09:55 MENGNIU DAIRY<02319> - Announcement (1) This announcement is for information purposes only and does not constitute an invitation or offer to acquire, purchase or subscribe for securities. The Stock Exchange of Hong Kong Limited takes 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. Unless otherwise defined herein, terms defined in the prospectus dated 1 June 2004 (the ``Prospectus'') issued by China Mengniu Dairy Company Limited (the ``Company'') shall have the same meanings in this announcement. China Mengniu Dairy Company Limited (Incorporated in the Cayman Islands with limited liability) (Stock Code: 2319) CONTINUING CONNECTED TRANSACTIONS AND FINANCIAL ASSISTANCE The Mengniu Maanshan JV Agreement The Directors announce that, on 18 May 2005, Mengniu, the operating subsidiary of the Company, and Mengniu Founding have entered into the Mengniu Maanshan JV Agreement to inject further capital into Mengniu Maanshan. Mengniu Founding is a connected person and this transaction constitutes a connected transaction under Chapter 14A of the Listing Rules. As each of the applicable percentage ratios (other than the profits ratio) for the capital injection is less than 2.5%, in accordance with Rule 14A.32 of the Listing Rules, the Company is subject only to the reporting and announcement requirements set out in Rules 14A.45 to 14A.47 of the Listing Rules. The Mengniu Maanshan Intra-Group Transactions Mengniu Maanshan will commence operations in the second half of 2005 and will take part in the centralised sales arrangement and inventory adjustment system implemented by the Group. Mengniu Maanshan has on 18 May 2005 entered into the UHT Milk and Milk Beverage Products Centralised Sales Agreement with Mengniu. The transactions contemplated therein constitute continuing connected transactions under Chapter 14A of the Listing Rules. As each of the applicable percentage ratios (other than the profits ratio) is greater than 2.5%, in accordance with Rule 14A.35 of the Listing Rules, the centralised sales transactions are subject to reporting and announcement requirements and will require independent shareholders' approval as set out in Rules 14A.45 to 14A.48 of the Listing Rules. Mengniu Maanshan has on 18 May 2005 entered into the UHT Milk and Milk Beverage Products Inventory Adjustment Agreement with Mengniu and other Mengniu Subsidiaries. Pursuant to Rule 14A.25 of the Listing Rules and as requested by the Stock Exchange, the current proposed caps in respect of these inventory adjustment transactions would have to be aggregated with the proposed restated caps in respect of the continuing connected transaction as set out under paragraph 4(A) to this announcement. Such aggregation would result in each of the applicable percentage ratios (other than the profits ratio) for the inventory adjustment transactions being less than 2.5%. In accordance with Rule 14A.32 of the Listing Rules, the Company is subject only to the reporting and announcement requirements set out in Rules 14A.45 to 14A.47 of the Listing Rules. Mengniu Maanshan has on 18 May 2005 entered into a Yogurt Products Centralised Sales Agreement with Mengniu Beijing. The transactions contemplated therein constitute continuing connected transactions under Chapter 14A of the Listing Rules. As each of the applicable percentage ratios (other than the profits ratio) is greater than 2.5%, in accordance with Rule 14A.35 of the Listing Rules, the centralised sales transactions are subject to reporting and announcement requirements and will require independent shareholders' approval as set out in Rules 14A.45 to 14A.48 of the Listing Rules.