CHK Oil Limited — Proxy Solicitation & Information Statement 2003

Jul 30, 2003

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, a bank manager, solicitor, professional accountant or other professional adviser.

If you have sold or transferred your shares in China Merchants DiChain (Asia) Limited (the “Company”), you should at once hand this circular together with the enclosed form of proxy to the purchase or transferee or to the bank, stockbroker or other agent through whom the sale or transfer was effected for transmission to the purchaser or transferee.

The Stock Exchange of Hong Kong Limited takes no responsibility for the contents of this circular, makes no representation as to its accuracy or completeness and expressly disclaims any liability whatsoever for any loss howsoever arising from or in reliance upon the whole or any part of the contents of this circular.

CHINA MERCHANTS DICHAIN (ASIA) LIMITED 招商迪辰( 亞洲) 有限公司

(Incorporated in Bermuda with limited liability)

Executive Directors: Registered office: Fan Di (Chairman) Clarendon House Li Xinggui 2 Church Street Wu Shiyue Hamilton HM 11 Zhu Xiaojun Bermuda Zheng Yingsheng Head Office & Principal Place of Non-executive Directors: Business in Hong Kong: Robert Fung Hing Piu Units 3207-08, 32/F Wang Shizhen West Tower, Shun Tak Centre Barry J Buttifant 168-200 Connaught Road Central Iain F Bruce Hong Kong

* Independent Non-executive Directors

30 July 2003

To the shareholders

Dear Sir and Madam:

GENERAL MANDATE TO PURCHASE ITS OWN SHARES AND TO ISSUE NEW SHARES

INTRODUCTION

The purpose of this circular is to provide you with information relating to the Ordinary Resolutions to be proposed at the forthcoming Annual General Meeting to be held on 25 August 2003: (i) to grant the directors of the Company (the “Directors”) a general mandate to exercise the powers of the Company to

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undertake repurchases of the Company’s fully paid up shares (“Shares”) representing up to a maximum of 10% of the existing issued share capital of the Company on the date of passing the Ordinary Resolutions (the “Repurchase Proposal”); (ii) to grant a general mandate to the Directors to issue new shares not exceeding 20% of the existing issued share capital of the Company at the date of passing the Ordinary Resolutions; and (iii) to increase the number of shares which the Directors may issue under such general mandate by the number of shares repurchased under the Repurchase Proposal.

In accordance with the Listing Rules, this circular also serves as the explanatory statement to provide you with requisite information reasonably necessary to enable you to make an informed decision on whether to vote for or against Ordinary Resolutions 4 to 6 to be proposed at the Annual General Meeting of the Company to be held on 25 August 2003.

REASONS FOR SHARE BUYBACK

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

SHARE CAPITAL

As at 24 July 2003, the latest practicable date prior to the printing of this circular, the issued share capital of the Company comprised 4,536,565,000 Shares of HK$0.01 each.

Subject to the passing of the Ordinary Resolution 4, the Company would be allowed under the Repurchase Proposal to repurchase a maximum of 453,656,500 Shares on the basis that no further Shares will be issued or repurchased prior to the date of the forthcoming Annual General Meeting.

FUNDING OF REPURCHASES

The Directors propose that repurchases of Shares under the Repurchase Proposal in these circumstances would be financed from the Company’s internal resources or existing banking facilities which will be funds legally available for such purposes in accordance with the Memorandum and Articles of Association and the laws of Bermuda.

There might be material adverse impact on the working capital or gearing position of the Company (as compared with the position disclosed in the audited accounts contained in the Annual Report for the year ended 31 March 2003) in the event that the Repurchase Proposal was to be carried out in full at any time during the proposed repurchase period. However, the Directors do not propose to exercise the Repurchase Proposal to such extent as would, in the circumstances, have a material adverse effect on the working capital requirements of the Company or the gearing levels which in the opinion of the Directors are from time to time appropriate for the Company. The number of Shares to be repurchased on any occasion and the price and other terms upon which the same are purchased will be decided by the Directors at the relevant time having regard to the circumstances then pertaining.

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MARKET PRICES

The highest and lowest prices at which Shares of the Company have been traded on the Stock Exchange during each of the previous 12 months from July 2002 to June 2003 were as follows:

	Highest	Lowest
	HK$	HK$
2002
July	0.3300	0.2500
August	0.3100	0.2550
September	0.2700	0.2270
October	0.2330	0.1790
November	0.2200	0.1600
December	0.2220	0.1660
2003
January	0.2210	0.1860
February	0.2050	0.1730
March	0.1830	0.1490
April	0.1610	0.1230
May	0.1550	0.1100
June	0.1590	0.1280

RESOLUTIONS TO BE PROPOSED AT THE ANNUAL GENERAL MEETING

The Ordinary Resolution 5 to be proposed at the Annual General Meeting relates to the granting of a general mandate to the Directors of the Company to repurchase, on the Stock Exchange, Shares up to a maximum of 10% of the issued share capital of the Company at the date of passing the resolution until the conclusion of the next annual general meeting of the Company.

The Ordinary Resolution 4 to be proposed at the Annual General Meeting relates to the granting of a general mandate to the Directors to issue new Shares up to a maximum of 20% of the issued share capital of the Company at the date of passing the resolution until the conclusion of the next annual general meeting of the Company; in addition, subject to a separate approval of shareholders of the Ordinary Resolution 6, the number of Shares purchased by the Company under the Repurchase Proposal will also be added to the 20% general mandate as mentioned above.

The Ordinary Resolution 6 to be proposed at the Annual General Meeting relates to the extension of the general mandate to be granted to the Directors to issue new Shares during the relevant period by adding to it the number of Shares purchased under the Repurchase Proposal, if any.

DISCLOSURE OF INTERESTS

As at 24 July 2003, the latest practicable date prior to the printing of this circular, Farsight Holdings Limited and DiChain Holdings Limited (collectively called the “DHL Group”), the single largest group of shareholders of the Company, beneficially held 2,682,515,000 Shares in the issued share capital of the Company, representing approximately 59.13% of the Company’s issued share capital. In the event that the Directors exercise in full the power to repurchase Shares of the Company in accordance with the terms of the ordinary resolution to be proposed at the Annual General Meeting, the interests of

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DHL Group in the Shares of the Company would be increased to 65.7% of the issued Shares of the Company. Such increase will not give rise to an obligation to make a mandatory offer under Rule 26 of the Hong Kong Code on Takeovers and Mergers. The Company has no present intention to repurchase shares to such an extent that would result in the amount of Shares held by the public being reduced to less than 25%.

The Directors have undertaken to the Stock Exchange to exercise the powers of the Company to make purchases under the Repurchase Proposal in accordance with the Listing Rules and laws of Bermuda. The Directors are not aware of any consequences which will arise under the Takeover Code as a result of any purchases to be made under the Repurchase Proposal.

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

The Company has not been notified by any connected persons (as defined in the Listing Rules) of the Company that they have a present intention to sell any Shares, or that they have undertaken not to sell any Shares held by them to the Company in the event that its shareholders approved the Repurchase Proposal.

SHARES PURCHASES MADE BY THE COMPANY

The Company did not make any purchase of Shares during the last six months (whether on the Stock Exchange or otherwise).

PROXY ARRANGEMENT

A form of proxy for use at the Annual General Meeting is enclosed with the Annual Report for the year ended 31 March 2003. To be valid, the form of proxy must be completed in accordance with the instructions printed thereon and deposited, together with the power of attorney or other authority (if any) under which it is signed or a notarially certified copy of that power of attorney or authority at the Company’s Branch Registrars in Hong Kong, Tengis Limited, at G/F, Bank of East Asia Harbour View Centre, 56 Gloucester Road, Wanchai, Hong Kong not less than 48 hours before the time appointed for holding the meeting. Completion and delivery of the form of proxy will not prevent you from attending and voting at the Annual General Meeting.

RECOMMENDATION

The Directors consider that the Repurchase Proposal and the granting of general mandate to issue new shares are in the best interests of the Company and its shareholders and accordingly recommend that all shareholders should vote in favour of the Ordinary Resolutions 4 to 6 to be proposed at the Annual General Meeting as they intend to do themselves in respect of their own holdings.

Yours faithfully, Dr. Fan Di Chairman

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