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