09:56     MENGNIU DAIRY<02319> - Announcement (3)                             

    In respect of the transfer of yogurt products amongst Mengniu,            
    Mengniu Beijing and those Mengniu Subsidiaries which manufacture          
    yogurt products as disclosed in the Prospectus under category 16,         
    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(B)          
    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(D) to this announcement. Such aggregation           
    would result in each of the applicable percentage ratios (other           
    than the profits ratio) 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.                                           
                                                                              
    Approval of the independent shareholders for the Mengniu Maanshan         
    Intra-Group Transactions (for which the percentage ratios exceed          
    2.5%), the Guarantee Agreements and the restated caps in relation         
    to the continuing connected transaction as mentioned in paragraph         
    4(B) to this announcement will be sought at the upcoming AGM. An          
    Independent Board Committee has been formed to advise the                 
    Independent Shareholders as to the fairness and reasonableness of         
    the Mengniu Maanshan Intra-Group Transactions (for which the              
    percentage ratios exceed 2.5%), the Guarantee Agreements and the          
    restated caps in relation to the continuing connected transaction         
    as mentioned in paragraph 4(B) to this announcement. Watterson            
    Asia Limited, an independent financial adviser has been appointed         
    to advise the Independent Board Committee and the independent             
    shareholders in this respect.                                             
                                                                              
    A circular containing details of the Mengniu Maanshan Intra-Group         
    Transactions (for which the percentage ratios exceed 2.5%), the           
    Guarantee Agreements and restated caps in relation to the                 
    continuing connected transaction as mentioned in paragraph 4(B)           
    to this announcement, the letter of advice from the independent           
    financial adviser, the recommendation of the Independent Board            
    Committee and the notice of the AGM will be despatched to the             
    Shareholders as soon as possible.                                         
                                                                              
    CHAPTER 14A OF THE LISTING RULES                                          
                                                                              
    Mengniu is a non wholly-owned subsidiary of the Company. Four             
    executive directors of the Company, who are connected persons of          
    the Company, namely, Niu Gensheng, Lu Jun, Sun Yubin and Yang             
    Wenjun who are also Founding Individuals and another five Founding        
    Individuals (who are connected persons of the Company) together           
    are entitled to exercise more than 10% of the voting power of             
    Mengniu. The Founding Individuals have been acting as the                 
    controlling group of the Mengniu business since its inception in          
    1999 and as a result, they as a group are the controlling                 
    shareholders of the Company and they are connected persons of the         
    Company. Accordingly, pursuant to Rule 14A.11(5) of the Listing           
    Rules, Mengniu is a connected person of the Company.                      
                                                                              
    Due to Mengniu being a connected person of the Company, all of the        
    Mengniu Subsidiaries are also connected persons of the Company            
    pursuant to Rule 14A.11(6) of the Listing Rules.                          
                                                                              
    Accordingly, all transactions between Mengniu and the Mengniu             
    Subsidiaries, or amongst the Mengniu Subsidiaries, are connected          
    transactions under the Listing Rules.