Chairman Zhang pointed out that all staff rallied together, spared no efforts to overcome many difficulties and promoted healthy and stable development of each company under the tough international and domestic economic circumstances. This spirit of concerted effort to meet the challenge is not only the fundamental guarantee of our positive response to the current complex and difficult situation, but also a solid foundation for 2013 as well. Chairman Zhang also introduced the completion of the main work of the Group in 2012.

　　1. Hiking listed company successfully completed the restructuring of major assets by issuing stocks to purchase hair products assets attached to the Group. After integration of domestic and oversea’s hair products assets, the Group has formed a relatively complete industrial chain of processing, trade, logistics, brand design and sales. The successful restructuring of major assets, on the one hand, greatly improves the profitability of Hiking listed company. On the other hand, it also provides a better capital platform for the development of hair product business.

　　2. Hiking strengthened the internal management and risk control. In 2012, the Group further improved the management of investment and continued to strengthen the import business risk control system to effectively avoid the occurrence of the import risk; The Group also strengthened the audit over companies with poor efficiency, newly mergered companies and new business and intensified the follow-up of corrective measures. The Group actively responded to various legal proceedings and economic disputes to create a good environment for the safe and healthy operation of the Group and its subsidiaries.

　　3.The Group adjusted and optimized the financing structure and capital allocation. The Group employed capital budget management and further strengthened the cooperation with relevant financial institutions. Apart from expansion of financing channels, and appropriately increasing the scale of credit, the Group actively optimized the financing structure to reduce the cost of financing.

　　At the same time, Chairman Zhang also pointed out the main problems in 2012: that is: firstly, the overall operation quality needs improving and core competitiveness of the industry segment is not strong enough. Secondly, flexible mechanisms of private enterprise, strong innovation ability and timely incentive and other advantages have not been fully exploited. Thirdly, the ability to adapt and adjust to external environment needs to be further improved.

　　After the analysis of the operation situation of 2013, Chairman Zhang pointed out that in 2013, we are still facing very tough business operation situation with challenges coexistence with opportunities and hopes concurrence with difficulties.

International economic situation remains complicated and the international economy has transited into adjustment and transformation stage from the stage of pre-crisis rapid development. With the great changes in the domestic and international environment, it is very difficult for the foreign trade sector in China to enjoy continuous rapid growth as it did in the previous years.

　　The Economic Conference of the Party Central Committee proposed that the economic work of 2013 shall center on the increase of quality and efficiency of economic growth, and continue to implement proactive fiscal policy and prudent monetary policy. The conference pointed out that China is still in the important period of strategic opportunity, and our Group shall take full advantage of this important period of strategic opportunity and mainly stress our work in the following three aspects:

　　Firstly, boosting domestic demand. China continues to expand domestic demands and strengthen the fundamental role of consumption to economic growth. These are all important opportunities for Hiking in term of the adjustment of trade structure. Shandong, as an industrial powerhouse, has great and stable demand for energy and raw materials such as fuel, copper and cotton, etc. After the development of 2011 and 2012, we have initially laid foundation for business operation of bulk commodity, especially imports of bulk raw materials. The bank line of credit advantage and various favorable conditions provide us a rare opportunity to vigorously develop bulk commodities business.

　　Secondly, boosting the urbanization construction. It is proposed at the Economic Work Conference of the Party Central Committee that China shall steadily promote urbanization and make efforts to improve urbanization quality. Urbanization is one of the focuses of financial investment and an important driving force to boost economic development in the coming years. Therefore, the real estate business of Hiking will face great opportunities as well as pressure.

　　Thirdly, China will maintain its proactive fiscal policy and prudent monetary policy, perfect structural tax cutting policies, strengthen the flexibility of currency policies and reduce substantially the financing cost of real economy. These policies will benefit the Group to improve the financing environment, adjust the capital structure to reduce financial costs.

　　On this basis, Chairman Zhang put forward general idea on the work of 2013: further transformation of growth mode, adjustment of the industrial structure to promote the overall development quality and economic return of Hiking Group.

　　In 2013, the Group will target over enhancement of development quality and economic return, further transform the growth mode, optimize the resource allocation, encourage operation management innovation, and establish new profit mode step by step and improve the overall development quality. Hiking will further optimize incentive and restraint mechanisms and pay close attention to the business objectives and the implementation of the measures, carry forward the “12 Insights on the Group’s Growth” and the core value of the Group: “Be a man of integrity and do things with all your heart” and rally around to seek common development.

　　According to the aforesaid general ideas, the main work arrangements of Hiking in 2013 are as follows :

　　1. Formulate and implement the third Five-Year Strategy to define the development direction and objective in the next five years. Under the guidance of the third “Five Year Strategy”, the Group will set up annual comprehensive operation target for each business sector and balance the short-term operation business and long-term competitiveness. Hiking shall speed up the improvement of talents training system, performance appraisal mechanisms and distribution and incentive mechanism. The Group will intensify the cultivation and introduction of managerial talent in core industries, strengthen the building of the management team, encourage operation and management innovation to enhance the operation and management proficiency of each industries.

　　Each functional sectors and subsidiaries, according to the overall requirements of the third five-year strategy, shall set up their own annual strategic plans and work measures as the overall basis for the annual budget management before the second quarter of 2013.

　　2. Optimize the asset structure, reduce the financial cost and get economic benefits through revitalization of its assets and optimization of resource allocation.

　　3. Improve income distribution system and strengthen incentive and restrain mechanism. The Group will continue to enrich and improve the income distribution system on the basis of labor cost control and honor incentive. The Group will introduce incentives and punishment instrument for the chiefs of subsidiary companies and further strengthen performance incentive and management constraints.

　　4. Transform the mode and adjust the structure to enhance the development quality and efficiency of the four major industries of the Group.

　　---The Group shall continue to accelerate the transformation of the trade and logistics sector to increase its profitability. The headquarter will further strengthen coordination with each trade companies in aspects of consolidation of current business, acceleration of structure adjustment, fostering of new export growth points, expansion of diversified markets, extension of industrial chain and exploiting of new type trade modes to realize growth in both economic return and business scale. The Trade Development Department shall make the most of the advantage of the Group, organize subsidiary trade companies to participate in government trade promotion events and international exhibitions held in emerging markets like South America and Middle East and actively exploit the emerging markets.

　　----To implement strategic adjustment in a rapid way and develop real estate sector steadily.

　　---Financial investment shall abide by the principle of combination production with finance and take the capital advantage of listed company of Hiking and develop the current business in a better way. 

　　---To promote the elderly care industry. Longlife Company will further enhance its service and strengthen marketing to raise occupancy rate and speed up the return of investment.

　　5. Improve the overall level of management in accordance with the requirements of lean management.

　　1)To further improve the management level of scientific decision-making.

　　2) To deepen the budget management and pay close attention to the implementation of business operation objectives.

　　3) To continue to strengthen the internal management and risk control. Strengthen the implementation of financing budget and process control and intensify control of capital risk; shift the focal point and view of audit and highlight the implementation of corrective measures.

　　4) To continue to improve the macro-management capacity and service level of the headquarters to establish a better supporting system. Each functional department of the headquarters shall set up a better communication mechanism with the subsidiary companies, offer appropriate suggestions to them over the problems the subsidiaries encounter in their business operation and provide powerful support and superb service to the growth of the subsidiary companies; The headquarters shall further change its work style, improve work efficiency and management level, enhance service awareness to help solve real problems subsidiary companies have in their work.

　　5) Top officials at all levels shall set an example for the staff and lead them to practice the “12 Insights on the Group’s Growth” and the core value of the Group: “Be a man of integrity and do things with all your heart”. The leaders shall bear their responsibility in mind at all time and make contribution to the development of the Group and safeguard the interests of shareholders and employees. Top officials at all levels shall work with resolution and mobilize the enthusiasm and creativity of every employee to contribute ideas, talents and strength to the development of the Group.

　　2013 is the first year to implement the third “Five Year Strategy”. It is expected that all staff shall rally around and complete successfully various work tasks throughout the year and make the greatest efforts and contributions to promote the better and faster development of the Group.