Nestlé Sa Hsu Fu Chi International Limited Credit Suisse

SCHEME DOCUMENT DATED 31 AUGUST 2011 THIS SCHEME DOCUMENT IS ISSUED BY HSU FU CHI INTERNATIONAL LIMITED (THE “COMPANY” OR “HSU FU CHI”). THIS SCHEME DOCUMENT IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION. PLEASE READ IT CAREFULLY. IF YOU ARE IN ANY DOUBT ABOUT THIS SCHEME DOCUMENT OR THE ACTION YOU SHOULD TAKE, YOU SHOULD CONSULT YOUR STOCKBROKER, BANK MANAGER, SOLICITOR, ACCOUNTANT, TAX ADVISER OR OTHER PROFESSIONAL ADVISER IMMEDIATELY. If you have sold or transferred all your issued ordinary shares in the capital of the Company, you should immediately forward this Scheme Document and the accompanying forms to the purchaser or transferee or to the bank, stockbroker or agent through whom you effected the sale for onward transmission to the purchaser or transferee. The Singapore Exchange Securities Trading Limited assumes no responsibility for the correctness of any of the statements made, reports contained or opinions expressed in this Scheme Document.

NESTLÉ S.A. HSU FU CHI INTERNATIONAL LIMITED (Incorporated in Switzerland) (Incorporated in the Cayman Islands) (RNS Number: 2136S) (Registration Number: CT-175834)

PROPOSED JOINT VENTURE TO BE IMPLEMENTED BY WAY OF A SCHEME OF ARRANGEMENT UNDER SECTION 86 OF THE COMPANIES LAW OF THE CAYMAN ISLANDS

Financial Adviser to Nestlé

CREDIT SUISSE (SINGAPORE) LIMITED (Incorporated in the Republic of Singapore) (Company Registration No. 197702363D)

Independent Financial Adviser to the Independent Directors

MORGAN STANLEY ASIA (SINGAPORE) PTE. (Incorporated in the Republic of Singapore) (Company Registration No. 199206298Z)

IMPORTANT Last date and time for lodgement of Proxy Forms : Friday, 23 September 2011 at 6.00 p.m. for Court Meeting Date and time of the Court Meeting : Monday, 26 September 2011 at 6.00 p.m. Place of Court Meeting : 108 Robinson Road, Level 11, The Finexis Building, Singapore 068900

The action to be taken by you is set out on page 31 of this Scheme Document.

The important dates, times and place relating to the Court Meeting and the expected timetable are set out on page 9 of this Scheme Document. Your attention is also drawn to the notes under the expected timetable.

CONTENTS

DEFINITIONS...... 3

EXPECTED TIMETABLE ...... 9

CORPORATE INFORMATION...... 11

LETTER TO THE SHAREHOLDERS AND DEPOSITORS ...... 13 1. INTRODUCTION ...... 13 2. RATIONALE FOR THE ACQUISITION AND FUTURE PLANS FOR THE COMPANY ...... 16 3. THE SCHEME ...... 17 4. FINANCIAL EVALUATION OF THE SCHEME CONSIDERATION ...... 18 5. NO CASH OUTLAY ...... 18 6. WAIVER OF RIGHTS TO A GENERAL OFFER ...... 18 7. CONFIRMATION OF FINANCIAL RESOURCES ...... 18 8. INDEPENDENT FINANCIAL ADVISER’S OPINION ...... 18 9. RECOMMENDATION OF THE INDEPENDENT DIRECTORS ...... 19 10. DIRECTORS’ RESPONSIBILITY STATEMENT...... 20 11. GENERAL INFORMATION ...... 20

EXPLANATORY MEMORANDUM...... 21 1. INTRODUCTION ...... 21 2. RATIONALE FOR THE PROPOSED TRANSACTION...... 21 3. THE SCHEME ...... 21 4. PRINCIPAL TERMS OF THE IMPLEMENTATION AGREEMENT ...... 22 5. IRREVOCABLE UNDERTAKINGS...... 25 6. SHARE ACQUISITION...... 25 7. INFORMATION ON THE COMPANY ...... 26 8. INFORMATION ON NESTLÉ...... 26 9. COURT MEETING ...... 26 10. REGULATORY APPROVALS...... 27 11. EFFECT OF THE SCHEME AND DELISTING ...... 28 12. IMPLEMENTATION OF THE SCHEME ...... 28 13. CLOSURE OF BOOKS ...... 29 14. SETTLEMENT AND REGISTRATION PROCEDURES...... 30 15. DIRECTORS’ AND SUBSTANTIAL SHAREHOLDERS’ INTERESTS IN SHARES OF THE COMPANY ...... 30 16. OVERSEAS SHAREHOLDERS...... 30 17. ACTION TO BE TAKEN BY SHAREHOLDERS AND DEPOSITORS ...... 31 18. IFA’S ADVICE TO THE INDEPENDENT DIRECTORS ...... 33 19. GENERAL INFORMATION ...... 33

1 CONTENTS

APPENDIX 1 – LETTER FROM MORGAN STANLEY TO THE INDEPENDENT DIRECTORS ...... 34

APPENDIX 2 – LETTER FROM NESTLÉ S.A. TO THE SHAREHOLDERS AND DEPOSITORS ...... 70

APPENDIX 3 – GENERAL INFORMATION RELATING TO THE COMPANY ...... 119

APPENDIX 4 – RELEVANT EXCERPTS OF THE MEMORANDUM AND ARTICLES OF ASSOCIATION ...... 130

APPENDIX 5 – AUDITED CONSOLIDATED FINANCIAL STATEMENTS OF THE GROUP FOR FY2010 ...... 152

APPENDIX 6 – UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS OF THE GROUP FOR FY2011 ...... 198

APPENDIX 7 – SCHEME CONDITIONS ...... 213

APPENDIX 8 – MATERIAL COVENANTS ...... 215

APPENDIX 9 – REPRESENTATIONS AND WARRANTIES OF NESTLÉ...... 216

APPENDIX 10 – REPRESENTATIONS AND WARRANTIES OF THE COMPANY ...... 217

THE SCHEME ...... 221

NOTICE OF COURT MEETING...... 225

2 DEFINITIONS

In this Scheme Document, the following definitions apply throughout except where the context otherwise requires:

“ADS Depository” : Citibank N.A.;

“Announcement” : The joint announcement made by the Company and Nestlé dated 11 July 2011 in relation to, inter alia, the Scheme and the Share Acquisition;

“Announcement Date” : 11 July 2011, being the date of the Announcement;

“Books Closure Date” : A date and time to be announced (before the Effective Date) by the Company on which (i) the Register of Members and (ii) the Depository Register will be closed in order to determine the entitlements of the Scheme Shareholders and Depositors in respect of the Scheme;

“Business Day” : A day (except a Saturday or Sunday) on which banks are generally open for business in the Cayman Islands, Switzerland (Canton de Vaud), the PRC (Beijing) and Singapore;

“Cayman Companies Law” : The Companies Law, Cap. 22 (Law 3 of 1961, as consolidated and revised) of the Cayman Islands;

“CDP” : The Central Depository (Pte) Limited;

“CEO” : Chief executive officer of the Company;

“CHF” : Swiss franc, being the lawful currency of Switzerland;

“Code” : The Singapore Code on Take-overs and Mergers, as administered by the SIC from time to time;

“Company” or “Hsu Fu Chi” : Hsu Fu Chi International Limited, a company incorporated in the Cayman Islands (registration number CT-175834) whose registered office is at Cricket Square, Hutchins Drive, P.O. Box 2681, Grand Cayman KY1-1111, Cayman Islands;

“Competing Offer” : An offer or proposal by any person (other than Nestlé) pursuant to which such person or other person may, whether by share purchase, scheme of arrangement or amalgamation, capital reconstruction, purchase of assets, tender offer, general offer, partial offer, joint venture, dual listed company structure or otherwise:

(a) acquire or become the holder or owner of, or otherwise have an economic interest in (i) all or substantially all of the assets, business and/or undertakings of the Group or (ii) all or a significant portion of the share capital of the Company;

(b) acquire Control of the Group;

(d) effect a transaction which would preclude or restrict the Scheme;

3 DEFINITIONS

“Control” : (a) the direct legal and/or beneficial ownership of more than 50% of the voting power of a person; or

(b) the possession of the power to appoint a majority of the board of directors or equivalent body of a person or otherwise direct the management or policies of a person, whether through the ownership of voting securities, proxy, contract, agency or otherwise, and “Controlling” and “Controlled” will be construed accordingly;

“Court” : The Grand Court of the Cayman Islands;

“Court Meeting” : The meeting of Scheme Shareholders to be convened at the direction of the Court, notice of which is set out on pages 225 and 226 of this Scheme Document, and any adjournment thereof;

“Court Order” : The order of the Court sanctioning the Scheme under Section 86 of the Cayman Companies Law;

“Credit Suisse” : Credit Suisse (Singapore) Limited, the financial adviser to Nestlé;

“Depositor Proxy Form” : The Depositor proxy form for the Court Meeting, a copy of which is sent with this Scheme Document;

“Directors” : The directors of the Company as at the date of this Scheme Document;

“Effective Date” : The Business Day falling five (5) Business Days after the satisfaction or waiver of the Scheme Conditions set out in paragraphs 1 to 5 and paragraphs 9 and 10 of Appendix 7 provided that the other Scheme Conditions are satisfied or waived at such date;

“Encumbrance” : Any pledge, charge, lien, mortgage, debenture, hypothecation, security interest, pre-emption right, option and any other encumbrance or third party right or claim of any kind or any agreement to create any of the above;

“Entitled Depositors” : Depositors having Scheme Shares standing to the credit of their Securities Account as at 5.00 p.m. on the Books Closure Date;

“Entitled Shareholders” : Scheme Shareholders as at 5.00 p.m. on the Books Closure Date;

“Explanatory Memorandum” : The explanatory memorandum in compliance with the Rules of the Court as set out on pages 21 to 33 of this Scheme Document;

“FY” : The financial year of the Company which, in any given year, begins on 1 July and ends on 30 June;

“Group” : The Company, its subsidiaries and any company which is on or at any time after the date of the Implementation Agreement, a person Controlled directly or indirectly by the Company and the expression “Group Company” means any member of the Group;

“Holdco” : The holding company into which the Individual Shareholders intend to restructure, on or prior to the Scheme becoming effective, the Shares they or their related corporations hold;

4 DEFINITIONS

“IFA Letter” : The letter from the IFA to the Independent Directors as set out in Appendix 1 to this Scheme Document;

“Implementation Agreement” : The implementation agreement dated 11 July 2011 entered into between the Company and Nestlé for the implementation of the Scheme;

“Independent Directors” : The Directors who are considered independent for the purpose of making a recommendation to the Scheme Shareholders on the Scheme, being Mr. Hu Chia-Hsun, Mr. Shaw Sun Kan Gordon, Mr. Cheong Tuck Kuen Kenneth (alternate director to Mr. Shaw Sun Kan Gordon), Mr. Lim Hock San, Mr. Lam Khin Khui and Mr. Lee Tsu- Der;

“Individual Holders” : Mr. Hsu Chen, Mr. Hsu Pu, Ophira Finance Ltd and Suncove Investments Ltd;

“Individual Shareholders” : Mr. Hsu Chen, Mr. Hsu Keng, Mr. Hsu Hang and Mr. Hsu Pu;

“Irrevocable Undertakings” : Irrevocable undertakings given by each of the Undertaking Shareholders to Nestlé on 11 July 2011 to, inter alia, vote in favour of the Scheme, on terms described in paragraph 6 of the Letter from Nestlé to the Shareholders and Depositors as set out in Appendix 2 to this Scheme Document;

“Joint Venture Agreement” : The joint venture agreement to be entered into between the Individual Shareholders, Nestlé, the Company and Holdco;

“Latest Practicable Date” : 26 August 2011, being the latest practicable date prior to the printing of this Scheme Document;

“Listing Manual” : The listing manual issued by the SGX-ST and as amended from time to time;

“Long Stop Date” : The earlier of:

(a) the date falling four (4) months from the date of the Implementation Agreement if the approval of the Scheme has not been obtained at the Court Meeting by that date; or

(b) 31 March 2012;

“Market Day” : A day on which the SGX-ST is open for trading of securities;

“Material Covenants” : The material covenants of the Company extracted from the Implementation Agreement and reproduced in Appendix 8 of this Scheme Document;

“Morgan Stanley” or “IFA” : Morgan Stanley Asia (Singapore) Pte., as the independent financial adviser to the Independent Directors in respect of the Scheme;

“Nestlé ADR” : The certificates issued by the ADS Depository to evidence the Nestlé ADS;

“Nestlé ADS” : Nestlé American depository shares, each of which represents the right to receive one (1) ordinary share of CHF 0.10 of Nestlé on deposit with the ADS Depository;

5 DEFINITIONS

“Nestlé Directors” : The directors of Nestlé as at the date of this Scheme Document;

“Offer” : The mandatory or voluntary conditional cash offer by or on behalf of Nestlé to acquire Shares not already owned or controlled by Nestlé, on the terms and subject to the conditions which will be set out in the offer document issued for or on behalf of Nestlé in the event of the exercise of the Switch Option;

“Parties” : The Company and Nestlé, and “Party” shall mean either of them;

“PRC” : People’s Republic of China;

“Proposed Transaction” : The Scheme and the Share Acquisition;

“Proxy Form” : The Shareholder Proxy Form or the Depositor Proxy Form, as the case may be;

“Purchaser” or “Nestlé” : Nestlé S.A., a company incorporated in Switzerland (RNS number 2136S) whose global headquarters is located at Avenue Nestlé 55, 1800 Vevey, Switzerland;

“Register of Members” : The register of members of the Company which is administered by the Share Registrar in the Cayman Islands;

“Renminbi” or “RMB” : Renminbi, being the lawful currency of the PRC;

“Restricted Period” : The period from (and including) the date of the Implementation Agreement up to (and including) the date on which the Implementation Agreement is terminated in accordance with its terms;

“Restricted Transaction” : (a) the possible acquisition of, or issue or grant of any option over, the Shares; and/or

(b) the possible acquisition of all or substantially all of the assets of any Group Company, and will include any Competing Offer;

“Sale Shares” : The 131,000,000 Shares to be acquired by Nestlé pursuant to the Share Acquisition, representing approximately 16.48% of all the Shares as at the Latest Practicable Date;

“Scheme” : The scheme of arrangement between the Company and the Scheme Shareholders under Section 86 of the Cayman Companies Law, on the terms and subject to the conditions set out in this Scheme Document, subject to any modification, addition or condition approved or imposed by the Court and agreed in writing by the Parties;

“Scheme Conditions” : The conditions precedent to the effectiveness of the Scheme which are reproduced in Appendix 7 of this Scheme Document;

“Scheme Consideration” : The cash consideration of four Singapore Dollars and thirty five cents (S$4.35) per Scheme Share as further set out in paragraph 3.1 of the Explanatory Memorandum of this Scheme Document;

6 DEFINITIONS

“Scheme Document” : This document dated 31 August 2011, including all appendices, and any other document(s) which may be issued by or on behalf of the Company and/or Nestlé to amend, revise, supplement or update this document from time to time;

“Scheme Shareholders” : Shareholders other than the Individual Holders;

“Scheme Shares” : Shares held by the Scheme Shareholders;

“Securities Account” : The securities account maintained by a Depositor with CDP but does not include a securities sub-account;

“SGXNET” : The website of the SGX-ST;

“SGX-ST” : Singapore Exchange Securities Trading Limited;

“Share Acquisition” : The acquisition of the Sale Shares from the Individual Holders;

“Share Registrar” : Codan Trust Company (Cayman) Limited;

“Share Transfer Agent” : Boardroom Corporate & Advisory Services Pte. Ltd.;

“Shareholder” : Any person who has his, her or its name entered on the Register of Members as a holder of Shares, including without limitation, CDP;

“Shareholder Proxy Form” : The Shareholder proxy form for the Court Meeting, a copy of which is sent with this Scheme Document;

“Shares” : Issued ordinary shares of par value of S$0.01 each in the capital of the Company;

“SIC” : The Securities Industry Council of Singapore;

“Singapore” : The Republic of Singapore;

“Singapore Dollars” or “S$” : Singapore dollars, being the lawful currency of Singapore;

“Substantial Shareholder” : Any person holding an interest in any Shares representing 5% or more of all the Shares;

“Switch Option” : An option (on the terms set out under paragraph 4.3 of the Explanatory Memorandum of this Scheme Document) exercisable by Nestlé to proceed by way of an Offer in lieu of the Proposed Transaction in the event of a Competing Offer or otherwise, subject to the prior written consent of the Individual Shareholders;

“Undertaking Shareholders” : (i) Arisaig Asia Consumer Fund Limited and (ii) Winmoore Holdings Limited and Star Candy Ltd, two subsidiaries of The Baring Asia Private Equity Fund IV, L.P.;

“Voting Record Date” : The date and time being 72 hours before the date and time of the Court Meeting on which (i) the Register of Members and (ii) the Depository Register will be closed to determine who can vote in the context of the Court Meeting;

7 DEFINITIONS

“VWAP” : Volume weighted average price; and

“%” : per centum or percentage.

The terms “Depositor”, “Depository Agent” and “Depository Register” shall have the meanings ascribed to them respectively in Section 130A of the Companies Act of Singapore.

The term “acting in concert” shall have the meaning ascribed to it in the Code.

Any reference to a time of day and date in this Scheme Document shall be a reference to Singapore time and date, unless otherwise specified.

Words importing the singular shall, where applicable, include the plural and vice versa. Words importing the masculine gender shall, where applicable, include the feminine and neuter genders. References to persons shall, where applicable, include corporations.

Any reference in this Scheme Document to any enactment is a reference to that enactment as for the time being amended or re-enacted. Any word defined in the Cayman Companies Law, the Code, the Companies Act of Singapore, the Listing Manual or any modification thereof and used in this Scheme Document shall, where applicable, have the meaning assigned to it under the Cayman Companies Law, the Code, the Companies Act of Singapore, the Listing Manual or any modification thereof, as the case may be, unless the context otherwise requires.

Any reference to “you” or “your” in this Scheme Document is a reference to the Shareholders and/or Depositors (as applicable) unless the context otherwise requires.

Any discrepancies in the figures included in this Scheme Document between the amounts shown and the totals thereof are due to rounding. Accordingly, figures shown as totals in this Scheme Document may not be an arithmetic aggregation of the figures that precede them.

In this Scheme Document, the total number of Shares, as at the Latest Practicable Date, is 795,000,000.

8 EXPECTED TIMETABLE

Singapore time (unless otherwise stated)

Latest date and time for lodgement of Proxy Form in respect : 23 September 2011 at 6.00 p.m. of the Court Meeting(1)(2)(3)

Voting Record Date : 23 September 2011 at 6.00 p.m.

Date and time of the Court Meeting : 26 September 2011 at 6.00 p.m.

Place of the Court Meeting(4) : 108 Robinson Road, Level 11, The Finexis Building, Singapore 068900

Announcement of the results of the Court Meeting : 28 September 2011

Expected date of Court hearing of the application to sanction : 10 October 2011 the Scheme

Expected last day of trading of the Shares : To be announced subject to satisfaction of the Scheme Conditions

Expected Books Closure Date : To be announced subject to satisfaction of the Scheme Conditions

Expected Effective Date(5) : To be announced subject to satisfaction of the Scheme Conditions

Expected date for the payment of the Scheme Consideration : On or before the date falling ten (10) days after the Effective Date

Expected date for delisting of the Shares : One day after the date of the payment of the Scheme Consideration

You should note that save for the last date and time for lodgement of the Proxy Form and the date and time of the Court Meeting, the above timetable is indicative only and may be subject to change. For the events listed above which are described as “expected”, please refer to future announcement(s) by the Company and/or the SGX-ST for the exact dates and times of these events.

Notes: (1) Depositors who wish to withdraw their interest in Scheme Shares from CDP and become Scheme Shareholders should contact CDP at 4 Shenton Way, #02-01, SGX Centre 2, Singapore 068807. The latest time for submitting the withdrawal request form is ten (10) Market Days prior to the Voting Record Date. Further details on such withdrawal process are set out at http://www.cdp.com.sg/business/withdraw.html and Paragraph 17.3 of the Explanatory Memorandum of this Scheme Document. Depositors who have become Shareholders and who wish to trade their Shares on the SGX-ST will need to first become Depositors again by depositing their share certificates with CDP together with the duly executed instruments of transfer in favour of CDP and have their respective Securities Accounts credited with the number of Shares deposited before they can effect the desired trades. It will take about twelve (12) Market Days for the Shares to be credited into the relevant Securities Account and Depositors will only be able to trade the Shares once they have received a notification from CDP.

(2) Shareholders and Depositors are requested to lodge Proxy Forms for the Court Meeting not less than 72 hours before the time appointed for the Court Meeting, but if they are not so lodged, they may be handed to the chairman of the Court Meeting at the Court Meeting.

9 EXPECTED TIMETABLE

(3) All Proxy Forms for the Court Meeting (if lodged before the Court Meeting) must be lodged at the office of the Share Transfer Agent, Boardroom Corporate & Advisory Services Pte. Ltd., 50 Raffles Place #32-01, Singapore Land Tower, Singapore 048623 or faxed to (65) 6536 1360. Completion and return of a Proxy Form will not preclude a Scheme Shareholder or Depositor as at the Voting Record Date from attending and voting in person at the Court Meeting in accordance with paragraph 17 of the Explanatory Memorandum of this Scheme Document.

(4) If Shareholders and Depositors in Hong Kong or the PRC wish to attend the Court Meeting, which is on 26 September 2011 at 6.00 p.m. (Beijing time), arrangements have been made at Meeting Room 707, Dongguan Hsu Chi Foods Co. Ltd, Zhouwu Industrial District, Dongcheng, Dongguan, Guangdong Province, 523118, PRC to facilitate participation in the Court Meeting via video-conferencing or other telecommunication facilities.

(5) The Scheme will only come into effect upon all the Scheme Conditions set out in Appendix 7 of this Scheme Document having been satisfied (or, where applicable, waived).

10 CORPORATE INFORMATION

DIRECTORS : Hsu Chen, Executive Chairman Hu Chia-Hsun, Executive Director Hsu Hang, Executive Director Hsu Pu, Non-Executive Director Shaw Sun Kan Gordon, Non-Executive Director Lim Hock San, Independent Director Lam Khin Khui, Independent Director Lee Tsu-Der, Independent Director Cheong Tuck Kuen Kenneth, Alternate Director to Shaw Sun Kan Gordon

COMPANY SECRETARY : Busarakham Kohsikaporn, FCIS Toh Lei Mui, ACIS

REGISTERED OFFICE : Cricket Square Hutchins Drive P.O. Box 2681 Grand Cayman KY1-1111 Cayman Islands

CAYMAN ISLANDS : Codan Trust Company (Cayman) Limited SHARE REGISTRAR Cricket Square Hutchins Drive P.O. Box 2681 Grand Cayman KY1-1111 Cayman Islands

SINGAPORE SHARE : Boardroom Corporate & Advisory Services Pte. Ltd. TRANSFER AGENT 50 Raffles Place #32-01 Singapore Land Tower Singapore 048623

LEGAL ADVISER : Reed Smith Richards Butler TO THE INDIVIDUAL 20th Floor Alexandra House SHAREHOLDERS 18 Chater Road, Central Hong Kong

SINGAPORE LEGAL ADVISER : Loo & Partners LLP TO THE COMPANY 16 Gemmill Lane Singapore 069254

CAYMAN LEGAL ADVISER : Conyers Dill & Pearman TO THE COMPANY 2901 One Exchange Square 8 Connaught Place, Central Hong Kong

LEGAL ADVISER TO NESTLÉ : White & Case Pte. Ltd. 8 Marina View #27-01 Asia Square Tower 1 Singapore 018960

CAYMAN LEGAL ADVISER : Maples and Calder TO NESTLÉ 53rd Floor, The Center 99 Queen’s Road, Central Hong Kong

11 CORPORATE INFORMATION

PRC LEGAL ADVISER : King & Wood TO NESTLÉ 40th Floor, Office Tower A Beijing Fortune Plaza 7 Dongsanhuan Zhonglu Chaoyang District Beijing 100020, PRC

FINANCIAL ADVISER : Credit Suisse (Singapore) Limited TO NESTLÉ One Raffles Link South Lobby, #03/#04-01 Singapore 039393

INDEPENDENT FINANCIAL : Morgan Stanley Asia (Singapore) Pte. ADVISER TO THE 23 Church Street INDEPENDENT DIRECTORS #16-01 Capital Square Singapore 049481

AUDITORS : Ernst & Young LLP One Raffles Quay North Tower Level 18 Singapore 048583

12 LETTER TO THE SHAREHOLDERS AND DEPOSITORS

HSU FU CHI INTERNATIONAL LIMITED (Incorporated in Cayman Islands) (Co. Reg. No: CT-175834)

Directors: Registered Office: Hsu Chen, Executive Chairman Cricket Square Hu Chia-Hsun, Executive Director Hutchins Drive Hsu Hang, Executive Director P.O. Box 2681 Hsu Pu, Non-Executive Director Grand Cayman KY1-1111 Shaw Sun Kan Gordon, Non-Executive Director Cayman Islands Lim Hock San, Independent Director Lam Khin Khui, Independent Director Lee Tsu-Der, Independent Director Cheong Tuck Kuen Kenneth, Alternate Director to Shaw Sun Kan Gordon

Date: 31 August 2011

To: The Shareholders and Depositors of Hsu Fu Chi International Limited

Dear Sir/Madam

PROPOSED JOINT VENTURE BY WAY OF A SCHEME OF ARRANGEMENT UNDER SECTION 86 OF THE CAYMAN COMPANIES LAW

1. INTRODUCTION 1.1 Announcement of the Scheme and the Share Acquisition On 11 July 2011, the Company and Nestlé jointly announced the proposed establishment of a joint venture between Nestlé and the Individual Shareholders. In order to implement the Proposed Transaction, (i) the Company and Nestlé entered into the Implementation Agreement for Nestlé to acquire the Scheme Shares representing approximately 43.52% of all the Shares by way of the Scheme from the Scheme Shareholders and (ii) subject to the Scheme becoming effective, Nestlé will acquire in addition the Sale Shares representing approximately 16.48% of all the Shares by way of the Share Acquisition.

A copy of the Announcement is available on the website of the SGX-ST at www.sgx.com.

1.2 Delisting Upon the Proposed Transaction becoming effective, all of the Shares will be held by Nestlé and Holdco. An application has been made to seek confirmation from the SGX-ST to withdraw the Shares from the Official List of the SGX-ST upon the Scheme becoming effective and binding. The SGX-ST has advised that, inter alia, subject to the approval of the Scheme Shareholders being obtained at the Court Meeting in the manner ordered by the Court and the Scheme becoming effective and binding, it has no objection to the proposed withdrawal of the Shares from the Official List of the SGX-ST. The SGX-ST’s confirmation, however, is not an indication of the merits of the Company, any other Group Company, the Scheme, the Share Acquisition or the proposed withdrawal of the Shares from the Official List of the SGX-ST.

SHAREHOLDERS AND DEPOSITORS SHOULD NOTE THAT BY VOTING IN FAVOUR OF THE SCHEME, THE COMPANY WILL BE DELISTED FROM THE SGX-ST IF THE SCHEME BECOMES EFFECTIVE IN ACCORDANCE WITH ITS TERMS.

13 LETTER TO THE SHAREHOLDERS AND DEPOSITORS

1.3 Purpose The purpose of this Scheme Document is to set out information pertaining to the Scheme, to seek your approval of the Scheme and to give you notice of the Court Meeting.

1.4 Explanatory Memorandum An Explanatory Memorandum as required by the Rules of the Court setting out the key terms, the rationale for, and the effect of, the Scheme and the procedures for its implementation is set out on pages 21 to 33 of this Scheme Document and the Appendices to this Scheme Document. It should be read in conjunction with the full text of this Scheme Document, including the Scheme as set out on pages 221 to 224 of this Scheme Document.

1.5 Information on the Company The Company is an exempted company with limited liability, incorporated in the Cayman Islands on 18 October 2006 and is listed on the Mainboard of the SGX-ST. The registered office of the Company is at Cricket Square, Hutchins Drive, P.O. Box 2681, Grand Cayman KY1-1111, Cayman Islands, and the principal place of business of the Group is located at Zhouwu Industrial District, Dongcheng, Dongguan, Guangdong Province, 523118, PRC.

As at the Latest Practicable Date, the Company has an issued share capital of 795,000,000 Shares.

Further information relating to the Company is set out in Appendix 3 of this Scheme Document.

1.6 Information on Nestlé Information on Nestlé is set out in paragraph 8 of the Letter from Nestlé to the Shareholders and Depositors set out in Appendix 2 of this Scheme Document and is reproduced in italics below:

“8.1 Nestlé is a company incorporated in Switzerland and listed on the SIX Swiss Exchange (Code: NESN.VX). Nestlé is the largest food and beverage company in the world, and its principal business is the production, marketing and sales of food and beverage products.

8.2 The global headquarters of Nestlé is located at Avenue Nestlé 55, 1800 Vevey, Switzerland.

8.3 The names, addresses and descriptions of the directors of Nestlé as of the Latest Practicable Date are as follows:

Name Address Designation

Peter Brabeck-Letmathe Nestlé S.A. Chairman Avenue Nestlé 55, 1800 Vevey, Switzerland

Paul Bulcke Nestlé S.A. Chief Executive Officer Avenue Nestlé 55, 1800 Vevey, Switzerland

Andreas Koopmann Nestlé S.A. 1st Vice Chairman Avenue Nestlé 55, 1800 Vevey, Switzerland

Rolf Hänggi Nestlé S.A. 2nd Vice Chairman Avenue Nestlé 55, 1800 Vevey, Switzerland

14 LETTER TO THE SHAREHOLDERS AND DEPOSITORS

Jean-René Fourtou Nestlé S.A. Director Avenue Nestlé 55, 1800 Vevey, Switzerland

Daniel Borel Nestlé S.A. Director Avenue Nestlé 55, 1800 Vevey, Switzerland

Jean-Pierre Meyers Nestlé S.A. Director Avenue Nestlé 55, 1800 Vevey, Switzerland

André Kudelski Nestlé S.A. Director Avenue Nestlé 55, 1800 Vevey, Switzerland

Carolina Müller-Möhl Nestlé S.A. Director Avenue Nestlé 55, 1800 Vevey, Switzerland

Steven George Hoch Nestlé S.A. Director Avenue Nestlé 55, 1800 Vevey, Switzerland

Naïna Lal Kidwai Nestlé S.A. Director Avenue Nestlé 55, 1800 Vevey, Switzerland

Beat Hess Nestlé S.A. Director Avenue Nestlé 55, 1800 Vevey, Switzerland

Titia De Lange Nestlé S.A. Director Avenue Nestlé 55, 1800 Vevey, Switzerland

Jean-Pierre Roth Nestlé S.A. Director Avenue Nestlé 55, 1800 Vevey, Switzerland

Ann Veneman Nestlé S.A. Director” Avenue Nestlé 55, 1800 Vevey, Switzerland

1.7 Third Party Proposals From the Announcement Date up to the Latest Practicable Date, no alternative offers for the Shares from any third party have been received by the Company.

15 LETTER TO THE SHAREHOLDERS AND DEPOSITORS

2. RATIONALE FOR THE ACQUISITION AND FUTURE PLANS FOR THE COMPANY 2.1 Rationale and Benefits of the Proposed Transaction Nestlé’s rationale and benefits of the Proposed Transaction are set out in paragraph 2 of the Letter from Nestlé to the Shareholders and Depositors set out in Appendix 2 of this Scheme Document and are reproduced in italics below:

“2. RATIONALE FOR THE SCHEME 2.1 Hsu Fu Chi’s products are tailored to Chinese consumers’ needs and habits, and complement Nestlé’s existing product portfolio in the PRC, which includes culinary products, soluble coffee, bottled water, milk powder and products for the foodservice industry. Hsu Fu Chi’s large portfolio of affordable products, with the potential for enhanced nutritional value, fits perfectly into Nestlé’s global portfolio.

2.2 The Scheme presents the Scheme Shareholders with an opportunity to realise their investment in the Scheme Shares at an attractive premium of approximately 8.7%, 10.0%, 15.7% and 24.7% over the Company’s closing share price of S$4.000 on 1 July 2011 (being the last full trading day preceding the Announcement Date), 30-day VWAP of S$3.956, 90- day VWAP of S$3.759 and 180-day VWAP of S$3.490, respectively.

2.3 In maintaining its listing status, the Company incurs compliance costs. The Scheme would allow the Company to dispense with listing-related expenses and channel its resources to its business operations.”

2.2 Future Plans for the Group Nestlé’s future plans for the Group are set out in paragraph 3 of the Letter from Nestlé to the Shareholders and Depositors set out in Appendix 2 of this Scheme Document and are reproduced in italics below:

“3. FUTURE PLANS FOR THE COMPANY 3.1 It is the intention of both Nestlé and the Individual Shareholders that the Company will continue with its existing business activities and Nestlé and the Individual Shareholders presently have no intention to (i) introduce any major changes to the business of the Company, (ii) redeploy the fixed assets of the Company or (iii) discontinue the employment of the employees of the Group.

3.2 It is also the intention of both Nestlé and the Individual Shareholders to continue to develop and expand the Company business and preserve the legacy of the Hsu Fu Chi brand.

3.3 The Individual Shareholders and Nestlé intend to ensure that there is continuity of management and minimal interruption of business of the Company. Subsequent to the Scheme and Share Acquisition, the current executive chairman of the Company, Mr. Hsu Chen, will continue as CEO and there are currently no plans to change the existing terms of his employment.”

16 LETTER TO THE SHAREHOLDERS AND DEPOSITORS

3. THE SCHEME 3.1 Terms of the Scheme The Scheme will be implemented by way of a scheme of arrangement pursuant to Section 86 of the Cayman Companies Law and in accordance with the Code, together with the terms and conditions of the Implementation Agreement. The Scheme is proposed to all Scheme Shareholders and will involve a transfer of all the Scheme Shares to Nestlé and/or its nominees for the Scheme Consideration in accordance with the terms set out herein, in particular in paragraphs 3 and 4 of the Explanatory Memorandum of this Scheme Document.

Under the Scheme:

(a) all the Scheme Shares will be transferred to Nestlé and/or its nominees fully paid, free from all Encumbrances and together with all rights, benefits and entitlements attached thereto as at the Effective Date and thereafter attaching thereto, including the right to receive and retain all dividends, rights and other distributions (if any) declared, paid or made by the Company after the Effective Date; and

(b) in consideration for such transfer, each of the Scheme Shareholders will be entitled to receive the Scheme Consideration which is S$4.35 in cash for each Scheme Share as further set out in the Explanatory Memorandum of this Scheme Document.

The Scheme Consideration is on the basis that the Company will not make or agree to make any distribution or other payments of any kind to any person in its capacity as a Shareholder on or prior to the Effective Date. To the extent the Company declares or makes any distribution or other payment of any kind to the Scheme Shareholders on or prior to the Effective Date, the Scheme Consideration will be reduced on a per Scheme Share basis by any such amount which is due and payable (whether paid or unpaid as at the Effective Date) to the Scheme Shareholders.

Further details of the Scheme and the implementation thereof are set out in paragraphs 3, 4 and 12 of the Explanatory Memorandum of this Scheme Document.

3.2 Irrevocable Undertakings Each of the Undertaking Shareholders has given an irrevocable undertaking to Nestlé, inter alia: (i) to vote all the Shares that it owns directly or indirectly, legally or beneficially, at the Court Meeting in favour of any resolutions required to give effect to the Scheme as set out in the notice of meeting in the Scheme Document; and (ii) if Nestlé elects to proceed with an Offer, to accept or procure the acceptance of such Offer in respect of such Shares.

The Irrevocable Undertakings relate to an aggregate of 202,238,854 Scheme Shares, representing approximately 58.45% of the total issued Scheme Shares as at the Latest Practicable Date.

Further details of the Irrevocable Undertakings can be found in paragraph 6 of the Letter from Nestlé to the Shareholders and Depositors set out in Appendix 2 of this Scheme Document.

Each of the Individual Holders have delivered on 26 August 2011 an undertaking to the Court that it will, inter alia, support the Scheme and comply with the terms of the Scheme subject to the Scheme becoming effective and binding.

3.3 No Other Irrevocable Undertakings As at the Latest Practicable Date and save as disclosed in the Letter from Nestlé to the Shareholders and Depositors set out in Appendix 2 to this Scheme Document, neither Nestlé nor any other party acting or deemed to be acting in concert with it, has received any irrevocable undertaking from any other party to vote in favour of or against the Scheme at the Court Meeting.

17 LETTER TO THE SHAREHOLDERS AND DEPOSITORS

4. FINANCIAL EVALUATION OF THE SCHEME CONSIDERATION The Scheme Consideration represents a premium / (discount) as compared to the relevant trading prices for Shares as follows:

Premium / (Discount) to Company Scheme Company Share Price Consideration Share Price (S$) (S$) (S$) (%)

360-day VWAP(1) 2.683 4.350 1.667 62.1% 180-day VWAP(1) 3.490 4.350 0.860 24.7% 90-day VWAP(1) 3.759 4.350 0.591 15.7% 30-day VWAP(1) 3.956 4.350 0.394 10.0% Closing price on 1 July 2011(2) 4.000 4.350 0.350 8.7%

Source: Bloomberg

Notes : (1) Up to 1 July 2011 (being the last full trading day preceding the Company’s holding announcement and suspension of its Shares on 4 July 2011).

(2) Being the last full trading day preceding the Company’s holding announcement and suspension of its Shares on 4 July 2011.

5. NO CASH OUTLAY Shareholders and Depositors should note that no cash outlay (including any stamp duties or brokerage expenses) will be required from them under the Scheme.

6. WAIVER OF RIGHTS TO A GENERAL OFFER Shareholders and Depositors should note that by voting in favour of the Scheme, they are agreeing to Nestlé and its concert parties acquiring effective control of the Company without having to make a general offer for the Company.

7. CONFIRMATION OF FINANCIAL RESOURCES We note in paragraph 15 of the Letter from Nestlé to the Shareholders and Depositors as set out in Appendix 2 to this Scheme Document that Credit Suisse, in its capacity as financial adviser to Nestlé, has confirmed that sufficient financial resources are available to Nestlé to satisfy in full the aggregate Scheme Consideration payable by Nestlé for all the Scheme Shares to be acquired by it pursuant to the Scheme.

8. INDEPENDENT FINANCIAL ADVISER’S OPINION The Independent Directors have considered carefully the IFA’s opinion on the Scheme Consideration which is set out on pages 34 to 69 of this Scheme Document. The following is an extract from paragraph 10 of the letter from Morgan Stanley to the Independent Directors and should be read by Shareholders in conjunction with, and in the context of, the full text of the IFA Letter (reproduced in Appendix 1 to this Scheme Document):

“Based upon and subject to the foregoing, we are of the opinion that, as at the Latest Practicable Date, the Scheme Consideration is fair and reasonable from a financial point of view.

18 LETTER TO THE SHAREHOLDERS AND DEPOSITORS

Our opinion is only based on a financial analysis and does not incorporate any assessment of commercial, legal, tax, regulatory or other matters, including but not limited to: (i) the objectives highlighted by Nestlé and Hsu Fu Chi in the Scheme Document; and (ii) the potential impact of the success or failure of the Scheme on the Group. Our opinion also does not incorporate an assessment of the price at which Shares may trade following the success or failure of the Scheme. Such factors (including the aforesaid illustrations) are beyond the ambit of our review and do not fall within our terms of reference in connection with the Scheme.

The Independent Directors may wish to consider advising the Scheme Shareholders who wish to realise their investments in the Company and/or are uncertain of the longer term performance and prospects of the Company, that such Scheme Shareholders may wish to consider voting in favour of the approval of the Scheme at the Court Meeting.

If the Independent Directors make a recommendation to the Scheme Shareholders to vote in favour of the Scheme, the Independent Directors may also wish to consider highlighting that the Scheme will become effective only if all conditions precedent set out in the Implementation Agreement and the requisite approvals set out in the Implementation Agreement and the Scheme Document are obtained.”

9. RECOMMENDATION OF THE INDEPENDENT DIRECTORS 9.1 Recommendation on the Scheme Each of Mr. Hsu Chen, Mr. Hsu Hang and Mr. Hsu Pu, being Directors who are not Independent Directors, will abstain from making a recommendation on the Scheme to the Scheme Shareholders in accordance with the terms of the exemption granted by the SIC as described in paragraph 10.1.1(b) of the Explanatory Memorandum to this Scheme Document.

None of the directors of Nestlé is related to the Independent Directors and/or (as far as the Independent Directors are aware) controlling shareholders of the Company. There are no controlling shareholders in the share capital of Nestlé.

Having regard to the terms of the Scheme, the advice of the IFA to the Independent Directors as set out in the IFA’s opinion on the Scheme Consideration on pages 34 to 69 and the fact that from the Announcement Date up to the Latest Practicable Date, no alternative offers for the Shares have been received by the Company, the Independent Directors consider that, from a financial point of view, the terms of the Scheme are fair and reasonable. The Independent Directors therefore unanimously recommend, in the absence of a superior offer, Scheme Shareholders and Depositors to vote in favour of the Scheme at the Court Meeting. Scheme Shareholders and Depositors should read and consider carefully this Scheme Document, including the recommendation and advice of the IFA set out in Appendix 1 to this Scheme Document in its entirety before deciding whether to vote in favour of, or against the Scheme. Shareholders should note that the advice of the IFA to the Independent Directors should not be relied upon as the sole basis for deciding whether to vote in favour of, or against, the Scheme.

Scheme Shareholders and Depositors should also be aware that there is currently no certainty that the Scheme will become effective and there is no assurance that the trading volumes and market prices of the Shares will be maintained at the current levels prevailing as at the Latest Practicable Date in the short term if the Scheme does not become effective for whatever reason. In the event that the Scheme becomes effective, it will be binding on all Shareholders and Depositors and the Company will be delisted and withdrawn from the Official List of the SGX-ST.

19 LETTER TO THE SHAREHOLDERS AND DEPOSITORS

9.2 No Regard to Specific Objectives The Independent Directors advise, in deciding whether to vote in favour of the Scheme, to carefully consider the full text of the advice of the IFA to the Independent Directors on the Scheme and in particular, the various factors highlighted by the IFA in the IFA Letter.

In making the above recommendation, the Independent Directors have not had regard to the specific objectives, financial situation or unique needs and constraints of any person. As different persons would have different investment objectives and profiles, the Independent Directors recommend that any person who may require advice in the context of his specific investment objectives or portfolio should consult his stockbroker, bank manager, solicitor, accountant, tax adviser or other professional adviser immediately.

9.3 Directors’ Intention As at the Latest Practicable Date, all Directors (other than Mr. Hsu Chen, Mr. Hsu Hang and Mr. Hsu Pu who cannot vote at the Court Meeting) intend to vote in favour of the Scheme at the Court Meeting in respect of their own Shares and/or beneficial interest in Shares.

10. DIRECTORS’ RESPONSIBILITY STATEMENT The Directors (including those who may have delegated detailed supervision of this Scheme Document) have taken all reasonable care to ensure that the facts stated and all opinions expressed in this Scheme Document (other than the information in Appendices 1 and 2 to this Scheme Document and the facts relating to Nestlé, Morgan Stanley and Credit Suisse) are fair and accurate and that no material facts have been omitted from this Scheme Document, and they jointly and severally accept responsibility accordingly.

Where any information has been extracted from published or publicly available sources, the sole responsibility of the Directors has been to ensure, through reasonable enquiries, that such information is accurately extracted from such sources or, as the case may be, reflected or reproduced in this Scheme Document.

11. GENERAL INFORMATION Your attention is drawn to the further relevant information in the Appendices to this Scheme Document.

Yours faithfully, For and on behalf of the Board of Directors of HSU FU CHI INTERNATIONAL LIMITED

Hsu Chen Executive Chairman

20 EXPLANATORY MEMORANDUM

PROPOSED JOINT VENTURE TO BE IMPLEMENTED BY WAY OF A SCHEME OF ARRANGEMENT UNDER SECTION 86 OF THE CAYMAN COMPANIES LAW

1. INTRODUCTION 1.1 Announcement of the Proposed Transaction On 11 July 2011, the respective boards of the Company and Nestlé jointly announced the proposed establishment of a joint venture between Nestlé and the Individual Shareholders.

In order to implement the Proposed Transaction, (i) the Company and Nestlé entered into the Implementation Agreement for Nestlé to acquire the Scheme Shares representing approximately 43.52% of all the Shares by way of the Scheme from the Scheme Shareholders and (ii) subject to the Scheme becoming effective, Nestlé will acquire in addition the Sale Shares representing approximately 16.48% of all the Shares by way of the Share Acquisition.

As a result of the Proposed Transaction, Nestlé will own 60% of all the Shares with the remaining 40% owned by Holdco.

1.2 Explanatory Memorandum This Explanatory Memorandum should be read in conjunction with the full text of this Scheme Document, including the Scheme as set out on pages 221 to 224 of this Scheme Document. Capitalised terms used in this Explanatory Memorandum have the same meaning as those defined on pages 3 to 8 of this Scheme Document unless otherwise indicated.

2. RATIONALE FOR THE PROPOSED TRANSACTION Nestlé’s rationale and benefits of the Proposed Transaction and future plans for the Group are set out in paragraphs 2 and 3 of the Letter from Nestlé to the Shareholders and Depositors set out in Appendix 2 of this Scheme Document.

3. THE SCHEME 3.1 Terms 3.1.1 The Scheme will be effected in accordance with the Cayman Companies Law and the Code, together with the terms and conditions of the Implementation Agreement.

3.1.2 Pursuant to Section 86 of the Cayman Companies Law where an arrangement is proposed between a company and its members or any class of them, the Court may, on the application of the company or any member of the company, order a meeting of the members of the company or class of members, as the case may be, to be held in such manner as the Court directs. It is expressly provided in Section 86 of the Cayman Companies Law that if a majority in number representing 75% in value of the members or class of members, as the case may be, present and voting either in person or by proxy at the meeting or meetings, as the case may be, held as directed by the Court as aforesaid, agree to any arrangement, the arrangement shall, if sanctioned by the Court, be binding on all members or class of members, as the case may be, and also on the company.

3.1.3 The Court in its hearing on 30 August 2011 determined that the relevant class of shareholders for the purposes of the Scheme is the Scheme Shareholders. The Individual Holders will not vote at the Court Meeting. Instead, prior to the Scheme being sanctioned by the Court, the Individual Holders will provide undertakings to the Court to be bound by the Scheme and to do any and all acts and deeds required of them pursuant to the Scheme to implement it.

21 EXPLANATORY MEMORANDUM

3.1.4 Under the Scheme:

(b) in consideration for such transfer, each of the Scheme Shareholders will be entitled to receive four Singapore Dollars and thirty five cents (S$4.35) in cash for each Scheme Share.

3.1.5 The Scheme Consideration was agreed by the Company after arm’s-length negotiations between the Company and Nestlé, on a willing-seller, willing-buyer basis, after taking into consideration, amongst others, the recent market price of the Shares.

3.1.6 The Scheme Consideration is on the basis that the Company will not make or agree to make any distribution or other payments of any kind to any person in its capacity as a Shareholder on or prior to the Effective Date. To the extent the Company declares or makes any distribution or other payment of any kind to the Scheme Shareholders on or prior to the Effective Date, the Scheme Consideration will be reduced on a per Scheme Share basis by any such amount which is due and payable (whether paid or unpaid as at the Effective Date) to the Scheme Shareholders.

3.1.7 Shareholders and Depositors should note that no cash outlay (including any stamp duties or brokerage expense) will be required from them under the Scheme.

3.1.8 Shareholders and Depositors should note that by voting in favour of the Scheme, they are agreeing to Nestlé and its concert parties acquiring effective control of the Company without having to make a general offer for the Company.

4. PRINCIPAL TERMS OF THE IMPLEMENTATION AGREEMENT 4.1 Scheme Conditions 4.1.1 The Scheme will be conditional upon the satisfaction (or, where applicable, waiver) of the Scheme Conditions on or prior to 5.00 p.m. (Singapore time) on the Long Stop Date.

4.1.2 Under the Implementation Agreement:

(a) the Scheme Conditions set out in paragraphs 1 to 5 of Appendix 7 of this Scheme Document are not capable of being waived by either Party or both Parties;

(b) with respect to the Scheme Conditions set out in paragraphs 6(b), 7 (in respect of the warranties by the Company and the Company’s compliance with the Implementation Agreement only, including but not limited to the Material Covenants set out in Appendix 8 of this Scheme Document) and 8 to 10 of Appendix 7 of this Scheme Document, any breach or non-fulfilment of any such Scheme Conditions may be relied upon only by Nestlé in deciding whether to waive any such breach or non-fulfilment of such Scheme Condition(s) and whether to terminate the Implementation Agreement. Nestlé may at any time and from time to time at its sole discretion waive any such breach or non-fulfilment;

22 EXPLANATORY MEMORANDUM

(c) with respect to the Scheme Conditions set out in paragraphs 6(a) and 7 (in respect of the warranties by Nestlé and Nestlé’s compliance with the Implementation Agreement only) of Appendix 7 of this Scheme Document, any breach or non- fulfilment of any such Scheme Condition may be relied upon only by the Company in deciding whether to waive any such breach or non-fulfilment of such Scheme Conditions and whether to terminate the Implementation Agreement. The Company may at any time and from time to time at its sole discretion waive any such breach or non-fulfilment; and

(d) with respect to the Scheme Conditions set out in paragraphs 11 (to the extent legally permissible) and 12 of Appendix 7 of this Scheme Document, each may be jointly waived by the Company and Nestlé.

4.1.3 Where any approval or consent is required and any Scheme Condition is granted subject to any condition or undertaking, such Scheme Condition will not be deemed satisfied unless and until any such condition or undertaking is reasonably acceptable to the Party suffering the burden of such condition or undertaking.

4.1.4 In the event that any Scheme Condition set out in paragraphs 6 to 12 of Appendix 7 of this Scheme Document is not satisfied or waived prior to the Long Stop Date, the Party with the benefit of such Scheme Condition may only invoke the non-satisfaction of the relevant Scheme Condition to terminate the Implementation Agreement upon prior consultation with the SIC.

4.1.5 As at the Latest Practicable Date, the Scheme Conditions set out in paragraphs 1 and 9 of Appendix 7 have been satisfied.

4.2 Termination Right 4.2.1 Shareholders and Depositors should note that pursuant to the terms of the Implementation Agreement, the Implementation Agreement may be terminated by either Party (other than a Party having prevented, by its actions or omissions in breach of the Implementation Agreement, the Scheme from becoming effective) if the Scheme has not become effective on or before 5.00 p.m. on the Long Stop Date, and on the following:

(a) by either Party at any time if any court of competent jurisdiction or governmental authority has issued an injunction, order, decree or ruling or taken any other action permanently enjoining, restraining or otherwise prohibiting or preventing the consummation of the proposed acquisition of the Scheme Shares or the implementation of the Scheme (or the proposed transactions relating to the Scheme), and such order, decree, ruling, other action or refusal shall have become final and non-appealable;

(b) by either Party in the event of a material breach by the other Party, which if capable of remedy, has not been remedied within ten (10) Business Days from the termination for breach notification;

(c) by either Party if the resolutions submitted to the Court Meeting are not approved (without amendment) by the requisite majorities of Scheme Shareholders;

(d) by (i) either Party at any time if a proposal or offer by any person other than Nestlé under Rule 14 or Rule 15 of the Code becomes or is declared unconditional in all respects or becomes effective, as the case may be or (ii) a Party electing to terminate the Implementation Agreement for a breach of the warranties therein; or

23 EXPLANATORY MEMORANDUM

(e) by either Party, in the event that, following the conclusion of the procedure which may, from time to time, be established by the SIC to resolve a competitive situation (the “SIC Competitive Procedure”), the latest bid submitted by Nestlé pursuant to such SIC Competitive Procedure is lower than the latest bid submitted by other competing offeror(s) pursuant to the SIC Competitive Procedure.

4.2.2 Prior to exercising any termination right under the Implementation Agreement, the Parties will consult the SIC and obtain the SIC’s approval of, or a statement that the SIC has no objections to, such termination.

4.3 Switch Option 4.3.1 Subject to prior consultation with the SIC, Nestlé may elect to proceed by way of an Offer in lieu of proceeding with the Proposed Transaction by way of the Scheme (the “Switch Option”) in the event of a Competing Offer (or otherwise) subject to the prior written consent of the Individual Shareholders.

4.3.2 In such event, Nestlé will make the Offer on the same or better terms as those which apply to the Scheme, including the same or a higher consideration than the Scheme Consideration.

4.3.3 If Nestlé exercises the Switch Option, the Parties agree that the Implementation Agreement will terminate with effect from the date of the announcement by Nestlé of its firm intention to make the Offer. The Parties’ accrued rights and obligations under the Implementation Agreement and the rights and obligations under certain surviving provisions will continue to subsist, but in all other respects, the Parties’ rights and obligations under the Implementation Agreement will cease.

4.4 Non-solicitation 4.4.1 Under the Implementation Agreement, the Company will not, during the Restricted Period:

(a) directly or indirectly, solicit, make any initial or further approach to, entertain any approach from, or enter into or continue any discussion, understanding, arrangement or agreement with any person other than Nestlé (“Third Party Purchaser”) unless with the prior written consent of Nestlé, in relation to any actual or proposed investment in, or acquisition of, all or any part of the Shares, business, undertakings and/or assets of the Company or any of its subsidiaries which would preclude, restrict, delay or otherwise affect the consummation of the transactions contemplated in the Implementation Agreement;

(b) reach any agreement or understanding (whether binding or non-binding, and whether orally or in writing) with any Third Party Purchaser unless with the prior written consent of Nestlé, in relation to any investment in, or acquisition of, all or any part of the Shares;

(d) enter into, continue, solicit, facilitate or encourage any discussion, enquiry or proposal from, or discussions or negotiations with, any person whatsoever in relation to a Restricted Transaction or the financing thereof or solicit or assist any such person to enter into a Restricted Transaction,

save that the restrictions set out above will not apply to (i) the making of normal presentations, by or on behalf of the Company, to brokers, portfolio investors and analysts in the ordinary and usual course of business and (ii) the provision of information by or on behalf of the Company to the SGX-ST.

24 EXPLANATORY MEMORANDUM

4.4.2 Without prejudice to paragraph 4.4.1 above, neither the Company nor the Directors are prohibited or restricted, during the Restricted Period, from receiving a bona fide unsolicited or uninitiated offer or proposal with respect to any Competing Offer (an “Unsolicited Offer”). In the event that any Group Company or their respective directors, employees, officers or advisers receives any Unsolicited Offer, the Company and/or the Directors shall be entitled to, inter alia:

(a) announce such Unsolicited Offer, insofar as such announcement is required under the Listing Manual, the Code, or any applicable laws or regulations;

(b) comply with Rule 9.2 of the Code in relation to the equality of information to any competing offeror;

(c) enter into negotiations, discussions or otherwise entertain such Unsolicited Offer if necessary for the Directors to comply with and discharge their fiduciary duties to the Company; and

(d) in the exercise of the fiduciary duties of the Directors, make or refrain from making any recommendation to the Shareholders as the Directors may deem fit in respect of the Unsolicited Offer.

5. IRREVOCABLE UNDERTAKINGS 5.1 Paragraph 6 of the Letter from Nestlé to the Shareholders and Depositors as set out in Appendix 2 of this Scheme Document sets out the details of the Undertaking Shareholders who have given Irrevocable Undertakings to Nestlé.

5.2 Shareholders should note that the aggregate shareholding represented by the Undertaking Shareholders is approximately 58.45% of the total number of Scheme Shares as at the Latest Practicable Date.

6. SHARE ACQUISITION 6.1 Under a transaction agreement entered into on 11 July 2011, the Individual Holders will sell, and Nestlé will acquire, the Sale Shares, subject only to the occurrence of the Effective Date.

6.2 The consideration to be paid is four Singapore Dollars and thirty five cents (S$4.35) for each Sale Share, payable in cash, which is identical to the Scheme Consideration on a per Share basis.

6.3 Under the terms of the Share Acquisition:

6.3.1 the Individual Shareholders and their related corporations have agreed to support the Scheme;

6.3.2 the Individual Shareholders and their related corporations have agreed not to acquire, sell, accept any offer in respect of, or otherwise deal in, any Shares, except pursuant to the Scheme, the Share Acquisition, or any transfer of Shares to Holdco, until the Effective Date;

6.3.3 the Individual Shareholders and their related corporations have agreed to give customary representations and warranties in relation to title, authority and no insolvency;

6.3.4 subject to the occurrence of the Effective Date, the Individual Shareholders, Nestlé, the Company and Holdco will enter into the Joint Venture Agreement;

25 EXPLANATORY MEMORANDUM

6.3.5 subject to the occurrence of the Effective Date, the Individual Shareholders and their related corporations will procure that the Company will enter into a general licence agreement with Nestlé and certain affiliates of Nestlé, relating to the licence of trade marks, know-how and other intellectual property rights as further set out in Annex 5 of the Letter from Nestlé to the Shareholders and Depositors set out in Appendix 2 of this Scheme Document; and

6.3.6 the Individual Shareholders and their related corporations have agreed to be bound by certain exclusivity and non-solicitation provisions with respect to their Shares until the earlier of the Effective Date or Long Stop Date, subject to applicable laws and regulations and fiduciary duties, as applicable.

Please refer to paragraph 7.4 of the Letter from Nestlé to the Shareholders and Depositors set out in Appendix 2 of this Scheme Document for a summary of the terms of the Joint Venture Agreement.

7. INFORMATION ON THE COMPANY Information on the Company is set out in Appendix 3 to this Scheme Document.

8. INFORMATION ON NESTLÉ Information on Nestlé is set out at paragraph 8 of the Letter from Nestlé to the Shareholders and Depositors set out in Appendix 2 to this Scheme Document.

9. COURT MEETING 9.1 Court Meeting By an order of the Court dated 30 August 2011, the Court Meeting has been directed to be convened for the purpose of the Scheme Shareholders considering and, if thought fit, approving the Scheme.

By proposing that the acquisition of the Scheme Shares be implemented by way of a scheme of arrangement under Section 86 of the Cayman Companies Law, the Company is providing the Scheme Shareholders with an opportunity to decide at the Court Meeting whether they consider the Scheme to be in their best interests.

The Scheme must be approved at the Court Meeting by a majority in number of, and representing not less than 75% in value of the Scheme Shares held by, Scheme Shareholders, present and voting, either in person or by proxy, at the Court Meeting. For the purposes of this vote, Scheme Shareholders are holders of Scheme Shares as of the Voting Record Date.

When the Scheme, with or without modification, becomes effective, it will be binding on the Company and all Scheme Shareholders and Depositors, whether or not they are present in person or by proxy or voted at the Court Meeting. Scheme Shareholders or Depositors do not have any specific rights to require an independent appraisal of the value of the Scheme Shares in connection with the Scheme.

9.2 Notice The notice of Court Meeting is set out on pages 225 to 226 of this Scheme Document. You are requested to take note of the date and time of the Court Meeting. The Court Meeting will be held at 6.00 p.m. (Singapore/Beijing time) on 26 September 2011 at 108 Robinson Road, Level 11, The Finexis Building, Singapore 068900. If you are in Hong Kong or the PRC and wish to attend the Court Meeting, arrangements have been made at Meeting Room 707, Dongguan Hsu Chi Foods Co. Ltd, Zhouwu Industrial District, Dongcheng, Dongguan, Guangdong Province, 523118, PRC, to facilitate participation in the Court Meeting via video conferencing or other telecommunication facilities.

26 EXPLANATORY MEMORANDUM

10. REGULATORY APPROVALS 10.1 The SIC has confirmed on 8 July 2011 that:

10.1.1 the Scheme is exempted from Rules 14, 15, 16, 17, 20.1, 21, 22, 28, 29 and 33.2 and Note 1(b) to Rule 19 of the Code, subject to the following conditions:

(a) the Individual Shareholders, Nestlé and their concert parties abstain from voting on the proposed Scheme;

(b) the Individual Shareholders, Nestlé and their concert parties abstain from making a recommendation on the proposed Scheme to the Shareholders of the Company; and

In respect of paragraph 10.1.1(a) above, the Company understands that as at the Latest Practicable Date, none of the Individual Shareholders, Nestlé or their concert parties holds any Scheme Shares which entitle them to vote at the Court Meeting.

In respect of paragraph 10.1.1(b) above, the Individual Shareholders who are Directors, have abstained from making a recommendation on the Scheme.

In respect of paragraph 10.1.1(c) above, Morgan Stanley has been appointed to advise the Independent Directors in their recommendation to the Scheme Shareholders in relation to the Scheme;

10.1.2 it has no objections to the Scheme Conditions;

10.1.3 it has no objections to the Share Acquisition, details of which are set out in paragraph 6 of this Explanatory Memorandum;

10.1.4 the Share Acquisition does not constitute a special deal for the purposes of Rule 10 of the Code; and

10.1.5 the proposed terms of the Joint Venture Agreement do not constitute a special deal for the purposes of Rule 10 of the Code.

10.2 SIC has also on 11 August 2011 confirmed that no obligation to make a general offer will be triggered as a result of the transfer of Shares by the Individual Holders to Holdco on or prior to the Scheme becoming effective.

10.3 The Scheme is subject to sanction by the Court as stated in paragraph 12 below. The Court, in considering whether to sanction the Scheme, may decline to sanction it unless the Court is satisfied not only that the required Court Meeting was properly constituted and the Scheme was approved as required by the Cayman Companies Law, but also that the result of the Court Meeting fairly reflected the view of the Scheme Shareholders in general and that an intelligent and honest person acting in respect of their interests in the Scheme Shares might reasonably approve the Scheme.

10.4 Scheme Shareholders (including any beneficial owners of such Scheme Shares (including Depositors) that give voting instructions to a custodian or clearing house (such as CDP) that subsequently vote at the Court Meeting) should note that they are entitled to appear in person or by counsel at the Court hearing on 10 October 2011 at which the Company will seek the sanction of the Scheme.

27 EXPLANATORY MEMORANDUM

11. EFFECT OF THE SCHEME AND DELISTING 11.1 If the Scheme becomes effective and binding and the Share Acquisition is completed, Nestlé will own 60% of all the Shares with the remaining 40% owned by Holdco. An application has been made to seek confirmation from the SGX-ST to withdraw the Shares from the Official List of the SGX-ST upon the Scheme becoming effective and binding. The SGX-ST has advised that, inter alia, subject to the approval of the Scheme Shareholders being obtained at the Court Meeting in the manner ordered by the Court and the Scheme becoming effective and binding, it has no objection to the proposed withdrawal of the Shares from the Official List of the SGX-ST. The SGX- ST’s confirmation, however, is not an indication of the merits of the Company, any other Group Company, the Scheme, the Share Acquisition or the proposed withdrawal of the Shares from the Official List of the SGX-ST.

11.2 The Shares will be delisted and withdrawn from the Official List of the SGX-ST after the Scheme has become effective and binding and the Scheme Consideration has been paid to the Entitled Shareholders and the Entitled Depositors in accordance with paragraph 12.2.4 below.

12. IMPLEMENTATION OF THE SCHEME 12.1 Upon the Scheme being approved by a majority in number of, and representing not less than 75% in value of the Scheme Shares held by, Scheme Shareholders, present and voting, either in person or by proxy, at the Court Meeting, an application will be made to the Court by the Company to sanction the Scheme.

12.2 If the Court sanctions the Scheme, the Company will (subject to the satisfaction (or, where applicable, waiver) of all the Scheme Conditions) take the necessary steps to render the Scheme effective by delivering a copy of the Court Order to the Registrar of Companies in the Cayman Islands for registration. Thereafter, the following will be implemented:

12.2.1 the Scheme Shares held by the Entitled Shareholders (including CDP) will be transferred to Nestlé and/or its nominee by operation of law on the Effective Date and in accordance with the terms of the Scheme. For the avoidance of doubt, no action is required to be taken by the Entitled Shareholders (including CDP) with respect to such transfer of Scheme Shares to Nestlé on the Effective Date;

12.2.2 from the Effective Date, all existing share certificates relating to the Scheme Shares held by the Scheme Shareholders will cease to have any effect as evidence of title of Shares represented therein;

12.2.3 Entitled Shareholders (not being Depositors) are required to forward their existing share certificates relating to their Shares to the Company’s registered office as from the Effective Date for cancellation; and

12.2.4 Nestlé shall, not later than ten (10) calendar days after the Effective Date make payment of the Scheme Consideration to:

(a) Entitled Shareholders whose Scheme Shares are not deposited with CDP (other than CDP) each Entitled Shareholder (not being a Depositor or CDP) by sending a cheque for the aggregate Scheme Consideration payable to and made out in favour of such Entitled Shareholder by ordinary post to its/his/her address in the Register of Members on the Books Closure Date, at the sole risk of such Entitled Shareholder, or in the case of joint Entitled Shareholders, to the first-named Entitled Shareholder made out in favour of such Entitled Shareholder by ordinary post to its/his/her address in the Register of Members on the Books Closure Date, at the sole risk of such Entitled Shareholders; and

28 EXPLANATORY MEMORANDUM

(b) Entitled Depositors CDP with respect to the Scheme Shares held by CDP as at the Books Closure Date. CDP shall (i) in the case of an Entitled Depositor who has registered for CDP’s direct crediting service, credit the aggregate Scheme Consideration payable to such Entitled Depositor to the designated bank account of such Entitled Depositor; and (ii) in the case of an Entitled Depositor who has not registered for CDP’s direct crediting service, send to such Entitled Depositor, by ordinary post to his mailing address in the Depository Register and at the sole risk of such Entitled Depositor, a cheque for the payment of such aggregate Scheme Consideration made out in favour of such Entitled Depositor.

On or after the day falling six (6) months after the posting of such cheques by Nestlé, Nestlé shall have the right to cancel or countermand payment of any such cheque which has not then been cashed (or has been returned uncashed) and shall place all moneys represented thereby in a dedicated bank account in the Company’s name in a licensed bank in Singapore selected by the Company. The Company shall hold such moneys until the expiration of six (6) years from the Effective Date and shall prior to such date make payments therefrom of the sums (without interest) payable pursuant to the Scheme (as set out on pages 221 to 224 of this Scheme Document) to persons who satisfy the Company that they are respectively entitled thereto and that the cheques referred to in paragraph 4 of the Scheme (as set out on pages 221 to 224 of this Scheme Document) of which they are payees have not been cashed.

On the expiry of six (6) years from the Effective Date, Nestlé shall be released from any further obligation to make any payments under the Scheme to any Entitled Shareholder and/or Entitled Depositor and/or CDP and the Company shall transfer to Nestlé the balance (if any) of the sums then standing to the credit of the bank account referred to in paragraph 4 of the Scheme (as set out on pages 221 to 224 of this Scheme Document) including accrued interest, subject, if applicable, to the deduction of interest, tax or any withholding tax or any other deduction required by law and subject to the deduction of any expenses.

13. CLOSURE OF BOOKS 13.1 Notice of Books Closure Notice will be given of the Books Closure Date for the purpose of determining the entitlements of the Scheme Shareholders and Depositors under the Scheme.

13.2 Books Closure No Entitled Shareholders or Entitled Depositors may transfer or trade any Shares after the Books Closure Date.

13.3 Trading in Shares on the SGX-ST An application has been made to seek confirmation from the SGX-ST to withdraw the Shares from the Official List of the SGX-ST upon the Scheme becoming effective and binding. The SGX-ST has advised that, inter alia, subject to the approval of the Scheme Shareholders being obtained at the Court Meeting in the manner ordered by the Court and the Scheme becoming effective and binding, it has no objection to the proposed withdrawal of the Shares from the Official List of the SGX-ST. The SGX-ST’s confirmation, however, is not an indication of the merits of the Company, any other Group Company, the Scheme, the Share Acquisition or the proposed withdrawal of the Shares from the Official List of the SGX-ST.

Shareholders and Depositors should note that the Shares will continue to be traded on the SGX- ST until the Market Day falling three (3) Market Days before the Books Closure Date. The Shares are expected to be delisted and withdrawn from the Official List of the SGX-ST only after payment of the Scheme Consideration to the Entitled Shareholders and the Entitled Depositors in accordance with paragraph 12.2.4 above.

29 EXPLANATORY MEMORANDUM

SHAREHOLDERS AND DEPOSITORS SHOULD NOTE THAT BY VOTING IN FAVOUR OF THE SCHEME, THE SHARES OF THE COMPANY WILL BE DELISTED FROM THE SGX-ST IF THE SCHEME BECOMES EFFECTIVE IN ACCORDANCE WITH ITS TERMS.

14. SETTLEMENT AND REGISTRATION PROCEDURES Subject to the Scheme becoming effective, the following settlement and registration procedures will apply:

Scheme Shareholders whose Shares are not deposited with CDP (other than CDP) Entitlements of Entitled Shareholders (not being Depositors) to the Scheme Consideration will be determined on the basis of their holdings of Scheme Shares appearing in the Register of Members on the Books Closure Date.

Scheme Shareholders (not being Depositors or CDP) who have not already done so are requested to take the necessary action to ensure that the Scheme Shares owned by them are registered in their names on the Books Closure Date.

From the Effective Date, each existing share certificate representing a former holding of the Scheme Shares by the Entitled Shareholders (not being Depositors) will cease to be evidence of title to the Scheme Shares represented thereby.

Entitled Depositors whose Shares are deposited with CDP Entitlements of Entitled Depositors to the Scheme Consideration will be determined on the basis of the number of Scheme Shares standing to the credit of their Securities Accounts on the Books Closure Date.

On the Effective Date, CDP will debit the number of Scheme Shares standing to the credit of the Securities Account of the relevant Entitled Depositor.

Within ten (10) calendar days of the Effective Date and after having received payment referred to in paragraph 12.2.4(b) above, CDP shall make payment of the Scheme Consideration to each Entitled Depositor based on the number of Scheme Shares standing to the credit of his, her or its Securities Account on the Books Closure Date.

15. DIRECTORS’ AND SUBSTANTIAL SHAREHOLDERS’ INTERESTS IN SHARES OF THE COMPANY The interests in Shares of the Directors and the Substantial Shareholders are set out under paragraph 3.3 of Appendix 3 to this Scheme Document. Save as disclosed in this Scheme Document, the effect of the Scheme on such interests of the Directors and Substantial Shareholders does not differ from that of the other Scheme Shareholders. After the Scheme has become effective and binding and the Proposed Transaction has been completed and effected, Nestlé and/or its nominee will own 60% of the Shares with the remaining 40% owned by Holdco.

16. OVERSEAS SHAREHOLDERS 16.1 Overseas Shareholders The applicability of the Scheme to Scheme Shareholders and Depositors whose addresses are outside Singapore, as shown on the Register of Members and the Depository Register maintained by CDP (each, an “Overseas Shareholder”) may be affected by the laws of the relevant overseas jurisdictions. Accordingly, Overseas Shareholders should keep themselves informed of, and observe any applicable legal requirements. This Scheme Document will be sent to all Overseas Shareholders by airmail.

30 EXPLANATORY MEMORANDUM

16.2 Copies of Scheme Document Scheme Shareholders including Overseas Shareholders may obtain additional copies of this Scheme Document and any related documents, during normal business hours on any day prior to the date of the Court Meeting, from the Share Transfer Agent, Boardroom Corporate & Advisory Services Pte. Ltd., 50 Raffles Place #32-01, Singapore Land Tower, Singapore 048623. Alternatively, an Overseas Shareholder may write to the Share Transfer Agent at the same address to request for this Scheme Document and any related documents to be sent to an address in Singapore by ordinary post at his own risk, not later than three (3) Market Days prior to the date of the Court Meeting.

16.3 Notice Nestlé and the Company each reserves the right to notify Shareholders or Depositors of any matter, including the fact that the Scheme has been proposed, to any or all Shareholders and Depositors with a registered address outside Singapore by announcement via SGXNET or paid advertisement in a daily newspaper published and circulated in Singapore, and in which case such notice shall be deemed to have been sufficiently given notwithstanding any failure by any Shareholder or Depositor to receive or see such announcement via SGXNET or advertisement. For the avoidance of doubt, for as long as the Company remains listed on the SGX-ST, it will continue to notify all Shareholders and Depositors of any matter relating to the Scheme by announcement via SGXNET.

16.4 Foreign Jurisdiction It is the responsibility of any Overseas Shareholder who wishes to (i) request for this Scheme Document and/or any related documents or (ii) vote on or participate in the Scheme to satisfy itself/himself/herself as to the full observance of the laws of the relevant jurisdiction in that connection, including the obtaining of any governmental or other consent which may be required and compliance with all necessary formalities or legal requirements. In requesting this Scheme Document and/or any related documents, the Overseas Shareholder is deemed to represent and warrant to the Company and Nestlé that it/he/she is in full observance of the laws of the relevant jurisdiction in that connection, and that it/he/she is in full compliance with all necessary formalities or legal requirements. This Scheme Document and/or any related documents will be given on this basis. Any Overseas Shareholder who is in any doubt about its/his/her position should consult its/his/her professional adviser in the relevant jurisdiction. In voting on or participating in the Scheme, the Overseas Shareholder represents and warrants to Nestlé and the Company that it/he/she is in full observance of the laws of the relevant jurisdiction in that connection, and that it/he/she is in full compliance with all necessary formalities or legal requirements.

17. ACTION TO BE TAKEN BY SHAREHOLDERS AND DEPOSITORS If you own an interest in any Shares through a Securities Account, you are a Depositor and the provisions of paragraph 17.1 apply to you. If your name is registered on the Register of Members, you are a Shareholder and the provisions of paragraph 17.2 apply to you. If you are a Depositor and wish to become a Shareholder, the provisions of paragraph 17.3 apply.

17.1 Depositors Depositors cannot vote directly at the Court Meeting, as only Shareholders (being registered as holders of Shares in the Register of Members) are entitled to vote at the Court Meeting in accordance with Cayman Companies Law.

However, CDP will appoint each of the Depositors and, in relation to each of the Depositors, in respect of such number of Shares set out opposite their respective names in the Depository Register as at the Voting Record Date, as its proxy/proxies.

31 EXPLANATORY MEMORANDUM

Accordingly, each Depositor may:

(a) attend the Court Meeting and vote the Scheme Shares credited to its/his/her Securities Account;

(b) vote on the Scheme without attending the Court Meeting by lodging a Depositor Proxy Form to the benefit of the chairman of the Court Meeting (a copy of which is sent with this Scheme Document) completed and signed at the office of the Share Transfer Agent at Boardroom Corporate & Advisory Services Pte. Ltd., 50 Raffles Place #32-01, Singapore Land Tower, Singapore 048623 or faxed to (65) 6536 1360, in accordance with the instructions printed thereon so as to arrive not less than 72 hours before the time fixed for the Court Meeting. Alternatively, the Depositor Proxy Form may be handed before the commencement of the Court Meeting to the chairman of the Court Meeting at the Court Meeting; or

(c) appoint any other person(s) to vote at the Court Meeting in its/his/her stead by appointing such person(s) as its/his/her proxy by completing, signing and lodging a Depositor Proxy Form in accordance with the instructions printed thereon.

A Depositor who is a corporation and who wishes to attend the Court Meeting must submit the Depositor Proxy Form for the appointment of person(s) to attend and vote at the Court Meeting on its/his/her behalf.

The vote of Depositors will only be taken into account to determine whether the 75% in value threshold has been reached and not for the majority in number count.

For the purposes of counting the majority in number, CDP shall be counted as one Scheme Shareholder voting for or against the Scheme. In order to determine CDP’s vote, the Company will take into account the majority of Scheme Shares held by CDP that are voted for or against the Scheme by the Depositors, present and voting, either in person or by proxy, at the Court Meeting.

The completion and lodgement of Depositor Proxy Forms will not prevent the Depositors from attending and voting in person at the Court Meeting if they subsequently wish to do so. In such event, the relevant Depositor Proxy Forms will be deemed to be revoked.

Even if you do not vote by appointing a proxy and/or attending and voting at the Court Meeting, you will be bound by the outcome of the Court Meeting.

17.2 Shareholders Shareholders may attend the Court Meeting in person and vote on the Scheme.

Shareholders who are unable to attend the Court Meeting are requested to complete the Shareholder Proxy Form (a copy of which is sent with this Scheme Document) in accordance with the instructions printed thereon (i) for the benefit of the chairman of the Court Meeting or (ii) for the benefit of any other person(s) to vote at the Court Meeting in its/his/her stead and return so as to arrive at the office of Share Transfer Agent at Boardroom Corporate & Advisory Services Pte. Ltd., 50 Raffles Place #32-01, Singapore Land Tower, Singapore 048623 or faxed to (65) 6536 1360 not less than 72 hours before the time fixed for the Court Meeting. Alternatively, the Shareholder Proxy Form may be handed before the commencement of the Court Meeting to the chairman of the Court Meeting at the Court Meeting.

The completion and lodgement of Shareholder Proxy Forms will not prevent the Shareholders from attending and voting in person at the Court Meeting if they subsequently wish to do so. In such event, the relevant Shareholder Proxy Forms will be deemed to be revoked.

Even if you do not vote by appointing a proxy and/or attending and voting at the Court Meeting, you will be bound by the outcome of the Court Meeting.

32 EXPLANATORY MEMORANDUM

17.3 Conversion of Depositors to Shareholders Depositors may elect to become Shareholders, and thereby have the right to vote at the Court Meeting and be counted for the purposes of calculating a “majority in number” in respect of the Scheme at the Court Meeting by withdrawing its/his/her Scheme Shares from CDP and having those Shares registered in the Depositor’s name (provided that such Depositor becomes a Shareholder of record not later than the Voting Record Date).

Depositors who wish to withdraw the Scheme Shares and become Shareholders should contact CDP at 4 Shenton Way, #02-01, SGX Centre 2, Singapore 068807. The latest time for submitting the withdrawal request form is ten (10) Market Days prior to the Voting Record Date. Further details on withdrawal of Shares are set out at http://www.cdp.com.sg/business/withdraw.html. Currently, the fees payable for the withdrawal of Scheme Shares from CDP are as follow:

Withdrawal fee S$26.75 (inclusive of GST) for withdrawals of more than 1,000 shares, or S$10.70 (inclusive of GST) for 1,000 shares or less

Scrip fee S$2.14 (inclusive of GST) per certificate

Depositors who have become Shareholders and who wish to trade their Shares on the SGX- ST will need to first become Depositors again by depositing their share certificates with CDP together with the duly executed instruments of transfer in favour of CDP and have their respective Securities Accounts credited with the number of Shares deposited before they can effect the desired trades. It will take about twelve (12) Market Days for the Shares to be credited into the relevant Securities Account and Depositors will only be able to trade the Shares once they have received a notification from CDP.

As the Company is registered in the Cayman Islands and the Register of Members is kept in the Cayman Islands, any transfer of Shares will be exempted from stamp duty under the Stamp Duties Act, Chapter 312 of Singapore.

18. IFA’S ADVICE TO THE INDEPENDENT DIRECTORS The letter from Morgan Stanley, the IFA, setting out its advice to the Independent Directors on the Scheme is reproduced in Appendix 1 of this Scheme Document.

19. GENERAL INFORMATION Your attention is drawn to the further relevant information in the Appendices of this Scheme Document. These Appendices form part of this Scheme Document. This Explanatory Memorandum is qualified by, and should be read in conjunction with, the full text of this Scheme Document, including the Scheme as set out in pages 221 to 224 of this Scheme Document.

33 APPENDIX 1 – LETTER FROM MORGAN STANLEY TO THE INDEPENDENT DIRECTORS

31 August 2011

To: The Independent Directors of Hsu Fu Chi International Ltd Cricket Square Hutchins Drive P.O. Box 2681 Grand Cayman KY1-1111 Cayman Islands

Dear Sir/Madam:

PROPOSED SCHEME OF ARRANGEMENT UNDER SECTION 86 OF THE COMPANIES LAW OF THE CAYMAN ISLANDS PURSUANT TO WHICH NESTLÉ S.A. (“NESTLÉ”) WILL ACQUIRE 43.52% OF THE ISSUED ORDINARY SHARES OF HSU FU CHI INTERNATIONAL LIMITED (“HSU FU CHI” OR THE “COMPANY”) (ALL ISSUED ORDINARY SHARES OF PAR VALUE S$0.01 EACH OF HSU FU CHI BEING REFERRED TO HEREIN AS THE “SHARES”)

1. INTRODUCTION On 11 July 2011 (the “Announcement Date”), Nestlé and Hsu Fu Chi jointly announced the proposed establishment of a joint venture (the “Joint Venture”) between Nestlé and the current majority shareholders of the Company, Mr. Hsu Chen, Mr. Hsu Keng, Mr. Hsu Hang and Mr. Hsu Pu (the “Individual Shareholders”), who together own or hold a deemed interest of approximately 56.48% of the Shares. Nestlé will acquire 60% of the Shares by purchasing (i) a 43.52% interest from shareholders in the Company other than the Individual Shareholders, their related corporations and their respective nominees by way of a scheme of arrangement (the “Scheme”) under Section 86 of the Companies Law, Cap. 22 (Law 3 of 1961, as consolidated and revised) of the Cayman Islands (the “Cayman Companies Law”) and in accordance with The Singapore Code on Take-overs and Mergers (the “Code”) and (ii) a 16.48% interest from the Individual Shareholders or their related corporations by way of a transaction agreement dated 11 July 2011 (the “Transaction Agreement”). As a result of the transactions contemplated in (i) and (ii) above (the “Proposed Transactions”), Nestlé will own 60% of the Shares with the remaining 40% owned indirectly by the Individual Shareholders.

On 11 July 2011, Hsu Fu Chi and Nestlé entered into an implementation agreement (the “Implementation Agreement”) for Nestlé to acquire 43.52% of the Shares (the “Scheme Shares”) from the shareholders of Hsu Fu Chi, other than the Individual Shareholders and their related corporations and respective nominees (the “Scheme Shareholders”) by way of the Scheme.

Also on 11 July 2011, Nestlé entered into the Transaction Agreement pursuant to which Nestlé will acquire, subject to the Scheme becoming effective, 16.48% of the Shares from the Individual Shareholders or their related corporations (the “Sale Shares”).

Upon the Proposed Transactions becoming effective, all of the Shares will be owned, directly or indirectly, by Nestlé and the Individual Shareholders and subject to the approval of the Singapore Exchange Securities Trading Limited (“SGX-ST”), Hsu Fu Chi will be delisted from the Official List of the SGX-ST.

34 APPENDIX 1 – LETTER FROM MORGAN STANLEY TO THE INDEPENDENT DIRECTORS

Morgan Stanley Asia (Singapore) Pte. (“Morgan Stanley”) has been appointed to act as Independent Financial Adviser to the Directors of the Company (the “Directors”) who are considered to be independent for the purposes of the Scheme (the “Independent Directors”). The Directors have confirmed to Morgan Stanley that Mr. Hu Chia-Hsun, Mr. Shaw Sun Kan Gordon, Mr. Cheong Tuck Kuen Kenneth (alternate director to Mr. Shaw Sun Kan Gordon), Mr. Lim Hock San, Mr. Lam Khin Khui and Mr. Lee Tsu-Der are the Independent Directors for the purposes of the Scheme and that there are no special circumstances or other arrangements which may affect the independence of the foregoing Directors. This letter sets out our opinion arising from our evaluation of the Scheme, from a financial point of view, for inclusion in the document dated 31 August 2011, including all appendices (the “Scheme Document”) to be sent to the shareholders of the Company.

2. TERMS OF REFERENCE In the course of our evaluation of the Scheme, from a financial point of view, we have, amongst other things:

(i) reviewed certain publicly available financial statements and other information relating to Hsu Fu Chi, as well as certain information provided, and representations made, to us by the Directors, senior executives, professional advisers and other authorised representatives of the Company;

(ii) discussed the past and current operations and financial condition of Hsu Fu Chi and its subsidiaries (the “Group”) with senior executives of the Company;

(iii) reviewed the reported prices, trading multiples and trading activity for the Shares;

(iv) compared the prices and trading multiples with those of certain other comparable publicly- traded companies and their securities;

(v) reviewed the financial terms, to the extent publicly available, of certain comparable transactions;

(vi) participated in discussions with representatives of Hsu Fu Chi and its legal advisers with respect to the Scheme;

(vii) reviewed the Implementation Agreement and the Scheme Document (collectively, the “Hsu Fu Chi Transaction Documents”), the Irrevocable Undertakings (as defined below) and the Transaction Agreement (collectively the “Shareholder Transaction Documents,” and together with the Hsu Fu Chi Transaction Documents, the “Transaction Documents”); and

(viii) performed such other analyses, reviewed such other information and considered such other matters as we deemed appropriate.

We do not comment on the merits of the Proposed Transactions, including without limitation on the fairness of the consideration for the Sale Shares, nor do we evaluate and/or comment on the strategic or commercial merits of the Proposed Transactions or on the prospects of the Company. We do not address the relative merits of the Proposed Transactions as compared to any other alternative transaction, or other alternatives, or whether or not such alternatives could be achieved or are available. This opinion is necessarily based on financial, economic, market and other conditions in effect on, and the information made available to us as at 26 August 2011, being the Latest Practicable Date. We have not been requested or authorised to solicit, nor have we solicited, any indications of interest from any third party with respect to the Shares.

35 APPENDIX 1 – LETTER FROM MORGAN STANLEY TO THE INDEPENDENT DIRECTORS

We have assumed and relied upon, without independent verification, the accuracy and completeness of the information that was publicly available or supplied or otherwise made available to us by the Company and formed a substantial basis for this opinion.

The Directors have confirmed to us that, to the best of their knowledge and belief, all material information in connection with the Company, the Group and the Proposed Transactions, including without limitation the Transaction Documents, has been disclosed to us, that such information is true, complete and accurate in all material respects and that there are no omissions which may cause any information given to us to be incomplete, inaccurate or misleading. The Directors have jointly and severally accepted the responsibility for the accuracy and completeness of such information. We have relied upon such confirmation by the Directors and the accuracy and completeness of all information given to us and have not independently verified such information, whether written or verbal, and accordingly cannot and do not represent or warrant, expressly or impliedly, and do not accept any responsibility for, the accuracy, completeness or adequacy of such information.

In addition, we have assumed that the Proposed Transactions will be consummated in accordance with the terms set forth in the Transaction Documents without any waiver, amendment or delay of any terms or conditions except as set out therein including, without limitation, that the Scheme will be consummated in accordance with the terms set forth in the Implementation Agreement and the Scheme Document. Morgan Stanley has assumed that in connection with receipt of all necessary governmental, regulatory or other approvals and consents required for the Proposed Transactions, no delays, limitations, conditions or restrictions will be imposed that would have a material adverse effect on the contemplated benefits expected to be derived from the Proposed Transactions. We are not legal, tax or regulatory advisers. We are financial advisers only and have relied upon, without independent verification, the assessment of Hsu Fu Chi and its legal, tax or other regulatory advisers with respect to legal, tax or regulatory requirements. We have not made an independent evaluation or appraisal of the assets and liabilities (including without limitation, real property) of the Group or any of its associated or joint venture companies, nor have we been furnished with any such appraisals.

We have relied upon the assurances of the Directors that the Scheme Document has been approved by the Directors (including those who may have delegated detailed supervision of the Scheme Document) and that the Directors have taken all reasonable care to ensure that the facts stated and all the opinions expressed in the Scheme Document (other than the information in Appendices 1 and 2 to the Scheme Document and the facts relating to Nestlé, Morgan Stanley and Credit Suisse (Singapore) Limited) are fair and accurate and that no material facts have been omitted from the Scheme Document, and the Directors jointly and severally accept responsibility accordingly.

Where information relating to the Scheme and the other Transaction Documents, Nestlé, Hsu Fu Chi and parties acting in concert with them has been extracted from published or otherwise publicly available sources, the responsibility of the Directors has been to ensure that, having made reasonable enquiries, such information has been accurately and correctly extracted from the relevant sources.

Our terms of reference do not require us to express, and we do not express, an opinion on the Shareholder Transaction Documents or the future growth prospects of Hsu Fu Chi. We are therefore not expressing any opinion herein as to the price at which the Shares may trade upon completion or rejection of the Scheme or on the future financial performance of the Company. Scheme Shareholders should note that trading of the Shares is subject to, inter alia, the performance and prospects of Hsu Fu Chi, prevailing economic conditions, economic outlook and stock market conditions and sentiments. Accordingly, our evaluation of the Scheme, from a financial point of view, does not and cannot take into account the future trading activities or patterns or price levels that may be established beyond the Latest Practicable Date.

36 APPENDIX 1 – LETTER FROM MORGAN STANLEY TO THE INDEPENDENT DIRECTORS

For the purposes of our evaluation of the Scheme, from a financial point of view, we have not received nor relied on any financial projections or forecasts in respect of the Group. We are not required to express and we do not express any view on the growth prospects and earnings potential of the Group in connection with our opinion herein.

The preparation of this letter, our evaluation of the Scheme, from a financial point of view, and our opinion in this letter are based solely upon financial, market, economic, industry, monetary, regulatory and other conditions in effect on, and the information made available to us as at the Latest Practicable Date. Events occurring after the date hereof may affect this opinion and the assumptions used in preparing it. We assume no responsibility to update, revise or reaffirm our opinion in light of any subsequent development after the Latest Practicable Date that may affect our opinion contained herein.

In rendering our opinion, we have not had regard to any general or specific investment objectives, financial situations, risk profiles, tax positions or particular needs or constraints of any individual Scheme Shareholder or any specific group of Scheme Shareholders and do not assume any responsibility for, nor hold ourselves out as advisers to, any person other than the Independent Directors. As different Scheme Shareholders would have different investment profiles and objectives, we advise the Independent Directors to recommend that any Scheme Shareholder who may require specific advice in relation to his or her investment portfolio to consult their stockbroker, bank manager, solicitor, accountant, tax adviser or other professional adviser immediately.

Hsu Fu Chi will be separately advised by its own professional advisers in the preparation of the Scheme Document (other than this letter). We have no role or involvement and have not and will not provide any advice (financial or otherwise) whatsoever in the preparation, review and verification of the Scheme Document (other than this letter and paragraphs 5 and 15.3 of Appendix 3 of the Scheme Document). Accordingly, we take no responsibility for (other than this letter and paragraphs 5 and 15.3 of Appendix 3 of the Scheme Document) and express no views, whether express or implied, on the contents of the Scheme Document (except for this letter).

We have acted as Independent Financial Adviser to the Independent Directors for the purposes of the Scheme and will receive a fee for our services in connection with the delivery of this letter. Morgan Stanley may also seek to provide services to Hsu Fu Chi or the Group and Nestlé or parties acting in concert with Hsu Fu Chi or the Group or Nestlé in the future and expect to receive fees for rendering such services. In addition, the Company has agreed to indemnify us for certain liabilities arising out of our engagement. In the ordinary course of our securities underwriting, trading, brokerage, foreign exchange, commodities and derivatives trading, prime brokerage, investment management, financing and financial advisory activities, Morgan Stanley or its affiliates may at any time hold long or short positions, finance positions, and may trade or otherwise structure and effect transactions, for our own account or the accounts of customers, in debt or equity securities or loans of Hsu Fu Chi or Nestlé or any other company or currency or commodity that may be involved in this transaction or any related derivative instrument.

This opinion has been approved by a committee of Morgan Stanley employees in accordance with our customary practice. This opinion is for the information of the Independent Directors only and may not be used for any other purpose without our prior written consent. This opinion is not addressed to and may not be relied upon by any third party apart from the Independent Directors.

Any opinion and advice set forth herein should be considered in the context of the entirety of this letter and the Scheme Document.

37 APPENDIX 1 – LETTER FROM MORGAN STANLEY TO THE INDEPENDENT DIRECTORS

3. TERMS AND CONDITIONS OF THE SCHEME, IMPLEMENTATION AGREEMENT AND IRREVOCABLE UNDERTAKINGS The following summary of the principal terms of the Scheme, the Implementation Agreement and the Irrevocable Undertakings has been obtained from the Scheme Document.

3.1. The Principal Terms of the Scheme The principal terms of the Scheme are set out below:

Scheme Consideration (a) All the Scheme Shares will be transferred to Nestlé and/or its nominees fully paid, free from all Encumbrances (as defined in the Scheme Document) and together with all rights, benefits and entitlements attached thereto as at the Effective Date (as defined in the Scheme Document) and thereafter attaching thereto, including the right to receive and retain all dividends, rights and other distributions (if any) declared, paid or made by Hsu Fu Chi after the Effective Date.

(b) In consideration for such transfer, each of the Scheme Shareholders will be entitled to receive four Singapore Dollars and thirty-five cents (S$4.35) in cash for each Scheme Share (the “Scheme Consideration”).

(c) The Scheme Consideration was agreed by Hsu Fu Chi after arm’s-length negotiations between Hsu Fu Chi and Nestlé, on a willing-seller, willing-buyer basis, after taking into consideration, amongst others, the recent market price of the Shares.

(d) The Scheme Consideration is on the basis that Hsu Fu Chi will not make or agree to make any distribution or other payments of any kind to any person in its capacity as a Shareholder on or prior to the Effective Date. To the extent the Company declares or makes any distribution or other payment of any kind to the Scheme Shareholders on or prior to the Effective Date, the Scheme Consideration will be reduced on a per Scheme Share basis by any such amount which is due and payable (whether paid or unpaid as at the Effective Date) to the Scheme Shareholders.

No Cash Outlay Scheme Shareholders and Depositors (as defined in the Scheme Document) should note that no cash outlay (including any stamp duties or brokerage expense) will be required from them under the Scheme.

Waiver of Rights to a General Offer Scheme Shareholders and Depositors (as defined in the Scheme Document) should note that by voting in favour of the Scheme, they are agreeing to Nestlé and its concert parties acquiring effective control of Hsu Fu Chi without having to make a general offer for the Company.

Further details of the terms and conditions of the Scheme are set out in paragraph 3 of Hsu Fu Chi’s Letter to Shareholders and Depositors and paragraph 3 of the Explanatory Memorandum in the Scheme Document.

3.2. Principal Terms of the Implementation Agreement The principal terms of the Implementation Agreement are set out below:

Scheme Conditions. The Scheme will be conditional upon the satisfaction (or, where applicable, waiver) of the conditions set out in Appendix 7 of the Scheme Document (the “Scheme Conditions”) on or prior to 5.00 p.m. (Singapore time) on the Long Stop Date (as defined in the Scheme Document).

38 APPENDIX 1 – LETTER FROM MORGAN STANLEY TO THE INDEPENDENT DIRECTORS

Termination Right. The Implementation Agreement may be terminated by either Party (as defined in the Scheme Document) (other than a Party having prevented, by its actions or omissions in breach of the Implementation Agreement, the Scheme from becoming effective) if the Scheme has not become effective on or before 5.00 p.m. on the Long Stop Date, and on the grounds as set out in paragraph 4.2 of the Explanatory Memorandum in the Scheme Document.

Switch Option. Subject to prior consultation with the Securities Industry Council of Singapore (the “SIC”), Nestlé may elect to proceed by way of an Offer (as defined in the Scheme Document) in lieu of proceeding with the Proposed Transactions by way of the Scheme (the “Switch Option”) in the event of a Competing Offer (as defined in the Scheme Document) (or otherwise) subject to the prior written consent of the Individual Shareholders. In such event, Nestlé will make the Offer on the same or better terms as those which apply to the Scheme, including the same or a higher consideration than the Scheme Consideration.

Non-solicitation. Under the Implementation Agreement, the Company is bound by certain non-solicitation obligations set out in paragraph 4.4 of the Explanatory Memorandum in the Scheme Document during the period from (and including) 11 July 2011 up to (and including) the date on which the Implementation Agreement is terminated in accordance with its terms (the “Restricted Period”).

Further details of the terms and conditions of the Implementation Agreement are set out in paragraph 4 of the Explanatory Memorandum in the Scheme Document.

3.3 Principal Terms of the Irrevocable Undertakings The principal terms of the Irrevocable Undertakings are set out below:

Each of Arisaig Asia Consumer Fund Limited, Winmoore Holdings Limited and Star Candy Ltd (collectively, the “Undertaking Shareholders”), which directly or indirectly, legally or beneficially hold 71,176,000, 13,324,000 and 117,738,854 Shares representing approximately 8.95%, 1.68% and 14.81% of the Shares respectively as at 11 July 2011, has given an irrevocable undertaking to Nestlé to, inter alia:

(a) exercise or cause the registered holder of the Shares which are owned (whether directly or indirectly, legally or beneficially) or controlled by it, to exercise, all voting rights attaching to the Shares at the meeting of the Scheme Shareholders, notice of which is set out in the Scheme Document, and any adjournment thereof (the “Court Meeting”) in favour of the resolution required to give effect to the Scheme; and

(b) if Nestlé elects to proceed with the Offer, to accept or procure the acceptance of such Offer in respect of its Shares (collectively the “Irrevocable Undertakings”).

Further, each of the Undertaking Shareholders has agreed to be bound by certain non-solicitation provisions during the term of its undertaking, save for certain exceptions.

Further details of the Irrevocable Undertakings are set out in paragraph 3.2 of Hsu Fu Chi’s Letter to Shareholders and Depositors, paragraph 5 of the Explanatory Memorandum in the Scheme Document and paragraph 6 of the Letter from Nestlé to the Shareholders and Depositors in Appendix 2 of the Scheme Document.

4. INFORMATION ON NESTLÉ Information on Nestlé is set out in paragraph 1.6 of Hsu Fu Chi’s Letter to the Shareholders and Depositors in the Scheme Document, paragraph 8 of the Explanatory Memorandum in the Scheme Document and paragraph 8 of the Letter from Nestlé to the Shareholders and Depositors in Appendix 2 of the Scheme Document.

39 APPENDIX 1 – LETTER FROM MORGAN STANLEY TO THE INDEPENDENT DIRECTORS

5. RATIONALE FOR THE SCHEME The rationale for the Scheme is set out paragraph 2 of Hsu Fu Chi’s Letter to the Shareholders and Depositors in the Scheme Document, paragraph 2 of the Explanatory Memorandum in the Scheme Document and paragraph 2 of the Letter from Nestlé to the Shareholders and Depositors in Appendix 2 of the Scheme Document.

6. NESTLÉ’S INTENTIONS IN RELATION TO HSU FU CHI The intentions of Nestlé in relation to Hsu Fu Chi are set out in paragraph 2.2 of Hsu Fu Chi’s Letter to the Shareholders and Depositors in the Scheme Document, paragraph 2 of the Explanatory Memorandum in the Scheme Document and paragraph 3 of the Letter from Nestlé to the Shareholders and Depositors in Appendix 2 of the Scheme Document.

7. INFORMATION ON HSU FU CHI Information on Hsu Fu Chi can be found in paragraph 1.5 of Hsu Fu Chi’s Letter to the Shareholders and Depositors in the Scheme Document, paragraph 7 of the Explanatory Memorandum in the Scheme Document and Appendix 3 of the Scheme Document.

8. FINANCIAL EVALUATION OF THE SCHEME We have confined our evaluation to the financial terms of the Scheme. In evaluating the Scheme, from a financial point of view, we have performed the following analyses based upon publicly available information and information made available to us by Hsu Fu Chi as at the Latest Practicable Date:

Liquidity and broker research coverage analysis to evaluate whether the historical share prices of the Company provide a meaningful reference point for comparison against the Scheme Consideration;

Hsu Fu Chi’s historical share price performance analysis to evaluate how the Scheme Consideration compares to the historical share prices of the Company over different observation periods;

Hsu Fu Chi’s historical trading performance analysis to evaluate how the valuation multiples implied by the Scheme Consideration compare to the Company’s historical trading multiples;

Trading comparable analysis to evaluate how the valuation multiples implied by the Scheme Consideration compare to trading multiples of listed comparable companies;

Precedent transaction analysis to evaluate how the valuation multiples implied by the Scheme Consideration compare to multiples of selected transactions in the food and beverage (“F&B”) industry in Asia Pacific and in the confectionery and bakery industry globally;

Precedent take-over analysis to evaluate how the premia implied by the Scheme Consideration compare to the premia/discounts on selected take-overs in Singapore at different times prior to their respective announcement dates; and

Broker research price targets for the Shares to evaluate how the Scheme Consideration compares to broker research price targets for Hsu Fu Chi in reports issued prior to and after the Scheme Announcement.

40 APPENDIX 1 – LETTER FROM MORGAN STANLEY TO THE INDEPENDENT DIRECTORS

The figures and underlying financial data used in our analyses, including share prices, trading volumes, free float data, and broker research have been extracted from Bloomberg, FactSet, Capital IQ, SGX-ST and other public filings as at the Latest Practicable Date. Morgan Stanley makes no representations or warranties, express or implied, as to the accuracy or completeness of such information.

8.1. Liquidity and Broker Research Coverage Analysis To evaluate whether the historical market prices of the Shares provide a meaningful reference point for comparison against the Scheme Consideration, we have considered the liquidity, free float and extent of research coverage of the Company relative to companies that make up the top 25 companies traded on the SGX-ST based on market capitalisation as at the Latest Practicable Date (“Top 25 Largest SGX Companies”).

Chart 1 — Liquidity Analysis and Broker Research Coverage (1)

Market Avg. Daily Volume (3) /Avg. Daily Value (4) / Approx. # Capitalisation Free Float (2) Free FloatMarket Capof Brokers Rank Company (S$ MM) (%) (%) (%) Covering Compannyy (5) 1 Singapore Telecommunications Ltd. 49,413 45% 0.29% 0.13% 24 2 Jardine Matheson Holdings Ltd. 40,620 37% 0.10% 0.04% 8 3 Jardine Strategic Holdings Ltd. 39,343 19% 0.08% 0.02% 7 4 Wilmar International Ltd. 33,092 37% 0.38% 0.16% 23 5 DBS Group Holdings Ltd. 30,023 72% 0.31% 0.25% 25 6 OCBC Bank 28,818 80% 0.19% 0.17% 25 7 United Overseas 27,748 85% 0.22% 0.20% 26 8 Genting Singapore 18,716 48% 1.69% 1.06% 25 9 Hongkong Land 15,108 50% 0.19% 0.12% 18 10 Keppel Corp 15,098 78% 0.42% 0.39% 23 11 Jardine Cycle 15,081 24% 0.28% 0.06% 1 12 Dairy Farm 13,235 22% 0.03% 0.01% 4 13 Singapore Airlines 12,658 45% 0.42% 0.25% 21 14 Capitaland Ltd 10,631 60% 0.57% 0.47% 24 15 Noble Group 9,278 55% 0.77% 0.58% 20 16 City Developments 9,093 68% 0.25% 0.19% 24 17 Singapore Tech Eng 8,892 48% 0.15% 0.08% 14 18 Fraser & Neave Ltd. 8,096 84% 0.19% 0.17% 10 19 Sembcorp Marine 7,715 38% 0.76% 0.39% 23 20 Golden Agri-Resources Ltd. 7,526 50% 1.27% 0.70% 18 21 Global Logistics 7,399 39% 1.02% 0.52% 7 22 Singapore Exchange Ltd. 7,244 71% 0.54% 0.47% 22 23 SembCorp Industries Ltd. 6,977 50% 0.35% 0.22% 18 24 Hutchison Port Holdings Trust 6,939 58% 0.94% 0.77% 13 25 Thai Beverage PCL 6,780 78% 0.04% 0.03% 5 Average (6) 17,421 54% 0.46% 0.30% 17 Median (6) 12,658 50% 0.31% 0.20% 20 Maximum (6) 49,413 85% 1.69% 1.06% 26 Minimum (6) 6,780 19% 0.03% 0.01% 1 (7) 39 Hsu Fu Chi 3,307 18% 0.14% 0.02% 1

Source Bloomberg, FactSet and Company Filings

Notes 1 All figures are as of 26 August 2011, being the Latest Practicable Date 2 Free float amounts are Bloomberg estimates 3 Average daily trading volume for the last 12 months prior to the Latest Practicable Date (27 August 2010 to 26 August 2011) 4 Average daily trading value for the last 12 months prior to the Latest Practicable Date (27 August 2010 to 26 August 2011) 5 Based on the latest analyst coverage as of the Latest Practicable Date (Source: Bloomberg) 6 Average, median, maximum and minimum values based on the top 25 SGX-listed companies by market capitalisation 7 Hsu Fu Chi free float is calculated from total shares outstanding after excluding shareholdings of the Individual Shareholders and the Undertaking Shareholders

41 APPENDIX 1 – LETTER FROM MORGAN STANLEY TO THE INDEPENDENT DIRECTORS

With respect to Chart 1, we note that in the twelve months leading up to the Latest Practicable Date, Hsu Fu Chi’s average daily trading volume represented 0.14 per cent. of free float and 0.02 per cent. of market capitalisation. These values are within the ranges of the Top 25 Largest SGX Companies (between 0.03 per cent. and 1.69 per cent. and between 0.01 per cent. and 1.06 per cent., respectively), and below the average and median average daily trading volume to free float of 0.46 per cent. and 0.31 per cent., respectively, and the average and median average daily trading value to market capitalisation of 0.30 per cent. and 0.20 per cent., respectively, for the Top 25 Largest SGX Companies.

We also note that only one brokerage house provides research coverage on the Company. This is at the bottom of the range of the number of brokerage houses providing research coverage on the Top 25 Largest SGX Companies from 1 to 26 and below the average and median of 17 and 20, respectively.

We have also considered the historical trading volume of the Shares for the 1-week, 1-month, 3- month, 6-month and 12-month periods leading up to the Latest Practicable Date, as well as the period from the Announcement Date to the Latest Practicable Date, as set out in Chart 2 below:

Chart 2 — Historical Trading Volume

Total Volume Avg. Daily Avg. Daily Avg. Daily Trading Period up to the Latest VWAP (2) Traded Trading Value Trading Volume Volume / Free Float (3) Practicable Date (1) (S$) ('000) (S$'000) ('000) (%)

12-month S$3.79 41,090 308 200 0.14%

6-month S$4.04 28,547 413 269 0.19%

3-month S$4.17 16,004 484276 0.19%

1-month S$4.08 2,656 446 121 0.08%

1-week S$4.14 336278 67 0.05%

From Announcement Date to S$4.21 5,838 692 172 0.12% Latest Practicable Date

Source Bloomberg

Notes 1 The Latest Practicable Date is 26 August 2011. Trading in the Shares was halted on 4 July 2011 and resumed trading on 11 July 2011. Periods analysed are as follows - 12 months: 27 August 2010 to 26 August 2011, 6 months: 1 March 2011 to 26 August 2011, 3 months: 27 May 2011 to 26 August 2011, 1 month: 27 July 2011 to 26 August 2011 and 1 week: 22 August 2011 to 26 August 2011). Only trading days have been included in the analysis 2 VWAP calculated as the average daily trading value / average daily trading volume for the relevant period over the last 12 months up to 26 August 2011, being the Latest Practicable Date 3 Free float amount excludes shareholdings of the Individual Shareholders as well as the shareholdings of the Undertaking Shareholders

We note that the analysis of the historical trading volume of the Shares includes the period from 11 July 2011, being the Announcement Date to 26 August 2011, being the Latest Practicable Date. For the 12-month period shown ending on the Latest Practicable Date, the average daily trading value has been approximately S$308,000. We note that announcements related to the Scheme may have had an impact on the trading volume of the Shares during this period.

42 APPENDIX 1 – LETTER FROM MORGAN STANLEY TO THE INDEPENDENT DIRECTORS

Our analysis of the historical trading volume of the Shares and the average daily trading volume and value of the Shares relative to the Top 25 Largest SGX Companies suggests there is low liquidity in the Shares both in absolute terms and relative to the free float of the Company.

In the context of illiquid trading conditions, trading prices (including volume-weighted average prices) may be less meaningful as analytical benchmarks.

8.2. Hsu Fu Chi’s Historical Share Price Performance Analysis We have compared the Scheme Consideration to the historical and current share price performance of the Shares over different observation periods.

We set out below in Chart 3 the daily closing prices of the Shares compared to the performance of the Straits Times (“STI”), MSCI Asia ex Japan Consumer Staple (“MSCI Consumer Asia”) and MSCI China Consumer Staple (“MSCI Consumer China”) Indices (collectively, the “Benchmark Indices”) for the period from 27 August 2009 to 26 August 2011, being the Latest Practicable Date.

Chart 3 — Share Price Performance Relative to the Benchmark Indices Share Price (S$)

5.00 1-Jul-11: Nestlé is rumoured to be in talks to acquire a stake in Hsu 18-Sep-09: (1) Fu Chi Baring Asia acquires a 14.8% stake in Hsu Fu Chi at an entry price of S$1.55 8 4.00 per share from TranspacCapital 7 6 5

3.00 4-Jul-11: Trading halt in Hsu Fu Chi 4 shares 3

2.00 2 1

11-Jul-11: 1.00 Nestlé announced its proposed acquisition of a 60% stake in Hsu Fu Chi

Trading resumes in Hsu Fu Chi shares

0.00 27-Aug-09 20-Jan-10 09-Jul-10 08-Nov-10 01-Apr-11 26-Aug-11

(2) (2) MSCI Asia Ex Japan Consumer Staple Index MSCI China Consumer Staple Index Hsu Fu Chi's Share Price STI (Rebased to Hsu Fu Chi’Chi’ss Share Price) (Rebased to Hsu Fu Chi’s Share Price) (Rebased to Hsu Fu Chi’s Share Price) Source Company Filings, Factiva Newsrun, Bloomberg and FactSet

Notes 1 Arisaig Asia Consumer Fund became a substantial shareholder in Hsu Fu Chi through its open market purchase of 2.03% on 8 January 2008, increasing its stake from 4.03% to 6.06%

2 MSCI Consumer Asia and MSCI Consumer China indices are both sourced from Bloomberg

43 APPENDIX 1 – LETTER FROM MORGAN STANLEY TO THE INDEPENDENT DIRECTORS

Earnings Announcement (Period — Date)

1 1Q10 - 23 Oct 2009 2 2Q10 – 8 Feb 2010 3 3Q10 – 10 May 2010 4 FY10–23 Aug 2010

5 1Q11 – 29 Oct 2010 6 2Q11 – 14 Feb 2011 7 3Q11 – 6 May 2011 8 FY11 – 26 Aug 2011

Source Company Filings, SGX-ST

Table 1 — Historical Share Price Performance of Hsu Fu Chi and the Benchmark Indices

MSCI MSCI Hsu Fu Chi STI Consumer Asia (1) Consumer China (1) L3M 6.1% (12.4%) (0.7%) (10.0%)

L6M 15.6% (8.7%) 12.0% 3.1%

LTM 54.1% (6.5%) 10.6% (7.5%)

L2Y 179.2% 4.0% 46.2% 38.7%

Source Bloomberg

Note 1 MSCI Consumer Asia and MSCI Consumer China indices are both sourced from Bloomberg

We note that the Shares have significantly outperformed the Benchmark Indices.

We set out below in Chart 4 the daily closing prices of the Shares and daily trading volumes for the period from 2 July 2009 to 1 July 2011, being the last full trading day preceding the Scheme Announcement on 11 July 2011 (“Last Pre-Announcement Trading Day”).

Chart 4 — Share Price Performance and Trading Volume until the Last Pre-Announcement Trading Day (1)(2)

Share Price Trading Volume S$ 000’s 4.50 140,000

(3) Scheme Consideration: S$4.35 4.00 18-Sep-09: Baring Asia acquires 14.8% stake in Hsu Fu Chi at an entry price of S$1.55 per share from Transpac 3.50 Capital 6,000

2.50 4,000

1.50 2,000

1.24

0.50 0 02-Jul-09 14-Sep-09 25-Nov-09 05-Feb-10 20-Apr-10 01-Jul-10 13-Sep-10 24-Nov-10 04-Feb-11 19-Apr-11 01-Jul-11

Hsu Fu Chi 's Share Price Trading Volume

Source FactSet

44 APPENDIX 1 – LETTER FROM MORGAN STANLEY TO THE INDEPENDENT DIRECTORS

Notes 1 Last Pre-Announcement Trading Day is 1 July 2011, the last full trading day preceding the Scheme Announcement on 11 July 2011. Trading in the Shares was halted on 4 July 2011 and resumed after the Scheme Announcement on 11 July 2011 2 For the period from 2 July 2009 to 1 July 2011, being the Last Pre-Announcement Trading Day, 17% of total trading days had zero trading volume (86 out of 507 trading days) 3 On 18 September 2009, 119,742,000 Shares were traded, out of which 117,738,854 were Shares which Baring Asia acquired from Transpac Capital

Based on Chart 4, we note that over the period from 2 July 2009 to 1 July 2011, being the Last Pre-Announcement Trading Day, the price of the Shares increased by 223%, based on closing prices of S$1.24 and S$4.00, respectively. The Scheme Consideration is equivalent to the highest closing price observed during the period shown and since the Company’s IPO in 2006 to the Last Pre-Announcement Trading Day.

The average daily volume of Shares traded over the 24-month period prior to the Announcement Date was approximately 565,519. There was no trading volume during 86 of the 507 trading days in this period, representing approximately 17% of total trading days, highlighting limited liquidity in the Shares.

We set out below in Chart 5 the daily closing prices of the Shares and total volume of Shares traded after the Announcement Date until the Latest Practicable Date.

Chart 5 — Post-Announcement Share Price Performance and Trading Volume

Closing Share Price Trading Volume

S$ ‘000

4.40 2,000 Scheme Consideration: S$4.35

4.30 1,600

4.20 1,121 1,200

4.10 800 Latest 530 Practicable Date Closing Price: S$4.16 416 397 4.00 326 400 300 290 283 254 199 230 133122 115 121 115 75 85 94 97 86 45 41 50 45 62 56 52 19 30 99 4 27 3.90 11-Jul 13-Jul 15-Jul 19-Jul 21-Jul 25-Jul 27-Jul 29-Jul 2-Aug 4-Aug 8-Aug 11-Aug 15-Aug 17-Aug 19-Aug 23-Aug 25-Aug

Trading Volume Hsu Fu Chi's Closing Share Price

Source Bloomberg

Based on Chart 5, we note that, between the Announcement Date and the Latest Practicable Date, the closing prices of the Shares ranged between S$3.98 and S$4.40 and the total volume of Shares traded was approximately 5.8 million Shares, representing approximately 0.7% of the Company’s total issued Shares as at the Latest Practicable Date.

45 APPENDIX 1 – LETTER FROM MORGAN STANLEY TO THE INDEPENDENT DIRECTORS

We set out below in Chart 6 the premia implied by the Scheme Consideration over the volume weighted average price of the Shares (“VWAP”) for the 1-week, 1-month, 3-month, 6-month and 12-month periods preceding the Last Pre-Announcement Trading Day and over the VWAP for the 30-day, 90-day, 180-day and 360-day periods (i.e., trading days) preceding the Last Pre- Announcement Trading Day. Chart 6 also sets out the premia implied by the Scheme Consideration over the closing price of the Shares on the Latest Practicable Date, one trading day following the Announcement Date and on the Last Pre-Announcement Trading Day.

Chart 6 — Analysis of Share Price Performance

Scheme Consideration Price % Premium / Price Basis S$ (Discount)

Latest Practicable Date (26-August-11) Closing Price 4.160 4.6%

1 Trading Day Post Scheme Announcement Date (12-Jul-11) Closing Price 4.290 1.4%

Scheme ConConssideriderationation 4.350

Last Pre-Announcement Trading Day Closing Price 4.000 8.7%

CCalendaralendar PeriodPeriod VWAP VWAP Prior Prior to to Anno Announcementuncement Da teDate (1)(1)

(2) 1 Week Period up to Last Pre-Announcement Trading Day VWAP 4.009 8.5%

1 Month Period up to Last Pre-Announcement Trading Day VWAP (2) 3.971 9.5%

3 Month Period up to Last Pre-Announcement Trading Day VWAP (2) 3.868 12.5%

6 Month Period up to Last Pre-Announcement Trading Day VWAP (2) 3.725 16.8%

12 Month Period up to Last Pre-Announcement Trading Day VWAP (2) 3.258 33.5%

TradinTradingg D Dayay VWAP VWAP Di Disscloclosedsed in inS chemeScheme Anno Announcementuncement

30-day VWAP up to Last Pre-Announcement Trading Day VWAP (2) 3.956 10.0%

90-day VWAP up to Last Pre-Announcement Trading Day VWAP (2) 3.759 15.7%

180-day VWAP up to Last Pre-Announcement Trading Day VWAP (2) 3.490 24.7%

360-day VWAP up to to Last Pre-Announcement Trading Day VWAP (2) 2.683 62.1%

Source Scheme Announcement, Bloomberg and FactSet

Notes 1 Periods analysed are as follows - 1 week: 27 June 2011 to 1 July 2011, 1 month: 2 June 2011 to 1 July 2011, 3 months: 5 April 2011 to 1 July 2011, 6 months: 3 January 2011 to 1 July 2011 and 12 months: 2 July 2010 to 1 July 2011). Only trading days were included for the analysis 2 Total daily trading value / total daily trading volume for the relevant periods

Based on Chart 6, we note the following:

The Scheme Consideration represents a premium of approximately 4.6% over the closing price of the Shares of S$4.16 on the Latest Practicable Date and a premium of 1.4% over the closing price of S$4.29 one trading day after the Announcement Date.

The closing price of the Shares on the Latest Practicable Date of S$4.16 represents an increase of approximately 4.0% over the closing price of S$4.00 on the Last Pre- Announcement Trading Day.

46 APPENDIX 1 – LETTER FROM MORGAN STANLEY TO THE INDEPENDENT DIRECTORS

The closing price of the Shares on 12 July 2011 (being the first trading day after the Announcement Date) of S$4.29 represents an increase of approximately 7.3% over the closing price of S$4.00 on the Last Pre-Announcement Trading Day.

The Scheme Consideration represents a premium of approximately 8.7% over the closing price of the Shares of S$4.00 on the Last Pre-Announcement Trading Day.

The Scheme Consideration represents premia of approximately 8.5%, 9.5%, 12.5%, 16.8% and 33.5%, respectively, over the VWAP of the Shares in the 1-week, 1-month, 3-month, 6- month and 12-month periods preceding the Last Pre-Announcement Trading Day.

The Scheme Consideration represents premia of approximately 10.0%, 15.7%, 24.7% and 62.1%, respectively, over the VWAP of the Shares in the 30-day, 90-day, 180-day and 360- day periods (i.e., trading days) preceding the Last Pre-Announcement Trading Day.

We note there is no assurance that the price of the Shares will remain at current levels. In addition, the past price performance of the Shares is not indicative of the future price performance of the Shares.

8.3. Hsu Fu Chi’s Historical Trading Performance Analysis We have compared the P/E multiple (defined herein) implied by the Scheme Consideration (based on the Company’s Last Twelve Month Net Income as of 30 June 2011) to the Company’s P/E multiple (based on its trailing 12-month earnings for the applicable time periods) over the last twelve months prior to the Announcement Date.

Chart 7 — Historical LTM P/E (1)(2)

(x) A s 14 Feb 2011: 25 23 Aug 2010: 2Q11 Earnings

rning 2010 Earnings Announcement a Announcement

20 B 29 Oct 2010: 6 May 2011: 1Q11 Earnings 3Q11 Earnings Price / LTM E Announcement Announcement 15 Jul-10 Jul-10 Aug-10 Sep-10 Oct-10 Nov-10 Dec-10 Jan-11 Feb-11 Mar-11 Apr-11 May-11 Jun-11

Table 2 — Summary of Historical P/E Multiples (2) y p A Implied by Scheme Consideration 27.4x Pre-Offer (12 months up to 1 July 2011) B LTM Average 20.2x LTM Maximum(3) 24.5x LTM Minimum 15.7x

Source Company Filings and FactSet as of 1 July 2011

47 APPENDIX 1 – LETTER FROM MORGAN STANLEY TO THE INDEPENDENT DIRECTORS

Notes 1 Based on quarterly net income (excluding extraordinary items such as gains or losses on sale of PP&E, reversal of deferred tax liabilities and impairment on PP&E on a tax-effected basis) as reported by the Company. As Hsu Fu Chi’s share price is in SGD and reported financial statements are in CNY, daily S$/CNY foreign exchange rates sourced from FactSet have been assumed in the calculation of multiples 2 LTM defined as Last Twelve Months 3 On 18 May 2011, Hsu Fu Chi closed at S$4.35

We note that the P/E multiple implied by the Scheme Consideration (based on the trailing 12- month earnings) of 27.4 times is above the range of P/E multiples (based on trailing 12-month earnings) of 15.7 times to 24.5 times over the last twelve months prior to the Announcement Date.

We have also compared the EV/EBITDA multiple (defined herein) implied by the Scheme Consideration (based on the Company’s Last Twelve Month EBITDA as of 30 June 2011) to the Company’s EV/EBITDA multiple (based on its trailing 12-month EBITDA for the applicable time periods) over the last twelve months prior to the Announcement Date.

Chart 8 — Historical LTM EV (1)(2) / EBITDA (3)

A 16 23 Aug 2010: 2010 Earnings 14 Feb 2011: 14 Announcement 2Q11 Earnings Announcement

12 B 29 Oct 2010: 6 May 2011: 10 1Q11 Earnings 3Q11 Earnings EV / LTM EBITDA (x) EBITDA / LTM EV / LTM EBITDA (x) Announcement Announcement 8 Jul-10 Aug-10 Sep-10 Oct-10 Nov-10 Dec-10 Jan-11 Feb-11 Mar-11 Apr-11 May-11 Jun-11

Table 3 — Summary of Historical EV/EBITDA Multiples (2)(3)

A Implied by Scheme Consideration 16.6x Pre-Offer (12 months up to 1 July 2011) B LTM Average 11.8x LTM Maximum(4) 15.2x LTM Minimum 8.5x

Source Company Filings and FactSet as of 1 July 2011

Notes 1 Enterprise Value calculated as equity value + net debt + minority interest – associate interest 2 LTM defined as Last Twelve Months 3 Based on quarterly EBITDA (excluding extraordinary items such as gains or losses on sale of PP&E, reversal of deferred tax liabilities and impairment on PP&E) and balance sheet items as reported by the Company. As Hsu Fu Chi’s share price is in SGD and reported financial statements are in CNY, daily S$/CNY foreign exchange rates sourced from FactSet have been assumed in the calculation of multiples 4 On 18 May 2011, Hsu Fu Chi closed at S$4.35

We note that the EV/EBITDA multiple implied by the Scheme Consideration (based on its trailing 12-month EBITDA) of 16.6 times is above the range of EV/EBITDA multiples (based on trailing 12- month EBITDA) of 8.5 times to 15.2 times over the last twelve months prior to the Announcement Date.

48 APPENDIX 1 – LETTER FROM MORGAN STANLEY TO THE INDEPENDENT DIRECTORS

8.4. Trading Comparable Analysis We have considered selected F&B companies listed in Hong Kong and Singapore as trading comparables for the Company. The companies which we have selected as trading comparables in the list below are a representative sample of companies in the F&B industry in Asia Pacific (“Comparable Companies”).

In evaluating these companies, we have used the following ratios:

Price/Earnings (P/E)

Enterprise Value/Earnings before interest, tax, depreciation and amortisation (EV/EBITDA)

Enterprise Value/Sales (EV/Sales)

Price to Net Tangible Assets (P/NTA)

Enterprise Value is the market capitalisation as at the Latest Practicable Date, plus the latest Net Debt and the latest minority interest minus the latest associate interest. Net Debt is total debt less cash and cash equivalents. Net Tangible Assets equals total assets less any intangible assets less total liabilities.

A brief description of the Comparable Companies is set out below:

Table 4 — Comparable Companies Overview

Company Name Market Cap (1) Description

Hong Kong

Tingyi Cayman S$19,169 MM Tingyi Cayman Islands Holding (“Tingyi”) engages in the Islands Holding manufacturing and sale of instant noodles, bakery products and beverages primarily under the ‘Master Kong’ brand name in China. It offers instant noodles, ready-to-drink teas, bottled water, diluted juices, sandwich crackers, rice crackers, milk products, potato starch, seasoning flavors and dehydrated vegetables. Tingyi distributes its products through sales offices and warehouses to wholesalers and direct retailers

Want Want China S$13,207 MM Want Want China Holdings engages in the manufacturing, Holdings distribution and sale of food and beverages. The company offers rice crackers, including sugar coated crackers and fried crackers, dairy products and beverages, as well as wine and other food products. The company operates in China, Taiwan, Singapore and Hong Kong, and sells its products in Southeast Asia, the United States and Europe. Currently, Want Want has 33 sales branches and 330 sales offices in mainland China

Tsingtao Brewery S$9,199 MM Tsingtao Brewery Co. primarily engages in the production, sale Co. and trade of beer products in China. The company sells its beer principally under the ‘Tsingtao Beer’ trademark. It is also involved in manufacturing and trading malt, prepackaged food, as well as accommodation and design businesses, indoor decoration and industrial equipment fixing operations, as well as importing and exporting of beer

49 APPENDIX 1 – LETTER FROM MORGAN STANLEY TO THE INDEPENDENT DIRECTORS

Company Name Market Cap (1) Description

Hong Kong

China Mengniu S$6,828 MM China Mengniu Dairy Co. engages in the manufacturing and Dairy Co. distribution of dairy products primarily in China. The company sells liquid milk comprising UHT milk, milk beverages and yogurt, ice cream and other dairy products, such as milk powder and cheese. The company offers its products primarily under the “Mengniu” brand name

China Yurun S$4,989 MM China Yurun Food Group engages in slaughtering, producing and Food Group selling of chilled and frozen meat as well as processed meat products in China. It markets chilled and frozen meat and pork, and low and high temperature processed meat products under the Yurun, Furun, Wangrun and Popular Meat Packing brand names. It has established a nationwide production network throughout China

Uni-President S$2,463 MM Uni-President China Holdings engages in the manufacturing and China Holdings sale of beverages and instant noodles in China. The Company’s principal beverage products include juice drinks and ready-to- drink teas, as well as milk, tea, coffee, bottled water, and yogurt. The company’s instant noodle products comprise bowl noodles, packet noodles and snack noodles in various flavors. The company distributes its products in 31 provinces through various sales channels and other distribution points, such as entertainment and leisure venues, schools and transportation stations

China Huiyuan S$751 MM China Huiyuan Juice Group engages in the manufacturing and Juice Group sale of juice products primarily in China. The company offers fruit and vegetable juice products, including 100% juices, nectars and juice drinks primarily under the Huiyuan brand. It also produces mineral water, milk and dairy drinks and bottled tea, as well as sells potable water and fruit and vegetable juices. China Huiyuan sells its products directly, as well as through sales distribution networks

Singapore

Fraser & Neave S$8,096 MM Fraser & Neave Ltd. operates in the food and beverage, property Ltd. and publishing and printing industries in Singapore and internationally. The company engages in the production and sale of soft drinks, beer, stout and dairy products. It offers various milk drinks, ice cream and isotonic and Asian drinks. The company is also involved in the development, investment, and management of real estate properties, as well as management of a real estate investment trust. In addition, it engages in publishing, printing, direct sales, distribution, and retailing of books and magazines, as well as providing educational services. The company also offers treasury and financial services, management consultancy services and produces and sells of mineral water, carbonated drinks and bottles

50 APPENDIX 1 – LETTER FROM MORGAN STANLEY TO THE INDEPENDENT DIRECTORS

Company Name Market Cap (1) Description

Singapore

Cerebos Pacific S$1,532 MM Cerebos Pacific Ltd. engages in the manufacturing, marketing, Ltd. sale and distribution of health supplements and food products in the Asia Pacific region. The company’s health supplement product offering includes essence of chicken and related products and food products include sauces, gravies, coffee, salt and other food products. The company also provides a range of canned food, juices, beverages, desserts, toppings, condiments, cooking aids, tablet health supplements and canned soups. It markets its products under the BRAND’S, Fountain, Gravox, Robert Harris and Greggs brand names

Petra Foods Ltd. S$1,088 MM Petra Foods Ltd. manufactures and markets cocoa ingredients and consumer chocolate confectionery products. The company’s Cocoa Ingredients segment engages in the manufacturing and marketing of specialty cocoa butter, liquor and powder products for food and beverage companies. The company’s Branded Consumer segment manufactures and markets chocolate confectionery products under various brands, such as Goya and Ceres. It also provides manpower and management consulting services. It operates in Indonesia, Japan, Singapore, the Philippines and other countries in Asia, Europe, Australia, North and South America, the Middle East and Africa

Super Group Ltd. S$825 MM Super Group Ltd. manufactures, packages and distributes instant beverages and convenience food products primarily in Singapore, Southeast Asia and East Asia. The company provides instant coffee mixes, instant coffee, instant tea mixes, instant cereals, instant noodles, canned drinks and non-dairy creamers, as well as cereal related products, soluble coffee powder and vending machine services

People’s Food S$795 MM People’s Food Holdings engages in the production, processing, Holdings marketing and distribution of meat products primarily in China. It offers high temperature meat products, low temperature meat products, chilled fresh pork, frozen pork, pig by-products and frozen chicken. The company sells its meat products under the Jinluo brand name. It also engages in trading meat and other products and operates pig farms

Synear Food S$197 MM Synear Food Holdings develops, produces and sells quick freeze Holdings food products primarily in China. It offers various traditional Chinese staple food products, including savory dumpling products, glutinous sweet dumpling products, and other products comprising glutinous rice dumpling products, and specialty desserts and snacks. The company sells its products under the Synear brand name. It distributes its products to supermarkets, retail outlets and stores

Source Company Information, Bloomberg and Capital IQ

Note 1 Market capitalisation and FX rates used as of 26 August 2011, being the Latest Practicable Date

51 APPENDIX 1 – LETTER FROM MORGAN STANLEY TO THE INDEPENDENT DIRECTORS

Chart 9 below sets out the valuation statistics for the Comparable Companies:

Chart 9 — Comparable Companies Trading Multiples

(3) Enterprise LTM (1) (2) (4) Local Share Price Market CapValue P / LTM EV / LTM P / Latest ADTV # Broker Company Name Currency (Lcl Currency) (Lcl Currency MM) (S$ MM) (S$ MM) Earnings (x) Sales (x) EBITDA (x) NTA (x) (S$ MM) Coverage HongHong KongKong Li Lisstedted Chin Chinaa F&B F&B (6) Tingyi Cayman Islands Holding HKD 22.05 123,809 19,169 19,646 34.2x 2.1x 15.2x 8.6x 20.6 31 Want Want China Holdings (7) HKD 6.45 85,302 13,207 13,033 30.1x 4.3x 21.0x 9.9x 16.7 29 Tsingtao Brewery Co. (8) HKD 43.75 59,416 9,199 7,897 26.4x 1.9x 14.6x 7.0x 10.8 22 (9) China Mengniu Dairy Co. HKD 24.95 44,101 6,828 5,786 29.0x 1.0x 14.0x 4.2x 24.3 27 China Yurun Food Group (10) HKD 17.66 32,224 4,9894,66610.8x1.0x9.8x2.0x49.6 30 (11) Uni-President China Holdings HKD 4.42 15,910 2,463 2,07337.4x 0.9x 14.9x 1.9x 3.0 13 China Huiyuan Juice Group (12) HKD 3.28 4,848 751 1,259 15.3x 1.6x 14.0x 1.0x 1.7 10 Singingaaporepore Li Lisstedted F&B F&B Fraser & Neave Ltd. (13) SGD 5.70 8,096 8,096 10,267 13.8x 1.7x 9.2x 1.4x 13.1 10 (14) Cerebos Pacific Ltd. SGD 4.82 1,532 1,532 1,445 14.1x 1.5x 7.8x 4.3x 0.3 1 (15) Petra Foods Ltd. SGD 1.78 1,088 1,088 1,696 16.5x 0.8x 11.4x 3.0x 0.3 2 (16) Super Group Ltd. SGD 1.48 825 825 697 15.7x 1.7x 10.1x 2.5x 1.4 5 People's Food Holdings Ltd. (17) SGD 0.70 795 795 379 37.8x0.1x5.2x0.8x0.51 (18) Synear Food Holdings Ltd. SGD 0.14 197 197 62 12.3x 0.2x 1.7x 0.4x 0.8 0 AverageAverage 23.0x23.0x 1.5x 11.8x11.8x 3 3.5x.5x MedianMedian 21.4x 1.6x 12.7x 2.3x2.3x (5) Hsusu FFuu ChiChi (L (Lateatesst tPr Practicableacticable D aDate)te) (19) SGDSGD 4.16 4.16 3,3307,307 3,3307,307 3,0293,029 26. 26.3x3x 3.1x3.1x 15.9x 15.9x 6.5x 6.5x 0.3 0.3 (5) 1 1 (5) Hssuu FFuu ChiChi ( (SSchemecheme Con Considersideration)ation) (19) SGDSGD 4.3 4.535 3,453,458383,45,458383,179,179 27.4x 27.4x 3.2x3.2x 16.6x 16.6x 6.8 6.x0.8x0.3 3 (5) 1 1

Source Company Filings and FactSet as of 26 August 2011

Notes 1 Market capitalisation calculated on a fully diluted basis assuming treasury stock method and foreign exchange conversion rate as at 26 August 2011 2 Enterprise Value calculated as equity value + net debt + minority interest – associate interest 3 Last twelve month average daily trading value in S$ MM (Source: FactSet) 4 Based on the latest analyst coverage as of 26 August 2011 (Source: FactSet) 5 Calculated as average daily turnover over the last twelve months (Source: Bloomberg) 6 Financial information reflects data for the last twelve months ended 30 June 2011, with total shares outstanding and share options as of 31 July 2011. EBITDA figures from reported filings and net income figures have been adjusted for extraordinary items such as gains or losses on sale of PP&E, gain on discontinuation of associates, impairment on PP&E, and impairment on intangibles; 25% marginal tax rate applied to net income adjustments 7 Financial information reflects data for the last twelve months ended 30 June 2011, with total shares outstanding and share options as of 31 July 2011. Figures adjusted for extraordinary items such as gains or losses on sale of PP&E and financial assets and gains from waived liabilities; 25% marginal tax rate applied to net income adjustments 8 Financial information reflects data for the last twelve months ended 30 June 2011, with total shares outstanding and share options as of 31 July 2011. Market capitalisation includes both HK-listed H-shares and Shanghai listed A- shares. Figures adjusted for extraordinary items such as gains or losses on sale of assets and impairment loss on assets; 25% marginal tax rate applied to net income adjustments 9 Financial information reflects data for the last twelve months ended 31 December 2010, with total shares outstanding and share options as of 31 July 2011. Share Option tranches have been adjusted for changes based on monthly return filings on a weighted basis. Intangibles include land use rights. Figures adjusted for extraordinary items such as gains or losses on sale of PP&E and associates; 25% marginal tax rate applied to net income adjustments 10 Financial information reflects data for the last twelve months ended 30 June 2011, with total shares outstanding and share options as of 31 July 2011. Figures adjusted for extraordinary items such as gains or losses on sale of PP&E and financial assets, and recognition of negative goodwill; 25% marginal tax rate applied to net income adjustments 11 Financial information reflects data for the last twelve months ended 30 June 2011, with total shares outstanding and share options as of 31 July 2011. Figures adjusted for extraordinary items such as gains or losses on sale of PP&E and financial assets and reversal of impairment of receivables; 25% marginal tax rate applied to net income adjustments

52 APPENDIX 1 – LETTER FROM MORGAN STANLEY TO THE INDEPENDENT DIRECTORS

12 Financial information reflects data for the last twelve months ended 30 June 2011, with total shares outstanding and share options as of 31 July 2011. Adjusted for extraordinary items such as gains or losses on sale of PP&E; 25% marginal tax rate applied to net income adjustments 13 Financial information reflects data for the last twelve months ended 30 June 2011, with total shares outstanding as of 30 June 2011 and share options as of 31 December 2010. EBITDA adjusted for extraordinary items such as gains or losses on sale of fixed assets, provisions on land premium, sale of derivatives, fair value loss of derivatives, and impairment of fixed and intangible assets. Reported net profit excludes extraordinary items 14 Financial information reflects data for the last twelve months ended 30 June 2011, with total shares outstanding and as of 30 June 2011 and share options as of 31 December 2010. Adjusted for extraordinary items such as gains or losses on sale of PP&E, PP&E write-off, allowance of impairment loss for PP&E, insurance recovery, and sale of subsidiaries; 17% marginal tax rate applied to net income adjustments 15 Financial information reflects data for the last twelve months ended 30 June 2011, with total shares outstanding and share options as of 30 June 2011. Adjusted for extraordinary items such as gains or losses on sale of PP&E; 17% marginal tax rate applied to net income adjustments 16 Financial information reflects data for the last twelve months ended 30 June 2011, with total shares outstanding and as of 30 June 2011 and share options as of 31 December 2010. Adjusted for extraordinary items such as gains or losses on sale of PP&E and joint venture company, fair value loss on securities, impairment loss on PP&E and gain on disposal of securities; 17% marginal tax rate applied to net income adjustments 17 Financial information reflects data for the last twelve months ended 30 June 2011, with total shares outstanding and share options as of 30 June 2011. Adjusted for extraordinary items such as fair value gains or losses; 25% marginal tax rate applied to net income adjustments 18 Financial information reflects data for the last twelve months ended 30 June 2011, with total shares outstanding and share options as of 30 June 2011. Adjusted for extraordinary items such as gains or losses on sale of PP&E; 25% marginal tax rate applied to net income adjustments 19 Financial information reflects data for the last twelve months ended 30 June 2011, with total shares outstanding and share options as of 30 June 2011. Adjusted for extraordinary items such as gains or losses on sale of PP&E, reversal of deferred tax liabilities and impairment on PP&E; 16.5% marginal tax rate applied to net income adjustments; total debt includes bills payable and intangibles include land rights

Based on Chart 9, we note that:

Hong Kong-listed Comparable Companies are generally larger, have greater liquidity and trade at higher multiples than Singapore-listed Comparable Companies; and

The Company’s market capitalisation, liquidity and broker research coverage are generally more consistent with the Singapore-listed Comparable Companies.

We also note that at the Scheme Consideration:

The implied multiples are within the range of the Hong Kong-listed Comparable Companies across P/E, EV/EBITDA, EV/Sales and P/NTA;

The implied multiples are within the range of the Singapore-listed Comparable Companies for P/E and above the range for EV/Sales, EV/EBITDA and P/NTA; and

Overall, the implied multiples are within the range of the Comparable Companies. The implied P/E, EV/EBITDA, EV/Sales and P/NTA multiples are above the average and median of the Comparable Companies.

53 APPENDIX 1 – LETTER FROM MORGAN STANLEY TO THE INDEPENDENT DIRECTORS

The above comparison with the Comparable Companies is for illustrative purposes only. The Comparable Companies may not be directly comparable with the Company and may vary with respect to, amongst other factors: the geographical spread of activities, business mix and model within the F&B industry, size of the addressable market for their products, scale of operations, asset intensity, financial leverage, accounting policies, risk profile, tax factors and track record and future prospects. Accordingly, the Comparable Companies may not provide a meaningful basis for valuation comparison.

The underlying financial data used to calculate the P/E, EV/EBITDA, EV/Sales and P/NTA in our analysis have been extracted from the relevant companies’ financials, Bloomberg and FactSet as at the Latest Practicable Date. Morgan Stanley makes no representations or warranties, express or implied, as to the accuracy or completeness of such information.

8.5. Precedent Transaction Analysis We have reviewed selected recent transactions involving the acquisitions of equity interests in F&B companies in Asia Pacific, and for which information is publicly available (“Selected Asia F&B Precedent Transactions”).

A brief description of the companies selected for our analysis is set out below:

Table 5 — Companies Underlying Selected Asia F&B Precedent Transactions

Stake Date of Acquired Description Target Announcement (%) (at time of acquisition)

Asia F&B - Control Transactions

China Huiyuan 3-Sep-08 100% China Huiyuan Juice Group is the leading PRC fruit and Juice Group vegetable juice producer in China. According to AC Nielsen, Huiyuan Juice was the largest 100% juice series and nectars producer in China, ranked by sales volume for the twelve months ended 31 December 2007. Huiyuan Juice possesses an extensive nationwide distribution network as well as plants at strategic locations

Asia F&B - Minority Transactions

Fraser & Neave 26-Jul-10 15% Fraser & Neave Ltd. is a Singapore-listed conglomerate Ltd. involved in food and beverage, brewery and real estate businesses. F&N’s food and beverage business is focused on soft drinks and dairy products, and operates through an extensive network in the Southeast Asian market including Singapore, Thailand and Malaysia

Sichuan Swellfun 01-Mar-10 21% Sichuan Swellfun Co. is the fourth largest super premium Co. Chinese white spirits brand by volume in China. The company is currently listed on the Shanghai Stock Exchange (600779)

Hsu Fu Chi 2-Sep-09 15% Hsu Fu Chi International, registered in China in 1992, International was founded by four Hsu brothers from Taiwan. Over 99% of the Group’s confectionery products are sold in China. As at the financial year ended 30 June 2009, the Group had 97 sales branches in China. The Group’s sales team comprised over 8,000 sales personnel managing a mix of modern and traditional sales channels consisting of more than 13,170 direct retail points; amongst which 3,060 specialty counters staffed by dedicated promoters were deployed in hypermarkets and supermarkets

54 APPENDIX 1 – LETTER FROM MORGAN STANLEY TO THE INDEPENDENT DIRECTORS

Stake Date of Acquired Description Target Announcement (%) (at time of acquisition)

Asia F&B - Minority Transactions

China Mengniu 6-Jul-09 20% China Mengniu Dairy Company manufactures and Dairy Company distributes dairy products. The company’s products include liquid milk products such as ultra heat-treated milk, yogurt, milk beverages, ice cream and other dairy products, such as milk powder and milk tablets. The company manufactures dairy products under the Mengniu brand. China Mengniu Dairy Company was founded in 1999 and is headquartered in Hong Kong

Tsingtao Brewery 23-Jan-09 20% Tsingtao Brewery Co. was founded in 1903 and is one of Co. the oldest breweries in China. As the company has regularly expanded its distribution capabilities in the country and has actively invested in business opportunities, Tsingtao has become one of the top breweries in terms of production as well as sales in China

Want Want 17-May-07 25% Want Want Group began operations with I Lan Foods Holdings Industrial Co., Ltd in Taiwan in May 1962, as a manufacturer of canned agricultural products mainly for export. The principal activities of the Group are the manufacturing and trading of snack foods, beverages and related products. The Group has also ventured into hospital, hotel and property businesses

Source Company Information, News Reports and Capital IQ

Chart 10 below sets out the implied valuation metrics for the Selected Asia F&B Precedent Transactions.

Chart 10 — Selected Asia F&B Precedent Transactions

(3) Target Enterprise Value Enterprise Value /LTM Prem to 1 Day (1) (2) (2) Announ. Date Acquiror Target Country % Stake (S$ MM) Sales EBITDA LTM P/E Prior Price Asia F&B-Control Transactions (4) 3-Sep-08 Coca Cola China Huiyuan Juice China 100%3,645 6.7x 40.3x 60.6x 195.0% Asia F&B-Minority Transactions 26-Jul-10 Kirin Holdings(5) Fraser & Neave Singapore 15% 13,203 2.2x 10.9x 15.0x 13.0% 1-Mar-10 Diageo(6) Sichuan Swellfun China 21% 2,040 8.6x 28.5x 44.1x (0.6%) 2-Sep-09 Baring PE(7) Hsu Fu Chi China 15% 1,026 1.3x6.1x12.6x2.6% 6-Jul-09 COFCO/Hopu(8) China Mengniu Dairy Company China 20% 4,968 1.0x 67.2x NM (7.9%) 8-May-09 Chen Fashu(9) Tsingtao Brewery China 7% 4,694 1.3x 12.0x 29.0x (11.9%) (10) 23-Jan-09 Asahi Breweries Tsingtao Brewery China 20% 4,852 1.4x 13.5x 35.3x 37.7% 14-May-07 Want Want InternationalW(11) ant Want Holdings China 25% 4,667 3.3x15.2x23.0x 15.0% Average (Asia F&B-Minority Transactions) 2.7x 21.9x 26.5x 6.9% Median (Asia F&B-Minority Transactions) 1.4x 13.5x 26.0x 2.6% 11-Jul-11 Nestlé(12) (13) Hsu Fu Chi China 60% 3,179 3.2x 16.6x 27.4x 8.7%

Source Comany Filings, FactSet and MergerMarket

Notes

1 Enterprise Value based on transaction price per share and diluted total shares outstanding adjusted for options outstanding using Treasury Stock Method. Net Debt as on the latest filings on the date of acquisition and includes minority interest. Enterprise Value adjusted for associates. Conversion to S$ using exchange rate as on the date of announcement

55 APPENDIX 1 – LETTER FROM MORGAN STANLEY TO THE INDEPENDENT DIRECTORS

2 EBITDA and net income adjusted for one-off items and exceptional items. Tax effect of these adjustments applied using marginal tax rate as disclosed in the company filings

3 Sourced from company press releases where disclosed, otherwise closing price sourced from FactSet as on one trading day prior to the date of announcement of the transaction

4 Enterprise Value based on disclosed offer amounts in The Coca Cola Company and China Huiyuan Juice Group Limited joint announcement dated 3 September 2008 comprising of consideration for shares, convertible bonds and options outstanding aggregating to HK$19,647 MM. Convertible bonds and options assumed to be converted and exercised. EBITDA and Net Income LTM to the period of 30 June 2008 and adjusted for interest on subscription monies from IPO shares, gain on disposal of PPE and donations to Red Cross. Net income adjustments tax-effected at marginal tax rate of 33%. The proposed acquisition was blocked by MOFCOM

5 Enterprise Value based on acquisition price of S$6.5 per share. Enterprise Value excludes net book value of joint ventures. EBITDA and net income LTM to the period of 30 June 2010 and adjusted for loss on sale of fixed assets. Net income adjustments tax-effected at marginal tax rate of 17%

6 Enterprise Value based on Mandatory Tender Offer price per share of CNY21.45. EBITDA and net income LTM to the period of 30 September 2009 and adjusted for impairment loss, gain/loss on disposal of PPE. Diageo holds 53% of Quanxing Group post transaction, which in turn holds 39.7% in Swellfun. Stake acquired calculated as the effective interest held by Diageo in Swellfun

7 Enterprise Value based on acquisition price of S$1.55 per share as disclosed in the substantial shareholder notice and net debt as on 30 June 2009. EBITDA and net income LTM to the period of 30 June 2009 and excludes loss on disposal of PPE. Net income adjustments tax-effected at marginal tax rate of 17%

8 Enterprise Value based on acquisition price per share of HK$17.6 and Net Debt as on 31 December 2008. EBITDA and net income LTM to the period of 31 December 2008 and excludes write off and write downs of inventories pursuant to melamine scandal and loss of disposal of PPE. Net income adjustments tax-effected at marginal tax rate of 25%. COFCO further increased its stake to 28.0% on 13 July 2011. P/E is shown NM as LTM net profit is negative

9 Enterprise Value based on acquisition price per share of HK$19.83 and net debt as on 31 March 2009. EBITDA and net income LTM to the period of 31 March 2009 and excludes gain from changes of fair value, asset impairment and gain or loss from sale of assets. Net income adjustments tax-effected at marginal tax rate of 25%

10 Enterprise Value based on acquisition price per share of HK$19.2 and net debt as on 30 September 2008. EBITDA and net income LTM to the period of 30 September 2008 and excludes gain from changes of fair value, asset impairment and gain or loss from sale of assets. Net income adjustments tax-effected at marginal tax rate of 25%

11 Enterprise Value based on offer price of US$2.35 per share and net debt as on 31 March 2007. EBITDA, and net income LTM to the period of 31 March 2007 excluding gain on disposal of trading investments, reversal for diminution in value of investment, under-provision of tax in respect of prior years, loss on sale of disposal of PPE and fair value (gain) loss of available-for-sale investments. Net income adjustments tax-effected at marginal tax rate of 25%

12 Enterprise Value based on the offer price of S$4.35 per share and net debt as on 30 June 2011. EBITDA and net income LTM to the period of 30 June 2011 adjusted for loss on disposal of PPE, impairment and reversal of deferred tax liabilities. Net income adjustments tax-effected at marginal tax rate of 16.5%

13 Nestlé also acquired 60% stake in Yinlu Food Group in April 2011. The transaction value was not disclosed publicly

The Selected Asia F&B Precedent Transactions are provided for illustrative purposes only. The Selected Asia F&B Precedent Transactions and the acquired companies may not be directly comparable with the Scheme and the Company and may vary with respect to, amongst other factors: the acquisition of minority versus controlling stakes in the transactions, the liquidity of the underlying shares in the acquired companies and the prevailing market conditions at the time of the transactions, as well as the geographical spread of activities, business mix and model within the F&B industry, size of the addressable market for their products, scale of operations, asset intensity, financial leverage, accounting policies, risk profile, tax factors, track record and future prospects of the acquired companies. Accordingly, the Selected Asia F&B Precedent Transactions may not provide a meaningful basis for valuation comparison.

56 APPENDIX 1 – LETTER FROM MORGAN STANLEY TO THE INDEPENDENT DIRECTORS

We further wish to highlight that underlying financial data used to calculate the P/E, EV/EBITDA, EV/Sales and premia in our analysis have been extracted from the relevant companies’ financials, Bloomberg and FactSet as at the Latest Practicable Date. Morgan Stanley makes no representations or warranties, express or implied, on the accuracy or completeness of such information.

Based on Chart 10, we note that at the Scheme Consideration:

The implied EV/Sales multiple is above the average and the median of the minority transactions among the Selected Asia F&B Precedent Transactions;

The implied EV/EBITDA multiple is below the average and above the median of the minority transactions among the Selected Asia F&B Precedent Transactions;

The implied P/E multiple is above the average and the median of the minority transactions among the Selected Asia F&B Precedent Transactions; and

The premium implied by the Scheme Consideration is above the average and median 1-day offer premium for the minority transactions among the Selected Asia F&B Precedent Transactions.

We also note specifically that:

Baring Private Equity acquired a 15 per cent. stake in Hsu Fu Chi from Transpac Capital in 2009; the transaction occurred at P/E, EV/EBITDA and EV/Sales multiples of 12.6 times, 6.1 times and 1.3 times, respectively; and

Want Want International conducted a take-private of Want Want Holdings in 2007. Want Want Holdings was listed in Singapore and the transaction occurred at P/E, EV/EBITDA and EV/Sales multiples of 23.0 times, 15.2 times and 3.3 times, respectively.

We have also reviewed selected recent transactions involving the acquisitions of majority interests in Confectionery and Bakery companies globally and for which information is publicly available (“Selected Global Confectionery and Bakery Precedent Transactions”).

A brief description of the companies selected for our analysis is set out below:

Table 6 — Companies Underlying Selected Global Confectionery and Bakery Precedent Transactions

Stake Target Date ofAcquired Description Announcement (%) (at time of acquisition)

Global Confectionery and Bakery

Cadbury 19-Jan-10 100% Cadbury is a UK-based manufacturer of beverages and confectionery products. The company offers Chocolates under key brands like Cadbury Dairy Milk, Cadbury Creme Egg, Flake and Green & Black’s; Gum under key brands like Trident, Hollywood, Stimorol, Dentyne, Clorets and Bubbaloo; and Candy under key brands like Halls, Maynards, The Natural Confectionery Co. and Cadbury Eclairs

57 APPENDIX 1 – LETTER FROM MORGAN STANLEY TO THE INDEPENDENT DIRECTORS

Stake Target Date ofAcquired Description Announcement (%) (at time of acquisition)

Wm. Wrigley Jr. 28-Apr-08 100% Wm. Wrigley Jr. Company is a recognised leader in Company confections with a wide range of product offerings including gum, mints, hard and chewy candies, lollipops, and chocolate. The company distributes its brands in more than 180 countries. Three of these brands - Wrigley’s Spearmint, Juicy Fruit, and Altoids - have heritages stretching back more than a century. Other well-known brands include Doublemint, Life Savers, Big Red, Boomer, Pim Pom, Winterfresh, Extra, Freedent, Hubba Bubba, Orbit, Excel, Creme Savers, Eclipse, Airwaves, Solano, Sugus, P.K., Cool Air and 5

Godiva 20-Dec-07 100% Godiva Chocolatier was established in Brussels in 1926 Chocolatier by Joseph Daps and has been producing premium chocolate products for 80 years. The Godiva brand serves its customers through 450 standalone boutiques and 9,300 sales points worldwide with products ranging from premium chocolates to biscuits, from coffee to cocoa, chocolate drinks, cakes and chocolate bars. Godiva offers its products throughout four geographies including North America, Japan, the Pacific region and Europe

Danone (Biscuits 3-Jul-07 100% The company includes all of Groupe Danone Biscuits & & Cereals) Cereals division except Groupe Danone’s stakes in Britannia and Arcor JV. It has 15,000 employees, 36 manufacturing plants and a leading portfolio in more than 22 countries. Danone (Biscuits & Cereals) operates in more than 15 countries

Burton’s Foods 18-Mar-07 100% Burton’s Foods owns popular biscuit brands in the U.K. such as Maryland Cookies, Jammie Dodgers and Wagon Wheels. The company bakes and sells under license a wide range of Cadbury chocolate biscuits, including Cadbury Fingers and Cadbury Chocolate Digestives. Burton’s brands all occupy strong positions, largely No.1 or No.2 in the key market segments in which they participate. The company serves all the major grocery retailers in the U.K. with branded and own label products and has significant exports to Scandinavia, France and the US. Founded in the 1930s, it was acquired by Associated British Foods in 1949. The company was sold to Hicks, Muse, Tate and Furst in 2000 and subsequently merged with the Horizon Biscuit Company Ltd.

A. Korkunov 23-Jan-07 80% Founded in 1999 by two Russian entrepreneurs, Andrey Chocolatier Inc. Korkunov and Sergey Lyapuntsov, A. Korkunov Chocolatier Inc. has become the seventh largest player in the Russian chocolate category, which has an estimated value of US$3.7 billion. It is also the #2 player in the overall premium-boxed chocolate segment, with its namesake brand — A. Korkunov — the top-seller in that highly competitive segment

58 APPENDIX 1 – LETTER FROM MORGAN STANLEY TO THE INDEPENDENT DIRECTORS

Stake Target Date ofAcquired Description Announcement (%) (at time of acquisition)

Kraft (Sugar 15-Nov-04 100% Kraft’s sugar confectionery business includes the Life Confectionery) Savers, Creme Savers, Altoids, Trolli and Sugus brands, which represent approximately 1.5% of Kraft’s global revenues. The company operates sugar confectionery manufacturing facilities in Creston, IA; Chattanooga, TN; Brasov, Romania; and Bridgend and UK

Adams 17-Dec-02 100% Adams Confectionery is a branded global confectionery Confectionery manufacturer with presence across 70 countries. In 2001, Adams had a 3.3% share of the total global retail confectionery market and within this 25.5% of the retail market for functional confectionery. Adams has significant market presence and operations in North, Central and South America, which accounted for 75% of sales in 2001. Adams is also represented in Europe, Africa, the Middle East and Asia. It has an established presence in a number of developing markets, principally Latin America, which in aggregate accounted for around 40% of sales in 2001

Source Company Press Releases, News Reports and Capital IQ

Chart 11 below sets out the implied valuation metrics for the Selected Global Confectionery and Bakery Precedent Transactions.

Chart 11 — Selected Global Confectionery and Bakery Precedent Transactions

(1) (3) Target Enterprise Value Enterprise Value /LTM Prem to 1 Day (2) (2) Announ. Date Acquiror Target Country % Stake (S$ MM) Sales EBITDA LTM P/E Prior Price 19-Jan-10 Kraft Foods (4) Cadbury UK 100% 30,161 2.3x 13.1x 22.7x 5.3% 28-Apr-08 Mars (5) William Wrigley USA 100%30,6894.0x17.8x 32.6x 28.0% 20-Dec-07 Ülker (6) Godiva USA 100% 1,242 1.7x 15.0x NA NA 3-Jul-07 Kraft Foods(7) Danone (Biscuits & Cereals)France 100% 11,046 2.7x 13.6x NM NA 18-Mar-07 Duke (8) Burton's UK 100% 665 0.8x 8.2x 17.0x NA 23-Jan-07 Wrigley (9) Korkunov Russia 80% 575 3.8x NA NA NA 15-Nov-04 Wrigley (10) Kraft (Sugar Confectionery) USA 100% 2,446 3.0x NA NA NA 17-Dec-02 Cadbury Schweppes(11) Adams Confectionery USA 100% 7,3322.0x12.8xNANA Average 2.5x 13.4x 24.1x 16.6% Median 2.5x 13.4x 22.7x 16.6% 11-Jul-11 Nestlé (12) (13) Hsu Fu Chi China 60% 3,179 3.2x 16.6x 27.4x 8.7%

Source Company Data and FactSet

Notes

1 Enterprise value based on offer price per share and diluted shares outstanding adjusted for options outstanding using Treasury Stock Method. Net Debt as on the latest filings on the date of acquisition and includes minority interest. Enterprise value adjusted for associates. Conversion to S$ using exchange rate as on the date of announcements

2 EBITDA and net income adjusted for one-off items and exceptional items. Tax effect of these adjustments applied using marginal tax rate as disclosed in the company filings

3 Sourced from company press releases where disclosed, otherwise closing price sourced from FactSet as on one trading day prior to the date of announcement of the transaction

4 Enterprise value based on offered share price GBP8.5 per share (which includes special dividend to be paid by Kraft to shareholders of Cadbury of 10 pence) and net debt as on 31 December 2009 and includes retirement obligations. EBITDA and Net Income LTM to the period of 31 December 2009

59 APPENDIX 1 – LETTER FROM MORGAN STANLEY TO THE INDEPENDENT DIRECTORS

5 Enterprise value based on the offer price of US$80 per share and net debt as on 31 March 2008. EBITDA and Net Income LTM to the period of 31 March 2008 and excludes restructuring charges and net loss/gain on sale of assets. Net income adjustments tax-effected at marginal tax rate of 32%

6 Enterprise value, sales and EBITDA multiples as reported by Campbell in press release. LTM to the period of 31 December 2006

7 Valuation multiples based on the financials as disclosed by Danone in its investor presentation. LTM to the period of 31 December 2006. Business was effectively a sale on a 100% debt free basis, therefore P/E is not meaningful

8 Consideration as reported by Duke Street Capital’s announcement assumed as enterprise value. Burton financials for year ending December 2006

9 Consideration of US$300 MM for 80% stake assumed to be including net debt. Net sales as reported by Wrigley’s press release

10 Purchase price of US$1.48 Bn assumed as enterprise value. Sales for 2004 sourced from press release information

11 Valuation multiples (based on Dec-01 financials) as reported by Cadbury in its press release

12 Enterprise value based on the offer price of S$4.35 per share and TSO of 795 MM and net debt as on 30 June 2011. EBITDA and Net Income LTM to the period of 30 June 2011 adjusted for loss on disposal of PPE, impairment and reversal of deferred tax liabilities. Net income adjustments tax-effected at marginal tax rate of 16.5%

13 Nestlé also acquired 60% stake in Yinlu Food Group in April 2011. The transaction value was not disclosed publicly

The Selected Global Confectionery and Bakery Precedent Transactions are provided for illustrative purposes only. The Selected Global Confectionery and Bakery Precedent Transactions and the acquired companies may not be directly comparable with the Scheme and the Company and may vary with respect to, amongst other factors: the liquidity of the underlying shares in the acquired companies and the prevailing market conditions at the time of the transactions, the geographical spread of activities, business mix and model within the confectionery and bakery industry, size of the addressable market for their products, scale of operations, asset intensity, financial leverage, accounting policies, risk profile, track record and future prospects. Accordingly, the Selected Global Confectionery and Bakery Precedent Transactions may not provide a meaningful basis for valuation comparison.

The underlying financial data used to calculate the P/E, EV/EBITDA, EV/Sales and premia in our analysis have been extracted from the relevant companies’ financials and FactSet as at the Latest Practicable Date. Morgan Stanley makes no representations or warranties, express or implied, on the accuracy or completeness of such information.

Based on Chart 11, we note that at the Scheme Consideration:

The implied EV/Sales multiple is above the average and the median of the Selected Global Confectionery and Bakery Precedent Transactions;

The implied EV/EBITDA multiple is above the average and the median of the Selected Global Confectionery and Bakery Precedent Transactions; and

The implied P/E multiple is above the average and the median of the Selected Global Confectionery and Bakery Precedent Transactions.

60 APPENDIX 1 – LETTER FROM MORGAN STANLEY TO THE INDEPENDENT DIRECTORS

8.6. Precedent Take-over Analysis We have selected take-over transactions in Singapore resulting in a change of control, announced and completed between 1 January 2007 and the Latest Practicable Date. The transaction sizes implied by the respective take-overs are greater than S$100 million and only those transactions where only cash was offered as consideration were considered.

Chart 12 sets out the premia/discounts implied by the various transaction prices compared to the closing prices of each target 1-day prior to the relevant offer announcement and the VWAP for the 1-month, 3-month, 6-month and 12-month periods prior to the relevant take-over announcement.

Chart 12 — Precedent Take-overs in Singapore

(1) PremiPremiumum / / (Di(Disscocount)unt) Prior Prior to toPre-Anno Pre-Announcementuncement Sha Srehare Price Price (2) Date of Closinging VWAP

Announcement Target Name Acquiror Name 1D 1M 3M6M12M (4) 29-Oct-10 Thomson Medical Centre Ltd Sasteria Pte Ltd 62.0% 69.4%(3)(82.5% 3)(100.2%3)(120.9% 3)

28-Jun-10 Design Studio Furniture Manufacturer Ltd (5) Depa Interiors LLC 36.8% 35.7% 23.8% 4.7% 17.3%

26-Jul-10 Parkway Holdings Ltd Integrated Healthcare Holdings Ltd 30.8% 20.4% 23.1% 29.1% 68.1%

(6) 18-Jan-10 Hongguo International Holdings Ltd Info Giants Investments Limited 37.2%31.4%35.5%36.8% 69.5%

(3)(3)(3)(3) 7-Sep-09 Chartered Semiconductor Manufacturing Ltd (7) Advanced Tech Invest Co LLC 22.9% 41.1% 63.8% 61.7% 43.3%

24-Aug-09 Sihuan Pharmaceutical Holdings China Pharma 27.5% 24.4% 33.2% 36.4% 46.4%

(8) 21-Jun-09 Singapore Petroleum Company Ltd PetroChina International Pte Ltd 24.0% 52.1% 90.0% 120.8% 54.3%

(3) 20-Jan-09 Singapore Food Industries Ltd (9) Singapore Airport Terminal Services 24.8% 25.2% 24.0% 20.5% 19.3%

(10) (3) 10-Jun-08 SNP Corp Ltd Toppan Printing Co Ltd 8.0% 14.7% 22.0% 25.4% 57.9%

(11) 7-Jun-08 Unisteel Technology Ltd Latch Holding (Labuan) Ltd 39.3% 44.0%(3) 46.7% (3) 27.8%(3) 1.8%(3)

4-Feb-08 AsiaPharm Group Ltd (12) LuYe Pharmaceutical Investment 14.2% 31.1% 32.1% 28.1% 6.1%(3)

(13) 20-Jan-08 Robinson & Co Ltd ALF Global Pte Ltd 61.4% 64.4% 60.4% 54.5% 45.7%

(14) 6-Jan-08 Straits Trading Co Ltd Cairns Pte Ltd 35.1% 30.4% 35.1% 41.9% 50.6%

(3) 5-Dec-07 Frontline Technologies Corporation Ltd (15) BT Singapore Pte Ltd 28.9% 33.9% 38.2% 38.4% 45.8%

(3) 29-Oct-07 Labroy Marine Ltd Dubai Drydocks World LLC 3.4% 9.2% 19.8% 18.1% 28.1%

7-Aug-07 ECS Holdings Ltd VST Holdings Ltd 6.0% 9.1%(3)(13.3% 3)(20.3%3)(29.2% 3) (16) 27-Jun-07 United Test and Assembly Center Ltd Global AT&T Electronics Ltd 31.9% 30.6%(3)(30.8% 3)(36.8%3)(48.3% 3)

(17) (3) 13-Jun-07 Sembawang Kimtrans Ltd Toll Express (Asia) Pte Ltd 12.7% 13.9% 15.1% 16.4% 20.7%

(18) 28-May-07 Pan-United Marine Ltd Dubai Drydocks World LLC 3.0% 14.4% 21.7% 33.0% 61.7% (19) 22-May-07 Amtek Engineering Ltd Metcomp Co (Singapore) Pte Ltd 41.0% 51.3% 59.0% 66.3% 77.2%

(3)(3)(3)(3) 5-Apr-07 MMI Holdings Ltd (20) Precision Capital Pte Ltd 16.2% 28.5% 43.7% 62.4% 86.3%

(21) 4-Mar-07 RSH Ltd Golden Ace Pte Ltd (12.5%) 7.0% 35.2% 41.8% 43.7% (22) 1-Mar-07 Stats ChipPAC Ltd Singapore Tech Semiconductors 18.2% 21.8%(3)(33.2% 3)(46.4%3)(53.1% 3)

8-Jan-07 Guthrie GTS Ltd(23) Alam Indah Bintan Pte Ltd 3.6% 22.5% 29.5% 47.0% 62.3%

Average 24.0% 30.3% 38.0% 42.3% 48.2% Median 24.4% 29.4% 33.2% 36.8% 47.3% Minimum (12.5%) 7.0% 13.3% 4.7% 1.8% Maximum 62.0% 69.4% 90.0% 120.8% 120.9%

(24) (3)(3)(3)(3) 11-Jul-11 Hsu Fu Chi Nestlé S.A. 8.7% 9.5% 12.5% 16.8% 33.5%

Source Relevant Company Filings and Bloomberg

Notes

1 Premia calculated over the closing price of each target company one day prior to the relevant take-over announcement and the VWAP of 1 month, 3 months, 6 months and 12 months prior to the relevant take-over announcement

2 Bloomberg VWAP for the relevant periods as stated in the Offer Documents for each transaction

3 VWAP calculated as average daily trading value divided by average daily trading volume for the relevant period

61 APPENDIX 1 – LETTER FROM MORGAN STANLEY TO THE INDEPENDENT DIRECTORS

4 On 29 October 2010, Sasteria Pte Ltd (“Sasteria”) and Thomson Medical Centre Ltd’s (“Thomson Medical”) founder, Dr Cheng Wei Chen entered into a married deal for 39.34 per cent. for S$1.75. With this purchase, Sasteria was required to make a mandatory conditional cash offer for Thomson Medical. The mandatory offer was conditional on Sasteria acquiring more than 50 per cent. of the shares in the capital of Thomson Medical. Premia have been calculated with reference to 28 October 2008, being the last trading day prior to the Announcement Date

5 On 28 June 2010, CIMB Bank Berhad, on behalf of Depa Interiors LLC (“Depa Interiors”), announced its intention to make a voluntary conditional cash offer for the shares in the capital of Design Studio Furniture Manufacturer Ltd (“Design Studio”) at a price of S$0.55. On 2 August 2010, Depa Interiors announced that it had acquired an additional 26.45 per cent. of Design Studio’s shares for S$0.65, increasing Depa Interiors’ stake in Design Studio to approximately 51.22 and triggering the conversion of Depa Interiors’ offer to a mandatory cash offer. The market premia in the table above were computed based on the final offer price of S$0.65 and market prices prior to the first offer announcement on 28 June 2010. In computing the premium of the offer price over the last transacted price, the last transacted price on 25 June 2010 has been used

6 VWAP figures as shown in offer document based on Capital IQ

7 On 29 May 2009, the Singapore Business Times reported a possible acquisition by ATIC of Chartered Semiconductor Manufacturing Ltd (“Chartered”) shares held by Singapore Technologies Semiconductors Pte Ltd. Following this report, Chartered issued a holding announcement on the same day. Premia have been calculated with reference to 28 May 2009, being the day of the last transacted price prior to the commencement of market speculation

8 On 24 May 2009, a pre-conditional offer for Singapore Petroleum Co Ltd (“Singapore Petroleum”) was announced, in conjunction with a purchase of a 45.5 per cent. stake in Singapore Petroleum. The offer premia in the above table are referenced against the pre-conditional offer announcement date

9 Premia calculated with reference to 21 October 2008, being the last full day prior to the query of the SGX-ST regarding a substantial increase in the price of shares for Singapore Food Industries Limited (“SFI”). On 23 October 2008, SFI announced that Ambrosia Investment Pte. Ltd. was evaluating options in respect of its stake in SFI

10 Premia calculated with reference to 17 April 2008, being the last trading day prior to SNP Corp Ltd’s (“SNP”) announcement that it had been informed by its majority shareholder, Green Dot that Green Dot was evaluating options with respect to its 54% stake in SNP

11 On 16 April 2008, Unisteel Technology Ltd (“Unisteel”) replied to a query by the SGX-ST regarding the substantial increase in Unisteel’s share price on 15 April 2008 that Unisteel was in the preliminary stages of reviewing strategic options. On 7 June 2008, the proposed acquisition relating to Unisteel was announced. The market premia in the table above were computed with reference to 14 April 2008, being the last full day of trading prior to the query by SGX-ST on 15 April 2008

12 Premia calculated with reference to 30 January 2009, being the last trading day prior to high trading volumes and substantial price increases in AsiaPharm Group Ltd shares, leading to a suspension of the shares on 31 January 2008 prior to the announcement date on 4 February 2008

13 On 20 January 2008, ALF Global Private Ltd (“ALF”) announced its intention to make a voluntary conditional cash offer for the shares in the capital of Robinson and Company Limited at a price of S$6.25. Subsequently, ALF increased the offer price to S$7.00 on 17 March 2008, and to S$7.20 on 3 April 2008. The bid premia in the table above were computed based on the final offer price of S$7.20 and market prices prior to the first offer announcement on 20 January 2008

14 On 6 January 2008, Standard Chartered Bank on behalf of The Cairns Pte Ltd (“The Cairns”) announced its intention to make a voluntary conditional cash offer for the shares in the capital of The Straits Trading Company Limited at a price of S$5.70. Subsequently, The Cairns increased the offer price to S$6.50 on 28 January 2008, and to S$6.70 on 18 February 2008. The market premia in the table above were computed based on the final offer price of S$6.70 and market prices prior to the first offer announcement on 6 January 2008. In computing the premium of the offer price over the last transacted price, the last transacted price on 4 January 2008 had been used.

15 Premia calculated with reference to 30 November 2007, being the last full trading day preceding 3 December 2007, the date on which Frontline requested for a trading halt for its shares

16 Premia calculated with reference to 1 June 2007, being the last trading day prior to the publication of the DBS Group research report saying that United Test and Assembly Center Ltd was a “good buyout candidate”

17 On 13 June 2007, Toll Express (Asia) Pte Ltd (“Toll Express”) launched a voluntary general offer for Sembawang Kimtrans Ltd at $0.70 per share. In the event that Toll Express acquired not less than 90% of shares of the shares not already owned by Toll Express, the offer price would be revised to S$0.80. Two-tiered offer, with premia calculated using S$0.80 as the offer price

62 APPENDIX 1 – LETTER FROM MORGAN STANLEY TO THE INDEPENDENT DIRECTORS

18 Premia calculated with reference to 24 May 2007, being the last full day of trading in the shares prior to a trading halt on 25 May 2007

19 Premia calculated with reference to 13 April 2007, being the last full day of trading in the shares prior to the announcement on 16 April 2007 by Amtek Engineering Ltd (“Amtek Engineering”), announcing that certain shareholders, including a substantial shareholder and shareholders who are executive directors, have been approached in relation to possible transactions involving their shares in Amtek Engineering

20 Premia calculated with reference to 8 February 2007, being the day prior to an announcement by MMI Holdings Ltd (“MMI”) that it had received expressions of interest in relation to a possible transaction involving MMI

21 Premia calculated with reference to 28 February 2007, the last day which RSH Ltd shares were traded on SGX-ST immediately preceding the announcement date

22 On 1 March 2007, Singapore Tech Semiconductors (“ST”) launched a voluntary general offer to purchase Stats ChipPAC shares at S$1.75 per share. In the event that ST acquired not less than 90% of shares of the shares not already owned by ST, the offer price would be revised to S$1.88. Two-tiered offer, with premia calculated using S$1.75 as the offer price

23 The market premia in the table were calculated with reference to 28 December 2006, being the last full day of trading of the shares in Guthrie GTS Limited (“Guthrie”) prior to the release of a holding announcement by Guthrie. On 8 January 2007, the offer was announced by Kim Eng Capital Pte Ltd on behalf of Alam Indah Bintan Pte Ltd

24 Premia calculated with reference to 1 July 2011, being the last full trading day preceding the Company’s holding announcement and the suspension of its shares on 4 July 2011

Based on Chart 12, we note that:

The premium implied by the Scheme Consideration is below the average and median 1-day take-over premium, but is within the range of the selected precedent take-overs in Singapore; and

The premia implied by the Scheme Consideration are below the average and median 1- month, 3-month, 6-month and 12-month take-over premia but within the range of the 1- month, 6-month and 12-month offer premia for the selected precedent take-over offers in Singapore.

The Independent Directors should note that the level of premium (if any) an acquirer would normally pay in a general offer, merger or take-over transaction varies in different circumstances depending on, inter alia, the attractiveness of the underlying business to be acquired, the synergies to be gained by the acquirer from integrating the target company’s businesses with its existing business, the possibility of significant revaluation of the assets to be acquired, the availability of substantial cash reserves, the liquidity in the trading of the target company’s shares, the presence of competing bids for the target company, the form of consideration offered by an acquirer, the extent of control the acquirer already has in the target company and prevailing market conditions and expectations.

The Independent Directors should also note that the comparison is made without taking into consideration the underlying liquidity of the shares of the relevant companies, the performance of the shares of the companies or the quality of earnings prior to the relevant announcement and the market conditions or sentiments when the announcements were made or the desire or relative need for control leading to compulsory acquisition. Moreover, as the Company is not in the same industry and does not conduct the same businesses as the other target companies in Chart 12, it may not, therefore, be directly comparable to the target companies in terms of geographical spread of activities, composition of business activities, product lines, size of addressable market, scale of operations, asset intensity, financial leverage, risk profile, client base, accounting policies, track record, prospects and other relevant criteria. Accordingly, the selected precedent take-over offers may not provide a meaningful basis for premium comparison.

63 APPENDIX 1 – LETTER FROM MORGAN STANLEY TO THE INDEPENDENT DIRECTORS

8.7. Broker Research Price Targets for the Shares We have reviewed the price targets for the Shares estimated by broker research as set out in Bloomberg.

The Company is covered by one brokerage house. Between 1 January 2011 and the Announcement Date, this brokerage house issued four research reports with a price target on the Company. This brokerage house subsequently revised its price target following speculation of a transaction on 4 July 2011 and subsequently on the Announcement Date.

Chart 13 — Broker Research Estimates

Target Price S$ 5.00

Scheme Consideration : S$4.35 4.50 4.34 4.35 4.35

4.20 S$4.15

S$4.00 S$4.00 4.00 3.89

3.50 S$3.39

S$3.23

3.00 Pre-announcement Pre-announcement Post Market Speculation Announcement Date Post-announcement

DDateate of 28-Jan-2011 14-Feb-2011 4-Jul-2011 11-Jul-2011 18-Aug-2011 Report

Share price as on the date prior to research report

Source Bloomberg

Based on Chart 13, we note that:

The Scheme Consideration is at a premium of 3.6 per cent. over the pre-announcement broker research price target of S$4.20 (which represented a 30 per cent. premium to the price of the Shares immediately prior to the report); and

The Scheme Consideration is equal to the post-announcement broker research price target of S$4.35.

We wish to highlight that the above broker research report is not exhaustive and price targets for the Shares represent the individual views of the broker research analyst based on the circumstances (including, inter alia, market, economic, industry and monetary conditions as well as market sentiment and investor perceptions regarding the future prospects of the Company) prevailing at the date of the publication of the respective broker research reports. The opinions of the brokers may change over time as a result of, among other things, changes in market conditions, the Company’s market development and the emergence of new information relevant to the Company. As such, the above price targets may not be an accurate prediction of future market prices of the Shares.

64 APPENDIX 1 – LETTER FROM MORGAN STANLEY TO THE INDEPENDENT DIRECTORS

Any opinions or price targets expressed in such broker research reports represent the individual views of the respective brokers and not of Morgan Stanley.

9. OTHER CONSIDERATIONS 9.1 Joint Venture Agreement Certain information regarding the joint venture agreement to be entered into on the Effective Date between, among others, the Individual Shareholders and Nestlé (the “Joint Venture Agreement”) is set out in paragraphs 6 and 10 of the Explanatory Memorandum in the Scheme Document and paragraph 7.4 of the Letter from Nestlé to the Shareholders and Depositors in Appendix 2 of the Scheme Document. We note that under paragraph 10.1 of the Explanatory Memorandum in the Scheme Document, the SIC has confirmed that the proposed terms of the Joint Venture Agreement between Nestlé and the Individual Shareholders do not constitute a special deal for the purposes of Rule 10 of the Code. Morgan Stanley has not reviewed the Joint Venture Agreement, has not evaluated whether or how the Scheme becoming effective or otherwise would affect such matters and has not evaluated the proposed terms of the Joint Venture Agreement, as such evaluation does not fall within the scope of Morgan Stanley’s terms of reference.

9.2 General Licence Agreement Certain information regarding the general licence agreement which is to be entered into between Nestlé, certain affiliates of Nestlé and Hsu Fu Chi on, and subject to the occurrence of, the Effective Date (the “GLA”) is set out in Annex 5 of Appendix 2 of the Scheme Document, paragraph 6.3 of the Explanatory Memorandum in the Scheme Document and paragraph 7.3 of the Letter from Nestlé to the Shareholders and Depositors in Appendix 2 of the Scheme Document. Morgan Stanley has not reviewed the GLA, has not evaluated whether or how the Scheme becoming effective or otherwise would affect such matters and has not evaluated the proposed terms of the GLA, as such evaluation does not fall within the scope of Morgan Stanley’s terms of reference.

9.3 CEO Service Arrangement Certain information regarding the current executive chairman of the Company, Mr Hsu Chen’s employment arrangement with the Company as chief executive officer subsequent to the Scheme and Share Acquisition (the “CEO Service Arrangement”) is set out in paragraph 2.2 of Hsu Fu Chi’s Letter to the Shareholders and Depositors in the Scheme Document and paragraphs 3.3 and 7.4 and Annex 5 of the Letter from Nestlé to the Shareholders and Depositors in Appendix 2 of the Scheme Document. Morgan Stanley has not reviewed the CEO Service Arrangement, has not evaluated whether or how the Scheme becoming effective or otherwise would affect such matters and has not evaluated the terms of the CEO Service Arrangement, as such evaluation does not fall within the scope of Morgan Stanley’s terms of reference.

9.4 The Scheme is binding on all Scheme Shareholders If the Scheme is approved by a majority in number of Scheme Shareholders present and voting, either in person or by proxy, at the Court Meeting, such majority holding not less than 75 per cent. in value of the Scheme Shares held by Scheme Shareholders present and voting at the Court Meeting, the Scheme will be binding on all Scheme Shareholders, regardless of whether they were present in person or by proxy or voted at the Court Meeting.

9.5 The Scheme is applicable only to the Scheme Shareholders The Scheme is proposed to the Scheme Shareholders only and excludes the Individual Shareholders, their related corporations and their respective nominees.

65 APPENDIX 1 – LETTER FROM MORGAN STANLEY TO THE INDEPENDENT DIRECTORS

9.6 Irrevocable Undertakings As at the Latest Practicable Date, the Shares which are the subject of the Irrevocable Undertakings represent approximately 25.44 per cent. of all the Shares and 58.45 per cent. of the Scheme Shares. Further details of the Irrevocable Undertakings can be found in paragraph 3.2 of Hsu Fu Chi’s Letter to Shareholders and Depositors, paragraph 5 of the Explanatory Memorandum in the Scheme Document and paragraph 6 of the Letter from Nestlé to the Shareholders and Depositors in Appendix 2 of the Scheme Document.

9.7 Switch Option Pursuant to the terms of the Implementation Agreement, subject to prior consultation with the SIC, Nestlé may elect to proceed by way of a Switch Option in the event of a Competing Offer (as defined in the Scheme Document) (or otherwise) subject to the prior written consent of the Individual Shareholders.

In such event, Nestlé will make the Offer on the same or better terms as those which apply to the Scheme, including the same or higher consideration than the Scheme Consideration.

Further details of the Switch Option are contained in paragraph 4.3 of the Explanatory Memorandum in the Scheme Document.

9.8 Non-solicitation Under the Implementation Agreement, Hsu Fu Chi will not, inter alia, during the Restricted Period directly or indirectly, solicit or reach any agreement or understanding or enter into transaction involving (a) the possible acquisition of, or issue or grant of any option over the Shares and/or (b) the possible acquisition of all or substantially all of the assets of any member of the Group, including any Competing Offer.

Further details of the non-solicitation obligations of Hsu Fu Chi are contained in paragraph 4.4 of the Explanatory Memorandum in the Scheme Document.

Each of the Undertaking Shareholders has agreed to be bound by certain non-solicitation provisions during the term of its undertakings, save for certain exceptions.

Further details of the non-solicitation obligations of the Undertaking Shareholders are set out in paragraph 6 of the Letter from Nestlé to the Shareholders and Depositors in Appendix 2 of the Scheme Document.

The Individual Shareholders and their related corporations have agreed to be bound by certain exclusivity and non-solicitation provisions with respect to their Shares until the earlier of the Effective Date or Long Stop Date, subject to applicable laws and regulations and fiduciary duties, as applicable.

Further details of the exclusivity and non-solicitation obligations of the Individual Shareholders and their related corporations are set out in paragraph 6.3 of the Explanatory Memorandum in the Scheme Document and paragraph 7.3 of the Letter from Nestlé to the Shareholders and Depositors in Appendix 2 of the Scheme Document.

9.9 Delisting of Hsu Fu Chi Upon the Proposed Transactions becoming effective, all of the Shares will be owned directly by Nestlé and indirectly by the Individual Shareholders and subject to the approval of the SGX-ST, Hsu Fu Chi will be delisted from the Official List of the SGX-ST.

66 APPENDIX 1 – LETTER FROM MORGAN STANLEY TO THE INDEPENDENT DIRECTORS

9.10 Acquisition of Shares of the Individual Shareholders On 11 July 2011, Nestlé entered into the Transaction Agreement pursuant to which Nestlé will acquire, subject to the Scheme becoming effective, the Sale Shares from the Individual Shareholders (or their related corporations) (the “Share Acquisition”). The consideration to be paid is S$4.35 for each Sale Share, payable in cash, which is identical to the Scheme Consideration.

The Individual Shareholders and their related corporations have agreed not to acquire, sell, accept any offer in respect of, or otherwise deal in, any Shares, except pursuant to the Scheme, the Share Acquisition, or any permitted transfers of the Shares, until the Effective Date.

Each of the Individual Shareholders or their related corporations has delivered on 26 August 2011 an undertaking to the Court (as defined in the Scheme Document) that they will, inter alia, support the Scheme and comply with the terms of the Scheme subject to the Scheme becoming effective and binding.

Further details of the Transaction Agreement are set out in paragraph 6 of the Explanatory Memorandum of the Scheme Document and paragraph 7 of the Letter from Nestlé to the Shareholders and Depositors in Appendix 2 of the Scheme Document. We note that under paragraph 10.1 of the Explanatory Memorandum to the Scheme Document, the SIC has confirmed that it has no objections to the Share Acquisition and that the Share Acquisition does not constitute a special deal for the purposes of Rule 10 of the Code.

9.11 Third Party Proposals The Directors have confirmed that from the Announcement Date up to the Latest Practicable Date, the Directors, the Individual Shareholders and Hsu Fu Chi have not been approached by any person with an offer competing with the Scheme.

9.12 Material Litigation The Directors have confirmed that as at the Latest Practicable Date, none of Hsu Fu Chi or any member of the Group are engaged in any material litigation, either as plaintiff or defendant, which might materially and adversely affect the financial position of Hsu Fu Chi or the Group, and the Directors are not aware of any litigation, claims or proceedings pending or threatened against Hsu Fu Chi or any member of the Group or any facts likely to give rise to any litigation, claims or proceedings which might materially and adversely affect the financial position of Hsu Fu Chi or the Group.

10. CONCLUSION In arriving at our opinion to the Independent Directors, we have taken into consideration, inter alia, the following factors:

(a) Our analysis of the historical trading volume of the Shares and the average daily trading volume and value in comparison against the Top 25 Largest SGX Companies suggests that there is low liquidity in the Shares both in absolute terms and relative to the free float of the Company.

(b) The closing prices of the Shares have ranged between S$2.29 and S$4.35 and between S$1.24 and S$4.35 over the 12-month and 24-month periods, respectively, prior to the Last Pre-Announcement Trading Day. The Shares have significantly outperformed the Benchmark Indices over the two years prior to the Latest Practicable Date.

(c) The Scheme Consideration is equivalent to the highest closing price of the shares from the Company’s initial public offering in 2006 until the Last Pre-Announcement Trading Day.

67 APPENDIX 1 – LETTER FROM MORGAN STANLEY TO THE INDEPENDENT DIRECTORS

(d) Subsequent to the Announcement Date and up to the Latest Practicable Date, the closing prices of the Shares have traded between S$3.98 and S$4.40, with a VWAP of S$4.21 and a last closing price of S$4.16.

(e) There is limited broker research covering the Company. The Scheme Consideration represents a premium of approximately 3.6% to the pre-announcement broker research price target of S$4.20 (which represented a 30% premium to the price of the Shares immediately prior to the research report) and is equivalent to the post-announcement broker research price target of S$4.35.

(f) The implied P/E and EV/EBITDA multiples are above the high end of the range for Hsu Fu Chi’s multiples for the 12-month period prior to the Announcement Date.

(g) The implied multiples are within the range of the Hong Kong-listed Comparable Companies across P/E, EV/EBITDA, EV/Sales and P/NTA. In addition, the implied multiples are within the range of the Singapore-listed Comparable Companies for P/E and above the range for EV/Sales, EV/EBITDA and P/NTA. Overall, the implied multiples are within the range of the Comparable Companies.

(h) The implied P/E multiple is above the average and median, of the minority transactions among the Selected Asia F&B Precedent Transactions. The implied EV/EBITDA multiple is below the average and above the median multiples of the minority transactions among the Selected Asia F&B Precedent Transactions. The EV/Sales multiple is above the average and the median multiples of the minority transactions among the Selected Asia F&B Precedent Transactions.

(i) The implied P/E, EV/EBITDA and EV/Sales multiples are above the average and median multiples of the Selected Global Confectionery and Bakery Precedent Transactions.

(j) The Scheme Consideration represents a premium of approximately 8.7% to the closing price of S$4.00 on the Last Pre-Announcement Trading Day and a premium of approximately 9.5%,12.5%,16.8% and 33.5%, respectively, over the VWAP of the Shares in the 1-month, 3- month, 6-month and 12-month periods preceding the Announcement Date.

(k) The premia implied by the Scheme Consideration are generally within the range of the corresponding premia for the selected precedent take-over offers in Singapore for the time periods considered.

(l) The Undertaking Shareholders who hold an aggregate of 25.44% of all the issued Shares (and 58.45% in the Scheme Shares), have provided irrevocable undertakings to vote in favour of the Scheme. The Individual Shareholders, Nestlé and their concert parties will abstain from voting on the Scheme.

(m) The Company has confirmed to us that alternative strategic options were considered prior to the Announcement, including preliminary discussions with alternative partners.

(n) The Company has not been approached by any person with a competing offer since the Announcement.

68 APPENDIX 1 – LETTER FROM MORGAN STANLEY TO THE INDEPENDENT DIRECTORS

Based upon and subject to the foregoing, we are of the opinion that, as at the Latest Practicable Date, the Scheme Consideration is fair and reasonable from a financial point of view.

We wish to emphasise that we have been appointed to render our opinion as of the Latest Practicable Date. Our terms of reference do not require us to express, and we do not express, an opinion on the future growth prospects of Hsu Fu Chi. This letter is addressed to the Independent Directors solely for their benefit in connection with and for the purposes of their consideration of the Scheme and should not be relied on by any other party or for any other purpose. This opinion does not constitute and should not be relied on, as advice or a recommendation to, or confer any rights or remedies upon, any individual Scheme Shareholder, specific group of Scheme Shareholders or Individual Shareholder, their related corporations and their respective nominees. Nothing herein shall confer or be deemed or is intended to confer any right or benefit to any third party and the Contracts (Rights of Third Parties) Act, Chapter 53B of Singapore shall not apply. The recommendations made by the Independent Directors to the Scheme Shareholders in relation to the Scheme remain the sole responsibility of the Independent Directors.

This letter is governed by, and construed in accordance with the laws of Singapore, and is strictly limited to the matters stated herein and does not apply by implication to any other matter. No other person may use, reproduce, disseminate or quote this letter (or any part thereof) for any other purpose at any time and in any manner except with Morgan Stanley’s prior written consent in each specific case.

Yours faithfully, For and on behalf of MORGAN STANLEY ASIA (SINGAPORE) PTE.

Jonathan Popper Managing Director

69 APPENDIX 2 – LETTER FROM NESTLÉ S.A. TO THE SHAREHOLDERS AND DEPOSITORS

31 August 2011

To: The Shareholders and Depositors of Hsu Fu Chi International Limited

Dear Sir/Madam

PROPOSED SCHEME OF ARRANGEMENT UNDER SECTION 86 OF THE CAYMAN COMPANIES LAW TO ACQUIRE A 43.52% INTEREST IN HSU FU CHI INTERNATIONAL LIMITED

1. INTRODUCTION 1.1 On 11 July 2011, the respective boards of Nestlé and the Company jointly announced the proposed establishment of a joint venture between Nestlé and the Individual Shareholders.

1.2 In order to implement the Proposed Transaction, (i) the Company and Nestlé entered into the Implementation Agreement for Nestlé to acquire the Scheme Shares representing approximately 43.52% of all the Shares by way of the Scheme from the Scheme Shareholders and (ii) subject to the Scheme becoming effective, Nestlé will acquire in addition the Sale Shares representing approximately 16.48% of all the Shares by way of the Share Acquisition. As a result of the Proposed Transaction, Nestlé will own 60% of all the Shares with the remaining 40% owned by Holdco.

A copy of the Announcement is available on the website of the SGX-ST at www.sgx.com.

1.3 The Scheme Consideration is on the basis that the Company will not make or agree to make any distribution or other payments of any kind to any person in his capacity as a shareholder of the Company on or prior to the Effective Date. To the extent the Company declares or makes any distribution or other payment of any kind to the Scheme Shareholders on or prior to the Effective Date, the Scheme Consideration will be reduced on a per Scheme Share basis by any such amount which is due and payable (whether paid or unpaid as at the Effective Date) to the Scheme Shareholders.

1.4 Nestlé wishes to draw the attention of the Shareholders and Depositors to the fact that the effectiveness of the Scheme is conditional on the satisfaction or waiver (as applicable) of all the conditions precedent to the Scheme, including without limitation the approval by Ministry of Commerce, PRC (MOFCOM) of the Scheme, as set out in paragraph 4.1 of the Explanatory Memorandum in the Scheme Document and Appendix 7 to the Scheme Document.

1.5 The terms of the Scheme are more particularly described in paragraphs 3 and 4 of the Explanatory Memorandum in the Scheme Document.

70 APPENDIX 2 – LETTER FROM NESTLÉ S.A. TO THE SHAREHOLDERS AND DEPOSITORS

1.6 If the Scheme becomes effective and binding and the Share Acquisition is completed, Nestlé will own 60% of all the Shares with the remaining 40% owned by Holdco. An application has been made to seek confirmation from the SGX-ST to withdraw the Shares from the Official List of the SGX-ST upon the Scheme becoming effective and binding. The SGX-ST has advised that, inter alia, subject to the approval of the Scheme Shareholders being obtained at the Court Meeting in the manner ordered by the Court and the Scheme becoming effective and binding, it has no objection to the proposed withdrawal of the Shares from the Official List of the SGX-ST. The SGX- ST’s confirmation, however, is not an indication of the merits of the Company, any other Group Company, the Scheme, the Share Acquisition or the proposed withdrawal of the Shares from the Official List of the SGX-ST.

1.7 Capitalised terms used in this Letter have the same meaning and construction as those defined in the Scheme Document, unless otherwise indicated.

2. RATIONALE FOR THE SCHEME 2.1 Hsu Fu Chi’s products are tailored to Chinese consumers’ needs and habits, and complement Nestlé’s existing product portfolio in the PRC, which includes culinary products, soluble coffee, bottled water, milk powder and products for the foodservice industry. Hsu Fu Chi’s large portfolio of affordable products, with the potential for enhanced nutritional value, fits perfectly into Nestlé’s global portfolio.

2.2 The Scheme presents the Scheme Shareholders with an opportunity to realise their investment in the Scheme Shares at an attractive premium of approximately 8.7%, 10.0%, 15.7% and 24.7% over the Company’s closing share price of S$4.000 on 1 July 2011 (being the last full trading day preceding the Announcement Date), 30-day VWAP of S$3.956, 90-day VWAP of S$3.759 and 180- day VWAP of S$3.490, respectively.

3. FUTURE PLANS FOR THE COMPANY 3.1 It is the intention of both Nestlé and the Individual Shareholders that the Company will continue with its existing business activities and Nestlé and the Individual Shareholders presently have no intention to (i) introduce any major changes to the business of the Company, (ii) redeploy the fixed assets of the Company or (iii) discontinue the employment of the employees of the Group.

3.2 It is also the intention of both Nestlé and the Individual Shareholders to continue to develop and expand the Company business and preserve the legacy of the Hsu Fu Chi brand.

4. IMPLEMENTATION OF THE SCHEME Paragraphs 12 and 14 of the Explanatory Memorandum in the Scheme Document set out the details of the process for the implementation of the Scheme and the settlement and registration procedures in relation thereto.

71 APPENDIX 2 – LETTER FROM NESTLÉ S.A. TO THE SHAREHOLDERS AND DEPOSITORS

5. SWITCH OPTION 5.1 Subject to prior consultation with the SIC and the prior written consent of the Individual Shareholders, Nestlé may elect to proceed by way of an Offer in lieu of proceeding with the Proposed Transaction by way of the Scheme (the “Switch Option”) in the event of a Competing Offer (or otherwise).

5.2 In such event, Nestlé will make the Offer on the same or better terms as those which apply to the Scheme, including the same or a higher consideration than the Scheme Consideration.

5.3 If Nestlé exercises the Switch Option, the Parties agree that the Implementation Agreement will terminate with effect from the date of the announcement by Nestlé of its firm intention to make the Offer. The Parties’ accrued rights and obligations under the Implementation Agreement and the rights and obligations under certain surviving provisions will continue to subsist, but in all other respects, the Parties’ rights and obligations under the Implementation Agreement will cease.

6. IRREVOCABLE UNDERTAKINGS 6.1 The Undertaking Shareholders have each given irrevocable undertakings dated 11 July 2011 in favour of Nestlé, inter alia:

(a) to vote all the Shares that it owns directly or indirectly, legally or beneficially, at the Court Meeting in favour of any resolutions required to give effect to the Scheme as set out in the notice of meeting in the Scheme Document; and

(b) if Nestlé elects to proceed with an Offer, to accept or procure the acceptance of such Offer in respect of such Shares.

6.2 Further, the Undertaking Shareholders have agreed to be bound by certain non-solicitation provisions during the term of their undertakings, save for certain exceptions.

6.3 As at the Latest Practicable Date, the Undertaking Shareholders hold directly or indirectly, legally or beneficially, 202,238,854 Shares in the aggregate, representing approximately 25.44% of all the issued Shares and approximately 58.45% of all the Scheme Shares, details of which are set out as below:

Number of Shares directly or indirectly held by Undertaking Percentage Percentage of the Name Shareholders of all the Shares Scheme Shares

Arisaig Asia Consumer 71,176,000 8.95% 20.57% Fund Limited

Winmoore Holdings 13,324,000 1.68% 3.85% Limited

Star Candy Ltd 117,738,854 14.81% 34.03%

TOTAL 202,238,854 25.44% 58.45%

NOTE: Winmoore Holdings Limited and Star Candy Ltd (each a “BPEA Subsidiary” and together, the “BPEA Subsidiaries”) are subsidiaries of The Baring Asia Private Equity Fund IV, L.P.

72 APPENDIX 2 – LETTER FROM NESTLÉ S.A. TO THE SHAREHOLDERS AND DEPOSITORS

6.4 Lapse of the Irrevocable Undertakings 6.4.1 The irrevocable undertaking of Arisaig Asia Consumer Fund Limited will lapse and cease to have any effect:

(a) if the Announcement is not released on or before 5.30 p.m. (Singapore time) on the date of the irrevocable undertaking;

(b) if the Scheme lapses or is withdrawn, other than pursuant to Nestlé’s exercise of the Switch Option in accordance with certain provisions of the irrevocable undertaking;

(d) if the Switch Option has not been exercised and the Company’s shareholders have not approved the Scheme with the requisite majority by 5.30 p.m. (Singapore time) on the day falling four (4) months after the Announcement; or

(e) immediately following the close of the Court Meeting.

6.4.2 The irrevocable undertakings of each of the BPEA Subsidiaries will lapse and cease to have any effect at the earliest of any of the following occurrences:

(a) at 5.30 p.m. (Singapore time) on 11 July 2011, if the Announcement is not released on or before 5.30 p.m. (Singapore time) on 11 July 2011;

(b) save where Nestlé had exercised the Switch Option, if the Implementation Agreement is terminated, on the date on which the Implementation Agreement is terminated;

(c) if the acquisition is implemented by way of an Offer pursuant to the exercise of the Switch Option, on the date such BPEA Subsidiary accepts (or procure the acceptance of) the Offer in respect of all the relevant securities;

(d) at 5.30 p.m. (Singapore time) on 31 March 2012, if the acquisition is implemented by way of an Offer pursuant to the exercise of the Switch Option and the Offer has not been declared unconditional in all respects by 5.30 p.m. (Singapore time) 31 March 2012;

(e) if the Offer lapses or is withdrawn, on the date that the Offer lapses or is withdrawn;

(f) if the terms of the Scheme deviate substantially from those set out in the Announcement;

(g) if any term of the Implementation Agreement is amended, supplemented or varied in any material respect;

(h) at 5.30 p.m. (Singapore time) on the day falling four (4) months after the Announcement:

(i) if the Company’s shareholders have not approved the Scheme with the requisite majority by such day; and

(ii) Nestlé has not exercised the Switch Option;

(i) if at any time prior to the Court Meeting, the irrevocable undertaking dated 11 July 2011 by Arisaig Asia Consumer Fund Limited in favour of Nestlé lapses, is withdrawn or terminated;

73 APPENDIX 2 – LETTER FROM NESTLÉ S.A. TO THE SHAREHOLDERS AND DEPOSITORS

(j) if any time prior to the Court Meeting, the transaction agreement entered into or to be entered into by the Individual Shareholders and Nestlé lapses, is withdrawn or terminated; or

(k) if the Company’s shareholders approve the Scheme with the requisite majority at the Court Meeting, on the date of the Court Meeting.

6.4.3 Save for the Irrevocable Undertakings as disclosed above, neither Nestlé nor any its concert parties has received any other irrevocable undertakings from any other party to vote in favour of the Scheme as at the Latest Practicable Date.

6.5 Each of the Individual Holders has delivered on 26 August 2011 an undertaking to the Court that they will, inter alia, support the Scheme and comply with the terms of the Scheme subject to the Scheme becoming effective and binding.

7. SHARE ACQUISITION AND JOINT VENTURE 7.1 Subject only to the Scheme being effective, the Individual Holders will sell, and Nestlé will acquire, the Sale Shares.

7.2 The consideration to be paid will be S$4.35 for each Sale Share, payable in cash, which is identical to the Scheme Consideration.

7.3 Under the terms of the Share Acquisition:

(a) the Individual Shareholders and their related corporations have agreed to support the Scheme;

(b) the Individual Shareholders and their related corporations have agreed not to acquire, sell, accept any offer in respect of, or otherwise deal in, any Shares, except pursuant to the Scheme, the Share Acquisition, or any transfer of Shares to Holdco, until the Effective Date;

(c) the Individual Shareholders and their related corporations have agreed to give customary representations and warranties in relation to title, authority and no insolvency;

(d) subject to the occurrence of the Effective Date, the Individual Shareholders, Nestlé, the Company and Holdco will enter into the Joint Venture Agreement;

(e) subject to the occurrence of the Effective Date, the Individual Shareholders and their related corporations will procure that the Company will enter into a general licence agreement with Nestlé and certain affiliates of Nestlé, relating to the licence of trade marks, know-how and other intellectual property rights as further set out in Annex 5 of this Letter; and

(f) the Individual Shareholders and their related corporations have agreed to be bound by certain exclusivity and non-solicitation provisions with respect to their Shares until the earlier of the Effective Date or Long Stop Date, subject to applicable laws and regulations and fiduciary duties, as applicable.

7.4 Under the terms of the Joint Venture Agreement:

(a) Nestlé and Holdco, shall each be entitled to appoint a specified number of representatives to the board of directors of the Company approximately proportionate to their shareholding in the Company;

(b) the current executive chairman, Mr. Hsu Chen, will continue as CEO of the Company for the next five (5) years;

74 APPENDIX 2 – LETTER FROM NESTLÉ S.A. TO THE SHAREHOLDERS AND DEPOSITORS

(c) board decisions will be subject to a simple majority vote except for certain limited reserved matters which will require a positive vote of Holdco; and

(d) the sale of shares in the Company by either party will be subject to a five (5) year initial lock-up period and thereafter to a right of first offer coupled with a right of first refusal.

8. INFORMATION ON NESTLÉ 8.1 Nestlé is a company incorporated in Switzerland and listed on the SIX Swiss Exchange (Code: NESN.VX). Nestlé is the largest food and beverage company in the world, and its principal business is the production, marketing and sales of food and beverage products.