What is Ally Giant (the Concert Group)?

Per the Group’s prospectus issued on 25 February 2008 “Company History and Reorganization - Ownership Continuity and Control” Section, some of the Group’s shareholders, including Zhang Mi, Ren Jie, Liu Zhi, Zheng Yong, Zuo Huixian, Zhang Xu, Wang Jiangyang, Chen Jun, Fan Bin, Zhang Yanyong, Ao Pei, Tian Diyong, Shen Dingjian, Liu Xuetian (deceased), Zhou Bin, Lu Lan, Tian Yu, Li Hanqiang, Liu Yingguo, Liu Lulu, He Guangfu, Zhang Zongyou and Chen Zongliang, formed the Concert Group (Out of which He Guangfu, Zhang Zongyou and Chen Zongliang transferred an aggregate of approximately 9.1325% equity interest in Honghua Company to the other members of the Concert Group. The transfers were completed on 17 February 2006).

How should I understand disclosure of changes in board-members’ interest posted by the Stock Exchange of Hong Kong?

According to Hong Kong Securities and Futures Ordinance, all equity changes made by board-members need to be disclosed. If changes to the Concert Group’s shareholding does not exceed one percent, no disclosure is required. Any trading by the Concert Group members will cause the interest of Group’s three board-members (Mr. Zhang Mi, Mr. Ren Jie and Mr. Liu Zhi), also as members of the Concert Group, to change, and thus needs to be disclosed.

Types of trading disclosures by the Stock Exchange of Hong Kong (the “Exchange”)：

The Group’s three board-members (Mr. Zhang Mi, Mr. Ren Jie and Mr. Liu Zhi) hold Honghua Company equity interest through the Company, trust and Ally Giant (the Concert Group). The corresponding trading disclosed by the Exchange are categorized into:

(1) Beneficial owner（Code201）；

(2) Discretionary trust founder（Code 209）；

(3) Members of the Concert Group（Code 211）。

Between 8 October 2012 and 22 October 2012, per the Exchange’s disclosure of interest website, these three board members (Mr. Zhang Mi, Mr. Ren Jie and Mr. Liu Zhi) sold 100,000 shares of Honghua Company. Disclosure of interest code is 211, indicating this shareholding change is made not by the three board-members above, but by other members of the Concert Group. Because this equity change does not exceed one percent, the Exchange’s website disclosed only Mr. Zhang Mi, Mr. Ren Jie and Mr. Liu Zhi’s shareholding changes.

Honghua has a diverse global marketing network, and has established 10 wholly owned subsidiaries in China, USA, Russia, Egypt, United Arab Emirates and Ukraine, and 4 representative offices in India, Indonesia, Pakistan and Uzbekistan. In the full year 2011, Honghua generated revenue of RMB 3.15 billion from exports, accounting for approximately 90.4% of the Group's total revenue.

As international business grows, Honghua will open more representative offices, warehouses and service centers to realize sales and services covering its global network.

Honghua Group’s strategic partners include Nabors Industries Limited, one of the world largest oil & gas drilling equipment contractors, China Ocean Oilfields Services, a wholly owned subsidiary of China National Offshore Oil Corporation, and some institutional investors including Carlyle Group, Development Partners Fund, and etc.

Honghua has advanced technological and engineering expertise and a track record of developing successful new technologies. As one of the leading developers of land rig technologies in China and the first rig manufacturer to launch the digitally-controlled VFD rigs in China, Honghua has created a wide range of patented technologies and proprietary designs which enhance the function and performance of drilling rigs. As of June 30th, 2012, the Group has accumulatively filed 165 patent applications and 86 of them had been approved.

In 2012, the in-house designed products including direct top drives and direct-driven pumps have been successfully launched and are constantly modified to meet the demands of customers in different regions. In regard to products for non-conventional gas drilling equipment, Honghua has designed the super single pipe rigs, coiled tubing rigs, rack and pinion rigs and fracturing pumps. Regarding the offshore oil and gas equipment segment,. both of the jack-up platform jacking and fixation systems have passed the load test and the following NDT certification of American Bureau of Shipping (the“ABS”) , and also obtain certification by ABS officials and quality inspectors.

 Leveraging on its solid foundation on land drilling equipment manufacturing, Honghua will proactively implement its diversified development strategy in both the land and offshore segments, so as to develop into a diversified conglomerate with interactive development in the fields of equipment production, oil and gas resources exploration (especially the unconventional oil and gas sector) as well as engineering services.

Honghua Group Limited is a large-scale equipment manufacturer and drilling service provider, specializing in research, design, manufacture, and set-assembly of drilling rigs, offshore engineering, and oil & gas exploitation and production equipment. It is the biggest exporter of drilling rigs in China, and one of the largest land drilling rig manufacturers in the world. Leveraging on its strong research and development capabilities, quality production facilities, as well as a highly-sophisticated global marketing network, the Group’s products are sold to world-renowned customers in major oil-producing regions such as North America and the Middle East, and emerging markets such as South America, India, Russia, China and Africa.

Launched its IPO in March 2008, Honghua (HKEx 0196) became the first drilling rig manufacturer of China to go public. Headquartered in Chengdu, Sichuan, Honghua Group has positioned its land and offshore equipment manufacturing bases in Guanghan, Sichuan and Qidong, Jiangsu respectively; the group also operates through more than ten overseas subsidiaries and agencies with manufacturing facilities in America, Dubai and Egypt etc.