09:55 MENGNIU DAIRY<02319> - Announcement (2) Mengniu Maanshan has on 18 May 2005 entered into the Yogurt Products Inventory Adjustment Agreement with Mengniu and other Mengniu Subsidiaries which manufacture yogurt products and also Mengniu Beijing. 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(B) 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 greater than 2.5%. In accordance with Rule 14A.35 of the Listing Rules, these inventory adjustment transactions are subject to the reporting and announcement requirements and will require independent shareholders' approval and must comply with the requirements as set out in Rules 14A.45 to 14A.48 of the Listing Rules. Mengniu Maanshan has on 18 May 2005 entered into the Ice Cream Products Inventory Adjustment Agreement with other Mengniu Subsidiaries which manufacture ice cream products and also Mengniu. 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 approved caps in respect of the continuing connected transaction as set out under category 17 on page 117 to 118 of the Prospectus. Such aggregation would result in each of the applicable percentage ratios (other than the profits ratio) for the inventory adjustment transactions being greater than 2.5%. In accordance with Rule 14A.35 of the Listing Rules, these inventory adjustment transactions are subject to the reporting and announcement requirements and will require independent shareholders' approval and must comply with the requirements as set out in Rules 14A.45 to 14A.48 of the Listing Rules. Mengniu Maanshan has on 18 May 2005 entered into the inventory adjustment agreement for the transfer of raw materials and packaging materials with other Mengniu Subsidiaries and also Mengniu. 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 approved caps in respect of the continuing connected transaction as set out under category 18 on page 118 to 119 of the Prospectus. Such aggregation would result in each of the applicable percentage ratios (other than the profits ratio) for the inventory adjustment transactions being greater than 2.5%. In accordance with Rule 14A.35 of the Listing Rules, these inventory adjustment transactions are subject to reporting and announcement requirements and will require independent shareholders' approval and must comply with the requirements as set out in Rules 14A.45 to 14A.48 of the Listing Rules. Provision of guarantees by Mengniu for loans to certain Mengniu Subsidiaries Mengniu has on 18 May 2005 entered into the Guarantee Agreements with eight Mengniu Subsidiaries to act as guarantor in loans to be borrowed by such Mengniu Subsidiaries, at no consideration. From the recipient of the guarantee's perspective, that is from Mengniu Subsidiaries' perspective, the guarantee is a continuing connected transaction and financial assistance provided by Mengniu, a connected person. Pursuant to Rule 14A.65(4) of the Listing Rules, this transaction is exempt from the reporting, announcement and independent shareholders' approval requirements. From Mengniu's perspective, such financial assistance is provided by the issuer to the Mengniu Subsidiaries, who are connected persons. Such financial assistance is subject to reporting and announcement requirements and independent shareholders' approval requirements under Rule 14A.63 of the Listing Rules. Restating of caps In respect of the transfer of UHT milk and milk beverage products between Mengniu and Mengniu Subsidiaries as disclosed in the Prospectus under category 13, the estimated caps for the year ended 2005 and 2006 will be exceeded. Pursuant to Rule 14A.25 of the Listing Rules and as requested by the Stock Exchange, the proposed restated caps in respect of these inventory adjustment transactions as mentioned in paragraph 4(A) to this announcement would have to be aggregated with the proposed caps in respect of the inventory adjustment transactions as set out under paragraph 2(B) to this announcement. Such aggregation would result in each of the applicable percentage ratios (other than the profits ratio) 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 as set out in Rules 14A.45 to 14A.47 of the Listing Rules.