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



(Incorporated in Bermuda with limited liability)

(Stock Code: 00336) CONTINUING CONNECTED TRANSACTIONS WITH CUSTOMER NEW HONGTA FRAMEWORK AGREEMENT

Chemactive Investments is a direct wholly owned subsidiary of the Company. Chemactive Investment indirectly owns 60% equity interest in Yunnan Tianhong. The remaining 40% equity interest in Yunnan Tianhong is held by Yunnan Hongta. Yunnan Hongta is wholly owned by Hongta Tobacco. By virtue of such 40% interest in Yunnan Tianhong, Hongta Tobacco Group are regarded as connected persons at the subsidiary level of the Company under the Listing Rules. Transactions between the Group and Hongta Tobacco Group constitute connected transactions of the Company.
The Existing Hongta Framework Agreement is due to expire on 31 March 2015. In order to continue the continuing connected transactions between Chemactive and Hongta Tobacco Group, on 31 March 2015, Chemactive Investments entered into a New Hongta Framework Agreement with Yunnan Hongta for a term of 3 years commencing on 1 April 2015 and expiring on 31 March 2018. The continuing connected transactions contemplated under the New Hongta Framework Agreement relate to the provision of tobacco flavours and fragrances products, RTL, stem powder, auxiliary materials and related services by Chemactive to Hongta Tobacco Group.

IMPLICATIONS UNDER THE LISTING RULES

The highest of the applicable percentage ratios of the annual caps of the continuing connected transactions for each of the three financial years ending 31 March 2018 contemplated under the New Hongta Framework Agreement as calculated pursuant to Rule 14.07 of the Listing Rules exceed 5%, the continuing connected transactions are subject to the reporting, annual review, announcement and the independent shareholders' approval requirements.
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As (i) Hongta Tobacco Group are regarded as connected persons at the subsidiary level of the Company; (ii) the continuing connected transactions contemplated under the New Hongta Framework Agreement are on normal commercial terms; (iii) the Board (including all the independent non-executive Directors of the Company) has approved the continuing connected transactions and confirmed that the terms of the continuing connected transactions are fair and reasonable and that the continuing connected transactions are on normal commercial terms and in the interests of the Company and the Shareholders as a whole, the continuing connected transactions contemplated under the New Hongta Framework Agreement are subject to the reporting and announcement requirements but are exempt from the circular, independent financial advice and shareholders' approval requirements under Rule 14A.101 of the Listing Rules.

RELATIONSHIP BETWEEN THE COMPANY AND HONGTA TOBACCO GROUP

The Group is principally engaged in the research and development, production, distribution and sale of flavours, fragrances, RTL and new materials products that are innovative, functional, and applicable to tobacco industry in the PRC.
Yunnan Hongta is a direct wholly owned subsidiary of Hongta Tobacco, and is responsible for the investment and management of Hongta Tobacco.
Hongta Tobacco is a PRC state-owned tobacco group, principally engaged in cigarettes production. Hongta Tobacco Group are one of the largest tobacco manufacturing groups in the PRC and one of the long term customers of the Group's products.
Chemactive Investments is a direct wholly owned subsidiary of the Company. Chemactive Investments indirectly owns 60% equity interest in Yunnan Tianhong. The remaining 40% equity interest in Yunnan Tianhong is held by Yunnan Hongta. Yunnan Hongta is wholly owned by Hongta Tobacco. By virtue of such 40% interest in Yunnan Tianhong, Hongta Tobacco Group are regarded as connected persons at the subsidiary level of the Company under the Listing Rules. Transactions between the Group and Hongta Tobacco Group constitute connected transactions of the Company.

EXISTING HONGTA FRAMEWORK AGREEMENT AND ANNUAL CAPS

The Existing Hongta Framework Agreement is for a term of three years commencing on 1 April
2012 and expiring on 31 March 2015. For the three financial years ending 31 March 2015, the annual caps of the sale of the related goods and services by Chemactive to Hongta Tobacco Group were set at RMB115,000,000 (as revised and approved by the independent shareholders at the special general meeting of the Company held on 31 January 2013), RMB280,000,000 and RMB330,000,000 (as revised and approved by the independent shareholders at the special general meeting of the Company held on 13 September 2013) respectively. The aggregate transaction amounts in respect of the sale of the related goods and services to Hongta Tobacco Group for the two financial years ended 31 March 2014 were RMB114,351,587 (audited) and RMB277,236,831 (audited) respectively; and for the eleven months ended 28 February 2015 was approximately RMB154,651,000 (unaudited).
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NEW HONGTA FRAMEWORK AGREEMENT AND NEW PROPOSED ANNUAL CAPS

The Existing Hongta Framework Agreement is due to expire on 31 March 2015. The Board considers that continuing the connected transactions with Hongta Tobacco Group are necessary for the operations of the Company's businesses as an on-going concern, and such long term transactions are and will be beneficial for the business operation and expansion of the Company.
On 31 March 2015, Chemactive Investments entered into a New Hongta Framework Agreement with Yunnan Hongta. The principal terms of the New Hongta Framework Agreement are set out below:
Date : 31 March 2015
Parties : (i) Yunnan Hongta
(ii) Chemactive Investments
Subject Matter : Provision of tobacco flavours and fragrances products, RTL, stem powder, auxiliary materials and related services by Chemactive to Hongta Tobacco Group
Term : 1 April 2015 to 31 March 2018
Basis of pricing : (i) Implementation of bidding prices (if applicable); or
(ii) Implementation of the prevailing market prices, i.e. prices and terms payable to Chemactive shall be no less favourable than those terms offered by independent third party customers for provision of similar products and services in its ordinary and usual course of business
Payment terms : Payments of the transactions will be settled in arrears by cash transfer, or such other manners as agreed by the parties in accordance with the agreed timing and manners as specified in the separate implementation agreements to be entered into between the parties from time to time
The Company estimates that the aggregate transaction amounts for the continuing connected transactions contemplated under the New Hongta Framework Agreement for each of the three financial years ending 31 March 2018 will not exceed RMB347,000,000, RMB365,000,000 and RMB384,000,000, respectively ("New Proposed Hongta Annual Caps").
In determining the New Proposed Hongta Annual Caps, the Company has taken into account a number of factors, including the relevant historical transactions, the Group's estimates of the growth of tobacco industry in the PRC, the projected demand for the Group's tobacco related products and services in accordance with the Group's operation scale and future business development, including expansion of new materials business, etc. with reference to the prevailing market conditions.
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INTERNAL CONTROL MEASURES

The continuing connected transactions under the New Hongta Framework Agreement will be conducted on a non-exclusive basis. Payment terms are basically market-driven according to the prevailing market conditions. Nonetheless, the Group will conduct enquiry process by which the Group will make reference to several other contemporaneous transactions with unrelated third parties for products and services to determine if the price and terms offered by Hongta Tobacco Group are fair and reasonable and comparable to those offered by independent third parties.
In addition, the Group will also adopt the following internal control measures regarding the continuing connected transactions:
(i) The external auditors of the Company will conduct a year-end audit for each financial year, and will issue their opinion to the Board in relation to the pricing policies and annual caps of the continuing connected transactions of the Company conducted during the financial year pursuant to the Listing Rules.
(ii) The independent non-executive Directors of the Company will conduct an annual review with respect to the continuing connected transactions of the Company throughout the financial year and confirm the transaction amounts and terms of the continuing connected transactions in the annual report of the Company.
(iii) The Company's internal audit department shall conduct random internal assessments in order to ensure that the internal control measures in respect of the connected transactions remain complete and effective.

BOARD CONFIRMATION

The Directors (including all the independent non-executive Directors of the Company) are of the opinion that the continuing connected transactions with Hongta Tobacco Group contemplated under the New Hongta Framework Agreement were entered into: (i) in the ordinary and usual course of business of the Company; (ii) on normal commercial terms (on arm's length basis) or on terms no less favourable than those terms offered by the Group to independent third party for similar products and services in its ordinary and usual course of business; (iii) and that the terms of the New Hongta Framework Agreement (including the New Proposed Hongta Annual Caps) are fair and reasonable. The Directors (including all the independent non-executive Directors of the Company) are of the view that the continuing connected transactions (including the New Proposed Hongta Annual Caps) are in the interests of the Company and its Shareholders as a whole.
To the best belief and knowledge of the Directors, as at the date of this announcement, Hongta Tobacco Group does not hold any interest in the shares of the Company. In addition, each Director has confirmed that he/she does not hold any equity interest in Hongta Tobacco Group. No Directors are required to abstain from voting on the resolutions in respect of the New Hongta Framework Agreement (including the New Proposed Hongta Annual Caps).
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IMPLICATIONS UNDER THE LISTING RULES

The highest of the applicable percentage ratios of the annual caps of the continuing connected transactions for each of the three financial years ending 31 March 2018 contemplated under the New Hongta Framework Agreement as calculated pursuant to Rule 14.07 of the Listing Rules exceed 5%, the continuing connected transactions are subject to the reporting, annual review, announcement and the independent shareholders' approval requirements.
As (i) Hongta Tobacco Group are regarded as connected persons at the subsidiary level of the Company; (ii) the continuing connected transactions contemplated under the New Hongta Framework Agreement are on normal commercial terms; (iii) the Board (including all the independent non-executive Directors of the Company) has approved the continuing connected transactions and confirmed that the terms of the continuing connected transactions are fair and reasonable and that the continuing connected transactions are on normal commercial terms and in the interests of the Company and the Shareholders as a whole, the continuing connected transactions contemplated under the New Hongta Framework Agreement are subject to the reporting and announcement requirements but are exempt from the circular, independent financial advice and shareholders' approval requirements under Rule 14A.101 of the Listing Rules.

DEFINITIONS

In this announcement, the following expressions shall have the following meanings unless the context otherwise requires:
"associate(s)" has the meaning ascribed to it in the Listing Rules
"Board" the board of directors of the Company
"Chemactive" Chemactive Investments Limited and its subsidiaries and fellow subsidiaries
"Chemactive Investments" Chemactive Investments Limited
"Company" Huabao International Holdings Limited
"connected person(s)" has the meaning ascribed to it in the Listing Rules
"Director(s)" director(s) of the Company
"Existing Hongta
Framework Agreement"
the frame w ork agreement on the continuing connected transactions entered into between Chemactive Investments and Hongta Tobacco on 28 August 2012
"Group" the Company and its subsidiaries, as appropriate, and regardless of whether directly or indirectly owned
"Hong Kong" or "HK" Hong Kong Special Administrative Region of the PRC "Hongta Tobacco" Hongta Tobacco (Group) Co., Ltd.
"Hongta Tobacco Group" Hongta Tobacco and its subsidiaries and related companies
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"Listing Rules" the Rules Governing the Listing of Securities on the Main Board of the Stock Exchange
"New Hongta Framework
Agreement"
the framework agreement on the continuing connected transactions entered into between Chemactive Investments and Yunnan Hongta on 31 March 2015
"PRC" or "China" the People's Republic of China
"RMB" Renminbi, the lawful currency of the PRC "RTL" reconstituted tobacco leaves
"Shareholder(s)" shareholder(s) of the Company
"Stock Exchange" The Stock Exchange of Hong Kong Limited
"Yunnan Hongta" Yunnan Hongta Group Co., Ltd.
"Yunnan Tianhong" Yunnan Tianhong Flavor & Fragrance Co., Ltd.
By Order of the Board

Huabao International Holdings Limited POON Chiu Kwok

Executive Director

Hong Kong, 31 March 2015

As at the date of this announcement, the Board comprises four executive directors, namely Ms. CHU Lam Yiu (Chairwoman and CEO), Messrs. XIA Li Qun, POON Chiu Kwok, WANG Guang Yu, one non-executive director, namely Mr. LAM Ka Yu and four independent non-executive directors, namely Dr. DING Ningning, Mr. LEE Luk Shiu, Ms. MA Yun Yan and Mr. WU Chi Keung.

* For identification purposes only

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