2011 • otcqb: yhgg • xetra : ysf.de

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2011 OTCQB: YHGG XETRA: YSF.DE

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2011 • OTCQB: YHGG • XETRA : YSF.DE. Safe Harbor Statement. - PowerPoint PPT Presentation

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Page 1: 2011  •  OTCQB:  YHGG   •   XETRA :  YSF.DE

2011 • OTCQB: YHGG • XETRA: YSF.DE

Page 2: 2011  •  OTCQB:  YHGG   •   XETRA :  YSF.DE

Safe Harbor Statement

Any statements in this summary about YaSheng Group’s expectations, beliefs, plans, objectives, assumptions or future events or performance are not historical facts and are forward-looking statements for purposes of the Private Securities Litigation Reform Act of 1995 (the “Act”). These statements are often, but not always, made through the use of words or phrases such as “believe”, “will”, “expect”, “anticipate”, “estimate”, “intend”, “plan”, “forecast”, “could”, and “would”. YHGG bases these forward-looking statements on current expectations about future events. They involve known and unknown risks, uncertainties and assumptions that may cause actual results, levels of activity, performance or achievements to differ materially from those expressed or implied by any forward-looking statement.

Some of the risks, uncertainties and assumptions that could cause actual results to differ materially from estimates or projections in the forward-looking statement include, but are not limited to, the risk that we might not achieve our anticipated development milestones, the market for our products will not grow as expected, and the risk that our products will not achieve expectations. For additional information about risks and uncertainties YHGG faces, see documents YHGG files with the SEC. YHGG claims the protection of the safe harbor for forward-looking statements under the Act and each assume no obligation and expressly disclaim any duty to update any forward-looking statement to reflect events or circumstances after the date of this presentation or to reflect the occurrence of subsequent events.

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Page 3: 2011  •  OTCQB:  YHGG   •   XETRA :  YSF.DE

Company OverviewLARGEST AGRICULTURE COMPANY IN NORTHWEST CHINA Operated through 7 wholly-owned subsidiary ‘Agro Bases’ Nationwide distribution covering 18 provinces and over 100 cities 30-year history

PRODUCTS: Large portfolio of premium specialty agriculture products

MISSION: Feed China and the world in a natural, sustainable and harmonious way

LEADERSHIP: – Contributed to industrialization and transformation of China’s traditional agricultural sector into modern operations– Investment in R&D-based agricultural innovation– Premium on quality control and food safety– High-tech agricultural technology (drip irrigation for water efficiency, pesticide reduction)

LOCATION: – Headquartered in Lanzhou, China; executive offices in Redwood City, CA– Over 15,000 employees– Established in 2004 by GanSu Yasheng Salt Industrial Group

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Page 4: 2011  •  OTCQB:  YHGG   •   XETRA :  YSF.DE

Market Data at a Glance

YHGG (OTCQB) (as of 12/31/10) FYE: December 31Price $2.74

Shares Outstanding 155.1 M

Market Cap $425 M

Cash $10.1 M

Total Assets $1.87 B

LT Debt $2.4 M

Revenue $849.5 M

Net Income $99.2 M

EPS $0.64

FY 2011 Revenue Guidance $976 M

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Page 5: 2011  •  OTCQB:  YHGG   •   XETRA :  YSF.DE

Investment HighlightsProfitable Business Model with Strong Track Record 30 years of successful operations in Northwest China Agricultural leader in China: Over 30 major products History of strong sales and earnings growth

Assets Highly qualified management team, experienced workforce Over 250,000 acres of land, beneficial climatic/soil conditions Ongoing R&D investment in advanced technologies Diverse portfolio of award-winning premium specialty agriculture products

Large Market Opportunity & Favorable Environment Strong product demand driven by China’s GDP and population growth and limited arable land Favorable government policies (tax-free agro sector) Long-term high-growth domestic and global market opportunity

Growth PlanCapitalize on longstanding market leadership in Chinese agricultural industry Expand into global market through organic growth and M&A while keeping up with expanding domestic demandsAccess to global capital market through dual-listing of U.S. and Deutsche Börse exchange

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Page 6: 2011  •  OTCQB:  YHGG   •   XETRA :  YSF.DE

Market Trends − Domestic

– Safe, high-quality foods

– Organic all natural foods– Protein-based foods

(meats, milk)– Convenience, specialty

processed foods

– High-end luxury foods

– Demand for wholesome foods, which drives need for organic fertilizers and healthy processing practices

– Demand for meats and dairy, which increases need for animal feeds

– Urbanization reduces land for cultivation driving need for fertilizers and efficient farming techniques

drives

Growth in domestic consumer demand for

Growth in commodity market

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Page 7: 2011  •  OTCQB:  YHGG   •   XETRA :  YSF.DE

Market Trend − Global

1959 1969 1979 1989 1999 2009 2019 2029 2039 2049 2.0

4.0

6.0

8.0

10.0

3.0

3.6

4.4

5.2

6.0

6.8

7.6

8.3

8.9

9.5

World Population Growth Forecast(Billion)

14% / 10 years

Source: US Census Bureau

Agro product prices still near all time records.

Agro demand forecast to increase:

- Expected world population growth- Worldwide robust economic growth- Increasing per capita income driving trend towards

more diverse, higher calorie diets (with fruits, vegetables and meat) away from staple diets

- Impact of developing world’s increasingly diverse diet on global agro demand compounded by rapid population growth there (nearly double the rate of developed countries)

Source: Economic research service, USDA

Rising demand for food and agro commodities presents global long-term growth opportunity. Yasheng expanding to meet this demand.

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Page 8: 2011  •  OTCQB:  YHGG   •   XETRA :  YSF.DE

Less Arable Land for Cultivation

3.5 B acres arable land in 2005 Worldwide average loss of 24.7 M acres p.a. Factors: Urbanization, soil overuse / degradation, climate shifts, cost of landLand allocated to growth of bio mass for biofuel production

2009 2019 2029 2039 2049 -

0.10

0.20

0.30

0.40

0.50

0.60

0.50

0.42

0.35 0.30

0.25

Arable land acreage per capita

Source: United Nations

YASHENG:– Vast land resources in Northwest China

– Strategic geological location with favorable natural conditions

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Page 9: 2011  •  OTCQB:  YHGG   •   XETRA :  YSF.DE

• Focus on agriculture, biotech, and chemical industries with originally over 126 operating divisions and R&D capabilities

• Over past 30 years transformed family plot style farm into industrial agro operations with infrastructure to support long-term growth

Gansu Province

XiaheqingJiuquan

Jinta

Tiaoshan

7 Large-scale Agro Production Bases

Lanzhou Headquarters

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Page 10: 2011  •  OTCQB:  YHGG   •   XETRA :  YSF.DE

Major Products in 8 Segments• Field Crops: Cotton, Soybean, Alfalfa, Barley, Wheat• Vegetables: Onions, Potatoes, Beets, Peas/Corn• Fruits: Fuji Apples, Chinese Pears, Apricots• Specialty Crops: Hops, Chinese Wolfberry, Cumin, Flax Seeds• Seeds: Black Melon, Sunflower, Corn• Husbandry: Poultry, Eggs• Agro Products: Fertilizers, Animal Feed• Bio Friendly : Bio Energy, Biomaterials

Revenues by crop type (2010)

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Page 11: 2011  •  OTCQB:  YHGG   •   XETRA :  YSF.DE

Sales into Various Markets

Strategic Commodities

Institutional Contract Growing

Consumer Direct Wholesale Markets

Domestic & Export Food Distribution

Animal Husbandry

Agro Business

Medical & Biotech

Alternative Energy Products

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Page 12: 2011  •  OTCQB:  YHGG   •   XETRA :  YSF.DE

Competitive Advantage − Land

Long sunny days with short nights during growing seasons produce larger yields than other areas in China

Very hot days / very cold nights allow agro products with more sugar and richer flavor

Dry air with limited humidity reduces threat from pests, leading to lower pesticide needs

Very aerated soil and its chemical balance provide favorable conditions for growing without heavy use of artificial fertilizers

Land is abundant and manufacturing industry is low reducing exposure to pollution

Majority of Agro Bases are fed by the glacier waters from the Qilian Mountains and the upper reaches of the Yellow River, which are very clean compared to other parts of China and the world

Yaheng’s Agro Bases strategically placed in geological locations with natural environmental benefits:

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Page 13: 2011  •  OTCQB:  YHGG   •   XETRA :  YSF.DE

Advanced R&D Capabilities Maintains strong R&D relationships / capabilities in agro industry R&D investment to develop hybrid strains (higher yields, drought, pest, & disease resistance) Focus on bio non-food feedstocks & biomass waste (alternative energy production) Association with GanSu Yasheng Salt Industrial Group provides strategic advantages in

training and research Research results of Yasheng Group Science Academy’s applied in company’s operations

Yasheng Group Science Academy Post-Doctoral Degree Center Biology Research Institute Trans-Genetic Research Institute Chinese Medicine Research Institute Information Technology Research Institute New Biology Material Research Institute

GanSu Yasheng Salt Industrial Group’s AGRO R&D Park

High-tech agro park fully operational after strategic investments since 2000

Focus on high-tech agro R&D in bio-engineering, soil-less culture, propagation, other modern industrial agro techniques

High-tech agro advantages resulted from intellectual advancements by Yasheng Academy of Science

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Page 14: 2011  •  OTCQB:  YHGG   •   XETRA :  YSF.DE

Operational Excellence − ExampleWATER CONSERVATION SOLUTIONS

Company-wide Modern Drip Irrigation Technology Projects

The technology controls both biochemical and physical indices for crop and flower growth and allow precise adjustment of water, fertilizer and insecticide usage

It moderates the extreme cooling effects sometimes produced by flood-type irrigation

Introduced the most advanced water-efficient drip irrigation techniques from Israel to ensure efficient water use on large-scale intensive agricultural projects in the fertile, but water-scarce Hexi Corridor

Over 20 years of industrial agro experience turning harsh lands into major food base oasis

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Page 15: 2011  •  OTCQB:  YHGG   •   XETRA :  YSF.DE

Institutional Contracts Growing Contracts growing for institutional food and beverage companies

Established long-term relationships with institutions and large food and beverage processors to grow products that meet their needs and standards

Yasheng Group works closely with processors to establish demands and assure quality for consistency and long-term market stability

Long-term hops supplier for Beijing Yanjing Group, Tsingtao Brewery Group, Beijing Huarun Snowflake Group, Shanghai Yingbo Group, Harbin Beer, Henan Jinxing, and Chongqing Beer

Potato supplier to YUM Brands (KFC) & McDonald’s

Liquorices root base supplier to Traditional Chinese Medicine market

Black melon, sunflower seeds, National Chinese Wolfberry

Award winning fruits and vegetables

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Page 16: 2011  •  OTCQB:  YHGG   •   XETRA :  YSF.DE

Sales & Marketing Extensive domestic sales and distribution

network in 18 provinces: • Direct clients (30) • Distributors (200), 70% of sales

Diverse customer base (food processors, supermarkets and wholesale stores)

Stable long-term group of distributors selling products nationally and internationally

Long-term contracts

Cooperative relationships

Preferred Supplier in the strategic commodities distribution network

Export qualification and license

Low customer concentration

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Global Market Presence 2010

Page 17: 2011  •  OTCQB:  YHGG   •   XETRA :  YSF.DE

Recognition for Quality & LeadershipIndustrial and Technology Awards: “China AAA Image Enterprise” “National Key Hi-Tech Enterprise” “Leading Enterprise” for National Agriculture

Industrialization “Organic Food“ certification for many products by the

National Organic Food Development Center “Tiaoshan Fruits” national and provincial awards “Green Food” recognition by China National Green

Food Development Center

Premium on Quality National model as AAA green food base Model for sustainable pollution free farm ISO 9000, ISO 14000 International Quality recognition HACCP (Hazard Analysis & Critical Control Point)

standard food processing

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Page 18: 2011  •  OTCQB:  YHGG   •   XETRA :  YSF.DE

Growth Plan: Market Focus & Product Innovation

Maintain and expand existing domestic market position in premium products with a focus on customer satisfaction

Continue strategic consolidation and segmentation of Yasheng products. Emphasis on high margin and high growth product segments

Continue to increase brand awareness for Yasheng Products

Expand product line with new by-products by utilizing modern deep processing food technology meeting the increased domestic demand for quality products

Develop by-products; fruit and vegetable concentrates, food extracts, nutritional beverages, edible and bio oils, organic and environmentally friendly products, frozen and fresh vegetables with uniform packaging

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Page 19: 2011  •  OTCQB:  YHGG   •   XETRA :  YSF.DE

Growth Plan: Expand Know How Continue to acquire and develop new hybrid strains for agro

products that improve quality, yield, and overall cultivation methods

Expand cultivation area by using more high-tech irrigation systems and other modern agriculture techniques

Expand seeding and propagation technologies to consistently supply growers

Expand animal husbandry division, agriculture chemicals, fertilizers, animal feed, and environmental product segment

Continue to implement the vision as leading company in sustainable agricultural practices

Implement business plans for the development of bio friendly products (bioplastics, biomass molding techniques, biofuels etc.)

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Page 20: 2011  •  OTCQB:  YHGG   •   XETRA :  YSF.DE

Growth Plan: Diversify Market Expand domestic and international business development and sales

departments to enter new markets

Strategic product development to meet demands of specialized markets (institutions, organic niche markets, and retail volume outlets)

Continue to establish long-term relationships with industrial scale agro contracting to food and beverage processors and distributors

Strengthen global and domestic logistics and distribution network

Internal and external acquisitions that bring added value in technology, management, production capabilities, and open up new markets and distribution points

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Page 21: 2011  •  OTCQB:  YHGG   •   XETRA :  YSF.DE

Competitive Advantages Scale advantage over local competitors: Largest competitor in fragmented domestic market More diversified products Economies of scale through higher production capacity, greater resources Successfully set up modern agricultural operating model (further advanced than others in

China) regarding policy arrangements, institutional design, coverage, cooperation with farms etc.

Long-term established relationships on local, regional and national level: Honored as a top industrial company in China

Contracts with major institutions: Designated national strategic supplier of commodities Lower labor and raw materials cost than elsewhere in China or world Significant barriers to entry: Over past 30 years acquired vast land resources, leases and

land use rights; built relationships with local and provincial government agencies and land tenants

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Page 22: 2011  •  OTCQB:  YHGG   •   XETRA :  YSF.DE

2008 to 2010 Quarterly Comparison (unaudited)

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Q1 Q2 Q32008 2009 2010 2008 2009 2010 2008 2009 2010

Net Sales 161.81 168.08 168.32 191.17 190.12 191.29 181.99 181.59 235.59

Gross Profit 18.98 18.41 18.44 19.79 20.99 21.12 25.33 25.25 33.79

Net income 17.96 17.11 17.14 18.26 19.69 19.82 24.06 24.01 31.65

EPS 0.12 0.11 0.11 0.12 0.13 0.13 0.16 0.15 0.20

Net Margin 11.1% 10.2% 10.2% 9.6% 10.4% 10.4% 13.2% 13.2% 13.4%

Total Assets 1670.46 1730.62 1756.55 1715.25 1732.76 1783.50 1723.99 1733.78 1822.25

Total Liabilities 239.22 186.52 131.16 232.39 168.07 129.81 208.19 144.42 114.75

Shareholder Equity 1431.24 1544.10 1622.40 1482.86 1564.69 1653.69 1515.80 1589.36 1707.50

Book Value $9.23 $9.96 $10.46 $9.56 $10.09 $10.66 $9.77 $10.25 $11.01

In US$ Million (except EPS)

Page 23: 2011  •  OTCQB:  YHGG   •   XETRA :  YSF.DE

Consolidated Balance Sheet

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Year Ended December 31,

Current liabilities:      Accounts payable and accrued expenses 44,593,435 55,031,294 65,925,273 Short term loans 15,099,582 19,606,983 25,761,947 VAT Tax payable 988,429 1,142,638 1,205,555 Current portion of long term debt 7,518,868 9,796,158 25,228,661 Other current liabilities 801,140 1,170,455 1,365,609        Total current liabilities 69,001,454 86,747,529 119,487,044        Long term debt 2,441,364 3,220,335 3,579,453 Long term payable 37,359,986 51,643,382 77,168,451        Total liabilities 108,802,804 141,611,245 200,234,948  Stockholders’ equity:Common stock, US$1.00 par value      800,000,000 shares authorized      155,097,355 shares issued and outstanding

155,097,355 155,097,355 155,097,355

Accumulated other comprehensive income

291,678,383 240,383,631 238,919,350

Retained earnings 1,311,516,545 1,212,330,569 1,133,266,828        Total stockholders’ equity 1,758,292,283 1,607,811,555 1,527,283,533        Total liabilities & stockholders' equity 1,867,095,086 1,749,422,800 1,727,518,481

Year Ended December 31,

2010 2009 2008

ASSETS

Current assets:      Cash and cash equivalents 10,116,750 8,010,017 7,880,338 Accounts receivable, net 76,240,589 71,216,566 64,616,646 Inventories 103,588,885 75,332,668 70,357,148 Prepaid and other current assets 4,538,059 4,673,279 4,762,327

Total current assets 194,484,282 159,232,530 147,616,459

Equity and other investments 193,974 190,402 190,509        Property, plant and equipment, net

404,385,526 393,776,831 403,954,071

       Construction in progress 6,664,773 5,446,595 5,823,620 Intangible assets, net 985,004,893 958,065,063 945,931,378 Other long term assets 276,361,639 232,711,379 224,002,445        Total assets 1,867,095,086 1,749,422,800 1,727,518,481        

Page 24: 2011  •  OTCQB:  YHGG   •   XETRA :  YSF.DE

Experienced Management Team

Mr. Zhou Changsheng, Chairman & CEO Founder and Chairman of Yasheng Group, Mr. Zhou leads the overall operation and management of the Company. He is also a standing

council member of International Hops Grower Association and holds many other positions in industrial and agricultural trade associations. From May 1987 to May 1997, Mr. Zhou served as Chairman of Gansu Yasheng Salt Industry (Group) Co., Ltd. Subsequently, he served as Chairman of the Board of Gansu Yasheng Industrial (Group) Co., Ltd. from June 1997 to May 2006. Mr. Zhou holds a Ph.D. in Business Administration. Mr. Zhou, a Senior Economist, have over 40-year experience in several fields: agriculture, chemicals, biotechnology, management, and finance.

Ms. Wu Meiping, President Ms. Wu is President of YaSheng Group and sits on the Board of Directors. She is also holds an honorary PhD in Architecture and a master of

Business Administration. Ms. Wu practiced architecture for many years and designed dozens of significant buildings throughout Northwestern China. She is an accomplished and published artist. Ms. Wu works for YaSheng Group for over seven years and has been an active business leader in the bay area of California for eight years. She has accumulated extensive experience in operation and management. Ms. Wu is also Honorary Principal of Silk Road Fine Art Research Institution.

Mr. Zhuang Haiyun, CFO Mr. Zhuang has served as both the Chief Financial Officer and Director of the Company since March 2007. Between February 2005 and May

2006, Mr. Zhuang was the Chief Financial Officer of Gansu Salt Industrial Group. From December 2003 to March 2007, he served as the Chief Financial Officer of Yasheng Group. Mr. Zhuang was the General Accountant of Gansu Salt Industrial Group from June 1998 to November 2003. Mr. Zhuang holds a bachelor degree in Accounting. Mr. Zhuang, a Senior Accountant, has over 15-year experience in business administration and finance of agriculture industry.

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Page 25: 2011  •  OTCQB:  YHGG   •   XETRA :  YSF.DE

Independent Board DirectorsMr. Wei Tingwu

Since March 2009 Mr. Wei has served as General Manager and Engineering Technical Director for Lanzhou Jiaoda Engineering Consulting Co., Ltd., where he has overseen the development and construction of many large projects throughout China. Previously, from 1997 to 2009, he was Technical Director with Jiuquan City Project Construction Inspection Center. He is a Senior Engineer with over 20 years of experience in engineering supervision and administrative management. Mr. Wei is currently both an independent director of the Board and a member of the Audit Committee.

Mr. Yang Baoquan From 2001 to 2010, Mr. Yang was the Chief Technology Officer for the Jiuquan Botanical Garden. From 1987 to 1999, he served as an

engineer and subsequently Technical Director for the Jiuquan City Forestry Bureau. Mr. Yang is a Senior Engineer with over 20 years of experience in the fields of ecological protection and administrative management. He is currently both Chairman of the Compensation Committee and a member of Corporate Governance and Nominating Committee. He received a Bachelor’s Degree from Gansu Agriculture University, majoring in Forestry and Ecological Protection.

Mr. Zhang Xinmin Mr. Zhang is a licensed attorney and certified public accountant in China. For the past five years Mr. Zhang has worked at the Jiuquan Yangguan Law

Firm as a senior attorney and simultaneously with the Jiuquan Hongzheng Accounting Firm as a certified public accountant. He has acted as counsel on numerous substantial corporate transactions and is expert in the area of internal control and financial audit. He has been practicing law for over 12 years and holds a L.L.B degree. Mr. Zhang is currently an independent director of the Board. He also serves as both Chairman of the Audit Committee and a member of Corporate Governance and Nominating Committee.

Mr. Liu Darong From 1995 to present, Mr. Liu has served as Chairman and legal representative with Akesai County Granite Stone Material Factory in China. During this

period, Mr. Liu took a leading role in stone material program with many large projects, including Mo Gao Grotto at Dunhuang. From 1988 to 1994, he was Vice Major with Gansu Qingshui County. He brings over 20 years of experience in project and administrative management. Mr. Liu is currently an independent director of the Board. He also serves as both Chairman of the Corporate Governance and Nominating Committee and a member of the Compensation Committee.

Mr. Wang Anxue From 2000 to 2010, Mr. Wang has served as a Senior Engineer with the Suzhou Municipal Water Affairs Bureau in China, in charge of water resources

engineering survey and design. During the period, he won a Second Prize in Science and Technology Progress at Gansu Province level. Previously, from 1986 to 2000, Mr. Wang served as the Corp Secretary for Jiuquan Dayu Co., Ltd., a listed company in China. Mr. Wang is a Senior Engineer. He holds a Bachelor’s Degree in Engineering. Mr. Wang has over 25 years experience in survey and administrative management. Mr. Wang currently is an independent director and he also serves as both a member of the Compensation Committee and a member of the Audit Committee.

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Page 26: 2011  •  OTCQB:  YHGG   •   XETRA :  YSF.DE

Investment RecapPROFITABLE BUSINESS MODEL WITH STRONG TRACK RECORD• 30 years of successful operations in Northwest China• Agricultural leader in China: Over 30 major products • History of strong sales and earnings growth ASSETS• Highly qualified management team, experienced workforce• Over 250,000 acres of land, beneficial climatic/soil conditions• Ongoing R&D investment in advanced technologies • Diverse portfolio of award-winning premium specialty agriculture products LARGE MARKET OPPORTUNITY & FAVORABLE ENVIRONMENT • Strong product demand driven by China’s GPD and population growth and limited arable land• Favorable government policies (tax-free agro sector)• Long-term high-growth domestic and global market opportunity

GROWTH PLAN• Capitalize on longstanding market leadership in Chinese agricultural industry • Expansion into global market through organic growth and M&A while keeping up with expanding domestic demands• Access to global capital market through dual-listing of U.S. and Deutsche Börse exchange

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Page 27: 2011  •  OTCQB:  YHGG   •   XETRA :  YSF.DE

Contact

INVESTOR RELATIONSJared Gulliver(650) 363-8345 ext. [email protected]

INDEPENDENT AUDITORGansu Hongxin CPA12nd Floor, Xingzhong Mansion 20 Gaolan AvenueLanzhou, China 730030

YASHENG GROUP805 Veterans BoulevardRedwood City, CA 94063www.yashenggroup.com

LEGAL COUNSELSteven M. Kaplan, Esq.ROSENFELD & KAPLAN, LLP535 Fifth Avenue Suite 1006New York, New York 10017

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Page 28: 2011  •  OTCQB:  YHGG   •   XETRA :  YSF.DE

Facts on China’s Agro Sector

• China has 6% of the World’s arable land and 22% of global population• Rising food prices and ago policy has become a major concern of the PRC • PRC Government Policy directives implemented to grow and protect domestic

agro industry long term• 12th 5-Year Plan for Agriculture Economic Development (2011-2015):

– PRC Beneficial Policies for key high tech agriculture industries– Income Tax Free to agro business and preferential land policy– Favorable policies towards eco-friendly agro products and energy

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