Lonking Holdings Limited — Proxy Solicitation & Information Statement 2015

Nov 20, 2015

THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION

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

If you have sold or transferred all your shares in Lonking Holdings Limited , you should at once hand this circular and the accompanying form of proxy to the purchaser or the transferee or to the bank, stockbroker or other agent through whom the sale or transfer was effected for transmission to the purchaser or the 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.

==> picture [47 x 36] intentionally omitted <==

LONKING HOLDINGS LIMITED 中國龍工控股有限公司 [*]

(Incorporated in the Cayman Islands with Limited Liability)

(Stock code: 3339)

MAJOR TRANSACTION IN RELATION TO THE ASSET MANAGEMENT CONTRACT

Hong Kong, 20 November 2015

* For identification purposes only

CONTENTS

		Pages
Definitions . . . .	. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	1
**Letter from the **	Board . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	5
Appendix I –	Financial Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	14
Appendix II –	General Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	17

• i -

DEFINITIONS

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

“AEGON-INDUSTRIAL Fund” AEGON-INDUSTRIAL Fund Management Co., Ltd.（興業全球基 金管理有限公司）, a company established in the PRC with limited liability, a subsidiary of Industrial Securities and an Independent Third Party

• “Announcements” the announcements of the Company dated 28 May 2015 and 10 June 2015 regarding the discloseable transactions of the Company in relation to the Previous Asset Management Contracts

• “Articles of Association” the articles of association of the Company (as amended from time to time)

• “associates” has the same meaning as ascribed to it under the Listing Rules “Bank of Shanghai” Bank of Shanghai Co., Ltd.（上海銀行股份有限公司）, a licensed bank established under the laws of the PRC and an Independent Third Party

• “close associates” has the meaning as ascribed to it under the Listing Rules “Company” Lonking Holdings Limited, a company incorporated in the Cayman Islands with limited liability, the Shares are listed on the main board of the Stock Exchange

• “CSRC” the China Securities Regulatory Commission “Director(s)” the directors of the Company “Entrusted Assets” the assets, as the subject matter of the Fourth Contract, that the asset entrustor has the right to legally dispose of and entrust the asset manager to manage, and such assets are under custody of the asset custodian pursuant to the Fourth Contract

“First Contract” the asset management contract dated 28 May 2015 entered into between Lonking Shanghai Machinery (as asset entrustor), Shanghai AEGON Rui Zhong (as asset manager) and Bank of Shanghai (as asset custodian) with an investment amount of RMB200,000,000 (equivalent to approximately HK$243,000,000), as amended by the Supplemental Agreement, details of which are disclosed in the Announcements

• 1 -

DEFINITIONS

“Fourth Contract” the asset management contract dated 23 September 2015 entered into between Lonking Shanghai Machinery (as asset entrustor), Shanghai AEGON Rui Zhong (as asset manager) and Bank of Shanghai (as asset custodian) with an investment amount of RMB200,000,000 (equivalent to approximately HK$243,000,000) “Group” the Company and its subsidiaries

• “HK$” Hong Kong dollars, the lawful currency of Hong Kong

• “Hong Kong” the Hong Kong Special Administrative Region of the PRC

• “Independent Third Party(ies)” third party(ies) independent of the Company and its connected persons

• “Industrial Securities” Industrial Securities Co., Ltd.（興業證券股份有限公司）, a licensed securities company established under the laws of the PRC and an Independent Third Party

• “Latest Practicable Date” 18 November 2015, being the latest practicable date prior to the printing of this circular for ascertaining certain information contained herein

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

• “Lonking Shanghai Machinery” Lonking Shanghai Machinery Co., Ltd.（龍工（上海）機械製造有限 公司）, a company established in the PRC with limited liability which is interested as to 99.89% by the Company and 0.11% by Shanghai Longgong Machinery Limited（上海龍工機械製造有限公 司）, a company which is owned as to 39.5% and 60.5% by Mr. Li and Ms. Ngai, respectively

“Lonking Shanghai Precision”

• Lonking (Shanghai) Precision Hydraulic Component Co., Ltd.,（龍 工（上海）精工液壓有限公司）, a company established in the PRC with limited liability and a wholly-owned subsidiary of the Company

• “Mr. Li”

• Mr. Li San Yim, an executive Director and the spouse of Ms. Ngai

• “Ms. Ngai”

• Ms. Ngai Ngan Ying, a non-executive Director and the spouse of Mr. Li

• “Net Entrusted Assets Unit Value”

the net asset value of the Entrusted Assets (after deducting the fees, charges and expenses payable under the Scheme) divided by the total number of units of the Scheme as at the calculation date

• 2 -

DEFINITIONS

“PRC”	the People’s Republic of China, but for the purposes of this circular
	only, excludes Hong Kong, the Macau Special Administrative
	Region of the PRC and Taiwan
“Previous Asset Management	the First Contract, the Second Contract and the Third Contract
Contracts”
“Relevant Shareholders”	Mr. Li, Ms. Ngai and China Longgong Group Holdings Limited,
	each being an existing Shareholder
“RMB”	Renminbi, the lawful currency of the PRC
“Second Contract”	the contract dated 28 May 2015 entered into between Lonking
	Shanghai Precision and Industrial Securities to subscribe for wealth
	management products with the investment amount of up to
	RMB300,000,000 (equivalent to approximately HK$365,000,000),
	details of which are disclosed in the Company’s announcement
	dated 28 May 2015
“SFO”	the Securities and Futures Ordinance, Chapter 571 of the Laws of
	Hong Kong
“Shanghai AEGON Rui Zhong”	Shanghai AEGON Rui Zhong Asset Management Co., Ltd.*（上海
	興全睿眾資產管理有限公司）, a company established in the PRC
	with limited liability which is licensed by the CSRC and a wholly-
	owned subsidiary of AEGON-INDUSTRIAL Fund
“Share(s)”	ordinary share(s) of the Company
“Shareholder(s)”	holder(s) of the Shares
“Stock Exchange”	The Stock Exchange of Hong Kong Limited
“Supplemental Agreement”	the supplemental agreement dated 10 June 2015 entered into
	between Lonking Shanghai Machinery (as asset entrustor),
	Shanghai AEGON Rui Zhong (as asset manager) and Bank of
	Shanghai (as asset custodian) which amended the First Contract by
	adding an additional investment amount of RMB100,000,000
	(equivalent to approximately HK$122,000,000) as the entrusted
	assets of the First Contract, details of which are disclosed in the
	Company’s announcement dated 10 June 2015

* For identification purposes only

• 3 -

DEFINITIONS

“Third	Contract”	the contract dated 28 May 2015 entered into between Lonking
		Shanghai Precision and Industrial Securities to subscribe for wealth
		management products with the investment amount of up to
		RMB500,000,000 (equivalent to approximately HK$608,000,000),
		details of which are disclosed in the Company’s announcement
		dated 28 May 2015
“%”		per cent

For the purpose of this circular, the exchange rate of HK$1.00 = RMB0.822 has been used for currency translation, where applicable. Such exchange rate is for illustration purposes and does not constitute representation that any amount in RMB or HK$ has been or may be converted in such rates.

• 4 -

LETTER FROM THE BOARD

==> picture [47 x 35] intentionally omitted <==

LONKING HOLDINGS LIMITED 中國龍工控股有限公司 [*]

(Incorporated in the Cayman Islands with Limited Liability)

(Stock code: 3339)

Executive Directors: Mr. Li San Yim (Chairman) Mr. Qiu De Bo Mr. Chen Chao Mr. Luo Jian Ru Mr. Zheng Ke Wen Mr. Yin Kun Lun

Non-executive Director:

Ms. Ngai Ngan Ying

Independent Non-executive Directors:

Dr. Qian Shi Zheng Mr. Jin Zhi Guo Mr. Wu Jian Ming Mr. Chen Zhen

Registered Office: Cricket Square Hutchins Drive P.O. Box 2681 Grand Cayman KY1-1111 Cayman Islands

Principle place of business in Hong Kong: Unit 1802, 18th Floor West Tower Shun Tak Centre 168-200 Connaught Road Central Hong Kong

20 November 2015

To the Shareholders

Dear Sir/Madam,

MAJOR TRANSACTION IN RELATION TO THE ASSET MANAGEMENT CONTRACT

1. INTRODUCTION

The purposes of this circular are, to provide you with information regarding, among other things, (i) further details of the Fourth Contract and the transactions contemplated thereunder; and (ii) other financial information of the Group. This circular is despatched to the Shareholders for information purposes only.

* For identification purposes only

• 5 -

LETTER FROM THE BOARD

2. THE FOURTH CONTRACT

Reference is made to the Announcements. On 23 September 2015, Lonking Shanghai Machinery (as asset entrustor), entered into the Fourth Contract with Shanghai AEGON Rui Zhong (as asset manager) and Bank of Shanghai (as asset custodian), pursuant to which Lonking Shanghai Machinery agreed to participate in an asset management scheme (the “ Scheme ”) operated by Shanghai AEGON Rui Zhong and to deposit an investment amount of RMB200,000,000 (equivalent to approximately HK$243,000,000) as the Entrusted Assets to the designated account with Bank of Shanghai.

The major terms of the Fourth Contract are as follows:

Date of the Fourth 23 September 2015 Contract:

Parties:

• (1) Lonking Shanghai Machinery, as the asset entrustor

• (2) Shanghai AEGON Rui Zhong, as the asset manager

• (3) Bank of Shanghai, as the asset custodian

To the best information, knowledge and belief of the Directors, and after making all reasonable enquiries, Shanghai AEGON Rui Rong and Bank of Shanghai, and their respective associates are Independent Third Parties. Lonking Shanghai Machinery is a non-wholly owned subsidiary of the Company.

Investment amount:

RMB200,000,000 (equivalent to approximately HK$243,000,000) as stipulated in the Fourth Contract which will be funded by the internal resources of the Group. The investment amount was determined by the Company with reference to the idle cash of the Company available to be utilized for investment purpose. Pursuant to the terms of the Fourth Contract, the investment amount shall be paid by cash in full immediately after establishing the asset custodian account with the asset custodian. The asset custodian account has been established and the investment amount has been fully paid by cash. The Scheme has become effective on 8 October 2015.

• 6 -

LETTER FROM THE BOARD

Scope and proportion of investment:

Investment under the Scheme will include cash, bank deposits, shares (including new shares and private placement), bonds (including newly issued bonds and convertible bonds), exchangeable private placement bonds, bond repurchase, securities investment funds (including securities investment funds issued by AEGON-INDUSTRIAL Fund), other asset management schemes operated by the other mutual fund companies and their subsidiaries (including special asset management schemes, and asset management schemes issued by Shanghai AEGON Rui Zhong and AEGON-INDUSTRIAL Fund), central bank bills, nonfinancial corporate debt financing instruments, asset backed securities, various types of asset income rights, stock futures and other assets approved by the CSRC.

Under the Scheme, the proportion of investment in shares (including new shares) shall be not more than 50% of the net asset value of the Scheme by market capitalization; the proportion of investment in bonds (including newly issued bonds) and exchangeable private placement bonds shall be not more than 100% of the total asset value of the Scheme by market capitalization; and the proportion of investment in funds shall be not more than 100% of the net asset value of the Scheme by market capitalization.

Fees:

The Company shall pay asset management fee, asset custodian fee and performance-based management fee (in any) to Shanghai AEGON Rui Zhong and Bank of Shanghai, respectively calculated based on the investment amount which shall be calculated as follows:

• (i) Asset management fee (per day) = net asset value of the Entrusted Assets as at the previous date x 1.2% / total number of calendar days of the relevant year

The rate of the asset management fee of 1.2% was determined based on the average rates of 1 to 2% of similar products offered by Shanghai AEGON Rui Hong to its individual customers other than the Group as adjusted in accordance with different situations of specific customers and agreed between the asset manager and the asset entrustor. Taking into account the tailor-made features of the products offered by Shanghai AEGON Rui Hong to its individual customers, the asset management fee of the Scheme has been adjusted with reference to the scale, the term, the investment scope and the specific terms and conditions of the above comparable products.

The asset management fee shall be payable quarterly by the Company to Shanghai AEGON Rui Zhong.

• 7 -

LETTER FROM THE BOARD

The Directors are of the view that the asset management fee is fair and reasonable as (a) it was determined by making reference to the “2-20” fee model (the “ Fee Model ”) for private equity funds which is widely adopted by the market that private equity fund management companies charge about 2% of the fund size as asset management fee and about 20% of the investment return as the performance-based management fee; (b) the Group shall monitor whether Shanghai AEGON Rui Zhong has been charging the asset management fee in accordance with the Fee Model; and (c) the asset management fee was determined by taking into account the scale, the term, the investment scope and the specific terms and conditions of the Scheme.

• (ii) Asset custodian fee (per day) = net asset value of the Entrusted Assets as at the previous date x 0.15% / total number of calendar days of the relevant year

The rate of the asset custodian fee of 0.15% was determined based on the generally accepted rate in banking industry.

The asset custodian fee shall be payable quarterly by the Company to Bank of Shanghai.

• (iii) Performance-based management fee = A × NAV0 × [(NAV1 – NAV0)/NAV0 – B × T/365)] × 20%

where:

A = the unit(s) of the Entrusted Assets held or withdrawn by the asset entrustor as at the settlement date of the performancebased management fee

NAV0 = the subscription price or the additional subscription price of A or the accumulative Net Entrusted Assets Unit Value of the last payment date of the performance-based management fee

NAV1 = the accumulative Net Entrusted Assets Unit Value as at the settlement date of the performance-based management fee

B = 6%, being the benchmark return (the “ Benchmark Return ”)

T = the number of days of management of the relevant unit(s) of the Entrusted Assets

• 8 -

LETTER FROM THE BOARD

If the calculation result of the above formula is less than or equal to zero, the performance-based management fee shall be zero.

The rate of the performance-based management fee is 20% (the “ Fee Percentage ”).

The Directors are of the view that the Benchmark Return and the Fee Percentage are fair and reasonable as they were determined by making reference to the Fee Model which follows the market practice. The asset manager is only entitled to charge the performance-based management fee when the return of the Scheme exceeds the Benchmark Return.

The performance-based management fee shall be settled on the following days (the settlement date of performance-based management fee):

• (i) the first anniversary after the commencement of the Scheme; or

• (ii) when the Entrusted Assets have been withdrawn pursuant to the terms of the Fourth Contract; or

• (iii) when the Scheme has been terminated and the Entrusted Assets have been liquidated.

The asset entrustor shall pay the performance-based management fee in a lump sum to the asset manager within 10 business days of the second month after the settlement date of performance-based management fee.

The rate of performance-based management fee was determined based on the average rates of similar products available in the market as adjusted in accordance with different situations of specific customers and agreed between the asset manager and the asset entrustor.

In addition, the Company shall also pay securities transaction fee and bank remittance fee to Shanghai AEGON Rui Zhong and/or Bank of Shanghai.

Term:

The Fourth Contract is valid for 18 months from the date thereof. The Fourth Contract can be extended for another period of one year if no written objection is raised by the asset entrustor within one month before the expiry of the Fourth Contract.

• 9 -

LETTER FROM THE BOARD

Risk-return profile:

The risk-return profile of the Scheme is “relatively high risk and relatively high return”. The Scheme seeks to maximise the portfolio return by investing on various investment products as specified above in order to have higher expected returns on earnings. Since the scope of investment of the Scheme also includes stock futures, the Scheme will be exposed to risks such as leveraging, maturity dates, margin calls risks. Accordingly, the Scheme is expected to have high return with high risk exposure.

Expected return:

• Floatable return with no upper limit and no guaranteed profits depending on the prevailing market conditions and the investment strategies as adjusted by the asset manager pursuant to the scope and proportion of investment of the Scheme according to the terms of the Fourth Contract.

• According to 《基金管理公司特定客戶資產管理業務試點辦法》 (the Trial Measures for Fund Management Companies to Provide Asset Management Services for Specific Clients) as promulgated by the CSRC, asset managers engaging in specific asset management services are not allowed to guarantee any investment profits to its customers. Accordingly, the asset manager is unable to specify the expected return of the Scheme.

• Withdrawal of Entrusted The Entrusted Assets are not allowed to be withdrawn within 10 Assets: working days from depositing the investment amount. For the remaining term of the Fourth Contract, if the net asset value of the Entrusted Assets is more than RMB30,000,000, partial withdrawal of Entrusted Assets is allowed, provided that the net asset value of the remaining Entrusted Assets after withdrawal shall not be less than RMB30,000,000. In the event that the net asset value of the Entrusted Assets is less than RMB30,000,000, early withdrawal is not allowed but the parties to the Fourth Contract may by mutual agreement to early terminate the Fourth Contract.

• Risk Exposure and Stop Loss:

• The initial Net Entrusted Assets Unit Value is RMB1.00. The Scheme has set a stop loss value of the Net Entrusted Assets Unit Value of RMB0.80, and upon the Net Entrusted Assets Unit Value of the Scheme on a trade day hitting the stop loss value, the asset manager will realise all the assets of the Scheme by closing out all positions within 15 working days (except for restricted assets (流通受限資產)), and the Scheme will be subject to early termination and will be liquidated.

• 10 -

LETTER FROM THE BOARD

• Monitoring of the Scheme performance

• The asset entrustor shall monitor the performance of the Scheme through the reports provided by the asset manager as follows:

• (a) Weekly reports: the asset manager shall provide weekly reports on the net asset value of the Entrusted Assets and the Net Entrusted Assets Value, which should have been reviewed by the asset custodian, to the asset entrustor.

• (b) Interim reports: the asset entrustor is entitled to make enquiries on the operation and custody of the Scheme in accordance with the terms of the Fourth Contract. The asset manager and the asset custodian shall immediately provide an interim report to the asset entrustor if there is any material adverse change to the Scheme which will affect the interest of the asset entrustor.

• (c) Quarterly reports: the asset manager shall complete the preparation of the quarterly report on the investment status, performance and risk status of the Scheme within 15 business days after the end of each quarter, which should have been reviewed by the asset custodian, to the asset entrustor.

• (d) Annual reports: the asset manager shall complete the preparation of the annual report on the investment status, performance and risk status of the Scheme within 3 months after the end of each year, which should have been reviewed by the asset custodian, to the asset entrustor.

The senior management of the Company shall also monitor the investment status, performance and risk status of the Scheme through telephone calls with the asset manager from time to time.

3. REASONS FOR AND BENEFITS OF ENTERING INTO THE FOURTH CONTRACT

By entering into the Fourth Contract, the Group intends to further improve the capital usage efficiency and earn certain investment return to increase the profits of the Group. The Directors (including independent non-executive Directors) are of the opinion that the terms of the Fourth Contract are fair and reasonable and are in the interests of the Group and its Shareholders as whole.

4. INFORMATION OF THE PARTIES TO THE FOURTH CONTRACT

The Company is principally engaged in the manufacture of wheel loaders and other infrastructure machinery in the PRC. It also manufactures axles and transmission, which are critical components for wheel loaders.

Lonking Shanghai Machinery is a non-wholly owned subsidiary of the Company which is primarily engaged in the manufacture and distribution of wheel loaders.

• 11 -

LETTER FROM THE BOARD

Shanghai AEGON Rui Zhong is a company established in the PRC with limited liability and is a wholly-owned subsidiary of AEGON-INDUSTRIAL Fund which is licensed by the CSRC to engage in business in providing specific asset management services to its clients, including launching and managing equity, fixed income and balanced funds for its clients.

Bank of Shanghai is a licensed bank established under the laws of the PRC which is principally engaged in banking and financial business, including public deposits; short-, medium-, and long-term loans; domestic and international settlement; bills acceptance and discounting; issuance of financial bonds; agency services and underwriting of government bonds; trading of government and financial bonds; interbank lending and borrowing; foreign exchange trading; bank card services; letter of credit and guarantee services; collection of receivables and insurance services; safe deposit box services; credit investigation, advisory and witnessing services; and other business activities approved by regulatory authorities in the PRC.

5. LISTING RULES IMPLICATIONS

Pursuant to Rule 14.22 of the Listing Rules, as one of the applicable percentage ratios in respect of the investment amount under the Fourth Contract when aggregated with those of the Previous Asset Management Contracts as disclosed in the Announcements exceeds 25% but is less than 100%, the Previous Asset Management Contracts and the Fourth Contract, on an aggregate basis, constitutes a major transaction of the Company and is subject to the reporting, announcement and the Shareholders’ approval requirements under Chapter 14 of the Listing Rules.

Mr. Li directly holds 1,071,467,760 Shares and China Longgong Group Holdings Limited, which is interested as to 55% by Mr. Li and 45% by Ms. Ngai, directly holds 1,312,058,760 Shares. Accordingly, the Relevant Shareholders together are a group of shareholders holding an aggregate of 2,383,526,520 Shares, representing approximately 55.69% of the issued share capital of the Company, as at the Latest Practicable Date. To the best of the knowledge, information and belief of the Directors, after having made all reasonable enquires, no Shareholder or any of its associate has any material interest in the Fourth Contract and the transactions contemplated thereunder and is required to abstain from voting if the Company were to convene a general meeting for approving the Fourth Contract and the transactions thereunder. Accordingly, the Company has obtained written shareholders’ approval for the Fourth Contract and the transactions thereunder pursuant to Rule 14.44 of the Listing Rules from the Relevant Shareholders and no general meeting will be convened for the purpose of approving the Fourth Contract and the transactions thereunder as permitted under Rule 14.44 of the Listing Rules.

6. RECOMMENDATION

The Directors are of the view that the terms of the Fourth Contract are fair and reasonable and are in the interests of the Company and the Shareholders as a whole. If a general meeting were to be convened for the approval of the Fourth Contract and the transactions contemplated thereunder, the Board would recommend the Shareholders to vote in favour of the resolution to approve the same at such general meeting.

• 12 -

LETTER FROM THE BOARD

7. ADDITIONAL INFORMATION

Your attention is drawn to the information set out in the appendices to this circular.

Yours faithfully, For and on behalf of the Board Lonking Holdings Limited Li San Yim Chairman

• 13 -

FINANCIAL INFORMATION

APPENDIX I

1. FINANCIAL INFORMATION OF THE GROUP

The Company is required to set out in this circular the information for the last three financial years with respect to the profits and losses, financial record and position in a comparative table and the latest published audited balance sheet together with the notes on the annual report for the last financial year of the Group.

The audited consolidated financial statements of the Group prepared in accordance with all applicable Hong Kong Financial Reporting Standards issued by the Hong Kong Institute of Certified Public Accountants for the three financial years ended 31 December 2014 together with the relevant notes thereto can be found from pages 41 to 140 of the annual report of the Company for the year ended 31 December 2012, pages 42 to 144 of the annual report of the Company for the year ended 31 December 2013 and pages 40 to 144 of the annual report of the Company for the year ended 31 December 2014, respectively.

Each of the said audited consolidated financial statements of the Group for the three financial years ended 31 December 2014 is incorporated by reference to this circular and forms part of this circular. The said annual reports of the Company are available on the Company’s website at www.lonkinggroup.com and the website of the Stock Exchange at www.hkexnews.hk.

Please also see below the links to the annual reports of the Company:

Annual Report 2014:

http://www.hkexnews.hk/listedco/listconews/SEHK/2015/0424/LTN20150424558.pdf

Annual Report 2013:

http://www.hkexnews.hk/listedco/listconews/SEHK/2014/0424/LTN20140424880.pdf

Annual Report 2012:

http://www.hkexnews.hk/listedco/listconews/SEHK/2013/0423/LTN20130423385.pdf

2. INDEBTEDNESS

As at the close of business on 30 September 2015, being the latest practicable date for the purpose of this indebtedness statement, the Group had indebtedness as follows:

Borrowings

As at 30 September 2015, the Group had total outstanding borrowings of approximately RMB4,678 million which are secured bank loans.

• 14 -

FINANCIAL INFORMATION

APPENDIX I

Pledge of assets

As at 30 September 2015, the Group had pledged assets with aggregate carrying values of approximately RMB2,588 million, of which approximately RMB2,568 million and RMB20 million are pledged as collateral for bank loans and other loans respectively.

Contingent liabilities and guarantees

Certain sales of the Group were funded by finance leases entered into by the end-user customers and PRC domestic banks or other finance lease providers. Under the guarantee agreements entered into between the Group and the PRC domestic banks, where the end-user customers and their guarantors fail to perform their payment obligations, the Group will repurchase the equipment from the banks or other finance lease providers to settle the outstanding amounts and the related interest. As at 30 September 2015, the Group’s contingent liabilities for such repurchase obligation amounted to RMB137,987,800 (before deduction of the security deposits paid by the end-user customers and the interest on undue rent). The Directors considered that the fair value of the financial guarantees as at 30 September 2015 was insignificant.

Save as disclosed above, the Group did not have any outstanding mortgages, charges, debentures or other loan capital or bank overdrafts, loans, debt securities or other similar indebtedness or acceptance credits or hire purchase commitments or any guarantees or other material contingent liabilities as at 30 September 2015.

3. WORKING CAPITAL

Taking into account the financial resources available to the Group, without obtaining any additional financing from any persons or institutions for 12 months from the date of publication of this circular, and in the absence of unforeseen circumstances, and also taking into account the effect of the Fourth Contract, the Directors believed that the Group will be in a strong and healthy position and has sufficient resources in support of its working capital requirement and meet its foreseeable capital expenditure.

4. FINANCIAL AND TRADING PROSPECTS OF THE GROUP

Looking into the second half of 2015, the international and domestic environment of economy will remain complex and austere. As affected by the macro economic policy, the construction machinery sector will experience a long period of adjustment and integration. The growth of demand across the sector will remain slowdown in the coming period, and the risk of over capacity is unable to be released effectively. Facing various market challenges, the Company will focus on the construction machinery industry and improve its products including wheel loaders, fork lifts, excavators, road rollers and core components, constantly raise its own technological research and development capacity, pay attention to the quality of products, improve brand awareness, leverage the marketing and service advantage while keeping risk controllable, constantly consolidate supply and transportation optimization resources, enhance cost control and expense management, deeply develop both international and domestic market, continue to promote the balanced development of every kind of complete machines and vigorously improve the market share. The

• 15 -

FINANCIAL INFORMATION

APPENDIX I

Company believes that it will seize market opportunity upon a slight recovery of the industry, positively develop and obtain more stable and excellent performance in the future, endeavor to create value for the customers and bring best return for the Shareholders.

5. MATERIAL ADVERSE CHANGE

As disclosed in the interim report of the Company for the six months ended 30 June 2015, in the first half of 2015, the Group recorded net profit of approximately RMB177 million, representing a year-on-year decline of 48.88%, mainly attributable to the decrease of gross profit and control of financial expense as a result of reduce of the sales revenue.

Save as disclosed above, the Directors are not aware of any other material adverse change in the financial or trading position of the Group since 31 December 2014, being the date to which the latest published audited financial statements of the Group have been made up and up to and including the Latest Practicable Date.

6. EFFECT OF THE FOURTH CONTRACT ON THE EARNINGS AND ASSETS AND LIABILITIES OF THE GROUP

The Entrusted Assets are recorded as short-term investments under current assets of the Group. Entering into the Fourth Contract will increase the short-term investments of the Group and will decrease the bank balances and cash of the Group. The investment return of the Entrusted Assets will be recorded as other income of the Group.

• 16 -

GENERAL INFORMATION

APPENDIX II

1. 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 respect to the Group. 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.

2. DISCLOSURE OF INTERESTS

(a) Directors

As at the Latest Practicable Date, the interests and short positions of the Director and chief executive of the Company in the Shares or, underlying shares or debenture of the Company or any of its associated corporations (within the meaning of Part XV of the SFO) which were required (i) to be notified to the Company and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO (including interests and short positions which they were taken or deemed to have under such provisions of the SFO), or (ii) pursuant to section 352 of the SFO, to be entered in the register maintained by the Company referred to therein, or (iii) pursuant to the Model Code for Securities Transactions by Directors of Listed Issuers contained in the Listing Rules, to be notified to the Company and the Stock Exchange were as follows:

(i) Long positions in shares and underlying shares of the Company

Name of directors Capacity Mr. Li and Ms. Ngai (Note 1) Held by controlled corporation (Note 2) Mr. Li and Ms. Ngai (Note 1) Beneficial owner Qiu De Bo Beneficial owner Luo Jian Ru Beneficial owner Chen Chao Beneficial owner Zheng Ke Wen Beneficial owner	Number of shares held 1,312,058,760 1,071,467,760 3,404,000 1,460,000 1,344,000 429,900 2,390,164,420	Approximate percentage of the issued share capital of the Company 30.65% 25.03% 0.08% 0.03% 0.03% 0.01%
		55.84%

Note 1: Mr. Li and Ms. Ngai are husband and wife to each other and are deemed to be interested in each other’s interest.

Note 2: These shares were held through China Longgong Group Holdings Limited, a company that is wholly owned by Mr. Li and Ms. Ngai as to 55% and 45% respectively, which is the registered shareholder of these 1,312,058,760 shares.

• 17 -

GENERAL INFORMATION

APPENDIX II

• (ii) Long positions in shares of the associated corporation of the Company and Lonking Shanghai Machinery

			Percentage of
			the issued
		Number of	share capital of
Name of directors	Capacity	shares held	the Company
Mr. Li	Corporate (Note)	480,000	0.11%
Ms. Ngai	Corporate (Note)	480,000	0.11%

Note: The 0.11% interest of Lonking Shanghai Machinery is held by Shanghai Longgong Machinery Limited, which is owned by Mr. Li and Ms. Ngai as to 39.5% and 60.5% respectively.

Save as disclosed in this circular, as at the Latest Practicable Date, none of the Directors or chief executive of the Company had any interest and short positions in the shares, underlying shares and debentures of the Company or any associated corporations (within the meaning of Part XV of the SFO) which were required (i) to be notified to the Company and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO (including the interests and short positions which they were taken or deemed to have under such provisions of the SFO), or (ii) pursuant to section 352 of the SFO, to be entered in the register maintained by the Company referred to therein, or (iii) pursuant to the Model Code for Securities Transactions by Directors of Listed Issuers contained in the Listing Rules, to be notified to the Company and the Stock Exchange.

(b) Substantial shareholders

As at the Latest Practicable Date, so far as is known to the Directors and the chief executive of the Company, Shareholders (other than a Director or chief executive of the Company) who had an interest or short position in the Shares and underlying Shares which fall to be disclosed to the Company under the provisions of Divisions 2 and 3 of Part XV of the SFO, or who was, directly or indirectly, interested in 10% or more of the nominal value of any class of share capital carrying rights to vote in all circumstances at general meetings of the Company:

			Percentage of
			the issued
		Number of	share capital of
Name of shareholders	Capacity	shares held	the Company
China Longgong Group	Beneficial owner	1,312,058,760	30.65%
Holdings Limited
GIC Private Limited	Investment manager	300,905,916	7.03%

Note: China Longgong Group Holdings Limited is wholly owned by Mr. Li and Ms. Ngai as to 55% and 45% respectively. Both Mr. Li and Ms. Ngai are directors of China Longgong Group Holdings Limited.

• 18 -

GENERAL INFORMATION

APPENDIX II

Save as disclosed in this circular, as at the Latest Practicable Date, so far as is known to the Directors and the chief executive of the Company, other than a Director or chief executive of the Company, no persons had interests or short position in the Shares or underlying Shares which fall to be disclosed to the Company under the provisions of Divisions 2 and 3 of Part XV of the SFO, or who was, directly or indirectly, interested in 10% or more of the nominal value of any class of share capital carrying rights to vote in all circumstances at general meetings of the Company.

3. DIRECTORS’ SERVICE CONTRACTS

As at the Latest Practicable Date, none of the Directors had any existing or proposed service contracts with any member of the Group (excluding contracts expiring or determinable within one year without payment of compensation, other than statutory compensation).

4. MATERIAL CONTRACTS

The following contracts (not being contracts entered into in the ordinary course of business) have been entered into by members of the Group within the two years preceding the date of this circular and are or may be material:

• (a) the First Contract;

• (b) the Second Contract;

• (c) the Third Contract;

• (d) the Supplemental Agreement;

• (e) the agreement dated 15 May 2014 (as supplemented by an agreement dated 27 June 2014) entered into between Henan Longgong Machinery Manufacturing Co., Ltd.（河南龍工機械製 造有限公司）(“ Henan Longgong ”) and the management committee (the “ Management Committee ”) of Zhengzhou Economic and Technological Development Zone（鄭州經濟技 術開發區）(“ Zhengzhou ETDZ ”) in relation to the disposal of the land use right in respect of a land parcel with a total floor area of approximately 815.16 mu in Zhengzhou ETDZ (“ Land Parcel ”) and the buildings and plants under construction on the Land Parcel with a total constructed floor area of approximately 149,000 sq.m. by Henan Longgong to the Management Committee at a total consideration of approximately RMB254 million; and

• (f) the agreement dated 28 January 2015 entered into between Lonking Shanghai Machinery as vendor and Fujian Lonyan Engineering Machinery (Group) Co., Ltd（福建龍岩工程機械（集 團）有限公司）(“ Fujian Longyan* ”) as purchaser in relation to the disposal of a residential property situated at No. 1005, Lane 288, Linyin Xin Road, Sheshan Town, Songjiang District, Shanghai, the PRC by Lonking Shanghai Machinery to Fujian Longyan at a consideration of RMB94.5 million.

* For identification purposes only

• 19 -

GENERAL INFORMATION

APPENDIX II

5. LITIGATION

So far as the Company is aware, as at the Latest Practicable Date, no member of the Group was engaged in any litigation or arbitration of material importance and there was no litigation or claim of material importance known to the Directors to be pending or threatened against any member of the Group.

6. COMPETING BUSINESS INTEREST OF DIRECTORS

As at the Latest Practicable Date, none of the Directors nor their respective close associates was interested in any business apart from the business of the Group, which competes or is likely to compete, either directly or indirectly, with that of the Group.

7. MISCELLANEOUS

• (a) As at the Latest Practicable Date, none of the Directors had any direct or indirect interest in any assets which have been acquired or disposed of by or leased to or are proposed to be acquired or disposed of by or leased to any member of the Group since 31 December 2014, being the date to which the latest published audited accounts of the Group were made up.

• (b) As at the Latest Practicable Date, none of the Directors was materially interested in contract or arrangement subsisting as at the Latest Practicable Date which was significant in relation to the business of the Group.

• (c) The company secretary of the Company is Mr. Chu Shun. He is an associate member of the CPA Australia and a member of the Institute of Public Accountants in Australia.

• (d) The registered office of the Company is Cricket Square, Hutchins Drive, P.O. Box 2681, Grand Cayman KY1-1111.

• (e) The principal place of business of the Company in Hong Kong is United 1802, 18th Floor, West Tower, Shun Tak Centre, 168-200 Connaught Road Central, Hong Kong.

• (f) The principal share registrar of the Company is Royal Bank of Canada Trust Company (Cayman) Limited at 4th Fl., Royal Bank House, 24 Shedden Road, PO Box 1586, Grand Cayman, KY1-1110, Cayman Islands.

• (g) The branch share registrar and transfer office of the Company in Hong Kong is Computershare Hong Kong Investor Services Limited at Shops 1712-1716, 17/F, Hopewell Centre, 183 Queen’s Road East, Wanchai, Hong Kong.

• (h) The English text of this circular shall prevail over their respective Chinese text for the purpose of interpretation.

• 20 -

GENERAL INFORMATION

APPENDIX II

8. DOCUMENTS AVAILABLE FOR INSPECTION

Copies of the following documents are available for inspection at the Company’s registered office at United 1802, 18th Floor, West Tower, Shun Tak Centre, 168-200 Connaught Road Central, Hong Kong during normal business hours on any weekdays, except public holidays, from the date of this circular up to and including 4 December 2015:

• (a) the memorandum and articles of association of the Company;

• (b) the material contracts referred to in the paragraph headed “Material Contracts” in this appendix;

• (c) the Fourth Contract; and

• (d) this circular.

• 21 -