Yashili International : Announcements and Notices - CONTINUING CONNECTED TRANSACTIONS - SERVICE AGREEMENT WITH MEMBER OF DANONE

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Yashili International Holdings Ltd

雅 士 利 國 際 控 股 有 限 公 司

(Incorporated in the Cayman Islands with limited liability)

(Stock Code: 1230)

CONTINUING CONNECTED TRANSACTIONS

SERVICE AGREEMENT WITH MEMBER OF DANONE

THE SERVICE AGREEMENT

On 21 October 2019, Yashili New Zealand, a wholly-owned subsidiary of the Company, entered into the Service Agreement with Milupa, pursuant to which Yashili New Zealand agreed to provide processing services in respect of goat milk powder to Milupa from time to time during the term of the Service Agreement.

LISTING RULES IMPLICATIONS

As of the date of the Service Agreement, Danone Asia has a 25.0% shareholding interest in the Company. Milupa is an indirect subsidiary of Danone SA and a member of Danone. Therefore, Milupa is a connected person of the Company under the Listing Rules. Yashili New Zealand is an indirect wholly-owned subsidiary of the Company. As such, the entering into of the Service Agreement and the transactions contemplated thereunder constitute continuing connected transactions of the Company under Chapter 14A of the Listing Rules. As the highest applicable percentage ratio in respect of the aggregate amount of the annual cap of the Service Agreement and the annual cap of other similar agreements entered into by the Group with Danone during the previous 12 months ended 21 October 2019 exceeds 0.1% but is less than 5%, the Service Agreement and the transactions contemplated thereunder are subject to the reporting, annual review and announcement requirements but exempt from the independent shareholders' approval requirement under Chapter 14A of the Listing Rules.

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THE SERVICE AGREEMENT

On 21 October 2019, Yashili New Zealand, a wholly-owned subsidiary of the Company, entered into the Service Agreement with Milupa, pursuant to which Yashili New Zealand agreed to provide processing services in respect of goat milk powder to Milupa from time to time during the term of the Service Agreement. Principal terms of the Service Agreement are summarized below.

Date	21 October 2019
Parties	(1) Yashili New Zealand as service provider
	(2) Milupa as customer
Duration	six months commencing from the effective date of the Service
	Agreement, being 21 October 2019
Nature of Transaction	Milupa shall deliver to Yashili New Zealand goat milk powder for
	processing services. Yashili New Zealand shall provide processing
	services to Milupa in respect of goat milk powder.
Pricing Terms	Milupa shall pay a service fee to Yashili New Zealand in consideration
	for the processing services provided by Yashili New Zealand. The service
	fee shall be determined on a cost plus basis with reference to, among
	others, manufacturing cost, raw material cost, packaging cost, lab testing
	cost, applicable duties, and logistics and handling cost related to delivery
	and custom clearance.
Payment Terms	Yashili New Zealand shall issue invoice to Milupa in respect of the
	service fee. Payment shall be made by Milupa within 90 calendar days
	from the manufacturing date.

The price and terms of the Service Agreement were determined in the ordinary course of business on normal commercial terms, negotiated on an arm's length basis and no more favourable to Milupa than those available to the Group from independent third parties.

HISTORICAL TRANSACTION AMOUNT

During the period between 5 August 2019 and the date of this announcement, prior to the entering into of the Service Agreement, Yashili New Zealand has provided processing services in respect of goat milk powder to Milupa. The value of such transactions during the period of 5 August 2019 and the date of this announcement was approximately EUR0.07 million (unaudited). Upon taking effect of the Service Agreement, such transactions shall automatically be subject to the Service Agreement, and the value of such transactions has been taken into account in determining the proposed annual cap in respect of the transactions contemplated under the Service Agreement. The Directors confirm that such transactions were conducted on terms consistent with the terms of the Service Agreement.

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ANNUAL CAP

The proposed annual cap in respect of the transactions contemplated under the Service Agreement during the period from 5 August 2019 to 20 April 2020 shall be EUR0.7 million (equivalent to approximately RMB5.5 million).

The above annual cap was determined after taking into account: (i) the amount of goat milk powder to be processed under the Service Agreement; (ii) the pricing terms; and (iii) the value of the transactions in respect of the processing services provided by the Group to Danone during the period from 5 August 2019 to 21 October 2019.

INFORMATION ON THE COMPANY, YASHILI NEW ZEALAND AND MILUPA

The Company is an investment holding company, which, along with its subsidiaries, is primarily engaged in the manufacturing and sale of dairy and nourishment products. It operates in the following segments: (a) production and sale of milk powder products (including the development, manufacture and sale of milk powder products in the PRC and overseas); (b) other milk products (including the production and sale of base powder); (c) sale of dissolvable products (including the development, manufacture and sale of soymilk powder, rice flour and cereal products); and (d) other operations (mainly including the sale of surplus raw materials and consigned processing operation).

Yashili New Zealand is a company incorporated in New Zealand and an indirect wholly-owned subsidiary of the Company. It is primarily engaged in the production and sale of dairy products.

Milupa is a company incorporated in Germany and an indirect subsidiary of Danone SA. It is primarily engaged in the production of nutrients for early life (baby) and medical products, as well as the establishment, acquisition and management of such production and its related activities.

REASONS FOR AND BENEFITS OF THE SERVICE AGREEMENT

The Directors are of the view that the Service Agreement and the transactions contemplated thereunder would enable Yashili New Zealand to explore more business opportunities with Danone, and achieve greater synergies between the Group and Danone.

LISTING RULES IMPLICATIONS

As of the date of the Service Agreement and the date of this announcement, Danone Asia has a 25.0% shareholding interest in the Company. Milupa is an indirect subsidiary of Danone SA and a member of Danone. Therefore, Milupa is a connected person of the Company under the Listing Rules. Yashili New Zealand is an indirect wholly-owned subsidiary of the Company. As such, the entering into of the Service Agreement and the transactions contemplated thereunder constitute continuing connected transactions of the Company under Chapter 14A of the Listing Rules. As the highest applicable percentage ratio in respect of the aggregate amount of the annual cap of the Service Agreement and the annual cap of other similar agreements entered into by the Group with Danone during the previous 12 months ended 21 October 2019 exceeds 0.1% but is less than 5%, the Service Agreement and the

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transactions contemplated thereunder are subject to the reporting, annual review and announcement requirements but exempt from the independent shareholders' approval requirement under Chapter 14A of the Listing Rules.

The Directors (including the independent non-executive Directors but excluding Mr. Qin Peng and Mr. Gu Peiji (alias Philip Gu)) are of the view that the Service Agreement and the transactions contemplated thereunder are conducted on arm's length basis and on normal commercial terms in the ordinary and usual course of business of the Company and that the terms of the Service Agreement, including the annual cap, are fair and reasonable and the Service Agreement and the transactions contemplated thereunder are in the interests of the Company and its shareholders as a whole.

Mr. Qin Peng and Mr. Gu Peiji (alias Philip Gu) are Directors nominated by Danone and therefore are considered to have a material interest in the Service Agreement and the transactions contemplated thereunder. As such, each of Mr. Qin Peng and Mr. Gu Peiji (alias Philip Gu) has abstained from voting on the board resolution approving the Service Agreement and the transactions contemplated thereunder.

DEFINITIONS

In this announcement, unless the context otherwise requires, the following expressions have the following meanings:

''Board''	the board of directors of the Company
''Company''	Yashili International Holdings Ltd, a company listed on the Main
	Board of the Stock Exchange (stock code: 1230)
''connected person''	has the meaning ascribed to it under the Listing Rules
''Danone''	Danone SA, Danone Asia and other companies directly or indirectly
	controlled by Danone SA
''Danone Asia''	Danone Asia Baby Nutrition Pte. Ltd., a company established and
	existing under the laws of Singapore and an indirect wholly-owned
	subsidiary of Danone SA. Danone Asia is a substantial shareholder of
	the Company
''Danone SA''	Danone SA, a company incorporated under the laws of France, the
	ultimate controlling shareholder of Danone Asia
''Directors''	the directors of the Company

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''EUR''	the lawful currency of the member states of the European Union that
	adopted the single currency in accordance with the Treaty establishing
	the European Community (signed in Rome on 25 March 1957), as
	amended by the Treaty on European Union (signed in Maastricht on 7
	February 1992)

''Group'' ''HK$'' ''Hong Kong'' ''Listing Rules''

''Milupa''

''PRC''

''RMB''

''Service Agreement''

the Company and its subsidiaries

Hong Kong dollar(s), the lawful currency of Hong Kong

Hong Kong Special Administrative Region of the PRC

the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited

Milupa GmbH, a company incorporated in Germany and an indirect subsidiary of Danone SA

the People's Republic of China

Renminbi, the lawful currency of PRC

the service agreement dated 21 October 2019 between Yashili New Zealand and Milupa in relation to the processing services to be provided by Yashili New Zealand in respect of goat milk powder to Milupa

''Stock Exchange''

The Stock Exchange of Hong Kong Limited

''Yashili New Zealand'' Yashili New Zealand Dairy Co., Limited, a company incorporated in New Zealand and an indirect wholly-owned subsidiary of the Company

''%''

per cent.

By order of the Board

Yashili International Holdings Ltd

雅士利國際控股有限公司

Kwok Wai Cheong, Chris

Company Secretary

Hong Kong, 21 October 2019

As at the date of this announcement, the Board comprises: Mr. Jeffrey, Minfang Lu (Chairman), Mr. Qin Peng, Mr. Zhang Ping and Mr. Gu Peiji (alias Philip Gu) as non-executive directors; Mr. Chopin Zhang as executive director; and Mr. Mok Wai Bun Ben, Mr. Cheng Shoutai and Mr. Lee Kong Wai Conway as independent non-executive directors.

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