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Introduction of YILI

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Company Overview

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Asia China World

YILI is NO.1 diary company in China and the NO.1 in AsiaYILI has 60,257 employee, and over 100 branches and subordinate

companiesYili Group boasts of five major sectors: liquid milk, ice cream, milk powder,

yoghurt, and raw milk, with more than 1000 varieties of productsIn 2012, Yili generated ~7 billion USD net sales; processed 3.77 million

tones raw milk; About 23 billion packs of liquid milk were soldIn 1996 ， Yili listed on Shanghai Stock Exchange, being the 1st A-share listed

dairy company

For last 10 years, YILI’s CAGR is 23.2% ， while industry CAGR is 10.4%; YILI enjoyed a growth rate 2 times as high as market average

In recent years, Yili has accelerated its overseas expansion speed. For 2012, Yili’s total investment in PP&E is 953 million USD, yoy growth 43%

The Industry Leader

A well established sales network covering all 32 provinces in China, extended to villages and towns

YILI serves 1 billion Chinese consumers; Over 20 million consumers choose our products everyday

In 2012, YILI has more than 1500 self-constructive, under-constructive and co-operative pastures

YILI has 75 production bases whose milk source bases are located in the whole country

Widest Coverage

Highest Growth and Further Expansion

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Liquid Milk

Ice Cream

Yoghurt

Milk Powder

Product Portfolio

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Key Decision Makers

Gang PANChairman & President

Executive Team Key Decision Makers

Key Members of innovation centre

Ji Wu YangDirectorInnovation Centre

Chunhai LIU Director & Vice

President

Xiao Ping Huang

Deputy directorInnovation Centre

Zhan You Yun Deputy Director Innov

ation Centre

Yutang HANAssistant to the

President

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1.Brand Concept

Nourish Our LivesIt is the provider of healthy food and also the

advocator of healthy lifestyle

2.The Root of the NameYI : means “she “, which can be extended as you, me , him and us LI : means benefit YILI : means benefit all

4.Company CultureVision : The most reliable health foods provider in

the worldMission : Keep Innovation for Human’s Well-beingValues : Quality, Efficiency, Accountability,

Collaboration

Brand and Culture

3.YILI’s LogoWhite stands for nutritious milkBlue stands for the sky, with the sunshine nourishing

everything, bringing out vitalityGreen stands for endless grasslandRed stands for “YILI”, which grows under the shining

blue sky over green lands

Mission: keep innovation for human’s wall-being

Values

CollaborationShape good virtues

Do things right

Offer good products

QualityEnsure a right direction

Ensure the fastest speed

Ensure the best result

Be professional & devoted to our goal

Be dedicated to success

Respect through understanding Support through trust

Build alignment from communicationEstablish win-win from mutual benefitsAccomplish from mutual help

Efficiency Accountability

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The Development of YILI

1956-1993

1993-1996

1996-2005

2005-2010

2010-Present

In 1956, the Cow-raising Cooperation Group at Hui Min district in Hohhot was founded which was YILI’s predecessor

YILI is one of the earliest diary industry in China and also has the longest history

Birth A Diary Giant

A Huge LeapGrowth

Expansion

In 1993, after company ownership was changed from state-owned to shareholding, it was officially renamed as “YILI”

In 1996, YILI listed on the stock market which has become the first A-share listed company in diary industry

In 1999, the YILI liquid milk division was founded. It introduced the first domestic large-scale modernization of liquid milk production line, extending the shelf life of milk to 6-8 months. Since then, YILI pioneered an new era of liquid milk in China, and expanded from Inner Mongolia to China

Became the exclusive supplier for Beijing 2008 Olympic Games

Became the only supplier for the 2010 Shanghai Expo

Brand restage, launched new logo and slogan of the brand 　

Became the exclusive supplier for Chinese Olympic Athletes of London 2012 Olympic Games

Became the first Chinese dairy industry with revenue over 40 billion 　

Became the exclusive supplier for Chinese Olympic Athletes of Rio 2016 Olympic Games 　　

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YILI has 75 production bases whose milk source bases are located in the whole country. And sales organizations extend to villages and towns

In 2012, YILI has more than 1500 self-constructive, under-constructive and co-operative pastures

In 2012, YILI processed 3.77 million tones of raw milk

Milk Source Bases

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Supply and Operating Chain: Quality is the Priority

In 2012, YILI has more than 1500 self-constructive, under-constructive and co-operative pastures in total. Among the overall milk supply, all kinds of pastures and concentrated-breeding milk contribute more than 90% of the total milk.

High Quality Raw MilkWorld-Class quality control

standard, 117 test items of raw milk, 899 test items covering raw, auxiliary materials and packages.

Quality Control Standard

“3W” quality control system-- whole process, whole directions, whole staff, to ensure 100% safety of the products.

Quality Control System

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Brands ： Billion RMB Brands

First organic milk brand in China

• Satine Milk certificated by OFDC as first organic brand in 2006

• Awarded as SIAL Innovation Brand in 2012

NO.1 Children Brand in China

• Reach 100 million children (220 million children aged 0-14 in China)

No.1 Ice-Cream Brand in China

• More than 2.32 million Chocliz sticks sold out every day

Every One of Six Chinese babies drinks YILI milk powder

• World’s First Breast Milk Research Database

• World’s Largest single mold factory of infant formula powder

Liquid Milk Yoghurt Ice Cream Milk Powder

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Brands ： 20 Brands Target Every Stage of Life

Babies, Toddler

s, Childre

n

Hea

lth

Nee

ds

Age Groups

Teenagers, Adults, Elders

Elders

Market Share of YILI Group

Liquid Milk# Company %

1 24.3

2 23.6

3 19.0

4 6.7

5 4.9

6 3.0

7 1.8

Milk Powder# Company %

1 17.4

2 13.3

3 10.1

4 9.3

5 7.3

6 6.6

7 5.9

Yoghurt# Company %

1 19.3

2 14.6

3 14.1

4 11.2

5 7.2

6 6.0

7 3.5

Ice Cream# Company %

1 19.6

2 14.8

3 9.0

4 3.1

5 2.1

6 1.4

7 1.3

Source: market share of liquid milk, milk powder and yoghurt is from AC Nielsen ， 2013 YTD July market share based on sales volume; market share of ice cream is from Euromonitor, 2012 full year market share

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Great Event Marketing of YILI

World Expo ：At 2010 Shanghai Expo, YILI

exclusively supplied nutritious diary products for the 70 million guests at home and abroad

Walt Disney ：YILI is the exclusively

licensed dairy company of the Walt Disney in China. Except the production package, YILI also has an extensive collaboration with Walt Disney at film and Hong Kong Disneyland

Heat TV shows：YILI ads inserted in the Big Bang Theory

Olympic Games ：From the Beijing 2008 to London 2012, or even the Rio 2016 Olympic Games, YILI has become the exclusive supplier for Chinese Olympic Athletes for 12 consecutive years

Hollywood ：Implant in Transformer III Implant in IronmanJointly Promote Superman

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Honors and Awards

Most Influential Brand in 60 years of China

Top 60 China Outstanding Brand in 60 Years of China

Asian-Pacific Customer’s Favorite Brand of 2009

Best Practice of Chinese Enterprise Fulfilling Social Responsibility

China’s Youth Nutrition Improvement Award

2009 2010 2011 2012

Top 500 China most valuable brand

Top-10 Global Green Economy Enterprise

Chinese Low-Carbon Innovative Enterprise

Outstanding Enterprise of Chinese Enterprise Social Responsibility Rank

YILI Big Fruit Yogurt Expo Edition wins 2010 China EFFIE SILVER AWARDS

China Enterprise Social Responsibility Special Award

Member of Global organic Authoritative Organization

Asia-Pacific Outstanding Contribution to Green Economy

2011 China Enterprise

Social Responsibility Special Award

Global Carbonate Gold Award

Model Food and Beverage Brand of 2012

Model Enterprise of Staff Training and Development

BrandZ-2013 China’s Top 50 Most Valuable Brands

Low-carbon Innovation Award

Best Marketing Innovation Cases of 2012

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Note: Using RMB-USD exchange rate of Sep. 2nd(closing price) 6.12.

Company Financials

Revenue (million USD) Gross Profit (million USD)

Operating Profit (million USD) Net Profit (million USD)

2010-12 CAGR 12.3%

1H 2012

1H 2012

1H 2012

1H 2012

International Layout - NZ Infant Formula Project

Acquisition of Oceania Dairy - access its land and resource consents to build a plant over 38ha in South Canterbury, New Zealand

Investment in infant formula project - totaling 214.05 million NZD (1103.45 million RMB ）

Investment horizon – construction expected to take 19 months

Expected return on investment ： 10.24% ROI

YILI founded the first oversea production base in New Zealand - Oceania Dairy Company Ltd, which aims to build up the project with annual full capacity of 47,000 tones of infant formula

International Layout – Cooperation with DFA

Formed a strategic partnership with DFA, the NO.1 diary company in USA, which has become the milestone that make YILI to realize its internationalization and to be a world-class groupYILI has signed an MOU with DFA, agreeing to establish long-term strategic

cooperation relationship in as strategic purchases, pasture services and other issues. The two parties also formed strategic priority relationship with each other in dairy projects in the future.

DFA is the largest dairy company in the USA, which owns 8500 farms along with its strong sales network in 48 US states. It also independently owns 21 large-scale dairy production and processing bases.

YILI is the only enterprise globally which is qualified for providing dairy products and services for both the 2008 Olympic Games and the 2010 World Expo. Since the company launches the move to upgrade the brand and identifies themselves as "Nourish our life", YILI has accumulated significant brand advantages through its continuous efforts of consumer communication.

Significant brand advantageYILI is a well-known

brand in China with high brand recognition

YILI takes the lead in channel sinking and innovation in the industry. It launches the "Network-Building Initiative" and has established its strategic layout nationwide since 2006, making itself the first dairy enterprise with a comprehensive national market coverage. Meanwhile, it entered the markets of villages and towns through the "Thousands of Villages and Towns Initiative" lead by MOFCOM in 2007. The channels further sank to county, village and town markets in 2012, owing to the further release of existing plant capacity as well as the establishment of new plants.

Effective Channel Building YILI’s leading channel capability could help international brands enter Chinese market in a short time

YILI will further accumulate capacity and seek sources worldwide

YILI will cooperate with international leading companies to introduce high-end products to China

YILI attaches great importance to the construction of milk source bases and prioritizes the safety and quality of products from the original sources. YILI is the first domestic dairy enterprise that introduces optimized model into the development of milk source areas and raw milk pasture bases. In the mean time, YILI takes the lead in building of capacity as well as related industry chains.

Leading capacity building

Based on the vision of "Be recognized as a world-class health foods group", YILI takes steps to build supply chains with a global view. It has been actively exploring international resources in various aspects, including the breeding cow introduction, fodder planting, equipment manufacturing and testing, packing material supply and raw milk supply. It has established partnership with international leading suppliers to ensure the company products to be the first-class products with global resources.

Global supply system

Advantages

TECHNOLOGY CENTRE

Yili Group innovation centre R&D activities include new products development, probiotics, nutrition function, processing technology, packaging, food safety testing and risk assessment, dairy farm technology sustainable, development, regulation and standards, intellectual property.

Yili Group new innovation centre opened up on November of 2012 。 New innovation centre has office, laboratories, pilot plant and other facilities. The total area is about 16000 square meters.

We have highly qualified R&D and technology employees about 400, 13 of them has Ph.D degree, 110 has master degree.

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TECHNOLOGY CENTER science and technology award in nearly three years

2010 2011 2012

Development and research on cereal milk beverage series new product

Information management system of scale dairy farms

Screening and effect research on regulate the intestinal probiotics

and development of application products changqing yogurt

The development program of QQ star children growing up milk series product

The development of sour of fruit

milk beverage series products The products of Yili QQ

Star children growing up milk

The development of sweet whey powder composite desalting process

The development of the dairy safety prevention and control system

The development and industrialization demonstration of cold and hot installations energy saving and emission reduction technology in raw milk production

The key technology research and industrialization application of new type of dairy products processing

Modern production technology integration of dairy industry and industrialization demonstration in farming-pastoral zone

The development of sour milk beverage of fruit series products

The research on yoghurt starter cultures of high viscosity and low Post acidification

The key technology development and research of improving the immune efficacy of Shuhua milk product of Lactoferrin nutrition