by the CNPC Group to the Group 240 480 480
-19-
LETTER FROM THE INDEPENDENT FINANCIAL ADVISER
3.1.1 Production services to be provided by the CNPC Group to the
Group
The proposed increases to the Existing Caps for the products and
services to be provided by the CNPC Group to the Group have been
determined with reference to:
(i) the estimated growth in crude oil production and business of
the PetroKazakhstan Group;
(ii) current market prices of crude oil;
(iii) potential fluctuations and increases in the prices of crude
oil both in the international market and in the domestic
market;
(iv) the estimated annual crude oil volume to be purchased by the
Group from the PetroKazakhstan Group;
(v) the transportation capacities of the Kazakhstan-China
Pipeline and the Western Pipeline; and
(vi) charges of the Kazakhstan-China Pipeline and the Western
Pipeline for oil transportation and the potential
fluctuations and increases in such charges.
The proposed increases to the Existing Caps for the production
services to be provided by the CNPC Group to the Group for the three
years ending 31 December 2006, 2007 and 2008 are mainly due to the
proposed purchase of the crude oil from the PetroKazakhstan Group and
transportation of such crude oil through the Kazakhstan-China Pipeline
and the Western Pipeline in accordance with the Amended Comprehensive
Agreement as a result of the Acquisition.
Part of the Kazakhstan-China Pipeline and the Western Pipeline
has been put into service in 2006. Based on the information provided
by PetroChina, the Group plans to purchase 3.5 million tons, 10
million tons and 10 million tons of crude oil from the PetroKazakhstan
Group for 2006, 2007 and 2008 respectively. The proposed increases in
transaction amounts are estimated based on the transportation capacity
of the two pipelines, the business development of the Group, the
current crude oil market and the estimated commodity price of crude
oil price with reference to the average Brent crude oil future price
of approximately US$64.7 per barrel in early 2006 as quoted in
Bloomberg.
In light of the above and taken into consideration of (i) the
discussion with the management of PetroChina on the business plan of
the PetroKazakhstan Group, including its estimated growth in crude oil
production and the expected time frame for the full-scale operation of
the Kazakhstan-China Pipeline and the Western Pipeline; and (ii) the
continuing business growth of the Group as well as the anticipated
increase in future crude oil price (both internationally and
domestically), we are of the view that the proposed purchase price
used in estimating the proposed caps is reasonable and the proposed
increases to the Existing Caps for this type of transactions are
fairly and reasonably determined.
-20-
LETTER FROM THE INDEPENDENT FINANCIAL ADVISER
3.1.2 Construction and technical services to be provided by the CNPC
Group to the Group
The proposed increases to the Existing Caps for construction and
technical services to be provided by the CNPC Group to the Group have
been determined with reference to:
(i) the historical transactions and transaction amounts for the
construction and technical services of the PetroKazakhstan
Group; and
(ii) the estimated business growth of the PetroKazakhstan Group.
After the Acquisition, the PetroKazakhstan Group will expedite
its development and increase capital expenditure in the next three
years. As stated in the Letter from the Board of this Circular, given
that the construction and technical services provided to the Group by
the CNPC Group are of a high quality and on favourable in pricing
term, the Group (including the PetroKazakhstan Group) will continue to
obtain construction and technical services from the CNPC Group after
the Acquisition. We have discussed with the management of PetroChina
on the future capital expenditure plan of PetroKazakhstan and have
reviewed the relevant documents and information (in particular, the
historical transactions and transaction amounts), and considered the
plan was prepared after due and careful enquiry. As such, we are of
the view that the proposed increases to the Existing Caps for this
type of services are determined on a fair and reasonable basis and are
sufficient for the Group to capture the future anticipated expansion
plan of the PetroKazakhstan Group.
3.1.3 Material supply services to be provided by the CNPC Group to the
Group
The proposed increases to the Existing Caps for material supply
services to be provided by the CNPC Group to the Group have been
determined with reference to:
(i) historical prices and transaction amounts in respect of
material supply transactions of the PetroKazakhstan Group;
(ii) estimated business growth of the PetroKazakhstan Group; and
(iii) estimated changes in the volume of purchases by the
PetroKazakhstan Group.
The proposed increases are mainly attributable to the provision
of casing pipes, drill heads, drilling liquid and lubricating oil and
other raw materials or equipment by the CNPC Group to the
PetroKazakhstan Group for its ordinary daily operation.
We understand from the management of PetroChina that the CNPC
Group and other independent international suppliers will be invited to
tender for the provision of material supply services to the
PetroKazakhstan Group. However, based on their past experience, the
CNPC Group has competitive advantage over other suppliers on the
quality and the price of the services.
The proposed increases to the Existing Caps for this type of
transactions are based on the potential demand for the materials and
equipment of the PetroKazakhstan Group in accordance with its business
development plan as well as the estimated cost incurred with the
related materials and equipment. Based on (i) the discussion with the
management of PetroChina on the future plan of the PetroKazakhstan
Group and the possibility for the CNPC Group to obtain contracts for
provision of material supply services to the PetroKazakhstan Group;
and (ii) the
-21-
LETTER FROM THE INDEPENDENT FINANCIAL ADVISER
review on the relevant documents and information (in particular, the
historical transactions and transaction amounts), we are of the view
that the proposed increases to the Existing Caps are determined on a
fair and reasonable basis.
3.2 Revision due to changes to PetroChina's production and
operational environment
Proposed increases to the Existing Caps
---------------------------------------
Category of Products and Services 2006 2007 2008
--------------------------------- ------ ------ ------
(RMB in millions)
3.2.1 Products and services to be provided by the
CNPC Group to the Group
(a) Production services to be provided by the
CNPC Group to the Group 23,430 31,514 31,151
(b) Construction and technical services to be
provided by the CNPC Group to the Group 21,187 24,959 24,385
(c) Material supply services to be provided by
the CNPC Group to the Group 646 649 595
3.2.2 Products and services to be provided by the
Group to the CNPC Group 17,536 21,498 23,219
3.2.3 Products and services to be provided by the
Group to CRMSC 722 666 658
3.2.1 Products and services to be provided by the CNPC Group to the
Group
(a) Production services to be provided by the CNPC Group to the
Group
The proposed increases to the Existing Caps for the
production services to be provided by the CNPC Group to the Group
have been determined with reference to:
(i) historical transaction records for the production
services provided by the CNPC Group to the Group;
(ii) the medium and long term development plan of the Group;
(iii) the actual and estimated business growth of the Group;
and
(iv) the potential increase in the international and
domestic market prices of crude oil, petroleum and
other petrochemical products.
Being a major producer and supplier of crude oil in the PRC,
PetroChina has the responsibilities on satisfying the national
energy demands. In this connection, part of the crude oil from
CNPC E&D will be send back to the Group in the PRC for refining
and processing, and sold in the domestic market. Approximately 5%
of the crude oil production of CNPC E&D in 2005 was sent back to
the domestic market through PetroChina following the completion
of PetroChina's acquisition of interest in CNPC E&D in November
2005.
-22-
LETTER FROM THE INDEPENDENT FINANCIAL ADVISER
Since CNPC E&D is expected to speed up its business expansion in
the international market in the near future, PetroChina believed
that more crude oil will be sold from CNPC E&D to the Group in
order to meet the strong domestic demand in the next years.
In addition, we understand from the management of PetroChina
that (i) the full-scale operation of Kazakhstan-China Pipeline
and Western Pipeline is expected to be commenced in 2007, which
is earlier than previously expected in September 2005; and (ii)
following the internal integration beginning from June 2005, the
CNPC Group has established an advanced transportation company
which is equipped with modern machines for petroleum and other
petrochemical products and able to provide transportation
services with higher efficiency and quality and competitive
advantage on the quality and price of such services. In view of
the above, the management of PetroChina considered that there
will be increased opportunities of refined oil delivery business
for the Group than that as anticipated in September 2005, and
hence, increasing the other production services to be provided by
the CNPC Group to the Group such as water supply, electricity
generation and supply, gas supply and transportation.
We also noted that the actual transaction amount for the
production services provided by the CNPC Group to the Group for
the first six months ended 30 June 2005 was approximately
RMB8,945 million, representing approximately 38.3% of the total
transaction amount of the whole year of 2005. Based on the
information of PetroChina, the actual transaction amount for the
same type of services for the first six months ended 30 June 2006
was approximately RMB17,058 million, representing approximately
62.0% of the Existing Cap for 2006 and approximately 33.5% of the
Proposed Cap for 2006.
Production services to be provided by the CNPC Group to the
Group
Percentage of amount
Actual amount for Actual amount/cap for first six months to
first six months for the whole year that for whole year
----------------- ------------------ -----------------------
(RMB in millions) (RMB in millions)
2005 8,945 23,344 38.3%
2006 17,058 27,513 62.0%
(Existing Cap)
50,943 33.5%
(Proposed Cap)
(Note)
Note: The figure includes the Existing Cap and the proposed
increase due to the effect of the changes to the operational
environment, and excludes the proposed increase arising as a
result of the Acquisition as refer in paragraph 3.1.1 above.
Given the increasing demand of crude oil from CNPC E&D, the
increased opportunities of refined oil delivery business for the Group
and that the proposed caps are in line with the historical data, we
consider the revision of the Existing Caps is fair and reasonable so
far as the Group and Shareholders concerned and the Proposed Caps have
been determined on a fair and reasonable basis.
-23-
LETTER FROM THE INDEPENDENT FINANCIAL ADVISER
(b) Construction and technical services to be provided by the
CNPC Group to the Group
The proposed increases to the Existing Caps for the
construction and technical services to be provided by the CNPC
Group to the Group have been determined with reference to:
(i) historical transaction records for the construction and
technical services provided by the CNPC Group to the
Group;
(ii) the medium and long term development plan of the Group;
(iii) the actual and the estimated business growth of the
Group;
(iv) the increases of prices of relevant oil products; and
(v) the estimated relevant service price.
The construction and technical services to be provided by
the CNPC Group to the Group are mainly related to development of
oilfields, including but not limited to exploration technology
service, down hole operation service, oilfield construction
service, oil refinery construction service and project
supervision and design service.
We understand from the management of PetroChina that after
Existing Caps were determined in 2005, there has been important
oil exploration discovery on three major oilfields of PetroChina
(including Ji Dong oilfields). Accordingly, PetroChina plans to
substantially increase its capital and expenditure budget in the
three years ending 31 December 2006, 2007 and 2008 to cater for
the development of such oilfields.
Even assuming that there was no breakthrough in oil
exploration discovery on such oilfields and they were developed
as originally planned, the overall transaction amount of the
construction and technical services of the Group for the three
years ending 31 December 2008 is expected to rise because of the
increase of the crude oil price since last September. According
to Platts, the world's leading provider of energy information,
the Minas Crude Oil price as quoted in Singapore Market was
around US$60.5 per barrel in September 2005 when the Existing
Caps were estimated and reached as high as US$74.1 per barrel in
July 2006. Since certain amount of oil products (such as gasoline
and diesel oil) will be consumed to generate power during the
course of providing the construction and technical services (such
as well drilling) to the Group, the increase in the crude oil
price is expected to substantially increase the operational cost
for construction and technical service providers. Based on the
information provided by PetroChina, we noted that approximately
256,000 tons and 1,379,000 tons of gasoline and diesel oil are
expected to be consumed respectively in connection with the
provision of the construction and technical service in 2006.
Despite the construction and technical services for
development of such oilfields will be put out to tender, it is
likely that the CNPC Group would win the bid and provide such
services to the Group because of the large production capability
and competitive strengths of the CNPC Group on the oil
construction and technical services industry.
Given the breakthrough in the oil exploration on some
oilfield of PetroChina and the substantial increase in
development costs because of the increase in crude oil price
since last September, we are of the view that the revision of the
Existing Caps for this type of
-24-
LETTER FROM THE INDEPENDENT FINANCIAL ADVISER
services is in the interest of PetroChina so to capture the
future anticipated business expansion and the respective Proposed
Caps have been determined on a fair and reasonable basis.
(c) Material supply services to be provided by the CNPC Group to
the Group
The proposed increases to the Existing Caps for the material
supply services to be provided by the CNPC Group to the Group
have been determined with reference to:
(i) historical transaction records for the supply of
materials services provided by the CNPC Group to the
Group;
(ii) the medium and long term development plan of the Group;
(iii) the actual and the estimated business growth of the
Group; and
(iv) the actual and estimated prices of relevant materials.
Pursuant to the Amended Comprehensive Agreement, the Group
obtains material supply services from the CNPC Group. Such
material supply services are mainly for facilitating the daily
operation of the Group, including but not limited to purchase of
materials, quality control, storage of materials and delivery of
materials. As such, the transaction amounts of this type of
services proportionate to the scale of PetroChina's production
and operation.
Given the unexpected expansion of the business of PetroChina
in the near future as analyzed in above paragraphs (a) and (b),
we are of the view that revision of the Existing Caps is
necessary and the proposed increases to the Existing Caps for
this type of services are determined on a fair and reasonable
basis.
3.2.2 Products and services to be provided by the Group to the CNPC
Group
The proposed increases to the Existing Caps for the products and
services to be provided by the Group to the CNPC Group have been
determined with reference to:
(i) historical transaction records for products and services
provided by the Group to the CNPC Group;
(ii) the actual and estimated increases to the price of relevant
products; and
(iii) the actual and estimated business growth of the Group and
the CNPC Group.
The Amended Comprehensive Agreement provides that the Group
should supply products such as natural gas, crude oil and refined oil
and other products to the CNPC Group at the government-prescribed
price, or where there is no government-prescribed price, the price
shall be determined with reference to the market price. However, as
explained in the Letter from the Board in this Circular, since the
approval of the Existing Caps in 2005, the prices of certain major oil
products to be supplied by the Group to the CNPC Group has
substantially increased.
-25-
LETTER FROM THE INDEPENDENT FINANCIAL ADVISER
- Natural Gas
Pursuant to the Notice on the Reform of the Mechanism for
Determining the Ex- Factory Prices of Natural Gas and Recent
Appropriate Increase of the Ex-Factory Prices of Natural Gas
issued by the National Development and Reform Commission on 23
December 2005, the government-prescribed ex-factory price of
natural gas increased by approximately 17.95% since 26 December
2005 and the PRC government plans to increase the price of
natural gas in the next five years.
- Refined oil
The National Development and Reform Commission has issued
two notices on the adjustment to the prices of refined oil on 26
March 2006 and 24 May 2006. Pursuant to the two notices, the
government-prescribed ex-factory prices of refined oil have
increased by approximately 52%.
- Crude oil
Currently, the crude oil prices in the domestic market of
the PRC are in line with the crude oil prices in the
international market. As stated above, the Minas Crude Oil price
as quoted in Singapore Market was US$60.5 per barrel in September
2005 when the Existing Caps were estimated and reached as high as
US$74.1 per barrel in July 2006.
- Naphtha, solvent oil
Pursuant to the Notice on Adjustments and Perfection of the
Policy on Consumer Taxes issued by the Ministry of Finance and
the State Administration of Taxation on 20 March 2006, consumer
tax is imposed on naphtha, solvent oil, and other products since
1 April 2006, increasing the costs of raw materials for chemical
products.
In addition, PetroChina's middle and long term development goal
has been adjusted with respect to the chemicals and marketing segment
and refining and marketing segment to further increase its production
capacity of these segments. With the anticipated increase in its
production capacity, increasing demands for products and services as
well as the enlarged business scale and new business development of
the CNPC Group, PetroChina is able to supply more products and
services to the CNPC Group.
We noted that based on the information provided by PetroChina,
the actual transaction amount for the products and services provided
by the Group to the CNPC Group for the first half of 2005 was
approximately RMB6,932 million, representing approximately 35.0% of
the total transaction amount for the whole year 2005. However, the
actual transaction amount of the first half of 2006 was approximately
RMB13,447 million, representing approximately 70.3% of the Existing
Cap for 2006 and approximately 36.7% of the Proposed Cap for 2006.
-26-
LETTER FROM THE INDEPENDENT FINANCIAL ADVISER
Products and services to be provided by the Group to the CNPC
Group
Percentage of amount
Actual amount for Actual amount/cap for first six months to
first six months for the whole year that for whole year
----------------- ------------------ -----------------------
(RMB in millions) (RMB in millions)
2005 6,932 19,823 35.0%
2006 13,447 19,134 70.3%
(Existing Cap)
36,670 36.7%
(Proposed Cap)
(Note)
Note: The figure includes the Existing Cap and the proposed
increase due to the effect of the changes to the operational
environment of the Group.
In light of the above and given that the unexpected business
expansion of the Group as well as the anticipated increase in the
prices for oil products, we are of the view that the revision of the
Existing Cap for this type of services is fair and reasonable and the
proposed increases to the Existing Caps are determined on a fair and
reasonable basis.
3.2.3 Products and services to be provided by the Group to CRMSC
The proposed increases to the Exiting Caps for products and
services to be provided by the Group to CRMSC have been determined
with reference to:
(i) the Group's historical transaction records with CRMSC;
(ii) the estimated business growth of the Group and CRMSC; and
(iii) the actual and estimated price of refined oil.
PetroChina entered into the CRMSC Products and Services Agreement
with CRMSC on 1 September 2005, pursuant to which PetroChina should
provide CRMSC with products and services including, among other
things, refined products (such as gasoline, diesel and other petroleum
products) on a continuing basis. Detailed information about the terms
and conditions of the CRMSC Products and Services Agreement was
disclosed in the circular of PetroChina to the Shareholders dated 22
September 2005.
We understand from the management of PetroChina that the supply
of refined products to CRMSC constituted a substantial proportion of
the CRMSC Transactions. In view that the government-prescribed price
of refined oil in the PRC has increased, we consider that the revision
of the Existing Cap for this type of services is in the interest of
PetroChina and the Shareholders as a whole and the proposed increases
to the Existing Caps are fairly and reasonably determined.
-27-
LETTER FROM THE INDEPENDENT FINANCIAL ADVISER
3.3 Proposed Caps
Set out below is a summary of the Existing Caps and the Proposed
Caps for each of the three years ending 31 December 2008 :
2006 2007 2008
------------------- ------------------- -------------------
Category Existing Proposed Existing Proposed Existing Proposed
of Products and Services Caps Caps Caps Caps Caps Caps
------------------------ -------- -------- -------- -------- -------- --------
(RMB in millions)
(i) Production services to be 27,513 63,983 28,923 96,437 32,647 98,518
provided by the CNPC (Note 1) (Note 1) (Note 1)
Group to the Group
(ii) Construction and 91,614 114,681 88,280 115,039 79,636 105,661
technical services to be (Note 2) (Note 2) (Note 2)
provided by the CNPC
Group to the Group
(iii) Material supply services 4,471 5,356 4,331 5,459 4,500 5,574
to be provided by the (Note 3) (Note 3) (Note 3)
CNPC Group to the Group
(iv) Products and services to 19,134 36,670 23,472 44,970 26,910 50,129
be provided by the Group (Note 4) (Note 4) (Note 4)
to the CNPC Group
(v) Products and services to 10,326 11,048 11,359 12,025 12,495 13,152
be provided by the Group (Note 5) (Note 5) (Note 5)
to CRMSC
Notes:
1. The Proposed Caps represent the sum of (a) the Existing Caps for this type
of services; (b) the proposed increase arising as a result of Acquisition
as refer in paragraph 3.1.1 above; and (c) the proposed increase due to the
effect of the changes to the operational environment as refer in paragraph
3.2.1(a) above.
2. The Proposed Caps represent the sum of (a) the Existing Caps for this type
of services; (b) the proposed increase arising as a result of Acquisition
as refer in paragraph 3.1.2 above; and (c) the proposed increase due to the
effect of the changes to the operational environment as refer in paragraph
3.2.1(b) above.
3. The Proposed Caps represent the sum of (a) the Existing Caps for this type
of services; (b) the proposed increase arising as a result of Acquisition
as refer in paragraph 3.1.3 above; and (c) the proposed increase due to the
effect of the changes to the operational environment as refer in paragraph
3.2.1(c) above.
4. The Proposed Caps represent the sum of (a) the Existing Caps for this type
of services; and (b) the proposed increase due to the effect of the changes
to the operational environment as refer in paragraph 3.2.2 above.
5. The Proposed Caps represent the sum of (a) the Existing Caps for this type
of services; and (b) the proposed increase due to the effect of the changes
to the operational environment as refer in paragraph 3.2.3 above.
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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER
4. Annual review of non-exempted continuing connected transactions
As discussed with PetroChina, it will comply with the annual review
requirements of the Stock Exchange, in particular:
(i) Each year the independent non-executive Directors must
review the continuing connected transactions and confirm in
the annual report that the transactions have been entered
into:
- in the ordinary and usual course of business of
PetroChina;
- either on normal commercial terms or, if there are not
sufficient comparable transactions to judge whether
they are on normal commercial terms, on terms no less
favourable to PetroChina than terms available to or
from (as appropriate) independent third parties; and
- in accordance with the relevant agreement governing
them on terms that are fair and reasonable and in the
interests of the Shareholders as a whole; and
(ii) Each year the auditors must provide a letter to the
Directors (with a copy provided to the Stock Exchange at
least 10 business days prior to the bulk printing of
PetroChina's annual report), confirming that the continuing
connected transactions:
- have received the approval of the Directors;
- are in accordance with the pricing policies of
PetroChina if the transactions involve provision of
goods or services by PetroChina;
- have been entered into in accordance with the relevant
agreement governing the transactions; and
- have not exceeded the caps approved by the Independent
Shareholders (or by the Shareholders for CRMSC
Transactions) and disclosed in previous
announcement(s).
Based on the above, we are of the view that there are appropriate
measures in place to monitor the non-exempted continuing connected
transactions and protect the interest of PetroChina and the Shareholders as
a whole.
RECOMMENDATION
Having considered the above principal factors and reasons, we consider that
the revision of the Existing Caps is in the interest of PetroChina and the
Shareholders as a whole, and the Proposed Caps are determined on a fair and
reasonable basis and are in the interest of PetroChina and the Independent
Shareholders (or the Shareholders for CRMSC Transactions) as a whole.
Accordingly, we advise the Independent Board Committee to recommend the
Independent Shareholders (or the Shareholders for CRMSC Transactions) to vote in
favor of the relevant ordinary resolutions in the EGM.
----------------------------------------
Yours faithfully, For and on behalf of
ICEA Capital Limited Fabian Shin
Executive Director
-29-
APPENDIX GENERAL INFORMATION
1. RESPONSIBILITY STATEMENT
This circular includes particulars given in compliance with the Listing
Rules for the purpose of giving information with regard to PetroChina. The
Directors collectively and individually accept full responsibility for the
accuracy and completeness 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. DISCLOSURE OF INTERESTS AND CONFIRMATIONS
As at the Latest Practicable Date:
(a) none of the Directors, supervisors or chief executives of PetroChina
had any interest and short positions in the shares, underlying shares
and debentures of PetroChina or any associated corporation (within the
meaning of Part XV of the Securities and Futures Ordinance (Cap. 571
of the Laws of Hong Kong)) ("SFO"), which are required to be notified
to PetroChina and the Stock Exchange pursuant to Divisions 7 and 8 of
Part XV of the SFO (including interests and short positions which he
is taken or deemed to have under such provision of the SFO); or are
required pursuant to section 352 of the SFO to be entered in the
register referred to therein, or as otherwise notified to PetroChina
and the Stock Exchange pursuant to the Model Code for Securities
Transactions by Directors of Listed Companies;
(b) PetroChina has not granted its Directors, chief executive or their
respective spouses or children below 18 any rights to subscribe for
its equity securities or debt securities;
(c) none of the Directors was materially interested in any contract or
arrangement entered into by any member of the Group since 31 December
2005, being the date to which the latest published audited financial
statements of PetroChina were made up, and which was significant in
relation to the business of the Group;
(d) none of the Directors had any direct or indirect interest in any
assets which have been since 31 December 2005, being the date to which
the latest published audited financial statements of PetroChina were
made up, acquired or disposed of by or leased to any member of the
Group, or are proposed to be acquired or disposed of by or leased to
any member of the Group;
(e) none of the Directors or, so far as is known to them, any of their
respective associates was interested in any business (apart from the
Group's business) which competes or is likely to compete either
directly or indirectly with the Group's business (as would be required
to be disclosed under Rule 8.10 of the Listing Rules if each of them
were a controlling shareholder);
(f) the Directors are not aware of any material adverse change in the
financial or trading positions of PetroChina since 31 December 2005,
the date to which the latest published audited financial statements of
PetroChina were made up; and
(g) none of the Directors had entered into any service contract with
PetroChina or any member of the Group (excluding contracts expiring or
determinable by the employer within one year without payment of
compensation (other than statutory compensation)).
-30-
APPENDIX GENERAL INFORMATION
3. SUBSTANTIAL SHAREHOLDER
Save as disclosed in this circular, as at the Latest Practicable Date, as
far as is known to the Directors and the chief executive of PetroChina, the
following persons have an interest or short position in the shares or underlying
shares of PetroChina which would fall to be disclosed to PetroChina under
Divisions 2 and 3 of Part XV of the SFO or who are directly or indirectly
interested in 10% or more of the nominal value of any class of share capital
carrying rights to vote in all circumstances at general meetings of any member
of the Group:
Percentage (%) Percentage (%)
of the total of the
number of total
that class share
Name of Shareholder Type of Shares No. of Shares in issue capital
------------------- ------------------ -------------------- -------------- --------------
CNPC State-owned shares 157,922,077,818 100.00 88.21
Warren E. Buffett(1) H shares 2,347,761,000 11.13 1.311
J.P. Morgan Chase & Co.(2) H shares 1,266,853,762(L) 6.00(L) 0.708
825,934,402(P)(3) 3.91(P) 0.461
Credit Suisse Group(4) H shares 1,284,549,834(L) 6.09(L) 0.718
998,677,000(S) 4.73(S) 0.558
24,965,600(P)(5) 0.12(P) 0.014
Templeton Asset Management Limited H shares 1,085,834,903(L) 5.15(L) 0.607
Notes:
(1) By virtue of Warren E. Buffett's 35.4% interest in Berkshire Hathaway Inc.,
Berkshire Hathaway's 100% interest in OBH Inc., OBH Inc.'s 100% interest in
National Indemnity Co. and 100% interest in GEICO Corporation, and GEICO
Corporation's 100% interest in Government Employees Inc. Company, each of
Warren E. Buffett, Berkshire Hathaway Inc. and OBH Inc. is deemed to be
interested in 2,279,151,000 H shares held by National Indemnity Co. and
68,610,000 H shares held by Government Employees Inc. Company, totalling
2,347,761,000 H shares.
(2) J.P. Morgan Chase & Co. through its various controlled corporations is
interested in an aggregate of 1,266,853,762 H shares of PetroChina.
Of these 1,266,853,762 H shares, 836,570,402 H Shares are directly held by
JP Morgan Chase Bank, N.A., J.P. Morgan Chase & Co. is deemed to be
interested in these 836,570,402 H shares by virtue of its 100% interest in
JP Morgan Chase Bank, N.A.; 48,900,010 H shares are directly held by J.P.
Morgan Securities Ltd., by virtue of J.P. Morgan Chase International
Holdings Limited's 98.95% interest in J.P. Morgan Securities Ltd., J.P.
Morgan Chase (UK) Holdings Limited's 100% interest in J.P. Morgan Chase
International Holdings Limited, J.P. Morgan Capital Holdings Limited's 100%
interest in J.P. Morgan Chase (UK) Holdings Limited and J.P. Morgan
International Finance Limited's 72.72% interest in J.P. Morgan Capital
Holdings Limited, J.P. Morgan Chase International Holdings Limited, J.P.
Morgan Chase (UK) Holdings Limited, J.P. Morgan Capital Holdings Limited
and J.P. Morgan International Finance Limited are deemed to be interested
in these 48,900,010 H shares; 99,663,648 H shares are directly held by J.P.
Morgan Whitefriars Inc., J.P. Morgan Overseas Capital Corporation is deemed
to be interested in these 99,663,648 H shares by virtue of its 100%
interest in J.P. Morgan Whitefriars Inc.; 29,849,702 H shares are directly
held by J.P. Morgan Investment Management Inc., JP Morgan Asset Management
Holdings Inc. is deemed to be interested in these 29,849,702 H shares by
virtue of its 100% interest in J.P. Morgan Investment Management Inc.;
11,178,000 H shares are directly held by JF International Management Inc.,
JP Morgan Asset Management (Asia) Inc. is deemed to be interested in these
11,178,000 H shares by virtue of its 100% interest in JF International
Management Inc.; 217,204,000 H shares are directly held by JF Asset
Management Limited, JP Morgan Asset Management (Asia) Inc. is deemed to be
interested in these 217,204,000 H shares by virtue of its 100% interest in
JF Asset Management Limited; 4,094,000 H shares are directly held by J.P.
Morgan International Bank Limited, J.P. Morgan Overseas Capital Corporation
is deemed to be interested in these 4,094,000 H shares by virtue of its
100% interest in J.P. Morgan International Bank Limited; 11,362,000 H
shares are
-31-
APPENDIX GENERAL INFORMATION
directly held by JF Asset Management (Singapore) Limited -- Co Reg #:
197601586K, JP Morgan Asset Management (Asia) Inc. is deemed to be
interested in these 11,362,000 H shares by virtue of its 100% interest in
JF Asset Management (Singapore) Limited; and 8,032,000 H shares are
directly held by JP Morgan Asset Management (Japan) Limited, JP Morgan
Asset Management (Asia) Inc. is deemed to be interested in these 8,032,000
H shares by virtue of its 100% interest in JP Morgan Asset Management
(Japan) Limited.
Of these 1,266,853,762 H shares, 152,657,658 H shares are indirectly held
by J.P. Morgan International Finance Limited, by virtue of Bank One
International Holdings Corporation's 100% interest in J.P. Morgan
International Finance Limited, J. P. Morgan International Inc.'s 100%
interest in Bank One International Holdings Corporation, JP Morgan Chase
Bank, N.A.'s 100% interest in J. P. Morgan International Inc, J.P. Morgan
Chase & Co.'s 100% interest in JP Morgan Chase Bank, N.A., Bank One
International Holdings Corporation, J. P. Morgan International Inc., JP
Morgan Chase Bank, N.A. and J.P. Morgan Chase & Co. are also deemed to be
interested in these 152,657,658 H shares; 103,757,648 H shares are also
indirectly held by J. P. Morgan Overseas Capital Corporation, J. P. Morgan
International Finance Limited is also deemed to be interested in these
shares by virtue of its 100% interest in J. P. Morgan Overseas Capital
Corporation; 277,625,702 H shares are also indirectly held by JP Morgan
Asset Management Holdings Inc., J.P. Morgan Chase & Co. is also deemed to
be interested in these shares by virtue of its 100% interest in JP Morgan
Asset Management Holdings Inc.; and 247,776,000 H shares are also
indirectly held by JP Morgan Asset Management (Asia) Inc., JP Morgan Asset
Management Holdings Inc. is also deemed to be interested in these shares by
virtue of its 100% interest in JP Morgan Asset Management (Asia) Inc..
(3) Comprising 825,934,402 H shares in the lending pool as described in the
SFO. The term "lending pool" is defined as (i) shares that the approved
lending agent holds as agent for a third party which he is authorized to
lend and other shares that can be lent according to the requirements of the
Securities Borrowing and Lending Rules; and (ii) shares that have been lent
by the approved lending agent, and only if the right of the approved
lending agent to require the return of the shares has not yet been
extinguished.
(4) Credit Suisse Group through its various controlled corporations is
interested in an aggregate of 1,284,549,834 H shares of PetroChina as long
position and 998,677,000 H shares of PetroChina as short position.
Of these 1,284,549,834 H shares held as long position and 998,677,000 H
shares as short position, 167,984,500 H shares as long position and
165,384,500 H shares as short position are directly held by Credit Suisse
Securities (USA) LLC, by virtue of Credit Suisse (USA), Inc.'s 100%
interest in Credit Suisse Securities (USA) LLC, Credit Suisse Holdings
(USA), Inc.'s 100% interest in Credit Suisse (USA), Inc., Credit Suisse's
57% interest in Credit Suisse Holdings (USA), Inc., Credit Suisse Group's
43% in Credit Suisse Holdings (USA), Inc. and Credit Suisse Group's 100%
interest in Credit Suisse, each of Credit Suisse (USA), Inc., Credit Suisse
Holdings (USA), Inc., Credit Suisse and Credit Suisse Group is deemed to be
interested in these 167,984,500 H shares as long position and 165,348,500 H
shares as short position; 216,756,974 H shares as long position and
99,068,000 H shares as short position are directly held by Credit Suisse
International, by virtue of Credit Suisse (International) Holding AG's 24%
interest in Credit Suisse International, Credit Suisse's 56% interest in
Credit Suisse International, Credit Suisse Group's 20% interest in Credit
Suisse International, Credit Suisse's 100% interest in Credit Suisse
(International) Holding AG and Credit Suisse Group's 100% interest in
Credit Suisse, each of Credit Suisse and Credit Suisse Group is deemed to
be interested in these 216,756,974 H shares as long position and 99,068,000
H shares as short position; 805,372,760 H shares as long position and
662,228,500 H shares as short position are directly held by Credit Suisse
(Hong Kong) Limited, by virtue of Credit Suisse (International) Holding
AG's 88.38% interest in Credit Suisse (Hong Kong) Limited, Credit Suisse
First Boston International (Guernsey) Limited's 11.62% interest in Credit
Suisse (Hong Kong) Limited, Credit Suisse (International) Holding AG's 100%
interest in Credit Suisse First Boston International (Guernsey) Limited,
Credit Suisse's 100% interest in Credit Suisse (International) Holding AG
and Credit Suisse Group's 100% interest in Credit Suisse, each of Credit
Suisse (International) Holding AG, Credit Suisse and Credit Suisse Group is
deemed to be interested in these 805,372,760 H shares as long position and
662,228,500 H shares as short position; 56,352,000 H shares as long
position and 71,996,000 H shares as short position are directly held by
Credit Suisse Securities (Europe) Limited, by virtue of Credit Suisse
Investment Holdings (UK)'s 100% interest in Credit Suisse Securities
(Europe) Limited, Credit Suisse Investments (UK)'s 98.07% interest in
Credit Suisse Investment Holdings (UK), Credit Suisse First Boston
Management AG's 1.93% interest in Credit Suisse Investment Holdings (UK),
Credit Suisse (International) Holding AG's 100% interest in Credit Suisse
First Boston Management AG, Credit Suisse (International) AG's 100%
interest in Credit Suisse Investments (UK), Credit Suisse's 100% interest
in Credit Suisse (International) AG and Credit Suisse Group's 100% interest
in Credit Suisse, each of Credit Suisse Investment Holdings (UK), Credit
Suisse Investments (UK), Credit Suisse (International) Holding AG, Credit
Suisse and Credit Suisse Group is deemed to be interested in these
56,352,000 H shares as long position and 71,996,000 H shares as short
position; 11,393,000 H shares as long position are directly held by Credit
Suisse, by virtue of Credit Suisse Group's 100% interest in Credit Suisse,
Credit Suisse Group is deemed to be
-32-
APPENDIX GENERAL INFORMATION
interested in these 11,393,000 H shares as long position; 24,965,600 H
shares as long position are directly held by Credit Suisse New York Branch,
by virtue of Credit Suisse's 100% interest in Credit Suisse New York
Branch, Credit Suisse Group's 100% interest in Credit Suisse, each of
Credit Suisse and Credit Suisse Group is deemed to be interest in these
24,965,600 H shares as long position; 1,725,000 H shares as long position
are directly held by Credit Suisse Capital LLC, by virtue of Credit Suisse
Capital Holdings, Inc.'s 100% interest in Credit Suisse Capital LLC, Credit
Suisse (USA), Inc.'s 100% interest in Credit Suisse Capital Holdings, Inc.,
Credit Suisse Holdings (USA), Inc.'s 100% interest in Credit Suisse (USA),
Inc., Credit Suisse's 57% interest in Credit Suisse Holdings (USA), Inc.,
Credit Suisse Group's 43% interest in Credit Suisse Holdings (USA), Inc.
and Credit Suisse Group's 100% interest in Credit Suisse, each of Credit
Suisse Capital Holdings, Inc., Credit Suisse (USA), Inc., Credit Suisse
Holdings (USA), Inc., Credit Suisse and Credit Suisse Group is deemed to be
interested in these 1,725,000 H shares as long position.
(5) Comprising 24,965,600 H shares in the lending pool as described in the SFO.
The term "lending pool" is defined as (i) shares that the approved lending
agent holds as agent for a third party which he is authorized to lend and
other shares that can be lent according to the requirements of the
Securities Borrowing and Lending Rules; and (ii) shares that have been lent
by the approved lending agent, and only if the right of the approved
lending agent to require the return of the shares has not yet been
extinguished.
Save as disclosed above, the Directors and chief executive of PetroChina
are not aware that there is any party who, as at the Latest Practicable Date,
had an interest or a short position in the shares and underlying shares which
would fall to be disclosed to PetroChina under the provisions of Divisions 2 and
3 of Part XV of the SFO, or who is, 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.
4. EXPERT'S QUALIFICATION AND CONSENT
ICEA Capital Limited, a corporation registered under the transitional
arrangement of the SFO for type 1 (dealing in securities) and type 6 (advising
on corporate finance) regulated activities, has given and has not withdrawn its
written consent to the issue of this circular with inclusion of its letter, and
the reference to its name included herein in the form and context in which it
appears.
ICEA Capital Limited confirms that:
(a) it is not beneficially interested in the share capital of any member
of the Group and does not 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; and
(b) as at the Latest Practicable Date, it did not have any interest in any
assets which have been, since 31 December 2005 (being the date to
which the latest published audited accounts of PetroChina were made
up), acquired or disposed of by or leased to any member of the Group,
or are proposed to be acquired or disposed of by or leased to any
member of the Group.
5. GENERAL
(a) The secretary to the Board is Mr. Li Huaiqi.
(b) The registered office of PetroChina is at 16 Andelu, Dongcheng
District, Beijing, 100011, the PRC.
(c) The principal share register and transfer office is Hong Kong
Registrars Limited, Room 1901-5, 19th Floor, Hopewell Centre, 183
Queen's Road East, Hong Kong.
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APPENDIX GENERAL INFORMATION
(d) In the event of inconsistency, the English language text of this
circular shall prevail over the Chinese language text.
6. PROCEDURES OF DEMANDING A POLL
Pursuant to the Articles, the vote of a general meeting of PetroChina shall
be taken on a show of hands unless a request for a voting by poll is made by the
following person(s) before or after a voting by a show of hands:
(a) the chairman of the meeting;
(b) at least two Shareholders with voting rights or their proxies;
(c) a Shareholder or Shareholders (including his or their proxies) who
solely or jointly hold(s) 10% or more of the Shares with rights to
vote at the meeting.
Unless a request for a voting by poll has been made, the chairman of the
meeting shall, based on the results of the voting by a show of hands, announce
the results of voting on a resolution and enter the same in the minutes of the
meeting.
In accordance with Rule 13.39(4) of the Listing Rules, the chairman of the
EGM will demand a poll in relation to the ordinary resolutions for approving the
Proposed Caps and the special resolution for approving the proposed amendments
to the Articles.
7. DOCUMENTS AVAILABLE FOR INSPECTION
Copies of the following documents will be available for inspection during
normal business hours at the offices of Freshfields Bruckhaus Deringer at 11th
Floor, Two Exchange Square, Hong Kong from the date of this circular up to and
including 28 September 2006 :
(a) the Articles;
(b) the Amended Comprehensive Agreement;
(c) the CRMSC Products and Services Agreement;
(d) the letter of recommendation from the Independent Board Committee;
(c) the letter issued by the Independent Financial Adviser; and
(d) the written consent of the Independent Financial Adviser referred to
paragraph 4 of this Appendix.
-34-
NOTICE OF EXTRAORDINARY GENERAL MEETING
(PETROCHINA COMPANY LIMITED LOGO)
(Chinese Characters)
PETROCHINA COMPANY LIMITED
(a joint stock limited company incorporated in the People's Republic of China
with limited liability)
(Stock Code: 857)
EXTRAORDINARY GENERAL MEETING
NOTICE IS HEREBY GIVEN that an extraordinary general meeting ("EGM") of the
shareholders of PetroChina Company Limited (the "PetroChina") will be held at
Kempinski Hotel, No. 50 Liangmaqiao Road, Chaoyang District, Beijing 100016, the
People's Republic of China at 9 : 00 a.m. on 1 November 2006 for the purpose of
considering and, if deemed appropriate, passing, with or without modification,
(i) the following resolutions as ordinary resolutions:
1. "THAT the continuing connected transactions arising as a result
of the acquisition of a 67% interest in PetroKazakhstan Inc. by
PetroChina through CNPC Exploration and Development Company
Limited ("Acquisition"), as set out in the circular of PetroChina
dated 14 September 2006 ("Circular"), which will fall within the
scope of the amended comprehensive agreement as approved by the
independent shareholders of PetroChina on 8 November 2005
("Amended Comprehensive Agreement"), and are expected to occur on
a regular and continuous basis in the ordinary and usual course
of business of PetroChina and its subsidiaries, as the case
maybe, and to be conducted on normal commercial terms, be and are
hereby generally and unconditionally approved."
2. "THAT the proposed revision to the existing annual caps for the
three years from 1 January 2006 to 31 December 2008 of each of
the continuing connected transaction under the Amended
Comprehensive Agreement as a result of the Acquisition, as set
out in the Circular, be and hereby approved, ratified and
confirmed."
3. "THAT the proposed revision to the existing annual caps for the
three years from 1 January 2006 to 31 December 2008 of each of
the continuing connected transaction under the Amended
Comprehensive Agreement as a result of changes to PetroChina's
production and operational environment, as set out in the
Circular, be and hereby approved, ratified and confirmed."
4. "THAT the proposed revision to the existing annual caps for the
three years from 1 January 2006 to 31 December 2008 in respect of
the products and services to be provided by PetroChina and its
subsidiaries to China Railway Materials and Suppliers Corporation
("CRMSC") pursuant to the agreement dated 1 September 2005
entered into between PetroChina and CRMSC in relation to the
provision of certain products and services, as set out in the
Circular, be and hereby approved, ratified and confirmed."
-35-
NOTICE OF EXTRAORDINARY GENERAL MEETING
(ii) the following resolution as a special resolution:
5. "THAT the proposed amendments to the articles of association of
PetroChina as set out in the Circular be and hereby generally and
unconditionally approved. The board of directors of PetroChina
should be authorized, as proposed to be approved at the EGM, to
make such modifications to the proposed amendments to the
articles of association as required by the relevant regulatory
bodies of the PRC."
----------------------------------------
Yours faithfully, By Order of the Board
PetroChina Company Limited Li Huaiqi
Secretary to the Board
Beijing, the PRC, 14 September 2006
Notes:
1. Holders of H shares and holders of domestic shares whose names are
registered in the register of members of PetroChina on 3 October 2006 are
entitled to attend and vote at the EGM. Persons holding PetroChina's H
shares should note that the register of members of PetroChina's H shares
will be closed from 3 October 2006 to 1 November 2006, both days inclusive,
during which period no transfer of shares will be effected.
2. Shareholders who intend to attend the EGM are required to send the reply
slip to the Secretariat of the Board of PetroChina by 13 October 2006.
Please refer to the form of reply slip for details.
3. Any shareholder entitled to vote at the EGM is entitled to appoint one (1)
or more proxies to attend and vote on his behalf. A proxy need not be a
shareholder of PetroChina. Shareholders must appoint a proxy in writing.
Such instrument should be signed by the person appointing the proxy or by
such person's authorised representative. If the form of proxy is signed by
another person so authorised by the shareholder, the power of attorney or
other authorising document must be certified by a notary. The notarially
certified power of attorney or other authorising document together with the
proxy form must be returned to the Secretariat of the Board of PetroChina
not later than 24 hours prior to the commencement of the EGM. The
completion and deposit of a form of proxy will not preclude any shareholder
from attending and voting at the EGM.
4. Each shareholder (or his/her proxy) shall be entitled to one vote for each
share held. If a shareholder has appointed more than one proxy to attend
the meeting, the voting rights can only be exercised by way of poll.
Address of Secretariat of the Board of PetroChina:
Secretariat of Board of Directors of PetroChina Company Limited
World Tower, 16 Andelu, Dongcheng District
Beijing, 100011, P.R. China
Tel: 8610-8488 6270
Fax: 8610-8488 6260
-36-
(PETROCHINA COMPANY LIMITED LOGO)
(Chinese Characters)
PETROCHINA COMPANY LIMITED
(A joint stock limited company incorporated in the People's Republic of China
with limited liability)
(Stock Code: 857)
FORM OF PROXY FOR THE EXTRAORDINARY GENERAL MEETING
TO BE HELD ON 1 NOVEMBER 2006
Number of shares to which this Proxy relates(1) ___________
Type of shares (State-owned shares or H shares)
to which this Proxy relates(1) ___________
I/We(2) ________________________________________________________________________
of _____________________________________________________________________________
(address as shown in the register of members) being shareholder(s) of PetroChina
Company Limited (the "Company") hereby appoint the Chairman of the Meeting or(3)
________________________________________________________________________________
of _____________________________________________________________________________
as my/our proxy to attend, act and vote for me/us and on my/our behalf at the
Extraordinary General Meeting of the Company to be held at Kempinski Hotel, No.
50 Liangmaqiao Road, Chaoyang District, Beijing, the People's Republic of China
(Post Code 100016) at 9:00 a.m. on 1 November 2006 and at any adjournment
thereof as hereunder indicated in respect of the resolutions set out in the
Notice of Extraordinary General Meeting, and, if no such indication is given, as
my/our proxy thinks fit.
ORDINARY RESOLUTIONS FOR(4) AGAINST(4) ABSTAIN(4)
-------------------- ------ ---------- ----------
1. "THAT the continuing connected
transactions arising as a result of the
acquisition of a 67% interest in
PetroKazakhstan Inc. by PetroChina
through CNPC Exploration and Development
Company Limited ("Acquisition"), as
set out in the circular of PetroChina
dated 14 September 2006 ("Circular"),
which will fall within the scope of the
amended comprehensive agreement as
approved by the independent shareholders
of PetroChina on 8 November 2005
("Amended Comprehensive Agreement"),
and are expected to occur on a regular
and continuous basis in the ordinary and
usual course of business of PetroChina
and its subsidiaries, as the case maybe,
and to be conducted on normal commercial
terms, be and are hereby generally and
unconditionally approved."
2. "THAT the proposed revision to the
existing annual caps for the three years
from 1 January 2006 to 31 December 2008
of each of the continuing connected
transaction under the Amended
Comprehensive Agreement as a result of
the Acquisition, as set out in the
Circular, be and hereby approved,
ratified and confirmed."
3. "THAT the proposed revision to the
existing annual caps for the three years
from 1 January 2006 to 31 December 2008
of each of the continuing connected
transaction under the Amended
Comprehensive Agreement as a result of
changes to PetroChina's production and
operational environment, as set out in
the Circular, be and hereby approved,
ratified and confirmed."
4. "THAT the proposed revision to the
existing annual caps for the three years
from 1 January 2006 to 31 December 2008
in respect of the products and services
to be provided by PetroChina and its
subsidiaries to China Railway Materials
and Suppliers Corporation ("CRMSC")
pursuant to the agreement dated 1
September 2005 entered into between
PetroChina and CRMSC in relation to the
provision of certain products and
services, as set out in the Circular, be
and hereby approved, ratified and
confirmed."
SPECIAL RESOLUTION
5. "THAT the proposed amendments to the
articles of association of PetroChina as
set out in the Circular be and hereby
generally and unconditionally approved.
The board of directors of PetroChina
should be authorized, as proposed to be
approved at the EGM, to make such
modifications to the proposed amendments
to the articles of association as
required by the relevant regulatory
bodies of the PRC."
Dated ____________ 2006 Signature(s)(5)
------------------------
Notes:
(1.) Please insert the number of shares registered in your name(s) to which this
form of proxy relates. If no number is inserted, this form of proxy will be
deemed to relate to all the shares in the Company registered in your
name(s). Please also insert the type of shares (State-owned shares or H
shares) to which this form of proxy relates.
(2.) Please insert the full name(s) (in Chinese or in English) and address(es)
(as shown in the register of members) in block letters.
(3.) If any proxy other than the Chairman of the Meeting is preferred, delete
the words "the Chairman of the Meeting or" and insert the name and address
of the proxy desired in the space provided. A shareholder may appoint one
or more proxies to attend and vote in his stead. A proxy need not be a
shareholder of the Company. A proxy of a shareholder who has appointed more
than one proxy may only vote on a poll. Any alteration made to this form of
proxy must be duly initialed by the person who signs it.
(4.) Important: If you wish to vote for any resolution, please tick in the box
marked "FOR". If you wish to vote against any resolution, please tick in
the box marked "AGAINST". If you wish to abstain from voting on any
resolution, tick in the box marked "ABSTAIN". Any abstain vote or waiver to
vote shall be disregarded as voting rights for the purpose of calculating
the result of that resolution. If you do not indicate how you wish your
proxy to vote, your proxy will be entitled to exercise his discretion.
Unless you have indicated otherwise in this form of proxy, your proxy will
also be entitled to vote at his discretion on any resolution properly put
to the Meeting other than those referred to in the Notice convening the
Meeting.
(5.) This form of proxy must be signed by you or your attorney duly authorised
in writing or, in the case of a legal person, must either be executed under
seal or under the hand of a director or an attorney duly authorised to sign
the same. If this form of proxy is signed by an attorney of the appointor,
the power of attorney authorising that attorney to sign, or other document
of authorisation, must be notarised.
(6.) Where there are joint holders of any shares, any one of such persons may
vote at the Meeting, either personally or by proxy, in respect of such
shares as if he were solely entitled thereto. However, if more than one of
such joint holders is present at the Meeting, either personally or by
proxy, then one of the said persons so present whose name stands first in
the register of members in respect of such shares shall alone be entitled
to vote in respect thereof.
(7.) To be valid, for holders of State-owned shares, this form of proxy,
together with the notarised power of attorney or other document of
authorisation (if any), must be delivered to the Secretariat of the Board
of Directors of the Company at Room 1521, 16 Andelu, Dongcheng District,
Beijing, The PRC (Postal code 100011) not less than 24 hours before the
time appointed for the Meeting. In order to be valid, for holders of H
shares, the above documents must be delivered to Hong Kong Registrars
Limited, 46/F Hopewell Centre, 183 Queen's Road East, Hong Kong within the
same period.
(PETROCHINA COMPANY LIMITED LOGO)
(Chinese Characters)
PETROCHINA COMPANY LIMITED
(a joint stock limited company incorporated in the People's Republic of China
with limited liability)
(Stock Code: 857)
REPLY SLIP
To: PetroChina Company Limited (the "Company")
I/We(1) (English name): ______________________ of ______________________________
(address as shown in the register of members) (telephone number(s)(2):
______________________________________) being the registered holder(s) of(3)
____________________________ State-owned/H(4) share(s) of RMB1.00 each in the
capital of the Company, hereby inform the Company that I/we intend to attend (in
person or by proxy) the Extraordinary General Meeting of the Company to be held
at Kempinski Hotel, No. 50 Liangmaqiao Road, Chaoyang District, Beijing, the
People's Republic of China (Post Code 100016) on 1 November 2006 at 9:00 a.m.
Dated: ____________________________ 2006
Signature(s):
--------------------------
Notes:
(1) Please insert full name(s) (in Chinese or in English) and address(es) (as
shown in the register of members) in block letters.
(2) Please insert telephone number(s) at which you can be contacted for
confirmation purpose.
(3) Please insert the number of shares registered under your name(s).
(4) Please delete as appropriate.
(5) The completed and signed reply slip should be delivered to the Secretariat
of the Board of Directors of the Company at Room 1521, World Tower, 16
Andelu, Dongcheng District, Beijing, PRC (Postal code 100011) on or before
Friday, 13 October 2006 personally, by mail or by fax (fax number: (8610)
8488 6260).