China Shengmu Organic Milk : (1) MAJOR AND CONNECTED TRANSACTION - SUPPLEMENTAL AGREEMENT II TO THE EQUITY TRANSFER FRAMEWORK AGREEMENT IN RELATION TO THE ACQUISITION OF MINORITY INTEREST IN THE 12 FARMING COMPANIES AND ISSUE OF CONSIDERATION SHARES UNDER SPECIFIC MANDATE AND (2) EXTENSION OF LONG STOP DATE RELATING TO THE ISSUE OF UNLISTED WARRANTS

Hong Kong Exchanges and Clearing Limited and The Stock Exchange of Hong Kong Limited take no responsibility for the contents of this announcement, make no representation as to its accuracy or completeness and expressly disclaim any liability whatsoever for any loss howsoever arising from or in reliance upon the whole or any part of the contents of this announcement.

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)

1. MAJOR AND CONNECTED TRANSACTION - SUPPLEMENTAL AGREEMENT II TO THE EQUITY TRANSFER FRAMEWORK

AGREEMENT IN RELATION TO THE ACQUISITION OF MINORITY

INTEREST IN THE 12 FARMING COMPANIES AND ISSUE OF CONSIDERATION SHARES UNDER SPECIFIC MANDATE AND

1. EXTENSION OF LONG STOP DATE RELATING TO THE ISSUE OF UNLISTED WARRANTS

References are made to the announcements of China Shengmu Organic Milk Limited (the "Company") dated 21 December 2018, 24 December 2018, 27 December 2018, 3 January 2019, 11 January 2019 and 10 March 2019 respectively (the "Announcements") and the circulars of the Company dated 7 January 2019 and 12 March 2019 respectively (the "Circulars") in relation to, among other things, (i) the entering into of the Warrant Subscription Agreement B between the Company and the Subscriber B, pursuant to which the Company has agreed to issue to the Subscriber B, and the Subscriber B has agreed to subscribe for the Warrants B; and (ii) the Equity Transfer Framework Agreement and the Supplemental Agreement to the Equity Transfer Framework Agreement entered into by the Company, the 12 Individual Shareholders and Shengmu High-tech in relation to the Acquisition of minority interest in the 12 Farming Companies and issue of Consideration Shares under specific mandate.

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

− 1 −

BACKGROUND

According to the Equity Transfer Framework Agreement and the Supplemental Agreement to the Equity Transfer Framework Agreement, the 12 Individual Shareholders agreed to complete the Reorganisation before 30 November 2019. Shengmu High-tech shall pay the Cash Consideration in full to the 12 Individual Shareholders by instalments upon fulfilment of all the conditions precedent to the Equity Transfer Framework Agreement and before 30 November 2019. The 12 Individual Shareholders agreed to commence the closing and transfer the 60% equity interest in Shengmu Sand and Grass and the 100% equity interest in BVI Company

1. that they held or under their control to Shengmu High-tech and the Company, respectively, within five business days upon receipt of all the Cash Consideration.

As at the date of this announcement, Shengmu High-tech has paid the Cash Consideration in full to the 12 Individual Shareholders. The 12 Individual Shareholders have set up the BVI Companies I and BVI Company II, but have not completed the reorganisation of Shengmu Sand and Grass and have not transferred the 60% equity interest in Shengmu Sand and Grass and 100% equity interest in BVI Company II to Shengmu High-tech and the Company, respectively.

SUPPLEMENTAL AGREEMENT II TO THE EQUITY TRANSFER

FRAMEWORK AGREEMENT

On 25 December 2019, the Company, the 12 Individual Shareholders and Shengmu High-tech entered into the Supplemental Agreement II to the Equity Transfer Framework Agreement ("Supplemental Agreement II to the Equity Transfer Framework Agreement") to amend certain terms in relation to the Reorganisation and completion of the Acquisition, details of which are set out below.

Pursuant to the Supplemental Agreement II to the Equity Transfer Framework Agreement, the 12 Individual Shareholders agreed to transfer the 60% equity interest in Shengmu Sand and Grass to Shengmu Hi-tech within 10 days from 25 December 2019. Subject to laws and regulations of the PRC, the 12 Individual Shareholders undertook to continue to take legitimate and effective measures to implement the reorganisation regarding the 40% equity interests in Shengmu Sand and Grass through themselves or other entities under their control before 10 June 2020, upon which the 12 Individual Shareholders will indirectly hold 40% equity interests in Shengmu Sand and Grass. The 12 Individual Shareholders shall then transfer the 100% equity interests in BVI Company II to the Company within five days upon completion of the aforementioned reorganisation. The date on which such transfer is completed shall be the closing date (the "Closing Date").

− 2 −

The Company shall issue the Consideration Shares to BVI Companies I to acquire 100% equity interest in BVI Company II which in turn indirectly hold the 40% equity interest in Shengmu Sand and Grass after the Closing Date. The Company shall complete the issuance of the Consideration Shares before 30 June 2020.

The 12 Individual Shareholders agreed that the Company will be entrusted with the voting rights associated with the 40% equity interest in Shengmu Sand and Grass held by the 12 Individual Shareholders from 25 December 2019 to the Closing Date or to the date on which all parties agree, in writing, to terminate the Supplemental Agreement II to the Equity Transfer Framework Agreement.

Save as disclosed above, all the other terms of the Equity Transfer Framework Agreement and the Supplemental Agreement to the Equity Transfer Framework Agreement remain unchanged and in full force and effect.

REASONS FOR ENTERING INTO OF THE SUPPLEMENTAL AGREEMENT II TO THE EQUITY TRANSFER FRAMEWORK AGREEMENT

The terms of the Supplemental Agreement II to the Equity Transfer Framework Agreement were agreed upon after arm's length negotiations among the Company, the 12 Individual Shareholders and Shengmu High-tech after taking into account the time required for completing the Reorganisation and the time for processing relevant transfer and registration procedures.

The Directors are of the view that the amendments in relation to the Reorganisation and the transfer of the 40% equity interest in Shengmu Sand and Grass as agreed upon in the Supplemental Agreement II to the Equity Transfer Framework Agreement do not materially affect the completion of the Acquisition and the terms and conditions of the Supplemental Agreement II to the Equity Transfer Framework Agreement are on normal commercial terms, fair and reasonable and in the interests of the Company and the Shareholders as a whole. On this basis, the Directors do not consider that it is necessary for the Company to re-comply with the independent Shareholders' approval requirements under Chapter 14 and Chapter 14A of the Listing Rules.

EXTENSION OF LONG STOP DATE RELATING TO THE ISSUE OF UNLISTED WARRANTS

Pursuant to the Warrant Subscription Agreement B, completion of the subscription of Tranche 2 Warrants B is subject to the fulfillment or waiver of conditions set out in the Warrant Subscription Agreement B on or before 31 December 2019 (or such other date as may be agreed between the Company and the Subscriber B in writing).

− 3 −

As additional time is required for the fulfillment of certain condition(s) under the Warrant Subscription Agreement B, on 25 December 2019, the parties to the Warrant Subscription Agreement B agree in writing to extend the date for fulfillment of the conditions set out in the Warrant Subscription Agreement B to 31 July 2020 (or such other date as may be agreed between the Company and the Subscriber B in writing). Save as aforesaid, all other terms and conditions of the Warrant Subscription Agreement B shall remain unchanged.

By Order of the Board of Directors

China Shengmu Organic Milk Limited

Shao Genhuo

Chairman

Hong Kong, 25 December 2019

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

− 4 −