Tencent Holdings Limited — Proxy Solicitation & Information Statement 2010

Nov 10, 2010

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 a licensed securities dealer, bank manager, solicitor, professional accountant or other professional adviser.

If you have sold or transferred all your shares in China Zenith Chemical Group Limited , you should at once hand this circular to the purchaser or transferee or to the bank, licensed securities dealer or other agent through whom the sale or transfer was effected for transmission to the purchaser or transferee.

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

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(Incorporated in the Cayman Islands with limited liability)

(Stock Code: 362)

PROPOSED RE-ELECTION OF DIRECTORS AND GENERAL MANDATES TO ISSUE SHARES AND TO PURCHASE ITS OWN SHARES AND REFRESHMENT OF THE LIMIT OF THE EXISTING SHARE OPTION SCHEME AND NOTICE OF ANNUAL GENERAL MEETING

A notice convening the annual general meeting of China Zenith Chemical Group Limited to be held at Mandarin Oriental Hong Kong, 5 Connaught Road, Central, Hong Kong, on 20 December 2010, Monday at 1:30 p.m. is set out on pages 19 to 23 of this circular. If you are not able to attend the meeting in person, you are requested to complete and return the enclosed proxy form in accordance with the instructions printed thereon and lodge the same with the Company’s branch share registrar in Hong Kong, Tricor Tengis Limited, at 26/F., Tesbury Centre, 28 Queen’s Road East, Hong Kong not less than 48 hours before the time fixed for holding the meeting or any adjournment thereof.

Completion and delivery of the form of proxy will not preclude you from attending and voting at the meeting or any adjournment thereof if you so wish.

11 November 2010

CONTENTS

			Page
Definitions	. . . . . . . . . . . . . . . . . . . .	. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	1
**Letter from **	the Board
–	Introduction . . . . . . . . . .	. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	5
–	Proposed re-election of Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .		6
–	General Mandate to Issue	Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	6
–	General Mandate to Repurchase Shares . . . . . . . . . . . . . . . . . . . . . . . . .		6
–	Refreshment of the Existing Scheme Mandate Limit . . . . . . . . . . . . . . .		7
–	Annual General Meeting .	. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	11
–	Voting at the Annual General Meeting . . . . . . . . . . . . . . . . . . . . . . . . . .		11
–	Responsibility Statement	. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	11
–	Recommendation . . . . . .	. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	12
Appendix I	– Details of Directors	. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	13
Appendix II – Explanatory Statement on the Repurchase Mandate . . . . . . . . . .			16
Notice of Annual General Meeting .		. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	19

DEFINITIONS

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

• “AGM”

• the annual general meeting of the Company to be held at Mandarin Oriental Hong Kong, 5 Connaught Road, Central, Hong Kong on 20 December 2010, Monday at 1:30 p.m., notice of which is set out on pages 19 to 23 of this circular;

• “Annual Report”

• the annual report of the Company for the year ended 30 June 2010;

• “Articles of Association”

the articles of association of the Company;

• “associates”

• has the meaning as defined in the Listing Rules;

• “Board” the board of Directors;

• “Cayman Islands Companies Law”

• the Companies Law (Law 3 of 1961, as consolidated and revised) of the Cayman Islands;

• “Companies Ordinance”

• Companies Ordinance, Chapter 32 of the Laws of Hong Kong;

• “Company”

• China Zenith Chemical Group Limited 中國天化工集 團有限公司, a company incorporated in the Cayman Islands with limited liability, the Shares of which are listed on the Stock Exchange;

• “connected person(s)”

has the meaning as ascribed to it in the Listing Rules;

• “Director(s)”

• the director(s) of the Company for the time being;

• “Eligible Participants”

any employee or executive (including executive director, non-executive director and independent non-executive director of the Group or any Invested Entity), supplier of goods or services, customer, any person or entity that provides research, development or other technological support, Shareholders, advisers or consultants relating to business development, and joint venture partner or counterparty to business transactions to the Group or any Invested Entity;

– 1 –

DEFINITIONS

• “Existing Scheme Mandate Limit”

• “Existing Share Option Scheme”

• “First Refreshed Limit”

• “Fifth Refreshed Limit”

• “Fourth Refreshed Limit”

• “Group”

• “Hong Kong”

• “Initial Limit”

• “Invested Entity”

• the maximum number of Shares which may be issued upon exercise of all options to be granted under the Existing Share Option Scheme;

• the existing share option scheme of the Company approved by the Shareholders at the extraordinary general meeting held on 18 November 2002;

• the scheme mandate limit under the Existing Share Option Scheme which sets out the maximum number of share options to be granted by the Company refreshed by the Shareholders on 2 December 2005, being 10% of the issued share capital of the Company as at 2 December 2005;

• the scheme mandate limit under the Existing Share Option Scheme which sets out the maximum number of share options to be granted by the Company refreshed by the Shareholders on 17 December 2009, being 10% of the issued share capital of the Company as at 17 December 2009;

• the scheme mandate limit under the Existing Share Option Scheme which sets out the maximum number of share options to be granted by the Company refreshed by the Shareholders on 31 December 2008, being 10% of the issued share capital of the Company as at 31 December 2008;

• the Company and its subsidiaries;

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

• the initial scheme mandate limit under the Existing Share Option Scheme which sets out the maximum number of share options to be granted by the Company at the time of adoption of the Existing Share Option Scheme, being 10% of the issued Share capital of the Company at the time of adoption of the Existing Share Option Scheme;

• any entity in which any member of the Group holds any equity interest;

– 2 –

DEFINITIONS

• “Issue Mandate”

• “Latest Practicable Date”

• “Listing Rules”

• “PRC”

• “Repurchase Mandate”

• “Second Refreshed Limit”

• “SFO”

• “Share(s)”

• “Shareholder(s)”

• “Stock Exchange”

• “Takeovers Code”

• the general and unconditional mandate proposed to be granted to the Directors to allot, issue and deal with Shares with an aggregate nominal amount not exceeding 20% of the aggregate nominal amount of the Share capital of the Company in issue as at the date of passing of the relevant resolution approving this issue mandate at the AGM, which is extended by the addition of the number of Shares repurchased under the Repurchase Mandate;

• 9 November 2010, being the latest practicable date prior to the printing of this circular for ascertaining certain information of this circular;

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

• the People’s Republic of China;

• the general and unconditional mandate proposed to be granted to the Directors to repurchase Shares with an aggregate nominal amount not exceeding 10% of the aggregate nominal amount of the Share capital of the Company in issue as at the date of passing of the relevant resolution approving this repurchase mandate at the AGM;

• the scheme mandate limit under the Existing Share Option Scheme which sets out the maximum number of share options to be granted by the Company refreshed by the Shareholders on 28 June 2007, being 10% of the issued Share capital of the Company as at 28 June 2007;

• the Securities and Futures Ordinance;

• ordinary share(s) of HK$0.01 each in the share capital of the Company;

• holder(s) of Shares;

• The Stock Exchange of Hong Kong Limited;

• the Hong Kong Code on Takeovers and Mergers;

– 3 –

DEFINITIONS

“Third Refreshed Limit” the scheme mandate limit under the Existing Share Option Scheme which sets out the maximum number of share options to be granted by the Company refreshed by the Shareholders on 6 December 2007, being 10% of the issued Share capital of the Company as at 6 December 2007; and “HK$” Hong Kong dollars, the lawful currency of Hong Kong

the scheme mandate limit under the Existing Share Option Scheme which sets out the maximum number of share options to be granted by the Company refreshed by the Shareholders on 6 December 2007, being 10% of the issued Share capital of the Company as at 6 December 2007; and

– 4 –

LETTER FROM THE BOARD

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(Incorporated in the Cayman Islands with limited liability)

(Stock Code: 362)

Executive Directors: Registered Office: Chan Yuen Tung Cricket Square Chan Yuk Foebe Hutchins Drive Chiau Che Kong P.O. Box 2681 Peng Zhanrong Grand Cayman KY1–1111 Wu Jianwei Cayman Islands

Independent non-executive Directors: Ma Wing Yun Bryan Yau Chung Hong Tam Ching Ho Wong Sin Just

Principal Place of Business in Hong Kong: Unit 1101–12 Sun Hung Kai Centre 30 Harbour Road Wanchai Hong Kong 11 November 2010

To the Shareholders

Dear Sir or Madam,

PROPOSED RE-ELECTION OF DIRECTORS AND

GENERAL MANDATES TO ISSUE SHARES AND TO PURCHASE ITS OWN SHARES AND REFRESHMENT OF THE LIMIT OF THE EXISTING SHARE OPTION SCHEME AND NOTICE OF ANNUAL GENERAL MEETING

INTRODUCTION

The purpose of this circular is to provide you with information regarding the resolutions to be proposed at the AGM which, upon approval, would enable the Company to:

• (a) re-elect the retiring Directors;

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LETTER FROM THE BOARD

• (b) grant the Issue Mandate;

• (c) grant the Repurchase Mandate;

• (d) extend the Issue Mandate set out in (b) above by an amount representing the aggregate amount of the Shares repurchased by the Company pursuant to the Repurchase Mandate set out in (c) above; and

• (e) refresh the Existing Scheme Mandate Limit.

PROPOSED RE-ELECTION OF DIRECTORS

In accordance with Article 108 of the Company’s Articles of Association, Mr. Chan Yuen Tung, Ms. Chan Yuk Foebe, Mr. Wu Jianwei, all executive Directors, and Mr. Tam Ching Ho, an independent non-executive Director, will retire from office by rotation and be eligible for re-election at the AGM. Details of Mr. Chan Yuen Tung, Ms. Chan Yuk Foebe, Mr. Wu Jianwei and Mr. Tam Ching Ho are set out in the Appendix I to this circular.

GENERAL MANDATE TO ISSUE SHARES

At the AGM, it will be proposed, by way of ordinary resolution, that the Directors be given a general and unconditional mandate to allot, issue and deal with Shares with an aggregate nominal amount not exceeding 20% of the aggregate nominal amount of the Share capital of the Company in issue as at the date of passing of such resolution. Such mandate will give the Directors greater flexibility to issue new Shares when it is in the interests of the Group and the Shareholders as a whole.

The Company has an aggregate of 6,256,331,736 Shares in issue as at the Latest Practicable Date. Subject to the passing of the proposed ordinary resolution at the AGM for the approval of granting the Issue Mandate to the Directors and on the basis that no Shares would be issued and/or repurchased by the Company from the Latest Practicable Date up to the date of the AGM, the Issue Mandate would allow the Directors to issue and allot up to a maximum of 1,251,266,347 Shares, representing 20% of the aggregate nominal amount of the Share capital of the Company in issue as at the date of the AGM.

In addition, it will be further proposed, by way of a separate ordinary resolution, that the Issue Mandate be extended by adding to it the number of Shares repurchased under the Repurchase Mandate referred to below. Any issue of new Shares in the Company is subject to approval from the Stock Exchange for the listing of and permission to deal in such new Shares.

GENERAL MANDATE TO REPURCHASE SHARES

At the AGM, it will also be proposed, by way of ordinary resolution, that the Directors be given a general and unconditional mandate to repurchase Shares with an aggregate nominal amount not exceeding 10% of the aggregate nominal amount of the Share capital of the Company in issue as at the date of passing of such resolution.

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LETTER FROM THE BOARD

Pursuant to the Listing Rules, the Company is required to provide you with the requisite information which is reasonably necessary to enable you to make an informed decision on whether to vote for or against the resolution relating to the Repurchase Mandate. An explanatory statement for such purpose is contained in Appendix II to this circular.

REFRESHMENT OF THE EXISTING SCHEME MANDATE LIMIT

The Existing Share Option Scheme was adopted by the resolution passed by the Shareholders at the extraordinary general meeting of the Company held on 18 November 2002. The purpose of the Existing Share Option Scheme is to enable the Company to provide incentives or rewards to the Eligible Participants for their contribution to the Group.

Under the Existing Share Option Scheme, the Directors were authorized to grant options to subscribe for Shares thereunder and to allot, issue and deal with Shares pursuant to the exercise of options granted under the Existing Share Option Scheme. The Company may grant options of up to the Initial Limit, i.e. 10% (equivalent to 87,300,000 Shares) of the issued share capital of the Company as at the date of adoption of the Existing Share Option Scheme. Under the Initial Limit, options carrying the rights to subscribe for 20,000,000 Shares were granted and 13,000,000 of which were exercised (representing approximately 0.21% of the issued Share capital of the Company as at the Latest Practicable Date) and 7,000,000 share options granted under the Initial Limit of the Existing Share Options Scheme were lapsed during the year ended 30 June 2006.

At the annual general meeting of the Company held on 2 December 2005, the Initial Limit was refreshed and the First Refreshed Limit was approved by the Shareholders. Pursuant to the First Refreshed Limit, the Company may grant options under the Existing Share Option Scheme up to 10% of the issued Share capital of the Company as at 2 December 2005, i.e. not exceeding 166,441,000 Shares. Up to the Latest Practicable Date, options carrying the rights to subscribe for 166,100,000 Shares have been granted under the First Refreshed Limit and 98,330,000 of which were exercised during the year ended 30 June 2006.

The Company completed an open offer on 9 January 2007. The open offer offered 1,050,770,000 offer Shares on the basis of one offer Share for every two existing Shares held by the qualifying shareholders on the record date at a price of HK$0.30 per offer share. With effect from the completion of the open offer, the remaining outstanding and unexercised options granted under the First Refreshed Limit of 67,770,000 were adjusted to 72,610,714 and the exercise prices of these outstanding options have been adjusted. The auditor of the Company has reviewed such adjustments and confirmed in writing that such adjustments satisfy the requirements pursuant to Rule 17.03(13) of the Listing Rules.

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LETTER FROM THE BOARD

Further details of the adjustments are as follows:

Date of grant 3 January 2006 4 May 2006	Before the open offer Number of Shares to be allotted upon the exercise of the outstanding options Exercise price of options 13,770,000 0.363 54,000,000 0.552 67,770,000	After the open offer Number of Shares to be allotted upon the exercise of the outstanding options Exercise price of options 14,753,571 0.339 57,857,143 0.515 72,610,714

Up to the Latest Practicable Date, options carrying the rights to subscribe for 72,610,714 Shares have been granted under the First Refreshed Limit (as adjusted subsequent to the open offer) and 72,590,000 of which were exercised and 20,714 were cancelled during the year ended 30 June 2007.

At the extraordinary general meeting of the Company held on 28 June 2007, the First Refreshed Limit was refreshed and the Second Refreshed Limit was approved by the Shareholders. Pursuant to the Second Refreshed Limit, the Company may grant options under the Existing Share Option Scheme up to 10% of the issued Share capital of the Company as at 28 June 2007, i.e. not exceeding 337,782,907 Shares. Up to the Latest Practicable Date, options carrying the rights to subscribe for 337,000,000 Shares have been granted under the Second Refreshed Limit and 116,100,000 of which were exercised during the year ended 30 June 2008.

At the annual general meeting of the Company held on 6 December 2007, the Second Refreshed Limit was refreshed and the Third Refreshed Limit was approved by the Shareholders. Pursuant to the Third Refreshed Limit, the Company may grant options under the Existing Share Option Scheme up to 10% of the issued Share capital of the Company as at 6 December 2007, i.e. not exceeding 363,507,732 Shares. Up to the Latest Practicable Date, options carrying the rights to subscribe for 72,000,000 Shares have been granted under the Third Refreshed Limit and all of which were exercised during the year ended 30 June 2008.

At the annual general meeting of the Company held on 31 December 2008, the Third Refreshed Limit was refreshed and the Fourth Refreshed Limit was approved by the Shareholders. Pursuant to the Fourth Refreshed Limit, the Company may grant options under the Existing Share Option Scheme up to 10% of the issued share capital of the Company as at 31 December 2008, i.e. not exceeding 374,088,782 Shares. Up to the Latest Practicable Date, options carrying the rights to subscribe for 205,000,000 Shares have been granted under the Fourth Refreshed Limit. Up to the Latest Practicable Date, options carrying the rights to subscribe for 205,000,000 Shares have been granted under the Fourth Refreshed Limit and all of which had been exercised as at the Latest Practicable Date.

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LETTER FROM THE BOARD

The Company completed an open offer on 19 August 2009. The open offer offered 1,870,443,912 offer Shares on the basis of one offer Share for every two existing Shares held by the qualifying Shareholders on the record date at a price of HK$0.11 per offer share. With effect from the completion of the open offer, the remaining outstanding and unexercised options granted under the Second Refreshed Limit of 220,900,000 were adjusted to 265,300,900 and the exercise prices of these outstanding options have been adjusted. The auditor of the Company has reviewed such adjustments and confirmed in writing that such adjustments satisfy the requirements pursuant to Rule 17.03(13) of the Listing Rules.

Date of grant 20 July 2007 22 August 2007	Before the open offer Number of Shares to be allotted upon the exercise of the outstanding options Exercise price of options 86,100,000 0.582 134,800,000 0.420 220,900,000	After the open offer Number of Shares to be allotted upon the exercise of the outstanding options Exercise price of options 103,406,100 0.485 161,894,800 0.350 265,300,900

The aforementioned 103,406,100 share options and 161,894,800 share options granted under the Second Refreshed Limit of the Existing Share Options Scheme were lapsed on 23 July 2010 and 23 August 2010, respectively.

At the annual general meeting of the Company held on 17 December 2009, the Fourth Refreshed Limit was refreshed and the Fifth Refreshed Limit was approved by the Shareholders. Pursuant to the Fifth Refreshed Limit, the Company may grant options under the Existing Share Option Scheme up to 10% of the issued Share capital of the Company as at 17 December 2009, i.e. not exceeding 561,133,173 Shares. Up to the Latest Practicable Date, no options have been granted under the Fifth Refreshed Limit.

As at the Latest Practicable Date, there were no share options outstanding and unexercised under the Existing Share Option Scheme. If the Company does not seek the Shareholders’ approval to refresh the Existing Scheme Mandate Limit (which is currently the Fifth Refreshed Limit) at the AGM or in the event that such refreshment of the Existing Scheme Mandate Limit is not approved by the Shareholders at the AGM, it may further grant share options carrying the rights to subscribe for 561,133,173 Shares pursuant to the Fifth Refreshed Limit.

Apart from the Existing Share Option Scheme, the Company has no other share option scheme currently in force. The Directors consider that the Company should refresh the Existing Scheme Mandate Limit so that the Company could have more flexibility to provide incentives to those Eligible Participants of the Existing Share Option Scheme by way of granting share options to them. If the refreshment of the Existing Scheme Mandate

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LETTER FROM THE BOARD

Limit is approved at the AGM, based on the 6,256,331,736 Shares in issue as at the Latest Practicable Date and assuming no further Shares will be allotted and issued and no Shares will be repurchased after the Latest Practicable Date and up to the date of the AGM, the Company will be allowed to grant options under the Existing Share Option Scheme for subscription of up to a total of 625,633,173 Shares, representing 10% of the issued share capital of the Company as at the date of the AGM.

The following table shows the details of the share options granted/ exercised/lapsed/cancelled/outstanding under the Existing Share Option Scheme up to the Latest Practicable Date:

			Under		Under		Total As of
		Under First	Second	Under Third	Fourth	Under Fifth	the Latest
	Under	Refreshed	Refreshed	Refreshed	Refreshed	Refreshed	Practicable
	Initial Limit	Limit	Limit	Limit	Limit	Limit	Date
Maximum number of Shares to be
subscribed for if maximum							Not
options are granted	87,300,000	166,441,000	337,782,907	363,507,732	374,088,782	561,133,173	applicable
No. of options granted	20,000,000	166,100,000	337,000,000	72,000,000	205,000,000	−	800,100,000
No. of options exercised	13,000,000	170,920,000	116,100,000	72,000,000	205,000,000	−	572,020,000
Adjusted upon the completion of
the open offer on 9 January
2007	–	4,840,714	–	–	–	−	4,840,714
Adjusted upon the completion of
the open offer on 19 August
2009	–	–	44,400,900	–	–	−	44,400,900
No. of options lapsed/cancelled	7,000,000	20,714	265,300,900	–	–	−	272,321,614
No. of outstanding options	–	–	–	–	–	−	−

So far as the Company is aware, there is no grantee under the Existing Share Option Scheme be granted with options which exceed the limit of 1% of the issued Share capital of the Company in the 12-month period up to and including the date of grant as set out in Rule 17.03(4) of the Listing Rules.

The maximum number of Shares to be issued upon exercise of all outstanding options granted and yet to be exercised under the Existing Share Option Scheme and any other share option scheme of the Group must not in aggregate exceed 30% of the issued Share capital of the Company from time to time. The Directors consider that the refreshment of the Existing Scheme Mandate Limit is in the interests of the Group and the Shareholders as a whole because it enables the Company to reward and motivate the Eligible Participants under the Existing Share Option Scheme.

The refreshment of the Existing Scheme Mandate Limit is conditional upon:

• (i) the passing of the ordinary resolution at the AGM to approve the refreshment of the Existing Scheme Mandate Limit; and

• (ii) the Stock Exchange granting the listing of, and permission to deal in any new Shares which may fall to be allotted and issued upon the exercise of the subscription rights attaching to the options that may be granted under the refreshed limit of the Existing Share Option Scheme up to 10% of the issued Share capital of the Company as at the date of passing of the ordinary resolution at the AGM.

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LETTER FROM THE BOARD

Application will be made to the Stock Exchange for the listing of, and permission to deal in, the Shares to be issued under the refreshed Existing Scheme Mandate Limit.

The documents of the Existing Share Option Scheme are available for public inspection at the principal place of business of the Company in Hong Kong at Unit 1101-12, Sun Hung Kai Centre, 30 Harbour Road, Wanchai, Hong Kong during normal business hours on any weekday, except public holiday, for the period from the date of this circular, i.e. 11 November 2010 to 14 days thereafter, i.e. 1 December 2010.

ANNUAL GENERAL MEETING

A notice of the AGM is set out on pages 19 to 23 of this circular. A form of proxy for use at the AGM is enclosed with this circular. To be valid, the form of proxy must be completed 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 notarially certified copy of such power of attorney or other authority, must be lodged with the Company’s branch share registrar in Hong Kong, Tricor Tengis Limited at 26/F., Tesbury Centre, 28 Queen’s Road East, Hong Kong not less than 48 hours before the time fixed for holding the AGM or any adjournment thereof. Completion and delivery of the form of proxy will not preclude Shareholders from attending and voting at the AGM or any adjournment thereof if they so wish.

VOTING AT THE ANNUAL GENERAL MEETING

Pursuant to Rule 13.39 of the Listing Rules, all votes of the Shareholders at the general meetings must be taken by poll. The chairman of the meeting will therefore demand a poll for every resolution put to the vote of the AGM in accordance with the Articles of Association. An announcement on the poll vote results will be made by the Company after the AGM in the manner prescribed under Rule 13.39(5).

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.

So far as the Directors are aware having made all reasonable enquiries, there is no Shareholder who is required to abstain from voting at the AGM under the Listing Rules.

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LETTER FROM THE BOARD

RECOMMENDATION

The Directors consider that the proposed re-election of Directors, the granting of the Issue Mandate and the Repurchase Mandate, the extension of the Issue Mandate and the refreshment of the Existing Scheme Mandate Limit are in the best interests of the Company and the Shareholders as a whole. Accordingly, the Directors recommend the Shareholders to vote in favour of all the relevant resolutions to be proposed at the AGM.

Yours faithfully, For and on behalf of the Board China Zenith Chemical Group Limited Chan Yuk Foebe Chief Executive Officer

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APPENDIX I

DETAILS OF DIRECTORS

Details of the Directors proposed to be re-elected are as follows:

Mr. Chan Yuen Tung (陳遠東) (“Mr. Chan”) , aged 42, graduated with a bachelor’s degree in Computer Engineering from The University of Hong Kong in 1992. Mr. Chan has enormous experience in manufacturing industries in the mainland China, properties development and investment in both the property and stock market in Hong Kong. From October 1995 to February 1999, Mr. Chan was appointed as an executive director of DC Finance (Holdings) Limited (now known as “SMI Corporation Limited”) (Stock Code: 198), whose shares are listed on the main board of The Stock Exchange of Hong Kong Limited (the “Stock Exchange”). Since 2000, Mr. Chan has been participating in the investment in the manufacturing industries in the People’s Republic of China (the “PRC”). He was appointed as a member of Mudanjiang Committee of the Chinese People’s Political Consultative Conference in 2005 and became a member of standing committee of Mudanjiang Committee of the Chinese People’s Political Consultative Conference in 2006. He was appointed as a member of Heilongjiang Province Committee of the Chinese People’s Political Consultative Conference in 2007. Save as disclosed herein, Mr. Chan did not hold any other directorships in any listed public companies in the last three years. Mr. Chan was appointed as the chairman of the Board and an executive director of the Company with effect from 29 October 2007. Mr. Chan Yuen Tung was appointed as a member of remuneration committee in place of Ms. Chan Yuk Foebe with effect from 18 August 2009.

Mr. Chan has entered into a service contract with the Company commencing from 29 October 2007, which shall, subject to the re-appointment as a Director in accordance with the Company’s Articles of Association, continue until terminated by either party giving not less than three months’ notice in writing to the other. Mr. Chan will be entitled to HK$10,000 per annum payable by the Group under the service contract. Mr. Chan’s emoluments is determined by the Board with reference to Mr. Chan’s experience, duties and responsibilities and the prevailing market practice, and in accordance with the remuneration policy adopted by the remuneration committee of the Company.

As at the Latest Practicable Date, Mr. Chan holds 1,659,885,430 Shares within the meaning of Part XV of the SFO. Save as being an executive Director, Mr. Chan does not have any relationship with any directors, senior management or substantial or controlling Shareholders of the Company or its subsidiaries.

Save as disclosed above, there is no other matter that needs to be brought to the attention of the Shareholders in relation to the re-election of Mr. Chan and there is no information required to be disclosed pursuant to any of the requirements of Rules 13.51(2)(h) to 13.51(2)(v) of the Listing Rules.

Ms. Chan Yuk Foebe (陳昱) (“Ms. Chan”) , aged 41, is the chief executive officer of the Group and joined the Group in January 2004. Ms. Chan is responsible for the overall management and business development of the Group. Ms. Chan holds a bachelor’s degree in Accountancy from the Queensland University of Technology in Australia. Ms. Chan has over 10 years’ experience in the areas of corporate finance and management. Ms. Chan is a non-executive director of Heng Tai Consumables Group Limited (“Heng Tai”), a company listed on the main board of the Stock Exchange. Mr. Chan Yuen Tung was appointed as a member of remuneration committee in place of Ms. Chan Yuk Foebe with effect from 18 August 2009.

– 13 –

APPENDIX I

DETAILS OF DIRECTORS

Ms. Chan has entered into a service contract with the Company commencing from 22 November 2004, which shall, subject to the re-appointment as a Director in accordance with the Company’s Articles of Association, continue until terminated by either party giving not less than three months’ notice in writing to the other. Ms. Chan will be entitled to HK$100,000 per month payable by the Group under the service contract. Ms. Chan’s emoluments is determined by the Board with reference to Ms. Chan’s experience, duties and responsibilities and the prevailing market practice, and in accordance with the remuneration policy adopted by the remuneration committee of the Company.

As at the Latest Practicable Date, Ms. Chan holds 22,125,000 Shares within the meaning of Part XV of the SFO. Save as being an executive Director, Ms. Chan does not have any relationship with any directors, senior management or substantial or controlling Shareholders of the Company or its subsidiaries.

Save as disclosed above, there is no other matter that needs to be brought to the attention of the Shareholders in relation to the re-election of Ms. Chan and there is no information required to be disclosed pursuant to any of the requirements of Rules 13.51(2)(h) to 13.51(2)(v) of the Listing Rules.

Mr. Wu Jianwei (武建偉) (“Mr. Wu”) , aged 56, is an executive director and the chief operation officer of the Company. He is mainly responsible for overseeing the sale, marketing, administration and production of vinyl acetate, polyvinyl-chloride, glucose and starch, heat and power. He joined the Company in September 2004. Mr. Wu has over 30 years’ extensive experience in the operation and production management of coal-related petrochemical enterprises. He was the Chairman and Party secretary general manager of Mudanjiang Association of Petrochemical Industry (formerly known as Mudanjiang Petrochemical Industry Group Company) before serving the Group. He graduated from Mudanjiang Education College, majoring in economic management. Mr. Wu is a qualified senior economist in the PRC. Save as disclosed herein, he did not hold any other directorships in listed public companies in the last three years. Mr. Wu is appointed as an executive director of the Company with effect from 15 October 2007.

Mr. Wu has entered into a service contract with the Company commencing from 15 October 2007, which shall, subject to the re-appointment as a Director in accordance with the Company’s Articles of Association, continue until terminated by either party giving not less than three months’ notice in writing to the other. Mr. Wu will be entitled to RMB25,000 per month (borne by the Company’s PRC subsidiaries) and HK$15,000 per month (borne by the Company’s Hong Kong office) under the service contract. Mr. Wu’s emoluments is determined by the Board with reference to Mr. Wu’s experience, duties and responsibilities and the prevailing market practice, and in accordance with the remuneration policy adopted by the remuneration committee of the Company.

As at the Latest Practicable Date, Mr. Wu does not hold any Shares within the meaning of Part XV of the SFO. Save as being an executive Director, Mr. Wu does not have any relationship with any directors, senior management or substantial or controlling Shareholders of the Company or its subsidiaries.

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APPENDIX I

DETAILS OF DIRECTORS

Save as disclosed above, there is no other matter that needs to be brought to the attention of the Shareholders in relation to the re-election of Mr. Wu and there is no information required to be disclosed pursuant to any of the requirements of Rules 13.51(2)(h) to 13.51(2)(v) of the Listing Rules.

Mr. Tam Ching Ho (譚政豪) (“Mr. Tam”) , aged 39, is an independent non-executive Director and is a member of the Audit Committee, the Remuneration Committee and the Nomination Committee of the Company. He obtained a bachelor’s degree of arts with honours in accountancy from the City University of Hong Kong in 1993. Since graduation, Mr. Tam has worked in a reputable international accounting firm specialising in providing assurance services to pre-listing, listed and multinational clients for more than eight years. He has also held senior positions in several companies which mainly include acting as the financial controller of a company listed on the main board of the Stock Exchange and another company listed on the main board of the Singapore Exchange for a total of about seven years. He is currently a practising certified public accountant registered with the Hong Kong Institute of Certified Public Accountants. Mr. Tam has accumulated extensive experience in the areas of corporate finance and administration, listing compliance, PRC business operating environment, investor relations, accounting and auditing. Mr. Tam is an associate member of the Hong Kong Institute of Certified Public Accountants and a fellow member of The Association of Chartered Certified Accountants. He is also an independent non-executive director of Chaoda Modern Agriculture (Holdings) Limited (stock code: 682) whose shares are listed on the main board of the Stock Exchange.

Mr. Tam first joined the Company as an independent non-executive Director on 30 June 2007. Mr. Tam has renewed his service contract with the Company for a two-year term commencing from 7 December 2009, which shall, subject to the re-appointment as a Director in accordance with the Company’s Articles of Association, continue until terminated by either party giving not less than one month’s notice in writing to the other. Mr. Tam will be entitled to HK$10,000 per month payable by the Group under the service contract. Mr. Tam’s emoluments is determined by the Board with reference to Mr. Tam’s experience, duties and responsibilities and the prevailing market practice, and in accordance with the remuneration policy adopted by the remuneration committee of the Company.

As at the Latest Practicable Date, Mr. Tam holds 2,880,000 Shares within the meaning of Part XV of the SFO. Save as being an independent non-executive Director, Mr. Tam does not have any relationship with any directors, senior management or substantial or controlling Shareholders of the Company or its subsidiaries.

Save as disclosed above, there is no other matter that needs to be brought to the attention of the Shareholders in relation to the re-election of Mr. Tam and there is no information required to be disclosed pursuant to any of the requirements of Rules 13.51(2)(h) to 13.51(2)(v) of the Listing Rules.

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APPENDIX II EXPLANATORY STATEMENT ON THE REPURCHASE MANDATE

This Appendix serves as an explanatory statement, as required by the Listing Rules, to provide you with the requisite information relating to the Repurchase Mandate to be proposed at the AGM.

1. REASONS FOR REPURCHASE MANDATE

Although the Directors have no present intention of repurchasing any Shares, they believe that the flexibility afforded by the Repurchase Mandate would be beneficial to the Company and the Shareholders. Trading conditions on the Stock Exchange have sometimes been volatile in recent years. At any time in the future when Shares are trading at a discount to their underlying value, the ability of the Company to repurchase Shares will be beneficial to those Shareholders who retain their investment in the Company since their percentage interest in the assets of the Company would increase in proportion to the number of Shares repurchased by the Company and thereby resulting in an increase in net assets and/or earnings per Share. Such repurchases will only be made when the Directors believe that such repurchases will benefit the Company and the Shareholders.

2. SHARE CAPITAL

As at the Latest Practicable Date, the issued Share capital of the Company comprised 6,256,331,736 Shares.

Subject to the passing of the Repurchase Mandate (ordinary resolution no. 4B), the Company would be allowed under the Repurchase Mandate to repurchase Shares up to a maximum of 625,633,173 Shares on the basis that no further Shares will be issued or repurchased prior to the date of the AGM.

3. FUNDING OF REPURCHASE

In repurchasing the Shares, the Company may only apply funds legally available for such purpose in accordance with its memorandum and articles of association, the Cayman Islands Companies Law and the Listing Rules. Under the Cayman Islands law, any repurchase of Shares would be made out of profits of the Company or out of a fresh issue of Shares made for the purpose of the repurchase or, subject to the Cayman Islands Companies Law, out of capital and, in the case of any premium payable on the repurchase, out of the profits of the Company or from sums standing to the credit of the share premium account of the Company or, subject to the Cayman Islands Companies Law, out of capital.

There might be 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 for the year ended 30 June 2010) in the event that the Repurchase Mandate was to be carried out in full at any time during the proposed repurchase period. However, the Directors do not propose to exercise the Repurchase 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. The number of Shares to be repurchased on any occasion and the price and other terms upon which the

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APPENDIX II EXPLANATORY STATEMENT ON THE REPURCHASE MANDATE

same are purchased will be decided by the Directors at the relevant time having regard to the circumstances then pertaining.

4. MARKET PRICES

The highest and lowest prices at which the Shares have been traded on the Stock Exchange during each of the previous twelve months prior to the Latest Practicable Date are as follows:

							Shares
							Highest	Lowest
							HK$	HK$
2009
November							0.2600	0.1740
December							0.2950	0.2350
2010
January							0.2900	0.2200
February							0.2430	0.2180
March							0.2550	0.2100
April							0.2800	0.2380
May							0.2460	0.1850
June							0.2080	0.1860
July							0.1960	0.1770
August							0.2150	0.1920
September							0.2550	0.1950
October							0.2700	0.2360
November	(up	to	the	Latest	Practicable	Date)	0.2850	0.2600

5. SHARE REPURCHASE MADE BY THE COMPANY

No purchase of Shares has been made by the Company during the last six months preceding the Latest Practicable Date (whether on the Stock Exchange or otherwise).

6. UNDERTAKING

The Directors have undertaken to the Stock Exchange to exercise the powers of the Company to make purchases under the Repurchase Mandate in accordance with the Listing Rules, the Articles of Association and the Cayman Islands Companies Law.

None of the Directors nor, to the best of their knowledge having made all reasonable enquiries, any of their associates, presently intends to sell Shares to the Company under the Repurchase Mandate in the event that the Repurchase Mandate is approved by the Shareholders.

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APPENDIX II EXPLANATORY STATEMENT ON THE REPURCHASE MANDATE

No connected persons of the Company have notified to the Company that they have a present intention to sell any Shares, or that they have undertaken not to sell any Shares held by them to the Company in the event that the Repurchase Mandate is approved by the Shareholders.

7. TAKEOVERS CODE

If on the exercise of the Repurchase 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 Rule 32 of the Takeovers Code. As a result, 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 Rules 26 and 32 of the Takeovers Code.

As at the Latest Practicable Date and based on the information available to the Company, Mr. Chan Yuen Tung, the single largest Shareholder of the Company, was beneficially interested in 1,659,885,430 Shares, representing 26.53% of the issued Share capital of the Company. In the event that the Directors exercise in full the Repurchase Mandate, the shareholding of Mr. Chan Yuen Tung in the Company will be increased to approximately 29.48% of the issued Share capital of the Company. Such an increase would give rise to an obligation to Mr. Chan Yuen Tung to make a mandatory offer under Rule 26 of the Takeovers Code. However, the Directors have no current intention to exercise the proposed Repurchase Mandate to such an extent that will trigger a requirement requiring Mr. Chan Yuen Tung to make a mandatory offer under the Takeovers Code.

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NOTICE OF ANNUAL GENERAL MEETING

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(Incorporated in the Cayman Islands with limited liability)

(Stock Code: 362)

NOTICE IS HEREBY GIVEN THAT an annual general meeting of China Zenith Chemical Group Limited (the “Company”) will be held at Mandarin Oriental Hong Kong, 5 Connaught Road, Central, Hong Kong on 20 December 2010, Monday at 1:30 p.m. (if there is a “black” rainstorm warning or a tropical cyclone warning signal number 8 or above is hoisted on 20 December 2010, the provisions contained in Note 5 below shall be applicable) for the purpose of considering and, if thought fit, passing the following resolutions:

ORDINARY RESOLUTIONS

1. to receive and consider the audited consolidated financial statements and the reports of the directors of the Company (the “Directors”) and the auditors for the year ended 30 June 2010;

2. (a) to re-elect the following persons as Directors:

   • (i) Mr. Chan Yuen Tung (Note 1)

   • (ii) Ms. Chan Yuk Foebe (Note 1)

   • (iii) Mr. Wu Jianwei (Note 1)

   • (iv) Mr. Tam Ching Ho (Note 1)

3. (b) to authorize the board of Directors (the “Board”) to fix the Directors’ remuneration;

4. to re-appoint Messrs. RSM Nelson Wheeler as auditors of the Company for the ensuing year and to authorize the Board to fix their remuneration;

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NOTICE OF ANNUAL GENERAL MEETING

1. as special business, to consider and, if thought fit, pass with or without amendments, the following resolutions as ordinary resolutions:

ORDINARY RESOLUTIONS

• (A) “THAT:

• (a) subject to paragraph (c) below, the exercise by the Directors during the Relevant Period (as hereinafter defined) of all the powers of the Company to allot, issue and deal with additional shares of HK$0.01 each in the capital of the Company and to make or grant offers, agreements and options which might require the exercise of such powers be and is hereby generally and unconditionally approved;

• (b) the approval in paragraph (a) above shall authorize the Directors during the Relevant Period to make or grant offers, agreements and options which might require the exercise of such powers, after the end of the Relevant Period;

• (c) the aggregate nominal amount of share capital allotted or agreed conditionally or unconditionally to be allotted (whether pursuant to an option or otherwise) by the Directors pursuant to the approval in paragraph (a) above shall not exceed 20% of the aggregate nominal amount of the share capital of the Company in issue at the date of the passing of this resolution and the said approval shall be limited accordingly; and

• (d) for the purpose of this resolution:

“Relevant Period” means the period from the passing of this resolution until whichever is the earlier of:

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

• (ii) 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 law to be held; or

• (iii) the revocation or variation of the authority given under this resolution by an ordinary resolution of the shareholders in general meeting.”

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NOTICE OF ANNUAL GENERAL MEETING

• (B) “ THAT:

• (a) subject to paragraph (b) below, the exercise by the Directors during the Relevant Period (as hereinafter defined) of all the powers of the Company to purchase shares of HK$0.01 each in the capital of the Company be and is hereby generally and unconditionally approved;

• (b) the aggregate nominal amount of the shares to be purchased pursuant to the approval in paragraph (a) above shall not exceed 10% of the aggregate nominal amount of the share capital of the Company in issue at the date of the 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 earlier of:

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

  • (ii) 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 law to be held; or

  • (iii) the revocation or variation of the authority given under this resolution by an ordinary resolution of the shareholders in general meeting.”

• (C) “ THAT the general mandate granted to the Directors pursuant to resolutions nos. 4A and 4B as 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 referred to in resolution no. 4A be and is hereby extended by the total nominal amount of shares in the capital of the Company repurchased by the Company since the granting of such general mandate pursuant to the exercise by the Directors of the powers of the Company to purchase such shares pursuant to resolution no. 4B, provided that such amount shall not exceed 10% of the aggregate nominal amount of the share capital of the Company in issue at the date of the passing of this resolution.”

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NOTICE OF ANNUAL GENERAL MEETING

• (D) “ THAT the existing scheme mandate limit under the share option scheme adopted by a resolution of the shareholders of the Company on 18 November 2002 (“Share Option Scheme”) be refreshed so that the aggregate nominal amount of the shares of the Company to be allotted and issued pursuant to the grant or exercise of the options under the Share Option Scheme (excluding options previously granted, outstanding, cancelled, lapsed or exercised under the Share Option Scheme) shall not exceed 10% of the aggregate nominal amount of the share capital of the Company in issue at the date of the passing of this resolution (“Refreshed Scheme Limit”) and that the Directors be and are hereby authorized, subject to compliance with the Rules Governing the Listing of Securities on the Stock Exchange (as amended from time to time), to grant options under the Share Option Scheme up to the Refreshed Scheme Limit and to exercise all the powers of the Company to allot, issue and deal with shares of the Company pursuant to the exercise of such options.”

By Order of the Board China Zenith Chemical Group Limited Chan Yuk Foebe Chief Executive Officer

Hong Kong, 11 November 2010

As at the date hereof, Mr. Chan Yuen Tung, Ms. Chan Yuk Foebe, Mr. Chiau Che Kong, Mr. Peng Zhanrong and Mr. Wu Jianwei are the executive Directors and Mr. Ma Wing Yun Bryan, Mr. Yau Chung Hong, Mr. Tam Ching Ho and Dato’ Wong Sin Just are the independent non-executive Directors.

Notes:

• (1) Please refer to the circular for the annual general meeting of the Company for details of Mr. Chan Yuen Tung, Ms. Chan Yuk Foebe, Mr. Wu Jianwei and Mr. Tam Ching Ho.

• (2) The members of the Company whose names appear on the register of members held by the Company’s branch share registrar in Hong Kong, Tricor Tengis Limited, at 26/F., Tesbury Centre, 28 Queen’s Road East, Hong Kong at 4:30 p.m. on 16 December 2010 shall qualify for attending and voting at the annual general meeting. The register of members of the Company will be closed from 17 December 2010 to 20 December 2010, both days inclusive, during which period no share transfer will be registered. In order to qualify to attend and vote on the proposed resolutions set out in this notice, all transfers accompanied by the relevant share certificates must be lodged with Company’s branch share registrar in Hong Kong, Tricor Tengis Limited, at 26/F., Tesbury Centre, 28 Queen’s Road East, Hong Kong not later than 4:30 p.m. on 16 December 2010.

• (3) A member entitled to attend and vote at the meeting is entitled to appoint one or more proxies to attend and vote on his behalf. A proxy need not be a member of the Company.

• (4) The instrument appointing a proxy and the power of attorney or other authority, if any, under which it is signed, or a notarially certified copy of such power of attorney or other authority, must be lodged with the Company’s branch share registrar in Hong Kong, Tricor Tengis Limited, at 26/F., Tesbury Centre, 28 Queen’s Road East, Hong Kong not less than 48 hours before the time fixed for holding the meeting or at any adjournment thereof.

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NOTICE OF ANNUAL GENERAL MEETING

• (5) If there is a “black” rainstorm warning or a tropical cyclone warning signal number 8 or above is hoisted at or after 11:30 a.m. on 20 December 2010 and/or the Hong Kong Observatory has announced at or before 11:30 a.m. on 20 December 2010 that either of the above mentioned warnings is to be issued within the next two hours, the meeting shall automatically be postponed to the next Business Day on which no “black” rainstorm warning or tropical cyclone warning signal number 8 or above is hoisted between the hours from 11:30 a.m. to 1:30 p.m. and in such case the meeting shall be held at 1:30 p.m. on that Business Day at Unit 1101-12, Sun Hung Kai Centre, 30 Harbour Road, Wanchai, Hong Kong. “Business Day”, in this context, shall mean a day (not being a Saturday) on which banks are open for general banking business in Hong Kong.

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