China Gas : VOLUNTARY ANNOUNCEMENT - ENTERING INTO STRATEGIC COOPERATION AGREEMENT WITH YANCHANG PETROLEUM AND X

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CHINA GAS HOLDINGS LIMITED

中 國 燃 氣 控 股 有 限 公 司*

(Incorporated in Bermuda with limited liability)

(Stock Code: 384)

VOLUNTARY ANNOUNCEMENT -

LITIGATION

The board of directors (the''Board'') of China Gas Holdings Limited (the''Company'') wishes to announce that Mr. Xu Ying (''Mr. Xu''), a former director of the Company, has initiated the following legal proceedings against the Company recently.

HIGH COURT ACTION IN RELATION TO OPTION SHARES (HCA 606/2017)

On 15 March 2017, the Company was served a writ of summons issued by Mr. Xu in the Court of First Instance of the High Court of the Hong Kong Special Administrative Region (the''High Court'') with regard to Mr. Xu's purported exercise of share options of the Company on 22 February 2017, which would have entitled Mr. Xu to 100,000,000 shares of the Company (the''Option Shares''), in relation to which the Company did not allot and issue the Option Shares to him. The exercise price in respect of the abovementioned share options granted to Mr. Xu was HK$2.10 per share.

Mr. Xu seeks, among others, an order for specific performance by the Company to allot and issue the Option Shares to Mr. Xu pursuant to the share options exercised by him and also damages in lieu of or in addition to specific performance.

HIGH COURT ACTION IN RELATION TO DISMISSAL (HCA 1083/2017) (FORMERLY LABOUR TRIBUNAL CLAIM (LBTC 1049/2017))

On 30 March 2017, the Company received a form of claim filed by Mr. Xu in the Labour Tribunal of Hong Kong claiming approximately HK$140 million (being the alleged loss of salary in the sum of HK$21.6 million (annual salary of HK$7.2 million) for the three financial years ended 31 March 2014 and the aggregate bonus in the sum of approximately HK$118.4 million for the four financial years ended 31 March 2014) and other unliquidated damages and interest from the Company for the alleged wrongful dismissal by the Company of Mr. Xu as a director and an employee of the Company on 29 March 2011. By the mutual consent of the parties to the claim, the claim has been transferred to the Court of First Instance of the High Court by reason that, among others, the facts of the above claim relate to and/or substantially overlap with Mr. Xu's ongoing and concurrent actions described below.

HIGH COURT ACTION IN RELATION TO BREACH OF DUTIES (HCA 751/2017)

On 11 May 2017, the Company was served with a writ of summons filed by Mr. Xu against the Company (as the 1st Defendant), Mr. Pang Yingxue, Mr. Feng Zhuozhi, Mr. Zhu Weiwei, Mr. Ma Jinlong, Dr. Mao Erwan, Ms. Wong Sin Yue Cynthia and Mr. Liu Ming Hui (as the 2nd to 8th Defendant) (the''2nd to 8th Defendants'') in the High Court (the''HCA 751/2017 Writ of Summons''). Mr. Pang Yingxue and Mr. Feng Zhuozhi were former directors of the Company. Mr. Zhu Weiwei, Mr. Ma Jinlong and Mr. Liu Ming Hui are the current executive directors of the Company, and Dr. Mao Erwan and Ms. Wong Sin Yue Cynthia are the current independent non-executive directors of the Company. It is alleged by Mr. Xu that the 2nd to 8th Defendants had wrongfully interfered with Mr. Xu's economic interests, including inducing and/or procuring the Company to breach its duties under the share option scheme of the Company adopted on 6 February 2003 (the''Scheme''), its duties owed to Mr. Xu in tort and/or otherwise under Mr. Xu's service agreement with the Company.

In light of the alleged breaches, Mr. Xu claims against the Company for, among others, damages and a declaration that the termination of his service agreement with the Company was wrongful. Mr. Xu also seeks damages from the 2nd to 8th Defendants for their alleged wrongful tortious acts.

ANOTHER HIGH COURT ACTION IN RELATION TO SHARE OPTIONS (HCA 1964 & 1965/ 2014)

The Board would also like to inform the shareholders that seven holders of share options under the Scheme (the''Seven Option Holders'') have also initiated legal proceedings against the Company in the High Court with regard to their respective purported exercise of share options under the Scheme, which would have entitled them to a total of 10,000,000 shares of the Company. The exercise price in respect of the abovementioned share options was HK$0.71 per share.

The Seven Option Holders sought, among others, an order for specific performance by the Company to allot and issue the abovementioned shares to them and damages in lieu of or in addition to specific performance. This court action is presently stayed by the High Court as a result of the Seven Option Holders'failure to comply with an order issued by the High Court. The Company notes that the Seven Option Holders have applied to the High Court to lift the stay such that the action may be proceeded with again.

THE BOARD'S STATEMENT TO THE ABOVE CLAIMS

Based on (amongst others) the following reasons, the Board considers that all of the abovementioned claims are without merit:

1. Mr. Xu, owing to his misconduct, was dismissed by the Company on 29 March 2011 and was removed from the office as director of the Company pursuant to the resolutions passed at the special general meeting of the Company held on 26 April 2011. As such, according to the terms of the Scheme, Mr. Xu was no longer an eligible person under the Scheme when he exercised the share options in relation to the Option Shares;

2. the Company has never agreed to pay Mr. Xu the alleged salary and/or annual bonus of HK$140 million;

3. the Board considers that the 2nd to 8th Defendants did not breach any of their duties referred to in the HCA 751/2017 Writ of Summons. The Board further considers that the 2nd to 7th Defendants have made every effort to discharge their responsibilities as directors so as to protect the interests of the Company and its shareholders in the relevant matter. In respect of the 8th Defendant, between 18 December 2010 and 26 April 2011, he was not able to carry out his duties as a director of the Company and therefore was not involved in the Company's affairs at the material time. For further details, please refer to the Company's announcements dated 24 December 2010, 4 January 2011, 31 January 2011, 16 March 2011, 13 April 2011, 20 April 2011 and 27 April 2011; and

4. according to the terms of the Scheme, the Seven Option Holders were not the eligible persons under the Scheme when they exercised the share options in relation to the 10,000,000 shares of the Company.

In respect of the aforementioned legal proceedings, the Company has sought advice from its legal advisors and has been advised that there is a sound basis for defending the above claims. Therefore, the Company will vigorously defend the above claims.

The Board would like to reiterate that it always endeavours to protect the interests of the Company and its shareholders as a whole. The Company wishes to clarify that the purpose of the Company granting share options to eligible persons is to provide an incentive and reward to such persons for their contributions to the Company. However, if any such persons are found to have caused harm to the Company's interests or have not contributed to the Company, the Board shall have the right to cancel the share options granted to such persons in accordance with the terms of the relevant share option schemes and grant letters and the applicable laws.

Further announcement(s) will be made to update the shareholders as and when necessary in compliance with The Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited. Shareholders and potential investors of the Company should exercise caution when dealing in the securities of the Company.

By order of the Board

China Gas Holdings Limited ZHOU Si

Chairman

Hong Kong, 2 June 2017

As of the date of this announcement, Mr. ZHOU Si, Mr. LIU Ming Hui, Mr. HUANG Yong, Mr. ZHU Weiwei, Mr. MA Jinlong and Ms. LI Ching are the executive directors of the Company; Mr. YU Jeong Joon (his alternate being Mr. KIM Yong Joong), Mr. LIU Mingxing, Mr. Arun Kumar MANCHANDA and Mr. JIANG Xinhao are the non-executive directors of the Company; and Mr. ZHAO Yuhua, Dr. MAO Erwan, Ms. WONG Sin Yue Cynthia, Mr. HO Yeung and Ms. CHEN Yanyan are the independent non-executive directors of the Company.

* for identification purpose only