Yashili International : Announcements and Notices - Continuing Connected Transaction - Service Agreement with A Member of the DanOne Group

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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 TRANSACTION

SERVICE AGREEMENT WITH A MEMBER OF THE DANONE GROUP

On 1 May 2017, Yashili New Zealand, a subsidiary of the Company, entered into the Service Agreement with the Purchaser, a subsidiary of Danone SA, pursuant to which Yashili New Zealand agreed to co-pack and deliver to the Purchaser canned infant formula from time to time during the term of the Service Agreement.

As of the date of the Service Agreement and this announcement, Danone Asia has a 25.0% shareholding interest in the Company and the Purchaser is a member of the Danone Group. Therefore, the Purchaser is a connected person of the Company under the Listing Rules. As Yashili New Zealand is an indirect wholly-owned subsidiary of the Company, the entering into of the Service Agreement constitutes continuing connected transactions of the Company under Chapter 14A of the Listing Rules. As the highest applicable percentage ratio in respect of the Service Agreement exceeds 0.1% but is less than 5%, the Service Agreement is subject to the reporting, announcement and annual review requirements but exempt from the independent shareholders' approval requirement under Chapter 14A of the Listing Rules.

THE SERVICE AGREEMENT

On 1 May 2017, Yashili New Zealand, a subsidiary of the Company, entered into the Service Agreement with the Purchaser, a subsidiary of Danone SA, pursuant to which Yashili New Zealand agreed to co-pack and deliver to the Purchaser canned infant formula from time to time during the term of the Service Agreement. Principal terms of the Service Agreement are summarized below.

Date 1 May 2017

Parties (1) Yashili New Zealand

• (2) the Purchaser

Duration

The initial term of the Service Agreement (''Initial Term'') shall commence from 1 May 2017 and end on 31 December 2017. Pursuant to the terms of the Service Agreement, Yashili New Zealand and the Purchaser have agreed to extend the term of the Service Agreement for another six months. Accordingly, the Service Agreement shall remain in force until 30 June 2018.

Nature of Transaction The Purchaser shall provide raw materials and packaging materials to Yashili

New Zealand and Yashili New Zealand shall co-pack and deliver to the Purchaser canned infant formula in accordance with the prescribed quality standards as set out in the Service Agreement.

Pricing Terms

The Purchaser shall pay a processing fee to Yashili New Zealand for each can of product co-packed by Yashili New Zealand which fulfils the prescribed quality standards as set out in the Service Agreement. The processing fee shall be determined based on a cost-plus pricing method and include processing costs such as variable costs (e.g. direct labour costs, utility costs), overhead costs (e.g. indirect labour, maintenance, depreciation and amortisation) and transportation, storage and handling costs, with reference to general industry standards and rates as well as the production volumes.

Payment Terms

Yashili New Zealand shall provide the Purchaser with the invoice in respect of the processing fee in New Zealand dollars upon each delivery. Payment shall be made by the Purchaser within 45 days upon receipt of the relevant invoice.

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 the Purchaser than those available to the Company from independent third parties.

ANNUAL CAP

The proposed annual cap in respect of the transactions contemplated under the Service Agreement for (i) the period from 1 May 2017 to 31 December 2017 and (ii) the period from 1 January 2018 to 30 June 2018 is 4 million New Zealand dollars (equivalent to HK$21.68 million) and 7 million New Zealand dollars (equivalent to HK$37.94 million), respectively. The annual cap was determined after taking into account the estimated production capacity utilization arrangements of Yashili New Zealand and the estimated demand of the Purchaser.

For the period from 1 May 2017 to 31 December 2017, the total transaction amount under the Service Agreement was 3.05 million New Zealand dollars (equivalent to HK$16.53 million) based on the management accounts of the Company for the year ended 31 December 2017.

INFORMATION ON THE COMPANY, YASHILI NEW ZEALAND AND THE PURCHASER

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 in the PRC: (i) Yashili pediatric milk formula products segment; (ii) Scient pediatric milk formula products segment; (iii) Oushi, Arla and Dumex products segment; (iv) nutrition products segment and (v) other segments, including the production and sale of packing materials and sale of surplus raw materials. The Company is a leading player in the PRC's paediatric milk formula industry and also has a leading position in the soymilk powder market in the PRC.

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

The Purchaser is a company incorporated under the laws of New Zealand and an indirect subsidiary of Danone SA. It is primarily engaged in the manufacture of infant formula.

REASONS FOR AND BENEFITS OF THE SERVICE AGREEMENT

The Directors (including the independent non-executive Directors but excluding Mr. Jeffrey, Minfang Lu, Mr. Qin Peng and Ms. Lam Pik Po, Katty) are of the view that the transactions contemplated under the Service Agreement would enable Yashili New Zealand to further improve its utilisation rate, thereby achieving greater synergies between the Group and the Danone Group.

LISTING RULES IMPLICATIONS

As of the date of the Service Agreement and this announcement, Danone Asia has a 25.0% shareholding interest in the Company and the Purchaser is a member of the Danone Group. Therefore, the Purchaser is a connected person of the Company under the Listing Rules. As Yashili New Zealand is an indirect wholly-owned subsidiary of the Company, the entering into of the Service Agreement constitutes continuing connected transactions of the Company under Chapter 14A of the Listing Rules. As the highest applicable percentage ratio in respect of the Service Agreement exceeds 0.1% but is lessthan 5%, the Service Agreement is subject to the reporting, announcement and annual review 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. Jeffrey, Minfang Lu, Mr. Qin Peng and Ms. Lam Pik Po, Katty) 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 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. Jeffrey, Minfang Lu, Mr. Qin Peng and Ms. Lam Pik Po, Katty are Directors nominated by the Danone Group and therefore are considered to have a material interest in the Service Agreement and the transactions contemplated thereunder. As such, each of Mr. Jeffrey, Minfang Lu, Mr. Qin Peng and Ms. Lam Pik Po, Katty did not participate in the decision making process in respect of, nor has his view been solicited or considered in the consideration and approval of, the Service Agreement and the transactions contemplated thereunder.

DEFINITIONS

In this announcement, unless	the context otherwise requires, the following expressions have the
following meanings:
''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 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 Group''	Danone SA, Danone Asia and other companies directly or indirectly
controlled by Danone SA
''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
''Group''	the Company and its subsidiaries
''HK$''	Hong Kong dollar(s), the lawful currency of Hong Kong
''Hong Kong''	Hong Kong Special Administrative Region of the PRC

''Listing Rules''	the Rules Governing the Listing of Securities on The Stock Exchange
of Hong Kong Limited
''Service Agreement''	the service agreement for finished goods dated 1 May 2017 between
Yashili New Zealand and the Purchaser in respect of the co-packing
and delivery of canned infant formulas by Yashili New Zealand to the
Purchaser
''PRC''	the People's Republic of China
''Purchaser''	Danone Nutricia NZ Ltd, a company incorporated under the laws of
New Zealand and an indirect subsidiary of Danone SA
''Stock Exchange''	The Stock Exchange of Hong Kong Limited
''Yashili New Zealand''	Yashili New Zealand Dairy Co., Ltd., a company incorporated in New
Zealand and an indirect wholly-owned subsidiary of the Company
%	per cent.

This announcement contains translation between New Zealand dollar and HK$ at 1 New Zealand dollar to HK$5.42. The translation shall not be taken as representation that New Zealand dollar could actually be converted into Hong Kong dollars at that rate, or at all.

By order of the board of directors of Yashili International Holdings Ltd 雅士利國際控股有限公司

Chopin Zhang

Chief Executive Officer and Executive Director

Hong Kong, 18 January 2018

As at the date of this announcement, the board of directors of the Company comprises: Mr. Jeffrey, Minfang Lu (Chairman), Mr. Qin Peng, Mr. Zhang Ping and Ms. Lam Pik Po, Katty as non-executive directors; Mr. Chopin Zhang and Mr. Hua Li as executive directors; and Mr. Mok Wai Bun Ben, Mr. Cheng Shoutai and Mr. Lee Kong Wai Conway as independent non-executive directors.