Fufeng Group Limited — Capital/Financing Update 2016

Aug 22, 2016

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.

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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 MADE PURSUANT TO RULE 13.09 OF THE LISTING RULES

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

BACKGROUND

Reference is made to the announcement of the Company dated 19 December 2014, pursuant to which Junan North Company A and Junan North Company B, both wholly-owned subsidiaries of the Company, won the bids for the land use rights, 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 ), in respect of the approximately 104,967.6 square metres and approximately 43,781.0 square metres at the consideration of approximately RMB110.23 million and approximately RMB45.98 million respectively (the “ Land Purchase ”). The total site area of the Land is approximately 148,748.6 square metres and is situated at located at Longshan Road (Northern section), Junan County, Shandong Province, PRC ( 莒南縣縣城隆山 路北段 ), is designated for commercial use and forms part of the Shangdong Land where an old monosodium glutamate (MSG) production site of the Group was situated. Since the date of purchase of the Land, the Group has been holding the Land for investment purpose as it evaluated the Group’s future business development and expansion plans in Shandong province.

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THE PROPOSED DISPOSALS

The Board announced that on 22 August 2016 (after trading hours), the Vendor, an indirect wholly-owned subsidiary of the Company, has entered into the Disposal Agreements with the Purchaser, pursuant to which the Vendor has conditionally agreed to dispose of and the Purchaser has conditionally agreed to acquire the (i) Sale Shares A for a consideration of RMB5 million, which would be payable within 10 days upon signing of the First Disposal Agreement. Pursuant to the First Disposal Agreement, within 10 days upon signing of the First Disposal Agreement, the Purchaser and Junan North Company A undertake to repay the outstanding Shareholder’s Loan A of RMB110,798,568.2 payable by Junan North Company A to the Vendor; (ii) Sale Shares B for a consideration of RMB5 million, which would be payable within 10 days upon signing of the Second Disposal Agreement. Pursuant to the Second Disposal Agreement, within 10 days upon signing of the Second Disposal Agreement, the Purchaser and Junan North Company B undertake to repay the outstanding Shareholder’s Loan B of RMB43,330,407.0 payable by Junan North Company B to the Vendor. The aggregate consideration pursuant to the Disposal Agreements amount to RMB164,128,975.2. If the Purchaser and the Target Companies are unable to settle the above mentioned consideration according to the deadline, a daily 0.03% interest would be imposed on the amount outstanding.

The consideration was determined after arm’s length negotiations between the Vendor and the Purchaser by taking into account the net asset value of the Target Companies as at 30 June 2016, which included the respective shareholder’s loans outstanding. The Company has also considered the value of the Land with reference to the property valuation performed by an independent PRC valuer.

To the best knowledge, information and belief of the Directors having made all reasonable enquiries, the Purchaser and its ultimate beneficial owner(s) are independent of and not connected with the Company and its connected persons.

INFORMATION ABOUT THE TARGET COMPANIES

The Target Companies are investment holding companies and hold parcel of lands which are located at Longshan Road (Northern section), Junan County, Shandong Province, PRC* ( 莒 南縣縣城隆山路北段 ). The aggregate site area of the Land is approximately 148,748.6 square metres, and the Land is currently designated for commercial use and held by the Group for investment purpose as it evaluated the Group’s business development and expansion plans in Shandong province.

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REASONS FOR AND BENEFITS OF THE DISPOSAL AND USE OF PROCEEDS

After assessing its strategic options, given that the Land is not required for the development and growth of the core business of the Group, the Directors consider that the Disposal would help realize cash for the reduction of net gearing and working capital of the Group, and in turn strengthen the overall balance sheet structure.

In view of the above, the Directors (including the independent non-executive Directors) consider that the terms of the Disposal Agreements are fair and reasonable and in the interests of the Company and its shareholders as a whole.

GENERAL

As no applicable percentage ratio (as defined under the Listing Rules) in respect of the Disposal exceeds 5%, the Disposal, if materialize, will not constitute a notifiable transaction of the Company under Chapter 14 of the Listing Rules. As the Disposal may or may not proceed, the shareholders and potential investors of the Company are advised to exercise caution when dealings in the shares of the Company.

DEFINITIONS

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

“Board”	the board of Directors;
“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;
“connected person(s)”	has the meaning ascribed thereto under the Listing Rules;
“Director(s)”	the director(s) of the Company;
“Disposal”	the disposal of Sale Shares A and Sale Shares B, together
	with all the interests in the Shareholder’s Loan A and
	Shareholder’s Loan B pursuant to the Disposal Agreements;
“Disposal Agreements”	First Disposal Agreement and Second Disposal Agreement;
“First Disposal Agreement”	the equity transfer agreement dated 22 August 2016
	(after trading hours) entered into between the Vendor
	and the Purchaser for the disposal of Sale Shares A and
	Shareholder’s Loan A;
“Group”	the Company and its subsidiaries;

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“Hong Kong” the Hong Kong Special Administrative Region of the People’s Republic of China; “Junan North Company A” Junan North City Property Company Limited ( 莒 南 北 部置業有限公司 ), a wholly-owned subsidiary of the Company; “Junan North Company B” Junan Northern Property Company Limited ( 莒南北方置 業有限公司 ), a wholly-owned subsidiary of the Company; “Land” two plots of land located at Longshan Road (Northern section) Junan County, Shandong Province, PRC ( 莒 南 縣縣城隆山路北段 ), held as to 104,967.6 square metres by Junan North Company A and 43,781.0 square metres by Junan North Company B, which together occupy a total site area of approximately 148,748.6 square metres; “Listing Rules” the Rules Governing the Listing of Securities on the Stock Exchange as amended from time to time; “PRC” the People’s Republic of China, which for the purpose of the Disposal Agreement, excludes Hong Kong and Macau Special Administrative Regions and Taiwan; “Purchaser” 莒南縣新城建築安裝工程有限公司 (Junan County New Town Construction and Installation Co., Ltd.), a company incorporated in the PRC with limited liability; “RMB” Renminbi, the lawful currency of the PRC; “Sale Shares A” the entire issued share capital of Junan North Company A; “Sale Shares B” the entire issued share capital of Junan North Company B; “Second Disposal Agreement” the equity transfer agreement dated 22 August 2016 (after trading hours) entered into between the Vendor and the Purchaser for the disposal of Sale Shares B and Shareholder’s Loan B; “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;

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“Shareholder’s Loan A” the shareholder’s loan owing by Junan North Company A to the Vendor amounting to RMB110,798,568.2 as at 30 June 2016;

• “Shareholder’s Loan B” the shareholder’s loan owing by Junan North Company B to the Vendor amounting to RMB43,330,407.0 as at 30 June 2016;

“Stock Exchange”

The Stock Exchange of Hong Kong Limited;

“Target Companies”

Junan North Company A and Junan North Company B;

“Vendor”

山東阜豐發酵有限公司 (Shandong Fufeng Fermentation Co., Ltd.*), an indirect wholly-owned subsidiary of the Company; and

“%”

per cent.

By Order of the Board Fufeng Group Limited Li Xuechun Chairman

Hong Kong, 22 August 2016

As at the date of this announcement, the executive directors of the Company are Mr. Li Xuechun, Mr. Feng Zhenquan, Mr. Xu Guohua, Mr. Li Deheng and Mr. Li Guangyu and the independent non-executive directors of the Company are Mr. Sun Yu Guo, Mr. Qi Qingzhong and Ms. Zheng Yu.

• For identification purposes only

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