Yingde Gases : Announcements and Notices - Update Announcement

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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) UPDATE ANNOUNCEMENT SUMMARY OF BOARD MEETING HELD ON 23 JANUARY 2017 POSSIBLE AIR PRODUCTS OFFER - MR. ZHAO' SECOND IBC PROPOSAL FURTHER DELAY IN FORMATION OF INDEPENDENT BOARD COMMITTEE DUE TO MR. SUN AND MR. STRUTT'S COMPROMISED INED ALLEGATIONS COMPANY CONTACTED AIR PRODUCTS TO PROCEED WITH DUE DILIGENCE AND POSSIBLE STELLARS OFFER - A SUSPECTED BOGUS OFFER SUSPECTED CONSPIRACY AMONG MR. SUN, MR. STRUTT, STELLARS AND MR. ZHANG MAO IN EXTENDING THE BOGUS OFFER AND PROPOSED FORMATION OF INDEPENDENT BOARD COMMITTEE AND MR. SUN'S SUSPECTED FALSE SWORN AFFIRMATION ON BARING'S INTEREST BOARD'S RESOLUTION TO PROPOSE REMOVAL OF MR. SUN & MR. STRUTT IN NEXT EGM The Possible Air Products Offer and the Possible Stellars Offer are possible offers only and may or may not happen, shareholders and potential investors in the Company are advised to exercise caution when dealing in the shares or other securities of the Company.

This announcement is made by Yingde Gases Group Company Limited (the "Company") pursuant to Rule 13.09 of the Rules Governing the Listing of Securities (the "Listing Rules") on The Stock Exchange of Hong Kong Limited, The Hong Kong Code on Takeovers and Mergers (the "Takeovers Code") and the Inside Information Provisions (as defined in the Listing Rules) under Part XIVA of the Securities and Futures Ordinance (Chapter 571 of the laws of Hong Kong) (the "SFO").

SUMMARY OF BOARD MEETING HELD ON 23 JANUARY 2017 AND PRIOR CORRESPONDENCE AMONG DIRECTORS

1. Possible Air Products Offer

   • On 17 January 2017, Mr. Zhao put forward a second proposal to establish IBC

   • On 21 January 2017, Mr. Zhao's proposal was frustrated by Mr. Sun and Mr. Strutt raising a new allegation that the independent non-executive directors ("INED") of the Company are compromised.

   • Majority Board considered that the due diligence by Air Products should not be unduly delayed and has contacted Air Products to proceed with the due diligence.

   • Notwithstanding Mr. Sun and Mr. Strutt's Compromised INED Allegations, Mr. Zhao as the Chairman of the Board will convene an urgent meeting to resolve the appointment of the IBC. The board will evaluate the eligibility of each and every non-executive Director and INED to be members of the IBC and is optimistic that the IBC will be formed at the forthcoming Board meeting.

2. Possible Stellars Offer

   • On 12 December 2016, Mr. Sun and Mr. Strutt issued a public letter expressing their disagreement against the Abortive Placing.

   • On 17 December 2016, a board meeting notice was despatched to directors of the Company for a board meeting on 18 December 2016 to consider the Abortive Placing.

   • On 18 December 2016, Mr. Zhang Mao, director of Stellars, sent out the first letter of interest to the email address of each director of the Company just half an hour before the Board resolved to approve the Abortive Placing. Under Rule 4 of Takeovers Code, placing of new shares will be considered as 'frustrating' a general offer under certain circumstances.

   • On 19 December 2016, Mr. Sun and Mr. Strutt lodged false complaint letter with the regulatory body with respect to the Abortive Placing frustrating the first letter of interest from Stellars which was not incorporated yet.

   • On 21 December 2016, Stellars was incorporated.

   • On 22 December 2016, Stellars issued the second letter of interest without approaching the Board.

   • On 31 December 2016, Majority Board initiated to send a draft confidentiality agreement and information request list to Stellars requesting for feedback by 9 January 2017.

   • On 8 January 2017, Stellars did not even sign back the confidentiality agreement and asked for '4 weeks' extension.

   • On 9 January 2017, Mr. Zhao wrote a warning letter to Stellars which questioned Stellars' offer being not bona fide and indicated a possible legal action. Stellars did not reply to this warning letter.

   • On 10 January 2017, Mr. Sun and Mr. Strutt admitted disclosing the email contact of the directors of the Company to Stellars.

   • On 10 January 2017, the Company decided to terminate the Abortive Placing. Since then, Stellars did not make any further contact. In fact, Stellars never asked for due diligence or meeting with the Company.

   • On 23 January 2017, Majority Board resolved to petition the regulatory body to investigate into the possible conspiracy among Mr. Zhang Mao (director of Stellars), Stellars, Mr. Sun and Mr. Strutt extending bogus general offer with a principal aim to block the Abortive Placing. Mr. Sun and Mr. Strutt denied any collusion with Stellars.

3. Baring's interest according to Mr. Sun's sworn affirmation

   • On 6 November 2016, according to Mr. Sun's sworn affirmation, a representative from Baring indicated to Mr. Sun its interest to subscribe for the shares of the Company at a price between HK$5 and HK$6.

   • On 12 December 2016, Mr. Sun & Mr. Strutt issued public letter against the Abortive Placing at a price of HK$3.2 but without mentioning the Baring's interest between HK$5 and HK$6.

   • On 29 December 2016, in support of legal proceedings against the Abortive Placing, Mr. Sun stated in his sworn affirmation dated 29 December 2016 that a representative from Baring indicated its interest to subscribe for the shares of the Company at a price between HK$5 and HK$6.

   • Since 31 December 2016, Majority Board repeatedly requested Mr. Sun for contact details of Baring. Mr. Sun refused to provide the contact to date.

   • Majority Board considered that Mr. Sun might be making a false statement in his sworn affirmation with a deliberate intent to block the Abortive Placing.

4. Majority Board's view on Mr. Sun and Mr. Strutt based on the currently available information

   Mr. Sun and Mr. Strutt failed to act in the interest of the Company and shareholders as a whole in light of their following conducts:

5. raising Compromised INED Allegations as new objection to Mr. Zhao's proposal of establishing IBC to consider the Possible Air Products Offer;

6. being in suspected conspiracy with Mr. Zhang Mao and Stellars to abuse Rule 4 of Takeovers Code in blocking the Abortive Placing;

7. Mr. Sun failed to provide the contact details of representative of Baring which was 'interested in subscribing for the shares of the Company at a price between HK$5-HK$6 per share' and might have made such false statement in his sworn affirmation with deliberate intent to block the Abortive Placing; and

8. Mr. Sun and Mr. Strutt were only interested in control of the Company by blocking the Abortive Placing while were not genuinely interested in soliciting general offer as stated in their open letter dated 12 December 2016, nor did they give due care for the financing need of the Company by not facilitating Company to approach Baring (as shown in Mr. Sun's sworn affirmation) for equity financing opportunities. In fact, the Company never utilized equity financing since listing in 2009.

9. Board resolution with respect to proposing removal of Mr. Sun and Mr. Strutt in the next extraordinary general meeting ("EGM")

The Board resolved by majority to propose a resolution for shareholders' consideration in the next extraordinary general meeting to remove Mr. Sun and Mr. Strutt from the position of director in light of the unsatisfactory performance and serious misconducts.

PROPOSED FORMATION OF IBC

To break the impasse between the Minority Directors and the Majority Board, Mr. Zhao as the Chairman of the Board will convene an urgent board meeting to resolve the formation of the IBC to overcome further delaying tactic of the Minority Directors on that matter. It is expected that the board meeting will be held right after the Chinese New Year holiday so as to comply with the Cayman court orders initiated by Mr. Sun and Mr. Strutt which paralyzes the board with a 7-days notice for general matters, and a 3-days notice for urgent matters.