Honghua Group Limited

Hong Kong Exchanges and Clearing Limited and The Stock Exchange of Hong Kong Limited take no responsibility for the contents of this announcement, make no representation as to its accuracy or completeness and expressly disclaim any liability whatsoever for any loss howsoever arising from or in reliance upon the whole or any part of the contents of this announcement.

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宏華集團有限公司

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

(Stock Code: 196)

ADOPTION OF THE 2021 RESTRICTED

SHARE AWARD SCHEME

Reference is made to the announcement of the Company dated 30 December 2011 in relation to the Restricted Share Award Scheme. The Restricted Share Award Scheme adopted by the company on 30 December 2011 will expire on 30 December 2021. As at the date of this announcement, under the original Scheme, 61,089,300 Shares may be administered and have not yet been granted (representing approximately 1.14% of the total number of issued Shares of the Company).

The Board of the Company has adopted the 2021 Restricted Share Award Scheme on the Adoption Date. The Scheme will be valid and effective for a period of 10 years commencing on the Adoption Date. With the prior approval of the Board, the Trustee may purchase Shares up to 5% of the issued share capital of the Company from time to time in accordance with the Scheme Rules ((including the Shares

which may be administered and have not yet been granted under the original Scheme).

The Scheme does not constitute a share option scheme pursuant to Chapter 17 of the Listing Rules and is a discretionary scheme of the Company. And no approval of Shareholders is required for adoption of the Scheme.

Reference is made to the announcement of the Company dated 30 December 2011 in relation to the Restricted Share Award Scheme, the Restricted Share Award Scheme adopted by the company on 30 December 2011 will expire on 30 December 2021. Nonetheless, the rights and obligations of the Eligible Participant and the Company with respect to the original Scheme that have been granted or earmarked pursuant to the original Scheme on or before the termination date as provided (or will be provided) in the relevant grant letters shall remain in full force and effect except otherwise provided for in such grant letters. As at the date of this announcement, the total number of shares of the Company in issue was 5,355,994,900 shares. Under the original Scheme, 61,089,300 Shares may be administered and have not yet been granted (representing approximately 1.14% of the total number of issued Shares of the Company).

The board of directors of Honghua Group Limited announces that the Board has adopted the 2021 Restricted Share Award Scheme on the Adoption Date. The Scheme will be valid and effective for a period of 10 years commencing on the Adoption Date. The Scheme will be as an incentive to recognise the contributions by the Eligible Participants and to give incentives in order to retain them for their continuing operation and development and to attract suitable personnel for further development of the Group, and to provide them with a direct economic interest in attaining the long-term business objectives of the Group.

With the prior approval of the Board, the Trustee may purchase Shares up to 5% of the issued share capital of the Company from time to time in accordance with the

Scheme Rules. The Shares which may be administered and have not yet been granted under the original Scheme as at the Adoption Date shall also be included in the aforementioned 5% maximum limit under the Scheme. As at the date of this announcement, the number of Shares which may be administered and have not yet been granted under the original Scheme is 61,089,300.

Pursuant to the Scheme Rules, existing Shares (including the 61,089,300 Shares which may be administered and have not yet been granted under the original Scheme) will be purchased by the Trustee from the market and be held in trust for the relevant Selected Participant until such Shares are vested with the relevant Selected Participants in accordance with the Scheme Rules.

For the avoidance of doubt, no new Shares will be granted under the Scheme, and no approval of Shareholders is required for adoption or implementation of the Scheme.

Listing Rules Implication

The Scheme does not constitute a share option scheme pursuant to Chapter 17 of the Listing Rules and is a discretionary scheme of the Company.

Eligible Participants cover any Employee or Director, any consultant or adviser (whether on any employment or contractual or honorary basis and whether paid or unpaid) of the Company or any member of the Group, who, in the absolute opinion of the Board, have contributed to the Company or the Group. Where any grant of Restricted Shares is proposed to be made to any Selected Participant who is a Director, such grant must first be approved by all the independent non-executive Directors and in each case excluding any independent non-executive Director who is the proposed Selected Participant, and the grant of the Restricted Shares to the Director may constitute a connected transaction. However, given the grant of Restricted Shares to a Director will form part of the remuneration of the relevant Director under his service contract, such grant of Restricted Shares are exempted from all the reporting, announcement and independent shareholders’ approval

requirements under rule 14A.73(6) and 14A.95 of the Listing Rules. In the event that the Board grants the Restricted Shares to a connected person (as defined under the Listing Rules) of the Company [other than a director of any company of the Group], the Company shall comply with the relevant requirements under Chapter 14A of the Listing Rules.

Reasons for the adoption of the Scheme

The Directors strongly believe that the future success of the Company is closely tied to the commitment and efforts of the Eligible Participants. The Board proposes the Scheme to increase the degree to which the interests of the Eligible Participants are directly tied to the fortunes of the Company and the Shareholders. The awards to be made under the Scheme enable the Selected Participants to see their fortunes more directly linked to that of the Shareholders through the mechanism under the Scheme. The Restricted Shares to be awarded will be calculated and awarded on the basis of specific pre-defined criteria that directly links to the Company’s operating performance.

Summary of the Scheme Rules

A summary of the Scheme Rules is set out below.

Purposes and Objectives

The purpose of the Scheme is to recognise the contributions by the Eligible Participants and to give incentives in order to retain them for their continuing operation and development and to attract suitable personnel for further development of the Group, and to provide them with a direct economic interest in attaining the long-term business objectives of the Company.

Administration

The Scheme shall be subject to the administration of the Board in accordance with the Scheme Rules.

Determination of Eligibility

The eligibility of any Eligible Participant and Selected Participant shall be determined by the Board from time to time on the basis of their contribution or potential contribution to the development and growth of the Group.

Maximum Limit

The Board shall not make any further award of the Restricted Shares which will result in the aggregate number of the Restricted Shares awarded by the Board throughout the duration of the Scheme to be in excess of 5% of the issued Share capital of the Company from time to time. The maximum number of the Restricted Shares which may be awarded to a Selected Participant under the Scheme shall not exceed 1% of the issued share capital of the Company from time to time.

Restrictions

No instructions and no payments to purchase Shares shall be given to the Trustee by the Board when any Directors is in possession of inside information in relation to the Group or where dealings by Directors are prohibited under any code or requirement of the Listing Rules and all applicable laws from time to time.

No grant shall be made to any Selected Participant:

(a) after inside information has come to the Company’s knowledge, until such information has been announced;

(b) on any day on which the financial results of the Company are published and:

(i) during the period of 60 days immediately preceding the publication date of the annual results or, if shorter, the period from the end of the relevant financial year up to the publication date of the results; and

(ii) during the period of 30 days immediately preceding the publication date of the quarterly results (if any) and half-year results or, if shorter, the period from the end of the relevant quarterly or half-year period up to the publication date of the results.

(c) in any circumstances which are prohibited under the Listing Rules or where the requisite approval from any applicable regulatory authorities has not been granted.

Operation

Pursuant to the Scheme Rules, the Board may, from time to time, at its absolute discretion select the Eligible Participant(s) (excluding any Excluded Participant) after taking into various factors as they deem appropriate as a Selected Participant and determines the number of the Restricted Shares to be awarded. Where any grant of the Restricted Shares is proposed to be made to any Selected Participant who is a Director, such grant must first be approved by all the independent non-executive Directors (and in each case excluding any independent non-executive Director who is the proposed Selected Participant). The grant of the Restricted Shares to the Director may constitute a connected transaction. However, given the grant of Restricted Shares to a Director will form part of the remuneration of the relevant Director under his service contract, such grant of Restricted Shares are exempted from all the reporting, announcement and independent shareholders’ approval requirements under rule 14A.73(6) and 14A.95 of the Listing Rules In the event that the Board grants the Restricted Share to a connected person (as defined under the Listing Rules), the Company shall also comply with the relevant requirements under Chapter 14A of the Listing Rules .

The Board shall cause to pay the Trustee the purchase price and the related expenses from the Company’s resources for the Shares to be purchased by the Trustee. The Trustee shall apply the purchase price to purchase from the market the maximum number of Shares and shall hold such Shares until they are vested in the relevant Selected Participant(s) in accordance with the Scheme Rules and the Trust Deed. For the avoidance of doubt, all Shares purchased as aforesaid shall only be used for allocation to the Selected Participant(s) in accordance with the Scheme Rules. The Board shall issue a written grant letter to the Selected Participants upon granting of the Restricted Shares. The grant of Restricted Shares is subject to acceptance by the Selected Participants. Restricted Shares granted to but not accepted by the Selected Participants shall become Unaccepted Shares.

The Selected Participant is not entitled to receive any income or distribution, such as dividend derived from the Restricted Shares allocated to him, prior to the vesting of the Restricted Shares in the Selected Participants. The said income or distributions

shall be used by the Trustee for the payment of fees, costs and expenses of the Trustee and in respect of the remainder for purchase of further Shares to be held upon trust as specified by the Board. When the Selected Participant has satisfied all vesting conditions specified by the Board in the written grant letter at the time of making the award and become entitled to the Shares forming the subject of the award, the Trustee shall transfer the relevant vested Shares to that Selected Participant.

Vesting and Lapse

Unless otherwise determined by the Board at its discretion, the Restricted Shares held by the Trustee upon the Trust and which are referable to a Selected Participant shall not vest in the Selected Participant under the following circumstances:

●in the event of any failure of the Selected Participant to remain as an Eligible Participant on the date which the Restricted Shares are supposed to be vested in him;

● in the event that the Selected Participant fails to achieve the key performance indicator or such other condition(s) as specified in the written grant letter issued pursuant to the Scheme or the Selected Participant infringes any of the provisions of the Employee handbook (if applicable);

● in the event that the Selected Participant(s) fails to return duly executed transfer documents prescribed by the Trustee for the relevant Restricted Shares within the stipulated period; and

● in the event of the death of Selected Participant.

Unless otherwise determined by the Board at its discretion, an award shall automatically lapse when (i) a Selected Participant fails to satisfy any condition as set out in the written grant letter, or (ii) the Subsidiary employing or engaging the Selected Participant ceases to be a Subsidiary, or (iii) an order for the winding-up of the Company is made or a resolution is passed for the voluntary winding-up of the Company (otherwise than for the purposes of, and followed by, an amalgamation or reconstruction in such circumstances that substantially the whole of the undertaking, assets and liabilities of the Company pass to a successor company). In any event, the relevant Restricted Shares awarded shall not vest on the relevant vesting date but shall become the Returned Shares and shall be held as the Returned Shares for the purposes

of the Scheme.

If there occurs an event of change in control (as specified in The Codes on Takeovers and Mergers and Share Repurchases from time to time) of the Company, whether by way of offer, merger, scheme of arrangement or otherwise, all the awarded Restricted Shares shall immediately vest on the date when such change in control event becomes or is declared unconditional and such date shall be deemed the vesting date.

Where the Restricted Shares do not vest in accordance with the Scheme Rules, the Trustee shall hold such Shares for the benefit of one or more Eligible Participants as it determines in its discretion, after having taken into account the recommendations of the Board.

Voting Rights and Limitations of the Restricted Shares

The Trustee shall not exercise any voting rights in respect of any Shares held under the Trust (including but not limited to the awarded Restricted Shares, and further Shares acquired out of the income derived therefrom).

A Selected Participant shall have no rights in (a) any cash and non-cash income in respect of a Share; and (b) any cash remaining in the trust fund of the Trust in respect of a Share. All restrictions and limitations on the Restricted Shares shall be removed upon vesting.

Duration and Termination

The Scheme shall be effective for a term of 10 years commencing on the Adoption Date subject to any early termination as may be determined by the Board. The termination of the Scheme shall not affect any subsisting rights of any Selected Participant under the Scheme. Upon termination (whether due to early termination or upon expiry of the Scheme), no further Restricted Shares shall be granted. The Company shall notify the Trustee of such termination.

Upon termination, all awarded Restricted Shares shall become vested in the Selected

Participants so referable on such date of termination, subject to the receipt by the Trustee of the transfer documents duly executed by the Selected Participants within the stipulated period. Net sale proceeds (after making appropriate deductions) of the Unaccepted Shares and the Returned Shares and such non-cash income together with the residual cash and such other funds remaining in the Trust shall be remitted to the Company forthwith after the sale.

Definitions

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

“Adoption Date”

29 December 2021, the date on which the Scheme is adopted by the Company by a resolution of the Board

“Board”

the board of directors of the Company

“Company”

Honghua Group Limited, a limited liability company incorporated in the Cayman Islands, the shares of which are listed on the Main Board of The Stock Exchange of Hong Kong Limited (stock code:196)

“Director(s)”

director(s) of the Company

“ Eligible Participant ”

any Employee or Director, any consultant or adviser (whether on any employment or contractual or honorary basis and whether paid or unpaid) of the Company or any member of the Group, who in the absolute opinion of the Board, have contributed to the Company or the Group

“Employee(s)”

any employee (whether full-time or part-time) of the Company or any Subsidiary

any Eligible Participant who is resident in a place where the award of the Restricted Shares and/ or the award of the Returned Shares and/or the vesting and transfer of Shares pursuant to the terms of the Scheme

‘‘Excluded Participant’’

“Group”

‘‘Listing Rules’’

‘‘Restricted Shares’’

‘‘Returned Shares’’

‘‘the Scheme’’

‘‘Scheme Rules’’

is not permitted under the laws and regulations of such place, or where in the view of the Board or the Trustee (as the case may be) compliance with applicable laws and regulations in such place make it necessary or expedient to exclude such Eligible Participant

the Company and its Subsidiaries

the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited

the restricted Shares granted under the Scheme and has the meaning ascribed to such term in the Scheme Rules

such awarded Restricted Shares which are not vested and/or forfeited in accordance with the terms of the Scheme Rules
the 2021 Restricted Share Award Scheme of the Company adopted by the Board on the Adoption Date

the rules relating to the Scheme adopted by the Board

‘‘Selected

Participant(s)’’

“Shares”

“Shareholder(s)”

‘‘Subsidiary(ies)’’

“Trust”

‘‘Trust Deed’’

‘‘Trust Period’’

any of the Eligible Participant(s) selected by the Board pursuant to Scheme Rules or selected by the Trustee after having taken into consideration recommendations of the Board pursuant to Scheme Rules for participation in the Scheme

shares of HK$0.1 each in the capital of the Company

holders of Share(s) of the Company

a company which is for the time being and from time to time a subsidiary of the Company, as determined by reference to thedefinitions in the Companies Ordinance (Cap. 622) as amended from time to time

the trust constituted by the Trust Deed

the trust deed to be entered into between the Company as settlor and the Trustee as trustee for implementation of the Scheme, (as restated, supplemented and amended from time to time)

the period beginning with the Adoption Date and ending upon the first to happen of the following, namely: (a) such date, being the 10th anniversary date of the Adoption Date; or (b) the date when an order for the winding-up of the Company is made or a resolution is passed for the voluntary winding-up of the Company (otherwise than for the purposes of, and

followed by, an amalgamation or reconstruction in such circumstances that substantially the whole of the undertaking, assets and liabilities of the Company pass to a successor company); or (c) the date as may be informed by the Company that the Scheme shall be terminated

“the original Scheme”

the Restricted Share Award Scheme of the Company adopted by the Board on 30 December 2011

‘‘Trustee’’

the trustee which is appointed by the Company for the administration of the Scheme pursuant to the Trust Deed and is independent and not connected with the Company

“Unaccepted Shares”

such Shares pursuant to a grant which are not accepted by the Selected Participants within [seven (7) days] after the date of grant and have been or will be dealt with in accordance with the Scheme Rules

On behalf of the Board