The board of directors of Fufeng Group Limited announced to the shareholders of the company and potential investors that based on a preliminary review of the unaudited consolidated management accounts of the Group, the consolidated net profit for the year ended December 31, 2012 of the Group is expected to register a notable decrease as compared to that of the year ended December 31, 2011. The Board believes that the Group's annual results for the year ended December 31, 2012 was mainly affected by: the overall decrease in the gross profit margin of the Group in 2012, which was mainly attributable to the decrease in average selling price of monosodium glutamate, one of the key products of the Group. Throughout 2012, the Group has strategically maintained its product prices at a competitive level in order to increase its sales volume, including fully utilizing the extra production capacity at Hulunbeir Plant; and the overall increase in the interest expenses incurred by the Group for the year ended December 31, 2012, which was primarily due to the increase in the level of borrowings of the Group, including domestic loans and the issuance of USD senior notes in April 2011.

Such increase in borrowings was necessary for the expansion of the Group's business and rising working capital needs, in particular for the construction of Hulunbeir Plant and Xinjiang Plant as the Group continued to enhance and consolidate its scale and position in its key markets.