Honghua Group Limited — AGM Information 2017

May 12, 2017

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.

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

GRANTING OF GENERAL MANDATES TO BUY BACK SHARES AND TO ISSUE SHARES OF THE COMPANY AND ADOPTION OF THE 2017 SHARE OPTION SCHEME, TERMINATION OF EXISTING SHARE OPTION SCHEME AND NOTICE OF THE ANNUAL GENERAL MEETING

A notice convening the annual general meeting of Honghua Group Limited to be held at Renaissance Harbour View Hotel Hong Kong, 1 Harbour Road, Wanchai, Hong Kong on Wednesday, 14 June 2017 at 9:30 a.m. is set out on pages 32 to 36 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 and Transfer Office 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 but in any event not less than 48 hours before the time appointed for the annual general meeting (i.e. not later than 9:30 a.m. on Monday, 12 June 2017 (Hong Kong time)) or the adjourned meeting (as the case may be). 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.

• References to time and dates in this circular are to Hong Kong time and dates.

12 May 2017

CONTENTS

	Page
Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	1
Letter from the Board
1. Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	4
2. Re-election of Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	5
3A. Proposed Granting of General Mandate to Buy Back Shares . . . . . . . . . . . . . . . . . .	6
3B. Proposed Granting of General Mandate to Issue Shares . . . . . . . . . . . . . . . . . . . . . .	6
4. Adoption of The 2017 Share Option Scheme and Termination of
Existing Share Option Scheme . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	7
5. Annual General Meeting and Proxy Arrangement . . . . . . . . . . . . . . . . . . . . . . . . . . . .	9
6. Recommendation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	10
7. Responsibility Statement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	10
8. General Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	10
Appendix I — Explanatory statement on the Buy-back Mandate . . . . . . . . . . . . . . . . .	11
Appendix II — Details of Directors proposed to be re-elected
at the Annual General Meeting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	14
Appendix III — Summary of Principal Terms of
The 2017 Share Option Scheme . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	24
Notice of the Annual General Meeting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	32

– i –

DEFINITIONS

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

• ‘‘2017 Share Option Scheme’’

• the share option scheme which is proposed to be adopted by the Company at the Annual General Meeting, the principal terms of which are set out in Appendix III to this circular;

• ‘‘Adoption Date’’

• 14 June 2017, the date on which the 2017 Share Option Scheme is proposed to be conditionally adopted by the Shareholders at the Annual General Meeting;

• ‘‘Annual General Meeting’’

an annual general meeting of the Company to be held at Renaissance Harbour View Hotel Hong Kong, 1 Harbour Road, Wanchai, Hong Kong on Wednesday, 14 June 2017 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 32 to 36 of this circular or any adjournment thereof;

• ‘‘Board’’

• the Board of Directors or a duly authorised committee of the Board of Directors;

• ‘‘Buy-back Mandate’’ as defined in paragraph 3A of the Letter from the Board;

• ‘‘CASIC’’

• China Aerospace Science and Industry Corporation (中國航 天科工集團有限公司), a company incorporated in the People’s Republic of China;

• ‘‘CASIC Group’’ CASIC and its subsidiaries;

• ‘‘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;

• ‘‘Existing Share Option Scheme’’

the share option scheme adopted by the Company on 21 January 2008 and which will expire on 20 January 2018;

• ‘‘Group’’

• the Company and its subsidiaries (as defined under the Listing Rules);

• ‘‘Hong Kong’’

the Hong Kong Special Administrative Region of the People’s Republic of China;

• ‘‘Issuance Mandate’’

as defined in paragraph 3B of the Letter from the Board;

– 1 –

DEFINITIONS

• ‘‘Latest Practicable Date’’

• ‘‘Listing Rules’’

• ‘‘Participant’’

• ‘‘Scheme Period’’

• ‘‘SFO’’

• ‘‘Share(s)’’

• ‘‘Shareholder(s)’’

• 10 May 2017, being the latest practicable date prior to the printing of this circular for ascertaining certain information in this circular;

• the Rules Governing the Listing of Securities on the Stock Exchange;

• (a) any executive director, employee or proposed employee (whether full time or part time) of any member of the Group; (b) any non-executive director (including independent non-executive directors) of any member of the Group; (c) any supplier of goods or services to any member of the Group; (d) any customer of any member of the Group; (e) any person or entity that provides research, development or other technological support or any advisory, consultancy, professional or other services to any member of the Group; (f) any joint venture partner, business or strategic alliance partner, in each case of any member of the Group; (g) any discretionary trust whose discretionary objects may be any executive director, employee or proposed employee (whether full time or part time) and any non-executive director (including independent nonexecutive directors) of any member of the Group, any supplier of goods or services to any member of the Group, any customer of any member of the Group, any person or entity that provides research, development or other technological support or any advisory, consultancy, professional or other services to any member of the Group, and any joint venture partner, business or strategic alliance partner, in each case of any member of the Group;

• the period commencing on the Adoption Date and expiring at the close of business on the business day immediately preceding the tenth anniversary thereof unless terminated earlier by the Shareholders or by the Board;

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

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

• holder(s) of Share(s);

– 2 –

DEFINITIONS

‘‘Stock Exchange’’

• ‘‘Takeovers Code’’

‘‘HK$’’

The Stock Exchange of Hong Kong Limited;

The Hong Kong Code on Takeovers and Mergers issued by the Securities and Future Commission in Hong Kong;

Hong Kong dollar, the lawful currency of Hong Kong.

– 3 –

LETTER FROM THE BOARD

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. Chen Yajun (Chairman) Mr. Zhang Mi (Vice Chairman) Mr. Ren Jie Mr. Liu Zhi

Non-executive Director: Mr. Han Guangrong Mr. Chen Wenle

Independent Non-executive Directors: Mr. Liu Xiaofeng Mr. Qi Daqing Mr. Chen Guoming Ms. Su Mei

Head Office: 99 East Road, Information Park Jinniu District, Chengdu Sichuan People’s Republic of China Post code: 610036

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

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

12 May 2017

To Shareholders

Dear Sir/Madam,

PROPOSED RE-ELECTION OF DIRECTORS AND GRANTING OF GENERAL MANDATES TO BUY BACK SHARES AND TO ISSUE SHARES OF THE COMPANY AND ADOPTION OF THE 2017 SHARE OPTION SCHEME, TERMINATION OF EXISTING SHARE OPTION SCHEME AND NOTICE OF THE ANNUAL GENERAL MEETING

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 Buy-back Mandate to the Directors; (iii) the granting of the Issuance Mandate to the Directors; (iv) the extension of the Issuance Mandate by adding to it the aggregate number of the issued Shares bought back

– 4 –

LETTER FROM THE BOARD

by the Company under the Buy-back Mandate; and (v) adoption of the 2017 Share Option Scheme and termination of Existing Share Option Scheme and to give you notice of the Annual General Meeting.

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 office by rotation provided that every Director (including those appointed for a specific 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 fill the vacated office.

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 office since their last re-election or appointment and so that as between persons who became or were last re-elected 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 fill 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 office 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. Zhang Mi, Mr. Ren Jie, Mr. Qi Daqing, Mr. Chen Yajun, Mr. Han Guangrong, Mr. Chen Wenle and Ms. Su Mei shall retire at the Annual General Meeting. All the retiring Directors, being eligible to offer themselves for re-election.

Mr Qi Daqing, who has been serving as Independent Non-executive Director of the Company for more than 9 years, has confirmed his independence with reference to the factors set out in Rule 3.13 of the Listing Rules. The Company considers Mr Qi Daqing is still independent in accordance with the independence guidelines as set out in the Listing Rules and will continue to bring valuable business experience, knowledge and professionalism to the Board for its efficient and effective functioning.

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

– 5 –

LETTER FROM THE BOARD

3A. PROPOSED GRANTING OF GENERAL MANDATE TO BUY BACK SHARES

At the annual general meeting of the Company held on 24 May 2016, a general mandate was granted to the Directors to buy back Shares. Such mandate will lapse at the conclusion of the Annual General Meeting. In order to give the Company the flexibility to buy back Shares if and when appropriate, an ordinary resolution will be proposed at the Annual General Meeting to approve the granting of the Buy-back Mandate to the Directors to buy back Shares on the Stock Exchange of not exceeding 10% of the total number of issued Shares of the Company as at the date of passing of the proposed ordinary resolution contained in item 4 of the notice of the Annual General Meeting as set out on pages 32 to 36 of this circular (i.e. a total of 513,742,090 Shares on the basis that the issued share capital of the Company remains unchanged on the date of the Annual General Meeting out of the total number of issued Shares of 5,137,420,900 Shares as at the Latest Practicable Date).

The Directors wish to state that the Company has no plan to buy back any Shares pursuant to the Buy-back Mandate as at the Latest Practicable Date.

The Buy-back 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 resolution numbered 4 set out in the notice of the Annual General Meeting (i.e. (i) the conclusion of the next annual general meeting of the Company; (ii) the revocation or variation of the authority given under the resolution numbered 4 set out in the notice of the Annual General Meeting 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).

An explanatory statement required by the Listing Rules to provide the Shareholders with requisite information reasonably necessary for them to make an informed decision on whether to vote for or against the granting of the Buy-back Mandate is set out in Appendix I to this circular.

If the Company conducts a share consolidation or subdivision after the Buy-back Mandate has been approved in Annual General Meeting, the maximum number of shares that may be bought back under the Buy-back Mandate as a percentage of the total number of issued shares at the date immediately before and after such consolidation or subdivision shall be the same.

3B. PROPOSED GRANTING OF GENERAL MANDATE TO ISSUE SHARES

At the annual general meeting of the Company held on 24 May 2016, a general mandate was granted to the Directors to issue Shares. Such mandate will lapse at the conclusion of the Annual General Meeting. In order to give the Company the flexibility to issue Shares if and when appropriate, an ordinary resolution will be proposed at the Annual General Meeting to approve the granting of the Issuance Mandate to the Directors to allot, issue or deal with additional Shares of not exceeding 20% of the total number of issued Shares of the Company as at the date of passing of the proposed ordinary resolution contained in item 5 of the notice of the Annual General Meeting as set out on pages 32 to 36 of this circular (i.e. a total of 1,027,484,180 Shares on the basis that the issued share capital of the Company remains unchanged on the date of the Annual General Meeting out of the total number of issued Shares

– 6 –

LETTER FROM THE BOARD

of 5,137,420,900 Shares as at the Latest Practicable Date). An ordinary resolution to extend the Issuance Mandate by adding the number of Shares bought back by the Company pursuant to the Share Buy-back Mandate will also be proposed at the Annual General Meeting.

The Directors wish to state that the Company has no plan to issue any new Shares pursuant to the Issuance Mandate as at the Latest Practicable Date.

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 resolution numbered 5 set out in the notice of the Annual General Meeting (i.e. (i) the conclusion of the next annual general meeting of the Company; (ii) the revocation or variation of the authority given under the resolution numbered 5 set out in the notice of the Annual General Meeting 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).

If the Company conducts a share consolidation or subdivision after the Issuance Mandate has been approved in Annual General Meeting, the maximum number of securities that may be issued under the Issuance Mandate as a percentage of the total number of issued shares at the date immediately before and after such consolidation or subdivision shall be the same.

4. ADOPTION OF THE 2017 SHARE OPTION SCHEME AND TERMINATION OF EXISTING SHARE OPTION SCHEME

The Existing Share Option Scheme was adopted on 21 January 2008 and will expire on 20 January 2018. In light of the expiration of the Existing Share Option Scheme, an ordinary resolution will be proposed at the Annual General Meeting to terminate the Existing Share Option Scheme and adopt the 2017 Share Option Scheme. There are no material differences between the Existing Share Option Scheme and the 2017 Share Option Scheme. Following the termination of the Existing Share Option Scheme, no further options will be offered under that scheme, but in all other respects the provisions of the Existing Share Option Scheme will remain in full force and effect and options granted prior to such termination will continue to be valid and exercisable in accordance with the rules of the Existing Share Option Scheme.

As at the Latest Practicable Date, the Company had granted options to subscribe for a total of 170,325,000 Shares (representing approximately 3.32% of the total issued Shares as at the Latest Practicable Date) pursuant to the Existing Share Option Scheme, out of which options to subscribe for 18,368,900 Shares had been exercised, options to subscribe for 12,321,648 Shares had lapsed and options to subscribe for 139,634,452 Shares are valid and outstanding. Any valid options granted under the Existing Share Option Scheme will remain valid after the termination of the Existing Share Option Scheme. Upon termination of the Existing Share Option Scheme, no further option may be granted thereunder.

The purpose of the 2017 Share Option Scheme is to provide incentives or rewards to Participants for their contribution to the Group and/or to enable the Group to recruit and retain high caliber employees and attract human resources that are available to the Group. The Company recognises that certain persons other than employees and directors (executive or nonexecutive) may nonetheless make contributions to the Group. The 2017 Share Option Scheme

– 7 –

LETTER FROM THE BOARD

will allow the Board to retain the flexibility to reward those Participants with options in lieu of cash, thus incentivising these Participants to contribute in a way that enhances the value of the Company’s shares while preserving cash and liquidity for the Group. The amount of options granted will be proportionate to the degree of the Participant’s contribution to the Group as determined by the Board. The Scheme will give the Participants an opportunity to have a personal stake in the Company and will (a) motivate the Participants to optimise their performance and efficiency; and (b) attract and retain the Participants whose contributions are important to the long-term growth and profitability of the Group.

A summary of the principal terms of the 2017 Share Option Scheme is set out in Appendix III to this circular. A copy of the 2017 Share Option Scheme is available for inspection at the principal place of business of the Company in Room 2508, Harcourt House, 39 Gloucester Road, Wan Chai, Hong Kong during normal business hours from the date hereof up to and including the date of the Annual General Meeting and at the Annual General Meeting.

As of the Latest Practicable Date, there were 5,137,420,900 Shares in issue. Assuming there is no change to the issued Shares in the period commencing from the Latest Practicable Date to the date of the Annual General Meeting, the total number of Shares that may be issued under the 2017 Share Option Scheme and any other schemes of the Company will be 513,742,090 Shares representing 10% of the issued Shares as at the date of the Annual General Meeting.

Unless otherwise determined by the Board and specified in the offer letter at the time of the offer of the Option, there is neither any performance target that need to be achieved by the grantee before an Option can be exercised nor any minimum period for which an Option must be held before the Option can be exercised.

The subscription price for the Shares under the 2017 Share Option Scheme shall be a price solely determined by the Board and notified to a Participant (as defined in paragraph iii of Appendix III to this circular) and shall be at least the highest of (i) the closing price of the Shares as stated in the Stock Exchange’s daily quotations sheet on the date on which an Option is granted, which must be a Business Day; (ii) the average closing price of the Shares as stated in the Stock Exchange’s daily quotations sheets for the 5 Business Days immediately preceding the date on which an Option is granted; and (iii) the nominal value of a Share.

The Company considers it most conducive to the purpose of the 2017 Share Option Scheme to confer the discretion of setting the terms of the options (including and not limited to minimum holding period and performance targets) on the Board to make the most appropriate commercial decision in the circumstances when granting the options.

None of the Directors is a trustee of the 2017 Share Option Scheme nor has any direct or indirect interest in the trustees of the 2017 Share Option Scheme, if any.

The Directors consider that it is not appropriate to state the value of all Options that can be granted pursuant to the 2017 Share Option Scheme as if they had been granted at the Latest Practicable Date. The Directors believe that any statement regarding the value of the Options as at the Latest Practicable Date will not be meaningful to Shareholders, taking into account

– 8 –

LETTER FROM THE BOARD

the number of variables which are crucial for the calculation of the Option value which have not been determined. Such variables include the exercise price, exercise period and other relevant variables. However, in compliance with the Listing Rules, estimated fair valuations of Options granted during the relevant financial year/period will be provided and disclosed to the Shareholders in the relevant annual or interim report of the Company.

The 2017 Share Option Scheme shall take effect conditional upon:

• (i) the passing of an ordinary resolution at the Annual General Meeting approving the adoption of the 2017 Share Option Scheme by the Shareholders and authorising the Directors to grant Options to subscribe for Shares hereunder and to allot, issue and deal with Shares pursuant to the exercise of any Option granted under the 2017 Share Option Scheme, and the termination of the Existing Share Option Scheme at the Annual General Meeting; and

• (ii) the Listing Committee of the Stock Exchange granting approval of the 2017 Share Option Scheme and the listing of, and the permission to deal in, any Shares to be issued pursuant to the exercise of Options under the 2017 Share Option Scheme.

Application will be made to the Stock Exchange for approval of the listing of, and permission to deal in, the Shares to be allotted and issued pursuant to the exercise of any Options granted under the 2017 Share Option Scheme.

5. ANNUAL GENERAL MEETING AND PROXY ARRANGEMENT

The notice of the Annual General Meeting is set out on pages 32 to 36 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 Buy-back Mandate and the Issuance Mandate, the extension of the Issuance Mandate by the addition thereto of the number of Shares bought back pursuant to the Buy-back Mandate and the adoption of the 2017 Share Option Scheme and termination of Existing Share Option Scheme.

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 certified copy of that power of attorney or authority, at the Company’s Branch Share Registrar and Transfer Office 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 but in any event not less than 48 hours before the time appointed for the Annual General Meeting (i.e. not later than 9:30 a.m. on Monday, 12 June 2017 (Hong Kong time)) or the adjourned meeting (as the case my be). 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.

– 9 –

LETTER FROM THE BOARD

Pursuant to Rule 13.39(4) of the Listing Rules, any vote of the Shareholders at the Annual General Meeting must be taken by poll except where the chairman of the meeting, in good faith, decides to allow a resolution which relates purely to a procedural or administrative matter to be voted on by a show of hands. The Company will announce the results of the poll in the manner prescribed under Rule 13.39(5) of the Listing Rules.

6. RECOMMENDATION

The Directors consider that the proposed re-election of Directors, the granting of the Buyback Mandate, the granting/extension of the Issuance Mandate and the adoption of the 2017 Share Option Scheme and termination of Existing Share Option Scheme are in the interests of the Company, the Group and the Shareholders. Accordingly, the Directors recommend the Shareholders to vote in favour of the relevant resolutions to be proposed at the Annual General Meeting.

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 circular misleading.

To the best of the Directors’ knowledge, information and belief, having made all reasonable enquiries, no Shareholder has a material interest in and is required to abstain from voting on the resolution to be proposed at the Annual General Meeting to approve the 2017 Share Option Scheme. The Board confirm that to the best of its knowledge, information and belief having made all reasonable enquiries, as at the Latest Practicable Date, there was no voting trust or other agreement or arrangement or understanding (other than an outright sale) entered into by or binding upon any Shareholder and there was no obligation or entitlement of any Shareholder whereby he has or may have temporarily or permanently passed control over the exercise of the voting right in respect of his Shares to a third party, either generally or on a case-by-case basis.

8. GENERAL INFORMATION

Your attention is drawn to the additional information set out in the Appendix I (Explanatory statement on the Buy-back Mandate), Appendix II (Details of Directors proposed to be re-elected at the Annual General Meeting) and Appendix III (Summary of Principal Terms of the 2017 Share Option Scheme) to this circular.

Yours faithfully, Chen Yajun Chairman of the Board

– 10 –

APPENDIX I EXPLANATORY STATEMENT ON THE BUY-BACK 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 Buy-back Mandate.

1. REASONS FOR SHARE BUY-BACK

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

Share buy-back 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 Buy-back Mandate to give the Company the flexibility to do so if and when appropriate. The number of Shares to be bought back on any occasion and the price and other terms upon which the same are bought back 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 5,137,420,900 Shares.

Subject to the passing of the ordinary resolution numbered 4 set out in the notice of the Annual General Meeting in respect of the granting of the Buy-back Mandate and on the basis that no Shares are issued or bought back by the Company prior to the Annual General Meeting, the Company would be allowed under the Buy-back Mandate to buy back a maximum of 513,742,090 Shares (representing 10 percent of the total number of Shares in issue as at the date of the Annual General Meeting) during the period in which the Buy-back Mandate remains in force.

3. FUNDING OF SHARE BUY-BACK

In buying back 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 buy back its Shares. The laws of the Cayman Islands provide that the amount of capital paid in connection with a share buy-back may only be paid out of either the profits 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 buy-back may be paid out of profits 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 bought back.

– 11 –

EXPLANATORY STATEMENT ON THE BUY-BACK MANDATE

APPENDIX I

4. IMPACT OF SHARE BUY-BACK

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 2016) in the event that the Buyback Mandate was to be carried out in full at any time during the proposed buy-back period. However, the Directors do not intend to exercise the Buy-back Mandate to such extent as would, in the circumstances, have a material adverse effect 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 buy back Shares pursuant to the Buy-back 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 (the directors of the Company) and the controlling shareholders (as defined under the Listing Rules) of the Company, together with parties acting in concert with them (collectively the ‘‘Parties’’) were beneficially interested in 1,563,780,620 (including share options to be exercised) Shares, representing approximately 30.43% of the total issued share capital of the Company. On the basis that no Shares are issued or bought back prior to the date of the Annual General Meeting, in the event that the Directors exercise in full the power to buy back 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 33.82% of the total issued share capital of the Company and such an increase may give rise to an obligation to make a mandatory offer under the Takeovers Code. The Directors have no intention to make buy-back of Shares to an extent that an obligation to make a mandatory offer under the Takeovers Code will be triggered.

6. GENERAL

To the best of their knowledge and having made all reasonable enquiries, none of the Directors nor any of their respective close associates (as defined 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 notified by any core connected persons (as defined 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 Buy-back Mandate is approved by the Shareholders.

– 12 –

APPENDIX I EXPLANATORY STATEMENT ON THE BUY-BACK MANDATE

The Directors have undertaken to the Stock Exchange to exercise the power of the Company to buy back Shares pursuant to the Buy-back Mandate in accordance with the Listing Rules and the applicable laws of the Cayman Islands.

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 2016 and up to the Latest Practicable Date were as follows:

Month	Highest	Lowest
	HK$	HK$
2016
April	0.42	0.37
May	0.38	0.305
June	0.37	0.31
July	0.405	0.355
August	0.425	0.355
September	0.495	0.38
October	0.88	0.465
November	0.86	0.68
December	0.99	0.71
2017
January	0.84	0.74
February	0.85	0.76
March	0.96	0.75
April	0.85	0.78
May (up to the Latest Practicable Date)	0.80	0.70

8. SHARE BUY-BACK MADE BY THE COMPANY

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

– 13 –

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 be proposed to be reelected at the Annual General Meeting are provided below.

Mr. Zhang Mi (張弭先生), aged 60, has been an Executive Director of the Company since June 2007, the Chairman of the Company from June 2007 to March 2017 and the Vice Chairman since March 2017. He is also President of the Company.

Experience

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

Subsidiary	Position	Term of Office
Honghua Holdings Limited	director	Since 18 August 2006
	chairman, and chief	Since 8 September 2009
	executive officer
Sichuan Honghua Petroleum Equipment	director	Since 31 December 1997
Co., Ltd.
Sichuan Honghua International Co., Ltd.	director	Since 13 January 2004
Honghua Offshore Oil & Gas	chairman	Since 8 June 2009
Equipment (Jiangsu) Co., Ltd.
Shanghai Honghua Offshore Oil & Gas	executive director	Since 9 September 2009
Equipment Co., Ltd.
Honghua (China) Investment Co, Ltd.	chairman, and	Since 14 January 2010
	general manager
Honghua Oil & Gas Engineering	director	Since 14 April 2009
Services Co., Ltd.
Honghua America, LLC.	chairman	Since 11 October 2004
Egyptian Petroleum HH Rigs	director	Since 26 April 2007
Manufacturing CO. S.A.E
Gansu Hongteng Oil & Gas Equipment	director	Since 28 December 2011
Co., Ltd.

Mr. Zhang graduated from the Sichuan Petroleum Administration Vocational University in 1982, with a diploma in machinery manufacture, design and equipment. He graduated from the Party Institute of Sichuan Provincial Committee Correspondence College in 1998, with a degree in Economics and Management. In 2004 he then obtained a senior engineer qualification granted by the Committee for Evaluation of Senior Technical Positions of the China National Petroleum Corp.. He has been receiving special subsidies granted by the State Council of the PRC government since February 2007, for his significant contribution to the development of machinery engineering in the PRC.

– 14 –

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

APPENDIX II

In 2005, Mr. Zhang was awarded the Sichuan Province Prize for Outstanding Talent in Innovation (四川省第三屆傑出創新人才獎), by the Sichuan Provincial Party Committee and the Sichuan Provincial People’s Government. In 2007, he was granted the May 1 Labor Medal of Sichuan Province (四川省五一勞動獎章) by the Sichuan Provincial Federation of Trade Unions in 2007. Mr. Zhang was rewarded as Leading Entrepreneur of Foreign Trading and Export Enterprises in Sichuan for 2009. In 2005, he was rewarded as a national model worker.

Save as disclosed, Mr. Zhang did not hold any directorships in any other listed public companies in the last three years.

Length of service and emoluments

Mr. Zhang has entered into a service contract with the Company for a fixed term of 3 years commencing from 7 March 2017 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.

According to the service contract, the remuneration of Mr. Zhang is based on his management positions in the Company. The emolument will be paid in installments of 12 months, and the emolument is payable in accordance with the emolument payment arrangement of the Company and will be determined by the Company in accordance with such arrangement at the appropriate time. In case the term of office of executive director at that month is less than one month, the emolument of the executive director shall be adjusted in a pro-rata basis. The executive director appointed according to the terms of the service contract as director (whether executive director or non-executive director) of any other subsidiaries will not receive additional remuneration.

The 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 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.

– 15 –

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

APPENDIX II

Notwithstanding any provisions set out in the service contract, the executive director should avoid attending the Board’s meeting (at which he has no right to vote) to determine his remuneration, annual salary, allowances, bonus and any other benefits, such that he shall not be counted into the quorum required by the Board to approve such resolution(s).

Relationships

Other than the relationship arising from his being the Company’s vice chairman and executive director, president, member of the strategic investment and risk control committee, the member of the remuneration committee, controlling shareholder as well as his positions in the Company’s subsidiaries set forth in the table above, Mr. Zhang does not have any relationships with any other Directors, senior management, substantial shareholders (as defined in the Listing Rules), or controlling shareholders (as defined in the Listing Rules) of the Company.

Interests in Shares

As at the Latest Practicable Date, Mr. Zhang was interested in 1,563,780,620 Shares, representing 30.43% 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. Zhang that need to be brought to the attention of the Shareholders.

Mr. Ren Jie (任杰先生), aged 50, has been an Executive Director of the Company since 18 January 2008. He has been the senior vice-president of the Company since 1 January 2016.

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 qualification, 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, and in 2012, he earned a Doctor’s degree in Mechanical Design and Theory from Southwest Petroleum University. Mr. Ren is employed as an engineer by Sichuan Honghua Petroleum Equipment Co., Ltd..

– 16 –

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

APPENDIX II

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

Subsidiary	Position	Term of Office
Honghua Holdings Limited	director	Since 18 August 2006
Sichuan Honghua Petroleum Equipment	director	Since 31 December 1997
Co., Ltd.	general manager	Since 1 July 2013
Sichuan Honghua International Co.,	director and	Since 13 January 2004
Ltd.	chairman	Since 20 May 2014
Sichuan Honghua Electric Co., Ltd.	director	Since 1 August 2009
Honghua (China) Investment Co., Ltd.	director	Since 14 January 2010
Newco (H.K.) Limited	director	Since 22 June 2008
	chairman, and	Since 22 September 2009
	general manager
Honghua America, LLC.	director	Since 10 October 2008
Sichuan Honghua International (H.K.)	director	Since 25 June 2010
Limited

Save as disclosed, Mr. Ren 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 fixed term of 3 years commencing from 7 March 2017 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 to the terms and conditions of the service contract.

According to the service contract, the remuneration of Mr. Ren is based on his management positions in the Company. The emolument will be paid in installments of 12 months, and the emolument is payable in accordance with the emolument payment arrangement of the Company and will be determined by the Company in accordance with such arrangement at the appropriate time. In case the term of office 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. The executive director appointed according to the terms of the service contract as director (whether executive director or non-executive director) of any other subsidiaries will not receive additional remuneration.

The 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 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.

– 17 –

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

APPENDIX II

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.

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 meeting to determine his remuneration, annual salary, allowances, bonus and any other benefits, such that he shall not be counted into the quorum required by the Board to approve such resolution(s).

Relationships

Other than the relationship arising from his being the Company’s executive director, senior vice president, controlling shareholder (as defined in the Listing Rules), 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 defined in the Listing Rules) or controlling shareholders (as defined in the Listing Rules) of the Company.

Interests in Shares

As at the Latest Practicable Date, Mr. Ren was interested in 1,563,780,620 Shares, representing 30.43% 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 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. Qi Daqing (齊大慶先生), aged 53, has been an Independent Non-executive Director of the Company since 18 January 2008.

Experience

Mr. Qi is an independent non-executive director of Sohu.com Inc., Sino Media Holding Ltd., iKang Healthcare Group, Inc., MONO INC., Jutal Offshore Oil Services Limited and Yunfeng Financial Group Limited. Mr. Qi is currently a professor of Cheung Kong Graduate School of Business and a member of the American Accounting Association. Mr. Qi had worked for The Chinese University of Hong Kong, the Eli Broad Graduate School of Management at Michigan State University in the United States, the East-West Center in the United States and the China Features in Xinhua News Agency in the PRC. Mr. Qi graduated from Fudan University with a bachelor’s degree of science in Biophysics and a bachelor’s degree of arts in International Journalism. He obtained a master’s degree in Management from the University of Hawaii and a doctoral degree in Accounting from the Eli Broad College of Business, Michigan State University in the United States.

– 18 –

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

APPENDIX II

Save as disclosed, Mr. Qi 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 fixed term of 3 years commencing from 7 March 2017 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 office 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 fixed emolument of HK$200,000 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) actually 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 nonexecutive director and chairman of the Company’s audit committee and saved as disclosed above, Mr. Qi does not have any relationships with any other Directors, senior management, substantial shareholders (as defined in the Listing Rules), or controlling shareholders (as defined in the Listing Rules) of the Company.

Interests in Shares

As at the Latest Practicable Date, Mr. Qi was interested in 3,450,000 share options, representing 0.067% of the Company’s total issued Shares under Part XV of the SFO.

– 19 –

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

APPENDIX II

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.

Mr. Chen Yajun (陳亞軍先生), aged 54, has been an Executive Director of the Company and Chairman of the Board since 29 March 2017.

Experience

Mr. Chen joined in CASIC Group since 1988 and had leaderships in the second institute, the forth research institute of CASIC Group and China Aerospace Automotive Co., Ltd. respectively. Mr. Chen obtained Bachelor’s degree and Master’s degree from Beijing Institute of Technology in 1985 and 1988 respectively.

Saved as disclosed above, Mr. Chen did not hold any directorships in any other listed public companies in the last three years.

Length of service and emoluments

Mr. Chen has entered into an executive director’s service contract with the Company for a term of 3 years commencing from 29 March 2017, subject to retirement by rotation and reelection in accordance with the memorandum and articles of association of the Company (‘‘Articles’’). According to his service contract, Mr. Chen’s remuneration consists of annual basic remuneration and annual performance appraisal remuneration. The annual basic remuneration is about renminbi (RMB) 1.08 million, and the annual performance appraisal remuneration is determined based on the executive director’s remuneration management method of the Company. Mr. Chen’s remuneration was determined by the Board after taking into consideration of his qualification, experience and responsibility.

Relationships

Other than the relationship arising from his being the Company’s chairman and executive director, chairman of the strategic investment and risk control committee and the member of the remuneration committee and saved as disclosed above, Mr. Chen does not have any relationships with any other Directors, senior management, substantial shareholders (as defined in the Listing Rules), or controlling shareholders (as defined in the Listing Rules) of the Company.

Interests in Shares

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

– 20 –

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

APPENDIX II

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. Chen that need to be brought to the attention of the Shareholders.

Mr. Han Guangrong (韓廣榮先生), aged 55, has been a Non-executive Director of the Company since 29 March 2017.

Experience

Mr. Han is currently the deputy director of the international-business department of CASIC and the vice chairman of Aerospace Hi-tech Holding Group Co., Ltd. Mr. Han joined in CASIC Group since 1984 and had leaderships in the third institute of CASIC Group and CASIC. Mr. Han obtained Bachelor of engineering degree from Harbin Institute of Technology and Master of engineering degree from Beihang University in 1984 and 1997 respectively.

Saved as disclosed above, Mr. Han did not hold any directorships in any other listed public companies in the last three years.

Length of service and emoluments

Mr. Han has entered into a non-executive director’s service contract with the Company for a term of 3 years with effect from 29 March 2017, subject to retirement by rotation and reelection in accordance with the Articles. Mr. Han does not receive director’s remuneration from the Company.

Relationships

Other than the relationship arising from his being the Company’s non-executive director and saved as disclosed above, Mr. Han does not have any relationships with any other Directors, senior management, substantial shareholders (as defined in the Listing Rules), or controlling shareholders (as defined in the Listing Rules) of the Company.

Interests in Shares

As at the Latest Practicable Date, Mr. Han 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. Han that need to be brought to the attention of the Shareholders.

– 21 –

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

APPENDIX II

Mr. Chen Wenle (陳文樂先生), aged 37, has been the Non-executive Director of the Company since 29 March 2017.

Experience

Mr. Chen is currently the director of corporate plan and development department of Shenzhen Aerospace Industry Technology Research Institute Co., Ltd. and chairman of Zhuhai Aerospace Science and Technology Innovation Industrial Co., Ltd. Mr. Chen has worked in Shum Yip Group Limited and joined in CASIC Group in 2011. Mr. Chen obtained Bachelor of finance degree from Shandong University in 2003 and Master of economics degree from Shanghai University of Finance and Economics in 2006.

Saved as disclosed above, Mr. Chen did not hold any directorships in any other listed public companies in the last three years.

Length of service and emoluments

Mr. Chen has entered into a non-executive director’s service contract with the Company for a term of 3 years with effect from 29 March 2017, subject to retirement by rotation and reelection in accordance with the Articles. Mr. Chen does not receive director’s remuneration from the Company.

Relationships

Other than the relationship arising from his being the Company’s non-executive director and saved as disclosed above, Mr. Chen does not have any relationships with any other Directors, senior management, substantial shareholders (as defined in the Listing Rules), or controlling shareholders (as defined in the Listing Rules) of the Company.

Interests in Shares

As at the Latest Practicable Date, Mr. Chen 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. Chen that need to be brought to the attention of the Shareholders.

– 22 –

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

APPENDIX II

Ms. Su Mei (蘇梅女士), aged 48, has been an Independent Non-executive Director of the Company since 29 March 2017.

Experience

Ms. Su is currently the chief executive officer of Beijing YaMeiHeZhong Consultanting Co., Ltd. Ms. Su once had leaderships in Discipline Inspection Commission of Sichuan Province and Sichuan Development and Reform Commission and State-owned Assets Supervision and Administration Commission of State Council, worked as the vice-president in Sichuan Provincial Investment Group, the chairman of Sichuan Chuantou Water Group and vice-president of Joneson Group. Ms. Su obtained Doctor’s degree in finance and Master’s degree in securities investment from Sichuan University in 2013 and 1999 respectively, and obtained Bachelor’s degree of Chinese from Shandong University in 1991.

Saved as disclosed above, Ms. Su did not hold any directorships in any other listed public companies in the last three years.

Length of service and emoluments

Ms. Su has entered into an independent non-executive director’s service contract with the Company for a term of 3 years with effect from 29 March 2017, subject to retirement by rotation and re-election in accordance with the Articles. Ms. Su is entitled to director’s emolument of HKD100,000 per annum which was determined by the Board after taking into consideration of her qualification, experience and responsibility.

Relationships

Other than the relationship arising from her being the Company’s independent nonexecutive director, member of audit committee and member of remuneration committee and saved as disclosed above, Ms. Su does not have any relationships with any other Directors, senior management, substantial shareholders (as defined in the Listing Rules), or controlling shareholders (as defined in the Listing Rules) of the Company.

Interests in Shares

As at the Latest Practicable Date, Ms. Su was interested in 150,000 Shares, representing 0.003% 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 Ms. Su that need to be brought to the attention of the Shareholders.

– 23 –

SUMMARY OF PRINCIPAL TERMS OF THE 2017 SHARE OPTION SCHEME

APPENDIX III

The following is a summary of the principal terms of the 2017 Share Option Scheme (‘‘Share Option Scheme’’) proposed to be approved by the Shareholders at the Annual General Meeting:

1. SUMMARY OF THE PRINCIPAL TERMS

(i) Purpose of the Share Option Scheme

The purpose of the Scheme is to provide incentives or rewards to Participants for their contribution to the Group and/or to enable the Group to recruit and retain high caliber employees and attract human resources that are available to the Group. The Scheme will give the Participants an opportunity to have a personal stake in the Company and will (a) motivate the Participants to optimise their performance and efficiency; and (b) attract and retain the Participants whose contributions are important to the long-term growth and profitability of the Group.

(ii) Who may join and basis of eligibility

The Board may, at its absolute discretion and on such terms as it may think fit, grant any Participant options to subscribe at a price calculated in accordance with paragraph (iii) below for such number of Shares as it may determine in accordance with the terms of the Share Option Scheme. The basis of eligibility of any Participant to the grant of any option shall be determined by the Board (or as the case may be, the Independent Nonexecutive Directors) from time to time on the basis of his contribution or potential contribution to the development and growth of the Group.

(iii) Price of Shares

The subscription price of a Share in respect of any particular option granted under the Share Option Scheme shall be a price solely determined by the Board and notified to a Participant and shall be at least the higher of: (a) the closing price of the Shares as stated in the Stock Exchange’s daily quotations sheet on the date of grant of the option; (b) the average of the closing prices of the Shares as stated in the Stock Exchange’s daily quotations sheets for the 5 business days immediately preceding the date of grant of the option; and (c) the nominal value of a Share on the date of grant of the option.

(iv) Grant of options and acceptance of offers

An offer for the grant of options must be made to a Participant on a trading day by letter in such form as the Board may from time to time determine, requiring the Participant to undertake to hold the option on the terms on which it is to be granted and to be bound by the provisions of the Share Option Scheme and shall remain open for acceptance by the Participant concerned within seven days inclusive of the day on which such offer was made. The amount payable by the grantee of an option to the Company on acceptance of the offer for the grant of an option is HK$1.00. No Offer shall be made after any inside information (as defined in the Listing Rules) has come to the knowledge of the Company, until such information has been announced with the requirements of the

– 24 –

SUMMARY OF PRINCIPAL TERMS OF THE 2017 SHARE OPTION SCHEME

APPENDIX III

Listing Rules. No Option may be granted during the period commencing one month immediately preceding the earlier of: (a) the date of the meeting of the Board (as such date is first notified to the Stock Exchange in accordance with the Listing Rules) for the approval of the Company’s results for any year, half-year, quarterly or any other interim period (whether or not required under the Listing Rules); and (b) the deadline for the Company to publish an announcement of its results for any year or half-year under the Listing Rules, or quarterly or any other interim period (whether or not required under the Listing Rules).

(v) Maximum number of Shares

• (a) The aggregate number of Shares which may be issued upon exercise of all outstanding options granted and yet to be exercised under the Share Option Scheme and any other share option schemes of the Company must not exceed 30% of the Shares in issue from time to time (the ‘‘Scheme Limit’’). No options may be granted under the Share Option Scheme or any other share option schemes of the Company, if this will result in such 30% limit being exceeded.

• (b) Subject to the Scheme Limit and sub-paragraph (c) and (d) below, the maximum number of Shares issuable upon exercise of all options to be granted under the Share Option Scheme and any other share option schemes of the Company as from the commencement of the Scheme Period (excluding, for this purpose, Shares issuable upon exercise of options which have been granted but which have lapsed in accordance with the terms of the Share Option Scheme or any other share option schemes of the Company) must not in aggregate exceed 10% of the nominal amount of all the issued Shares as at the Adoption Date (the ‘‘Scheme Mandate Limit’’).

• (c) The Scheme Mandate Limit may be refreshed at any time by obtaining approval of the Shareholders in general meeting provided that the total number of Shares which may be issued upon exercise of all options to be granted under the Share Option Scheme and any other share option schemes of the Company must not exceed 10% of the Shares in issue at the date of approval of the limit (the ‘‘Refreshed Limit’’). For the avoidance of doubt, if any subsequent consolidation or subdivision of shares of the Company is effected after the 10% limit has been approved, the maximum number of Shares that may be issued upon exercise of all share options to be granted under all of the schemes of the Company under the 10% limit as a percentage of the total number of issued Shares at the date immediately before and after such consolidation or subdivision shall be the same and such maximum number of Shares shall be adjusted accordingly. Options previously granted under the Share Option Scheme or any other share option schemes of the Company (including those outstanding, cancelled or lapsed in accordance with the terms of the Share Option Scheme or any other share option schemes of the Company) will not be

– 25 –

SUMMARY OF PRINCIPAL TERMS OF THE 2017 SHARE OPTION SCHEME

APPENDIX III

counted for the purposes of calculating the Refreshed Limit. A circular must be sent to the Shareholders containing the information as required under the Listing Rules in this regard.

• (d) The Company may seek separate approval of the Shareholders in general meeting for granting options beyond the 10% limit under sub-paragraph (b) and (c) provided the options in excess of the limit are granted only to grantees specifically identified by the Company before such approval is sought. In such event, the Company must send a circular to the Shareholders containing a generic description of such grantees, the number and terms of such options to be granted and the purpose of granting options to them with an explanation as to how the terms of the options will serve such purpose, and such other information required under the Listing Rules.

(vi) Maximum entitlement of each Eligible Person

The total number of Shares issued and to be issued upon exercise of options granted to any Participant (including both exercised and outstanding options) under the Share Option Scheme, in any 12-month period up to the date of grant shall not exceed 1% of the Shares in issue. Any further grant of options in excess of such limit must be separately approved by Shareholders in general meeting with such Participant and his associates (as defined under the Listing Rules) abstaining from voting. In such event, the Company must send a circular to the Shareholders containing the identity of the Participant, the number and terms of the options to be granted (and options previously granted to such Participant), and all other information required under the Listing Rules. The number and terms (including the exercise price) of the options to be granted must be fixed before the approval of the Shareholders and the date of the Board meeting proposing such further granted should be taken as the date of grant for the purpose of calculating the subscription price.

(vii) Grant of options to certain connected persons

• (a) Any grant of an option to a Director, chief executive or substantial Shareholder of the Company (or any of their respective associates (as defined under the Listing Rules)) must be approved by the Independent Non-executive Directors (excluding any independent non-executive Director who is the grantee of the option).

• (b) Where any grant of options to a substantial Shareholder of the Company or an independent non-executive Director (or any of their respective associates (as defined under the Listing Rules)) will result in the total number of Shares issued and to be issued upon exercise of all options already granted and to be granted to such person under the Share Option Scheme and any other share option schemes of the Company (including options exercise, cancelled and outstanding) in any 12-month period up to and including the date of grant:

• (i) representing in aggregate over 0.1% of the Shares in issue; and

– 26 –

SUMMARY OF PRINCIPAL TERMS OF THE 2017 SHARE OPTION SCHEME

APPENDIX III

• (ii) having an aggregate value, based on the closing price of the Shares at the date of each grant, in excess of HK$5 million;

such further grant of options is required to be approved by Shareholders in general meeting of the Company, with voting to be taken by way of poll. The Company shall send a circular to the Shareholders containing all information as required under the Listing Rules in this regard. All connected persons of the Company shall abstain from voting (except where any connected person intends to vote against the proposed grant). Any change in the terms of an option granted to a substantial Shareholder of the Company or an independent nonexecutive Director or any of their respective associates (as defined under the Listing Rules) is also required to be approved by Shareholders in the aforesaid manner.

(viii) Time of exercise of option

An option may be exercised in accordance with the terms of the Share Option Scheme at any time during a period as the Board may determine which shall not exceed ten years from the date of grant subject to the provisions of early termination thereof.

(ix) Performance targets and minimum holding period

Save as determined by the Board and provided in the offer of the grant of the relevant options, there is no performance target which must be achieved or any minimum period for which an option must be held before any of the options can be exercised.

(x) Ranking of Shares

The Shares to be allotted upon the exercise of an option will be subject to all the provisions of the Articles for the time being in force and will rank pari passu in all respects with the fully paid Shares in issue on the date of allotment and accordingly will entitle the holders to participate in all dividends or other distribution paid or made after the date of allotment other than any dividend or other distribution previously declared or recommended or resolved to be paid or made with respect to a record date which shall be on or before the date of allotment.

(xi) Rights are personal to grantee

An option shall not be transferable or assignable and shall personal to the grantee of the option.

(xii) Rights on cessation of employment by death

In the event of the death of the grantee (provided that none of the events which would be a ground for termination of employment referred to in (xiii) below arises within a period of three years prior to the death, in the case the grantee is an employee at the date of grant), the legal representative(s) of the grantee may exercise the option up to the

– 27 –

SUMMARY OF PRINCIPAL TERMS OF THE 2017 SHARE OPTION SCHEME

APPENDIX III

grantee’s entitlement (to the extent which has become exercisable and not already exercised) within a period of 12 months following his death provided that where any of the events referred to in (xvi), (xvii) and (xviii) occurs prior to his death or within such period of six months following his death, then his personal representative(s) may so exercise the option within such of the various periods respectively set out therein.

(xiii) Rights on cessation of employment by dismissal

In the event that the grantee is an employee of the Group at the date of grant and he subsequently ceases to be an employee of the Group on any one or more of the grounds that he has been guilty of serious misconduct, or has committed an act of bankruptcy or has become insolvent or has made any arrangement or composition with his or her creditors generally, or has been convicted of any criminal offence involving his integrity or honesty or (if so determined by the Board) on any other ground on which an employer would be entitled to terminate his employment at common law or pursuant to any applicable laws or under the grantee’s service contract with the Group, his option shall lapse automatically (to the extent not already exercised) on the date of cessation of his employment with the Group.

(xiv) Rights on cessation of employment for other reasons

In the event that the grantee is an employee of the Group when an Offer is made to him and he subsequently ceases to be an employee of the Group for any reason other than his death or the termination of his employment on one or more of the grounds specified in (xiii) above, the option (to the extend not already exercised) shall lapse on the expiry of three months after the date of cessation of such employment (which date will be the last actual working day with the Company or the relevant member of the Group whether salary is paid in lieu of notice or not).

(xv) Effects of alterations to share capital

In the event of a capitalization issue, rights issue, consolidation, subdivision or reduction of the share capital of the Company, such corresponding adjustments (if any) shall be made in the number of Shares subject to the option so far as unexercised; and/or the subscription prices. In respect of any such adjustments, other than any made on a capitalization issue, an independent financial adviser, or the auditors of the Company shall certify or confirm in writing (as the case may be) to the Board to be in their opinion fair and reasonable in compliance with Rule 17.03(13) of the Listing Rules and the note thereto and the supplemental guidance attached to the letter from the Stock Exchange dated September 5, 2005 to all issuers relating to the share option schemes (the ‘‘Supplemental Guidance’’). Any such adjustments will be made on the basis that a grantee shall have the same proportion of the issued share capital of the Company (as interpreted in accordance with the Supplemental Guidance) for which any grantee of any option is entitled to subscribe pursuant to the options held by him before such adjustments and the aggregate subscription price payable on the full exercise of any option is to remain as nearly as possible the same (and in any event not greater than) as it was before such event. No such adjustments will be made the effect of which would be to enable a

– 28 –

SUMMARY OF PRINCIPAL TERMS OF THE 2017 SHARE OPTION SCHEME

APPENDIX III

Share to be issued at less than its nominal value. The issue of securities as consideration in a transaction is not to be regarded as a circumstance regarding any such adjustments. Any adjustment to be made will comply with the Listing Rules, the Supplemental Guidance and any future guidance/interpretation of the Listing Rules issued by the Stock Exchange from time to time.

(xvi) Rights on a general offer

In the event of a general offer (whether by way of takeover offer or scheme of arrangement or otherwise in like manner) being made to all the Shareholders (or all such holders other than the offeror and/or any person controlled by the offeror and/or any person acting in association or concert with the offeror) and such offer becoming or being declared unconditional (in the case of a takeover offer), or such scheme of arrangement has been approved by the necessary number of Shareholders at the requisite meetings (in the case of a scheme of arrangement), the grantee (or as the case may be, his legal personal representative(s)) shall be entitled to exercise his options in full (to the extent not already exercised) at any time before the close of the offer (in the case of a takeover offer), or before the record date for determining entitlements under the scheme of arrangement (the ‘‘Record Date’’) (in the case of a scheme of arrangement). To the extent that they have not been so exercised, the options shall immediately lapse upon the close of the offer or the Record Date.

(xvii) Rights on winding-up

In the event a notice is given by the Company to its members to convene a general meeting for the purposes of considering, and if thought fit, approving a resolution to voluntarily wind-up the Company, the Company shall on the same date as or soon after it despatches such notice to each member of the Company give notice thereof to all grantees and thereupon, each grantee (or, as the case may be, his legal personal representative(s)) shall be entitled to exercise all or any of his options at any time not later than two business days prior to the proposed general meeting of the Company by giving notice in writing to the Company, accompanied by a remittance for the full amount of the aggregate subscription price for the Shares in respect of which the notice is given whereupon the Company shall as soon as possible and, in any event, no later than the business day immediately prior to the date of the proposed general meeting referred to above, allot the relevant Shares to the Grantee credited as fully paid.

(xviii) Rights on compromise or arrangement

Subject to clause (xvi), in the event of a compromise or arrangement between the Company and the Shareholders or its creditors being proposed in connection with a scheme for the reconstruction or amalgamation of the Company pursuant to the Companies Law, the Company shall give notice thereof to all the grantees (or as the case may be, his legal personal representative(s)) on the same day as it gives notice of the meeting to the Shareholders or its creditors to consider such a compromise or arrangement and the options shall become exercisable as from such date until the earlier of (i) two months after that date and (ii) the date on which such compromise or arrangement is

– 29 –

SUMMARY OF PRINCIPAL TERMS OF THE 2017 SHARE OPTION SCHEME

APPENDIX III

sanctioned by the court of the Cayman Islands and becomes effective, but the exercise of any option as aforesaid shall be conditional upon such compromise or arrangement being sanctioned by the court and becoming effective.

(xix) 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 (viii) above;

• (b) the date on which the grantee commits a breach of paragraph (xi) above;

• (c) the expiry of the relevant period within which the options are exercisable or the occurrence of the relevant event referred to in paragraph (xii), (xiv), (xvi), (xvii) and (xviii) above;

• (d) subject to (xvii) above, the date of the commencement of the winding-up of the Company;

• (e) in the event of (xiii) above, the date on which the grantee ceases his employment with the Group;

• (f) the occurrence of any act of bankruptcy, insolvency or entering into of any arrangements or compositions with his creditors generally by the grantee, or conviction of the grantee of any criminal offence involving his integrity or honesty; and

• (g) where the grantee is a substantial shareholder of any member of the Group, the date on which the grantee ceases to be a substantial shareholder of such member of the Group.

(xx) Cancellation of options granted but not yet exercised

Any cancellation of options granted but not exercised may be effected on such terms as may be agreed with the relevant grantee, as the Board may in its absolute discretion sees fit and in manner that complies with all applicable legal requirements for such cancellation.

(xxi) Period of the Share Option Scheme

The Share Option Scheme will remain in force for a period of ten years commencing on the date on which the Share Option Scheme is adopted by the Shareholders in general meeting or by way of written resolution and shall expire at the close of business on the day preceding the tenth anniversary thereof unless terminated earlier by the Shareholders in general meeting or by the Board.

– 30 –

SUMMARY OF PRINCIPAL TERMS OF THE 2017 SHARE OPTION SCHEME

APPENDIX III

(xxii) Alteration to the Share Option Scheme

• (a) The Share Option Scheme may be altered in any respect by resolution of the Board except that alternations of the provisions of the Share Option Scheme which alters to the advantage of the grantees or prospective grantees of the options relating to matters governed by Rule 17.03 of the Listing Rules shall not be made except with the prior approval of the Shareholders in general meeting.

• (b) Any amendment to any terms of the Share Option Scheme, which are of a material nature or any change to the terms of options granted, or any change to the authority of the Board in respect of alteration of the Share Option Scheme must be approved by Shareholders in general meeting, except where the alterations take effect automatically under the existing terms of the Share Option Scheme.

• (c) Any amendment to any terms of the Share Option Scheme or the options granted shall comply with the relevant requirements of Chapter 17 of the Listing Rules.

(xxiii) Termination to the Share Option Scheme

The Company by resolution in general meeting or the Board may at any time terminate the operation of the Share Option Scheme and in such event no further options will be offered but options granted prior to such termination shall continue to be valid and exercisable in accordance with provisions of the Share Option Scheme.

(xxiv) Conditions of the Share Option Scheme

The Share Option Scheme is conditional on the Listing Committee of the Stock Exchange granting the listing of, and permission to deal in the Shares to issued pursuant to the exercise of any options granted under the Share Option Scheme.

2. DISCLOSURE OF THE SHARE OPTION SCHEME

The Company shall disclose all relevant information of the Share Option Scheme as required by the Listing Rules or any other applicable rules and regulations in its annual and interim reports.

– 31 –

NOTICE OF THE ANNUAL GENERAL MEETING

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 Renaissance Harbour View Hotel Hong Kong, 1 Harbour Road, Wanchai, Hong Kong on Wednesday, 14 June 2017 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 auditors of the Company (the ‘‘Auditors’’) for the year ended 31 December 2016;

2. (i) (a) To re-elect Mr. Zhang Mi as executive Director;

   • (b) To re-elect Mr. Ren Jie as executive Director;

   • (c) To re-elect Mr. Qi Daqing as independent non-executive Director;

   • (d) To re-elect Mr. Chen Yajun as executive Director;

   • (e) To re-elect Mr. Han Guangrong as non-executive Director;

   • (f) To re-elect Mr. Chen Wenle as non-executive Director;

   • (g) To re-elect Ms. Su Mei as independent non-executive Director; and

3. (ii) To authorize the Board of Directors to fix Directors’ remuneration;

4. To re-appoint PricewaterhouseCoopers as Auditors for the year ending 31 December 2017 and authorise the Board of Directors to fix their remuneration;

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

‘‘THAT

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

– 32 –

NOTICE OF THE ANNUAL GENERAL MEETING

• (b) the total number of shares of the Company to be bought back pursuant to the approval in paragraph (a) above shall not exceed 10% of the total number of shares 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.’’;

• To consider as special business and, if thought fit, pass with or without amendments, the following resolution as an ordinary resolution:

‘‘THAT

• (a) the exercise by the Directors during the Relevant Period (as defined 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 defined 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 fixed 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 officers 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 number of 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 number of shares of the Company in issue as at the date of passing of this resolution and the said approval shall be limited accordingly; and

– 33 –

NOTICE OF THE ANNUAL GENERAL MEETING

• (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

• To consider as special business and, if thought fit, 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 5 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 number of shares of the Company bought back by the Company pursuant to the exercise by the Directors of the Company of the powers of the Company to buy back such shares since the granting of such general mandate referred to in the above resolution numbered 4 provided that such amount shall not exceed 10% of the total number of shares of the Company in issue as at the date of passing of this resolution.’’

1. To consider and, if thought fit, pass the following resolution as an ordinary resolution of the Company:

‘‘THAT:

• (a) subject to and conditional upon The Stock Exchange of Hong Kong Limited (the ‘‘Stock Exchange’’) granting approval of the listing of, and permission to deal in, shares of the Company (the ‘‘Shares’’) which may fall to be allotted and issued pursuant to the exercise of any option granted under the 2017 Share Option Scheme of the Company, the rules of which are contained in the document marked ‘‘A’’ produced to the meeting and for the purposes of identification signed by the chairman of the meeting, the 2017 Share Option Scheme be and is hereby approved and adopted and that the directors of the Company (the‘‘Directors’’) be and are hereby authorised to do all such acts and to enter into all such transactions, arrangements and agreements as may be necessary or expedient in order to give full effect to the 2017 Share Option Scheme including but without limitation:

• (i) to administer and grant options under the 2017 Share Option Scheme;

– 34 –

NOTICE OF THE ANNUAL GENERAL MEETING

• (ii) to modify and/or amend the 2017 Share Option Scheme from time to time provided that such modification and/or amendment is effected in accordance with the provisions of the 2017 Share Option Scheme relating to modification and/or amendment and the requirements of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited;

• (iii) to allot, issue and deal with from time to time such number of Shares as may fall to be issued pursuant to the exercise of the options under the 2017 Share Option Scheme, provided always that the total number of Shares subject to the 2017 Share Option Scheme, when aggregated with any Shares subject to any grants after the date of passing this resolution pursuant to any other share option schemes, shall not exceed 10% of the relevant class of the shares of the Company in issue as at the date of passing this resolution, but the Company may seek approval of its shareholders in general meeting for refreshing the 10% limit under the 2017 Share Option Scheme and the maximum number of Shares which may be issued upon exercise of all outstanding options granted and yet to be exercised under the 2017 Share Option Scheme and any other share option schemes of the Company in issue shall not exceed 30% of the relevant class of the shares of the Company in issue from time to time; and

• (iv) to take all such steps as may be necessary, desirable or expedient to carry into effect the 2017 Share Option Scheme from the close of business of the day on which this resolution is passed; and

• (b) upon the 2017 Share Option Scheme becoming unconditional, the Existing Share Option Scheme which was adopted by the Company on 21 January 2008 be and is hereby terminated with effect from the date on which such resolution became unconditional.’’

On behalf of the Board Chen Yajun Chairman

PRC, 12 May 2017

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. Every member present in person or by proxy shall be entitled to one vote for each share held by him.

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 certified copy of such power of attorney or authority, must be deposited with the Company’s Branch Share Registrar and Transfer Office in Hong Kong, Computershare Hong Kong Investor Services

– 35 –

NOTICE OF THE ANNUAL GENERAL MEETING

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 the above meeting (i.e. not later than 9:30 a.m. on Monday, 12 June 2017 (Hong Kong time)) or the adjourned meeting (as the case may be). 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.

1. For determining the entitlement to attend and vote at the above Meeting, the Register of Members of the Company will be closed from Thursday, 8 June 2017 to Wednesday, 14 June 2017, both dates inclusive, during which period no transfer of shares of the Company will be registered. In order to be eligible to attend and vote at the Meeting, all transfer documents accompanied by the relevant share certificates must be lodged with the Company’s Branch Share Registrar and Transfer Office 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 Wednesday, 7 June 2017.

2. In relation to the ordinary resolutions numbered 4 to 6 set out in the above notice, the Directors wish to state that they have no immediate plan to issue any new shares or buy back any existing shares of the Company.

4. References to time and dates in this notice are to Hong Kong time and dates.

As at the date of this notice, Mr. Chen Yajun, Mr. Zhang Mi, Mr. Ren Jie and Mr. Liu Zhi are the executive Directors of the Company, and Mr. Han Guangrong and Mr. Chen Wenle are the non-executive Directors of the Company, and Mr. Liu Xiaofeng, Mr. Qi Daqing, Mr. Chen Guoming and Ms. Su Mei are the independent non-executive Directors of the Company.

– 36 –