Vedan International : REVISION OF ANNUAL CAP FOR CONTINUING CONNECTED TRANSACTIONS UNDER THE TAIWAN SALES AGREEMENT

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VEDAN INTERNATIONAL (HOLDINGS) LIMITED

味 丹 國 際（ 控 股 ）有 限 公 司

(Incorporated under the laws of the Cayman Islands with limited liability)

(Stock code: 02317)

REVISION OF ANNUAL CAP FOR

CONTINUING CONNECTED TRANSACTIONS

UNDER THE TAIWAN SALES AGREEMENT

Reference is made to the Company's announcement dated 7 December 2020 in relation to the sales of the Products to the Taiwan Vedan Group pursuant to the Taiwan Sales Agreement. Taiwan Vedan Group is a manufacturer of MSG products which produces MSG by processing GA (being a semi-finished product of MSG). The price of raw materials of GA, namely, molasses, has increased recently, which will lead to an increase in the cost of producing GA in Taiwan and Vietnam. However, the cost of GA in Vietnam is normally lower than the cost of GA in Taiwan. Therefore, instead of producing GA by itself in Taiwan, it is expected that the Taiwan Vedan Group will increase the purchase of GA from the Group during the Relevant Period. As a result, the existing cap as set out in the Taiwan Sales Agreement will not be sufficient for the expected increase in the volume of business between the Group and the Taiwan Vedan Group. On 4 May 2021, the Company entered into the Supplemental Agreement with Taiwan Vedan to revise the annual cap for the continuing connected transactions under the Taiwan Sales Agreement for each of the three financial years ending 31 December 2023 from US$7,000,000 (equivalent to approximately HK$54,460,000) to US$50,000,000 (equivalent to approximately HK$389,000,000), subject to approval of the Independent Shareholders having been obtained.

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As at the date of this announcement, Taiwan Vedan is one of the controlling shareholders of the Company holding indirectly approximately 33.62% of the entire issued share capital of the Company, the transactions contemplated under the Supplemental Agreement therefore constitute continuing connected transactions for the Company under Chapter 14A of the Listing Rules.

As one or more of the applicable percentage ratios (as defined in the Listing Rules) in respect of the Revised Annual Cap, on an annual basis, exceeds 5% for the purpose of Rule 14.07 of the Listing Rules, the Supplemental Agreement and the Revised Annual Cap are subject to the reporting, announcement, circular and Independent Shareholders' approval requirements pursuant to Chapter 14A of the Listing Rules. Each of Yang Family and their respective associates will abstain from voting on the resolution in respect of the Supplemental Agreement and the Revised Annual Cap at the EGM.

The Independent Board Committee, comprising all the independent non-executive Directors, has been set up to advise the Independent Shareholders in connection with the Supplemental Agreement and the Revised Annual Cap. Celestial Capital Limited has been appointed as the Independent Financial Adviser for the purpose of providing independent advice to the Independent Board Committee and the Independent Shareholders in connection with the Supplemental Agreement and the Revised Annual Cap.

A circular containing, among other things, information regarding the Supplemental Agreement and the Revised Annual Cap, the recommendation of the Independent Board Committee, the advice from the Independent Financial Adviser and the notice of the EGM is expected to be dispatched to the shareholders of the Company on or before 26 May 2021.

BACKGROUND

Reference is made to the Company's announcement dated 7 December 2020 in relation to the sales of the Products to the Taiwan Vedan Group pursuant to the Taiwan Sales Agreement. Pursuant to the Taiwan Sales Agreement entered into between Taiwan Vedan and the Company, the Group will sell the Products to the Taiwan Vedan Group for use in Taiwan during the Relevant Period subject to an annual cap of US$7,000,000 (equivalent to approximately HK$54,460,000). As at the date of this announcement, the annual cap under the Taiwan Sales Agreement has not been exceeded.

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HISTORICAL FIGURES AND REVISED ANNUAL CAP

For each of the three financial years ended 31 December 2020, the aggregate amount of sales of the Products to the Taiwan Vedan Group pursuant to the Previous Taiwan Sales Agreement amounted to approximately US$8,687,082 (equivalent to approximately HK$67,585,498), US$7,410,473 (equivalent to approximately HK$57,653,480) and US$10,993,536 (equivalent to approximately HK$85,529,710), respectively. The transaction amount for each of the three financial years ended 31 December 2020 was within the relevant annual cap under the Previous Taiwan Sales Agreement as disclosed in the announcement of the Company dated 12 April 2018 and the circular of the Company dated 7 May 2018, which is US$30,000,000 (equivalent to approximately HK$233,400,000).

On 4 May 2021, the Company entered into the Supplemental Agreement with Taiwan Vedan to revise the annual cap for the continuing connected transactions under the Taiwan Sales Agreement for each of the three financial years ending 31 December 2023 from US$7,000,000 (equivalent to approximately HK$54,460,000) to US$50,000,000 (equivalent to approximately HK$389,000,000), subject to approval of the Independent Shareholders having been obtained. In arriving at the Revised Annual Cap of US$50,000,000 (equivalent to approximately HK$389,000,000), the Company has taken into account (i) the production and marketing policy of the Group in respect of the Products; (ii) the estimated increase in demand for the Products by Taiwan Vedan Group as a result of the increase in the cost of GA in Taiwan; and

1. the actual aggregate amount of sales of the Products by the Group to the Taiwan Vedan Group in the previous financial years. Save and except for the revised maximum transaction amount between the Group and the Taiwan Vedan Group as amended and supplemented by the Supplemental Agreement, the rest of the provisions of the Taiwan Sales Agreement will remain in full force and effect in accordance with its terms.

PRICING

As disclosed in the announcement of the Company dated 7 December 2020, the price of the Products payable by Taiwan Vedan and/or other member(s) of the Taiwan Vedan Group to the relevant member of the Group shall be determined in accordance with and be not more favourable to the Taiwan Vedan Group than the price charged by the relevant member of the Group to other independent customers of the Group in respect of the relevant Products.

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The management of the Company will determine the price of the Products (other than GA) after taking into consideration the production costs and the market price of the relevant Products in Taiwan, aiming at maintaining an overall gross margin within a range of approximately 14% to 18%. The price of GA will be determined by the Group with reference to (i) its production costs with a view to having an expected gross margin within a range of approximately 6% to 7%; and (ii) the market price of GA in Asia.

The price of the Products is subject to review by the Board from time to time and at least once every six months.

REASONS FOR AND THE BENEFITS OF THE REVISED ANNUAL CAP

The Group has been selling the Products to the Taiwan Vedan Group and the Directors believe that the continuous sale of the Products to the Taiwan Vedan Group will generate additional income to the Group. Taiwan Vedan Group is a manufacturer of MSG products which produces MSG by processing GA (being a semi-finished product of MSG). The price of raw materials of GA, namely, molasses, has increased recently, which will lead to an increase in the cost of producing GA in Taiwan and Vietnam. However, the cost of GA in Vietnam is normally lower than the cost of GA in Taiwan. Therefore, instead of producing GA by itself in Taiwan, it is expected that the Taiwan Vedan Group will increase the purchase of GA from the Group during the Relevant Period. As a result, the existing cap as set out in the Taiwan Sales Agreement will not be sufficient for the expected increase in the volume of business between the Group and the Taiwan Vedan Group.

The Board considers that the terms of the Supplemental Agreement and the Revised Annual Cap were arrived at after arm's length negotiations between the parties involved. The Supplemental Agreement was entered into in the ordinary and usual course of business of the Group. The Directors (excluding the independent non-executive Directors who will express their opinion after considering the advice of the Independent Financial Adviser) consider that the terms of the Supplemental Agreement and the transactions contemplated thereunder are on normal commercial terms, fair and reasonable and in the interests of the Company and its shareholders as a whole and that the Revised Annual Cap as contemplated by the Supplemental Agreement for each of the three years ending 31 December 2023 is fair and reasonable.

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Mr. Yang, Tou-Hsiung, Mr. Yang, Cheng, Mr. Yang, Kun-Hsiang, Mr. Yang, Chen-Wen and Mr. Yang, Kun-Chou, being executive Directors, are members of the Yang Family and are considered to have a material interest in the transactions contemplated under the Supplemental Agreement. Accordingly, they have abstained from voting on the resolutions of the Board in relation to the Supplemental Agreement and the Revised Annual Cap.

INTERNAL CONTROL PROCEDURES

The Group has formulated a series of measures and policies to ensure that the Transactions will be implemented in accordance with the terms of the agreement and the pricing policies.

The management of the Company will review, among other things, the pricing involved in the transactions contemplated under the Taiwan Sales Agreement (as supplemented by the Supplemental Agreement) and compare it with other independent customers on a quarterly basis to ensure that the pricing and certain major terms of such transactions are fair and reasonable, and shall report the relevant information at least once every six months to the Board for review.

In addition, the management of the Company will also prepare and submit to the independent non-executive Directors the following:-

1. monthly reports setting out the amount and certain major terms of the Transactions; and
2. semi-annualreports on the Transactions with information including, but not limited to,
3. 1. the aggregate transaction amount for the relevant 6-month period in respect of the Transactions; and (ii) whether the relevant annual caps in respect of the Transactions have been exceeded.

The independent non-executive Directors and the auditors of the Company will review the Transactions and report in the annual reports pursuant to Rule 14A.55 and Rule 14A.56 of the Listing Rules, respectively.

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INFORMATION ABOUT TAIWAN VEDAN

Taiwan Vedan is a company incorporated under the laws of Taiwan and its principal business is the production of food additive products, including MSG products, and beverages in Taiwan. It is one of the controlling shareholders of the Company holding indirectly approximately 33.62% of the entire issued share capital of the Company as at the date of this announcement and is therefore a connected person of the Company.

INFORMATION ABOUT THE GROUP

The current principal activities of the Group are the manufacturing and sale of fermentation- based amino acids, food additive products and cassava starch based products in Asia.

LISTING RULES REQUIREMENTS

As at the date of this announcement, Taiwan Vedan is one of the controlling shareholders of the Company holding indirectly approximately 33.62% of the entire issued share capital of the Company, the transactions contemplated under the Supplemental Agreement therefore constitute continuing connected transactions for the Company under Chapter 14A of the Listing Rules.

As one or more of the applicable percentage ratios (as defined in the Listing Rules) in respect of the Revised Annual Cap, on an annual basis, exceeds 5% for the purpose of Rule

14.07 of the Listing Rules, the Supplemental Agreement and the Revised Annual Cap are subject to the reporting, announcement, circular and Independent Shareholders' approval requirements pursuant to Chapter 14A of the Listing Rules. Each of Yang Family and their respective associates will abstain from voting on the resolution in respect of the Supplemental Agreement and the Revised Annual Cap at the EGM.

The Independent Board Committee, comprising all the independent non-executive Directors, has been set up to advise the Independent Shareholders in connection with the Supplemental Agreement and the Revised Annual Cap. Celestial Capital Limited has been appointed as the Independent Financial Adviser for the purpose of providing independent advice to the Independent Board Committee and the Independent Shareholders in connection with the Supplemental Agreement and the Revised Annual Cap.

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A circular containing, among other things, information regarding the Supplemental Agreement and the Revised Annual Cap, the recommendation of the Independent Board Committee, the advice from the Independent Financial Adviser and the notice of the EGM is expected to be dispatched to the shareholders of the Company on or before 26 May 2021.

DEFINITIONS

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

"connected person"has the meaning ascribed thereto under the Listing Rules;

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As at the date of this announcement, the Board comprises the following members:-

• For identification purpose only

For the purpose of this announcement, conversion of US$ into HK$ or vice versa has been calculated by using an exchange rate of US$1 to HK$7.78.

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