Yuhe International Inc. Completes Independent Review of Payment Procedures by Ernst & Young (China) Advisory Limited

WEIFANG, China, May 7 /PRNewswire-Asia-FirstCall/ -- Yuhe International Inc. (Nasdaq: YUII) ("Yuhe" or the "Company"), a leading supplier of day-old chickens raised for meat production, or broilers, in the People's Republic of China ("PRC"), today announced that the completion of third-party independent review of payment procedures that was launched by its Audit Committee and conducted by Ernst & Young (China) Advisory Limited. The Board of Directors also decided to implement more stringent measures to ensure adequate internal controls are in place in the payment procedures.

Yuhe International's Audit Committee engaged Ernst & Young (China) Advisory Limited to review the Company's payment procedures, following the board resolution reached in the first board meeting on March 10, 2010. Ernst & Young has already finished the review and the scope of the review covers all the payments made between the period of January 1, 2010 to March 31, 2010. Ernst & Young has delivered a report prepared based on the review to all the board members, who had reviewed it before the second board meeting held on May 4, 2010.

Based on the discussion with the Company's management team and the review of the report delivered by Ernst & Young, the Board of Directors and Audit Committee concluded that (1) Yuhe International has cleared all the inter-company balances with related party companies; (2) There was no payment between Yuhe International and its related party companies in the period of March 1, 2010 to March 31, 2010; and (3) No material exception was noted during the review of payment procedures.

Although according to the discussion with the Company's management and the review performed by Ernst & Young, all balances with related party companies were settled and no other material control exception in the payment procedures was noted, the Board of Directors has elected to implement the following measures to ensure adequate internal controls are in place in the payment procedures and operated effectively, thus unauthorized or improper related party payment would not occur and exceptional related party transactions would be detected in time.

A: Update and Revision of Relevant Policies and Procedures

The Company will update its existing code of business ethics and other relevant policies and procedures to clearly stipulate the following two points.

    (1) Related party loan is a violation of the Company's code of business
        ethics and is strictly prohibited.
    (2) All related party transactions have to be reported to and approved by
        the Board of Directors in advance.

B: Execution of the relevant policies and procedures

The revised policies will be thoroughly communicated within the Company. All department heads would be required to sign to confirm their acknowledgement of the revised policies. The Finance Department will play a major role in the execution of the revised policies and will strictly follow the revised policy and report any transactions that violate or seemingly violate the policies.

C: Monitoring of the Operation of Internal Controls

The Company will fill a new position of Internal Auditor, who directly reports to the Chairman of the Audit Committee functionally, and to the Chief Financial Officer from the administrative perspective.

    -- Quarterly, the Internal Auditor will conduct an independent audit to
       review the Company's payment procedures and test the controls as stated
       in the revised policies. Then the Internal Auditor will report the
       results to the Board of Directors.

    -- Quarterly, the Internal Auditor will conduct specific audit to review
       all related party transactions to examine if the revised policies are
       properly executed, then the Internal Auditor will report the results to
       the Board of Directors.

    -- The Internal Auditor will be on board on June 1, 2010. The Board of
       Directors is in the process of reviewing the background and experience
       of a number of candidates at the same time defining the job description
       of the Internal Auditor.

"We appreciate the efforts of all our board members who have helped us improve our financial controls and reduce our operational risk," commented Mr. Zhentao Gao, Chief Executive Officer. "Going forward, we will strictly conform to our new code of business ethics and ensure that we act responsibly for the long term interests of all shareholders."

About Yuhe International, Inc.

Founded in 1996, Yuhe is the second largest day-old broiler breeder in China. The Company's main operations involve breeding, as all broilers are sold within a day of hatching. With headquarters in Weifang, Shandong Province, the Company has modern facilities and is led by an experienced team which includes experts in chicken breeding, disease prevention and animal husbandry science. Yuhe has two operational subsidiaries, Weifang Yuhe Poultry Co. Ltd. and Weifang Taihong Feed Co. Ltd. which largely supplies the Company's internal demand for chicken feed. Currently, 90% of the Company's sales of day-old broilers are in Shandong Province through 28 local agents there. There are 10 other sales agents in adjacent provinces. The Company has imported state-of-the-art equipment from the United States, Germany and Japan and has passed ISO9001 certification, allowing it to adhere to international standards of operation. For more information on the Company and its products, please visit http://www.yuhepoultry.com .

Cautionary Statement

This press release contains forward-looking statements concerning the Company's business, products and financial results. The Company's actual results may differ materially from those anticipated in the forward-looking statements depending on a number of risk factors including, but not limited to, the following: general economic and business conditions, development, shipment, market acceptance, additional competition from existing and new competitors, changes in technology, and various other factors beyond the Company's control. All forward-looking statements are expressly qualified in their entirety by this Cautionary Statement and the risk factors detailed in the Company's reports filed with the Securities and Exchange Commission. The Company undertakes no duty to revise or update any forward-looking statements to reflect events or circumstances after the date of this release.

     For more information, please contact:

    Yuhe International, Inc.
     Mr. Vincent Hu, CFO
     Phone: +86-536-7300-667
     Email: [email protected]

     Mr. Jason Wang, Director of IR
     Phone: +1-765-409-1844
     Email: [email protected]
     Web:   http://www.yuhepoultry.com

    CCG Investor Relations Inc.
     Mr. Athan Dounis, Account Manager
     Phone: +1-646-213-1916
     Email: [email protected]

     Shaun Smolarz, Financial Writer
     Phone: +1-646-101-7444
     Email: [email protected]
     Web:   http://www.ccgirasia.com

SOURCE Yuhe International, Inc.