Fufeng Group Limited — Capital/Financing Update 2017

Apr 21, 2017

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.

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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) PLACING OF EXISTING SHARES AND (2) SUBSCRIPTION FOR NEW SHARES UNDER GENERAL MANDATE

Sole Placing Agent

PLACING AND SUBSCRIPTION

On 20 April 2017, the Vendor, the Guarantor and the Company entered into the Placing and Subscription Agreement with the Placing Agent pursuant to which the Placing Agent has agreed to place, on a best effort basis, 140,000,000 existing Shares at a price of HK$5.55 per Share on behalf of the Vendor. The Placing Shares represent approximately 5.90% of the existing issued share capital of the Company and approximately 5.57% of the issued share capital of the Company as enlarged by the Subscription.

The Placing Shares will be placed by the Placing Agent to more than six independent professional, institutional and/or individual investors who are or will be third parties independent of and not connected with the Company or its connected persons or any person who are or will be acting in concert with the Vendor or parties acting in concert with it. The Placing is conditional on certain termination events upon the occurrence of which the Placing will not proceed to completion unless waived by the Placing Agent.

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Pursuant to the Placing and Subscription Agreement, the Vendor has conditionally agreed to subscribe at the Placing Price for the same number of new Shares as the Placing Shares that have been placed by the Placing Agent. Assuming that all of the Placing Shares have been successfully placed by the Placing Agent, the Subscription Shares will represent approximately 5.90% of the existing issued share capital of the Company and approximately 5.57% of the issued share capital of the Company as enlarged by the Subscription.

The shareholding of the Vendor and parties acting in concert with it in the issued share capital of the Company will be reduced from approximately 41.82% to approximately 35.91% upon completion of the Placing but before completion of the Subscription and will be increased from approximately 35.91% to approximately 39.49% upon completion of the Subscription. The Vendor will apply to the Executive Director of the Corporate Finance Division of the SFC for a waiver under Note 6 on dispensations from Rule 26 of the Takeovers Code.

The Company will apply to the Listing Committee of the Stock Exchange for the granting of the listing of, and permission to deal in, the Subscription Shares.

Completion of the Subscription is conditional upon:

• (1) completion of the Placing;

• (2) the Listing Committee of the Stock Exchange granting the listing of and permission to deal in the Subscription Shares; and

• (3) the Executive Director of the Corporate Finance Division of the SFC granting the Vendor a waiver from its obligation as a result of the Subscription to make a general offer under Rule 26 of the Takeovers Code.

The Placing and the Subscription is being undertaken to supplement the Group’s long term funding of its expansion and growth plan, in particular for the strategic acceleration of the construction of the Group’s new amino acid plant in Qiqihar. The Company intends to use the estimated net proceeds of the Subscription of approximately HK$766.5 million for the construction of the new plant in Qiqihar and as general working capital of the Group.

As the Placing and Subscription are subject to the fulfillment of a number of conditions and may or may not proceed to completion, Shareholders and prospective investors are advised to exercise caution when dealing in the securities of the Company.

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PLACING AND SUBSCRIPTION AGREEMENT

Date: 20 April 2017

Parties: (1) the Company;

• (2) Motivator Enterprises Limited as the vendor. Motivator Enterprises Limited is beneficially owned by the Guarantor. As at the date of this announcement, the Vendor and its associates are interested in 991,638,461 Shares, representing approximately 41.82% of the existing issued share capital of the Company;

• (3) Mr. Li Xue Chun as the guarantor of the Vendor. The Vendor is wholly-owned by Mr. Li Xue Chun. Mr. Li Xue Chun is the controlling shareholder and the Chairman of the Company and an executive Director; and

• (4) China International Capital Corporation Hong Kong Securities Limited as the placing agent. The Placing Agent is independent of and not connected with the Company or any of its connected persons and is not acting in concert with the Vendor or parties acting in concert with the Vendor.

PLACING

Number of Sale Shares

140,000,000 existing Shares, representing approximately 5.90% of the existing issued share capital of the Company and about 5.57% of the issued share capital as enlarged by the Subscription.

Placing Price

The Placing Price is HK$5.55 per Share and represents:

• (i) a discount of 7.50% to the closing price of HK$6.00 per Share as quoted on the Stock Exchange on 20 April 2017, the last full trading day prior to the date of the Placing and Subscription Agreement; and

• (ii) a discount of approximately 9.05% to the average closing price of HK$6.102 per Share as quoted on the Stock Exchange for the last 5 trading days up to and including 19 April 2017.

The Placing Price was determined after arm’s length negotiations between the Vendor and the Placing Agent and the Directors (including the independent non-executive Directors) consider that the Placing Price to be fair and reasonable under the current market conditions and is in the best interests of the Company and the Shareholders as a whole.

The costs of the Placing and the Subscription shall be borne by the Company.

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Rights

The Placing Shares will be sold free of all liens, charges and encumbrances, and together with all rights attaching thereto as at 21 April 2017 (or if dealings in the Shares on the Stock Exchange are suspended at all times on 21 April 2017, the first day on which dealings resume and the cross trade can be reported to the Stock Exchange in accordance with its rules or such other date as the Vendor and the Placing Agent may agree in writing), including the right to receive all dividends or other distributions declared, made or paid on or after the date of the Placing and Subscription Agreement.

Independence of the Placing Agent and the Placees

It is expected that the Placing Shares will be placed by the Placing Agent to not less than six independent professional, institutional and/or individual investors. It is not expected that any placee will become a substantial shareholder of the Company as a result of the Placing.

The placees and their ultimate beneficial owners are as the case may be independent of and not acting in concert the Vendor or any parties acting in concert with it.

Termination Events

The obligation of the Placing Agent to proceed to completion of the Placing is conditional upon, amongst other conditions, the requirement that none of the following shall have occurred prior to completion:

• (a) there develops, occurs or comes into force:

• (i) any new law or regulation or any change or development involving a prospective change in existing laws or regulations which in the sole judgement of the Placing Agent has or is likely to have a material adverse effect on the financial position of the Group as a whole; or

• (ii) any significant change (whether or not permanent) in local, national or international monetary, economic, financial, political or military conditions which in the sole judgement of the Placing Agent is or would be materially adverse to the success of the Placing; or

• (iii) any significant change (whether or not permanent) in local, national or international securities market conditions or currency exchange rates or exchange controls which in the sole judgement of the Placing Agent is or would be materially adverse to the success of the Placing; or makes it impracticable or inadvisable or inexpedient to proceed therewith; or

• (iv) a general moratorium on commercial banking activities in Hong Kong, London or New York declared by the relevant authorities or a material disruption in commercial banking or securities settlement or clearance services in Hong Kong, the United Kingdom or the United States; or

• (v) a change or development involving a prospective change in taxation adversely affecting the Company, the Sale Shares or the transfer thereof; or

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• (vi) any outbreak or escalation of hostilities or act of terrorism involving Hong Kong, the United Kingdom or the United States or the declaration by the People’s Republic of China, the United Kingdom or the United States of a national emergency or war; or

• (vii) any suspension of dealings in the Shares for any period whatsoever (other than as a result of the Placing); or

• (viii) any moratorium, suspension or material restriction on trading in shares or securities generally on the Stock Exchange, the London Stock Exchange, the New York Stock Exchange or Nasdaq due to exceptional financial circumstances or otherwise at any time prior to the Closing Date; or

• (b) any breach of any of the representations, warranties and undertakings by the Company, the Guarantor and/or the Vendor under the Placing and Subscription Agreement comes to the knowledge of the Placing Agent or any event occurs or any matter arises on or after the date of the Placing and Subscription Agreement and prior to the Closing Date which if it had occurred or arisen before the date of the Placing and Subscription Agreement would have rendered any of such representations, warranties and undertakings untrue or incorrect in any respect or there has been a breach of, or failure to perform, any other provision of the Placing and Subscription Agreement on the part of the Vendor, the Guarantor and/or the Company; or

• (c) there is any such adverse change, or development involving a prospective adverse change, in the general affairs, condition, results of operations or prospects, management, business, stockholders’ equity or in the financial or trading position of the Group as a whole which in the sole judgement of the Placing Agent is materially adverse to the success of the Placing.

In the event the Placing Agent terminates the Placing and Subscription Agreement, the obligations of parties under the agreement will cease and determine and no party will have any claim against any other party save for any antecedent breach. Shareholders and investors are therefore advised to exercise caution when dealing in the securities of the Company.

Completion of the Placing

The parties expect that the Placing will be completed on 25 April 2017 (or such other date as the parties may agree in writing).

Undertakings

Each of the Guarantor and the Vendor has undertaken to the Placing Agent that, except for the sale of the Placing Shares pursuant to the Placing and Subscription Agreement, for a period of six months from the Closing Date, it will not and will procure that none of its nominees and companies controlled by it and trusts associated with it (whether individually or together and whether directly or indirectly) without the prior written consent of the Placing Agent (i) offer, lend, pledge, issue, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase, or otherwise transfer

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or dispose of (either conditionally or unconditionally, or directly or indirectly, or otherwise) any Shares (including the Subscription Shares) or any interests therein beneficially owned or held by the Guarantor or the Vendor or any securities convertible into or exercisable or exchangeable for or substantially similar to any such Shares or interests or (ii) enter into any swap or similar agreement that transfers, in whole or in part, the economic risk of ownership of such Shares, whether any such transaction described in (i) or (ii) above is to be settled by delivery of Shares or such other securities, in cash or otherwise or (iii) announce any intention to enter into or effect any such transaction described in (i) or (ii) above.

The Company undertakes to the Placing Agent, and the Vendor undertakes to the Placing Agent to procure, that for a period of six months from the Closing Date, the Company will not, except for the Subscription Shares and save pursuant to (1) the terms of any employee share option scheme of the Company or (2) any outstanding subscription warrants or (3) bonus or scrip dividend or similar arrangements which provide for the allotment of Shares in lieu of the whole or part of a dividend on Shares of the Company in accordance with its articles of association or (4) conversion of outstanding convertible bonds or notes or (5) any agreement to issue shares entered into in connection with any transaction, which agreement has been announced prior to the date of this Agreement, (i) allot or issue or offer to allot or issue or grant any option, right or warrant to subscribe (either conditionally or unconditionally, or directly or indirectly, or otherwise) any Shares or any interests in Shares or any securities convertible into or exercisable or exchangeable for or substantially similar to any Shares or interest in Shares or (ii) agree (conditionally or unconditionally) to enter into or effect any such transaction with the same economic effect as any of the transactions described in (i) above or (iii) announce any intention to enter into or effect any such transaction described in (i) or (ii) above without first having obtained the written consent of the Placing Agent.

SUBSCRIPTION

Number of new Shares to be subscribed

140,000,000 new Shares to be subscribed by the Vendor, representing approximately 5.90% of the existing issued share capital of the Company and approximately 5.57% of the issued share capital of the Company as enlarged by the Subscription.

Subscription Price

The subscription price per new Share is equivalent to the Placing Price of HK$5.55 per Share. The Subscription Shares have a nominal value of HK$14,000,000 and a market value of HK$840,000,000, based on the closing price of HK$6.00 on 20 April 2017, the last full trading day in the Shares prior to the Placing and Subscription Agreement. The net price of the Subscription is approximately HK$5.475 per Share.

The Directors (including the independent non-executive Directors) consider that the terms of the Subscription are fair and reasonable under the current market conditions and are in the interest of the Company and the Shareholders as a whole.

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General mandate to issue the Subscription Shares

The issue of the Subscription Shares will not be subject to Shareholders’ approval and the Subscription Shares will be issued under the general mandate granted by the Shareholders to the Directors pursuant to the resolution of the Shareholders passed in the general meeting held on 12 May 2016. Pursuant to such mandate, the Directors were granted authority to issue up to 425,336,926 Shares, representing 20% of the issued share capital of the Company as at 12 May 2016. The Company has not issued any Shares pursuant to such general mandate.

Ranking of the Subscription Shares

The Subscription Shares, when fully paid, will rank pari passu in all respects with the Shares in issue on the completion date of the Subscription including the right to any dividends or distributions after the date of completion of the Subscription.

Conditions of the Subscription

The Subscription is conditional upon:

• (1) completion of the Placing;

• (2) the Listing Committee of the Stock Exchange granting the listing of and permission to deal in the Subscription Shares; and

• (3) the Executive Director of the Corporate Finance Division of the SFC granting the Vendor a waiver from its obligation as a result of the Subscription to make a general offer under Rule 26 of the Takeovers Code.

None of the conditions stated above can be waived. In the event that the conditions are not fulfilled or on or before 4 May 2017 (or such later date as may be agreed between the parties) the Subscription and all rights and obligations thereunder will cease and terminate.

Completion of the Subscription

Completion of the Subscription will take place on the next business day following the fulfillment of the above conditions or such other day as agreed by the Vendor and the Company. As the Subscription constitutes a connected transaction of the Company, if the Subscription is not completed within 14 days after the date of the Placing and Subscription Agreement, shareholders’ approval will be required for the Subscription and the relevant provisions of the Listing Rules in relation to connected transaction will apply, unless otherwise waived by the Stock Exchange. Further announcement will be made if this occurs.

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EFFECT OF THE PLACING AND THE SUBSCRIPTION ON SHAREHOLDING:

Assuming there is no change in the number of issued Shares from the date of this announcement to completion of the Subscription, the shareholding structure of the Company before and after the Placing and the Subscription will be as follows:

Shareholders The Vendor and its associates Directors (other than Li Xuechun) Treetop Assets Management SA Placees Other public Shareholders Total

Current Immediately after completion of the Placing but before the Subscription Immediately after completion of the Placing and the Subscription Number of Shares % Number of Shares % Number of Shares % 991,638,461 41.82 851,638,461 35.91 991,638,461 39.49 61,640,320 2.60 61,640,320 2.60 61,640,320 2.45 276,162,316 11.65 276,162,316 11.65 276,162,316 11.00 0 0.00 140,000,000 5.90 140,000,000 5.57 1,041,943,942 43.94 1,041,943,942 43.94 1,041,943,942 41.49 2,371,385,039 100.00 2,371,385,039 100.00 2,511,385,039 100.00

Note: Due to rounding, the total percentage shareholding of shareholders may not add up to 100%.

After completion of the Placing, the shareholding percentage of the Vendor and parties acting in concert with it will decrease from approximately 41.82% to approximately 35.91%. Immediately upon completion of the Subscription, the shareholding of the Vendor and the parties acting in concert with it in the Company will increase from approximately 35.91% to approximately 39.49%. As the Vendor and parties acting in concert with it have not held more than 50% of the voting rights in the Company for a continuous 12-month period immediately prior to the date of the Placing and Subscription Agreement, there is a technical increase in the Vendor’s voting rights in the Company for more than 2% within a 12-month period and thereby triggering a mandatory offer obligation under Rule 26.1 of the Takeovers Code. The Vendor will apply to the Executive Director of the Corporate Finance Division of the SFC for a waiver under Note 6 on dispensations from Rule 26 of the Takeovers Code for its obligation, as a result of the Subscription, to make a general offer under Rule 26 of the Takeovers Code.

The Company will apply to the Listing Committee of the Stock Exchange for the listing of, and permission to deal in, the Subscription Shares.

REASON FOR THE PLACING AND THE SUBSCRIPTION

The Placing and Subscription is being undertaken to supplement the Group’s long term funding of its expansion and growth plan, in particular for the strategic acceleration of the construction of the Group’s new amino acid plant in Qiqihar. The Directors consider the Placing and Subscription will provide an opportunity to raise further capital for the Company whilst broadening the shareholder base and the capital base of the Company.

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USE OF PROCEEDS OF THE SUBSCRIPTION

The Company intends to use the estimated net proceeds of the Subscription of approximately HK$766.5 million for the construction of the new plant in Qiqihar and as general working capital of the Group.

CAPITAL-RAISING ACTIVITIES DURING PAST 12 MONTHS

The Company has not carried out any capital raising activities during the 12 months immediately preceding the date of this announcement.

GENERAL

The Group is principally engaged in the production of bio-fermentation products including monosodium-glutamine, amino acid products for human nutrition as well as animal feeds, and hydrophilic colloids.

DEFINITIONS

“acting in concert”	has the meaning defined in the Takeovers Code
“associate”	has the meaning ascribed to it in the Listing Rules
“Board”	the board of Directors
“Closing Date”	two business days after the date when the sale of the Placing
	Shares shall be reported as a cross-trade to the Stock
	Exchange
“Company”	Fufeng Group Limited, a company incorporated in the
	Cayman Islands with limited liability, the shares of which
	are listed on the Stock Exchange
“Directors”	the directors of the Company
“Group”	the Company and its subsidiaries
“Guarantor”	Mr. Li Xuechun, the controlling shareholder, the chairman
	and an executive Director of the Company
“HK$”	Hong Kong dollar, the lawful currency of Hong Kong
“Hong Kong”	the Hong Kong Special Administrative Region of the PRC
“Listing Rules”	the Rules Governing the Listing of Securities on the Stock
	Exchange
“Placing”	the placement of up to 140,000,000 existing Shares to
	independent investors at the Placing Price

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“Placing Agent” China International Capital Corporation Hong Kong Securities Limited, which is a third party independent of and not connected with the Company and its connected persons. It is not acting in concert with the Vendor or parties acting in concert with the Vendor. “Placing and Subscription the placing and subscription agreement dated 20 April 2017 Agreement” between the Vendor, the Guarantor, the Company and the Placing Agent in respect of the Placing and the Subscription “Placing Price” the placing price of HK$5.55 per Share “Placing Shares” up to 140,000,000 existing Shares “PRC” the People’s Republic of China “SFC” The Securities and Futures Commission of Hong Kong “Shares” ordinary shares of HK$0.10 each in the share capital of the Company “Stock Exchange” The Stock Exchange of Hong Kong Limited “Subscription” the subscription of the Subscription Shares by the Vendor “Subscription Price” the subscription price of HK$5.55 per Share “Subscription Shares” such number of Shares equivalent to the number of Placing Shares (i.e. up to 140,000,000 new Shares) “Takeovers Code” the Hong Kong Code on Takeovers and Mergers “Vendor” Motivator Enterprises Limited, a company incorporated in the British Virgin Islands with limited liability and is 100% beneficially owned by the Guarantor

By order of the Board of Fufeng Group Limited Li Xuechun Executive Director

Hong Kong, 20 April 2017

As at the date of this announcement, the executive directors of the Company are Mr. Li Xuechun, Mr. Li Deheng, Mr. Xu Guohua and Mr. Li Guangyu and the independent nonexecutive directors of the Company are Mr. Sun Yu Guo, Mr. Qi Qing Zhong and Ms. Zheng Yu.

The directors of the Company jointly and severally accept full responsibility for the accuracy of information contained in this announcement and confirm, having made all reasonable enquiries, that to the best of their knowledge, opinions expressed in this announcement have been arrived at after due and careful consideration and there are no other facts not contained in this announcement the omission of which would make any statements in this announcement misleading.

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