Inside information exercise of warrants a and change in largest shareholder

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CHINA SHENGMU ORGANIC MILK LIMITED

中 國 聖 牧 有 機 奶 業 有 限 公 司

(Incorporated in the Cayman Islands with limited liability)

(Stock Code: 1432)

INSIDE INFORMATION

EXERCISE OF WARRANTS A

AND

CHANGE IN LARGEST SHAREHOLDER

This announcement is made by China Shengmu Organic Milk Limited (the "Company") pursuant to Rule 13.09 of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (the "Listing Rules") 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").

References are made to the announcements of the Company dated 24 December 2018, 27 December 2018, 3 January 2019, 11 January 2019 and 30 December 2019 respectively (the "Announcements") and the circulars of the Company dated 7 January 2019 and 6 March 2020 (the "Circulars") in relation to, among other things,

1. the entering into of the Warrant Subscription Agreement A dated 23 December 2018 between the Company and the Subscriber A (a direct wholly-owned subsidiary of China Mengniu Dairy Company Limited ("China Mengniu")), pursuant to which the Company has agreed to issue to the Subscriber A, and the Subscriber A has agreed to subscribe for the Warrants A and (ii) the Raw Fresh Milk Supply Framework Agreement, the Financial Assistance Framework Agreement, the transactions contemplated under such agreements and the proposed annual caps for such transactions for the three years ending 31 December 2020, 2021 and 2022.

Unless otherwise defined herein, capitalized terms used in this announcement shall have the same meaning as defined in the Announcements and the Circulars.

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EXERCISE OF WARRANTS A

On 27 July 2020, the Company received the exercise notice (the "Exercise Notice") from the Subscriber A to exercise all 1,197,327,890 Warrants A to subscribe for 1,197,327,890 Warrant Shares at the exercise price of HK$0.33 per Warrant Share. The Company confirmed receipt in the sum of HK$395,118,203.70 (the

• Subscription Monies"), being the aggregate subscription price payable for the 1,197,327,890 Warrant Shares, on 28 July 2020. In accordance with the Warrant Subscription Agreement A and the Exercise Notice, the Company shall apply the Subscriptions Monies to repay the outstanding entrusted loans due to China Mengniu Group under the Financial Assistance Framework Agreement. Pursuant to the terms of the Warrants A, the Company shall allot and issue a total of 1,197,327,890 Warrant Shares to the Subscriber A on 31 July 2020 (the "Completion"). The Warrant Shares shall rank pari passu in all aspects among themselves and with all the Shares in issue as at the date of allotment and issue of such Warrant Shares, and will represent approximately 14.53% of the issued share capital of the Company as enlarged by the allotment and issue of 1,197,327,890 Warrant Shares. After the exercise of the Subscription Rights of Warrants A noted above, there are no outstanding Subscription Rights of Warrants A for the Subscriber A.

CHANGE IN LARGEST SHAREHOLDER

Immediately after the Completion and assuming no shares of the Company will be issued from the date of this announcement to the date of Completion apart from the 1,197,327,890 Warrant Shares, the Subscriber A will hold in aggregate 1,467,193,490 Shares, representing approximately 17.80% of the total number of issued Shares and will become the single largest shareholder of the Company. As the Subscriber A is a wholly-owned subsidiary of China Mengniu, China Mengniu will be deemed to be interested in the 1,467,193,490 Shares in which the Subscriber A will be interested pursuant to Part XV of the SFO.

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EFFECT ON THE SHAREHOLDING STRUCTURE OF THE COMPANY

For illustrative purpose only, set out below is a summary of the shareholding structure of the Company (i) as at the date of this announcement and (ii) immediately after the Completion assuming no shares of the Company will be issued from the date of this announcement to the date of Completion apart from the 1,197,327,890 Warrant Shares:

1. Mr. SHAO Genhuo (邵根夥), the Chairman and a non-executive Director of the Company, holds the entire equity interests of Beijing Zhi Nong Investment Co., Ltd., which in turn holds the entire equity interests of Nong You Co., Ltd. Therefore, Mr. Shao is deemed to be interested in the Shares held by Nong You Co., Ltd.
2. As the Subscriber A is a direct wholly-owned subsidiary of China Mengniu, China Mengniu is deemed to be interested in the Shares in which the Subscriber A is interested.
3. The Subscriber B is interested in a total of 140,862,105 Warrants B issued pursuant to the Warrant Subscription Agreement B dated 23 December 2018 entered into between the Company and the Subscriber B. Upon the exercise of the subscription rights attaching to the Warrants B in full, a maximum of 140,862,105 Warrant Shares will be issued and allotted by the Company to the Subscriber B at the subscription price of HK$0.33 per Warrant Share. As at the date of this announcement, none of the Warrants B has been exercised.

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CONTINUING CONNECTED TRANSACTIONS

Following the Completion, each of the Subscriber A, China Mengniu and their respective associates (including Inner Mongolia Mengniu) will become a connected person of the Company and the continuing transactions between the Company and its subsidiaries on the one hand and the Subscriber A, China Mengniu and their respective associates on the other hand (including Inner Mongolia Mengniu), including the transactions contemplated under the Raw Fresh Milk Supply Framework Agreement and the Financial Assistance Framework Agreement, shall constitute continuing connected transactions of the Company under Chapter 14A of the Listing Rules and the proposed annual caps for the transactions contemplated thereunder shall simultaneously become effective.

By order of the Board of

China Shengmu Organic Milk Limited

Shao Genhuo

Chairman

Hong Kong, 28 July 2020

As at the date of this announcement, the executive directors of the Company are Mr. Yao Tongshan and Mr. Zhang Jiawang; the non-executive directors of the Company are Mr. Shao Genhuo, Mr. Zhao Jiejun, Mr. Sun Qian and Mr. Lu Boxiang; and the independent non-executive directors of the Company are Mr. Fu Wenge, Mr. Wang Liyan and Mr. Li Xuan.

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