Honghua Group Limited — AGM Information 2012

Apr 17, 2012

THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION

If you are in any doubt about this circular or as to the action to be taken, you should consult your stockbroker, bank manager, solicitor, professional accountant or other professional adviser.

If you have sold or transferred all your shares in Honghua Group Limited, you should at once hand this circular, together with the enclosed form of proxy, 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.

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.

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Honghua Group Limited 宏華集團有限公司

(a company incorporated in the Cayman Islands with limited liability)

(Stock Code: 196)

PROPOSED RE-ELECTION OF DIRECTORS AND GENERAL MANDATES TO REPURCHASE SHARES AND TO ISSUE NEW SHARES OF THE COMPANY

A notice convening the annual general meeting of Honghua Group Limited to be held at Gloucester Luk Kwok Hong Kong, 72 Gloucester Road, Wanchai, Hong Kong on Tuesday, 22 May 2012 at 9:30 a.m. is set out on pages 17 to 19 of this circular. A form of proxy for use at the annual general meeting is also enclosed. Such form of proxy is also published on the website of The Stock Exchange of Hong Kong Limited (www.hkexnews.hk).

If you do not propose to attend the meeting, you are requested to complete the form of proxy in accordance with the instructions printed thereon and return the same to the Company’s Branch Share Registrar in Hong Kong, Computershare Hong Kong Investor Services Limited, at Shops 1712–1716, 17th Floor Hopewell Centre, 183 Queen’s Road East, Wanchai, Hong Kong as soon as possible and in any event not less than 48 hours before the time fi xed for the holding of the meeting or any adjournment thereof. Completion and return of the form of proxy will not preclude shareholders from attending and voting in person at the meeting should they so wish.

17 April 2012

CONTENTS

Page

Def nitions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	1
Letter from the Board
1. Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	3
2. Re-election of Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	4
3. Buyback and Issuance Mandates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	4
4. Annual General Meeting and Proxy Arrangement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	5
5. Recommendation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	5
6. General Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	5
Appendix I — Explanatory statement on the Buyback Mandate. . . . . . . . . . . . . . . . . . . . . . . .	6
Appendix II — Details of Directors proposed to be re-elected at the Annual General
Meeting. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	9
Notice of the Annual General Meeting. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	17

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DEFINITIONS

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

“Annual General Meeting” an annual general meeting of the Company to be held at Gloucester Luk Kwok Hong Kong, 72 Gloucester Road, Wanchai, Hong Kong on Tuesday, 22 May 2012 at 9:30 a.m. to consider and, if appropriate, to approve the resolutions contained in the notice of the meeting which is set out on pages 17 to 19 of this circular or any adjournment thereof;

“Board” the board of Directors; “Buyback Mandate” as defi ned in paragraph 3(a) of the Letter from the Board; “Company” Honghua Group Limited, a company incorporated in the Cayman Islands with limited liability, the Shares of which are listed on the Stock Exchange; “Current Articles of Association” the current articles of association of the Company; “Director(s)” director(s) of the Company; “Group” the Company and its subsidiaries;

“Hong Kong” The Hong Kong Special Administrative Region of the People’s Republic of China; “Issuance Mandate” as defi ned in paragraph 3(b) of the Letter from the Board;

• “Latest Practicable Date” 5 April 2012, being the latest practicable date prior to the printing of this circular for ascertaining certain information in this circular;

“Listing Rules” the Rules Governing the Listing of Securities on the Stock Exchange;

• “SFO” the Securities and Futures Ordinance, Chapter 571 of the Laws of Hong Kong;

• “Share(s)” ordinary share(s) of HK$0.1 each in the capital of the Company or if there has been a subsequent sub-division, consolidation, reclassifi cation or reconstruction of the share capital of the Company, shares forming part of the ordinary equity share capital of the Company;

“Shareholder(s)” holder(s) of Share(s); “Stock Exchange” The Stock Exchange of Hong Kong Limited;

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DEFINITIONS

“Takeovers Code” The Hong Kong Code on Takeovers and Mergers issued by the Securities and Future Commission in Hong Kong; “HK$” Hong Kong dollar, the lawful currency of Hong Kong

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LETTER FROM THE BOARD

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Honghua Group Limited 宏華集團有限公司

(a company incorporated in the Cayman Islands with limited liability)

(Stock Code: 196)

Executive Directors:

Mr. Zhang Mi (Chairman) Mr. Ren Jie Mr. Liu Zhi

Head Offi ce:

99 East Road, Information Park Jinniu District, Chengdu Sichuan 610036 People’s Republic of China

Non-executive Directors:

Mr. Siegfried Meissner Mr. Huang Dongyang

Independent Non-executive Directors:

Mr. Liu Xiaofeng Mr. Qi Daqing Mr. Tai Kwok Leung Alexander Mr. Chen Guoming Mr. Shi Xingquan

Principal Place of Business in Hong Kong: Room 2508, Harcourt House, 39 Gloucester Road Wan Chai, Hong Kong

Registered Offi ce: Clifton House, 75 Fort Street PO Box 1350, Grand Cayman KY1-1108, Cayman Islands

Mr. Guo Yanjun

17 April 2012

To Shareholders

Dear Sir/Madam,

PROPOSED RE-ELECTION OF DIRECTORS AND GENERAL MANDATES TO REPURCHASE SHARES AND TO ISSUE NEW SHARES OF THE COMPANY

1. INTRODUCTION

The purpose of this circular is to provide you with information in respect of, amongst others, the resolutions to be proposed at the Annual General Meeting for (i) the re-election of Directors retiring at the Annual General Meeting; (ii) the granting of the Buyback Mandate to the Directors; (iii) the granting of the Issuance Mandate to the Directors; and (iv) the extension of the Issuance Mandate by adding to it the aggregate number of the issued Shares repurchased by the Company under the Buyback Mandate.

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LETTER FROM THE BOARD

2. RE-ELECTION OF DIRECTORS

Pursuant to article 108(a) and (b) of the Current Articles of Association, at each annual general meeting, one-third of the Directors for the time being, or, if their number is not three or a multiple of three, then the number nearest to but not less than one-third, shall retire from offi ce by rotation provided that every Director (including those appointed for a specifi c term) shall be subject to retirement by rotation at least once every 3 years. A retiring Director shall be eligible for re-election. The Company at the general meeting at which a Director retires may fi ll the vacated offi ce.

The Directors to retire by rotation shall include (so far as necessary to obtain the number required) any Director who wishes to retire and not to offer himself for re-election. Any Director who has not been subject to retirement by rotation in the 3 years preceding the annual general meeting shall retire by rotation at such annual general meeting. Any further Directors so to retire shall be those who have been longest in offi ce since their last re-election or appointment and so that as between persons who became or were last reelected Directors on the same day those to retire shall (unless they otherwise agree among themselves) be determined by lot.

Pursuant to article 112 of the Current Articles of Association, the Board shall have power from time to time and at any time to appoint any person as a Director either to fi ll a casual vacancy or as an additional Director but so that the number of Directors so appointed shall not exceed the maximum number determined from time to time by the Shareholders in general meeting. Any Director so appointed shall hold offi ce only until the next general meeting of the Company and shall then be eligible for re-election at the meeting but shall not be taken into account in determining the Directors or the number of Directors who are to retire by rotation at such meeting.

Pursuant to articles 108(a), 108(b) and 112 of the Current Articles of Association, Mr. Ren Jie, Mr. Siegfried Meissner, Mr. Qi Daqing, Mr. Shi Xingquan and Mr. Guo Yanjun shall retire at the Annual General Meeting. All the retiring Directors, being eligible will offer themselves for re-election.

Brief biographical details of the retiring Directors are set out in Appendix II of this circular.

3. BUYBACK AND ISSUANCE MANDATES

Ordinary resolutions will be proposed at the Annual General Meeting to approve the grant of new general mandates to the Directors:

• (a) to purchase Shares on the Stock Exchange of an aggregate nominal amount of up to ten percent of the aggregate nominal amount of the issued share capital of the Company on the date of passing such resolution (i.e. an aggregate nominal amount of Shares up to HK$32,237,984 (equivalent to 322,379,840 Shares) on the basis that the issued share capital of the Company remains unchanged on the date of Annual General Meeting) (“Buyback Mandate”);

• (b) to issue, allot and deal with Shares of an aggregate nominal amount of up to twenty percent of the aggregate nominal amount of the share capital of the Company in issue on the date of passing such resolution (i.e. an aggregate nominal amount of Shares up to HK$64,475,968 (equivalent to 644,759,680 Shares) on the basis that the issued share capital of the Company remains unchanged on the date of Annual General Meeting) (“Issuance Mandate”); and

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LETTER FROM THE BOARD

• (c) to extend the Issuance Mandate by an amount representing the aggregate nominal amount of the Shares repurchased by the Company pursuant to and in accordance with the Buyback Mandate.

The Buyback Mandate and the Issuance Mandate will continue in force until the conclusion of the next annual general meeting of the Company or any earlier date as referred to in resolutions numbered 5 and 6 set out in the notice of the Annual General Meeting.

In accordance with the requirements of the Listing Rules, the Company is required to send to the Shareholders an explanatory statement containing all the information reasonably necessary to enable them to make an informed decision on whether to vote for or against the grant of the Buyback Mandate. An explanatory statement as required by the Listing Rules in connection with the Buyback Mandate is set out in Appendix I to this circular.

4. ANNUAL GENERAL MEETING AND PROXY ARRANGEMENT

The notice of the Annual General Meeting is set out on pages 17 to 19 of this circular. At the Annual General Meeting, resolutions will be proposed to approve, inter alia, the re-election of Directors, the granting of the Buyback Mandate and the Issuance Mandate, the extension of the Issuance Mandate by the addition thereto of the number of Shares repurchased pursuant to the Buyback Mandate.

A form of proxy for use at the Annual General Meeting is also enclosed with this circular and such form of proxy is also published on the website of the Stock Exchange (www.hkexnews.hk). To be valid, the form of proxy must be completed and signed in accordance with the instructions printed thereon and deposited, together with the power of attorney or other authority (if any) under which it is signed or a certifi ed copy of that power of attorney or authority, at the Company’s Branch Share Registrar in Hong Kong, Computershare Hong Kong Investor Services Limited, at Shops 1712–1716, 17th Floor Hopewell Centre, 183 Queen’s Road East, Wanchai, Hong Kong not less than 48 hours before the time appointed for holding the Annual General Meeting or any adjournment thereof. Completion and delivery of the form of proxy will not preclude Shareholders from attending and voting at the Annual General Meeting if they so wish.

5. RECOMMENDATION

The Directors consider that the proposed re-election of Directors, the granting of the Buyback Mandate, the granting/extension of the Issuance Mandate are in the interests of the Company and the Group and the Shareholders. Accordingly, the Directors recommend Shareholders to vote in favour of the relevant resolutions to be proposed at the Annual General Meeting.

6. GENERAL INFORMATION

Your attention is drawn to the additional information set out in the Appendix I (Explanatory statement on the Buyback Mandate) and Appendix II (Details of Directors proposed to be re-elected at the Annual General Meeting) to this circular.

Yours faithfully, Zhang Mi Chairman of the Board

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APPENDIX I EXPLANATORY STATEMENT ON THE BUYBACK MANDATE

This Appendix serves as an explanatory statement, as required by the Listing Rules, to provide requisite information to you for your consideration of the Buyback Mandate.

1. REASONS FOR SHARE BUYBACK

The Directors believe that the proposed granting of the Buyback Mandate is in the interests of the Company and the Shareholders.

Repurchases may, depending on market conditions and funding arrangements at the time, result in an enhancement of the net assets and/or earnings per Share. The Directors are seeking the granting of the Buyback Mandate to give the Company the fl exibility to do so if and when appropriate. The number of Shares to be repurchased on any occasion and the price and other terms upon which the same are repurchased will be decided by the Directors at the relevant time, having regard to the circumstances then pertaining.

2. SHARE CAPITAL

As at the Latest Practicable Date, the issued share capital of the Company comprised 3,223,798,400 Shares.

Subject to the passing of the ordinary resolution numbered 5 set out in the notice of the Annual General Meeting in respect of the granting of the Buyback Mandate and on the basis that no Shares are issued or repurchased by the Company prior to the Annual General Meeting, the Company would be allowed under the Buyback Mandate to repurchase a maximum of 322,379,840 Shares (representing 10 percent of the Shares in issue as at the date of the Annual General Meeting) during the period in which the Buyback Mandate remains in force.

3. FUNDING OF REPURCHASES

In repurchasing Shares, the Company may only apply funds legally available for such purpose in accordance with its memorandum and articles of association, the laws of the Cayman Islands and other applicable laws.

The Company is empowered by its memorandum and articles of association to repurchase its Shares. The laws of the Cayman Islands provide that the amount of capital paid in connection with a share repurchase may only be paid out of either the profi ts of the Company or out of the proceeds of a fresh issue of Shares made for such purpose or, if so authorised by its articles of association and subject to the provisions of the Cayman Islands laws, out of capital. The amount of premium payable on repurchase may be paid out of profi ts of the Company or out of the share premium account of the Company, or, if so authorised by its articles of association and subject to the provisions of the Cayman Islands laws, out of capital before the Shares are repurchased.

4. IMPACT OF REPURCHASES

There might be a material adverse impact on the working capital or gearing position of the Company (as compared with the position disclosed in the audited accounts contained in the annual report of the Company for the year ended 31 December 2011) in the event that the Buyback Mandate was to be carried out in full at any time during the proposed repurchase period. However, the Directors do not intend to exercise the Buyback Mandate to such extent as would, in the circumstances, have a material adverse effect

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EXPLANATORY STATEMENT ON THE BUYBACK MANDATE

APPENDIX I

on the working capital requirements of the Company or the gearing levels which in the opinion of the Directors are from time to time appropriate for the Company.

5. TAKEOVERS CODE

If, on the exercise of the power to repurchase Shares pursuant to the Buybank Mandate, a Shareholder’s proportionate interest in the voting rights of the Company increases, such increase will be treated as an acquisition for the purposes of the Takeovers Code. Accordingly, a Shareholder, or group of Shareholders acting in concert, could obtain or consolidate control of the Company and become obliged to make a mandatory offer in accordance with Rule 26 of the Takeovers Code for all the Shares not already owned by such Shareholder or group of Shareholders.

As at the Latest Practicable Date, to the best of the knowledge and belief of the Directors and as recorded in the register required to be kept by the Company under Section 336 of the SFO, Mr. Zhang Mi, Mr. Ren Jie, Mr. Liu Zhi, and the controlling shareholders (as defi ned under the Listing Rules) of the Company, together with parties acting in concert with them (the “Parties”) were benefi cially interested in 1,612,371,037 (including share options to be exercised) Shares, representing approximately 50.01% of the total issued share capital of the Company. On the basis that no Shares are issued or repurchased prior to the date of the Annual General Meeting, in the event that the Directors exercise in full the power to repurchase Shares in accordance with the terms of the relevant ordinary resolution to be proposed at the Annual General Meeting, the interests of the Parties in the issued Shares would be increased to approximately 55.57% of the total issued share capital of the Company and such an increase may not give rise to an obligation to make a mandatory offer under the Takeovers Code. The Directors have no intention to make repurchase of Shares to an extent that an obligation to make a mandatory offer under the Takeovers Code will be triggered.

6. GENERAL

None of the Directors or, to the best of their knowledge having made all reasonable enquiries, any of their respective associates (as defi ned in the Listing Rules) have any present intention to sell any Shares to the Company in the event that the granting of the Buyback Mandate is approved by the Shareholders.

The Company has not been notifi ed by any connected persons (as defi ned in the Listing Rules) of the Company that they have a present intention to sell any Shares to the Company, or that they have undertaken not to sell any Shares held by them to the Company in the event that the granting of the Buyback Mandate is approved by the Shareholders.

The Directors have undertaken to the Stock Exchange to exercise the power of the Company to make repurchases of Shares pursuant to the Buyback Mandate in accordance with the Listing Rules and the laws of the Cayman Islands.

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EXPLANATORY STATEMENT ON THE BUYBACK MANDATE

APPENDIX I

7. MARKET PRICES OF SHARES

The highest and lowest prices per Share at which the Shares have traded on the Stock Exchange during the period from 1 April 2011 and up to the Latest Practicable Date were as follows:

	Highest	Lowest
Month	HK$	HK$
2011
April	1.20	0.99
May	1.04	0.88
June	0.93	0.77
July	1.05	0.84
August	1.04	0.80
September	0.96	0.63
October	0.83	0.65
November	0.86	0.70
December	0.83	0.73
2012
January	0.84	0.74
February	1.17	0.83
March	1.25	1.06
April (up to the Latest Practicable Date)	1.21	1.12

8. REPURCHASES OF SHARES MADE BY THE COMPANY

No repurchase of Shares has been made by the Company during the previous six months (whether on the Stock Exchange or otherwise).

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DETAILS OF DIRECTORS PROPOSED TO BE RE-ELECTED AT THE ANNUAL GENERAL MEETING

APPENDIX II

Pursuant to the Listing Rules, the details of the Directors who will retire at the Annual General Meeting according to the Current Articles of Association and will be proposed to be re-elected at the Annual General Meeting are provided below.

Mr. Ren Jie (任杰先生), aged 45, has been an Executive Director of the Company since 18 January 2008. He is also a Vice-president of the Company.

Experience

In 1990, Mr. Ren earned a Bachelor’s degree in mining machinery from Southwest Petroleum University, located in Sichuan Province, specializing in petroleum and natural gas. In 1995, Mr. Ren obtained an engineering qualifi cation, granted by the China National Petroleum Corp., Sichuan Petroleum Administration. In November 2007, he also became a member of the 5th Edition Committee of the Oil Field Equipment Journal. Mr. Ren is employed as senior engineer by Sichuan Honghua Petroleum Equipment Co., Ltd..

In the early stages of Sichuan Honghua Petroleum Equipment Co., Ltd., Mr. Ren successfully designed a rotary table transmission unit, a drawworks bevel gear box, and universal shaft equipment for the ZJ70LC drilling rigs, which contributed greatly to the development of the Company. Mr. Ren, together with his research and development team, also successfully developed a set of digitally-controlled VFD rigs, after the development of the fi rst digitally controlled VFD rig (DBS).

Positions held by Mr. Ren in the Company’s subsidiaries are set forth in the table below.

Subsidiary	Position	Term of Off ce
Honghua Holdings Limited	director	Since 18 August 2006
Sichuan Honghua Petroleum Equipment	director	Since 31 December 1997
Co., Ltd.
Honghua International Co., Ltd.	director	Since 13 January 2004
	general manager	Since 24 April 2008
Sichuan Honghua Youxin Petroleum	director	Since 8 December 2006
Machinery Co., Ltd.		Until 1 August 2009
Honghua Offshore Oil & Gas Equipment	director	Since 8 June 2009
(Jiangsu) Co. Ltd.
Chengdu Hongtian Electric Drive	director	Since 1 August 2009
Engineering Co., Ltd.
Honghua (China) Investment Co., Ltd.	director	Since 14 January 2010
	deputy general manager	Since 30 June 2010
Newco (H.K.) Limited	director	Since 22 June 2008
	chairman, and	Since 22 September 2009
	general manager
Alpha Advanced Limited	director	Since 10 July 2009
Russia Honghua Co., Ltd.	director	Since 26 June 2008
Egyptian Petroleum HH Rigs	director	Since 7 August 2009
Manufacturing Shareholder Co., Ltd.
Honghua America, LLC	director	Since 10 October 2008
Sichuan Honghua International (H.K.)	director	Since 25 June 2010
Limited

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DETAILS OF DIRECTORS PROPOSED TO BE RE-ELECTED AT THE ANNUAL GENERAL MEETING

APPENDIX II

Save as disclosed above, Mr. Ren did not hold any positions with the Company and other members of the Group and did not hold any directorships in any other listed public companies in the last three years.

Length of service and emoluments

Mr. Ren has entered into a service contract with the Company for a fi xed term of 3 years commencing from 7 March 2008 unless and until terminated by, among others, either party giving to the other not less than three calendar months’ prior notice in writing or terminated according the terms and conditions of the service contract. The service contract, when expires, will be renewable for a term of three years until being terminated according to the service contract. The service contract has been renewed for a further term of 3 years commencing from 7 March 2011.

According to the service contract, the remuneration of Mr. Ren is based on his administrative management position. The emolument will be paid in equal installments of 12 months, and the emolument payable each month shall be paid on or before the last working day of the month. In case the term of offi ce of the executive director at that month is less than one month, the emolument of the executive director shall be adjusted on pro-rata basis. A director appointed according to terms of the service contract as director (whether executive director or non-executive director) of any other subsidiaries will not receive additional remuneration.

In addition to the above emolument, the executive director is entitled to a discretionary bonus to be determined by the Board and approved by the remuneration committee during each fi nancial year, provided that the total amount of bonus to be paid to the executive director shall not exceed six percent (6%) of the net profi t (net of tax, minority interest and such bonus payment, and excluding extraordinary items) as per the audited consolidated accounts of the Group for that fi nancial year. Besides, the executive director will be invited by the Board at its discretion to the participate the share award scheme adopted by the Company from time to time, including but not limited to the restricted share award scheme, the participating criterion will be determined by the Board at its discretion. The Board will award shares to the executive director in accordance with the share award scheme, (including but not limited to the restricted shares awarded under the restricted share award scheme), and the awarded shares will be contributed as part of the remuneration of the executive director.

All reasonable traveling, hotel and other expenses incurred in the course of performing contractual duties and actually paid by the executive director may be reimbursed (subject to producing of formal voucher or document as required by the Company for reimbursement), provided however that such expenses should be within the budgeted amount approved by the Board.

During the term of employment, the executive director is entitled by the Mandatory Provident Fund Schemes Ordinance (Chapter 485 of the Laws of Hong Kong) to join the mandatory provident fund designated by the Company from time to time; and to enjoy all allowances and benefi ts provided by the Company to all other staff, including the medical insurance plan selected by the Company.

Notwithstanding any provisions set out in the service contract, the executive director should avoid attending the meeting without the right to vote in respect of the Board’s meeting to determine his remuneration, annual salary, allowances, bonus and any other benefi ts, such that he shall not be counted into the quorum required by the Board to approve such resolution(s).

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DETAILS OF DIRECTORS PROPOSED TO BE RE-ELECTED AT THE ANNUAL GENERAL MEETING

APPENDIX II

Relationships

Other than the relationship arising from his being the Company’s executive director, vice-president, controlling shareholder, as well as his positions in the Company’s subsidiaries set forth in the table above, Mr. Ren does not have any relationships with any other Directors, senior management, substantial shareholders (as defi ned in the Listing Rules), or controlling shareholders (as defi ned in the Listing Rules) of the Company.

Interests in Shares

As at the Latest Practicable Date, Mr. Ren was interested in 1,612,371,037 Shares, representing 50.01% of the Company’s total issued Shares under Part XV of the SFO.

Matters that need to be brought to the attention of the Shareholders

There is no information that needs to be disclosed pursuant to any of the requirements of the provisions under paragraphs 13.51(2)(h) to 13.51(2)(v) of the Listing Rules, and there are no other matters concerning Mr. Ren that need to be brought to the attention of the Shareholders.

Mr. Siegfried Meissner , aged 59, has been a Non-executive Director of the Company since 26 May 2008.

Experience

Mr. Meissner graduated from the Technical University of Clausthal-Zellerfeld, Germany as Dipl. Berging., specialized in drilling, reservoir and production engineering in 1982. Since 1993, Mr. Meissner joined Nabors Group as President of Nabors Drilling International Limited. Mr. Meissner has been a director of Nabors International Management Limited since 29 December 2004.

Save as disclosed above, Mr. Meissner did not hold any positions with the Company and other members of the Group and did not hold any directorships in any other listed public companies in the last three years.

Length of service and emoluments

The Company entered into a service agreement with Mr. Meissner commencing from 26 May 2011 for a fi xed term of 3 years and can be extended in accordance with the articles of association of the Company in force from time to time and with both parties’ prior written consent unless and until terminated by, among others, either party giving to the other not less than one calendar month’s prior notice in writing. Under the service agreement, Mr. Meissner shall be entitled to a fi xed annual director’s fee of HK$150,000 according to his positions and duties in the Group. However, Mr. Meissner had rejected the aforesaid remuneration. Besides, the non-executive director will be invited by the Board at its discretion to participate the share award scheme adopted by the Company from time to time, including but not limited to the restricted share award scheme, the participating criterion will be determined by the Board at its discretion. The Board will award shares to the non-executive director in accordance with the share award scheme, (including but not limited to the restricted shares awarded under the restricted share award scheme), and the awarded shares will be contributed as part of the remuneration of the non-executive director.

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DETAILS OF DIRECTORS PROPOSED TO BE RE-ELECTED AT THE ANNUAL GENERAL MEETING

APPENDIX II

Relationships

Other than the relationship arising from his being the Company’s non-executive director, Mr. Meissner joined the Nabors Group as president of Nabors Drilling International Limited since 1993. Mr. Meissner has been a director of Nabors International Management Limited, substantial shareholder (as defi ned in the Listing Rules), since 29 December 2004. Apart from the aforesaid relationship, Mr. Meissner does not have any relationships with any other Directors, senior management, substantial shareholders (as defi ned in the Listing Rules), or controlling shareholders (as defi ned in the Listing Rules) of the Company.

Interests in Shares

As at the Latest Practicable Date, Mr. Meissner did not have any interest in Shares under Part XV of the SFO.

Matters that need to be brought to the attention of the Shareholders

There is no information that needs to be disclosed pursuant to any of the requirements of the provisions under paragraphs 13.51(2)(h) to 13.51(2)(v) of the Listing Rules, and there are no other matters concerning Mr. Meissner that need to be brought to the attention of the Shareholders.

Mr. Qi Daqing (齊大慶先生), aged 48, has been an Independent Non-executive Director of the Company since 18 January 2008.

Experience

Mr. Qi is a Professor of Accounting and Associate Dean at Cheung Kong Graduate School of Business (CKGSB). He taught at the School of Accounting, The Chinese University of Hong Kong, from 1996 to 2002. His research interests primarily focus on fi nancial reporting and strategy execution. He has published many articles in accounting and fi nance journals, and he has extensive executive training and consulting experience in accounting and corporate fi nance.

His clients include:

Type of client	Name of client	Duration of service
Government:	Shanghai Municipal Government	2000–2001
	Ministry of Information Industries of PRC	1998–2000
Private Sector:	Huawei Technologies Co., Ltd.	2006
	Lenovo Group Limited	2004–2005
	Digital China Holdings Limited	2004
	Siemens Ltd., China	2002
	China Telecommunications Corporation	2001
	Nokia (China) Investment Co., Ltd.	1999–2001

Mr. Qi received his Ph.D. in Accounting from Michigan State University in 1996, his MBA from the University of Hawaii at Manoa in 1992, and his Bachelor’s degrees in Biophysics and International Journalism from Fudan University in 1985 and 1987, respectively. Mr. Qi is not a certifi ed public accountant; he became a member of the American Accounting Association in 1996. With over ten years

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DETAILS OF DIRECTORS PROPOSED TO BE RE-ELECTED AT THE ANNUAL GENERAL MEETING

APPENDIX II

of experience as a Professor of Accounting, a Ph.D in Accounting, a MBA and extensive executive training and consulting experience in accounting and corporate fi nance, Mr. Qi’s experience means that he has the requisite expertise as required by the Listing Rules. Therefore, whilst Mr. Qi does not hold formal accounting professional qualifi cations, he meets the criteria for accounting and related fi nancial management expertise as required by Rule 3.10(2) of the Listing Rules.

Mr. Qi is currently an independent non-executive director and chairman of the audit committee of Sohu (a NASDAQ listed company), Focus Media Holding Limited (a NASDAQ listed company), Sino Media Holding Limited (a Stock Exchange listed company) AutoNavi Holdings Limited (a NASDAQ listed company), China Huiyuan Juice Group Limited (a Stock Exchange listed company), Daqo New Energy Co., Ltd. (a NYSE listed company) and Bona Film Group (a NASDAQ listed company) respectively. He is an independent non-executive director and committee member of the audit committee of China Vanke Co., Ltd. (a SZSE listed company). He is directly involved in the formulation of accounting policies and audit processes of the aforesaid companies.

Save as disclosed, Mr. Qi did not hold any positions with the Company and other members of the Group and did not hold any directorships in any other listed public companies in the last three years.

Length of service and emoluments

Mr. Qi has entered into a service contract with the Company for a fi xed term of 3 years commencing from 7 March 2011 unless and until terminated by, among others, either party giving to the other not less than three calendar months’ prior notice in writing or terminated according the provisions concerning termination of employment of the service contract. The afore-said term of offi ce may be renewed according to the articles of association of the Company effective from time to time or as agreed by the parties in writing in advance.

According to the service contract, Mr. Qi will, based on his position and duties in the Group, be entitled to a fi xed emolument of HKD200,000 per year. The emolument will be paid in equal installments of 12 months and released quarterly, and the emolument payable quarterly shall be paid on or before the last working day of the quarter. The emolument of the independent non-executive director is subject to approval and review of the Board. Besides, the independent non-executive director will be invited by the Board at its discretion to participate the share award scheme adopted by the Company from time to time, including but not limited to the restricted share award scheme, the participating criterion will be determined by the Board at its discretion. The Board will award shares to the independent non-executive director in accordance with the share award scheme, (including but not limited to the restricted shares awarded under the restricted share award scheme), and the awarded shares will be contributed as part of the remuneration of the independent non-executive director.

According to the service contract, all reasonable and necessary expenses (such as business trip expenses) incurred in the course of providing services to the Company under the service contract by the independent non-executive director may be reimbursed after producing relevant receipt(s) or effective voucher(s) by the independent non-executive director. The Company may advance an amount to the independent non-executive director for payment all afore-said necessary expenses, provided however that the independent non-executive director must produce regularly effective expense voucher to the Company as soon as possible or as requested by the Company after payment of the said amount to have them eliminated.

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DETAILS OF DIRECTORS PROPOSED TO BE RE-ELECTED AT THE ANNUAL GENERAL MEETING

APPENDIX II

Relationships

Other than the relationship arising from his being the Company’s independent non-executive director and chairman of the Company’s audit committee, Mr. Qi does not have any relationships with any other Directors, senior management, substantial shareholders (as defi ned in the Listing Rules), or controlling shareholders (as defi ned in the Listing Rules) of the Company.

Interests in Shares

As at the Latest Practicable Date, Mr. Qi was interested in 2,000,000 share options, representing 0.06% of the Company’s total issued Shares under Part XV of the SFO.

Matters that need to be brought to the attention of the Shareholders

There is no information that needs to be disclosed pursuant to any of the requirements of the provisions under paragraphs 13.51(2)(h) to 13.51(2)(v) of the Listing Rules, and there are no other matters concerning Mr. Qi that need to be brought to the attention of the Shareholders of the Company.

Mr. Shi Xingquan (史興全先生), aged 69, has been an Independent Non-executive Director of the Company since 14 April 2009.

Experience

Mr. Shi graduated from the Northeastern Petroleum College in 1965 and is a well-known petroleum engineering expert. Mr. Shi has been appointed as the vice president of PetroChina Company Limited from 1999 until 2003. Mr. Shi was awarded the National Technology Advancement Award (First Prize) by the National Science and Technology Council of the PRC in 1997. In 2003, Mr. Shi was awarded the National Scientifi c and Technological Progress Award (First Prize) by State Council of the PRC. Mr. Shi was also granted the Middle-aged and Young Experts of the State with Outstanding Contribution by Ministry of Personnel of the PRC.

Save as disclosed above, Mr. Shi did not hold any positions with the Company and other members of the Group and did not hold any directorships in any other listed public companies in the last three years.

Length of service and emoluments

Mr. Shi has entered into a service contract with the Company for a fi xed term of 3 years commencing from 7 March 2011 unless and until terminated by, among others, either party giving to the other not less than three calendar months’ prior notice in writing or terminated according the provisions concerning termination of employment of the service contract. The afore-said term of offi ce may be renewed according to the articles of association of the Company effective from time to time or as agreed by the parties in writing in advance.

According to the service contract, Mr. Shi will, based on his position and duties in the Group, be entitled to a fi xed emolument of HKD100,000 per year. The emolument will be paid in equal installments of 12 months and released quarterly, and the emolument payable quarterly shall be paid on or before the last working day of the quarter. The emolument of the independent non-executive director is subject to approval and review of the Board. Besides, the independent non-executive director will be invited by the Board at its discretion to participate the share award scheme adopted by the Company from time to time,

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DETAILS OF DIRECTORS PROPOSED TO BE RE-ELECTED AT THE ANNUAL GENERAL MEETING

APPENDIX II

including but not limited to the restricted share award scheme, the participating criterion will be determined by the Board at its discretion. The Board will award shares to the independent non-executive director in accordance with the share award scheme, (including but not limited to the restricted shares awarded under the restricted share award scheme), and the awarded shares will be contributed as part of the remuneration of the independent non-executive director.

According to the service contract, all reasonable and necessary expenses (such as business trip expenses) incurred in the course of providing services to the Company under the service contract by the independent non-executive director may be reimbursed after producing relevant receipt(s) or effective voucher(s) by the independent non-executive director. The Company may advance an amount to the independent non-executive director for payment all afore-said necessary expenses, provided however that the independent non-executive director must produce regularly effective expenses voucher to the Company as soon as possible or as requested by the Company after payment of the said amount to have them eliminated.

Relationships

Other than the relationship arising from his being the Company’s independent non-executive director, Mr. Shi does not have any relationships with any other Directors, senior management, substantial shareholders (as defi ned in the Listing Rules), or controlling shareholders (as defi ned in the Listing Rules) of the Company.

Interests in Shares

As at the Latest Practicable Date, Mr. Shi was interested in 1,500,000 share options, representing 0.05% of the Company’s total issued shares under Part XV of the SFO.

Matters that need to be brought to the attention of the Shareholders

There is no information that needs to be disclosed pursuant to any of the requirements of the provisions under paragraphs 13.51(2)(h) to 13.51(2)(v) of the Listing Rules, and there are no other matters concerning Mr. Shi that need to be brought to the attention of the Shareholders of the Company.

Mr. Guo Yanjun (郭燕軍先生), aged 59, has been an Independent Non-executive Director of the Company since 20 June 2011.

Experience

Mr. Guo graduated with a Diploma in Law from China People’s University in 1984. Mr. Guo is an independent non-executive director of Z-Obee Holdings Limited (a Stock Exchange and Singapore Exchange Limited listed company) and Strong Petrochemical Holdings Limited (a Stock Exchange listed company). Mr. Guo has extensive entrepreneurship experiences and experience of corporate operation and management. Mr. Guo is currently the chairman of Beijing Junxinda Economic Development Co., Ltd., CNHK Media Limited, CNHK Energy Limited and CNHK Publication Limited respectively.

Save as disclosed above, Mr. Guo did not hold any positions with the Company and other members of the Group and did not hold any directorships in any other listed public companies in the last three years.

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DETAILS OF DIRECTORS PROPOSED TO BE RE-ELECTED AT THE ANNUAL GENERAL MEETING

APPENDIX II

Length of service and emoluments

Mr. Guo has entered into a service contract with the Company for a fi xed term of 3 years commencing from 20 June 2011 unless and until terminated by, among others, either party giving to the other not less than three calendar months’ prior notice in writing or terminated according the provisions concerning termination of employment of the service contract. The afore-said term of offi ce may be renewed according to the articles of association of the Company effective from time to time or as agreed by the parties in writing in advance.

According to the service contract, Mr. Guo will, based on his position and duties in the Group, be entitled to a fi xed emolument of HKD150,000 per year. The emolument will be paid in equal installments of 12 months and released quarterly, and the emolument payable quarterly shall be paid on or before the last working day of the quarter. The emolument of the independent non-executive director is subject to approval and review of the Board. Besides, the independent non-executive director will be invited by the Board at its discretion to participate the share award scheme adopted by the Company from time to time, including but not limited to the restricted share award scheme, the participating criterion will be determined by the Board at its discretion. The Board will award Shares to the independent non-executive director in accordance with the share award scheme, (including but not limited to the restricted shares awarded under the restricted share award scheme), and the awarded shares will be contributed as part of the remuneration of the independent non-executive director.

According to the service contract, all reasonable and necessary expenses (such as business trip expenses) incurred in the course of providing services to the Company under the service contract by the independent non-executive director may be reimbursed after producing relevant receipt(s) or effective voucher(s) by the independent non-executive director. The Company may advance an amount to the independent non-executive director for payment all afore-said necessary expenses, provided however that the independent non-executive director must produce regularly effective expense voucher to the Company as soon as possible or as requested by the Company after payment of the said amount to have them eliminated.

Relationships

Other than the relationship arising from his being the Company’s independent non-executive director, Mr. Guo does not have any relationships with any other Directors, senior management, substantial shareholders (as defi ned in the Listing Rules), or controlling shareholders (as defi ned in the Listing Rules) of the Company.

Interests in Shares

As at the Latest Practicable Date, Mr. Guo was interested in 2,100,000 Shares and 850,000 share option, representing in aggregate 0.09% of the Company’s total issued Shares under Part XV of the SFO.

Matters that need to be brought to the attention of the Shareholders

There is no information that needs to be disclosed pursuant to any of the requirements of the provisions under paragraphs 13.51(2)(h) to 13.51(2)(v) of the Listing Rules, and there are no other matters concerning Mr. Guo that need to be brought to the attention of the Shareholders.

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NOTICE OF THE ANNUAL GENERAL MEETING

==> picture [77 x 72] intentionally omitted <==

Honghua Group Limited 宏華集團有限公司

(a company incorporated in the Cayman Islands with limited liability)

(Stock Code: 196)

NOTICE IS HEREBY GIVEN that an Annual General Meeting (the “Meeting”) of Honghua Group Limited (the “Company”) will be held at Gloucester Luk Kwok Hong Kong, 72 Gloucester Road, Wanchai, Hong Kong on Tuesday, 22 May 2012 at 9:30 a.m. for the following purposes:

1. To receive and consider the Audited Consolidated Financial Statements and the Reports of the Directors and of the Independent Auditor for the year ended 31 December 2011;

2. To declare a fi nal dividend of HK$0.04 per share of the Company for the year ended 31 December 2011;

3. To re-elect Directors and authorise the Board of Directors to fi x Directors’ remuneration;

4. To re-appoint Independent Auditor and authorise the Board of Directors to fi x Independent Auditor’s remuneration;

5. To consider as special business and, if thought fi t, pass with or without amendments, the following resolution as an ordinary resolution:

“ THAT

• (a) the exercise by the Directors during the Relevant Period (as defi ned below) of all the powers of the Company to purchase its shares, subject to and in accordance with the applicable laws, be and is hereby generally and unconditionally approved;

• (b) the total nominal amount of shares of the Company to be purchased pursuant to the approval in paragraph (a) above shall not exceed 10% of the total nominal amount of the share capital of the Company in issue as at the date of passing of this resolution and the said approval shall be limited accordingly; and

• (c) for the purpose of this resolution, “Relevant Period” means the period from the passing of this resolution until whichever is the earliest of:

• (i) the conclusion of the next annual general meeting of the Company;

• (ii) the revocation or variation of the authority given under this resolution by ordinary resolution passed by the Company’s shareholders in general meetings; or

• (iii) the expiration of the period within which the next annual general meeting of the Company is required by the articles of association of the Company or any applicable laws to be held.”;

— 17 —

NOTICE OF THE ANNUAL GENERAL MEETING

1. To consider as special business and, if thought fi t, pass with or without amendments, the following resolution as an ordinary resolution:

“ THAT

• (a) the exercise by the Directors during the Relevant Period (as defi ned below) of all the powers of the Company to issue, allot and deal with additional shares of the Company and to make or grant offers, agreements and options which would or might require shares to be allotted, issued or dealt with during or after the end of the Relevant Period (as defi ned below), be and is hereby generally and unconditionally approved, provided that, otherwise than pursuant to (i) a rights issue where shares are offered to shareholders on a fi xed record date in proportion to their then holdings of shares (subject to such exclusions or other arrangements as the Directors may deem necessary or expedient in relation to fractional entitlements or having regard to any restrictions or obligations under the laws of, or the requirements of any recognised regulatory body or any stock exchange in any territory outside Hong Kong), or (ii) any option scheme or similar arrangement for the time being adopted for the grant or issue to offi cers and/or employees of the Company and/or any of its subsidiaries and/or any eligible grantee pursuant to the scheme of shares or rights to acquire shares of the Company, or (iii) any scrip dividend scheme or similar arrangement providing for the allotment of shares in lieu of the whole or part of a dividend on shares of the Company in accordance with the articles of association of the Company, the total nominal amount of additional shares to be issued, allotted, dealt with or agreed conditionally or unconditionally to be issued, allotted or dealt with shall not in total exceed 20% of the total nominal amount of the share capital of the Company in issue as at the date of passing of this resolution and the said approval shall be limited accordingly; and

• (b) for the purpose of this resolution, “Relevant Period” means the period from the passing of this resolution until whichever is the earliest of:

• (i) the conclusion of the next annual general meeting of the Company;

• (ii) the revocation or variation of the authority given under this resolution by ordinary resolution passed by the Company’s shareholders in general meetings; or

• (iii) the expiration of the period within which the next annual general meeting of the Company is required by the articles of association of the Company or any applicable laws to be held.”; and

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NOTICE OF THE ANNUAL GENERAL MEETING

1. To consider as special business and, if thought fi t, pass with or without amendments, the following resolution as an ordinary resolution:

“ THAT the general mandate granted to the Directors of the Company pursuant to resolution numbered 6 above and for the time being in force to exercise the powers of the Company to allot shares and to make or grant offers, agreements and options which might require the exercise of such powers be and is hereby extended by the total nominal amount of shares in the capital of the Company repurchased by the Company pursuant to the exercise by the Directors of the Company of the powers of the Company to purchase such shares since the granting of such general mandate referred to in the above resolution numbered 5 provided that such amount shall not exceed 10% of the total nominal amount of the share capital of the Company in issue as at the date of passing of this resolution.”

On behalf of the Board Zhang Mi Chairman

PRC, 17 April 2012

Notes:

1. A member of the Company who is entitled to attend and vote at the Meeting convened by the above notice is entitled to appoint a proxy to attend and vote on his behalf. A proxy need not be a member of the Company but must attend in person to represent the member. A member who is the holder of two or more shares may appoint more than one proxy to represent him and vote on his behalf. If more than one proxy is so appointed, the appointment shall specify the number and class of shares in respect of which each such proxy is so appointed.

2. In order to be valid, the form of proxy together with any power of attorney or other authority under which it is signed or a certifi ed copy of such power of attorney or authority, must be deposited with the Company’s Branch Share Registrar in Hong Kong, Computershare Hong Kong Investor Services Limited, at Shops 1712–1716, 17th Floor Hopewell Centre, 183 Queen’s Road East, Wanchai, Hong Kong not less than 48 hours before the time fi xed for holding the Meeting, or any adjournment thereof. Delivery of the form of proxy shall not preclude a member of the Company from attending and voting in person at the meeting and in such event, the instrument appointing a proxy shall be deemed to be revoked.

3. For determining the entitlement to attend and vote at the above Meeting, the Register of Members of the Company will be closed from Wednesday, 16 May 2012 to Tuesday, 22 May 2012, both dates inclusive, during which period no transfer of shares will be registered. In order to be eligible to attend and vote at the Meeting, all transfer documents accompanied by the relevant share certifi cates must be lodged with the Company’s Branch Share Registrar in Hong Kong, Computershare Hong Kong Investor Services Limited, at Shops 1712–1716, 17th Floor Hopewell Centre, 183 Queen’s Road East, Wanchai, Hong Kong for registration not later than 4:30 p.m. on Tuesday, 15 May 2012.

4. For determining the entitlement to the proposed fi nal dividend, the Register of Members of the Company will be closed from Monday, 28 May 2012 to Friday, 1 June 2012, both dates inclusive, during which period no transfer of shares will be registered. In order to qualify for the proposed fi nal dividend, all transfer documents accompanied by the relevant share certifi cates must be lodged with the Company’s Branch Share Registrar in Hong Kong, Computershare Hong Kong Investor Services Limited, at Shops 1712–1716, 17th Floor Hopewell Centre, 183 Queen’s Road East, Wanchai, Hong Kong for registration not later than 4:30 p.m. on Friday, 25 May 2012.

5. In relation to the ordinary resolutions numbered 5 to 7 set out in the above notice, the Directors wish to state that they have no immediate plan to issue any new shares or repurchase any existing shares of the Company.

As at the date of this notice, Mr. Zhang Mi, Mr. Ren Jie and Mr. Liu Zhi are the executive Directors of the Company, and Mr. Siegfried Meissner and Mr. Huang Dongyang are the non-executive Directors of the Company, and Mr. Liu Xiaofeng, Mr. Qi Daqing, Mr. Tai Kwok Leung Alexander, Mr. Chen Guoming, Mr. Shi Xingquan and Mr. Guo Yanjun are the independent non-executive Directors of the Company.

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