Fufeng Group Limited — Capital/Financing Update 2011

Apr 7, 2011

Hong Kong Exchanges and Clearing Limited and The Stock Exchange of Hong Kong Limited take no responsibility for the contents of this announcement, make no representation as to its accuracy or completeness and expressly disclaim any liability whatsoever for any loss howsoever arising from or in reliance upon the whole or any part of the contents of this announcement.

This announcement does not constitute an offer to sell or the solicitation of an offer to buy any securities in the United States or any other jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such jurisdiction. The securities referred to herein will not be registered under the United States Securities Act 1933, as amended. No securities may be offered or sold in the United States absent registration or an exemption from the registration requirements. Any public offering of securities to be made in the United States will be made by means of a prospectus that may be obtained from the issuer or the selling security holder. Such prospectus will contain detailed information about the company involved and its management and financial statements. The Company does not intend to make any public offering of securities in the United States.

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Fufeng Group Limited 阜豐集團有限公司

(incorporated in the Cayman Islands with limited liability)

(Stock code: 546)

ISSUANCE OF US$300 MILLION 7.625% SENIOR NOTES DUE 2016

On 6 April 2011 (New York time), the Company, the Subsidiary Guarantors and the Subsidiary Guarantor Pledgors entered into the Purchase Agreement with Citigroup and Deutsche Bank in connection with the issue of US$300 million 7.625% senior notes due 2016.

The estimated net proceeds of the Notes Issue, after deduction of the underwriting discounts and commissions and other estimated expenses, will amount to approximately US$293 million and the Company intends to use the net proceeds to finance the construction of new production facilities, and for general working capital purposes. The Company may adjust the foregoing plans in response to changing market conditions and, thus, reallocate the use of the proceeds in accordance with the requirements of the Company.

Approval in-principle has been obtained for the listing and quotation of the Notes on the SGX-ST. Admission of the Notes to the Official List of the SGX-ST or quotation of any Notes on the SGX-ST is not to be taken as an indication of the merits of the Company or the Notes. The SGX-ST assumes no responsibility for the correctness of any of the statements made, opinions expressed or reports contained in this announcement. No listing of the Notes has been sought in Hong Kong.

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Reference is made to the announcement of the Company dated 28 March 2011 in relation to the Notes Issue. The Board is pleased to announce that on 6 April 2011 (New York time), the Company, the Subsidiary Guarantors and the Subsidiary Guarantor Pledgors entered into the Purchase Agreement with Citigroup and Deutsche Bank in relation to the Notes Issue in the aggregate principal amount of US$300 million.

THE PURCHASE AGREEMENT

Date 6 April 2011 (New York time)

• Parties (a) the Company as the issuer;

• (b) the Subsidiary Guarantors as the guarantors of the Company’s obligations under the Notes and the Indenture;

• (c) the Subsidiary Guarantor Pledgors as the pledgors of certain collateral to secure the obligations of the Company under the Notes and the Indenture and of such Subsidiary Guarantor Pledgors under their Subsidiary Guarantees; and

• (d) Citigroup and Deutsche Bank as the initial purchasers.

Citigroup and Deutsche Bank are the joint bookrunners and the joint lead managers in respect of the offer and sale of the Notes. They are also the initial purchasers of the Notes. To the best of the Directors’ knowledge, information and belief, having made all reasonable enquiry, each of Citigroup and Deutsche Bank is an independent third party and not a connected person of the Company.

The Notes will be offered only (i) in the United States, to qualified institutional buyers in reliance on the exemption from the registration requirements of the U.S. Securities Act provided by Rule 144A, or (ii) outside the United States, in reliance on Regulation S under the U.S. Securities Act. None of the Notes will be offered to the public in Hong Kong.

Principal terms of the Notes

Notes offered

Subject to certain conditions to completion, the Company will issue the Notes in the aggregate principal amount of US$300 million which will mature on 13 April 2016, unless earlier redeemed pursuant to the terms thereof.

Offering price

The offering price of the Notes will be 100% of the principal amount of the Notes.

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Interest

The Notes will bear interest from and including 13 April 2011 at the rate of 7.625% per annum, payable semi-annually in arrears.

Ranking of the Notes

The Notes are (1) general obligations of the Company; (2) senior in right of payment to any existing and future obligations of the Company expressly subordinated in right of payment to the Notes; (3) at least pari passu in right of payment with all other unsecured, unsubordinated indebtedness of the Company (subject to any priority rights of such unsubordinated indebtedness pursuant to applicable law); (iv) guaranteed by the Subsidiary Guarantors on a senior basis, subject to certain limitations; (v) effectively subordinated to the other secured obligations) of the Company and the Subsidiary Guarantors, to the extent of the value of the assets serving as security therefor (other than the collateral securing the Notes); and (vi) effectively subordinated to all existing and future obligations of the subsidiaries of the NonGuarantor Subsidiaries.

Events of default

The events of default under the Notes include, among others:

• (i) default in the payment of principal of (or premium, if any);

• (ii) default in the payment of interest that continues for a period of 30 consecutive days;

• (iii) defaults in the performance of or breaches of provisions of certain covenants, the failure by the Company to make or consummate an offer to purchase, or the failure by the Company to create, or cause its Restricted Subsidiaries to create, a first priority lien on the collateral in accordance with the covenants as described in the Indenture;

• (iv) the Company or any Restricted Subsidiary defaults in the performance of or breaches any other covenant or agreement in the Indenture or under the Notes (other than the default specified in (i), (ii) and (iii) above) and such default or breach continues for a period of 30 consecutive days after written notice by the Trustee or the holders of the Notes of 25% or more in aggregate principal amount of the Notes;

• (v) there occurs with respect to any indebtedness of the Company or any Restricted Subsidiary having an outstanding principal amount of US$10 million (or the Dollar Equivalent thereof) or more in the aggregate for all such indebtedness;

• (vi) one or more final judgments or orders for the payment of money are rendered against the Company or any of its Restricted Subsidiaries and are not paid or discharged , and there is a period of 60 consecutive days following entry of the final judgment or order that causes the aggregate amount for all such final judgments or orders outstanding and not paid or discharged against all such Persons to exceed US$10 million (or the Dollar Equivalent thereof) (in excess of amounts which the Company’s insurance carriers have agreed to pay under applicable policies) during which a stay of enforcement, by reason of a pending appeal or otherwise, is not in effect;

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• (vii) involuntary bankruptcy or insolvency proceedings against the Company or any Restricted Subsidiary with respect to it or its debts under any applicable bankruptcy, insolvency or other similar law now or hereafter in effect seeking the appointment of a receiver, liquidator, assignee, custodian, trustee, sequestrator or similar official of the Company or any Restricted Subsidiary or for any substantial part of the property and assets of the Company or any Restricted Subsidiary and such involuntary case or other proceeding remains undismissed and unstayed for a period of 60 consecutive days; or an order for relief is entered against the Company or any Restricted Subsidiary under any applicable bankruptcy, insolvency or other similar law as now or hereafter in effect;

• (viii) the Company or any Restricted Subsidiary, (a) commences a voluntary case under any applicable bankruptcy, insolvency or other similar law now or hereafter in effect, or consents to the entry of an order for relief in an involuntary case under any such law, (b) consents to the appointment of or taking possession by a receiver, liquidator, assignee, custodian, trustee, sequestrator or similar official of the Company or any Restricted Subsidiary or for all or substantially all of the property and assets of the Company or any Restricted Subsidiary or (c) effects any general assignment for the benefit of creditors;

• (ix) any Subsidiary Guarantor denies or disaffirms its obligations under its Subsidiary Guarantee or, except as permitted by the Indenture, any Subsidiary Guarantee is determined to be unenforceable or invalid or will for any reason cease to be in full force and effect;

• (x) any default by the Company or any Subsidiary Guarantor Pledgor in the performance of any of its obligations under the Security Documents that adversely affects the enforceability, validity, perfection or priority of the applicable Lien on the Collateral or that adversely affects the condition or value of the Collateral; or

• (xi) the Company or any Subsidiary Guarantor Pledgor denies or disaffirms its obligations under any Security Document or, other than in accordance with the Indenture and the Security Documents, any Security Document ceases to be or is not in full force and effect or the Trustee ceases to have a first-priority Lien over the Collateral.

If an event of default (other than an event of default specified in (vii) or (viii) above) occurs and is continuing under the Indenture, the Trustee or the holders of at least 25% in aggregate principal amount of the Notes then outstanding, by written notice to the Company (and to the Trustee if such notice is given by the holders of the Notes), may, and the Trustee at the request of such holders of the Notes shall, declare the principal of, premium, if any, and accrued and unpaid interest on the Notes to be immediately due and payable. Upon a declaration of acceleration, such principal of, premium, if any, and accrued and unpaid interest shall be immediately due and payable.

If an event of default specified in (vii) or (viii) above occurs with respect to the Company or any Restricted Subsidiary, the principal of, premium, if any, and accrued and unpaid interest on the Notes then outstanding shall automatically become and be immediately due and payable without any declaration or other act on the part of the Trustee or any holder of the Notes.

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Covenants

The Notes, the Indenture and the guarantees to be provided by the Subsidiary Guarantors will limit the Company’s ability and the ability of its Restricted Subsidiaries to, among other things:

• (i) incur or guarantee additional indebtedness and issue disqualified or preferred stock;

• (ii) declare dividends on its capital stock or purchase or redeem capital stock;

• (iii) make investments or other specified restricted payments;

• (iv) issue and sell capital stock of Restricted Subsidiaries;

• (v) guarantee indebtedness of the Company or Restricted Subsidiaries;

• (vi) sell assets;

• (vii) create liens;

• (viii) enter into sale and leaseback transactions;

• (ix) engage in any business other than permitted business;

• (x) enter into agreements that restrict the Restricted Subsidiaries’ ability to pay dividends, transfer assets or make intercompany loans;

• (xi) enter into certain transactions with shareholders or affiliates; and

• (xii) effect a consolidation or merger.

Redemption

On or after 13 April 2014, the Company may at its option redeem the Notes, in whole or in part, at a redemption price equal to the percentage of principal amount set forth below plus accrued and unpaid interest, if any, to (but not including) the redemption date if redeemed during the twelve month period beginning on 13 April of each of the years indicated below.

Year		Redemption Price
2014		103.8125%
2015	and thereafter	101.90625%

The Company may at its option redeem the Notes, in whole but not in part, at any time prior to 13 April 2014, at a redemption price equal to 100% of the principal amount of the Notes, plus the applicable premium as of, and accrued and unpaid interest, if any, to (but not including) the redemption date.

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At any time and from time to time prior to 13 April 2014, the Company may redeem up to 35% of the aggregate principal amount of the Notes with the net cash proceeds of one or more sales of the common stock of the Company in an equity offering at a redemption price of 107.625% of the principal amount of the Notes, plus accrued and unpaid interest, if any, to (but not including) the redemption date, provided that at least 65% of the aggregate principal amount of the Notes originally issued remains outstanding after each such redemption and any such redemption takes place within 60 days after the closing of the related equity offering.

The Company will give not less than 30 days’ nor more than 60 days’ notice of any redemption.

Reasons for the Notes Issue

The Company is the largest manufacturer of MSG in China and the largest manufacturer of xanthan gum in the world based on production capacity as of 31 December 2009.

The Notes Issue is intended to provide funding to construct the Northeastern Plant Phase I and the Northeastern Plant Phase II and for general corporate purposes to enhance the Company’s liquidity position. The Company may adjust its development plans in response to changing market conditions and thus reallocate the use of the proceeds. The Company believes that the Notes Issue will further extend the Company’s international profile and improve its ability to access the international debt capital markets to support the growth of the Group in the future.

Proposed use of proceeds

The estimated net proceeds of the Notes Issue, after deduction of the underwriting discounts and commissions and other estimated expenses, will amount to approximately US$293 million and the Company intends to apply the net proceeds from the Notes Issue as follows:

• (i) approximately US$62 million to construct the Northeastern Plant Phase I;

• (ii) approximately US$155 million to construct the Northeastern Plant Phase II; and

• (iii) the remainder for general corporate purposes to enhance the Company’s liquidity position.

The Company may adjust its development plans in response to changing market conditions and, thus, reallocate the use of the proceeds from the Notes Issue.

Listing

Approval in-principle has been received for the listing of the Notes on the SGX-ST. Admission of the Notes to the Official List of the SGX-ST is not to be taken as an indication of the merits of the Company or the Notes. No listing of the Notes has been sought in Hong Kong.

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Rating

The Notes have been provisionally rated “BB” by Standard & Poor’s Rating Services and “BB” by Fitch Ratings.

DEFINITIONS

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

“Board”	the board of Directors;
“Citigroup”	Citigroup Global Markets Inc., one of the joint bookrunners and
	the joint lead managers in respect of the offer and sale of the
	Notes;
“Company”	Fufeng Group Limited (阜豐集團有限公司), an exempted
	company incorporated under the laws of the Cayman Islands with
	limited liability, whose Shares are listed on the main board of the
	Stock Exchange;
“Deutsche Bank”	Deutsche Bank AG, Singapore Branch, one of the joint
	bookrunners and the joint lead managers in respect of the offer
	and sale of the Notes;
“Director(s)”	the director(s) of the Company;
“Dollar Equivalent”	with respect to any monetary amount in a currency other than
	U.S. dollars, at any time for the determination thereof, the amount
	of U.S. dollars obtained by converting such foreign currency
	involved in such computation into U.S. dollars at the noon buying
	rate for U.S. dollars in New York City for cable transfers as
	certified for customs purposes by the Federal Reserve Bank of
	New York on the date of determination;
“Group”	the Company and its subsidiaries;
“Hong Kong”	the Hong Kong Special Administrative Region of the PRC;
“Indenture”	the indenture to govern the Notes;
“Lien”	any mortgage, pledge, security interest, encumbrance, lien or
	charge of any kind (including, without limitation, any conditional
	sale or other title retention agreement or lease in the nature thereof
	or any agreement to create any mortgage, pledge, security interest,
	lien, charge, easement or encumbrance of any kind);
“Listing Rules”	the Rules Governing the Listing of Securities on the Stock
	Exchange;

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“MSG”	a salt of glutamic acid which is commonly used as a flavor
	enhancer and additive in the food industry, the restaurant sector
	and for domestic household use;
“Non-Guarantor	Restricted Subsidiaries that are not organized under the laws of
Subsidiaries”	the PRC;
“Northeastern Plant”	the production plant of the Group located in Hulunbeir, Inner
	Mongolia near the border with Heilongjiang Province;
“Northeastern Plant	phase I of the Northeastern Plant, which the Company expects to
Phase I”	commence production in the second half of 2011;
“Northeastern Plant	phase II of the Northeastern Plant which the Company expects to
Phase II”	commence construction by the end of 2011;
“Notes”	US$300 million 7.625% senior notes due 2016 to be issued by the
	Company;
“Notes Issue”	the issue of the Notes by the Company;
“PRC”	the People’s Republic of China (excluding, for the purposes of this
	announcement, Hong Kong, Macau and Taiwan);
“Purchase Agreement”	the agreement entered into among the Company, the Subsidiary
	Guarantors, Citigroup and Deutsche Bank, in relation to the Notes
	Issue on 6 April 2011 (New York time);
“Restricted Subsidiary”	any subsidiary of the Company other than an Unrestricted
	Subsidiary;
“Security Documents”	collectively, share mortgages, share charges and any other agreements or
	instruments that may evidence or create, or purport to create, any Lien in
	favor of, among others, the Trustee;
“SGX-ST”	Singapore Exchange Securities Trading Limited;
“Stock Exchange”	The Stock Exchange of Hong Kong Limited;
“Subsidiary Guarantees”	guarantees to be provided by the Subsidiary Guarantors;
“Subsidiary Guarantor	certain subsidiaries of the Company that on the issue of the Notes
Pledgors”	will provide pledges over the capital stock in certain subsidiaries
	of the Company held by them to secure the obligations of
	the Company under the Indenture and the Notes and of such
	Subsidiary Guarantor Pledger under its Subsidiary Guarantee;

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• “Subsidiary Guarantors” certain subsidiaries of the Company that on the issue date of the Notes will guarantee the Company’s obligations under the Notes;

• “Trustee” Citicorp International Limited;

• “U.S. Securities Act” the United States Securities Act of 1933, as amended;

• “Unrestricted Subsidiary” any subsidiary of the Company that at the time of determination shall be designated an Unrestricted Subsidiary by the Board in the manner provided in the Indenture, and any subsidiary of an Unrestricted Subsidiary;

• “US$” US dollar, the lawful currency of the United States of America; and

• “%” per cent.

By order of the Board Fufeng Group Limited Li Xuechun Chairman

Shandong, the PRC, 6 April 2011

As at the date of this announcement, the executive directors of the Company are Mr. Li Xuechun, Mr. Wang Longxiang, Mr. Feng Zhenquan, Mr. Xu Guohua, Mr. Li Deheng, Mr. Chen Yuan, Mr. Gong Qingli and Mr. Li Guangyu and the independent non-executive directors of the Company are Mr. Choi Tze Kit, Sammy, Mr. Chen Ning and Mr. Liang Wenjun.

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