Looking ahead, China Milk has adopted a three-pronged approach to drive growth:

1. Improve herd size and structure to drive higher milk yield

To ensure optimal productivity, we remain focused on raising our efficiency via continuous improvement in our herd structure and expansion of our herd of Canadian and Australian dairy cows via internal breeding.

In July 2007, the Group commenced the production of gender-controlled bull semen and cow embryos for internal use, raising the probability of breeding a dairy cow by over 90% and reducing the time needed for breed improvement by as much as 50%.

2. Increase production of quality bull semen and cow embryos

In tandem with our continual enhancement of herd structure, we remain focused on breeding and importing quality bull sires and dairy cows to increase the production of pedigree bull semen and cow embryos, which generally command higher margins.

3. Move downstream to process raw milk

The Group intends to accelerate plans to launch our proprietary Yinluo (银螺) brand of milk products, which are produced using raw milk processed by the Group's milk processing plant. A detailed market research is currently being carried out to help us develop our marketing strategies.