Yongsheng Advanced Materials : VOLUNTARY ANNOUNCEMENT UPDATE ON FORMATION OF JOINT VENTURE

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Yongsheng Advanced Materials Company Limited

永盛新材料有限公司

(Incorporated in the Cayman Islands with limited liability)

(Stock Code: 3608)

VOLUNTARY ANNOUNCEMENT

UPDATE ON

FORMATION OF JOINT VENTURE

Reference is made to the announcements (the "Announcements") of Yongsheng Advanced Materials Company Limited (the "Company", together with its subsidiaries, the "Group") dated 28 April 2020 and 12 May 2020 in relation to the formation of the JV Company in the Cayman Islands with Bagan. Unless otherwise defined, capitalised terms used in this announcement shall have the same meanings as those defined in the Announcements.

ACQUISITION OF THE PROJECT COMPANIES

The Board wishes to inform the shareholders of the Company and potential investors that the JV Company has been incorporated and is owned by the Group and Bagan as to approximately 60% and 40%, respectively, as at the date of this announcement. As disclosed in the Announcements, after the establishment of the JV Company, the JV Company shall acquire 100% issued share capital of the Project Companies, which are principally engaged in the development, investment, operation and management of water works projects, in particular regarding water supply and wastewater treatment, in the PRC and the Southeast Asia.

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On 23 July 2020 (after trading hours), the JV Company entered into a sale and purchase agreement (the "SPA") with Mr. Yang Dongwei ("Mr. Yang"), the controlling shareholder of Bagan, pursuant to which the JV Company has conditionally agreed to acquire, and Mr. Yang has conditionally agreed to sell the entire issued share capital of WZ Environment Limited ("WZ HK"). The total consideration for the transaction contemplated under the SPA amounted to HK$10,000.

It is expected that the WZ Group (as defined below) will procure water supply and/or wastewater treatment project(s) in the Southeast Asia in due course.

INFORMATION ON WZ HK

WZ HK is a company incorporated in Hong Kong with limited liability and is an investment holding company. As at the date of this announcement, it was wholly owned by Mr. Yang, and it wholly owned (i) a company incorporated in Cambodia; and (ii) a company incorporated in Myanmar. WZ HK and its subsidiaries (together, the "WZ Group") are part of the Project Companies.

REASONS FOR AND BENEFIT OF THE TRANSACTION CONTEMPLATED UNDER THE SPA

As disclosed in the Announcements, the Group plans to diversify its revenue sources in order to bring valuable returns on the Shareholders. Having considered (i) the prospects of the water supply and wastewater treatment industry in the PRC and the Southeast Asia as disclosed in the Announcements; and (ii) Bagan's contribution through provision of technical know-how in relation to water supply and wastewater treatment market intelligence, business connections in the Southeast Asia and human resources for the daily operation of the WZ Group, the Board considers that the Group's engagement of waste supply and wastewater treatment industry in the PRC and the Southeast Asia through acquisition of WZ Group by the JV Company from Bagan and its shareholders is fair and reasonable, and favourable to the Company's long term business perspective.

Upon completion of the transaction contemplated under the SPA, (a) the WZ Group will be accounted for as non-wholly-owned subsidiaries of the Company with their financial results to be consolidated into the financial statements of the Group; and (b) the Group would be able to conduct business in the water supply and wastewater treatment industry in the PRC and the Southeast Asia through the WZ Group.

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In respect of the acquisition of the rest of the Project Companies, the Company will re-comply with the relevant Listing Rules requirements when acquisition of them materialise in the future.

LISTING RULES IMPLICATIONS

The transaction contemplated under the SPA constitutes a connected transaction by virtue of Mr. Yang being a connected person under Chapter 14A of the Listing Rules since he owns more than 30% of the entire issued share capital of Bagan, which in turn owns approximately 40% of the JV Company, a subsidiary of the Company. However, as the highest percentage ratio as set out in the Listing Rules in respect of the transaction contemplated under the SPA is less than 0.1%, the entering into the SPA and the transaction as contemplated thereunder does not constitute a connected transaction of the Company under Chapter 14A of the Listing Rules. This announcement is made voluntarily by the Company.

As the transaction contemplated under the SPA is subject to fulfillment and/or waiver, if applicable, of various conditions precedent which may or may not be fulfilled, there is no assurance that the transaction contemplated under the SPA will be completed. Shareholders and potential investors of the Company should exercise caution when dealing in the securities of the Company.

By Order of the Board

Yongsheng Advanced Materials Company Limited

Li Cheng

Chairman and Executive Director

Hong Kong, 23 July 2020

As at the date of this announcement, the executive Directors are Mr. Li Cheng, Mr. Li Conghua, Mr. Ma Qinghai and Mr. Xu Wensheng; and the independent non-executive Directors are Ms. Wong Wai Ling, Mr. Shiping James Wang and Dr. Wang Huaping.

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