Yingde Gases Group Company Limited 盈德氣體集團有限公司 (Incorporated in the Cayman Islands with Limited Liability) (Stock Code: 02168)

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.

Yingde Gases Group Company Limited 盈德氣體集團有限公司 (Incorporated in the Cayman Islands with limited liability) (Stock Code: 02168)

Letter from Minority Directors

Reference is made to the circular (the “Board & Zhao Circular”) dated 9 February 2017 in relation to the proposed removal of Mr. Zhongguo Sun (“Mr. Sun”) and Mr. Trevor Raymond Strutt (“Mr. Strutt”, together with Mr. Sun as the “Minority Directors”) as directors of the Company at the extraordinary general meeting (the “Board & Zhao EGM”) to be held at 10:00 am on 8 March 2017 at the office of Zhuhai Yingde Gases Co., Ltd., Dianchang South Road, Gaolangang Economic Zone, Zhuhai City, PRC. The Board & Zhao Circular sets out, among others, the grounds for removing Mr. Sun and Mr. Strutt as directors of the Company and reasons for supporting the Majority Board (i.e. the directors of the Company excluding Mr. Sun and Mr. Strutt).

The section headed “Letter from Minority Directors” of the Board & Zhao Circular, which represents the Minority Directors’ views only, was despatched by the Minority Directors separately and is set out in full as appendix to this announcement.

Shareholders are reminded to read the Letter from Minority Directors together with other parts of the Board & Zhao Circular and make an informed voting decision.

By order of the Board Yingde Gases Group Company Limited 盈德氣體集團有限公司 Zhao Xiangti Chairman Hong Kong, 9 February 2017

As at the date of this announcement, the executive directors of the Company are Mr. Zhao Xiangti, Mr. He Yuanping and Mr. Zhang Yunfeng; the non-executive directors of the Company are Mr. Zhongguo Sun, Mr.Trevor Raymond Strutt and Mr. Suo Yaotang; and the independent non-executive directors of the Company are Mr. Zheng Fuya, Dr. Wang Ching and Dr. Feng Ke.

—1— YINGDE GASES GROUP COMPANY LIMITED

WHY YOU SHOULD SUPPORT YOUR FOUNDING DIRECTORS

ZHONGGUO SUN & TREVOR STRUTT

7th February, 2017 PAGE

SUMMARY ...... 1

LETTER FROM ZHONGGUO SUN AND TREVOR STRUTT ...... 2

DEFINITIONS ...... 9

APPENDIX 1 — OUR ACHIEVEMENTS ...... 11

APPENDIX 2 — RESPONSE TO THE ALLEGATIONS ...... 17

APPENDIX 3 — POTENTIAL EFFECT OF THE PLACING OF 20% OF THE ISSUED SHARE CAPITAL AT HK$3.20 PER SHARE ON THE VALUE PER SHARE OF THE AIR PRODUCTS PRELIMINARY OFFER ...... 19 SUMMARY

THE DECISION TO BE MADE BY SHAREHOLDERS OF YINGDE GASES

If you believe, as Mr. Sun and Mr. Strutt do, that the most favourable outcome to you would be that the Company is managed by experienced executives and eventually acquired by a suitable offeror at a price reflecting a premium for control and the Group’s prospects, you should support Mr. Sun and Mr. Strutt. The “Majority Board” has announced that it does not wish to solicit offers and its behaviour to date has not encouraged potential offerors.

This represents the position and opinions of your Directors, Zhongguo Sun and Trevor Strutt, as to why you should vote in favour of our resolutions set out in the Notice of Meeting to be held at 11:00 a.m. on 8th March, 2017 and against the resolutions proposed in the Rongton requisitioned meeting.

• The Board Meetings on 5th November, 2016 were held on less than 24 hours’ notice. The resolutions passed at those meetings are invalid and the unreasonable notice was an attempt to ambush us

• The effect of the purported resolutions passed in our absence was to remove us from management participation in the business, which we had developed so successfully since it began in 2001

• Since its establishment in 2001, the Group has under our leadership grown to be a leader in its industry in the PRC

• The proposed placings of shares by the current “Majority Board” were designed to consolidate the de facto control of your Company through the very significant proposed issue of shares to Originwater

• The SFC reached a preliminary view that Originwater and Mr. Zhao and their respective concert parties were acting together to acquire control of your Company

• The unilateral removal of Mr. Sun as Chairman and Chief Executive Officer was reckless and could have given rise to events requiring early repayments of loan facilities

• The claim by the “Majority Board” that the Group was in urgent need to raise funds transpired to be untrue

• Through our actions we have protected you from dilutive issues of shares and have raised interest in the Company from potential buyers

• Through our actions Air Products have announced a preliminary offer of up to HK$6.00 per share. The share price closed on 6th February, 2017 at HK$4.86, more than 50% above the proposed placing price of HK$3.20 per share

• We have long supported Air Products approach and will support other approaches which offer attractive terms

• The allegations made against us are designed to smear us and destroy our reputation ahead of the EGM. They are unsubstantiated and we deny them

• The current “Majority Board” has no operational experience of running an industrial gas company. Its recent behaviour has not been to advance your interests

• Our interests and your interests are clearly aligned. We hold 29.48% of the Company

PLEASE VOTE IN FAVOUR OF RESOLUTIONS 1 TO 8 AT THE EGM TO BE HELD AT 11:00 A.M. ON 8TH MARCH, 2017.

– 1 – YINGDE GASES GROUP COMPANY LIMITED

7th February, 2017

Letter from Zhongguo Sun and Trevor Strutt

Dear Fellow Shareholders of Yingde Gases,

Our proposals to make changes to the Board of Yingde Gases Group Company Limited and solicit offers for the whole of its issued share capital

The Company announced on 12th January, 2017 that it had received a notice on 10th January, 2017 from BBH and BTL requiring an extraordinary general meeting of the Company to be held for shareholders to consider the removal of five directors of the Company and the appointment of a new independent non- executive director. As has been previously disclosed Mr. Zhongguo Sun, through BBH, is interested in 373,000,000 shares and Mr. Trevor Strutt, through BTL, is interested in 184,352,961 shares representing in total 29.48% of the issued share capital of the Company. We propose to arrange that these shares are voted in favour of the resolutions proposed by BBH and BTL.

We are writing to explain to you not only why you should vote in favour of our resolutions to remove Mr. Zhao Xiangti, Mr. He Yuangping, Mr. Zhang Yunfeng, Mr. Suo Yaotang and Dr. Feng Ke as directors of the Company, and to appoint Mr. Zhihe Mah as a director, but also why we have taken the steps we have to protect the interest of all shareholders, which to date has involved the prevention of the placings of shares which would have been significantly dilutive to your interests in the Company. It will be your decision as to whether our proposal will best serve your interests but we would ask you to bear in mind that we are largely responsible for the operational successes of the Company since it was founded (as is explained in more detail in this letter) and that none of the so called “Majority Board”, including those said to have been appointed on 5th November, 2016 at a meeting called at unreasonably short notice without our participation, has the requisite experience of running the Company.

BACKGROUND

Both of us have considerable experience in the industrial gas industry. We initially developed our career in the sector with BOC Group Plc, now part of Linde AG, a world leader in the gas industry. In 2001, we sought suitable funding and appropriate business partners from the industrial sector to assist with and participate in the establishment of an independent industrial gas company in the PRC. In October 2001, Hunan Yingde Gases Company Limited was established and it was at this stage that Mr. Zhao became involved. Since these early days your Group has been expanded into a leading industrial gas business in the PRC under the chairmanship of Mr. Sun, who also acted as chief executive officer, and with Mr. Trevor Strutt as chief operating officer while Mr. Zhao was responsible for the financial planning of the Company.

The Company was listed in 2009 and for the year ended 31st December, 2008 had revenues of RMB1.4 billion. By 2015, our annual revenues had increased over fivefold to RMB7.9 billion. The great majority of our revenue comes from the supply of industrial gas products to on-site customers on whose premises our gas production facilities are located and with whom we have long term contracts. Revenue represented by our merchant customers and other related services represented in 2015 about 13% of total revenue and the balance of 87% came from the sale of gas to on-site customers on long term contracts. A further description of the financial performance of the Company is set out in the Appendix 1.

– 2 – RECENT EVENTS

The supposed reconstitution of the board

On 6th November, 2016, after a board meeting held at unreasonably short notice without our attendance, the Company announced that, among other things, with effect from 5th November, 2016, Mr. Strutt and Mr. Sun had been redesignated from executive directors to non-executive directors. According to the announcement: Mr. Zhao was appointed as chairman of the board in place of Mr. Sun; Mr. Sun was also removed as chief executive officer and replaced by Mr. He; Mr. Strutt was also removed as chief operating officer and replaced by Mr. Zhang Yunfeng who was also appointed as an executive director; Mr. Suo Yaotang was appointed as a non-executive director and Dr. Feng Ke was appointed as an independent non-executive director.

Mr. He is a director, executive vice president, chief financial officer and board secretary of Beijing Originwater Technology Co., Ltd, which is listed on the Shenzhen Stock Exchange (stock code: 300070)

The proposed placing to Originwater

In addition, according to the Company’s announcements the proposed placing of 378,000,000 shares in the Company to Originwater, with Mr. He as its sole director, was also approved at the meeting. The placing was conditional, inter alia, on the Listing Committee of the Hong Kong Stock Exchange having granted the listing of, and permission to deal in, the new shares.

The proposed placing would have increased Originwater’s interest in the Company to 20.17% of the enlarged share capital. Mr. Zhao controls 12.33% of the existing share capital of the Company. On our behalf, it was submitted to the SFC that Originwater and Mr. Zhao (with others) are acting in concert and therefore on completion of the placing would control 30% or more of voting rights of the Company. Under The Hong Kong Code on Takeovers and Mergers they should be required to make a general offer for all the shares in the Company not owned by Originwater and persons acting in concert with it at the highest price paid during the six months period to the commencement of the offer period. We believe that the principal objective of the placing was for Originwater and Mr. Zhao to obtain or consolidate control of the Company without paying the premium for control that would be generally expected. Your director, Mr. He, at a conference held on 26th November, 2016, stated (translated from Chinese),

“… We, Originwater, in the early November 2016, obtained control of the largest gas supplier in mainland China – Yingde Gases. This merger and acquisition was executed by me, and the means of doing this, we think, was the cheapest, quickest and easiest hostile takeover.”

– 3 – We believe that the meetings held on 5th November, 2016 were invalid and the resolutions passed at these meeting ineffective. We believe that one of the purposes of the meetings was to drive through a placing at under value to persons acting in concert to the detriment of other shareholders. We prevented the placing and subsequent events have demonstrated that the placing was not necessary for the purposes of repaying maturing debt (the refinancing of which had already been arranged) which was the only commercial reason given for the placing. As a result we have saved shareholder value in the order of between HK$724 million and HK$882 million, given a potential offer price of between HK$5.50 per share and HK$6.00 per share, on the basis that no offeror for the Company will be willing to pay a premium for the cash proceeds from any placing. The calculation of the saved shareholder value mentioned above is set out in Appendix 3.

As the Company announced on 9th January, 2017, the SFC reached a preliminary view on 2nd December, 2016 that Originwater and its concert parties (including Mr. He) are acting in concert with Mr. Zhao and his concert parties. The board of the Company then announced on 18th December, 2016 a revised placing of 189,000,000 shares to Originwater representing about 10% of the issued share capital of the Company. Through the Grand Court in the Cayman Islands, the jurisdiction in which the Company is incorporated, we prevented this smaller placing from proceeding and subsequent events have demonstrated that the smaller placing was no more necessary than the original larger placing.

It is our contention that the principal objective of the placing, rather than the reason that was given, was to dilute the interests of all shareholders rather than to raise funds. On 19th December, 2016, BBH and BTL obtained an interim injunction from the Grand Court restraining the Company from implementing the proposed revised placing. The Grand Court restraining order made on 19th December, 2016 was subsequently extended until 11th January, 2017. In addition, the Company was ordered to convene a meeting of its board of directors on 10th January, 2017 to consider and if thought fit to ratify the board resolutions of 5th November, 2016 and 18th December, 2016. While board meetings were held on 10th January, 2017 there were again material procedural irregularities in connection with those meetings and their outcome is contested. However, in a consent order, the Company undertook to the Grand Court not to place, or to enter into any agreement to place, any new shares until the hearing date before the Grand Court now listed for 12th April, 2017.

Further Announcements

On 9th January, 2017 the Company made a further announcement in respect of the StellarS indication of interest and a letter from Air Products setting out the indicative terms of a preliminary offer for the whole of the issued share capital of the Company. Air Products is a publicly traded company listed on the New York Stock Exchange with a market capitalisation of over US$30 billion. It is a leading global industrial gas business with over 17,000 employees and operation in more than 50 countries. In our view its expression of interest should be taken seriously.

On 19th January, 2017 the Company announced that it had received a notice from Rongton, controlled by Mr. Zhao, requiring an extraordinary general meeting to be convened for the shareholders to consider our removal as directors of the Company. The announcement also included further allegations against us. These allegations are unfounded and are merely designed to discredit us and smear our reputations, and are addressed in more detail in Appendix 2.

– 4 – On 20th January, 2017 the Company announced further details of the possible offers for shares in your Company by Air Products and StellarS Capital (Hong Kong) Limited. The prices for these possible offers range between HK$4.50 in respect of StellarS, and between HK$5.50 to HK$6.00 in respect of Air Products.

MISCONDUCT OF MR. ZHAO XIANGTI, MR. HE YUANPING, MR. ZHENG FUYA AND MR. WANG CHING

The proposed placing to Originwater

The reason given for the placing announced on 6th November, 2016 was that

“Through the Proposed Placing, Originwater will become a strategic investor of the Company and will be helpful in improving the management, long-term business development and corporate governance of Company.”

No basis was given for making the statement regarding management, long-term business development or corporate governance. Furthermore, although it was stated that the funds proposed to be raised would be used to repay bank loans, the announcement made no reference to any urgent requirement to raise funds.

The announcement dated 14th December, 2016 was the first suggestion that the Group was under financial pressure, which we challenge. The urgency of raising funds was repeated in announcement dated 18th December, 2016 and 22nd December, 2016. On 2nd January, 2017 the Company announced that it had repaid the HK$820 million offshore bank loan that was due on 3rd January, 2017 and that was said to be the commercial reason for the placing. After reviewing the two refinancing loan documents dated 22nd November 2016 and 22nd December, 2016, respectively, we believe that by the time of the announcement on 22nd December, 2016, arrangements had already been made to refinance that loan and therefore the statements as to the desperate state of the Group’s finances were misleading not only to shareholders, but also to the Grand Court.

We have consistently maintained that the Group has sufficient resources to service its debt, as is borne out by the strong and improving cash flow of the Company reported by the chief financial officer of the Company on the investors’ conference call on 11th January, 2017.

We believe that the proposed placing of shares to Originwater were not in the interest of the shareholders and that, if any new issue of shares was to be undertaken, it should have been done by way of rights issue. It is clear that there was no urgent need for funds and therefore the appropriate way to use equity as a financing mechanism, if indeed it was needed, would have been to ensure that all the existing shareholders were given an equal opportunity to subscribe pro-rata by way of a rights issue. The introduction of a new shareholder, with little or no synergy with the existing business of the Company, which would have resulted in Originwater becoming the single largest shareholder was, we maintain, undertaken with the primary objective of diluting the interests of the other shareholders of the Company.

– 5 – Potential breach of the Facility Agreement dated 22nd November, 2013 between the Company and China Development Bank Corporation and the Facility Agreement dated 12th October, 2015 between the Company and a syndicate of banks

The Company stated in an announcement dated 22nd November, 2013 that it had entered into a facility agreement with CDB for a term loan facility of up to HK$1,170 million maturing on the date 36 months from the date the first loan is to be made.

Pursuant to the agreement it would be an event triggering mandatory prepayment of the facility, if

“(c) Other than in each case, by reason of death, mental incapacity or critical illness, Mr. Zhongguo Sun ceases to be the chief executive officer or chairman of the Company, or Mr. Trevor Raymond Strutt ceases to be a director of the Company.”

After reviewing the confirmation letter issued by CDB, we believe that no waiver was obtained from CDB in respect of this provision until 9th December, 2016, some two months after the board meeting had potentially triggered the mandate prepayment obligation that was, in our view invalidly, held on 5th November, 2016.

The facility agreement the Company entered into with a syndicate of banks on 12th October, 2015 has a similar mandatory prepayment clause. We have not received any confirmation regarding the waiver in respect of this provision and believe no waiver was obtained prior to the board meeting of 5th November, 2016.

Mr. Zhao, the director responsible for finance department of the Company, and the other directors of the Company who approved the removal of Mr. Sun as Chairman and Chief Executive Officer, were reckless as to the potential consequences not only in respect of the facility from CBD and the syndicated loan but of other potential cross defaults.

Further, the provisions referred to in the loan documentation regarding the continuing chairmanship of Mr. Sun and directorship of Mr. Strutt demonstrate the importance that financial institutions attach to our continued role in the Group.

Breach of fiduciary duty

We believe the general mandate passed by the shareholders in respect of the issue of shares was wrongfully used for the improper purpose of obtaining or consolidating control of the Company and that the “Majority Board” have not acted in the interests of the Company and the shareholders as a whole. Accordingly BBH and BTL have instituted proceedings in the Grand Court against the persons defined as the “Majority Board” for breach of fiduciary duty to the Company.

Ultra Growth Management Limited

Ultra Growth which holds 97,400,000 shares, representing 5.15% of the existing share capital, holds share on behalf of the employee share allotment scheme. It is a provision of the document constituting the employee share allotment scheme that “in the event any of the directors of the Company has any material interest in any transactions or matters that will be subject to the approval by the Shareholders, the Company shall not instruct the Trustee to vote nor the Trustee shall vote in respect of the relevant resolutions.” Ultra Growth should abstain in respect of the resolutions proposed by BBH and BTL and Rongton.

– 6 – ALLEGATIONS AGAINST US

In the Company’s announcement dated 6th November, 2016, the explanation given for the removal of Mr. Sun as chief executive officer was “as part of the restructuring of the Board and senior management of the Company to cope with the challenges the Company is facing in the current market and economic environment…”. No particulars were given as to why the then existing structure required changing. In the Company’s announcement dated 14th December, 2016, a reference to the “unsatisfactory performance” of Mr. Sun and Mr. Strutt was introduced and that announcement went on to state:

“As for the performance of Mr. Sun and Mr. Strutt during their terms of office, the Company is conducting an internal financial and business investigations. The Company will disclose the findings in due course.”

There is no cogent evidentiary support for the allegations of unsatisfactory performance made against us. The changes to the board instead were made to effect de facto control of the Company.

In the Company’s announcement dated 19th January, 2017, more allegations were made against us. These allegations again have no substance and are part of a wider, vindictive and unjustified smear campaign designed to damage our reputations with the shareholders in advance of the forthcoming EGMs. We address these allegations in Appendix 2, using the numbering and heading set out in the announcement of 19th January, 2017.

NEXT STAGE

Although Air Products has continued to repeat its interest in acquiring the whole of the issued share capital of your Company, the “Majority Board” appear to have been reluctant to respond to that interest and to allow you as shareholder to decide whether the Air Products proposals would be of interest to you. Indeed, at a meeting of the board of the Company dated 23rd January, 2017, the “Majority Board” refused to take a vote on resolutions on the agenda regarding the Air Products offer, despite our repeated requests during the meeting to do so. Four weeks has elapsed since Air Products made its approach and only now has the “Majority Board” agreed to grant Air Products due diligence access to the Company. We have long support for Air Products’ approach.

We urge you to vote in favour of the resolutions set out in our requisition and not permit the control of your Company to be seized by the “Majority Board”, who have demonstrated a continuing disregard for the wider interests of all shareholders. There is compelling evidence that the “Majority Board” have sought to place shares (on more than one occasion) to a member of a party acting in concert.

We also urge you to vote against the resolutions prepared by Rongton in its requisition. Given the events since early November last year, it is in the interests of the Company and its shareholders for the Company to be acquired by either a strategic or financial buyer who would control the management of the Company. Neither Mr. Zhao nor Mr. He has operational experience in managing a large industrial gas group. We will always act in the best interests of the Company and its shareholders and, when in a position to do so, entertain any bona fide interest in acquiring the shares of the Company so that the benefit of the value we have created is shared among all shareholders and not reserved for the few shareholders associated with the “Majority Board”.

– 7 – THE DECISION TO BE MADE BY SHAREHOLDERS OF YINGDE GASES

HOW TO VOTE

Please vote FOR all the resolutions set out in the notice of the meeting to be held at 11:00 a.m. on 8th March, 2017. Please vote AGAINST the resolutions to remove us as directors proposed by Mr. Zhao through Rongton that are to be considered at another meeting.

We objected to the EGM being held in Gaolangang Economic Zone, Zhuhai City, the PRC owing to the inconvenience and inaccessibility of the proposed venue but have been unable to persuade the “Majority Board” to select a venue in Hong Kong which has been the location of every general meeting of the Company since its listing in 2009.

If you hold your shares through a nominee or through the Central Clearing and Settlement System please instruct the nominee, or the participant, through whom you hold your shares to instruct the registered holder to vote FOR all the resolutions set out in the notice of the meeting to be held at 11:00 a.m. on 8th March, 2017 and AGAINST the resolutions to remove us as directors proposed that are to be considered at another meeting.

If you hold your shares in your own name and will not be able to attend the relevant meeting, please appoint a proxy by inserting in the relevant place in the form: Zhongguo Sun or in his absence Mr. Trevor Raymond Strutt. Please ensure that you send your proxy so as to arrive at the offices of the share registrar, Computershare Hong Kong Investor Services Limited, 17M Floor, Hopewell Centre, 183 Queen’s Road East, Wanchai Hong Kong at least 48 hours before the relevant meeting.

SPECIAL WEBSITE FOR THE EGM

The “Majority Board” has not permitted us access to the HKEXnews website for announcements that we have wished to make without it doctoring our announcements with its comments and views. It has released many announcements seeking to smear our reputations without giving us the opportunity to comment or express our views. In order that we can keep you properly informed of information that we think is important for you before reaching your decision on how to vote on 8th March, 2017 we have established a special website at www.yingdeshareholders.com which we ask you to read regularly. We will also release material through Bloomberg.

If you have any questions please contact Dennis Cassidy on 2501-5798 or Andrew Forbes on 2110-3261 or Avent Tong on 2110-3980 or Wade Ho on 2521-4001 at Anglo Chinese Corporate Finance, Limited.

Yours sincerely

Zhongguo Sun Trevor Strutt Director Director

– 8 – DEFINITIONS

In this letter, the following expressions shall have the meanings set out below unless the context requires otherwise:

“Air Products” Air Products and Chemicals, Inc.;

“BBH” Bubbly Brooke Holdings Limited;

“Board” the board of Directors;

“BTL” Baslow Technology Limited;

“CDB” China Development Bank Hong Kong Branch;

“Chairman” Chairman of the Board;

“Company” Yingde Gases Group Company Limited, an exempted company incorporated in the Cayman Islands with limited liability on 25th September, 2007;

“Director(s)” the director(s) of the Company, including the directors perpetually appointed on 5th November, 2016;

“EGM” the extraordinary general meeting of the Company to be held at 11:00 a.m. on Wednesday, 8th March, 2017 at the office of Zhuhai Yingde Gases Co., Ltd., Dianchang South Road, Gaolangang Economic Zone, Zhuhai City, the PRC or any adjournment thereof;

“Grand Court” The Grand Court of the Cayman Islands;

“Group” the Company and its subsidiaries;

“HK$” Hong Kong dollar, the lawful currency of Hong Kong;

“Hong Kong” the Hong Kong Special Administrative Region of the PRC;

“Majority Board” all the Directors excluding Mr. Sun and Mr. Strutt;

“Mr. He” Mr. He Yuanping, a Director;

“Mr. Strutt” Mr. Trevor Raymond Strutt, a Director and one of the founders of the Group;

“Mr. Sun” Mr. Zhongguo Sun, a Director and one of the founders of the Group;

“Mr. Zhao” Mr. Zhao Xiangti, a Director;

– 9 – “Notice of Meeting” a notice convening the EGM set out on pages 8 to 10 of the Company’s circular dated 27th January, 2017;

“Originwater” Originwater Hong Kong Environmental Protection Co., Limited, a wholly owned subsidiary of Beijing Originwater Technology Co., Ltd;

“PRC” the People’s Republic of China;

“Rongton” Rongton Investments Limited, a company controlled by Mr. Zhao;

“SFC” the Securities and Futures Commission of Hong Kong;

“Stock Exchange” The Stock Exchange of Hong Kong Limited;

“Ultra Growth” Ultra Growth Management Limited, a corporation incorporated in the British Virgin Islands and the holder of shares in the Company’s employees share allotment scheme.

– 10 – APPENDIX 1

OUR ACHIEVEMENTS

In the annual report for the year ended 31st December, 2015 and the interim report for the six months ended 30th June, 2016 reference was made to the weak demand for industrial products. Notwithstanding these conditions, under our leadership both revenue and gross profit have experienced year on year growth for the five financial years to 31st December, 2015. Please refer to the following sections for further information.

We strongly dispute that the Group, which has grown to be a market leader in industrial gases in the PRC since we established it in 2001 and listed it in 2009, has suffered under our management. The self-serving allegations endorsed by the parties describing themselves as the “Majority Board” are unfounded and we urge shareholders to so treat them.

Financial analysis

In this section, we compare in detail the financial performance of the Company with Hangzhou Hangyang Co., Ltd. (“Hangyang”) and other international industry participants, including:

• Praxair, Inc., the largest industrial gas supplier in North and South America which is listed on the New York Stock Exchange;

• Linde Group, one of the leading gases and engineering companies in the world which is listed on all German stock exchanges;

• Air Liquide, the world leader in gases, technologies and services for industry and health which is listed on the Paris Euronext stock exchange;

• Air Products and Chemicals, Inc., the world’s largest supplier of hydrogen which is listed on the New York Stock Exchange; and

• Iwatani Corp., a company supplying gases for industrial and household use which is listed on the Tokyo Stock Exchange.

Profitability

Net profit margin of the Group over the last three and a half years, being the latest period for which public information is available, was higher than Hangyang and when adjusted for foreign exchange losses was higher than the average among the industry participants.

– 11 – Net profit margin

FY 2013 FY 2014 FY 2015 2016 1H

The Group 13.2% 11.7% 10.8%* 13.0%*

Hangyang 4.2% 2.3% 2.4% -2.6% Praxair 14.7% 13.8% 14.4% 14.6% Linde 7.9% 6.5% 6.4% 7.4% Air Liquide 10.8% 10.8% 10.7% 9.8% Air Products 9.8% 9.5% 12.9% -2.4% Iwatani 1.5% 0.9% 2.0% 1.5% Average 8.2% 7.3% 8.1% 4.7%

* The net profit margin after deducting the foreign currency exchange loss were 6.8% in 2015 and 9.3% in 2016 1H.

Operating cash flow

The ratio of operating cash flow level to revenue of the Group is significantly higher than Hangyang and has been improving since 2015.

Operating Cash Flow/Revenue

FY 2013 FY 2014 FY 2015 2016 1H

The Group 13.9% 12.0% 17.4% 23.7%

Hangyang 7.6% 2.4% 7.3% 1.1% Praxair 24.5% 23.4% 24.9% 24.3% Linde 18.9% 17.6% 20.0% 19.1% Air Liquide 18.4% 18.4% 17.3% 14.4% Air Products 15.3% 20.9% 24.6% 23.5% Iwatani 3.2% 6.2% 5.9% 3.0% Average 14.7% 14.8% 16.7% 14.2%

Financial gearing

Financial gearing level of the Group is in line with the key international participants in the industry during the period since 2013.

– 12 – Net debt/equity

As at the end of FY 2013 FY 2014 FY 2015 2016 1H

The Group 121.4% 136.0% 136.7% 134.3%

Hangyang 38.7% 53.5% 45.7% 46.6% Praxair 123.8% 151.4% 189.5% 169.3% Linde 62.4% 61.6% 52.7% 63.6% Air Liquide 55.7% 53.3% 56.7% 161.1% Air Products 80.9% 76.9% 76.9% 78.0% Iwatani 153.8% 126.2% 105.7% 68.6% Average 85.9% 87.2% 87.9% 97.9%

Growth

The compound annual growth rate of the Group since 2011 in terms of revenue and operating cash flow is significantly higher than most industry participants.

Compound annual growth rate

Operating Revenue cash flow 2011-2015 2011-2015

The Group 16.9% 9.0%

Hangyang 8.8% N/A Praxair -1.1% 2.2% Linde 6.8% 10.3% Air Liquide 3.2% 4.0% Air Products -0.5% 8.6% Iwatani -1.7% 3.5% Average 2.6% 5.7%

Comparable peers analysis

The share price in the Company has experienced a downturn in recent years. Nonetheless, the fundamentals of the business operation are improving, as shown above and as shown by the improving the operating cash flow of the Group that are beginning to reap the benefits of many years of development. The share price has been significantly influenced by the general market concern over the PRC economy, especially the steel sector, which is the largest customer segment of the Company.

This section compares the Company with Hangyang, the only comparable listed Company that operates only in the PRC. Hangyang is listed on the Shenzhen Stock Exchange (stock code: 002430).

– 13 – Share price performance

Set out in the graph below are the share prices performances (adjusted for dividends, stock splits and other corporate actions) for the Company and Hangyang which have tracked each other closely in the last 12 months.

2168 HK Equity

002430 CH Equity (rebased)

Source: Bloomberg

Financial performance

Although the two companies have similar share price performances since 2011, the financial performance of the Group has been superior compared with Hangyang both in terms of growth and efficiency ratios.

Compound annual growth Efficiency (FY 2011 to FY 2015) (2016 1H) Profit attributable Operating Revenue to shareholders Net Profit margin cash flow/Revenue

The Group 16.9% -10.4% 13.0%* 23.7% Hangyang 8.8% -26.5% -2.6% 1.1%

* The net profit margin after deducting the foreign currency exchange loss was 9.3% in 2016 1H.

– 14 – Operational Information

Mr. Sun and Mr. Strutt as the founders of the Company in charge of the technical and operation side of the Company, have in aggregate more than 50 years of experience in the industrial gases sector.

Although the PRC’s economy is slowing down and the severe over-capacity problem that the PRC steel sector has encountered has resulted in a lack of growth opportunities in the PRC industrial gases sector, the Company under the management of Mr. Sun and Mr. Strutt maintained growth and its status as the largest domestic independent on-site gas supplier in the PRC (according to the “Industrial Gas Market Analysis” published by Strategic Analysis Inc. (“SAI report”) on 18th March, 2016).

Besides the steel and iron sector, the Company in recent years expanded in industries including chemical and nonferrous metal. With a portfolio of BOO (build, own or operate, a model widely used by market leaders across the world for over 100 years) projects, the Company was also tapping into BOT (build, operate and transfer) model and started its first BOT project in late 2016.

Set out below are the number of the Company’s facilities in operation and under construction since 2011. There has been a steady increase in the number of facilities in operation that are owned by the Company between 2011 and 2014. Given the slowdown in the macroeconomic and the industrial gases sector, Mr. Sun and Mr. Strutt decided to act more prudently and adjusted the Company’s pace of expansion since 2015. Mr. Sun and Mr. Strutt believe this has been and continues to be in the best interest of the Company and its shareholders.

Number of Projects

FY 2011 FY 2012 FY 2013 FY 2014 FY 2015 2016 1H

In operation 36 41 57 64 68 69 Under construction 23 30 31 27 10 11

Improvements in efficiency

In response to the recent challenging conditions, we dedicated our efforts to improve efficiency of plant management and to control of cost by streamlining the structure of the Company in the best interest of the Company and its shareholders.

Staff costs

FY 2011 FY 2012 FY 2013 FY 2014 FY 2015 2016 1H

Staff costs/revenue 4.2% 4.6% 5.5% 4.6% 4.1% N/A*

* Half year not comparable due to bonus etc.

– 15 – In the Company’s announcement dated 19th January, 2017, we were accused as follows:–

“Mr. Sun and Mr. Strutt initiated a general 25% pay cut effective from February 2015 for most of the employees of the Group whose monthly income is higher than RMB15,000, and also to stop paying any bonus for most of the employees of the Group during 2014 and 2015.”

This is false and misleading. In order to cope with the economic downturn, we initiated a mechanism in which a remuneration package is linked with key performance indicators. This was not a pay cut, but an incentive scheme. Outperformers realised an increase in their total package under this scheme. While the remuneration package of mid and high level management has been affected, Mr. Sun and Mr. Strutt consciously maintained the welfare of the base level workers.

Under our management, with the headcount and the staff costs to revenue ratio close to 2011 levels, we managed to increase the total number of projects from 59 to 80 (the projects in operation increased from 36 to 69) from 2011 to 2016, and net operating cash flow doubled during the period.

Cash flow

Set out below is a table showing the operating cash flow and earnings before interest, taxes, depreciation, and amortisation (“EBITDA”) of the Group since 2011.

(RMB Million)

FY 2011 FY 2012 FY 2013 FY 2014 FY 2015 2016 1H

Net operating cash flow 974 919 955 925 1,374 2,000*

* It was reported that in an investors’ conference call on 11th January, 2017, the chief financial officer of the Company indicated that net operating cash flow for 2016 would reach a historical high of around RMB 2 billion.

(RMB Million)

FY 2011 FY 2012 FY 2013 FY 2014 FY 2015 2015 1H 2016 1H

EBITDA 1,367 1,450 2,024 2,480 2,641 1,270 1,486

– 16 – APPENDIX 2

RESPONSE TO THE ALLEGATIONS

1. “Unsatisfactory financial performance and share price performance and deteriorating debt structure”

We refer you to the Appendix 1 which sets out the financial analysis and share price analysis of the Company over the last three and a half years. Despite difficult trading conditions, the cashflow of the Company has improved materially, enabling the Company to retire debt. The share price performance has been closely in line with the Hangyang only comparable listed company, in the PRC. In 2009, when the Company was listed the average price earnings ratio for Hong Kong Stock Exchange Hang Seng China Enterprises Index was around 19. Since then it has halved to about 8 times, resembling the performance of the Company’s share price for the same period.

2. “The discretionary bonus paid to Mr. Sun and Mr. Strutt was not in line with the share price performance or basic earnings per share in the recent year of 2015”

This is misleading. Our remuneration packages are recommended by the Remuneration Committee (consist of Mr. Zheng Fuya, Dr. Wang Ching and Mr. He Yuanping from 2013) and approved by the Board. Our bonuses are determined by a formula based on the net profit after taxation after adjusting for items which are not attributed to the operations of the Group, not the share price performance, over which we do not claim to have control.

Set out below is the calculation results of our remuneration package compared with the Company’s revenues between 2011 and 2015. Our remuneration relative to revenues is significantly lower than the 2011 level and in a general reducing trend.

Remuneration/Revenues

FY 2011 FY 2012 FY 2013 FY 2014 FY 2015

Mr. Sun 0.12% 0.10% 0.10% 0.06% 0.08% Mr. Strutt 0.05% 0.04% 0.03% 0.04% 0.04% Total 0.17% 0.15% 0.13% 0.10% 0.12%

In the same announcement, it stated that Mr. Zhao did not receive bonus in 2014 and 2015. We should point out that Mr. Zhao was not a full-time employee in the Company and came to the offices of the Group infrequently.

– 17 – 3. “Mr. Sun’s interest in Astrotec which is engaged in competing business as revealed in a judgment of Hong Kong High Court”

The allegation that there has been any misconduct on Mr. Sun’s part because of certain observations made by the Hong Kong Court in 2013 is wholly misplaced. We understand that the allegation is that, in July 2011, Mr. Sun made two statements to the Stock Exchange inconsistent with certain observations or comments made in a judgment of the Hong Kong Court of First Instance handed down in January 2013. The fact that this apparent inconsistency has only been raised now, some three years after the event and five years after Mr. Sun’s statement to the exchange, speaks volumes as to the supposed seriousness and urgency of the allegation. Leaving that aside, Mr. Sun was not a party to the case heard before Recorder Mr. Patrick Fung QC in September and October 2012 or indeed any other case involving Astrotec. Neither did he appear as a witness in the case. The comments made by Recorder Fung are neither binding on Mr. Sun nor factually accurate. Mr Sun’s statements to the Stock Exchange in July 2011 were correct when he made them and are correct now. He ceased to have an interest in or any management control over Astrotec from 22nd March, 2006. He was never a director of Astrotec. In any event, there is no legal basis for any claim against him by the Company, or indeed by anyone else, in connection with this allegation and none has been articulated. The suggestion that he has been in breach of fiduciary duty or that the Company has, in some unspecified way, suffered loss or damage as a result is nonsense. The allegation against Mr Strutt relating to the same subject matter is similarly without foundation.

4. “Suspected connected transaction with entity controlled by Ms. Yu Yin (“Madam Yu Junior”) the sister of Madam Yu who is a suspected associate of Mr. Sun. Mr. Strutt was a sole signatory of the Company without board approval”

The premise for this allegation appears the allegation referred to above relating to Astrotec. These allegations are unsupported by any evidence and are false, and the implication against Mr. Strutt is equally spurious.

5. “Mr. Sun’s suspected interest in shares in the Company through Mr. Mao Zhuoxiong (“Mr. Mao”) as nominee”

Mr. Mao does not own any shares in the Company as a nominee for Mr. Sun.

6. “Repeated non-disclosed cash advances to Mr. Sun”

The allegation refers to HK$4,000,000 being received by Mr. Sun some six years ago. No sensible basis has been made for suggesting any impropriety in connection with the receipt of this sum.

7. “Mr. Strutt’s use of corporate credit card”

Mr Strutt confirms the payments referred to, if and to the extent they were made, were in connection with legitimate business expenses or compensation that was properly due to him by the Company.

8. “Payment of salary to Mr. Strutt’s son for two years who never reported for duty”

Mr. Strutt confirms that the allegations that his son, in some unspecified way, improperly benefitted at the expense of the Company are rejected. There is no evidence in support of those allegations let alone any basis for saying that Mr Strutt has misconducted himself. – 18 – APPENDIX 3

POTENTIAL EFFECT OF THE PLACING OF 20% OF THE ISSUED SHARE CAPITAL AT HK$3.20 PER SHARE ON THE VALUE PER SHARE OF THE AIR PRODUCTS PRELIMINARY OFFER

Preliminary Offer Prices (HK$/share) A $5.50 $6.00 Number of Shares Offered for B 1,890,573,500 1,890,573,500 Number of Options Offered for C 3,832,500 3,832,500 Number of Fully Diluted Shares Offered for D = B + C 1,894,406,000 1,894,406,000 Value of Preliminary Offers (HK$) E = A x D $10,419,233,000 $11,366,436,000

Placing Size (% of existing issued share capital) F 20% 20% Number of Placing Shares G 378,000,000 378,000,000 Placing Price (HK$/share) H $3.20 $3.20 Gross Proceeds (HK$) I = G x H $1,209,600,000 $1,209,600,000

Value of Preliminary Offer + Gross Proceeds (HK$) J = E + I $11,628,833,000 $12,576,036,000 Enlarged Share Capital K = D + G 2,272,406,000 2,272,406,000 Adjusted Offer Price (HK$/share) L = J/K $5.12 $5.53 Value Loss to existing Shareholders (HK$) (A – L) x D $724,780,949 $882,342,024

– 19 –