| x | ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES AND EXCHANGE ACT OF 1934 |
|---|------------------------------------------------------------------------------------|

| o | TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
|---|------------------------------------------------------------------------------------|

| Utah                                                                      | 90-0208758                                |
|---------------------------------------------------------------------------|-------------------------------------------|
| (State or other jurisdiction of  Incorporation or organization) | (I.R.S. Employer Identification No.) |

| Title of each class | Name of each exchange on which registered |
|---------------------|-------------------------------------------|
| Common Stock        | New York Stock Exchange, Inc.             |

----

| Large accelerated filer o   | Accelerated filer x   | Non-accelerated filer o     | Smaller Reporting Company o |
|--------------------------------------------|--------------------------------------|------------------------------------------------------|--------------------------------------------|

----

| PART I   |   |                                                                                                                         |   |     |
|----------|--------|------------------------------------------------------------------------------------------------------------------------------|--------|----------|
| Item 1.  |   | Business                                                                                                                     |   |  1  |
| Item 1A. |   | Risk Factors                                                                                                                 |   |  11 |
| Item 1B. |   | Unresolved Staff Comments                                                                                                    |   |  21 |
| Item 2.  |   | Properties                                                                                                                   |   |  21 |
| Item 3.  |   | Legal Proceedings                                                                                                            |   | 21       |
| Item 4.  |   | (Removed and Reserved)                                                                                                       |   | 21       |
|     |   |                                                                                                                         |   |     |
| PART II  |   |                                                                                                                         |   |     |
| Item 5.  |   | Market for the Registrant’s Common Stock, Related Shareholder Matters and Issuer Repurchases of Equity Securities |   | 22       |
| Item 6.  |   | Selected Financial Data                                                                                                      |   | 23       |
| Item 7.  |   | Management’s Discussion and Analysis of Financial Condition and Results of Operations                                  |   | 25       |
| Item 7A. |   | Quantitative and Qualitative Disclosures About Market Risk                                                                   |   | 40       |
| Item 8.  |   | Financial Statements and Supplementary Data                                                                                  |   | 41       |
| Item 9.  |   | Changes in and Disagreements with Accountants on Accounting and Financial Disclosure                                         |   | 41       |
| Item 9A. |   | Controls and Procedures                                                                                                      |   | 41       |
| Item 9B. |   | Other Information                                                                                                            |   | 44       |
|     |   |                                                                                                                         |   |     |
| PART III |   |                                                                                                                         |   |     |
| Item 10. |   | Directors, Executive Officers and Corporate Governance                                                                       |   | 45       |
| Item 11. |   | Executive Compensation                                                                                                       |   | 45       |
| Item 12. |   | Security Ownership of Certain Beneficial Owners and Management and Related Shareholder Matters                               |   | 45       |
| Item 13. |   | Certain Relationships and Related Transactions, and Director Independence                                                    |   | 45       |
| Item 14. |   | Principal Accountant Fees and Services                                                                                       |   | 45       |
|     |   |                                                                                                                         |   |     |
| PART IV  |   |                                                                                                                         |   |     |
| Item 15. |   | Exhibits and Financial Statement Schedules                                                                                   |   | 46       |

----

----

|   | · | Heilongjiang Feihe Dairy Co., Limited, or Feihe Dairy, which produces, packages and distributes milk powder and other dairy products; |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Gannan Flying Crane Dairy Products Co., Limited, or Gannan Feihe, which produces milk products; |
|--------|--------|-------------------------------------------------------------------------------------------------|

|   | · | Shanxi Feihesantai Biotechnology Scientific and Commercial Co., Limited, or Shanxi Feihe, which produces walnut and soybean products;  |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------|
|   | · | Langfang Flying Crane Dairy Products Co., Limited, or Langfang Feihe, which packages and distributes finished products;                     |

|   | · | Baiquan Feihe Dairy Co., Limited, or Baiquan Dairy, which produces milk products; |
|--------|--------|-----------------------------------------------------------------------------------|

|   | · | Heilongjiang Feihe Kedong Feedlots Co., Limited, or Kedong Farms, which operates dairy farms; |
|--------|--------|-----------------------------------------------------------------------------------------------|

|   | · | Heilongjiang Feihe Gannan Feedlots Co., Limited, or Gannan Farms, which operates dairy farms; |
|--------|--------|-----------------------------------------------------------------------------------------------|

|   | · | Heilongjiang Aiyingquan International Trading Co., Limited, or Aiyingquan, which markets and distributes water and cheese, specifically marketed for consumption by children; |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Heilongjiang Flying Crane Trading Co., Limited, or Feihe Trading, which sells milk and soybean related products;                   |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                                               |
|   | · | Qiqihaer Feihe Soybean Co., Limited, or Feihe Soybean, which manufactures and distributs soybean products; and                     |
|   |   |                                                                                                                               |
|   | · | Beijing Feihe Biotechnology Scientific and Commercial Co., Limited, or Beijing Feihe, which markets and distributs dairy products. |

----

----

|              |   | 2010                   |   | 2009                |   | 2010 over 2009 |
|-------------------|--------|------------------------|--------|---------------------|--------|----------------|
| Product name |   | Quantity(Kg’000) |   | Amount($’000) |   | % ofSales |   | Quantity(Kg’000) |   | Amount($’000) |   | % ofSales |   | Quantity(Kg’000) |   | Amount($’000) |   | %  |
|              |   |                   |   |                |   |           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Milk powder       |   |                   | 22,816 |                |   |           | 180,218 |   |   |   | 70.1 |   |   |   | 28,783 |   |   |   | 216,230 |   |   |   | 79.8 |   |   |   | (5,967 | ) |   |   | (36,012 | ) |   |   | (16.7 | )  |
| Raw milk powder   |   |                   | 15,691 |                |   |           | 57,752 |   |   |   | 22.5 |   |   |   | 11,637 |   |   |   | 34,328 |   |   |   | 12.7 |   |   |   | 4,054 |   |   |   | 23,424 |   |   |   | 68.2 |   |
| Soybean powder    |   |                   | 4,917  |                |   |           | 10,812 |   |   |   | 4.2 |   |   |   | 3,349 |   |   |   | 7,319 |   |   |   | 2.7 |   |   |   | 1,568 |   |   |   | 3,493 |   |   |   | 47.7 |   |
| Rice cereal       |   |                   | 633    |                |   |           | 4,040 |   |   |   | 1.6 |   |   |   | 1,103 |   |   |   | 6,730 |   |   |   | 2.5 |   |   |   | (470 | ) |   |   | (2,690 | ) |   |   | (40.0 | )  |
| Walnut products   |   |                   | 263    |                |   |           | 1,511 |   |   |   | 0.6 |   |   |   | 601 |   |   |   | 3,070 |   |   |   | 1.1 |   |   |   | (338 | ) |   |   | (1,559 | ) |   |   | (50.8 | )  |
| Other             |   |                   | 2,207  |                |   |           | 2,767 |   |   |   | 1.0 |   |   |   | 543 |   |   |   | 3,401 |   |   |   | 1.2 |   |   |   | 1,664 |   |   |   | (634 | ) |   |   | (18.6 | )  |
| Total        |   |                   | 46,527 |                |   |           | 257,100 |   |   |   | 100 |   |   |   | 46,016 |   |   |   | 271,078 |   |   |   | 100 |   |   |   | 511 |   |   |   | (13,978 | ) |   |   | (5.2 | )  |

|              |   | 2009                   |   | 2008                |   | 2009 over 2008 |
|-------------------|--------|------------------------|--------|---------------------|--------|----------------|
| Product name |   | Quantity(Kg’000) |   | Amount($’000) |   | % ofSales |   | Quantity(Kg’000) |   | Amount($’000) |   | % ofSales |   | Quantity(Kg’000) |   | Amount($’000) |   | %  |
|              |   |                   |   |                |   |           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Milk powder       |   |                   | 28,783 |                |   |           | 216,230 |   |   |   | 79.8 |   |   |   | 16,311 |   |   |   | 121,255 |   |   |   | 62.8 |   |   |   | 12,472 |   |   |   | 94,975 |   |   |   | 78.3 |   |
| Raw milk powder   |   |                   | 11,637 |                |   |           | 34,328 |   |   |   | 12.7 |   |   |   | 16,572 |   |   |   | 60,753 |   |   |   | 31.4 |   |   |   | (4,935) |   |   |   | (26,425) |   |   |   | (43.5) |   |
| Soybean powder    |   |                   | 3,349  |                |   |           | 7,319 |   |   |   | 2.7 |   |   |   | 2,153 |   |   |   | 4,400 |   |   |   | 2.3 |   |   |   | 1,196 |   |   |   | 2,919 |   |   |   | 66.3 |   |
| Rice cereal       |   |                   | 1,103  |                |   |           | 6,730 |   |   |   | 2.5 |   |   |   | 816 |   |   |   | 4,631 |   |   |   | 2.4 |   |   |   | 287 |   |   |   | 2,099 |   |   |   | 45.3 |   |
| Walnut products   |   |                   | 601    |                |   |           | 3,070 |   |   |   | 1.1 |   |   |   | 327 |   |   |   | 1,663 |   |   |   | 0.9 |   |   |   | 274 |   |   |   | 1,407 |   |   |   | 84.6 |   |
| Other             |   |                   | 543    |                |   |           | 3,401 |   |   |   | 1.2 |   |   |   | 727 |   |   |   | 490 |   |   |   | 0.2 |   |   |   | (184) |   |   |   | 2,911 |   |   |   | 594.1 |   |
| Total        |   |                   | 46,016 |                |   |           | 271,078 |   |   |   | 100 |   |   |   | 36,906 |   |   |   | 193,192 |   |   |   | 100 |   |   |   | 9,110 |   |   |   | 77,886 |   |   |   | 40 |   |

----

----

----

| Facility            |   | Province/Region |   | Products                                                        |   | ProductionCapacity     |   | Packaging Capacity(tons/year) |   |
|---------------------|--------|-----------------|--------|-----------------------------------------------------------------|--------|------------------------|--------|------------------------------------|--------|
| Feihe Dairy    |   | Heilongjiang    |   | Infant milk formula                                   |   | 550 (tons/day)    |   |                               | 22,000 |   |
| Gannan Feihe   |   | Heilongjiang    |   | Infant milk formula                                   |   | 1,000 (tons/day)  |   |                               | N/A    |   |
| Langfang Feihe |   | Hebei           |   | N/A                                                             |   | N/A                    |   |                               | 50,000 |   |
| Shanxi Feihe   |   | Shanxi          |   | Walnut powder & Soybean powder;                        |   | 5,000 (tons/year) |   |                               | N/A    |   |
|                |   |            |   | Walnut oil                                                      |   | 1,000 (tons/year) |   |                               |   |   |
| Baiquan Dairy  |   | Heilongjiang    |   | Raw milk powder                                                 |   | 100 (tons/day)    |   |                               | N/A    |   |
| Qiqihaer Feihe |   | Heilongjiang    |   | Infant milk formula; Adult milk powder |   | 270 (tons/day)    |   |                               | N/A    |   |
|                |   |            |   | Butter                                                          |   | 15 (tons/day)     |   |                               |   |   |
| Longjiang Feihe     |   | Heilongjiang    |   | Adult milk powder;                                    |   | 16 (tons/day)          |   |                               | N/A    |   |
|                |   |            |   | Raw milk powder                                                 |   | 11 (tons/day)          |   |                               |   |   |

----

|   | · | Strengthen distribution logistics in strategic PRC markets.  We plan to focus on improving sales at existing sales points, leveraging our extensive distribution network to generate revenues in a cost-effective manner.  Our distribution network has grown in first-tier markets in the PRC, including Beijing, Shanghai, Guangzhou, Shenzhen and other major second and third-tier cities in the Pearl River Delta.  Our extensive distribution network, which reaches many provincial capital and sub-provincial cities, has special channels into first-tier markets that we plan to expand.  We believe that improving our distribution logistics in our network is important driver of our gross margins. |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Strengthen our premium quality brand awareness.  We believe that our products enjoy a reputation for high quality among those familiar with them, and our products routinely pass government and internal quality inspections.  We have increased our advertising expenses and plan to continue advertising on China Central Television, or CCTV, as well as provincial stations in China, in order to market our products as premium and super-premium products.  We believe many consumers in China tend to regard higher prices as indicative of higher quality and higher nutritional value, and as a result consumers with higher disposable incomes are increasingly inclined to purchase higher priced products, particularly in the areas of infant formula and nutritional products. |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Align sourcing, production and distribution by region.  We believe that we can increase our efficiency and decrease our costs if our products are produced from local sources and sold in local markets.  We plan to select strategic locations for our company-owned collection stations and production facilities that will enhance this efficiency.                                                                                         |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | · | Maintaining quality through world-class production processes.  We believe we can maintain our production of high quality dairy products by continuing to enter exclusive contracts with dairy farmers who can deliver quality milk, strengthening our company-owned large-scale dairy farm operations, expanding our company-owned collection stations and production facilities, and employing comprehensive testing and quality control measures. |

----

|   | · | the PRC Product Quality Law; |
|--------|--------|------------------------------|

|   | · | the PRC Food Hygiene Law; |
|--------|--------|---------------------------|

|   | · | the Access Conditions for Dairy Products Processing Industry; |
|--------|--------|---------------------------------------------------------------|

|   | · | the Implementation Rules on the Administration and Supervision of Quality and Safety in Food Producing and Processing enterprises; |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------|

|   | · | the Regulation on the Administration of Production Licenses for Industrial Products; |
|--------|--------|--------------------------------------------------------------------------------------|

|   | · | the General Measure on Food Quality Safety Market Access Examination; |
|--------|--------|-----------------------------------------------------------------------|

|   | · | the General Standards for the Labeling of Prepackaged foods; |
|--------|--------|--------------------------------------------------------------|

|   | · | the Implementation Measures on Examination of Dairy Product Production Permits; |
|--------|--------|---------------------------------------------------------------------------------|

|   | · | the Standardization Law; |
|--------|--------|--------------------------|

|   | · | the Raw Milk Collection Standard; |
|--------|--------|-----------------------------------|

|   | · | the Whole Milk Powder, Skimmed Milk Powder, Sweetened Whole Milk Powder and Flavored Milk Powder Standards; and |
|--------|--------|-----------------------------------------------------------------------------------------------------------------|

|   | · | the General Technical Requirements for Infant Formula Powder and Supplementary Cereal for Infants and Children. |
|--------|--------|-----------------------------------------------------------------------------------------------------------------|

----

----

----

----

|   | · | increasing market demand; |
|--------|--------|---------------------------|

|   | · | inflation; |
|--------|--------|------------|

|   | · | severe climatic and environmental conditions; |
|--------|--------|-----------------------------------------------|

|   | · | seasonal factors, with dairy cows generally producing more milk in temperate weather as opposed to cold or hot weather and extended unseasonably cold or hot weather potentially leading to lower than expected production; |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | commodity price fluctuations; |
|--------|--------|-------------------------------|

|   | · | currency fluctuations; and |
|--------|--------|----------------------------|

|   | · | changes in governmental and agricultural regulations and programs. |
|--------|--------|--------------------------------------------------------------------|

----

----

----

|   | · | the higher level of government involvement and regulation; |
|--------|--------|------------------------------------------------------------|

|   | · | the early stage of development of the market-oriented sector of the economy; |
|--------|--------|------------------------------------------------------------------------------|

|   | · | the rapid growth rate; |
|--------|--------|------------------------|

|   | · | the higher level of control over foreign exchange; and |
|--------|--------|--------------------------------------------------------|

|   | · | government control over the allocation of many resources. |
|--------|--------|-----------------------------------------------------------|

----

----

----

----

|   | · | it may be difficult for us to satisfy our obligations with respect to our indebtedness; |
|--------|--------|-----------------------------------------------------------------------------------------|

|   | · | our ability to obtain additional financing for working capital, capital expenditures, or general corporate or other purposes may be impaired; |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | a substantial portion of our cash flow from operations must be dedicated to the payment of principal and interest on our indebtedness, reducing the funds available to us for other purposes; |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | it may cause our trade creditors to change their terms for payment on goods and services provided to us, thereby negatively impacting our ability to receive products and services on acceptable terms; |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | it may place us at a competitive disadvantage compared to our competitors that have less debt or are less leveraged; and |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------|

|   | · | we may be more vulnerable to economic downturns, may be limited in our ability to respond to competitive pressures and may have reduced flexibility in responding to changing business, regulatory and economic conditions. |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

----

|                          |   | Closing Price Range of Common Stock |   |
|-------------------------------|--------|--------------------------------------------------------------|--------|
|                          |   | High ($)                                                     |   |   | Low ($) |   |
| Year Ended December 31, 2009: |   |                                                         |   |   |   |   |   |   |
| 1st Quarter                   |   | $                                                            | 17.08  |   |   | $ | 9.77 |   |
| 2nd Quarter                   |   | $                                                            | 43.16  |   |   | $ | 15.25 |   |
| 3rd Quarter                   |   | $                                                            | 39.95  |   |   | $ | 20.08 |   |
| 4th Quarter                   |   | $                                                            | 34.85  |   |   | $ | 20.25 |   |
|                          |   |                                                         |   |   |   |   |   |   |
|                          |   |                                                         |   |   |   |   |   |   |
| Year Ended December 31, 2010: |   |                                                         |   |   |   |   |   |   |
| 1st Quarter                   |   | $                                                            | 25.40  |   |   | $ | 19.15 |   |
| 2nd Quarter                   |   | $                                                            | 19.93  |   |   | $ | 15.63 |   |
| 3rd Quarter                   |   | $                                                            | 15.91  |   |   | $ | 6.64 |   |
| 4th Quarter                   |   | $                                                            | 13.22  |   |   | $ | 9.49 |   |

----

| Plan Category                                          |   | Number ofsecurities issuedand to be issuedupon exercise ofoutstandingoptions, warrantsand rights |    |   | Weighted-averageexercise price ofoutstanding options,warrants and rights |   |   | Number ofsecuritiesremainingavailable forfuture issuance |   |
|--------------------------------------------------------|--------|--------------------------------------------------------------------------------------------------|---------|--------|--------------------------------------------------------------------------|--------|--------|----------------------------------------------------------|--------|
| Equity compensation plans approved by security holders |   |                                                                                             | 856,254 |   |                                                                     | $      | 15.84  |                                                     |   |   | 2,143,746 |   |
| Total                                                  |   |                                                                                             | 856,254 |   |                                                                     | $      | 15.84  |                                                     |   |   | 2,143,746 |   |

----

|                                                                   |   | For the Fiscal Years Ended December 31,       |     |
|------------------------------------------------------------------------|--------|-----------------------------------------------|----------|
|                                                                   |   | 2010                                          |     |   | 2009 |   |   | 2008 |   |   | 2007 |   |   | 2006 |   |
|                                                                   |   | (in thousands except earnings per share data) |
| Selected Consolidated Statements of Operations Data:              |   |                                          |     |   |   |   |   |   |   |   |   |   |   |   |   |
| Sales                                                                  |   | $                                             | 257,100  |   |   | $ | 271,078 |   |   | $ | 193,192  |   |   | $ | 163,899 |   |   | $ | 115,082 |   |
| Cost of goods sold                                                     |   |                                          | (153,848 | )  |   |   | (140,427 | )  |   |   | (117,181 | )  |   |   | (19,430 | )  |   |   | (65,170 | )  |
| Gross profit                                                           |   |                                          | 103,252  |   |   |   | 130,651 |   |   |   | 76,011 |   |   |   | 72,469 |   |   |   | 49,912 |   |
| Sales and marketing expenses                                           |   |                                          | (99,476  | )  |   |   | (105,109 | )  |   |   | (50,686 |  ) |   |   | (40,739 | ) |   |   | (40,740 | )  |
| General and administrative expenses                                    |   |                                          | (23,380  | )  |   |   | (20,479 | )  |   |   | (19,047 | )  |   |   | (13,836 | ) |   |   | (13,840 | )  |
| Goodwill impairment                                                    |   |                                          | (1,437   | ) |   |   | (930 | )  |   |   | - |   |   |   | - |   |   |   | - |   |
| Loss on disposal of biological assets                                  |   |                                          | (10,241  | )  |   |   | (1,740 | )  |   |   | (287 | )  |   |   | - |   |   |   | - |   |
| Operating (loss) income                                                |   |                                          | (31,036  | ) |   |   | 2,368 |   |   |   | 6,460 |   |   |   | 17,893 |   |   |   | 16,256 |   |
| Interest and finance costs                                             |   |                                          | (2,516   | )  |   |   | (6,139 | )  |   |   | (18,843 | )  |   |   | (13,405 | )  |   |   | (1,521 | )  |
| Registration rights penalty                                            |   |                                          | -        |   |   |   | - |   |   |   | (2,389 | ) |   |   | (2,540 | ) |   |   |   |   |
| Gain on extinguishment of debt                                         |   |                                          | -        |   |   |   | - |   |   |   | 30,497 |   |   |   | - |   |   |   | (688 | ) |
| (Loss) gain on derivatives                                             |   |                                          | -        |   |   |   | (2,162 | ) |   |   | (8,321 | ) |   |   | 3,279 |   |   |   | - |   |
| Government subsidy                                                     |   |                                          | 23,462   |   |   |   | 21,177 |   |   |   | 6,810 |   |   |   | 8,140 |   |   |   | 7,492 |   |
| (Loss) income before income taxes and discontinued operations          |   |                                          | (10,175  | ) |   |   | 15,427 |   |   |   | 14,137 |   |   |   | 13,507 |   |   |   | 21,280 |   |
| Income tax (benefit) expenses                                          |   |                                          | (280     | ) |   |   | (746 | ) |   |   | 3,567 |   |   |   | 5,662 |   |   |   | 4,858 |   |
| (Loss) income from continuing operations, net of tax                   |   |                                          | (9,895   | ) |   |   | 16,173 |   |   |   | 10,570 |   |   |   | 7,842 |   |   |   | 16,422 |   |
| Net income from discontinued operations, net of tax                    |   |                                          | -        |   |   |   | 3,290 |   |   |   | 6,463 |   |   |   | 442 |   |   |   | - |   |
| Net (loss) income                                                      |   |                                          | (9,895   | ) |   |   | 19,463 |   |   |   | 17,033 |   |   |   | 8,284 |   |   |   | 16,422 |   |
| Net (income) loss attributable to the noncontrolling interest          |   |                                          | 311      |   |   |   | 118 |   |   |   | (10 | )  |   |   | (4 | )  |   |   | 11 |   |
| Net (loss) income attributable to Feihe International, Inc.            |   | $                                             | (9,584   | ) |   | $ | 19,581 |   |   | $ | 17,023 |   |   | $ | 8,280 |   |   | $ | 16,433 |   |
| Net (loss) income from continuing operations per share of common stock |   |                                          |     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| -Basic                                                                 |   | $                                             | (0.48    | ) |   | $ | 0.86 |   |   | $ | 0.62 |   |   | $ | 0.48 |   |   | $ | 1.11 |   |
| -Diluted                                                               |   | $                                             | (0.48    | ) |   | $ | 0.81 |   |   | $ | 0.60 |   |   | $ | 0.46 |   |   | $ | 0.98 |   |
| Net income from discontinued operations per share of common stock |   |                                          |     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| -Basic                                                                 |   | $                                             | -        |   |   | $ | 0.17 |   |   | $ | 0.38 |   |   | $ | 0.03 |   |   | $ | - |   |
| -Diluted                                                               |   | $                                             | -        |   |   | $ | 0.16 |   |   | $ | 0.37 |   |   | $ | 0.02 |   |   | $ | - |   |
| Net (loss) income per share of common stock                            |   |                                          |     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| -Basic                                                                 |   | $                                             | (0.48    | ) |   | $ | 1.03 |   |   | $ | 1.00 |   |   | $ | 0.51 |   |   | $ | 1.11 |   |
| -Diluted                                                               |   | $                                             | (0.48    | ) |   | $ | 0.97 |   |   | $ | 0.97 |   |   | $ | 0.48 |   |   | $ | 0.98 |   |
| Net (loss) income per share of redeemable common stock                 |   |                                          |     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| -Basic                                                                 |   | $                                             | (0.07    | ) |   | $ | 1.03 |   |   | $ | - |   |   | $ | - |   |   | $ | - |   |
| -Diluted                                                               |   | $                                             | (0.07    | ) |   | $ | 0.97 |   |   | $ | - |   |   | $ | - |   |   | $ | - |   |

|                              |   | December 31,   |    |
|-----------------------------------|--------|----------------|---------|
|                              |   | 2010           |    |   | 2009 |   |   | 2008 |   |   | 2007 |   |   | 2006 |   |
|                              |   | (in thousands) |    |
| Selected Balance Sheets Data:     |   |           |    |   |   |   |   |   |   |   |   |   |   |   |   |
| Cash and cash equivalents         |   | $              | 17,530  |   |   | $ | 48,165 |   |   | $ | 11,785 |   |   | $ | 11,058 |   |   | $ | 39,521 |   |
| Working capital (deficit) (1)     |   |           | (59,338 | )  |   |   | (5,499 | ) |   |   | (69,467 | )  |   |   | (49,356 | ) |   |   | 24,694 |   |
| Inventory                         |   |           | 71,683  |   |   |   | 59,045 |   |   |   | 31,003 |   |   |   | 25,949 |   |   |   | 14,657 |   |
| Trade receivables, net            |   |           | 15,886  |   |   |   | 27,495 |   |   |   | 12,275 |   |   |   | 4,519 |   |   |   | 5,566 |   |
| Property, plant and equipment     |   |           | 213,507 |   |   |   | 177,743 |   |   |   | 117,137 |   |   |   | 85,289 |   |   |   | 44,699 |   |
| Biological assets                 |   |           | 54,398  |   |   |   | 48,904 |   |   |   | 25,268 |   |   |   | - |   |   |   | - |   |
| Prepaid leases for land use right |   |           | 29,754  |   |   |   | 29,016 |   |   |   | 29,148 |   |   |   | 20,968 |   |   |   | 6,063 |   |
| Total assets                      |   |           | 464,309 |   |   |   | 440,258 |   |   |   | 358,547 |   |   |   | 260,578 |   |   |   | 117,625 |   |
| Short-term bank loans             |   |           | 68,816  |   |   |   | 58,182 |   |   |   | 7,737 |   |   |   | 8,214 |   |   |   | 11,115 |   |
| Convertible debt                  |   |           | -       |   |   |   | - |   |   |   | 91,542 |   |   |   | 55,238 |   |   |   | 16,484 |   |
| Long- term bank loans             |   |           | 37,859  |   |   |   | 39,740 |   |   |   | 13,165 |   |   |   | 484 |   |   |   | 1,581 |   |
| Derivatives                       |   |           | -       |   |   |   | - |   |   |   | - |   |   |   | 50,019 |   |   |   | - |   |
| Total liabilities                 |   |           | 236,457 |   |   |   | 223,806 |   |   |   | 242,122 |   |   |   | 178,373 |   |   |   | 61,466 |   |
| Redeemable common stock           |   |           | 66,114  |   |   |   | 53,645 |   |   |   | - |   |   |   | - |   |   |   | - |   |
| Total equity                      |   | $              | 161,738 |   |   | $ | 162,807 |   |   | $ | 116,424 |   |   | $ | 82,206 |   |   | $ | 56,159 |   |

----

|   | · | Dairy Industry Growth.  We believe the market for dairy products in China for the long term will be growing rapidly, driven by China’s economic growth, increased penetration of infant formula, and a growing female working population.  Despite the damage to the industry as a result of the melamine crisis in 2008, we expect these factors to continue to drive industry growth. We believe that the rapid economic growth of our primary markets has become an increasingly important driver of growth. |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Production Capacity. We believe much of the dairy market in China is still underserved, particularly with respect to infant formula.  In addition, since the melamine crisis in 2008, which did not involve any of our products, we have at times operated our milk production facilities at maximum capacity.  Accordingly, we believe that the ability to increase production of high quality dairy products will allow well positioned companies to significantly increase revenues and market share.                                                                                                                                                                                                               |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
|   | · | Perceptions of Product Quality and Safety. We believe that rising consumer wealth in China has contributed to a greater demand for higher-priced products with perceived quality advantages.  We believe many consumers in China tend to regard higher prices as indicative of higher quality and higher nutritional value, particularly in the areas of infant formula and nutritional products.  Accordingly, we believe our reputation for quality and safety allows us to command higher average selling prices and generate higher gross margins than competitors who do not possess the same reputation.  Conversely, any decrease in consumer perceptions of quality and safety could adversely impact us. |

----

|   | · | Seasonality.  The dairy industry remains seasonal, with higher production in the summer season and greater demand in winter months. This seasonality is offset by production of powder products with longer shelf lives.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
|   | · | Raw Material Supply and Prices.  The per unit costs of producing our infant formula are subject to the supply and price volatility of raw milk and other raw materials, which are affected by the PRC and global markets. For example, in 2008 our raw milk prices increased by approximately 45%, in 2009 decreased by approximately 20% and in 2010 increased by approximately 24% and we expect they will continue to be affected by factors such as geographic location, rising feed prices, general economic conditions such as inflation and fuel prices, and fluctuations in production, rising production costs and competition, as well as increased competition abroad and currency fluctuations. |

|   | · | Expenses Associated with Expansion and Competition.  In implementing our plan to expand our business, we face corresponding increases in expenses, especially for sales and marketing expenses, in order to attract and retain qualified talent, monitor our sales by region and address potential cross-territory selling activities by distributors, implement strategic advertising campaigns, and finance our expansion. |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                                                                               |   | Years Ended December 31, |     |
|------------------------------------------------------------------------------------|--------|-----------------------------------------|----------|
|                                                                               |   | 2010                                    |     |   | 2009 |   |   | 2008 |   |
|                                                                               |   | ($ in thousands)              |     |
| Statements of Operations Data                                                      |   |                                    |     |   |   |   |   |   |   |
| Sales                                                                              |   |                                    | 257,100  |   |   |   | 271,078 |   |   |   | 193,192 |   |
| Cost of goods sold                                                                 |   |                                    | (153,848 | ) |   |   | (140,427 | )  |   |   | (117,181 | ) |
| Gross profit                                                                       |   |                                    | 103,252  |   |   |   | 130,651 |   |   |   | 76,011 |   |
| Operating expenses:                                                                |   |                                    |     |   |   |   |   |   |   |   |   |   |
| Sales and marketing                                                                |   |                                    | (99,476  | ) |   |   | (105,109 | )  |   |   | (50,686 | ) |
| General and administrative                                                         |   |                                    | (23,380  | ) |   |   | (20,479 | )  |   |   | (19,047 | )  |
| Goodwill impairment                                                                |   |                                    | (1,437   | ) |   |   | (930 | ) |   |   | - |   |
| Loss on disposal of biological assets                                              |   |                                    | (10,241  | ) |   |   | (1,740 | ) |   |   | (287 | ) |
| Operating (loss) income                                                            |   |                                    | (31,036  | ) |   |   | 2,368 |   |   |   | 6,460 |   |
| Other income (expenses)                                                            |   |                                    | 20,861   |   |   |   | 13,059 |   |   |   | 7,676 |   |
| Income tax (benefit) expenses                                                      |   |                                    | (280     | ) |   |   | (746 | )  |   |   | 3,567 |   |
| Net income from discontinued operations, net of tax                                |   |                                    | -        |   |   |   | 3,290 |   |   |   | 6,463 |   |
| Accretion of redemption premium on redeemable common stock                         |   |                                    | (1,087   | ) |   |   | - |   |   |   | - |   |
| Net (loss) income attributable to common shareholders of Feihe International, Inc. |   |                                    | (10,670  | ) |   |   | 19,581 |   |   |   | 17,023 |   |

----

|              |   | 2010                   |   | 2009                |   | 2010 over 2009 |
|-------------------|--------|------------------------|--------|---------------------|--------|----------------|
| Product name |   | Quantity(Kg’000) |   | Amount($’000) |   | % ofSales |   | Quantity(Kg’000) |   | Amount($’000) |   | % ofSales |   | Quantity(Kg’000) |   | Amount($’000) |   | % of Sales |
|              |   |                   |   |                |   |           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Milk powder       |   |                   | 22,816 |                |   |           | 180,218 |   |   |   | 70.1 |   |   |   | 28,783 |   |   |   | 216,230 |   |   |   | 79.8 |   |   |   | (5,967 | ) |   |   | (36,012 | ) |   |   | (16.7 | )  |
| Raw milk powder   |   |                   | 15,691 |                |   |           | 57,752 |   |   |   | 22.5 |   |   |   | 11,637 |   |   |   | 34,328 |   |   |   | 12.7 |   |   |   | 4,054 |   |   |   | 23,424 |   |   |   | 68.2 |   |
| Soybean powder    |   |                   | 4,917  |                |   |           | 10,812 |   |   |   | 4.2 |   |   |   | 3,349 |   |   |   | 7,319 |   |   |   | 2.7 |   |   |   | 1,568 |   |   |   | 3,493 |   |   |   | 47.7 |   |
| Rice cereal       |   |                   | 633    |                |   |           | 4,040 |   |   |   | 1.6 |   |   |   | 1,103 |   |   |   | 6,730 |   |   |   | 2.5 |   |   |   | (470 | ) |   |   | (2,690 | ) |   |   | (40.0 | )  |
| Walnut products   |   |                   | 263    |                |   |           | 1,511 |   |   |   | 0.6 |   |   |   | 601 |   |   |   | 3,070 |   |   |   | 1.1 |   |   |   | (338 | ) |   |   | (1,559 | ) |   |   | (50.8 | )  |
| Other             |   |                   | 2,207  |                |   |           | 2,767 |   |   |   | 1.0 |   |   |   | 543 |   |   |   | 3,401 |   |   |   | 1.2 |   |   |   | 1,664 |   |   |   | (634 | ) |   |   | (18.6 | )  |
| Total        |   |                   | 46,527 |                |   |           | 257,100 |   |   |   | 100 |   |   |   | 46,016 |   |   |   | 271,078 |   |   |   | 100 |   |   |   | 511 |   |   |   | (13,978 | ) |   |   | (5.2 | )  |

|                                        |   | 2010   |    |   | 2009   |   |
|---------------------------------------------|--------|--------|---------|--------|--------|--------|
| Sales revenues (in thousands)               |   | $      | 257,100 |   |   | $      | 271,078 |   |
| Total sales volume (kilograms in thousands) |   |   | 46,527  |   |   |   | 46,016 |   |
| Average selling prices/kilogram             |   | $      | 5.53    |   |   | $      | 5.89 |   |

----

|            |   | Average Price Per Kilogram |   |   | Percentage |   |
|-----------------|--------|-------------------------------------------|--------|--------|------------|--------|
| Product         |   | 2010                                      |   |   | 2009       |   |   | Change |   |
| Milk powder     |   | $                                         | 7.90   |   |       | $      | 7.51 |   |   |   | 5.2 |   |
| Raw milk powder |   |                                      | 3.68   |   |       |   | 2.95 |   |   |   | 24.7 |   |
| Soybean powder  |   |                                      | 2.20   |   |       |   | 2.19 |   |   |   | 0.5 |   |
| Rice cereal     |   |                                      | 6.38   |   |       |   | 6.10 |   |   |   | 4.6 |   |
| Walnut products |   |                                      | 5.75   |   |       |   | 5.11 |   |   |   | 12.5 |   |
| Other           |   |                                      | 1.25   |   |       |   | 6.27 |   |   |   | (80.0 | )  |
| Total      |   | $                                         | 5.53   |   |       | $      | 5.89 |   |   |   | (6.1 | )  |

----

----

|              |   | 2009                   |   | 2008                |   | 2009 over 2008 |
|-------------------|--------|------------------------|--------|---------------------|--------|----------------|
| Product name |   | Quantity(Kg’000) |   | Amount($’000) |   | % ofSales |   | Quantity(Kg’000) |   | Amount($’000) |   | % ofSales |   | Quantity(Kg’000) |   | Amount($’000) |   | % of Sales |   |
|              |   |                   |   |                |   |           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Milk powder       |   |                   | 28,783 |                |   |           | 216,230 |   |   |   | 79.8 |   |   |   | 16,311 |   |   |   | 121,255 |   |   |   | 62.8 |   |   |   | 12,472 |   |   |   | 94,975 |   |   |   | 78.3 |   |   |
| Raw milk powder   |   |                   | 11,637 |                |   |           | 34,328 |   |   |   | 12.7 |   |   |   | 16,572 |   |   |   | 60,753 |   |   |   | 31.4 |   |   |   | (4,935 | ) |   |   | (26,425 | ) |   |   | (43.5 | )  |   |
| Soybean powder    |   |                   | 3,349  |                |   |           | 7,319 |   |   |   | 2.7 |   |   |   | 2,153 |   |   |   | 4,400 |   |   |   | 2.3 |   |   |   | 1,196 |   |   |   | 2,919 |   |   |   | 66.3 |   |   |
| Rice cereal       |   |                   | 1,103  |                |   |           | 6,730 |   |   |   | 2.5 |   |   |   | 816 |   |   |   | 4,631 |   |   |   | 2.4 |   |   |   | 287 |   |   |   | 2,099 |   |   |   | 45.3 |   |   |
| Walnut products   |   |                   | 601    |                |   |           | 3,070 |   |   |   | 1.1 |   |   |   | 327 |   |   |   | 1,663 |   |   |   | 0.9 |   |   |   | 274 |   |   |   | 1,407 |   |   |   | 84.6 |   |   |
| Other             |   |                   | 543    |                |   |           | 3,401 |   |   |   | 1.2 |   |   |   | 727 |   |   |   | 490 |   |   |   | 0.2 |   |   |   | (184 | ) |   |   | 2,911 |   |   |   | 594.1 |   |   |
| Total        |   |                   | 46,016 |                |   |           | 271,078 |   |   |   | 100 |   |   |   | 36,906 |   |   |   | 193,192 |   |   |   | 100 |   |   |   | 9,110 |   |   |   | 77,886 |   |   |   | 40 |   |   |

|                                        |   | 2009   |    |   | 2008   |   |
|---------------------------------------------|--------|--------|---------|--------|--------|--------|
| Sales revenues (in thousands)               |   | $      | 271,078 |   |   | $      | 193,192 |   |
| Total sales volume (kilograms in thousands) |   |   | 46,016  |   |   |   | 36,906 |   |
| Average selling prices/kilogram             |   | $      | 5.89    |   |   | $      | 5.23 |   |

|            |   | Average Price Per Kilogram |   |   | Percentage |   |
|-----------------|--------|-------------------------------------------|--------|--------|------------|--------|
| Product         |   | 2009                                      |   |   | 2008       |   |   | Change |   |
| Milk powder     |   | $                                         | 7.51   |   |       | $      | 7.43 |   |   |   | 1.1 |   |
| Raw milk powder |   |                                      | 2.95   |   |       |   | 3.67 |   |   |   | (19.5 | )  |
| Soybean powder  |   |                                      | 2.19   |   |       |   | 2.04 |   |   |   | 7.4 |   |
| Rice cereal     |   |                                      | 6.10   |   |       |   | 5.68 |   |   |   | 7.4 |   |
| Walnut products |   |                                      | 5.11   |   |       |   | 5.09 |   |   |   | 0.4 |   |
| Other           |   |                                      | 6.27   |   |       |   | 0.67 |   |   |   | 829.6 |   |
| Total      |   | $                                         | 5.89   |   |       | $      | 5.23 |   |   |   | 12.6 |   |

----

----

|                                                     |   |   Year ended December 31 |
|----------------------------------------------------------|--------|----------------------------------------------|
| Net cash provided by (used in): |   | 2010                                         |   | 2009 |   |   | 2008 |   |
|                                                     |   | ($ in thousands)                   |
| Operating activities                                     |   |                                         | 5,545 |   |   |   | 27,207 |   |   |   | 22,504 |   |
| Investing activities                                     |   |                                         | (42,878 | ) |   |   | (54,649 | ) |   |   | (23,282 | ) |
| Financing activities                                     |   |                                         | 5,608 |   |   |   | 62,283 |   |   |   | (279 | ) |

|   | · | increase in inventory purchases of approximately $6.4 million reflecting our increased production in preparation to meet expected sales demand; |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | increase in advances to suppliers of approximately $4.6 million as a result of increased production combined with the rising costs of raw material, especially purchased raw milk powder which prices increased approximately 24% in 2010; |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | increased payment of approximately $6.5 million in notes payable primarily as a result of increased inventory purchases; |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------|

|   | · | decrease of government subsidies of approximately $11.5 million as a significant amount of government subsidy received in 2009 was related to the Longjiang Feihe acquisition; and |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | increase of approximately $8.2 million in advances from customers for raw milk powder primarily attributable to increased sales of raw milk powder despite an overall decrease in sales. |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|   | · | decrease of inventory purchases of approximately $20.1 million partially offset by decrease in accounts payable of $15.9 million as compared with 2008.  Because we intended to significantly expand the business in 2008 and believed our competitive position following the melamine crisis was favorable, we purchased significant amounts of raw material and accordingly produced increased levels of inventory in 2008.  Although our business plan in 2009 still includes expansion, we have shifted our product mix to higher-margin milk powder and therefore sold off excess inventory at lower margins to stabilize our inventory levels; |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | increase in trade receivables of approximately $6.3 million primarily due to increases in sales of higher-margin products in addition to our expansion within China during 2009 as compared to 2008. In 2009, we also increased credit limits available to long term customers, although we continue to require advance payments from new customers; |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | decrease in advances from customers of approximately $8.1 million, which reflected a higher balance of advance from distributors at the year end of 2008, ordering sufficient milk powder to meet the increased needs of 2009 first quarter’s sales which was a direct result of the melamine crisis; |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | increase in amounts due to related parties of approximately $8.9 million, relating to the advance received from one related company for the purchase of cattle; and |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | increase in advances to suppliers of approximately $9.7 million relating to our upcoming productions in the first half of 2010 to meet our increasing demands in the winter season.  Additionally, costs of raw material in 2009 have increased compared to 2008. |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

----

| Payment due by period(amounts in thousands of US$) |   |
|----------------------------------------------------|--------|

|                                        |   | Total          |    |   | Less than1 year |   |    | 1-3 years |   |   | 3-5 years |   |   | More than5 years |   |
|---------------------------------------------|--------|----------------|---------|--------|-----------------|--------|---------|-----------|--------|--------|-----------|--------|--------|------------------|--------|
|                                        |   | (in thousands) |    |
| Short-term debt obligations                 |   | $              | 68,816  |   |            | $      | 68,816  |      |   | $      | -         |   |   | $                | -      |   |   | $ | - |   |
| Long-term debt obligations                  |   |           | 37,859  |   |            |   | 9,756   |      |   |   | -         |   |   |             | 28,103 |   |   |   | - |   |
| Capital lease obligations                   |   |           | 756     |   |            |   | 151     |      |   |   | 454       |   |   |             | 151    |   |   |   | - |   |
| FIN 48 obligations                          |   |           | 5,062   |   |            |   | -       |      |   |   | -         |   |   |             | -      |   |   |   | - |   |
| Purchase obligations                        |   |           | 7,028   |   |            |   | 2,188   |      |   |   | 3,630     |   |   |             | 1,210  |   |   |   | - |   |
| Capital obligations                         |   |           | 5,098   |   |            |   | -       |      |   |   | -         |   |   |             | -      |   |   |   | - |   |
| Redemption of redeemable stock and interest |   |           | 65,080  |   |            |   | 48,701  |      |   |   | 16,379    |   |   |             | -      |   |   |   | - |   |
| Total                                       |   | $              | 189,699 |   |            | $      | 129,612 |      |   | $      | 45,201    |   |   | $                | 4,726  |   |   | $ | - |   |

|                                                        |   | Three Months Ended (Unaudited) |                                           |
|-------------------------------------------------------------|--------|-----------------------------------------------|------------------------------------------------|
| Fiscal 2010                                            |   | December 31                              |                                           |   | September 30 |   |   | June 30 |   |   | March 31 |   |
|                                                        |   | US$                                           |                                           |   | US$ |   |   | US$ |   |   | US$ |   |
| Sales                                                       |   |                                          | 62,328,127                                     |   |   |   | 61,141,112 |   |   |   | 52,194,506 |   |   |   | 81,435,903 |   |
| Gross profit                                                |   |                                          | 19,036,835                                     |   |   |   | 27,312,648 |   |   |   | 18,464,339 |   |   |   | 38,437,721 |   |
| Net income (loss) from continuing operations, net of tax    |   |                                          | 1,708,270                                      |   |   |   | 3,645,057 |   |   |   | (20,720,485 | )  |   |   | 5,471,903 |   |
| Net income (loss) from discontinued operations, net of tax  |   |                                          | -                                              |   |   |   | - |   |   |   | - |   |   |   | - |   |
|                                                        |   |                                          |                                           |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net income (loss) attributable to Feihe International, Inc. |   |                                          | 793,239                                        |   |   |   | 3,577,264 |   |   |   | (20,574,592 | )  |   |   | 5,533,596 |   |
|                                                        |   |                                          |                                           |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Earnings per share – Basic                            |   |                                          |                                           |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net income (loss) from continuing operations           |   |                                          | 0.08                                           |   |   |   | 0.16 |   |   |   | (0.92 | )  |   |   | 0.25 |   |
| Net income from discontinued operations                     |   |                                          | -                                              |   |   |   | - |   |   |   | - |   |   |   | - |   |
| Net income (loss)                                           |   |                                          | 0. 08                                          |   |   |   | 0.16 |   |   |   | (0.92 | )  |   |   | 0.25 |   |
|                                                        |   |                                          |                                           |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Earnings per share – Diluted                          |   |                                          |                                           |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net income (loss) from continuing operations           |   |                                          | 0. 08                                          |   |   |   | 0.16 |   |   |   | (0.92 | )  |   |   | 0.25 |   |
| Net income from discontinued operations                     |   |                                          | -                                              |   |   |   | - |   |   |   | - |   |   |   | - |   |
| Net income (loss)                                           |   |                                          | 0. 08                                          |   |   |   | 0.16 |   |   |   | (0.92 | )  |   |   | 0.25 |   |
|                                                        |   |                                          |                                           |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Earnings per redeemable common share – Basic          |   |                                          |                                           |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net income (loss) from continuing operations           |   |                                          | 0.45                                           |   |   |   |  0.16 |   |   |   |  (0.92 | )  |   |   | 0.25 |   |
| Net income from discontinued operations                     |   |                                          | -                                              |   |   |   |  - |   |   |   |  - |   |   |   |  - |   |
| Net income (loss)                                           |   |                                          | 0.45                                           |   |   |   |  0.16 |   |   |   |  (0.92 | )  |   |   | 0.25 |   |
|  Earnings per redeemable common share – Diluted  |   |                                          |                                           |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net income (loss) from continuing operations           |   |                                          | 0.45                                           |   |   |   | 0.16 |   |   |   |  (0.92 | )  |   |   | 0.25 |   |
| Net income from discontinued operations                     |   |                                          | -                                              |   |   |   | - |   |   |   | - |   |   |   | - |   |
| Net income (loss)                                           |   |                                          |        0.45 |   |   |   | 0.16 |   |   |   | (0.92 | ) |   |   | 0.25 |   |

----

|                                                        |   | Three Months Ended (Unaudited) |         |
|-------------------------------------------------------------|--------|-----------------------------------------------|--------------|
| Fiscal 2009                                            |   | December 31                              |         |   | September 30 |   |   | June 30 |   |   | March 31 |   |
|                                                        |   | US$                                           |         |   | US$ |   |   | US$ |   |   | US$ |   |
| Sales                                                       |   |                                          | 43,958,701   |   |   |   | 72,110,934 |   |   |   | 41,186,466 |   |   |   | 113,821,847 |   |
| Gross (loss) profit                                         |   |                                          | (3,040,156)  |   |   |   | 36,981,402 |   |   |   | 24,132,413 |   |   |   | 72,577,578 |   |
| Net (loss) income from continuing operations                |   |                                          | (27,046,014) |   |   |   | 11,133,549 |   |   |   | 4,328,252 |   |   |   | 27,757,421 |   |
| Net income from discontinued operations                     |   |                                          | -            |   |   |   | - |   |   |   | 3,286,694 |   |   |   | 3,214 |   |
|                                                        |   |                                          |         |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net (loss) income attributable to Feihe International, Inc. |   |                                          | (26,977,937) |   |   |   | 11,141,097 |   |   |   | 7,631,443 |   |   |   | 27,786,783 |   |
|                                                        |   |                                          |         |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Earnings per share – Basic                            |   |                                          |         |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net (loss) income from continuing operations           |   |                                          | (1.24)       |   |   |   | 0.57 |   |   |   | 0.25 |   |   |   | 1.61 |   |
| Net income from discontinued operations                     |   |                                          | -            |   |   |   | - |   |   |   | 0.19 |   |   |   | - |   |
| Net (loss) income                                           |   |                                          | (1.24)       |   |   |   | 0.57 |   |   |   | 0.44 |   |   |   | 1.61 |   |
|                                                        |   |                                          |         |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Earnings per share – Diluted                          |   |                                          |         |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net (loss) income from continuing operations           |   |                                          | (1.17)       |   |   |   | 0.52 |   |   |   | 0.24 |   |   |   | 1.55 |   |
| Net income from discontinued operations                     |   |                                          | -            |   |   |   | - |   |   |   | 0.16 |   |   |   | - |   |
| Net (loss) income                                           |   |                                          | (1.17)       |   |   |   | 0.52 |   |   |   | 0.40 |   |   |   | 1.55 |   |
|  Earnings per redeemable common stock – Basic    |   |                                          |         |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net (loss) income from continuing operations           |   |                                          | (1.24)       |   |   |   | 0.57 |   |   |   | 0.25 |   |   |   | 1.61 |   |
| Net income from discontinued operations                     |   |                                          | -            |   |   |   | - |   |   |   | 0.19 |   |   |   | - |   |
| Net (loss) income                                           |   |                                          | (1.24)       |   |   |   | 0.57 |   |   |   | 0.44 |   |   |   | 1.61 |   |
|                                                        |   |                                          |         |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Earnings per redeemable common share – Diluted        |   |                                          |         |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net (loss) income from continuing operations           |   |                                          | (1.17)       |   |   |   | 0.52 |   |   |   | 0.24 |   |   |   | 1.55 |   |
| Net income from discontinued operations                     |   |                                          | -            |   |   |   | - |   |   |   | 0.16 |   |   |   | - |   |
| Net (loss) income                                           |   |                                          | (1.17)       |   |   |   | 0.52 |   |   |   | 0.40 |   |   |   | 1.55 |   |

----

----

----

----

----

----

----

----

----

----

|   | Reports of Independent Registered Public Accounting Firm                                         |   |   | F-1                                                                                |   |
|--------|--------------------------------------------------------------------------------------------------|--------|--------|------------------------------------------------------------------------------------|--------|
|   | Consolidated Balance Sheets                                                                      |   |   | F-3                                                                                |   |
|   | Consolidated Statements of Operations                                                            |   |   | F-6                                                                                |   |
|   | Consolidated Statements of Changes in Shareholders’ Equity and Comprehensive Income (Loss) |   |   | F-6                                                                                |   |
|   | Consolidated Statements of Cash Flows                                                            |   |   | F-8                                                                                |   |
|   | Notes to the Consolidated Financial Statements                                                   |   |   | F-8                                                                                |   |
|   | Schedule I                                                                                       |   |   |              F-43 |   |

|             |   |                                                                                                                                                           |   |          |   |  Incorporated by Reference |
|------------------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|---------------|--------|-------------------------------------------|
| Exhibit No. |   | Exhibit Title                                                                                                                                             |   | FiledHerewith |   |  Form                                |   | Exhibit No. |   |  File No. |   |  Filing Date |
|             |   |                                                                                                                                                           |   |          |   |                                      |   |   |   |   |   |   |
| 2                |   | Stock Exchange Agreement, dated as of January 15, 2003, by and among the registrant, the registrant’s shareholders and Lazarus Industries, Inc.          |   |          |   | 8-K                                       |   | 2.1 |   | 000-27351 |   | 1/21/03 |
|             |   |                                                                                                                                                           |   |          |   |                                      |   |   |   |   |   |   |
| 2.1              |   | Amendment to Stock Exchange Agreement, dated as of March 5, 2003, by and among the registrant, the registrant’s shareholders and Lazarus Industries, Inc |   |          |   | 8-K/A                                     |   | 2.2 |   | 000-27351 |   | 3/5/03 |
|             |   |                                                                                                                                                           |   |          |   |                                      |   |   |   |   |   |   |
| 3.1              |   | Articles of Incorporation                                                                                                                                      |   |          |   | 10-SB                                     |   | 1 |   | 000-27351 |   | 9/16/99 |
|             |   |                                                                                                                                                           |   |          |   |                                      |   |   |   |   |   |   |
| 3.2              |   | Amendment to Articles of Incorporation                                                                                                                         |   |          |   | 10-KSB/A                                  |   | 3.2 |   | 000-27351 |   | 5/25/04 |
|             |   |                                                                                                                                                           |   |          |   |                                      |   |   |   |   |   |   |
| 3.3              |   | Articles of Amendment to Articles of Incorporation                                                                                                             |   |          |   | 8-K                                       |   | 3.1 |   | 001-32473 |   | 10/13/10 |
|             |   |                                                                                                                                                           |   |          |   |                                      |   |   |   |   |   |   |
| 3.3              |   | Bylaws                                                                                                                                                         |   |          |   | 10-SB                                     |   | 2 |   | 000-27351 |   | 9/16/99 |
|             |   |                                                                                                                                                           |   |          |   |                                      |   |   |   |   |   |   |
| 4.1              |   | Specimen certificate evidencing shares of common stock                                                                                                         |   |          |   | S-1/A                                     |   | 4.1 |   | 333-158777 |   | 5/28/09 |
|             |   |                                                                                                                                                           |   |          |   |                                      |   |   |   |   |   |   |
| 4.2              |   | Form of 7.75% Convertible Note                                                                                                                                 |   |          |   | 8-K/A                                     |   | 4.1 |   | 001-32473 |   | 10/6/06 |
|             |   |                                                                                                                                                           |   |          |   |                                      |   |   |   |   |   |   |
| 4.3              |   | Form of Common Stock Purchase Warrant                                                                                                                          |   |          |   | 8-K/A                                     |   | 4.2 |   | 001-32473 |   | 10/6/06 |
|             |   |                                                                                                                                                           |   |          |   |                                      |   |   |   |   |   |   |
| 10.1             |   | Joint Venture Agreement to organize Beijing Feihe                                                                                                              |   |          |   | 10-QSB                                    |   | 10.1 |   | 000-27351 |   | 5/17/04 |

----

| 10.2       |   | 2003 Stock Incentive Plan                                                                                                                           |   |   |   | S-8    |   | 10     |   | 333-123932 |   | 4/7/05  |
|------------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------|--------|--------|--------|--------|--------|------------|--------|---------|
|       |   |                                                                                                                                                |   |   |   |   |   |   |   |       |   |    |
| 10.3       |   | Asset Purchase Agreement, dated as of May 20, 2005, by and between the registrant and Nutricia Nutritionals Col, Ltd.                               |   |   |   | 8-K    |   | 10.1   |   | 001-32473  |   | 5/26/05 |
|       |   |                                                                                                                                                |   |   |   |   |   |   |   |       |   |    |
|  10.4 |   | Form of Subscription Agreement, dated as of October 3, 2006, by and between the registrant and investors listed therein                             |   |   |   | 8-K/A  |   | 10.1   |   | 333-128075 |   | 10/6/06 |
|       |   |                                                                                                                                                |   |   |   |   |   |   |   |       |   |    |
| 10.5       |   | Form of Registration Rights Agreement, dated as of October 3, 2006, by and between the registrant and investors listed therein                      |   |   |   | 8-K/A  |   | 10.2   |   | 333-128075 |   | 10/6/06 |
|       |   |                                                                                                                                                |   |   |   |   |   |   |   |       |   |    |
| 10.6       |   | Share Transference Agreement, dated as of July 1, 2006, by and between the registrant and Shanxi Li Santai Science and Technology Co., Ltd.         |   |   |   | S-1/A  |   | 10.16  |   | 333-128075 |   | 4/17/07 |
|       |   |                                                                                                                                                |   |   |   |   |   |   |   |       |   |    |
| 10.7       |   | Amended and Restated Notes Purchase Agreement, dated as of June 1, 2007, by and among the registrant, Leng You-Bin, Liu Hua and Citadel Equity Fund |   |   |   | 8-K    |   | 10.1   |   | 001-32473  |   | 6/4/07  |
|       |   |                                                                                                                                                |   |   |   |   |   |   |   |       |   |    |
| 10.8       |   | Indenture, dated as of June 1, 2007, by and between the registrant and The Bank of New York.                                                        |   |   |   | 8-K    |   | 10.2   |   | 001-32473  |   | 6/4/07  |

| 10.9   |   | Form of Note (attached as exhibit to the Indenture filed as Exhibit 10.19)                                             |   |   |   | 8-K    |   | 10.2   |   | 001-32473  |   | 6/4/07  |
|--------|--------|------------------------------------------------------------------------------------------------------------------------|--------|--------|--------|--------|--------|--------|--------|------------|--------|---------|
|   |   |                                                                                                                   |   |   |   |   |   |   |   |       |   |    |
| 10.10  |   | Registration Rights Agreement                                                                                          |   |   |   | 8-K    |   | 10.3   |   | 001-32473  |   | 6/4/07  |
|   |   |                                                                                                                   |   |   |   |   |   |   |   |       |   |    |
| 10.11  |   | Investor Rights Agreement                                                                                              |   |   |   | 8-K    |   | 10.4   |   | 001-32473  |   | 6/4/07  |
|   |   |                                                                                                                   |   |   |   |   |   |   |   |       |   |    |
| 10.12  |   | Share Pledge Agreement                                                                                                 |   |   |   | 8-K    |   | 10.5   |   | 001-32473  |   | 6/4/07  |
|   |   |                                                                                                                   |   |   |   |   |   |   |   |       |   |    |
| 10.13  |   | Indenture, dated as of June 27, 2007, by and among the registrant, the holders listed therein and The Bank of New York |   |   |   | S-1/A  |   | 10.25  |   | 333-128075 |   | 6/28/07 |
|   |   |                                                                                                                   |   |   |   |   |   |   |   |       |   |    |
| 10.14  |   | Form of 1% Guaranteed Senior Secured Convertible Note (attached as an exhibit to the Indenture filed as exhibit 10.25) |   |   |   | S-1/A  |   | 10.25  |   | 333-128075 |   | 6/28/07 |
|   |   |                                                                                                                   |   |   |   |   |   |   |   |       |   |    |
| 10.15  |   | Form of Accession Letter                                                                                               |   |   |   | S-1/A  |   | 10.26  |   | 333-128075 |   | 6/28/07 |
|   |   |                                                                                                                   |   |   |   |   |   |   |   |       |   |    |
| 10.16  |   | Form of Non-Competition Agreement, by and between the registrant and each of Mr. Leng You-Bin and Roger Liu            |   |   |   | S-1/A  |   | 10.27  |   | 333-128075 |   | 6/28/07 |

----

|   |   |                                                                                                                                                                           |   |   |   |   |   |   |   |       |   |     |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------|--------|--------|--------|--------|--------|------------|--------|----------|
| 10.17  |   | Joinder Agreement                                                                                                                                                              |   |   |   | S-1/A  |   | 10.28  |   | 333-128075 |   | 6/28/07  |
|   |   |                                                                                                                                                                           |   |   |   |   |   |   |   |       |   |     |
| 10.18  |   | Loan Agreement, dated as of June 27, 2007, by and between the registrant and Moveup                                                                                            |   |   |   | 10-Q/A |   | 10.1   |   | 001-32473  |   | 8/22/07  |
|   |   |                                                                                                                                                                           |   |   |   |   |   |   |   |       |   |     |
| 10.19  |   | Equity Purchase Agreement, dated as of August 2, 2007, by and among Moveup, Hunan Mulin Modern Food Company, Ltd., Australia Ausnutria Dairy Pty., Chen Yuanrong and Ausnutria |   |   |   | 10-Q/A |   | 10.2   |   | 001-32473  |   | 8/22/07  |
|   |   |                                                                                                                                                                           |   |   |   |   |   |   |   |       |   |     |
| 10.20  |   | Share Subscription Agreement, dated as of August 12, 2007, by and between Moveup and Ausnutria                                                                                 |   |   |   | 10-Q/A |   | 10.3   |   | 001-32473  |   | 8/22/07  |
|   |   |                                                                                                                                                                           |   |   |   |   |   |   |   |       |   |     |
| 10.21  |   | Share Subscription Agreement, by and between the registrant and Ausnutria                                                                                                      |   |   |   | 10-Q/A |   | 10.4   |   | 001-32473  |   | 8/22/07  |
|   |   |                                                                                                                                                                           |   |   |   |   |   |   |   |       |   |     |
| 10.22  |   | Equity Purchase Agreement, dated as of October 25, 2007, by and among Moveup, Hunan Mulin Modern Food Company, Ltd Chen Yuanrong and Ausnutria                                 |   |   |   | 8-K    |   | 10.1   |   | 001-32473  |   | 10/31/07 |
|   |   |                                                                                                                                                                           |   |   |   |   |   |   |   |       |   |     |
| 10.23  |   | Employment Agreement, dated as of April 15, 2008 by and between the registrant and Jonathan H. Chou                                                                            |   |   |   | 8-K    |   | 10.1   |   | 001-32473  |   | 4/18/08  |
|   |   |                                                                                                                                                                           |   |   |   |   |   |   |   |       |   |     |
| 10.24  |   | Supplemental Indenture, dated as of November 12, 2008, by and between the registrant and The Bank of New York Mellon, as Trustee, as amended                                   |   |   |   | 8-K/A  |   | 10.1   |   | 001-32473  |   | 11/21/08 |
|   |   |                                                                                                                                                                           |   |   |   |   |   |   |   |       |   |     |
| 10.25  |   | Agreement Regarding 2009 Notes, dated as of November 12, 2008, by and among the registrant, Leng You-Bin and the investors named therein                                       |   |   |   | 8-K/A  |   | 10.2   |   | 001-32473  |   | 11/21/08 |
|   |   |                                                                                                                                                                           |   |   |   |   |   |   |   |       |   |     |
| 10.26  |   | Share Pledge Agreement, dated as of November 12, 2008, by and among the registrant, Leng You-Bin and The Bank of New York, Mellon, as collateral agent                         |   |   |   | 8-K/A  |   | 10.3   |   | 001-32473  |   | 11/21/08 |
|   |   |                                                                                                                                                                           |   |   |   |   |   |   |   |       |   |     |
| 10.27  |   | First Amendment to Registration Rights Agreement, dated as of November 12, 2008, by and between the registrant and the investors named therein.                                |   |   |   | 8-K/A  |   | 10.4   |   | 001-32473  |   | 11/21/08 |
|   |   |                                                                                                                                                                           |   |   |   |   |   |   |   |       |   |     |
| 10.28  |   | Waiver Letter to Registration Rights Agreement, dated as of November 12, 2008, by and between the registrant and the investors named therein                                   |   |   |   | 8-K/A  |   | 10.5   |   | 001-32473  |   | 11/21/08 |
|   |   |                                                                                                                                                                           |   |   |   |   |   |   |   |       |   |     |
| 10.29  |   | Form of Amended and Restated 7.75% Convertible Note due October 2, 2009                                                                                                        |   |   |   | 8-K/A  |   | 10.6   |   | 001-32473  |   | 11/21/08 |

----

|   |   |                                                                                                |   |   |   |   |   |   |   |      |   |     |
|--------|--------|-----------------------------------------------------------------------------------------------------|--------|--------|--------|--------|--------|--------|--------|-----------|--------|----------|
| 10.30  |   | Form of Amended and Restated Common Stock Purchase Warrant                                          |   |   |   | 8-K/A  |   | 10.7   |   | 001-32473 |   | 11/21/08 |
|   |   |                                                                                                |   |   |   |   |   |   |   |      |   |     |
| 10.31  |   | Form of 2009 Stock Incentive Plan and related agreements                                            |   |   |   | 8-K/A  |   | 10.1   |   | 001-32473 |   | 5/14/09  |
|   |   |                                                                                                |   |   |   |   |   |   |   |      |   |     |
| 10.32  |   | Subscription Agreement, dated as of August 12, 2009, by and among the registrant and the Purchasers |   |   |   | 8-K    |   | 10.1   |   | 001-32473 |   | 8/12/09  |

| 10.33  |   | Registration Rights Agreement, dated as of August 26, 2009, by and among the registrant and the Purchasers                                                                                |   |   |   | 8-K    |   | 10.1   |   | 001-32473 |   | 8/26/09  |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------|--------|--------|--------|--------|--------|-----------|--------|----------|
|   |   |                                                                                                                                                                                      |   |   |   |   |   |   |   |      |   |     |
| 10.34  |   | Redemption Agreement, dated as of February 1, 2011, by and among the registrant and the Purchasers                                                                                        |   |   |   | 8-K    |   | 10.1   |   | 001-32473 |   | 2/2/11   |
|   |   |                                                                                                                                                                                      |   |   |   |   |   |   |   |      |   |     |
| 14.1   |   | Code of Business Conduct and Ethics                                                                                                                                                       |   |   |   | 10-KSB |   | 14     |   | 000-27351 |   | 3/31/05  |
|   |   |                                                                                                                                                                                      |   |   |   |   |   |   |   |      |   |     |
| 14.2   |   | Amended and Restated Code of Business Conduct and Ethics                                                                                                                                  |   |   |   | 8-K    |   | 14     |   | 001-32473 |   | 5/12/08  |
|   |   |                                                                                                                                                                                      |   |   |   |   |   |   |   |      |   |     |
| 16.1   |   | Letter of HJ & Associates, L.L.C. regarding change in certifying accountant                                                                                                           |   |   |   | 8-K    |   | 16     |   | 000-27351 |   | 8/6/03   |
|   |   |                                                                                                                                                                                      |   |   |   |   |   |   |   |      |   |     |
| 16.2   |   | Letter of Weinberg & Company, regarding change in certifying accountant                                                                                                               |   |   |   | 8-K    |   | 16     |   | 000-27351 |   | 11/17/03 |
|   |   |                                                                                                                                                                                      |   |   |   |   |   |   |   |      |   |     |
| 16.3   |   | Letter of Murrell, Hall, McIntosh & Co., PLLP, regarding change in certifying accountant                                                                                              |   |   |   | 8-K    |   | 16.1   |   | 001-32473 |   | 12/13/07 |
|   |   |                                                                                                                                                                                      |   |   |   |   |   |   |   |      |   |     |
| 16.4   |   | Letter of Grant Thornton  regarding change in certifying accountant                                                                                                             |   |   |   | 8-K    |   | 16.1   |   | 001-32473 |   | 4/15/10  |
|   |   |                                                                                                                                                                                      |   |   |   |   |   |   |   |      |   |     |
| 21.1   |   | Subsidiaries of the registrant                                                                                                                                                            |   | X      |   |   |   |   |   |      |   |     |
|   |   |                                                                                                                                                                                      |   |   |   |   |   |   |   |      |   |     |
| 23.1   |   | Consent of Deloitte Touche Tohmatsu CPA Ltd.                                                                                                                                              |   | X      |   |   |   |   |   |      |   |     |
|   |   |                                                                                                                                                                                      |   |   |   |   |   |   |   |      |   |     |
| 23.2   |   | Consent of JBPB & Co.                                                                                                                                                                 |   | X      |   |   |   |   |   |      |   |     |
|   |   |                                                                                                                                                                                      |   |   |   |   |   |   |   |      |   |     |
| 24.1   |   | Power of Attorney (included on signature page)                                                                                                                                            |   | X      |   |   |   |   |   |      |   |     |
|   |   |                                                                                                                                                                                      |   |   |   |   |   |   |   |      |   |     |
| 31.1   |   | Certification of Principal Executive Officer pursuant to Rules 13a-14 and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002                                 |   | X      |   |   |   |   |   |      |   |     |
|   |   |                                                                                                                                                                                      |   |   |   |   |   |   |   |      |   |     |
| 31.2   |   | Certification of Principal Financial Officer pursuant to Rules 13a-14 and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002                                 |   | X      |   |   |   |   |   |      |   |     |
|   |   |                                                                                                                                                                                      |   |   |   |   |   |   |   |      |   |     |
| 32.1   |   | Certification of Principal Executive Officer and Principal Financial Officer pursuant to 18 U.S.C. § 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |   | X      |   |   |   |   |   |      |   |     |

----

| March 31, 2011 | FEIHE INTERNATIONAL, INC. |                                                |
|----------------|---------------------------|-----------------------------------------------------|
|           |                      |                                                |
|           | By:                       | /s/ Leng You-Bin                                    |   |
|           |                      | Leng You-Bin, Chief Executive                       |   |
|           |                      | Officer and President (Principal Executive Officer) |   |
|           |                      |                                                |   |
|           | By:                       | /s/ Liu Hua                                         |   |
|           |                      | Liu Hua, Acting Chief Financial Officer             |   |
|           |                      | (Principal Accounting and Financial Officer)        |   |

| /s/ Leng You-Bin                                                      | March 31, 2011 |
|-----------------------------------------------------------------------|----------------|
| Leng You-Bin, Director, Chief Executive                               |           |
| Officer and President (Principal Executive Officer)                   |           |
|                                                                  |           |
| /s/ Liu Hua                                                           | March 31, 2011 |
| Liu Hua, Director, Vice Chairman, Secretary, Treasurer and Acting CFO |           |
|                                                                  |           |
| /s/ Liu Sheng-Hui                                                     | March 31, 2011 |
| Liu Sheng-Hui, Director                                               |           |
|                                                                  |           |
| /s/ Sean Shao                                                         | March 31, 2011 |
| Sean Shao, Director                                                   |           |
|                                                                  |           |
| /s/ Kirk Downing                                                      | March 31, 2011 |
| Kirk Downing, Director                                                |           |
|                                                                  |           |
| /s/ James Lewis                                                       | March 31, 2011 |
| James Lewis, Director                                                 |           |

| /s/ Neil Shen       | March 31, 2011 |
|---------------------|----------------|
| Neil Shen, Director |           |

----

----

----

|                                                                                                          |   | December 31,2010 |        |   | December 31,2009 |   |
|---------------------------------------------------------------------------------------------------------------|--------|-----------------------|-------------|--------|-----------------------|--------|
|                                                                                                          |   | US$                   |        |   | US$                   |   |
| Assets                                                                                                        |   |                  |        |   |                  |   |
| Current assets:                                                                                               |   |                  |        |   |                  |   |
| Cash and cash equivalents                                                                                     |   |                  | 17,529,582  |   |                  |   | 48,164,932 |   |
| Restricted cash                                                                                               |   |                  | 3,078,564   |   |                  |   | 784,592 |   |
| Notes receivable, net of allowance for doubtful accounts of $3,500,028 and $4,000,000, respectively           |   |                  | 136,120     |   |                  |   | 438,776 |   |
| Trade receivables, net of allowance for doubtful accounts  of $1,084,308 and $791,119, respectively |   |                  | 15,885,708  |   |                  |   | 27,495,190 |   |
| Due from related parties                                                                                      |   |                  | 1,806,889   |   |                  |   | 2,188,243 |   |
| Advances to suppliers                                                                                         |   |                  | 7,520,804   |   |                  |   | 5,908,020 |   |
| Inventories                                                                                                   |   |                  | 71,683,471  |   |                  |   | 59,044,665 |   |
| Prepayments and other current assets                                                                          |   |                  | 266,935     |   |                  |   | 1,814,472 |   |
| Income taxes receivable                                                                                       |   |                  | 4,970,271   |   |                  |   | 4,834,754 |   |
| Input value-added taxes                                                                                       |   |                  | 6,886,531   |   |                  |   | 3,697,875 |   |
| Other receivables                                                                                             |   |                  | 7,275,903   |   |                  |   | 4,704,404 |   |
| Investment in mutual funds- available-for-sale                                                                |   |                  | 139,294     |   |                  |   | 136,466 |   |
| Total current assets                                                                                          |   |                  | 137,180,072 |   |                  |   | 159,212,389 |   |
|                                                                                                          |   |                  |        |   |                  |   |   |   |
| Investments:                                                                                                  |   |                  |        |   |                  |   |   |   |
| Investment at cost                                                                                            |   |                  | 272,239     |   |                  |   | 263,264 |   |
|                                                                                                          |   |                  |        |   |                  |   |   |   |
| Property, plant and equipment:                                                                                |   |                  |        |   |                  |   |   |   |
| Property, plant and equipment, net                                                                            |   |                  | 170,354,132 |   |                  |   | 154,572,409 |   |
| Construction in progress                                                                                      |   |                  | 43,152,905  |   |                  |   | 23,170,909 |   |
|                                                                                                          |   |                  | 213,507,037 |   |                  |   | 177,743,318 |   |
| Biological assets:                                                                                            |   |                  |        |   |                  |   |   |   |
| Immature biological assets                                                                                    |   |                  | 26,713,971  |   |                  |   | 35,672,123 |   |
| Mature biological assets, net                                                                                 |   |                  | 27,683,821  |   |                  |   | 13,232,124 |   |
|                                                                                                          |   |                  | 54,397,792  |   |                  |   | 48,904,247 |   |
| Other assets:                                                                                                 |   |                  |        |   |                  |   |   |   |
| Advance to suppliers - non-current                                                                            |   |                  | 22,643,263  |   |                  |   | 18,509,948 |   |
| Deferred tax assets – non-current                                                                       |   |                  | 5,522,990   |   |                  |   | 3,632,815 |   |
| Prepaid leases for land use rights                                                                            |   |                  | 29,754,376  |   |                  |   | 29,016,486 |   |
| Other intangible assets, net                                                                                  |   |                  | 585,671     |   |                  |   | 821,331 |   |
| Goodwill                                                                                                      |   |                  | 445,842     |   |                  |   | 1,784,331 |   |
| Deferred charges, net                                                                                         |   |                  | -           |   |                  |   | 369,608 |   |
| Total assets                                                                                                  |   |                  | 464,309,282 |   |                  |   | 440,257,737 |   |

----

| Liabilities                                                                                                                                                      |   |   |        |   |   |   |          |   |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------|-------------|--------|--------|--------|---------------|--------|
| Current liabilities:                                                                                                                                             |   |   |        |   |   |   |          |   |
| Notes payable                                                                                                                                                    |   |   | 378,112     |   |   |   | 3,429,767     |   |
| Short term bank loans                                                                                                                                            |   |   | 68,816,359  |   |   |   | 58,181,712    |   |
| Accounts payable                                                                                                                                                 |   |   | 43,729,571  |   |   |   | 37,956,046    |   |
| Accrued expenses                                                                                                                                                 |   |   | 6,436,898   |   |   |   | 8,365,245     |   |
| Income taxes payable                                                                                                                                             |   |   | 1,589,165   |   |   |   | 2,980,774     |   |
| Advances from customers                                                                                                                                          |   |   | 12,183,444  |   |   |   | 6,893,947     |   |
| Due to related parties                                                                                                                                           |   |   | 79,257      |   |   |   | 10,531,851    |   |
| Advances from employees                                                                                                                                          |   |   | 456,261     |   |   |   | 483,647       |   |
| Employee benefits and salary payable                                                                                                                             |   |   | 7,018,794   |   |   |   | 4,120,053     |   |
| Other payable                                                                                                                                                    |   |   | 45,957,104  |   |   |   | 24,455,060    |   |
| Current portion of long term bank loans                                                                                                                          |   |   | 9,756,193   |   |   |   | 7,312,935     |   |
| Current portion of capital lease obligation                                                                                                                      |   |   | 116,770     |   |   |   | -             |   |
| Total current liabilities                                                                                                                                        |   |   | 196,517,928 |   |   |   | 164,711,037   |   |
|                                                                                                                                                             |   |   |        |   |   |   |          |   |
| Long term bank loans, net of current portion                                                                                                                     |   |   | 28,102,786  |   |   |   | 32,427,230    |   |
| Capital lease obligation, net of current portion                                                                                                                 |   |   | 532,467     |   |   |   | -             |   |
| Unrecognized tax benefits – non-current                                                                                                                    |   |   | 5,062,336   |   |   |   | 4,747,083     |   |
| Deferred income                                                                                                                                                  |   |   | 6,241,661   |   |   |   | 10,538,313    |   |
| Performance share obligation                                                                                                                                     |   |   | -           |   |   |   | 11,382,000    |   |
| Total liabilities                                                                                                                                                |   |   | 236,457,178 |   |   |   | 223,805,663   |   |
|                                                                                                                                                             |   |   |        |   |   |   |          |   |
| Commitments and contingencies (See Note 32)                                                                                                                      |   |   |        |   |   |   |          |   |
|                                                                                                                                                             |   |   |        |   |   |   |          |   |
|                                                                                                                                                             |   |   |        |   |   |   |          |   |
| Redeemable common stock (US$0.001 par value, 2,625,000 and 2,100,000 shares issued and outstanding as of December 31, 2010 and 2009, respectively)               |   |   | 66,113,715  |   |   |   | 53,645,093    |   |
|                                                                                                                                                             |   |   |        |   |   |   |          |   |
| Equity                                                                                                                                                           |   |   |        |   |   |   |          |   |
| Feihe International, Inc. shareholders’ equity:                                                                                                            |   |   |        |   |   |   |          |   |
| Common stock (US$0.001 par value, 50,000,000 shares authorized; 19,671,291 and 19,607,376 issued and outstanding as of December 31, 2010 and 2009, respectively) |   |   | 19,671      |   |   |   | 19,607        |   |
| Additional paid-in capital                                                                                                                                       |   |   | 57,177,680  |   |   |   | 54,482,098    |   |
| Common stock warrants                                                                                                                                       |   |   | 1,774,151   |   |   |   | 1,774,151     |   |
| Statutory reserves                                                                                                                                               |   |   | 9,132,581   |   |   |   | 6,861,224     |   |
| Accumulated other comprehensive income                                                                                                                           |   |   | 32,836,344  |   |   |   | 25,651,571    |   |
| Retained earnings                                                                                                                                                |   |   | 60,731,029  |   |   |   | 73,672,879    |   |
| Total Feihe International, Inc. shareholders’ equity                                                                                                       |   |   | 161,671,456 |   |   |   | 162,461,530   |   |
|  Noncontrolling interests                                                                                                                                   |   |   | 66,933      |   |   |   | 345,451  |   |
|                                                                                                                                                             |   |   |        |   |   |   |          |   |
|                                                                                                                                                             |   |   |        |   |   |   |          |   |
| Total equity                                                                                                                                                     |   |   | 161,738,389 |   |   |   | 162,806,981   |   |
|                                                                                                                                                             |   |   |        |   |   |   |          |   |
| Total liabilities, redeemable common stock and equity                                                                                                            |   |   | 464,309,282 |   |   |   | 440,257,737   |   |

----

|                                                                                                   |   |   For the years ended December 31, |         |
|--------------------------------------------------------------------------------------------------------|--------|------------------------------------------------------------------|--------------|
|                                                                                                   |   | 2010                                                             |         |   | 2009 |   |   | 2008 |   |
|                                                                                                   |   | US$                                                              |         |   | US$ |   |   | US$ |   |
|                                                                                                   |   |                                                             |         |   |   |   |   |   |   |
| Sales                                                                                                  |   |                                                             | 257,099,648  |   |   |   | 271,077,948 |   |   |   | 193,191,710 |   |
|                                                                                                   |   |                                                             |         |   |   |   |   |   |   |   |   |   |
| Cost of goods sold                                                                                     |   |                                                             | (153,848,105 | )  |   |   | (140,426,711 | ) |   |   | (117,180,986 | )  |
|                                                                                                   |   |                                                             |         |   |   |   |   |   |   |   |   |   |
| Gross profit                                                                                           |   |                                                             | 103,251,543  |   |   |   | 130,651,237 |   |   |   | 76,010,724 |   |
|                                                                                                   |   |                                                             |         |   |   |   |   |   |   |   |   |   |
| Operating expenses:                                                                                    |   |                                                             |         |   |   |   |   |   |   |   |   |   |
| Sales and marketing                                                                                    |   |                                                             | (99,475,595  | )  |   |   | (105,109,120 | )  |   |   | (50,685,804 | )  |
| General and administrative                                                                             |   |                                                             | (23,380,145  | )  |   |   | (20,478,875 | ) |   |   | (19,046,939 | )  |
| Goodwill impairment                                                                                    |   |                                                             | (1,437,005   | ) |   |   | (929,526 | )  |   |   | - |   |
| Loss on disposal of biological assets                                                                  |   |                                                             | (10,240,865  | ) |   |   | (1,739,714 | ) |   |   | (286,727 | ) |
| Total operating expenses                                                                               |   |                                                             | (134,533,610 | )  |   |   | (128,257,235 | )  |   |   | (70,019,470 | )  |
|                                                                                                   |   |                                                             |         |   |   |   |   |   |   |   |   |   |
| Other operating income (expense), net                                                                  |   |                                                             | 245,931      |   |   |   | (25,553 | ) |   |   | 469,133 |   |
| Operating (loss) income                                                                                |   |                                                             | (31,036,136  | )  |   |   | 2,368,449 |   |   |   | 6,460,387 |   |
|                                                                                                   |   |                                                             |         |   |   |   |   |   |   |   |   |   |
| Other income (expenses):                                                                               |   |                                                             |         |   |   |   |   |   |   |   |   |   |
| Interest income                                                                                        |   |                                                             | 294,915      |   |   |   | 306,691 |   |   |   | 579,724 |   |
| Interest and finance costs                                                                             |   |                                                             | (2,516,425   | )  |   |   | (6,139,152 | )  |   |   | (18,843,032 | ) |
| Amortization of deferred charges                                                                       |   |                                                             | (379,413     | )  |   |   | (124,110 | ) |   |   | (657,258 | ) |
| Registration rights penalty                                                                            |   |                                                             | -            |   |   |   | - |   |   |   | (2,389,077 | ) |
| Gain on extinguishment of debt                                                                         |   |                                                             | -            |   |   |   | - |   |   |   | 30,497,268 |   |
| Loss on derivatives                                                                                    |   |                                                             | -            |   |   |   | (2,162,000 | )  |   |   | (8,321,481 | )  |
| Government subsidy                                                                                     |   |                                                             | 23,462,082   |   |   |   | 21,177,132 |   |   |   | 6,810,231 |   |
|                                                                                                   |   |                                                             |         |   |   |   |   |   |   |   |   |   |
| (Loss) income before income taxes and discontinued operations                                          |   |                                                             | (10,174,977  | )  |   |   | 15,427,010 |   |   |   | 14,136,762 |   |
|                                                                                                   |   |                                                             |         |   |   |   |   |   |   |   |   |   |
| Income tax (benefit) expenses                                                                          |   |                                                             | (279,722     | )  |   |   | (746,198 | )  |   |   | 3,567,135 |   |
| (Loss) income from continuing operations                                                               |   |                                                             | (9,895,255   | )  |   |   | 16,173,208 |   |   |   | 10,569,627 |   |
|                                                                                                   |   |                                                             |         |   |   |   |   |   |   |   |   |   |
| Net income from discontinued operations, net of tax                                                    |   |                                                             | -            |   |   |   | 3,289,908 |   |   |   | 6,462,878 |   |
| Net (loss) income                                                                                      |   |                                                             | (9,895,255   | ) |   |   | 19,463,116 |   |   |   | 17,032,505 |   |
| Net loss (income) attributable to noncontrolling interests                                             |   |                                                             | 311,384      |   |   |   | 118,270 |   |   |   | (9,470 | ) |
| Accretion of redemption premium on redeemable common stock                                             |   |                                                             | (1,086,622   | ) |   |   | - |   |   |   | - |   |
| Net (loss) income attributable to common shareholders of Feihe International, Inc.                     |   |                                                             | (10,670,493  | )  |   |   | 19,581,386 |   |   |   | 17,023,035 |   |
| Net (loss) income  from  continuing operations per share of common stock           |   |                                                             |         |   |   |   |   |   |   |   |   |   |
| Basic                                                                                                  |   |                                                             | (0.48        | ) |   |   | 0.86 |   |   |   | 0.62 |   |
| Diluted                                                                                                |   |                                                             | (0.48        | ) |   |   | 0.81 |   |   |   | 0.60 |   |
| Net (loss) income from continuing operations per share of redeemable common stock                 |   |                                                             |         |   |   |   |   |   |   |   |   |   |
| Basic                                                                                                  |   |                                                             | (0.07        | ) |   |   | 0.86 |   |   |   | - |   |
| Diluted                                                                                                |   |                                                             | (0.07        | ) |   |   | 0.81 |   |   |   | - |   |
|                                                                                                   |   |                                                             |         |   |   |   |   |   |   |   |   |   |
| Net (loss) income from discontinued operations, net of tax per common stock                       |   |                                                             |         |   |   |   |   |   |   |   |   |   |
| Basic                                                                                                  |   |                                                             | -            |   |   |   | 0.17 |   |   |   | 0.38 |   |
| Diluted                                                                                                |   |                                                             | -            |   |   |   | 0.16 |   |   |   | 0.37 |   |
| Net (loss) income from discontinued operations, net of tax, per share of redeemable common stock  |   |                                                             |         |   |   |   |   |   |   |   |   |   |
| Basic                                                                                                  |   |                                                             | -            |   |   |   | 0.17 |   |   |   | - |   |
| Diluted                                                                                                |   |                                                             | -            |   |   |   | 0.16 |   |   |   | - |   |
| Net (loss) income per share of common stock                                                            |   |                                                             |         |   |   |   |   |   |   |   |   |   |
| Basic                                                                                                  |   |                                                             | (0.48        | )  |   |   |   1.03 |   |   |   |   1.00 |   |
| Diluted                                                                                                |   |                                                             | (0.48        | ) |   |   | 0.97 |   |   |   | 0.97 |   |
| Net (loss) income per share of redeemable common stock                                                 |   |                                                             |         |   |   |   |   |   |   |   |   |   |
| Basic                                                                                                  |   |                                                             | (0.07        | )  |   |   | 1.03 |   |   |   | - |   |
| Diluted                                                                                                |   |                                                             | (0.07        | ) |   |   | 0.97 |   |   |   | - |   |
|                                                                                                   |   |                                                             |         |   |   |   |   |   |   |   |   |   |
| Weighted average shares used in calculating net (loss) income per share of common stock                |   |                                                             |         |   |   |   |   |   |   |   |   |   |
| Basic                                                                                                  |   |                                                             | 19,647,844   |   |   |   | 18,273,652 |   |   |   | 16,993,390 |   |
| Diluted                                                                                                |   |                                                             | 19,647,844   |   |   |   | 19,449,913 |   |   |   | 17,636,862 |   |
|                                                                                                   |   |                                                             |         |   |   |   |   |   |   |   |   |   |
| Weighted average shares used in calculating net (loss) income per share of redeemable common stock     |   |                                                             |         |   |   |   |   |   |   |   |   |   |
| Basic                                                                                                  |   |                                                             | 2,625,000    |   |   |   | 730,685 |   |   |   | - |   |
| Diluted                                                                                           |   |                                                             | 2,625,000    |   |   |   | 730,685 |   |   |   | - |   |

----

|                                                            |   | Feihe International, Inc. Shareholders |       |   |   |   |   |       |   |
|-----------------------------------------------------------------|--------|----------------------------------------|------------|--------|--------|--------|--------|------------|--------|
|                                                            |   | Common Stock                           |       |   |   |   |   |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                            |   | (US$0.001 par value)         |       |   |   |   |   |       |   |   |   |   |   | Accumulated |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                            |   | Number                                 |       |   |   |   |   | Additional |   |   | Common |   |   |   |   |   | Other |   |   |   |   |   |   |   |   |   |   |   | Total |   |
|                                                            |   | of                                     |       |   | Par    |   |   | Paid-in    |   |   | Stock |   |   | Statutory |   |   | Comprehensive |   |   | Retained |   |   | Noncontrolling |   |   | Total |   |   | Comprehensive |   |
|                                                            |   | Shares                                 |       |   | Value  |   |   | Capital    |   |   | Warrants |   |   | Reserves |   |   | Income |   |   | Earnings |   |   | Interest |   |   | Equity |   |   | Income (Loss) |   |
|                                                            |   |                                   |       |   | US$    |   |   | US$        |   |   | US$ |   |   | US$ |   |   | US$ |   |   | US$ |   |   | US$ |   |   | US$ |   |   | US$ |   |
|                                                            |   |                                   |       |   |   |   |   |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Balance as of January 1, 2008                                   |   |                                   | 16,961,768 |   |   |   | 16,961 |       |   |   | 22,629,333 |   |   |   | 3,011,444 |   |   |   | 6,040,382 |   |   |   | 12,081,467 |   |   |   | 37,889,300 |   |   |   | 536,977 |   |   |   | 82,205,864 |   |   |   |   |
| Warrant exercise                                                |   |                                   | 3,000      |   |   |   | 3      |       |   |   | 14,743 |   |   |   | (7,996 | ) |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 6,750 |   |   |   |   |
| Shares issued for services                                      |   |                                   | 72,500     |   |   |   | 73     |       |   |   | 1,092,578 |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 1,092,651 |   |   |   |   |
| Shares issued for notes conversion                              |   |                                   | 216,639    |   |   |   | 217    |       |   |   | 2,881,082 |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   |   |   |   |   | 2,881,299 |   |   |   |   |
| Stock compensation                                              |   |                                   | -          |   |   |   | -      |       |   |   | 140,689 |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 140,689 |   |   |   |   |
| Net income                                                      |   |                                   | -          |   |   |   | -      |       |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 17,023,035 |   |   |   | 9,470 |   |   |   | 17,032,505 |   |   |   | 17,032,505 |   |
| Currency translation adjustments                                |   |                                   | -          |   |   |   | -      |       |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 13,169,453 |   |   |   | - |   |   |   | - |   |   |   | 13,169,453 |   |   |   | 13,169,453 |   |
| Change in fair value of available-for-sale investment           |   |                                   | -          |   |   |   | -      |       |   |   | - |   |   |   | - |   |   |   | - |   |   |   | (104,865 | ) |   |   | - |   |   |   | - |   |   |   | (104,865 | ) |   |   | (104,865 | ) |
| Comprehensive income                                            |   |                                   |       |   |   |   |   |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   | 30,097,093 |   |
| Appropriation to statutory reserves                             |   |                                   | -          |   |   |   | -      |       |   |   | - |   |   |   | - |   |   |   | 820,842 |   |   |   | - |   |   |   | (820,842 | ) |   |   | - |   |   |   | - |   |   |   |   |   |
| Balance as of December 31, 2008                                 |   |                                   | 17,253,907 |   |   |   | 17,254 |       |   |   | 26,758,425 |   |   |   | 3,003,448 |   |   |   | 6,861,224 |   |   |   | 25,146,055 |   |   |   | 54,091,493 |   |   |   | 546,447 |   |   |   | 116,424,346 |   |   |   |   |   |
| Warrant exercise                                                |   |                                   | 804,347    |   |   |   | 804    |       |   |   | 3,066,962 |   |   |   | (1,229,297 | ) |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 1,838,469 |   |   |   |   |   |
| Stock compensation                                              |   |                                   | -          |   |   |   | -      |       |   |   | 2,196,106 |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 2,196,106 |   |   |   |   |   |
| Shares issued for notes conversion                              |   |                                   | 1,549,122  |   |   |   | 1,549  |       |   |   | 22,460,605 |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 22,462,154 |   |   |   |   |   |
| Net income                                                      |   |                                   | -          |   |   |   | -      |       |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 19,581,386 |   |   |   | (118,270 | ) |   |   | 19,463,116 |   |   |   | 19,463,116 |   |
| Currency translation adjustments                                |   |                                   | -          |   |   |   | -      |       |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 446,554 |   |   |   | - |   |   |   | - |   |   |   | 446,554 |   |   |   | 446,554 |   |
| Change in fair value of available-for-sale investment           |   |                                   | -          |   |   |   | -      |       |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 58,962 |   |   |   | - |   |   |   | - |   |   |   | 58,962 |   |   |   | 58,962 |   |
| Comprehensive income                                            |   |                                   |       |   |   |   |   |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   | 19,968,632 |   |
| Sale of a subsidiary                                            |   |                                   | -          |   |   |   | -      |       |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | (82,726 | ) |   |   | (82,726 | ) |   |   |   |   |
| Balance as of December 31, 2009                                 |   |                                   | 19,607,376 |   |   |   | 19,607 |       |   |   | 54,482,098 |   |   |   | 1,774,151 |   |   |   | 6,861,224 |   |   |   | 25,651,571 |   |   |   | 73,672,879 |   |   |   | 345,451 |   |   |   | 162,806,981 |   |   |   |   |   |
| Shares issued for services                                      |   |                                   | 55,915     |   |   |   | 56     |       |   |   | 889,318 |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 889,374 |   |   |   |   |   |
| Stock compensation                                              |   |                                   | -          |   |   |   | -      |       |   |   | 1,710,272 |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 1,710,272 |   |   |   |   |   |
| Issuance of common stock in connection with exercise of options |   |                                   | 8,000      |   |   |   | 8      |       |   |   | 95,992 |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 96,000 |   |   |   |   |   |
| Net loss                                                        |   |                                   | -          |   |   |   | -      |       |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | (9,583,871 | ) |   |   | (311,384 | ) |   |   | (9,895,255 | ) |   |   | (9,895,255 | ) |
| Accretion of redemption premium on redeemable common stock      |   |                                   | -          |   |   |   | -      |       |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | (1,086,622 | ) |   |   | - |   |   |   | (1,086,622 | ) |   |   |   |   |
| Currency translation adjustments                                |   |                                   | -          |   |   |   | -      |       |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 7,181,945 |   |   |   | - |   |   |   | 21,719 |   |   |   | 7,203,664 |   |   |   | 7,203,664 |   |
| Change in fair value of available-for- sale investment          |   |                                   | -          |   |   |   | -      |       |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 2,828 |   |   |   | - |   |   |   | - |   |   |   | 2,828 |   |   |   | 2,828 |   |
| Comprehensive loss                                              |   |                                   |       |   |   |   |   |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   | (2,688,763 | ) |
| Dividend distributed to noncontrolling interests                |   |                                   | -          |   |   |   | -      |       |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | (208,225 | ) |   |   | (208,225 | ) |   |   |   |   |
| Investment in an existing subsidiary                            |   |                                   | -          |   |   |   | -      |       |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 219,372 |   |   |   | 219,372 |   |   |   |   |   |
| Appropriation to statutory reserve                              |   |                                   | -          |   |   |   | -      |       |   |   | - |   |   |   | - |   |   |   | 2,271,357 |   |   |   | - |   |   |   | (2,271,357 | ) |   |   | - |   |   |   | - |   |   |   |   |   |
| Balance as of December 31, 2010                                 |   |                                   | 19,671,291 |   |   |   | 19,671 |       |   |   | 57,177,680 |   |   |   | 1,774,151 |   |   |   | 9,132,581 |   |   |   | 32,836,344 |   |   |   | 60,731,029 |   |   |   | 66,933 |   |   |   | 161,738,389 |   |   |   |   |   |

----

|                                                                              |   For the years ended December 31, |   |
|-----------------------------------------------------------------------------------|------------------------------------------------------------------|--------|
|                                                                              |                                                             | 2010   |   |   | 2009 |   |   | 2008 |   |
|                                                                              |                                                             | US$    |   |   | US$ |   |   | US$ |   |
| Cash flows from operating activities:                                             |                                                             |   |   |   |   |   |   |   |   |
| Net (loss) income                                                                 |                                                             |   | (9,895,255 | ) |   |   | 19,463,116 |   |   |   | 17,032,505 |   |
| Less: Net income from discontinued operations, net of tax                         |                                                             |   | - |   |   |   | (3,289,908) |   |   |   | (6,462,878) |   |
| Adjustments to reconcile net income to net cash provided by operating activities: |                                                             |   |   |   |   |   |   |   |   |   |   |   |
| Depreciation and amortization                                                     |                                                             |   | 8,728,275 |   |   |   | 6,631,203 |   |   |   | 5,300,479 |   |
| Depreciation of biological assets                                                 |                                                             |   | 4,223,473 |   |   |   | 1,835,364 |   |   |   | 6,816 |   |
| Loss on disposal of property, plant and equipment                                 |                                                             |   | 14,637 |   |   |   | 475,363 |   |   |   | 5,397 |   |
| Loss on disposal of biological assets                                             |                                                             |   | 10,240,865 |   |   |   | 1,739,714 |   |   |   | 286,727 |   |
| Provision for doubtful accounts                                                   |                                                             |   | (240,309 | ) |   |   | (523,473 | ) |   |   | 641,218 |   |
| Write down of inventories                                                         |                                                             |   | 1,164,384 |   |   |   | 156,297 |   |   |   | (217,045 | )  |
| Goodwill impairment                                                               |                                                             |   | 1,437,005 |   |   |   | 929,526 |   |   |   | - |   |
| Gain on debt extinguishment                                                       |                                                             |   | - |   |   |   | - |   |   |   | (30,497,268 | )  |
| Share-based compensation                                                          |                                                             |   | 2,599,646 |   |   |   | 2,196,106 |   |   |   | 1,233,339 |   |
| Registration rights penalty paid in shares                                        |                                                             |   | - |   |   |   | - |   |   |   | 2,881,299 |   |
| Interest expense from accrual of guaranteed redemption value                      |                                                             |   | - |   |   |   | - |   |   |   | 13,584,533 |   |
| Interest expense from amortization of note discounts                              |                                                             |   | - |   |   |   | 5,129,617 |   |   |   | 8,028,585 |   |
| Gain on waived interest expense                                                   |                                                             |   | - |   |   |   | (550,000 | ) |   |   | - |   |
| Loss on derivatives                                                               |                                                             |   | - |   |   |   | 2,162,000 |   |   |   | 8,321,481 |   |
| Amortization of deferred charges                                                  |                                                             |   | 379,413 |   |   |   | 124,110 |   |   |   | 657,258 |   |
| Gain on sales of subsidiary                                                       |                                                             |   | - |   |   |   | (2,552,733 | ) |   |   | - |   |
| Changes in assets and liabilities:                                                |                                                             |   |   |   |   |   |   |   |   |   |   |   |
| Decrease (increase) in trade receivables                                          |                                                             |   | 11,683,107 |   |   |   | (14,696,220 | ) |   |   | (8,398,068 | ) |
| Decrease (increase) in due from related parties                                   |                                                             |   | 376,098 |   |   |   | (1,922,764 | ) |   |   | (150,002 | ) |
| Increase in inventories                                                           |                                                             |   | (13,612,934 | ) |   |   | (7,228,712 | ) |   |   | (27,334,926 | ) |
| (Increase) decrease in advances to suppliers                                      |                                                             |   | (1,590,555 | ) |   |   | 3,036,656 |   |   |   | (6,711,087 | )  |
| Decrease (increase)  in prepayments and other current assets            |                                                             |   | 1,526,207 |   |   |   | (1,750,761 | ) |   |   | 2,306,151 |   |
| Increase in income taxes receivable                                               |                                                             |   | (133,649 | ) |   |   | (4,834,754 | ) |   |   | - |   |
| Increase in input value-added taxes                                               |                                                             |   | (3,144,706 | ) |   |   | (4,203,496 | ) |   |   | (345,235 | )  |
| (Increase) decrease in other receivables                                          |                                                             |   | (3,002,413 | ) |   |   | 201,204 |   |   |   | (946,674 | ) |
| Decrease in notes receivable                                                      |                                                             |   | 298,484 |   |   |   | 1,058,182 |   |   |   | 1,432,072 |   |
| (Decrease) increase in notes payable                                              |                                                             |   | (3,009,594 | ) |   |   | 3,429,767 |   |   |   | - |   |
| Increase in deferred tax assets                                                   |                                                             |   | (1,864,122 | ) |   |   | (2,902,325 | )  |   |   | (730,491 | )  |
| Increase in accounts payable                                                      |                                                             |   | 5,693,947 |   |   |   | 4,528,693 |   |   |   | 20,431,092 |   |
| (Decrease) increase in accrued expenses                                           |                                                             |   | (1,901,768 | ) |   |   | (2,255,148 | ) |   |   | 4,789,735 |   |
| (Decrease) increase in income taxes payable                                       |                                                             |   | (1,372,429 | ) |   |   | 1,255,857 |   |   |   | 1,167,261 |   |
| Increase (decrease) in advances from customers                                    |                                                             |   | 5,216,591 |   |   |   | (2,970,133 | )  |   |   | 5,125,231 |   |
| (Decrease) increase in due to related parties                                     |                                                             |   | (10,308,523 | ) |   |   | 9,514,452 |   |   |   | 615,839 |   |
| (Decrease) increase in advances from employees                                    |                                                             |   | (27,010 | ) |   |   | (532,526 | )  |   |   | 441,594 |   |
| Increase in employee benefits and salary payable                                  |                                                             |   | 2,858,787 |   |   |   | - |   |   |   | 1,785,718 |   |
| Increase in other payable                                                         |                                                             |   | 3,457,904 |   |   |   | 4,248,459 |   |   |   | 9,152,276 |   |
| Increase in unrecognized tax benefits – non-current                         |                                                             |   | 310,908 |   |   |   | 1,996,196 |   |   |   | 1,036,458 |   |
| (Decrease) increase in deferred income                                            |                                                             |   | (4,561,569 | ) |   |   | 6,864,185 |   |   |   | - |   |
| Net cash provided by continuing operations                                        |                                                             |   | 5,544,895 |   |   |   | 26,763,114 |   |   |   | 24,469,390 |   |
| Net cash provided by (used in) discontinued operations                            |                                                             |   | - |   |   |   | 444,305 |   |   |   | (1,965,294 | ) |
| Net cash provided by operating activities                                         |                                                             |   | 5,544,895 |   |   |   | 27,207,419 |   |   |   | 22,504,096 |   |
|                                                                              |                                                             |   |   |   |   |   |   |   |   |   |   |   |
| Cash flows from investing activities:                                             |                                                             |   |   |   |   |   |   |   |   |   |   |   |
| Purchase of property, plant and equipment                                         |                                                             |   | (32,250,476 | ) |   |   | (66,996,852 | ) |   |   | (25,937,958 | ) |
| Purchase of biological assets                                                     |                                                             |   | (13,086,486 | ) |   |   | (22,827,020 | ) |   |   | (9,341,769 | )  |
| Decrease in time deposit                                                          |                                                             |   | - |   |   |   | - |   |   |   | 8,446,778 |   |
| Change in restricted cash                                                         |                                                             |   | (2,293,973 | ) |   |   | 388,786 |   |   |   | 589,345 |   |
| Purchase of Longjiang Feihe operation, net of $nil cash acquired                  |                                                             |   | - |   |   |   | (4,382,890 | ) |   |   | - |   |
| Deposit for disposal of a subsidiary                                              |                                                             |   | - |   |   |   | - |   |   |   | 4,352,033 |   |
| Proceeds from sale of a subsidiary, net of $310 cash disposed                     |                                                             |   | - |   |   |   | 38,957,413 |   |   |   | - |   |
| Proceeds from sale of property, plant and equipment                               |                                                             |   | 32,182 |   |   |   | 16,275 |   |   |   | - |   |
| Proceeds from disposal of biological assets                                       |                                                             |   | 4,720,595 |   |   |   | 195,326 |   |   |   | - |   |
| Net cash used in continuing operations                                            |                                                             |   | (42,878,158 | ) |   |   | (54,648,962 | ) |   |   | (21,891,571 | ) |
| Net cash used in discontinued operations                                          |                                                             |   | - |   |   |   | - |   |   |   | (1,390,763 | ) |
| Net cash used in investing activities                                             |                                                             |   | (42,878,158 | ) |   |   | (54,648,962 | ) |   |   | (23,282,334 | ) |
|                                                                              |                                                             |   |   |   |   |   |   |   |   |   |   |   |
| Cash flows from financing activities:                                             |                                                             |   |   |   |   |   |   |   |   |   |   |   |
| Proceeds from short term bank loans                                               |                                                             |   | 68,161,391 |   |   |   | 58,188,645 |   |   |   | 7,844,115 |   |
| Repayment of short term bank loans                                                |                                                             |   | (58,712,808 | ) |   |   | (7,318,715 | ) |   |   | (8,777,630 | ) |
| Proceeds from long term bank loans                                                |                                                             |   | 6,602,970 |   |   |   | 27,568,260 |   |   |   | 11,755,714 |   |
| Repayment of long term bank loans                                                 |                                                             |   | (9,815,750 | ) |   |   | (408,311 | ) |   |   | (108,369 | ) |
| Repayment of short term debt                                                      |                                                             |   | - |   |   |   | (80,450,000 | ) |   |   | (11,000,000 | )  |
| Proceeds from issuance of redeemable common stock                                 |                                                             |   | - |   |   |   | 62,865,093 |   |   |   | - |   |
| Capital injection in subsidiary by noncontrolling interests                       |                                                             |   | 219,372 |   |   |   | - |   |   |   | - |   |
| Payment on capital lease obligations                                              |                                                             |   | (735,179) |   |   |   | - |   |   |   |   | - |
| Dividend distributed to noncontrolling interest                                   |                                                             |   | (208,225 | ) |   |   | - |   |   |   | - |   |
| Proceeds from option exercise                                                     |                                                             |   | 96,000 |   |   |   | - |   |   |   | - |   |
| Proceeds from warrant exercise                                                    |                                                             |   | - |   |   |   | 1,838,469 |   |   |   | 6,750 |   |
| Net cash provided by (used in) continuing operations                              |                                                             |   | 5,607,771 |   |   |   | 62,283,441 |   |   |   | (279,420 | )  |
| Net cash provided by discontinued operations                                      |                                                             |   | - |   |   |   | - |   |   |   | - |   |
| Net cash provided by (used in) financing activities                               |                                                             |   | 5,607,771 |   |   |   | 62,283,441 |   |   |   | (279,420 | )  |
|                                                                              |                                                             |   |   |   |   |   |   |   |   |   |   |   |
| Effect of exchange rate changes on cash                                           |                                                             |   | 1,090,142 |   |   |   | 602,575 |   |   |   | 2,374,537 |   |
| Net increase in cash of discontinued operations                                   |                                                             |   | - |   |   |   | 2,108,429 |   |   |   | 3,106,821 |   |
|                                                                              |                                                             |   |   |   |   |   |   |   |   |   |   |   |
| Net (decrease) increase in cash and cash equivalents                              |                                                             |   | (30,635,350 | ) |   |   | 37,552,902 |   |   |   | 1,316,879 |   |
| Cash and cash equivalents, beginning of year                                      |                                                             |   | 48,164,932 |   |   |   | 10,612,030 |   |   |   | 9,295,151 |   |
| Cash and cash equivalents, end of year                                            |                                                             |   | 17,529,582 |   |   |   | 48,164,932 |   |   |   | 10,612,030 |   |
|                                                                              |                                                             |   |   |   |   |   |   |   |   |   |   |   |
| Supplemental disclosure of cash flow information:                                 |                                                             |   |   |   |   |   |   |   |   |   |   |   |
| Cash paid during the year for income tax                                          |                                                             |   | (1,942,509 | ) |   |   | (6,101,669 | ) |   |   | (3,084,582 | )  |
| Cash received during the year for tax refund                                      |                                                             |   | 12,677,388 |   |   |   | 16,265,458 |   |   |   | 6,715,872 |   |
| Interest paid during the year                                                     |                                                             |   | (4,797,131 | ) |   |   | (2,667,860 | ) |   |   | (1,498,952 | ) |
|                                                                              |                                                             |   |   |   |   |   |   |   |   |   |   |   |
| Supplemental disclosure of non-cash investing and financing activities:           |                                                             |   |   |   |   |   |   |   |   |   |   |   |
| Conversion of convertible debt and accrued interest on common stock          |                                                             |   | - |   |   |   | 22,462,154 |   |   |   | - |   |
| Registration rights penalty paid in shares                                        |                                                             |   | - |   |   |   | - |   |   |   | 2,881,299 |   |
| Conversion of bridge loan to redeemable common stock                              |                                                             |   | - |   |   |   | 16,000,000 |   |   |   | - |   |
| Issuance of performance shares of common stock                                    |                                                             |   | 11,382,000 |   |   |   | - |   |   |   | - |   |
| Accretion of redemption premium on redeemable common stock                        |                                                             |   | 1,086,622 |   |   |   | - |   |   |   | - |   |

----

| 1. ORGANIZATION AND NATURE OF OPERATION |
|----------------------------------------------|

| · | American Flying Crane Corporation – Investment holding                                        |
|--------|-----------------------------------------------------------------------------------------------------|
|   |                                                                                                |
| · | Langfang Flying Crane Dairy Products Co., Limited – Packaging and distributing dairy products |

| · | Gannan Flying Crane Dairy Products Co., Limited – Manufacturing dairy products        |
|--------|---------------------------------------------------------------------------------------------|
|   |                                                                                        |
| · | Heilongjiang Feihe Dairy Co., Limited – Manufacturing and distributing dairy products |

| · | Baiquan Feihe Dairy Co., Limited – Manufacturing dairy products                                                     |
|--------|---------------------------------------------------------------------------------------------------------------------------|
|   |                                                                                                                      |
| · | Beijing Feihe Biotechnology Scientific and Commercial Co., Limited – Marketing and distributing dairy products |

| · | Shanxi Feihesantai Biotechnology Scientific and Commercial Co., Limited – Manufacturing and distributing walnut and soybean products |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------|
|   |                                                                                                                                       |
| · | Heilongjiang Feihe Kedong Feedlots Co., Limited – Breeding and rearing of dairy cows, and distributing fresh milk                    |

| · | Heilongjiang Feihe Gannan Feedlots Co., Limited – Breeding and rearing of dairy cows, and distributing fresh milk |
|--------|-------------------------------------------------------------------------------------------------------------------------|

----

| · | Qiqihaer Feihe Soybean Co., Limited – Manufacturing and distributing soybean products |
|--------|---------------------------------------------------------------------------------------------|

| · | Heilongjiang Aiyingquan International Trading Co., Limited – Marketing and distributing water and cheese, specifically marketed for consumption by children                                                                                                                                                                                                                                           |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |                                                                                                                                                                                                                                                                                                                                                                                                             |
| · | Heilongjiang Flying Crane Trading Co., Limited (“Feihe Trading”) – Distributing milk and soybean related products. The subsidiary was registered in Heilongjiang province, China on January 22, 2010. The Feihe Dairy holds an 85% equity interest of the total paid-in capital of RMB 10,000,000 ( or approximately $1.5 million) of Heilongjiang Flying Crane Trading Co., Limited |

| 2. PRINCIPAL ACCOUNTING POLICIES |
|---------------------------------------|

----

----

| Buildings and plant     | 20-33 years |
|-------------------------|-------------|
| Machinery and equipment | 10-14 years |
| Office equipment        | 5 years     |
| Motor vehicles          | 5-8 years   |

----

----

| Fair value of financial instruments |
|-------------------------------------|

----

| ·   | Feihe Dairy obtained refunds from the local government authorities for 50% of its VAT and 100% of its enterprise income tax ("EIT") paid and shared by local tax authorities during the year ended December 31, 2008. It enjoys tax refunds at 40% of VAT of its paid and shared by local tax authorities, and 40% of EIT paid and shared by local tax authorities during the years 2009 to 2013; |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Gannan Feihe enjoyed 100% tax holidays during the years ended December 31, 2008 and 2009. Gannan Feihe obtained 100% of its EIT paid and shared by local tax authorities during the year ended December 31, 2010; |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Baiquan Dairy obtained refunds from the local government authorities for 50% of its VAT during the years ended December 31, 2008 and 2009, respectively.  Baiquan Dairy obtained refunds from the local government authorities for 100% and 40% EIT paid and shared by local tax authorities during the years ended December 31, 2008 and 2009, respectively. |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| Comprehensive income (loss) |
|-----------------------------|

----

|   | ·   | The balance of restricted cash of approximately $0.8 million as of December 31, 2009 has been reclassified from cash and cash equivalents.  In addition changes in notes receivable and notes payable have been reclassified from investing and financing activities to operating activities on the Consolidated Statements of Cash Flows. As a result, for the year ended December 31, 2009, net cash provided by operating activities, used in investing activities, and provided by financing activities increased approximately $10 million, increased approximately $6.2 million, and decreased by approximately $3.4 million, respectively.  For the year ended December 31, 2008 net cash provided by operating activities, used in investing activities, and used in financing activities decreased approximately $7.4 million, decreased by approximately $9.0 million, and increased approximately $1.0 million, respectively.    |
|--------|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | ·   | Total current assets as of December 31, 2009 decreased by approximately $18.4 million as a result of reclassifications of certain advances to suppliers from current to non-current slightly offset by the reclassification of available-for-sale investment into current assets. |
|--------|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | ·   | Operating income presented for the year ended December 31, 2009 decreased approximately $2.7 million and increased approximately $0.2 million for the year ended December 31, 2008, mainly as a result of reclassification of goodwill impairment and loss on disposal of biological assets from "Other income (expense)" to "Operating expense" on the Consolidated Statements of Operations. |
|--------|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | ·   | The presentation regarding noncontrolling interest was retroactively applied for December 31, 2009 and 2008. |
|--------|--------------------|--------------------------------------------------------------------------------------------------------------|

|   | ·   | Earnings per share for the years ended December 31, 2009 and 2008 have been amended to the two-class method.  |
|--------|--------------------|--------------------------------------------------------------------------------------------------------------------|

----

| 4. CONCENTRATIONS OF BUSINESS AND CREDIT RISK |
|-----------------------------------------------|

----

| 5. INCOME TAXES |
|----------------------|

|      |   | 2010   |       |   | 2009   |   |       | 2008    |   |
|-----------|--------|--------|------------|--------|--------|--------|------------|---------|--------|
|      |   | US$    |       |   | US$    |   |       | US$     |   |
| Current:  |   |   |       |   |   |   |       |    |   |   |
| Federal   |   |   | (271,969   | )      |   |   | 253,644    |    |   |   | - |   |
| State     |   |   | 4,241      |   |   |   | 912        |    |   |   | 5,823 |   |
| PRC       |   |   | 1,878,181  |   |   |   | 1,725,593  |    |   |   | 4,291,802 |   |
|      |   |   | 1,610,453  |   |   |   | 1,980,149  |    |   |   | 4,297,625 |   |
| Deferred: |   |   |       |   |   |   |       |    |   |   |   |   |
| Federal   |   |   | -          |   |   |   | -          |    |   |   | - |   |
| State     |   |   | -          |   |   |   | -          |    |   |   | - |   |
| PRC       |   |   | (1,890,175 | )      |   |   | (2,726,347 | )  |   |   | (730,490 | ) |
|      |   |   | (279,722   | )      |   |   | (746,198   | )  |   |   | 3,567,135 |   |

| Continuing operations   |   |   | (279,722 | )  |   |   | (746,198 | )      |   |   | 3,567,135 |   |
|-------------------------|--------|--------|----------|---------|--------|--------|----------|--------|--------|--------|-----------|--------|
| Discontinued operations |   |   | -        |    |   |   | 539,389  |   |   |   | 2,130,686 |   |
|                    |   |   | (279,722 | )  |   |   | (206,809 | )      |   |   | 5,697,821 |   |

----

|                  |   |   |   |   |   |   |   |   |   |   |   |   |   | 2012 and   |   |
|-----------------------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|------------|--------|
| Subsidiary            |   | 2008   |   |   | 2009   |   |   | 2010   |   |   | 2011   |   |   | thereafter |   |
|                  |   |   |   |   |   |   |   |   |   |   |   |   |   |       |   |
| Shanxi Feihe (i) |   |   | 0      | %      |   |   | 0      | %      |   |   | 12     | .5%    |   |       | 12.5   | % |   |   | 12.5%-25 | % |
| Langfang Feihe(i)     |   |   | 0      | %      |   |   | 0      | %      |   |   | 12     | .5%    |   |       | 12.5   | % |   |   | 12.5%-25 | % |
| Gannan Feihe(i)       |   |   | 0      | %      |   |   | 0      | %      |   |   | 12     | .5%    |   |       | 12.5   | % |   |   | 12.5%-25 | % |
| Kedong Farms(ii)      |   |   | 0      | %      |   |   | 0      | %      |   |   | 0      | %      |   |       | 0      | % |   |   | 0 | % |
| Gannan Farms(ii)      |   |   | 0      | %      |   |   | 0      | %      |   |   | 0      | %      |   |       | 0      | % |   |   | 0 | % |

----

|                                   |   | 2010   |      |   | 2009   |   |
|----------------------------------------|--------|--------|-----------|--------|--------|--------|
|                                   |   | US$    |      |   | US$    |   |
| Current deferred tax assets:           |   |   |      |   |   |   |
| Accrued expenses                       |   |   | 2,095,794 |   |   |   | 1,024,337 |   |
| Provision for doubtful accounts        |   |   | 1,607,115 |   |   |   | 1,541,269 |   |
| Other deferred tax assets              |   |   | 167,798   |   |   |   | 784,614 |   |
|                                   |   |   |      |   |   |   |   |   |
| Total current deferred tax assets:     |   |   | 3,870,707 |   |   |   | 3,350,220 |   |
| Less: Valuation allowance              |   |   | 1,634,394 |   |   |   | 1,675,546 |   |
| Current deferred tax assets, net:      |   |   | 2,236,313 |   |   |   | 1,674,674 |   |
|                                   |   |   |      |   |   |   |   |   |
| Non-current deferred tax assets:       |   |   |      |   |   |   |   |   |
| Stock option expense                   |   |   | 24,811    |   |   |   | 191,395 |   |
| Net operating loss carry forwards      |   |   | 3,924,715 |   |   |   | 2,295,769 |   |
| Depreciation and amortization          |   |   | 1,283,674 |   |   |   | 994,566 |   |
|                                   |   |   | 5,233,200 |   |   |   | 3,481,730 |   |
| Non-current deferred tax liabilities:  |   |   |      |   |   |   |   |   |
| Intangible assets acquired             |   |   | (141,216  | )      |   |   | (196,902 | ) |
|                                   |   |   |      |   |   |   |   |   |
| Total non-current deferred tax assets: |   |   | 5,091,984 |   |   |   | 3,284,828 |   |
| Less: Valuation allowance              |   |   | 1,805,307 |   |   |   | 1,326,686 |   |
| Non-current deferred tax assets, net:  |   |   | 3,286,677 |   |   |   | 1,958,142 |   |

----

|                                                     |   | 2010   |   |   | 2009   |   |   | 2008   |   |
|----------------------------------------------------------|--------|--------|--------|--------|--------|--------|--------|--------|--------|
|                                                     |   |   |   |   |   |   |   |   |   |
| Tax at federal statutory rate                            |   |   | 34     | %      |   |   | 34     | %      |   |   | 34 | % |
|                                                     |   |   |   |   |   |   |   |   |   |   |   |   |
| Permanent differences                                    |   |   | -12.03 | %      |   |   | 101.43 | %      |   |   | 18.33 | % |
|                                                     |   |   |   |   |   |   |   |   |   |   |   |   |
| Effect of income tax rate differences in PRC             |   |   | -16.57 | %      |   |   | -25.45 | %      |   |   | -15.55 | % |
|                                                     |   |   |   |   |   |   |   |   |   |   |   |   |
| Effect of tax holidays and preferential tax rates in PRC |   |   | 8.45   | %      |   |   | -99.79 | %      |   |   | -24.03 | % |
|                                                     |   |   |   |   |   |   |   |   |   |   |   |   |
| Change in valuation allowance                            |   |   | -9.04  | %      |   |   | -28.21 | %      |   |   | 4.75 | % |
|                                                     |   |   |   |   |   |   |   |   |   |   |   |   |
| (Decrease) increase in unrecognized tax benefit balance  |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                     |   |   | -5.32  | %      |   |   | 12.65  | %      |   |   | 6.85 | % |
|                                                     |   |   |   |   |   |   |   |   |   |   |   |   |
| Others                                                   |   |   | 3.26   | %      |   |   | 0.53   | %      |   |   | 0.88 | % |
|                                                     |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                     |   |   | 2.75   | %      |   |   | -4.84  | %      |   |   | 25.23 | % |

|                                   |   | 2010   |     |    | 2009   |   |        | 2008    |   |
|----------------------------------------|--------|--------|----------|---------|--------|--------|-------------|---------|--------|
|                                   |   | US$    |     |    | US$    |   |        | US$     |   |
| Aggregate dollar effect of tax holiday |   |   | (859,790 | )  |   |   | (16,086,536 | )  |   |   | (3,397,666 | ) |
| Per share effect—basic           |   |   | 0.04     |    |   |   | 0.85        |    |   |   | 0.20 |   |
| Per share effect—diluted         |   |   | 0.04     |    |   |   | 0.80        |    |   |   | 0.19 |   |

|                                              |   | Gross UTB |      |
|---------------------------------------------------|--------|-----------|-----------|
|                                              |   | US$       |      |
| Beginning balance as of January 1, 2009           |   |      | 3,465,640 |   |
| Increase in unrecognized tax benefits in the year |   |      | 1,529,682 |   |
| Ending balance as of December 31, 2009            |   |      | 4,995,322 |   |
| Decrease in unrecognized tax benefits in the year |   |      | (1,032    | )  |
| Ending balance as of December 31, 2010            |   |      | 4,994,290 |   |

----

| 6.  EARNINGS PER SHARE OF COMMON STOCK |
|--------------------------------------------------|

----

|                                                                                                                                                    |   | For the years endedDecember 31, |         |
|---------------------------------------------------------------------------------------------------------------------------------------------------------|--------|---------------------------------|--------------|
|                                                                                                                                                    |   | 2010                            |         |   | 2009 |   |   | 2008 |   |
| Net (loss) income attributable to Feihe International, Inc. shareholders                                                                                |   |                            |         |   |   |   |   |   |   |
| Net (loss) income from continuing operations                                                                                                            |   |                            | (9,583,871   | )  |   |   | 16,291,478 |   |   |   | 10,560,157 |   |
| Net income from discontinued operations, net of tax                                                                                                     |   |                            | -            |   |   |   | 3,289,908 |   |   |   | 6,462,878 |   |
| Net (loss) income attributable to Feihe International, Inc. shareholders                                                                                |   |                            | (9,583,871   | )  |   |   | 19,581,386 |   |   |   | 17,023,035 |   |
|                                                                                                                                                    |   |                            |         |   |   |   |   |   |   |   |   |   |
| Deemed dividends on redeemable common stock                                                                                                             |   |                            | (1,086,622   | ) |   |   | - |   |   |   | - |   |
| Net (loss) income attributable to Feihe International, Inc. shareholders allocated for computing net (loss) income per common share - basic             |   |                            | (10, 670,493 | ) |   |   | 19,581,386 |   |   |   | 17,023,035 |   |
| Net (loss) income attributable to Feihe International, Inc. allocated for computing net (loss) income per share of common stock - Basic                 |   |                            |         |   |   |   |   |   |   |   |   |   |
| Net (loss) income from continuing operations                                                                                                            |   |                            | (9,412,906   | )  |   |   | 15,665,098 |   |   |   | 10,560,157 |   |
| Net income from discontinued operations, net of tax                                                                                                     |   |                            | -            |   |   |   | 3,163,418 |   |   |   | 6,462,878 |   |
| Net (loss) income attributable to Feihe International, Inc. allocated for computing net (loss) income per share of common stock - Basic                 |   |                            | (9,412,906   | )  |   |   | 18,828,516 |   |   |   | 17,023,035 |   |
|                                                                                                                                                    |   |                            |         |   |   |   |   |   |   |   |   |   |
| Net (loss) income attributable to Feihe International, Inc. allocated for computing net (loss) income per share of redeemable common stock - Basic      |   |                            |         |   |   |   |   |   |   |   |   |   |
| Net (loss) income from continuing operations                                                                                                            |   |                            | (170,965     | )  |   |   | 626,380 |   |   |   | - |   |
| Net income from discontinued operations, net of tax                                                                                                     |   |                            | -            |   |   |   | 126,492 |   |   |   | - |   |
| Net (loss)income attributable to Feihe International, Inc. allocated for computing net (loss) income per share of redeemable common stock - Basic       |   |                            | (170,965     | )  |   |   | 752,872 |   |   |   | - |   |
| Net (loss) income attributable to Feihe International, Inc. allocated for computing net (loss) income per share of common stock - Diluted               |   |                            |         |   |   |   |   |   |   |   |   |   |
| Net (loss) income from continuing operations                                                                                                            |   |                            | (9,412,906   | )  |   |   | 15,665,098 |   |   |   | 10,560,157 |   |
| Net income from discontinued operations, net of tax                                                                                                     |   |                            | -            |   |   |   | 3,163,418 |   |   |   | 6,462,878 |   |
| Net (loss) income attributable to Feihe International, Inc. allocated for computing net (loss) income per share of common stock - Diluted               |   |                            | (9,412,906   | )  |   |   | 18,828,516 |   |   |   | 17,023,035 |   |
| Weighted-average common stock outstanding used in computing net (loss) income per share of common stock – Basic                                   |   |                            | 19,647,844   |   |   |   | 18,273,652 |   |   |   | 16,993,390 |   |
| Weighted-average common stock outstanding used in computing net (loss) income per share of common stock – Diluted (i)                             |   |                            | 19,647,844   |   |   |   | 19,449,913 |   |   |   | 17,636,862 |   |
| Weighted average shares of redeemable common stock outstanding used in computing net (loss) income per share of redeemable common stock – Basic   |   |                            | 2,625,000    |   |   |   | 730,685 |   |   |   | - |   |
| Weighted average shares of redeemable common stock outstanding used in computing net (loss) income per share of redeemable common stock – Diluted |   |                            | 2,625,000    |   |   |   | 730,685 |   |   |   | - |   |
|                                                                                                                                                    |   |                            |         |   |   |   |   |   |   |   |   |   |
| Net (loss) income per share of common stock – Basic                                                                                               |   |                            |         |   |   |   |   |   |   |   |   |   |
| (Loss) income from continuing operations attributable to Feihe International, Inc.                                                                      |   |                            | (0.48        | ) |   |   | 0.86 |   |   |   | 0.62 |   |
| Income from discontinued operations attributable to Feihe International, Inc., net of tax                                                               |   |                            | -            |   |   |   | 0.17 |   |   |   | 0.38 |   |
| Net (loss) income attributable to Feihe International, Inc.                                                                                             |   |                            | (0.48        | ) |   |   | 1.03 |   |   |   | 1.00 |   |
| Net (loss) income per share of common stock – Diluted                                                                                             |   |                            |         |   |   |   |   |   |   |   |   |   |
| (Loss) income from continuing operations attributable to Feihe International, Inc.                                                                      |   |                            | (0.48        | ) |   |   | 0.81 |   |   |   | 0.60 |   |
| Income from discontinued operations attributable to Feihe International, Inc., net of tax                                                               |   |                            | -            |   |   |   | 0.16 |   |   |   | 0.37 |   |
| Net (loss) income attributable to Feihe International, Inc.                                                                                             |   |                            | (0.48        | ) |   |   | 0.97 |   |   |   | 0.97 |   |
| Net (loss) income per share of redeemable common stock – Basic                                                                                    |   |                            |         |   |   |   |   |   |   |   |   |   |
| (Loss) income from continuing operations attributable to Feihe International, Inc.                                                                      |   |                            | (0.07        | ) |   |   | 0.86 |   |   |   | - |   |
| Income from discontinued operations attributable to Feihe International, Inc., net of tax                                                               |   |                            | -            |   |   |   | 0.17 |   |   |   | - |   |
| Net (loss) income attributable to Feihe International, Inc.                                                                                             |   |                            | (0.07        | ) |   |   | 1.03 |   |   |   | - |   |
| Net (loss) income per share of redeemable common stock – Diluted                                                                                  |   |                            |         |   |   |   |   |   |   |   |   |   |
| (Loss) income from continuing operations attributable to Feihe International, Inc.                                                                      |   |                            | (0.07        | ) |   |   | 0.81 |   |   |   | - |   |
| Income from discontinued operations attributable to Feihe International, Inc., net of tax                                                               |   |                            |         |   |   |   | 0.16 |   |   |   | - |   |
| Net (loss) income attributable to Feihe International, Inc.                                                                                             |   |                            | (0.07        | ) |   |   | 0.97 |   |   |   | - |   |

| (i)   | The following table sets forth the computation of weighted-average shares outstanding for calculating basic and diluted (loss) earnings per share for the years ended December 31: |
|-----------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|                                    |   | 2010   |       |   | 2009   |   |       | 2008   |   |
|-----------------------------------------|--------|--------|------------|--------|--------|--------|------------|--------|--------|
| Weighted-average shares – Basic   |   |   | 19,647,844 |   |   |   | 18,273,652 |   |   |   | 16,993,390 |   |
| Effect of dilutive securities           |   |   |       |   |   |   |       |   |   |   |   |   |
| Stock options                           |   |   |   -   |   |   |   | 454,995    |   |   |   | - |   |
| Warrants                                |   |   |   -   |   |   |   | 514,182    |   |   |   | 643,472 |   |
| Performance adjustment share            |   |   | -          |   |   |   | 207,084    |   |   |   | - |   |
| Weighted-average shares – Diluted |   |   | 19,647,844 |   |   |   | 19,449,913 |   |   |   | 17,636,862 |   |

| 7.  DISCONTINUED OPERATIONS |
|---------------------------------------|

|                                    |   | For the years ended December 31, |   |
|-----------------------------------------|--------|-----------------------------------------------------------|--------|
|                                    |   | 2010                                                      |   |   | 2009 |   |   | 2008 |   |
|                                    |   | US$                                                       |   |   | US$ |   |   | US$ |   |
|                                    |   |                                                      |   |   |   |   |   |   |   |
| Sales                                   |   |                                                      | -      |   |   |   | 10,451,277 |   |   |   | 38,979,045 |   |
|                                    |   |                                                      |   |   |   |   |   |   |   |   |   |   |
| Income from operations                  |   |                                                      | -      |   |   |   | 1,301,909 |   |   |   | 8,593,564 |   |
| Gain on sale of subsidiary              |   |                                                      | -      |   |   |   | 2,552,733 |   |   |   | - |   |
| Income tax expenses                     |   |                                                      | -      |   |   |   | (564,734 | ) |   |   | (2,130,686 | )  |
| Net income from discontinued operations |   |                                                      | -      |   |   |   | 3,289,908 |   |   |   | 6,462,878 |   |

----

|                                        |   | US$    |      |
|---------------------------------------------|--------|--------|-----------|
| Total purchase price                        |   |   | 4,382,890 |   |
|                                        |   |   |      |   |
| Fair value of identifiable assets acquired: |   |   |      |   |
| Property, plant and equipment, net          |   |   | 2,219,661 |   |
| Prepaid leases for land use rights          |   |   | 481,460   |   |
| Other intangible assets                     |   |   | 1,081,113 |   |
| Deferred tax asset                          |   |   | 175,980   |   |
| Goodwill                                    |   |   | 424,676   |   |
|                                        |   |   | 4,382,890 |   |

|                                                                           |   | For the year endedDecember 31, 2009 |        |   | For the yearendedDecember 31,2008 |   |
|--------------------------------------------------------------------------------|--------|-------------------------------------|-------------|--------|-----------------------------------|--------|
|                                                                           |   | US$(unaudited)                      |        |   | US$(unaudited)                    |   |
| Sales                                                                          |   |                                | 271,077,948 |   |                              |   | 193,191,710 |   |
| Net income attributable to Feihe International, Inc.                           |   |                                | 19,301,217  |   |                              |   | 16,182,110 |   |
| Net income attributable to Feihe International, Inc. per common share -basic   |   |                                | 1.06        |   |                              |   | 0.95 |   |
| Net income attributable to Feihe International, Inc. per common share -diluted |   |                                | 0.99        |   |                              |   | 0.92 |   |

----

| 10. NOTES RECEIVABLE, NET |
|--------------------------------|

|                                                                          |   | 2010   |       |   | 2009   |   |
|-------------------------------------------------------------------------------|--------|--------|------------|--------|--------|--------|
|                                                                          |   | US$    |       |   | US$    |   |
| PRC bank note, due within three months                                        |   |   | 136,120    |   |   |   | 438,776 |   |
| Promissory note, bearing interest at 8%, due on June 27, 2009 (See Note 4(3)) |   |   | 3,500,028  |   |   |   | 4,000,000 |   |
|                                                                          |   |   | 3,636,148  |   |   |   | 4,438,776 |   |
| Less: Allowance for doubtful notes receivable                                 |   |   | (3,500,028 | )      |   |   | (4,000,000 | ) |
|                                                                          |   |   | 136,120    |   |   |   | 438,776 |   |

| 11.  TRADE RECEIVABLES, NET |
|---------------------------------------|

|                                  |   | 2010   |       |   | 2009   |   |
|---------------------------------------|--------|--------|------------|--------|--------|--------|
|                                  |   | US$    |       |   | US$    |   |
| Trade receivables                     |   |   | 16,970,016 |   |   |   | 28,286,309 |   |
| Less: Allowance for doubtful accounts |   |   | (1,084,308 | )      |   |   | (791,119 | ) |
| Trade receivables, net                |   |   | 15,885,708 |   |   |   | 27,495,190 |   |

|                                       |   | 2010   |      |    | 2009   |   |
|--------------------------------------------|--------|--------|-----------|---------|--------|--------|
|                                       |   | US$    |      |    | US$    |   |
| Balance as of January 1                    |   |   | 4,791,119 |    |   |   | 5,311,331 |   |
| Add: Current year additions                |   |   | 561,016   |    |   |   | 2,198,399 |   |
| Less: Current year reductions of provision |   |   | (801,325  | )  |   |   | (2,721,872 | )  |
| Foreign exchange adjustment                |   |   | 33,526    |    |   |   | 3,261 |   |
| Balance as of December 31                  |   |   | 4,584,336 |    |   |   | 4,791,119 |   |

| 12. ADVANCES TO SUPPLIERS |
|--------------------------------|

| 13.  INVENTORIES |
|----------------------------|

|              |   | 2010   |       |   | 2009   |   |
|-------------------|--------|--------|------------|--------|--------|--------|
|              |   | US$    |       |   | US$    |   |
| Raw materials     |   |   | 27,983,563 |   |   |   | 23,360,410 |   |
| Work-in-progress  |   |   | 37,400,104 |   |   |   | 33,967,523 |   |
| Finished goods    |   |   | 6,299,804  |   |   |   | 1,716,732 |   |
| Total inventories |   |   | 71,683,471 |   |   |   | 59,044,665 |   |

----

| 14.  INVESTMENT IN MUTUAL FUNDS – AVAILABLE-FOR-SALE |
|----------------------------------------------------------------------|

|                                    |   |              |    |   | Fair value measurement                                                   |   |
|-----------------------------------------|--------|-------------------|---------|--------|------------------------------------------------------------------------------------|--------|
| Description                             |   | December 31, |    |   | Quoted pricesin activemarkets ofidentical assets(Level 1) |   |   | Significantotherobservableinputs (Level 2) |   |   | Significantunobservableinputs (Level 3) |   |
|                                    |   | US$               |    |   | US$                                                                                |   |   | US$ |   |   | US$ |   |
| Investment in mutual funds – 2010 |   |              | 139,294 |   |                                                                               |   | 139,294 |   |   |   | - |   |   |   | - |   |
| Investment in mutual funds – 2009 |   |              | 136,466 |   |                                                                               |   | 136,466 |   |   |   | - |   |   |   | - |   |

| 15. PROPERTY, PLANT AND EQUIPMENT, NET |
|---------------------------------------------|

|                               |   | 2010   |        |   | 2009   |   |
|------------------------------------|--------|--------|-------------|--------|--------|--------|
|                               |   | US$    |        |   | US$    |   |
|                               |   |   |        |   |   |   |
| Buildings and plant                |   |   | 121,592,268 |   |   |   | 111,469,845 |   |
| Machinery and equipment            |   |   | 67,521,048  |   |   |   | 55,787,234 |   |
| Office equipment                   |   |   | 4,065,779   |   |   |   | 2,793,510 |   |
| Motor vehicles                     |   |   | 3,404,990   |   |   |   | 2,210,482 |   |
|                               |   |   | 196,584,085 |   |   |   | 172,261,071 |   |
| Less: Accumulated depreciation     |   |   | (26,229,953 | )      |   |   | (17,688,662 | ) |
| Property, plant and equipment, net |   |   | 170,354,132 |   |   |   | 154,572,409 |   |

----

| 16. CONSTRUCTION IN PROGRESS |
|-----------------------------------|

|                                         |   | 2010   |       |   | 2009   |   |
|----------------------------------------------|--------|--------|------------|--------|--------|--------|
|                                         |   | US$    |       |   | US$    |   |
|                                         |   |   |       |   |   |   |
| Feihe Dairy processing facilities            |   |   | -          |   |   |   | 4,671,469 |   |
| Langfang Feihe production factory facilities |   |   | -          |   |   |   | 2,711 |   |
| Gannan Feihe production factory facilities   |   |   | 39,208,398 |   |   |   | 13,721,606 |   |
| Shanxi Feihe processing facilities           |   |   | -          |   |   |   | 51,386 |   |
| Gannan Farms facilities                      |   |   | 1,326,026  |   |   |   | 702,116 |   |
| Kedong Farms facilities                 |   |   | 1,260,399  |   |   |   | - |   |
| Feihe Soybean processing facilities          |   |   | 1,333,098  |   |   |   | 4,015,104 |   |
| Others                                       |   |   | 24,984     |   |   |   | 6,517 |   |
| Total                                        |   |   | 43,152,905 |   |   |   | 23,170,909 |   |

| 17. BIOLOGICAL ASSETS |
|----------------------------|

|                           |   | 2010   |       |   | 2009   |   |
|--------------------------------|--------|--------|------------|--------|--------|--------|
|                           |   | US$    |       |   | US$    |   |
|                           |   |   |       |   |   |   |   |
| Immature biological assets     |   |   | 26,713,971 |   |   |   | 35,672,123 |   |
| Mature biological assets       |   |   | 32,841,081 |   |   |   | 15,008,468 |   |
| Less: Accumulated depreciation |   |   | (5,157,260 | )      |   |   | (1,776,344 | ) |
|                           |   |   |       |   |   |   |   |   |
| Mature biological assets, net  |   |   | 27,683,821 |   |   |   | 13,232,124 |   |
| Total biological assets        |   |   | 54,397,792 |   |   |   | 48,904,247 |   |

----

|                               |   | December 31,2010 |    |   | December 31,2009 |   |
|------------------------------------|--------|------------------|---------|--------|------------------|--------|
|                               |   | US$              |    |   | US$              |   |
| Production permit                  |   |             | -       |   |             |   | 68,254 |   |
| Exclusive rights of milk supply    |   |             | 585,671 |   |             |   | 753,077 |   |
| Total other intangible assets, net |   |             | 585,671 |   |             |   | 821,331 |   |

| 19. GOODWILL |
|-------------------|

| 20. SHORT TERM BANK LOANS |
|--------------------------------|

----

|                                                                                                                                                                                                  |   | 2010   |            |   | 2009   |   |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------|-----------------|--------|--------|--------|
|                                                                                                                                                                                                  |   | US$    |            |   | US$    |   |
|                                                                                                                                                                                                  |   |   |            |   |   |   |   |   |
| Loan payable to a bank in the PRC, bearing interest at 5.31% per annum, secured by machinery, payable with interest on maturity, due on January 4, 2010                                               |   |   | -               |   |   |   | 2,193,881 |   |
|                                                                                                                                                                                                  |   |   |            |   |   |   |   |   |
| Loan payable to a bank in the PRC, bearing interest at 5.31% per annum, secured by machinery,  payable with interest on maturity, due on January 5, 2010                                    |   |   | -               |   |   |   | 3,656,468 |   |
|                                                                                                                                                                                                  |   |   |            |   |   |   |   |   |
| Loan payable to a bank in the PRC, bearing interest at 5.31% per annum, secured by land use rights, guaranteed by Feihe Dairy, payable with interest on maturity, due on May 22, 2010                 |   |   | -               |   |   |   | 4,972,796 |   |
|                                                                                                                                                                                                  |   |   |            |   |   |   |   |   |
| Loan payable to a bank in the PRC, bearing interest at 5.31% per annum, secured by machinery, payable with interest on maturity, due on May 22, 2010                                                  |   |   | -               |   |   |   | 2,340,139 |   |
|                                                                                                                                                                                                  |   |   |            |   |   |   |   |   |
| Loan payable to a bank in the PRC, bearing interest at 5.31% per annum, secured by machinery, payable with interest on maturity, due on March 31, 2010                                                |   |   | -          |   |   |   | 3,773,475 |   |
|                                                                                                                                                                                                  |   |   |            |   |   |   |   |   |
| Loan payable to a bank in the PRC, bearing interest at 5.31% per annum, secured by buildings of Feihe Soybean, guaranteed by Feihe Dairy, payable with interest on maturity, due on July 19, 2010 (i) |   |   | -               |   |   |   | 1,775,581 |   |
|                                                                                                                                                                                                  |   |   |            |   |   |   |   |   |
| Loan payable to a bank in the PRC, bearing interest at 5.31% per annum, guaranteed by Feihe Dairy, payable with interest on maturity, due on July 19, 2010 (i)                                        |   |   | -               |   |   |   | 1,149,593 |   |
|                                                                                                                                                                                                  |   |   |            |   |   |   |   |   |
| Loan payable to a bank in the PRC, bearing interest at 5.31% per annum, guaranteed by Feihe Dairy, payable with interest on maturity, due on August 30, 2010 (ii)                                     |   |   | -               |   |   |   | 2,925,174 |   |
|                                                                                                                                                                                                  |   |   |            |   |   |   |   |   |
| Loan payable to a bank in the PRC, bearing interest at 5.31% per annum, guaranteed by Feihe Dairy, payable with interest on maturity, due on September 28, 2010 (ii)                                  |   |   | -               |   |   |   | 1,462,587 |   |
|                                                                                                                                                                                                  |   |   |            |   |   |   |   |   |
| Loan payable to a bank in the PRC, bearing interest at 5.31% per annum, guaranteed by Feihe Dairy, payable with interest on maturity, due on September 14, 2010                                       |   |   | -               |   |   |   | 11,846,955 |   |
|                                                                                                                                                                                                  |   |   |            |   |   |   |   |   |
| Loan payable to a bank in the PRC, bearing interest at 5.31% per annum, secured by building, payable with interest on maturity, due on September 15, 2010                                             |   |   | -               |   |   |   | 2,778,915 |   |
|                                                                                                                                                                                                  |   |   |            |   |   |   |   |   |
| Loan payable to a bank in the PRC, bearing interest at 5.31% per annum, guaranteed by Feihe Dairy, payable with interest on maturity, due on October 22, 2010 (ii)                                    |   |   | -               |   |   |   | 2,925,174 |   |
|                                                                                                                                                                                                  |   |   |            |   |   |   |   |   |
| Loan payable to a bank in the PRC, bearing interest at 5.31% per annum, guaranteed by Feihe Dairy(i), payable with interest on maturity, due on July 19, 2010                                         |   |   | -               |   |   |   | 5,850,348 |   |
|                                                                                                                                                                                                  |   |   |            |   |   |   |   |   |
| Loan payable to a bank in the PRC, bearing interest at 5.31% per annum, guaranteed by Feihe Dairy, payable with interest on maturity, due on November 12, 2010                                        |   |   | -               |   |   |   | 5,850,348 |   |
|                                                                                                                                                                                                  |   |   |            |   |   |   |   |   |
| Loan payable to a bank in the PRC, bearing interest at 5.31% per annum, secured by machinery, guaranteed by Feihe Dairy, payable with interest on maturity, due on December 23, 2010                  |   |   | -               |   |   |   | 4,680,278 |   |
|                                                                                                                                                                                                  |   |   |            |   |   |   |   |   |
| Loan payable to a bank in the PRC, bearing interest at 5.31% per annum,  secured by machinery, payable with interest on maturity, due on January 17, 2011                                   |   |   | 1,361,203  |   |   |   | - |   |
|                                                                                                                                                                                                  |   |   |            |   |   |   |   |   |
| Loan payable to a bank in the PRC, bearing interest at 5.31% per annum,  payable with interest on maturity, due on July 25, 2011 (iii)                                                      |   |   | 7,562,237       |   |   |   | - |   |
|                                                                                                                                                                                                  |   |   |            |   |   |   |   |   |
| Loan payable to a bank in the PRC, bearing interest at 5.31% per annum, payable with interest on maturity, due on August 30, 2011 (vi)                                                                |   |   | 3,024,895       |   |   |   | - |   |
|                                                                                                                                                                                                  |   |   |            |   |   |   |   |   |
|  Loan payable to a bank in the PRC, bearing interest at 5.31% per annum, payable with interest on maturity, due on September 7, 2011 (v)                                                         |   |   | 7,562,237  |   |   |   | -  |   |
|                                                                                                                                                                                                  |   |   |            |   |   |   |   |   |
| Loan payable to a bank in the PRC, bearing interest at 5.31% per annum, payable with interest on maturity, due on September 14, 2011 (iv)                                                             |   |   | 5,293,566       |   |   |   | - |   |
|                                                                                                                                                                                                  |   |   |            |   |   |   |   |   |
| Loan payable to a bank in the PRC, bearing interest at 5.31% per annum,  payable with interest on maturity, due on September 27, 2011 (vi)                                                  |   |   | 1,512,447       |   |   |   | - |   |
|                                                                                                                                                                                                  |   |   |            |   |   |   |   |   |
| Loan payable to a bank in the PRC, bearing interest at 5.56% per annum, payable with interest on maturity, due on October 26, 2011 (vi)                                                               |   |   | 3,024,895       |   |   |   | - |   |
|                                                                                                                                                                                                  |   |   |            |   |   |   |   |   |
| Loan payable to a bank in the PRC, bearing interest at 5.56% per annum, payable with interest on maturity, due on November 7, 2011                                                                    |   |   | 23,745,426      |   |   |   | - |   |
|                                                                                                                                                                                                  |   |   |            |   |   |   |   |   |
| Loan payable to a bank in the PRC, bearing interest at 5.56% per annum, secured by plant and land use right, payable with interest on maturity, due on November 7, 2011                               |   |   | 6,503,524       |   |   |   | - |   |
|                                                                                                                                                                                                  |   |   |            |   |   |   |   |   |
| Loan payable to a bank in the PRC, bearing interest at 5.56% per annum, payable with interest on maturity, due on November 17, 2011                                                                   |   |   | 1,361,203       |   |   |   | - |   |
|                                                                                                                                                                                                  |   |   |            |   |   |   |   |   |
| Loan payable to a bank in the PRC, bearing interest at 5.56% per annum, secured by machinery, payable with interest on maturity, due on December 23, 2011                                             |   |   | 3,932,363       |   |   |   | - |   |
|                                                                                                                                                                                                  |   |   |            |   |   |   |   |   |
| Loan payable to a bank in the PRC, bearing interest at 5.56% per annum, payable with interest on maturity, due on December 23, 2011                                                                   |   |   | 3,932,363       |   |   |   | - |   |
|                                                                                                                                                                                                  |   |   |            |   |   |   |   |   |
| Total                                                                                                                                                                                                 |   |   | 68,816,359      |   |   |   | 58,181,712 |   |

----

| (i) | In connection with the purchase of raw materials by Qiqihaer Feihe Soybean Co., Limited, Feihe Dairy guaranteed the loans payable to a bank in the PRC for a period of one year, beginning on July 20, 2009 and ending on July 19, 2010. The maximum potential future amount under the terms of the guarantee is RMB 63,200,000 (or $9,253,000) as of December 31, 2009. The loan was fully repaid on July 19, 2010. |
|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (ii) | Feihe Dairy guaranteed the loans payable to a bank in the PRC for a period of one year, beginning on August 30, 2009 and ending on August 29, 2010. The maximum potential future amount under the terms of the guarantee is RMB 100,000,000 (or $14,641,000) as of December 31, 2009. The loans, amounting $2,925,174, $1,462,587 and $2,925,174, were fully repaid on August 30, September 28 and October 22, 2010. |
|------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (iii)  | Gannan Feihe guaranteed the loans payable to a bank in the PRC for a period, beginning on July 26, 2010 and ending on the date which is two years after the maturity date or the date of repayment if earlier.                                                                                    |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |                                                                                                                                                                                                                                                                                              |
| (iv)   | Feihe Dairy guaranteed the loans payable to a bank in the PRC for a period of one year, beginning on September 15, 2010 and ending on September 14, 2011. The maximum potential future payment amount under the terms of the guarantee is RMB 35,000,000 (or $5,294,000) as of December 31, 2010. |
|   |                                                                                                                                                                                                                                                                                              |
| (v)    | Gannan Feihe guaranteed the loans payable to a bank in the PRC for a period, beginning on September 7, 2010 and ending on the date which is two years after the maturity date or the date of repayment if earlier.                                                                                |
|   |                                                                                                                                                                                                                                                                                              |
| (vi)   | Feihe Dairy guaranteed the loans payable to a bank in the PRC for a period of two years, beginning on August 30, 2010 and ending on August 30, 2012. The maximum potential future payment amount under the terms of the guarantee is RMB 50,000,000 (or $7,562,000) as of December 31, 2010.      |

----

| 21. ACCRUED EXPENSES |
|---------------------------|

|                       |   | 2010   |      |   | 2009   |   |
|--------------------------------------|--------|--------|-----------|--------|--------|--------|
|                                 |   | US$    |      |   | US$    |   |
| Accrued sales and marketing expenses |   |   | 5,885,595 |   |   |   | 8,050,982 |   |
| Other accrued expenses               |   |   | 551,303   |   |   |   | 314,263 |   |
|                                 |   |   | 6,436,898 |   |   |   | 8,365,245 |   |

| 22. ADVANCES FROM EMPLOYEES |
|----------------------------------|

| 23. EMPLOYEE BENEFITS PAYABLE |
|------------------------------------|

| 24. OTHER PAYABLE |
|------------------------|

|                                                                 |   | 2010   |       |   | 2009   |   |
|----------------------------------------------------------------------|--------|--------|------------|--------|--------|--------|
|                                                                 |   | US$    |       |   | US$    |   |
| Payable for property, plant and equipment                            |   |   | 23,473,721 |   |   |   | 12,220,117 |   |
| Payable for purchase of biological assets                            |   |   | 6,742,211  |   |   |   | - |   |
| Payable for land use rights                                          |   |   | 1,001,325  |   |   |   | 1,082,590 |   |
| Other tax payable                                                    |   |   | 385,050    |   |   |   | 1,989,165 |   |
| Deposits from distributors                                           |   |   | 2,057,685  |   |   |   | 1,604,165 |   |
| Payable to local County Finance Bureaus (i)                          |   |   | 2,144,650  |   |   |   | 1,781,430 |   |
| Advance received from Yuanshengtai for purchase of biological assets |   |   | 891,436    |   |   |   | - |   |
| Dividend payable to noncontrolling interests                         |   |   | 208,226    |   |   |   | - |   |
| Payable to an unrelated party, due on demand                         |   |   | 442,600    |   |   |   | 442,600 |   |
| Others (ii)                                                          |   |   | 8,610,200  |   |   |   | 5,334,993 |   |
|                                                                 |   |   | 45,957,104 |   |   |   | 24,455,060 |   |

| (i) | The Group received funding from the local County Finance Department for construction of the production facilities in the region and working capital usage.  Although, no repayment terms were attached with the funds, the Group considers them to be unsecured, non-interest bearing loans from the County Finance Department that are repayable on demand. |
|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (ii) | Other payables mainly include deposits received from logistics companies and milk collection stations, prepayment made by employees on behalf of the Group, advertising cost, and other miscellaneous payables. |
|------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|                                                                                                                                                                                                                                |   | December 31,2010 |       |    | December 31,2009 |   |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|------------------|------------|---------|------------------|--------|
|                                                                                                                                                                                                                                |   | US$              |       |    | US$              |   |
| Loan payable to a bank in the PRC, bearing interest at 7.47%, unsecured, guaranteed by Feihe Dairy (i), and payable on maturity. The loan commenced in October 29, 2008 and matures on October 28, 2014                             |   |             | 1,552,679  |    |             |   | 3,861,230 |   |
|                                                                                                                                                                                                                                |   |             |       |    |             |   |   |   |
| Loan payable to a bank in the PRC, bearing interest at 7.47%, secured by biological assets, guaranteed by Feihe Dairy (i), and payable on maturity. The loan commenced on October 29, 2008 and matures on September 24, 2014        |   |             | 4,062,434  |    |             |   | 3,928,509 |   |
|                                                                                                                                                                                                                                |   |             |       |    |             |   |   |   |
| Loan payable to a bank in the PRC, bearing interest at 7.47%, secured by biological assets, guaranteed by Feihe Dairy (i), and payable on maturity. The loan commenced on October 29, 2008 and matures on September 25, 2014        |   |             | 4,141,081  |    |             |   | 4,004,563 |   |
|                                                                                                                                                                                                                                |   |             |       |    |             |   |   |   |
| Loan payable to a bank in the PRC, bearing interest at 5.94%, secured by biological assets, guaranteed by Feihe Dairy (i) and payable on maturity. The loan commenced on June 29, 2009 and matures on October 28, 2014              |   |             | 7,143,289  |    |             |   | 6,907,798 |   |
|                                                                                                                                                                                                                                |   |             |       |    |             |   |   |   |
| Loan payable to a bank in the PRC, bearing interest at 5.94%, secured by biological assets, guaranteed by Feihe Dairy (i) and payable on maturity. The loan commenced on March 27, 2009 and matures on October 28, 2014             |   |             | 3,982,274  |    |             |   | 3,850,992 |   |
|                                                                                                                                                                                                                                |   |             |       |    |             |   |   |   |
| Loan payable to a bank in the PRC, bearing interest at six months London Interbank Offered Rate ("LIBOR") plus 1.95%, guaranteed by American Dairy Inc. The loan commenced on October 13, 2009 and matures on October 13, 2014 (ii) |   |             | -          |    |             |   | 4,023,790 |   |
|                                                                                                                                                                                                                                |   |             |       |    |             |   |   |   |
| Loan payable to a bank in the PRC, bearing interest at 5.76%, secured by land use rights, plant and machinery.  The loan commenced on December 24, 2009 and matures on December 24, 2014                                  |   |             | 5,036,569  |    |             |   | 4,870,530 |   |
|                                                                                                                                                                                                                                |   |             |       |    |             |   |   |   |
| Loan payable to a bank in the PRC, bearing interest at 5.76%, guaranteed by Langfang Feihe and payable on maturity. The loan commenced on December 24, 2009 and matures on December 24, 2014                                        |   |             | 8,575,458  |    |             |   | 8,292,753 |   |
|                                                                                                                                                                                                                                |   |             |       |    |             |   |   |   |
| Loan payable to a bank in the PRC, bearing interest at 5.96%, secured by land use right of Gannan Feihe. The loan commenced on December 24, 2010 and matures on December 24, 2015                                                   |   |             | 3,365,195  |    |             |   | - |   |
|                                                                                                                                                                                                                                |   |             |       |    |             |   |   |   |
|                                                                                                                                                                                                                                |   |             | 37,858,979 |    |             |   | 39,740,165 |   |
| Less: current portion of long term bank loans                                                                                                                                                                                       |   |             | (9,756,193 | )  |             |   | (7,312,935 | ) |
|                                                                                                                                                                                                                                |   |             | 28,102,786 |    |             |   | 32,427,230 |   |

----

| (i) | In connection with the purchase of long-lived fixed assets of Kedong Farms, Feihe Dairy guaranteed the loans payable to a bank in the PRC for a period of one year, beginning on October 29, 2008 and ending on October 28, 2009.  The maximum potential amount under the terms of the guarantee was $38,040,000 (or RMB 251,510,000). |
|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (ii) | In October, 2009, the Company entered into a loan agreement with a bank in the PRC for a principal amount of up to approximately $9.2 million for the purpose of financing the purchase of certain equipment.  The loan bears interest at the six-month LIBOR rate plus 1.95%, with principal payable in 10 equal semi-annual installments and interest payable semi-annually. As of December 31, 2009, there was $4,023,790 in principal payable under this loan. The loan was fully repaid in June 2010. |
|------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| Year ended December 31, |   | Future repayments |       |
|----------------------------------------|--------|------------------------|------------|
|                                   |   | US$                    |       |
| 2011                                   |   |                   | 9,756,193  |   |
| 2012                                   |   |                   | -          |   |
| 2013                                   |   |                   | -          |   |
| 2014                                   |   |                   | 24,737,591 |   |
| 2015                                   |   |                   | 3,365,195  |   |
|                                   |   |                   | 37,858,979 |   |

----

| 26.  CONVERTIBLE DEBT |
|---------------------------------|

|                                                 |   | Future paymentsUS$ |     |
|------------------------------------------------------|--------|--------------------|----------|
|                                                 |   |               |     |
| 2011                                                 |   |               | 151,245  |   |
| 2012                                                 |   |               | 151,245  |   |
| 2013                                                 |   |               | 151,245  |   |
| 2014                                                 |   |               | 151,245  |   |
| 2015                                                 |   |               | 151,245  |   |
| Total minimum lease payments as of December 31, 2010 |   |               | 756,225  |   |
| Less amount representing interest                    |   |               | (106,988 | ) |
| Net present value of minimum lease payments          |   |               | 649,237  |   |
| Current portion of capital lease obligation          |   |               | (116,770 | ) |
| Non-current portion of capital lease obligation      |   |               | 532,467  |   |

----

| 28. RELATED PARTY TRANSACTIONS |
|-------------------------------------|

| (1)   | Due from /to related parties |
|-----------------|------------------------------|

|                            |   | 2010   |      |   | 2009   |   |
|---------------------------------|--------|--------|-----------|--------|--------|--------|
|                            |   | US$    |      |   | US$    |   |
| Due from related parties:       |   |   |      |   |   |   |
| Due from Directors of the Group |   |   | 52,735    |   |   |   | 60,978 |   |
| Due from related companies      |   |   | 1,754,154 |   |   |   | 2,127,265 |   |
| Total                           |   |   | 1,806,889 |   |   |   | 2,188,243 |   |

|                            |   | 2010   |   |   | 2009   |   |
|---------------------------------|--------|--------|--------|--------|--------|--------|
|                            |   | US$    |   |   | US$    |   |
| Due to related parties:         |   |   |   |   |   |   |
| Due to Directors of the Group   |   |   | 30,249 |   |   |   | 29,252 |   |
| Due to related companies        |   |   | 610    |   |   |   | 10,429,470 |   |
| Loan payable to a related party |   |   | 48,398 |   |   |   | 73,129 |   |
| Total                           |   |   | 79,257 |   |   |   | 10,531,851 |   |

|         |   | 2010   |   |   | 2009   |   |
|--------------|--------|--------|--------|--------|--------|--------|
|         |   | US$    |   |   | US$    |   |
| Leng You-Bin |   | 34,466 |   |   | 33,823 |   |
| Liu Hua      |   |   | 18,269 |   |   |   | 27,155 |   |
| Total        |   |   | 52,735 |   |   |   | 60,978 |   |

|         |   | 2010   |   |   | 2009   |   |
|--------------|--------|--------|--------|--------|--------|--------|
|         |   | US$    |   |   | US$    |   |
| Leng You-Bin |   |   | 30,249 |   |   |   | 29,252 |   |
| Total        |   |   | 30,249 |   |   |   | 29,252 |   |

----

|                              |   | 2010   |      |   | 2009   |   |
|-----------------------------------|--------|--------|-----------|--------|--------|--------|
|                              |   | US$    |      |   | US$    |   |
| Tangshan Feihe Trading Company    |   |   | 1,727,719 |   |   |   | 1,897,078 |   |
| Qinhuangdao Feihe Trading Company |   |   | 26,435    |   |   |   | 230,187 |   |
| Total                             |   |   | 1,754,154 |   |   |   | 2,127,265 |   |

|                                     |   | 2010   |   |   | 2009   |   |
|------------------------------------------|--------|--------|--------|--------|--------|--------|
|                                     |   | US$    |   |   | US$    |   |
| Heilongjiang Feihe Yuanshengtai Co., Ltd |   |   | -      |   |   |   | 10,428,246 |   |
| Dalian Hewang Trading Company            |   |   | 610    |   |   |   | 1,224 |   |
| Total                                    |   |   | 610    |   |   |   | 10,429,470 |   |

| (2)   | Sales to related parties |
|-----------------|--------------------------|

|                              |   | 2010   |      |   | 2009   |   |      | 2008   |   |
|-----------------------------------|--------|--------|-----------|--------|--------|--------|-----------|--------|--------|
|                              |   | US$    |      |   | US$    |   |      | US$    |   |
| Tangshan Feihe Trading Company    |   |   | 1,562,374 |   |   |   | 5,750,743 |   |   |   | 1,216,948 |   |
| Qinhuangdao Feihe Trading Company |   |   | -         |   |   |   | 411,312   |   |   |   | 476,397 |   |
| Dalian Hewang Trading Company     |   |   | 197,345   |   |   |   | 227,392   |   |   |   | 90,629 |   |
| Total                             |   |   | 1,759,719 |   |   |   | 6,389,447 |   |   |   | 1,738,974 |   |

----

|                                                       |   | 2010   |       |   | 2009   |   |
|------------------------------------------------------------|--------|--------|------------|--------|--------|--------|
|                                                       |   | US$    |       |   | US$    |   |
| Balance as of January 1                                    |   |   | 53,645,093 |   |   |   | - |   |
|                                                       |   |   |       |   |   |   |   |   |
| Issuance of shares for performance obligation              |   |   | 11,382,000 |   |   |   | - |   |
|                                                       |   |   |       |   |   |   |   |   |
| Accretion of redemption premium on redeemable common stock |   |   | 1,086,622  |   |   |   |   |   |
|                                                       |   |   |       |   |   |   |   |   |
| Balance as of December 31                                  |   |   | 66,113,715 |   |   |   | 53,645,093 |   |

| 30. SHARE-BASED COMPENSATION |
|-----------------------------------|

----

| Expected volatility            |   |   | 74.94      | %      |
|--------------------------------|--------|--------|------------|--------|
| Expected dividends             |   |   | 0          | %      |
| Expected term (in years)  |   |   |  5.25 |   |
| Risk-free rate                 |   |   | 2.27       | %      |

| Expected volatility                |   |   | 93     | % |
|-----------------------------------------|--------|--------|--------|---|
| Expected dividends                 |   |   | 0      | % |
| Expected term (in years) |   | 2.5    |   |
| Risk-free rate                     |   |   | 1.24   | % |

----

| Expected volatility            |   |   | 83        | %       |
|--------------------------------|--------|--------|-----------|---------|
| Expected dividends             |   |   | 0         | %       |
| Expected term (in years)  |   |   |  5.2 | 5  |
| Risk-free rate                 |   |   | 2.59      | %       |

| Expected volatility            |   |   | 54         | %        |
|--------------------------------|--------|--------|------------|----------|
| Expected dividends             |   |   | 0          | %        |
| Expected term (in years)  |   |   |  0.   | 81  |
| Risk-free rate                 |   |   |  0.22 | %        |

| Expected volatility                |   |   | 90.7   | % |
|-----------------------------------------|--------|--------|--------|---|
| Expected dividends                 |   |   | 0      | % |
| Expected term (in years) |   | 2.5    |   |
| Risk-free rate                     |   |   | 2.7    | % |

|                                |   | Options |      |   | Weightedaveragegrant datefair value |   |   | Weightedaverageexercise price |   |   | Aggregateintrinsicvalue |   |   | Weightedaverageremainingcontractualterm |      |
|-------------------------------------|--------|---------|-----------|--------|-------------------------------------|--------|--------|-------------------------------|--------|--------|-------------------------|--------|--------|-----------------------------------------|-----------|
|                                |   |    |      |   | US$                                 |   |   | US$                           |   |   | US$                     |   |   |                                    |      |
| Outstanding as of January 1, 2009   |   |    | 80,000    |   |                                |   | 7.03   |                          |   |   | 12.00                   |   |   |                                    | 243,200   |   |   |   | 3.83 |   |
| Granted                             |   |    | 2,153,190 |   |                                |   | 11.04  |                          |   |   | 16.99                   |   |   |                                    | -         |   |   |   | - |   |
| Exercised                           |   |    | -         |   |                                |   | -      |                          |   |   | -                       |   |   |                                    | -         |   |   |   | - |   |
| Forfeited or expired                |   |    | (748,536  | )      |                                |   | 10.66  |                          |   |   | 16.86                   |   |   |                                    | -         |   |   |   | - |   |
| Outstanding as of December 31, 2009 |   |    | 1,484,654 |   |                                |   | 11.02  |                          |   |   | 16.79                   |   |   |                                    | 7,443,232 |   |   |   | 5.15 |   |
| Granted                             |   |    | 84,000    |   |                                |   | 1.96   |                          |   |   | 7.25                    |   |   |                                    | 71,190    |   |   |   | 1.76 |   |
| Exercised                           |   |    | (8,000    | )      |                                |   | 7.03   |                          |   |   | 12.00                   |   |   |                                    | 63,120    |   |   |   | - |   |
| Forfeited or expired                |   |    | (704,409  | )      |                                |   | 10.66  |                          |   |   | 16.86                   |   |   |                                    | -         |   |   |   | - |   |
| Outstanding as of December 31, 2010 |   |    | 856,245   |   |                                |   | 10.45  |                          |   |   | 15.84                   |   |   |                                    | 71,190    |   |   |   | 3.97 |   |
| Exercisable as of December 31, 2010 |   |    | 143,000   |   |                                |   | 11.54  |                          |   |   | 12.70                   |   |   |                                    | 71,190    |   |   |   | 2.39 |   |

----

|                               |   | Options |      |    | Weighted averagegranted date fairvalue |   |
|------------------------------------|--------|---------|-----------|---------|-------------------------------------------------------|--------|
|                               |   |    |      |    | US$                                                   |   |
| Non-vested as of January 1, 2009   |   |    | 80,000    |    |                                                  |   | 7.03 |   |
| Granted                            |   |    | 2,153,190 |    |                                                  |   | 11.04 |   |
| Vested                             |   |    | (80,000   | )  |                                                  |   | 7.03 |   |
| Forfeited or expired               |   |    | (748,536  | )       |                                                  |   | 10.66 |   |
| Non-vested as of December 31, 2009 |   |    | 1,404,654 |    |                                                  |   | 11.25 |   |
| Granted                            |   |    | 84,000    |    |                                                  |   | 1.96 |   |
| Vested                             |   |    | (71,000   | )       |                                                  |   | 16.12 |   |
| Forfeited or expired               |   |    | (704,409  | )       |                                                  |   | 10.66 |   |
| Non-vested as of December 31, 2010 |   |    | 713,245   |    |                                                  |   | 10.24 |   |

|                                         |   | Warrants |      |   | Average exercisePrice |   |
|----------------------------------------------|--------|----------|-----------|--------|----------------------------|--------|
|                                         |   |     |      |   | US$                        |   |
| Outstanding warrants as of January 1, 2009   |   |     | 1,050,984 |   |                       |   | 5.06 |   |
| Exercised                                    |   |     | (804,347  | )      |                       |   | 2.29 |   |
| Expired                                      |   |     | (8,700    | )      |                       |   | 1.50 |   |
| Outstanding warrants as of December 31, 2009 |   |     | 237,937   |   |                       |   | 14.50 |   |
| Exercised                                    |   |     | -         |   |                       |   | - |   |
| Expired                                      |   |     | -         |   |                       |   | - |   |
| Outstanding warrants as of December 31, 2010 |   |     | 237,937   |   |                       |   | 14.50 |   |

----

| 31. STATUTORY RESERVES |
|-----------------------------|

| 32. COMMITMENTS AND CONTINGENCIES |
|----------------------------------------|

| 33.  SEGMENTS |
|-------------------------|

----

|                                      |   | Dairy products |        |   | Dairy farms |   |        | Corporate |   |   | Total       |   |
|-------------------------------------------|--------|---------------------|-------------|--------|------------------|--------|-------------|-----------|--------|--------|-------------|--------|
|                                      |   | US$                 |        |   | US$              |   |        | US$       |   |   | US$         |   |
| Sales from external customers             |   |                | 255,838,176 |   |             |   | 1,261,472   |      |   |   | -           |   |   |   | 257,099,648 |   |
| Intersegment sales                        |   |                | 776,152     |   |             |   | 27,151,876  |      |   |   | -           |   |   |   | 27,928,028 |   |
| Interest income                           |   |                | 287,968     |   |             |   | 6,947       |      |   |   | -           |   |   |   | 294,915 |   |
| Interest expenses                         |   |                | 2,009,925   |   |             |   | 505,142     |      |   |   | 1,358       |   |   |   | 2,516,425 |   |
| Depreciation and amortization             |   |                | 6,277,965   |   |             |   | 6,673,783   |      |   |   | -           |   |   |   | 12,951,748 |   |
| Income tax                                |   |                | (11,993     | )      |             |   | -           |      |   |   | (267,729    | )      |   |   | (279,722 | ) |
| Segment profit (loss)                     |   |                | 576,902     |   |             |   | (6,340,883  | )         |   |   | (4,410,996  | )      |   |   | (10,174,977 | )  |
| Segment assets                            |   |                | 507,923,238 |   |             |   | 175,090,984 |      |   |   | 191,724,270 |   |   |   | 874,738,492 |   |
| Goodwill                                  |   |                | 445,842     |   |             |   | -           |      |   |   | -           |   |   |   | 445,842 |   |
| Addition to property, plant and equipment |   |                | 32,660,079  |   |             |   | 5,318,045   |      |   |   | -           |   |   |   | 37,978,124 |   |
| Addition to biological assets             |   |                | -           |   |             |   | 22,543,420  |      |   |   | -           |   |   |   | 22,543,420 |   |

|                                      |   | Dairy products |        |   | Dairy farms |   |        | Corporate |   |   | Total       |   |
|-------------------------------------------|--------|---------------------|-------------|--------|------------------|--------|-------------|-----------|--------|--------|-------------|--------|
|                                      |   | US$                 |        |   | US$              |   |        | US$       |   |   | US$         |   |
| Sales from external customers             |   |                | 271,077,948 |   |             |   | -           |      |   |   | -           |   |   |   | 271,077,948 |   |
| Intersegment sales                        |   |                | -           |   |             |   | 10,616,132  |      |   |   | -           |   |   |   | 10,616,132 |   |
| Interest income                           |   |                | 294,815     |   |             |   | 11,876      |      |   |   | -           |   |   |   | 306,691 |   |
| Interest expenses                         |   |                | 909,469     |   |             |   | 2,283       |      |   |   | 5,227,400   |   |   |   | 6,139,152 |   |
| Depreciation and amortization             |   |                | 5,800,112   |   |             |   | 2,680,230   |      |   |   | -           |   |   |   | 8,480,342 |   |
| Income tax                                |   |                | (2,501,269  | )      |             |   | -           |      |   |   | 1,755,071   |   |   |   | (746,198 | ) |
| Segment profit (loss)                     |   |                | 30,634,469  |   |             |   | (2,788,614  | )         |   |   | 11,081,075  |   |   |   | 38,926,930 |   |
| Segment assets                            |   |                | 468,919,425 |   |             |   | 151,112,953 |      |   |   | 190,001,003 |   |   |   | 810,033,381 |   |
| Goodwill                                  |   |                | 1,784,331   |   |             |   | -           |      |   |   | -           |   |   |   | 1,784,331 |   |
| Addition to property, plant and equipment |   |                | 16,933,506  |   |             |   | 53,839,077  |      |   |   | -           |   |   |   | 70,772,583 |   |
| Addition to biological assets             |   |                | -           |   |             |   | 27,528,114  |      |   |   | -           |   |   |   | 27,528,114 |   |

----

|                                      |   | Dairy products |        |   | Dairy farms |   |       | Corporate |   |   | Total       |   |
|-------------------------------------------|--------|---------------------|-------------|--------|------------------|--------|------------|-----------|--------|--------|-------------|--------|
|                                      |   | US$                 |        |   | US$              |   |       | US$       |   |   | US$         |   |
| Sales from external customers             |   |                | 193,191,710 |   |             |   | -          |      |   |   | -           |   |   |   | 193,191,710 |   |
| Intersegment sales                        |   |                | -           |   |             |   | 91,299     |      |   |   | -           |   |   |   | 91,299 |   |
| Interest income                           |   |                | 254,457     |   |             |   | 5,242      |      |   |   | 320,025     |   |   |   | 579,724 |   |
| Interest expenses                         |   |                | 1,041,447   |   |             |   | 183        |      |   |   | 18,401,184  |   |   |   | 19,442,814 |   |
| Depreciation and amortization             |   |                | 4,936,788   |   |             |   | 384,031    |      |   |   | -           |   |   |   | 5,320,819 |   |
| Income tax                                |   |                | 3,536,373   |   |             |   | 24,939     |      |   |   | 5,823       |   |   |   | 3,567,135 |   |
| Segment profit (loss)                     |   |                | 21,266,451  |   |             |   | (1,182,203 | )         |   |   | 7,208,685   |   |   |   | 27,292,933 |   |
| Segment assets                            |   |                | 385,536,806 |   |             |   | 89,175,716 |      |   |   | 188,428,520 |   |   |   | 663,141,042 |   |
| Goodwill                                  |   |                | 2,282,838   |   |             |   | -          |      |   |   | -           |   |   |   | 2,282,838 |   |
| Addition to property, plant and equipment |   |                | 8,350,555   |   |             |   | 22,756,584 |      |   |   | -           |   |   |   | 31,107,139 |   |
| Addition to biological assets             |   |                | -           |   |             |   | 25,568,188 |      |   |   | -           |   |   |   | 25,568,188 |   |

|            |   | 2010                   |   | 2009                |   | 2008      |
|-----------------|--------|------------------------|--------|---------------------|--------|-----------|
| Product name    |   | Quantity(Kg’000) |   | Amount($’000) |   | % ofSales |   | Quantity(Kg’000) |   | Amount($’000) |   | % ofSales |   | Quantity(Kg’000) |   | Amount($’000) |   | % of Sales |
|            |   |                   |   |                |   |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Milk powder     |   |                   | 22,816 |                |   |      | 180,218 |   |   |   | 70.1 |   |   |   | 28,783 |   |   |   | 216,230 |   |   |   | 79.8 |   |   |   | 16,311 |   |   |   | 121,255 |   |   |   | 62.8 |   |
| Raw milk powder |   |                   | 15,691 |                |   |      | 57,752 |   |   |   | 22.5 |   |   |   | 11,637 |   |   |   | 34,328 |   |   |   | 12.7 |   |   |   | 16,572 |   |   |   | 60,753 |   |   |   | 31.4 |   |
| Soybean powder  |   |                   | 4,917  |                |   |      | 10,812 |   |   |   | 4.2 |   |   |   | 3,349 |   |   |   | 7,319 |   |   |   | 2.7 |   |   |   | 2,153 |   |   |   | 4,400 |   |   |   | 2.3 |   |
| Rice cereal     |   |                   | 633    |                |   |      | 4,040 |   |   |   | 1.6 |   |   |   | 1,103 |   |   |   | 6,730 |   |   |   | 2.5 |   |   |   | 816 |   |   |   | 4,631 |   |   |   | 2.4 |   |
| Walnut products |   |                   | 263    |                |   |      | 1,511 |   |   |   | 0.6 |   |   |   | 601 |   |   |   | 3,070 |   |   |   | 1.1 |   |   |   | 327 |   |   |   | 1,663 |   |   |   | 0.9 |   |
| Other           |   |                   | 2,207  |                |   |      | 2,767 |   |   |   | 1.0 |   |   |   | 543 |   |   |   | 3,401 |   |   |   | 1.2 |   |   |   | 727 |   |   |   | 490 |   |   |   | 0.2 |   |
| Total           |   |                   | 46,527 |                |   |      | 257,100 |   |   |   | 100 |   |   |   | 46,016 |   |   |   | 271,078 |   |   |   | 100 |   |   |   | 36,906 |   |   |   | 193,192 |   |   |   | 100 |   |

|                                |   | For the years ended December 31, |        |
|-------------------------------------|--------|----------------------------------|-------------|
|                                |   | 2010                             |        |   | 2009 |   |   | 2008 |   |
|                                |   | US$                              |        |   | US$ |   |   | US$ |   |
| Sales                               |   |                             |        |   |   |   |   |   |   |
| Total sales for reportable segments |   |                             | 285,027,676 |   |   |   | 281,694,080 |   |   |   | 193,283,009 |   |
| Elimination of intersegment sales   |   |                             | (27,928,028 | )  |   |   | (10,616,132 | ) |   |   | (91,299 | ) |
| Total consolidated sales            |   |                             | 257,099,648 |   |   |   | 271,077,948 |   |   |   | 193,191,710 |   |

|                                                                              |   | 2010   |        |   | 2009   |   |        | 2008    |   |
|-----------------------------------------------------------------------------------|--------|--------|-------------|--------|--------|--------|-------------|---------|--------|
|                                                                              |   | US$    |        |   | US$    |   |        | US$     |   |
| Profit                                                                            |   |   |        |   |   |   |        |    |   |
| Total profit for reportable segments                                              |   |   | (10,174,977 | )      |   |   | 38,926,930  |    |   |   | 27,292,933 |   |
| Elimination of dividend                                                           |   |   | -           |   |   |   | (23,499,920 | )  |   |   | (12,999,960 | ) |
| Elimination of unrealized profit                                                  |   |   | -           |   |   |   | -           |    |   |   | (156,212 | ) |
| Income from continuing operations before income taxes and noncontrolling interest |   |   | (10,174,977 | )      |   |   | 15,427,010  |    |   |   | 14,136,761 |   |

|                                    |   | As of December 31, |         |
|-----------------------------------------|--------|--------------------|--------------|
|                                    |   | 2010               |         |   | 2009 |   |
|                                    |   | US$                |         |   | US$ |   |
| Assets                                  |   |               |         |   |   |   |
| Total assets for reportable segments    |   |               | 874,738,492  |   |   |   | 810,033,381 |   |
| Elimination of intercompany receivables |   |               | (289,620,816 | )  |   |   | (249,519,304 | ) |
| Elimination of investment               |   |               | (120,808,394 | )  |   |   | (120,256,340 | ) |
| Total assets                            |   |               | 464,309,282  |   |   |   | 440,257,737 |   |

| 34. SUBSEQUENT EVENTS |
|----------------------------|

----

|                                                                                                                                               |   | December 31,2010 |        |   | December 31,2009 |   |
|----------------------------------------------------------------------------------------------------------------------------------------------------|--------|-----------------------|-------------|--------|-----------------------|--------|
|                                                                                                                                               |   | US$                   |        |   | US$                   |   |
| Assets                                                                                                                                             |   |                  |        |   |                  |   |
| Current assets:                                                                                                                                    |   |                  |        |   |                  |   |
| Cash and cash equivalents                                                                                                                          |   |                  | 64,612      |   |                  |   | 964,373 |   |
| Notes receivable, net of allowance for doubtful accounts of $3,500,028 and $4,000,000, respectively                                                |   |                  | -           |   |                  |   | - |   |
| Due from related parties                                                                                                                           |   |                  | -           |   |                  |   | 3,496 |   |
| Other receivables                                                                                                                                  |   |                  | 1,598       |   |                  |   | 151,566 |   |
| Income tax receivable                                                                                                                              |   |                  | 670         |   |                  |   | - |   |
| Prepayments                                                                                                                                        |   |                  | -           |   |                  |   | 29,167 |   |
| Total current assets                                                                                                                               |   |                  | 66,880      |   |                  |   | 1,148,602 |   |
|                                                                                                                                               |   |                  |        |   |                  |   |   |   |
| Other assets:                                                                                                                                      |   |                  |        |   |                  |   |   |   |
| Due from subsidiaries                                                                                                                              |   |                  | 84,066,057  |   |                  |   | 84,563,276 |   |
| Investment in subsidiaries                                                                                                                         |   |                  | 145,471,859 |   |                  |   | 144,951,533 |   |
| Total assets                                                                                                                                       |   |                  | 229,604,796 |   |                  |   | 230,663,411 |   |
|                                                                                                                                               |   |                  |        |   |                  |   |   |   |
| Liabilities                                                                                                                                        |   |                  |        |   |                  |   |   |   |
| Current liabilities:                                                                                                                               |   |                  |        |   |                  |   |   |   |
| Accounts payable                                                                                                                                   |   |                  | 478,239     |   |                  |   | 964,612 |   |
| Other payable                                                                                                                                      |   |                  | 442,600     |   |                  |   | 442,600 |   |
| Income tax payable                                                                                                                                 |   |                  | -           |   |                  |   | 267,058 |   |
| Total current liabilities                                                                                                                          |   |                  | 920,839     |   |                  |   | 1,674,270 |   |
|                                                                                                                                               |   |                  |        |   |                  |   |   |   |
| Due to subsidiaries                                                                                                                                |   |                  | 652,412     |   |                  |   | - |   |
| Unrecognized tax benefits - non-currents                                                                                                           |   |                  | 246,374     |   |                  |   | 1,500,518 |   |
| Performance share obligation                                                                                                                       |   |                  | -           |   |                  |   | 11,382,000 |   |
| Total liabilities                                                                                                                                  |   |                  | 1,819,625   |   |                  |   | 14,556,788 |   |
|                                                                                                                                               |   |                  |        |   |                  |   |   |   |
| Redeemable common stock (US$0.001 par value, 2,625,000 and 2,100,000 shares issued and outstanding as of December 31, 2010 and 2009, respectively) |   |                  | 66,113,715  |   |                  |   | 53,645,093 |   |
|                                                                                                                                               |   |                  |        |   |                  |   |   |   |
| Shareholders’ equity                                                                                                                         |   |                  | 161,671,456 |   |                  |   | 162,461,530 |   |
|                                                                                                                                               |   |                  |        |   |                  |   |   |   |
| Total liabilities, redeemable common stock and equity                                                                                              |   |                  | 229,604,796 |   |                  |   | 230,663,411 |   |

----

|                                                                               |   |   For the years ended December 31, |        |
|------------------------------------------------------------------------------------|--------|------------------------------------------------------------------|-------------|
|                                                                               |   | 2010                                                             |        |   | 2009 |   |   | 2008 |   |
|                                                                               |   | US$                                                              |        |   | US$ |   |   | US$ |   |
|                                                                               |   |                                                             |        |   |   |   |   |   |   |
| General and administrative                                                         |   |                                                             | (4,422,488  | ) |   |   | (6,371,616 | ) |   |   | (7,620,468 | ) |
| Operating (loss)                                                                   |   |                                                             | (4,422,488  | ) |   |   | (6,371,616 | ) |   |   | (7,620,468 | ) |
|                                                                               |   |                                                             |        |   |   |   |   |   |   |   |   |   |
| Other income (expense), net                                                        |   |                                                             | 12,851      |   |   |   | 1,449,566 |   |   |   | - |   |
|                                                                               |   |                                                             |        |   |   |   |   |   |   |   |   |   |
| Other income (expenses):                                                           |   |                                                             |        |   |   |   |   |   |   |   |   |   |
| Interest income                                                                    |   |                                                             | -           |   |   |   | - |   |   |   | 320,025 |   |
| Interest and finance costs                                                         |   |                                                             | (1,361      | ) |   |   | (5,227,400 | ) |   |   | (17,744,639 | ) |
| Amortization of deferred charges                                                   |   |                                                             | -           |   |   |   | (107,396 | ) |   |   | (532,904 | ) |
| Registration rights penalty                                                        |   |                                                             | -           |   |   |   | - |   |   |   | (2,389,077 | ) |
| Gain on extinguishment of debt                                                     |   |                                                             | -           |   |   |   | - |   |   |   | 30,497,268 |   |
| Loss on derivatives                                                                |   |                                                             | -           |   |   |   | (2,162,000 | )  |   |   | (8,321,481 | ) |
|                                                                               |   |                                                             |        |   |   |   |   |   |   |   |   |   |
| (Loss) before income tax expenses                                                  |   |                                                             | (4,410,998  | ) |   |   | (12,418,846 | ) |   |   | (5,791,276 | ) |
|                                                                               |   |                                                             |        |   |   |   |   |   |   |   |   |   |
| Income tax (benefits) expenses                                                     |   |                                                             | (267,729    | ) |   |   | 1,755,071 |   |   |   | 5,823 |   |
| (Loss) from continuing operations                                                  |   |                                                             | (4,143,269  | ) |   |   | (14,173,917 | ) |   |   | (5,797,099 | ) |
|                                                                               |   |                                                             |        |   |   |   |   |   |   |   |   |   |
| Equity in (losses) earnings of subsidiaries                                        |   |                                                             | (5,440,602  | ) |   |   | 33,755,303 |   |   |   | 22,820,134 |   |
| Net (loss) income                                                                  |   |                                                             | (9,583,871  | )  |   |   | 19,581,386 |   |   |   | 17,023,035 |   |
| Accretion of redemption premium on redeemable common stock                         |   |                                                             | (1,086,622  | ) |   |   | - |   |   |   | - |   |
| Net (loss) income attributable to common shareholders of Feihe International, Inc. |   |                                                             | (10,670,493 | ) |   |   | 19,581,386 |   |   |   | 17,023,035 |   |

----

|                                                            |   | Common Stock                   |       |   |   |   |   |       |   |   |        |   |   |          |       |   |     |   |       |   |   |
|-----------------------------------------------------------------|--------|--------------------------------|------------|--------|--------|--------|--------|------------|--------|--------|-------------|--------|--------|---------------|------------|--------|----------|--------|------------|--------|--------|
|                                                            |   | (US$0.001 par value) |       |   |   |   |   |       |   |   | Accumulated |   |   |          |       |   |     |   |       |   |   |
|                                                            |   | Number                         |       |   |   |   |   | Additional |   |   | Common      |   |   | Other         |       |   |     |   |       |   |   |   | Total |   |
|                                                            |   | of                             |       |   | Par    |   |   | Paid-in    |   |   | Stock       |   |   | Comprehensive |       |   | Retained |   |       | Total  |   |   | Comprehensive |   |
|                                                            |   | Shares                         |       |   | Value  |   |   | Capital    |   |   | Warrants    |   |   | Income        |       |   | Earnings |   |       | Equity |   |   | Income (Loss) |   |
|                                                            |   |                           |       |   | US$    |   |   | US$        |   |   | US$         |   |   | US$           |       |   | US$      |   |       | US$    |   |   | US$ |   |
|                                                            |   |                           |       |   |   |   |   |       |   |   |        |   |   |          |       |   |     |   |       |   |   |   |   |   |
| Balance as of January 1, 2008                                   |   |                           | 16,961,768 |   |   |   | 16,961 |       |   |   | 22,629,333  |   |   |          | 3,011,444  |   |     |   | 12,081,467 |   |   |   | 43,929,682 |   |   |   | 81,668,887 |   |   |   |   |
| Warrant exercise                                                |   |                           | 3,000      |   |   |   | 3      |       |   |   | 14,743      |   |   |          | (7,996     | )      |     |   | -          |   |   |   | - |   |   |   | 6,750 |   |   |   |   |
| Shares issued for services                                      |   |                           | 72,500     |   |   |   | 73     |       |   |   | 1,092,578   |   |   |          | -          |   |     |   | -          |   |   |   | - |   |   |   | 1,092,651 |   |   |   |   |
| Shares issued for notes conversion                              |   |                           | 216,639    |   |   |   | 217    |       |   |   | 2,881,082   |   |   |          | -          |   |     |   | -          |   |   |   | - |   |   |   | 2,881,299 |   |   |   |   |
| Stock compensation                                              |   |                           | -          |   |   |   | -      |       |   |   | 140,689     |   |   |          | -          |   |     |   | -          |   |   |   | - |   |   |   | 140,689 |   |   |   |   |
| Net income                                                      |   |                           | -          |   |   |   | -      |       |   |   | -           |   |   |          | -          |   |     |   | -          |   |   |   | 17,023,035 |   |   |   | 17,023,035 |   |   |   | 17,023,035 |   |
| Currency translation adjustments                                |   |                           | -          |   |   |   | -      |       |   |   | -           |   |   |          | -          |   |     |   | 13,169,453 |   |   |   | - |   |   |   | 13,169,453 |   |   |   | 13,169,453 |   |
| Change in fair value of available-for- sale investments         |   |                           | -          |   |   |   | -      |       |   |   | -           |   |   |          | -          |   |     |   | (104,865   | )      |   |   | - |   |   |   | (104,865 | ) |   |   | (104,865 | ) |
| Comprehensive income                                            |   |                           |       |   |   |   |   |       |   |   |        |   |   |          |       |   |     |   |       |   |   |   |   |   |   |   |   |   |   |   | 30,087,623 |   |
| Balance as of December 31, 2008                                 |   |                           | 17,253,907 |   |   |   | 17,254 |       |   |   | 26,758,425  |   |   |          | 3,003,448  |   |     |   | 25,146,055 |   |   |   | 60,952,717 |   |   |   | 115,877,899 |   |   |   |   |   |
| Warrant exercise                                                |   |                           | 804,347    |   |   |   | 804    |       |   |   | 3,066,962   |   |   |          | (1,229,297 | )      |     |   | -          |   |   |   | - |   |   |   | 1,838,469 |   |   |   |   |   |
| Stock compensation                                              |   |                           | -          |   |   |   | -      |       |   |   | 2,196,106   |   |   |          | -          |   |     |   | -          |   |   |   | - |   |   |   | 2,196,106 |   |   |   |   |   |
| Shares issued for notes conversion                              |   |                           | 1,549,122  |   |   |   | 1,549  |       |   |   | 22,460,605  |   |   |          | -          |   |     |   | -          |   |   |   | - |   |   |   | 22,462,154 |   |   |   |   |   |
| Net income                                                      |   |                           | -          |   |   |   | -      |       |   |   | -           |   |   |          | -          |   |     |   | -          |   |   |   | 19,581,386 |   |   |   | 19,581,386 |   |   |   | 19,581,386 |   |
| Currency translation adjustments                                |   |                           | -          |   |   |   | -      |       |   |   | -           |   |   |          | -          |   |     |   | 446,554    |   |   |   | - |   |   |   | 446,554 |   |   |   | 446,554 |   |
| Change in fair value of available-for-sale investment           |   |                           | -          |   |   |   | -      |       |   |   | -           |   |   |          | -          |   |     |   | 58,962     |   |   |   | - |   |   |   | 58,962 |   |   |   | 58,962 |   |
| Comprehensive income                                            |   |                           |       |   |   |   |   |       |   |   |        |   |   |          |       |   |     |   |       |   |   |   |   |   |   |   |   |   |   |   | 20,086,902 |   |
| Balance as of December 31, 2009                                 |   |                           | 19,607,376 |   |   |   | 19,607 |       |   |   | 54,482,098  |   |   |          | 1,774,151  |   |     |   | 25,651,571 |   |   |   | 80,534,103 |   |   |   | 162,461,530 |   |   |   |   |   |
| Shares issued for services                                      |   |                           | 55,915     |   |   |   | 56     |       |   |   | 889,318     |   |   |          | -          |   |     |   | -          |   |   |   | - |   |   |   | 889,374 |   |   |   |   |   |
| Stock compensation                                              |   |                           | -          |   |   |   | -      |       |   |   | 1,710,272   |   |   |          | -          |   |     |   | -          |   |   |   | - |   |   |   | 1,710,272 |   |   |   |   |   |
| Issuance of common stock in connection with exercise of options |   |                           | 8,000      |   |   |   | 8      |       |   |   | 95,992      |   |   |          | -          |   |     |   | -          |   |   |   | - |   |   |   | 96,000 |   |   |   |   |   |
| Net loss                                                        |   |                           | -          |   |   |   | -      |       |   |   | -           |   |   |          | -          |   |     |   | -          |   |   |   | (9,583,871 | ) |   |   | (9,583,871 | ) |   |   | (9,583,871 | ) |
| Accretion of redemption premium on redeemable common stock      |   |                           | -          |   |   |   | -      |       |   |   | -           |   |   |          | -          |   |     |   | -          |   |   |   | (1,086,622 | ) |   |   | (1,086,622 | ) |   |   |   |   |
| Currency translation adjustments                                |   |                           | -          |   |   |   | -      |       |   |   | -           |   |   |          | -          |   |     |   | 7,181,945  |   |   |   | - |   |   |   | 7,181,945 |   |   |   | 7,181,945 |   |
| Change in fair value of available-for- sale investment          |   |                           | -          |   |   |   | -      |       |   |   | -           |   |   |          | -          |   |     |   | 2,828      |   |   |   | - |   |   |   | 2,828 |   |   |   | 2,828 |   |
| Comprehensive loss                                              |   |                           |       |   |   |   |   |       |   |   |        |   |   |          |       |   |     |   |       |   |   |   |   |   |   |   |   |   |   |   | (2,399,098 | ) |
| Balance as of December 31, 2010                                 |   |                           | 19,671,291 |   |   |   | 19,671 |       |   |   | 57,177,680  |   |   |          | 1,774,151  |   |     |   | 32,836,344 |   |   |   | 69,863,610 |   |   |   | 161,671,456 |   |   |   |   |   |

----

|                                                                                               |   For the years ended December 31, |   |
|----------------------------------------------------------------------------------------------------|------------------------------------------------------------------|--------|
|                                                                                               |                                                             | 2010   |   |   | 2009 |   |   | 2008 |   |
|                                                                                               |                                                             | US$    |   |   | US$ |   |   | US$ |   |
| Cash flows from operating activities:                                                              |                                                             |   |   |   |   |   |   |   |   |
| Net (loss) income                                                                                  |                                                             |   | (9,583,871 | ) |   |   | 19,581,386 |   |   |   | 17,023,035 |   |
| Adjustments to reconcile net (loss) income to net cash (used in) provided by operating activities: |                                                             |   |   |   |   |   |   |   |   |   |   |   |
| Equity in earnings (losses) of subsidiaries                                                        |                                                             |   | 5,440,602 |   |   |   | (33,755,303 | ) |   |   | (22,820,134 | ) |
| Gain on debt extinguishment                                                                        |                                                             |   | - |   |   |   | - |   |   |   | (30,497,268 | )  |
| Share-based compensation                                                                           |                                                             |   | 2,599,646 |   |   |   | 2,196,106 |   |   |   | 1,233,339 |   |
| Registration rights penalty paid in shares                                                         |                                                             |   | - |   |   |   | - |   |   |   | 2,881,299 |   |
| Interest expense from accrual of guaranteed redemption value                                       |                                                             |   | - |   |   |   | - |   |   |   | 13,584,533 |   |
| Interest expense from amortization of note discounts                                               |                                                             |   | - |   |   |   | 5,129,617 |   |   |   | 8,028,585 |   |
| Gain on waived interest expense                                                                    |                                                             |   | - |   |   |   | (550,000 | ) |   |   | - |   |
| Loss on derivatives                                                                                |                                                             |   | - |   |   |   | 2,162,000 |   |   |   | 8,321,481 |   |
| Amortization of deferred charges                                                                   |                                                             |   | - |   |   |   | 107,396 |   |   |   | 532,904 |   |
| Changes in assets and liabilities:                                                                 |                                                             |   |   |   |   |   |   |   |   |   |   |   |
| Decrease in due from related parties                                                               |                                                             |   | 500,716 |   |   |   | 9,159 |   |   |   | 28,128 |   |
| Decrease (increase) in other receivable, prepayments and other assets                              |                                                             |   | 179,137 |   |   |   | (150,000 | ) |   |   | 348,483 |   |
| (Decrease) increase in accounts payable                                                            |                                                             |   | (486,374 | ) |   |   | (2,800,499 | ) |   |   | 3,376,451 |   |
| Increase in accrued expenses, other payable and income taxes payable                               |                                                             |   | 956,115 |   |   |   | 667,601 |   |   |   | 1,928,826 |   |
| Increase (decrease) in due to subsidiaries                                                         |                                                             |   | 652,412 |   |   |   | (3,080,474 | ) |   |   | 205,066 |   |
| (Decrease) increase of unrecognized tax benefits - non-current                                     |                                                             |   | (1,254,144 | ) |   |   | 1,500,518 |   |   |   | - |   |
| Net cash (used in) provided by operating activities                                                |                                                             |   | (995,761 | ) |   |   | (8,982,493 | ) |   |   | 4,174,728 |   |
|                                                                                               |                                                             |   |   |   |   |   |   |   |   |   |   |   |
| Cash flows from investing activities:                                                              |                                                             |   |   |   |   |   |   |   |   |   |   |   |
| Capitalized interest in long term assets                                                           |                                                             |   | - |   |   |   | 2,528,844 |   |   |   | - |   |
| Increase in due from subsidiaries                                                                  |                                                             |   | - |   |   |   | (497,219 | ) |   |   | (6,196,209 | ) |
| Dividend distributed from subsidiaries                                                             |                                                             |   | - |   |   |   | 23,499,920 |   |   |   | 12,999,960 |   |
| Net cash provided by investing activities                                                          |                                                             |   | - |   |   |   | 25,531,545 |   |   |   | 6,803,751 |   |
|                                                                                               |                                                             |   |   |   |   |   |   |   |   |   |   |   |
| Cash flows from financing activities:                                                              |                                                             |   |   |   |   |   |   |   |   |   |   |   |
| Repayment of short term debt                                                                       |                                                             |   | - |   |   |   | (80,450,000 | ) |   |   | (11,000,000 | )  |
| Proceeds from issuance of redeemable common stock                                                  |                                                             |   | - |   |   |   | 62,865,093 |   |   |   | - |   |
| Proceeds from option exercise                                                                      |                                                             |   | 96,000 |   |   |   | - |   |   |   | - |   |
| Proceeds from warrant exercise                                                                     |                                                             |   | - |   |   |   | 1,838,469 |   |   |   | 6,750 |   |
| Net cash provided by (used in) financing activities                                                |                                                             |   | 96,000 |   |   |   | (15,746,438 | ) |   |   | (10,993,250 | )  |
|                                                                                               |                                                             |   |   |   |   |   |   |   |   |   |   |   |
| Effect of exchange rate changes on cash                                                            |                                                             |   | - |   |   |   | - |   |   |   | - |   |
|                                                                                               |                                                             |   |   |   |   |   |   |   |   |   |   |   |
| Net (decrease) increase in cash and cash equivalents                                               |                                                             |   | (899,761 | ) |   |   | 802,614 |   |   |   | (14,771 | )  |
| Cash and cash equivalents, beginning of year                                                       |                                                             |   | 964,373 |   |   |   | 161,759 |   |   |   | 176,530 |   |
| Cash and cash equivalents, end of year                                                             |                                                             |   | 64,612 |   |   |   | 964,373 |   |   |   | 161,759 |   |

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