Honghua Group Limited — Remuneration Information 2012

Apr 1, 2012

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Honghua Group Limited

( Incorporated in the Cayman Islands with limited liability )

( "the Company")

Terms of Reference of the Remuneration Committee (The "Terms of Reference)

• 1 Company Constitution

The Board of directors established a Committee subordinated to it known as the Remuneration Committee (the “ Committee ” ).

• 2 Membership

2.1 Members of the Committee shall be appointed by the Board of directors (the "Board ” ) of the Company and the Committee shall consist of at least three members. The majority of the members shall be independent non-executive directors. The quorum for a Committee meeting shall be at least two members. 2.2 The chairman of the Committee shall be an independent non-executive director appointed by the Board.

2.3 A former partner of the Company ’ s existing remuneration consulting firm (if any) shall be prohibited from acting as a member of the Committee for a period of one year commencing on the dates of his ceasing:

（a） to be a partner of the consulting firm; or

• (b) to have any financial interest in the firm, whichever is later.

2.4 The Company ’ s secretary shall serve as the administrator of the Committee and is responsible for daily administration and meeting organization. The HR Department of the Company shall serve as the executive division of the Committee.

• 3 The Secretary of the Committee

The Secretary of the Committee shall be the Company ’ s secretary or other individuals appointed by the Committee from time to time.

• 4 Meeting

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4.1 The Committee shall convene meetings at least once a year.

4.2 Any provision in the Company ’ s Article of Association applicable to the convening and procedures of Board Meeting shall be deemed as having been adjusted to be applicable to the Committee Meeting. .

4.3 Before the Committee meeting, the members shall report their interests in the issues to be discussed at the meeting. If any issue to be discussed would cause conflicts of interests with a member or any of his/her associates (see the Rules Governing the Listing of Securities on the Stock Exchange of Hong Kong Limited (the “ Listing Rules ” ) for definition), the member shall not attend the meeting and shall have no vote.

5 Authority

5.1 The Committee has been authorized by the Board to conduct investigations within the scope of this Terms of Reference. It is also authorized to seek any information it requires from any employees, and all employees shall co-operate with any reasonable request made by the Committee.

5.2 The Committee shall consult the Chairman of the Board and the Chief Executive of the Company about their proposals on the remuneration of Executive Directors and shall have access to professional advice if necessary.

5.3 The Committee secretary is authorized by the Board to seek any information required for the Committee members to perform their duties

5.4 The Committee shall be provided with sufficient resources to perform its duties.

6 Duties

6.1 The duties of the Committee are as follows:

(a) to study and make recommendations or proposals to the Board for its review on the Company ’ s policy and structure for remuneration of all directors and senior management, on the company ’ s incentive systems and on the establishment of a formal and transparent procedure for developing the remuneration policies and incentive systems.

Note: For the purpose of this Terms of Reference, "senior management" refers to the same category of persons as referred to in the company ’ s annual report and is required to be disclosed under Appendix 16 of the "Listing Rules".

(b） to determine, with the delegated responsibility by the Board, the specific remuneration packages of all executive Directors and senior management, including benefits in kind, pension rights and

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compensation payments, including any compensation payable for loss or termination of their office or appointment, and make recommendations to the Board on the remuneration of non-executive Directors. The Committee shall consider factors such as salaries paid by comparable companies, time commitment and responsibilities of the Directors, employment conditions of other positions in the Group and the practicability of performance-based remuneration.

(c) to review and approve performance-based remuneration by reference to corporate objectives approved by the Board from time to time;

(d) to review and approve the compensation payable to executive Directors and senior management in connection with any loss or termination of their office or appointment to ensure that such compensation is consistent with relevant contractual terms and is otherwise fair and not excessive for the Company.

(e) to review and approve compensation arrangements relating to dismissal or removal of Directors for misconduct to ensure that such arrangements are consistent with relevant contractual terms and are otherwise reasonable and appropriate; and

(f) to ensure that no Director or any of his/her associates is involved in deciding his/her own remuneration.

Note: the Committee shall advise shareholders of the Company on how to vote with respect to any service contracts of Directors that require shareholders ’ approval (under Rule 13.68 of the Listing Rules).

6.2 The scope of authority and responsibility of the Committee shall be made public and its roles and the authorities conferred by the Board shall be explained.

• 7 Reporting Procedure

Minutes of the Committee meeting shall be kept by the secretary of the Committee. Draft and final version of the minutes shall be sent to all the members for their comments and records within a reasonable time after the meeting. The endorsed Committee meeting minutes shall be submitted to the Board.

1. The Company's Annual General Meeting

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As required by the Board, the chairman of the Committee, or in his absence, another member of the Audit Committee (or his/her duly appointed representative) shall be present at the Annual General Meeting of the Company and answer questions at the meeting.

9 The Authority of the Board

• 9.1 The Board reserves the ultimate right of interpretation to this Terms of Reference.

• 9.2 This Terms of Reference shall enter into force after being reviewed and approved by the Board.

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