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.

CHINA QINFA GROUP LIMITED

(Incorporated in the Cayman Islands with limited liability)

(Stock code: 00866) DISCLOSEABLE TRANSACTION RELATING TO THE DISPOSAL OF A SUBSIDIARY

On 16 December 2014 (after trading hours), the Vendor, a wholly-owned subsidiary of the Company, entered into the Sale and Purchase Agreement with the Purchaser, under which the Vendor sold and the Purchaser acquired the 87.88% of the equity interest of the Target Company at a total consideration of RMB80,000,000 (equivalent to approximately HK$101,407,000).
As one or more of the applicable percentage ratios in respect of the Disposal is more than 5% but less than 25%, the Disposal constitutes a discloseable transaction for the Company and is subject to reporting and announcement requirements but exempt from Shareholders' approval requirement under Chapter 14 of the Listing Rules.

INTRODUCTION

On 16 December 2014 (after trading hours), the Vendor, a wholly-owned subsidiary of the Company, entered into the Sale and Purchase Agreement with the Purchaser, under which the Vendor sold and the Purchaser acquired the 87.88% of the equity interest of the Target Company at a total consideration of RMB80,000,000 (equivalent to approximately HK$101,407,000).

SALE AND PURCHASE AGREEMENT

A summary of the principal terms of the Sale and Purchase Agreement are set out below:-

Date:

16 December 2014 (after trading hours)

Parties:

(1) Vendor: Datong Xiejiazhuang Jinfa Trading and Transportation Co., Ltd.* (2) Purchaser: Shanxi Heng Sheng Yong Xing Gong Mao Co., Ltd.*
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Assets to be disposed of:

87.88% of the equity interest of the Target Company.

Consideration:

RMB80,000,000 (equivalent to approximately HK$101,407,000) which shall be settled in cash by the Purchaser at Completion. The consideration was determined after arm's length negotiations with reference to the carrying value of the major assets of the Target Company from the unaudited consolidated management accounts of the Target Company as of 30 September 2014 and the market condition. Since the domestic coal market has been hit by decelerated growth in economy in recent years and the demand continues to be weak, there is a prominent imbalance of supply and demand and a continuous decline in coal price. Based on the market conditions and the reasons for the disposal as discussed below, the Directors are of the view that the consideration maximises the shareholders' benefit and is fair and reasonable.

Conditions precedent:

The Sale and Purchase Agreement is not subject to any condition.

Completion:

Completion of the Disposal will take place after the Purchaser has arranged payment of Consideration to the Vendor, which shall be made within 10 days upon signing of the Agreement, and the Purchaser has obtained the capital contribution certificate.
Immediately after Completion, the Company will cease to hold any interest in the Target Company.

INFORMATION ON THE GROUP, THE VENDOR AND THE TARGET COMPANY

The Group is principally engaged in coal mining, purchase and sales, filtering, storage, blending of coal, shipping transportation and port business.
The Vendor is a company incorporated in the PRC with limited liability whose principal business is sales of coal. It is a wholly-owned subsidiary of the Company.
The Target Company was established on 20 December 2007 with a registered capital of RMB17,000,000 under the laws of the PRC. As at the date of this announcement, the Group owns 87.88% of the equity interest of the Target Company. The Target Company is the owner and operator of a coal mine in Hun Yuan County, Datong City, Shanxi Province, the PRC. Principal business of the Target Company is coal mining.
As at the date of this announcement, the other shareholder of the Target Company, namely Llì1lif

!lal'iJli:i/i'Y1fllR0"1 (Shanxi Ruifeng Medicine Manufacturing Group Co., Ltd.*) owns 12.12% of

the equity interests of the Target Company, has already signed a confirmation letter renouncing its
right of first refusal as a shareholder to acquire the 87.88% equity interest of the Target Company from the Vendor.
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INFORMATION ON THE PURCHASER

The Company understands that the Purchaser is a company incorporated in the PRC with limited liability whose principal business includes sales of mining and electrical equipment.
To the best of the Directors' knowledge, information and belief having made all reasonable enquiries, the Purchaser and its ultimate beneficial owners are third parties independent of the Company and its connected persons (as defined in the Listing Rules).

FINANCIAL INFORMATION OF THE TARGET COMPANY

As at 31 December 2013, the audited net book value of the Target Company excluding inter- company receivables and payables with members of the Group was net assets of approximately RMB159,791,000.
The following is the financial information of the Target Company for the nine months ended
30 September 2014 and the years ended 31 December 2013 and 31 December 2012:-
Year ended Year ended

Nine months ended

31 December
2012
31 December
2013

30 September 2014

(RMB'000) (RMB'000) (RMB'000)

(audited) (audited) (unaudited)
Turnover 399,360 343,820 31,617
Profit before taxation 205,148 324,547 94,373
Net profit after taxation 154,336 243,276 71,326

REASONS FOR AND BENEFITS OF THE DISPOSAL

As disclosed in the 2010 annual report of the Company, the Target Company is applying to the relevant government authority for the change of coal extraction method from underground to open- pit mining. Up to the date of the Disposal, relevant licenses were not granted by the government authority. Simultaneously, business registration certificate and tax registration certificate of the Target Company cannot be renewed during the application period. Since application of relevant licenses for open-pit mining may take an extended amount of time and effort, delay in full scale production was expected.
Upon the Purchaser entered into the Sales and Purchase Agreement, the Purchaser agreed to take over the Target Company's assets and liabilities, including any contingent liabilities, since the date of Completion.
The Directors consider that the Disposal provides an opportunity to reallocate the Group's resources from lengthy licenses application process in the Target Company and to take away the uncertainty of the regulatory requirements in applying relevant licenses from the Group. It is expected that the overall cashflow and liquidity position of the Group will also improve upon completion of the Disposal.
The Directors believe that the terms of the Sale and Purchase Agreement are fair and reasonable and in the interests of the Shareholders as a whole.
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FINANCIAL EFFECT OF THE DISPOSAL

Upon the Disposal, the Group will not hold any equity interests in the Target Company which will cease to be a subsidiary of the Company.
It is expected that the Group will make a loss of approximately RMB170,880,000 as a result of the Disposal, which is arrived after taking into consideration the difference between (i) the consideration of the sale of 87.88% equity interest of the Target Company at RMB80,000,000 and (ii) the unaudited net asset value of the Target Company attributable to the Group as at 30
September 2014.

Shareholders should note that the above figures are for illustrative purpose only. The actual loss on the Disposal may be different from the above and will be determined based on the financial position of the Target Company on the date of completion of Disposal and subject to audit by the Group's auditors upon finalisation of the consolidated financial statements of the Group for the year ending 31 December 2014. LISTING RULES IMPLICATIONS

As one or more of the applicable percentage ratios in respect of the Disposal is more than 5% but less than 25%, the Disposal constitutes a discloseable transaction for the Company and is subject to reporting and announcement requirements but exempt from Shareholders' approval requirement under Chapter 14 of the Listing Rules.

DEFINITIONS

In this announcement, unless the context otherwise requires, the following expressions have the following meanings:
"Company" China Qinfa Group Limited, a company incorporated in the Cayman Islands with limited liability and whose shares are listed on the main board of The Stock Exchange of Hong Kong Limited (stock code: 866)
"Completion" completion of the Disposal pursuant to the terms of the Sale and
Purchase Agreement
"Directors" director(s) of the Company
"Disposal" the disposal of 87.88% of the equity interest of the Target Company by the Vendor to the Purchaser under the Sale and Purchase Agreement
"Group" the Company and its subsidiaries
"Hong Kong" the Hong Kong Special Administrative Region of the PRC "HK$" Hong Kong dollars, the lawful currency of Hong Kong
"Listing Rules" the Rules Governing the Listing of Securities on the Stock Exchange of
Hong Kong Limited
"PRC" the People's Republic of China
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"Purchaser" Llì1§.�J(Shanxi Heng Sheng Yong Xing Gong Mao Co., Ltd.*), a company incorporated in the PRC with limited liability
"RMB" Renminbi, the lawful currency of the PRC
"Sale and Purchase
Agreement"
sale and purchase agreement dated 16 December 2014 (after trading hours) entered into between the Vendor and the Purchaser in respect of the Disposal
"Shareholders" the holder(s) of the shares of the Company
"Target Company" Llì1!J�lif!lal�1fllRff0"1 (Shanxi Hun Yuan Ruifeng Coal Industry Co., Ltd.*) incorporated in the PRC with limited liability whose principal business is coal mining
"Vendor" ::k!PW�:li�J�ì!1fllR0"1 (Datong Xiejiazhuang Jinfa Trading and Transportation Co., Ltd.*), a company incorporated in the PRC with limited liability whose principal business is sales of coal and which owns 87.88% of the equity interest of the Target Company
By Order of the Board of

China Qinfa Group Limited Mr. XU Jihua

Chairman

Hong Kong, 16 December 2014
As at the date of this announcement, the Board comprises:-

Executive Directors:

Mr. XU Jihua (Chairman)
Ms. WANG Jianfei
Mr. WENG Li
Mr. XU Da
Mr. MA Baofeng
Mr. BAI Tao

Independent Non-executive Directors:

Mr. HUANG Guosheng
Mr. LAU Sik Yuen
Mr. XING Zhiying

* for identification purposes only

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