Fufeng Group Limited — Capital/Financing Update 2015

Oct 27, 2015

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 is for information purposes only and does not constitute an invitation or offer to acquire, purchase or subscribe for securities of the Company or any of its subsidiaries nor is it intended to invite any such offer or invitation. In particular, this announcement does not constitute and is not an offer to sell or a solicitation of any offer to buy securities of the Company or any of its subsidiaries in Hong Kong, the United States or elsewhere.

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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)

(1) PROPOSED SPIN-OFF AND SEPARATE LISTING OF SHENHUA HEALTH HOLDINGS LIMITED ON THE GROWTH ENTERPRISE MARKET OF THE STOCK EXCHANGE; (2) NOTICE OF BOARD MEETING; (3) SHAREHOLDERS’ APPROVAL FOR PROPOSED SPECIAL DIVIDEND BY WAY OF DISTRIBUTION IN SPECIE; AND

(4) PROPOSED ADOPTION OF THE SHENHUA HEALTH SHARE OPTION SCHEME

This announcement is made pursuant to the inside information provisions under Part XIVA of the Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong) and Rule 13.09(2)(a) and Practice Note 15 of the Listing Rules.

The Board is pleased to announce that the Company has submitted an application to the Stock Exchange pursuant to Practice Note 15 of the Listing Rules in relation to the Proposed Spin-off of Shenhua Health and has received written confirmation from the Stock Exchange on 16 October 2015 that it may proceed with the Proposed Spin-off. On 27 October 2015, Shenhua Health submitted through its appointed sole sponsor, J.P. Morgan Securities (Far East) Limited, a listing application form (Form 5A) to the Stock Exchange to apply for the Listing.

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The Proposed Spin-off involves the spin-off by the Company and the separate listing of the Shenhua Health Shares on the GEM of the Stock Exchange. Shenhua Health is currently a wholly-owned subsidiary of the Company. The Shenhua Health Group is principally engaged in the pharmaceutical business, which comprises the manufacturing and sale of amino acids-based pharmaceutical and health products, and fungi-based pharmaceutical and health products.

The Company has carried out the Reorganisation, which upon completion will result in Shenhua Health becoming the immediate holding company of the pharmaceutical business of the Company. The Company proposes to effect the Proposed Spin-off by declaring a special dividend to the Shareholders, to be satisfied by way of a distribution in specie of its holding in the entire issued share capital of Shenhua Health to Qualifying Shareholders in proportion to their respective shareholdings in the Company on the Record Date. The Company currently does not expect the Proposed Spin-off to involve any form of capital raising.

Upon completion of the Proposed Spin-off, the Company will not hold any equity interests in Shenhua Health and accordingly Shenhua Health will cease to be a subsidiary of the Company. The Remaining Group will continue to be principally engaged in the following two business segments: (i) the amino acid segment (excluding the pharmaceutical business to be held solely by the Shenhua Health Group following the Proposed Spin-Off); and (ii) the xanthan gum segment.

In anticipation of the Proposed Spin-off, a meeting of the Board will be convened on 6 November 2015 for the purpose of, among other matters, considering a recommendation to the Shareholders to declare a special dividend, to be satisfied by way of a distribution in specie of the Company’s holding in the entire issued share capital of Shenhua Health to Qualifying Shareholders in proportion to their respective shareholdings in the Company on the Record Date, subject to the satisfaction of the conditions of the Proposed Spin-off and the Listing.

According to the Articles of Association, the proposed Distribution shall be subject to the approval by the Shareholders. In addition, the Company shall seek Shareholders’ approval for the proposed adoption of the Shenhua Health Share Option Scheme, which constitutes a share option scheme governed by Chapter 17 of the Listing Rules. Pursuant to Rules 17.01(1) and 17.02(1)(a) of the Listing Rules, the adoption of the Shenhua Health Share Option Scheme is subject to the approval of the Shareholders.

Subject to the approval of the recommendation to Shareholders to declare the special dividend at the meeting of the Board to be held on 6 November 2015, the Company will convene the EGM, and will for such purpose despatch to Shareholders the notice of the EGM and the circular giving further information on the proposed Distribution and the proposed adoption of the Shenhua Health Share Option Scheme as soon as practicable. Ordinary resolutions will be proposed at the EGM for the purposes of considering and, if thought fit, approving the proposed Distribution and the proposed adoption of the Shenhua Health Share Option Scheme.

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The disposal of the Company’s shareholding interest in Shenhua Health will be effected by way of the Distribution, which will not be a transaction of the Company for the purposes of Chapter 14 of the Listing Rules. Accordingly, there will be no requirement arising from such disposal to comply with the notification or shareholders’ approval requirements thereunder. However, as required under the Articles of Association, the Distribution is subject to the approval of Shareholders. No Shareholders are required to abstain from voting at the EGM.

The Proposed Spin-off and the Listing are subject to, among other things, the final decisions of the Board and of the board of directors of Shenhua Health, the approval from the Shareholders for the Distribution, the Shenhua Health Share Option Scheme and the Listing Approval being obtained. Accordingly, Shareholders and potential investors in the Company should be aware that there is no assurance that the Proposed Spin-off and Listing will take place or, if they do, when they will take place. If the Proposed Spin-off and Listing do not proceed for any reason, the proposed Distribution and the Shenhua Health Share Option Scheme will not be implemented. Shareholders and potential investors in the Company should therefore exercise caution when dealing in or investing in the securities of the Company.

Further announcement(s) will be made by the Company in relation to the Proposed Spinoff and Listing as and when appropriate.

1. INTRODUCTION

This announcement is made pursuant to the inside information provisions under Part XIVA of the Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong) and Rule 13.09(2)(a) and Practice Note 15 of the Listing Rules.

The Board is pleased to announce that the Company has submitted an application to the Stock Exchange pursuant to Practice Note 15 of the Listing Rules in relation to the Proposed Spin-off of Shenhua Health and has received written confirmation from the Stock Exchange on 16 October 2015 that it may proceed with the Proposed Spin-off.

On 27 October 2015, Shenhua Health submitted through its appointed sole sponsor, J.P. Morgan Securities (Far East) Limited, a listing application form (Form 5A) to the Stock Exchange to apply for the Listing. A redacted form of the application proof of Shenhua Health’s listing document will be available for viewing and downloading on the Stock Exchange’s website at www.hkexnews.hk/APP/SEHKAPPMainIndex.htm.

2. PROPOSED SPIN-OFF

The Proposed Spin-off involves the spin-off by the Company and the separate listing of the Shenhua Health Shares on the GEM of the Stock Exchange. Shenhua Health is currently a direct wholly-owned subsidiary of the Company. The Shenhua Health Group is principally engaged in the pharmaceutical business, which comprises the manufacturing and sale of amino acids-based pharmaceutical and health products, and fungi-based pharmaceutical and health products.

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The Company has carried out the Reorganisation which upon completion will result in Shenhua Health becoming the immediate holding company of the pharmaceutical business of the Company. The Company proposes to effect the Proposed Spin-off by declaring a special dividend to the Shareholders, to be satisfied by way of a distribution in specie of its holding in the entire issued share capital of Shenhua Health to Qualifying Shareholders in proportion to their respective shareholdings in the Company on the Record Date.

If there are any Overseas Shareholder(s) on the Record Date, the Company will make enquiries regarding the feasibility of extending the Distribution to the Overseas Shareholder(s). Based on the legal opinions provided by the legal advisers to the Company, the assured entitlement to Shenhua Health Shares will not be available to particular Overseas Shareholder(s) if the Directors consider that it is necessary or expedient not to extend the Distribution to such Overseas Shareholder(s) on account either of the legal restrictions under the laws of the place(s) of its/his/her/their registered addresses or the requirements of the relevant regulatory bodies or stock exchanges in those places outside Hong Kong. Instead, the Excluded Shareholders will receive a cash amount representing the net proceeds of the sale by the Company or its agents on their behalf of the Shenhua Health Shares to which it/he/she/they would otherwise be entitled pursuant to the Distribution after dealings in the Shenhua Health Shares commence on the GEM of the Stock Exchange at the prevailing market price. The Company and/or its agents will ensure that the purchaser(s) of such Shenhua Health Shares is/are Independent Third Party(ies). The proceeds of such sale, net of expenses, of more than HK$100.0 will be paid to the relevant Excluded Shareholders in Hong Kong dollars. The Company will retain individual amounts of HK$100.0 or less for its own benefit.

The Company currently does not expect the Proposed Spin-off to involve any form of capital raising. The Distribution and the Proposed Spin-off shall be conditional on (among other things): (i) the approval of the Distribution by the Shareholders at the EGM; and (ii) the Stock Exchange granting the Listing Approval of the Shenhua Health Shares.

Upon completion of the Proposed Spin-off, Shenhua Health will cease to be a subsidiary of the Company. The Remaining Group will continue to be principally engaged in the following two business segments: (i) the amino acid segment (excluding the pharmaceutical business to be held solely by the Shenhua Health Group following the Proposed Spin-Off); and (ii) the xanthan gum segment.

3. NOTICE OF BOARD MEETING

In anticipation of the Proposed Spin-off, a meeting of the Board will be convened on 6 November 2015 for the purpose of, among other things, considering a recommendation to the Shareholders to declare a special dividend, to be satisfied by way of a distribution in specie of the Company’s holding in the entire issued share capital of Shenhua Health to Qualifying Shareholders in proportion to their respective shareholdings in the Company on the Record Date, subject to the satisfaction of the conditions of the Proposed Spin-off and the Listing.

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4. SHAREHOLDERS’ APPROVAL FOR PROPOSED DISTRIBUTION AND PROPOSED ADOPTION OF THE SHENHUA HEALTH SHARE OPTION SCHEME

According to the Articles of Association, the proposed Distribution shall be subject to the approval by the Shareholders. Article 136 of the Articles of Association provides that the Company in general meeting may from time to time declare dividends in any currency to be paid to the Shareholders but no dividend shall be declared in excess of the amount recommended by the Board. Article 137 of the Articles of Association provides that with the sanction of an ordinary resolutions dividends may be declared and paid out of share premium account of the Company. Article 144 of the Articles of Association provides that whenever the Company in general meeting has resolved that a dividend be paid or declared, the Board may further resolve that such dividend be satisfied in wholly or in part by the distribution of specific assets of any kind. As the proposed Distribution is to be made out of the share premium account of the Company, in compliance with the Articles of Association, the Company shall seek Shareholders’ approval for the Distribution.

In addition, the Company shall seek Shareholders’ approval for the proposed adoption of the Shenhua Health Share Option Scheme, which constitutes a share option scheme governed by Chapter 17 of the Listing Rules. Pursuant to Rules 17.01(1) and 17.02(1)(a) of the Listing Rules, the adoption of the Shenhua Health Share Option Scheme is subject to the approval of the Shareholders.

Subject to the approval of the declaration of the special dividend at the meeting of the Board to be held on 6 November 2015, the Company will convene the EGM, and will for such purpose despatch to Shareholders the notice of the EGM and the circular giving further information on the proposed Distribution and the proposed adoption of the Shenhua Health Share Option Scheme as soon as practicable. An ordinary resolution will be proposed at the EGM for the purposes of considering and, if thought fit, approving the proposed Distribution and the proposed adoption of the Shenhua Health Share Option Scheme. The voting at such meeting will be taken on a poll and the Company will make an announcement of the poll results. No Shareholders are required to abstain from voting at the EGM.

5. REASONS FOR AND BENEFITS OF THE PROPOSED SPIN-OFF AND THE LISTING

The Directors consider the Proposed Spin-off and Listing to be in the interests of the Company and the Shareholders as a whole due to the following reasons and benefits:

• (a) Clarification of the equity story and creation of own investor base for the business of the Shenhua Health Group: The Proposed Spin-off could unlock the value of the Company’s investment in the Shenhua Health Group and the investors would be able to appraise and assess the performance and potential of the Shenhua Health Group on a standalone basis and separately from the Remaining Group. Moreover, investors will be provided more details of the operating performance of the businesses of the Shenhua Health Group and will be given the opportunity to invest specifically in the pharmaceutical business involving the manufacturing and sale of amino acids-based pharmaceutical and health products, and fungi-based pharmaceutical and health products.

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• (b) More defined business focus: The Proposed Spin-off and the Listing of Shenhua Health will create a more defined business focus for both: (i) the Remaining Group, which will focus on the further development of its amino acid segment (excluding the pharmaceutical business to be held solely by the Shenhua Health Group following the Proposed Spin-Off) and its xanthan gum segment; and (ii) the Shenhua Health Group, which will focus on the pharmaceutical business. As the Remaining Group and the Shenhua Health Group have different growth paths and different business strategies, the Proposed Spin-off will allow separate platforms for the development of the businesses of the two groups and will also enable future funds raised by the Remaining Group to be focused on and targeted at its amino acid segment (excluding the pharmaceutical business to be held solely by the Shenhua Health Group following the Proposed Spin-Off) and its xanthan gum Segment.

The Proposed Spin-off will increase the transparency of business performance and the financial status of both the Remaining Group and the Shenhua Health Group.

• (c) Enhancement of access to capital markets for the Shenhua Health Group and increase in financing flexibility: The Proposed Spin-off and the Listing will allow the Shenhua Health Group to position itself as an independent listed group with direct access to the debt and equity capital markets to finance its future growths. A separate listing of the Shenhua Health Group will provide clarity to the credit profile of the Shenhua Health Group and to financial institutions who wish to analyze and lend against the credit rating of a company operating in the pharmaceutical business involving the manufacturing and sale of amino acidsbased pharmaceutical and health products, and fungi-based pharmaceutical and health products and a separate platform for the Shenhua Health Group to raise funds in the capital markets.

• (d) Providing management incentives: A separate listing of the Shenhua Health Group should also improve management incentives to grow shareholder value in the business of the Shenhua Health Group as the Shenhua Health Share Option Scheme is designed to provide incentives, among other things, to the staff of the Shenhua Health Group measured by reference to the performance of the securities of Shenhua Health after the Proposed Spin-off and the Listing.

• (e) Management focus and efficient resource allocation: The management focus, expertise and technical skills which are required for the businesses of the Shenhua Health Group and the Remaining Group are different and the Proposed Spin-off will allow for a clear separation of operations and management, allowing for a more focused strategy and efficient resource allocation in both businesses.

Furthermore, the independent listing of Shenhua Health will lead to a more direct alignment of its management’s responsibilities and accountability with its operating and financial performance. This is expected to result in enhanced management focus, which should in turn lead to improved decision-making processes, shorter response time to market changes and increased operational efficiency. The senior management of Shenhua Health will be under heightened scrutiny from the investor community and it will be possible to measure their performance against the stock market performance of Shenhua Health relative to its listed industry peers. It will also be possible to link management incentives to such performance, thereby increasing the motivation and commitment of the management.

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• (f) Creation and unlocking of value for Shareholders by better identifying and establishing the value of the Shenhua Health Group: The Board believes that a separate listing of the pharmaceutical business to be carried out by the Shenhua Health Group will unlock value for the Shareholders and better identify and establish the fair value of the Shenhua Health Group. A separate listing of Shenhua Health is expected to align the specific characteristics of its pharmaceutical business with the appropriate investor base.

The Proposed Spin-off and the Listing are intended to facilitate the future growth of the Shenhua Health Group and the Remaining Group. As the Proposed Spin-off will be implemented by way of the Distribution to the Qualifying Shareholders, such Shareholders will, so long as they remain Shareholders of the Company, continue to enjoy the benefits from the development of the business of the Remaining Group whilst also enjoying the benefits from the development of Shenhua Health Group. In light of the clear and distinct delineation between the businesses of the Remaining Group and those of the Shenhua Health Group, the assured entitlement to be provided to the Qualifying Shareholders and the commercial benefits of the Proposed Spin-off as highlighted above, the Directors are of the view that the Proposed Spin-off and the Listing will not result in any adverse impact on the interests of the Shareholders.

6. LISTING RULES IMPLICATIONS

Following completion of the Proposed Spin-off and the Listing, the Company will not retain any interest in the issued share capital of Shenhua Health and Shenhua Health will no longer be a subsidiary of the Company. As the disposal of the Company’s shareholding interest in Shenhua Health will be effected by way of the Distribution, it will not be a transaction of the Company for the purposes of Chapter 14 of the Listing Rules and accordingly there will be no requirement arising from such disposal to comply with the notification or shareholders’ approval requirements thereunder. However, as required under the Articles of Association, the Distribution is subject to the approval of the Shareholders.

The Shenhua Health Share Option Scheme is also subject to the approval of the Shareholders pursuant to Chapter 17 of the Listing Rules.

7. GENERAL

The Proposed Spin-off and the Listing are subject to, among other things, the final decisions of the Board and of the board of directors of Shenhua Health, the approval from the Shareholders for the Distribution, the Shenhua Health Share Option Scheme and the Listing Approval being obtained. Accordingly, Shareholders and potential investors in the Company should be aware that there is no assurance that the Proposed Spin-off and Listing will take place or, if they do, when they will take place. If the Proposed Spin-off and Listing do not proceed for any reason, the proposed Distribution and the Shenhua Health Share Option Scheme will not be implemented. Shareholders and potential investors in the Company should therefore exercise caution when dealing in or investing in the securities of the Company.

Further announcement(s) will be made by the Company in relation to the Proposed Spinoff and Listing and the EGM to be convened to approve the Distribution and the Shenhua Health Share Option Scheme as and when appropriate.

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8. DEFINITIONS

• “Articles of Association”

• the articles of association of the Company, as amended, modified or otherwise supplemented from time to time

• “Board”

the board of Directors

• “Company” Fufeng Group Limited, a company incorporated in the Cayman Islands with limited liability, whose issued Shares are listed on the Main Board of the Stock Exchange

“connected persons”

• has the meaning ascribed to such term under the Listing Rules

• “Director(s)” the director(s) of the Company

• “Distribution” the proposed payment of a special dividend by the Company to be effected by way of a distribution in specie of the entire issued share capital of Shenhua Health to the Qualifying Shareholders in proportion to their respective shareholdings in the Company on the Record Date, subject to the satisfaction of the conditions described in the section headed “Proposed Spin-off” in this announcement

• “EGM” the extraordinary general meeting of the Company for the Shareholders to approve, among other things, the proposed Distribution and the Shenhua Health Share Option Scheme

• “Excluded Shareholder(s)” the Overseas Shareholder(s) whom the Board, after making enquiries considers it necessary or expedient not to transfer the Shenhua Health Shares to, on account either of legal restrictions under the laws of the relevant place or the requirements of the relevant regulatory body or stock exchange in that place

“Form 5A”

• the listing application form submitted on behalf of Shenhua Health to the Stock Exchange on 27 October 2015

“GEM”

the Growth Enterprise Market of the Stock Exchange

• “Independent Third Parties” any person or company and its ultimate beneficial owner(s), to the best of the Directors’ knowledge, information and belief having made all reasonable enquiries, are third parties independent of the Company and its connected persons

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“Listing”

the listing by way of introduction of, and permission to deal in, the Shenhua Health Shares in issue on the GEM of the Stock Exchange

• “Listing Approval”

• the approval by the Listing Committee of the Stock Exchange for the Listing

• “Listing Rules”

• the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited, as amended from time to time

• “Main Board” the stock market (excluding the option market) operated by the Stock Exchange, which is independent from and operates in parallel with the GEM

• “Overseas Shareholder(s)” Shareholder(s) whose address(es) appear(s) on the register of members of the Company on the Record Date are in jurisdictions outside Hong Kong

• “Proposed Spin-off” the proposed spin-off of Shenhua Health by the Company to be effected by way of the Distribution

• “Qualifying Shareholder(s)” Shareholder(s) whose name(s) appear(s) on the register of members of the Company on the Record Date, other than the Excluded Shareholders

• “Record Date” the record date for ascertaining entitlements to the Distribution, to be determined and announced by the Board

• “Remaining Group” the Company and its subsidiaries following the Distribution, which will exclude the Shenhua Health Group

• “Reorganisation” the reorganisation of Shenhua Health Group in preparation for the Proposed Spin-off and the Listing

• “Share(s)”

• ordinary share(s) in the share capital of the Company with par value HK$0.10 each

• “Shareholder(s)” holder(s) of the Share(s)

• “Shenhua Health”

Shenhua Health Holdings Limited (神華維康控股有限 公司), a company incorporated under the laws of the Cayman Islands with limited liability on 19 August 2015, and a direct wholly-owned subsidiary of the Company as at the date of this announcement

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“Shenhua Health Group”

Shenhua Health and its subsidiaries after the Reorganisation or, where the context so requires, in respect of the period before Shenhua Health became the holding company of its present subsidiaries, such present subsidiaries or (as the case may be) their predecessors

“Shenhua Health Share Option Scheme”

the share option scheme of Shenhua Health proposed to be presented to the Shareholders for their approval at the EGM

“Shenhua Health Shares”

ordinary shares in the share capital of Shenhua Health

“Stock Exchange”

The Stock Exchange of Hong Kong Limited

On behalf of the Board Fufeng Group Limited Li Xuechun Chairman

Hong Kong, 27 October 2015

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 and Mr. Li Guangyu and the independent non-executive directors of the Company are Mr. Choi Tze Kit, Sammy, Mr. Qi Qingzhong and Ms. Zheng Yu.

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