China Shengmu Organic Milk : Announcements and Notices - Clarification Announement - Issue of Unlisted Warrants under Specific Mandate

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.

This announcement appears for information purposes only and does not constitute an invitation or offer to acquire, purchase or subscribe for any securities of the Company.

CHINA SHENGMU ORGANIC MILK LIMITED ʕ਷໋ىϞዚุ̲Ϟࠢʮ̡

(Incorporated in the Cayman Islands with limited liability)

(Stock Code: 1432)

CLARIFICATION ANNOUNEMENT

ISSUE OF UNLISTED WARRANTS UNDER SPECIFIC MANDATE

BACKGROUND

Reference is made to the announcement of the Company (the "Announcement") dated 24 December 2018 in relation to among other things, (i) the Warrant Subscription Agreement A entered into by the Company with the Subscriber A, 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 Warrant Subscription Agreement B entered into by the Company with 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. Unless otherwise defined, capitalised terms used in this announcement shall have the same meanings as defined in the Announcement.

CONDITIONS PRECEDENT

As stated in the Announcement:

(i) pursuant to the terms of the Warrant Subscription Agreement A, completion of the subscription of Tranche 2 Warrants A is conditional upon, among other things, the completion of the Equity Transfer Framework Agreement or any agreement that parties to the Equity Transfer Framework Agreement could enter into in future in substitution of the Equity Transfer Framework Agreement to effect the issue of Consideration Shares (or any number of Shares to be issuedas part or all of the consideration to the Acquisition) ( the "Condition A"); and this condition may be waived by agreement of the parties to the Warrant Subscription Agreement A; and

(ii) pursuant to the terms of the Warrant Subscription Agreement B, completion of the subscription of Tranche 2 Warrants B is conditional upon, among other things, the completion of the Equity Transfer Framework Agreement (the "Condition B"); and this condition may be waived by agreement of the parties to the Warrant Subscription Agreement B.

LISTING RULES IMPLICATION

Pursuant to Rule 15.02(1) of the Listing Rules, the Warrant Shares to be issued on exercise of the Warrants must not, when aggregated with all other equity securities remain to be issued on exercise of any other subscription rights, if all such rights were immediately exercised, whether or not such exercise is permissible, exceed 20% of the total number of Shares in issue at the time the Warrants are issued.

Upon issue of the Warrant Shares A and Warrant Shares B (assuming other than the issue of the Consideration Shares, there is no change in the issued share capital of the Company between the date of this announcement and the date upon which the Subscription Rights of Warrants A and Subscription Rights of Warrants B are exercised in full), a maximum of 1,338,189,995 new Shares will fall to be issued, which represents approximately 19% of the total number of Shares in issue at the time immediately after the Consideration Shares are issued (assuming there is no other change in the issued share capital of the Company) and approximately 15.97% of the total number of Shares in issue as enlarged by the issue of the Warrant Shares A and Warrant Shares B (assuming other than the issue of the Consideration Shares, there is no other changes in the issued share capital of the Company).

Save as disclosed in the Announcement, the Company did not have any securities with subscription rights as at the date of this announcement.

The Company confirmed that it will not agree to waive the Condition A under the Warrant Subscription Agreement A or Condition B under the Warrant Subscription Agreement B if the Company will as a result be in breach of Rule 15.02(1) of the

Listing Rules.

As each of the Warrant Subscription Agreement A and Warrant Subscription Agreement B is subject to the fulfilment of certain conditions precedent as set out in the Announcement, the Warrant Subscription Agreement A and Warrant Subscription Agreement B may or may not become unconditional or be completed. Shareholders and potential investors should exercise caution when dealing in the Shares.

By order of the Board of

China Shengmu Organic Milk Limited

Shao Genhuo

Chairman

Hong Kong, 27 December 2018

As at the date of this announcement, the executive directors of the Company are Mr. Yao Tongshan, Mr. Wu Jianye and Mr. Wang Yuehua; 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.