Lehman Brothers Commercial Corporation Asia Limited

(In Liquidation)
FU JI Food and Catering Services Holdings Limited
Bondholders’ Meeting
23 October 2009
Disclaimer
This Report has been prepared by the Joint and Several Liquidators of Lehman Brothers Commercial Corporation Asia Limited (In Liquidation) for the
Bondholders of Fu Ji Food and Catering Services Holdings Limited, based on information currently available from various public sources. It is prepared for the
sole purpose of facilitating initial discussions.

This Report should not be relied upon by any other person, or for any other purpose, or used in any other context, including but not limited to trading in the
Company’s securities. This Report has been released on a confidential basis and it should not be copied, referred to or disclosed, in whole or in part, without
the prior consent of the Joint and Several Provisional Liquidators of Lehman Brothers Commercial Corporation Asia Limited (In Liquidation).

© 2009 KPMG, a Hong Kong partnership and a member firm of the KPMG network of independent member firms affiliated with 1
KPMG International, a Swiss cooperative. All rights reserved. Printed in Hong Kong.
FU JI Food and Catering Services Holdings Limited (“the Company”)
Events leading to winding up

 On 29 July 2009, the Company announced a delay in the publication of the annual report. HKSE suspended the trading of the Company’s
shares and convertible bonds on the same day. Subsequently, the Company announced further delays on 25 August 2009 and 22 September
2009 respectively.
 On 30 September 2009, the delay in publishing annual reports resulted in technical defaults under the Company’s convertible bonds and bank
facility agreements.
 On the same day, one of the Company’s Independent Non-executive Directors, Dr Tsui Wai Ling Carlye, resigned, citing lack of open
communication from the management as the cause.
 On 7 October 2009, Deloitte was appointed as the Independent Financial Advisors.

 On 17 October 2009, the board filed a winding-up petition and the Court appointed Deloitte as the Provisional Liquidators.

Divested almost all of

HKSE suspended the Deloitte
its ownership in Golden
trading of the appointed as
Publication of the Hans, one of the most
Company’s shares profitable restaurant independent
last interim and convertible bonds financial advisors
financial report chain.

30/9/2008 Mar-Apr 2009 29/7/2009 30/9/2009 7/10/2009 17/10/2009

31/3/2009 Breach of covenants of Filed a winding-up petition and

– Fiscal year end convertible bonds and appointed Deloitte as the
8/4/2009 a cross default under Provisional Liquidators
– Company amended its bank the bank facility
loan facility

© 2009 KPMG, a Hong Kong partnership and a member firm of the KPMG network of independent member firms affiliated with 2
KPMG International, a Swiss cooperative. All rights reserved. Printed in Hong Kong.
FU JI Food and Catering Services Holdings Limited
Current Situation

Cash Positions
 Cash positions declined dramatically. As of petition date, the remaining bank deposits were as follows, excluding
pledged deposits.

As of Petition Date As of Sept 08 As of March 08

Local Local Local
US$ US$ US$
Currency Currency Currency
Bank Deposits
Cash in HK Bank Account 75 10
Cash in PRC Bank Account 39 6
15 689 103 957 143

Dramatic Revenue Decline

 Lost a great number of major institutional clients including Intel, Asus and Wal-Mart. Sales to the remaining
institutional clients have also substantially declined.
 Possible inflation of revenue figures for the past few years.

Key Customers Lost

Apr 08 to Sep 09 Oct 08 to Mar 09
(Amount in millions) RMB USD RMB USD
Intel 24.7 3.6 16.0 2.3
Asus 7.9 1.2 3.6 0.5
Ping An Insurance 7.4 1.1 7.0 1.0
Saint-Gobain 7.1 1.0 4.2 0.6
TSMC 3.2 0.5 6.1 0.9
Philips 2.9 0.4 5.0 0.7
Lenovo 2.6 0.4 0.5 0.1
China Mobile 2.2 0.3 - -
Wal-Mart 1.2 0.2 0.6 0.1
Dupont 0.9 0.1 0.9 0.1

© 2009 KPMG, a Hong Kong partnership and a member firm of the KPMG network of independent member firms affiliated with 3
KPMG International, a Swiss cooperative. All rights reserved. Printed in Hong Kong.
FU JI Food and Catering Services Holdings Limited
Current Situation (Continued)

Supplier concerns
 There are indications that certain suppliers are very concerned with the Company’s financial position and have
stopped delivery.

Massive layoffs
 Laid off 5,500 of its 8,500 employees in the past year.

 Some laid-off employees organized strikes in the factories and business premises, interfering day-to-day operations.

Management hemorrhage
 During the past year, key management level staff resignations included vice president, sales director, head of
investment department, general manager of processing factory, head of convenience food division, head of legal
department and head of human resources department.
 Sales Department – fourteen out of fifteen managerial staff left the Company

 Finance Department – twelve out of nineteen staff resigned

Potential asset preservation issue

 Unpaid construction contractors occupied certain land and properties owned by the Company

 With 15 legal proceedings against the Group in the PRC, some assets have been frozen by the PRC court.

© 2009 KPMG, a Hong Kong partnership and a member firm of the KPMG network of independent member firms affiliated with 4
KPMG International, a Swiss cooperative. All rights reserved. Printed in Hong Kong.
FU JI Food and Catering Services Holdings Limited
Summary of Liabilities

As the Company has failed Liabilities Position

to complete its annual
financial report, this event Value in Value in
(All amounts in millions) Currency Due Date
local currency US$
triggers the default of the
convertible bonds and
bank loan. The Bank Loan at operation Entity Level N/A N/A
outstanding sums are Bank Loan - Deutsche Bank * USD 5 5 Nov-Dec 2009
immediately repayable. Convertible Bonds due 2009 HKD 548 71 Nov 2009
Convertible Bonds due 2010 RMB 1,610 235 Oct 2009

Other Liabilities
Suppliers RMB 93 14
Construction Contractors RMB 149 22
Landlords of business/ factory premises RMB 32 5

PRC Tax Liabilities RMB 22 3

* Pursuant to an Amendment entered on 8 April 2009

Source: Affirmation of Wong Chi Keung, independent non-executive director of FU JI Food and Catering
Services Holdings Limited, filed with the High Court of HKSAR.

© 2009 KPMG, a Hong Kong partnership and a member firm of the KPMG network of independent member firms affiliated with 5
KPMG International, a Swiss cooperative. All rights reserved. Printed in Hong Kong.
FU JI Food and Catering Services Holdings Limited
Issues Facing the Bondholders

 Building a united and focused strategy to optimize recovery to Bondholders through the Liquidation process

 Steering Committee for the Bondholders?

 Financial and legal advisors representing the Bondholders?

 Evaluating options in preserving value of the Company

 Sales of the Company as a whole or in parts?

 Interested parties already surfacing

 Wind-down and sales of assets?

 Evaluating the Company’s operations and identifying value-drivers

 Assessing core and non-core assets

 Recovery of lost value - claims against Directors?

 Identification of potential investors?

© 2009 KPMG, a Hong Kong partnership and a member firm of the KPMG network of independent member firms affiliated with 6
KPMG International, a Swiss cooperative. All rights reserved. Printed in Hong Kong.
FU JI Food and Catering Services Holdings Limited
Appendix: Revenue and Operation Profit by Segment

Financial information
(Amounts in Millions) For the 6 months For the 12 months
ending Sept 2008 ending Mar 2008
RMB USD RMB USD
Segment Revenue
Catering Services business 959 140 1,383 202
Chinese Restaurants business 152 22 275 40
Theme Restaurants business 260 38 191 28
Convenience Food and other 17 3 66 10
Total Revenue 1,387 203 1,916 280

Segment Income
Catering Services business 309 45 459 67
Chinese Restaurants business 27 4 50 7
Theme Restaurants business 56 8 41 6
Convenience Food and other (14) (2) (16) (2)
Other Income 22 3 46 7
Profit from operations 401 59 581 85

© 2009 KPMG, a Hong Kong partnership and a member firm of the KPMG network of independent member firms affiliated with 7
KPMG International, a Swiss cooperative. All rights reserved. Printed in Hong Kong.