I think at their age you don't have to offer a whole lot in way of an explanation. Introduce the child as their sister (or brother?), and if they ask questions, explain that she lives with her mommy in another house, that she's Daddy's child just like they are, etc. In time, as they get older, you may have to explain in more detail but for now, a very simple explanation should suffice.
But really, it sounds like this wound is still too fresh to be introducing the children to each other so soon. When H is seeing his child, he can take her out somewhere, visit elsewhere. He doesn't need to bring her into your house until you are ready (if at all). One thing to keep in mind is that his child and your two children will all feel the hurt & pain & resentment if you bring them all together before you are emotionally ready. Not that you need another thing to worry about, but I just wanted to mention it because I'd imagine your reaction to his child will be so mixed, so full of emotion.
If you can look for a trauma therapist... that might be someone in a good place to help you start to work through this.