We have adopted the operating model of "ompany + Farmers + Cultivation Base,"which is well supported by our advanced production capabilities, large warehousing capacity and exclusive logistic centers. In Shanxi Province, we have access to over 109,000 acres (650,000 mu) of farmland that serves as our plantation base and we have established partnerships with over 60,000 farmers for the cultivation of high quality grains and corn. Based on our supply, the Company has developed the "Deyu"operating chain, which consists of breeding, cultivating, processing, warehousing and distribution of our products. The Company's operating model can be described as following:

• Vertical value chain from farmland to end market
• Unique partnership with farmers on shared farmland to deliver strategic industrial and market advantages
• To enter a market demanding highly integrated multiple commercial and community based resources
• High entry barriers for new competitors: agricultural expertise; crop access; logistics advantages; sales network
• Vision: to be a global leader in vertical agriculture value chain to provide diversified product lines delivered to commercial and consumer markets.

Mission
Deyu's mission is to develop, produce and deliver high quality food products that promote balanced diet and improve the health of our customers. Our products are consistent with traditional Chinese health regimen that combines balanced diet of healthy and organic food.

Philosophy
Deyu company strives to provide best quality organic, green and nutritious food products to support and improve the health of our valued customers. We place great emphasis on the high quality of our products and the social responsibility that we have towards our consumers, as well as distributors, investors and partner farmers.

R&D
Strong research and development capabilities ensure the optimization of quality, taste, nutrition and safety of our products to fulfill the demands of the consumers. In addition to our own R&D staff, we have established long-term partner relationships with agriculture and food research and development institutions. We work together with the Chinese Academy of Agricultural Sciences, Peking University, China Agricultural University, Shanxi Academy of Agricultural Sciences, and Shanxi Agricultural University to develop highly qualified (non-transgenic) crop seeds, and to give instruction on every aspect from crop cultivation to final product processing. Together with technicians of Beijing Food Research Institute, we have developed a series of nutritious tasty meals, including noodles, porridges, grain products, ready-to drink beverages, baked goods, etc.

Cultivation Base
Our grains are mainly grown in the elevated area near Taihang Mountain, at an altitude of between 5,000 to 8,000 feet above sea level. This region has a wide temperature variation between night and day and a long daily exposure to sunlight. These geographic characteristics produce grains that are rich in nutrients, especially minerals, cellulose, amino acids, chlorophyll, lecithin, linoleic acid, and other nutrients.

Farmer Partnerships
Agricultural land for large scale farming of grains is becoming a rarity in China. With the support of our local government, we have adopted the operation mode of "company + Farmers + Base" on a large scale. In regards to our cultivation base of 109,000 acres in Jinzhong, Shanxi Province, we hold the land use rights to 17,000 acres of this farmland, with average remaining use life of 38 years and signing agricultural cooperative agreements with the governments of the counties and villages for the development of 92,000 acres for 20 years. We have established stable partnerships with over 60,000 farmers to grow crops on this farmland. We provide instruction to the farmers for planting crops and technical support for seeding and cultivation. Our scale of cultivation ensures a stable, high quality supply of raw material.

Advanced Production Lines
We have a modern processing center for corn, which has five drying cylinders and six warehouses. Construction of this warehouse was completed in 2011, and our total storage capacity and annual turnover of corn now exceed 100,000 tons and 700,000 tons, respectively. This facility is equipped with fully automatic and advanced production lines for grain processing, with a total production capacity of over 105,000 tons. Our advanced production lines and production technologies help produce premium grain products by maintaining the nutritional components of the grains.

Warehousing and Logistics
We have six self-owned warehouses, one rental warehouse and several temporary warehouses with a collective storage capacity of over 100,000 tons of food products and an annual turnover of 700,000 tons. This capacity helps us to reach economies of scale with low cost of processing and storage. Our production bases are located in Jinzhong and Quwo, which are both in Shanxi Province and conveniently near transportation links. The Jinzhong facilities and warehouses are in proximity to Shitai Railway and Provincial Road 317. The Quwo facilities are several kilometers away from a transportation hub of Houma. We have exclusive lease agreements with three railway lines for freight transportation in Jinzhong: (1) Shanxi Cereal & Oil Group, Mingli Reservation Depot; (2) Shanxi Yuci Cereal Reservation Depot; and (3) Yuci Dongzhao Railway Freight Station. The advantageous geographical positions of these facilities and our exclusive agreements with railway lines help ensure speedy delivery of our products at a low cost.

Honors and Awards
We value integrity and quality. From seed breeding to crop processing, to sales and service functions, we strictly adhere to the ISO9001-2000 quality management system. Our superior quality food products have won many provincial and national honors and awards, such as the Gold Medal Award at the Special Local Product Fair of the 6th China Folk Festival, Best Selling Award at the 2nd China International Agro-Product Trade Fair, and The First Class Leading Agriculture Company in Shanxi Province.

We maintain facilities in central and southern Shanxi Province with total site coverage of approximately 1,780,000 square feet (approximately 165,000 square meters) and constructed area of 500,000 square feet (approximately 46,000 square meters). Our facilities are equipped with advanced crop production, processing and packaging lines as well as modern equipment.

Corn Production Capacity

Our Corn Division - warehousing, processing and logistics center is located in Jinzhong with site coverage of 503,000 square feet (approximately 47,000 square meters) and constructed area of 144,000 square feet (approximately 13,000 square meters). The processing center has five drying cylinders and six warehouses for the storage of 70,000 tons. We have a large rental cave-type warehouse named Shanxi 661 Warehouse with storage capacity of 30,000 tons. We also have contracts for temporary warehouses near railway stations which supplement our storage capacity. Our total capacity of storage and annual turnover reach over 100,000 tons and 700,000 tons, respectively.

We process drying and water removal treatments for corn before the corn is stored in our warehouses. The five drying cylinders are equipped with the most advanced equipment for corn drying. After the drying process, the corn is packaged in bags and moved into warehouses. Then, the products undergo insecticide and anti-bacterial treatments. After being sealed and air ventilated, the products are then stored in enclosed warehouses.

Our six newly-constructed warehouses are equipped with advanced detection and air ventilation devices to ensure cereals are being kept in good condition. Ventilation ducts are installed on the ground level of the warehouses. Once moisture is detected, air ventilation driven by a blower will help disseminate the overall heat on the cereals. Infrared temperature sensors and 360-degree high resolution cameras have been installed in each warehouse to allow the control room to conduct 24-hour monitoring for real-time analysis of water, moisture, mildew and pests so that we can quickly take corrective measures.

The cave-type warehouse that we rent is fully enclosed and have thermostatic and moisture proof characteristics. The cave-type warehouse is built with 1.5 meter thick walls and moisture proof layers. They maintain a temperature of 10 degrees Celsius throughout the year, which is well-suited for food storage. Since no air conditioning is required, the operating costs of these warehouses are low. These warehouses are also equipped with infrared sensors that can accurately detect temperature changes and the presence of rodents, insects and other pests.

Grain Production Capacity

We are equipped with three fully automatic production lines for millet, grain and flour at our Jinzhong production base in the center of Shanxi Province, with site coverage of approximately 199,000 square feet (approximately 18,000 square meters) and a constructed area of 119,000 square feet (approximately 11,000 square meters). These lines include various kinds of rice milling machines, filtering machines, elevators, color selection machines, exhaust fans, automatic packing machines and other equipment. The production capacity of grain is over 60,000 tons.

Another production base in Quwo, in the southern part of Shanxi Province, has site coverage of over 1,076,000 square feet (approximately 100,000 square meters) and a constructed area of 238,000 square feet (approximately 22,000 square meters). This base is equipped with three kinds of advanced production lines: (1) two production lines for bean-based products with an annual production capacity of 15,000 tons; (2) two production lines for other grain products with an annual production capacity of over 26,000 tons; (3) two production lines for fruit vinegar and fruit juices with an annual production capacity of 4,000 tons. These production lines are comprised of advanced grain milling, degreasing, automatic drying, packaging, inspection and testing equipment. At present, less than one third of the land at this production base has been developed. We believe we can develop more production lines for future demand without acquiring land use rights for more land.

To ensure high quality, we have installed fully automated production equipment at our facilities. Characteristics of our production lines and equipment are as follows:

• Production equipment for grain processing is fully automated. We use elevators to move raw materials through the production process. The production process is fully enclosed for protection against any pollution or contamination. We have installed equipment with advanced color selection technology for grains. We believe the device is stable and reliable, and it features automatic temperature control, automatic removal of dust and impurities, automatic air pressure detection, self injection and light testing. We have a cooling system that helps millet maintain its nutritious components, color and appearance. Selective application of the polishing process helps maintain nutritional components.
• Soybean food series production uses advanced technology of dry heat extrusion equipment in oil extraction, oil purification filling, milling, squeezing and other equipment which undertake processes of peeling, crushing, oil extraction, milling, forming, drying, shaping, sterilization, packaging and other processes in the production of various soybean products while retaining most of the raw nutrients.
• Production lines for our fruit vinegar and fruit juice include water treatment equipment, sugar devices, dispensing equipment, homogenization equipment, sterilization equipment and aseptic filling equipment. We use Ro water treatment equipment and remote infrared automatic filling equipment. Sterilization technology adopts aseptic filling and high temperature sterilization processes to ensure high quality of products and advanced, reliable, automatic and stable quality for the entire production line.

Our modern equipment and technology, combined with advanced processing techniques, helps to ensure that grain production is high-quality, natural, green and ecological. Additionally, a portion of our grains can be categorized as organic by the Beijing Zhonglu Huaxia Organic Food Certification Centre. We believe the careful management of breeding, cultivation, production, packaging and storage also leads to high quality products.

We implement strict quality control with each process in purchasing, storage, processing, packaging and distribution. We keep all items that are examined in the course of quality control inspections for one year in accordance with National Technology Quality Supervision Bureau requirements. We cooperate fully with the Bureau during their random testing and examination of our products.