China Foods Limited — Proxy Solicitation & Information Statement 2003

Dec 15, 2003

THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION

If you are in any doubt as to any aspect of this circular or as to the action to be taken, you should consult your licensed securities dealer or other registered dealer in securities, bank manager, solicitor, professional accountant or other professional adviser.

If you have sold and transferred all your shares in COFCO International Limited, you should at once hand this circular and the accompanying form of proxy to the purchaser or to the bank, licensed securities dealer or other agent through whom the sale or transfer was effected for transmission to the purchaser or transferee.

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

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(Incorporated in Bermuda with limited liability)

ONGOING CONNECTED TRANSACTIONS

Independent financial adviser to the Independent Board Committee

A notice convening the Special General Meeting to be held at the Boardroom, World Trade Centre Club Hong Kong, 38th Floor, World Trade Centre, 280 Gloucester Road, Causeway Bay, Hong Kong on 29 December 2003 at 3:30 p.m. is set out on pages 30 and 31 of this circular. Whether or not you are able to attend the Special General Meeting please complete and return the enclosed form of proxy in accordance with the instructions printed thereon and return it to the branch share registrars of COFCO International Limited in Hong Kong, Progressive Registration Limited at Ground Floor, Bank of East Asia Harbour View Centre, 56 Gloucester Road, Wanchai, Hong Kong as soon as possible and in any event, not less than 48 hours before the time appointed for holding the Special General Meeting or any adjourned meeting. Completion and return of the form of proxy will not preclude you from attending and voting in person at the Special General Meeting or any adjourned meeting should you so wish.

12 December 2003

CONTENTS

	Page
Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	1
Letter from the Board
1. Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	5
2. Connected persons . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	6
3. Ongoing Connected Transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	6
4. Reasons for application for the New Waiver and the basis for determining
the annual cap amount for each of the Ongoing Connected Transactions . . . . . . . . .	13
5. Conditions of the New Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	14
6. Special General Meeting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	16
7. Additional information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	16
Letter from the Independent Board Committee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	17
Letter from Access Capital. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	19
Appendix – General information. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	26
Notice of the Special General Meeting. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	30

DEFINITIONS

In this circular, the following expressions shall have the meanings set out below unless the context requires otherwise:

“Access Capital”	Access Capital Limited, independent financial adviser to
	the Independent Board Committee. It is a deemed licensed
	corporation for types 1 (dealing in securities), 4 (advising
	on securities), 6 (advising on corporate finance) and 9 (asset
	management) regulated activities under the SFO
“ADM”	Archer Daniels Midland Asia-Pacific Ltd., a substantial
	shareholder of certain non wholly-owned subsidiaries of
	the COFCO Oils & Fats Group
“ADM Group”	ADM and any of its subsidiaries or an associate of any of
	them
“associate(s)”	in relation to a director, chief executive or substantial
	shareholder of a company listed on the Stock Exchange,
	has the same meaning ascribed thereto in the Listing Rules
“Board”	the board of directors of the Company
“CFTL”	China Foods Trading Limited, a company incorporated in
	Hong Kong with limited liability and an indirect wholly-
	owned subsidiary of the Company
“COFCO”	China National Cereals, Oils & Foodstuffs Import & Export
	Corporation, a state-owned enterprise of the PRC under the
	purview of the State Council of the PRC and is the ultimate
	holding company of the Company
“COFCO Group”	COFCO together with its subsidiaries and associated
	companies (excluding the Group)
“COFCO International (Beijing)”	中糧國際（北京）有限公司(COFCO International (Beijing)
	Company Limited), a company established in the PRC with
	limited liability and an indirect wholly-owned subsidiary
	of the Company
“COFCO Oils & Fats”	COFCO Oils & Fats Holdings Limited, a company
	incorporated in the British Virgin Islands with limited
	liability and a wholly-owned subsidiary of the Company
“COFCO Oils & Fats Group”	COFCO Oils & Fats together with its subsidiaries and
	associated companies

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DEFINITIONS

“COFCO Services”	COFCO (BVI) No.99 Limited, a company incorporated in
	the British Virgin Islands with limited liability and a
	wholly-owned subsidiary of the Company
“COFCO Trading Group”	COFCO (BVI) No. 100 Limited, a company incorporated
	in the British Virgin Islands with limited liability and a
	wholly-owned subsidiary of the Company, together with its
	subsidiaries and associated companies
“COFCO Wines and Spirits”	COFCO Wines & Spirits Holdings Limited, a company
	incorporated in the British Virgin Islands with limited
	liability and a wholly-owned subsidiary of the Company
“COFCO Wines & Spirits Group”	COFCO Wines and Spirits together with its subsidiaries
	and associated companies
“Commodities”	various commodities and foodstuffs comprising, inter alia,
	cereals, oils and fats, sugar, feedstuffs and other agricultural
	products and foodstuffs
“Commodities Connected	the connected transactions between the Group and the
Transactions”	COFCO Group in relation to the trading of Commodities
“Company”	COFCO International Limited, a company incorporated in
	Bermuda with limited liability whose shares are listed on
	the Stock Exchange
“Directors”	the directors of the Company
“Existing Waivers”	waivers in respect of certain ongoing connected transactions
	of the Group that were granted by the Stock Exchange on 4
	May 2001 and 29 June 2001 respectively
“GGHR”	廣東金福米業有限公司(Guangdong Golden Happiness
	Rice Company Limited), a company in which COFCO holds
	a beneficial equity interest of 50%
“GOI”	Grand Ocean International Trading Limited (formerly known
	as Grand Silver Trading Co., Ltd.), a company incorporated
	in Hong Kong with limited liability and indirectly owned
	as to 50% by COFCO
“Group”	the Company and its subsidiaries
“Hong Kong”	the Hong Kong Special Administrative Region of the PRC

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DEFINITIONS

“Independent Board Committee”	an independent committee of the Board established for the
	purpose of reviewing the Ongoing Connected Transactions
“Independent Shareholder(s)”	Shareholder(s) other than COFCO and who are entitled to
	vote at the Special General Meeting
“Latest Practicable Date”	11 December 2003, the latest practicable date prior to the
	printing of this circular for the purpose of ascertaining
	certain information contained hereunder
“Listing Rules”	The Rules Governing the Listing of Securities on the Stock
	Exchange
“Miscellaneous Connected	the Ongoing Connected Transactions other than the
Transactions”	Commodities Connected Transactions
“New Waiver”	the waiver from strict compliance with Chapter 14 of the
	Listing Rules in respect of the Ongoing Connected
	Transactions
“NTA”	the latest published net tangible asset value of the Group as
	determined in accordance with Rule 14.04(1) of the Listing
	Rules and adjusted in accordance with Rule 14.04(6) of the
	Listing Rules
“Ongoing Connected Transactions”	the Commodities Connected Transactions and the
	Miscellaneous Connected Transactions
“PRC”	the People’s Republic of China
“Service Agreement”	a service agreement dated 26 October 2001 between COFCO
	Services and COFCO, pursuant to which COFCO Services
	agreed to provide to the COFCO Group management
	services
“SFO”	the Securities and Futures Ordinance (Chapter 571 of the
	Laws of Hong Kong)
“Share(s)”	share(s) of HK$0.10 each in the share capital of the
	Company
“Shareholder(s)”	holder(s) of the Shares
“Special General Meeting”	special general meeting of the Company to be held to
	consider and approve the waivers for the Commodities
	Connected Transactions and those Miscellaneous Connected
	Transactions (as described in paragraphs 3.2.1, 3.2.2 and
	3.2.5 in the “Letter from the Board” of this circular)

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DEFINITIONS

“Stock Exchange”	The Stock Exchange of Hong Kong Limited
“TSO”	中糧（天津）南洋食品冷凍有限公司(COFCO (Tianjin)
	Southern Ocean Cold Storage Co., Ltd.), a company
	indirectly owned as to 38.46% by COFCO
“Wilmar”	Wilmar Holdings Pte. Ltd., a substantial shareholder of
	certain non wholly-owned subsidiaries of the COFCO Oils
	& Fats Group
“Wilmar Group”	Wilmar together with any of its subsidiaries or an associate
	of any of them
“HK$”	Hong Kong dollars, the lawful currency of Hong Kong
“US$”	United States dollars, the lawful currency of the United
	States of America
“%”	per cent.

For the purpose of this circular, conversion of US dollars into Hong Kong dollars is calculated at the approximate exchange rate of US$1.00 to HK$7.80 for the purpose of illustration only and does not constitute a representation that any amounts have been, could have been, or may be, exchanged at this or any other rate.

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LETTER FROM THE BOARD

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(Incorporated in Bermuda with limited liability)

Executive Directors: Zhou Mingchen (Chairman) Liu Fuchun (Vice Chairman) Yu Guangquan (Managing Director) Xue Guoping Liu Yongfu Ng Eng Leong Qu Zhe

Independent non-executive Directors: Yuen Tin Fan, Francis Liang Shangli

Principal place of business in Hong Kong: 33rd Floor, Top Glory Tower 262 Gloucester Road Causeway Bay Hong Kong

Registered office: Clarendon House 2 Church Street Hamilton HM 11 Bermuda

To the Shareholders

12 December 2003

Dear Sir/Madam,

ONGOING CONNECTED TRANSACTIONS

1. INTRODUCTION

The Directors announced on 11 December 2003 that the Company has applied to the Stock Exchange for a conditional and continuous waiver from strict compliance with Chapter 14 of the Listing Rules in respect of the Ongoing Connected Transactions. Details of the Ongoing Connected Transactions are set out in the section headed “3. Ongoing Connected Transactions” below.

An independent board committee comprising the two independent non-executive Directors has been established to consider the terms of the Ongoing Connected Transactions, and advise the Independent Shareholders as to how to vote in the Special General Meeting with regard to the approval for the New Waiver for the Commodities Connected Transactions and those Miscellaneous Connected Transactions (as described in paragraphs 3.2.1, 3.2.2 and 3.2.5 below). In addition, Access Capital has been appointed as the independent financial adviser to advise the Independent Board Committee on the terms of the Commodities Connected Transactions and those Miscellaneous Connected Transactions (as described in paragraphs 3.2.1, 3.2.2 and 3.2.5 below).

The purpose of this circular is to provide you with further information relating to the Ongoing Connected Transactions and the New Waiver, and to set out the advice of Access Capital to the Independent Board Committee in respect of certain Ongoing Connected Transactions and to give you notice for convening the Special General Meeting at which an ordinary resolution will be proposed in order to seek Shareholders’ approval of the abovementioned Ongoing Connected Transactions.

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LETTER FROM THE BOARD

2. CONNECTED PERSONS

The Company is an investment holding company and its subsidiaries are principally engaged in food processing and related businesses which include edible oils, soyabean meal and related products; wineries; confectionery; trading and flour milling.

COFCO is the ultimate holding company of the Company. COFCO beneficially owns approximately 68.97% of the issued share capital of the Company.

ADM and Wilmar are substantial shareholders of certain non wholly-owned subsidiaries of the COFCO Oils & Fats Group.

Accordingly, COFCO, ADM and Wilmar and their respective associates are connected persons of the Company, and the Ongoing Connected Transactions will constitute connected transactions of the Company under the Listing Rules. COFCO (beneficially owned approximately 68.97% of the issued share capital of the Company as at the Latest Practicable Date) will abstain from voting at the Special General Meeting.

3. ONGOING CONNECTED TRANSACTIONS

The Ongoing Connected Transactions include the Commodities Connected Transactions and the Miscellaneous Connected Transactions. A summary of the Ongoing Connected Transactions is set out below.

3.1 Commodities Connected Transactions

3.1.1 Parties

(a) CFTL; and

(b) the COFCO Group.

3.1.2 Information on the transactions

Currently, the Group through CFTL sells and purchases Commodities to and from the COFCO Group.

In the two financial years ended 31 December 2002, the aggregate value of these connected transactions amounted to approximately HK$1,083.4 million and approximately HK$953.4 million respectively (representing approximately 39.0% and approximately 30.9% of the NTA for the two financial years ended 31 December 2002 respectively).

The Directors confirm that CFTL will continue to enter into the Commodities Connected Transactions with the COFCO Group. The terms of the Commodities Connected Transactions will continue to be determined by the respective parties on an arm’s length negotiations basis having regard to (i) the pricing of the Commodities

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LETTER FROM THE BOARD

offered by other established trading firms, (ii) the quality and quantity of the Commodities required, and (iii) the date and place of delivery and the packing of the relevant Commodities. The Directors believe that the Commodities Connected Transactions will continue to be entered into in the ordinary course of business of CFTL and will be on terms no less favourable than those available to (or from, as appropriate) independent third parties.

The Commodities being traded by the Group can be divided into the following two categories:

• (a) Exclusive Products (i.e. wheat, rice and corn)

• (i) Import of wheat

According to certain documents issued by the State Council of the PRC, and given the circumstances that there is no other company handling the import of wheat to the PRC, COFCO is practically the sole agent in the PRC for the import of wheat.

• (ii) Export of corn

According to certain regulations in the PRC and as far as the Directors are aware, the export of corn shall be exclusively handled by two companies, an associated company of COFCO and another company. As far as the Directors are aware, such associated company is owned as to approximately 40% by COFCO.

• (iii) Export of rice

According to certain regulations in the PRC on the export of rice, the export of rice shall be handled in the following manner:

• (aa) export of rice by the PRC Government to other governments shall be exclusively handled by COFCO;

• (bb) export of rice other than between governments:

• (x) in the case of certain designated provinces, shall be handled by COFCO or certain other designated companies;

• (y) in the case of other provinces, shall be handled by COFCO or such other company as may be approved by the then Ministry of Foreign Trade and Economic Cooperation.

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LETTER FROM THE BOARD

• (b) General Products

The COFCO Group is the principal agent of the PRC Government in the import/export of the General Products (i.e. all Commodities other than the Exclusive Products).

3.1.3 Reasons for applying for a waiver for the Commodities Connected Transactions

The reasons for applying for a waiver for the Commodities Connected Transactions are as follows:

• (a) In respect of the Exclusive Products

• (i) as the COFCO Group is practically the sole and exclusive agent of the PRC Government in the import/export of the Exclusive Products in the PRC, it is inevitable for trading companies like CFTL to deal with the COFCO Group if CFTL is to carry out the business of import/export trading in the Exclusive Products in the PRC;

• (ii) the transactions are carried out on a regular basis and on normal commercial terms reflecting market prices and in the ordinary course of business of the Company; and

• (iii) trading in the Exclusive Products is expected to be bulk sale/ purchase involving huge quantities and substantial amount of monies.

• (b) In respect of the General Products

• (i) as the COFCO Group is the principal agent of the PRC Government in the import/export of the General Products in the PRC, it is essential for trading companies like CFTL carrying on the business of trading of General Products in the PRC to trade with the COFCO Group in order to have a secure and stable source of supply/ demand of the General Products;

• (ii) the transactions are carried out on a regular basis and on normal commercial terms reflecting market prices and in the ordinary course of business of the Company;

• (iii) through the many years of experience in the trading of the General Products, the COFCO Group is reputable in the business. It is therefore in the interests of the Company and the Shareholders as a whole to trade with the COFCO Group; and

• (iv) trading in the General Products is expected to be bulk sale/purchase involving huge quantities and substantial amount of monies.

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LETTER FROM THE BOARD

3.2 Miscellaneous Connected Transactions

There are 7 categories of Miscellaneous Connected Transactions, a summary of which is set out below.

3.2.1 Sale of oils, oil related products and soyabean products

3.2.1.1 Parties

Currently, COFCO Oils & Fats Group sells edible oils, oil related products and soyabean products to the following connected persons:

• (a) GOI;

• (b) ADM Group;

• (c) COFCO Group; and

• (d) Wilmar Group.

3.2.1.2 Information on the transactions

The amounts of sales of edible oils, oil related products and soyabean products by the COFCO Oils & Fats Group to the connected persons mentioned in (a) to (d) above for the two financial years ended 31 December 2002 were approximately HK$322.0 million and approximately HK$769.0 million respectively. These amounts of sales of edible oils, oil related products and soyabean products represent approximately 5.2% and approximately 6.9% of the audited consolidated turnover of the Company for the two financial years ended 31 December 2002 respectively.

The Directors confirm that the COFCO Oils & Fats Group will continue to sell edible oils, oil related products and soyabean products to the connected persons mentioned in (a) to (d) above on normal commercial terms to be determined by the respective parties on an arm’s length negotiation basis. The prices at which these oil products and soyabean products will be sold by the COFCO Oils & Fats Group to these connected persons will not be less than the prices at which these products are sold to independent third parties.

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LETTER FROM THE BOARD

3.2.2 Purchase of raw materials of oils and soyabean

3.2.2.1 Parties

Currently, the COFCO Oils & Fats Group purchases raw materials of oils and soyabean from the following connected persons:

• (a) GOI;

• (b) Wilmar Group;

• (c) COFCO Group; and

• (d) ADM Group.

3.2.2.2 Information on the transactions

The amounts of purchase of raw materials by the COFCO Oils & Fats Group from the connected persons mentioned in (a) to (d) above for the two financial years ended 31 December 2002 were approximately HK$2,086.4 million and approximately HK$6,300.5 million respectively. These amounts of purchase of raw materials represent approximately 33.6% and approximately 56.7% of the audited consolidated turnover of the Company for the two financial years ended 31 December 2002 respectively.

The Directors confirm that the COFCO Oils & Fats Group will continue to purchase these raw materials from the connected persons mentioned in (a) to (d) above on normal commercial terms to be determined by the respective parties on an arm’s length negotiation basis. The prices at which these raw materials will be purchased by the COFCO Oils & Fats Group from these connected persons will not be higher than the prices at which these products are purchased from independent third parties.

3.2.3 Sale of wine and wine related products

Currently, COFCO Wines & Spirits Group sells wine and wine related products to the COFCO Group.

The amounts of sales of wine and wine related products by the COFCO Wines & Spirits Group to the COFCO Group for the two financial years ended 31 December 2002 were approximately HK$0.9 million and approximately HK$5.8 million respectively. These amounts of sales of wine and wine related products represent approximately 0.03% and approximately 0.19% of the NTA for the two financial years ended 31 December 2002 respectively.

The Directors confirm that the COFCO Wines & Spirits Group will continue to sell wine and wine related products to the COFCO Group on normal commercial terms to be determined by the respective parties on an arm’s length negotiation basis.

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LETTER FROM THE BOARD

The prices at which these wine and wine related products will be sold by the COFCO Wines & Spirits Group to the COFCO Group will not be less than the prices at which these products are sold to independent third parties.

3.2.4 Sale of rice products to the COFCO Group

It is expected that commencing from January 2004, COFCO International (Beijing) will import and sell rice products to GGHR, a company of which COFCO holds a beneficial equity interest of 50%.

As far as the Directors are aware, following the PRC’s successful accession to the World Trade Organisation, the restrictions on import of rice products have basically been eliminated, and GGHR has the option to purchase rice products from COFCO International (Beijing) and other similar trading companies.

The Directors believe that GGHR will request COFCO International (Beijing) to import rice products on the basis of the import network already possessed by COFCO International (Beijing).

The amount of sales of rice products by COFCO International (Beijing) to GGHR is expected to be in the range of HK$15 million to HK$30 million for the forthcoming three financial years ending 31 December 2006.

The Directors confirm that COFCO International (Beijing) will sell rice products to GGHR on normal commercial terms to be determined on an arm’s length negotiation basis. The prices at which the rice products will be sold by COFCO International (Beijing) to GGHR will not be less than the prices at which these products are sold to independent third parties.

3.2.5 Purchase and processing of agricultural products

Currently, COFCO Trading Group purchases certain agricultural products (including red bean products, sesame products, rice products, chestnut products, cottonseed meal and rapeseed meal) from the COFCO Group. The COFCO Group also processes the products for the COFCO Trading Group. It is expected that commencing from 2004, the COFCO Group will commence its rice processing business and the COFCO Group will sell its processed rice to the COFCO Trading Group.

The aggregate amounts of agricultural products purchased by the COFCO Trading Group from the COFCO Group for each of the two years ended 31 December 2002 were approximately HK$21.2 million and approximately HK$150.3 million respectively. These aggregate amounts of purchase of agricultural products represent approximately 0.3% and approximately 1.4% of the audited consolidated turnover of the Company for the two financial years ended 31 December 2002 respectively. In view of the commencement of the rice processing business in 2004, the Directors expect that there will be an increase in amount to be transacted from 2004 onwards.

In view of the long-term working relationship and the quality assurance on the products supplied by the COFCO Group, the Directors confirm that the COFCO Trading Group will continue to purchase certain agricultural products from the COFCO Group and also request them to process these agricultural products prior to export on

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LETTER FROM THE BOARD

normal commercial terms to be determined by the respective parties on an arm’s length negotiation basis. COFCO has undertaken to procure that the prices to be paid by the COFCO Trading Group to the COFCO Group for the purchasing and processing of these agricultural products will not be more than the prices at which these products are charged by independent third parties and the prices charged by the COFCO Group to independent third parties (where applicable).

3.2.6 Provision of product processing and storage services

Currently, the COFCO Trading Group processes and stores chestnut products through TSO, a company indirectly owned as to 38.46% by COFCO.

There was no transaction for the two financial years ended 31 December 2002. However, given the nature of business and the diversity of the business of the COFCO Group, it is likely that transaction of this category may re-occur for the year ending 31 December 2003 and thereafter.

The Directors confirm that the COFCO Trading Group will continue to process and store chestnut products through TSO on normal commercial terms to be determined on an arm’s length negotiation basis. The prices at which such chestnut products will be processed and stored by the COFCO Trading Group through TSO will not be higher than the prices at which these products are processed and stored by independent third parties.

3.2.7 Provision of management services to the COFCO Group

COFCO Services entered into the Service Agreement with COFCO, pursuant to which COFCO Services agreed to provide to the COFCO Group management services relating to the COFCO Group’s sugar and corn import and export businesses, including, but not limited to, the provision of market information relating to worldwide supply of sugar and corn, market research on the credit worthiness and financial positions of customers, development and solicitation of customers, pricing advice and shipping information for a term of ten years.

COFCO Services is principally engaged in the provision of the above services to the COFCO Group.

In return for the management services relating to the COFCO Group’s corn export business, COFCO Services will be paid by the COFCO Group a basic annual fee of US$0.6 million (approximately HK$4.68 million) and 0.3% on the total dollar value of corn exported during each financial year under the export rights of COFCO.

In return for the management services relating to the COFCO Group’s sugar import and export business, COFCO Services will be paid by the COFCO Group a basic annual fee of US$1.6 million (about HK$12.48 million) and 0.3% on the total dollar value of sugar imported and exported by the COFCO Group during each financial year under the import and export rights of COFCO.

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LETTER FROM THE BOARD

The terms of the Service Agreement were arrived at after arm’s length negotiation and are in the interests of the Company and the Shareholders taken as a whole. Under the Service Agreement, the COFCO Group paid to COFCO Services an annual service fee of approximately HK$3.6 million and approximately HK$30.3 million for the two financial years ended 31 December 2002 respectively.

4. REASONS FOR APPLICATION FOR THE NEW WAIVER AND THE BASIS FOR DETERMINING THE ANNUAL CAP AMOUNT FOR EACH OF THE ONGOING CONNECTED TRANSACTIONS

The Directors consider that the Ongoing Connected Transactions will be conducted on an arm’s length negotiations basis and on normal commercial terms, in the usual and ordinary course of businesses of the Group, and that they are fair and reasonable as far as the Shareholders, including the Independent Shareholders, taken as a whole, are concerned having regard to the circumstances in which they are entered into. The Directors believe that it will not be practical to make disclosure of, or, where it is required under the Listing Rules, obtain approval from the Independent Shareholders, for each particular Ongoing Connected Transaction.

The Existing Waivers were granted by the Stock Exchange on 4 May 2001 and 29 June 2001 respectively and will expire by 31 December 2003. As the expiry date for the Existing Waivers is approaching and the Group will enter into the Ongoing Connected Transactions with the COFCO Group and other connected persons of the Company in the ordinary course of businesses of the parties involved and on normal commercial terms, the Company has applied to the Stock Exchange for a waiver from strict compliance with the connected transactions requirements set out in Chapter 14 of the Listing Rules in respect of the Ongoing Connected Transactions for a term of three years ending 31 December 2006, subject to the approval of the Independent Shareholders at the Special General Meeting and subject to the conditions set out below.

The Commodities Connected Transactions and the Miscellaneous Connected Transactions as described under paragraphs 3.2.1, 3.2.2 and 3.2.5 above fall within the requirements under Rule 14.26 of Chapter 14 of the Listing Rules, in respect of which the annual cap amount has been set as referred to below (representing an amount exceeding the higher of 3% of the NTA for that year or HK$10 million), and shall require approval of the Independent Shareholders every three years.

The Miscellaneous Connected Transactions as described under paragraphs 3.2.3, 3.2.4, 3.2.6 and 3.2.7 above fall within the requirements under Rule 14.25(1) of Chapter 14 of the Listing Rules, in respect of which the annual cap amount has been set as referred to below (representing an amount equal to or less than the higher of 3% of the NTA for that year or HK$10 million), and shall require to be disclosed in the annual report of the Company.

The annual cap amount is determined with reference to (i) the cap amount set out in the Existing Waivers; (ii) the historical percentages of the respective Ongoing Connected Transactions over the consolidated annual turnover of the Group or over the NTA for the two financial years ended 31 December 2002 respectively; and (iii) the anticipated growth in the next few years.

The Board believes that it is natural for the harvest conditions of the Commodities in the PRC and in other Asian countries to dictate the amount of supply in the PRC market, and in turn, to affect the market prices of the Commodities and the quantity that could be imported to the PRC. Despite the actual transaction amount of the Commodities Connected Transactions being substantially below the Cap Amount (as defined in the section headed “5. Conditions of the New Waiver” below) over the past two financial years ended 31 December 2002, given the volatility of

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LETTER FROM THE BOARD

the Commodities trading business, the Directors consider it essential to maintain a sufficiently large Cap Amount in order to meet market demand when opportunities arise.

As regards the Miscellaneous Connected Transactions as described under paragraph 3.2.5 above, in view of the commencement of the rice processing business in 2004, the Directors expect that there will be an increase in amount to be transacted from 2004 onwards and accordingly, the Directors consider it essential to maintain a sufficiently large Cap Amount for these transactions.

Please note that the Company has complied with the conditions and requirements set out in the Existing Waivers.

5. CONDITIONS OF THE NEW WAIVER

The New Waiver shall be subject to the following conditions:

5.1 The Ongoing Connected Transactions shall be:

• 5.1.1 entered into by the Company in the ordinary and usual course of its business;

• 5.1.2 conducted either (A) on normal commercial terms (which expression will be applied by reference to transactions of a similar nature and to be made by similar entities in the PRC) or (B) (where there is no available comparison) on terms that are fair and reasonable so far as the Shareholders are concerned; and

• 5.1.3 entered into either (A) in accordance with the terms of the agreements governing such Ongoing Connected Transactions or (B) (where there are no such agreements) on terms no less favourable than those available to or from independent third parties.

5.2 The cap of each category of Ongoing Connected Transactions shall be:

• 5.2.1 in respect of the Commodities Connected Transactions, the annual cap amount (the “Cap Amount”) of such transactions for each of the three financial years ending 31 December 2006 shall not exceed 70% of the NTA as disclosed in the audited consolidated accounts for the relevant financial year;

• 5.2.2 in respect of the Miscellaneous Connected Transactions, the aggregate amount of each of the connected transactions for each of the three financial years ending 31 December 2006 shall not exceed the respective Cap Amounts set forth in the right column below:

Description of Miscellaneous Connected Transactions

Cap Amount

Sale of edible oils and oil related 18% of the Group’s consolidated products as described in paragraph annual turnover 3.2.1 Purchase of raw materials as described 80% of the Group’s consolidated in paragraph 3.2.2 annual turnover

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LETTER FROM THE BOARD

Description of Miscellaneous Connected Transactions Cap Amount Sale of wine and wine related products Less than the higher of (i) HK$10 and sale of rice products as set out in million; and (ii) 3% of the audited paragraphs 3.2.3 and 3.2.4 consolidated NTA of the Group for the relevant financial year

Purchase and processing of 6% of the Group’s consolidated annual agricultural products as set out in turnover paragraph 3.2.5

Provision of product processing and storage services and provision of management services as set out in paragraphs 3.2.6 and 3.2.7

Less than the higher of (i) HK$10 million; and (ii) 3% of the audited consolidated NTA of the Group for the relevant financial year

• 5.3 Details of the Ongoing Connected Transactions shall be disclosed in the Company’s next and successive annual reports as set out in Rules 14.25(1)(A) to (D) of the Listing Rules.

• 5.4 Independent non-executive Directors shall review annually the Ongoing Connected Transactions and confirm in the Company’s next and successive annual reports that the Ongoing Connected Transactions are conducted in the manner as stated in paragraphs 5.1 and 5.2 above.

• 5.5 The Company is required to engage its auditors to provide the Directors with a letter (the “Auditors’ Letter”) in respect of the Ongoing Connected Transactions occurring during the financial year ending 31 December 2006. Where the Ongoing Connected Transactions will extend beyond one financial year, these requirements will apply for each such successive financial year. The Auditors’ Letter is to be addressed to the Directors and a copy of the Auditors’ Letter is to be provided by the Company to the Stock Exchange.

The Auditors’ Letter will state that:

• the Ongoing Connected Transactions received the approval of the Directors;

• the condition noted under paragraph 5.2 above is met;

• the Ongoing Connected Transactions are in accordance with the pricing policies of the Company and have been entered into in accordance with the terms of the agreement governing the Ongoing Connected Transactions or, where there is no such agreement, on terms no less favourable than terms available to (or from, as appropriate) independent third parties; and

• if the Cap Amount has been exceeded.

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LETTER FROM THE BOARD

Where, for whatever reason, the auditors decline to accept the engagement or are unable to provide the Auditors’ Letter, the Directors shall contact the Stock Exchange immediately.

• 5.6 The Company shall provide to the Stock Exchange an undertaking that, for so long as the Shares are listed on the Stock Exchange, they will provide the Company’s auditors with full access to its relevant records for the purpose of the auditors’ review of the Ongoing Connected Transactions referred to in paragraph 5.5 above.

If any terms of the Ongoing Connected Transactions as mentioned above are altered or if the Company entered into any new agreements with any connected persons (within the meaning of the Listing Rules) in the future, the Company must comply with the provisions of Chapter 14 of the Listing Rules governing connected transactions unless it applies for and obtains a separate waiver from the Stock Exchange.

6. SPECIAL GENERAL MEETING

A notice convening the Special General Meeting to be held at the Boardroom, World Trade Centre Club Hong Kong, 38th Floor, World Trade Centre, 280 Gloucester Road, Causeway Bay, Hong Kong on 29 December 2003 at 3:30 p.m. is set out on pages 30 and 31 of this circular for the purpose of considering and, if thought fit, passing the ordinary resolution in respect of the Commodities Connected Transactions and those Miscellaneous Connected Transactions (as described in paragraphs 3.2.1, 3.2.2 and 3.2.5 above).

A form of proxy for use by the Shareholders at the Special General Meeting is enclosed. Whether or not you are able to attend the meeting in person, you are requested to complete and return the form of proxy in accordance with the instructions printed thereon to the branch share registrars of the Company in Hong Kong, Progressive Registration Limited at Ground Floor, Bank of East Asia Harbour View Centre, 56 Gloucester Road, Wanchai, Hong Kong, as soon as possible and in any event, not less than 48 hours before the time appointed for holding such meeting or any adjourned meeting (as the case may be). Completion and return of the form of proxy will not preclude you from attending and voting in person at the Special General Meeting or any adjourned meeting thereof (as the case may be) should you so wish.

COFCO (beneficially owned approximately 68.97% of the issued share capital of the Company as at the Latest Practicable Date) will abstain from voting at the Special General Meeting.

7. ADDITIONAL INFORMATION

Your attention is drawn to the letter of advice from the Independent Board Committee and the letter from Access Capital containing its advice to the Independent Board Committee in relation to certain Ongoing Connected Transactions set out on pages 17 and 18 and pages 19 to 25 of this circular respectively.

Your attention is also drawn to the additional information set out in the appendix to this circular.

By Order of the Board COFCO International Limited Yu Guangquan Managing Director

– 16 –

LETTER FROM THE INDEPENDENT BOARD COMMITTEE

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(Incorporated in Bermuda with limited liability)

To the Independent Shareholders

12 December 2003

Dear Sir or Madam,

ONGOING CONNECTED TRANSACTIONS

We refer to the circular dated 12 December 2003 of the Company (“Circular”) of which this letter forms part. Terms defined in the Circular shall have the same meanings herein unless the context otherwise requires.

We have been appointed to form the Independent Board Committee to consider and to advise the Independent Shareholders as to whether, in our opinion, the terms of the Commodities Connected Transactions and certain Miscellaneous Connected Transactions (being described in paragraphs 3.2.1, 3.2.2 and 3.2.5 in the “Letter from the Board” of the Circular) are fair and reasonable so far as the Independent Shareholders are concerned. Access Capital has been appointed to advise the Independent Board Committee in respect of the terms of the Commodities Connected Transactions and certain Miscellaneous Connected Transactions (being described in paragraphs 3.2.1, 3.2.2 and 3.2.5 in the “Letter from the Board” of the Circular).

We wish to draw your attention to the “Letter from the Board” set out on pages 5 to 16 of the Circular which contains, inter alia, information of the Ongoing Connected Transactions, and the letter from Access Capital set out on pages 19 to 25 of the Circular which contains its advice in respect of the terms of the Commodities Connected Transactions and certain Miscellaneous Connected Transactions (being described in paragraphs 3.2.1, 3.2.2 and 3.2.5 in the “Letter from the Board” of the Circular).

– 17 –

LETTER FROM THE INDEPENDENT BOARD COMMITTEE

Having taken into account the advice of Access Capital, we consider that the pre-determined cap amount and the terms for the Commodities Connected Transactions and certain Miscellaneous Connected Transactions (being described in paragraphs 3.2.1, 3.2.2 and 3.2.5 in the “Letter from the Board” of the Circular) to be fair and reasonable so far as the Independent Shareholders are concerned and in the interests of the Company and the Shareholders as a whole. Accordingly, we recommend the Independent Shareholders to vote in favour of the ordinary resolution to be proposed at the Special General Meeting in relation to the Commodities Connected Transactions and certain Miscellaneous Connected Transactions (being described in paragraphs 3.2.1, 3.2.2 and 3.2.5 in the “Letter from the Board” of the Circular) and the attached waiver.

Yours faithfully, For and on behalf of Independent Board Committee Yuen Tin Fan, Francis Liang Shangli Independent non-executive Directors

– 18 –

LETTER FROM ACCESS CAPITAL

The following is the full text of the letter of advice to the Independent Board Committee from Access Capital dated 12 December 2003 prepared for incorporation in this circular.

3rd Floor No. 8 Queen’s Road Central Hong Kong

12 December 2003

To: The Independent Board Committee of COFCO International Limited

Dear Sirs,

ONGOING CONNECTED TRANSACTIONS

I. INTRODUCTION

We refer to our appointment to advise the Independent Board Committee as regards the terms of certain ongoing connected transactions (“Ongoing Connected Transactions”). Details of the Ongoing Connected Transactions are contained in the “Letter from the Board” set out on pages 5 to 16 of the circular to the Shareholders dated 12 December 2003 (the “Circular”), of which this letter forms part. Terms used in this letter shall have the same meaning as defined in the Circular unless the context otherwise stated.

According to the Directors, the Ongoing Connected Transactions are divided into two major groups:

• Commodities Connected Transactions; and

• Miscellaneous Connected Transactions.

Details of the Ongoing Connected Transactions are set out under the section headed “Ongoing Connected Transactions” in the “Letter from the Board”.

The Special General Meeting will be held for the purpose of approving the New Waiver for the Commodities Connected Transactions and certain Miscellaneous Connected Transactions (being described in paragraphs 3.2.1, 3.2.2 and 3.2.5 in the “Letter from the Board” of the Circular). The New Waiver for the aforesaid Ongoing Connected Transactions is subject to approval of the Independent Shareholders who are entitled to vote at the Special General Meeting. COFCO (beneficially owned approximately 68.97% of the issued share capital of the Company as at the Latest Practicable Date) will abstain from voting at the Special General Meeting.

– 19 –

LETTER FROM ACCESS CAPITAL

II. THE INDEPENDENT BOARD COMMITTEE

The Board currently comprises Zhou Mingchen, Liu Fuchun, Yu Guangquan, Xue Guoping, Liu Yongfu, Ng Eng Leong, Qu Zhe, Yuen Tin Fan, Francis and Liang Shangli. Zhou Mingchen, Liu Fuchun, Yu Guangquan, Xue Guoping, Liu Yongfu, Ng Eng Leong and Qu Zhe are employee directors of the Company and are not considered independent in so far as the Ongoing Connected Transactions are concerned. Accordingly, an independent board committee comprising Yuen Tin Fan, Francis and Liang Shangli has been established to consider the terms of the Ongoing Connected Transactions. We have been appointed by the independent board committee of the Company to advise them as to whether the terms of the Commodities Connected Transactions and those Miscellaneous Connected Transactions (as described in paragraphs 3.2.1, 3.2.2 and 3.2.5 in the “Letter from the Board” of the Circular) are fair and reasonable so far as the Independent Shareholders are concerned and to give our opinion in relation to the aforesaid Ongoing Connected Transactions for their consideration in making their recommendation to the Independent Shareholders.

III. BASES OF THE OPINION

In formulating our advice, we have relied solely on the statements, information, opinions and representations contained in the Circular and the information and representations provided to us by the Company and/or the Directors. We have assumed that all such statements, information, opinions and representations contained or referred to in the Circular or otherwise provided or made or given by the Company and/or its senior management staff and/or the Directors and for which it is/they are solely responsible were true and accurate and valid at the time they were made and given and continue to be true and valid as at the date of the Circular. We have assumed that all the opinions and representations made or provided by the Directors and/or the senior management staff of the Company contained in the Circular have been reasonably made after due and careful enquiry. We have also sought and obtained confirmation from the Company and/or its senior management staff and/or the Directors that no material facts have been omitted from the information provided and referred to in the Circular.

We consider that we have reviewed all currently available information and documents which are available to enable us to reach an informed view and to justify our reliance on the information provided so as to provide a reasonable basis for our opinions. We have no reason to doubt the truth, accuracy and completeness of the statements, information, opinions and representations provided to us by the Company and/or its senior management staff and/or the Directors and their respective advisers or to believe that material information has been withheld or omitted from the information provided to us or referred to in the aforesaid documents. We have not, however, carried out an independent verification of the information provided, nor have we conducted an independent investigation into the business and affairs of the Company or any of its subsidiaries.

– 20 –

LETTER FROM ACCESS CAPITAL

IV. PRINCIPAL FACTORS AND REASONS CONSIDERED

In formulating our recommendation, we have taken into consideration the following principal factors and reasons:

1. Background to the Ongoing Connected Transactions and reason for the waiver application

• (a) Background to the Ongoing Connected Transactions

The Company is an investment holding company and its subsidiaries are principally engaged in food processing and related businesses which include the edible oils, soyabean meal and related products; wineries; confectionery; trading and flour milling.

The Company is a subsidiary of COFCO (Hong Kong) Limited. The ultimate holding company of the Company is COFCO.

Since the Company and its subsidiaries have entered into various transactions with certain connected persons (as defined in the Listing Rules) including COFCO and its subsidiaries, such transactions constituted as connected transactions for the Company under the Listing Rules.

• (b) Reason for the waiver application

On 4 May 2001 and 29 June 2001 respectively, the Company obtained various conditional waivers from the Stock Exchange, pursuant to which the Company is exempted from compliance with certain announcement and shareholders’ approval requirements under the Listing Rules in connection with the Ongoing Connected Transactions. These waivers are conditional, among other things, that the total value for each category of Ongoing Connected Transactions for each of the three financial years ending 31 December 2003 must not exceed a pre-determined cap amount approved by the Stock Exchange. As stated in each of the annual reports of the Company for the last two financial years ended 31 December 2002, the cap amount for each category of Ongoing Connected Transactions has not been exceeded.

As the abovementioned waivers will expire by 31 December 2003, and those transactions constituting Ongoing Connected Transactions will continue to occur in the ordinary course of business and on normal commercial terms after 31 December 2003, the Company has applied to the Stock Exchange for a waiver from strict compliance with the disclosure and shareholders’ approval requirements of the Listing Rules regarding the Ongoing Connected Transactions, and the cap amount of each category of Ongoing Connected Transactions for the three years ending 31 December 2006 are stated in the section headed “Conditions of the New Waiver” in the “Letter from the Board”.

– 21 –

LETTER FROM ACCESS CAPITAL

2. Commercial justifications for the New Waiver and determining the cap amount for each category of Ongoing Connected Transactions

• (a) For the New Waiver

• (i) In relation to the Commodities Connected Transactions, we have taken into account the following reasons:

  • (aa) In respect of Exclusive Products as defined in the “Letter from the Board”:

    • (1) as the COFCO Group (other than the Company) is practically the sole and exclusive agent of the PRC Government in the import/export of the Exclusive Products in the PRC, it is inevitable for trading companies like CFTL to deal with the COFCO Group if CFTL is to carry out the business of import/export trading in the Exclusive Products in the PRC; and

    • (2) the transactions are carried out on a regular basis and on normal commercial terms reflecting market prices and in the ordinary course of business of the Company.

  • (bb) In respect of General Products as defined in the “Letter from the Board”:

    • (1) as the COFCO Group is the principal agent of the PRC Government in the import/export of the General Products in the PRC, it is essential for trading companies like CFTL carrying on the business of trading of General Products in the PRC to trade with the COFCO Group in order to have a secure and stable source of supply/demand of General Products; and

    • (2) the transactions are carried out on a regular basis and on normal commercial terms reflecting market prices and in the ordinary course of business of the Company.

• (ii) In relation to the Miscellaneous Connected Transactions as set out below:

  • (aa) in respect of the sale of edible oils, oil related products and soyabean products (as described in paragraph 3.2.1 under the section headed “Miscellaneous Connected Transactions” in the “Letter from the Board”);

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LETTER FROM ACCESS CAPITAL

• (bb) in respect of purchase of raw materials of oils and soyabean (as described in paragraph 3.2.2 under the section headed “Miscellaneous Connected Transactions” in the “Letter from the Board”); and

• (cc) in respect of purchase and processing of agricultural products (as described in paragraph 3.2.5 under the section headed “Miscellaneous Connected Transactions” in the “Letter from the Board”).

In considering the appropriateness for the New Wavier, we have taken into account the Company’s confirmations that the transactions are:

• (1) entered into by the Company in the ordinary and usual course of its business;

• (2) conducted either (A) on normal commercial terms (which expression will be applied by reference to transactions of a similar nature and to be made by similar entities in the PRC) or (B) (where there is no available comparison) on terms that are fair and reasonable so far as the Shareholders are concerned;

• (3) entered into either (A) in accordance with the terms of the agreements governing such Ongoing Connected Transactions or (B) (where there are no such agreements) on terms no less favourable than those available to or from independent third parties;

• (4) the terms of such connected transactions are to be determined on an arm’s length negotiation basis.

We have also reviewed sample contracts of the Ongoing Connected Transactions and sample contracts of independent transactions entered into between CFTL and independent third parties during the year; and the reports of factual findings issued by the Company’s auditors in respect of the transactions for the two years ended 31 December 2002.

Based on the above features and our review, we believe that it is fair and reasonable for the Company to seek for the New Waiver.

• (b) For the cap amount

Details of the cap amount for each category of the Ongoing Connected Transactions are set out in the section headed “Conditions of the New Waiver” of the “Letter from the Board”.

– 23 –

LETTER FROM ACCESS CAPITAL

According to the Directors, the bases of determining the cap amount in relation to each category of the Ongoing Connected Transactions are as follows:

• (i) with reference to the cap amount set out in the Existing Waivers;

• (ii) with reference to the historical percentages of the respective Ongoing Connected Transactions over the consolidated annual turnover of the Group or over the audited consolidated NTA of the Group for the two financial years ended 31 December 2002 respectively; and

• (iii) with reference to the anticipated growth in the next few years.

It is also stated in the section headed “4. Reasons for application for the New Waiver and the basis for determining the annual Cap Amount for each of the Ongoing Connected Transactions” of the “Letter from the Board” that the harvest conditions of the Commodities in the PRC and in other Asian countries dictate the amount of supply in the PRC market, which in turn affect the market prices of the Commodities and the quantity that could be imported to the PRC. Given the volatility of the Commodities trading business, we concur with the view of the Directors that it is essential to maintain a sufficiently large Cap Amount in order to meet market demand when opportunities arise.

Despite the actual transaction amount for the Miscellaneous Connected Transaction (as described in paragraph 3.2.5 in the “Letter from the Board”) is substantially below the Cap Amount of that category, the Directors expect that the COFCO Group will commence rice processing business in 2004 and the COFCO Group will sell its processed rice to the COFCO Trading Group. Hence, we believe this forms the basis for determining and maintaining a sufficiently large Cap Amount for this category of Ongoing Connected Transaction.

Taking into account the factors mentioned above and our discussion with the Directors relating to the transaction amount of each category of the Ongoing Connected Transactions for the six months ended 30 June 2003, we are of the view that the basis of determining the cap amount for each category of the Ongoing Connected Transactions are fair and reasonable so far as the Independent Shareholders are concerned.

V. RECOMMENDATION

Having considered the above principal factors including, inter alia, (i) the background to the Commodities Connected Transactions and certain Miscellaneous Connected Transactions (being described in paragraphs 3.2.1, 3.2.2 and 3.2.5 in the “Letter from the Board” of the Circular) and reason for the waiver application; and (ii) the commercial justifications for the New Waiver and basis of determining the cap amount for the Commodities Connected Transactions and certain Miscellaneous Connected Transactions (being described in paragraphs 3.2.1, 3.2.2 and 3.2.5 in the “Letter from the Board” of the Circular), we are of the view that the pre-determined cap amount

– 24 –

LETTER FROM ACCESS CAPITAL

and the terms for the Commodities Connected Transactions and certain Miscellaneous Connected Transactions (being described in paragraphs 3.2.1, 3.2.2 and 3.2.5 in the “Letter from the Board” of the Circular) are fair and reasonable so far as the Independent Shareholders are concerned and in the interests of the Company and the Shareholders as a whole.

Further, in relation to compliance with condition 5.5 under the section headed “Conditions of the New Waiver” as mentioned in the “Letter from the Board”, the Directors confirm that the auditors of the Company shall review the Ongoing Connected Transactions and confirm the terms of the Ongoing Connected Transactions have received the approval of the independent non-executive Directors and that the Ongoing Connected Transactions have not exceeded the cap amount. In addition, in order to comply with this condition, the Directors confirm that the auditors of the Company will have full access to the books and records for the purpose of the auditors review of the Ongoing Connected Transactions. On this basis, we believe that the aforesaid condition and right have been given in the interests of the Shareholders and provide additional safeguards to the Company.

Accordingly, we advise the Independent Board Committee to recommend the Independent Shareholders to vote in favour of the ordinary resolution in relation to the Commodities Connected Transactions and certain Miscellaneous Connected Transactions (being described in paragraphs 3.2.1, 3.2.2 and 3.2.5 in the “Letter from the Board” of the Circular) and the attached waiver which will be proposed at the Special General Meeting.

Yours faithfully, For and on behalf of ACCESS CAPITAL LIMITED Jeanny Leung Managing Director

– 25 –

GENERAL INFORMATION

APPENDIX

1. RESPONSIBILITY STATEMENT

This circular includes particulars given in compliance with the Listing Rules for the purpose of giving information with regard to the Company. The Directors collectively and individually accept full responsibility for the accuracy of the information contained in this circular and confirm, having made all reasonable enquiries, that to the best of their knowledge and belief, there are no other facts the omission of which would make any statement herein misleading.

2. DISCLOSURE OF INTERESTS

As at the Latest Practicable Date, the interests and short position of the Directors and chief executive in the Shares, underlying Shares and debentures of the Company and its associated corporations (within the meaning of Part XV of the SFO) which (a) were required to be notified to the Company and Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO (including interests and short positions which they are taken or deemed to have under such provisions of the SFO); or (b) were required, pursuant to Section 352 of the SFO, to be entered in the register referred to therein; or (c) were required, pursuant to the Model Code for Securities Transactions by Directors of Listed Companies of the Listing Rules, to be notified to the Company and the Stock Exchange were as follows:

• (a) Aggregate long position in the Shares, underlying shares and debentures of the Company and its associated corporations

			Approximate
			percentage of
		Number of	existing issued
		Shares held	share capital
Directors	Capacity	long position	of the Company
		(Note)
Mr. Zhou Mingchen	Beneficial owner	6,000,000	0.34%
Mr. Liu Fuchun	Beneficial owner	5,400,000	0.31%
Mr. Yu Guangquan	Beneficial owner	2,817,000	0.16%
Mr. Xue Guoping	Beneficial owner	3,600,000	0.21%
Mr. Liu Yongfu	Beneficial owner	3,600,000	0.21%
Mr. Ng Eng Leong	Beneficial owner	1,200,000	0.07%
Mr. Qu Zhe	Beneficial owner	425,000	0.02%

Note: None of the Directors had any long position in the Shares, underlying shares and debentures of the Company and its associated corporations other than their respective long positions in the underlying shares of the Company pursuant to share options granted to them.

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GENERAL INFORMATION

APPENDIX

• (b) Aggregate short position in the Shares, underlying shares and debentures of the Company and its associated corporations

None of the Directors had any short position in the Shares, underlying shares and debentures of the Company and its associated corporations.

Save as disclosed above, as at the Latest Practicable Date:

• (i) none of the Directors and chief executive hold any interest or short position in the Shares, underlying shares and debentures of the Company or any of its associated corporation (within the meaning of the SFO) notificable to the Company and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO (including interests and short positions which they are taken or deemed to have under such provisions of the SFO) or which are required, pursuant to Section 352 of the SFO, to be entered in the register referred to therein, or which are required, pursuant to the Model Code for Securities Transactions by Directors of Listed Companies of the Listing Rules, to be notified to the Company and the Stock Exchange;

• (ii) none of the Directors had any direct or indirect interest in any assets which have been, since the date to which the latest published audited accounts of the Group were made up, acquired or disposed of by, or leased to, the Company or any of its subsidiaries, or are proposed to be acquired or disposed of by, or leased to, the Company or any of its subsidiaries;

• (iii) none of the Directors is materially interested in any contract or arrangement entered into by the Company or any of its subsidiaries which contract or arrangement is subsisting at the date of this circular and which is significant in relation to the business of the Group; and

• (iv) none of the Directors has entered or is proposing to enter into a service contract with the Company or any of its subsidiaries (excluding contracts expiring or determinable within one year without payment of compensation other than statutory compensation).

– 27 –

GENERAL INFORMATION

APPENDIX

3. SUBSTANTIAL SHAREHOLDERS

As at the Latest Practicable Date, the following person (other than a director or chief executive of the Company) who has interest or short position in the Shares and underlying shares as recorded in the register required to be kept by the Company pursuant to Section 336 of the SFO:

				Approximate
				percentage of
			Number of	existing issued
			Shares/	share capital
			underlying	of the
Name of Shareholder	Nature	Capacity	shares	Company
COFCO	Long position	Interest of controlled	1,204,948,949	68.97%
		corporation_(Note 1)_
COFCO (Hong Kong) Limited	Long position	Beneficial owner	10,138,000	0.58%
(“COFCO (HK)”)		Interest of controlled	1,194,810,949	68.39%
		corporation_(Note 2)_
Wide Smart Holdings Limited	Long position	Beneficial owner	1,054,810,949	60.38%
(“Wide Smart”)
COFCO (BVI) No. 108 Limited	Long position	Beneficial owner	140,000,000	8.01%
(“COFCO (BVI”)
J. P. Morgan Chase & Co.	Long position	Beneficial owner/other	104,858,999	6.00%
		(Note 3)
	Lending pool	Other_(Note 3)_	25,703,999	1.47%

Notes:

• (1) COFCO is deemed to be interested in 1,204,948,949 Shares in aggregate held by COFCO (HK), Wide Smart and COFCO (BVI) in which COFCO is entitled to exercise or control the exercise of one-third or more of the voting power at general meetings of COFCO (HK), Wide Smart and COFCO (BVI) respectively.

• (2) COFCO (HK) is deemed to be interested in 1,194,810,949 Shares in aggregate held by Wide Smart and COFCO (BVI) in which COFCO (HK) is entitled to exercise one-third or more of the voting power at general meetings of Wide Smart and COFCO (BVI) respectively.

• (3) The Shares in which J.P. Morgan Chase & Co. was deemed to be interested were held via JPMorgan Chase Bank, JF Asset Management Limited, JF International Management Inc., J.P. Morgan Fleming Asset Management Holdings Inc., J.P. Morgan Fleming Asset Management (Asia) Inc., J.P. Morgan Whitefriars Inc., J.P. Morgan Overseas Capital Corporation, J.P. Morgan International Finance Limited and J.P. Morgan International Inc. respectively.

Save as disclosed herein, so far as was known to the Directors, there was no other person (other than the Directors or chief executive of the Company) who, as at the Latest Practicable Date, had an interest or short position in the Shares and underlying shares which would fall to be disclosed to the Company under the provisions of Divisions 2 and 3 of Part XV of the SFO, or, who was, directly or indirectly, beneficially interested in 10% or more of the nominal value of any class of the share capital carrying rights to vote in all circumstances at general meeting of any member of the Company or in any options in respect of such capital.

4. MATERIAL ADVERSE CHANGES

The Directors are not aware of any material adverse changes in the financial or trading position of the Group since 31 December 2002, the date to which the latest published audited accounts of the Group have been made up.

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GENERAL INFORMATION

APPENDIX

5. LITIGATION

Neither the Company nor any of its subsidiaries is engaged in any litigation or arbitration of material importance and no litigation or claim of material importance is known to the Directors to be pending or threatened by or against the Company or any of its subsidiaries.

6. EXPERT AND CONSENT

Access Capital has given and has not withdrawn its written consent to the issue of this circular with the inclusion of its letter and references to its name in the form and context in which they appear.

Access Capital is not beneficially interested in the share capital of any member of the Group nor has any right, whether legally enforceable or not, to subscribe for or to nominate persons to subscribe for securities in any member of the Group.

7. MISCELLANEOUS

• (a) The registered office of the Company is at Clarendon House, 2 Church Street, Hamilton HM 11, Bermuda.

• (b) The head office and principal place of business of the Company in Hong Kong is at 33rd Floor, Top Glory Tower, 262 Gloucester Road, Causeway Bay, Hong Kong.

• (c) The company secretary of the Company is Mr. Mok Chung Fu, Eric. Mr. Mok is a solicitor admitted in Hong Kong, England and Wales.

• (d) The English text of this circular shall prevail over the Chinese text in the case of any inconsistency.

8. DOCUMENTS AVAILABLE FOR INSPECTION

Copies of the following documents will be available for inspection at the offices of Deacons at 5th Floor, Alexandra House, Central, Hong Kong during normal business hours on any weekday, except public holidays, from the date of this circular up to and including 29 December 2003:

• the bye-laws of the Company;

• the annual reports of the Company for the two years ended 31 December 2001 and 31 December 2002;

• the interim report of the Company for the six months ended 30 June 2003;

• the letter from the Independent Board Committee as set out on pages 17 and 18 of this circular;

• the letter from Access Capital as set out on pages 19 to 25 of this circular; and

• the written consent referred to in paragraph headed “6. Expert and consent” to this Appendix.

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NOTICE OF THE SPECIAL GENERAL MEETING

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(Incorporated in Bermuda with limited liability)

NOTICE IS HEREBY GIVEN that a special general meeting of the COFCO International Limited (the “Company”) will be held at the Boardroom, World Trade Centre Club Hong Kong, 38th Floor, World Trade Centre, 280 Gloucester Road, Causeway Bay, Hong Kong on 29 December 2003 at 3:30 p.m. for the purpose of considering and, if thought fit, passing the following resolution which will be proposed as ordinary resolution of the Company:

ORDINARY RESOLUTION

“ THAT the Commodities Connected Transactions (as defined in the circular of the Company dated 12 December 2003 to its shareholders (the “Circular”)) and such Miscellaneous Connected Transactions (as defined in the Circular) (being described in paragraphs 3.2.1, 3.2.2 and 3.2.5 in the “Letter from the Board” of the Circular), the fixing of their respective Cap Amounts (as defined and set out in the Circular) for the three financial years ending 31 December 2006 and all transactions and/or waivers contemplated thereby or relating thereto be and are hereby approved and confirmed.”

By Order of the Board Yu Guangquan Managing Director

Hong Kong, 12 December 2003

Registered office:

Clarendon House 2 Church Street Hamilton HM 11 Bermuda

Principal place of business in Hong Kong:

33rd Floor, Top Glory Tower 262 Gloucester Road Causeway Bay Hong Kong

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NOTICE OF THE SPECIAL GENERAL MEETING

Notes:

1. Any member of the Company entitled to attend and vote at the meeting is entitled to appoint one or more proxies to attend and vote instead of him. A proxy need not be a member of the Company.

2. A form of proxy for use at the meeting is enclosed. To be valid, the proxy form, together with any power of attorney or other authority (if any) under which it is signed, or a certified copy of that power of attorney or authority, must be deposited at the Company’s branch share registrars, Progressive Registration Limited at Ground Floor, Bank of East Asia Harbour View Centre, 56 Gloucester Road, Wanchai, Hong Kong as soon as possible and in any event not less than 48 hours before the time appointed for holding of the meeting or any adjournment of it.

3. Where there are joint holders of any share, any one of such holders may vote at the meeting, either in person or by proxy, in respect of such share as if he were solely entitled to vote, but if more than one of such joint holders be present at the meeting in person or by proxy, the person so present whose name stands first in the register of member of the Company in respect of such share shall alone be entitled to vote in respect of it.

4. Completion and return of the form of proxy will not preclude a member from attending the meeting and voting in person at the meeting or any adjourned meeting if he so desires. If a member attends the meeting after having deposited the form of proxy, his form of proxy will be deemed to have been revoked.

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