2009 Tax Treatment of Ivf Costs in Canada by xeb97311


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									IND DairyTech Ltd.

  Private and Confidential
         July 2009
Caution Relating to Use of Market and Industry Data

This Presentation includes market and industry data that has been obtained from third party sources, including
industry publications, as well as industry data prepared by IND management on the basis of its knowledge of and
experience in the industry in which it operates. Third party sources generally state that the information contained
therein has been obtained from sources believed to be reliable, but there is no assurance as to the accuracy or
completeness of such included information. Management believes that its industry data is accurate and that its
estimates and assumptions are reasonable, but there is no assurance as to the accuracy or completeness of this
data, estimates or assumptions. Management has not independently verified any of the data from third party
sources referred to in this Presentation or ascertained the underlying economic assumptions relied upon by such

Caution Relating to Forward-Looking Information
This Presentation contains statements and information that, to the extent that they are not historical fact, may constitute “forward-looking information” within
the meaning of applicable securities legislation. Forward-looking information may include financial and other projections, as well as statements regarding
future plans, objectives or economic performance, or the assumption underlying any of the foregoing. This Presentation uses words such as “may”, “would”,
“could”, “will”, “likely”, “expect”, “anticipate”, “believe”, “intend”, “plan”, “forecast”, “project”, “estimate”, “outlook”, “potential” and other similar expressions
to identify forward-looking information.

Forward-looking information is based in part, on assumptions that may change, thus causing actual future results or anticipated events to differ materially from
those expressed or implied in any forward-looking information. Such assumptions include the continuing shortage of high quality raw milk in China, the
stabilization of raw milk supply and demand in China, continued government incentives and support through production and consumption incentives and
preferential tax treatment, the maintenance of competitive advantages enjoyed by IND, stability or improvement of general economic conditions, the
availability of capital, the implementation and stability of strategic relationships, the ability of partners to meet funding and capital obligations, the significant
increase in demand for raw milk, the improvement in milk producing herds and quality of raw milk at IND’s farms, the continuing absence of price cap on raw
milk, the growth of IND herds, the ability to influence or control gender selection in Holstein embryos, the reliability of projections related to reproductive life
and milk production of Holstein cows, the reliability of projections related to prices for calves and salvage value of cows, the secure supply of livestock feed,
the stability of the ratio of raw milk price to feed cost, stable and secure agreements for sale of product, absence of disease or other events that could affect
the health of the livestock, the ability to comply with environmental and other regulations, the availability of permits on a timely basis and overall viability of the
business model.

Forward-looking information involves known and unknown risks, uncertainties and other factors that may cause the actual results, performance or
achievements to differ materially from any future results, performance or achievements expressed or implied by the forward-looking information. Such risks
include, but are not limited to, the need for funds, reliance on key personnel, reliance on key strategic relationships, dependence on technical innovation,
domestic and international competition, fluctuations in milk prices and costs or quality of livestock feed, failure of gender selection technology, failure of in
vitro fertilization techniques, disruptions due to bovine epidemic or other diseases affecting livestock, product liability, failure of the business plan, operating
risks, compliance with environmental regulations, risks associated with doing business in the PRC, and regulations imposed by the PRC with respect to, among
other things, establishment of business entities and issuance of permits, mergers and acquisitions, foreign exchange, export quotas, foreign investment,
repatriation of profits and taxation. For a more detailed discussion of certain of these risk factors, see “Risk Factors” in the Filing Statement.

The forward-looking information is a statement of the reasonable expectations of management for the business of IND as specified in the Presentation and is
not a guarantee of performance. It is presented to give readers a basic understanding of management’s expectations and may not be useful for any other
purpose. Actual results, performance or achievement could differ materially from that expressed in, or implied by, any forward-looking information in this
Presentation, and, accordingly, you should not place undue reliance on any such forward-looking information. Furthermore, the pursuit of IND’s business plan
does not ensure a linear progression of revenue and earnings, since they may involve significant up-front expenditures. IND has assumed a certain
progression, which may not be realized.

Any forward-looking statement speaks only as of the date on which such statement is made. New factors emerge from time to time, and it is not possible for
management to predict all of such factors and to assess in advance the impact of each such factor on IND’s business or the extent to which any factor, or
combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements. IND undertakes no obligation to
update any forward-looking information to reflect information, events, results, circumstances or otherwise after the date hereof or to reflect the occurrence of
unanticipated events, except as required by law.

Rider 21

This model is for illustrative purposes only and is not intended to be, nor should it be construed to be, a forecast
of results. This model assumes steady operations at full capacity. Notwithstanding the foregoing, this forward-
looking information is based on certain assumptions that IND management believes are reasonable in the
circumstances, reflect IND Group’s intended course of action and reflect IND management’s expectations
concerning the most probable set of economic conditions relating to the four-year period covered thereby. Actual
results may differ materially depending on a variety of factors. This model income statement data does not utilize
Canadian GAAP. Readers are cautioned that the model data should not be considered as an alternative to
earnings or cash flow as determined in accordance with Canadian GAAP as an indicator of performance, or to
cash flows from operating, investing and financing activities as a measure of liquidity and cash flows. Since this is
a model only, the information may not be directly comparable to similar information provided by other entities.

Mission Statement

 To be the leader of supplying high quality raw milk and Holsteins in China
   through the use of Canadian genetics, farming practices and quality
                            assurance programs

Investment Highlights
                • 8 million Chinese cows produce low quantity & quality milk, due to genetics limitation
 Solution to
                • Current importing cows from Australia is too expensive, time consuming and unproductive
China’s Dairy
                • Fragmented supply chain dominated by unsophisticated local farmers
                • Recent crisis involving contamination in raw milk supply needs a long-term solution

                • Over 300 years’ leading experience in cattle reproduction and farm management
                • Top Chinese management under North American market surveillance & corporate governance
                • Integration with Canadian and Chinese government
 and Board
                • Alignment of interest through significant management ownership and investment

                • China livestock import ban from North America
High Barriers   • Sole license to export Canadian Holstein IVF embryos from Canada to China
   to Entry     • The embryo transfer team with 100 experienced technicians built up through 8 years
                • Exclusive access agreement with one of Canada’s largest Canadian Holstein cow ovary supplier

                • Rapid growth in scale because of mature technology embryo production and transfer
                • Quick expansion because of favourable financing and policy from government and producers
                • 100% raw milk off-take agreements with local partners at prevailing market prices
                • 35% gross margin on milking cows and 36% natural growth in herd size without extra capital

Exponential     • Four births per cow allows for exponential growth at lower incremental costs
  Growth        • 50,000 cows of current farm capacity, with additional 235,000 capacity signed by LOI
  Pipeline      • Pilot partnership with Inner Mongolia Yili Industrial Group (China’s largest milk processors)
IND’s Corporate History
                                                                                     • 200,000
                                                                     • Accumulated
                                                                                     • 100,000
                                                   • Ban on                            semen
                                                                       totals C$16
                                                     embryo and        million       • 10,000 cows
                                 • Produced          semen
                                                                     • Successful    • 1,500
                                   first             import lifted
                • Produced                                             IPO in          milking cows
                                   Canadian          (live cattle
                  first IVF        Holstein                            Toronto       • 13 farms
• Established     embryos                            ban remains
                                   calves from                         Stock           under
  3,000 ft2                                          in place)
                • Exported IVF     IVF embryos                         Venture         operation
  R&D centre                                       • Gain access
                  embryos to       in China                            Exchange,     • 550
  in BC                                              to gender
                  China          • Mad Cow                             raising C$9     employees
                                                     selection         million
                • Established      disease           technology
                  first cattle     results in
                  farm in                          • Started
                                   ban on
                  China                              export of
                                   imports of
                                                     sexed semen
                                   Canadian live
                                                     and embryos
                                   cattle and
1999            2002             2003              2005              2008            June 2009

IND’s Business Strategy

1   Utilize suite of breeding technologies to develop a substantial herd size

2   Implement North American farming practices & quality control programs

3   Expand farms through co-operation agreements with local strategic partners

4   Sell quality raw milk at premium price through off-take with dairy processors

Canadian Holstein Advantage
                                        •      Canadian Holsteins produce higher quality milk in larger quantities than Chinese Holsteins
                                        •      Canadian Holsteins are scarce in China given the live cattle import ban

                               Average Milk Production per Holstein (1)(2)                                                                                                       Quality of Milk Produced                    (1)(3)

                                        12,000                                                                                                                             400
                                                             9,733                                                                                                         350
                                        10,000                        9,180                                                                                                                                               310

                                                                                                                                     A nnua l Pr o ducti o n (Kg / Co w)
Mi l k Pr o ducti o n (Kg / Y e a r )

                                         8,000                                                   7,470
                                                                                                          6,832                                                            250

                                         6,000                                                                                                                             200

                                                                                                                   4,000                                                                      136
                                         4,000                                                                                                                                                                                            116


                                               0                                                                                                                            0
                                                    United Canada Japan        United Germany France Australia China                                                                    Fat                                     Protein
                                                    States                    Kingdom                                                                                                         Canadian Holstein   Chinese Holstein

                                            Canadian Holsteins produce higher quality and in higher quantity milk than Chinese Holsteins

(1)                                         Source: United States Department of Agriculture, World Holstein-Friesian Federation and Agriculture and Agri-Food Canada
(2)                                         Note: US farming practices allow steroid usage, which is prohibited in Canada and China
(3)                                         China Dairy Association                                                                                                                                                                             9
Canadian Holstein Advantage
 Profitability breakdown of Chinese, Australian and Canadian Holsteins

   RMB/Cow                      Chinese Holstein      Australian Holstein    Canadian Holstein

   Milk Revenue                         13,200                   19,800               29,700

   Feed Costs                          (12,775)                 (13,870)             (14,600)

   Amortization                         (1,950)                  (1,950)              (3,000)

   G&A                                  (1,825)                  (1,825)               (1,825)

   Operation profit (loss)              (3,350)                   2,155                10,275

         Canadian Holsteins bring higher profitability due to quantity and quality premium

   Raw Milk Demand in China
 •                                   US$18 billion industry (1) in 2007; 3rd largest globally
                                         –          Historical growth driven by increased demand for higher value products requiring higher quality raw milk
 •                                   Consumption rates a fraction of those found in the developed world
 •                                   Demand is restoring after several months drop since melamine contamination crisis

                                                     Historical Dairy Consumption (2)                                                                                         Global Dairy Consumption (2)(3)

                                                              $US 18 billion market (1)                                                                               1,321                297                                            1,400

                                                                                                               2007 Annua l Co nsumpti o n Pe r Ca pi ta (Kg)
                                    40                                                                                                                                                                                           262
                                                                                                        37                                                                    1,110                                                       1,200

                                                                                                                                                                                                                                                  2007 Po pul a ti o n (Mi l l i o ns)
                                                                                                 34                                                             250
                                    30                                                                                                                          200
  Ki l o gr a ms (B i l l i o ns)

                                                                       19                                                                                                                                        102
                                    20                                                                                                                                          93
                                                                                                                                                                100                                       67                              400
                                                               15                                                                                                                         302
                                    15                                                                                                                                                                                    46
                                             10                                                                                                                 50     28                          142   128     109                      200
                                    10                                                                                                                                                                                    49     33
                                                                                                                                                                 0                                                                        0
                                                                                                                                                                      China    India United Russia Japan Mexico South Canada
                                    0                                                                                                                                                     States                        Korea








                                                                                                                                                                       Po p ul a ti o n     Annua l Co nsump ti o n Pe r Ca p i ta (Kg)

                                                        Historical growth set to resume once melamine crisis concerns are addressed
(1)                                 Source: Euromonitor International Plc
(2)                                 Source: United States Department of Agriculture
(3)                                 Source: the Economist
Raw Milk Supply in China
Current Situation                                                 Future Direction
• 85% from small local farms                                      • Shift towards large scale dairy farms
• Poor quality control                                            • Increased demand for high quality milk
• Low quality milk containing high                                    and high quality dairy products
    somatic cell count, low fat and low                           • Strictly enforced quality controls
    protein content

                           Dairy Cows per Farm (1)                 Raw Milk Buyers (Volume) (1)

                            5 - 19 (85.1%)     20 - 99 (13.4%)       Mengniu (9.1%)    Yili (7.7%)
                            100 - 199 (0.9%)   200 - 499 (0.4%)      Sanlu (3.7%)      Bright Dairy (2.3%)
                            500 - 999 (0.1%)   over 1000 (0.1%)      Wodersun (1.6%)   Other (75.5%)

        Systematic failures in the supply chain is leading to rapid migration towards secure sources
(1)   Source: China Dairy Yearbook, 2007
Scale Farm Competition
Modern Farming
• Currently 26,000 herds (Australian & Chinese Holstein) in its 4 scale farms
• Financed by Mengniu’s shareholders and KKR (a US PE) in 2008 and 2009
• The only independent cattle management company in China

Farms controlled by state-owned dairy companies
• Different from Yili and Mengniu, the other significant dairy producers, such as Beijing Dairy,
    Bright Dairy, American Dairy and Huisan Dairy, control farms on their own
• The above four major companies, controlling over 100,000 herds, are all financed by local
• The herds represent the highest quality Chinese & Australian Holstein but the costs are too
• They only focus on regional areas and the business model cannot be expanded

Emerging farms
• There have been some Chinese and foreign investors stepping upon scale farm segment,
   especially after the Melamine accident
• None of them is big enough to become significant competitors, due to limitation of genetics,
   expertise and industry exposure.

 IND has the comparative advantages in its Canadian genetics and 9 year industry exposure.
    All the competing farms could be the potential target of co-operation and acquisitions

  Government Support for the Dairy Industry
        “I have a dream to provide every Chinese, especially children, sufficient milk [0.5 kg] each day”
                                                                      -Wen Jiabao (Chinese Premier, 2006)
                                 Daily milk consumption of 0.5kg by every child in China represents ~49 billion kg of annual milk consumption (1)

                                                                    Strict Focus on Quality
•       Decisive government response to contain the melamine contamination crisis
          –      Suspended milk sales, removed quality test exemptions, dispatched 5,000 quality assurance personal
          –      Expected to accelerate quality assurance milestones
•       Dairy processors required to procure 70% of raw milk from secured sources within the next two
•       New processing plants must have 75% of raw milk from secured sources
•       Processors require on-site quality testing
                         Consumption Incentives                                                                             Taxes
•       National School Milk Program (2006):                                            •     0% corporate tax rate for companies involved
          –      10,000 primary & middle schools in >70 cities                                in the raising of livestock
          –      2.8M portions of milk                         •                              IND’s operation is granted 50 year income tax
          –      Only 100% fresh milk is distributed
                                                                                              exempt by Chinese government

                             Significant government support to restore confidence in the dairy industry
(1)   Based on ~267 million children in China (Source: Unicef)
 Breeding Technology Overview
                                                                     Technology 1: IVF Embryo Transfer

                                                                                                        Live cattle import ban
                                                                                                                                                   Chinese Holstein with
Gender Selection                          Ovary                          IVF Embryo                                                             Canadian Holstein Offspring (1)

• 90% + female                    • Exclusive
                                    agreement                                                         Sole license to export
                                    with Colbex
                           +                                  =                                            IVF embryos

                                                                                                                 IVF Embryos
                                                                                                               exported to China

                                                                   Technology 2: Artificial Insemination
                                                  Gender Selection                          Host Holstein                       Holstein Calf
                                                  • 90% + female                           • From IND’s

                                                                                +                                     =

                                                  Product of nine years of research and development
 (1)   Actual photo of Chinese Holstein cow and its Canadian Holstein offspring produced by IND through IVF embryo transfer technology

IND vs. Traditional Chinese Farming Practices

                                                          Typical Dairy Farm in China

Scale                                           Scale
• 1,000 – 10,000 cows per farm                  • 5 – 19 cows per farm
• Professional team including transfer,         • Family run
  breeding, nutrition and hygiene technicians   • Feed either grown or purchased at
• Feed procured direct from supplier              premium
Operating Practices                             Operating Practices
• Direct sale to dairy processors               • Supply primarily sold to dairy distributors
• Total Mixed Ration: optimizes protein and       (loss of quality control)
  energy content                                • Limited use of machinery and equipment
• Computerized feed and production              • Unsophisticated management
  monitoring systems                            • Unhygienic
• Professionally trained staff and veterinary   • Poor controls surrounding milk
  supervision                                     contamination
• Sanitary procedures to keep somatic cell      • Land inherited (limited ability to move to
  count and other contamination low               lower feed cost regions)
• Establish farms in corn belt and grassland
• Potential access to government land
  adjacent to farms                                                                         16
Life of a Canadian Holstein Cow
 0 – 2 years of age:
 • Calf is under development and generates no revenues
      –   Majority of development costs financed by co-operation partner and government
 3 – 6 years of age:
 • Calf reaches the age of a cow, begins to rear offspring and lactate
      –   Four lactation periods generating four offspring
      –   Generates positive cash flows in all four years; pays back development costs within 1.25 years
 Post 6 years of age:
 • Culled and sold for beef value (RMB 5000 / cow)

                     Pregnancy +     Year      Year      Year      Year       Year      Year
       Conception     3 Months        1         2         3         4          5         6      Sold for Beef

                               Development                       Lactation, offspring

                      90% female
                                                                       4 offspring
                       birth rate

Melamine Contamination Scandal
•    In September 2008, China’s dairy industry came under international scrutiny due to a scandal involving the contamination of
     raw milk with melamine
         –   Industrial chemical that has the effect of making milk appear to have a higher protein count
         –   Contamination may cause kidney stones and is said to have infected 54,000 children resulting in 13,000 hospitalizations and 4 deaths
         –   Originated at upstream sources where distributors procure raw milk from farmers and resell it to major national dairy processors
•    Expected to reduce short term demand in dairy consumption and a shift to more expensive foreign dairy products

Government Response
•    Suspended milk powder sales from 22 companies throughout China and dispatched 5,000 staff to infant formula factories
•    Immediately removed quality test exemptions on all food products
•    Changing regulations to speed up the percentage of raw milk from secured sources (Must be over 70% within two years)
•    Focused on winning back consumer confidence in China’s dairy industry

IND’s Solution
•    Large scale farm operations (1,000+ herd) with North American farming and quality control practices
•    Unlimited exclusive access to the highest yielding milking cows in the world
•    Transparent quality control procedures to be applied nationwide with IND becoming the brand name of raw milk
•    Publicly listed company with accountability and social responsibility

Opportunity from the Melamine Scandal (1)
Market change since the Melamine scandal (1)
•    Domestic dairy consumption was sharply down due to the lower demand in total and shift to foreign milk powder
•    Raw milk price from local, scattered sources was heavily hit and therefore thousands of local Chinese cows were for sale or
     sent to slaughter houses at price of beef (approximately 4,500 RMB per cow)
•    Scale farm practice was encouraged by the government and therefore the milk price is stable and starts to ramp up to pre-
     scandal level
•    Consumer confidence is being restored after the government’s regulation and the demand is expected to exceed prior-scandal
     level late 2009, especially after the de-stock of foreign milk powder inventory

IND’s opportunity (1)
•    Prior to the scandal, IND needs to send its transfer technician to farmers to rent yellow cows as recipient for embryo transfer.
     The rent is approximately 4,000 – 4,500 RMB and there are admin and logistics expenses incurred
•    After the scandal, due to strong buyer’s bargain power in the market, IND can purchase high quality Chinese Holsteins (4.5
     tonne annual production) with little incremental costs
•    At similar costs, IND receives two extra benefits: 1. Chinese Holsteins with potential annual production of 6 tonne/cow under
     Canadian cattle management practice (approximately 2,000 RMB profit per cow annual); 2. Embryo transfer will be conducted
     on scale farms instead of local farmers so the herd size of Canadian Holsteins will grow faster
•    Management expects the opportunity lasts about one year from now. The market should stabilize in 2010 when a large
     quantity of Chinese cows are culled. The raw milk supply deficiency will become more serious by then.

    The Melamine Scandal provides IND the opportunity purchase Chinese Holsteins at “no cost” to
                      enhance its profitability and expedite its herd growth

Opportunity from the Melamine Scandal (2)
Market change since the Melamine scandal (2)
•    A lot of scale farms have been built in the past few years in China to benefit from favorable agriculture policy
•    However, there lacks scale farm management and quality genetics (both needs long-term commitment) to ensure profitable
•    Therefore no player, including major dairy processors, is willing and able to take advantage of the government policy to be
     committed to scale farm operation

IND’s opportunity (2)
•    The local co-operation partners are more willing to purchase Canadian Holsteins from IND to take advantage of the
     government financing and policy
•    In the meantime, IND manages the farms and cows and is responsible for all the profit and loss. The local partners are paid by
     farm rent.
•    Raw milk offtake is signed to solve local partners’ (dairy processors’) supply issues and minimize IND’s sale uncertainty in
•    Compared to old co-operation terms prior to the scandal, IND receives extra cash through selling part of its Canadian Holsteins
     while not losing the future cash flow from milk because of the Company’s leading technology and experience in cattle

    The Melamine Scandal provides IND the opportunity sell Canadian Holsteins without losing its
                   future profits to enhance its financial position and cash flow

1,000 Canadian Holsteins Farm Economics
                   Capital Investment (One Farm)

                                                           Value                                                    Income Statements
 Land & equipment                                     $       1,500
 Working capital for 27 months                                 1,833                                       Milk Revenue                  4,950
 Cows (1,000 / farm)                                           1,000
 Total                                                 $      4,333                                        Heifer Revenue                1,022

                                                                                                           Feed Costs                   (2,433)

                                                                                                           Amortization                  (588)
  Investment Cycle :                                       6.25 Years
  (Year 0-2.25 is developing age;Year 2.25-6.25 is milking age)                                            G&A                           (305)
  Payback time:                                              3.5 Years
                                                                                                           Culled Cows                   (100)
  Total Return on the investment:                         298%
                                                                                                           Operation profit              2,546
  Annual Return on the investment:                          48%
                                                                                                           Operation cash flow           3,234

(1)   1 CAD = 6.0 RMB
(2)   Milk revenue = 3.3/6*9,000*1,000 = $4,950,000 (Milk price:3.3 RMB/kg; Production: 9,000kg per cow)
(3)   Feed costs = 40/6*365*1000 = $2,433 (40 RMB per cow per day)
(4)   Amortization = 1500
(5)   ROIC = (Gross Profit – Depreciation and Amortization) / Total Capital Invested ($4,350)
(6)   Please refer to Rider 21 in slide 4 for further explanation of this model

  Yili Co-operation Agreement
      Background on Yili
      • Public company (SH: 600887); $1.7B market cap
      • The largest dairy producers in China
      • Official sponsor and sole supplier of milk to the Beijing Summer Olympic Games

      Yili –IND Co-operation Agreement
      • Covers up to 100,000 cows
      • Yili has a ROFR on 100% of production at prevailing market prices + 0.20 RMB/kg
      • Expected revenues of ~US$400M (1)

      Yili Cow Purchase Agreement
      • Yili purchased 5,000 8-14 month cows (16,000 RMB/cow) from IND for a total of 80 million
      • 3,000 cows delivered in 2008 and 2,000 cows to be delivered in 2009
      • IND helps Yili to manage the cows and has the option to buy back all the offspring at 6,000
      • This becomes the basis of two companies’ long-term alliance

      Yili –IND Strategic Alliance
      • Yili and IND work together to develop 6 strategic areas in consideration of dairy product
            distribution and cattle management
      • Government gets involved in the strategic plan

(1)     Fully implemented, assuming 100,000 cows under agreement
Experienced Management and Board

                   Management                                          Board of Directors
Jesse Zhu – (Founder) CEO, Chairman                  Jesse Zhu – (Founder) CEO, Chairman
Master of reproduction technology and 20 years       Master of reproduction technology and 20 years
experience in the industry                           experience in the industry
James Xiang– CFO                                     Paul Haber – Independent Director
MBA, CPA & CMA, Corporate finance experience in      CA, 7 public companies’ director
4 public companies, former CFO of GobiMin Inc.
Dr. Kit Shum –VP of Business Development             Guocai Liu – Independent Director
Over 30 years experience in the cattle industry in   Chairman and CEO of Migao Corporation (TSX: MGO)
Canada and China
Qiao Yanping – VP of Operations in China             Shulin Sun – Independent Director
Over 30 years experience in the cattle industry,     Previous EVP of Harbin Property Rights Exchange
former director of Beijing Dairy
Wang Yinzhen – Director of Production                Guangyi Xu – Independent Director
Over 25 years experience in the cattle industry,     Deputy General Manager of Huishan Dairy Co. Ltd.
former manager of Beijing Dairy
Dr. Rob Lang – Consultant
Senior consultant of Canadian Livestock Genetics

Map of Farms
                            Inner Mongolia :                                            Capacity: 2,000
                            Intention to discuss                                        Herds:      0
                            co-operation: 2,000
   Capacity: 1,500                                                                      Jilin:
   Herds:       0                                                                       Intention to discuss

                                                                                         Capacity: 1,200
                                                                                         Herds:    1,413

Sichuan*:                                                                                Shandong:
Capacity: 10,000                                                                         Capacity: 6600
Herds:     542                                                                           Herds:    3024

                                                                                         Intention to discuss
     Capacity: 8,000                                                                     Anhui:
     Herds:      0                                                                       Capacity: 1,200
                                                                                         Herds: 1,168

                                                   * Not include the local government commitment to provision of
                       Henan:                       additional land (including Dalian, Liaoning and Sichuan Meishan)
                       Capacity : 18,400
                       Herds:      2,948           Note 1:As of May 31, 2009,company has signed population size
                                                    more than 40,000, and existing population of 9,095.

Share Capital
                              June 2009

         Shares Outstanding                 114 Million
         Options                           1.77 Million

         Fully Diluted                      116 Million

         Market Cap                         $69 Million
         Major Shareholders               Founder: 80%
         52 Week Range                    $0.24 – 0.90


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