Fufeng Group Limited - Proxy Solicitation & Information Statement 2015

THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION

Hong Kong Exchanges and Clearing Limited and The Stock Exchange of Hong Kong Limited take no responsibility for the contents of this circular, 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 circular.

If you are in any doubt as to any aspect of this circular or as to the action to be taken, you should consult a stockbroker or other licensed securities dealer, bank manager, solicitor, professional accountant or other professional adviser.

If you have sold or transferred all your shares in Fufeng Group Limited , you should at once hand this circular, together with the accompanying proxy form, to the purchaser or transferee or to the bank, stockbroker or other agent through whom the sale or transfer was effected for transmission to the purchaser or transferee.

This circular 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 circular 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 CONDITIONAL SPECIAL DIVIDEND BY WAY OF DISTRIBUTION IN SPECIE (2) PROPOSED ADOPTION OF THE SHENHUA HEALTH SHARE OPTION SCHEME AND (3) NOTICE OF EXTRAORDINARY GENERAL MEETING

A letter from the Board is set out on pages 8 to 21 of this circular.

A notice convening the extraordinary general meeting of Fufeng Group Limited to be held at Park Lane Room VI, 27/F, The Park Lane Hong Kong, 310 Gloucester Road, Causeway Bay, Hong Kong on Thursday, 26 November 2015 at 9:30 a.m., is set out on pages 31 to 33 of this circular.

Whether or not you are able to attend the said meeting, you are requested to complete the accompanying proxy form in accordance with the instructions printed thereon and return the same to the Company’s branch share registrar in Hong Kong, Tricor Investor Services Limited, at Level 22, Hopewell Centre, 183 Queen’s Road East, Hong Kong as soon as possible and in any event not less than 48 hours before the time appointed for holding the said meeting or any adjournment thereof. Completion and return of the form of proxy will not preclude you from attending and voting in person at the said meeting or any adjournment thereof should you so wish.

11 November 2015

CONTENTS

		Page
Definitions	. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	1
Letter from	the Board
1.	Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	8
2.	Background . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	9
3.	The Distribution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	16
4.	Adoption of the Shenhua Health Share Option Scheme . . . . . . . . . . . . .	18
5.	Extraordinary General Meeting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	21
6.	Recommendation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	21
7.	Responsibility Statement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	21
Appendix	– Summary of the Principal Terms of the Rules of the
	Shenhua Health Share Option Scheme . . . . . . . . . . . . .	22
Notice of Extraordinary General Meeting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .		31

DEFINITIONS

In this circular, unless the context otherwise requires or otherwise defined, the following expressions have the following meanings:

“Articles of Association”
the articles of association of the Company, as amended, modified or otherwise supplemented from time to time
“associate(s)” has the meaning ascribed to that term under the Listing Rules
“Board”
the board of Directors
“business day”
a day on which the Stock Exchange is open for securities trading
“Capitalization Issue”
the issue of 212,668,363 Shenhua Health Shares, credited as fully paid, by Shenhua Health to the Company by way of capitalization of the amount due to the Company arising from the Reorganization and the balance due from Shenhua Health to the Company as at the date on which the Listing Committee grants its approval for the Listing
“close associate(s)”
has the meaning ascribed to that term under the Listing Rules
“Companies Law”
the Companies Law, Cap. 22 (Law 3 of 1961, as consolidated and revised) of the Cayman Islands
“Companies Ordinance”
the Companies Ordinance (Chapter 622 of the Laws of Hong Kong)
“Company”
Fufeng Group Limited, a company incorporated in the Cayman Islands with limited liability, whose shares are listed on the Main Board of the Stock Exchange
“connected person(s)”
has the meaning ascribed to it under the Listing Rules
“control”

the power of a person to secure:

(i) by means of the holding of shares or other securities or the possession of voting power in or in relation to the relevant body corporate or any other body corporate; or

– 1 –

DEFINITIONS

(ii) by means of controlling the composition of a majority of the board of directors of the relevant body corporate or any other body corporate; or
(iii) by virtue of any powers conferred by the articles of association or other constitutional document regulating the relevant body corporate or any other body corporate,
that the affairs of the first-mentioned body corporate are conducted in accordance with the wishes of such person
“Controlling Shareholder”
“core connected person(s)”
“Date of Grant”
“Director(s)”
“Distribution”
in relation to a company, any person who is or group of persons who are together entitled to exercise or control the exercise of 30% (or such other amount as may from time to time be specified in the Takeovers Code (as approved by the Securities and Futures Commission and as amended from time to time) as being the level for triggering a mandatory general offer) or more of the voting power at general meetings of that company or who is or are in a position to control the composition of a majority of the board of directors of that company
has the meaning ascribed to that term under the Listing Rules
the date on which an Option is granted and, in any event, shall be on a business day
the directors of the Company

the proposed payment of a conditional special dividend by the Company to be satisfied 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 “Information about the Proposed Spin-off” in this circular

– 2 –

DEFINITIONS

“EGM”

“Eligible Person(s)”

the extraordinary general meeting of the Company to be convened at Park Lane Room VI, 27/F, The Park Lane Hong Kong, 310 Gloucester Road, Causeway Bay, Hong Kong on Thursday, 26 November 2015 at 9:30 a.m., the notice of which is set out on pages 31 to 33 in this circular

means, in relation to the Shenhua Health Share Option Scheme:

(i) any director (whether executive or non-executive, including any independent non-executive director), employee (whether full time or part time) of, or any individual for the time being seconded to work for, any member of the Shenhua Health Group who, in the Shenhua Health Board’s opinion, has made a contribution or will make a potential contribution to the Shenhua Health Group; or
(ii) any holder of any securities issued by any member of the Shenhua Health Group or any Controlling Shareholder of Shenhua Health (or any Controlling Shareholder of a Controlling Shareholder of Shenhua Health) or any company controlled by such Controlling Shareholder (who, in the Shenhua Health Board’s absolute discretion and opinion, has made a contribution or will make a potential contribution to the Shenhua Health Group); or
(iii) (a) any business or joint venture partner, contractor, agent or representative of,
(b) any person or entity that provides research, development or other technological support or any advisory, consultancy, professional or other services incident to the business of Shenhua Health and/or its subsidiaries to,

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DEFINITIONS

(c) any investor, vendor, supplier, producer, developer, agent, licensor or service provider of, or
(d) any customer, licensee (including any sub-licensee), wholesaler, retailer, trader or distributor of goods or services of,
any member of the Shenhua Health Group or any Controlling Shareholder of Shenhua Health (or any Controlling Shareholder of a Controlling Shareholder of Shenhua Health) or any company controlled by such Controlling Shareholder (who, in the Shenhua Health Board’s absolute discretion and opinion, has made a contribution or will make a potential contribution to the Shenhua Health Group);

and, for the purposes of the Shenhua Health Share Option Scheme, shall include any company controlled by one or more persons belonging to any of the above classes of participants

“Excluded Shareholder(s)”
“Form 5A”
“Full Health Global”
“Full Health (Hong Kong)”
“GEM”
“GEM Listing Rules”
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
the listing application form submitted on behalf of Shenhua Health to the Stock Exchange on 27 October 2015
Full Health Global Limited, a company incorporated in the British Virgin Islands with limited liability on 20 August 2015 and a direct wholly-owned subsidiary of Shenhua Health

Full Health (Hong Kong) Limited, a company incorporated in Hong Kong with limited liability on 31 August 2015 and an indirect wholly-owned subsidiary of Shenhua Health

the Growth Enterprise Market of the Stock Exchange

the Rules Governing the Listing of Securities on GEM

– 4 –

DEFINITIONS

“Group”
“HK$”
“Hong Kong”
“Independent Third Parties”
“Jiangsu Fufeng”
“Jiangsu Shenhua Medical”
“Latest Practicable Date”
“Listing”
“Listing Approval”
“Listing Committee”
“Listing Date”
“Listing Rules”
“Main Board”

the Company and its subsidiaries

Hong Kong dollars, the lawful currency of Hong Kong
the Hong Kong Special Administrative Region of the PRC
any person or company and its ultimate beneficial owner(s), who, 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
Jiangsu Fufeng Biotechnologies Co., Ltd. (江蘇阜豐生物科技有限公司), a company established in the PRC on 11 October 2011 with limited liability and an indirect wholly-owned subsidiary of Shenhua Health
Shenhua Pharmaceutical (Jiangsu) Co., Ltd. (神華醫藥
（江蘇）有限公司), a company established in the PRC with limited liability on 14 September 2005 and an indirect wholly-owned subsidiary of Shenhua Health
9 November 2015, being the latest practicable date prior to the printing of this circular for ascertaining certain information included therein
the listing by way of introduction of, and permission to deal in, the Shenhua Health Shares in issue and any Shenhua Health Shares, which may be issued pursuant to the exercise of Options granted under the Shenhua Health Share Option Scheme, on GEM
the approval by the Listing Committee for the Listing
the listing committee of the Stock Exchange
the date on which dealings in the Shenhua Health Shares first commence on the Stock Exchange
the Rules Governing the Listing of Securities on the Stock Exchange
the stock market (excluding the option market) operated by the Stock Exchange, which is independent from and operates in parallel with the GEM

– 5 –

DEFINITIONS

“Option”
an option to subscribe for Shenhua Health Shares pursuant to the Shenhua Health Share Option Scheme
“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
“PRC” The People’s Republic of China
“Proposed Spin-off”
the proposed spin-off of Shenhua Health by the Company to be effected by way of the Distribution
“Qualifying Shareholder(s)”
Shareholders whose names appear on the register of members of the Company on the Record Date, excluding 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 completion of the Distribution, which will exclude the Shenhua Health Group
“Reorganisation”
the reorganisation of the Shenhua Health Group in preparation for the Proposed Spin-off and Listing
“Scheme Period”
the period commencing on the Listing Date and expiring at the close of business on the day immediately preceding the tenth anniversary thereof
“SFO”
the Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong)
“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 circular

– 6 –

DEFINITIONS

“Shenhua Health Application the application proof of Shenhua Health’s Proof” listing document, which has been published on the website of the Stock Exchange at www.hkexnews.hk/APP/GEMAPPMainIndex.htm

“Shenhua Health Board”
the board of directors of Shenhua Health
“Shenhua Health Group”
Shenhua Health and its subsidiaries after the completion of 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 which was conditionally approved by the directors of Shenhua Health on 6 November 2015 and conditionally adopted by written resolutions of the sole shareholder of Shenhua Health passed on 6 November 2015 and proposed to be presented to the Shareholders for their approval at the EGM
“Shenhua Health Shareholder(s)”
holder(s) of Shenhua Health Share(s)
“Shenhua Health Shares”
ordinary shares in the share capital of Shenhua Health
“Shenhua Pharmaceutical”
Jiangsu Shenhua Pharmaceutical Co., Ltd. (江蘇神華藥業有限公司), a company established in the PRC on 24 August 2000 with limited liability and an indirect wholly-owned subsidiary of Shenhua Health
“Stock Exchange” The Stock Exchange of Hong Kong Limited
“Takeovers Code”
The Hong Kong Code on Takeovers and Mergers
“US$” United States dollars, the lawful currency of United States of America
“%” per cent.

The English names of PRC entities are translations of their Chinese names and are included for identification purposes only. In the event of inconsistency, the Chinese names shall prevail.

– 7 –

LETTER FROM THE BOARD

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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)

Executive Directors: Li Xuechun (Chairman) Wang Longxiang Feng Zhenquan Xu Guohua Li Deheng Li Guangyu

Independent non-executive Directors: Qi Qing Zhong Zheng Yu

Registered office: Cricket Square Hutchins Drive, P.O. Box 2681 Grand Cayman KY1-1111 Cayman Islands

Head office and principal place of business in the PRC: Western section of Huahai Road Junan Shandong PRC, 276600

Principal place of business in Hong Kong: Suite 1102, 11th Floor Chinachem Century Tower 178 Gloucester Road Wanchai, Hong Kong 11 November 2015

To the Shareholders, and for information only, the holders of the Company’s options

Dear Sirs,

(1) PROPOSED CONDITIONAL SPECIAL INTERIM DIVIDEND BY WAY OF DISTRIBUTION IN SPECIE (2) PROPOSED ADOPTION OF THE SHENHUA HEALTH SHARE OPTION SCHEME AND

(3) NOTICE OF EXTRAORDINARY GENERAL MEETING

1. INTRODUCTION

Reference is made to the announcement of the Company dated 27 October 2015 in relation to the Proposed Spin-off and separate listing of the shares of Shenhua Health (being the subsidiary which is interested in the pharmaceutical business involving the

– 8 –

LETTER FROM THE BOARD

manufacturing and sale of amino acids-based pharmaceutical and health products, and fungi-based pharmaceutical and health products) on the GEM of the Stock Exchange.

The Company announced on 27 October 2015 that 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 in respect of the Listing. The Shenhua Health Application Proof is available for viewing and downloading on the Stock Exchange’s website at www.hkexnews.hk/APP/GEMAPPMainIndex.htm. The Board confirms that the Company will implement the Proposed Spin-off in compliance with the requirements under Practice Note 15 and other relevant provisions of the Listing Rules. According to the Articles of Association, the Distribution shall be subject to the approval by the Shareholders.

The Shenhua Health Share Option Scheme was conditionally adopted by written resolution of the Company, in its capacity as the sole shareholder of Shenhua Health, on 6 November 2015. The Shenhua Health Share Option Scheme will constitute a share option scheme governed by Chapter 23 of the GEM Listing Rules. Therefore, pursuant to Rules 17.01(1) and 17.02(1)(a) of the Listing Rules, the adoption by Shenhua Health of the Shenhua Health Share Option Scheme is subject to the approval of the Shareholders.

The purposes of this circular are:

(i) to provide Shareholders with further information on the Proposed Spin-off, the Distribution and the proposed adoption of the Shenhua Health Share Option Scheme; and
(ii) to give notice and provide proxy form to the Shareholders of the EGM at which ordinary resolutions will be proposed to approve the Distribution and the proposed adoption of the Shenhua Health Share Option Scheme.

2. BACKGROUND

Information about the proposed spin-off

The Proposed Spin-off involves the spin-off by the Company and 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 engages principally in the development, production and sale of amino acids-based pharmaceutical products and health products, and fungi-based pharmaceutical products and health products, and also offers a range of chemically synthesized pharmaceutical products and pharmaceutical adjuvants. The Shenhua Health Group is also a holder of numerous pharmaceutical production licenses and the largest exporter of branched-chained amino acids in China for two consecutive years since 2013 based on the export value of branched-chained amino acids. For further details, please refer to the Shenhua Health Application Proof.

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LETTER FROM THE BOARD

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.

The following simplified chart sets out the shareholding structure of the Shenhua Health Group immediately after completion of the Reorganisation but before the Distribution:

==> picture [326 x 253] intentionally omitted <==

----- Start of picture text -----

Company
(Cayman Islands)
100%
Shenhua Health Other subsidiaries
(Cayman Islands) of the Company
100%
Full Health Global
(BVI)
100%
Full Health (Hong Kong)
(Hong Kong)
Offshore
Onshore 100%
Shenhua Pharmaceutical
(PRC)
100% 100%
Jiangsu Shenhua Medical Jiangsu Fufeng
(PRC) (PRC)
----- End of picture text -----

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LETTER FROM THE BOARD

The following simplified chart sets out the shareholding structure of the Shenhua Health Group immediately after the completion of the Reorganisation and the Distribution and upon the Listing (assuming all Shareholders are Qualifying Shareholders and that there are no changes to the shareholding interests of the Qualifying Shareholders in the Company from the Latest Practicable Date to the Record Date):

==> picture [366 x 257] intentionally omitted <==

----- Start of picture text -----

Mr. Li Xuechun [(Note 1)] Mr. Xu Guohua [(Note 2)] Ms. Li Hongyu [(Note 3)] Public
(李學純) (徐國華) (李鴻鈺)
45.30% 1.57% 0.01% 53.12%
Shenhua Health
(Cayman Islands)
100%
Full Health Global
(BVI)
100%
Full Health (Hong Kong)
(Hong Kong)
Offshore
Onshore 100%
Shenhua Pharmaceutical
(PRC)
100% 100%
Jiangsu Shenhua Medical Jiangsu Fufeng
(PRC) (PRC)
----- End of picture text -----

Notes:

Mr. Li is a non-executive director of Shenhua Health, and an executive director and a Controlling Shareholder of the Company. Mr. Li will be interested in approximately 45.30% of the total issued share capital of Shenhua Health through Motivator Enterprises Limited, a company which is wholly-owned by Mr. Li.
Mr. Xu is an executive director of Shenhua Health. Mr. Xu will be interested in approximately 1.57% of the total issued share capital of Shenhua Health through Best Range Investments Limited, a company which is wholly-owned by Mr. Xu.
Ms. Li is an executive director of Shenhua Health and will be directly interested in approximately 0.01% of the total issued share capital of Shenhua Health. She is the daughter of Mr. Li.

The Proposed Spin-off and Listing are subject to the following:

(a) the final decisions of the Board and Shenhua Health Board;
(b) the approval from the Shareholders for the Distribution; and
(c) the Listing Approval being obtained.

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LETTER FROM THE BOARD

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.

The following table sets out the key financial information of the Shenhua Health Group which has been extracted from the unaudited combined financial information of the Shenhua Health Group for each of the years ended 31 December 2013 and 2014 and the six months ended 30 June 2015:

Selected items of Combined Statements of Comprehensive Income

Revenue Cost of sales Gross profit Other income Selling and marketing expenses Administrative expenses Other operating expenses Operating profit Finance costs Profit before income tax Income tax expense Profit for the year/period, attributable to the owner of Shenhua Health Other comprehensive income Total comprehensive income for the year/period, attributable to the owner of Shenhua Health	For the year ended 31 December 2013 2014 RMB’000 RMB’000 148,112 172,887 (103,352) (135,099) 44,760 37,788 2,019 5,374 (9,151) (9,540) (19,521) (20,968) (1,065) (260) 17,042 12,394 — — 17,042 12,394 (2,867) (2,270) 14,175 10,124 — — 14,175 10,124	For the six months ended 30 June 2014 2015 RMB’000 RMB’000 88,084 91,152 (68,092) (70,736) 19,992 20,416 3,970 3,905 (4,487) (5,247) (9,288) (10,381) (203) (436) 9,984 8,257 — (59) 9,984 8,198 (1,938) (1,276) 8,046 6,922 — — 8,046 6,922

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LETTER FROM THE BOARD

Summary Combined Balance Sheets

As at 31 December
2013
2014
RMB’000
RMB’000
Current assets
Trade and other
receivables
33,541
46,796
Cash and cash equivalents
28,353
28,230
Inventories
45,220
28,273
Short term bank deposits
4,213
4,000
Total current assets
111,327
107,299
Current liabilities
Trade and other payables
63,558
51,981
Borrowings
—
—
Deferred income
1,096
601
Current income tax
liabilities
1,117
513
Total current liabilities
65,771
53,095
Net current assets
45,556
54,204
Summary Combined Statements of Cash Flows
For the year ended
31 December
2013
2014
RMB’000
RMB’000
Net cash generated from
operating activities
23,486
6,765
Net cash used in investing
activities
(12,500)
(6,888)
Net cash generated from
financing activities
—
—
Net increase/(decrease) in
cash and cash
equivalents
10,986
(123)
Cash and cash equivalents
at beginning of the
year/period
17,367
28,353
Cash and cash equivalents
at the end of the
year/period
28,353
28,230

As at
30 June
2015
As at
31 August
2015
RMB’000
RMB’000
54,219
38,875
28,227
36,976
36,739
34,034
4,000
4,000
123,185
113,885
59,093
47,784
20,100
20,100
3,963
3,930
724
498
83,880
72,312
39,305
41,573
For the six months
ended 30 June
2014
2015
RMB’000
RMB’000
7,885
4,204
(3,741)
(24,307)
—
20,100
4,144
(3)
28,353
28,230
32,497
28,227

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LETTER FROM THE BOARD

For further information on the Proposed Spin-off and the business and financial information in relation to Shenhua Health, please refer to the Shenhua Health Application Proof. Shareholders should note that the Shenhua Health Application Proof is in draft form and the information contained in it is subject to change. The Company does not have any obligation or liability whatsoever in relation to the Shenhua Health Application Proof.

Reasons for and benefits of the proposed spin-off and 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.
(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.

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LETTER FROM THE BOARD

(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 acids-based 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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LETTER FROM THE BOARD

(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.

3. THE DISTRIBUTION

Under the requirements of Practice Note 15 of the Listing Rules, the Company is expected to have due regard to the interests of Shareholders by providing them with an assured entitlement to the Shenhua Health Shares. The Board intends to fulfil the assured entitlement requirement in Practice Note 15 of the Listing Rules by declaring a special dividend in accordance with the Articles of Association of the Company and the Companies Law and satisfying the payment of such dividend by effecting the Distribution.

According to the Articles of Association, the 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 resolution dividends may be declared and paid out of the 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 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 at the EGM.

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LETTER FROM THE BOARD

On 6 November 2015, the Board conditionally approved and recommended the declaration of a special dividend by the Company to be satisfied by way of a distribution in specie of its holding in 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. The Directors were satisfied that immediately following the date on which the Distribution is proposed to be made, the Company would be able to pay its debt as they fall due in the ordinary course of business. 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: (i) the final decisions of the Board and the Shenhua Health Board, (ii) the approval from the Shareholders for the Distribution and (iii) the Listing Approval being obtained. The amount of the special dividend to be distributed by the Group will be equal to the carrying value of the net assets of Shenhua Health Group as at the date on which the declaration of a special dividend by the Company to the Qualifying Shareholders is approved by the Shareholders.

As at the Latest Practicable Date, Shenhua Health had one Shenhua Health Share in issue. It is expected that a share subdivision will take place before the Listing such that the one Shenhua Health Share will be divided into 100 Shenhua Health Shares. It is expected that immediately following the obtaining of the Listing Approval and prior to the Distribution, Shenhua Health will issue up to 212,668,363 new Shenhua Health Shares by way of the Capitalisation Issue, following which the total number of Shenhua Health Shares in issue will accordingly be increased to up to 212,668,463 Shenhua Health Shares. The Capitalisation Issue is subject to the approval by the Company in its capacity as the sole shareholder of Shenhua Health and the Listing Approval being obtained, but is not subject to the approval by the Shareholders.

Pursuant to the Distribution, subject to the final decision of the Board, each Qualifying Shareholder will be entitled to one Shenhua Health Share for every 10 Shares held on the Record Date, and in such case and for the avoidance of doubt, registered holders of less than 10 Shares on the Record Date will not be entitled to any Shenhua Health Shares. All entitlements will be rounded down to a whole number of Shares, and fractional entitlements will be disregarded. Based on the issued share capital of the Company as at the Latest Practicable Date and assuming this will remain unchanged on the Record Date, the number of Shenhua Health Shares in issue will be up to 212,668,463 Shenhua Health Shares upon Listing, which will comprise the entire issued share capital of Shenhua Health.

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

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LETTER FROM THE BOARD

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. Following the determination of the Overseas Shareholders on the Record Date, the Company will publish an announcement which will include, among other things, the number of Excluded Shareholders and the jurisdictions involved (if any).

The Shenhua Health Shares will be traded in board lots of 4,000 shares each. In order to facilitate the trading of odd lots of the Shenhua Health Shares, the Company has appointed Kingston Securities Limited to provide matching services, on a best efforts basis, to those Qualifying Shareholders who wish to acquire odd lots of the Shenhua Health Shares to make up a full board lot or to dispose of their holdings of odd lots of the Shenhua Health Shares for one month from the Listing Date. During such period, Qualifying Shareholders who wish to trade odd lots of the Shenhua Health Shares should contact Ms. Rosita Kiu of Kingston Securities Limited (telephone: (852) 2298-6215) at Suite 2801, 28th Floor, One International Finance Centre, 1 Harbour View Road, Central, Hong Kong during office hours on a business day. Qualifying Shareholders should note that the matching of and the sale and purchase of odd lots of the Shenhua Health Shares is on a best efforts basis, and is not guaranteed and will depend on odd lots amount of the Shenhua Health Shares available for such matching. Qualifying Shareholders are advised to consult their own professional advisors if they are in doubt about the facility described above.

As at the Latest Practicable Date, the listing application is being reviewed by the Stock Exchange. The Proposed Spin-off and the Listing are subject to the final decisions of the Board and the Shenhua Health Board, the approval from the Shareholders for the Distribution and the Listing Approval being obtained. Accordingly, Shareholders and potential investors of 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 Distribution will not be made. Shareholders and potential investors of the Company should therefore exercise caution when dealing in or investing in the securities of the Company.

4. ADOPTION OF THE SHENHUA HEALTH SHARE OPTION SCHEME

The Shenhua Health Share Option Scheme was adopted by written resolution of the Company, in its capacity as the sole shareholder of Shenhua Health, which was passed on 6 November 2015, and is conditional on:

(a) the Shenhua Health Share Option Scheme being approved by ordinary resolution of Shareholders at a general meeting of the Company to be held;
(b) the Listing Approval being obtained; and
(c) the commencement of dealings in the Shenhua Health Shares on the Stock Exchange.

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LETTER FROM THE BOARD

A summary of the principal terms of the rules of the Shenhua Health Share Option Scheme is set out in the Appendix to this circular.

The purpose of the Shenhua Health Share Option Scheme is to enable the Shenhua Health Board to grant options to selected Eligible Persons as incentives or rewards for their contribution or potential contribution to the Shenhua Health Group. The Board considers that it is in line with modern commercial practice that appropriate Eligible Persons determined by the Shenhua Health Board from time to time on the basis of their contribution or potential contribution to the development and growth of the Shenhua Health Group, should be given incentives in the form of options to subscribe for the Shenhua Health Shares.

The terms of the Shenhua Health Share Option Scheme provide that in granting options under the Shenhua Health Share Option Scheme, the Shenhua Health Board can determine whether there is any minimum holding period, and whether there is any performance target which must be achieved, before an option granted under the Shenhua Health Share Option Scheme can be exercised. The Shenhua Health Board will also determine the exercise price per share payable on the exercise of an option according to the terms of the Shenhua Health Share Option Scheme subject to the GEM Listing Rules. With such conditions, together with the incentive that the option will bring about, the Shenhua Health Board would be able to ensure a specified level of standard, which the Shenhua Health Board believes will serve the purpose of the Shenhua Health Share Option Scheme. Subject to the Shenhua Health Share Option Scheme becoming effective, the Shenhua Health Board intends to exercise its powers under the Shenhua Health Share Option Scheme during the Scheme Period with the objective of serving the purposes of the Shenhua Health Share Option Scheme as stated above.

The Board and the Shenhua Health Board consider that it is not appropriate to state the value of all options that can be granted under the Shenhua Health Share Option Scheme as if they had been granted on the Latest Practicable Date as a number of variables which are crucial for the calculation of the option value have not been determined. Such variables include the exercise price, exercise period, lock up period (if any), performance targets set (if any) and other relevant variables. The Board and the Shenhua Health Board believe that any calculation of the value of any option which might have been granted on the Latest Practicable Date would be based on a number of speculative assumptions and would therefore not be meaningful but would be misleading to the Shareholders.

The Shenhua Health Board or a duly constituted committee of the Shenhua Health Board will be responsible for administering the Shenhua Health Share Option Scheme. There are no trustees appointed for the purposes of the Shenhua Health Share Option Scheme.

The Shenhua Health Share Option Scheme will become effective on the Listing Date subject to (i) the Shareholders passing an ordinary resolution at the EGM to approve and adopt the Shenhua Health Share Option Scheme; (ii) the Listing Committee granting the Listing Approval; and (iii) the commencement of dealings in the Shenhua Health Shares on the GEM of the Stock Exchange.

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LETTER FROM THE BOARD

Pursuant to Note (1) to Rule 17.03(3) of the Listing Rules, the total number of securities which may be issued upon exercise of all options to be granted under a share option scheme and any other schemes must not in aggregate exceed 10% (the “ General Scheme Limit ”) of the relevant class of securities of the listed issuer (or the subsidiary) in issue as at the date of approval of the scheme, that is, the date of the EGM.

Taking into consideration the fact that (i) the Shenhua Health Share Option Scheme does not become effective until, among other things, the commencement of dealings in the Shenhua Health Shares on the Stock Exchange on the Listing Date and (ii) the significant increase in the number of Shenhua Health Shares expected to be in issue as at the Listing Date from the number of Shenhua Health Shares which will be in issue as at the date of the EGM (assuming no new Shenhua Health Shares will be issued from the Latest Practicable Date to the date of the EGM), it is impracticable to set the General Scheme Limit of the Shenhua Health Share Option Scheme by reference to the number of Shenhua Health Shares in issue as at the date of the EGM, as required by Note (1) to Rule 17.03(3) of the Listing Rules. The Company has therefore applied for a waiver from strict compliance with the requirement under Note (1) to Rule 17.03(3) of the Listing Rules so that the General Scheme Limit in respect of the Shenhua Health Share Option Scheme can be based on the total number of Shenhua Health Shares in issue at the time when dealings in the Shenhua Health Shares first commence on the Stock Exchange on the Listing Date. Therefore, subject to the Shenhua Health Share Option Scheme becoming effective and assuming no Shenhua Health Shares will be issued from the Latest Practicable Date to the Record Date, Shenhua Health may grant options under the Shenhua Health Share Option Scheme in respect of which up to 21,266,846 Shenhua Health Shares, being 10% of the Shenhua Health Shares in issue as at the Listing Date, may be issued (subject to further refreshments).

A copy of the rules of the Shenhua Health Share Option Scheme will be available for inspection at the principal place of business of the Company in Hong Kong at Suite 1102, 11th Floor, Chinachem Century Tower, 178 Gloucester Road, Wanchai, Hong Kong during normal business hours (i.e. 9:00 a.m. to 6:00 p.m.) on any business day from the date of this circular to and including the date of the EGM and will also be available for inspection at the EGM.

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LETTER FROM THE BOARD

5. EXTRAORDINARY GENERAL MEETING

Set out on pages 31 to 33 is a notice convening the EGM to be held at Park Lane Room VI, 27/F, The Park Lane Hong Kong, 310 Gloucester Road, Causeway Bay, Hong Kong on Thursday, 26 November 2015 at 9:30 a.m. at which ordinary resolutions will be proposed for the purpose of considering and, if thought fit, approving the Distribution and the proposed adoption of the Shenhua Health Share Option Scheme by Shenhua Health. None of the Shareholders is required to abstain from voting on any of the foregoing resolutions at the EGM.

Pursuant to Rule 13.39(4) of the Listing Rules, any vote of shareholders at a general meeting must be taken by poll. Therefore, all the resolutions put to the vote at the EGM will be taken by way of poll and the Company will announce the results of the poll in the manner prescribed under Rule 13.39(5) of the Listing Rules.

A form of proxy for use at the EGM is enclosed. Whether or not you are able to attend the EGM, you are requested to complete and return the form of proxy to the Company’s branch share registrar in Hong Kong, Tricor Investor Services Limited, at Level 22, Hopewell Centre, 183 Queen’s Road East, Hong Kong as soon as possible and in any event not less than 48 hours before the time appointed for holding of the EGM or any adjournment thereof. Completion and return of the form of proxy will not preclude you from attending and voting in person at the EGM or any adjourned meeting should you so wish.

6. RECOMMENDATION

The Board considers that the approval of the Distribution and the Shenhua Health Share Option Scheme are in the best interests of the Company and the Shareholders as a whole. Accordingly, the Board recommends all Shareholders to vote in favour of the relevant resolutions to be proposed at the EGM.

7. RESPONSIBILITY STATEMENT

This circular, for which the Directors collectively and individually accept full responsibility, includes particulars given in compliance with the Listing Rules for the purpose of giving information with regard to the Company. The Directors, having made all reasonable enquiries, confirm that to the best of their knowledge and belief the information contained in this circular is accurate and complete in all material respects and not misleading or deceptive, and there are no other matters the omission of which would make any statement herein or this document misleading.

Yours faithfully, On behalf of the Board Fufeng Group Limited Li Xuechun Chairman

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APPENDIX

SUMMARY OF THE PRINCIPAL TERMS OF THE RULES OF THE SHENHUA HEALTH SHARE OPTION SCHEME

The following is a summary of the principal terms of the Shenhua Health Share Option Scheme, which is proposed to be approved and adopted at the EGM. The terms of the Shenhua Health Share Option Scheme comply with the provisions of Chapter 23 of the GEM Listing Rules.

1. PURPOSE OF THE SHENHUA HEALTH SHARE OPTION SCHEME

The purpose of the Shenhua Health Share Option Scheme is to enable Shenhua Health to grant Options to selected Eligible Persons as incentives or rewards for their contribution or potential contribution to the Shenhua Health Group.

2. WHO MAY JOIN AND BASIS OF ELIGIBILITY

Subject to the rules of the Shenhua Health Share Option Scheme and all applicable regulatory and legal requirements including, if applicable, any codes of conduct, the Shenhua Health Board may, at its absolute discretion and on such terms as it may think fit, grant Options to any Eligible Person to subscribe at a price calculated in accordance with paragraph 3 below for such number of Shenhua Health Shares as it may determine in accordance with the terms of the Shenhua Health Share Option Scheme.

The basis of eligibility of any of the Eligible Persons to the grant of Options shall be determined by the Shenhua Health Board from time to time on the basis of his contribution or potential contribution to the development and growth of the Shenhua Health Group.

3. EXERCISE PRICE FOR SUBSCRIPTION OF SHARES

The exercise price per Shenhua Health Share payable on the exercise of an Option is to be determined by the Shenhua Health Board provided always that it shall be at least the higher of:

(i) the closing price of the Shenhua Health Shares as stated in the daily quotations sheet issued by the Stock Exchange on the Date of Grant; and
(ii) the average closing price of the Shenhua Health Shares as stated in the daily quotations sheets issued by the Stock Exchange for the five business days immediately preceding the Date of Grant,

(as subsequently adjusted pursuant to the terms of the Shenhua Health Share Option Scheme, if relevant), provided that the exercise price per Shenhua Health Share shall in no event be less than the nominal amount of one Shenhua Health Share.

4. PAYMENT ON GRANT OF OPTION

A grantee is not required to pay for the grant of any Option.

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APPENDIX

SUMMARY OF THE PRINCIPAL TERMS OF THE RULES OF THE SHENHUA HEALTH SHARE OPTION SCHEME

5. MAXIMUM NUMBER OF ORDINARY SHARES

(a) Subject to sub-paragraphs (b) and (c) below, the maximum number of Shenhua Health Shares issuable upon exercise of all options to be granted under the Shenhua Health Share Option Scheme and any other share option schemes of Shenhua Health as from the commencement of the Scheme Period (excluding, for this purpose, options which have lapsed in accordance with the terms of the Shenhua Health Share Option Scheme or any other share option schemes of Shenhua Health) must not in aggregate exceed 10% of the Shenhua Health Shares in issue as at the Listing Date (the “ Scheme Mandate ”). The Shenhua Health Shares underlying any options granted under the Shenhua Health Share Option Scheme or any other share option schemes of Shenhua Health which have been canceled (but not options which have lapsed in accordance with the terms of the Shenhua Health Share Option Scheme or (as the case may be) any other share option schemes of Shenhua Health) will be counted for the purpose of the Scheme Mandate.
(b) The Scheme Mandate may be refreshed at any time by obtaining approval of the Shenhua Health Shareholders at general meeting provided that the new limit under the refreshed Scheme Mandate must not exceed 10% of the Shenhua Health Shares in issue at the date of the Shenhua Health Shareholders’ approval of such refreshed Scheme Mandate (or any other limit(s) provided in the GEM Listing Rules). Options previously granted under the Shenhua Health Share Option Scheme or any other share option schemes of Shenhua Health (including those exercised, outstanding, canceled or lapsed in accordance with the terms of the Shenhua Health Share Option Scheme or any other share option schemes of Shenhua Health) will not be counted for the purpose of calculating the total number of Shenhua Health Shares subject to the refreshed Scheme Mandate.
(c) Shenhua Health may also, by obtaining separate approval of the Shenhua Health Shareholders at general meeting, grant options to subscribe for Shares (whether under the Shenhua Health Share Option Scheme or otherwise) beyond the Scheme Mandate provided the options in excess of the Scheme Mandate are granted only to Eligible Persons specifically identified by Shenhua Health before such approval is sought.
(d) The aggregate number of Shenhua Health Shares which may be issued upon exercise of all outstanding options granted and yet to be exercised under the Shenhua Health Share Option Scheme and any other share option schemes of Shenhua Health must not exceed 30% of the Shenhua Health Shares in issue from time to time (or any other limit(s) provided in the Listing Rules).

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APPENDIX

SUMMARY OF THE PRINCIPAL TERMS OF THE RULES OF THE SHENHUA HEALTH SHARE OPTION SCHEME

6. MAXIMUM ENTITLEMENT OF EACH ELIGIBLE PERSON

The maximum number of Shenhua Health Shares issued and to be issued upon exercise of options granted under the Shenhua Health Share Option Scheme and any other share option schemes of Shenhua Health to any Eligible Person (including canceled, exercised and outstanding options), in any 12-month period up to the Date of Grant shall not exceed 1% of the Shenhua Health Shares in issue. Any further grant of options in excess of such limit must be separately approved by the Shenhua Health Shareholders with such Eligible Person and his close associates (or his associates if that Eligible Person is a connected person) abstaining from voting.

7. GRANT OF OPTIONS TO CERTAIN CONNECTED PERSONS

(a) Any grant of an Option to a director, chief executive or substantial shareholder of Shenhua Health (or any of their respective associates) must be approved by the independent non-executive directors of Shenhua Health (excluding any independent non-executive director of Shenhua Health who is the grantee of the Option).
(b) Where any grant of Options to a substantial shareholder of Shenhua Health or an independent non-executive director of Shenhua Health (or any of their respective associates) will result in the total number of Shenhua Health Shares issued and to be issued upon exercise of options already granted and to be granted to such person under the Shenhua Health Share Option Scheme and any other share option schemes of Shenhua Health (including options exercised, canceled and outstanding) in any 12-month period up to and including the Date of Grant to:
(i) represent in aggregate over 0.1% of the Shenhua Health Shares in issue; and
(ii) have an aggregate value, based on the closing price of the Shenhua Health Shares at each Date of Grant, in excess of HK$5 million

(or any other limit(s) provided in the GEM Listing Rules), such further grant of Options is required to be approved by the Shenhua Health Shareholders at a general meeting of Shenhua Health. The grantee of the Option, his associates and all core connected persons of Shenhua Health shall abstain from voting at such general meeting. Any change in the terms of an Option granted to a substantial shareholder of Shenhua Health or an independent non-executive director of Shenhua Health or any of their respective associates is also required to be approved by the Shenhua Health Shareholders in the aforesaid manner.

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APPENDIX

SUMMARY OF THE PRINCIPAL TERMS OF THE RULES OF THE SHENHUA HEALTH SHARE OPTION SCHEME

8. TIME OF EXERCISE OF OPTION

An Option may be exercised in accordance with the terms of the Shenhua Health Share Option Scheme at any time during a period commencing on such date on or after the Date of Grant as the Shenhua Health Board may determine in granting the Option and expiring at the close of business on such date as the Shenhua Health Board may determine in granting the Option but in any event shall not exceed 10 years from the Date of Grant.

9. PERFORMANCE TARGETS

Save as determined by the Shenhua Health Board and provided in the offer of the grant of the relevant Option, there is no performance target which must be achieved before any of the Options can be exercised.

10. RANKING OF SHARES

If under the terms of a resolution passed or an announcement made by Shenhua Health prior to the date of exercise of an Option, a dividend is to be or is proposed to be paid, or Shenhua Health Shares are to be issued or proposed to be issued by way of the capitalization of profits or reserves or by way of rights under an offer made pro rata, to the Shenhua Health Shareholders on the register of members of Shenhua Health on a date prior to such date of exercise, the Shenhua Health Shares to be issued upon such exercise will not rank for such dividend or such Shenhua Health Shares. Subject as aforesaid, the Shenhua Health Shares allotted upon the exercise of an outstanding Option will be subject to all the provisions of the memorandum and articles of association of Shenhua Health for the time being in force and will rank pari passu in all respects with the Shenhua Health Shares in issue on the date of such exercise. Shenhua Health Shares allotted upon the exercise of an Option for the time being outstanding shall not carry voting rights until completion of the registration of the Option holder (or any other person) as the holder thereof.

11. RIGHTS ARE PERSONAL TO GRANTEE

Except in relation to the transmission of an Option to the personal representatives of a grantee following the death of the grantee, an Option shall not be transferable or assignable and shall be personal to the grantee of the Option.

12. RIGHTS OF EXERCISE FOR GRANTEES

If a grantee of an Option who at the time of grant of an Option to him qualified as an Eligible Person under any of the criteria set out in the definition of “Eligible Person” ceases to be qualified under such criterion, the Shenhua Health Board in its absolute discretion may decide that such Option or any part thereof shall not so lapse or determine subject to such conditions or limitations as it may decide (including in the case where when he so ceases he still qualifies as an Eligible Person because he falls within another criterion set out in the definition of “Eligible Person”).

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APPENDIX

SUMMARY OF THE PRINCIPAL TERMS OF THE RULES OF THE SHENHUA HEALTH SHARE OPTION SCHEME

13. RIGHTS ON EXERCISE FOR GRANTEES WHICH WERE COMPANIES CONTROLLED BY ANY OF THE ELIGIBLE PERSONS

In respect of any Option granted to a company which qualified as an Eligible Person because it was a company controlled by a person who was an Eligible Person (“ Such Person ”):

(a) the relevant provisions set out in paragraph 12 would apply to its outstanding Option mutatis mutandis as if the option had been granted to Such Person; and
(b) its outstanding Option shall lapse on the date it ceases to be a company controlled by Such Person,

provided always that in each case the Shenhua Health Board in its absolute discretion may decide that such Option or any part thereof shall not so lapse or determine subject to such conditions or limitations as it may decide.

14. FAILURE TO MEET CONTINUING ELIGIBILITY CRITERIA

If the Shenhua Health Board in the grant of the relevant Option has specified that the grantee has to meet certain continuing eligibility criteria and that the failure of the grantee to meet any such continuing eligibility criterion would entitle Shenhua Health to cancel the Option then outstanding (or part thereof), then upon the failure of the grantee to meet any such continuing eligibility criterion, his outstanding Option shall lapse and determine on the date the Shenhua Health Board exercises Shenhua Health’s right to cancel the Option on the ground of such failure.

15. RIGHTS ON A GENERAL OFFER

If a general offer by way of takeover is made to all the Shenhua Health Shareholders other than the offeror and/or any person controlled by the offeror and/or any person acting in association or connection with the offeror, the grantee of an Option shall, subject to paragraph 8 above, be entitled to exercise at any time within a period of fourteen days after such control has been obtained by the offeror any Option in whole or in part to the extent not already exercised (and notwithstanding any restrictions which would otherwise have prevented such Option from being exercisable at that time). For the avoidance of doubt, an Option not so exercised shall remain valid in accordance with its terms and subject to such restrictions as applied to it before the general offer.

16. RIGHTS ON WINDING-UP

If notice is given by Shenhua Health to the Shenhua Health Shareholders of an extraordinary general meeting at which a resolution will be proposed for the voluntary winding-up of Shenhua Health, Shenhua Health shall forthwith give notice to all grantees of Options and each grantee shall be entitled, at any time no later than two business days

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APPENDIX

SUMMARY OF THE PRINCIPAL TERMS OF THE RULES OF THE SHENHUA HEALTH SHARE OPTION SCHEME

prior to the proposed meeting, to exercise any of his outstanding Options in whole or in part to the extent not already exercised (and notwithstanding any restrictions which would otherwise have prevented such Option from being exercisable at that time). If such resolution is duly passed, all Options shall, to the extent that they have not been exercised, thereupon lapse and determine on the commencement of the winding-up.

17. RIGHTS ON COMPROMISE OR ARRANGEMENT

In the event of a compromise or arrangement between Shenhua Health and the Shenhua Health Shareholders or Shenhua Health’s creditors being proposed in connection with a scheme for the reconstruction or amalgamation of Shenhua Health pursuant to the Companies Law, notice of the relevant meeting shall be given to the grantees of Options on the same day notice is given to the Shenhua Health Shareholders and Shenhua Health’s creditors, and thereupon each grantee (or where permitted his personal representative(s)) may forthwith and until the expiry of the period commencing with such date and ending with the earlier of the date falling two calendar months thereafter and the date on which such compromise or arrangement is sanctioned by the Grand Court of Cayman Islands be entitled to exercise his Option, but such exercise of an Option shall be conditional upon such compromise or arrangement being sanctioned by the Grand Court of Cayman Islands and becoming effective. Failing such exercise, all Options will lapse.

18. LAPSE OF OPTIONS

An Option shall lapse automatically and not be exercisable (to the extent not already exercised) on the earliest of:

(a) the expiry of the period referred to in paragraph 8 above;
(b) the date on which the grantee commits a breach of paragraph 11 above, if the Shenhua Health Board shall exercise Shenhua Health’s right to cancel the Option;
(c) the expiry of the relevant period or the occurrence of the relevant event referred to in paragraphs 12, 13 or 14 above; and
(d) the expiry of any of the relevant periods referred to in paragraphs 15, 16 or 17 above.

19. CANCELLATION OF OPTIONS GRANTED BUT NOT YET EXERCISED

Following the cancellation of any Options granted under the Shenhua Health Share Option Scheme but not exercised, new Options may only be granted to the same grantee under the Shenhua Health Share Option Scheme with available unissued Options (excluding the canceled Options) within the limit of the Scheme Mandate then available to the Shenhua Health Board.

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APPENDIX

SUMMARY OF THE PRINCIPAL TERMS OF THE RULES OF THE SHENHUA HEALTH SHARE OPTION SCHEME

20. EFFECTS OF ALTERATIONS TO CAPITAL

In the event of any variation in the issued share capital of Shenhua Health arising from any issue of shares in or other securities of Shenhua Health by way of capitalization issue, rights issue, sub-division or consolidation of Shenhua Health Shares or reduction of capital, the number of Shenhua Health Shares comprised in each Option for the time being outstanding and/or the exercise price of each Option thereunder may be adjusted such that the grantee shall have the same proportion of the equity capital of Shenhua Health to which he was entitled before such adjustments, and that no such adjustments shall be made the effect of which would be to enable a Shenhua Health Share to be issued at less than its nominal value. In respect of any such adjustments, other than any made on a capitalisation issue, an independent financial adviser or the auditors of Shenhua Health must confirm to the directors of Shenhua Health in writing that the adjustments satisfy the aforesaid requirements. The issue of Shenhua Health Shares as consideration in a transaction will not be regarded as a circumstance requiring adjustment.

21. PERIOD OF THE SHENHUA HEALTH SHARE OPTION SCHEME

The Shenhua Health Share Option Scheme will remain in force for a period of 10 years commencing on the Listing Date and shall expire at the close of business on the day preceding the tenth anniversary thereof unless terminated earlier by the Shenhua Health Shareholders in general meeting.

22. ALTERATION TO THE SHENHUA HEALTH SHARE OPTION SCHEME

(a) No amendment shall be made to the terms and conditions of the Shenhua Health Share Option Scheme which alters to the advantage of the grantees of the Options relating to matters governed by Chapter 23 of the GEM Listing Rules except with the prior approval of the Shenhua Health Shareholders in general meeting.
(b) Any amendment to any terms of the Shenhua Health Share Option Scheme which are of a material nature or any change to the Options granted must be approved by the Shenhua Health Shareholders in general meeting except where the alterations take effect automatically under the existing terms of the Shenhua Health Share Option Scheme.
(c) Any change to the authority of the Shenhua Health Board in relation to any alteration to the terms of the Shenhua Health Share Option Scheme must be approved by the Shenhua Health Shareholders in general meeting.
(d) Any amendment to any terms of the Shenhua Health Share Option Scheme or the Options granted shall comply with the relevant requirements of Chapter 23 of the GEM Listing Rules.

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APPENDIX

SUMMARY OF THE PRINCIPAL TERMS OF THE RULES OF THE SHENHUA HEALTH SHARE OPTION SCHEME

23. RESTRICTIONS ON THE TIME OF GRANT OF OPTION

A grant of Options may not be made at any time when Shenhua Health is prohibited from doing so under any provisions of the GEM Listing Rules.

24. TERMINATION OF THE SHENHUA HEALTH SHARE OPTION SCHEME

Shenhua Health may terminate the Shenhua Health Share Option Scheme at any time following which no further Options will be granted but in all other respects the rules of the Shenhua Health Share Option Scheme shall continue in full force and effect in respect of such Options as may have been granted under the Shenhua Health Share Option Scheme prior to such termination. Any Options granted prior to such termination, including Options exercised or outstanding under the Shenhua Health Share Option Scheme, shall continue to be valid and exercisable in accordance with the rules of the Shenhua Health Share Option Scheme.

25. RELATIONSHIP WITH EMPLOYMENT

Nothing in the rules or the operation of the Shenhua Health Share Option Scheme forms part of the contract of employment of an employee of a member of the Shenhua Health Group. The rights and obligations arising from the employment relationship between the employee of a member of the Shenhua Health Group and his employer are separate from, and are not affected by, the Shenhua Health Share Option Scheme and do not give rise to any entitlement to selection of the employee by the Shenhua Health Board for the grant of any Option. Participation in the Shenhua Health Share Option Scheme does not create any right to, or expectation of, continued employment. Participation in the Shenhua Health Share Option Scheme or the grant of Options on a particular basis in any year does not create any right to or expectation of participation in the Shenhua Health Share Option Scheme or the grant of Options on the same basis, or at all, in any future year.

The employee of a member of the Shenhua Health Group will have no claim or right of action in respect of any decision, omission or discretion which may operate to the disadvantage of the employee of a member of the Shenhua Health Group even if it is unreasonable, irrational or might otherwise be regarded as being in breach of the duty of trust and confidence (and/or any other implied duty) between the employee of a member of the Shenhua Health Group and his employer.

No employee of a member of the Shenhua Health Group has any right to compensation for any loss in relation to the Shenhua Health Share Option Scheme, including any loss in relation to:

(a) any loss or reduction of rights or expectations under the Shenhua Health Share Option Scheme in any circumstances (including lawful or unlawful termination of employment);

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APPENDIX

SUMMARY OF THE PRINCIPAL TERMS OF THE RULES OF THE SHENHUA HEALTH SHARE OPTION SCHEME

(b) any exercise of a discretion or a decision taken in relation to an Option or to the Shenhua Health Share Option Scheme, or any failure to exercise a discretion or take a decision; or
(c) the operation, suspension, termination or amendment of the Shenhua Health Share Option Scheme.

26. DATA PROTECTION

By participating in the Shenhua Health Share Option Scheme, the grantee of the Option consents to the holding and processing of personal data provided by the grantee to any member of the Shenhua Health Group, trustee or third party service provider for all purposes relating to the operation of the Shenhua Health Share Option Scheme. These include, but are not limited to:

(a) administering and maintaining grantee records;
(b) providing information to members of the Shenhua Health Group, trustees of any employee benefit trust, registrars, brokers or third party administrators of the Shenhua Health Share Option Scheme;
(c) providing information to future purchasers of Shenhua Health or the business in which the grantee works; and
(d) transferring information about the grantee to any country or territory even though it may not provide the same statutory protection for the information as the grantee’s home country.

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NOTICE OF EXTRAORDINARY GENERAL MEETING

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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)

NOTICE is hereby given that an extraordinary general meeting of Fufeng Group Limited (the “ Company ”) will be held at Park Lane Room VI, 27/F, The Park Lane Hong Kong, 310 Gloucester Road, Causeway Bay, Hong Kong on Thursday, 26 November 2015 at 9:30 a.m. to consider and, if thought fit, pass the following ordinary resolutions (with or without modification):

ORDINARY RESOLUTIONS

“ THAT , in connection with the proposed spin-off and listing of Shenhua Health Holdings Limited (“ Shenhua Health ”) (the “ Listing ”) on the Growth Enterprise Market (“ GEM ”) of The Stock Exchange of Hong Kong Limited (the “ Stock Exchange ”) and subject to and conditional upon (i) the approval by the Listing Committee of the Stock Exchange for the listing of, and permission to deal in, the ordinary shares of Shenhua Health (the “ Shenhua Health Shares ”) in issue and any Shenhua Health Shares which may be issued pursuant to the exercise of options which may be granted under the share option scheme of Shenhua Health (the “ Shenhua Health Share Option Scheme ”) on the GEM of the Stock Exchange (the “ Listing Approval ”) and (ii) the final decisions of the board of directors of the Company and the board of directors of Shenhua Health:
(a) a special dividend (the “ Special Dividend ”) recommended by the Board in accordance with the articles of association of the Company on the shares of the Company in the aggregate amount in United States dollars which is equal to the carrying value of the net assets of Shenhua Health and its subsidiaries (after the reorganisation in preparation for the Listing) (the “ Shenhua Health Group ”) as at the date when the declaration of a special dividend by the Company to the shareholders of the Company (the “ Shareholders ”) whose names appear on the register of members of the Company on the record date to be determined by the Board (the “ Record Date ”) is approved by Shareholders, in proportion to their respective holdings of the shares of the Company held on the Record Date, be and is hereby declared and paid out of the share premium account of the Company;

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NOTICE OF EXTRAORDINARY GENERAL MEETING

(b) the Special Dividend be satisfied by way of distribution of all the Shenhua Health Shares held by the Company to the Shareholders on the Record Date (the “ Distribution ”) except those whose address(es) appear(s) on the register of members of the Company on the Record Date are in jurisdictions outside Hong Kong and whom the Directors, based on enquiries made with its lawyers, consider it necessary or expedient not to offer the Shenhua Health Shares to them under the Distribution (the “ Excluded Overseas Shareholders ”), in which case the Excluded Overseas Shareholders shall 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 the Listing provided that only the proceeds of such sale, net of expenses, of more than HK$100.0 will be paid to the relevant Excluded Overseas Shareholders in Hong Kong dollars and the Company will retain individual amounts of HK$100.0 or less for its own benefit; and
(c) the Board be and is hereby authorised to do all such acts and to enter into all such transactions, arrangements and agreements as may be necessary or expedient to implement and administer the Distribution.”
“ THAT the adoption of the rules of the Shenhua Health Share Option Scheme (a copy of which has been produced to the meeting and marked “A” and for the purposes of identification signed by the Chairman thereof), subject to the Listing Approval being obtained, be and is hereby approved with such amendment(s) to the rules of the Shenhua Health Share Option Scheme as the Board may in its absolute discretion considers to be appropriate, necessary or desirable to give effect to any requirements or requests of the Stock Exchange or the Rules Governing the Listing of Securities on the GEM of the Stock Exchange and the Board be and is hereby authorised to enter into all such transactions and arrangements as may be necessary or expedient in order to give effect to the Shenhua Health Share Option Scheme.”

On behalf of the Board Fufeng Group Limited Li Xuechun Chairman

Hong Kong, 11 November 2015

Notes:

Any member of the Company entitled to attend and vote at the extraordinary general meeting convened by the above notice is entitled to appoint one or, if he holds two or more Shares, more proxies to attend and vote on his behalf. A proxy need not be a member of the Company.

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NOTICE OF EXTRAORDINARY GENERAL MEETING

To be valid, a form of proxy and the power of attorney or other authority, if any, under which it is signed or a notarially certified copy of such power or authority must be deposited at the Company’s branch share registrar in Hong Kong, Tricor Investor Services Limited, at Level 22, Hopewell Centre, 183 Queen’s Road East, Hong Kong not less than 48 hours before the time appointed for the holding of the extraordinary general meeting or any adjournment thereof. Completion and return of the form of proxy will not preclude a member from attending and voting in person.
If two or more persons are joint holders of a Share, the vote of the senior who tenders a vote, whether in person or by proxy, will be accepted to the exclusion of the other joint holder(s). For this purpose, seniority shall be determined by the order in which the names stand in the principal or branch register of members of the Company in respect of the joint holding.

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AI assistant

Fufeng Group Limited — Proxy Solicitation & Information Statement 2015

49286_rns_2015-11-10_c179efca-fb58-43a3-9351-d56558510238.pdf

Fufeng Group Limited 阜豐集團有限公司 (incorporated in the Cayman Islands with limited liability)

(1) PROPOSED CONDITIONAL SPECIAL DIVIDEND BY WAY OF DISTRIBUTION IN SPECIE (2) PROPOSED ADOPTION OF THE SHENHUA HEALTH SHARE OPTION SCHEME AND (3) NOTICE OF EXTRAORDINARY GENERAL MEETING

DEFINITIONS

DEFINITIONS

Fufeng Group Limited 阜豐集團有限公司

(Stock Code: 546)

(1) PROPOSED CONDITIONAL SPECIAL INTERIM DIVIDEND BY WAY OF DISTRIBUTION IN SPECIE (2) PROPOSED ADOPTION OF THE SHENHUA HEALTH SHARE OPTION SCHEME AND

(3) NOTICE OF EXTRAORDINARY GENERAL MEETING

1. INTRODUCTION

2. BACKGROUND

Information about the proposed spin-off

Selected items of Combined Statements of Comprehensive Income

Summary Combined Balance Sheets

Reasons for and benefits of the proposed spin-off and listing

3. THE DISTRIBUTION

4. ADOPTION OF THE SHENHUA HEALTH SHARE OPTION SCHEME

5. EXTRAORDINARY GENERAL MEETING

6. RECOMMENDATION

7. RESPONSIBILITY STATEMENT

1. PURPOSE OF THE SHENHUA HEALTH SHARE OPTION SCHEME

2. WHO MAY JOIN AND BASIS OF ELIGIBILITY

3. EXERCISE PRICE FOR SUBSCRIPTION OF SHARES

4. PAYMENT ON GRANT OF OPTION

5. MAXIMUM NUMBER OF ORDINARY SHARES

6. MAXIMUM ENTITLEMENT OF EACH ELIGIBLE PERSON

7. GRANT OF OPTIONS TO CERTAIN CONNECTED PERSONS

8. TIME OF EXERCISE OF OPTION

9. PERFORMANCE TARGETS

10. RANKING OF SHARES

11. RIGHTS ARE PERSONAL TO GRANTEE

12. RIGHTS OF EXERCISE FOR GRANTEES

13. RIGHTS ON EXERCISE FOR GRANTEES WHICH WERE COMPANIES CONTROLLED BY ANY OF THE ELIGIBLE PERSONS

14. FAILURE TO MEET CONTINUING ELIGIBILITY CRITERIA

15. RIGHTS ON A GENERAL OFFER

16. RIGHTS ON WINDING-UP

17. RIGHTS ON COMPROMISE OR ARRANGEMENT

18. LAPSE OF OPTIONS

19. CANCELLATION OF OPTIONS GRANTED BUT NOT YET EXERCISED

20. EFFECTS OF ALTERATIONS TO CAPITAL

21. PERIOD OF THE SHENHUA HEALTH SHARE OPTION SCHEME

22. ALTERATION TO THE SHENHUA HEALTH SHARE OPTION SCHEME

23. RESTRICTIONS ON THE TIME OF GRANT OF OPTION

24. TERMINATION OF THE SHENHUA HEALTH SHARE OPTION SCHEME

25. RELATIONSHIP WITH EMPLOYMENT

26. DATA PROTECTION

Fufeng Group Limited 阜豐集團有限公司

(Stock Code: 546)

ORDINARY RESOLUTIONS

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Fufeng Group Limited Proxy Solicitation & Information Statement 2015