#1YINGDE GASES GROUP COMPANY LIMITED 盈德氣體集團有限公司 N2 Investor Presentation Hong Kong, February 2017 1#2Disclaimer The presentation material contains forward-looking statements. Such forward-looking statements are subject to various risks, uncertainties and assumptions, certain of which are not under our control, causing actual results and growth which may differ materially from these direct or indirect forward- looking statements. Forward-looking events and relevant development discussed herein may differ from the expectation of Yingde Gases Group Company Limited (the "Company"), and even never occur due to such risks, uncertainties and assumptions. You should not rely excessively on any forward-looking information. As the presentation material prepared by the Company is not verified independently, there is no direct or indirect statement or guarantee for the accuracy, fairness and completeness of the information or content contained herein, and reliance should not be placed on the accuracy, fairness and completeness of the information or content contained herein. The Company, any of its associates, consultants or representatives shall not assume any responsibilities for losses arising from the information or content contained herein. Information or content contained herein is subject to variation from time to time without prior notice, and its accuracy is not assured. In addition, all of the forward- looking statements quoted herein by the Company are as of the day of the presentation; the Company is not obligated to update the statements. YINGDE GASES GROUP COMPANY LIMITED 盈德氣體集團有限公司 2#3Today's Presenters Mr. Zhao Xiangti Chairman & Executive Director • Co-founder of Yingde • Lead in management, business development and expansion since October 2001 • Over 16 years of experience in the industrial gas industry • Became the Manager of China FAW Group Xinjiang No. 1 Auto Factory in 1995 at age of 36; Previously led the industry research on the heavy truck sector and the drafting of Torch Automobile Group's initial acquisition strategy. Played an important role in many of Torch Automobile Group's investments. Led Torch Automobile Group's investment in Yingde Gases beginning with the initial feasibility study, which led to the formation of the Company Bachelor of Engineering from Hebei Science and Technology University in 1982 Ms. Samantha Sze Wing Wong Chief Financial Officer & Joint Company Secretary • Joined on July 1, 2008 Over 15 years of accounting experience in the industrial sector • Former chief financial officer of Orange Sky Entertainment Group • Bachelor of Business Administration from the University of Hong Kong, and EMBA from China Europe International Business School Chartered member of the Hong Kong Institute of Certified Public Accountants in 2003 YINGDE GASES GROUP COMPANY LIMITED 盈德氣體集團有限公司 3#4Today's Presenters (Cont'd) Mr. Zhang Yunfeng Chief Operations Officer • • • • Joined Yingde in 2013 as advisor, and assisted company to streamline operations, formulate strategic plans, manage market value, and execute investments, mergers and acquisitions Over 20 years of experience in industrial gases sector Prior Executive Partner at Zhonghe Ventures/Dingxing International Capital, General Manager of Investments for Shenyang Hejin Holdings (SSE: 000633) and Deputy Head of Markets for Xi'an Xihejingda Instruments Bachelor's degree in Industrial Analysis from Wuhan Engineering University in 1997, and Master's Degree In Industrial Economics from Wuhan University of Technology in 2002 Mr. Suo Yaotang Vice President of Markets and Investment, Deputy General Manager • Joined Yingde in 2001; Former Head of Developments Division, Non-Executive Director of Group • Over 53 years of experience in industrial gas manufacturing and applications • Former Deputy General Manager of Tsitsihar Steel Plant • Bachelor of Metallurgical Mechanics from Beijing Institute Of Iron And Steel (Now Beijing University Of Science And Technology) in 1964 • Mr. Li Hai Vice President of Design, Manufacturing & Engineering Joined Yingde in 2007; Former Project Manager, Baotou Yingde General Manager, Mongolia Region Manager and Zhihai Chemicals General Manager • Over 22 years of experience in industrial gas manufacturing and applications • • Former Chief Engineer of Zhejiang Industrial Equipment Installation Group, in charge of multiple gas and air separation projects Bachelor from Nanjing Tech University in Equipment Installation Engineering in 1964 YINGDE GASES GROUP COMPANY LIMITED 盈德氣體集團有限公司 4#5Other Key Management Diversified and Experienced Team Supportive of Senior Management Name Current Position/Responsibility Chen Kai Vice President of Operation Center Years of Experience Years of Service in the Industry in Group 24 16 Suo Yaotang Vice President of Markets and Investment (Deputy General Manager) 53 16 Zhang Vice President of Finance 22 22 11 Jianye Zhang Shunkai Co Vice President of Market and Investment 43 16 Li Hai Vice President of Design, Manufacturing & Engineering 22 22 10 Fang Ming Assistant to President (in Charge of Technology Center) 28 5 Jiao Zhen Assistant to President (in Charge of Administration Center) YINGDE GASES GROUP COMPANY LIMITED 盈德氣體集團有限公司 23 23 3 5#6TOC Section 1: Summary and Situation Recap Section 2: Air Products Proposal and Our Strategic Review Section 3: Financial Performance Section 4: Corporate Governance and Recent Initiatives Section 5: Transaction Statistics YINGDE GASES GROUP COMPANY LIMITED 盈德氣體集團有限公司 6#7Summary • • • • February 13, 2017, we announced that we had instructed Morgan Stanley Asia Limited ("Morgan Stanley") to run a sale process for the company Potential Bidders have been contacted, including international private equity firms and strategic players Timeline is fast and the due diligence data room will be available very soon We are creating the optimal condition for value to be created for shareholders, entrust us with the role of finding the right transaction for Yingde YINGDE GASES GROUP COMPANY LIMITED 盈德氣體集團有限公司 7#8Situation Recap • • • Prior to November 2016, Yingde's share price declined sigificantly along with all major operating metrics - Some macroeconomic headwinds, but also over expansion and over-leveraged Issues in relationship between key customers and prior management led to disputes idling roughly 10% of the Group's oxygen production capacity November 5, 2016: After careful deliberation, a majority of the Board, including all independent non-executive directors, voted to remove Mr. Sun and Mr. Strutt from executive roles. - Originwater had previously acquired 4.2% of shares on market; Mr. He joined the board first in 2013 At end October 2016, Company had less than US$12MM offshore. PRC currency controls were simultaneously tightening. After seeking terms from a number of private investors, Board agreed to raise HK$1.2 Bn of proceeds from placing equity to Originwater (at 3.2% premium to last trade) to replace CDB loan December 12, 2016: Entities affiliated with Mr. Sun & Mr. Strutt raised requisition to remove Mr. Zhao and other executive directors of the Company December 29, 2016: Air Products submitted an unsolicited offer to the Company at a price of HK$5.5 – 6.0 per share • January 9, 2017: Board announces termination of Originwater placing • • January 19, 2017: Entities affiliated with Chairman Zhao requisitioned an EGM to remove Mr. Sun and Mr. Strutt as directors February 6, 2017: To avoid unnecessary speculation, Majority Board publishes announcement clarifying it will not issue new shares, unless shareholders in the future approved such issuance by a specific or general mandate YINGDE GASES GROUP COMPANY LIMITED 盈德氣體集團有限公司 8#9Situation Recap: The Stock Price Decline Share Price Performance (1) January 2014 January 2017 HK$ $17.0 $12.0 $7.0 $2.0 Jan-14 Late 2014: Mr. Zhao began privately conveying to Mr. Sun his concerns Apr-14 Jul-14 Nov-14 Feb-15 July 2014: Yingde Loudi plant stoppage due to dispute in gas supply contract Customer and JV Disputes Nov. 6: Mr. Sun & Mr. Strutt removed as CEO and COO Nov. 8: Stock price closes 6.8% higher two days after removal announced Regional Comps (Rebased) Global Comps (Rebased) Yingde May-15 Sep-15 Dec-15 Dec 2015: Yingde Pingshan plant seizure due to refusal to accommodate key customer Heibei Jingye Steel's payment delays Mar-16 May/June 2016: Cashflow issues caused the Company to delay salary payments to employees for 2 mths Jul-16 Oct-16 Feb-17 October 2016: Taking measures to raise cash, including requiring plant managers to pledge equipment and raise RMB 5MM or face two-month salary penalty YINGDE GASES GROUP COMPANY LIMITED 盈德氣體集團有限公司 Notes 1. Regional comps includes Taiyo Nippon Sanso, Air Water, SK Materials and Wonik Materials; Global comps includes Air Products and Chemicals, Air Liquide and Linde Aktiengesellschaft 9#10The Upcoming EGMs Date and Time March 8th, 10 AM - Board & Chairman Zhao Requisitions March 8th, 11 AM - Sun & Strutt Requisitions Location Dianchang South Road, Zhuhai City, PRC (Yingde Zhuhai Office) Proxy Cut Off Date March 6th, 10 AM (may be earlier depending on your broker) Voting Mechanics Investor may vote on each director's removal or nomination separately. Each resolution will be carried by a simple majority of those present or voting by proxy First EGM (10 AM): Board & Chairman Requisitions; if approved, Mr. Sun and Mr. Strutt will be removed as directors Second EGM (11 AM): Sun & Strutt Requisitions; if approved, Mr. Zhao, Mr. He Yuanping, Mr. Zhang Yunfeng, Mr. Suo Yaotang, Dr. Feng Ke will be removed as directors; Mr. Ma Zhihe will be nominated; the board will be capped at 5 members YINGDE GASES GROUP COMPANY LIMITED 盈德氣體集團有限公司 10#11Why You Should Support Us We are committed to achieving the best value for your company The Company and Chairman Zhao, the latter as a shareholder of Yingde and as a director, are prepared to facilitate a sale, to APD or otherwise However indicative price of HKD 5.50 - or even HKD 6.00 - appears potentially opportunistic We have initiated a sale process • • • We have voluntarily formed an Independent Board Committee We have engaged Morgan Stanley to evaluate strategic alternatives and conduct sale process Potential bidders contacted. Dataroom preparation underway. Dataroom access as early as these two days or shortly thereafter Met with APD to indicate our willingness to engage We have reached out to Mr. Sun and Mr. Strutt through our advisors to facilitate a sale • We believe that it is only through coordination that greater value can be achieved by all shareholders Mr. Zhao has also notified the Majority Board, in his capacity as a shareholder of the Company, that as long as he remains a director of the Company and as such is informed of the progress of any sale exercise, he is willing to sell his shares in any transaction involving all the issued shares of the Company and which is recommended by the Majority Board in the foreseeable future We believe a professional, coordinated strategy and process is needed to identify the best outcome for the Company and its shareholders YINGDE GASES GROUP COMPANY LIMITED 盈德氣體集團有限公司 11#12TOC Section 1: Summary and Situation Recap Section 2: Air Products Proposal and Our Strategic Review Section 3: Financial Performance Section 4: Corporate Governance and Recent Initiatives Section 5: Transaction Statistics YINGDE GASES GROUP COMPANY LIMITED 盈德氣體集團有限公司 12#13The Air Products Proposal The possible Air Products offer was disclosed on January 8, 2017 • • • • • Air Products sent a letter to us on 29 December 2016 - - Air Products proposed the acquisition of all of the outstanding shares of Yingde, on a fully-diluted basis, at a price of HK$5.50 per share in cash If permitted to conduct a customary due diligence on the Company, Air Products could potentially offer a price as high as HK$6.0 per share The consummation of any offer would also be subject to antitrust approval from the Ministry of Commerce of the People's Republic of China and any other required regulatory approvals It does not represent a "firm" offer to buy the company under Takeovers Code Air Products "reserve the right to pursue, alternative transaction structures including a voluntary general offer"... The Company is working on addressing Air Products' request for customary due diligence while we evaluate the offer There is no proposal yet for the Yingde Independent Board Committee to review YINGDE GASES GROUP COMPANY LIMITED 盈德氣體集團有限公司 13#14Morgan Stanley Engagement Strategic Review • • • On February 10, 2017, the Company appointed Morgan Stanley as its financial advisor to assist the Company and the Board in evaluating the Possible Offers and other potential strategic alternatives A potentially material component of the fee payable under the terms of the Morgan Stanley engagement is benchmarked to the value of the Company's shares, as measured by, inter alia, the traded stock price of the shares or the value of any offer for the Company. Morgan Stanley has begun outreach to potentially interested strategic and financial investors as a part of their engagement - Rapid process timeline to bring bidders onto a similar timetable to Air Products YINGDE GASES GROUP COMPANY LIMITED 盈德氣體集團有限公司 14#15TOC Section 1: Summary and Situation Recap Section 2: Air Products Proposal and Our Strategic Review Section 3: Financial Performance Section 4: Corporate Governance and Recent Initiatives Section 5: Transaction Statistics YINGDE GASES GROUP COMPANY LIMITED 盈德氣體集團有限公司 15#16Business with Sustainable, Predictable Earnings Production Capacity No. of on-site facilities CY2013 CY2014 CY2015 1H 2015 1H 2016 54 61 65 62 66 Production capacity - Oxygen (Nm³/hr) 1,562,900 1,749,300 1,939,300 1,809,300 1,959,300 Production capacity - Nitrogen (Nm³/hr) 2,085,600 2,273,600 2,466,600 2,373,600 2,477,600 Production capacity - Argon (Nm³/hr) 41,860 45,400 48,900 47,400 49,540 Hunan Yingde Financials (CNY MM) Revenue 2,750 2,577 2,681 1,262 1,391 EBITDA 1,004 883 873 480 Yingde Gases Group Company Limited (CNY MM) Revenue 6,866 7,716 7,919 3,799 4,140 EBITDA 2,024 2,480 2,655 1,287 1,504 YINGDE GASES GROUP COMPANY LIMITED Source Company Filings 盈德氣體集團有限公司 16#17Benchmarking Yingde(1) Yingde has the lowest AV/EBITDA and P/E multiples of peers yet high EBITDA margin and reasonable net margin Trading Metrics (2) LTM Metrics AV Market Cap AV/EBITDA P/E P/B EBITDA Margin Net Margin 63,414 - Air Liquide 41,903 Air Liquide 13.9x - Air Liquide 52.4x - Air Products 6.5x - Praxair 50.8% - SK 21.0% - SK 42,979 Praxair - 33,171 Praxair 12.2x - Prax air 25.5x - Taiyo 5.0x - SK 34.8% - Yingde 15.1% - Praxair 38,791 - Linde 30,491 Air Products 11.2x - Air Products 23.5x - Air Water 4.3x - Air Products 33.8% - Praxair 10.3% Air Liquide 35,777 - Air Products 29,742 Linde 11.0x - Taiyo 23.3x - Linde 3.3x - Air Liquide 33.6% Air Products 10.1% Wonik 8,457 - Taiyo 5,388 - Taiyo 10.3x - SK 22.9x Air Liquide 2.1x - Linde 25.6% Air Liquide 6.9% - Linde 5,114 Air Water 3,694 Air Water 9.1x - Linde 21.6x SK - 2.0x - Taiyo 22.8% - Linde 6.1% - Yingde 2,579 - Yingde 1,581 - SK 8.8x Wonik 21.0x Praxair 1.8x - Wonik 21.6% Wonik - 6.1% Air Products 1,831 - SK 1,187 - Yingde 8.4x - Air Water 18.9x Wonik 1.8x - Air Water 13.8% - Taiyo 3.8% - Taiyo 329 - Wonik 331 - Wonik 6.2x - Yingde 16.1x - Yingde 1.2x - Ying de 10.5% - Air Water YINGDE GASES GROUP COMPANY LIMITED 盈德氣體集團有限公司 Source Company filings, CaplQ (for market capitalization) Notes 1. 2. Trading Metrics data as of 02/10/2017; LTM data as of 06/30/2016 Trading Metrics unit of US$ MM unless otherwise specified 2.7% Air Water - 17#18TOC Section 1: Summary and Situation Recap Section 2: Air Products Proposal and Our Strategic Review Section 3: Financial Performance Section 4: Corporate Governance and Recent Initiatives Section 5: Transaction Statistics YINGDE GASES GROUP COMPANY LIMITED 盈德氣體集團有限公司 18#19Corporate Governance Comparison Majority Board Entrenchment . Mr. Zhao holds 12.3% of the Company • Independent Directors Prior Company Equity Financing • . Three independent board directors • Former Executives Mr. Sun and Mr. Strutt, including Mr Sun's cousin, collectively hold 30% of the Company Mr. Zhihe Mah, the proposed nominee from Mr. Strutt and Sun, is a former employee and not truly independent Mr. Zhao has written to Mr. Sun previously of the need to attract capital and reduce leverage Steadfastly refused to sell shares or issue shares to third parties in the past Other Governance • None Issues YINGDE GASES GROUP COMPANY LIMITED 盈德氣體集團有限公司 Questionable cash advances to Mr. Sun Undisclosed competing interests • Disclosing corporate info and board deliberations for use in proxy 19#20Recent Initiatives Customers Employees Creditors Issues Prior to November 6 • Ongoing endemic litigation with customers and joint venture partners disrupted operations and joint ventures Key customer Hebei Jingye seized Pingshan factory on Dec. 2nd 2015 Four other disputes with key customers and joint venture partners since late 2015 involving contracts and unpaid dues Low morale due to across the board pay cut of 25% since 2015, while increasing Sun & Strutt bonuses by over 50% Dissatisfaction from employees due to 2-month delay in salary payments for May and June 2016 Less than US$12MM in cash offshore at end of October 2016; no fundraising Poorly conceived and executed fundraising measures (e.g. each plant manager forced to pledge equipment to raise RMB 5 million or face two-month salary penalty) Disputes with customers undermined creditor confidence and rating agency views Current Management Actions • • • • Improving the strained relationship with customers and more rational approach to dealing with customer issues This has not been done at the expense of receivables collection, which were highest on record in December 2016 and January 2017 Public expressions of support from all top 5 customers and 25 other major customers Much improved employee morale and greater engagement in managing the business Working on improving incentive alignment Public support letters from 110 core management, including VP Chen Kai and Deputy GM Suo Yaotang Despite termination of placing, successfully refinanced HK$820MM due in January 2017, with support from Originwater Engaging in constructive discussions with creditors YINGDE GASES GROUP COMPANY LIMITED 盈德氣體集團有限公司 20#21Why The Majority Board Is Best Placed To Run A Sale Process • • This management team and the Majority Board is committed to a transparent sale process that maximizes value for shareholders The Majority Board and current management team is the constituency that has the support of customers and employees Public support letters from 110 core management, including Vice President Chen Kai and Deputy General Manager Suo Yaotang; these are the people that run our plants, manage our finances and interact with our customers Public expressions of support from all top 5 customers and 25 other major customers 中国神华 CHINA SHENHUA • JINGYE-GROUP |日照钢铁控股集团有限公司 RIZHAO STEEL HOLDING GROUP CO.,LTD. 五矿营口中板有限责任公司 陕西龙门钢铁有限责任公司 Shaanxi Longmen Iron & Steel co.,Ltd. MINMETALS YINGKOU MEDIUM PLATE CO., LTD 陕西煤化 These two groups are critical in successfully executing a sale transaction, especially to a strategic competitor Creditor relations have been tense under prior management, and their full support is needed to manage a successful sale The Majority Board has investment and negotiation experience (as well as operational experience) and the ability to successfully manage a sale process • Morgan Stanley has already been engaged and directed to reach out to potential other interested parties YINGDE GASES GROUP COMPANY LIMITED 盈德氣體集團有限公司 21 21#22TOC Section 1: Summary and Situation Recap Section 2: Air Products Proposal and Our Strategic Review Section 3: Financial Performance Section 4: Corporate Governance and Recent Initiatives Section 5: Transaction Statistics YINGDE GASES GROUP COMPANY LIMITED 盈德氣體集團有限公司 22#23Yingde Market Valuation and Implied LTM EBITDA Multiples (1) Price/Share (HK$) Unaffected Price Today's Price Best APD Offer to Date 2.87 4.87 6.00 Implied FD Mkt Cap (HK$ MM) 5,426 9,211 11,350 Aggregate Value (HK$ MM) 16,225 20,010 22,149 LTM EBITDA Multiple (2) Notes 5.0x 6.2x 6.8x 1. Price as of 2/10/2017 close at HKD4.87; CNY:HKD as of 2/10/2017 close at 0.89 2. EBITDA calculated as profit from operations + depreciation and amortization + share of earnings from associates and joint ventures YINGDE GASES GROUP COMPANY LIMITED 盈德氣體集團有限公司 23#24Selected Global Industrial Gases Precedent Transactions Change-of-Control Transactions In the Industrials Gases Sector Since 2014(1) Ann. Date Acquiror Name Target Name Target Country Target Description Implied AV Implied AV/LTMEBITDA (US$MM) Apr '14 Daesung Group Partners Daesung Industrial South Manufacturer of industrial and specialty 877 9.8x Gases Korea gases May '14 Mitsubishi Chemical Holdings Taiyo Nippon Sanso Japan Producer of gases in Japan, the United States, and internationally 6,781 10.0x Supplies industrial, medical, and United Nov '15 Air Liquide SA Airgas, Inc. specialty gases; and welding States 13,075 13.4x equipment and related products Nov '15 SK Holdings Co. Ltd. OCI Materials Co., Ltd. South Specialty gas manufacturer 986 8.0x Korea Apr '16 Praxair Inc. Yara International ASA, European CO2 Business European CO2 business comprises Norway liquefaction plants, CO2 ships and terminals and dry ice production 246 10.1x Mean (All Transactions) Median (All Transactions) Note 1. Transactions with publicly disclosed financials where meaningful AV/LTM EBITDA transaction multiples to be calculated YINGDE GASES GROUP COMPANY LIMITED 盈德氣體集團有限公司 10.3x 10.0x 24#25Appendix YINGDE GASES GROUP COMPANY LIMITED 盈德氣體集團有限公司 25 25#26Company Overview Business Description . Yingde Gases (the "Company") is the largest domestic independent gas supplier in the PRC in terms of revenue, which produces, supplies and distributes a variety of industrial gas products (oxygen, nitrogen, argon) to on-site and merchant customers in 19 provinces On-site gas sales are typically from customers who have entered into long- term gas supply contracts with the Company, while merchant gas sales are generated from local distributors on the spot market Currently the Company owns more than 69 gas supply facilities in China, with a total installed oxygen capacity of 1,962,300 Nm3/hr Since 2012, on-site oxygen installed capacity has grown at CAGR of 12% • The Company was established in 2001 with shares listed on the Main Board of the Hong Kong Stock Exchange since October 2009 Financial Summary (CNY MM) Revenue EBITDA 2013 2014 2015 2016 1H 6,866 7,716 7,919 4,140 2,024 2,480 2,655 1,504 Net Profit 908 904 536 387 EBITDA Margin 29.5% 32.1% 33.5% 36.3% Net Profit Margin 13.2% 11.7% 6.8% 9.3% ROA (2) 12.9% 13.9% 13.7% 15.1% ROE 15.6% 14.2% 8.0% 11.4% Total Debt / Assets Total Debt/ EBITDA 0.5x 0.5x 0.5x 0.5x 3.9x 3.9x 3.8x 3.5x(3) Top 5 Customers Sales Breakdown By Customer Type (CNY MM) 7,716 7,919 ■ |日照钢铁控股集团有限公司 6,866 1.3% 2.6% 11.8% 10.4% 0.9% 11.1% 中国神华 JINGYE-GROUP 4,140 CHINA SHENHUA 五矿营口中板有限责任公司 16.6% 9.7% Baotou Coal Shenhua Chemical Hebei Jingye MINMETALS YINGKOU MEDIUM PLATE CO., LTD 86.9% 87.0% 88.0% Steel Co. 83.7% Industry Co. 陕西龙门钢铁有限责任公司 Shaanxi Longmen Iron & Steel co.,Ltd. 陕西理化 2013 2014 2015 1H2016 ■On-site Customers ■Merchant Customers Other Revenue YINGDE GASES GROUP COMPANY LIMITED 盈德氣體集團有限公司 Notes 1. Sourced from Company Presentation 2015 2. ROA calculated as EBITDA / Total Assets 3. Multiple based on annualized EBITDA 26