Fufeng Group Limited — Capital/Financing Update 2014

Jun 23, 2014

Hong Kong Exchanges and Clearing Limited, 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.

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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)

ANNOUNCEMENT

DISCLOSEABLE TRANSACTION ACQUISITION OF LAND IN THE PRC

The Board is pleased to announce that on 20 June 2014, Junan Company, a wholly-owned subsidiary of the Company, won a bid for the land use right in respect of the Land at the consideration of RMB286.04 million (equivalent to approximately HK$354.69 million), representing an average selling price of approximately RMB1,126.5 per square meter in terms of total site area through an auction (listing-for-sale) organized by Junan County Public Resources Service Center (莒南縣公共資源交易服務中心). The Land has a total site area of 253,926.1 square metres and is located at Longshan Road (Northern section), Junan County, Shandong Province, the PRC (莒南縣縣城隆山路北段). The Group intends to hold the Land for investment purpose as it continues to evaluate the Group’s future business development and expansion plans in Shandong province. As at the date hereof, the Group has not drawn up any concrete development and construction plan for the Land.

The Acquisition constitutes a discloseable transaction for the Company and is therefore subject to the reporting and announcement requirements under Chapter 14 of the Listing Rules.

THE LAND AND THE AUCTION (LISTING-FOR-SALE)

On 20 June 2014, the Land was put up for auction (listing-for-sale) by the Land Bureau. Pursuant to the terms of Confirmation Agreement, the Land Bureau confirmed that on 20 June 2014, Junan Company, a wholly-owned subsidiary of the Company, won a bid for the land use right in respect of the Land through the auction (listing-for-sale) process organized and held by Junan County Public Resources Service Center* (莒南縣公共資源交易服務中心).

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The Land is located at Longshan Road (Northern section), Junan County, Shandong Province, PRC* (莒南縣縣城隆山路北段). The site area of the Land is approximately 253,926.1 square metres, and the Land is designated for commercial use.

The consideration of the Land is RMB286.04 million (equivalent to approximately HK$354.69 million**), representing an average selling price of approximately RMB1,126.5 per square meter in terms of total site area. Pursuant to the terms of the Confirmation Agreements, the security deposit for auction already paid by Junan Company (i.e. RMB286.04 million) was automatically applied as a deposit for the consideration of the Land. Junan Company is required to enter into the relevant Land Transfer Contracts with the Land Bureau before 19 July 2014, of which the deposit balance would be used for the full settlement of the consideration. Junan Company has settled the above deposit for the Land from its internal resources.

The consideration for the Acquisition of the Land was arrived at as a result of successful bid by Junan Company in the auction (listing-for-sale) process. The bid submitted by Junan Company for the Land in aggregate was RMB286.04 million (equivalent to approximately HK$354.69 million**). In deciding to bid at that price, Junan Company has taken into account the minimum bid price, land price in the surrounding areas, current property market conditions and development potential of the Land.

The counterparty in the Acquisition is the Land Bureau, which is a PRC governmental body responsible for, among other things, the tendering, auction and listing-for-sale of rights to use state-owned land in Junan County, Shandong Province. To be best of the Directors’ knowledge, information and belief having made all reasonable enquiry, the Land Bureau is a third party independent of the Company and connected persons of the Company.

REASONS FOR AND BENEFITS OF THE ACQUISITION

Junan County, Shandong Province is one of the operational and organizational headquarters of the Group in China and the Land in aggregate is part of a piece of industrial use land of an aggregate area of approximately 509,857.4 square meters situated at Longshan Road (Northern section) Junan County, Shandong Province, PRC (莒南縣縣城隆山路北段) (the “Shandong Land”), which had been owned by the Company in Shandong as the old production site of Shandong Fufeng Fermentation Co. Ltd.. However, the Group relocated its Shandong production of MSG to Inner Mongolia in May 2011 and the Group had ceased production activities on the Shandong Land and had since utilized the Shandong Land for office use, before being notified by the Land Bureau that, as a part of the overall town planning and development of Junan County, the Land would be returned to Junan County Government and be put up for auction. As a result, the Group will receive a total compensation of approximately RMB439.2 million (or average price of RMB861.4 per square meter) (the “Compensation”). The book value of the Shandong Land (including land and building) is estimated to be approximately RMB126 million (or approximately HK$156.2 million)** as at 31 December 2013, and depending on certain factors which can only be ascertained in the future, such as the timing and the cost of the relocation and demolition of the existing buildings and equipments on the Land (which will be borne by the Group), the Group may record a gain in the Group’s accounts as a result of the Compensation. The Company will inform the Shareholders and the investor public regarding such issue as and when necessary and in compliance with the Listing Rules.

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The Directors believe that the Acquisition represents a good opportunity to repurchase an old property of the Company at a reasonable price. Upon completion of the auction and the Land Transfer Contracts, the usage of the Land will be changed from industrial to commercial, of which the Directors expect the valuation of the Land could be enhanced. The Group intends to hold the Land for investment purpose as it continues to evaluate the Group’s future business development and expansion plans in Shandong province. As at the date hereof, the Group has not drawn up any concrete development or construction plan for the Land.

The Group is also expecting that the remaining plots of the Shandong Land will be put up for auction (listing-for-sale) some time in the future, however the Group has not been informed by the Land Bureau or the Junan County Government regarding its concrete timetable or the exact size of land to be put up for sale. Nonetheless, subject to the assessment of the then market situation and the terms of such auction, the Group will consider enter such bidding for the remaining part of the Shandong Land should the opportunity come. The Company will keep the market informed of such progress (if any) in compliance with the Listing Rules. Further announcement(s) will be made as and when required.

The Directors consider that the terms and conditions of the Acquisition are fair and reasonable and in the interests of the Company and its shareholders as a whole.

GENERAL

The Acquisition constitutes a discloseable transaction for the Company under the Listing Rules as the relevant percentage ratios pursuant to Chapter 14 of the Listing Rules are more than 5% and less than 25%.

DEFINITIONS

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

“Acquisition” the acquisition of the land use right in respect of the Land by Junan Company under the auction (listing-for-sale) process

“Board” the board of Directors of the Company

“Company” Fufeng Group Limited (Stock Code: 546), a company incorporated in Cayman Islands with limited liability, the shares of which are listed on the main board of the Stock Exchange

“Confirmation Agreements” the seven Confirmation Agreements (成交確認書) entered into between the Land Bureau and Junan Company dated 20 June 2014 in relation to the results of the bid made by Junan Company for the land use right in respect of the Land

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“connected person(s)”	has the meaning ascribed thereto in the Listing Rules
“Director(s)”	the director(s) of the Company
“Group”	the Company and its subsidiaries
“HK$”	Hong Kong dollar, the legal currency of Hong Kong
“Hong Kong”	the Hong Kong Special Administrative Region of the PRC
“Junan Company”	Junan North City Property Company Limited* (莒南北
	城置業有限公司), a PRC incorporated company and a
	wholly-owned subsidiary of the Company
“Land”	Seven plots of land located at Longshan Road (Northern
	section) Junan County, Shandong Province, PRC (land lot
	no.: Junan 2014-G05/06/07/08/09/10/14) (莒南縣縣城隆
	山路北段), occupying a total site area of approximately
	253,926.1 square metres
“Land Bureau”	莒南縣國土資源局(Junan County Bureau of Land and
	Resources*)
“Land Transfer Contracts”	seven contracts for the transfer of land use right of seven
	plots of state-owned construction land (國有建設用地使
	用權出讓合同) in respect of the land use right of the Land
	to be entered into between the Land Bureau as transferor
	and Junan Company as transferee for a consideration
	of RMB286.04 million (equivalent to approximately
	HK$354.69 million**)
“Listing Rules”	the Rules Governing the Listing of Securities on the Stock
	Exchange
“PRC”	the People’s Republic of China
“RMB”	Renminbi, the legal currency of the PRC

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“Shandong Land”

a parcel of land located at Longshan Road (Northern section) Junan County, Shandong Province, PRC (莒南縣 縣城隆山路北段), occupying site area of approximately 509,857.4 square metres

“Stock Exchange”

The Stock Exchange of Hong Kong Limited

By order of the Board Fufeng Group Limited Li Xuechun Chairman

Hong Kong, 23 June 2014

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 and Mr. Li Guangyu and the independent non-executive directors of the Company are Mr. Choi Tze Kit, Sammy, Mr. Chen Ning, Mr. Liang Wenjun and Ms. Zheng Yu.

• for identification purpose only

• ** for the purpose of this announcement, the conversion of RMB into HK$ is based on the approximate exchange rate of RMB1.00 = HK$1.24.

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