The Rupp Report: Possible New Major Shareholder For Fong’s Group

Listed on the Hong Kong Stock Exchange since 1990, Fong’s Industries Co. Ltd., with its
headquarters in Hong Kong, is one of the world’s leaders in the design, manufacture and sale of
dyeing and finishing machinery, and together with its other major subsidiaries engages in
stainless-steel trading and the manufacturing of stainless-steel casting products. The rumor about
Fong’s started last week at Heimtextil in Frankfurt: Some people said “off the record” they had
heard that Fong’s had been sold and that even the shares had been taken off the Hong Kong Stock
Exchange. Now, based on information provided by Fong’s Industries, here is the true story, which
possibly will have major implications for the global textile machinery industry.

China Hengtian

On Jan. 14, 2011, China Hengtian Group Co. Ltd. and Fong’s Industries Co. Ltd. announced that
China Hengtian is to make a possible acquisition, subject to certain conditions for completion, for
a majority interest in Fong’s Industries. According to a sale and purchase agreement between China
Hengtian and Fong Sou Lam – the controlling shareholder, chairman and director of Fong’s Industries
– China Hengtian has agreed to acquire 207,895,250 shares in the Fong’s Group, or approximately
37.7 percent the company’s issued share capital, from Fong Sou Lam for a cash consideration of
HK$1,039,476,250 at HK$5.00 per share, by valuing the company at HK$2,757,231,425.

China Hengtian is a major state-owned enterprise whose principal business activities include
textile machinery, cargo trucks, textile production and trade, as well as other strategic
investments. The textile machinery business is one of its core business sectors. China Hengtian
says that it holds an important position in the global textile machinery industry, and the company
and its subsidiaries operate large-scale manufacturing bases in many locations in China.

Government Approval Required

In order to complete the acquisition, China Hengtian must obtain all necessary pertinent
authorizations, approvals and consents from Chinese governmental and regulatory agencies. “Such
authorizations, approvals and consents remain in full force and effect pursuant to the provisions
of any laws or regulations in the PRC. The condition cannot be waived,” the announcement states.The
condition must be fulfilled on or before the long-stop date, May 7, 2011, or the agreement will be
terminated automatically with no obligation on the part of either China Hengtian or Fong Sou Lam to
complete the acquisition.

More Shares To Acquire

Because the acquisition would surpass the threshold specified by the Hong Kong Code on
Takeover and Mergers, it is agreed that upon completion of the acquisition, Citigroup Global
Markets Asia Ltd., on behalf of China Hengtian, will make an unconditional mandatory cash offer for
all outstanding Fong’s shares except those shares China Hengtian or other relevant parties other
than Fong Sou Lam already own or have agreed to acquire at HK$5.00 per share.

The Target Is 55 Percent

China Hengtian has no previous or current interest in Fong’s Industries. Once the acquisition
is completed, Fong Sou Lam’s 59.8-percent interest in Fong’s Industries will drop to approximately
22.1 percent. Furthermore, in the event China Hengtian fails to acquire 55 percent or more shares
of the company through the offer, Fong Sou Lam has committed to help China Hengtian build up its
holding in Fong’s Industries to 55 percent by accepting the offer for the number of shares of
Fong’s Industries that will result in China Hengtian reaching a 55-percent interest in the company
upon completion of the offer.

In addition, if Fong’s fails to meet the minimum public float requirement of 25 percent under
the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Ltd. upon
completion of the offer, Fong Sou Lam and China Hengtian have each committed to dispose of equal
number of shares of Fong’s Industries to the public in order to restore the minimum public float

China Hengtian has a controlling interest in other listed companies, such as Jinwei Textile
Machinery Co. Ltd.

A Step Toward The Future

According to information provided, China Hengtian intends to continue Fong’s Industries’
existing businesses essentially as they are currently operating. It also intends to maintain Fong’s
listing status. Fong Sou Lam will continue to hold a substantial stake in the company. “The
introduction of China Hengtian as Fong’s Industries’ major shareholder will enable us to further
enhance our market position and brand effect in the long term,” Fong said. “China Hengtian will
offer strong support to us for our future development, facilitating us to achieve better economies
of scale and to further strengthen our competitiveness in the field of dyeing and finishing
machinery both in China and abroad.”

January 21, 2011