China Huishan Dairy : DISCLOSEABLE TRANSACTION -FINANCE LEASE AGREEMENT

43902-01A 1..6

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CHINA HUISHAN DAIRY HOLDINGS COMPANY LIMITED

中 國 輝 山 乳 業 控 股 有 限 公 司

(Incorporated in the Cayman Islands with limited liability)

(Stock Code: 06863)

DISCLOSEABLE TRANSACTION FINANCE LEASE AGREEMENT

On 29 April 2016, Liaoning Huishan Group (as the vendor and lessee) entered into the Finance Lease Agreement with Guangdong Yuexin (as the purchaser and lessor). According to the Finance Lease Agreement, the Leased Assets shall be finance leased for a term commencing from the effective date of the Finance Lease Agreement and expiring on 30 April 2021 (both dates inclusive). The effective date of the Finance Lease Agreement is the date when Liaoning Huishan Group receives the consideration of RMB1 billion (approximately HK$1.2 billion) paid by Guangdong Yuexin for the purchase of the Leased Assets.

In accordance with the Listing Rules, as the applicable percentage ratio (as defined under the Listing Rules) exceeds 5% but is less than 25%, transactions contemplated under the Finance Lease Agreement constitute discloseable transactions of the Company and are subject to the reporting and announcement requirements under Chapter 14 of the Listing Rules, but are exempted from the shareholders' approval requirement under Chapter 14 of the Listing Rules.

On 29 April 2016, Liaoning Huishan Group (as the vendor and lessee) entered into the Finance Lease Agreement with Guangdong Yuexin (as the purchaser and lessor). According to the Finance Lease Agreement, the Leased Assets shall be finance leased for a term commencing from the effective date of the Finance Lease Agreement and expiring on 30 April 2021 (both dates inclusive). The effective date of the Finance Lease Agreement is the date when Liaoning Huishan Group receives the consideration of RMB1 billion (approximately HK$1.2 billion) paid by Guangdong Yuexin for the purchase of the Leased Assets.

Principal terms of the Finance Lease Agreement are set out below:

Date: 29 April 2016

Parties: (1) Liaoning Huishan Group (as vendor and lessee)

(2) Guangdong Yuexin (as purchaser and lessor) Subject of the lease: Leased Assets

The estimated value of the Leased Assets was approximately RMB2 billion (approximately HK$2.4 billion). The estimated value was agreed and considered fair and reasonable by parties to the Finance Lease Agreement.

Principal amount of lease and interest:

In accordance with the Finance Lease Agreement, Liaoning Huishan Group will sell the Leased Assets to Guangdong Yuexin at a cash consideration of RMB1 billion (approximately HK$1.2 billion).

Upon acquisition of the Leased Assets, Guangdong Yuexin shall lease the same to Liaoning Huishan Group with an aggregate principal amount of lease of RMB1 billion. Liaoning Huishan Group shall repay the initial principal amount of lease of RMB100 million (approximately HK$120 million) on 30 January 2017 and repay a principal amount of lease of RMB50 million (approximately HK$60.06 million) to Guangdong Yuexin on the 30th day of every three months thereafter for 18 instalments. The repayment of the principal amount of lease for the last instalment will be RMB100 million (approximately HK$120 million). Interest on the lease shall be paid together with the principal amount of lease on the relevant date of repayment, with calculations set out as follows:

Lease interest of each instalment = (principal amount of lease

- repaid principal amount of lease) × annualized interest rate

× (number of interest-bearing days/365)

The annualized interest rate is a fixed interest rate of not exceeding 6.2% per year. Interest shall accrue from the effective date of the Finance Lease Agreement. The principal amount of the lease and interest were agreed and arrived at after arm's length negotiation between parties to the Finance Lease Agreement.

Transactions contemplated under the Finance Lease Agreement will not have any immediate impact (which is material) on the Group's profit and loss statement and there will be no net change on the Group's balance sheet.

Security deposit: Liaoning Huishan Group shall pay a security deposit of RMB25 million (approximately HK$30 million) to Guangdong Yuexin. The security deposit shall be paid together with the first lease instalment at the same time.

Ownership of the Leased Assets:

During the lease period, the ownership of the Leased Assets is vested in Guangdong Yuexin. Actual delivery of the Leased Assets by Liaoning Huishan Group to Guangdong Yuexin is not required and the Leased Assets shall be possessed, managed and used by Liaoning Huishan Group.

Upon expiry of the lease term or early termination of the Finance Lease Agreement, Liaoning Huishan Group is entitled to acquire the ownership of the Leased Assets at a repurchase price of RMB1.0 (approximately HK$1.2).

Pledge: Upon the Finance Lease Agreement coming into effect, Liaoning Huishan Group shall pledge the insurance policy taken out for the Leased Assets to Guangdong Yuexin.

INFORMATION OF THE PARTIES

The Company is a leading and the most vertically integrated dairy company in the PRC. Its business model covers the entire dairy value chain from growing and processing of alfalfa and supplementary feeds and the processing of concentrated feeds to dairy farming. The brand history can be traced back to the early 1950s of the ''Huishan'' brand for dairy production and sales. Liaoning Huishan is an indirect wholly-owned subsidiary of the Company which, together with its subsidiaries, are principally engaged in production of dairy products.

Guangdong Yuexin was established in August 2013 at the approval of the People's

Government of Guangdong Province. It is a wholly-owned subsidiary of Guangdong Finance Investment International Co., Ltd* (粵財控股香港國際有限公司), a company

which is the Hong Kong arm of Guangdong Yuecai Investment Holdings Limited Company* (廣東粵財投資控股有限公司), and its principal business is provision of

financial services mainly involved finance lease.

To the best of knowledge, information and belief of the Directors, having made all reasonable enquiries, Guangdong Yuexin and its ultimate beneficial owner are third parties independent of the Company and its connected persons.

REASONS FOR AND BENEFITS OF THE TRANSACTION

The Group will be able to obtain additional working capital for the development of the Group's principal businesses by leveraging on the financing platform offered through transactions contemplated under the Finance Lease Agreement. The Directors consider that the terms of the Finance Lease Agreement are fair and reasonable and in the interests of the Company and the Shareholders as a whole.

LISTING RULES IMPLICATIONS

In accordance with the Listing Rules, as the applicable percentage ratio (as defined under the Listing Rules) exceeds 5% but is less than 25%, transactions contemplated under the Finance Lease Agreement constitute discloseable transactions of the Company and are subject to the reporting and announcement requirements under Chapter 14 of the Listing Rules, but are exempted from the shareholders' approval requirement under Chapter 14 of the Listing Rules.