Hong Kong Exchange and Clearing Limited, The Stock Exchange of Hong Kong Limited and the Securities and Futures Commission take no responsibility for the contents of this Web Proof Information Pack, make no representation as to its accuracy or completeness and expressly disclaim any liability whatsoever for any loss howsoever arising from or in reliance upon the whole or any part of the contents of this Web Proof Information Pack. Web Proof Information Pack of

361 Degrees International Limited 361 (incorporated in the Cayman Islands with limited liability) WARNING

This Web Proof Information Pack is being published as required by The Stock Exchange of Hong Kong Limited (“HKEx”)/the Securities and Futures Commission solely for the purpose of providing information to the public in Hong Kong.

This Web Proof Information Pack is in draft form. The information contained in it is incomplete and is subject to change which can be material. By viewing this document, you acknowledge, accept and agree with 361 Degrees International Limited (the “Company”), any of its sponsor, advisers or member of the underwriting syndicate that: (a) this Web Proof Information Pack is only for the purpose of facilitating equal dissemination of information to investors in Hong Kong and not for any other purposes. No investment decision should be based on the information contained in this Web Proof Information Pack; (b) the posting of the Web Proof Information Pack or supplemental, revised or replacement pages thereof on the HKEx website does not give rise to any obligation of the Company, any of its sponsor, advisers and/or member of the underwriting syndicate to proceed with an offering in Hong Kong or any other jurisdiction. There is no assurance that the Company will proceed with any offering; (c) the contents of the Web Proof Information Pack or supplemental, revised or replacement pages thereof may or may not be replicated in full or in part in the actual prospectus; (d) the Web Proof Information Pack may be updated or revised by the Company from time to time, but neither the Company nor any of its affiliates, advisers, sponsor or members of the underwriting syndicate is under any obligation, legal or otherwise, to update any information contained in this Web Proof Information Pack; (e) this Web Proof Information Pack does not constitute a prospectus, notice, circular, brochure or advertisement or document offering to sell any securities to the public in any jurisdiction, nor is it an invitation or solicitation to the public to make offers to acquire, subscribe for or purchase any securities, nor is it calculated to invite or solicit offers by the public to acquire, subscribe for or purchase any securities; (f) this Web Proof Information Pack must not be regarded as an inducement to subscribe for or purchase any securities, and no such inducement is intended; (g) neither the Company nor any of its affiliates, advisers, sponsor or members of the underwriting syndicate is offering, or is soliciting offers to buy, any securities in any jurisdiction through the publication of this Web Proof Information Pack; (h) neither the Company nor any of its affiliates, advisers, sponsor or members of the underwriting syndicate makes any express or implied representation or warranty as to the accuracy or completeness of the information contained in this Web Proof Information Pack; (i) each of the Company and its affiliates, advisers, sponsor or members of the underwriting syndicate expressly disclaims any and all liability on the basis of any information contained in, or omitted from, or any inaccuracies or errors in, this Web Proof Information Pack; (j) neither this Web Proof Information Pack or anything contained herein shall form the basis of or be relied on in connection with any contract or commitment whatsoever; (k) the Company has not and will not register the securities referred to in this Web Proof Information Pack under the United States Securities Act of 1933, as amended, or any state securities laws of the United States, and securities of the Company may not be offered or sold in the United States without registration under, or without an applicable exemption from the registration requirements of, the United States Securities Act of 1933, as amended; and (l) as there may be legal restrictions on the distribution of this Web Proof Information Pack or dissemination of any information contained in this Web Proof Information Pack, you agree to inform yourself about and observe any such restrictions applicable to you.

THIS WEB PROOF INFORMATION PACK IS NOT FOR PUBLICATION OR DISTRIBUTION TO PERSONS IN THE UNITED STATES. ANY SECURITIES REFERRED TO HEREIN HAVE NOT BEEN AND WILL NOT BE REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE OFFERED OR SOLD WITHOUT REGISTRATION THEREUNDER OR PURSUANT TO AN AVAILABLE EXEMPTION THEREFROM.

NEITHER THIS WEB PROOF INFORMATION PACK NOR THE INFORMATION CONTAINED HEREIN CONSTITUTES AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY ANY SECURITIES IN THE UNITED STATES. THIS WEB PROOF INFORMATION PACK IS NOT BEING MADE AND MAY NOT BE DISTRIBUTED OR SENT INTO CANADA OR JAPAN.

If an offer or an invitation is made to the public in Hong Kong in due course, prospective investors are reminded to make their investment decisions solely based on a prospectus of the Company registered with the Registrar of Companies in Hong Kong, copies of which will be distributed to the public during the offer period, and no such offer or invitation to the public in Hong Kong will be made until after such registration. THIS WEB PROOF INFORMATION PACK IS IN DRAFT FORM. The information contained in it is incomplete and is subject to change. This Web Proof Information Pack must be read in conjunction with the section headed “Warning” on the cover of this Web Proof Information Pack.

CONTENTS

This Web Proof Information Pack contains the following information relating to 361 Degrees International Limited extracted from the Listing Committee Post-Hearing proof of the draft document. • Summary • Definitions • Forward-looking Statements • Risk Factors • Waivers from Compliance with the Listing Rules • Directors and Parties Involved • Corporate Information • Industry Overview • Regulations • History and Corporate Structure • Business • Relationship with Controlling Shareholders • Directors and Senior Management • Substantial Shareholders • Share Capital • Financial Information • Future Plans • Appendix I: Accountants’ Report • Appendix III: Profit Forecast • Appendix IV: Property Valuation • Appendix V: Summary of the Constitution of Our Company and Cayman Islands Companies Law • Appendix VI: Statutory and General Information

YOU SHOULD READ THE SECTION HEADED “WARNING” ON THE COVER OF THIS WEB PROOF INFORMATION PACK. THIS WEB PROOF INFORMATION PACK IS IN DRAFT FORM. The information contained in it is incomplete and is subject to change. This Web Proof Information Pack must be read in conjunction with the section headed “Warning” on the cover of this Web Proof Information Pack.

SUMMARY

OVERVIEW We are one of the leading domestic sportswear enterprises in the PRC. As of the Latest Practicable Date, our 361° products were sold at more than 5,900 361° authorised retail outlets in 31 provinces and most major cities in the PRC. According to Frost & Sullivan, among the ten major participants of the PRC sportswear market (selected based on revenue for 2008), we were the fastest growing brand in terms of revenue growth rate for 2008 as compared to 2007, a top five domestic brand in terms of revenue for 2008, accounting for approximately 4.2% of the total revenue of the PRC sportswear market for the same period, and a top five brand in terms of the number of retail outlets in the PRC as of 31 March 2009.(1) We design, develop, produce, market and distribute high performance, innovative and stylish sportswear products, including athletic footwear, apparel and accessories. Our 361° products are marketed primarily to the fast-growing, up-and-coming consumer group comprised of sports-minded consumers between the ages of 16 and 25. Founded in 2003, we have grown rapidly in recent years in terms of sales and number of authorised retail outlets. We believe our growth has been driven principally by the successful promotion of our 361° brand, rapid expansion of the 361° retail network, improved product designs, expansion of our range of product offerings, and our conversion to an exclusive distributorship business model. Increasing market demand for sportswear products and improving economic conditions in the PRC also contributed to our growth.

Our brand, 361°, represents the 360 degrees of a complete circle plus one extra degree, symbolising our goal of establishing our brand to provide complete satisfaction in athleticism and functionality, plus an added degree of innovation and creativity. It also represents our continuous commitment to always pursuing one more degree of management and operational excellence and highlights our goal of distinguishing 361° from other competitors by this one degree.

We place great emphasis on brand building and promoting our 361° products. We produce integrated, theme-based print, television and Internet advertising that promote 361°’s spirit of passion and individualism. We also create influential co-marketing campaigns through our selection of top athletes, such as Olympic badminton gold medallists Ms. Zhang Ning ( ) and Mr. Lin Dan ( ), as our spokespersons and the sponsorship of high quality, brand enhancing sporting events, such as the 361° China University Basketball Super League (361° ), the Xiamen International Marathon ( ) and various other promotional activities. This allows us to develop product tie-ins that are cross-marketed during the events’ promotional campaigns and, in turn, stimulate in-store sales of our 361° products. Our 361° trademark has been recognised as a “China Well-Known Trademark” ( ) by the State Administration for Industry and Commerce of the PRC ( ) and a “China Famous Brand” ( ) (for 361° sports footwear) by the State General Administration of Quality Supervision, Inspection and Quarantine of the PRC ( ).

In collaboration with external design agencies, our in-house design team of 49 staff develops stylish and functional sportswear products for a wide variety of sporting activities. Our team caters to consumer trends while echoing thematic elements from our integrated marketing campaigns to establish a unified image for our brand and products.

We also pride ourselves on creating high performance sportswear products for our consumers. Our team of 57 dedicated research and development staff is engaged in developing new technologies and applications to enhance the technical innovations and performance of our 361° products. Our two laboratories, the primary role of which is quality control testing, also provide data to our research and development department to assist them in developing new technologies and applications. Key achievements of our research and development departments include patented sportswear technologies, such as NFO Tech soles, which enhance the shock absorbing characteristics of soles, and Hold Ground Tech, which enhances the gripping power of soles. We currently hold six patents related to footwear.

Note: (1) Please refer to “Industry Overview — The PRC Sportswear Industry” section in this document for more information.

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SUMMARY

To better manage our growth, enhance our market penetration in retail channels and focus our resources on overall brand building and product design and development, we shifted our business model in the beginning of 2008. Under the new business model, we sell our 361° products exclusively to our distributors, who in turn sell our 361° products to authorised retailers within the exclusive geographic areas assigned to them pursuant to annual distributorship agreements. The authorised retailers then sell our 361° products to consumers in 361° authorised retail outlets (including individual outlets and store counters in department stores) which have been specifically authorised by our distributors, with our consent, to sell exclusively our 361° products. The new business model improves our efficiency in the distribution of our 361° products and reduces our selling and distribution expenses as we only need to manage a relatively small number of customers compared to hundreds of customers under the previous business model. In addition, by leveraging our distributors’ local resources and business networks, we are able to expand the 361° retail network more efficiently. Since the adoption of our new business model, we ceased entering into new purchase contracts with customers who are not our distributors. However, since we continued to honour our obligations under the purchase contracts entered into prior to 2008 up to December 2008, approximately 4.6% and 0.4% of our 361° product sales during the six months ended 30 June 2008 and the nine months ended 31 March 2009, respectively, were made to these customers pursuant to such purchase contracts. No sales have been made to such customers who are not our distributors since January 2009.

Prior to 2008, substantially all of our revenues were generated from sales of our 361° products to customers who were primarily wholesalers and authorised retailers (including department stores) of sportswear products pursuant to purchase contracts which covered orders for a particular season. These customers either resold our 361° products to authorised retailers or sold our 361° products at their self-operated authorised retail outlets. The purchase contracts set out the sales terms including price, purchase quantity, delivery terms and settlement terms. As we did not adopt a wholesale distribution business model before 2008, we did not enter into any long-term agreements which governed our relationship with our pre-2008 customers.

We select our distributors based on their capital base, financial stability, expertise in retail distribution, retail management and history of operation in the sportswear industry, as well as their commitment to the expansion of the 361° retail network. We have entered into an annual distributorship agreement with each of our distributors since February 2008. The terms of each of our distributorship agreements are substantially the same and include such terms as geographical exclusivity, product exclusivity, payment terms, minimum purchases, minimum number of new 361° authorised retail outlets to be opened and certain other undertakings. Under the new distributorship business model, we have adopted a uniform pricing policy with a national suggested retail pricing system. We sell our 361° products to our distributors at a uniform discount to the suggested retail price, and our distributors, in turn, sell our 361° products to their authorised retailers at a uniform price that has been approved by us. We do not have any contractual relationship with our authorised retailers.

As of the Latest Practicable Date, the distribution network of our 361° products consisted of 30 distributors who oversaw 3,173 authorised retailers. These authorised retailers owned and operated 5,925 361° authorised retail outlets, covering 31 provinces and more than 450 district-level cities, as well as more than 1,200 county-level cities in the PRC. Currently, we do not have any interest in, or operate, any of our distributors, authorised retailers, or 361° authorised retail outlets. While we do not have direct contractual relationships with authorised retailers, our distributors enter into separate agreements with authorised retailers and require them to comply with our standard operating procedures, some of which include guidelines on the design and layout of 361° authorised retail outlets, product pricing and customer service. To ensure compliance with these procedures and to assist authorised retailers with marketing and sales, our regional sales managers routinely visit 361° authorised retail outlets. In addition, we offer authorised retailers and 361° authorised retail outlets training programmes several times a year.

We introduce our new products to our distributors and authorised retailers at our sales fairs, which have historically been held three times a year, in February, May and August, approximately four to six months before a new season’s products are introduced to consumers. Our distributors place their orders for the products featured at a sales fair, and we then use these orders to determine production schedules and quantities, and either manufacture the ordered products at our own production facilities or outsource the manufacturing to various contract manufacturers. As we manufacture products only after receipt of purchase volume indications from our

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SUMMARY distributors, and in the quantities ordered, we are able to coordinate raw material supplies and inventory levels with manufacturing and distribution, which allows us to better control inventory levels and achieve timely delivery of products to our distributors.

Our production facilities are located in Jinjiang City, Fujian Province, the PRC. As of the Latest Practicable Date, we operated 16 footwear production lines, with an aggregate annual production capacity of approximately 13.6 million pairs of footwear. We do not operate any production facilities for apparel or accessories and have, during the Track Record Period, outsourced all production of those products to third-party contract manufacturers.

Our revenues for the financial years ended 30 June 2006, 2007 and 2008 were RMB262.9 million, RMB373.3 million and RMB1,317.1 million, respectively, representing a CAGR of 123.8%. Our gross profits for the financial years ended 30 June 2006, 2007 and 2008 were RMB27.1 million, RMB76.9 million and RMB348.0 million, respectively, representing a CAGR of 258.6%. Our net profits for the financial years ended 30 June 2006, 2007 and 2008 were RMB11.0 million, RMB22.9 million and RMB179.0 million, respectively, representing a CAGR of 303.3%. Our revenues for the nine months ended 31 March 2008 and 2009 were RMB853.7 million and RMB2,423.7 million, respectively, representing an increase of 183.9%. Our gross profits for the nine months ended 31 March 2008 and 2009 were RMB202.4 million and RMB791.3 million, respectively, representing an increase of 291.1%. Our net profits for the nine months ended 31 March 2008 and 2009 were RMB102.7 million and RMB364.2 million, respectively, representing an increase of 254.8%. The significant growth in our profits for the financial year ended 30 June 2008 and the nine months ended 31 March 2009, as compared to the financial year ended 30 June 2007 and the nine months ended 31 March 2008, respectively, was primarily due to the successful promotion of our 361° brand, rapid expansion of the 361° retail network, improved product design, expansion of our range of product offerings, and our conversion to an exclusive distributorship business model, which encouraged our distributors to concentrate their resources exclusively on the wholesale distribution of our 361° products and helped us to develop and expand the 361° retail network.

COMPETITIVE STRENGTHS We have grown quickly to become one of the leading sportswear brands in the PRC, and according to Frost & Sullivan, we were the fastest growing sportswear brand among the ten major participants of the PRC sportswear market (selected based on revenue for 2008) in terms of revenue growth rate for 2008 as compared to 2007. We believe that our ability to rapidly expand our business and capture the increasing opportunities in the PRC sportswear market is underpinned by the following competitive strengths: • A leading and one of the fastest growing sportswear brands in the PRC • Extensive nationwide distribution network • Innovative design and product development capability • Innovative marketing and promotion strategies • Experienced and professional management team

BUSINESS STRATEGIES We aim to become the leading domestic sportswear brand in the PRC in terms of brand recognition and market share and to maximise shareholder value. The following sets forth our key business strategies which we expect to implement to meet our overall goal of increasing market share in the PRC sportswear market: • Expand our ten core markets and distribution network • Further develop and increase awareness of our 361° brand • Leverage our 361° brand into sub-brands and broaden the 361° authorised retail outlet format

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SUMMARY

• Increase investment in product research and development • Increase production efficiency by improving supply chain management

RISK FACTORS We believe that our business is subject to a number of risk factors, a summary of which is set out in the section headed “Risk Factors” in this document. These risks can be broadly classified into: • Risks relating to our business • Risks relating to the PRC sportswear industry • Risks relating to conducting business in the PRC

Set out below is a summary of the risks referred to above.

Risks relating to our business • We rely heavily on our 361° brand. Failure to effectively promote or maintain our 361° brand may materially and adversely affect our future success • Our 361° brand has a limited history in the branded sportswear industry and our new exclusive distributorship business model has a short track record • Consumer sales of our 361° products are conducted by authorised retailers over whom we have no direct control • Our sales depend on the popularity of our 361° brand and the market perception and consumer acceptance of our 361° products, which in turn depends on our ability to anticipate and respond in a timely manner to rapid changes in consumers’ tastes • A distributor’s failure to perform its obligations under its distributorship agreement with us could materially and adversely affect the business of the authorised retailers of an entire geographic area, as well as our reputation, brand, image and future prospects • We rely on a small number of customers for a significant portion of our sales; we rely on third-party distributors and authorised retailers for sales of our 361° products and our failure to maintain good relationships with our distributors or failure by them to ensure that authorised retailers adhere to our retail policies may adversely affect our business • We rely on our distributors to oversee authorised retailers and to expand the 361° retail network • Our ability to accurately track the sales and inventory levels at our distributors and 361° authorised retail outlets may be limited • We may fail to execute our growth strategy or maintain our growth rate • We are dependent on a small number of contract manufacturers for the production of a portion of our footwear and all of our apparel and accessories • We are dependent on certain of our key personnel. Our inability to attract, retain and motivate qualified key personnel could materially and adversely affect our business and prospects • Historical financial performance should not be used as an indicator for our future financial performance • We rely on a small number of suppliers for certain raw materials. Unfavourable fluctuations in the price, availability and quality of raw materials could cause material production delays and materially increase our production costs • Prices of our products are subject to factors beyond our control

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SUMMARY

• Any significant damage to our administrative or production facilities could have a material adverse effect on our results of operations • If our distributors do not pay us for their purchases in a timely manner or at all, our financial condition and results of operations could be materially and adversely affected • We recorded negative operating cash flow for the two financial years ended 30 June 2006 and 2007, and recorded positive operating cash flow for the financial year ended 30 June 2008 and the nine months ended 31 March 2009, and may not be able to continue to record positive operating cash flow in the future • The registration in the PRC of certain patents are still pending and may not be approved • We may not be able to adequately protect our intellectual property rights, which could harm our 361° brand and our business • Our business could be materially and adversely affected by claims of third parties for possible infringement of their intellectual property rights • Our ability to obtain additional financing may be limited, which could delay or prevent the completion of one or more of our strategies • Labour disputes could significantly affect our operations • We may be exposed to product liability, property damage or personal injury claims, which may materially and adversely affect our reputation and business

Risks relating to the PRC sportswear industry • We operate in a highly competitive market and the intense competition we face may result in a decline in our market share and lower profit margins • Our sales are subject to seasonality and weather conditions, which could cause our results of operations to fluctuate

Risks relating to conducting business in the PRC • Fluctuations in consumer spending caused by changes in macroeconomic conditions in the PRC may significantly affect our business, financial condition, results of operations and prospects • Our business may be materially and adversely impacted by recent financial difficulties and economic conditions in the United States, Europe and elsewhere • Changes in the laws, regulations and policies adopted by the PRC Government, including in relation to the environment, labour and taxation, may materially and adversely affect our business, financial condition, results of operations and prospects • Restrictions on foreign exchange and payments of dividends may limit our operating subsidiaries’ ability to remit payments to our Company • We are a holding company that heavily relies on dividend payments from our subsidiaries for funding • Fluctuations in foreign exchange rates may materially and adversely affect our financial condition and results of operations • Any change in our tax treatment, including an unfavourable change in preferential enterprise income tax rates in the PRC, may have a material adverse impact on our financial condition and results of operations • Gains on the sales of our Shares and dividends on our Shares may be subject to PRC income taxes

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SUMMARY

• It may be difficult to effect service of process on, or to enforce judgements obtained outside the PRC against, us, our Directors or our senior management members who reside in the PRC • The PRC legal system is not fully developed and has inherent uncertainties regarding the interpretation and enforcement of PRC laws and regulations which could limit the legal protections available to investors • Changes in existing laws and regulations or additional or stricter laws and regulations on environmental protection in the PRC may cause us to incur additional capital expenditures • Natural disasters, acts of war, political unrest and epidemics, which are beyond our control, may cause damage, loss or disruption to our business • Failure to comply with the SAFE regulations relating to the establishment of offshore special purpose vehicles by our beneficial owners may materially and adversely affect our business operations • Increases in labour costs and other costs of production in the PRC could materially and adversely affect our profitability • New labour laws in the PRC may materially and adversely affect our results of operations

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SUMMARY

SUMMARY FINANCIAL INFORMATION The tables below summarise our combined financial information for the financial years ended 30 June 2006, 2007 and 2008 and the nine months ended 31 March 2008 and 2009, and as of 30 June 2006, 2007 and 2008 and 31 March 2009. Financial results for the nine months ended 31 March 2009 are not necessarily indicative of the results that may be expected for the year ending 30 June 2009. Our combined financial information as of and for the nine months ended 31 March 2008 has not been audited. The following summary was extracted from our combined financial statements included in the accountants’ report set out in Appendix I to this document. You should read the entire financial statements, including the notes thereto, included in Appendix I to this document for more details.

Summary Combined Income Statement Information For the nine months For the financial year ended 30 June ended 31 March 2006 2007 2008 2008 2009 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 (unaudited) Revenues ...... 262,923 373,346 1,317,069 853,651 2,423,679 Cost of sales ...... (235,865) (296,423) (969,041) (651,292) (1,632,354) Gross profit ...... 27,058 76,923 348,028 202,359 791,325 Other revenue ...... 824 1,591 2,467 1,031 5,827 Other loss ...... — — (1,948) — (54) Selling and distribution expenses ...... (9,977) (36,484) (106,409) (62,507) (286,288) Administrative expenses ...... (5,668) (12,699) (39,595) (24,561) (68,209) Profit from operations ...... 12,237 29,331 202,543 116,322 442,601 Finance costs ...... (1,250) (3,026) (5,371) (3,457) (11,883) Profit before taxation ...... 10,987 26,305 197,172 112,865 430,718 Income tax ...... 19 (3,394) (18,199) (10,209) (66,513) Profit for the year/period ...... 11,006 22,911 178,973 102,656 364,205 Dividends payable to equity shareholders of the Company attributable to the year/period: Dividends declared during the year/period ...... — — — — 45,342 Dividends declared after the balance sheet date .... — — — — 31,400 — — — — 76,742

Basic earnings per share (RMB) ...... 0.007 0.015 0.119 0.068 0.243

Summary Combined Balance Sheet Information As of As of 30 June 31 March 2006 2007 2008 2009 RMB’000 RMB’000 RMB’000 RMB’000 Assets Current assets ...... 249,064 350,030 1,040,235 1,950,639 Non-current assets ...... 20,266 40,892 112,080 244,937 Total Assets ...... 269,330 390,922 1,152,315 2,195,576 Equity and Liabilities Current liabilities ...... 197,592 263,791 831,145 1,541,814 Non-current liabilities ...... — — 3,584 16,555 Total Equity ...... 71,738 127,131 317,586 637,207 Total Equity and Liabilities ...... 269,330 390,922 1,152,315 2,195,576

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SUMMARY

Summary Combined Cash Flow Statement Information For the financial year ended For the nine months 30 June ended 31 March 2006 2007 2008 2008 2009 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 (unaudited) Net cash (used in)/generated from operating activities ...... (39,868) (52,540) 4,734 (7,685) 162,483 Net cash used in investing activities ...... (5,113) (9,378) (121,487) (44,177) (149,660) Net cash generated from financing activities ...... 49,337 73,696 202,101 116,991 8,122 Net increase in cash and cash equivalents ...... 4,356 11,778 85,348 65,129 20,945 Cash and cash equivalents at end of year/period ...... 11,769 23,547 108,895 88,676 129,840

Summary Revenue Components For the financial year ended 30 June For the nine months ended 31 March 2006 2007 2008 2008 2009 RMB’000 % RMB’000 % RMB’000 % RMB’000 % RMB’000 % (unaudited) Revenues Footwear ...... 240,325 91.4 345,890 92.6 866,134 65.8 599,087 70.2 1,133,237 46.8 Apparel ...... 21,229 8.1 22,739 6.1 432,737 32.8 248,211 29.1 1,232,942 50.9 Accessories and others(1) ...... 1,369 0.5 4,717 1.3 18,198 1.4 6,353 0.7 57,500 2.3 Total ...... 262,923 100.0 373,346 100.0 1,317,069 100.0 853,651 100.0 2,423,679 100.0

Note: (1) “Others” include revenues from sales of TPR and TPU pellets for the three financial years ended 30 June 2008 and sales of certain packaging materials for the nine months ended 31 March 2009, respectively.

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SUMMARY

DIVIDEND AND DIVIDEND POLICY Our Company declared a dividend of RMB45.3 million in December 2008 and a dividend of RMB31.4 million in June 2009. All such dividends were paid out prior to the [Š]. Save as above, no other dividends were paid by us or any of our subsidiaries to their then shareholders during the Track Record Period.

No dividends may be declared or paid other than out of profit and reserves of our Company lawfully available for distribution, including share premium. We may declare dividends via a general meeting but the amount may not exceed the amount recommended by our Directors. We may from time to time also pay interim dividends as determined by our Directors to be justified by our profit and may also pay half yearly or at other intervals at a fixed rate if our Directors are of the opinion that the profit available for distribution justifies the payment.

Our Board of Directors will declare dividends, if any, in Hong Kong dollars on a per Share basis and will pay such dividends in Hong Kong dollars. The amount of any dividends to be declared or paid in the future will depend on, among other things, our results of operations, cash flows and financial condition, operating and capital requirements, the amount of distributable profit, the constitution of our Company, the Companies Law, applicable laws and regulations and other factors that our Directors may consider as relevant. Shareholders will be entitled to receive such dividends pro rata according to the amounts paid up or credited as paid up on the Shares. The declaration, payment, and amount of dividends will be subject to the absolute discretion of our Directors. Our future declaration of dividends may or may not reflect on its historical declarations of dividend. There is no assurance as to whether the dividend distribution will occur as intended, the amount of dividend payment or the timing of such payment.

Subject to the factors described above, our Board of Directors currently intends to recommend at the relevant shareholders meetings of the Company an annual dividend of no less than 20% of the net profit available for distribution to our Shareholders in the foreseeable future.

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DEFINITIONS

In this document, unless the context otherwise requires, the following expressions have the following meanings:

“Articles of Association” or “Articles” the articles of association of our Company adopted on 10 June 2009 and as amended from time to time, a summary of which is set out in Appendix V to this document

“associate(s)” has the meaning ascribed thereto under the Listing Rules

“authorised retail outlet(s)” retail outlet(s) operated by (i) one of our authorised retailers upon the adoption of the new distributorship business model in 2008 under the 361° brand name selling exclusively our 361° products; or (ii) one of our pre-2008 customers selling non-exclusively our 361° products (as the case may be). Such retail outlet(s) is/are owned and operated by Independent Third Party(ies)

“authorised retailer(s)” retailer(s) authorised by our distributor with our consent upon the adoption of the new distributorship business model in 2008 or authorised by us prior to 2008 to sell our 361° products to consumers in authorised retail outlets (as the case may be). Such retailer(s) is/are Independent Third Party(ies)

“Bieke Fujian” Bieke (Fujian) Shoes Co., Ltd.* ( ), a wholly foreign-owned enterprise incorporated under the laws of the PRC on 26 October 1994 and 100% beneficially owned by Mr. Ting Tong Bun ( ), the father-in-law of Mr. Ding Huirong ( ), who is one of our Controlling Shareholders. Mr. Ting Tong Bun ( ), Mr. Lin Licheng ( ) and Mr. Lin Jinhuan ( ) have been the board members of Bieke Fujian since 1 July 2008. Mr. Lin Licheng ( ) and Mr. Lin Jinhuan ( ) are Independent Third Parties

“Board” or “Board of Directors” the board of Directors of our Company

“business day” a day on which banks in Hong Kong are generally open for business to the public and which is not a Saturday, Sunday or public holiday in Hong Kong

“BVI” the British Virgin Islands

“CAGR” compound annual growth rate

“China” or “PRC” the People’s Republic of China excluding, for the purpose of this document, Hong Kong, the Macau Special Administrative Region and Taiwan

“Companies Law” the Companies Law, Cap. 22 (Law 3 of 1961, as consolidated and revised) of the Cayman Islands

“Companies Ordinance” the Companies Ordinance (Chapter 32 of the Laws of Hong Kong) as amended, supplemented or otherwise modified from time to time

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DEFINITIONS

“Company” or “our Company” 361 Degrees International Limited (361 ), an exempted company incorporated with limited liability under the laws of the Cayman Islands on 1 August 2008, which was formerly known as 361 International Ltd. and changed its name on 30 March 2009

“Connected Person(s)” has the meaning ascribed thereto under the Listing Rules

“Controlling Shareholders” has the meaning ascribed thereto under the Listing Rules and unless the context requires otherwise, refers to Hui Rong International and its beneficial owner Mr. Ding Huirong ( ), Ming Rong International and its beneficial owner Mr. Ding Huihuang ( ) and Dings International and its beneficial owner Mr. Ding Wuhao ( )

“Corporate Reorganisation” the corporate reorganisation of our Group conducted in preparation for the [Š], details of which are set out in the section headed “History and Corporate Structure—Corporate Reorganisation” in this document

“Covenantors” Hui Rong International and its beneficial owner Mr. Ding Huirong ( ), Ming Rong International and its beneficial owner Mr. Ding Huihuang ( ), Dings International and its beneficial owner Mr. Ding Wuhao ( ), Jia Chen International and its beneficial owner Mr. Wang Jiachen ( ), Jia Wei International and its beneficial owner Mr. Wang Jiabi ( ), and Jian Tong Investments and its beneficial owner Mr. Ding Jiantong ( )

“Deed of Indemnity” the deed of indemnity entered into between the Controlling Shareholders and our Company as referred to in Appendix VI of this document

“Deed of Non-competition” a deed of non-competition dated 10 June 2009 entered into by the Controlling Shareholders in favour of our Company, details of which are disclosed in the section headed “Relationship with Controlling Shareholders” in this document

“Dings International” Dings International Company Limited ( ), a company incorporated in the BVI with limited liability on 15 February 2008, the entire issued share capital of which is owned by Mr. Ding Wuhao ( )

“Director(s)” the director(s) of our Company

“Frost & Sullivan” Frost & Sullivan (Beijing) Inc. ( *), an international market research and consulting company, as well as an Independent Third Party

“governmental authority” any public, regulatory, taxing, administrative or governmental agency or authority (including, without limitation, the Stock Exchange, the SFC and the United States Securities and Exchange Commission), other authority and any court at the national, provincial, municipal or local level

“Group”, “our Group”, “we” or “us” our Company and its subsidiaries or, where the context so requires in respect of period before our Company became the holding company

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DEFINITIONS

of its present subsidiaries, the present subsidiaries of our Company and the businesses carried on by such subsidiaries or (as the case may be) their predecessors

“HK$” and “cents” Hong Kong dollars and cents respectively, the lawful currency for the time being of Hong Kong

“HKAS(s)” Hong Kong Accounting Standards

“HKFRS(s)” Hong Kong Financial Reporting Standard(s) (including HKASs and Interpretations) issued by HKICPA

“HKICPA” Hong Kong Institute of Certified Public Accountants

“Hong Kong”, “HKSAR” or “HK” the Hong Kong Special Administrative Region of the PRC

“Hui Rong International” Hui Rong International Company Limited ( ), a company incorporated in the BVI with limited liability on 15 February 2008, the entire issued share capital of which is owned by Mr. Ding Huirong ( )

“Independent Third Party(ies)” an individual(s) or a company(ies) who or which is/are not connected (within the meaning of the Listing Rules) with any directors, chief executive or substantial shareholders (within the meaning of the Listing Rules) of our Company, its subsidiaries or any of their respective associates

“Jia Chen International” Jia Chen International Co., Ltd. ( ), a company incorporated in the BVI with limited liability on 25 April 2008, the entire issued share capital of which is owned by Mr. Wang Jiachen ( )

“Jia Wei International” Jia Wei International Co., Ltd. ( ), a company incorporated in the BVI with limited liability on 25 April 2008, the entire issued share capital of which is owned by Mr. Wang Jiabi ( )

“Jian Tong Investments” Jian Tong Investments Co., Ltd. ( ), a company incorporated in the BVI with limited liability on 25 April 2008, the entire issued share capital of which is owned by Mr. Ding Jiantong ( )

“Latest Practicable Date” 11 June 2009, being the latest practicable date prior to the printing of this document for the purpose of ascertaining certain information in this document prior to its publication

“Laws” all laws, rules, statutes, ordinances, regulations, guidelines, opinions, notices, circulars, orders, judgements, decrees or rulings of any governmental authority and “Law” includes any one of them

“Listing Rules” the Rules Governing the Listing of Securities on the Stock Exchange (as amended from time to time)

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DEFINITIONS

“Memorandum of Association” or the memorandum of association of our Company “Memorandum”

“Ming Rong International” Ming Rong International Company Limited ( ), a company incorporated in the BVI with limited liability on 20 February 2008, the entire issued share capital of which is owned by Mr. Ding Huihuang ( )

“PBOC” the People’s Bank of China ( ), the central bank of China

“PRC Government” or “State” the central government of the PRC, including all governmental subdivisions (including provincial, municipal and other regional or local government entities) and instrumentalities thereof

“[Š] Share Option Scheme” the share option scheme approved and adopted by our Company on 10 June 2009, the principal terms of which are summarised under the paragraph headed “[Š] Share Option Scheme” in Appendix VI to this document

“RMB” or “Renminbi” Renminbi, the lawful currency of the PRC

“SAFE” the State Administration of Foreign Exchange of the People’s Republic of China ( )

“Sanliuyidu China” Sanliuyidu (China) Co., Ltd.* ( ), a wholly foreign-owned enterprise incorporated under the laws of the PRC on 21 April 2005 and an indirect wholly-owned subsidiary of our Company

“Sanliuyidu Fujian” Sanliuyidu (Fujian) Sports Goods Co., Ltd.* ( ), a wholly foreign-owned enterprise incorporated under the laws of the PRC on 7 July 2003 and an indirect wholly-owned subsidiary of our Company

“Sanliuyidu Holdings” Sanliuyidu Holdings Company Limited ( ), a company incorporated in the BVI with limited liability on 20 February 2008 and a direct wholly-owned subsidiary of our Company

“Sanliuyidu Hong Kong” Sanliuyidu (Hong Kong) Sports Goods Company Limited ( ), a company incorporated in Hong Kong with limited liability on 6 April 2004, the entire issued share capital of which is owned as to 51% by Mr. Ding Huirong ( ), as to 25% by Mr. Ding Wuhao ( ) and as to 24% by Mr. Ding Huihuang ( ). Sanliuyidu Hong Kong is not a part of our Group

“Sanliuyidu Xiamen” Sanliuyidu (Xiamen) Industry & Trade Co., Ltd.* ( ), a limited liability company incorporated under the laws of the PRC on 19 May 2008 and an indirect wholly-owned subsidiary of our Company

“SFC” the Securities and Futures Commission of Hong Kong

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DEFINITIONS

“SFO” the Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong)

“Share(s)” ordinary share(s) with a nominal value of HK$0.1 each in the capital of our Company

“Share Option Scheme” the share option scheme conditionally adopted by our Company on 10 June 2009, the principal terms of which are summarised in the paragraph headed “Share Option Scheme” in Appendix VI to this document

“Shareholder(s)” holder(s) of the Share(s)

“Stock Exchange” The Stock Exchange of Hong Kong Limited

“sub-brands” brands that are based on the existing 361° brand and seek to leverage the existing market power of the 361° brand for the development of a specific brand of sportswear products for a specific group, such as children

“subsidiary(ies)” has the meaning ascribed thereto in Section 2 of the Companies Ordinance

“TPR” Thermoplastic Rubber

“TPU” Thermoplastic Polyurethane

“Track Record Period” the three financial years ended 30 June 2008 and the nine months ended 31 March 2009

“United States” or “US” the United States of America within the meaning of [Š]

“US dollars” or “US$” United States dollars, the lawful currency of the United States

“Wanshile” Fujian Jinjiang Wanshile Shoes Plastic Co., Ltd.* ( ), a sino-foreign joint venture enterprise incorporated under the laws of the PRC on 7 November 1992 and beneficially owned as to 85.7% by Mr. Zhuang Enzhong ( ), an Independent Third Party, and 14.3% by Fujian Jinjiang Chendai Jiangtou Huafeng Shoes Co., Ltd.* ( ), which was owned as to 50% each by Mr. Ding Wuhao ( ) and Mr. Ding Jiantong ( ) prior to 17 June 2008. Fujian Jinjiang Chendai Jiangtou Huafeng Shoes Co., Ltd. ( )is now 100% beneficially owned by Mr. Lin Shanming ( ), an Independent Third Party. Mr. Zhuang Enzhong ( ), Mr. Lin Jinhuan ( ) and Mr. Lin Litong ( ) have been the board members of Wanshile since 30 June 2008 and are Independent Third Parties

“%” per cent.

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DEFINITIONS

“361 Enterprise” 361 Enterprise Company Limited ( ), a company incorporated in Hong Kong with limited liability on 22 April 2008 and an indirect wholly-owned subsidiary of our Company

Unless otherwise specified, all relevant information in this document assumes no exercise of the [Š].

In this document, for purposes of PRC sportswear industry and market share data, revenue means ex-factory revenue, i.e., sportswear manufacturers’ sales revenue to distributors which may be wholesalers and/or retailers (as opposed to end retail consumers). See “Industry Overview—The PRC Sportswear Industry” section in this document for more information.

In this document, unless otherwise stated, certain amounts denominated in Renminbi have been translated into HK dollars at an exchange rate of RMB0.88 = HK$1.00 and into US dollars at the historical or forecasted average exchange rate for the applicable year (e.g., for 2004, RMB8.2768 = US$1.00; for 2008, RMB6.9477 = US$1.00; and for 2013, RMB6.3300 = US$1.00), for illustration purpose only. Such conversions shall not be construed as representations that amounts in Renminbi were or may have been converted into HK dollars or US dollars at such rates or any other exchange rates.

Certain amounts and percentage figures included in this document have been subject to rounding adjustments. Accordingly, figures shown as totals in certain tables may not be an arithmetic aggregation of the figures preceding them.

In this document, if there is any inconsistency between the Chinese names of the PRC entities or enterprises established in the PRC and their English translations, the Chinese names shall prevail. The provision of English translation of company names in Chinese or another language which are marked with “*” is for identification purposes only.

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FORWARD-LOOKING STATEMENTS

This document contains forward-looking statements that are, by their nature, subject to significant risks and uncertainties. These forward-looking statements include, without limitation, statements relating to: • our business strategies and plan of operation; • our capital expenditure plans; • the amount and nature of, and potential for, future development of our business; • our operations and business prospects; • our dividend policy; • projects under construction or planning; • the regulatory environment of our industry in general; and • future development in our industry.

The words “anticipate”, “believe”, “can”, “could”, “estimate”, “expect”, “intend”, “may”, “plan”, “prospects”, “seek”, “sustain”, “will”, “would” and similar expressions, as they relate to us, are intended to identify a number of these forward-looking statements. These forward-looking statements reflecting our current views with respect to future events are not a guarantee of future performance and are subject to certain risks, uncertainties and assumptions, including the risk factors described in this document. One or more of these risks or uncertainties may materialise, or underlying assumptions may prove incorrect.

Subject to the requirements of the Listing Rules, we do not intend to publicly update or otherwise revise the forward-looking statements in this document, whether as a result of new information, future events or otherwise. As a result of these and other risks, uncertainties and assumptions, the forward-looking events and circumstances discussed in this document might not occur in the way we expect, or at all. Accordingly, you should not place undue reliance on any forward-looking information. All forward-looking statements in this document are qualified by reference to this cautionary statement.

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RISK FACTORS

RISKS RELATING TO OUR BUSINESS We rely heavily on our 361° brand. Failure to effectively promote or maintain our 361° brand may materially and adversely affect our future success As of the Latest Practicable Date, we only sold our products under our 361° brand, from which we derived substantially all of our revenues during the Track Record Period. Our revenues from sales of our 361° products were approximately RMB261.6 million, RMB368.6 million, RMB1,308.5 million and RMB2,422.0 million, representing approximately 99.5%, 98.7%, 99.3% and 99.9% of the total revenues, for the financial years ended 30 June 2006, 2007 and 2008 and the nine months ended 31 March 2009, respectively. Therefore, our 361° brand is critical for our success as we believe that market perception and consumer acceptance of a brand is a determining factor for consumers in making purchasing decisions for sportswear products. We have established and maintained our 361° brand as sportswear products that aim to provide complete satisfaction in athleticism and functionality, plus an added degree of innovation and creativity, targeting primarily the fast-growing, up-and-coming consumer group comprised of sports-minded consumers between the ages of 16 and 25. We spent approximately RMB8.7 million, RMB34.2 million, RMB84.0 million and RMB225.7 million on our advertising and marketing activities for the financial years ended 30 June 2006, 2007 and 2008 and the nine months ended 31 March 2009, respectively. These amounts represented approximately 3.3%, 9.1%, 6.4% and 9.3% of total revenues for such periods, respectively. If we are unsuccessful in promoting our 361° brand or fail to maintain our brand position, market perception and consumer acceptance of our 361° brand may be eroded, and our business, financial condition, results of operations and prospects may be materially and adversely affected. In addition, as we promote our 361° brand and image through the endorsement of athletes, we are dependent on market perception and consumer acceptance of these athletes, over which we have no control. Any negative publicity or disputes regarding our 361° brand, products, athletes who endorse our 361° brand or management or the loss of any award or accreditation associated with our 361° brand or products such as “China Well-Known Trademark” ( ) and “China Famous Brand” ( ) could materially and adversely affect our business, financial condition, results of operations and prospects.

Our 361° brand has a limited history in the branded sportswear industry and our new exclusive distributorship business model has a short track record Our 361° brand, which was first introduced to the market in January 2004, has a limited history upon which you can evaluate its prospects, and we have a limited operating history in the branded sportswear industry. In addition, we shifted our business model in the beginning of 2008. Under the new business model, we sell our 361° products exclusively to our distributors, who in turn sell our 361° products to authorised retailers within the exclusive geographic areas assigned to them pursuant to annual distributorship agreements. The authorised retailers then sell our 361° products to consumers in 361° authorised retail outlets. Since the adoption of our new business model, we ceased entering into new purchase contracts with customers who are not our distributors. However, since we continued to honour our obligations under the purchase contracts entered into prior to 2008 up to December 2008, approximately 4.6% and 0.4% of our 361° product sales during the six months ended 30 June 2008 and the nine months ended 31 March 2009, respectively, were made to these customers pursuant to such purchase contracts. No sales have been made to such customers who are not our distributors since January 2009. Our exclusive distributorship business model is new and has a short track record. As such, it is difficult to identify the difficulties that our Group may encounter in the different stages of developing and implementing this new business model, and we cannot assure you that the significant growth since the adoption of our new business model in 2008 will be sustainable or achieved at all in the future. You should consider our business and prospects in light of the risks and difficulties we face with a limited operating history in the branded sportswear industry and a new distributorship business model, and should not rely on our past results as an indication of our future performance. Any new sub-brands that we may launch in the future also may not achieve anticipated growth, or could fail. We also may not be able to successfully integrate future sub-brands into our existing operations. If we are unable to successfully address these risks, difficulties and challenges, our business, financial condition, results of operations and prospects could be materially and adversely affected.

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RISK FACTORS

Consumer sales of our 361° products are conducted by authorised retailers over whom we have no direct control Prior to 2008, substantially all of our revenues were generated from sales of our 361° products to our customers who were primarily wholesalers and authorised retailers (including department stores) and either resold our 361° products to authorised retailers or sold our 361° products at their self-operated authorised retail outlets. We shifted our business model in the beginning of 2008. Under the new business model, we sell our 361° products exclusively to our distributors, who in turn sell our 361° products to authorised retailers. The authorised retailers then sell our 361° products to consumers in 361° authorised retail outlets. Since the adoption of our new business model, we ceased entering into new purchase contracts with customers who are not our distributors. However, since we continued to honour our obligations under the purchase contracts entered into prior to 2008 up to December 2008, approximately 4.6% and 0.4% of our 361° product sales during six months ended 30 June 2008 and the nine months ended 31 March 2009, respectively, were made to these customers pursuant to such purchase contracts. No sales have been made to such customers who are not our distributors since January 2009. Under the new business model, we do not have direct contractual relationships with our authorised retailers and we rely on our distributors to oversee the authorised retailers. As we have no direct control over the authorised retailers, our ability to ensure their adherence to our policies, such as operational requirements, exclusivity, customer service, store image and pricing, is limited. Our authorised retailers’ failure to comply with our policies or aggressive discounting of the retail prices of our products for various reasons could result in the erosion of goodwill, a decrease in the market value of our 361° brand and an unfavourable public perception about the quality of our products, thereby resulting in a material adverse effect on our business, financial condition, results of operations and prospects.

Our sales depend on the popularity of our 361° brand and the market perception and consumer acceptance of our 361° products, which in turn depends on our ability to anticipate and respond in a timely manner to rapid changes in consumers’ tastes Our sales depend on the popularity of our 361° brand and the market perception and consumer acceptance of our 361° products, which are, in large part, dependent on our ability to cater to different consumer tastes. This requires continued anticipation and responsiveness to ever changing market and fashion trends. If we are unable to anticipate accurately and respond to market and fashion trends in a timely manner, demand for our 361° products may decrease. As a result, our business, financial condition, results of operations and prospects could materially suffer.

A distributor’s failure to perform its obligations under its distributorship agreement with us could materially and adversely affect the business of the authorised retailers of an entire geographic area, as well as our reputation, brand, image and future prospects As each of our distributors has exclusive distribution rights over a certain geographic area, the failure by such distributor to perform its obligations under its distributorship agreement with us may result in a material adverse effect on the business of authorised retailers in such area. Most of our distributors are either granted exclusivity over one province, autonomous region or municipality, or one or more areas within a province. However, certain distributors are granted exclusivity over more than one province, autonomous region or municipality due to their local resources and business network in those provinces or areas. If any of our distributors becomes unable or unwilling to supply our products to authorised retailers in the geographic area over which such distributor has exclusive distribution rights, the business of the authorised retailers operating in such geographic area will be materially and adversely affected. Any such disruption in the distribution network of our 361° products may materially and adversely affect our reputation, brand, image and future prospects. As a result, our business, financial condition, results of operations and prospects may be materially and adversely affected.

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RISK FACTORS

We rely on a small number of customers for a significant portion of our sales; we rely on third-party distributors and authorised retailers for sales of our 361° products and our failure to maintain good relationships with our distributors or failure by them to ensure that authorised retailers adhere to our retail policies may adversely affect our business Our five largest customers accounted for approximately 32.9%, 33.4%, 35.1% and 47.5% of our total revenues for the financial years ended 30 June 2006, 2007 and 2008 and the nine months ended 31 March 2009, respectively, and our largest customer accounted for approximately 14.0%, 14.0%, 11.9% and 17.0% of our total revenues for the financial years ended 30 June 2006, 2007 and 2008 and the nine months ended 31 March 2009, respectively. During the beginning of 2008, however, we changed our business model and began to sell our 361° products exclusively to distributors under formal distributorship agreements which have a term of one year. As we do not have long-term agreements with our distributors, it is possible that their agreements with us will not be renewed on favourable terms or at all. If any of our distributors terminates or does not renew its distributorship agreement with us, we may not be able to replace such distributor with a new and effective distributor in a timely manner or on terms acceptable to us, or at all. Any new replacement distributor may not be able to oversee the same network of authorised retailers or any network of authorised retailers on a similar scale to the replaced distributor. Our distributors are required to meet minimum purchase targets. However, if our distributors do not place orders at historical levels or at all or, if any major distributor substantially reduces its volume of purchases from us or ceases its business relationship with us, our business, financial condition, results of operations and prospects could materially suffer.

We rely on our distributors to oversee authorised retailers and to expand the 361° retail network We do not have any interest in, or operate, any of the authorised retailers that were operating the 5,925 361° authorised retail outlets comprising the 361° retail network as of the Latest Practicable Date. While we do not have direct contractual relationships with authorised retailers, our distributors enter into separate agreements with authorised retailers and require them to comply with our standard operating procedures, some of which include guidelines on the design and layout of 361° authorised retail outlets, product pricing and customer service. If our distributors are not effective in enforcing our retail policies on the authorised retailers, the public’s perception of our 361° brand and our reputation may be materially and adversely affected. In addition, we rely on our distributors to expand the 361° retail network by requiring each distributor to establish a minimum number of new 361° authorised retail outlets during the term of the distributorship agreement. If our distributors fail to satisfy their expansion requirements, we will not be able to meet our expansion goals, which will result in our inability to achieve desired growth.

Our ability to accurately track the sales and inventory levels at our distributors and 361° authorised retail outlets may be limited Our ability to track the sales by our distributors to authorised retailers and the ultimate retail sales by the 361° authorised retail outlets, and consequently their respective inventory levels, may be limited. We do not currently have in place an effective, comprehensive enterprise resource planning system. Our distributorship agreements require our distributors to provide us with an inventory report every month. Our distributors in turn track the sales and inventory levels at 361° authorised retail outlets. Currently, we also have 18 regional sales managers who regularly conduct on-site inspections at randomly selected 361° authorised retail outlets as well as provide us with local market condition reports from time to time. By tracking inventory levels of our distributors, we are able to gather information and data regarding the market acceptance of our products so that we can reflect consumers’ preferences in the design and development of our products for the next season. It also provides other useful information, such as market recognition of our products in a particular region, so that we can adjust our marketing strategy if needed. However, the implementation of this policy requires the cooperation of the distributors in accurately and timely reporting and submitting the relevant data to us, and we may not be able to ensure the accuracy of the data provided by our distributors or collected by us. Due to the above reasons, we may not be able to accurately track the sales and inventory levels at our distributors and 361° authorised retail outlets, or to identify or prevent any excessive inventory build-up at these 361° authorised retail outlets. If our distributors or 361° authorised retail outlets are not able to manage inventory levels, their future orders of our 361° products may be

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RISK FACTORS reduced, which would materially and adversely affect our future business, financial condition, results of operations and prospects.

We may fail to execute our growth strategy or maintain our growth rate Our rapid growth, including the expansion of the distribution network, will impose significant additional responsibilities on our management, including the need to identify, recruit, train and integrate additional employees, and oversee the expansion of our production facilities and the distribution network of our 361° products. In addition, rapid and significant growth may place a strain on our administrative and operational infrastructure, in particular on our internal accounting and financial reporting processes and systems. As our operations expand, we expect that additional resources will be required to manage new relationships with additional distributors and their authorised retailers and to oversee an increasing number of authorised retailers, as well as other third parties, including contract manufacturers, raw material suppliers, equipment providers, consultants and others. In addition, we plan to use part of the proceeds from the [Š] to establish self-owned and operated flagship stores in prime locations in major and fast-growing cities of the PRC. As we lack experience in the establishment and operation of our self-owned and operated flagship stores, we may not be successful in the execution of these new business plans. Our ability to manage our operations and growth will require us to continue to improve our operational, financial and management controls, reporting systems and procedures. If we are unable to effectively manage our growth, including the rapid expansion of the distribution network, it may be difficult for us to execute our growth strategy and a decrease in the market demand for our products and the corresponding drop in the sales of our products could result in an accumulation of inventory at the distribution network and may materially and adversely affect our business, financial condition, results of operations and prospects. In addition, we may fail to execute our growth strategy due to such other factors as inability to obtain adequate funding and regulatory limitations, many of which are beyond our control.

We are dependent on a small number of contract manufacturers for the production of a portion of our footwear and all of our apparel and accessories We began outsourcing a portion of our footwear production beginning in February 2007. For the financial years ended 30 June 2006, 2007 and 2008 and the nine months ended 31 March 2009, we outsourced the production of approximately nil, 1.5%, 9.6% and 39.3% of our footwear in terms of production volume, respectively. The percentage of our outsourced footwear production increased significantly to approximately 39.3% for the nine months ended 31 March 2009 as our production capacity for the same period (approximately 10.2 million pairs of footwear) lagged behind the increasing demand of our footwear (approximately 14.3 million pairs of footwear sold during the period). Ever since we began selling apparel and accessories in February 2005 and September 2007, respectively, we have outsourced the entire production of our apparel and accessories. We rely principally on three contract manufacturers for our footwear outsourcing production. As we grow, our reliance on contract manufacturers may also grow as increases and any added efficiencies in our own production capacity may not be sufficient to keep pace with the increased production requirements driven by our growth. We may not be able to find sufficient additional contract manufacturers to manufacture our products on the same or similar terms as our existing contract manufacturers.

In addition, while we have historically engaged contract manufacturers from time to time after each sales fair, our existing contract manufacturers may determine not to accept our purchase orders on the same or similar terms, or at all in the future. If any of our major contract manufacturers rejects all or part of our purchase orders or terminates or alters its business relationship with us in a manner which is adverse to us, our financial condition and results of operations may be materially and adversely affected. In addition, as some of our contract manufacturers also produce products for other companies that compete with us, our contract manufacturers may not treat our purchase orders as a priority when allocating their production capacity to their various customers.

Difficulties or delays in the production facilities or process of our contract manufacturers could also result in delays or failures in delivery of products to us or the production of poor quality products. If such events occur, we may not be able to deliver products to our distributors on a timely basis or at all.

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RISK FACTORS

We are dependent on certain of our key personnel. Our inability to attract, retain and motivate qualified key personnel could materially and adversely affect our business and prospects Our success and ability to expand our operations depend heavily on our ability to attract, retain and motivate qualified key personnel. In particular, we rely on the continued services of our president Mr. Ding Wuhao and our vice president Mr. Xia Youqun, among others, for their expertise in developing business strategies, product design and development, business operations and sales and marketing. Most of our key personnel have been part of our management team since the inception of our business. We do not maintain insurance with respect to the loss of any our key personnel. If we lose the services of any of these key personnel without securing adequate replacement in a timely manner, such event could limit our competitiveness and our business and prospects may be materially and adversely affected.

Historical financial performance should not be used as an indicator for our future financial performance We have experienced revenue growth at a CAGR of over 123.8% for the financial years ended 30 June 2006, 2007 and 2008 due to the successful promotion of our 361° brand, rapid expansion of the 361° retail network, which grew by 1,735 361° authorised retail outlets from 30 June 2006 to 30 June 2007, by 1,506 361° authorised retail outlets from 30 June 2007 to 30 June 2008 and by 911 361° authorised retail outlets from 30 June 2008 to 31 March 2009, improved product design, expansion of our range of product offerings, and our conversion to an exclusive distributorship business model. Increasing market demand for sportswear products and improving economic conditions in the PRC also contributed to our growth. In addition, the 2008 Beijing Olympic Games ( ), which increased the PRC public’s interest in, and awareness of, sports and fitness, slightly contributed to our growth in 2008. We believe that our gross profit margins increased during the Track Record Period, primarily as a result of the increases in average wholesale selling price of our 361° footwear and apparel, which together comprised the majority of our 361° product sales, economies of scale with respect to internal manufacturing and outsourcing costs driven by increases in number of products sold, and the shift in our product mix towards 361° apparel and accessories, which on average have a higher gross profit margin than our 361° footwear. We may fail to maintain the expansion rate of the number of 361° authorised retail outlets at historical levels. We may also fail to maintain our annual revenue growth if we are unable to sustain our brand recognition and a positive public perception of our brand or if we fail to continue to expand the distribution network of our 361° products. Our profit margins may be materially and adversely affected if our cost structure increases as a result of, among other factors, increased labour, manufacturing (internal and external contract manufacturing), raw materials or transportation costs. Our profit margins may also be materially and adversely affected if we must, in the face of increasing competition, provide more favourable terms to our distributors, such as higher sales discounts.

We rely on a small number of suppliers for certain raw materials. Unfavourable fluctuations in the price, availability and quality of raw materials could cause material production delays and materially increase our production costs The principal raw materials used in the production of our footwear products are leather, synthetic leather, fabrics, rubber, soles and plastics. We obtain all of these materials from domestic suppliers in the PRC. We purchase most of our major raw materials from suppliers located in the Fujian Province, the PRC and rely principally on four suppliers for the supply of our leather and synthetic leather needs. For the financial years ended 30 June 2006, 2007 and 2008 and the nine months ended 31 March 2009, our five largest raw material suppliers accounted for approximately 51.5%, 65.5%, 40.3% and 43.5%, respectively, of the aggregate amounts of raw materials we purchased, and our largest raw material supplier accounted for approximately 35.4%, 39.5%, 23.6% and 15.4%, respectively, of the aggregate amounts of raw materials we purchased. We do not enter into long-term agreements with our raw material suppliers and generally procure the raw materials that we require through purchase orders issued by us from time to time which set out the terms regarding the price, purchase quantity, delivery terms and settlement terms, among others. To the extent our suppliers do not continue to supply us with the raw materials we need to produce our products at favourable or similar prices or at all, our reputation, business, results of operations, financial condition and prospects could materially suffer. Fluctuations in the costs of our principal raw materials and our inability to pass on any increases in raw material costs to our

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RISK FACTORS customers by increasing the suggested retail prices of our products or increasing the sale price to our distributors may materially and adversely affect our cost of sales and our gross profit margins.

Prices of our products are subject to factors beyond our control The prices at which our distributors or consumers are willing to purchase our products are driven mainly by various factors such as internal and outsourcing production costs, our competitors’ pricing strategies, consumers’ purchasing power in the PRC and general economic conditions in the PRC, many of which are beyond our control. Further, the distributorship agreements entered into with our distributors do not impose a minimum purchase price at which they must purchase our products. Under our new distributorship business model, we sell our 361° products to all of our distributors at a uniform discount to the suggested retail price of the products. Our distributors then sell our 361° products to their respective authorised retailers at a uniform discount to the suggested retail price which has been approved by us. If we are unsuccessful in implementing the suggested retail pricing system or if we are unable to maintain selling prices of our products at desired levels, the market value of our 361° brand could be eroded and the public perception of our brand may deteriorate, which could have a material adverse effect on our business, financial condition, results of operations and prospects.

Any significant damage to our administrative or production facilities could have a material adverse effect on our results of operations Our ability to meet demands of, and our contractual obligations with, our distributors and our ability to grow our business are heavily dependent on efficient, proper and uninterrupted operations at our facilities. Power failures or disruptions, the breakdown, failure or substandard performance of equipment, the improper installation or operation of equipment and the destruction of buildings, equipment and other facilities due to fire or natural disasters such as hurricanes, severe winter storms or earthquakes would severely affect our ability to continue our operations. As of the Latest Practicable Date, we did not carry any business interruption insurance and our insurance policies may not be sufficient to compensate us for the actual cost of replacing such buildings, equipment and infrastructure. Any such events and any losses or liabilities that are not covered by our current insurance policies could have a material adverse effect on our business, financial condition, results of operations and prospects.

If our distributors do not pay us for their purchases in a timely manner or at all, our financial condition and results of operations could be materially and adversely affected Since the adoption of our new business model in the beginning of 2008, we sold the majority of our 361° products to our distributors, who are generally granted a credit period between 30 and 180 days, the exact terms of which are determined based on such factors as past sales performance, credit history and their expansion plans. Prior to 2008, we generally granted our customers a credit period between 30 and 90 days. As of 30 June 2006, 2007 and 2008 and 31 March 2009, approximately 71.9%, 64.8%, 47.7% and 20.7% of our trade and bill receivables were overdue as they exceeded their respective credit periods. In addition, there were instances when we granted payment extensions to certain of our distributors or customers, which resulted in payments being made to us more than 180 days after the date of delivery of our 361° products. For the financial years ended 30 June 2006, 2007 and 2008 and the nine months ended 31 March 2009, out of a total of 494, 614 and 595 distributors and pre-2008 customers, and 30 distributors(1) we granted such payment extension to 82, 69 and 22 distributors and pre-2008 customers and 8 distributors, respectively. We perform ongoing credit evaluations of our distributors’ financial condition and generally require no collateral from them to secure their payment obligations. As our sales increase, the amount of accounts receivable from our distributors will increase. In addition, as we implement our expansion plans and require our distributors to increase the number of authorised retailers, we may determine to lengthen the credit periods we grant to our distributors. If any distributor does not

Note: (1) No sales have been made to pre-2008 customers who are not our distributors since January 2009.

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RISK FACTORS pay us for its purchases in a timely manner or at all, our financial condition and results of operations could be materially and adversely affected.

We recorded negative operating cash flow for the two financial years ended 30 June 2006 and 2007, and recorded positive operating cash flow for the financial year ended 30 June 2008 and the nine months ended 31 March 2009, and may not be able to continue to record positive operating cash flow in the future We recorded negative operating cash flow of approximately RMB39.9 million and RMB52.5 million for the two financial years ended 30 June 2006 and 2007, respectively, and recorded positive operating cash flow of RMB4.7 million and RMB162.5 million, respectively, for the financial year ended 30 June 2008 and the nine months ended 31 March 2009. The main reason for our historical negative operating cash flow was an increase in trade and other receivables and inventories primarily due to increased sales volume. We cannot give any assurance that we will continue to record positive operating cash flow in the future. Our liquidity and financial condition may be materially and adversely affected should our future operating cash flow become negative, and we can give no assurance that we will have sufficient cash from other sources to fund our operations. If we resort to other financing activities to generate additional cash, we will incur additional financing costs, and we cannot guarantee that we will be able to obtain the financing on terms acceptable to us or at all. For details about our indebtedness and liquidity, financial resources and capital expenditure, please refer to the section headed “Financial Information—Liquidity and Capital Resources” in this document.

The registration in the PRC of certain patents are still pending and may not be approved We have obtained licences from the State Intellectual Property Office of the PRC ( ) for various patents which are under application. For further details, please see the section headed “Statutory and General Information—Intellectual Property Rights of Our Group” in Appendix VI to this document. We have been advised by our PRC legal advisers, Tian Yuan Law Firm, that under PRC law, patents must be registered with the relevant government authority in the PRC for a person or entity to become its registered owner so as to be protected by the relevant patent law. We were advised by our intellectual property agent, Fujian Longge Intellectual Property Service Co., Ltd. ( ), that as of the Latest Practicable Date, no objection has been received from the relevant PRC authority or from any third parties in respect to such applications or our use of those patents, and neither our intellectual property agent, Fujian Longge Intellectual Property Service Co., Ltd. ( ), as far as we have been informed by them, nor our Directors are aware of any threatened or pending claims by any third parties against our Company for use of such patents. However, our Group might not successfully register these patents under application, and the continued use of the patents might infringe upon intellectual property rights of third parties. Should our Group fail to secure the registration of any of the patents under application or we are held by any court or tribunal to be infringing upon or have infringed upon any patents or intellectual property rights of others, our reputation and brand image could be materially and adversely affected, which could in turn materially and adversely affect our business, financial condition, results of operations and prospects.

We may not be able to adequately protect our intellectual property rights, which could harm our 361° brand and our business We believe our trademarks and other intellectual property rights are crucial to our success. Our principal intellectual property rights include our trademarks for our 361° brand as well as patents for certain technologies. As of the Latest Practicable Date, we applied for the registration of certain trademarks for a number of logos and patents for certain technologies. The success of these applications depends upon a number of factors, and we may not be successful in registering trademarks and obtaining patents for technologies currently under application or which we may develop in the future. We depend, in large part, on PRC laws to protect our trademarks, patents and other intellectual property rights. Although we rely on the registration of trademarks and patents to protect our intellectual property, this measure may not be sufficient to prevent any misappropriation of our intellectual property or to prevent our competitors from independently developing designs and technologies that are substantially similar to ours. The legal framework governing intellectual property in the PRC is still evolving and

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RISK FACTORS the level of protection of intellectual property rights in the PRC differs from those in other more developed jurisdictions such as the United States and the United Kingdom. Third parties may infringe upon our intellectual property rights. We have discovered counterfeit versions of our products on the market, and have in the past had to, and may in the future have to, initiate legal or administrative proceedings in order to safeguard our intellectual property rights. Our efforts to enforce or defend our intellectual property rights may not be adequate, may require significant attention from our management and may be costly. The outcome of any legal actions to protect our intellectual property rights is uncertain. If we are unable to adequately protect or safeguard our intellectual property rights, our business, financial condition, results of operations and prospects may be materially and adversely affected.

Our business could be materially and adversely affected by claims of third parties for possible infringement of their intellectual property rights We may face claims from time to time that our products infringe upon the intellectual property rights of third parties, including our competitors. If any legal proceeding against us for infringement of intellectual property rights is successful, and if we are unable to obtain a licence for the usage of such intellectual property right on acceptable terms, or at all, or unable to design around such intellectual property right, we may be prohibited from manufacturing or selling products which are dependent on the usage of such intellectual property. In such case, we may experience a material adverse effect on our business and reputation, and this type of proceeding and its consequences could divert management’s attention from our business, all of which could have a material adverse effect on our business, financial condition, results of operations and prospects.

Our ability to obtain additional financing may be limited, which could delay or prevent the completion of one or more of our strategies We have, to date, financed our working capital and capital expenditure needs primarily through shareholder advances, capital contributions and bank loans from local banking institutions and from operating cash flows. We expect our working capital needs and our capital expenditure needs to increase in the future as we continue to expand and enhance our production facilities, increase our design, research and development capabilities and as we continue to implement our other strategies, including our plan to establish self-owned and operated flagship stores in prime locations in major and fast-growing cities of the PRC. Our ability to raise additional capital will depend on the financial success of our current business and the successful implementation of our key strategic initiatives, as well as financial, economic and market conditions and other factors, some of which are beyond our control. We may not be successful in raising any required capital on reasonable terms and at required times, or at all. Further, equity financings may have a further dilutive effect on our Shareholders. If we require additional debt financing, the lenders may require us to agree on restrictive covenants that could limit our flexibility in conducting future business activities, and the debt service payments may be a significant drain on our free capital allocated for research and other activities. If we are unsuccessful in raising additional capital or if new capital funding costs are higher than our prior capital funding costs, our business operations and our development programmes may be materially and adversely impacted, with similar effects on our results of operations and financial condition.

Labour disputes could significantly affect our operations Labour disputes, work stoppages or slowdowns at our production facilities or any of our contract manufacturers or raw material suppliers or at construction or engineering firms engaged in the construction of our production facilities could significantly disrupt our operations or our expansion plans. Delays caused by any such disruptions could materially and adversely affect our operations or projections for increased capacity, production and revenues, which could have a material adverse effect on our business and results of operations.

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RISK FACTORS

We may be exposed to product liability, property damage or personal injury claims, which may materially and adversely affect our reputation and business As of the Latest Practicable Date, all of our products were sold in the PRC. We may be exposed to product liability claims and we may, as a result, have to expend significant financial and managerial resources to defend against such claims. We believe that such product liability claim risks will increase as legal concepts in product liability claims begin to develop and mature in the PRC and in other countries and regions where our products may be sold. We may not have effective or sufficient control over the quality of our products, and we cannot give assurance that our business, financial condition, results of operations and prospects will not be materially and adversely affected by a successful product liability claim against us. We do not maintain any product liability insurance. In addition, we do not maintain third-party liability insurance against claims for property damage, personal injury or environmental liabilities. Regardless of the ultimate merits of a claim or dispute, we may face significant costs and expenses to defend against such claims or enter into settlement agreements, and we may suffer serious damage to our reputation, be subject to material monetary damages and be subject to government investigations. In such cases we may be fined or sanctioned, which could materially and adversely affect our reputation, business, prospects, financial condition and results of operations. Any losses or liabilities that are not covered by our current insurance policies may have a material adverse effect on our business, financial condition results of operations and prospects.

RISKS RELATING TO THE PRC SPORTSWEAR INDUSTRY We operate in a highly competitive market and the intense competition we face may result in a decline in our market share and lower profit margins The ever-evolving sportswear industry in the PRC is highly competitive. Participants in the sportswear industry in the PRC market include international and domestic brands which compete in, among other things, brand loyalty, product variety, product design, product quality, marketing and promotion, distribution network coverage, price and the ability to meet delivery commitments to distributors and authorised retailers. This competition has led to leading brands continuing to gain market share at the expense of less established, lower- end brands. We may not be able to compete effectively against competitors who may have greater financial resources, greater scales of production, superior technology, better brand recognition and a wider, more diverse and established distribution network. To compete effectively and maintain our market share, we may be forced to, among other actions, reduce prices, provide more sales incentives to our distributors and increase capital expenditures, which may in turn materially and adversely affect our profit margins and other results of operations. See also “Industry Overview” and “Business—Competition”.

In addition, the PRC’s accession to the World Trade Organisation may result in further changes to and developments in our industry, such as the removal of entry barriers for international brands so that foreign-invested enterprises may engage in the retail business and import tariffs may be reduced significantly. Significant changes in international distribution channels or in the pricing of imported competing products could materially and adversely affect our business, financial condition, results of operations and prospects.

Our sales are subject to seasonality and weather conditions, which could cause our results of operations to fluctuate Our industry has historically experienced seasonality, which we expect to continue. Our 361° products typically achieve higher sales when we sell our 361° products for the spring and summer seasons to our distributors due to seasonality of demand for sportswear and the lower average wholesale selling price of spring and summer products as compared to autumn and winter products. We generally sell and distribute our spring and summer seasonal products from February to August, and our autumn and winter seasonal products from September to January. Consumer sales are also affected by seasonal shopping patterns during the Chinese New Year in early spring, the National Labour Day holiday in early May, the summer months, the National Day holiday in early October and other PRC national holidays. In addition, weather conditions, such as unusual weather or temperatures, may affect our sales, which are dependent on the sales of our distributors and authorised retailers. Our quarterly results of operations may fluctuate from period to period based on consumer demand and

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RISK FACTORS the seasonality of consumer spending on sportswear products. Therefore, any comparison of our results of operations between interim and annual results may not be meaningful. Our results of operations are likely to continue to fluctuate due to seasonality.

RISKS RELATING TO CONDUCTING BUSINESS IN THE PRC Substantially all of our assets are located in the PRC and all of our revenues are derived from our operations in the PRC. As a result, our assets and operations are subject to significant political, economic, legal and other uncertainties associated with doing business in the PRC, which are discussed in more detail below.

Fluctuations in consumer spending caused by changes in macroeconomic conditions in the PRC may significantly affect our business, financial condition, results of operations and prospects All of our revenues have been generated in the PRC. Our sales and growth are dependent on consumer consumption and the continued improvement of macroeconomic conditions in the PRC, which in turn depend significantly on worldwide economic conditions and their impact on levels of consumer spending, which have recently deteriorated significantly in many countries and regions, and may remain depressed for the near future. There are many factors affecting the level of consumer spending, including but not limited to interest rates, currency exchange rates, recession, inflation, deflation, political uncertainty, taxation, stock market performance, unemployment level and general consumer confidence. In addition, we believe that our historical growth rates were largely dependent on the general growth of the PRC economy, where the PRC’s nominal GDP was estimated by the National Bureau of Statistics of the PRC ( ) to have grown at a CAGR of approximately 22.3% from 2004 to 2008. The failure of the PRC to continue to grow at historical or anticipated rates, or at all, and any slowdowns or declines in the PRC economy or consumer spending, may materially and adversely affect our business, financial condition, results of operations and prospects.

Our business may be materially and adversely impacted by recent financial difficulties and economic conditions in the United States, Europe and elsewhere Recent financial difficulties and economic conditions in the United Sates, Europe and other regions may materially and adversely impact our business, financial condition, results of operations and prospects in a number of ways, including: • economic difficulties in the United States, Europe and other regions may lead to an economic slowdown or recession in some or all of the markets in which we operate; • an economic slowdown or recession, or even the risk of a potential economic slowdown or recession, may cause our distributors to delay, defer or cancel their purchases from us, including decisions previously made; • under difficult economic conditions, consumers may seek to reduce discretionary spending by foregoing purchases of our sportswear products; • financing and other sources of liquidity may not be available on reasonable terms or at all; and •[Š].

These risks may be exacerbated in the event of a prolonged economic downturn or financial crisis.

Changes in the laws, regulations and policies adopted by the PRC Government, including in relation to the environment, labour and taxation, may materially and adversely affect our business, financial condition, results of operations and prospects The political, economic and social conditions in the PRC differ from those in more developed countries in many respects, including structure, government involvement, level of development, growth rate, control of

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RISK FACTORS foreign exchange, capital reinvestment, allocation of resources, rate of inflation and trade balance position. For the past three decades, the PRC Government has implemented economic reform and measures emphasising the utilisation of market forces in the development of the PRC economy. Although these economic reforms and measures could have a positive effect on the PRC’s overall and long-term development, the resulting changes also may have a material adverse effect on our current or future business, financial condition, results of operations and prospects. Despite these economic reforms and measures, the PRC Government continues to play a significant role in regulating industrial development, the allocation of natural resources and production, pricing and management of currency, and there can be no assurance that the PRC Government will continue to pursue a policy of economic reform or that the direction of reform will continue to be market friendly.

Our ability to successfully expand our business operations in the PRC depends on a number of factors, including macroeconomic and other market conditions and credit availability from lending institutions. Stricter lending policies in the PRC may affect our ability to obtain external financing, which may reduce our ability to implement our expansion strategies. We cannot give assurance that the PRC Government will not implement any additional measures to tighten lending standards or that, if any such measure is implemented, it will not materially and adversely affect our future results of operations or profitability.

Demand for our products and our business, financial condition, results of operations and prospects may be materially and adversely affected by the following factors: • political instability or changes in social conditions of the PRC; • changes in laws, regulations, and administrative directives or the interpretation thereof; • measures which may be introduced to control inflation or deflation; • changes in the rate or method of taxation; and • reduction in tariff protection and other import and export restrictions.

These factors are affected by a number of variables which are beyond our control.

Restrictions on foreign exchange and payments of dividends may limit our operating subsidiaries’ ability to remit payments to our Company At present, the RMB is not freely convertible to other foreign currencies, and the conversion and remittance of foreign currencies are subject to PRC foreign exchange regulations. Under current PRC laws and regulations, payments of current account items including profit distributions, interest payments and operation-related expenditures may be made in foreign currencies without prior approval from SAFE, but are subject to procedural requirements including presenting relevant documentary evidence of such transactions and conducting such transactions at designated foreign exchange banks within China that are licensed to engage in foreign exchange business. Strict foreign exchange control continues to apply to capital account transactions. These transactions must be approved by or registered with SAFE, and repayment of loan principal, distribution of return on direct capital investment and investment in negotiable instruments are also subject to restrictions. Under our current structure, our Company’s source of funds will primarily consist of dividend payments by its subsidiaries in the PRC denominated in RMB. We cannot give any assurance that we will be able to meet all of our foreign currency obligations or to remit profit out of China. If our subsidiaries are unable to obtain SAFE approval to repay loans to our Company or if future changes in relevant regulations were to place restrictions on the ability of the subsidiaries to remit dividend payments to our Company, our Company’s liquidity and ability to satisfy its third- party payment obligations and its ability to distribute dividends in respect of the Shares could be materially and adversely affected.

We are a holding company that heavily relies on dividend payments from our subsidiaries for funding We are a holding company incorporated in the Cayman Islands and operate our core business through our subsidiaries in the PRC. Therefore, the availability of funds to us to pay dividends to our Shareholders depends

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RISK FACTORS upon dividends received from these subsidiaries. If our subsidiaries incur debt or losses, such indebtedness or loss may impair their ability to pay dividends or other distributions to us. As a result, our ability to pay dividends will be restricted. PRC laws require that dividends be paid only out of the net profit calculated according to PRC accounting principles, which differ in many aspects from generally accepted accounting principles in other jurisdictions, including HKFRSs and International Financial Reporting Standards. PRC laws also require foreign invested enterprises to set aside part of their net profit as statutory reserves. These statutory reserves are not available for distribution as cash dividends. In addition, restrictive covenants in bank credit facilities or other agreements that we or our subsidiaries may enter into in the future may also restrict the ability of our subsidiaries to provide capital or declare dividends to us and our ability to receive distributions. Therefore, these restrictions on the availability and usage of our major source of funding may impact our ability to pay dividends to our Shareholders.

Fluctuations in foreign exchange rates may materially and adversely affect our financial condition and results of operations The value of the RMB against other foreign currencies is subject to changes in the PRC Government’s policies and international economic and political developments. Under the unified floating exchange rate system, the conversion of RMB into foreign currencies, including Hong Kong and US dollars, has been based on rates set by the PBOC, which have generally been stable. However, the PRC Government reformed the exchange rate regime on 21 July 2005 by moving into a managed floating exchange regime based on market supply and demand with reference to a basket of currencies. As a result, the RMB appreciated against the Hong Kong and US dollars by approximately 2.0% on the same date. On 23 September 2006, the PRC Government widened the daily trading band for RMB against non-US dollar currencies from 1.5% to 3.0% to improve the flexibility of the new foreign exchange system.

There has been pressure from foreign countries on the PRC recently to adopt a more flexible currency system that could lead to further appreciation of the RMB. The RMB may be revalued further against the US dollar or other currencies or may be permitted to enter into a full or limited free float, which may result in an appreciation or depreciation in the value of the RMB against the US dollar or other currencies. It is uncertain if the exchange rates of Hong Kong and US dollars against RMB will further fluctuate. Any appreciation of the RMB may subject us to increased competition from imported sportswear products. Also, since our revenues and profit are denominated in RMB, any depreciation of RMB would materially and adversely affect our financial position and the value of, and any dividends payable on, our Shares in foreign currency terms, as well as our ability to service any of our foreign currency obligations.

Any change in our tax treatment, including an unfavourable change in preferential enterprise income tax rates in the PRC, may have a material adverse impact on our financial condition and results of operations On 16 March 2007, the National People’s Congress of the PRC ( ) promulgated the Enterprise Income Tax Law of the PRC ( ) (the “New Tax Law”), which came into effect on 1 January 2008 and supersedes both the Foreign-invested Enterprise and Foreign Enterprise Income Tax Law of the PRC ( ) and the Provisional Regulations on Enterprise Income Tax of the PRC ( ) (the “Old Tax Regime”). The New Tax Law consolidates the two separate tax regimes for domestic enterprises and foreign-invested enterprises and imposes a unified enterprise income tax rate of 25% for both types of enterprises.

Under the New Tax Law, foreign-invested enterprises that enjoyed a preferential tax rate prior to the New Tax Law’s promulgation will gradually transit to the new tax rate over five years from 1 January 2008. Foreign- invested enterprises that enjoyed a tax rate of 24% will have their tax rate increased to 25% in 2008. Enterprises which enjoyed a fixed period of tax exemption and reduction prior to the New Tax Law’s promulgation will continue to enjoy such preferential tax treatment until the expiry of such prescribed period, and for those enterprises whose preferential tax treatment has not commenced before due to lack of profit, such preferential tax treatment will commence from 1 January 2008.

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RISK FACTORS

Under the Old Tax Regime and as approved by the relevant tax authorities, Sanliuyidu Fujian, a foreign- invested enterprise, was exempted from the enterprise income tax for its first two profitable years commencing from 1 January 2004, and thereafter was entitled to a 50% reduction in the enterprise income tax for the subsequent three years until 31 December 2008. Sanliuyidu Fujian enjoyed a full exemption from enterprise income tax in 2004 and 2005 as well as a 50% reduction of its enterprise income tax rate of 24% in 2006 and 2007, which had a significant positive effect on our profit after taxation during the financial years ended 30 June 2006 and 2007. Under the New Tax Law, Sanliuyidu Fujian continued to enjoy a 50% reduction of the phased-in enterprise income tax rate of 25% until 31 December 2008 and has thereafter been subject to a 25% tax rate.

Under the New Tax Law, Sanliuyidu China is exempted from the enterprise income tax for its first two profitable years commencing from 1 January 2008 and thereafter is entitled to a 50% reduction in the phased-in enterprise income tax rate of 25% for the subsequent three years until 31 December 2012. We expect that upon the expiry of the full exemption from the enterprise income tax currently enjoyed by Sanliuyidu China, the tax rate applicable to Sanliuyidu China will increase from 2010 onwards and will further increase from 2013 following the expiry of the above preferential tax treatment.

Under the New Tax Law, if an enterprise incorporated outside the PRC has its “effective management” located within the PRC, such enterprise may be recognised as a PRC tax resident enterprise and be subject to the unified enterprise income tax rate of 25% for its worldwide income. Our members that are not incorporated in the PRC may in the future be recognised as a PRC tax resident enterprise according to the New Tax Law by the PRC taxation authorities. According to the New Tax Law, dividends received by a qualified PRC tax resident from another PRC tax resident are exempted from enterprise income tax. However, given the limited history of the New Tax Law, it remains unclear as to the detailed qualification requirements for such exemption and whether dividends declared and paid by our members in the PRC to their overseas holding companies will be exempted from enterprise income tax if they are recognised as PRC tax residents. Our financial performance will be materially and adversely affected if such dividends are subject to PRC enterprise income tax.

Gains on the sales of our Shares and dividends on our Shares may be subject to PRC income taxes Under the New Tax Law and its implementation rules, our Company may in the future be recognised as a PRC tax resident enterprise by the PRC taxation authorities, and capital gains realised by foreign Shareholders from sales of our Shares and dividends on our Shares payable to foreign Shareholders may be regarded as income from “sources within the PRC” and therefore become subject to a 10% withholding income tax. If we are required under the New Tax Law to withhold PRC income tax on capital gains on sales of Shares and/or dividends on our Shares payable to foreign Shareholders, the value of our foreign Shareholders’ investment in our Shares may be materially and adversely affected.

It may be difficult to effect service of process on, or to enforce judgements obtained outside the PRC against, us, our Directors or our senior management members who reside in the PRC Substantially all of our Directors and senior management members reside in the PRC and substantially all of our assets and the assets of such persons are located in the PRC. Accordingly, it may be difficult for investors to effect service of process on any of these persons or to enforce judgements obtained outside of the PRC against us or any of these persons, as the PRC does not have treaties providing for the reciprocal recognition and enforcement of judgements awarded by courts in many developed countries, including the United States, the United Kingdom, Japan and the Cayman Islands. Hence, the recognition and enforcement in the PRC of judgements of a court in any of these jurisdictions in relation to any matter not subject to a binding arbitration provision may be difficult or even impossible.

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RISK FACTORS

The PRC legal system is not fully developed and has inherent uncertainties regarding the interpretation and enforcement of PRC laws and regulations which could limit the legal protections available to investors Substantially all of our operations are conducted in the PRC. The PRC legal system is based on written statutes, and prior court decisions can only be cited as reference and are non-binding. Since 1979, the PRC Government has been developing a comprehensive system of laws, rules and regulations in relation to economic matters, such as foreign investment, corporate organisation and governance, commerce, taxation and trade. However, as these laws and regulations have not yet been fully developed and because of the limited volume of published cases and their non-binding nature, the interpretation and enforcement of these laws, rules and regulations involve some degree of uncertainty, which may lead to additional restrictions and uncertainty for our business and uncertainty with respect to the outcome of any legal action investors may take against us in the PRC.

Changes in existing laws and regulations or additional or stricter laws and regulations on environmental protection in the PRC may cause us to incur additional capital expenditures Our business operation in the PRC is subject to the environmental laws and regulations issued by the PRC Government. The relevant environmental laws and regulations may be revised by the PRC Government from time to time to reflect the latest environmental needs or policies. We incurred approximately RMB6,000, RMB61,000, RMB75,000 and RMB106,000 in respect of regulatory compliance with applicable environmental protection requirements in the PRC for the financial years ended 30 June 2006, 2007 and 2008 and the nine months ended 31 March 2009, respectively. Any changes to such regulations and guidelines may materially increase our cost and regulatory exposure in complying with them.

Further, our current footwear production facilities and the new footwear and apparel production facilities at the Wuli Industrial Park Phase One and Phase Two, part of which we expect will commence production in or around December 2009, are subject to PRC environmental protection laws and regulations. These laws and regulations require enterprises engaged in manufacturing that may create environmental waste to adopt effective measures to control and properly dispose of this waste. If any failure to comply with such laws or regulations results in pollution, the administrative department for environmental protection can levy fines. Moreover, the PRC Government has the discretion to cease or close any operation if the failure to comply with such laws or regulations is serious. The PRC Government, in addition, may impose additional or stricter laws or regulations in the future. Compliance with any of these additional or stricter laws or regulations may cause us to incur additional material capital expenditure, the cost of which we may be unable to pass on to our customers through higher prices for our products.

Natural disasters, acts of war, political unrest and epidemics, which are beyond our control, may cause damage, loss or disruption to our business Natural disasters, acts of war, political unrest and epidemics, which are beyond our control, may materially and adversely affect the economy, infrastructure and livelihood of the people of the PRC. Some cities in the PRC are particularly susceptible to floods, earthquakes, sandstorms, snowstorms and droughts. Our business, financial condition, results of operations and prospects may be materially and adversely affected if such natural disasters occur in places where we operate or indirectly sell our products. Political unrest, acts of war and terrorists attacks may cause damage or disruption to us, our employees, our facilities, the distribution channels operated by our distributors or their authorised retailers and our markets, any of which could materially and adversely affect our sales, cost of sales, overall results of operations and financial condition. The potential for war or terrorists attacks may also cause uncertainty and cause our business to suffer in ways that we cannot currently predict. In addition, certain Asian countries, including the PRC, have encountered epidemics, such as SARS or incidents of the avian flu. Past occurrences of epidemics have caused different degrees of damage to the national and local economies in the PRC. A recurrence of an outbreak of SARS, avian flu or any other similar epidemic such as the H1N1 flu (swine flu) could cause a slowdown in the levels of economic activity generally, which could in turn materially and adversely affect our results of operations and the price of our Shares.

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RISK FACTORS

On 12 May 2008 at 2:28 p.m., an earthquake with a magnitude of 8.0 struck the Wenchuan County of Sichuan Province, the PRC. Many other cities and provinces in the country were affected. The retail operations at six of the 361° authorised retail outlets located in the Sichuan Province were affected. Such 361° authorised retail outlets, in aggregate, contributed indirectly approximately RMB2.5 million and RMB5.2 million, representing approximately 0.2% and 0.2%, of the total revenue of our Group for the financial year ended 30 June 2008 and the nine months ended 31 March 2009, respectively. Accordingly, the impact on our Group’s revenue and financial position as a result of the earthquake was immaterial, and no provision for inventory and bad debts was made as a result of the earthquake.

Failure to comply with the SAFE regulations relating to the establishment of offshore special purpose vehicles by our beneficial owners may materially and adversely affect our business operations On 21 October 2005, the SAFE issued a public circular which became effective on 1 November 2005. The circular requires PRC residents to register with the local SAFE branch before establishing or controlling any company, referred to in the circular as a “special purpose offshore vehicle”, outside of the PRC for the purpose of capital financing and to register again after completing an investment in or acquisition of any operating subsidiaries in the PRC, which we refer to herein as a round-trip investment. Also, any change of shareholding or any other material capital alteration in such special purpose offshore vehicle shall be filed within 30 days starting from the date of shareholding transfer or capital alteration. Our beneficial owners fall within the definition of PRC residents and thus are required to comply with the relevant requirements in all material respects in connection with our investments and financing activities. If such beneficial owners fail to comply with the relevant requirements, such failure may subject the beneficial owners to fines and legal sanctions, which may consequently also materially and adversely affect our business operations.

Increases in labour costs and other costs of production in the PRC could materially and adversely affect our profitability The sportswear manufacturing industry is labour intensive. Labour costs in the PRC have been increasing recently. If labour costs in the PRC continue to increase, our production and administrative costs, including both our internal production costs and our outsourcing costs, will also increase. If we are unable to identify and employ other appropriate means to reduce our costs of production or to pass on the increased labour and other costs of production to our customers by selling our products at higher prices, our business, financial condition, results of operations and prospects could be materially and adversely affected.

New labour laws in the PRC may materially and adversely affect our results of operations As of the Latest Practicable Date, we had 4,817 employees in the PRC. On 29 June 2007, the PRC Government promulgated a new labour law, namely the Labour Contract Law of the PRC ( ) (the “New Labour Law”), which became effective on 1 January 2008. The New Labour Law imposes greater liabilities on employers and significantly impacts the cost of an employer’s decision to reduce its workforce. Further, it requires certain terminations to be based upon seniority and not merit. If we decide to significantly change or decrease our workforce in the PRC, the New Labour Law could materially and adversely affect our ability to enact such changes in a manner that is most advantageous to our circumstances or in a timely and cost effective manner, thus our results of operations could be materially and adversely affected. We also could incur additional material compliance costs in connection with the New Labour Law.

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WAIVERS FROM COMPLIANCE WITH THE LISTING RULES

[Š]

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DIRECTORS AND PARTIES INVOLVED

DIRECTORS Name Address Nationality Executive Directors Mr. Ding Wuhao No. 66 Yangding Zhong Road, Group 5, Chinese Jiangtou District, Chendai Town, Jinjiang City, Fujian Province, the PRC Mr. Ding Huihuang No. 33 Wenming Road, Jiangtou District, Chinese Chendai Town, Jinjiang City, Fujian Province, the PRC Mr. Ding Huirong No. 33 Wenming Road, Jiangtou District, Chinese Chendai Town, Jinjiang City, Fujian Province, the PRC Mr. Wang Jiabi No. 93, Dongli Qiancai Village, Anhai Chinese Town, Jinjiang City, Fujian Province, the PRC Independent non-executive Directors Mr. Mak Kin Kwong M6, Floral Villas, 18 Tso Wo Road, Chinese Sai Kung, Hong Kong Mr. Sun Xianhong No. 5, Unit 4, Coal Supply and Marketing Chinese Company, Nan Ma Street, New District, Huhehaote City, Inner Mongolia, the PRC Mr. Liu Jianxing The Dormitory of Graduate Student Chinese Guanghua Management College (2002th), No. 5 Yiheyuan Road, Haidian District, Beijing, the PRC

PARTIES INVOLVED

Legal advisers to our Company As to Hong Kong and United States laws: Coudert Brothers in association with Orrick, Herrington & Sutcliffe LLP 43rd Floor Gloucester Tower The Landmark 15 Queen’s Road Central Hong Kong

As to PRC law: Tian Yuan Law Firm 11th Floor, Tower C, Corporate Square, No.35 Financial Street, Xicheng District, Beijing 100140, the PRC

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DIRECTORS AND PARTIES INVOLVED

As to Cayman Islands law: Conyers Dill & Pearman Cricket Square Hutchins Drive P.O. Box 2681 KY1-1111 Grand Cayman British West Indies

Auditors and reporting accountants KPMG Certified Public Accountants 8th Floor, Prince’s Building 10 Chater Road Central, Hong Kong

Property valuer Jones Lang LaSalle Sallmanns Limited 17/F Dorset House Taikoo Place 979 King’s Road Quarry Bay Hong Kong

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CORPORATE INFORMATION

Registered office Cricket Square, Hutchins Drive, PO Box 2681, Grand Cayman, KY1-1111, Cayman Islands

Headquarters in the PRC Jiangtou Industrial District, Chendai Town Jinjiang City, Fujian Province 362200, the PRC

Principal place of business in Hong Kong 43/F., Gloucester Tower The Landmark 15 Queen’s Road Central Hong Kong

Company’s website www.361sport.com (information contained in this website does not form part of the document)

Company secretary Ms. Choi Mun Duen FCCA HKICPA

Authorised representatives Mr. Ding Wuhao No. 66 Yangding Zhong Road, Group 5, Jiangtou District, Chendai Town, Jinjiang City, Fujian Province, the PRC

Ms. Choi Mun Duen B2, 5/F., Chermain Heights, 9 Eastbourne Road, Kowloon Tong, Kowloon, Hong Kong

Audit committee Mr. Mak Kin Kwong (chairman) Mr. Sun Xianhong Mr. Liu Jianxing

Nomination committee Mr. Ding Wuhao (chairman) Mr. Mak Kin Kwong Mr. Liu Jianxing

Remuneration committee Mr. Wang Jiabi (chairman) Mr. Sun Xianhong Mr. Liu Jianxing

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CORPORATE INFORMATION

Principal bankers China Construction Bank Corporation Jinjiang Branch Zengjing Residential Quarter, Qingyang Jinjiang City, Fujian Province 362200, the PRC

Industrial Bank Co., Ltd. Qingyang Branch, Jinjiang Huadong Ge, East Dihao Square, Qingyang Jinjiang City, Fujian Province 362200, the PRC

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INDUSTRY OVERVIEW

INTRODUCTION Our company primarily operates in the sportswear industry in the PRC. The performance of the PRC sportswear industry is primarily driven by the growth of the Chinese economy, and in particular, the increase in disposable income in the Chinese population, as well as market acceptance of sporting goods and apparel. We believe the sportswear industry in the PRC has benefited from compelling industry fundamentals such as rapid economic growth, urbanisation and increasing disposable income.

According to Frost & Sullivan, an independent market research and consulting company, the total expenditure on sportswear in the PRC was US$9.8 billion (RMB68.3 billion) in 2008, which has grown rapidly at a CAGR of 31.3% from US$3.3 billion (RMB27.4 billion) in 2004. In addition, total per capita expenditure on sportswear related products in the PRC was US$7.4 (RMB51.6) in 2008, which lags behind many developed countries such as the United States, Canada, United Kingdom, Germany, France, Australia, Japan, Korea and Singapore where per capita sportswear expenditure ranged from US$20.3 (RMB140.9) to US$232.8 (RMB1,617.7) for the same period. Total per capita expenditure on sportswear in the PRC is projected to grow at a CAGR of 31.4% between 2008 and 2013, which is significantly faster than the projected growth in many developed countries over such period.

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INDUSTRY OVERVIEW

RAPID GROWTH OF CHINESE ECONOMY, URBANISATION AND INCREASING DISPOSABLE INCOME Growth of the PRC Economy The PRC economy has grown significantly since the “Open Door” market liberalisation policies initiated by the PRC Government in the late 1970s. Economic growth was further spurred by the launch of special economic zones along the coastal region of the PRC in the early 1990s. According to the National Bureau of Statistics of China ( ), the PRC economy has been experiencing steady growth with nominal gross domestic product (the “nominal GDP”) growing steadily at a CAGR of approximately 22.3% from approximately US$1,931.6 billion (RMB15,987.8 billion) in 2004 to approximately US$4,327.6 billion (RMB30,067.0 billion) in 2008. The nominal GDP per capita increased from approximately US$1,490.4 (RMB12,336.0) to approximately US$3,267.0 (RMB22,698.0) during the same period. According to the International Monetary Fund (the “IMF”) the nominal GDP per capita is projected to further increase to approximately US$5,663.1 (RMB35,874.5) by 2013. The charts below set forth the historical and projected nominal GDP and nominal GDP per capita in the PRC for the periods indicated.

Nominal GDP in the PRC, 2004-2013E

(US$ bn) 9,000 8,020.0 8,000 7,055.9 7,000 6,176.4 6,000 5,412.6 4,817.8 5,000 4,327.6 4,000 3,280.8 3,000 2,658.2 2,236.1 1,931.6 2,000

1,000

0 2004 2005 2006 2007 2008 2009E 2010E 2011E 2012E 2013E

Source: Historical data converted into US$ from RMB with the average exchange rate of the corresponding year: National Bureau of Statistics of China; Projected data: IMF

Nominal GDP per capita in the PRC, 2004-2013E

(US$) 7,000

6,000 5,663.1 5,057.1 5,000 4,493.1 3,996.6 4,000 3,610.8 3,267.0

3,000 2,489.4 2,027.6 2,000 1,715.2 1,490.4

1,000

0 2004 2005 2006 2007 2008 2009E 2010E 2011E 2012E 2013E

Source: Historical data: National Bureau of Statistics of China; Projected data: IMF

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INDUSTRY OVERVIEW

Accelerating Urbanisation Trend Urbanisation has accelerated in the PRC as a result of the country’s rapid economic growth. Populations in large urban cities have increased with the influx of people from rural and less developed areas. During the span of 2004 to 2008, the total urban population in the PRC increased by approximately 63.9 million or approximately 11.8%. In 2008, the total urban population was approximately 606.7 million and accounted for around 45.7% of the total population. The following chart sets forth the historical and projected urban population and urbanisation rate in the PRC for the periods indicated.

Urban Population and Urbanisation Rate in the PRC, 2004-2013E

(Million) (%) 800 60%

746.4 750

710.3 55% 700 52.7% 676.8 50.9% 647.0 650 49.2% 50% 624.2 47.8% 606.7 46.8% 593.8 600 577.1 562.1 45.7% 45% 550 542.8 44.9% 43.9% 43.0% 41.8% 500 40% 2004 2005 2006 2007 2008 2009E 2010E 2011E 2012E 2013E

Urban Population Urbanisation Rate

Source: Historical data: National Bureau of Statistics of China; Projected data: Frost & Sullivan

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INDUSTRY OVERVIEW

Disposable Income Growth of Urban Households With the rapid growth of the PRC economy, income levels of urban households have increased and living standards have improved. According to the National Bureau of Statistics of China, the annual per capita disposable income of urban households in the PRC increased at a CAGR of approximately 18.9% from approximately US$1,138.3 (RMB9,421.6) in 2004 to approximately US$2,271.4 (RMB15,781.0) in 2008. According to Frost & Sullivan, the annual per capita disposable income of urban households in the PRC is projected to further increase to approximately US$3,785.5 (RMB23,962.1) in 2013. The following chart sets forth the historical and projected annual per capita disposable income of urban households in the PRC for the periods indicated.

Annual per capita Disposable Income of Urban Households in the PRC, 2004-2013E (US$) 4,500

4,000 3,785.5 3,408.8 3,500 3,057.2 3,000 2,745.1 2,500.2 2,500 2,271.4

2,000 1,812.6 1,475.0 1,500 1,280.6 1,138.3 1,000

500

0 2004 2005 2006 2007 20082009E 2010E 2011E 2012E 2013E

Source: Historical data: National Bureau of Statistics of China; Projected data: Frost & Sullivan

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INDUSTRY OVERVIEW

STRONG RETAIL GROWTH AND CHANGING CONSUMPTION PATTERNS From 2004 to 2008, retail sales of consumer goods in the PRC had experienced rapid growth amid the PRC’s strong economy, growing middle class and increasing affluence. These changing demographics have coincided with the increase in disposable income per capita, suggesting that the consumption power of consumers in the PRC has risen. Consumer spending, as measured by the total value of retail sales of consumer goods, has grown at a CAGR of approximately 21.4% from approximately US$718.9 billion (RMB5,950.1 billion) in 2004 to approximately US$1,561.5 billion (RMB10,848.8 billion) in 2008. According to Frost & Sullivan, the total retail sales value is projected to further increase to approximately US$2,806.5 billion (RMB17,765.4 billion) by 2013. The following chart sets forth the historical and projected total retail sales of consumer goods in the PRC for the periods indicated.

Total Retail Sales of Consumer Goods in the PRC, 2004-2013E

(US$ bn) 3,500

3,000 2,806.5

2,478.3 2,500 2,178.5 1,917.4 2,000 1,713.4 1,561.5 1,500 1,172.9 958.4 1,000 819.9 718.9

500

0 2004 2005 2006 2007 2008 2009E 2010E 2011E 2012E 2013E

Source: Historical data: National Bureau of Statistics of China; Projected data: Frost & Sullivan

Key Drivers of Sustainable Growth in the PRC’s Retail Market As the nominal GDP per capita has experienced significant growth in the PRC and as Chinese consumers have become more affluent, they have been gradually switching to mid- to high-end branded products with better designs and higher quality. We believe this change in the consumption patterns in the PRC will result in a gradually expanding target customer base for us with respect to those consumers interested in sportswear.

The increasing size of the PRC’s middle class and growing affluence in the PRC overall have greatly contributed to the increasing consumption of lifestyle-enhancing products, such as entertainment, leisure, technology, apparel and footwear. As the level of disposable income increases among these people, their purchase decisions become increasingly less driven by price and functionality, but more by brand image, product design and style.

The PRC’s generation Y, those born between 1980 and 1990, are expected to be a large driver of consumption among the population. This generation grew up amid rising consumerism and entrepreneurship in the PRC. Their higher education and stronger earning power coupled with the influx of Western culture and mentality into the PRC have slowly created a different perception of borrowing for consumption.

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INDUSTRY OVERVIEW

THE PRC SPORTSWEAR INDUSTRY Overview The PRC sportswear market, which includes footwear, apparel and accessories, has expanded rapidly in recent years. According to Frost & Sullivan, the footwear market was the largest segment in 2008 with revenue of 50.5%, apparel ranked the second with 45.5% and the remainder of 4.0% was occupied by the accessories segment.

The most common distribution channel in the PRC sportswear market is sales through distributors which are wholesalers and/or retailers. Almost all of the sportswear brand manufacturers in the PRC have dozens or even hundreds of distributors countrywide. In addition, some manufacturers also have self-owned retail outlets and sell directly to end retail consumers as well. As some major sportswear brands implement both wholesale and retail sales and the proportions of each differ by company, Frost & Sullivan used ex-factory revenue, i.e., sportswear brand manufacturers’ sales revenue to distributors (as opposed to end retail consumers), for market share to be consistent and to reflect the market better as compared to computing revenue on a retail sales basis. Accordingly, in this document, for purposes of PRC sportswear industry and market share data, revenue means ex-factory revenue. For sportswear brand manufacturers without retail sales which sell all products to distributors (such as our Company), ex-factory revenue equals the manufacturers’ sales revenue. For sportswear brand manufacturers which have retail sales, Frost & Sullivan converted their retail sales into ex-factory revenue according to the discount for their own distributors.

According to Frost & Sullivan, total sportswear revenue in the PRC increased from US$2.5 billion (RMB20.8 billion) in 2004 to US$7.7 billion (RMB53.3 billion) in 2008, representing a CAGR of 32.2% for that period. Frost & Sullivan projects total sportswear revenue to grow at 32.5% annually between 2008 and 2013 to reach US$31.3 billion (RMB197.9 billion) in 2013. The following chart sets forth the historical and projected total sportswear revenue in the PRC by type of sportswear for the periods indicated.

Total Sportswear Revenue (US$ bn) Breakdown Forecast by Product in the PRC, 2004-2013E 35 31.3

30 1.5

25 23.5 1.1 14.0

20 17.5 0.8 10.7 15 13.0 0.6 8.1 9.8 10 7.7 0.4 6.2 0.3 15.7 5.2 4.8 4.0 11.6 5 2.5 3.1 0.2 3.9 0.1 8.6 0.1 0.1 2.8 6.3 1.7 2.2 4.6 1.4 2.3 3.5 0 1.0 1.3 1.6 2004 2005 2006 2007 2008 2009E 2010E 2011E 2012E 2013E

Sports Apparel Sports Footwear Sports Accessories

Source: Frost & Sullivan

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INDUSTRY OVERVIEW

The growth potential of the sportswear market in the PRC is further demonstrated by the rapidly growing total sportswear expenditure per capita. According to Frost & Sullivan, total sportswear expenditure per capita in the PRC was US$7.4 (RMB51.6) in 2008, which lags behind many developed countries such as the United States, Canada and Germany. However, Frost & Sullivan projects annual sportswear expenditure per capita in the PRC to grow at 31.4% annually between 2008 and 2013, which is significantly faster than the same countries named above. The following chart sets forth total sportswear expenditure per capita in 2008 and the projected growth rate of total sportswear expenditure per capita from 2008 to 2013 for the PRC and various other countries.

Global Total Sportswear Expenditure per capita, 2008-2013E

(US$) (%) 250 40% 232.8

31.4% 211.4 30% 200 176.3 20% 150 136.5 133.3 119.1 5.9% 10% 5.4% 11.9% 100 7.5% 83.0 5.2% 3.8% 0% 0.6% 0.7% 63.1 (0.7%) (0.2%) 50 (10%) 20.3 7.4 0.4 0 (20%) China US Canada U.K. Germany France Australia Japan India Singapore Korea

Total Sportswear Expenditure per capita in 2008 CAGR of Total Sportswear Expenditure per capita, 2008-2013E

Source: Frost & Sullivan

Key Industry Growth Drivers Major factors contributing to the growth of the PRC sportswear market include the increase in PRC consumers’ purchasing power, increased market demand due to world-level sports events such as Olympic Games, the potential development in the market of the second or third tier cities, the implementation of the Nationwide Fitness Campaign ( ) by the PRC State Sports General Administration ( ), increasing brand consciousness among PRC consumers and fashion trends towards leisure consumption.

In addition, the rising popularity of sports and an increasing trend of consciousness of fitness are expected to continue to drive demand for sportswear in the PRC. The PRC Government has consistently promoted competitive athletics and athletic programs for the general public. The increased popularity of sports and fitness in the PRC and improvement in the Nationwide Fitness Campaign ( ) is evidenced by the 98.6% increase in sporting events from 1995 to 2007 held in the PRC, as illustrated in the following table.

1995 2000 2007 Number of sporting events held by sports commissions at and above county level from 1995 to 2007 ...... 24,880 26,196 49,410

Source: National Bureau of Statistics of China

We believe that following the PRC’s hosting of the 2008 Olympic Games ( ), the PRC public’s interest in, and awareness of, sports and fitness has increased. Further, Frost & Sullivan expects that the effects of the 2008 Beijing Olympic Games ( ) will continue to drive consumer spending on sportswear goods and will not simply be a one-off event. In addition, we expect the 2009 East Asian Games ( ) in Hong Kong and the 16th Asian Games in Guangzhou in 2010 ( ), among other events, will continue to drive interest in sports among the PRC consumers.

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INDUSTRY OVERVIEW

Market Segmentation The chart below illustrates the historical market shares of the sportswear brands in the PRC in terms of their revenue for 2008.

2008 Breakdown of the PRC Sportswear Market

Nike Others 18.8% 23.2%

Umbro 2.2% Adidas Puma 14.9% 2.5% 361° 4.2% Erke 4.4% Xtep Li-Ning 4.9% 11.1% Kappa Anta 5.3% 8.6%

Note: “Others” refers to international and domestic brands in the PRC sportswear market other than the brands named in the chart above. Such brands include, among others, Peak, Mizuno and Converse. Source: Frost & Sullivan

In addition, of the ten major brand companies in the PRC sportswear market (selected based on revenue for 2008), the table below illustrates the top five sportswear brands in the PRC in terms of number of retail outlets in the PRC as of 31 March 2009.

Top Five Major Sportswear Brands in the PRC (in terms of number of retail outlets in the PRC as of 31 March 2009)

Retail Outlets Company (As of 31 March 2009) Li-Ning ...... 6,445 Anta ...... 5,867 361° ...... 5,543 Xtep ...... 5,206 Adidas ...... 4,826

Source: Frost & Sullivan

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INDUSTRY OVERVIEW

In line with the rapid expansion of the sportswear market in the PRC, major domestic sportswear brand companies have experienced strong growth over the last few years. Of the ten major brand companies in the sportswear market in the PRC (selected based on revenue for 2008), the chart below illustrates the top five domestic brands in terms of revenue growth rate for 2008 as compared to 2007.

Top Five Major Domestic Sportswear Brands in the PRC (in term of revenue growth rate for 2008 as compared to 2007)

450%

400%

350% 295.7% 300%

250%

200%

150% 137.9%

100% 70.0% 66.9% 47.2% 50%

0% 361° Xtep Anta Li-Ning Erke

Source: Frost & Sullivan

Market research by Frost & Sullivan indicates that domestic brands have become increasingly prominent and successful during the past four years. Domestic brands have been effective in capturing market share by penetrating all levels of the Chinese market, whereas international brands have been less effective in penetrating medium and low end markets due to their brand positioning. The charts below set forth the share of five major international sportswear brands versus the share of five major domestic sportswear brands in terms of revenue in 2005 and in 2008.

Market Share of Five Major International Sportswear Brands versus Five Major Domestic Sportswear Brands in terms of Revenue 2005 2008

International Brands Domestic Brands International Brands Domestic Brands 65.3% 34.7% 56.7% 43.3%

Total = US$1,338.7 million Total = US$5,890.8 million

Source: Frost & Sullivan

The barriers to entry in the China branded sportswear market are high, due to the cost and time required to build brand awareness and establish an effective distribution network. The top sportswear brands have achieved

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INDUSTRY OVERVIEW high growth rates in China. Frost & Sullivan believes that in the coming years to 2013, these leading brands will continue to gain market share at the expense of less established, lower-end brands due to their critical mass in distribution network, superior brand recognition and innovation in product design and development.

REPORT COMMISSIONED FROM FROST & SULLIVAN We commissioned Frost & Sullivan, an independent market research and growth consulting company based in the United States with over 40 years of industry experience, to conduct an analysis of, and to report on, the sportswear market in the PRC for the period from 2004 to 2013. The report commissioned has been prepared by Frost & Sullivan independent of our influence. We paid RMB559,000 to Frost & Sullivan for the report commissioned and we consider such fee reflects market rates.

The Frost & Sullivan report we commissioned includes information on the PRC sportswear market such as market share and ranking of brand companies and sportswear retailers, sales value, total sportswear consumption, consumption per capita and other economic data, which have been quoted in this document. Frost & Sullivan’s independent research was undertaken through both primary and secondary research obtained from various sources within the PRC sportswear industry. Primary research involves interviewing leading industry participants including sportswear brand companies and sportswear retailers. Secondary research involves reviewing company reports, independent research reports and data based on Frost & Sullivan’s own research database. Projected total sportswear consumption and total retail sales value in the PRC were obtained from historical data analysis plotted against macroeconomic data as well as specific related industry drivers such as level of brand awareness, product variety, awareness of sporting activities, etc., mapped against available projected drivers obtained through interviews with industry experts and participants.

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REGULATIONS

REGULATIONS This section sets out summaries of certain aspects of PRC laws and regulations, which are relevant to our Group’s operation and business.

Establishment, operation and management of a wholly foreign-owned enterprise The establishment, operation and management of corporate entities in China are governed by the Company Law of the PRC ( ) (the “Company Law”), which was promulgated by the Standing Committee of the National People’s Congress ( ) on 29 December 1993 and became effective on 1 July 1994. It was subsequently amended on 25 December 1999, 28 August 2004 and 27 October 2005 respectively. The companies are classified into categories—limited liability companies and limited companies by shares. The Company Law shall also apply to foreign-invested limited liability companies. According to the Company Law, where laws on foreign investment have other stipulations, such stipulations shall apply.

The establishment procedures, approval procedures, registered capital requirement, foreign exchange, accounting practices, taxation and labour matters of a wholly foreign-owned enterprise are regulated by the Wholly Foreign-owned Enterprise Law of the PRC ( ) (the “Wholly Foreign-owned Enterprise Law”), which was promulgated on 12 April 1986 and amended on 31 October 2000, and the Implementation Regulation of the Wholly Foreign-owned Enterprise Law ( ), which was promulgated on 12 December 1990 and amended on 12 April 2001.

Investment in the PRC conducted by foreign investors and foreign-owned enterprises is governed by the Guidance Catalogue of Industries for Foreign Investment ( ) (the “Catalogue”), which was amended and promulgated by the Ministry of Commerce of the PRC ( ) and the National Development and Reform Commission of the PRC ( ) on 31 October 2007. The Catalogue is a long-standing tool that PRC policymakers have used to manage and direct foreign investment. Similar to the 2002 and 2004 editions, the Catalogue divides industries into three basic categories: encouraged, restricted, and prohibited. Industries not listed in the catalogue are generally open to foreign investment unless specifically barred in other PRC regulations. Foreign-invested enterprises in encouraged industries are often permitted to establish wholly foreign-owned enterprises. Parts of industries in the restricted category may be limited to equity or contractual joint ventures, in some cases with the Chinese partner as the majority shareholder. Restricted category projects are also subject to higher-level government approvals. Industries in the prohibited section are closed to foreign investment.

Taxation Income tax Prior to 1 January 2008, income tax payable by foreign-invested enterprises in the PRC was governed by the Foreign-invested Enterprise and Foreign Enterprise Income Tax Law of the PRC ( ) (the “FIE Tax Law”) promulgated on 9 April 1991 and effective on 1 July 1991 and the related implementation rules. Pursuant to the FIE Tax Law, a foreign-invested enterprise was subject to a national income tax at the rate of 30% and a local tax at the rate of 3% unless a lower rate was provided by laws or administrative regulations. The income tax on foreign-invested enterprises established in Special Economic Zones, foreign enterprises which have establishments or places in Special Economic Zones engaged in production or business operations, and on foreign-invested enterprises of a production nature in Economic and Technological Development Zones, was levied at the reduced rate of 15%. The income tax on foreign-invested enterprises of a production nature established in coastal economic open zones or in the old urban districts of cities where the Special Economic Zones or the Economic and Technological Development Zones are located, was levied at the reduced rate of 24%. Any foreign-invested enterprise of a production nature scheduled to operate for a period of not less than ten years was exempted from income tax for two years commencing from the first profit-making year (after offsetting all tax losses carried forward from previous years) and allowed a fifty percent reduction in the following three consecutive years.

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REGULATIONS

According to the newly promulgated Enterprise Income Tax Law of the PRC ( ) (the “New Tax Law”), which was promulgated on 16 March 2007, the income tax for both domestic and foreign- invested enterprises will be at the same rate of 25% effective from 1 January 2008. In order to clarify some provisions in the New Tax Law, The Implementation Rules to the New Tax Law ( ) (the “Implementation Rules”) was promulgated on 6 December 2007, effective from 1 January 2008. The New Tax Law provides certain relief during the transaction period that apply to enterprises that were established prior to 16 March 2007 (i) if foreign-invested enterprises enjoy reduced tax rates under the laws and regulations, the tax rate will be gradually increased to coincide with the new tax rate within five years starting from 2008; and (ii) if foreign-invested enterprises enjoy tax holidays for a fixed period under laws and regulations, such foreign-invested enterprises can continue the holiday until its expiry. However, if an enterprise has not started to enjoy the tax holiday due to a lack of profit, 2008 will be regarded as the first profit-making year and the enterprise starts to enjoy the tax holiday.

Value-added tax Pursuant to the Provisional Regulations on Value-added Tax of the PRC ( ) effective from 1 January 1994 (amended on 5 November 2008) and its implementation rules, all entities or individuals in the PRC engaging in the sale of goods, the provision of processing services, repairs and replacement services, and the importation of goods are required to pay value-added tax (“VAT”). VAT payable is calculated as “output VAT” minus “input VAT”. The rate of VAT is 17% or in certain limited circumstances, 13%, depending on the product type.

Foreign currency exchange and dividend distribution Foreign currency exchange The principal regulation governing foreign currency exchange in China is the Foreign Exchange Administration Rules of the PRC ( ) (the “Foreign Exchange Administration Rules”). It was promulgated by the State Council of the PRC ( ) on 29 January 1996, became effective on 1 April 1996 and was amended on 14 January 1997 and 1 August 2008. Under these rules, Renminbi is generally freely convertible for payments of current account items, such as trade and service-related foreign exchange transactions and dividend payments, but not freely convertible for capital account items, such as capital transfer, direct investment, investment in securities, derivative products or loan unless prior approval of the SAFE is obtained.

Under the Foreign Exchange Administration Rules, foreign-invested enterprises in the PRC may purchase foreign exchange without the approval of SAFE for paying dividends by providing certain evidencing documents (board resolutions, tax certificates, etc.), or for trade and services-related foreign exchange transactions by providing commercial documents evidencing such transactions. They are also allowed to retain foreign currency (subject to a cap approval by SAFE) to satisfy foreign exchange liabilities. In addition, foreign exchange transactions involving overseas direct investment or investment and exchange in securities, derivative products abroad are subject to registration with SAFE and approval or file with the relevant governmental authorities (if necessary).

Dividend distribution Before the promulgation of the New Tax Law, the principal regulations governing distribution of dividends paid by wholly foreign-owned enterprises include the Wholly Foreign-owned Enterprise Law and the Implementation Regulation of the Wholly Foreign-owned Enterprise Law.

Under these regulations, wholly foreign-owned enterprises in China may only pay dividends from accumulated after-tax profit, if any, determined in accordance with PRC accounting standards and regulations. Dividends paid to its foreign investors are exempt from withholding tax. However, this provision has been revoked by the New Tax Law. The New Tax Law prescribes a standard withholding tax rate of 20% on dividends and other China-sourced passive income of non-resident enterprises. However, the Implementation Rules reduced the rate from 20% to 10%, effective from 1 January 2008.

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REGULATIONS

The PRC and the government of Hong Kong signed Arrangement between the Mainland of the PRC and Hong Kong for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with respect to Taxes on Income ( ) on 21 August 2006 (the “Arrangement”). According to the Arrangement, no more than the 5% withholding tax rate applies to dividends paid by a PRC company to a Hong Kong resident, provided that the recipient is a company that holds at least 25% of the capital of the PRC company. The 10% withholding tax rate applies to dividends paid by a PRC company to a Hong Kong resident if the recipient is a company that holds less than 25% of the capital of the PRC company.

Product Quality The principal legal provisions governing product liability are set out in the Product Quality Law of the PRC ( ) (the “Product Quality Law”), which was promulgated on 22 February 1993 and amended on 8 July 2000.

The Product Quality Law is applicable to all activities of production and sale of any product within the territory of the PRC, and the producers and sellers shall be liable for product quality in accordance with the Product Quality Law.

Consumer Protection The principal legal provisions for the protection of consumer interests are set out in the Consumer Protection Law of the PRC ( ) (the “Consumer Protection Law”), which was promulgated on 31 October 1993 and came into effect on 1 January 1994.

According to the Consumer Protection Law, the rights and interests of the consumers who buy or use commodities for the purposes of daily consumption or those who receive services are protected and all manufacturers and distributors involved must ensure that the products and services will not cause damage to persons and properties.

Environmental protection According to the Environmental Protection Law of the PRC ( ) (the “Environmental Protection Law”), which was promulgated and effective on 26 December 1989: • any entity that discharges pollutants must establish environmental protection rules and adopt effective measures to control or properly treat waste gas, waste water, waste residues, dust, malodorous gases, radioactive substances, noise, vibration and electromagnetic radiation and other hazards it produces; • any entity that discharges pollutants must report to and register with the relevant environmental protection authorities; and • any entity that discharges pollutants in excess of the prescribed national or local standards must pay a fee therefore.

The purposes of the Environmental Protection Law are to protect and enhance living environment, prevent and cure contamination and other public hazards, and safeguard human health. The Ministry of Environmental Protection of the PRC ( ) implements uniform supervision and administration of environmental protection work nationwide and formulates the national waste discharge standards. Local environmental protection bureaus at county level and above are responsible for the environmental protection in their jurisdictions. Government authorities shall impose different penalties against persons or enterprises in violation of the Environmental Protection Law depending on the individual circumstances and the extent of contamination. Such penalties include warnings, fines, decisions to impose deadlines for cure, orders to stop protection, orders to re-install contamination prevention and cure facilities which have been removed or left unused, imposition of administrative actions against relevant responsible persons, or orders to close down those enterprises or authorities.

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HISTORY AND CORPORATE STRUCTURE

OUR HISTORY Our business development We primarily manufacture and sell our 361° products. From 2004 to 2007, substantially all of our revenues were generated from sales of our 361° products to customers who were primarily wholesalers and authorised retailers (including department stores) of sportswear products pursuant to purchase contracts which were entered into for each season’s order. These customers either resold our 361° products to authorised retailers or sold our 361° products at self-operated authorised retail outlets. We began to expand the distribution network of our 361° products aggressively in 2005 by venturing into the fast-growing cities and provincial capitals in the PRC to tap their large consumer market potential. The authorised retailers-owned retail network reached 432 361° authorised retail outlets as of 30 June 2005. Catering to customer demand, we also started to introduce athletic apparel in our product portfolio in February 2005. In the same year, our brand was selected by World Brand Laboratory ( ) as the “China’s 500 Most Valuable Brands” ( ), with an estimated value exceeding RMB2 billion. We were also awarded the “Top 100 Businesses with Great Potential in China” ( ) by Forbes China in 2005 and 2006, respectively.

We continued to build our brand while expanding our national footprint. In 2006, we focused on developing our brand strategy and developed sponsorship and co-marketing arrangements with sporting events in the PRC to increase our brand awareness on a national basis. Our 361° brand was named a “China Famous Brand” ( ) (for 361° sports footwear) in 2005 by the State General Administration of Quality Supervision, Inspection and Quarantine of the PRC ( ), and a “China Well-Known Trademark” ( )in 2005 (for the “ ” logo) and in 2008 (for the “ ” trademark) by the State Administration for Industry and Commerce of the PRC ( ). Our athletic footwear was granted an exemption from quality inspection by the State General Administration of Quality Supervision, Inspection and Quarantine of the PRC ( ) for the period from December 2006 to December 2009.

Starting in September 2007, we further expanded our product line by introducing branded accessories to the market. We also introduced new store concepts to elevate our brand status and to convey 361° as a premium sports brand in the PRC market. We started launching large format flagship stores in major cities in the PRC through our distributors and authorised retailers to showcase our comprehensive product portfolio and generate market awareness in 2007. To meet growing demand for our products, in August 2007, we began the construction of new production facilities in Wuli Industrial Park Phase One to expand our production capabilities. We also expanded our brand enhancing sponsorship activities, such as selecting Ms. Zhang Ning ( ) and Mr. Lin Dan ( ) who are Olympic badminton gold medallists as our spokespersons for 2008, and sponsoring the Xiamen International Marathon ( ) from 2006 to 2008.

As of 30 June 2007, we had successfully expanded the distribution network of our 361° products to 3,126 361° authorised retail outlets. To better manage our growth, enhance our market penetration in retail channels and focus our resources on overall brand building and product design and development, we shifted our business model in the beginning of 2008. Under the new business model, we sell our 361° products exclusively to our distributors, who in turn sell our 361° products to authorised retailers within the exclusive geographic areas assigned to them pursuant to annual distributorship agreements. The authorised retailers then sell our 361° products to consumers in 361° authorised retail outlets. Since the adoption of our new business model, we ceased entering into new purchase contracts with customers who are not our distributors. However, since we continued to honour our obligations under the purchase contracts entered into prior to 2008 up to December 2008, approximately 4.6% and 0.4% of our 361° product sales during the six months ended 30 June 2008 and the nine months ended 31 March 2009, respectively, were made to these customers pursuant to such purchase contracts. We have also formalised our management, merchandising, financial and operation requirements for distributors and 361° authorised retail outlets via annual distributorship agreements. Through such distributionship agreements, we have made significant progress in improving our operation infrastructure and expanding the retail presence of our 361° brand.

We have received a number of awards and accreditations since our establishment in the PRC. In recognition of our stringent quality control standards, our production facilities were granted ISO 9001:2000 certification

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HISTORY AND CORPORATE STRUCTURE in 2007. We received the “2006 China Sports Brand Top Ten Marketing Enterprise Award” (2006 ) from the China Association for Development and Promotion of International Brand ( ) and the China Sports Brand Research Centre ( ) in 2006. We were also awarded “Best Innovative Marketing of the Year” ( ) of “Impact on China” ( ) by QQ.com ( ) in 2006.

Our PRC Subsidiaries Sanliuyidu Fujian Establishment On 25 December 2002, Mr. Ting Tong Bun (the father-in-law of one of our Controlling Shareholders, Mr. Ding Huirong), Mr. Ding Huihuang, Mr. Ding Huirong and Mr. Ding Wuhao entered into an agreement (the “Sanliuyidu Fujian Trust Agreement”) pursuant to which Mr. Ding Huihuang, Mr. Ding Huirong and Mr. Ding Wuhao agreed to jointly establish a new company to engage in the sportswear business under the name of 361° and contribute capital in the proportion of 24%, 51% and 25%, respectively, and Mr. Ting Tong Bun agreed to act as the shareholder and legal representative of this new company but would not contribute any share capital, would have no dividend rights and would not be involved in the management of this new company. The parties entered into the Sanliuyidu Fujian Trust Agreement because they held the view that entrusting Mr. Ting Tong Bun, a Hong Kong resident, to hold the interest in Sanliuyidu Fujian, a company incorporated in the PRC, would facilitate the establishment of Sanliuyidu Fujian’s business as a foreign-invested and international enterprise. Mr. Ting Tong Bun was chosen as the nominee shareholder because he was the father-in-law of Mr. Ding Huirong and a relative of Mr. Ding Huihuang and Mr. Ding Wuhao. Mr. Ting Tong Bun agreed to enter into the Sanliuyidu Fujian Trust Agreement solely because of his family relationship with Mr. Ding Huirong, Mr. Ding Huihuang and Mr. Ding Wuhao, and he did not receive any consideration or benefit for entering into the same. Our PRC legal advisers, Tian Yuan Law Firm, have confirmed that the Sanliuyidu Fujian Trust Agreement did not violate any PRC laws and regulations and was valid and enforceable among the parties involved.

Mr. Ting Tong Bun was never involved in the management or operations of Sanliuyidu Fujian during the Track Record Period, had no influence over Sanliuyidu Fujian’s business, did not have any control over Sanliuyidu Fujian and always exercised all his shareholder’s rights (including but not limited to the right of appointment of directors and supervisors and voting at shareholder’s meetings) and director’s rights in Sanliuyidu Fujian at the direction of Mr. Ding Huirong, Mr. Ding Huihuang and Mr. Ding Wuhao. During the Track Record Period, there was no incidence where Mr. Ting Tong Bun did not vote at the direction of Mr. Ding Huirong, Mr. Ding Huihuang and Mr. Ding Wuhao, and Mr. Ting Tong Bun also acted at the direction of Mr. Ding Huirong, Mr. Ding Huihuang and Mr. Ding Wuhao in connection with all his activities (whether internal and external) concerning Sanliuyidu Fujian. Against such background, our Group was established in July 2003 by Mr. Ting Tong Bun through the incorporation of Sanliuyidu Fujian.

Pursuant to three loan agreements all dated 7 May 2003, Mr. Ting Tong Bun provided unsecured personal loans in the amount of HK$40.8 million, HK$19.2 million and HK$20.0 million to Mr. Ding Huirong, Mr. Ding Huihuang and Mr. Ding Wuhao, respectively, without interest, because of his family relationship with Mr. Ding Huirong, Mr. Ding Huihuang and Mr. Ding Wuhao. Mr. Ding Huirong, Mr. Ding Huihuang and Mr. Ding Wuhao in turn applied such loans to pay up the registered capital of Sanliuyidu Fujian. Such loans were repayable within two years from the date of provision of the entire loan amount and it was never intended that Mr. Ting Tong Bun would acquire any equity interest in Sanliuyidu Fujian by providing such loans. Pursuant to an agreement dated 20 March 2009, the repayment term of all such loans, together with the HK$160 million advanced by Mr. Ting Tong Bun under a loan agreement dated 15 March 2005 (as described below), was extended with HK$95 million repayable prior to the [Š] and the remaining HK$40.0 million, HK$40 million and HK$65 million repayable during the first, second and third year after the [Š], respectively. It is expected that the source of repayment of these loans to Mr. Ting Tong Bun will primarily be future dividends to be distributed to Mr. Ding Huirong, Mr. Ding Huihuang and Mr. Ding Wuhao by our Company.

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HISTORY AND CORPORATE STRUCTURE

Land and buildings

At the initial stage of its operations, Sanliuyidu Fujian used the land and buildings owned by Bieke Fujian and Wanshile after they ceased their sportswear business operations in around June and July 2003 pursuant to (i) the agreement dated 26 July 2003 between Bieke Fujian and Wanshile (as described below) and (ii) the agreement dated 5 August 2003 between Sanliuyidu Fujian and Bieke Fujian (as described below). Bieke Fujian was wholly beneficially-owned by Mr. Ting Tong Bun. Mr. Ting Tong Bun confirmed that he would not continue or commence any other business which competes or would compete with our Group in future. Wanshile was beneficially owned as to 14.3% by Mr. Ding Wuhao and Mr. Ding Jiantong, who is the father of Mr. Ding Huirong and Mr. Ding Huihuang, through Fujian Jinjiang Chendai Jiangtou Huafeng Shoes Co., Ltd. ( )(“Huafeng”), a company owned as to 50% by each of them, and 85.7% by Mr. Zhuang Enzhong ( ), an Independent Third Party. Mr. Ding Wuhao and Mr. Ding Jiantong transferred all their interests in Huafeng in June 2008 to Mr. Lin Shanming ( ), an Independent Third Party, at the total consideration of RMB500,000, which was determined on the basis of the capital contribution made by Mr. Ding Wuhao and Mr. Ding Jiantong at the time of transfer.

Pursuant to an agreement dated 26 July 2003 (the “July 2003 Agreement”) entered into between Bieke Fujian and Wanshile, Wanshile entrusted Bieke Fujian to negotiate with Sanliuyidu Fujian and agreed to grant Sanliuyidu Fujian the right to use Land B (as described below) and Property 1 (as described below) which was jointly owned by Wanshile and Bieke Fujian for a term of 5 years from 13 May 2003 to 13 May 2008, during which period Sanliuyidu Fujian was not required to pay any rent. To the best of the knowledge of our Directors, Bieke Fujian and Wanshile were of the view that it would be easier in terms of administration for one party, i.e., Bieke Fujian, to act on behalf of both of them to deal with our Group. As a result, Sanliuyidu Fujian was not a party to the July 2003 Agreement.

Pursuant to an agreement dated 5 August 2003 (the “August 2003 Agreement”) entered into between Sanliuyidu Fujian and Bieke Fujian, Bieke Fujian agreed to grant Sanliuyidu Fujian the right to use Land A, Land C, Property 2 (as described below), and Property 1 which was jointly owned by Wanshile and Bieke Fujian (as described below and based on the July 2003 Agreement) for a term of five years from 13 May 2003 to 13 May 2008 during which Sanliuyidu Fujian was not required to pay any rent, and Sanliuyidu Fujian agreed to acquire such land and properties within such five year period at a consideration to be determined by reference to a mutually acceptable valuation. As further set out in the August 2003 Agreement, the parties agreed that (i) Sanliuyidu Fujian would pre-pay part of the consideration at the request of Bieke Fujian; (ii) when Sanliuyidu Fujian acquired such land and properties, the consideration for the land and properties would include compensation for the grant of the right to use the land and properties. Accordingly, Sanliuyidu Fujian pre-paid to Bieke Fujian a total of RMB4.4 million, RMB18.0 million and RMB21.5 million during the financial years ended 30 June 2006, 2007 and 2008, respectively, as part of the transfer price prior to the formal transfer of the above land and properties.

The August 2003 Agreement was not registered with the relevant PRC authorities. According to our PRC legal advisers, Tian Yuan Law Firm, by granting Sanliuyidu Fujian the right to use Land A and Property 1 under the August 2003 Agreement prior to their acquisition of the allocated land use rights of those lands and properties, Bieke Fujian and Wanshile contravened certain provisions of the Provisional Rules on the Administration of Allocated Land Use Right ( ) and Provisional Regulations of the PRC on the Sale and Transfer of Land Use Right of State-owned Land in Cities and Towns ( ) and the relevant PRC authorities had the authority to impose administrative penalty on Bieke Fujian and Wanshile. Bieke Fujian and Wanshile obtained the land use right certificate in respect of the said allocated land use rights on 15 May 2008. Accordingly, as confirmed by our PRC legal advisers, Tian Yuan Law Firm, the relevant PRC authorities will not impose any penalty on Sanliuyidu Fujian and there will not be any material adverse impact on our Group’s operation. Further, according to our PRC legal advisers, Tian Yuan Law Firm, as Bieke Fujian had not obtained the relevant land use right certificate and building ownership certificate for Land C and Property 2 at the time of signing of the August 2003 Agreement, the August 2003 Agreement was not enforceable and the relevant PRC authorities had the authority to reclaim possession of the land occupied by Bieke Fujian. Nevertheless, upon obtaining the

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HISTORY AND CORPORATE STRUCTURE relevant land use right certificate and building ownership certificate on 9 June 2007, Bieke Fujian could lease Land C and Property 2.

In March and May 2008, we entered into the following agreements to acquire the land and buildings leased by us: (a) an agreement with Bieke Fujian to acquire the land use right of a piece of land with an area of approximately 1,431.0 square metres situated at Qianjin Road, Jiangtou Village, Chendai Town, Jinjiang City, Fujian Province, the PRC ( )(“Land A”) for a consideration of RMB546,800; (b) an agreement with Wanshile to acquire the land use right of a piece of land with an area of approximately 2,816.5 square metres situated at Qianjin Road, Jiangtou Village, Chendai Town, Jinjiang City, Fujian Province, the PRC ( )(“Land B”) for a consideration of RMB1,076,100; (c) an agreement with Bieke Fujian and Wanshile to acquire the building with a construction area of approximately 12,588.1 square metres built on the land covered in agreements (a) and (b) above jointly owned by Bieke Fujian and Wanshile (“Property 1”) for a consideration of RMB6,850,000; (d) an agreement with Bieke Fujian to acquire the land use right of a piece of land with an area of 21,564.0 square metres situated at Fangjiao Village, Chendai Town, Jinjiang City, Fujian Province, the PRC ( ) (“Land C”) for a consideration of RMB8,238,530; and (e) an agreement with Bieke Fujian to acquire the building with a construction area of approximately 56,201.5 square metres built on the land covered in agreement (d) above (“Property 2”) for a consideration of RMB36,190,000. Jones Lang LaSalle Sallmanns Limited, an independent property valuer, confirmed that the aggregate amount of RMB940,430 implied compensation for the rent free period from 13 May 2003 to 13 May 2008 as specified under the July 2003 Agreement and the August 2003 Agreement, being the difference between the total acquisition price of RMB52,901,430 for all land and properties owned by Bieke Fujian and Wanshile and the appraised value of these land and properties of RMB51,961,000, only amounted to approximately less than 1.8% of the total consideration of RMB52,901,430 paid for the acquisition of the land and properties under the agreements entered into in March and May 2008 and is immaterial, therefore the total consideration paid for the acquisition of the land and properties from Bieke Fujian and Wanshile, namely the compensation, prepayment and the balance of the purchase consideration paid as a whole, was comparable to the then prevailing market price. The implied compensation of RMB940,430 was amortised, on a straight line basis, in our combined income statements included in the accountants’ report set out in Appendix I to this document over the period between July 2004 and September 2007, when Sanlinyidu China and Bieke Fujian entered into a tenancy agreement (“2007 Tenancy Agreement”) in respect of the lease of certain factory premises covered under the July 2003 Agreement in order to facilitate Sanliuyidu China’s application for ordinary tax payer status with the local tax bureau at the relevant time. Our Directors are of the view that the above arrangements between Bieke Fujian and us as well as between Wanshile and us relating to the above land and properties as a whole made reasonable commercial sense and the above terms (including the annual rental expenses as stated in note 23 to our combined financial statements included in the accountants’ report set out in Appendix I to this document) are no less favourable to us than terms available to or from Independent Third Parties. The above transactions have also been disclosed in note 23 to our combined financial statements included in the accountants’ report set out in Appendix I to this document.

Brands, trademarks and vehicles acquired from Bieke Fujian and Wanshile After the cessation of the sportswear business operations of Bieke Fujian and Wanshile in around June and July 2003, Bieke Fujian also discontinued the use of the brands and trademarks relating to “Bieke” and “ ”. In order to provide flexibility to the development of our Group’s business, our Company acquired certain trademarks relating to “Bieke” and “ ” with a view to explore the potential of using such brands in the future. The application for registration of these trademarks were submitted by Bieke Fujian and Wanshile at different times during 1994 to 2003, and were approved by the Trademark Bureau under the State Administration for Industry and Commerce of the PRC ( ) and relevant overseas trademark authorities during the period from 1996 to 2004. We also acquired a few trademarks relating to 361° from Bieke Fujian and Wanshile. The application for registration of these trademarks were submitted by Bieke Fujian and Wanshile at different times during 1999 to 2003, and were approved by the Trademark Bureau under the State Administration for Industry and Commerce of the PRC ( ) and relevant overseas trademark authorities during the period from 2001 to 2008. The trademarks relating to 361º were never used by either Bieke Fujian or Wanshile. The registrations of the transfers of these trademarks from Bieke Fujian and Wanshile to us

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HISTORY AND CORPORATE STRUCTURE were approved by the Trademark Bureau under the State Administration for Industry and Commerce of the PRC ( ) and relevant overseas trademark authorities during the period from 2004 to 2006. Other than a small volume of sales of TPR and TPU pellets (which were raw materials for the production of soles and were not sold by us under any brands) and sales of certain packaging materials, we have conducted all business under our 361° brand since the inception of our Group and our Directors confirmed that our Group had never used any of the trademarks relating to “Bieke” and “ ”. We commenced designing, producing, marketing and selling athletic footwear under our 361° brand in January 2004.

Apart from the land and buildings used by us during the Track Record Period and certain trademarks described above, we also acquired three vehicles in December 2007 and October 2008 from Bieke Fujian at the total transfer price of RMB110,080. Save as aforesaid, no customers, suppliers, assets and liabilities of our Group have been transferred or acquired from Bieke Fujian pursuant to any agreement, oral or written, between Bieke Fujian and us and there was no agreement, oral or written, regarding the transfer of Bieke Fujian’s business to our Group. Several customers and suppliers of our Group who were also customers and suppliers of Bieke Fujian before the cessation of its sportswear business operations, at their own discretion, commenced business with us after Bieke Fujian ceased its sportswear business operation in June 2003. As stated above, since there was never any agreement, oral or written, regarding the transfer of these customers and suppliers to our Group, we considered that the major cause of this was the geographical proximity between our Group and Bieke Fujian.

Apart from the land and buildings used by us during the Track Record Period and certain trademarks described above, we also acquired three vehicles in December 2007 from Wanshile at the total transfer price of RMB358,460. Save for aforesaid, no customers, suppliers, assets and liabilities of our Group have been transferred or acquired from Wanshile pursuant to any agreement, oral or written, between Wanshile and us and there was no agreement, oral or written, regarding the transfer of Wanshile’s business to our Group.

Save and except for the activities as disclosed above, each of Bieke Fujian and Wanshile had not conducted any business operations after they ceased their sportswear business operation in around June and July 2003, and therefore was not during the Track Record Period and is currently not in competition with the business of our Group.

Certain of our Directors and senior management members had held positions in Bieke Fujian and Wanshile, as follows: (i) Mr. Ding Wuhao was a director and the general manager of Bieke Fujian since its incorporation until 1 July 2008 and a director and the general manager of Wanshile since its incorporation until 30 June 2008; (ii) Mr. Ding Huirong was a vice general manager of Bieke Fujian since its incorporation until 1 July 2008, and a vice general manager of Wanshile since its incorporation until 30 June 2008; and (iii) Mr. Wang Jiabi was a vice general manager of Bieke Fujian until 1 July 2008. However, none of them were involved in the management and operations of Bieke Fujian and Wanshile since they ceased their sportswear business operations in around June and July 2003. Save as disclosed above, (i) none of our Directors or senior management members were or will be involved in the management and operations of Bieke Fujian and Wanshile during the Track Record Period or after the [Š]; (ii) and none of the directors or senior management members of Bieke Fujian and Wanshile were or will be involved in the management and operations of our Group during the Track Record Period or after the [Š]. It is currently expected that Bieke Fujian will be dissolved by December 2009. After the disposal of the entire interest in Huafeng, which held 14.3% interests in Wanshile, by Mr. Ding Wuhao and Mr. Ding Jiantong to Mr. Lin Shanming in June 2008, none of our Directors or their respective associates has any interest in Wanshile, and our Directors are not in a position to participate or influence the conduct of business of Wanshile.

Sanliuyidu China In April 2005, we established Sanliuyidu China as a new member of our Group. Sanliuyidu China is primarily responsible for the manufacture and sales of sportswear products. The entire registered capital of Sanliuyidu China was held by Sanliuyidu Hong Kong, which was a company incorporated under Hong Kong law on 6 April 2004. The sole shareholder of Sanliuyidu Hong Kong at the relevant time was Mr. Ding Huihuang. Pursuant to a trust agreement entered into on 5 February 2005 by and among Mr. Ding Huihuang, Mr. Ding

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HISTORY AND CORPORATE STRUCTURE

Huirong and Mr. Ding Wuhao (the “Sanliuyidu Hong Kong Trust Agreement”), the entire issued share capital of Sanliuyidu Hong Kong, which was held by Mr. Ding Huihuang, was beneficially owned as to 51% by Mr. Ding Huirong, 24% by Mr. Ding Huihuang and 25% by Mr. Ding Wuhao. The parties entered into the Sanliuyidu Hong Kong Trust Agreement because they held the view that since Sanliuyidu Hong Kong is a Hong Kong company, it would be more convenient to manage the affairs of Sanliuyidu Hong Kong by registering the legal title of all the shares of Sanliuyidu Hong Kong under the name of one person rather than all of them so that only such person has to travel to Hong Kong (if required) to manage the affairs of Sanliuyidu Hong Kong and to sign the corporate documents of Sanliuyidu Hong Kong. Our PRC legal advisers, Tian Yuan Law Firm, have confirmed that Mr. Ding Huirong, Mr. Ding Huihuang and Mr. Ding Wuhao did not violate any PRC laws and regulations by entering into the Sanliuyidu Hong Kong Trust Agreement. In June 2008, each of Mr. Ding Huirong, Mr. Ding Huihuang and Mr. Ding Wuhao executed a statutory declaration to declare that Mr. Ding Huihuang had been holding the 51% and 25% equity interests in Sanliuyidu Hong Kong on trust for Mr. Ding Huirong and Mr. Ding Wuhao, respectively, since the incorporation of Sanliuyidu Hong Kong, and Mr. Ding Huihuang have executed formal declarations of trust to re-affirm the arrangements as set out in Sanliuyidu Hong Kong Trust Agreement. Our legal adviser as to Hong Kong laws advised that the above trust arrangement as set out in the Sanliuyidu Hong Kong Trust Agreement and as reaffirmed in the declarations of trust executed in June 2008 did not violate any laws or regulations in Hong Kong and is valid and legal. In July 2008, Mr. Ding Huihuang transferred the legal title in 51% and 25% interest to Mr. Ding Huirong and Mr. Ding Wuhao respectively. After such transfers, the shares of Sanliuyidu Hong Kong are not subject to any other trust arrangement.

Pursuant to a loan agreement dated 14 March 2005, Mr. Ding Huihuang agreed to provide Sanliuyidu Hong Kong a loan in the amount of HK$160 million, without interest, to fund the payment of the registered capital of Sanliuyidu China. Pursuant to a loan agreement dated 15 March 2005, Mr. Ting Tong Bun provided an unsecured personal loan in the amount of HK$160 million to Mr. Ding Huihuang without interest because of his family relationship with Mr. Ding Huihuang, Mr. Ding Huirong and Mr. Ding Wuhao. Mr. Ding Huihuang in turn applied such loan to lend to Sanliuyidu Hong Kong to pay up the registered capital of Sanliuyidu China. The loan provided by Mr. Ting Tong Bun to Mr. Ding Huihuang was repayable within two years from the date of provision of the entire loan amount and it was never intended that Mr. Ting Tong Bun would acquire any interest in Sanliuyidu China by providing such loan. As described above, pursuant to an agreement dated 20 March 2009, the repayment term of such loan, together with the HK$80 million advanced by Mr. Ting Tong Bun under three loan agreements all dated 7 May 2003 (as described above), was extended with HK$95 million repayable prior to the [Š] and the remaining HK$40 million, HK$40 million and HK$65 million repayable during the first, second and third year after the [Š], respectively. It is expected that the source of repayment of these loans to Mr. Ting Tong Bun will primarily be future dividends to be distributed to Mr. Ding Huirong, Mr. Ding Huihuang and Mr. Ding Wuhao by our Company. Mr. Ting Tong Bun was never involved in the management or operations of Sanliuyidu China during the Track Record Period, had no influence over Sanliuyidu China’s business and did not have any control over Sanliuyidu China.

Sanliuyidu Xiamen In view of the growth of our sales and as part of our strategic development, we established Sanliuyidu Xiamen, a limited liability company in Xiamen City, Fujian Province, the PRC, in May 2008, which primarily focuses on wholesale of athletic footwear, apparel and accessories. Sanliuyidu Xiamen is an indirect wholly- owned subsidiary of our Company and has been owned as to 10% by Sanliuyidu Fujian and as to 90% by Sanliuyidu China since its incorporation.

Our Company Our Company was incorporated under the laws of the Cayman Islands on 1 August 2008. To prepare our corporate structure for the [Š] and to facilitate our growth and expansion strategy, we underwent a reorganisation in which Sanliuyidu Holdings and 361 Enterprise were established and became the subsidiaries of our Company and the major holding companies of our Group.

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HISTORY AND CORPORATE STRUCTURE

CORPORATE REORGANISATION In preparation for the [Š], we underwent the Corporate Reorganisation which consisted primarily of the following steps: • the incorporation of Sanliuyidu Holdings and 361 Enterprise; • the acquisition of Sanliuyidu Fujian and Sanliuyidu China; and • the transfer of the equity interest in Sanliuyidu Holdings to our Company which resulted in our Company becoming the holding company of our Group.

Incorporation of Sanliuyidu Holdings and 361 Enterprise Sanliuyidu Holdings was incorporated in the BVI on 20 February 2008 with an authorised share capital of US$50,000 divided into 50,000 shares with a par value of US$1 each. At the time of incorporation, its share capital was held as to 51% by Hui Rong International, 25% by Dings International and 24% by Ming Rong International. Hui Rong International is wholly-owned by Mr. Ding Huirong, Ming Rong International is wholly- owned by Mr. Ding Huihuang and Dings International is wholly-owned by Mr. Ding Wuhao.

361 Enterprise was incorporated in Hong Kong on 22 April 2008 with an authorised share capital of HK$10,000 divided into 10,000 shares with a par value of HK$1 each. 361 Enterprise has been wholly-owned by Sanliuyidu Holdings since its incorporation.

Acquisition of Sanliuyidu Fujian and Sanliuyidu China On 25 July 2008, Sanliuyidu Hong Kong and 361 Enterprise entered into a share transfer agreement pursuant to which Sanliuyidu Hong Kong transferred all its equity interest in Sanliuyidu China to 361 Enterprise at the consideration of HK$1. In view that both Sanliuyidu China and 361 Enterprise were then beneficially owned as to 51% by Mr. Ding Huirong, 24% by Mr. Ding Huihuang and 25% by Mr. Ding Wuhao, the transfer did not result in any changes of the beneficial interest of Sanliuyidu China. Accordingly, a nominal consideration was used. After such transfer, Sanliuyidu Hong Kong ceased to hold any interest in any member of our Group. It was not injected into our Group as Mr. Ding Huirong, Mr. Ding Huihuang and Mr. Ding Wuhao all considered that the shareholding structure of our Group would be simplified by replacing Sanliuyidu Hong Kong, which involved a trust arrangement among its beneficial owners historically, with 361 Enterprise, which our Group directly owned.

Apart from holding the equity interest of Sanliuyidu China between April 2005 and July 2008, Sanliuyidu Hong Kong had no business operations since its incorporation on 6 April 2004. It is expected that Sanliuyidu Hong Kong will be deregistered by mid-2010.

On 25 July 2008, Mr. Ting Tong Bun and 361 Enterprise entered into a share transfer agreement pursuant to which Mr. Ting Tong Bun transferred all the equity interest in Sanliuyidu Fujian registered under his name to 361 Enterprise at the consideration of HK$1. In view that both Sanliuyidu Fujian and 361 Enterprise were then beneficially owned as to 51% by Mr. Ding Huirong, 24% by Mr. Ding Huihuang and 25% by Mr. Ding Wuhao, the transfer did not result in any changes of the beneficial interest of Sanliuyidu Fujian. Accordingly, a nominal consideration was used.

Transfer of equity interest in Sanliuyidu Holdings to our Company On 15 August 2008, Hui Rong International, Ming Rong International, Dings International and our Company entered into a share transfer agreement pursuant to which Hui Rong International, Ming Rong International and Dings International transferred their respective shareholdings in Sanliuyidu Holdings to our Company in consideration of (i) the crediting as fully paid the 51, 24 and 25 nil paid Shares in the share capital of our Company held by Hui Rong International, Ming Rong International and Dings International, respectively,

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HISTORY AND CORPORATE STRUCTURE and (ii) the issue of 5,049, 2,376 and 2,475 Shares in our Company credited as fully paid to Hui Rong International, Ming Rong International and Dings International, respectively.

SHARE TRANSFERS AFTER THE CORPORATE REORGANISATION After the Corporate Reorganisation, there were two share transfers in the share capital of our Company: (i) transfer of 25% equity interest in aggregate to Mr. Wang Jiabi and Mr. Wang Jiachen and (ii) transfer of 2% equity interest to Mr. Ding Jiantong.

Transfer of 25% equity interest to Mr. Wang Jiabi and Mr. Wang Jiachen On 12 October 2002, Mr. Ding Huihuang, Mr. Ding Huirong and Mr. Ding Wuhao entered into an undertaking (the “2002 Undertaking”) which acknowledged that the parties agreed to jointly invest in the sportswear business. In view of the strong experience of Mr. Wang Jiabi and Mr. Wang Jiachen in the manufacturing of sports shoes, as an incentive to retain their continued service in the new sportswear business to be established by Mr. Ding Huihuang, Mr. Ding Huirong and Mr. Ding Wuhao, the parties agreed to transfer 25% equity interest in the new sportswear products business to Mr. Wang Jiabi and Mr. Wang Jiachen at a consideration equal to 25% of the original investment costs of the new sportswear business on the basis that Mr. Wang Jiabi and Mr. Wang Jiachen will continue to serve in the new sportswear business. Mr. Ding Huihuang, Mr. Ding Wuhao and Mr. Ding Huirong further agreed that the interests to be transferred to Mr. Wang Jiabi and Mr. Wang Jiachen shall come from the interests held under Mr. Ding Huirong’s name.

Our PRC legal advisers, Tian Yuan Law Firm, have confirmed that the 2002 Undertaking did not violate PRC laws and regulations and was legally binding and valid between the parties under PRC laws. Pursuant to a confirmation dated 28 August 2008 and signed by Mr. Ding Huirong, Mr. Ding Huihuang, Mr. Ding Wuhao, Mr. Wang Jiabi and Mr. Wang Jiachen, the parties confirmed that the subject companies which were referred to in the 2002 Undertaking were Sanliuyidu China and Sanliuyidu Fujian and further agreed that upon completion of the transfer of an aggregate of 25% interests in our Company by Hui Rong International to Jia Wei International and Jia Chen International, respectively (i.e. upon completion of the transfer of a 12.5% equity interest in our Company from Hui Rong International to each of Jia Wei International and Jia Chen International), the obligations of Mr. Ding Huirong, Mr. Ding Huihuang and Mr. Ding Wuhao to transfer equity interest in our Company to Mr. Wang Jiabi and Mr. Wang Jiachen under the 2002 Undertaking would be considered fulfilled. On 30 August 2008, Hui Rong International, Jia Wei International and Jia Chen International entered into a share transfer agreement pursuant to which Hui Rong International transferred 1,250 shares in our Company (representing a 12.5% equity interest in our Company at the relevant time) to each of Jia Wei International and Jia Chen International, respectively (in aggregate 2,500 Shares, representing a 25% equity interest in our Company) at a total consideration of HK$60 million which was paid as to HK$30 million by each of Jia Chen International and Jia Wei International without any direct or indirect financial support from Mr. Ding Huirong, Mr. Ding Huihuang, Mr. Ding Wuhao and/or Mr. Ting Tong Bun. Such transfers were completed on 3 December 2008. As Mr. Ding Huirong, Mr. Ding Huihuang and Mr. Ding Wuhao equally bore the original cost for the 25% equity interest in our Company, they divided equally among themselves the total consideration of HK$60 million received by Hui Rong International. The consideration was determined by reference to 25% of the aggregate of the registered capital of Sanliuyidu China and Sanliuyidu Fujian. Each of Mr. Wang Jiabi and Mr. Wang Jiachen is a legal and beneficial owner in respect of a 12.5% interest in our Company held under the name of Jia Wei International and Jia Chen International, and none of them is holding any Shares in trust for any other party. The Shares held by Mr. Wang Jiabi and Mr. Wang Jiachen are subject to a lock-up arrangement identical to that applicable to our Controlling Shareholders. As it was the consensus among the parties to the 2002 Undertaking that the interests to be transferred to Mr. Wang Jiabi and Wang Jiachen would come from the interests beneficially held by Mr. Ding Huirong for ease of administration, the interests beneficially held by Mr. Ding Huirong had already taken into account the future share transfers to Mr. Wang Jiabi and Mr. Wang Jiachen, and were greater than those held by Mr. Ding Huihuang and Mr. Ding Wuhao. Accordingly, Mr. Ding Huihuang and Mr. Ding Wuhao did not transfer any Shares held under their names to Mr. Wang Jiabi and Mr. Wang Jiachen.

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HISTORY AND CORPORATE STRUCTURE

Transfer of 2% equity interest to Mr. Ding Jiantong Under the 2002 Undertaking, Mr. Ding Huirong and Mr. Ding Huihuang also agreed to gift a 2% equity interest in our Group to Mr. Ding Jiantong, the father of Mr. Ding Huirong and Mr. Ding Huihuang as an expression of filial piety and a gesture of gratitude towards their father. Mr. Ding Huihuang and Mr. Ding Huirong further agreed that the interests to be transferred to Mr. Ding Jiantong would come from the interests held under Mr. Ding Huirong’s name. Pursuant to a confirmation dated 28 August 2008 and signed by Mr. Ding Huirong, Mr. Ding Huihuang and Mr. Ding Jiantong, the parties agreed that upon completion of the transfer of 2% interest in our Company by Hui Rong International to Jian Tong Investments, the obligations of Mr. Ding Huirong and Mr. Ding Huihuang to transfer interests in our Company to Mr. Ding Jiantong under the 2002 Undertaking would be considered fulfilled. Mr. Ding Huirong and Mr. Ding Huihuang equally bore the original cost for the 2% equity interest in our Company. On 30 August 2008, Hui Rong International transferred 200 Shares pursuant to a deed of share transfer, representing a 2% interest in our Company, to Jian Tong Investments. The Shares held by Mr. Ding Jiantong are subject to a lock-up arrangement identical to that applicable to our Controlling Shareholders. As it was the consensus among the parties to the 2002 Undertaking that the Shares to be transferred to Mr. Ding Jiantong would come from interests beneficially held by Mr. Ding Huirong for ease of administration, the Shares held by Mr. Ding Huirong had already taken into account the future interest transfer to Mr. Jiantong, and were greater than those held by Mr. Ding Huihuang and Mr. Ding Wuhao. Accordingly, Mr. Ding Huihuang did not transfer any Shares held under his name to his father.

Mr. Ding Jiantong had been one of the directors of Sanliuyidu Fujian and Sanliuyidu China and the sole signatory of the bank accounts of Sanliuyidu China and Sanliuyidu Fujian since their respective dates of incorporation. As Mr. Ding Jiantong is the father of Mr. Ding Huirong and Mr. Ding Huihuang and has the trust and respect from each of Mr. Ding Huirong, Mr. Ding Huihuang and Mr. Ding Wuhao, they unanimously agreed to appoint him as the bank signatory of Sanliuyidu Fujian and Sanliuyidu China, a role which Mr. Ding Huirong, Mr. Ding Huihuang and Mr. Ding Wuhao all considered as honourable given that they believe that banks will generally regard a bank signatory as an important figure of an enterprise, as a sign of showing their respect towards him. Nevertheless, each of Mr. Ding Huirong, Mr. Ding Huihuang and Mr. Ding Wuhao as well as Mr. Ding Jiantong confirmed that (i) in his capacity as the director of Sanliuyidu Fujian and Sanliuyidu China, Mr. Ding Jiantong always followed the instructions of Mr. Ding Huirong, Mr. Ding Huihuang and Mr. Ding Wuhao in the exercise of director’s power and have never exercised any such power on his own; and (ii) in his capacity as the bank signatory of Sanliuyidu Fujian and Sanliuyidu China, Mr. Ding Jiantong always followed the instructions of Mr. Ding Huirong, Mr. Ding Huihuang and Mr. Ding Wuhao in signing all documents. Save as disclosed above, notwithstanding the positions held by Mr. Ding Jiantong mentioned above, Mr. Ding Jiantong was never involved in the management or operations of our Group. In addition, prior to the transfer of 2% interest in our Company in August 2008, Mr. Ding Jiantong had no equity interest in our Group. Mr. Ding Jiantong was previously a director of Bieke Fujian from its incorporation to 1 July 2008 and a director of Wanshile from its incorporation to 30 June 2008, but he has ceased to be involved in the management and operations of Bieke Fujian and Wanshile since they ceased their sportswear business operations in around June and July 2003.

CONTROL OF OUR GROUP Despite the fact that Mr. Ding Huirong was the single largest beneficial shareholder in Sanliuyidu Fujian and Sanliuyidu China, the operating subsidiaries of our Group during the Track Record Period, our Group was not controlled by Mr. Ding Huirong alone. As disclosed in the paragraph headed “Share Transfers after the Corporate Reorganisation” above, the interests beneficially held by Mr. Ding Huirong in our Company, which replicated his beneficial interest proportion in Sanliuyidu Fujian and Sanliuyidu China, were larger than those beneficially held by Mr. Ding Huihuang and Mr. Ding Wuhao because the interests beneficially held by Mr. Ding Huirong took into account the contemplated interest transfers to Mr. Wang Jiabi, Mr. Wang Jiachen and Mr. Ding Jiantong. Mr. Ding Huirong only beneficially held such interests to be transferred for ease of administration and Mr. Ding Huirong never attempted to exercise the voting rights held under his name independent from Mr. Ding Huihuang and Mr. Ding Wuhao.

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HISTORY AND CORPORATE STRUCTURE

Among our Controlling Shareholders, Mr. Ding Huihuang and Mr. Ding Huirong are brothers, Mr. Ding Wuhao married the sister of Mr. Ding Huihuang and Mr. Ding Huirong thus is the brother-in-law of both Mr. Ding Huirong and Mr. Ding Huihuang. Mr. Ding Huirong, Mr. Ding Huihuang and Mr. Ding Wuhao were brought up in the PRC. None of them is or was a full time government official of any country. Our Controlling Shareholders have worked together for more than 14 years and were all initial beneficial owners of each of Sanliuyidu Fujian and Sanliuyidu China. Since our Controlling Shareholders are relatives, have worked together for a long time, known each other very well and have built up mutual trust among themselves, they have not entered into any written agreements as to how they should act as a group of Controlling Shareholders. Nevertheless, as a matter of fact, our Controlling Shareholders made important corporate and business decisions jointly as a group after discussions among themselves. After they reached consensus, they either voted or directed other persons to vote unanimously as a group in a coordinated manner. They shared the same business visions and have never failed to reach consensus over important decisions relating to the affairs of our Group and none of our Controlling Shareholders has exercised his shareholder’s rights or made any material shareholder’s decision in relation to the affairs of our Group without the consent of the other Controlling Shareholders during the Track Record Period.

Accordingly, our Group was jointly controlled by our Controlling Shareholders and not by Mr. Ding Huirong alone throughout the Track Record Period and is expected to continue to be so after the [Š].

SAFE REGISTRATION According to the Notice on Issues Relating to the Administration of Foreign Exchange in Fund-raising and Return Investment Activities of Domestic Residents Conducted via Offshore Special Purpose Vehicle ( ) (the “SAFE Circular 75”), which was issued by SAFE on 21 October 2005, and effective on 1 November 2005: • domestic residents who plan to establish or control an overseas special purpose vehicle must conduct foreign exchange registration with the local foreign exchange authority; • domestic residents who have contributed their assets or shares of a domestic enterprise into an overseas special purpose vehicle, or have raised funds overseas after such contribution, must conduct foreign exchange registration for the modification of the record concerning the overseas special purpose vehicle with the local foreign exchange authority; and • domestic residents who are the shareholder of an overseas special purpose vehicle are required to go through registration for the modification of the record with the local foreign exchange authority within 30 days from the date of any major capital change event, such as an increase/decrease of capital, share transfer, share swap, merger or division, long term equity or debt investment or foreign guarantee where no round-trip investment is involved.

Our PRC legal advisers, Tian Yuan Law Firm, have advised that Mr. Ding Huihuang, Mr. Ding Huirong, Mr. Ding Wuhao, Mr. Wang Jiabi, Mr. Wang Jiachen and Mr. Ding Jiantong, being the relevant beneficial shareholders of our Group and domestic residents of the PRC, have completed their foreign exchange registration of overseas investments at the Fujian Branch of SAFE and confirmed that the SAFE Circular 75 has been duly satisfied.

OUR CORPORATE REORGANISATION AND THE RULES ON THE MERGER AND ACQUISITION OF DOMESTIC ENTERPRISES BY FOREIGN INVESTORS Under the Rules on the Acquisition of Domestic Enterprises by Foreign Investors in the PRC ( ) (the “M&A Rules”), a foreign investor is required to obtain necessary approvals when (i) a foreign investor acquires equity in a domestic company thereby converting it into an foreign-invested enterprise, or subscribes for new equity via an increase of registered capital thereby converting it into a foreign-invested enterprise; (ii) a foreign investor establishes a foreign-invested enterprise which purchases and operates the assets of a domestic enterprise, or which purchases the assets of a domestic enterprise

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HISTORY AND CORPORATE STRUCTURE and injects those assets to establish a foreign-invested enterprise. The acquisition shall be based on the appraisal result on the equity or assets to be acquired. According to Article 15 of the M&A Rules, where parties to an acquisition are related including where the control is only de facto, the parties must “provide an explanation on the purpose of the acquisition and whether the appraisal result is consistent with fair market value”. Avoiding this requirement by using trusts, nominees, or other means is prohibited.

Our PRC legal advisers, Tian Yuan Law Firm, have advised that the acquisition by 361 Enterprise of equities of Sanliuyidu Fujian and Sanliuyidu China does not fall within the scope of the above regulated activities stipulated in the M&A Rules, as Sanliuyidu Fujian and Sanliuyidu China have been established as foreign-invested enterprises upon approval of competent commerce authorities, before 8 September 2006, the date from which the M&A Rules became effective.

Our PRC legal advisers, Tian Yuan Law Firm, have advised that all approvals or permits required under PRC laws and regulations in connection with each stage of the Corporate Reorganisation and the [Š]ofour Company have been obtained.

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HISTORY AND CORPORATE STRUCTURE

CORPORATE AND SHAREHOLDING STRUCTURE OF OUR GROUP Set out below is the shareholding structure of our Group after the Corporate Reorganisation and the Share Transfers:

Mr. Ding Wuhao Mr. Ding Huihuang Mr. Ding Huirong Mr. Ding Jiantong Mr. Wang Jiabi Mr. Wang Jiachen (Note 1) (Notes 2 and 3) (Notes 2 and 3) (Note 3) (Note 4) (Note 4)

100% 100% 100% 100% 100% 100%

Ming Rong Jian Tong Dings International Hui Rong Jia Wei Jia Chen International International International International (BVI) Investments (BVI) (BVI) (BVI) (BVI) (BVI)

25% 24% 24% 2% 12.5% 12.5%

Our Company (Cayman Islands) (Investment Holding)

100%

Sanliuyidu Holdings (BVI) (Investment Holding)

100%

361 Enterprise (Hong Kong) (Investment Holding)

100% 100%

Sanliuyidu Fujian Sanliuyidu China (PRC) (PRC) (Manufacturing and Sales) (Manufacturing and Sales) (Principal Operating Subsidiary) (Principal Operating Subsidiary) 10% 90%

Sanliuyidu Xiamen (PRC) (Wholesale)

Notes: (1) Mr. Ding Wuhao is the brother-in-law of Mr. Ding Huihuang and Mr. Ding Huirong. (2) Mr. Ding Huihuang is the elder brother of Mr. Ding Huirong. (3) Mr. Ding Jiantong is the father of both Mr. Ding Huihuang and Mr. Ding Huirong. (4) Mr. Wang Jiabi is the elder brother of Mr. Wang Jiachen. Mr. Wang Jiabi and Mr. Wang Jiachen are not connected with any of Mr. Ding Jiantong, Mr. Ding Huihuang, Mr. Ding Huirong and Mr. Ding Wuhao.

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BUSINESS

OVERVIEW We are one of the leading domestic sportswear enterprises in the PRC. As of the Latest Practicable Date, our 361° products were sold at more than 5,900 361° authorised retail outlets in 31 provinces and most major cities in the PRC. According to Frost & Sullivan, among the ten major participants of the PRC sportswear market (selected based on revenue for 2008), we were the fastest growing brand in terms of revenue growth rate for 2008 as compared to 2007, a top five domestic brand in terms of revenue for 2008, accounting for approximately 4.2% of the total revenue of the PRC sportswear market for the same period, and a top five brand in terms of the number of retail outlets in the PRC as of 31 March 2009.(1) We design, develop, produce, market and distribute high performance, innovative and stylish sportswear products, including athletic footwear, apparel and accessories. Our 361° products are marketed primarily to the fast-growing, up-and-coming consumer group comprised of sports-minded consumers between the ages of 16 and 25. Founded in 2003, we have grown rapidly in recent years in terms of sales and number of authorised retail outlets. We believe our growth has been driven principally by the successful promotion of our 361° brand, rapid expansion of the 361° retail network, improved product designs, expansion of our range of product offerings, and our conversion to an exclusive distributorship business model. Increasing market demand for sportswear products and improving economic conditions in the PRC also contributed to our growth.

Our brand, 361°, represents the 360 degrees of a complete circle plus one extra degree, symbolising our goal of establishing our brand to provide complete satisfaction in athleticism and functionality, plus an added degree of innovation and creativity. It also represents our continuous commitment to always pursuing one more degree of management and operational excellence and highlights our goal of distinguishing 361° from other competitors by this one degree.

We place great emphasis on brand building and promoting our 361° products. We produce integrated, theme-based print, television and Internet advertising that promote 361°’s spirit of passion and individualism. We also create influential co-marketing campaigns through our selection of top athletes, such as Olympic badminton gold medallists Ms. Zhang Ning ( ) and Mr. Lin Dan ( ), as our spokespersons and the sponsorship of high quality, brand enhancing sporting events, such as the 361° China University Basketball Super League (361° ), the Xiamen International Marathon ( ) and various other promotional activities. This allows us to develop product tie-ins that are cross-marketed during the events’ promotional campaigns and, in turn, stimulate in-store sales of our 361° products. Our 361° trademark has been recognised as a “China Well-Known Trademark” ( ) by the State Administration for Industry and Commerce of the PRC ( ) and a “China Famous Brand” ( ) (for 361° sports footwear) by the State General Administration of Quality Supervision, Inspection and Quarantine of the PRC ( ).

In collaboration with external design agencies, our in-house design team of 49 staff develops stylish and functional sportswear products for a wide variety of sporting activities. Our team caters to consumer trends while echoing thematic elements from our integrated marketing campaigns to establish a unified image for our brand and products.

We also pride ourselves on creating high performance sportswear products for our consumers. Our team of 57 dedicated research and development staff is engaged in developing new technologies and applications to enhance the technical innovations and performance of our 361° products. Our two laboratories, the primary role of which is quality control testing, also provide data to our research and development department to assist them in developing new technologies and applications. Key achievements of our research and development departments include patented sportswear technologies, such as NFO Tech soles, which enhance the shock absorbing characteristics of soles, and Hold Ground Tech, which enhances the gripping power of soles. We currently hold six patents related to footwear.

To better manage our growth, enhance our market penetration in retail channels and focus our resources on overall brand building and product design and development, we shifted our business model in the beginning of

Note: (1) Please refer to “Industry Overview—The PRC Sportswear Industry” section in this document for more information.

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BUSINESS

2008. Under the new business model, we sell our 361° products exclusively to our distributors, who in turn sell our 361° products to authorised retailers within the exclusive geographic areas assigned to them pursuant to annual distributorship agreements. The authorised retailers then sell our 361° products to consumers in 361° authorised retail outlets (including individual outlets and store counters in department stores) which have been specifically authorised by our distributors, with our consent, to sell exclusively our 361° products. The new business model improves our efficiency in the distribution of our 361° products and reduces our selling and distribution expenses as we only need to manage a relatively small number of customers compared to hundreds of customers under the previous business model. In addition, by leveraging our distributors’ local resources and business networks, we are able to expand the 361° retail network more efficiently. Since the adoption of our new business model, we ceased entering into new purchase contracts with customers who are not our distributors. However, since we continued to honour our obligations under the purchase contracts entered into prior to 2008 up to December 2008, approximately 4.6% and 0.4% of our 361° product sales during the six months ended 30 June 2008 and the nine months ended 31 March 2009, respectively, were made to these customers pursuant to such purchase contracts. No sales have been made to such customers who are not our distributors since January 2009.

Prior to 2008, substantially all of our revenues were generated from sales of our 361° products to customers who were primarily wholesalers and authorised retailers (including department stores) of sportswear products pursuant to purchase contracts which covered orders for a particular season. These customers either resold our 361° products to authorised retailers or sold our 361° products at their self-operated authorised retail outlets. The purchase contracts set out the sales terms including price, purchase quantity, delivery terms and settlement terms. As we did not adopt a wholesale distribution business model before 2008, we did not enter into any long-term agreements which governed our relationship with our pre-2008 customers.

We select our distributors based on their capital base, financial stability, expertise in retail distribution, retail management and history of operation in the sportswear industry, as well as their commitment to the expansion of the 361° retail network. We have entered into an annual distributorship agreement with each of our distributors since February 2008. The terms of each of our distributorship agreements are substantially the same and include such terms as geographical exclusivity, product exclusivity, payment terms, minimum purchases, minimum number of new 361° authorised retail outlets to be opened and certain other undertakings. Under the new distributorship business model, we have adopted a uniform pricing policy with a national suggested retail pricing system. We sell our 361° products to our distributors at a uniform discount to the suggested retail price, and our distributors, in turn, sell our 361° products to their authorised retailers at a uniform price that has been approved by us. We do not have any contractual relationship with our authorised retailers.

As of the Latest Practicable Date, the distribution network of our 361° products consisted of 30 distributors who oversaw 3,173 authorised retailers. These authorised retailers owned and operated 5,925 361° authorised retail outlets, covering 31 provinces and more than 450 district-level cities, as well as more than 1,200 county- level cities in the PRC. Currently, we do not have any interest in, or operate, any of our distributors, authorised retailers, or 361° authorised retail outlets. While we do not have direct contractual relationships with authorised retailers, our distributors enter into separate agreements with authorised retailers and require them to comply with our standard operating procedures, some of which include guidelines on the design and layout of 361° authorised retail outlets, product pricing and customer service. To ensure compliance with these procedures and to assist authorised retailers with marketing and sales, our regional sales managers routinely visit 361° authorised retail outlets. In addition, we offer authorised retailers and 361° authorised retail outlets training programmes several times a year.

We introduce new products to our distributors and authorised retailers at our sales fairs, which have historically been held three times a year, in February, May and August, approximately four to six months before a new season’s products are introduced to consumers. Our distributors place their orders for the products featured at a sales fair, and we then use these orders to determine production schedules and quantities, and either manufacture the ordered products at our own production facilities or outsource the manufacturing to various contract manufacturers. As we manufacture products only after receipt of purchase volume indications from our distributors, and in the quantities ordered, we are able to coordinate raw material supplies and inventory levels with manufacturing and distribution, which allows us to better control inventory levels and achieve timely delivery of products to our distributors.

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BUSINESS

Our production facilities are located in Jinjiang City, Fujian Province, the PRC. As of the Latest Practicable Date, we operated 16 footwear production lines, with an aggregate annual production capacity of approximately 13.6 million pairs of footwear. We do not operate any production facilities for apparel or accessories and have, during the Track Record Period, outsourced all production of those products to third-party contract manufacturers.

Our revenues for the financial years ended 30 June 2006, 2007 and 2008 were RMB262.9 million, RMB373.3 million and RMB1,317.1 million, respectively, representing a CAGR of 123.8%. Our gross profits for the financial years ended 30 June 2006, 2007 and 2008 were RMB27.1 million, RMB76.9 million and RMB348.0 million, respectively, representing a CAGR of 258.6%. Our net profits for the financial years ended 30 June 2006, 2007 and 2008 were RMB11.0 million, RMB22.9 million and RMB179.0 million, respectively, representing a CAGR of 303.3%. Our revenues for the nine months ended 31 March 2008 and 2009 were RMB853.7 million and RMB2,423.7 million, respectively, representing an increase of 183.9%. Our gross profits for the nine months ended 31 March 2008 and 2009 were RMB202.4 million and RMB791.3 million, respectively, representing an increase of 291.1%. Our net profits for the nine months ended 31 March 2008 and 2009 were RMB102.7 million and RMB364.2 million, respectively, representing an increase of 254.8%. The significant growth in our profits for the financial year ended 30 June 2008 and the nine months ended 31 March 2009, as compared to the financial year ended 30 June 2007 and the nine months ended 31 March 2008, respectively, was primarily due to the successful promotion of our 361° brand, rapid expansion of the 361° retail network, improved product design, expansion of our range of product offerings, and our conversion to an exclusive distributorship business model, which encouraged our distributors to concentrate their resources exclusively on the wholesale distribution of our 361° products and helped us to develop and expand the 361° retail network.

COMPETITIVE STRENGTHS We have grown quickly to become one of the leading sportswear brands in the PRC, and according to Frost & Sullivan, we were the fastest growing sportswear brand among the ten major participants of the PRC sportswear market (selected based on revenue for 2008) in terms of revenue growth rate for 2008 as compared to 2007. We believe that our ability to rapidly expand our business and capture the increasing opportunities in the PRC sportswear market is underpinned by the following competitive strengths:

A leading and one of the fastest growing sportswear brands in the PRC We are one of the leading sportswear brands in the PRC and according to Frost & Sullivan, we were the fastest growing sportswear brand among the ten major participants of the PRC sportswear market (selected based on revenue for 2008) in terms of revenue growth rate for 2008 as compared to 2007. Our 361° trademark is recognised as a “China Well-Known Trademark” ( ) by the State Administration for Industry and Commerce of the PRC ( ), and we have received numerous other awards, recognitions and accolades for our sportswear products and our brand name, including “China Famous Brand” ( ) (for 361° sports footwear) by the State General Administration of Quality Supervision, Inspection and Quarantine of the PRC ( ) and “Certificate for Exemption from Product Quality Surveillance Inspection” ( ) by the State General Administration of Quality Supervision, Inspection and Quarantine of the PRC ( ), among others.

We have grown rapidly since we launched our 361° branded athletic footwear in January 2004. We expanded our product line to include men’s and women’s footwear in 2004, apparel beginning in February 2005 and accessories beginning in September 2007, all with a strong focus on high performance and technological innovation. We believe that our well-known brand name has created a strong brand following among our core consumer demographic of sports-minded consumers between the ages of 16 and 25 and has contributed to our significant growth over the period, both in terms of revenues and number of 361° authorised retail outlets. Our revenues have grown at a CAGR of 123.8% to RMB1,317.1 million from 2006 to 2008, and further increased to RMB2,423.7 million for the nine months ended 31 March 2009. The number of 361° authorised retail outlets has increased by a CAGR of 82.5% to 4,632 361° authorised retail outlets from 2006 to 2008, and further increased to 5,543 as of 31 March 2009 and 5,925 as of the Latest Practicable Date.

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Extensive nationwide distribution network The distribution network of our 361° products of 30 distributors and 3,173 authorised retailers as of the Latest Practicable Date has allowed us to expand quickly across the PRC and penetrate our core markets. Our distributors oversaw these authorised retailers who in turn owned and operated 5,925 361° authorised retail outlets in 31 provincial capitals, more than 450 district-level cities and over 1,200 county-level cities in 31 provinces of the PRC as of the Latest Practicable Date. These 361° authorised retail outlets include store counters in department stores in most major cities in the PRC. According to Frost & Sullivan, among the ten major participants of the PRC sportswear market (selected based on revenue for 2008), we were a top five brand in terms of number of the authorised retail outlets as of 31 March 2009. Our exclusive distributorship business model encourages our distributors to expand our market share by increasing our retail presence, providing an improved and enjoyable purchasing experience to consumers and contributing to the promotion and marketing of our 361° sportswear products.

We believe that our distributorship model has enabled us to establish a meaningful presence in all of our core markets. We collaborate closely with our exclusive distributors in developing a structured expansion plan, requiring each distributor to establish a minimum number of new outlets during the term of the distributorship agreement and to meet minimum purchase targets. From 2005 to 2008, we had successfully established retail positions in popular commercial districts within our 10 core markets: Beijing, Guangzhou, Kunming, Nanjing, Jinan, Shanghai, Shenyang, Shijiazhuang, Wuhan and Zhengzhou.

Innovative design and product development capability Our brand integrates our product development experience in the PRC market with our product research and development capabilities to create high performance, innovative and stylish sportswear for our consumers.

We have established stand-alone dedicated research and development and design departments for our footwear, apparel and accessories products which employ a total of 57 and 49 staff, respectively, as of the Latest Practicable Date. We currently operate one laboratory for footwear, which was established in 2004, and one laboratory for apparel, which was established in 2007, the primary role of which is quality control testing, though they also provide data to our research and development department to assist them in developing new technologies and applications. We also co-operated with domestic and international research and development and product design companies with a view towards enabling our 361° products to have the desired function and application, and to be responsive to market developments.

We currently own six patents related to the design and technologies of our footwear products. For example, we have successfully developed sportswear technologies such as NFO Tech soles which increase shock absorbing characteristics of soles and are incorporated into our Marathon I and Marathon II running shoes series, Hold Ground Tech which increases the gripping power of soles.

Innovative marketing and promotion strategies Our innovative multimedia marketing and promotion strategy highlights 361° as a leading sportswear brand. In addition to traditional mass media marketing, we cross-promote ourselves through integrated media advertising, special events, product promotion and marketing, our three annual sales fairs and in-store promotions that maximise our exposure and create a uniform and well-respected brand image.

We have also developed creative integrated marketing campaigns through our sponsorship of high quality, brand enhancing sporting events. This allows us to develop product tie-ins that are cross-marketed during the events’ promotional campaigns and, in turn, stimulate our 361° products in store sales. For example, we selected Olympic badminton gold medallists Ms. Zhang Ning ( ) and Mr. Lin Dan ( ) as the spokespersons for our products for 2008 and have collaborated with them to create specialised badminton sportswear products. We have also developed the Marathon I and Marathon II running shoes series in connection with the 361° sponsored Xiamen International Marathon ( ) from 2006 to 2008, and basketball shoes in connection with the 361° China University Basketball Super League (361° ), among others. We also were appointed as a Guangzhou 2010 Asian Games Sportswear Prestige Partner ( ) in 2008.

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BUSINESS

We market our brand through slogans that characterise our brand philosophy and highlight our 361° products’ theme, thereby personifying the 361° brand attitude with which consumers can easily associate. From 2004 to 2007, our slogan was “Dare to be” (“ ”). Further, in 2008, we coined the slogan “China, dare to be” (“ ”) in relation to the 2008 Beijing Olympic Games ( ) and created products with a view towards promoting the sporting spirit of the games. From January 2009, we adopted “One love” ( ) as our slogan to promote the love for sporting games in people’s lives.

Experienced and professional management team Our professional management team has extensive experience in sportswear marketing and manufacturing. Our president, Mr. Ding Wuhao, has approximately 14 years of experience in sportswear operations and management. Our vice president, Mr. Xia Youqun, has approximately 13 years of experience in marketing, brand management and retail marketing management in the PRC sportswear industry. We have recruited employees from other PRC sportswear businesses to leverage their operational and management experience to contribute to the success of our brand.

We have also created stand-alone management departments for various business units with a view towards obtaining optimal operational efficiency, while core functions, such as supply chain and brand management, are closely integrated. We believe we have created a management system with strong operational transparency which has enabled us to effectively execute our business strategies and rapidly increase our market share.

BUSINESS STRATEGIES We aim to become the leading domestic sportswear brand in the PRC in terms of brand recognition and market share and to maximise shareholder value. The following sets forth our key business strategies which we expect to implement to meet our overall goal of increasing market share in the PRC sportswear market:

Expand our ten core markets and distribution network We plan to continue to actively expand the distribution network of our 361° products in our ten existing core markets, namely Beijing, Guangzhou, Kunming, Nanjing, Jinan, Shanghai, Shenyang, Shijiazhuang, Wuhan and Zhengzhou. We also plan to further expand the existing distribution network to create one of the strongest sportswear distribution networks in the PRC. We aim to increase the number of the 361° authorised retail outlets that carry our sportswear products to over 6,400 by the end of December 2009. We also plan to use part of the proceeds from the [Š] to establish self-owned and operated flagship stores. As we expect the revenue arising from the flagship stores owned and operated by us may amount to only a small portion of our total revenue in the near future, we believe our establishment of the flagship stores will not change the business model we adopted in 2008. By broadening our distribution coverage, we can more effectively penetrate our target consumer market and further establish our brand as one of the leading sportswear brands in the PRC.

To complement our expansion plan, we intend to increase the number of our regional sales managers. We plan to recruit experienced regional sales managers who have an intimate understanding of local consumer demand and spending patterns. Through our regional sales managers who periodically conduct on-site inspections of randomly-selected 361° authorised retail outlets and visit our distributors in their respective geographic regions, we expect to be able to monitor the performance of our distributors, assist them in developing new 361° authorised retail outlets and entering into new markets and provide them with appropriate sales and marketing strategy education and merchandising training.

Further develop and increase awareness of our 361° brand We intend to continue to refine our brand strategy and improve our brand positioning to better target our consumer base. Through investment in and expansion of our retail channel management department and

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BUSINESS collaboration with external marketing consultants, we plan to research our consumers’ spending patterns, product preference and demographics to allow us to obtain first hand and intimate knowledge of our customer base. This should in turn help us to fine tune our marketing and product development programs to improve brand loyalty, reputation and recognition.

We expect to leverage our current sports sponsorship programs and continue to identify additional sports categories that align with our brand value, in both cases, to further increase brand awareness. Through the expansion of our event sponsorships and product tie-in arrangements, we expect to increase awareness of our 361° brand among our customers. We also plan to explore endorsement opportunities with international sports teams or well-known athletes to further enhance our brand value.

Moreover, we plan to use part of the proceeds from the [Š] to establish certain self-owned and operated flagship stores in prime locations in major and fast-growing cities of the PRC. We believe the establishment of these flagship stores should help raise the profile of our 361° brand in the PRC.

Perception of our retail channels is also critical to our brand’s recognition. We plan to improve our distributors’ management capabilities and, through distributors, increase the size and improve the locations of the 361° authorised retail outlets to provide an improved purchasing experience to our consumers. In addition, through our investment in training programs, we intend to assist our distributors in improving operation management through offering trainings several times a year to the 361° authorised retail outlet managers, store display managers and senior management through physical meetings and online resources. Further, we plan to maintain advanced technical development, high value-added and high quality standards in our 361° products, so our customers will continue to associate our brand with quality and performance.

Leverage our 361° brand into sub-brands and broaden the 361° authorised retail outlet format As we establish ourselves as a leader in the PRC sportswear market, we plan to further leverage our brand awareness by expanding our 361° product lines to add sub-brands of 361° so that we can better distinguish and align our 361° products with our target consumers. To that end, we are currently developing a new children’s footwear and apparel line to capture the attractive growth prospects of this market segment.

We continuously seek to optimise the distribution network of our 361° products to cater to specific demographics, age groups and product needs by adding more varieties to our 361° authorised retail outlet format to expand our distribution channels. While we will focus on our current standard stand alone outlet and store counter formats, through our distributors or by ourselves, we plan to develop multi-level flagship stores to increase our brand presence in core markets; create single product outlets, such as footwear-only 361° authorised retail outlets; and establish specialty stores that categorise products by their functions to better offer our customers an appealing one-stop shopping experience.

Increase investment in product research and development In order to maintain our position as a leading sportswear brand that offers products with high quality performance, we intend to increase our product research and development funding and recruit additional employees to expand our new product research and development capabilities. We will also continue to collaborate with domestic and international professional design firms to strengthen and expand our 361° product portfolio.

We also plan to continue to use the sponsorship of sporting events as our product development platform, such as our designated partnership with the 361° China University Basketball Super League (361° ) to develop customised sportswear products for players from 2007 to 2010.

In addition to product category expansion and extension, we intend to incorporate the latest technical innovation to enhance performance attributes of our 361° products. Further, to establish ourselves as a socially

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BUSINESS responsible enterprise and advocate of sustainable living, we plan to introduce ecologically friendly materials, such as organic cotton, recyclable materials and natural fibres into our future products.

Increase production efficiency by improving supply chain management To cope with our business needs and better manage the rapidly expanding distribution network of our 361º products, we plan to introduce and implement an enterprise resource planning (the “ERP”) system in 2010 that allows for the integration of operating information between our Group, our distributors and the authorised retail outlets. The system should allow real-time data flow through the supply chain to decrease production lead time, reduce logistics bottlenecks and improve the overall efficiency of our enterprise. We also plan to further invest in our ERP system to enable direct linkage of our system with the point-of-sales system of our distributors and authorised retailers and the authorised retail outlets. The ERP system integration is intended to help us to more efficiently gather financial and operational information from our distributors and retail channels, and further improve our merchandising and product ordering processes.

BUSINESS MODEL The following diagram illustrates our current business model:

Design and Development Ordering Process Production Marketing and Distribution

Raw Materials

Procurement Authorised Retailers

Design Product Retail Consumers Introduction Distributors and Sales Fair Production Marketing for Distributors Contract and Manufacturing Authorized of Footwear Retailers Components Research and Development Contract Manufacturing of Finished Products

Note: Components of our business model diagram indicated by solid lines represent those aspects of the value chain controlled by us, while those components indicated by dotted lines represent those not controlled by us.

We design, develop, manufacture and market our 361° branded sportswear, including footwear, apparel and accessories for sports-minded consumers and the general public. We manufactured approximately 100%, 98.5%, 90.4% and 60.7% of our footwear in terms of production volume for the financial years ended 30 June 2006, 2007 and 2008 and the nine months ended 31 March 2009, respectively, at our production facilities located in Jinjiang City, Fujian Province, the PRC. We outsourced the production of the rest of our footwear and all of our apparel and accessories to various contract manufacturers in the PRC during the Track Record Period, most of whom were located in the Fujian Province, the PRC. Our 361° products are marketed primarily to the fast- growing, up-and-coming consumer group comprised of sports-minded consumers between the ages of 16 and 25.

We shifted our business model in the beginning of 2008. Under the new business model, we sell our 361° products exclusively to our distributors, who in turn sell our 361° products to authorised retailers within the exclusive geographic areas assigned to them pursuant to annual distributorship agreements. The authorised retailers then sell our 361° products to consumers in 361° authorised retail outlets. The new business model improves our efficiency in the distribution of our 361° products and reduces our selling and distribution expenses as we only need to manage a relatively small number of customers compared to hundreds of customers under the previous business model. In addition, by leveraging our distributors’ local resources and business networks, we are able to expand the 361° retail network more efficiently. In view of (i) our previous experience in the management of our customers prior to 2008, (ii) our ability to develop a network of 361° authorised retail outlets

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BUSINESS in the PRC, the details of which are set out in the paragraph headed “Management of Sales Network” in this section, (iii) our management team’s multi-year experience in sportswear operations, brand management and retail marketing management in the PRC sportswear industry and (iv) the establishment and implementation of our polices and procedures on, among other things, financial reporting, purchases and payment, sales and credit control, as well as inventory control, we believe our management team has the ability, resources and sufficient internal control measures to manage the business of our Group under the current business model.

BRAND AND PRODUCTS Our 361° brand, which was first introduced to the market in January 2004, is widely recognised in the PRC as the 361° trademark has been recognised as a “China Well-Known Trademark” ( ) by the State Administration for Industry and Commerce of the PRC ( ) and a “China Famous Brand” ( ) (for 361° sports footwear) by the State General Administration of Quality Supervision, Inspection and Quarantine of the PRC ( ). We believe that the maintenance of our brand image and the public’s perception of our brand are critical to our success.

Brand Name “361°” Our brand, 361°, represents the 360 degrees of a complete circle plus one extra degree, symbolising our goal of establishing our brand to provide complete satisfaction in athleticism and functionality, plus an added degree of innovation and creativity. It also represents our continuous commitment to always pursuing one more degree of management and operational excellence and highlights our goal of distinguishing 361° from other competitors by this one degree. Through our brand, we strive to deliver a message of passion and individualism to our target group of sports-minded consumers, who are consumers between the ages of 16 and 25.

We market our brand through slogans that characterise our brand philosophy and highlight our 361° products’ theme, thereby personifying the 361° brand attitude with which consumers can easily associate. From 2004 to 2007, our slogan was “Dare to be” (“ ”). In 2008, we coined the slogan “China, dare to be” (“ ”) in relation to the 2008 Beijing Olympic Games ( ) and created products with a view to promote the sporting spirit of the games. From January 2009, we adopted “One love” ( ) as our slogan to promote the love for sporting games in people’s lives.

Our 361° trademark has been registered or is in the course of application for registration in Hong Kong, the PRC and over 90 other countries and jurisdictions worldwide.

We plan to further leverage our brand awareness by adding sub-brands of 361° to expand our 361° product lines to better distinguish and align our 361° products with our target consumers. To that end, we are currently developing a new children’s footwear and apparel line to capture the attractive growth prospects of this market segment.

Brand Recognition Our 361° brand is highly recognised in the PRC, as evidenced by the following awards and accreditations:

• “China Well-Known Trademark” ( ), awarded by the State Administration for Industry and Commerce of the PRC ( ) in December 2005 (for the “ ” logo) and in February 2008 (for the “ ” trademark); • “China Famous Brand” ( ) (for 361° sports footwear), awarded by the State General Administration of Quality Supervision, Inspection and Quarantine of the PRC ( ) with a term of five years commencing from September 2005; • “Certificate for Product Exemption from Quality Surveillance Inspection” ( ), awarded by the State General Administration of Quality Supervision, Inspection and Quarantine of the PRC ( ) with a term of three years commencing from December 2006;

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BUSINESS

• “China’s 500 Most Valuable Brands” ( ) with an estimated brand value exceeding RMB2 billion, awarded by the World Brand Laboratory ( ) in August 2005; • “2006 China Sports Brand Top Ten Marketing Enterprise Award” ( ), awarded by the China Association for Development and Promotion of International Brand ( ) and the China Sports Brand Research Centre ( )in December 2006; • “Top 100 Business with Great Potential in China” ( ) for year 2005 and 2006, awarded by the Forbes China; • “Best Innovative Marketing of the Year” ( ) for year 2006 of “Impact on China” ( ), awarded by QQ.com ( ) in January 2007; and • “Innovation Champion of China Brand” ( ) in sports industry and “Asia 500 Most Valuable Brand Award” ( ), awarded by the Asia Brand Ceremony Organising Committee ( ) with a term of one year commencing from September 2008.

Our 361° Products We develop sportswear collections that focus on sports activities, combining functionality and innovation. We utilise advanced technologies in our 361° products to provide sports-minded consumers and the general public with a unique sporting experience.

We currently offer a wide range of sportswear products under the 361° brand, including footwear, apparel and accessories. Each of these product lines is managed by a separate team, with each team being responsible for its own product design and development.

Our collections include: • Footwear: badminton, table tennis, tennis, basketball, casual, general training, running, and general outdoor; • Apparel: badminton, tennis, basketball, casual, general training, running, general outdoor and women’s fitness; and • Accessories: bags, balls, caps, equipment, knit wear, protective gear and socks.

Some examples of our 361° products include:

Footwear:

Badminton footwear Table tennis footwear Tennis footwear Basketball footwear

Casual footwear General training footwear Running footwear General outdoor footwear

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Apparel:

Badminton apparel Basketball apparel

Casual apparel Running apparel

Tennis apparel General training apparel

General outdoor apparel Women’s fitness apparel

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Accessories:

Bags Basketball Knit Wear and Protective Gear

Football Caps Socks

Footwear Material Sales In addition to sales of our 361° products, approximately 0.5%, 1.3% and 0.7% of our revenues for the financial years ended 30 June 2006, 2007 and 2008, respectively, were contributed by sales of footwear material, consisting of TPR pellets and TPU pellets (which were raw materials for the production of soles and were not sold by us under any brands) that we manufactured for sale to various manufacturers of soles for footwear. We ceased producing and selling these pellets in July 2008 as this business did not achieve our targeted results.

Packaging Material Sales We used to provide certain packaging materials, such as shoe boxes and shopping bags embossed with our 361º logo, to our distributors or pre-2008 customers for use by the authorised retailers in connection with sales of our 361º products at our cost, and such cost had been recognised as our selling and distribution expenses. In order to encourage efficiency in resources management, starting from June 2008, we only provide our distributors with a certain amount of packaging materials as we think fit at our cost, and provide additional packaging materials to our distributors only at their requests and at a charge. Such charges are regarded as sales of packaging materials by us. Sales of packaging materials accounted for approximately 0.1% of our revenue for the nine months ended 31 March 2009.

MARKETING AND PROMOTION Our marketing and promotion strategies have been important components of our success. As our success ultimately depends on the acceptance of our brand by consumers, our marketing strategy has been focused on developing our 361° brand into a sportswear brand consumers can easily identify and associate with high performance, innovative and stylish sportswear products. This goal has been promoted through our advertising, including print, billboard, bus, Internet and television, retail sales and promotions, promotional events and activities, for our products.

Our marketing strategy integrates all aspects of our products and strives to communicate the spirit of our brand to consumers as well as showcase the functionality, technological innovation and design of our 361° products. Our marketing strategy has included theme-based marketing promotions, such as sponsorship of national sporting and entertainment events. We were appointed as a Guangzhou 2010 Asian Games Sportswear Prestige Partner ( ) in 2008. We are one of CCTV’s live game broadcasting partners for 2007 and 2008 ( ). We have also endeavoured to develop different images, preferences and styles of the 361° brand to appeal to a diverse group of

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BUSINESS consumers, through different marketing channels. We will continue to centre our marketing strategies around images, logos, advertising slogans and sporting activities that are attractive to our target consumer groups.

Sponsorships of Sports Events and Top Athletes as Spokespersons We have also developed creative integrated marketing campaigns through our multi-year sponsorship of high quality, brand-enhancing sporting events and selecting top athletes as our spokespersons. For each event, we create promotional campaigns to generate market awareness and build momentum for the event and for our 361° brand. We develop customised products that are cross-marketed during the event’s promotional campaigns, and also advertise our products in each event’s promotional materials at the 361° authorised retail outlets to maximise cross-selling opportunities.

We believe our sponsorship activities and product tie-ins better position us as a leading provider of products for these sporting events and, in turn, stimulate the in-store sales of our 361° products.

Our cross-marketing activities include the following: • We selected Olympic badminton gold medallists Ms. Zhang Ning ( ) and Mr. Lin Dan ( ), doubles silver medallists Mr. Cai Yun ( ) and Mr. Fu Haifeng ( ) as the spokespersons for our products for 2008. We have collaborated with them to create the “Dan” and “Ning” series badminton shoes and apparel; • We sponsored the Xiamen International Marathon ( ) from 2006 to 2008. For this event we have created a short advertisement film showcasing the marathon experience from different personal perspectives and how 361° represents the marathon spirit. In connection with our sponsorship of this event, we developed the Marathon I and Marathon II running shoes series; • We entered into an agreement with the Federation of University Sports of China ( ) to be the designated partner of the 361° China University Basketball Super League (361° ) from 2007 to 2010, and have designed basketball shoes in connection with this relationship. We will continue to collaborate with the League to develop customised sportswear products for its players during the period; • We entered into an agreement with the Olympic Council of Asia ( ) and the 16th Asian Games Organising Committee ( ) to be a Guangzhou 2010 Asian Games Sportswear Prestige Partner ( ); • We entered into an agreement with CCTV (Beijing) Sports Promotion Company ( ) to be the title sponsor of China Table Tennis Super League from 2009 to 2013; • We also entered into an agreement with CCTV (Beijing) Sports Promotion Company ( ), which requires all CCTV Channel 5 (sports channel)’s reporters and journalists to wear our sportswear products from 2009 to 2013 on certain programs and games broadcasted on CCTV Channel 5; • We entered into an agreement with Henan Century Central China Sports & Culture Co., Ltd. ( ) to be a global top cooperative partner ( ) and the sole designated sports footwear and apparel sponsor ( ) of the China Zhengkai Marathon ( ) from 2009 to 2013; and • We entered into an agreement with the Chinese Taipei Road Running Association ( ) and Xiamen Television Broadcast Development Limited ( )tobea global top cooperative partner ( ) and the sole designated sports footwear and apparel sponsor ( ) of the Jinmen Marathon ( ) from 2009 to 2013.

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Media Advertising Our media advertising activities include the following: • We sponsored CCTV’s Entertainment Basketball ( ), a national basketball talent show. This is a large reality TV competition show in the PRC, in which young athletes participate in qualifying competitions to showcase their talents in various basketball skills, such as slam dunking and three- point shooting; • We were appointed as CCTV’s live game broadcasting partner for 2007 and 2008 ( ); and • We cooperated with QQ.com ( ), a large instant messaging service network in Asia, Sohu.com ( ) and Xiaonei.com ( ) to promote Internet sports programmes.

In addition to the broad media coverage provided to us by our sponsorship activities, we also strategically select other forms of advertising for our brand that we believe match our brand’s image and market position. For example, we have signed agreements to buy advertising space from a leading PRC-based basketball magazine, “NBA Space” ( ), as well as from a leading sports newspaper in the PRC, Sports Weekly ( ).

Our distributors also contribute to the marketing and promotion of our brand by conducting local promotions within their geographic areas. We encourage all of our distributors to spend a portion of their sales on local advertising and sponsorship activities. To this end, our distributor in Guangzhou sponsored the 2008 Beijing Olympics Diving Qualification Contest ( ) which were held in Jinan and our distributor in Zhengzhou ran advertisements for our 361° products on buses with routes within Zhengzhou.

Our advertising and marketing expenses for the financial years ended 30 June 2006, 2007 and 2008 and the nine months ended 31 March 2009 were approximately RMB8.7 million, RMB34.2 million, RMB84.0 million and RMB225.7 million, respectively, which represented approximately 3.3%, 9.1%, 6.4% and 9.3% of our total revenue, respectively, for the corresponding periods.

SALES AND DISTRIBUTION Sales of Our 361° Products Prior to 2008, substantially all of our revenues were generated from sales of our 361° products to our customers who were primarily wholesalers and authorised retailers (including department stores) of sportswear products pursuant to purchase contracts which were entered into for each season’s order. These customers either resold our products to authorised retailers or sold our products at their self-operated authorised retail outlets. We shifted our business model in the beginning of 2008. Under the new distributorship business model, we sell our 361° products exclusively to our distributors at a uniform discount to the suggested retail price. Our distributors in turn sell these products to authorised retailers at a price which is a uniform discount to the suggested retail price which has been approved by us. Our authorised retailers then sell our 361° products to consumers in authorised retail outlets. We believe our new business model enables us to achieve growth by leveraging the resources of our distributors, as well as the expertise in retail distribution and retail management and local relationships of our distributors. Our current business model also enables us to better manage our rapidly growing business and cater to the increased market demand for sportswear products in the PRC by allowing us to focus on designing and developing new and innovative sportswear products, and to allocate our resources to developing our 361° brand and marketing our 361° products. We are able to leverage the financial and management resources of each of our 30 distributors for the management of the 361° retail network and for overseeing that the authorised retailers operate according to our guidelines. Our Directors believe that the exclusive distributorship arrangement has been instrumental in enabling our Group to increase our sales and profitability since 2008.

We introduce our new 361° products to our distributors and authorised retailers at our sales fairs, which are held three times a year, in February, May and August, approximately four to six months before the new products

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BUSINESS for the fall, winter/spring and spring/summer seasons, respectively, are introduced to consumers. We then use the orders placed at each sales fair to determine production schedules and quantities for the applicable season. We do not permit our distributors to cancel, reduce or increase their orders after they have been placed and confirmed with us. We manufacture a portion of our footwear products internally and outsource the production of the remainder of our footwear products, and all apparel and accessories products, to contract manufacturers. Finished products are periodically delivered to our distributors from our warehouse based on previously agreed delivery schedules, and our distributors in turn deliver these products to their respective authorised retailers for sale to retail consumers.

We recognise revenue from the sales of goods to our distributors when our 361° products leave our warehouse because at that time the distributors have accepted the related risks and rewards of ownership. During the Track Record Period, we did not receive any sales returns from our distributors.

We determine the pricing of our products based on various factors such as our internal and outsourcing production costs, our competitors’ pricing strategies, consumers’ purchasing power in the PRC and general economic conditions in the PRC. Our distributors are given exclusivity over their respective geographic territories and are not allowed to distribute or sell any products that compete with our products. We believe this policy promotes distributors’ loyalty to our 361° brand and provides incentives to our distributors to market and expand the market share of our 361° products. Each distributor is responsible for expanding the 361° retail network in its exclusive geographic territory and is required to establish a minimum number of new outlets during the term of the distributorship agreement. We also require our distributors to meet minimum purchase targets.

We experienced significant growth in our sales of 361° products during the Track Record Period which was due to the growth in the sales of our 361° products to end retail consumers in the PRC. This growth was not due to the accumulation of inventory at distributors and authorised retail outlet level for the following reasons: (i) We closely monitored the inventories and sales of distributors by requiring our distributors to provide monthly inventory reports since 2008 and reviewing the periodic local market condition reports provided by our regional sales managers throughout the Track Record Period. The monitoring through the regional sales managers helps us collect sales and inventory data to arrange our production schedules and maintain optimum inventory levels. We also carried out random on-site inspections on our distributors and authorised retail outlets to track their inventories; (ii) Prior to each sales fair, we would allow our distributors and pre-2008 customers to preview the coming season’s products, and our distributors and pre-2008 customers would provide feedback to enhance our product selection. During the sales fair, our sales and marketing department would work closely with our distributors and pre-2008 customers to set appropriate growth plans with a view to ensure that products purchased from us can be sold to end retail consumers for each season. Through this ordering process, we can gauge potential market demand of end retail consumers through feedback from distributors and pre-2008 customers; (iii) We encourage our distributors and pre-2008 customers to clear their past-season inventory levels. As described in the paragraph headed “Factory Outlets” in this section, an authorised retailer with excess inventory at the end of a season may attempt to sell such excess inventory through regular and special end-of-season sales. The authorised retailer may also sell such excess inventory to a factory outlet if a factory outlet is being operated in such authorised retailer’s province; (iv) As we did not stipulate any minimum purchase targets with our pre-2008 customers, our pre-2008 customers would only place their orders according to their needs. Since the change of our business model in 2008, our distributors are required to meet minimum purchase targets as stipulated in the distributorship agreements, which are set by us and our distributors based on historical sales trends, local market demand, and feedback from our distributors; and (v) The PRC’s sportswear market experienced significant growth in recent years. In light of such growth in the PRC’s sportswear market, our Directors consider that our successful marketing strategies as well as

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BUSINESS

the expansion and optimisation of authorised retail outlets have been a key to enabling us to take advantage of the growth in PRC’s sportswear market and translate the same into growth in our sales during the Track Record Period.

The following chart illustrates the sales and distribution model of our 361° products prior to 2008:

Our Group

Wholesalers

Authorised Retailers

Authorised Retail Outlets

Consumers

The following chart illustrates the sales and distribution model of our 361° products as of the Latest Practicable Date:

Our Group

30 Distributors

3,173 Authorised Retailers

5,925 361o Authorised Retail Outlets

Consumers

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The Distribution Network of our 361° Products The following table illustrates the distribution network of our 361° products in the PRC as of the Latest Practicable Date:

Heilongjiang 237 1

Jilin 216 1

Liaoning 375 2 Xinjiang Inner Mongolia Beijing 314 1 92 1 121 3 Tianjin Hebei 90 1 Shanxi Ningxia 240 1 166 1 Shandong Qinghai 13 1 358 2 19 1 Gansu 59 1 Shaanxi Henan Jiangsu 1 149 1 225 541 3 Tibet Anhui 5 1 Shanghai Chongqing Hubei 138 2 Sichuan 219 1 186 1 88 1 307 1 Zhejiang 294 1 Hunan Jiangxi Guizhou 190 1 100 1 Fujian 147 1 204 1 Yunnan 185 1 Guangxi Guangdong 196 1 390 1

Hainan More than 200 retail outlets 61 1 100 to 200 retail outlets Number of retail outlets 50 to 99 retail outlets (Note) Number of distributors Less than 50 retail outlets

Note: 18 distributors have been granted exclusivity over one province, autonomous region or municipality; 6 distributors have been granted exclusivity over one or more areas within a province; and the remaining 6 distributors have been granted exclusivity over more than one province, autonomous region or municipality due to their local resources and business network in those provinces or areas.

We distribute our products via a network of 30 distributors, all of whom are Independent Third Parties without engaging in any business other than being our distributors. Many of our distributors or their predecessors or affiliates have substantial experience in the PRC sportswear or retail industry and have a business relationship of more than four years with us. We have not terminated any of the distributorship agreements or replaced any of the distributors of our 361° products since we signed distributorship agreements with them in February and March 2008. Each distributor is given exclusivity over its appointed geographic territory. Distributors that sell outside their exclusive territories are subject to penalties, which may include surrendering of profits realised from such sales to us, the imposition of a monetary fine and the termination of their distributorship agreement.

As of the Latest Practicable Date, our distributors did not own any 361° authorised retail outlets while they oversaw 3,173 authorised retailers. These authorised retailers, all of whom were, to the best of our knowledge, Independent Third Parties, owned and managed a total of 5,925 361° authorised retail outlets. Collectively, the 361° retail network covers all 31 provinces and more than 450 district-level cities, as well as more than 1,200 county-level cities in the PRC. Our distributors have direct contractual relationships with authorised retailers, but we do not. However, through our distributors, we are able to indirectly place certain operating requirements on our authorised retailers regarding their 361° authorised retail outlets, including compliance with our standard operating procedures, uniform retail pricing policy, standard store display and layout, as well as customer service

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BUSINESS standards. In addition, we currently have 18 regional sales managers who are responsible for monitoring and assisting distributors and 361° authorised retail outlets in their respective geographic regions to ensure that our distributors and authorised retailers remain in compliance with these operating requirements.

The following table sets forth the additions, terminations and total number of 361° authorised retail outlets operated by our authorised retailers in the PRC under the 361° brand, by region as of 30 June 2006, 2007 and 2008 and 31 March 2009, respectively:

As of 30 June As of 31 March 2006 2007 2008 2009 Addition Termination Total Addition Termination Total Addition Termination Total Addition Termination Total East China(1) .... 280 22 347 648 33 962 502 36 1,428 258 18 1,668 South China(2) .... 277 60 291 440 29 702 402 32 1,072 139 9 1,202 Southwest China(3) .... 122 — 201 135 10 326 162 13 475 202 4 673 Northeast China(4) .... 153 — 229 236 3 462 234 1 695 99 2 792 North China(5) .... 164 2 256 247 9 494 232 10 716 185 6 895 Northwest China(6) .... 47 — 67 113 — 180 66 — 246 70 3 313 Total ...... 1,043 84 1,391 1,819 84 3,126 1,598 92 4,632 953 42 5,543

Notes: (1) East China includes Shanghai, Jiangsu, Zhejiang, Anhui, Shandong, Jiangxi and Fujian. (2) South China includes Hubei, Hunan, Henan, Guangxi, Guangdong and Hainan. (3) Southwest China includes Sichuan, Guizhou, Tibet, Yunnan and Chongqing. (4) Northeast China includes Heilongjiang, Liaoning and Jilin. (5) North China includes Tianjin, Hebei, Shanxi, Beijing and Inner Mongolia. (6) Northwest China includes Shaanxi, Ningxia, Gansu, Qinghai and Xinjiang.

We have been working with our distributors to expand the 361° retail network. The number of 361° authorised retail outlets operated by our authorised retailers has grown rapidly from 1,391 as of 30 June 2006 to 3,126 as of 30 June 2007, 4,632 as of 30 June 2008, 5,543 as of 31 March 2009 and to 5,925 as of the Latest Practicable Date. We will continue to expand and optimise the 361° retail network by working closely with our distributors and leveraging their local resources and business networks. During the financial years ended 30 June 2006, 2007 and 2008 and the nine months ended 31 March 2009, 84, 84, 92 and 42 authorised retail outlets, respectively, were closed, primarily due to (i) unsatisfactory sales performance of such 361° authorised retail outlets, (ii) expiration of leases of such 361° authorised retail outlets, or (iii) the relocation of such 361° authorised retail outlets as a result of government orders to reconstruct the buildings, streets or areas on which such 361° authorised retail outlets were located. We currently anticipate that the number of 361° authorised retail outlets will surpass 6,400 by the end of December 2009. Certain of the authorised retailers also operate flagship outlets and “Star” outlets. These outlets are usually located in major metropolitan retail districts and are generally larger in size than other standard outlets. These outlets are often used to conduct promotions of our newly launched 361° products and often cooperate in many of the cross-marketing sponsorships and campaigns.

We plan to improve our distributors’ management capabilities and, through distributors, increase the size and improve the locations of 361° authorised retail outlets to provide an improved purchasing experience to our consumers. In addition, through our investment in training programs, we intend to assist our distributors in improving operation management through offering trainings several times a year to 361° authorised retail outlet managers, outlet display managers and senior management through physical meetings and online resources. Further, we plan to maintain advanced technical development, high value-added and high quality standards in our 361° products, so our customers will continue to associate our brand with quality and performance. We will also continue to closely monitor our authorised retailers’ performance by requiring distributors to provide us with monthly inventory reports on their specified geographic areas and by reviewing local market condition reports

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BUSINESS provided by our regional sales managers from time to time. We intend to continue to work closely with our distributors in various regions to plan the expansion of the existing 361° retail network and to place specific requirements on the number and types of new 361° authorised retail outlets to be opened.

Criteria for Selection of Distributors Our relationships with our distributors have been stable, as many of these distributors or their predecessors or affiliates have had a business relationship of more than four years with us during the Track Record Period. In addition, as each of our distributors has been selected after an extensive screening process, we expect to maintain long-term relationships with each of them. We strategically select our distributors based on various criteria, including the following: • capital resources and financial stability; • experience in the sportswear industry and retail sales; • management capabilities; • sales channels, local recognition and business network; and • sales performance prior to the establishment of our exclusive distributorship system in the beginning of 2008.

Distributorship Agreements We have entered into an annual distributorship agreement with each of our distributors since February 2008, which generally includes the following principal terms: • Geographical exclusivity—Each distributor is exclusively authorised to sell our 361° products within a defined geographic area; • Product exclusivity—Our distributors are not permitted to sell outside of their exclusive territories and are prohibited from distributing or selling any products that compete with our products; • Undertakings—Our distributors are required to meet a minimum purchase target and to establish a minimum number of new outlets during the term of the distributorship agreement. Our distributors are also required to comply with our sales policies, adhere to our pricing policies, and enforce our standardised outlet design and layout upon 361° authorised retail outlets within their exclusive geographic area; • Payment and credit terms—We provide our distributors a credit limit, the amount of which is determined based on the demands by distributors in different seasons; • Pricing—We agree to sell our products to our distributors at a uniform price across all distributors; • Duration—The agreement has a term of one year; • Protection of our intellectual property rights—Our distributors are only allowed to use our intellectual property in connection with the sale of our products and we require our distributors not to participate or assist in any activities that may infringe upon our intellectual property rights; • Termination rights—We are entitled to terminate the agreement in certain circumstances (such as, for breach of the agreement by the distributors, sale by the distributors of pirated products, material damages to our brand image caused by the distributors and failure to meet 50% of the minimum purchase target within six months). Our distributors do not have termination rights under the agreements; • Renewal—Negotiations for renewal of the distributorship agreements will usually takes place 60 days prior to their expiry date; and • Transportation insurance—Our distributors are responsible for making their own delivery arrangements with the risk of loss of or damage to products during transport being borne by the distributors.

As of the Latest Practicable Date, we were not aware of any of our distributors committing any material breach of their distributorship agreements with us. We have renewed annual distributorship agreements with all of our distributors for the year 2009.

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Pursuant to the distributorship agreements, our distributors are entitled to authorise a person to become an authorised retailer and sell our 361° products and to use the 361° logo in a 361° authorised retail outlet. Distributors then enter into separate agreements with our authorised retailers for the sale and purchase of our 361° products and other aspects of their commercial relationship. While we do not deal with the authorised retailers directly, the distributorship agreements entered into between us and our distributors require that distributors receive our consent prior to approving any person as an authorised retailer. Our distributors are responsible for ensuring that authorised retailers do not sell our 361° products outside of their respective territories. Authorised retailers breaching any of the terms stipulated in their separate agreements with our distributors will be subject to penalties, such as monetary fines and the termination of their authorisation to sell our 361° products.

Seasonal Sales Fairs and Ordering Process We generally hold previews for our new products with our distributors approximately one month in advance of the sales fairs, at which distributors can preview and evaluate our new products. During this time, we also exchange ideas with our distributors about current and future trends in the sportswear industry and how these trends will affect the products intended to be introduced in the upcoming season. During the month following the internal preview, distributors will work with their respective authorised retailers to estimate the approximate volume of products they intend to purchase. We formally introduce new products to our distributors and authorised retailers at our sales fairs, which are held three times a year, in February, May and August, approximately four to six months before the new products for the fall, winter/spring and spring/summer seasons, respectively, are introduced to consumers. We believe that by holding three sales fairs each year, we can respond to the ever-changing trends and demands of the sportswear industry. Prior to 2008, all sales fairs were held in Jinjiang City, Fujian Province, the PRC, but the three sales fairs for 2008 were held in Xiamen, Shenyang and Wuhan, respectively. We determine the locations of the seasonal sales fairs based on our marketing strategies, taking into account such factors as ease of access (availability of convenient transportation) and the performance of distributors and authorised retailers in the proposed region. One of the goals of the sales fair is to promote the 361° brand and products, thus a region with successful distributors and authorised retailers is preferable because such distributors and authorised retailers can serve as motivating role models for others that attend the sales fair. We encourage our distributors and authorised retailers not to over order, and we provide extensive training and guidance to them on how to make ordering decisions at the sales fairs. After collecting indicative orders from their respective authorised retailers, our distributors submit to us their intended purchase volume for our 361° products. We use this information to determine production schedules and quantities of products for the applicable season. We review and cancel the sale of certain products if the aggregate volume of purchases for such products fails to reach a minimum threshold to justify production. Formal orders from our distributors are generally required to be confirmed within one week following a sales fair. We do not permit our distributors to cancel, reduce or increase their orders after they have been placed and confirmed with us.

Management of Sales Network We believe that effective management of our sales network is an integral element to our success. Our retail channel management department, marketing department and brand management department, which consist of 28, 19 and 33 staff as of the Latest Practicable Date, respectively, are responsible for the overall management of our sales network. Their key responsibilities are discussed in more detail below.

Our distributors are required to ensure that their authorised retailers follow our pricing policies and adopt our standard operating procedures, both set by our retail channel management department. We believe this requirement strengthens the recognition of our 361° brand and helps to build a consistent brand image and management system at the retail level. Currently, we have 18 regional sales managers under our marketing department who are responsible for covering all of our 30 distributors and periodically conduct on-site inspections of randomly-selected 361° authorised retail outlets in their respective geographic regions to ensure that our distributors comply with the terms set out in the distributorship agreements and that the authorised retailers adhere to our standardised design and layout guidelines set by our retail channel management department. All distributors must obtain the approval from our retail channel management department prior to authorising the opening of new outlets by the authorised retailers, and our retail channel management department

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BUSINESS works closely with our distributors to choose locations that have high retail traffic flow and exposure to the public in order to enhance recognition of our 361° brand and sales of our 361° products. We organise training programmes several times a year for our distributors, authorised retailers and 361° authorised retail outlets. In addition, our brand management department coordinates with our distributors on various marketing, promotional and advertising campaigns and programmes for our sportswear products to enhance our 361° brand. We believe that working closely with our distributors and authorised retailers will allow us to gauge market trends and to control our production and inventory management systems more efficiently.

While we do not have direct contractual relationships with authorised retailers, our distributors enter into separate agreements with authorised retailers and require them to comply with our standard operating procedures, some of which include guidelines on the design and layout of 361° authorised retail outlets, product pricing and customer service. Authorised retailers breaching any of the terms stipulated in their agreements with our distributors will be subject to penalties, such as monetary fines and the termination of their authorisation to sell our 361° products. In addition, in order to closely monitor the authorised retailers’ performance, our distributors are required to provide us with monthly inventory reports on their specified geographic areas. Our distributors also periodically conduct on-site inspections of randomly-selected 361° authorised retail outlets.

Pricing Policies In determining our pricing policies both currently and during the Track Record Period, we take into account various factors such as internal and outsourcing production costs, our competitors’ pricing strategies, purchasing power of consumers in the PRC and general economic conditions in the PRC. We have adopted a suggested retail pricing system that is applied nationwide to all of our authorised retailers, to maintain our brand image and avoid price competition amongst our authorised retailers. Under the new distributorship business model, we sell our 361° products to all of our distributors at a uniform discount to the suggested retail price of the products. Our distributors then sell our 361° products to their respective authorised retailers at a uniform discount to the suggested retail price which has been approved by us. Authorised retailers may, after taking into account local market conditions and consumer preferences, sell a product at a discount to the suggested retail price, but pricing policies are subject to our prior approval. Authorised retailers are generally not allowed to offer discounts of greater than 50% of the suggested retail price. Our Directors, our Group and their associates did not fund the operations of our distributors or customers during the Track Record Period.

Factory Outlets An authorised retailer with excess inventory at the end of a season may attempt to sell such excess inventory through regular and special end-of-season sales. The authorised retailer may also sell such excess inventory to a factory outlet if a factory outlet is being operated in such authorised retailer’s province. All outlets labelled as factory outlets under the 361° brand name are operated by authorised retailers, and generally sell our 361° products from previous seasons at discounts greater than those offered by our 361° authorised retail outlets but in any event not greater than 50% of the suggested retail price. There were, as of the Latest Practicable Date, six factory outlets out of the 5,925 361° authorised retail outlets, located in four different provinces in the PRC.

Payment Terms and Credit Control Our distributors are invoiced upon delivery of our 361° products and we recognise revenue from the sales of goods to them when our 361° products leave our warehouse because at that time such distributor has accepted the related risks and rewards of ownership. Such revenue recognition policy also applied to pre-2008 customers during Track Record Period. We generally provide our distributors a credit period between 30 and 180 days, the exact term of which is determined based on such factors as past sales performance, credit history and their expansion plans. As a matter of policy, we do not grant credit periods of over 180 days to any of our distributors or customers. However, there may be instances when we grant payment extensions to certain of our distributors or customers, which will result in payments being made to us more than 180 days after the date of delivery of our 361° products. We grant these extensions on an ad hoc basis, usually in instances when we believe that the

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BUSINESS greater liquidity afforded to the distributor or customer by the credit extension would assist the distributor or customer in opening new 361° authorised retail outlets and expanding the 361° retail network. For the financial years ended 30 June 2006, 2007 and 2008 and the nine months ended 31 March 2009, out of a total of 494, 614 and 595 distributors and pre-2008 customers, and 30 distributors(1), respectively, we granted such payment extension to 82, 69 and 22 distributors and pre-2008 customers, and 8 distributors, respectively. We also maintain an overall credit limit with respect to each of our distributors, the amount of which varies depending on the particular distributor. Furthermore, we require distributors with balances that are older than one year from the date of billing to settle all outstanding balances before we grant them any further credit. Specific credit terms and repayment schedules are determined on a case by case basis with each distributor and with respect to each order of our 361° products. However, we work closely with our distributors and generally require payments from them on a weekly basis to reduce their accounts payable to us. Our credit policy prior to the adoption of our new business model in 2008 is not different from our current credit policy as stated above, except that we generally extended credit to customers for a period of 30 to 90 days. We perform ongoing credit evaluations of our distributors’ financial condition and generally require no collateral from them to secure their payment obligations. We monitor our receivable balances from each distributor on a weekly basis and will make appropriate assessments in a timely manner as to whether or not an allowance for doubtful debts will need to be made. We had an allowance for doubtful debts of RMB4.0 million, RMB5.4 million, RMB14.3 million and RMB39.5 million as of 30 June 2006, 2007 and 2008 and 31 March 2009, respectively. Our allowance for doubtful debts increased by 165.5% from RMB5.4 million as of 30 June 2007 to RMB14.3 million as of 30 June 2008, and further increased by 176.2% to RMB39.5 million as of 31 March 2009. Such increases were in line with the increases of 252.8% and 183.9% in our revenues during the corresponding periods as well as the granting of longer credit terms to all of our distributors and the granting of payment extensions to some of our distributors upon the conversion to our exclusive distributorship business model to afford them with greater liquidity and to encourage distributors to expand the 361° retail network.

See the section headed “Financial Information—Trade and Other Receivables Analysis” in this document for more information on our credit policy.

Sales Return Policies Our sales return policies only permit our distributors to return products to us due to material quality defects. Distributors should inspect the products and, where defective products are found, may report the alleged defect to us. Such reports must be made within three days of delivery and we inspect all returned products. We are not responsible for defects caused by improper storage by the distributors or improper use by consumers. Furthermore, the standard operating procedures that we impose on our distributors, which they in turn impose on authorised retailers, state that claims for defective products from consumers should be handled in accordance with applicable consumer protection laws in the PRC, which generally require defective products to be accepted for return or exchange if claimed within a certain prescribed time period. During the Track Record Period, we did not receive any notifications with respect to quality defects or any sales returns from our customers.

Our Customers We sell all of our 361° products on a wholesale basis to our 30 distributors, who are exclusive distributors of our 361° products. Our five largest distributors accounted for approximately 35.1% and 47.5% of our total revenues, and our largest distributor accounted for approximately 11.9% and 17.0% of our total revenues, in each case, for the financial year ended 30 June 2008 and the nine months ended 31 March 2009. We believe our relationships with our distributors have been stable, as many of these distributors or their predecessors or affiliates have established a business relationship of more than four years with us during the Track Record Period. For the financial years ended 30 June 2006 and 2007, prior to our shift to the distributorship model, our top five customers accounted for approximately 32.9% and 33.4% of our total revenues and our largest customer

Note: (1) No sales have been made to pre-2008 customers who are not our distributors since January 2009.

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BUSINESS accounted for approximately 14.0% and 14.0% of our total revenues, respectively. All of our distributors and authorised retailers were Independent Third Parties during the Track Record Period.

None of our Directors, our chief executive, or any person who (to the knowledge of our Directors) owns more than 5% of our issued share capital or any of our subsidiaries, or any of their respective associates, had any interest in any of our distributors or authorised retailers during the Track Record Period.

Pre-2008 Sales and Distribution Network Prior to 2008, substantially all of our revenues were generated from sales of our 361° products to our customers who were primarily wholesalers and authorised retailers (including department stores) of sportswear products, pursuant to purchase contracts which were entered into for each season’s order. These wholesalers and authorised retailers then either resold our 361° products to authorised retailers or sold our 361° products at their self-operated authorised retail outlets. The purchase contracts set out the terms regarding the price, purchase quantity, delivery terms and settlement terms, amongst others. As we did not adopt a wholesale distribution business model before 2008, we did not enter into any long-term agreements which governed our relationship with our pre-2008 customers. For the financial years ended 30 June 2006, 2007, 2008 and the nine months ended 31 March 2009 we also sold approximately 0.25%, 0.24%, 0.05% and nil, respectively, of our products via group purchases to institutions and government agencies.

All of our pre-2008 customers were Independent Third Parties, many of which engaged in the sales of sportswear products, including our 361° products, and have a business relationship of more than three years with us. Some of our pre-2008 customers were also engaged in non-sportswear business. The following table sets forth the additions, terminations and total number of our pre-2008 customers for the financial years ended 30 June 2006 and 2007, and for the six months ended 31 December 2007, respectively:

Pre-2008 Customers Addition Termination Total For the financial year ended 30 June 2006 ...... 248 84 494 For the financial year ended 30 June 2007 ...... 291 171 614 For the six months ended 31 December 2007 ...... 171 253 532

The number of terminations of our pre-2008 customers increased significantly from 84 for the financial year ended 30 June 2006 to 171 for the financial year ended 30 June 2007 primarily because some of our pre-2008 customers, who previously purchased through a number of entities, consolidated their purchase orders and purchased through a reduced number of entities since the financial year ended 30 June 2007. In addition, we did not enter into any long-term agreements with our pre-2008 customers and some of our pre-2008 customers discontinued to purchase our products due to the commercial decisions made by each such pre-2008 customers individually. To the best of the knowledge of our Directors, the decisions of such pre-2008 customers not to continue to purchase our products did not involve or relate to any dispute, the quality of our products or other claims. At the same time, the number of additions of our pre-2008 customers increased from 248 for the financial year ended 30 June 2006 to 291 for the financial year ended 30 June 2007, with the total number of our pre-2008 customers increasing by 120 from 494 to 614 for the financial year ended 30 June 2007. The number of terminations of our pre-2008 customers then increased to 253 for the six months ended 31 December 2007 in preparation for the adoption of our new exclusive distributorship business model under which we only sell our products through a limited number of distributors instead of a large number of customers who could be wholesalers and authorised retailers.

Of the 2,390 361° authorised retailers as of 30 June 2008, 11 authorised retailers were our pre-2008 customers. Of our current distributors, 19 were our customers prior to 2008. These 19 customers chose to continue to work with us after the implementation of our new wholesale distribution business model. Since the adoption of our new business model, we ceased entering into new purchase contracts with customers who are not our distributors. However, since we continued to honour our obligations under the purchase contracts entered into prior to 2008 up to December 2008, approximately 4.6% and 0.4% of our 361° product sales during the six months ended 30 June 2008 and the nine months ended 31 March 2009, respectively, were made to these

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BUSINESS customers pursuant to such purchase contracts. No sales have been made to such customers who are not our distributors since January 2009.

We closely monitored the operation of our pre-2008 customers, including, among other things, their sales, inventory, store location, display and layout, and advertising activities. We provided guidance to our customers as to suggested purchase amount. Our products were sold to customers at a discount to the suggested retail price, but the discounts varied on a case-by-case basis depending on our relationship with the customer and the quantity of purchase. No minimum purchase targets were stipulated or required of our customers. Our credit policy prior to the adoption of our new business model in 2008 is not different from our current credit policy as stated above except that we generally extended credit to customers for a period of 30 to 90 days. Our sales return policies in this period permitted customers to return materially defective products to us according to the requirements stipulated in the applicable consumer protection laws, subject to review by our quality control department. Our sales return policy has not changed significantly since we shifted our business model in the beginning of 2008. During the Track Record Period, we did not request our pre-2008 customers to provide us with detailed written sales or inventory reports, but our regional sales managers would visit our pre-2008 customers to monitor their inventory situation and reported back to us, and we then used this information to plan our sales and discount strategies. Our regional sales managers also periodically conducted on-site inspections of randomly-selected 361° authorised retail outlets in their respective geographic regions to ensure that our customers/authorised retail outlets complied with our guidelines and policies. Our inventory policy has not changed significantly since we shifted our business model during the beginning of 2008.

RESEARCH AND DEVELOPMENT AND DESIGN Research and Development As a sportswear enterprise, we work to develop high performance products that will meet the functional needs of our target consumers, which we believe can be achieved through technological innovation. One of our core competitive strengths is our ability to create innovative technologies we use in our sportswear products. We currently operate one laboratory for footwear, which was established in 2004, and one laboratory for apparel, which was established in 2007, the primary role of which is quality control testing, though they also provide data to our research and development department to assist them in developing new technologies and applications. Each laboratory is equipped with advanced equipment and stringent testing standards for footwear and apparel product testing. As of the Latest Practicable Date, we employed a total of 57 full-time employees for research and development. Our total expenditures for research and development amounted to approximately RMB167,000, RMB222,000, RMB3.6 million and RMB10.8 million, for the financial years ended 30 June 2006, 2007 and 2008 and the nine months ended 31 March 2009, respectively. We conduct research and development to ensure that our 361° products have the desired function and application, utilise advanced technology and raw materials, and are responsive to market developments. Our research and development teams have also focused on improving the manufacturing process to increase our production efficiency.

We believe our future success depends on our ability to deliver new technologies, as well as applying existing technologies in our 361° products, and we will continue to conduct research and development on technologies and raw materials to enable our 361° products to meet and exceed the expectations of our target consumers. Our research and development teams have developed the following six patented technologies which are already in use in our 361° products: • NFO Tech—We use a newly developed sole structure with enhanced shock absorption characteristics capable of better absorbing the shock created from motion; • Hold Ground Tech—We place one or more indents shaped like flower petals on the bottom of the sole which provide suction, allowing the sole to have enhanced grip; • 3D Cushion Tech—We use a new type of solid shock-absorbing sole to improve existing shock absorption structure of athletic footwear soles; • Long-distance Running Sole—We insert an elasticity system into the heel of the footwear to absorb shock and to protect the feet and legs during long-distance running;

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• Foot Massaging System—We embed massage tablets into the sole of the footwear at the ball of the foot and the heel, distributed to massage the two parts of the foot that hold the most weight; and • After Pushing System—We insert a function block that is enabled with an after pushing system in the heel of the footwear to make it more comfortable to wear and to allow faster response to body movement.

In addition, we are currently in the process of applying for registration of the following patents in the PRC: • Magnetic Therapy Sole—We insert an elasticity system and a magnetic therapy device into the heel of the footwear to absorb shock and to provide magnetotherapy effect on the foot; and • Spring & Cushion System—We insert a spring and cushion system into the sole to provide more elasticity and shock absorption.

Product Design We believe that product design has been one of the keys to our sustained success and will continue to play an important factor in our continued success and growth. The design process for our 361° products requires careful consideration of not only specific products, but of how they will embody and enhance the image of the 361° brand.

Consistency of Brand Image In keeping with our belief that the maintenance of our brand image and the public’s perception of our brand are critical to our success, we pay great attention to brand image in the process of designing our products. In order to promote increased brand recognition, we implement an integrated marketing strategy centred around the development of themes that recur in all aspects of our operation, including product design, advertising and retail promotion. We encourage our designers to stay true to such themes in their product design. We have also worked with a professional colour theme adviser, Dystar Textile Services (Shanghai) Ltd. ( ), since April 2008 in developing colour themes that match our brand image.

Product Concept Our 361° product design teams, assisted by external design agencies since April 2008, such as Daniel Richard Design, LLC (since October 2008), which provide us with current global fashion information and ideas, analyse the latest global sportswear trends based on data gathered through market research, product exhibitions and sales fairs. This analysis provides our design teams with a deep understanding of current trends in the sportswear industry, and they strive to cater to the varying tastes and preferences of consumers in different regions within the PRC, all the while keeping the theme developed by our marketing strategists in mind. Thus, we are able to deliver multi-line and multi-theme products reflecting a unified message.

As of the Latest Practicable Date, we employed 49 full-time designers. Each product line, footwear, apparel and accessories, has its own in-house design team. To add an international perspective to our designs, each product design team, as well as members of our sales and marketing team, visit fashion stores and shopping centres in South Korea and Japan, where sportswear trends we believe have been, and will continue to be, influential in determining the sportswear trends in the PRC. We believe that our three product design teams have a proven track record in identifying and responding to sportswear market trends in the PRC. They collaborate with our professional colour theme adviser and external sportswear design agencies, who lend their expertise in creating product designs reflecting the message of the brand.

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Product Testing and Improvement Once a design concept is solidified, our 361° product design teams refine their design ideas by considering the functionality and features of the products, as well as the materials used in production. We also collect information and feedback from all regional markets to assist the design teams in creating and improving their designs. Our prototype products reflecting initial designs undergo our internal and final product assessments, which include input from distributors, internal laboratory testing personnel and other professional advisers, such as Shanghai Ogilvy & Mather Advertising Co., Ltd. ( ), which provide comments towards design improvements.

Integrated Marketing Once a product has received final approval, we turn to our integrated marketing strategy to promote the product. The product can be tied into the theme around which it was designed and incorporated into an advertising campaign (print, billboard, bus, Internet and television), retail sales and promotions, and promotional events and activities.

We have invested and will continue to invest considerable resources in product design, both by maintaining our dedication to theme-based design to strengthen the brand image and by effectively implementing our integrated marketing and design strategy. We will also strive to retain our current employees and to recruit designers and production specialists globally, by offering attractive compensation packages and a work environment that is conducive to the innovation and design of new sportswear products, in order to maintain our position in designing functional and innovative sportswear products.

The different stages of our design process are summarised by the diagram below:

Brand Strategy

Third-Party Fashion Trend Product Concept Designers Analysis

Advertising Agency Product Testing and Market Feedback from Feedback Improvement Different Regions

Product Final Approval

Integrated Marketing

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MANUFACTURING Our Production Facilities We have our own production facilities for footwear. We produced approximately 100%, 98.5%, 90.4% and 60.7% of our footwear products in terms of production volume at our own production facilities located in Jinjiang City, Fujian Province, the PRC, for the financial years ended 30 June 2006, 2007 and 2008 and the nine months ended 31 March 2009, respectively. The percentage of our footwear products produced at our own production facilities decreased significantly to approximately 60.7% for the nine months ended 31 March 2009 primarily due to the increasing demand of our footwear with approximately 14.3 million of pairs of our 361° footwear sold for the nine months ended 31 March 2009 while our production capacity for the same period was approximately 10.2 million pairs of footwear. As of the Latest Practicable Date, we operated 16 footwear production lines, with an aggregate production capacity of approximately 13.6 million pairs of footwear products per annum(1). As of 30 June 2006, 2007 and 2008 and 31 March 2009, we operated six, six, 16 and 16 footwear production lines, respectively, with aggregate production capacity of approximately 5.1 million, 5.1 million, 13.6 million and 13.6 million pairs of footwear per annum, respectively. Some of the equipment we use in manufacturing our 361° products was imported from foreign countries, such as Japan and Italy. As of the Latest Practicable Date, our production staff consisted of approximately 4,180 workers. As of 30 June 2006, 2007 and 2008 and 31 March 2009, our production staff consisted of approximately 2,726, 2,350, 3,952 and 4,322 workers, respectively. For the financial years ended 30 June 2006, 2007 and 2008 and the nine months ended 31 March 2009, the utilisation rates of our production facilities, calculated by dividing the actual production output for the relevant period by the production capacity for such period, were approximately 111.0%(2), 122.5%(2), 103.1%(2) and 86.5%, respectively. The upward utilisation rate from the financial year ended 30 June 2006 to the financial year ended 30 June 2007 was primarily due to the growing demand of our 361° products. For the financial year ended 30 June 2008, the addition of production facilities, which increased our production capacity to approximately 13.6 million pairs of footwear per year, contributed to the declining utilisation rate during the same period.

Given that the utilisation rate of our footwear production facilities for the financial years ended 30 June 2006, 2007 and 2008 exceeded 100% and in order to ease the tension of the continuously high utilisation rates and to equip our Group with spare production capacity to meet the production capacity requirements of a rapidly growing business and adapt quickly to changing consumer needs and market trends, as well as to further enhance the quality of our 361° products by meeting strict quality requirements while controlling production costs, we plan to apply a portion of the proceeds from the [Š] to increase our production capacity.

In August 2007, we began construction of our new production facilities located in Wuli Industrial Park Phase One to increase our footwear production capacity. We expect to further incur approximately RMB102.1 million on these new footwear production facilities, which will commence operations with 2 footwear production lines with a production capacity of approximately 1.7 million pairs per annum upon completion of construction of the facilities by December 2009.

We also plan to construct new production facilities at the Wuli Industrial Park Phase Two to expand our production capabilities to include apparel, which will allow us to have access to both internal and outsourced manufacturing capabilities similar to our footwear manufacturing strategy. We expect to further incur approximately RMB182.2 million on these new apparel production facilities, which will commence operations with 2 apparel production lines and a production capacity of approximately 1.8 million pieces per annum upon completion of construction of the facilities by June 2010.

In addition, we plan to construct new footwear production facilities at the Jiangtou Industrial Park. We expect to further incur approximately RMB36.7 million on these new footwear production facilities, which will commence operations with 3 footwear production lines and a production capacity of approximately 2.6 million pairs per annum upon completion of construction of the facilities after June 2010.

Notes: (1) Calculated on the basis that our production facilities are operating at eight hours per day and 26 days per month. (2) The utilisation rate of our production facilities for the financial years ended 30 June 2006, 2007 and 2008 were over 100% because we utilised our production facilities more than the above thresholds.

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BUSINESS

As a contingency plan to deal with electricity shortages and suspensions, we have installed five electricity generators which we believe are capable of generating sufficient electricity for our production and administrative operations. We did not experience any material interruption of our production operations resulting from electricity shortages or suspensions during the Track Record Period.

Footwear Manufacturing Our footwear manufacturing process is divided into six main stages: (1) raw materials inspection and testing; (2) materials preparation and processing; (3) sewing and stitching; (4) assembly; (5) finished product inspection and testing; and (6) packaging. The following diagram outlines our manufacturing process for our footwear products:

The main raw materials used in our footwear production are leather, synthetic leather, fabrics, rubber, soles and plastics. Raw materials are generally inspected and tested before being used in production.

Raw materials are cut and trimmed to the desired shape and size by various cutting machines, moulding machines and trimming machines.

Logos and embroidery are affixed to the components.

The various components are then sewn and stitched together.

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The top and sole of the footwear are formed together.

Sample products undergo our rigorous quality control inspection process to ensure that all of our 361° products meet our stringent quality standards.

Our 361° products are then packaged for delivery to our distributors.

Production Outsourcing Production outsourcing includes the contract manufacturing of certain footwear components as well as of finished products. We began outsourcing a portion of our footwear in February 2007. For the financial years ended 30 June 2006, 2007 and 2008 and the nine months ended 31 March 2009, we outsourced the production of approximately nil, 1.5%, 9.6% and 39.3% of our footwear, respectively, in terms of production volume. Ever since we began selling apparel and accessories in February 2005 and September 2007, respectively, we have outsourced the entire production of our apparel and accessories. We may, but are not always required to, supply our contract manufacturers with the raw materials required to produce certain footwear components or, as applicable, finished products ordered by us. We often recommend or require that our contract manufacturers procure raw materials from a group of designated raw material suppliers. We believe that our use of both internal and external production capacity has enabled us to supply our customers with our products on a consistent basis during the Track Record Period. We expect to continue to outsource the production of all apparel and accessory products after [Š] until our new apparel production facility commences production.

During the financial year ended 30 June 2008 and the nine months ended 31 March 2009, we engaged approximately 79 and 57 contract manufacturers, respectively, all of whom were Independent Third Parties. Most of these contract manufacturers are located in Fujian Province, the PRC. We engage their services on a contractual basis after obtaining purchase orders during our sales fairs. For each order, we enter into separate purchase contracts, which set out the terms regarding the price, purchase quantity, delivery terms and settlement terms, amongst others. We do not prohibit our contract manufacturers from manufacturing products for other brands.

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We provide the designs and specifications of our products to contract manufacturers. To prevent any leakage of such information by the contract manufacturers, which is considered proprietary, contract manufacturers are generally obliged under the purchase contracts not to disclose such information to third parties or use the same for their own products or any other purposes. In addition, we require the contract manufacturers to return any documents and information incidental to the designs and specifications of our products when the purchase contracts expire.

Our agreements with our contract manufacturers generally include the following terms and conditions: • Quality—Contract manufacturers are required to produce products which conform to the specifications required by us; and • Delivery—Contract manufacturers are required to deliver products within a certain period of time after we give them notice, failing which they are typically required to pay certain damages and penalties.

Our contract manufacturers are carefully selected by us, and we require each of them to satisfy certain criteria. We evaluate the contract manufacturers’ performance, financial strength, experience, reputation, ability to produce high-quality products and quality control effectiveness in determining whether to continue using their services. In addition, our contract manufacturers are required to undergo quality tests by an independent quality testing institute.

INFORMATION SYSTEMS We believe that computerised systems are critical to improving our efficiency in supply chain management, quality and inventory control, logistics and sales. We currently use a computerised sales system and an inventory management system, which is also a category of ERP system, developed by Shanghai Baison Software Co., Ltd. ( ), which allows us to monitor our sales volume and track the movement of our 361° products at our warehouses. We also utilise a computerised ordering system at our sales fairs, which allows us to efficiently manage the ordering process. The data made available to us from these systems is shared with our production, inventory, procurement and finance departments.

We currently plan to apply a portion of the proceeds from the [Š] to upgrade our information system to establish an ERP system that allows for the integration of operating information between our Group, our distributors and the retail locations. The system would allow real-time data flow through the supply chain to decrease production lead time, reduce logistics bottlenecks and improve the overall efficiency of our enterprise. We also plan to further invest in our ERP system to enable direct linkage of our system with the point-of-sales system of our distributors and authorised retailers and authorised retail outlets. The ERP system integration is intended to help us to more efficiently gather financial and operational information from our distributors and retail channels, and further improve our merchandising and product ordering processes.

INVENTORY CONTROL AND LOGISTICS We strive to reduce excess levels of raw materials and finished goods in our inventory while still being able to meet the supply demands of our distributors and authorised retailers. We are able to manage our inventory levels by procuring the majority of raw materials and commencing production upon confirmation of purchase orders with our distributors. Beginning in 2008, we commenced production of a portion of the indicated purchase volume of certain products for which we received high purchase volume indications from our distributors during their preview of the prototype products, which takes place approximately one month prior to the sales fairs that follow. Prior to 2008, we only commenced mass production upon confirmation of purchase orders with our customers. We believe that the new production schedule allows us to better control production costs and manage delivery schedules. To further minimise the risk of accumulating excess inventory, we regularly review our level of inventory. During the Track Record Period, we were not required to and did not make any inventory provision.

Our distributorship agreements require our distributors to provide us with an inventory report every month. Our 18 regional sales managers currently provide us with local market condition reports from time to time and

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BUSINESS conduct periodic on-site inspections of our distributors and 361° authorised retail outlets to track their inventory levels. We encourage our distributors to clear their past-season inventory, as we believe that accumulation of inventory by distributors will adversely affect the volume of orders that they will order from us in the future. By tracking the inventory levels of our distributors, we are also able to gather information and data regarding the market acceptance of our 361° products, both in the PRC generally as well as in particular regions, so that we can reflect consumer preferences in the design and development of our 361° products for future seasons. However, our ability to accurately track the sales and inventory levels at our distributors and 361° authorised retail outlets may be limited. See “Risk Factors—Risks Relating to Our Business” in this document.

Our inventory balances as of 30 June 2006, 2007 and 2008 and 31 March 2009 were approximately RMB35.2 million, RMB68.9 million, RMB181.1 million and RMB131.7 million, respectively, while our average inventory turnover days were 39, 64, 47 and 26 for each of the financial years ended 30 June 2006, 2007 and 2008 and the nine months ended 31 March 2009, respectively. As of 30 April 2009, all of the finished goods in stock as of 30 June 2006, 2007 and 2008 and RMB76.4 million, or 90.7%, of finished goods in stock as of 31 March 2009 were subsequently consumed or sold above cost.

The size of our leased warehouses increased to approximately 10,691.5 square metres as of 31 March 2009, from approximately 5,500 square metres as of 30 June 2006. As of the Latest Practicable Date, our logistics team was comprised of 38 full-time employees. We deliver our 361° products to our distributors through professional logistics companies who are engaged and paid by our distributors and are responsible for any losses associated with the delivery of our 361° products. We did not experience any material loss in the delivery of our 361° products during the Track Record Period. Raw materials supplied by our suppliers are delivered to us at their own cost and their own risk. As of the Latest Practicable Date, we utilised one logistics company, who is an Independent Third Party, to deliver our products from the production facilities to our warehouses.

QUALITY MANAGEMENT SYSTEM

We have developed a comprehensive and effective quality management system, which is evidenced by our obtaining the ISO 9001:2000 quality management system certificate from the China Quality Mark Certification Group ( ) since October 2005. We have been granted the “Certificate of Exemption from Product Quality Surveillance Inspection” ( ) by the State General Administration of Quality Supervision, Inspection and Quarantine of the PRC ( ) with a term of three years commencing from December 2006.

We established a quality control department in 2004, which is equipped with two product testing laboratories with advanced equipment and stringent testing standards for footwear and apparel product testing. To enhance our quality management system, we plan to apply a portion of the proceeds from the [Š] to upgrade our laboratory facilities to enhance our quality control standards. As of the Latest Practicable Date, we had approximately 110 employees performing quality control functions.

Our quality control process starts early at the design and development stage, where we consider the functionality and qualities of the raw materials and other manufacturing components to be used for manufacturing. We conduct tests on raw materials and other manufacturing components based on inspections of appearance, as well as with testing equipment, to ensure that the raw materials and manufacturing components meet our quality standards. In respect of products manufactured at our manufacturing facilities, the staff from our quality control department are responsible for monitoring the quality of these manufactured products. In addition, several sales staff members monitor the quality of these products from the perspective of our customers and provide valuable input to our quality control process as if we were receiving such input directly from our customers. We also dispatch quality controllers to all of our contract manufacturers, who are stationed at the production facilities of our contract manufacturers to monitor the quality of our products and production procedures. Our quality control staff members conduct on-site inspections of all semi-finished products, both at our own facility and at the facilities of our contract manufacturers. After the assembly stage, our quality control

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BUSINESS staff members conduct sample tests on the finished products, to assess their functionality and quality before they are delivered to our customers.

RAW MATERIALS AND SUPPLIERS The principal raw materials used in the production of our footwear products are leather, synthetic leather, fabrics, rubber, soles and plastic. We obtain all of these materials from domestic suppliers in the PRC.

Many of our raw material suppliers are located in Jinjiang City, Fujian Province, the PRC, where our manufacturing facilities are also located. We believe such proximity of these suppliers offers convenience and helps us to improve procurement efficiency. We have developed solid and steady relationships with many of our key suppliers, as they have been supplying to us for a few years. Given our solid and steady relationships with our suppliers, we believe that our suppliers generally make supplying to us a priority and we did not experience any material delays in receiving supplies from our suppliers during the Track Record Period.

Our suppliers include raw material suppliers and contract manufacturers to whom we outsourced the production of our footwear, apparel and accessories. We have been granted credit periods of between 30 to 180 days by our suppliers. We may also be required to make deposits and advance payments to suppliers. For the financial years ended 30 June 2006, 2007 and 2008 and the nine months ended 31 March 2009, our five largest suppliers accounted for approximately 35.1%, 40.8%, 31.2% and 19.8%, respectively, of the aggregate amount of purchases from all suppliers and our largest supplier accounted for approximately 22.8%, 24.6%, 14.3% and 6.8%, respectively, of the aggregate amount of purchases from all suppliers.

None of our Directors, our chief executive, or any person who (to our knowledge) owns more than 5% of our issued share capital or any of our subsidiaries, or any of their respective associates, had any interest in any of our top five suppliers during the Track Record Period.

COMPETITION The demand for sportswear in the PRC has grown rapidly in recent years, in line with the general economic growth of the PRC. According to Frost & Sullivan, the total revenue of the PRC sportswear market was approximately US$7.7 billion (RMB53.3 billion) for 2008. We accounted for approximately 4.2% of this amount and were ranked one of the top five domestic sportswear brands in the PRC in terms of revenues for 2008. However, the barriers to entry in the China branded sportswear market are high due to the cost and time required to build brand awareness and to establish an effective distribution network. Participants in the highly competitive sportswear industry in the PRC market include international and domestic brands, which compete in, among other things, brand loyalty, product variety, product design, product quality, marketing and promotion, distribution network coverage, price and the ability to meet delivery commitments to distributors and authorised retailers. This competition has led to leading brands continuing to gain market share at the expense of less established, lower-end brands.

Our competitors, especially international brands, may have greater financial resources, greater production capabilities, superior technology, better brand recognition and a wider, more diverse and established distribution network than us. See “Risks relating to the PRC sportswear industry—We operate in a highly competitive market and the intense competition we face may result in a decline in our market share and lower profit margins” and “Industry Overview” in this document for more information. Nevertheless, we believe the following competitive strengths may allow us to compete effectively with our major competitors: • Recognition of our brand as a valuable brand in the PRC; • An extensive sales network comprised of exclusive distributors and 361° authorised retail outlets; • Effective and innovative marketing and promotion; • An experienced management team; and • Determination to offer customers the highest quality products in the PRC.

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We believe that competition in the PRC branded sportswear product industry will remain intense in the near future. However, we also believe that our competitive advantages will continue to allow us to differentiate ourselves from our competitors.

EMPLOYEES As of the Latest Practicable Date, our Group had a total of 4,817 full-time employees, all of whom were located in the PRC. The following table shows a breakdown of our employees by department as of the Latest Practicable Date:

As of the Latest Practicable Date Number of % of Total Employees Employees Management and administration ...... 105 2.2 Production and procurement ...... 4,187 86.9 Sales and marketing ...... 132 2.7 Finance and accounting ...... 49 1.0 Quality control ...... 110 2.3 Research and development ...... 57 1.2 Design ...... 49 1.0 Other (logistics and information technology) ...... 128 2.7 Total ...... 4,817 100

Our Directors believe that quality control, logistics and information technology are crucial to our reputation and growth. In order to effectively monitor the quality of our products, deliver the products to our distributors in a timely manner and share the information within our Group and our distributors, we employed a significant number of staff in these departments. Our Directors also believe that the number of employees in these departments is in line with the fast growing demand of our 361° products in the PRC.

Our Relationship with Employees We believe that we maintain satisfactory working relationships with our employees, with an average retention rate of approximately 90% through the Track Record Period, and we have not experienced significant problems with our employees or disruptions in our operations due to labour disputes, nor have we experienced any difficulties in the recruitment and retention of experienced staff.

Employee Training We are committed to employee development and have implemented various programmes for the development of our employees, including various training programmes to enhance our employees’ industrial and technical skills and to increase their knowledge of work safety standards.

Employee Remuneration The remuneration payable to the employees includes salaries and allowances. We determine our staff’s remuneration based on factors such as qualifications and years of experience. Our staff costs (including Directors’ and senior management’s emoluments) for the financial years ended 30 June 2006, 2007 and 2008 and the nine months ended 31 March 2009 were approximately RMB35.4 million, RMB41.8 million, RMB70.9 million and RMB84.5 million, respectively.

We reward our senior management with annual bonuses based on various performance criteria. As part of our remuneration policies for our senior management, we have in place two share-based remuneration schemes—

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BUSINESS the Share Option Scheme and the [Š] Share Option Scheme. These schemes are designed to provide incentives and rewards to our employees. Under the Share Option Scheme, eligible persons may be granted with options, the exercise of which will entitle the holder thereof to subscribe for our Shares at a price fixed on the date of grant. Under the [Š] Share Option Scheme, invitations are made to eligible persons inviting them to subscribe for our Shares at a price which represents a price which is at a discount of 20% to the final [Š] of our Shares at the [Š], subject to the fulfilment of certain vesting conditions. For further details on the principal terms of the Share Option Scheme and the [Š] Share Option Scheme, please refer to Appendix VI to this document. We believe that by offering our key employees a shareholding stake in our Company, we are aligning their interests with our interests, thereby providing our key employees with additional incentives to improve our performance.

Social Welfare Our contributions to various Social Insurance Funds for the financial years ended 30 June 2006, 2007 and 2008 and the nine months ended 31 March 2009 amounted to approximately RMB23,000, RMB98,000, RMB315,000 and RMB2,113,000, respectively.

Our PRC legal advisers, Tian Yuan Law Firm, and our Directors have confirmed that we are in compliance with all social insurance obligations applicable to us under PRC laws. We contribute to various social insurance plans, such as pension contribution plans, medical insurance plans, work-related injury insurance plans and unemployment insurance plans, as well as housing accumulation funds for our employees in accordance with the applicable PRC laws and regulations on social insurance. Please also refer to the paragraph headed “Legal Compliance and Proceedings” in this section.

Labour Matters We are subject to various labour and safety laws and regulations in the PRC, including the PRC Labour Law ( ), the PRC Labour Contract Law ( ) (the “New Labour Law”), the PRC Production Safety Law ( ), the Regulation of Insurance for Labour Injury ( ), the Unemployment Insurance Law ( ), the Provisional Insurance Measures for Maternity of Employees ( ), the Interim Provisions on Registration of Social Insurance ( ), the Interim Regulation on the Collection and the Payment of Social Insurance Premiums ( ), as well as other related regulations, rules and provisions issued by the relevant governmental authorities from time to time for our operations in the PRC.

According to the PRC Labour Law and the New Labour Law, we enter into labour contracts if we are to establish labour relationships with our employees. We must provide wages, which are no lower than the local minimum wage standards, to such employees. We are required to establish labour safety and sanitation systems, strictly abide by PRC rules and standards and provide relevant training to our employees. We must also provide our employees with working conditions that meet PRC rules and standards for safety and sanitation and we must regularly examine the health of our employees engaged in hazardous occupations.

The New Labour Law, which became effective on 1 January 2008, calls for stricter requirements in human resources management in terms of signing labour contracts with employees, stipulating probation and violation penalties, dissolving labour contracts, paying remuneration and economical compensation, as well as social security premiums. The New Labour Law may materially and adversely affect our results of operations. See “Risks relating to conducting business in the PRC—New labour laws in the PRC may materially and adversely affect our results of operations” in this document. We have taken a variety of proactive measures to improve our employment relationship management and fulfil our obligations under the New Labour Law and other applicable PRC laws. In addition, we will structure the terms of employment with our employees to comply with the new law. We expect that the New Labour Law will help us to establish a more stable and beneficial labour relationship with our employees. Our PRC legal advisers, Tian Yuan Law Firm, have confirmed that no potential risks will affect our track record results due to the New Labour Law.

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As confirmed by the relevant PRC authorities, we have fully paid social securities insurance, including health, accident and safety insurance under PRC laws and regulations. Our PRC legal advisers, Tian Yuan Law Firm, and our Directors have confirmed that, during the Track Record Period and up to the Latest Practicable Date, we complied with all applicable labour and safety laws and regulations, including but not limited to the New Labour Law, in all material respects. We work to ensure the safety of our employees. We have implemented safety guidelines and operating procedures for our production processes and have provided employees with occupational safety education and training to enhance their awareness of safety issues. Since our business commenced in 2004, none of our employees has been involved in any major accident in the course of their employment, and we have never been subject to disciplinary actions with respect to the labour protection issues.

We spent approximately RMB93,000, RMB1.2 million, RMB1.3 million and RMB4.3 million in respect of regulatory compliance with applicable labour, health and safety rules and regulations in the PRC for the financial years ended 30 June 2006, 2007 and 2008 and the nine months ended 31 March 2009, respectively. We currently do not have any specific expenditure plan in this regard. However, we will devote operating and financial resources to such compliance whenever we are required by PRC laws and regulations to do so in the future.

Our PRC legal advisers, Tian Yuan Law Firm, and our Directors have also confirmed that we will not be responsible for the breaches of laws, rules and regulations by our contract manufacturers, suppliers, distributors, or authorised retailers. We have not been held liable for such breaches during the Track Record Period.

INTELLECTUAL PROPERTY RIGHTS We use the 361° brand for the marketing and sales of our sportswear products. As of the Latest Practicable Date, we have registered or are in the course of application for registration of our 361° trademark in Hong Kong, the PRC and over 90 other countries and jurisdictions worldwide. For more information, please see the paragraph headed “Intellectual Property Rights of our Group” in Appendix VI to this document.

Protection of Intellectual Property Rights We recognise the importance of protecting and enforcing our intellectual property rights. Our employees who may have access to our trade secrets and other proprietary intellectual property are bound by confidentiality agreements regarding our 361° brand and our related intellectual property. During the Track Record Period, there has been no material action taken against any employee for breach of such confidentiality agreements. We will take appropriate action to defend our 361° brand and our intellectual property rights if they are infringed in the future. Moreover, we intend to apply for the appropriate intellectual property rights for any new technological know-how developed by us. As of the Latest Practicable Date, we have registered 153 trademarks and six patents. We are also in the process of applying for registration in the PRC and other countries of some other trademarks. In respect of the PRC trademark applications, our PRC legal advisers, Tian Yuan Law Firm, have confirmed that we have the right to use the pending trademarks notwithstanding that the registrations of such trademarks are still in process. To our best knowledge and so far as our PRC legal advisers are aware of, there are no legal impediments to the pending applications, except for one application which has been refused for the reason of a prior application for registration by a third party. We are appealing against the decision to refuse such application. We are also in the process of applying for registration in the PRC of some other patents. Our Directors confirm that they do not expect there will be any material adverse impact on our Group’s operations in the event that the registration of any of the pending trademark and/or patent applications is not successful. However, we may not be able to adequately protect our intellectual property rights. See “Risk Factors—Risks Relating to Our Business” in this document.

PROPERTIES As of 31 March 2009, we had a total area of approximately 194,544.3 square metres of land and a total gross floor area of approximately 72,018.8 square metres of buildings, all of which are situated in the PRC.

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Our PRC legal advisers, Tian Yuan Law Firm, and our Directors have confirmed that we hold valid land use right certificates with respect to all of our land. In respect of a piece of land located at Huatingkou Village, Chendai Town, Jinjiang City, Fujian Province, the PRC with a total area of approximately 253.9 square metres (the “Huatingkou Land”) which was converted from rural collective non-agricultural land for construction use ( ), our PRC legal advisers, Tian Yuan Law Firm, advised that pursuant to the Working Opinions on Trial Points of Circulation of Rural Collective Non-Agricultural Land for Construction Use ( ) (the “Working Opinions”) published by the Administration of State-owned Land and Resources of Fujian Province ( ) and the Provisional Measures for the Administration of Circulation of Rural Collective Non-Agricultural Land for Construction Use of Jinjiang City ( ) (the “Provisional Measures”) published by the People’s Government of Jinjiang City ( ), any rural collective non-agricultural land for construction use must first be converted to state-owned land before circulation ( ) of such land to any third party which will result in change of ownership of land use rights. The buildings and construction erected on the land subject to circulation will also be circulated at the same time as the circulation of the land. Such conversion and circulation shall be approved by the people’s government above county level. Our PRC legal advisers, Tian Yuan Law Firm, advised that there are no universal provisions on circulation of rural collective non-agricultural land for construction use under the PRC laws and regulations, and the circulation of the Huatingkou Land to us was approved by the People’s Government of Jinjiang City ( ) on 5 September 2008 and was in compliance with the aforesaid Working Opinions and Provisional Measures. Further, according to Regulations on the Listing for Sale of Land Use Right of State-owned Land for Construction Use by way of Tender and Auction ( ) (the “Tender Regulations”) published by the Administration of State-owned Land and Resources ( ), the land use right for industrial land shall be listed for sale by way of tender or auction. The circulation of the Huatingkou Land to us did not involve any tender or auction, and was effected by the land use right transfer contract entered into with the Jinjiang Administration of State-owned Land and Resources ( ), thus was not in compliance with the Tender Regulations. Nevertheless, relevant PRC laws and regulations do not specify any legal liabilities on the part of the acquirer of the land use right for industrial land which was not obtained by way of tender or auction. As the circulation of the Huatingkou Land to us has been approved by the People’s Government of Jinjiang City ( ) and was in compliance with the aforesaid Working Opinions and Provisional Measures, our PRC legal advisers, Tian Yuan Law Firm, is of the opinion that the possibility of the land use right of the Huatingkou Land to be compulsorily forfeited by the relevant land administrative department and for us to be penalised as a result of the land use right of the Huatingkou Land not being obtained by way of tender or auction is minimal, and there will not be any material adverse effect on the value, usage, transfer and/or sale of the land use right of the Huatingkou Land. Since the Huatingkou Land is used for dormitories of our employees, our Directors consider that such land is not crucial to the existing and future operation of our Group, and in the event that we are required to vacate from the Huatingkou Land, similar sites would be available at the nearby areas. For further details of the Huatingkou Land, please refer to valuation certificate no. 2 in the property valuation report in Appendix IV to this document.

As of 31 March 2009, approximately 44,940.0 square metres of our buildings are used by us as workshops and office buildings, representing approximately 62.4% of the total gross floor area of all of our buildings, and approximately 27,078.8 square metres of our buildings are used as dormitories, representing approximately 37.6% of the total gross floor area of all of our buildings.

As of 31 March 2009, we leased an office in Xiamen with a gross floor area of approximately 4,900 square metres and we also leased a warehouse in Guangzhou, the PRC, with a total gross floor area of approximately 10,691.5 square metres (together, the “Xiamen and Guangzhou Lease”). The tenancy agreements in relation to the Xiamen and Guangzhou Lease were not registered by the relevant lessors with the relevant PRC authorities. Our PRC legal advisers, Tian Yuan Law Firm, have confirmed that it is the obligation of the lessors, who possess the relevant title documents, to register the tenancy agreements. Further, our PRC legal advisers, Tian Yuan Law Firm, have confirmed that as under PRC laws, the registration of the tenancy agreements is not a condition for the tenancy agreements becoming effective, the lack of registration of these tenancy agreements will not affect the legality of such tenancy agreements and the tenancy agreements in relation to the Xiamen and Guangzhou Lease are valid, binding and enforceable under PRC laws. Details of the Xiamen and Guangzhou Lease are set out in valuation certificates no. 6 and no. 7 in the property valuation report in Appendix IV to this document.

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As of 31 March 2009, we also leased an office which is located in Beijing, the PRC, with a total leased area of approximately 445.88 square metres (the “Beijing Lease”). As the lessor of the building has not obtained proper building title certificate for the property and has not registered the relevant tenancy agreement with the relevant PRC authorities, Tian Yuan Law Firm, our PRC legal advisers, cannot confirm that the relevant tenancy agreement is valid, binding and enforceable under the PRC laws. Our PRC legal advisers, Tian Yuan Law Firm, advised that failure by the tenant to submit the Beijing Lease for registration may cause a fine of not less than RMB200 but not more than RMB500, and such fine would not have any material adverse impact to us. Details of the Beijing Lease are set out in valuation certificate no. 8 in the property valuation report in Appendix IV to this document.

In view of the uses of the Xiamen and Guangzhou Lease and the Beijing Lease (namely offices) and given that our Group has the right to claim losses against the lessors in respect of the Xiamen and Guangzhou Lease and the Beijing Lease, our Directors consider the fact that the above tenancy agreements have not yet been registered or may not be enforceable under PRC laws and regulations has no material impact on our Group’s operations. As the office under the Beijing Lease is only one of our Group’s offices and is not important to the operations of our Group, we believe that the absence of title certificate of such office does not have any material impact on our Group’s operations.

Our Controlling Shareholders have undertaken to indemnify our Group against any damages, losses or liabilities which are or become payable or incurred by any members of our Group, including relocation costs and expenses (if any), as a direct or indirect result of any title defects of the property used by our Group after the [Š].

Details of the properties are set out in the section headed “Property Valuation” in Appendix IV to this document.

ENVIRONMENTAL MATTERS We are subject to PRC environmental laws and regulations, which include the Environmental Protection Law of the PRC ( ), Law of the PRC on the Prevention and Control of Water Pollution ( ), Law of the PRC on the Prevention and Control of Atmospheric Pollution ( ), Law of the PRC on the Prevention and Control of Pollution From Environmental Noise ( ) and Law of the PRC on the Prevention and Control of Environmental Pollution by Solid Waste ( ). These laws and regulations govern a broad range of environmental matters, including air pollution, noise emissions and water and waste discharge.

According to current PRC national and local environmental protection laws and regulations, any enterprise which discharges wastewater, waste products, or polluted air is required to seek approval for the establishment of such an enterprise in the PRC from the relevant environmental protection authorities. The relevant PRC laws and regulations also require any such enterprise to carry out an environmental impact assessment before commencing construction of its production facilities and ensure that such production facilities meet the relevant environmental standards to treat wastewater, waste products and polluted air treatment before discharging such waste. In addition, the current PRC national and local environmental protection laws and regulations impose fees for the discharge of pollutants and, in cases where the pollutants have not been properly treated, fines for such discharge. The relevant environmental laws and regulations empower certain governmental authorities to shut down any enterprise that violates such laws and regulations through the discharge of pollutants.

PRC environmental laws and regulations also stipulate that all enterprises that may cause environmental pollution and other public health hazards are also required to incorporate environmental protection measures into their plans and establish a reliable system for environmental protection. These measures and systems must work to effectively prevent and control pollution levels and harm caused to the environment by waste gas, waste water, solid waste, dust, malodourous gas, radioactive substances, noise, vibration and electromagnetic radiation generated in the course of production, construction, or other activities of the enterprise.

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BUSINESS

During the Track Record Period, we carried out the relevant environmental impact assessments before commencing construction of our production facilities and have obtained all the required permits and environmental approvals for our production facilities. We were granted an environmental compliance certificate from the Jinjiang City Environmental Protection Bureau ( ) for complying with its environmental protection standards. Our PRC legal advisers, Tian Yuan Law Firm, and our Directors have confirmed that, during the Track Record Period, (i) we fully complied with the relevant environmental rules and regulations and obtained all the required permits and environmental approvals for our production facilities, (ii) no environmental pollution incident was discovered and (iii) no penalty of any kind was imposed on us.

We spent approximately RMB6,000, RMB61,000, RMB75,000 and RMB106,000 in respect of regulatory compliance with applicable environment protection requirements in the PRC for the financial years ended 30 June 2006, 2007 and 2008 and the nine months ended 31 March 2009, respectively. We expect such expenditures going forward will increase when our new production facilities commence production. We currently do not have any specific expenditure plan in this regard. However, we will devote operating and financial resources to such compliance whenever we are required by PRC laws and regulations to do so in the future.

As we do not produce material quantities of industrial waste in our production and we do not anticipate that our production will produce any material quantities of industrial waste in the future, other than the expenses incurred for compliance with the current PRC environmental laws and regulations, we have not allocated additional resources to new technology or to research and development to reduce our impact on the environment.

As of the Latest Practicable Date, we had obtained all the pollutant discharge permits required under the PRC laws and regulations. Our PRC legal advisers, Tian Yuan Law Firm, and our Directors have confirmed that we were, during the Track Record Period, and we are in compliance with the relevant requirements under PRC laws and regulations for waste water treatment. We do not produce material waste during our production process.

We believe that our production process does not emit material quantities of pollutants and that our operation will not be subject to any future environmental risk. However, in order to ensure that we comply with the relevant PRC environmental laws and regulations, we have appointed Mr. Zhou Pingbo ( ), our legal manager, to oversee environmental protection related matters within our Group. We will ensure that we comply with applicable PRC environmental laws and regulations in the future by (i) empowering the legal manager to oversee and maintain our compliance with environmental protection policies, (ii) providing both regular, annual training and special, as-needed training upon the promulgation of new environmental laws and regulations with respect to the latest PRC environmental laws and regulations and encouraging our team staff to attend environmental protection training sessions organised by the local environmental protection authorities, (iii) conducting on-site inspections every week, (iv) providing relevant training to our staff, including but not limited to providing training to our Directors regarding compliance with PRC environmental laws and regulations, (v) immediately reporting to our Directors any incident or non-compliance with the relevant PRC environmental laws and regulations and (vi) immediately reporting to and coordinating with competent authorities in the case that any incident or non-compliance arises.

INSURANCE Our insurance provides employee social insurance and property insurance coverage, which includes loss and damage to property, such as our fixed assets and inventories in our warehouses and factories. We believe that our insurance coverage is in line with the general practice in the PRC sportswear industry and is adequate for our operations. As of the Latest Practicable Date, we had not made nor been the subject of any material insurance claims. We have made the required contributions in relation to the retirement of our employees. In accordance with the applicable laws and regulations in the PRC, which require contribution by both our employees and us at a fixed percentage of the salaries of our employees.

As of the Latest Practicable Date, all of our products were sold in the PRC. In line with the general industry practice in the PRC, we do not maintain any product liability insurance for any of our 361° products. We have been advised by our PRC legal advisers, Tian Yuan Law Firm, that we are not required under PRC laws to

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BUSINESS maintain any product liability insurance. Taking into account the general practice in the PRC sportswear industry, our experience in running our business and insurance products available in the PRC, our Directors are of the view that we have sufficient insurance coverage for our current operations. During the Track Record Period, we did not receive any material claim from customers and/or consumers regarding any liability arising from or relating to the use of our 361° products.

LEGAL COMPLIANCE AND PROCEEDINGS As of the Latest Practicable Date, we were not engaged in any litigation, arbitration or claim of material importance and no litigation, arbitration or claim that would have a material adverse effect on our operation results or financial condition is known to be pending or threatened by or against us.

In 2006, Sanliuyidu Fujian received two tax penalty notices with the aggregate fine of approximately RMB210,000 for our failure to pay an aggregate of value-added tax of approximately RMB420,000. The underpaid value-added tax of approximately RMB420,000 was subsequently charged to our Group’s combined income statements for the financial years ended 30 June 2004 and 2005, being the years when the underpayment occurred and the payment should have been recorded. The fine of approximately RMB210,000 was charged to our Group’s combined income statement for the financial year ended 30 June 2007, being the year when the notice from the relevant tax bureau was received. Our Group has obtained confirmation from the relevant tax bureau that Sanliuyidu Fujian has paid all value-added tax and fines prior to the issuance of the confirmation and our Group had no outstanding liabilities. Our PRC legal advisers, Tian Yuan Law Firm, and our Directors have confirmed that there are no further liabilities for Sanliuyidu Fujian in connection with such failure to pay the value-added tax and the fine.

For each of the three financial years ended 30 June 2008 and for the nine months ended 31 March 2009, our Group made contributions to pension funds, medical insurance (including maternity insurance), unemployment insurance, work-related injury insurance (collectively, “Social Insurance Funds”) and housing funds (“Housing Funds”) for its employees in the PRC. These contributions, which were funded from internal financial resources of our Group, are in compliance with the requirements of the relevant labour bureau and housing fund administration centres of the relevant PRC laws and regulations with regard to Social Insurance Funds. Jinjiang City Labour and Social Security Bureau ( ) confirmed that as of 17 April 2009 (as to Sanliuyidu China and Sanliuyidu Fujian) and Xiamen Huli District Personnel Labour and Social Security Bureau ( ) confirmed that as of 22 April 2009 (as to Sanliuyidu Xiamen), (i) Sanliuyidu China, Sanliuyidu Fujian and Sanliuyidu Xiamen paid all social security payments in accordance with PRC laws and regulations; (ii) there were no outstanding social security payments payable by Sanliuyidu China, Sanliuyidu Fujian and Sanliuyidu Xiamen; and (iii) none of Sanliuyidu China, Sanliuyidu Fujian and Sanliuyidu Xiamen had been penalised by reason of breach of any PRC laws and regulations in respect of social security, and there existed no possibility for administrative penalty or legal dispute for breach of any PRC laws and regulations regarding social security. Our PRC legal advisers, Tian Yuan Law Firm, have confirmed that Jinjiang City Labour and Social Security Bureau ( ) and Xiamen Huli District Personnel Labour and Social Security Bureau ( ) had the authority to issue such confirmations.

Our PRC legal advisers, Tian Yuan Law Firm, have confirmed that we have complied with the relevant PRC laws and regulations in all material aspects, including laws and regulations relating to environmental protection, safety, and labour and have obtained all licences, approvals and permits from appropriate regulatory authorities for our business operations in the PRC.

In order to comply with relevant PRC laws and regulations applicable to our Group, including, among others, laws and regulations relating to tax and Social Insurance Funds, we have appointed Mr. Zhou Pingbo ( ) as the head of our legal department who is generally responsible for the legal matters of our Group. He received his master’s degree in law from East China University of Political Science and Law ( )in July 2003 and has held a Lawyer’s Qualification Certificate in China since March 2004. Mr. Zhou served as the legal manager of a company listed on the Shanghai Stock Exchange since 2003 before joining our Group in November 2007. We have also appointed Mr. Hou Zhaohui ( ) as the head of our human resources

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BUSINESS department. He received his master’s degree in business administration from Beijing University of Posts and Telecommunications ( ) in June 2004 and is responsible for organising staff training programmes. We will ensure that we comply with applicable PRC laws and regulations in the future by (i) empowering the legal department and human resources department to oversee and maintain our compliance with applicable PRC laws and regulations through, among other things, establishing policies to monitor tax return filings and payments with the relevant tax authority and strictly implementing monthly reporting procedures on tax, Social Insurance Funds and Housing Funds matters; (ii) providing regular trainings or updates in respect of PRC laws and regulations to our Directors on a bi-annual basis, and to senior management and the relevant staff on a monthly basis; and (iii) seeking external legal advice where appropriate and necessary. Our Directors considered that the internal control measures relating to compliance are adequate and effective.

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RELATIONSHIP WITH CONTROLLING SHAREHOLDERS

CONTROLLING SHAREHOLDERS Other than (i) Mr. Ding Huihuang’s interest in Sanliuyidu Hong Kong, which held 100% equity interests in Sanliuyidu China prior to 25 July 2008 and which does not have any business activities as of the Latest Practicable Date; and (ii) our Controlling Shareholders’ respective interests in Hui Rong International, Ming Rong International and Dings International, our Company and its subsidiaries, as of the Latest Practicable Date, none of the Controlling Shareholders nor any of their respective associates had interests in any other companies which (i) held interests in our business during the Track Record Period and ceased to hold such interests after the Corporate Reorganisation; or (ii) may, directly or indirectly, compete with our Group’s business.

INDEPENDENCE FROM OUR CONTROLLING SHAREHOLDERS Having considered the matters described above and the following factors, we believe that our Group is capable of carrying on its business independently of our Controlling Shareholders and their respective associates after the [Š].

Management Independence Our Board comprises four executive Directors and three independent non-executive Directors. Three directorships of our executive Directors are held by Mr. Ding Wuhao, Mr. Ding Huihuang and Mr. Ding Huirong, who are our Controlling Shareholders.

Each of our Directors is aware of his fiduciary duties as a Director of our Company which require, among other things, that he acts for the benefit and in the best interests of our Company and does not allow any conflict between his duties as a Director and his personal interest. In the event that there is a potential conflict of interest arising out of any transaction to be entered into between our Group and our Directors or their respective associates, the interested Director(s) shall abstain from voting at the relevant board meetings of our Company in respect of such transactions and shall not be counted in the quorum. In addition, we have an independent senior management team to carry out the business decisions of our Group independently. Having considered the above factors, our Directors are satisfied that they are able to perform their roles in our Company independently, and our Directors are of the view that we are capable of managing our business independently from our Controlling Shareholders after the [Š].

Operational Independence We have established our own organisational structure comprised of individual departments, each with specific areas of responsibilities. Our Group has independent access to sources of supplies or raw materials for production as well as customers. We have also established various internal controls procedures to facilitate the effective operation of our business. We used certain land and properties owned by, among others, Bieke Fujian, which is beneficially owned by Mr. Ting Tong Bun, the father-in-law of Mr. Ding Huirong, one of our Controlling Shareholders, during the Track Record Period pursuant to an agreement dated 5 August 2003. Please refer to the section headed “History and Corporate Structure” in this document. We acquired such land and properties from the relevant parties in 2008. Our Directors confirmed that our Group will not enter into any other transactions of similar nature with our Connected Persons and their associates after the [Š] that will affect our operational independence.

Financial Independence Our Group has an independent financial system and makes financial decisions according to our Group’s own business needs. Our Directors confirm that as of the Latest Practicable Date, all financial assistance, including amounts due to, and loans or guarantees provided by our Controlling Shareholders to our Group, were

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RELATIONSHIP WITH CONTROLLING SHAREHOLDERS repaid or released or otherwise settled in full. Therefore, there is no financial dependence on our Controlling Shareholders.

DEED OF NON-COMPETITION Each of our Controlling Shareholders has entered into the Deed of Non-competition in favour of our Company, pursuant to which each of our Controlling Shareholders has undertaken to our Company (for itself and for the benefit of its subsidiaries) that such Controlling Shareholder would not and would procure that its or his associates (except any members of our Group) would not, during the period that the Deed of Non-competition remains effective, directly or indirectly, either on such Controlling Shareholder’s own account or in conjunction with or on behalf of any person, firm or company, among other things, carry on, participate or be interested or engaged in or acquire or hold (in each case whether as a shareholder, partner, agent, employee or otherwise) any business which is or may be in competition with the business of any member of our Group from time to time (the “Restricted Business”).

The above undertaking does not apply where: (a) the holding by our Controlling Shareholders of interests in the shares of a company other than our Group which are listed on a recognised stock exchange provided that: (i) any Restricted Business conducted or engaged in by such company (and assets relating thereto) accounts for less than 5% of that company’s consolidated turnover or consolidated assets, as shown in that company’s latest audited accounts; or (ii) the total number of the shares held by our Controlling Shareholders and/or their respective associates in aggregate does not exceed 5% of the issued shares of that class of the company in question and such Controlling Shareholders and/or their respective associates are not entitled to appoint a majority of the directors of that company and at any time there should exist at least another shareholder of that company whose shareholdings in that company should be more than the total number of shares held by our Controlling Shareholders and their respective associates in aggregate; or (iii) our Controlling Shareholders and/or their respective associates do not have the control over more than 50% members of the board of such company; or (b) any opportunity to invest, participate, be engaged in and/or operate any Restricted Business has first been offered or made available by our Controlling Shareholders and/or their respective associates to us, and after review and approval by our Board of Directors and/or shareholders as required under the relevant laws and regulations (including but not limited to the Listing Rules) and in accordance with our Articles of Association, has declined in writing such opportunity to invest, participate, be engaged in or operate the Restricted Business, and that the principal terms by which such Controlling Shareholder (or his or its respective associates) subsequently invests, participates, engages in or operates the Restricted Business are no more favourable than those offered to the member of our Group.

Pursuant to the Deed of Non-competition, the above restrictions would only cease to have effect upon the earlier of: (i) [Š]; and (ii) in relation to each Controlling Shareholder, such Controlling Shareholder or such Controlling Shareholder’s associate ceases to hold an equity interest in our Company and (iii) the relevant Controlling Shareholders and/or their respective associates jointly or severally are entitled to exercise or control the exercise of less than 30% in aggregate of the voting power at general meetings of our Company and no longer the single largest shareholder of our Company.

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RELATIONSHIP WITH CONTROLLING SHAREHOLDERS

OTHER UNDERTAKINGS Our Controlling Shareholders have also undertaken to indemnify our Group against any damages, losses or liabilities which are or become payable or incurred by any members of our Group, including relocation costs and expenses (if any), as a direct or indirect result of any title defects of the properties used by our Group after the [Š]. Please refer to the section headed “Business—Properties” in this document.

CORPORATE GOVERNANCE MEASURES Our Company will adopt the following measures to manage any conflict of interests arising from the competing business of our Controlling Shareholders and to safeguard the interests of our Shareholders: (i) our independent non-executive Directors will review, at least on an annual basis, the compliance with the undertaking given by our Controlling Shareholders under the Deed of Non-competition; (ii) our Controlling Shareholders have undertaken to provide all information requested by our Company which is necessary for the annual review by our independent non-executive Directors and the enforcement of the Deed of Non-competition; (iii) our Company will disclose decisions on matters reviewed by our independent non-executive Directors relating to compliance and enforcement of the Deed of Non-competition in the annual reports of our Company; and (iv) our Controlling Shareholders will make an annual declaration in relation to compliance with the Deed of Non-competition in the annual reports of our Company.

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DIRECTORS AND SENIOR MANAGEMENT

DIRECTORS Executive Directors Mr. Ding Wuhao ( ), aged 44, was appointed as an executive Director of our Company on 1 August 2008 and is the president of our Company. He is primarily responsible for our overall strategies, planning and business development. From October 1994 to June 2008, he served as a director and the general manager in Bieke Fujian and he was primarily responsible for its daily operation. From June 1992 to June 2008, he served as a director and the general manager of Wanshile. He joined us as the director and general manager of Sanliuyidu Fujian in June 2003. He has approximately 14 years of experience in the PRC sportswear industry. Since December 2006, he has been a member of the Chinese People’s Political Consultative Conference (“CPPCC”) Fujian Province Jinjiang City Committee ( ). In May 2008, he was elected as a consultant for Jinjiang City Peasant Sports Association ( ). In October 2008, he received the award of the “2008 Most Socially Responsible Entrepreneur in China” ( ) by the Annual Selection Organising Committee of China Human Resources Management ( ). In May 2009, he received the “Contribution Award for China TV Sports Programmes” ( ) by CCTV Sports Channel ( ). In the past five years, Mr. Ding devoted himself to the implementation of our growth strategies, expansion plan and our overall business development. Mr. Ding is the son-in-law of Mr. Ding Jiantong, and the brother-in-law of Mr. Ding Huihuang and Mr. Ding Huirong. Mr. Ding is the sole director of Dings International which is a substantial shareholder (as defined under the Listing Rules) of our Company.

Mr. Ding received his diploma in a 10-day advanced level course for chief executive officer ( ) from Peking University ( ) in May 2004. He received his diploma from the 10- month MBA Series of Courses for China Entrepreneurs ( ) from Guanghua School of Management of Peking University ( ) in July 2007. Both diploma courses were part-time courses on business management and economics.

Mr. Ding Huihuang ( ), aged 43, was appointed as an executive Director of our Company on 29 September 2008 and is the chairman of our Company. He is primarily responsible for overall strategies, operation planning and footwear production. He has approximately 14 years of experience in the PRC sportswear industry. He joined us in June 2003. Prior to joining us, he worked at Bieke Fujian from October 1994 to June 2003 where he was responsible for production management of footwear. He was awarded the “Top Ten Outstanding Youths in China Industrial Economy” ( ) by the Organising Committee of China Industry Forum ( ) in January 2008 and the “Top Ten Outstanding Youth Entrepreneurs of Quanzhou City” ( ) jointly issued by 18 governmental and commercial institutions in Quanzhou City, Fujian Province, the PRC in February 2007. Since January 2006, he has been a standing member of the third committee of Quanzhou City Shoe Commercial Association ( ). Since January 2007, he has been a vice chairman of Fujian Province Shoe Industry Association ( ). Since June 2007, he has been the honorary vice chairman of Quanzhou City Youth Entrepreneur Association ( ) and Quanzhou City Youth Commercial Association ( ). Mr. Ding is a son of Mr. Ding Jiantong, the elder brother of Mr. Ding Huirong and the brother-in-law of Mr. Ding Wuhao. Mr. Ding is the sole director of Ming Rong International which is a substantial shareholder (as defined under the Listing Rules) of our Company. He received a diploma from Jinjiang Chendai Town Middle School for Nationalities ( ) in July 1980.

Mr. Ding Huirong ( ), aged 37, was appointed as an executive Director of our Company on 29 September 2008 and is a vice president of our Company. He is primarily responsible for financial management and infrastructure construction management of our Company, more specifically the construction of the new production facility and warehouse of our Group at the Wuli Industrial Park. He has approximately 14 years of experience in financial management. From October 1994 to June 2003, he worked as a vice general manager in Bieke Fujian and he was primarily responsible for financial management. He joined us in June 2003. Since August 2008, he has been the standing vice chairman of Jinjiang City Chendai Town Youth Commercial Association ( ). Since September 2008, he has been the vice chairman of Fujian Business Economical and Cultural Council ( ). Mr. Ding is a son of Mr. Ding Jiantong, the brother of Mr. Ding Huihuang and the brother-in-law of Mr. Ding Wuhao. Mr. Ding is the sole director of Hui Rong

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International which is a substantial shareholder (as defined under the Listing Rules) of our Company. He received a diploma from Jinjiang Chendai Town Middle School for Nationalities ( ) in July 1986.

Mr. Wang Jiabi ( ), aged 51, was appointed as an executive Director of our Company on 29 September 2008 and is a vice president of our Company. He is primarily responsible for the human resources and external public relationship. Mr. Wang has approximately 14 years of experience in the PRC sportswear industry. From October 1994 to June 2003, he worked as a vice general manager in Bieke Fujian and he was primarily responsible for the human resources. He joined us in June 2003. In February 2006, Mr. Wang was selected as the vice chairman of Chendai Chamber of Commerce ( ). In December 2006, he was elected as a member of the fourth Committee of Chendai Town Federation of Trade Unions ( ). Since June 2007, he has been the vice chairman of Council of Charity Association of Qian Cai County, An Hai Town. ( ). He enrolled in an EMBA programme offered by Peking University ( ) in September 2008. Mr. Wang is the elder brother of Mr. Wang Jiachen, a member of our senior management team.

Independent non-executive Directors Mr. Mak Kin Kwong ( ), aged 47, joined our Group and was appointed as an independent non-executive Director of our Company on 29 September 2008. Mr. Mak has many years of experience in initial public offering, mergers and acquisitions and corporate finance. Mr. Mak is the managing director of Venfund Investment, a boutique investment banking firm specialising in cross-border mergers and acquisitions, corporate restructuring and international financial advisory services for clients in China, which he co-founded in late 2001. Prior to that, Mr. Mak was a firm partner of Arthur Andersen Worldwide and was the managing partner of Arthur Andersen Southern China in his last position with the firm. Mr. Mak also serves as an independent non-executive director and audit committee chairman of Trina Solar Limited ( ), China GrenTech Corp. Ltd. ( ), Dragon Pharmaceutical Inc. ( ), Network CN Inc. ( ) and China Security & Surveillance Technology, Inc.( ), all of which are companies listed in the United States; Huabao International Holdings Ltd.( ) (stock code: 336), China Dongxiang (Group) Co., Ltd. ( ) (stock code: 3818) and Pou Sheng International (Holdings) Limited ( ) (stock code: 3813), companies listed on the Hong Kong Stock Exchange. Mr. Mak is also the non-executive director of Bright World Precision Machinery Ltd. ( ), a company listed in the Republic of Singapore. Mr. Mak was an independent director of Gemdale Corporation ( ) (stock code: 600383) from June 2003 to April 2009, which is a company listed on the Shanghai Stock Exchange. He was a non-executive director of Vinda International Holdings Limited ( ) (stock code: 3331) from June 2007 to December 2008, which is a company listed on the Hong Kong Stock Exchange.

Notwithstanding that Mr. Mak is also an independent non-executive director of China Dongxing (Group) Co., Ltd. ( ), and, to a lesser extent, Pou Sheng International (Holdings) Limited ( ), which are competing with us or being regarded as potentially competing with us, Mr. Mak confirms that he is fully aware of his fiduciary duties owing to the shareholders of the respective companies in his capacities as directors of each such company and his duty to avoid conflicts of interests in carrying out his duties as a director of both companies. Mr. Mak will fulfil his statutory and fiduciary duty to act honestly and in good faith with a view to achieving the best interests of our Company and to act in accordance with the memorandum and articles of association of our Company. He will exercise caution, declare interests and be abstained from discussion and voting when necessary should a conflict of interest exist.

Mr. Mak is a graduate of the Hong Kong Polytechnic University and a fellow member of the Association of Chartered Certified Accountants, and the HKICPA, and a member of the Institute of Chartered Accountants, in England and Wales.

Mr. Sun Xianhong ( ), aged 46, joined our Group and was appointed as an independent non-executive Director of our Company on 29 September 2008. Mr. Sun has over 20 years of experience in the media and marketing industries. From October 1985 to October 1988, he served as a cameraman in North China

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DIRECTORS AND SENIOR MANAGEMENT

Education TV Station of Ministry of Coal Industry ( ). From October 1988 to April 1994, he served as the cameraman and director in Inner Mongolia Radio and TV University ( ). In May 1994, he founded Inner Mongolia Sunsoar Brand Building Co., Ltd. ( ) and served as the chairman and general manager. From October 1994 to December 1998, he also served as the head of the advisement department of Inner Mongolia Yili Industrial Group Co., Ltd. ( ). In 1999, he co-founded Inner Mongolia Meng Niu Dairy (Group) Co., Ltd. ( ) with Mr. Niu Gensheng and worked as a vice president from 1999. He was a consultant for China Space Foundation ( ) in 2003. From October 2002 to October 2005, he was a director and since November 2005, he has been a supervisor in Inner Mongolia Little Sheep Catering Chain Co., Ltd ( ). Mr. Sun was awarded as one of the “China Top 10 Outstanding Marketing Managers” ( ) by the International Marketing Festival ( ) in January 2003, the “China Top 10 Planning Experts” ( ) by the Second China Planning Conference ( ) in June 2004, the “China Top 10 Outstanding Brand Managers of the Year” ( ) by the Organising Committee of First China Brand Festival ( ) in August 2007 and the “Top 50 Brand Leaders” ( ) by the China Brand Value Research Centre ( ) in March 2007. Since April 2002, he has been a member of the CPPCC of Huhhot City, Inner Mongolia Autonomous Region ( ).

Mr. Sun received his bachelor’s degree in industrial autoimmunisation from Shanxi Mining College ( ) in July 1985.

Mr. Liu Jianxing ( ), aged 34, joined our Group and was appointed as an independent non-executive Director of our Company on 29 September 2008. Mr. Liu has approximately three years of experience in macroeconomics and policy research. From September 1997 to August 2000, he served as the financial manager in Jiangxi Gas Compressor Factory ( ). Since July 2005, he has been the deputy head of the research department of International Cooperation Centre of National Development and Reform Commission (“NDRC”) ( ).

From October 2005 to December 2006, Mr. Liu took part in a series of key planning projects of the National 11th Five-Year Plan organised by the NDRC, including the Regional Planning for Metropolitan Coordinating Regions in Beijing, Tianjing and Hebei ( ), the Regional Planning for Metropolitan Coordinating Regions in Yangtze River Delta ( ) and the Plan for the Revitalisation of Northeast China ( ). From September 2005 to June 2007, Mr. Liu cooperated with Carnegie Endowment for International Peace for the Study on China Agricultural Economic Fluctuation from 1978 to 2006 ( ). From January 2006 to March 2007, he cooperated with American Global Environment and Technology Fund for the Study on the Sustainable Development of China Foundry Industry ( ). From June 2006 to March 2007, he cooperated with Australian Agency for International Development for the Study on the Establishment of Public Services Government, learning from Australian Experience ( ). From October 2007 to March 2008, he completed the program of Specific Industrial Park Planning in Bowang, Ma Anshan, An Hui Province ( ). Since May 2008, he cooperated with McKinsey & Company for the Strategic Study on China High Efficient Urbanisation ( ).

Mr. Liu received his bachelor’s degree in management engineering from Nanchang University ( )in July 1997, a master’s degree in national economics from Peking University ( ) in July 2002 and a doctor’s degree in national economics from Peking University ( ) in July 2005.

Except that Mr. Mak Kin Kwong, our independent non-executive Director, is also an independent non-executive director of China Dongxiang (Group) Co., Ltd. ( ) and Pou Sheng International (Holdings) Limited ( ) as disclosed above, none of our Directors has any direct or indirect interest in any business which is competing, or may compete, with that of our Group. Nevertheless, given that Mr. Mak does not hold any shares in our Company and China Dongxing (Group) Co., Ltd. ( ) and Pou Sheng International (Holdings) Limited ( ), and we have already imposed confidentiality obligations on him with respect to confidential information of our

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Group in the terms of his appointment, we do not consider Mr. Mak’s involvement in China Dongxiang (Group) Co., Ltd. ( ) and Pou Sheng International (Holdings) Limited ( ) would materially affect the performance of Mr. Mak’s duties as our independent non-executive Director.

SENIOR MANAGEMENT Mr. Xia Youqun ( ), aged 40, is a vice president of our Group and is primarily responsible for assisting the president in our overall operations. Mr. Xia has approximately 13 years of experience in marketing, brand management and retail marketing management in the PRC sportswear industry. He joined us in October 2003 as the head of marketing department and was promoted to be the operation head in July 2006. Prior to joining us, Mr. Xia was the head of marketing department of Qiaodan (China) Co., Ltd. ( ) from July 2000 to October 2003. From August 1995 to May 2000, Mr. Xia worked as a manager in the marketing department of Fujian Jiandong (Group) Development Co., Ltd. ( ). Mr. Xia received the “6th Golden Tripod Award of Chinese Marketing Excellence” ( )by Sales and Market Magazine ( ) and Golden Tripod Award of Chinese Marketing Excellence Committee ( ) in April 2009. Mr. Xia received his master’s degree in business administration from Beijing Zhong-xin College of Business Management ( ) in July 2005.

Mr. Chen Yongling ( ), aged 35, is the head of capital operation department of our Group and is primarily responsible for our overall financial management. He joined us in August 2005. Mr. Chen has approximately 13 years of experience in finance, operation and business management. From August 1995 to October 2003, Mr. Chen worked in Quanzhou International Economic & Trade Development Company ( ), where he served as an accountant and was promoted to be the financial manager in March 1998. From October 2003 to July 2005, Mr. Chen worked as the financial manager of Fujian Tian Ce Investment Management Co., Ltd. ( ). Mr. Chen received his diploma in business management from Zhejiang University ( ) in January 2007. Mr. Chen holds a qualification certificate for accounting ( ) conferred by the Ministry of Finance of the PRC in May 2005 and holds a qualification certificate for finance ( ) conferred by the Ministry of Human Resources and Social Security of the PRC ( ) in November 2004. He received the Certificate of Qualification for International Certified Senior Accountant ( ) by International Profession Certification Association ( ) in November 2008. He was recorded in China National Human Resource Network ( ) as a senior accountant by National Center for Human Resource of Personnel Ministry ( ) in November 2008. He was qualified as a financial manager ( ) by China Association for Employment Promotion ( ) in October 2008.

Mr. Hou Zhaohui ( ), aged 33, is the head of human resources and administration department of our Group and is primarily responsible for human resources management and administration. Mr. Hou has approximately four years of experience in the PRC sportswear industry. He joined us in January 2005 as the head of human resources. From September 2005, he has been the head of human resources and administration department. From July 1998 to September 2002, he worked in Qingdao People’s Air Defence Construction Centre ( ), where he served as an assistant engineer and was promoted to be a project manager in January 2001. From October 2003 to December 2004, he worked as a project manager in Beijing Alliance PKU Management Consultants Co. Ltd. ( ). Mr. Hou received his bachelor’s degree in science from Ocean University of Qingdao ( ) in July 1998 and the master’s degree in business administration from Beijing University of Posts and Telecommunications ( )in June 2004.

Mr. Zhu Geming ( ), aged 38, is the head of design department of our footwear business and is primarily responsible for the overall management of the design and research and development of our footwear products. He has approximately 15 years of experience in footwear research and development. From October 1993 to February 1998, Mr. Zhu was the head of technology and research and development in Fujian Putian Chigang Huaqiao Farm Second Footwear and Plastics Factory ( ). From May 1998 to May 2003, he worked as the design manager of men’s footwear in Bieke Fujian. He joined us in October 2003, and in February 2004 he was promoted to be the head of research and development for our men’s footwear.

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DIRECTORS AND SENIOR MANAGEMENT

Mr. Zhu received his diploma in technology and design for footwear from Jilin Second Light Industry School ( ) in July 1993.

Mr. Wang Zhiqian ( ), aged 37, is the head of the research and development department for our footwear business. Mr. Wang has approximately 16 years of experience in the PRC sportswear industry. He joined us in October 2003. Since February 2004, he has been the head of research and development of our women’s footwear business and is primarily responsible for the research and development of women’s footwear. Prior to joining us, Mr. Wang was a footwear designer at Xiamen Leather Industry Development Company ( ) from August 1992 to August 1996. From October 1996 to June 2003, he was responsible for the research and development of footwear in Bieke Fujian. Mr. Wang received his diploma from Jilin Second Light Industry School ( ) in July 1992.

Mr. Yang Guang ( ), aged 42, is the head of design department of our apparel business and is primarily responsible for the design and research and development of our apparel. He has approximately eleven years of experience in the PRC apparel industry. He joined us in January 2005. He was the manager of the development department of Gweat Sports Products Co., Ltd. ( ) from January 1998 to September 2001. He was the head of the apparel department of Qiaodan (China) Co., Ltd. ( ) from March 2000 to July 2004. Mr. Yang received his bachelor’s degree in apparel design from Beijing Institute of Fashion Technology ( ) in July 1990.

Ms. Zhao Jingli ( ), aged 51, is the head of sales department of our Group and is primarily responsible for the sales. She joined us in September 2006. Ms. Zhao has approximately 16 years of experience in the PRC sportswear industry. She was a regional manager of Beijing Lining Sports Products Co., Ltd. ( ) and worked in the market management department from January 1993 to December 2000. She was the deputy general manager of Beijing Hengxin Mingda Commerce and Trade Co., Ltd. ( ) and was responsible for sales and market management in the regions of Beijing and Shandong from January 2001 to May 2003. She was the general manager of the Beijing Branch of Hangzhou Nikko Sports Products Co., Ltd. ( ) from June 2003 to June 2005. She was the market head of Fujian Peak Group Co., Ltd. ( ) from August 2005 to August 2006. Ms. Zhao received her bachelor’s degree in business management in Economics Department of Beijing Normal University ( ) in July 1996.

Mr. Ling Jun ( ), aged 34, is the head of our brand department and is primarily responsible for our overall brand management. Mr. Ling has approximately four years of experience in brand management. He joined us in April 2008. Prior to joining us, Mr. Ling was the head of marketing department of Saucony Sports Distribution (Shanghai) Co., Ltd. ( ) from November 2004 to August 2007. He was the senior project manager in Lining (China) Co., Ltd. ( ) from July 2007 to April 2008. Mr. Ling received his bachelor’s degree in Chinese language and literature from Shanghai Normal University ( ) in July 1997. He received his diploma in the advance program of study in business communication and management from California State University of Sacramento in September 2002. He received his master’s degree in business administration from American National University in April 2003.

Mr. Li Xiang ( ), aged 35, is the head of the equipment and accessories business of our Group and is primarily responsible for the overall management of equipment and accessories. Mr. Li joined us in October 2007. Mr. Li has approximately eleven years of experience in marketing and product management. From September 1997 to January 2001, Mr. Li worked in C-Bons Group ( ) as a designer, regional sales manager and brand manager. From January 2001 to May 2002, he worked as a manager of the market department in Red Heart King Pharmaceutical Company ( ). From May 2002 to September 2007, he worked in the accessories department in Beijing Lining Sports Products Co., Ltd. ( ). Mr. Li received his bachelor’s degree in art from Hua Zhong Normal University ( ) in September 1997.

Mr. Wang Jiachen ( ), aged 47, is a vice general manager of our footwear business and is primarily responsible for the daily operation of our footwear production and the procurement of the soles. He has

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DIRECTORS AND SENIOR MANAGEMENT approximately 14 years of experience in footwear production management. He joined us in July 2003. Prior to joining us, Mr. Wang was a deputy manager of production department of the footwear business in Bieke Fujian from October 1994 to June 2003 and responsible for the procurement of the raw materials for footwear business and the quality control. Mr. Wang is the younger brother of Mr. Wang Jiabi.

Ms. Choi Mun Duen ( ): Please refer to the paragraph headed “Company Secretary” below.

COMPANY SECRETARY Ms. Choi Mun Duen ( ), aged 40, joined the Group in October 2008 and is the chief financial officer and authorised representative of our Company. She is also the company secretary of our Company. Before joining our Group, she was the chief financial officer in China Agri-Products Exchange Limited ( ) (stock code: 149) from July 2007 to September 2008. She was the assistant financial controller in Hua Yi Copper Holdings Limited ( ) (stock code: 559) from June 2006 to June 2007; the assistant group finance manager in Peaktop International Holdings Limited ( ) (stock code: 925) from January 2006 to June 2006; the financial controller in Espco Technology Holdings Limited ( ) (stock code: 8299) from April 2004 to October 2005; the accounting and finance manager in Luen Ming Electric & Plastic Works Co., Ltd. ( ) from July 1999 to March 2004; the accounting manager in Founder (Hong Kong) Limited ( ) from May 1998 to November 1998 and an auditor in Graham H. Y. Chan & Co. ( ) from November 1992 to April 1998. She has over 16 years of experience in auditing, finance and accounting. She received her bachelor’s degree in accounting and finance from University of Glamorgan in the U.K. She is a certified public accountant of the HKICPA and a fellow member of the Association of Chartered Certified Accountants.

MANAGEMENT PRESENCE IN HONG KONG [Š]

REMUNERATION POLICY Our Directors and senior management receive compensation in the form of salaries, benefits in kind and discretionary bonuses related to the performance of our Group. We also reimburse them for expenses which are necessarily and reasonably incurred for providing services to us or executing their functions in relation to our operations. We regularly review and determine the remuneration and compensation package of our Directors and senior management, by reference to, among other things, market level of salaries paid by comparable companies, the respective responsibilities of our Directors and the performance of our Group.

After the [Š], our Directors and senior management may also receive options to be granted under the Share Option Scheme.

DIRECTORS’ AND SENIOR MANAGEMENT’S REMUNERATION DURING THE TRACK RECORD PERIOD For the financial years ended 30 June 2006, 2007 and 2008 and the nine months ended 31 March 2009, the aggregate of the remuneration paid and benefits in kind granted to our Directors by us and our subsidiaries was approximately RMB176,000, RMB332,000, RMB1.4 million and RMB3.5 million, respectively. The amount paid represented mainly allowances provided to them for certain business trips outside China. We did not pay any remuneration to Mr. Ding Huirong and Mr. Wang Jiabi, our executive Directors, for the two financial years ended 30 June 2007 because they did not make any business trips outside China that required allowances from us during the period. All of our executive Directors have agreed to waive their salaries during the Track Record Period in order to enhance the capital base of our Group and facilitate our Group’s expansion. Our executive Directors will receive director fees determined by reference to market rates after the [Š].

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DIRECTORS AND SENIOR MANAGEMENT

Save as disclosed in this document, no other emoluments have been paid, or are payable, in respect of the three financial years ended 30 June 2006, 2007 and 2008 and the nine months ended 31 March 2009 by us to our Directors.

Under the arrangements currently in force, we estimate that the aggregate of the remuneration payable to, and benefits in kind receivable by, our Directors (excluding discretionary bonus) for the financial year ending 30 June 2009 will be approximately RMB4.9 million.

For additional information on Directors’ remuneration during the Track Record Period as well as information on the highest paid individuals, please refer to notes 6 and 7 to our combined financial statement, included in the accountants’ report set out in Appendix I to this document.

BOARD COMMITTEES Audit Committee We established an audit committee pursuant to a resolution of our Directors passed on 10 June 2009 in compliance with Rule 3.21 of the Listing Rules. The primary duties of the audit committee are mainly to review the material investment, capital operation and material financial system of our Company; to review the accounting policy, financial position and financial reporting procedures of our Company; to communicate with external audit firms; to assess the performance of internal financial and audit personnel; and to assess the internal controls of our Company. At present, the audit committee of our Company consists of three members who are Mr. Mak Kin Kwong, Mr. Sun Xianhong and Mr. Liu Jianxing, and Mr. Mak Kin Kwong is the chairman of the audit committee.

Nomination committee We established a nomination committee on 10 June 2009. The primary functions of the nomination committee are to make recommendations to the Board regarding candidates to fill vacancies on the Board. The nomination committee consists of three members, comprising Mr. Ding Wuhao, Mr. Mak Kin Kwong and Mr. Liu Jianxing. The chairman of the nomination committee is Mr. Ding Wuhao.

Remuneration Committee We established a remuneration committee on 10 June 2009. The primary duties of the remuneration committee are to review the terms of the remuneration package of each Director and member of senior management and making recommendations to the Board regarding any adjustment thereof. No Director shall participate in any discussion about his or her own remuneration. The remuneration committee consists of the three members, namely Mr. Wang Jiabi, Mr. Sun Xianhong and Mr. Liu Jianxing, and Mr. Wang Jiabi is the chairman of the remuneration committee.

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SUBSTANTIAL SHAREHOLDERS

Each of the following persons will, immediately following completion of the [Š] and [Š] (without taking into account the Shares which may be issued upon the exercise of the [Š] or the Shares which may be issued pursuant to the exercise of any options which were granted or may be granted under the [Š] Share Option Scheme and the Share Option Scheme), have an interest or short position in Shares or underlying Shares which would be required to be disclosed to us and the Stock Exchange under the provisions of Divisions 2 and 3 of Part XV of the SFO, or, directly or indirectly, be interested in 10% or more of the nominal value of any class of share capital carrying rights to vote in all circumstances at general meetings of any other member of our Group:

Approximate Capacity/ Number of percentage of Name Nature of interest Shares shareholding Dings International ...... Beneficial owner 375,000,000 18.75% Mr. Ding Wuhao ...... Interest in controlled 375,000,000 18.75% corporation Ming Rong International ...... Beneficial owner 360,000,000 18.00% Mr. Ding Huihuang ...... Interest in controlled 360,000,000 18.00% corporation Hui Rong International ...... Beneficial owner 360,000,000 18.00% Mr. Ding Huirong ...... Interest in controlled 360,000,000 18.00% corporation

Save as disclosed herein, our Directors are not aware of any person who will, immediately following the [Š] and [Š], have an interest or short position in Shares or underlying Shares which would be required to be disclosed to us and the Stock Exchange under the provisions of Divisions 2 and 3 of Part XV of the SFO, or, directly or indirectly, be interested in 10% or more of the nominal value of any class of share capital carrying rights to vote in all circumstances at general meetings of our Company.

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SHARE CAPITAL

HK$ Authorised share capital: 10,000,000,000 ...... Shares 1,000,000,000

Ranking The [Š] are ordinary shares in the share capital of our Company and will rank equally in all respects with all Shares in issue or to be issued as set out in the above table, and will qualify and rank in full for all dividends or other distributions declared, made or paid after the date of this document.

[Š] Share Option Scheme and Share Option Scheme We have conditionally approved and adopted the [Š] Share Option Scheme and the Share Option Scheme on 10 June 2009, the principal terms of which are summarised in the sections headed “[Š] Share Option Scheme” and “Share Option Scheme” in Appendix VI to this document.

Pursuant to the [Š] Share Option Scheme, eligible participants of the scheme (including our Directors and directors of members of our Group, full-time and part-time employees, advisers, consultants and business partners of our Group) may be granted options which entitle them to subscribe for Shares representing (when aggregated with options granted under any other scheme) a maximum of 10% of the issued share capital of our Company as of the [Š] excluding the number of Shares which may fall to be issued upon the exercise of [Š]. As of the Latest Practicable Date, we have granted options to subscribe for 20,380,000 Shares pursuant to the [Š] Share Option Scheme. No options under the [Š] Share Option Scheme were granted to any of our Connected Persons. We will not grant any further options under the [Š] Share Option Scheme upon the [Š].

Pursuant to the Share Option Scheme, eligible participants of the scheme (including our Directors and directors of other members of our Group, full-time and part-time employees, advisers, consultants and business partners of our Group) may be granted options which entitle them to subscribe for Shares representing (when aggregated with options granted under any other scheme) a maximum of 10% of the issued share capital of our Company as of the [Š]. No options have been granted under the Share Option Scheme as of the Latest Practicable Date.

General mandate to issue Shares Our Directors have been granted a general unconditional mandate to allot, issue and deal with Shares with an aggregate nominal value of not more than the sum of: (i) 20% of the aggregate nominal value of the share capital of our Company in issue immediately following completion of the [Š] and [Š] (excluding any Shares which may be issued pursuant to the [Š]); and (ii) the aggregate nominal value of share capital of our Company repurchased by our Company (if any) under the general mandate to repurchase Shares referred to below.

This mandate will expire at the earliest of: (i) the conclusion of our Company’s next annual general meeting; or (ii) the expiration of the period within which our Company is required by law or the Articles of Association to hold its next annual general meeting; or (iii) when varied, revoked or renewed by an ordinary resolution of our Company’s shareholders in a general meeting.

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SHARE CAPITAL

For further details of this general mandate, see the paragraph headed “Written resolutions of our Shareholders passed on 10 June 2009” in Appendix VI to this document.

General mandate to repurchase Shares Our Directors have been granted a general unconditional mandate to exercise all the powers of our Company to repurchase Shares with a total nominal value of not more than 10% of the aggregate nominal amount of the share capital of our Company in issue or to be issued immediately following completion of the [Š] and [Š] (excluding any Shares which may be issued upon the exercise of the [Š]).

This mandate only relates to repurchases made on the Stock Exchange, or any other approved stock exchange(s) on which the Shares are listed (and which is recognised by the SFC and the Stock Exchange for this purpose), and which are made in accordance with all applicable laws and/or requirements of the Listing Rules. A summary of the relevant Listing Rules is set out in the paragraph headed “Repurchase by our Company of its own Shares” in Appendix VI to this document.

This mandate will expire at the earliest of: (i) the conclusion of our Company’s next annual general meeting; or (ii) the expiration of the period within which our Company is required by law or Articles of Association to hold its next annual general meeting; or (iii) when varied, revoked or renewed by an ordinary resolution of our Company’s Shareholders in a general meeting.

For further details of this repurchase mandate, see the paragraph headed “Written resolutions of our Shareholders passed on 10 June 2009” in Appendix VI to this document.

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FINANCIAL INFORMATION

OVERVIEW We are one of the leading domestic sportswear enterprises in the PRC. As of the Latest Practicable Date, our 361° products were sold at more than 5,900 361° authorised retail outlets in 31 provinces and most major cities in the PRC. According to Frost & Sullivan, among the ten major participants of the PRC sportswear market (selected based on revenue for 2008), we were the fastest growing brand in terms of revenue growth rate for 2008 as compared to 2007, a top five domestic brand in terms of revenue for 2008, accounting for 4.2% of the total revenue of the PRC sportswear market for the same period, and a top five brand in terms of the number of retail outlets in the PRC as of 31 March 2009.(1) We design, develop, produce, market and distribute high performance, innovative and stylish sportswear products, including athletic footwear, apparel and accessories. Our 361° products are marketed primarily to the fast-growing, up-and-coming consumer group comprised of sports- minded consumers between the ages of 16 and 25. Founded in 2003, we have grown rapidly in recent years in terms of sales and number of authorised retail outlets. We believe our growth has been driven principally by the successful promotion of our 361° brand, rapid expansion of the 361° retail network, improved product designs, expansion of our range of product offerings, and our conversion to an exclusive distributorship business model. Increasing market demand for sportswear products and improving economic conditions in the PRC also contributed to our growth.

Our brand, 361°, represents the 360 degrees of a complete circle plus one extra degree, symbolising our goal of establishing our brand to provide complete satisfaction in athleticism and functionality, plus an added degree of innovation and creativity. It also represents our continuous commitment to always pursuing one more degree of management and operational excellence and highlights our goal of distinguishing 361° from other competitors by this one degree.

As of the Latest Practicable Date, the distribution network of our 361º products consisted of 30 distributors who oversaw 3,173 authorised retailers. These authorised retailers owned and operated 5,925 361° authorised retail outlets, covering 31 provinces and more than 450 district-level cities, as well as more than 1,200 county- level cities in the PRC. Currently, we do not have any interest in, or operate, any of our distributors, authorised retailers, or 361° authorised retail outlets. While we do not have direct contractual relationships with authorised retailers, our distributors enter into separate agreement with authorised retailers and require them to comply with our standard operating procedures, some of which include guidelines on the design and layout of 361° authorised retail outlets, product pricing and customer service. To ensure compliance with these procedures and to assist authorised retailers with marketing and sales, our regional sales managers routinely visit 361° authorised retail outlets. In addition, we offer authorised retailers and 361° authorised retail outlets training programmes several times a year.

Our production facilities are located in Jinjiang City, Fujian Province, the PRC. As of the Latest Practicable Date, we operated 16 footwear production lines, with an aggregate annual production capacity of approximately 13.6 million pairs of footwear. We do not operate any production facilities for apparel or accessories and have, during the Track Record Period, outsourced all production of those products to third-party contract manufacturers.

Our revenues for the financial years ended 30 June 2006, 2007 and 2008 were RMB262.9 million, RMB373.3 million and RMB1,317.1 million, respectively, representing a CAGR of 123.8%. Our gross profits for the financial years ended 30 June 2006, 2007 and 2008 were RMB27.1 million, RMB76.9 million and RMB348.0 million, respectively, representing a CAGR of 258.6%. Our net profits for the financial years ended 30 June 2006, 2007 and 2008 were RMB11.0 million, RMB22.9 million and RMB179.0 million, respectively, representing a CAGR of 303.3%. Our revenues for the nine months ended 31 March 2008 and 2009 were RMB853.7 million and RMB2,423.7 million, respectively, representing an increase of 183.9%. Our gross profits for the nine months ended 31 March 2008 and 2009 were RMB202.4 million and RMB791.3 million, respectively, representing an increase of 291.1%. Our net profit for the nine months ended 31 March 2008 and 2009 were RMB102.7 million and RMB364.2 million, respectively, representing an increase of 254.8%. The

Note: (1) Please refer to “Industry Overview—The PRC Sportswear Industry” section in this document for more information.

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FINANCIAL INFORMATION significant growth in our profits for the financial year ended 30 June 2008 and the nine months ended 31 March 2009, as compared to the financial year ended 30 June 2007 and the nine months ended 31 March 2008, respectively, was primarily due to the successful promotion of our 361° brand, rapid expansion of the 361° retail network, improved product design, expansion of our range of product offerings, and our conversion to an exclusive distributorship business model, which encouraged our distributors to concentrate their resources exclusively on the wholesale distribution of our 361° products and helped us to develop and expand the 361° retail network.

BASIS OF PRESENTATION OF FINANCIAL INFORMATION Mr. Ding Huihuang, Mr. Ding Wuhao and Mr. Ding Huirong owned various companies in the BVI, Hong Kong and the PRC which are principally engaged in the manufacturing and trading of sporting goods, including footwear, apparel and accessories in the PRC. To rationalise the corporate structure in preparation of the [Š]of the Company’s shares on the Stock Exchange, the Company underwent the Corporate Reorganisation, as detailed in the section headed “Corporate Reorganisation” in Appendix VI to this document.

As the companies that took part in the Corporate Reorganisation were controlled by the same group of ultimate equity holders, Mr. Ding Huihuang, Mr. Ding Wuhao and Mr. Ding Huirong, through their interests in Ming Rong International, Dings International and Hui Rong International (referred to as “the controlling equity holders”) before and after the Corporate Reorganisation and, consequently, there was a continuation of the risks and benefits to the controlling equity holders and therefore this is considered as a business combination under common control and Accounting Guideline 5 “Merger Accounting for Common Control Combinations” has been applied. The combined financial information has been prepared using the merger basis of accounting as if we had always been in existence. The net assets of the combining companies are combined using the existing book values from the controlling equity holders’ perspective.

Our combined income statements, combined statements of changes in equity, and combined cash flow statements as set out in Appendix I to this document for the Track Record Period include the results of operations of the companies of which we are comprised (or where the companies were incorporated/established at a date later than 1 July 2005, for the period from the date of incorporation/establishment to 31 March 2009) as if the current group structure had been in existence throughout the Track Record Period. Our combined balance sheets as of 30 June 2006, 2007 and 2008 and 31 March 2009 as set out in Appendix I to this document have been prepared to present the state of affairs of the companies of which we are comprised as of those dates, as if the current group structure had been in existence as of the respective dates.

The combined financial information included in the accountants’ report in Appendix I to this document has been prepared in accordance with HKFRSs promulgated by the HKICPA, the disclosure requirements of the Hong Kong Companies Ordinance and the applicable disclosure provisions of the Listing Rules. HKFRSs include HKASs and Interpretations.

We did not prepare combined financial statements previously. This is our first HKFRSs combined Financial Information, and HKFRS 1 “First-time adoption of Hong Kong Financial Reporting Standards” has been applied.

During the Track Record Period, the HKICPA issued a number of new and revised HKFRSs. For the purpose of preparing the financial information, we have adopted all of these new and revised HKFRSs applicable to the Track Record Period, except for any new standards or interpretations that are not yet effective for the accounting periods beginning on or after 1 January 2009. See note 26 to the combined financial statements in Appendix I to this document.

Intra-group balances and transactions are eliminated in full in preparing the combined financial information.

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FINANCIAL INFORMATION

FACTORS AFFECTING OUR FINANCIAL CONDITION AND RESULTS OF OPERATIONS Our financial condition and results of operations have been and will continue to be affected by a number of factors, including those factors discussed below, some of which are beyond our control.

Consumer demand for sportswear in the PRC Consumer demand in the PRC for sportswear is one of the key drivers of our revenues from sales of our 361° products and depends in large part on the general economic conditions in the PRC, the growth in disposable income of residents of the PRC and consumption patterns in the PRC. The increase in the purchasing power of PRC residents is expected to drive in part sentiment towards the purchase of sportswear products that bear a well- recognised brand, which may positively affect our results of operations. According to the PRC General Administration of Sport, there is a general correlation between increasing income levels and the rising popularity of sports.

Our growth also depends on the existence and the continuation of consumer spending preferences in the PRC for sportswear. Based on data from Frost & Sullivan, total sportswear revenue in the PRC increased from US$2.5 billion (RMB20.8 billion) in 2004 to US$7.7 billion (RMB53.3 billion) in 2008. According to Frost & Sullivan, total sportswear revenue in China is expected to reach US$31.3 billion (RMB197.9 billion) in 2013, representing a CAGR of 32.5% over the period from 2008 to 2013. We also expect there will be a growth in interest in sports among PRC consumers as a result of, among other events, the 2008 Beijing Olympic Games ( ), the 2009 East Asian Games ( ) in Hong Kong and the 16th Asian Games in Guangzhou in 2010 ( ). Changes in consumption patterns in the PRC or a less than expected increase in consumer spending for sportswear products may materially and adversely affect our financial condition and results of operations.

Our ability to maintain our competitive strengths that differentiate us from our competitors The demand for sportswear in the PRC has grown rapidly in recent years, in line with the general economic growth of the PRC. We believe that the sportswear industry is highly competitive in the PRC and will continue to be so for the near future. Participants in the sportswear industry in the PRC market include international and domestic brands, which compete in, among other things, brand loyalty, product variety, product design, product quality, marketing and promotion, distribution network coverage, price and the ability to meet delivery commitments to distributors and authorised retailers. This competition has led to leading brands continuing to gain market share at the expense of less established, lower-end brands. We must continue to meet these competitive challenges by maintaining our competitive strengths, such as our extensive, fast-growing distribution network, innovative design and product development capabilities, innovative marketing and promotion strategies as well as experienced management team, to offer customers high quality products in the PRC and to differentiate ourselves from our competitors.

Our ability to continuously maintain and enhance our 361° brand recognition Our financial condition and results of operations will also be affected by our ability to continuously maintain and enhance recognition of our 361° brand. In particular, we believe that our success will depend on our ability to implement our innovative multimedia marketing and promotion strategies and improve our authorised retail outlets in terms of size, location and layout. For the financial years ended 30 June 2006, 2007 and 2008 and the nine months ended 31 March 2009, our advertising and marketing expenses accounted for approximately 3.3%, 9.1%, 6.4% and 9.3% of our total revenue for each of those periods, respectively. We currently intend to increase our expenditures in advertising and marketing to further strengthen our brand and market position. If we are unsuccessful in promoting our 361° brand or fail to maintain our brand position, market perception and consumer acceptance of our 361° brand may be eroded, and our business, financial condition, results of operations and prospects may be materially and adversely affected.

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FINANCIAL INFORMATION

Our ability to continue to expand and develop the 361° distribution network Under our current business model, all of our sales of our 361° products are made to our distributors. Prior to 2008, all of our sales were made to customers who either resold our products to authorised retailers or sold our products at their self-operated retail outlets. We believe that our rapid growth during calendar year of 2008 was in part attributable to our ability to leverage the resources of our distributors after adoption of the exclusive distributorship business model. However, we cannot assure you that the significant growth since the adoption of our new business model in 2008 will be sustainable or achieved at all in the future. Our financial condition and results of operations will be affected by our ability to work closely with our distributors to increase and improve our marketing programmes, our ability to expand and optimise our network of distributors, and the ability of our distributors and authorised retailers to further enhance the network of 361° authorised retail outlets being operated within their exclusive geographic regions. If we fail to expand and develop the distribution network of our 361° products, our financial condition and results of operations may be materially and adversely affected. See “Risk Factors—We rely on our distributors to oversee authorised retailers and to expand the 361° retail network” and “our 361° brand has a limited history in the branded sportswear industry and our new exclusive distributorship business model has a short track record”.

Pricing of our products The brand power of our 361° brand is a significant factor that we take into consideration in determining the suggested retail prices of our 361° products. Our ability to continue to price our 361° products at current levels is important to our financial performance. We require our distributors and authorised retailers to comply with our uniform retail prices, which we determine based on various factors such as our internal and outsourcing production costs, our competitors’ pricing strategies, consumers’ purchasing power in the PRC and general economic conditions in the PRC. We market our 361° products to the fast-growing, up-and-coming consumer group comprised of sports-minded consumers between the ages of 16 and 25 who, we believe, are willing to pay a relatively higher price for sportswear products with athletic functionality, and innovation and creativity. We believe our product positioning enables us to capture a well-defined market with growing demand. In light of the growing demand and increasing popularity of our products, we have been increasing the average wholesale selling prices and retail prices of our 361° footwear products during the Track Record Period, which we believe has helped increase our revenues and profitability. Going forward, our ability to continue to attract consumers by offering sportswear products with athletic functionality, and innovation and creativity that are differentiated from those of our competitors should have a direct impact on the pricing of our products.

Our product mix We offer a wide range of sportswear products for both men and women, including footwear, apparel and accessories. We continuously monitor our product mix and develop new products that we believe will generate higher customer demand, as part of our efforts to maximise revenues. During the Track Record Period, we underwent a shift in the mix of revenues generated from our different product lines. Our revenues derived from sales of apparel increased to 33.1% and 50.9% of our 361° products revenues for the financial year ended 30 June 2008 and the nine months ended 31 March 2009 from 6.2% and 29.3% of our 361° products revenues for the financial year ended 30 June 2007 and the nine months ended 31 March 2008, respectively. We also introduced 361° accessories in 2007, which had the highest gross profit margin in 2008 among our three 361° product lines. Although we believe that revenue contributions from each of our three product lines as a percentage of total revenue will remain relatively stable in the near future, we will continue to adjust our product mix within each product line and enhance our product positioning in an effort to increase our revenues and gross profit. As we adjust our product mix, our gross profit will be affected both by any change in revenues attributable to, and any change in the gross profit margin of, each product line.

Cost of raw materials for our 361° products The principal raw materials used in the production of our footwear products are leather, synthetic leather, fabrics, rubber, plastics and soles. For the financial years ended 30 June 2006, 2007 and 2008 and the nine

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FINANCIAL INFORMATION months ended 31 March 2009, the cost of our raw materials accounted for approximately 53.1%, 56.4%, 47.0% and 23.8%, respectively, of our cost of sales for our 361° products. We do not include in our cost of raw materials the cost of raw materials incurred by our contract manufacturers to whom we outsourced the production of some of our footwear, all of our apparel and all of our accessories during the Track Record Period. It is important for us to obtain from our suppliers sufficient quantities of quality raw materials in a timely manner and at competitive prices for our internal production of footwear. The cost of some of our key raw materials is affected by several factors, such as fluctuations in commodity prices (including oil), purchase volume and availability of substitute materials. We do not enter into long-term agreements with our raw material suppliers. Fluctuations in the costs of our principal raw materials and our inability to pass on any increases in raw material costs to our customers by increasing the suggested retail prices of our products or increasing the sale price to our distributors may materially and adversely affect our cost of sales and our gross profit margins. See “We rely on a small number of suppliers for certain raw materials. Unfavourable fluctuations in the price, availability and quality of raw materials could cause production delays and materially increase production costs” in the section headed “Risk Factors—Risks Relating to Our Business” in this document.

Ability to maintain production flexibility through internal and external production We produced approximately 100%, 98.5%, 90.4% and 60.7% of our footwear products in terms of production volume at our own production facilities, located in Jinjiang City, Fujian Province, the PRC, for the financial years ended 30 June 2006, 2007 and 2008 and the nine months ended 31 March 2009, respectively. The percentage of our outsourced footwear production increased significantly to approximately 39.3% for the nine months ended 31 March 2009 as our production capacity for the same period (approximately 10.2 million pairs of footwear) lagged behind the increasing demand of our footwear (approximately 14.3 million pairs of footwear sold during the period). As of the Latest Practicable Date, we operated 16 footwear production lines with an aggregate production capacity of 13.6 million pairs of footwear products per annum. We currently intend to increase our footwear production to an annual production capacity of 15.3 and 17.9 million pairs of footwear by December 2009 and June 2010, respectively. We also plan to initiate our own apparel production which will have an annual production capacity of 1.8 million pieces of apparel by June 2010. Until we are able to increase our internal production capacity, we expect our reliance on external production to increase as our sales increase in the near future. If our contract manufacturers are unable to meet our production requirements on time, or at all, our ability to grow our business will be adversely affected. Our financial condition and results of operations will be significantly affected by our ability to maintain strong production capability and our flexibility in making effective use of our internal production and contract manufacturers.

Seasonality Our results of operations are subject to seasonality. Our 361° products typically achieve higher sales when we sell our 361° products for the spring and summer seasons to our distributors due to seasonality of demand for sportswear and the lower average selling price of spring and summer products as compared to autumn and winter products. We generally sell and distribute our spring and summer seasonal products from February to August, and our autumn and winter seasonal products from September to January. Unexpected and abnormal changes in climate may affect the sales of our products that are timed for release during a particular season. For example, a warm winter may affect the sales of our jackets and other winter products, while a cool summer may affect the sales of T-shirts and other summer products. As a result, we believe that comparisons of our operating results and net income over any interim periods may not be meaningful and such comparisons may not be an accurate indicator of our future performance.

Level of income tax and preferential tax treatment Our profit attributable to our Shareholders is affected by the level of income tax that we pay and the level of preferential tax treatment to which we may be entitled. On 16 March 2007, the National People’s Congress of the PRC ( ) promulgated the Enterprise Income Tax Law of the PRC ( ) (the “New Tax Law”), which came into effect on 1 January 2008. The New Tax Law consolidates the two

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FINANCIAL INFORMATION separate tax regimes for domestic enterprises and foreign-invested enterprises (the “Old Tax Regime”) and imposes a unified enterprise income tax rate of 25% for both domestic enterprises and foreign-invested enterprises in the PRC.

Under the New Tax Law, foreign-invested enterprises that enjoyed a preferential tax rate prior to the New Tax Law’s promulgation will gradually transit to the new tax rate over five years from 1 January 2008. Foreign- invested enterprises that enjoyed a tax rate of 24% will have their tax rate increased to 25% in 2008. Enterprises which enjoyed a fixed period of tax exemption and reduction prior to the New Tax Law’s promulgation will continue to enjoy such preferential tax treatment until the expiry of such prescribed period, and for those enterprises whose preferential tax treatment has not commenced before due to lack of profit, such preferential tax treatment will commence from 1 January 2008.

Under the Old Tax Regime and as approved by the relevant tax authorities, Sanliuyidu Fujian, a foreign- invested enterprise, was exempted from enterprise income tax for its first two profitable years, commencing from 1 January 2004, and thereafter was entitled to a 50% reduction in the enterprise income tax for the three subsequent years until 31 December 2008. Sanliuyidu Fujian enjoyed full exemption from enterprise income tax in 2004 and 2005, as well as a 50% reduction of its enterprise income tax rate of 24% in 2006 and 2007, which had a significant positive effect on our profit after taxation during the financial years ended 30 June 2006 and 2007. Under the New Tax Law, Sanliuyidu Fujian continued to enjoy a 50% reduction of the phased-in enterprise income tax rate of 25% until 31 December 2008 and has thereafter been subject to a 25% tax rate.

Under the New Tax Law, Sanliuyidu China is exempted from the enterprise income tax for its first two profitable years, commencing from 1 January 2008 and thereafter is entitled to a 50% reduction in the phased-in enterprise income tax rate of 25% for the subsequent three years until 31 December 2012. We expect that upon the expiry of the full exemption from enterprise income tax currently enjoyed by Sanliuyidu China, the tax rate applicable to our Group will increase from 2010 onwards and will further increase from 2013 following the expiry of the above preferential tax treatment.

Sanliuyidu Xiamen was incorporated on 19 May 2008 and is not entitled to enjoy any tax exemption or reduction since its incorporation. It did not commence operations nor generate any assessable profit until September 2008 and has thereafter been subject to the phased-in enterprise income tax rate of 25%.

Under the New Tax Law, if an enterprise incorporated outside the PRC has its “effective management” located within the PRC, such enterprise may be recognised as a PRC tax resident enterprise and be subject to the unified enterprise income tax rate of 25% for its worldwide income. Members of our Group which are not incorporated in the PRC may in the future be recognised as a PRC tax resident enterprise according to the New Tax Law by the PRC taxation authorities. According to the New Tax Law, dividends received by a qualified PRC tax resident from another PRC tax resident are exempted from enterprise income tax. However, given the limited history of the New Tax Law, it remains unclear as to the detailed qualification requirements for such exemption and whether dividends declared and paid by members of our Group in the PRC to their overseas holding companies will be exempted from enterprise income tax if they are recognised as PRC tax residents. Our financial performance will be materially and adversely affected if such dividends are subject to enterprise income tax. See “Any change in our tax treatment, including an unfavourable change in preferential enterprise tax rates in the PRC, may have a material adverse impact on our financial condition and results of operations” in the section headed “Risk Factors—Risks Relating to Conducting Business in the PRC” in this document.

In addition, under the New Tax Law and its implementation rules, our Company may in the future be recognised as a PRC tax resident enterprise by the PRC taxation authorities, capital gains realised by foreign Shareholders from sales of our Shares and dividends on our Shares payable to foreign Shareholders may be regarded as income from “sources within the PRC” and therefore become subject to a 10% withholding income tax. If we are required under the New Tax Law to withhold PRC income tax on capital gains on sales of Shares and/or dividends on our Shares payable to foreign Shareholders, the value of our foreign Shareholders’ investment in our Shares may be materially and adversely affected.

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FINANCIAL INFORMATION

CRITICAL ACCOUNTING POLICIES AND ESTIMATES The preparation of financial information in conformity with HKFRS requires us to make judgements, estimates and assumptions that affect the application of policies and reported amounts of assets, liabilities, income and expenses. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making the judgements about carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates.

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods.

Judgements made by us in the application of HKFRS that have a significant effect on the financial information and estimates with a significant risk of material adjustment in the next year are discussed in note 24 to our combined financial statements in the accountants’ report set out in Appendix I to this document.

The accounting policies set out below have been applied consistently to all periods presented in the financial information.

Revenue recognition We recognise revenue as profit or loss when we are able to measure such profit or loss and it is probable that the economic benefits will flow to us. Revenues of the following type are recognised as follows: • Sale of goods—Revenue is recognised when our products leave our warehouse because at that time the customer has accepted the related risks and rewards of ownership. Revenue excludes value added tax or other sales taxes and is after deduction of any trade discounts and goods return. • Interest income—Interest income is recognised as it accrues using the effective interest method. • Government grants—Government grants are recognised in the balance sheet initially when there is reasonable assurance that they will be received and that we will comply with the conditions attaching to them. Grants that compensate us for expenses incurred are recognised as revenue in profit or loss on a systematic basis in the same periods in which the expenses are incurred. Grants that compensate us for the cost of an asset are initially recognised as deferred income and subsequently recognised as revenue in profit or loss upon satisfaction of the conditions attaching to the grants.

Impairment of trade and other receivables We review trade and other receivables that are stated at cost or amortised cost as of each balance sheet date to determine whether objective evidence of impairment exists as of such date. Objective evidence of impairment includes observable data about one or more of the following loss events: • significant financial difficulty of the debtor; • a breach of contract, such as a default or delinquency in interest or principal payments; • likelihood of the debtor entering bankruptcy or other financial reorganisation; and • significant changes in the technological, market, economic or legal environment that have an adverse effect on the debtor.

If any such evidence exists, the amount of impairment loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows, discounted at the financial asset’s original effective interest rate (i.e, the effective interest rate computed at initial recognition of these assets), where the effect of discounting is material. This assessment is made collectively where financial assets carried at amortised cost share similar risk characteristics, such as similar past due status, and have not been individually assessed as

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FINANCIAL INFORMATION impaired. Future cash flows for financial assets which are assessed for impairment collectively are based on historical loss experience for assets with credit risk characteristics similar to the collective group.

If in a subsequent period the amount of an impairment loss decreases and the decrease can be linked objectively to an event occurring after the impairment loss was recognised, the impairment loss is reversed through profit or loss. A reversal of an impairment loss does not result in the asset’s carrying amount exceeding that which would have been determined had no impairment loss been recognised in prior years.

Impairment losses recognised in respect of trade and bills receivables included within trade and other receivables whose recovery is considered doubtful but not remote are recorded using an allowance account. When we are satisfied that recovery is remote, the amount considered irrecoverable is written off against trade and bills receivables directly and any amounts held in the allowance account relating to that debt are reversed. Subsequent recoveries of amounts previously charged to the allowance account are reversed against the allowance account. Other changes in the allowance account and subsequent recoveries of amounts previously written off directly are recognised in profit or loss.

Inventory Inventory is carried at the lower of cost and net realisable value. Cost is calculated using the weighted average cost formula and comprises all costs of purchase, costs of conversion and other costs incurred in bringing the inventory to their present location and condition. Net realisable value is the estimated selling price in the ordinary course of business less the estimated costs of completion and the estimated costs necessary to make the sale. These estimates are based on current market conditions and our experience of manufacturing and selling products of a similar nature. These estimates could change significantly as a result of changes in customer preferences and competitor actions in response to severe industry cycles. We reassess these estimates as of each balance sheet date.

When inventory is sold, the carrying amount of that inventory is recognised as an expense in the period in which the related revenue is recognised. The amount of any write-down of inventory to net realisable value and all losses of inventory are recognised as an expense in the period the write-down or loss occurs. The amount of any reversal of any write-down of inventory is recognised as a reduction in the amount of inventory recognised as an expense in the period in which the reversals occur.

We conduct physical stock counts at the end of each financial year and we record a specific provision if the estimate of the net realisable value of any inventory is below the corresponding cost of such inventory, as a result of, among other things, being obsolete or damaged. During the Track Record Period, we were not required to make any provisions because we only commenced mass production upon confirmation of purchase orders with our customers prior to 2008. Beginning in 2008, we procured a portion of raw materials and commenced production, before receipt of purchase orders, of a portion of the indicated purchase volume of certain products for which we received high purchase volume indications from our distributors during their preview of the prototype products, and we procured the majority of raw materials and commenced production of the majority of our products upon confirmation of purchase orders with our distributors or customers. As of 30 April 2009, all of the finished goods in stock as of 30 June 2006, 2007 and 2008 and RMB76.4 million, or 90.7%, of finished goods in stock as of 31 March 2009 were subsequently consumed or sold above cost.

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FINANCIAL INFORMATION

Property, plant and equipment We state items of property, plant and equipment in the balance sheet at cost less accumulated depreciation and impairment losses. The cost of self-constructed items of property, plant and equipment includes the cost of materials, direct labour, the initiate estimate, where relevant, of the cost of dismantling and removing the items and restoring the site on which they are located, and an appropriate proportion of production overheads and borrowing costs. We calculate depreciation to write-off the cost of items of property, plant and equipment, less their estimated residual value, if any, using the straight line method over their estimated useful lives as follows: • Buildings situated on leasehold land are depreciated over the shorter of the unexpired term of lease and their estimated useful lives, being no more than 20 years after the date of completion. • Plant and machinery ...... 5-10years • Motor vehicles ...... 5years • Office equipment and other fixed assets ...... 2-5years

Both the useful life of an asset and its residual value, if any, are reviewed at least annually.

Gains or losses arising from the retirement or disposal of an item of property, plant and equipment are determined as the difference between the net disposal proceeds and the carrying amount of the item and are recognised in profit or loss on the date of retirement or disposal.

Property, plant and equipment are depreciated on a straight-line basis over their estimated useful lives, after taking into account their estimated residual values. We review the estimated useful lives of the assets regularly in order to determine the amount of depreciation expense to be recorded during any reporting period. Useful lives are based on our historical experience with similar assets, after taking into account anticipated technological changes. The depreciation expense for future periods are adjusted if there are significant changes from previous estimates.

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FINANCIAL INFORMATION

RESULTS OF OPERATIONS Selected Combined Income Statements Information The selected combined income statements information presented below for the financial years ended 30 June 2006, 2007 and 2008 and the nine months ended 31 March 2008 and 2009 are derived from our combined financial statements included in the accountants’ report set out in Appendix I to this document. Our combined financial information as of and for the nine months ended 31 March 2008 has not been audited.

For the nine months ended For the financial year ended 30 June 31 March 2006 2007 2008 2008 2009 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 (unaudited) Revenues ...... 262,923 373,346 1,317,069 853,651 2,423,679 Cost of sales ...... (235,865) (296,423) (969,041) (651,292) (1,632,354) Gross profit ...... 27,058 76,923 348,028 202,359 791,325 Other revenue ...... 824 1,591 2,467 1,031 5,827 Other loss ...... — — (1,948) — (54) Selling and distribution expenses ...... (9,977) (36,484) (106,409) (62,507) (286,288) Administrative expenses ...... (5,668) (12,699) (39,595) (24,561) (68,209) Profit from operations ...... 12,237 29,331 202,543 116,322 442,601 Finance costs ...... (1,250) (3,026) (5,371) (3,457) (11,883) Profit before taxation ...... 10,987 26,305 197,172 112,865 430,718 Income tax ...... 19 (3,394) (18,199) (10,209) (66,513) Profit for the year/period ...... 11,006 22,911 178,973 102,656 364,205 Dividends payable to equity shareholders of the Company attribute to the year/period: Dividends declared during the year/period ...... — — — — 45,342 Dividends declared after the balance sheet date .... — — — — 31,400 — — — — 76,742

Basic earnings per share (RMB) ...... 0.007 0.015 0.119 0.068 0.243

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PRINCIPAL INCOME STATEMENT COMPONENTS Revenues Substantially all of our revenues are derived from sales of our 361° products, consisting of footwear, apparel and accessories. In addition, 0.5%, 1.3% and 0.7% of our revenues for the financial years ended 30 June 2006, 2007 and 2008, respectively, were contributed by sales of footwear material, consisting of TPR pellets and TPU pellets that we manufactured for sale to various manufacturers of soles for footwear. We ceased producing and selling these pellets in July 2008 as this business did not achieve our targeted results. Further, we used to provide certain packaging materials, such as shoe boxes and shopping bags embossed with our 361º logo, to our distributors and pre-2008 customers for use by the authorised retailers in connection with sales of our 361º products at our cost, and such cost had been recognised as our selling and distribution expenses. In order to encourage efficiency in resources management, starting from June 2008, we only provide our distributors with a certain amount of packaging materials as we think fit at our cost, and provide additional packaging materials to our distributors only at their requests and at a charge. Such charges are regarded as sales of packaging materials by us. Sales of packaging materials accounted for approximately 0.1% of our revenue for the nine months ended 31 March 2009. Revenues represent the value of goods sold, less returns, discounts and value-added taxes and other sales tax. The following table sets forth a breakdown of our revenues during the Track Record Period:

For the financial year ended 30 June For the nine months ended 31 March 2006 2007 2008 2008 2009 RMB’000 % RMB’000 % RMB’000 % RMB’000 % RMB’000 % (unaudited) Revenues Footwear ...... 240,325 91.4 345,890 92.6 866,134 65.8 599,087 70.2 1,133,237 46.8 Apparel ...... 21,229 8.1 22,739 6.1 432,737 32.8 248,211 29.1 1,232,942 50.9 Accessories and others(1) ...... 1,369 0.5 4,717 1.3 18,198 1.4 6,353 0.7 57,500 2.3 Total ...... 262,923 100.0 373,346 100.0 1,317,069 100.0 853,651 100.0 2,423,679 100.0

Note: (1) “Others” include revenues from sales of TPR and TPU pellets for the three financial years ended 30 June 2008 and sales of certain packaging materials for the nine months ended 31 March 2009, respectively.

The significant growth of our 361° product sales was primarily due to the successful promotion of our 361° brand, rapid expansion of the 361° retail network, which grew from 1,391 361° authorised retail outlets as of 30 June 2006 to 3,126 as of June 2007, 4,632 as of 30 June 2008 and 5,543 361° authorised retail outlets as of 31 March 2009, improved product design, expansion of our range of product offerings, and our conversion to an exclusive distributorship business model, which encouraged our distributors to concentrate their resources exclusively on the wholesale distribution of our 361° products and help us to develop and expand the 361° retail network. Increasing market demand for sportswear products and improving economic conditions in the PRC also contributed to our growth. In addition, the 2008 Beijing Olympic Games ( ), which increased the PRC public’s interest in, and awareness of, sports and fitness, slightly contributed to the increase of our sales in 2008 and the first quarter of 2009. We do not believe that completion of the 2008 Beijing Olympics Games ( ) will have a material adverse effect on our growth, as we believe that our 361° brand will continue to strengthen and gain increasing market acceptance as we implement our strategy of further developing and increasing awareness of our 361° brand.

Our product mix changed significantly during the Track Record Period as we expanded our 361° product line to include apparel in February 2005 and accessories in September 2007 to meet demand from consumers for 361° apparel and accessories and to diversify our 361° branded product offerings. As a result, our revenues from sales of footwear decreased from 91.4% of our total revenues for the financial year ended 30 June 2006 to 65.8% and 46.8% of our total revenues for the financial year ended 30 June 2008 and the nine months ended 31 March 2009, respectively. On the other hand, our revenues from sales of apparel increased from 8.1% of our total revenues for the financial year ended 30 June 2006 to 32.8% and 50.9% of our total revenues for the financial year ended 30 June 2008 and the nine months ended 31 March 2009, respectively. However, we believe that

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FINANCIAL INFORMATION revenue contributions from each of our three product lines (i.e. footwear, apparel and accessories) as a percentage of total revenue will remain relatively stable in the near future.

The following table sets forth the number of units sold and the average wholesale selling prices of our 361° products during the Track Record Period:

For the financial year ended 30 June For the nine months ended 31 March 2006 2007 2008 2008 2009 Average Average Average Average Average Total wholesale Total wholesale Total wholesale Total wholesale Total wholesale units selling units selling units selling units selling units selling sold price(1) sold price(1) sold price(1) sold price(1) sold price(1) ’000 RMB ’000 RMB ’000 RMB ’000 RMB ’000 RMB (unaudited) 361° Products Footwear (pairs) ...... 4,973 48.3 5,888 58.7 12,095 71.6 8,210 73.0 14,262 79.5 Apparel (pieces) ...... 316 67.2 337 67.5 8,756 49.4 5,488 45.2 20,174 61.1 Accessories (pieces/pairs) ...... — — — — 1,422 6.8 19 14.8 5,399 10.3

Note: (1) Average wholesale selling price represents revenues for the item sold divided by the total units of that item sold for the year/period.

The total number of pairs of our 361° footwear sold increased by 18.4% from 5.0 million for the financial year ended 30 June 2006 to 5.9 million for the financial year ended 30 June 2007, and by 105.4% from 5.9 million for the financial year ended 30 June 2007 to 12.1 million for the financial year ended 30 June 2008. The total number of pairs of our 361° footwear sold increased by 73.7% from 8.2 million for the nine months ended 31 March 2008 to 14.3 million for the nine months ended 31 March 2009. These increases were primarily due to successful promotion of our 361° brand, rapid expansion of the 361° retail network, improved product design, expansion of our range of product offerings, and our conversion to an exclusive distributorship business model. Increasing market demand for sportswear products and improving economic conditions in the PRC also contributed to our increase in sales.

The average wholesale selling price of our 361° footwear increased by 21.5% from RMB48.3 for the financial year ended 30 June 2006 to RMB58.7 for the financial year ended 30 June 2007, primarily because we were able to increase the suggested retail price of our 361° footwear due to the greater brand recognition of our 361° brand. The average wholesale selling price of our 361° footwear increased by 22.0% from RMB58.7 for the financial year ended 30 June 2007 to RMB71.6 for the financial year ended 30 June 2008, primarily due to the foregoing reasons and the fact that we were able to decrease the discounts to the suggested retail prices at which we sold our 361° products to our customers due to the greater brand recognition of our 361° brand. The average wholesale selling price of our 361° footwear increased by 8.9% from RMB73.0 for the nine months ended 31 March 2008 to RMB79.5 for the nine months ended 31 March 2009, primarily due to the greater brand recognition of our 361° brand and changes in our footwear product offerings.

The total number of pieces of our 361° apparel sold increased by 6.6% from approximately 316,000 for the financial year ended 30 June 2006 to approximately 337,000 for the financial year ended 30 June 2007, primarily due to the increasing market demand for sportswear apparel and our strategy to diversify our 361° branded product offerings. The total number of pieces of our 361° apparel sold increased by approximately 25 times from approximately 337,000 for the financial year ended 30 June 2007 to 8.8 million for the financial year ended 30 June 2008, primarily because our apparel sales operation began to mature as evidenced by our ability to leverage the success of our 361° footwear and the increased recognition of our 361° brand in the PRC sportswear market. This increase was also due to the fact that we expanded our 361º apparel product offerings as a result of an increase in the market acceptance of our 361º apparel. The total number of pieces of our 361° apparel sold increased by 267.6% from 5.5 million for the nine months ended 31 March 2008 to 20.2 million for the nine months ended 31 March 2009, primarily because we strategically sought to increase the portion of revenues contributed by our 361° apparel as apparel generally has higher profit margins than our 361° footwear.

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FINANCIAL INFORMATION

The average wholesale selling price of our 361° apparel increased slightly by 0.4% from RMB67.2 for the financial year ended 30 June 2006 to RMB67.5 for the financial year ended 30 June 2007. The average wholesale selling price of our 361° apparel decreased by 26.8% from RMB67.5 for the financial year ended 30 June 2007 to RMB49.4 for the financial year ended 30 June 2008. This decrease was primarily because spring and summer 361° apparel, such as T-shirts, which generally have lower average wholesale selling prices than autumn and winter 361° apparel, such as jackets, comprised a larger portion of our revenues for the financial year ended 30 June 2008, as compared to the financial year ended 30 June 2007. In addition, we reduced the suggested retail price of our apparel during 2008 to pass on to our consumers the savings we enjoyed from lower outsourcing costs for manufacturing apparel over the period as our contract manufacturers reduced the prices they charged us as we increased our order volumes and to improve the price competitiveness of our apparel products. The decreases to average wholesale selling price caused by the decrease in suggested retail price were partially offset by the fact that we were able to decrease the discounts to the suggested retail price at which we sold our 361° products to our customers over the period due to the greater brand recognition of our 361° brand. The average wholesale selling price of our 361° apparel increased by 35.1% from RMB45.2 for the nine months ended 31 March 2008 to RMB61.1 for the nine months ended 31 March 2009, primarily due to the greater brand recognition of our 361° brand and the increase in our apparel product offerings with higher average wholesale selling prices, such as certain types of winter apparel and apparel for women.

We expanded our 361° product line to include accessories in September 2007 to meet demand from consumers for 361° accessories and to diversify our 361° branded product offerings. The total number of pieces/ pairs of our 361° accessories sold for the financial year ended 30 June 2008 was 1.4 million and the average wholesale selling price for our 361° accessories for the financial year ended 30 June 2008 was RMB6.8. The total number of pieces of our 361° accessories sold for the nine months ended 31 March 2008 and 2009 was approximately 19,000 and 5.4 million, respectively. The average wholesale selling price for our 361° accessories for the nine months ended 31 March 2008 and 2009 was RMB14.8 and RMB10.3, respectively.

Cost of sales Substantially all of our cost of sales are incurred in sales of our 361° products, consisting of footwear, apparel and accessories. In addition, a small portion of our cost of sales incurred during the Track Record Period related to the manufacture and sales of TPR and TPU pellets as well as sales of certain packaging materials. The following table sets forth a breakdown of our cost of sales for our 361° products (excluding our cost of sales related to the manufacture and sales of TPR and TPU pellets as well as sales of certain packaging materials) during the Track Record Period:

For the financial year ended 30 June For the nine months ended 31 March 2006 2007 2008 2008 2009 RMB’000 % RMB’000 % RMB’000 % RMB’000 % RMB’000 % (unaudited) 361° Products Footwear (internal production) Raw materials ...... 124,175 53.1 164,399 56.4 452,026 47.0 316,870 49.1 388,061 23.8 Labour ...... 31,210 13.3 32,256 11.1 48,300 5.0 36,350 5.6 55,054 3.4 Manufacturing costs ..... 61,920 26.5 75,353 25.8 97,597 10.2 77,662 12.0 93,358 5.7 Subtotal ...... 217,305 92.9 272,008 93.3 597,923 62.2 430,882 66.8 536,473 32.9 Footwear (outsourced) ...... — — 2,233 0.7 62,419 6.5 43,021 6.7 261,003 16.0 Apparel (outsourced) ...... 16,483 7.1 17,351 6.0 294,823 30.7 171,392 26.6 798,870 49.0 Accessories (outsourced) ..... — — — — 5,651 0.6 197 0.03 33,659 2.1 Cost of sales for 361° products . . . 233,788 100.0 291,592 100.0 960,816 100.0 645,492 100.0 1,630,005 100.0

Our cost of sales for our 361° products primarily consists of internal production costs and outsourced production costs. Internal production costs include raw materials costs, labour costs and manufacturing costs incurred in the self-production of our 361° footwear. Raw materials costs refer to costs of procuring raw materials used in the internal production of our footwear products, such as leather, synthetic leather, fabrics,

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FINANCIAL INFORMATION rubber, plastics and soles. Labour costs consist of salaries paid to production staff. Manufacturing costs mainly include salaries, bonuses and other compensation expenses paid to administrative staff involved in the manufacturing process, depreciation of production facilities, costs associated with operating our facilities, such as electricity, water and maintenance costs, the processing fees we paid to some of our contract manufacturers, sales tax and other miscellaneous costs associated with our manufacturing operations. Outsourced production cost refers to the costs of procuring finished footwear, apparel and accessories, which represent amounts paid to contract manufacturers.

Gross profit and gross profit margin Substantially all of our gross profit relates to sales of our 361° products, consisting of footwear, apparel and accessories. In addition, a small portion of our gross profit (loss) realised during the Track Record Period related to the manufacture and sales of TPR and TPU pellets as well as sales of certain packaging materials. Gross profit for our 361° products is our revenues from sales of our 361° products for the relevant period less the cost of sales for our 361° products for the same period. The following table sets forth a breakdown of our gross profit and gross profit margin for our 361° products (excluding our gross profit (loss) and gross profit (loss) margin related to the manufacture and sales of TPR and TPU pellets as well as sales of certain packaging materials) during the Track Record Period:

For the financial year ended 30 June For the nine months ended 31 March 2006 2007 2008 2008 2009 Gross Gross Gross Gross Gross Gross profit Gross profit Gross profit Gross profit Gross profit profit margin profit margin profit margin profit margin profit margin RMB’000 % RMB’000 % RMB’000 % RMB’000 % RMB’000 % (unaudited) 361° Products Footwear ...... 23,020 9.6 71,649 20.7 205,792 23.8 125,184 20.9 335,761 29.6 Apparel ...... 4,746 22.4 5,388 23.7 137,914 31.9 76,819 30.9 434,072 35.2 Accessories ...... — — — — 3,962 41.2 84 29.9 22,192 39.7 Total ...... 27,766 10.6 77,037 20.9 347,668 26.6 202,087 23.8 792,025 32.7

Gross profit for our 361° products increased by 177.5% from RMB27.8 million for the financial year ended 30 June 2006 to RMB77.0 million for the financial year ended 30 June 2007, and increased by 351.3% from RMB77.0 million for the financial year ended 30 June 2007 to RMB347.7 million for the financial year ended 30 June 2008, primarily due to the increases in sales. Gross profit margin for our 361° products increased from 10.6% for the financial year ended 30 June 2006 to 20.9% for the financial year ended 30 June 2007, and increased further to 26.6% for the financial year ended 30 June 2008 because the rate of increase of our revenues outpaced the rate of increase in cost of sales. This was primarily due to the increases in average wholesale selling price of our 361° footwear, which comprised the majority of our 361° product sales, as a result of successful brand promotion, improved product design and the expansion of our range of product offerings. Gross profit margin for our 361° products was also positively affected by the result of the shift in our product mix towards 361° apparel and accessories, which on average have a higher gross profit margin than our 361° footwear.

Gross profit for our 361° products increased by 291.9% from RMB202.1 million for the nine months ended 31 March 2008 to RMB792.0 million for the nine months ended 31 March 2009, primarily due to the increases in sales. Gross profit margin for our 361° products increased from 23.8% to 32.7% over the same period, primarily due to the shift in our product mix towards 361° apparel and accessories, which on average have a higher gross profit margin than our 361° footwear, as well as a reduction in outsourcing costs we achieved through economies of scale and deepening relationships we developed with our contract manufacturers. Gross profit margin for our 361° products was also positively affected by the increases in average wholesale selling price of our 361° apparel, which comprised the majority of our 361° product sales for the nine months ended 31 March 2009, primarily as a result of the greater brand recognition of our 361° brand and the increase in our apparel product offerings with higher average wholesale selling price, such as certain types of winter apparel and apparel for women.

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FINANCIAL INFORMATION

Other revenue Our other revenue primarily consists of government grants from the PRC Government and interest income. Government grants from the PRC Government refer to non-recurring government grants received from the PRC government authorities, such as the Financial Services Bureau of Jingjiang City ( ), the Fujian Provincial Economic and Trade Commission ( ) and the Federation of Trade Union of Chendai Town, Jingjiang City ( ), as recognition for our contribution to the local economy through the development of our 361° brand and technology. Such government grants are available to any enterprise which meets the requirements stipulated by the relevant government authorities. There are no continuing obligations or requirements for us or conditions in relation to the government grants. The amount of government grants received by us varied during the Track Record Period, primarily due to changes in the aggregate amount of government grants available for all enterprises, as well as the amount of government grants that we were qualified for, which in turn primarily depended on the underlying government policies during each of the financial years ended 30 June 2006, 2007 and 2008 and the nine months ended 31 March 2008 and 2009. Interest income is derived from interest received from bank deposits.

Other loss Other loss for the financial year ended 30 June 2008 and the nine months ended 31 March 2009 relates to loss of RMB1.9 million and approximately RMB54,000, respectively, incurred on sales of footwear material equipment at a price lower than its net book value and disposal of other production equipment during the respective periods.

Selling and distribution expenses Selling and distribution expenses primarily consist of advertising and marketing expenses, costs associated with conducting our sales fairs, costs of certain packaging materials, such as shoe boxes and shopping bags embossed with the 361° logo that we provided to our distributors for use by authorised retailers in connection with sales of our 361° products, and salary and travelling expenses for our marketing and sales staff. Advertising and marketing expenses include fees paid for television advertising and advertising billboards, fees paid to marketing consultants and sponsorship fees.

For the financial years ended 30 June 2006, 2007 and 2008, selling and distribution expenses were RMB10.0 million, RMB36.5 million and RMB106.4 million, respectively, representing 3.8%, 9.8% and 8.1% of our total revenues, respectively. For the nine months ended 31 March 2008 and 2009, selling and distribution expenses were RMB62.5 million and RMB286.3 million, respectively, representing 7.3% and 11.8% of our total revenues, respectively.

Administrative expenses Administrative expenses primarily consist of salary for administrative staff (other than those involved in the production process), welfare and other benefits for all employees (including production staff), legal and professional fees, allowance for doubtful debts, entertainment expenses and depreciation expenses for our fixed assets. Salary for administrative staff includes wages, bonus and travelling expenses. Welfare and other benefits expenses include dormitory costs, training costs and the cost of other benefits for our employees. For the financial year ended 30 June 2008, we also incurred RMB10.0 million for our charitable donations, RMB5.9 million of which is a non-recurring expense for our charitable donations to relief organisations assisting victims of the Sichuan earthquake which occurred on 12 May 2008.

For the financial years ended 30 June 2006, 2007 and 2008, administrative expenses were RMB5.7 million, RMB12.7 million and RMB39.6 million, respectively, representing 2.2%, 3.4% and 3.0% of our total revenues, respectively. For the nine months ended 31 March 2008 and 2009, administrative expenses were RMB24.6 million and RMB68.2 million, respectively, representing 2.9% and 2.8% of our total revenues, respectively.

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Finance costs Our finance costs consist of interest on bank borrowings. For the financial years ended 30 June 2006, 2007 and 2008, finance costs were RMB1.3 million, RMB3.0 million and RMB5.4 million, respectively. For the nine months ended 31 March 2008 and 2009, finance costs were RMB3.5 million and RMB11.9 million, respectively.

Income tax Income tax represents amounts of corporate income tax paid by us. No provision for Hong Kong profits tax has been made as we did not generate any assessable profit arising in Hong Kong during the Track Record Period. We were also not subject to any tax in the Cayman Islands and the BVI during the Track Record Period. However, our PRC subsidiaries were subject to PRC enterprise income tax. The following table sets forth the applicable PRC enterprise income tax rates during the Track Record Period for our PRC subsidiaries:

For the nine months For the financial year ended 30 June ended 31 March 2006 2007 2008 2009 Sanliuyidu Fujian ...... 12.0%(1) 12.0% 12.0%/12.5%(2) 12.5%/25%(3) Sanliuyidu China ...... N/A N/A fully exempted fully exempted Sanliuyidu Xiamen ...... N/A N/A 25.0%(4) 25.0%(4)

Notes: (1) For the period between 1 July 2005 to 31 December 2005, Sanliuyidu Fujian was exempted from PRC enterprise income tax under the Old Tax Regime. (2) For the period between 1 July 2007 to 31 December 2007, the applicable PRC enterprise income tax rate for Sanliuyidu Fujian under the Old Tax Regime was 12.0% after a 50.0% reduction of the enterprise income tax rate of 24.0%. For the six months ended 30 June 2008, the applicable PRC enterprise income tax rate for Sanliuyidu Fujian under the New Tax Law was 12.5% after a 50.0% reduction of the phased-in enterprise income tax rate of 25.0%. (3) For the period between 1 July 2008 to 31 December 2008, the applicable PRC enterprise income tax rate for Sanliuyidu Fujian under the New Tax Law was 12.5% after a 50.0% reduction of the phased-in enterprise income tax rate of 25.0%. Since 1 January 2009, Sanliuyidu Fujian has no longer been entitled to any tax exemption and the applicable PRC enterprise income tax rate for Sanliuyidu Fujian under the New Tax Law has been the phased-in enterprise income tax rate of 25.0%. (4) Sanliuyidu Xiamen was incorporated on 19 May 2008 and is not entitled to enjoy any tax exemption or reduction since its incorporation. It did not commence operations nor generate any assessable profit until September 2008 and has thereafter been subject to the phased-in enterprise income tax rate of 25%.

See “Factors affecting our financial condition and results of operations—Level of income tax and preferential tax treatment” in this section of the document for additional details regarding taxation applicable to us.

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The following table sets forth a reconciliation between our actual tax credit or expense and our profits before taxation during the Track Record Period:

For the financial year ended For the nine months 30 June ended 31 March 2006 2007 2008 2008 2009 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 (unaudited) Profit before taxation ...... 10,987 26,305 197,172 112,865 430,718 National tax on profit before taxation, calculated at the rates applicable in the jurisdictions concerned ...... 2,637 6,314 48,987 28,046 107,680 Tax effect of non-deductible expenses(1) ...... 79 824 532 150 2,798 Tax effect of profit entitled to tax exemption in the PRC(2) ...... (2,735) (3,744) (31,320) (17,987) (43,965) Actual tax (credit)/expense ...... (19) 3,394 18,199 10,209 66,513

Notes: (1) “Tax effect of non-deductible expenses” mainly represents non-deductible entertainment expenses. (2) “Tax effect of profit entitled to tax exemption in the PRC” represents difference in tax expenses currently required to be paid for income earned during the tax concession period and tax expenses for income earned should no tax concession is granted. For further details, please see note 5(iii) in the accountants’ report set out in Appendix I to this document.

PERIOD TO PERIOD COMPARISON OF RESULTS OF OPERATIONS Nine Months Ended 31 March 2008 (unaudited) Compared to Nine Months Ended 31 March 2009 Revenues Revenues increased by 183.9% from RMB853.7 million for the nine months ended 31 March 2008 to RMB2,423.7 million for the nine months ended 31 March 2009, primarily as a result of the following:

Sales of our 361° footwear Revenues from sales of our 361° footwear increased by 89.2% from RMB599.1 million for the nine months ended 31 March 2008 to RMB1,133.2 million for the nine months ended 31 March 2009, primarily because the total number of pairs of our 361° footwear sold increased by 73.7% from 8.2 million for the nine months ended 31 March 2008 to 14.3 million for the nine months ended 31 March 2009. This increase in volume was primarily due to the successful promotion of our 361° brand, rapid expansion of the 361° retail network, improved product design, expansion of our range of product offerings, and our conversion to an exclusive distributorship business model. Increasing market demand for sportswear products and improving economic conditions in the PRC also contributed to our increase in volume. The increase in average wholesale selling price of our 361° footwear also contributed to the increase in sales. The average wholesale selling price of our 361° footwear increased by 8.9% from RMB73.0 for the nine months ended 31 March 2008 to RMB79.5 for the nine months ended 31 March 2009, primarily due to the greater brand recognition of our 361° brand and changes in our footwear product offerings.

Sales of our 361° apparel Revenues from sales of our 361° apparel increased by 396.7% from RMB248.2 million for the nine months ended 31 March 2008 to RMB1,232.9 million for the nine months ended 31 March 2009, primarily because the total number of pieces of our 361° apparel sold increased by approximately 267.6% from 5.5 million for the nine months ended 31 March 2008 to 20.2 million for the nine months ended 31 March 2009. This increase in volume was primarily because we strategically sought to increase the portion of revenues contributed by our 361° apparel as apparel generally has higher profit margins than our 361° footwear. This increase was also due to the fact that we expanded our 361° apparel product offerings as a result of an increase in the market acceptance of our 361° apparel. The effect of those factors were partially offset by a decrease in average wholesale selling prices of our

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361° apparel during the same period. The average wholesale selling price of our 361° apparel increased by 35.1% from RMB45.2 for the nine months ended 31 March 2008 to RMB61.1 for the nine months ended 31 March 2009, primarily due to the greater brand recognition of our 361° brand and the increase in our apparel product offerings with higher average wholesale selling prices, such as certain types of winter apparel and apparel for women.

Sales of our 361° accessories Sales of our 361° accessories were RMB0.3 million and RMB55.9 million for the nine months ended 31 March 2008 and 2009, respectively. We expanded our 361° product line to include accessories in September 2007 to meet demand from consumers for 361° branded accessories and to diversify our 361° branded product offerings. We believe that a comparative analysis of the sales of our 361° accessories for the nine months ended 31 March 2008 and 2009 is not meaningful in view of the fact our 361° accessories were only newly introduced to the market in September 2007.

Cost of sales Cost of sales for our 361° products increased by 152.5% from RMB645.5 million for the nine months ended 31 March 2008 to RMB1,630.0 million for the nine months ended 31 March 2009, primarily as a result of an increase in sales of our 361° products. Our raw materials costs for internal footwear production increased by 22.5% from RMB316.9 million for the nine months ended 31 March 2008 to RMB388.1 million for the nine months ended 31 March 2009, primarily due to the increase in the number of pairs of footwear produced and the use of raw materials of higher quality. Labour costs for internal footwear production increased by 51.5% from RMB36.4 million for the nine months ended 31 March 2008 to RMB55.1 million for the nine months ended 31 March 2009, primarily because we increased the number of our employees engaged in internal production and incurred additional salary expenses due to salary increases. Internal footwear production manufacturing costs increased by 20.2% from RMB77.7 million for the nine months ended 31 March 2008 to RMB93.4 million for the nine months ended 31 March 2009, primarily because we expanded our manufacturing operations and increased the number of administrative staff involved in the production process. Outsourced production costs increased significantly by approximately 409.5% from RMB214.6 million for the nine months ended 31 March 2008 to RMB1,093.5 million for the nine months ended 31 March 2009, primarily because the volume of footwear, apparel and accessories we purchased from our contract manufacturers increased and the increased use of raw materials of higher quality for apparel and accessories.

Gross profit and gross profit margin Gross profit for our 361° products increased by 291.9% from RMB202.1 million for the nine months ended 31 March 2008 to RMB792.0 million for the nine months ended 31 March 2009, primarily due to the increases in sales. Gross profit margin for our 361° products increased from 23.8% to 32.7% over the same period, primarily due to the shift in our product mix towards 361° apparel and accessories, which on average have a higher gross profit margin than our 361° footwear, as well as a reduction in outsourcing costs we achieved through economies of scale and deepening relationships we developed with our contract manufacturers. Gross profit margin for our 361° products was also positively affected by the increases in average wholesale selling price of our 361° apparel, which comprised the majority of our 361° product sales for the nine months ended 31 March 2009, primarily as a result of the increase in our apparel product offerings with higher average selling prices, such as certain types of winter apparel and apparel for women.

Gross profit and gross profit margin for our 361° footwear Gross profit for our 361° footwear increased by 168.2% from RMB125.2 million for the nine months ended 31 March 2008 to RMB335.8 million for the nine months ended 31 March 2009. Gross profit margin for our 361° footwear increased from 20.9% for the nine months ended 31 March 2008 to 29.6% for the nine months ended 31 March 2009 because the pace of growth of sales of our 361° footwear outpaced the corresponding

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FINANCIAL INFORMATION growth in cost of sales. This was primarily due to the reduction in outsourcing costs we achieved through economies of scale and deepening relationships we developed with our contract manufacturers and the increase in the average wholesale selling price of our 361° footwear increased.

Gross profit and gross profit margin for our 361° apparel Gross profit for our 361° apparel increased by 465.1% from RMB76.8 million for the nine months ended 31 March 2008 to RMB434.1 million for the nine months ended 31 March 2009, primarily due to the increases in sales. Gross profit margin for our 361° apparel increased from 30.9% for the nine months ended 31 March 2008 to 35.2% for the nine months ended 31 March 2009 because the pace of growth of sales of our 361° apparel outpaced the corresponding growth in cost of sales. This was primarily due to the increases in average wholesale selling price of our 361° apparel as the brand recognition of our 361° brand increased and we increased our apparel product offerings with higher average selling prices, such as certain types of winter apparel and apparel for women.

Gross profit for our 361° accessories Gross profit for our 361° accessories were approximately RMB84,000 and RMB22.2 million for the nine months ended 31 March 2008 and 2009, respectively. Gross profit margin for our 361° accessories were 29.9% and 39.7% for the nine months ended 31 March 2008 and 2009, respectively.

We believe that a comparative analysis of the gross profit and gross profit margin of our 361° accessories for the nine months ended 31 March 2008 and 2009 is not meaningful in view of the fact our 361° accessories were only newly introduced to the market in September 2007.

Other revenue Other revenue for the financial year ended 31 March 2008 and the nine months ended 31 March 2009 were RMB1.0 million and RMB5.8 million, respectively, 82.4% and 81.5% of which related to receipt of government grants from the PRC Government, respectively.

Other loss Other loss was approximately RMB54,000 for the nine months ended 31 March 2009, which was incurred on sales of footwear material equipment at a price lower than its net book value and disposal of other production equipment during the period.

Selling and distribution expenses Selling and distribution expenses increased by 358.0% from RMB62.5 million for the nine months ended 31 March 2008 to RMB286.3 million for the nine months ended 31 March 2009, primarily as a result of a significant increase in our advertising and marketing expenses in relation to television advertising and sponsorships. Costs of shoe boxes and shopping bags embossed with the 361° logo that we provided to our distributors for use by authorised retailers in connection with sales of our 361° products also increased significantly as a result of increases in sales volume as well as the adoption of recycle shopping bags which are more expensive. In addition, costs associated with conducting our sales fairs increased because sale fairs were held in major cities such as Wuhan City and Xiamen City instead of our headquarters in Jinjiang City as in the periods prior to 2008. Selling and distribution expenses represented 11.8% of our total revenues for the nine months ended 31 March 2009, as compared to 7.3% of our total revenues for the nine months ended 31 March 2008. Going forward, we anticipate selling and distribution expenses to increase as our business grows because our advertising and marketing expenses will increase as we intend to, among other things, expand our event sponsorships and product tie-in arrangements to increase awareness of our 361° brand.

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Administrative expenses Administrative expenses increased by 177.7% from RMB24.6 million for the nine months ended 31 March 2008 to RMB68.2 million for the nine months ended 31 March 2009, primarily due to increases in allowance for doubtful debts, and professional fees paid to an external design firm, as well as increases in salaries and welfare payments as we recruited more staff and the salary levels increased.

Profit from operations Profit from operations increased by 280.5% from RMB116.3 million for the nine months ended 31 March 2008 to RMB442.6 million for the nine months ended 31 March 2009, primarily due to the factors described above.

Finance costs Finance costs increased by 243.7% from RMB3.5 million for the nine months ended 31 March 2008 to RMB11.9 million for the nine months ended 31 March 2009, primarily due to an increase in bank borrowings to fund our working capital needs. If we are required to increase bank borrowings to fund our expansion plans, or if interest rates increase, our finance expenses may increase.

Profit before taxation Profit before taxation increased by 281.6% from RMB112.9 million for the nine months ended 31 March 2008 to RMB430.7 million for the nine months ended 31 March 2009, primarily due to the factors described above.

Income tax Income tax expense increased significantly by 551.5% from RMB10.2 million for the nine months ended 31 March 2008 to RMB66.5 million for the nine months ended 31 March 2009, primarily due to the increase in profit before taxation as a result of increased sales as well as the increase in applicable tax rate of Sanliuyidu Fujian, which increased from 12.0% for the period between July 2007 to December 2007 to 12.5% for the period between July 2008 to December 2008 and, upon expiry of exemption from the enterprise income tax, further increased to 25.0% since January 2009. The effective tax rate increased from 9.0% for the nine months ended 31 March 2008 to 15.4% for the nine months ended 31 March 2009, primarily due to the same reason as described above.

Profit for the period Net profit increased significantly by 254.8% from RMB102.7 million for the nine months ended 31 March 2008 to RMB364.2 million for the nine months ended 31 March 2009, primarily due to the factors described above. Our net profit margin increased from 12.0% for the nine months ended 31 March 2008 to 15.0% for the nine months ended 31 March 2009, primarily due to the foregoing reasons.

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Financial Year Ended 30 June 2007 Compared to Financial Year Ended 30 June 2008 Revenues Revenues increased by 252.8% from RMB373.3 million for the financial year ended 30 June 2007 to RMB1,317.1 million for the financial year ended 30 June 2008, primarily as a result of the following:

Sales of our 361° footwear Revenues from sales of our 361° footwear increased by 150.4% from RMB345.9 million for the financial year ended 30 June 2007 to RMB866.1 million for the financial year ended 30 June 2008, primarily because the total number of pairs of our 361° footwear sold increased by 105.4% from 5.9 million for the financial year ended 30 June 2007 to 12.1 million for the financial year ended 30 June 2008. This increase in volume was primarily due to the successful promotion of our 361° brand, rapid expansion of the 361° retail network, improved product design, expansion of our range of product offerings, and our conversion to an exclusive distributorship business model. Increasing market demand for sportswear products and improving economic conditions in the PRC also contributed to our increase in volume. The increase in average wholesale selling price of our 361° footwear also contributed to the increase in sales. The average wholesale selling price of our 361° footwear increased by 22.0% from RMB58.7 for the financial year ended 30 June 2007 to RMB71.6 for the financial year ended 30 June 2008, primarily because we were able to decrease the discounts to the suggested retail prices at which we sold our 361° products to our customers and to increase the suggested retail price of our 361° footwear, both due to the greater brand recognition of our 361° brand.

Sales of our 361° apparel Revenues from sales of our 361° apparel increased by approximately 18 times from RMB22.7 million for the financial year ended 30 June 2007 to RMB432.7 million for the financial year ended 30 June 2008, primarily because the total number of pieces of our 361° apparel sold increased by approximately 25 times from approximately 337,000 for the financial year ended 30 June 2007 to 8.8 million for the financial year ended 30 June 2008. This increase in volume was primarily because our apparel sales operation began to mature as evidenced by our ability to leverage the success of our footwear products and the increased recognition of our 361° brand in the PRC sportswear market. This increase was also due to the fact that we expanded our 361º apparel product offerings as a result of an increase in the market acceptance of our 361° apparel. The effect of those factors was partially offset by a decrease in average wholesale selling price of our 361° apparel during the same period. The average wholesale selling price of our 361° apparel decreased by 26.8% from RMB67.5 for the financial year ended 30 June 2007 to RMB49.4 for the financial year ended 30 June 2008, primarily because spring and summer 361° apparel, such as T-shirts, which generally have lower average wholesale selling price than autumn and winter 361° apparel, such as jackets, comprised a larger portion of our 361° apparel sales for the financial year ended 30 June 2008 as a result of an increase in the market acceptance of our spring and summer 361° apparel, as compared to the financial year ended 30 June 2007. In addition, we reduced the suggested retail prices of our apparel to pass on to our consumers the savings we enjoyed from lower manufacturing costs and to improve the pricing competitiveness of our products. Our outsourcing costs for manufacturing apparel decreased over the period due to our contract manufacturers reducing the prices they charged us as we increased our order volumes. The decreases to average wholesale selling price caused by the decreases in suggested retail prices were partially offset by the fact that we were able to decrease the discounts to the suggested retail prices at which we sold our 361° apparel to our customers over the period due to the greater brand recognition of our 361° brand.

Sales of our 361° accessories Revenues from sales of our 361° accessories was RMB9.6 million for the financial year ended 30 June 2008. We expanded our 361° product line to include accessories in September 2007 to meet demand from consumers for 361° branded accessories and to diversify our 361° branded product offerings.

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Cost of sales Cost of sales for our 361° products increased by 229.5% from RMB291.6 million for the financial year ended 30 June 2007 to RMB960.8 million for the financial year ended 30 June 2008, primarily as a result of an increase in sales of our 361° products. Our raw materials costs for internal footwear production increased by 175.0% from RMB164.4 million for the financial year ended 30 June 2007 to RMB452.0 million for the financial year ended 30 June 2008, primarily due to the significant increase in the number of pairs of footwear produced as well as increased costs of raw materials, such as fabrics and leather, during this period. Labour costs for internal footwear production increased by 49.7% from RMB32.3 million for the financial year ended 30 June 2007 to RMB48.3 million for the financial year ended 30 June 2008, primarily because we increased the number of our employees engaged in internal production and incurred additional salary expenses due to increases in salary levels. Internal footwear production manufacturing costs increased by 29.5% from RMB75.4 million for the financial year ended 30 June 2007 to RMB97.6 million for the financial year ended 30 June 2008, primarily because we expanded our manufacturing operations and increased the number of administrative staff involved in the production process. Outsourced production costs increased by approximately 18 times from RMB19.6 million for the financial year ended 30 June 2007 to RMB362.9 million for the financial year ended 30 June 2008, primarily because we began to outsource the production of a portion of our 361° footwear in April 2007 and the volume of apparel we purchased from our contract manufacturers increased.

Gross profit and gross profit margin Gross profit for our 361° products increased by 351.3% from RMB77.0 million for the financial year ended 30 June 2007 to RMB347.7 million for the financial year ended 30 June 2008, primarily due to the increases in sales. Gross profit margin for our 361° products increased from 20.9% to 26.6% over the same period because the rate of increase of our revenues outpaced the rate of increase in cost of sales. This was primarily due to the increases in average wholesale selling price of our 361° footwear, which comprised the majority of our 361° product sales, as a result of successful brand promotion, improved product design and the expansion of our range of product offerings. In addition, the increased number of products sold also enabled us to achieve economies of scale with respect to internal manufacturing costs for our 361° footwear and outsourcing costs for our 361° apparel. Gross profit margin for our 361° products also increased as a result of the shift in our product mix towards our 361° apparel and accessories, which on average have a higher gross profit margin than our 361° footwear.

Gross profit and gross profit margin for our 361° footwear Gross profit for our 361° footwear increased by 187.2% from RMB71.6 million for the financial year ended 30 June 2007 to RMB205.8 million for the financial year ended 30 June 2008. Gross profit margin for our 361° footwear increased from 20.7% for the financial year ended 30 June 2007 to 23.8% for the financial year ended 30 June 2008 because the pace of growth of sales of our 361° footwear outpaced the corresponding growth in cost of sales. This was primarily due to economies of scale achieved in our self-production process as our sales volume increased and the increase in the average wholesale selling price of our 361° footwear.

Gross profit and gross profit margin for our 361° apparel Gross profit for our 361° apparel increased by approximately 25 times from RMB5.4 million for the financial year ended 30 June 2007 to RMB137.9 million for the financial year ended 30 June 2008, primarily due to the increases in sales. Gross profit margin for our 361° apparel increased from 23.7% for the financial year ended 30 June 2007 to 31.9% for the financial year ended 30 June 2008 because the pace of growth of sales of our 361° apparel outpaced the corresponding growth in cost of sales. This was primarily due to economies of scale achieved in our outsourcing costs, which was driven by our contract manufacturers reducing the prices they charged us as the volume of our orders increased.

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Gross profit for our 361° accessories We had no sales of 361° accessories during the financial year ended 30 June 2007. Gross profit and gross profit margin for our 361° accessories were RMB4.0 million and 41.2% for the financial year ended 30 June 2008, respectively.

Other revenue Other revenue increased by 55.1% from RMB1.6 million for the financial year ended 30 June 2007 to RMB2.5 million for the financial year ended 30 June 2008, primarily due to the increase in the receipt of government grants from the PRC Government which accounted for 84.6% and 85.3% of the total other revenue for the financial years ended 30 June 2007 and 2008, respectively.

Other loss Other loss was RMB1.9 million for the financial year ended 30 June 2008, which was incurred as a result of sales of footwear material equipment at a lower price than its net book value and disposal of other production equipment during the year.

Selling and distribution expenses Selling and distribution expenses increased by 191.7% from RMB36.5 million for the financial year ended 30 June 2007 to RMB106.4 million for the financial year ended 30 June 2008, primarily as a result of a significant increase in our advertising and marketing expenses in relation to television advertising and fees paid to marketing consultants, costs associated with conducting our sales fairs and costs of shoe boxes and shopping bags embossed with the 361° logo that we provided to our distributors for use by authorised retailers in connection with sales of our 361° products. Such increases were partially offset by the fact that we only had to manage a relatively small number of customers under our exclusive distributorship business model compared to hundreds of customers under the previous business model. Selling and distribution expenses represented 8.1% of our total revenues for the financial year ended 30 June 2008, as compared to 9.8% of our total revenues for the financial year ended 30 June 2007.

Administrative expenses Administrative expenses increased by 211.8% from RMB12.7 million for the financial year ended 30 June 2007 to RMB39.6 million for the financial year ended 30 June 2008, primarily due to increases in charitable donations, allowance for doubtful debts, and professional fees paid to an external design firm, as well as increases in salaries and welfare payments as we recruited more staff, in particular, senior staff whose salary levels were higher.

Profit from operations Profit from operations increased by 590.5% from RMB29.3 million for the financial year ended 30 June 2007 to RMB202.5 million for the financial year ended 30 June 2008, primarily due to the factors described above.

Finance costs Finance costs increased by 77.5% from RMB3.0 million for the financial year ended 30 June 2007 to RMB5.4 million for the financial year ended 30 June 2008, primarily due to an increase in bank borrowings and increases in interest rates.

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Profit before taxation Profit before taxation increased by 649.6% from RMB26.3 million for the financial year ended 30 June 2007 to RMB197.2 million for the financial year ended 30 June 2008, primarily due to the factors described above.

Income tax Income tax expense increased significantly by 436.2% from RMB3.4 million for the financial year ended 30 June 2007 to RMB18.2 million for the financial year ended 30 June 2008, primarily due to the increase in profit before taxation as a result of increased sales as well as the increase in applicable tax rate of Sanliuyidu Fujian, which increased to 12.5% for the period between January 2008 to June 2008 from 12.0% for the period between July 2006 to December 2007. The effective tax rate decreased from 12.9% for the financial year ended 30 June 2007 to 9.2% for the financial year ended 30 June 2008, primarily due to the contribution of Sanliuyidu China (which did not commence operations until December 2007 and was fully exempt from PRC income tax for the financial year ended 30 June 2008) to our Group’s profit before taxation for the financial year ended 30 June 2008 compared to the financial year ended 30 June 2007.

Profit for the year Net profit increased significantly by 681.2% from RMB22.9 million for the financial year ended 30 June 2007 to RMB179.0 million for the financial year ended 30 June 2008, primarily due to the factors described above. Our net profit margin increased from 6.1% for the financial year ended 30 June 2007 to 13.6% for the financial year ended 30 June 2008, primarily due to the foregoing reasons.

Financial Year Ended 30 June 2006 Compared to Financial Year Ended 30 June 2007 Revenues Revenues increased by 42.0% from RMB262.9 million for the financial year ended 30 June 2006 to RMB373.3 million for the financial year ended 30 June 2007, primarily as a result of the following:

Sales of our 361° footwear Revenues from sales of our 361° footwear increased by 43.9% from RMB240.3 million for the financial year ended 30 June 2006 to RMB345.9 million for the financial year ended 30 June 2007, primarily because the total number of pairs of our 361° footwear sold increased by 18.4% from 5.0 million for the financial year ended 30 June 2006 to 5.9 million for the financial year ended 30 June 2007. This increase in volume was primarily due to successful promotion of our 361° brand, rapid expansion of the 361° retail network, improved product design and expansion of our range of product offerings. The increase in average wholesale selling price of our 361° footwear also contributed to the increase in sales. The average wholesale selling price of our 361° footwear increased by 21.5% from RMB48.3 for the financial year ended 30 June 2006 to RMB58.7 for the financial year ended 30 June 2007, primarily because we were able to increase the suggested retail price of our 361° footwear due to the greater brand recognition of our 361° brand.

Sales of our 361° apparel Revenues from sales of our 361° apparel increased by 7.1% from RMB21.2 million for the financial year ended 30 June 2006 to RMB22.7 million for the financial year ended 30 June 2007, primarily because the total number of pieces of 361° apparel sold increased by 6.6% from approximately 316,000 for the financial year ended 30 June 2006 to approximately 337,000 for the financial year ended 30 June 2007. This increase in volume was primarily due to the increased market demand for our 361° apparel and our strategy to diversify our 361° branded product offerings. The increase in average wholesale selling price of our 361° apparel also contributed to

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Cost of sales Cost of sales for our 361° products increased by 24.7% from RMB233.8 million for the financial year ended 30 June 2006 to RMB291.6 million for the financial year ended 30 June 2007, primarily as a result of an increase in sales. Our raw materials costs for internal footwear production increased by 32.4% from RMB124.2 million for the financial year ended 30 June 2006 to RMB164.4 million for the financial year ended 30 June 2007, primarily because the number of pairs of footwear produced and sold increased during this period. Labour costs for internal footwear production increased by 3.4% from RMB31.2 million for the financial year ended 30 June 2006 to RMB32.3 million for the financial year ended 30 June 2007, primarily because we increased the number of our employees engaged in internal production and the salary level increased. Internal footwear manufacturing costs increased by 21.7% from RMB61.9 million for the financial year ended 30 June 2006 to RMB75.4 million for the financial year ended 30 June 2007, primarily because we expanded our manufacturing operations and the increase in number of administrative staff involved in the production process. Outsourced production costs increased by 18.8% from RMB16.5 million for the financial year ended 30 June 2006 to RMB19.6 million for the financial year ended 30 June 2007, primarily due to the footwear outsourcing costs we first began to incur in 2007 and the increased number of pieces of apparel we purchased from our contract manufacturers.

Gross profit and gross profit margin Gross profit for our 361° products increased by 177.5% from RMB27.8 million for the financial year ended 30 June 2006 to RMB77.0 million for the financial year ended 30 June 2007, primarily due to the increase in sales. Gross profit margin for our 361° products increased from 10.6% to 20.9% over the same period because the rate of increase of our revenue outpaced the rate of increase in cost of sales. This was primarily due to the increases in average wholesale selling price of our 361° footwear, which comprised the majority of our 361° product sales, as a result of successful brand promotion, improved product design and expansion of our range of product offerings. In addition, the increased number of products sold also enabled us to achieve economies of scale with respect to internal manufacturing costs.

Gross profit and gross profit margin for our 361° footwear Gross profit for our 361° footwear increased by 211.2% from RMB23.0 million for the financial year ended 30 June 2006 to RMB71.6 million for the financial year ended 30 June 2007. Gross profit margin for our 361° footwear increased from 9.6% for the financial year ended 30 June 2006 to 20.7% for the financial year ended 30 June 2007 because the pace of growth of sales of our 361° footwear outpaced the corresponding growth in cost of sales. This was primarily due to economies of scale achieved in our self-production process as our sales volume increased and the increase in the average wholesale selling price of our 361° footwear.

Gross profit and gross profit margin for our 361° apparel Gross profit for our 361° apparel increased by 13.5% from RMB4.7 million for the financial year ended 30 June 2006 to RMB5.4 million for the financial year ended 30 June 2007. Gross profit margin for our 361° apparel increased from 22.4% for the financial year ended 30 June 2006 to 23.7% for the financial year ended 30 June 2007 because the pace of growth of sales of our 361° apparel outpaced the corresponding growth in cost of sales. This was primarily due to the increase in sales of our 361° apparel as a result of the increasing market demand for our 361° apparel and our strategy to diversify our 361° branded product offerings, as well as a decrease in per unit cost of our 361° apparel from RMB52.2 in 2006 to RMB51.5 in 2007 as a result of economies of scale achieved in our outsourcing costs, which was driven by our contract manufacturers reducing the prices they charged us as the volume of our orders increased.

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Other revenue Other revenue increased by 93.1% from approximately RMB824,000 for the financial year ended 30 June 2006 to RMB1.6 million for the financial year ended 30 June 2007, primarily due to an increase in the receipt of government grant income from the PRC Government which accounted for 82.5% and 84.6% of the other revenue for the financial years ended 30 June 2006 and 2007, respectively.

Selling and distribution expenses Selling and distribution expenses increased by 265.7% from RMB10.0 million for the financial year ended 30 June 2006 to RMB36.5 million for the financial year ended 30 June 2007, primarily due to an increase in advertising and marketing expenses as a result of increased advertising and marketing activities to promote our brand. Selling and distribution expenses represented 9.8% of our total revenues for the financial year ended 30 June 2007, as compared to 3.8% of our total revenues for the financial year ended 30 June 2006.

Administrative expenses Administrative expenses increased by 124.0% from RMB5.7 million for the financial year ended 30 June 2006 to RMB12.7 million for the financial year ended 30 June 2007, primarily due to increases in salaries and welfare payments as we increased salary levels and the number of employees, charitable donations, travelling expenses of our employees for attending trade shows and conferences, entertainment expenses and allowance for doubtful debts.

Profit from operations Profit from operations increased by 139.7% from RMB12.2 million for the financial year ended 30 June 2006 to RMB29.3 million for the financial year ended 30 June 2007, primarily due to the factors described above.

Finance costs Finance costs increased by 142.1% from RMB1.3 million for the financial year ended 30 June 2006 to RMB3.0 million for the financial year ended 30 June 2007, primarily due to an increase in the amount of bank borrowings.

Profit before taxation Profit before taxation increased by 139.4% from RMB11.0 million for the financial year ended 30 June 2006 to RMB26.3 million for the financial year ended 30 June 2007, primarily due to the factors described above.

Income tax Income tax changed from income tax credit of approximately RMB19,000 for the financial year ended 30 June 2006 to income tax expense of RMB3.4 million for the financial year ended 30 June 2007, primarily due to an increase in profit before tax. The effective tax rate for the financial year ended 30 June 2006 was negative because we were entitled to a tax exemption of RMB2.7 million that was greater than the notional tax payable of RMB2.6 million for the financial year ended 30 June 2006. The notional tax of RMB2.6 million for the financial year ended 30 June 2006 comprises income tax provision for the year of approximately RMB855,000, deferred tax credit arising from allowance for doubtful debt during the year of approximately RMB874,000, tax effect of profits entitled to exemption of RMB2.7 million and tax effect of non-deductible expense of approximately RMB79,000. The tax effect of profits entitled to exemption of RMB2.7 million included both tax effect of the

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FINANCIAL INFORMATION profits earned during the year which were exempted from income tax as well as tax effect of the difference in tax rate at the time when the deferred tax assets were recognised (i.e. 12.0%) and the tax rate at the time when the deferred tax assets are expected to realise (i.e. 25.0%). See “Factors affecting our financial condition and results of operations—Level of income tax and preferential tax treatment” and “ Principal income statement components—Income tax” in this section of the document for additional details regarding taxation applicable to us. The effective tax rate increased from -0.2% for the financial year ended 30 June 2006 to 12.9% for the financial year ended 30 June 2007, primarily because Sanliuyidu Fujian, the only operating subsidiary at the relevant time, was fully exempt from PRC income tax for the period from 1 July 2005 to 31 December 2005 and was subject to a PRC enterprise income tax rate of 12.0% from 1 January 2006 to 31 December 2007.

Profit for the year Net profit increased by 108.2% from RMB11.0 million for the financial year ended 30 June 2006 to RMB22.9 million for the financial year ended 30 June 2007, primarily due to the factors described above. Our net profit margin increased from 4.2% for the financial year ended 30 June 2006 to 6.1% for the financial year ended 30 June 2007, primarily due to the foregoing reasons.

LIQUIDITY AND CAPITAL RESOURCES Our primary uses of cash are for payment of purchases from suppliers and contract manufacturers, our various operating expenses and capital expenditure needs. We have historically financed our liquidity requirements primarily through bank loans, shareholders’ capital contributions and shareholder loans. There have been no material changes in our underlying drivers of the sources and uses of cash during the Track Record Period.

Going forward, we believe our liquidity requirements will be satisfied using a combination of the proceeds from the [Š], cash generated from operating activities and bank loans. We will use part of the proceeds from the [Š] to fulfil our capital commitments for future expansion and, based on our current and anticipated levels of operations and conditions in the markets and industry, we believe that we have the ability to generate adequate cash from our operations to fund our ongoing operating cash needs and the continuing expansion of our business. We may use short-term bank borrowings to finance operations and repay bank borrowings once our funding position is in surplus. It is our policy to monitor regularly our liquidity requirements and compliance with debt covenants (if any) to ensure that we maintain sufficient resources of cash and adequate debt or equity financing. We have not experienced and do not expect to experience any difficulties meeting our obligations as they become due. However, our ability to fund our working capital needs, repay our indebtedness and finance other obligations depends on our future operating performance and cash flow, which are in turn subject to prevailing economic conditions, the level of spending by our customers and other factors, many of which are beyond our control. Any future significant acquisition or expansion may require additional capital, and we cannot assure you that such capital will be available to us on acceptable terms, if at all. See “Risk Factors—Our ability to obtain additional financing may be limited, which could be delay or prevent the completion of one or more of our strategies”.

We had net cash used in operating activities for the financial years ended 30 June 2006 and 2007, primarily due to increases in our trade and other receivables, inventories and amounts due from related parties. Please refer to the risk factor headed “We recorded negative operating cash flow for the two financial years ended 30 June 2006 and 2007, and recorded positive operating cash flow for the financial year ended 30 June 2008 and the nine months ended 31 March 2009, and may not be able to continue to record positive operating cash flow in the future” under the section “Risk Factors—Risks relating to our business” for the relevant disclosure.

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FINANCIAL INFORMATION

The following table is a condensed summary of our combined cash flow statements for the periods indicated:

For the For the financial year nine months ended ended 30 June 31 March 2006 2007 2008 2008 2009 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 (unaudited) Net cash (used in)/generated from operating activities ...... (39,868) (52,540) 4,734 (7,685) 162,483 Net cash used in investing activities ...... (5,113) (9,378) (121,487) (44,177) (149,660) Net cash generated from financing activities ...... 49,337 73,696 202,101 116,991 8,122 Net increase in cash and cash equivalents ...... 4,356 11,778 85,348 65,129 20,945 Cash and cash equivalents at end of the year/period .... 11,769 23,547 108,895 88,676 129,840

Cash Flow from Operating Activities We derive our cash generated from operating activities principally from the receipt of payments for the sale of our 361° products. Our cash used in operating activities is principally for purchases of raw materials, payment of outsourcing fees, salary payments, advertising and marketing expenses and other operating expenses.

For the nine months ended 31 March 2009, we had an operating profit before changes in working capital but after adjustments for non-cash expenses and income of RMB449.9 million and net cash of RMB162.5 million generated from operating activities. The difference of RMB287.4 million was attributable to an increase in trade and other receivables of RMB939.9 million, primarily due to increased sales volume and the expansion of our distribution network. Such cash used in operating activities was partially offset by (i) an increase in trade and other payables of RMB579.9 million, primarily due to an increase in sales volume, and (ii) a decrease in inventories of RMB49.4 million primarily due to improved inventory control and the stock clearance as a result of the relocation of our warehouse in March 2009.

For the nine months ended 31 March 2008, we had an operating profit before changes in working capital but after adjustments for non-cash expenses and income of RMB126.1 million and net cash of RMB7.7 million used in operating activities. The difference of RMB133.8 million was attributable to an increase in trade and other receivables of RMB383.0 million and an increase in inventories of RMB53.6 million, both primarily due to increased sales volume. Such cash used in operating activities was partially offset by an increase in trade and other payables of RMB223.7 million, primarily due to an increase in sales volume and a decrease in amounts due from related parties of RMB87.2 million relating to advance payments made to certain related parties in connection with the purchase of land and building for our production and administrative functions.

For the financial year ended 30 June 2008, we had an operating profit before changes in working capital but after adjustments for non-cash expenses and income of RMB215.7 million and net cash of RMB4.7 million generated from operating activities. The difference of RMB211.0 million was attributable to an increase in trade and other receivables of RMB535.4 million and an increase in inventories of RMB112.1 million, both primarily due to increased sales volume. Such cash used in operating activities was partially offset by an increase in trade and other payables of RMB378.1 million, primarily due to an increase in sales volume, and a decrease in amounts due from related parties of RMB68.5 million relating to advance payments made to certain related parties in connection with the purchase of land and buildings for our production and administrative functions.

For the financial year ended 30 June 2007, we had an operating profit before changes in working capital but after adjustments for non-cash expenses and income of RMB33.9 million and net cash of RMB52.5 million used in operating activities. The difference of RMB86.4 million was attributable to an increase in trade and other receivables of RMB45.1 million, an increase in inventories of RMB33.7 million, both primarily due to increased sales volume, and an increase in amounts due from related parties of RMB7.6 million relating to advance

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FINANCIAL INFORMATION payments made to certain related parties in connection with the purchase of land and building for our production and administrative functions. Such cash used in operating activities was partially offset by an increase in trade and other payables of RMB2.3 million, primarily due to increased sales volume.

For the financial year ended 30 June 2006, we had an operating profit before changes in working capital but after adjustments for non-cash expenses and income of RMB14.8 million and net cash of RMB39.9 million used in operating activities. The difference of RMB54.7 million was attributable to an increase in trade and other receivables of RMB68.5 million, primarily due to increased sales volume, an increase in amounts due from related parties of RMB42.5 million, primarily due to advance payments made to certain related parties in connection with the purchase of land and building for our production and administrative functions, and an increase in inventories of RMB20.6 million, primarily due to increased sales volume. Such cash used in operating activities was partially offset by an increase in trade and other payables of RMB77.4 million, primarily due to increased sales volume.

Cash Flow from Investing Activities We derive our cash generated from investing activities principally from interest received on bank deposits. Our cash used in investing activities is principally for purchasing fixed assets and making pledged time deposits relating to our bills payable which requires that we have on deposit with our banks a certain percentage of the bills payable that are issued by them at our request.

For the nine months ended 31 March 2009, we had net cash used in investing activities of RMB149.7 million, which was primarily due to payment for purchases of fixed assets of RMB97.6 million, primarily consisting of property, plant and equipment, and an increase in pledged bank deposits of RMB53.2 million, partially offset by interest received of RMB1.1 million.

For the nine months ended 31 March 2008, we had net cash used in investing activities of RMB44.2 million, which was primarily due to payment for purchases of fixed assets of RMB41.8 million, primarily consisting of property, plant and equipment, and an increase in pledged bank deposits of RMB2.6 million partially offset by interest received of approximately RMB181,000.

For the financial year ended 30 June 2008, we had net cash used in investing activities of RMB121.5 million, which was primarily due to payment for purchases of fixed assets of RMB98.0 million, primarily consisting of property, plant and equipment, and an increase in pledged bank deposits of RMB25.9 million, partially offset by proceeds from disposal of fixed assets of RMB2.1 million.

For the financial year ended 30 June 2007, we had net cash used in investing activities of RMB9.4 million, which was primarily due to payment for purchases of fixed assets of RMB6.6 million and an increase in pledged bank deposits of RMB3.0 million, partially offset by interest received of approximately RMB245,000.

For the financial year ended 30 June 2006, we had net cash used in investing activities of RMB5.1 million, which was primarily due to payment for purchases of fixed assets of RMB2.3 million and an increase in pledged bank deposits of RMB3.0 million, partially offset by interest received of approximately RMB144,000.

Cash Flow from Financing Activities We derive our cash generated from financing activities principally from proceeds from new bank loans, shareholder loans and proceeds from capital injection. Our cash used in financing activities is principally for repayment of bank loans and interest payments.

For the nine months ended 31 March 2009, we had net cash generated from financing activities of RMB8.1 million, which was primarily due to proceeds from bank loans of RMB265.5 million, partially offset by repayment of bank loans of RMB188.0 million, a decrease in amounts due to a shareholder of the Company of RMB12.2 million and dividends paid of RMB45.3 million.

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For the nine months ended 31 March 2008, we had net cash generated from financing activities of RMB117.0 million, which was primarily due to proceeds from bank loans of RMB64.0 million and an increase in amounts due to a shareholder of the Company of RMB105.4 million, partially offset by repayment of bank loans of RMB49.0 million.

For the financial year ended 30 June 2008, we had net cash generated from financing activities of RMB202.1 million, which was primarily due to proceeds from bank loans of RMB149.5 million and an increase in amounts due to a shareholder of the Company of RMB118.0 million, which were partially offset by repayment of bank loans of RMB60.0 million.

For the financial year ended 30 June 2007, we had net cash generated from financing activities of RMB73.7 million, which was primarily due to proceeds from bank loans of RMB72.0 million, proceeds from capital injection of RMB30.6 million and an increase in amounts due to a shareholder of RMB29.1 million, which were partially offset by repayment of bank loans of RMB55.0 million.

For the financial year ended 30 June 2006, we had net cash generated from financing activities of RMB49.3 million, which was primarily due to proceeds from bank loans of RMB60.0 million and proceeds from capital injection of RMB17.6 million, which were partially offset by repayment of bank loans of RMB27.0 million.

CAPITAL EXPENDITURES We have historically funded our capital expenditures from proceeds from bank loans, shareholder loans and capital contributions by our Shareholders. Our capital expenditures have principally consisted of expenditures on property, plant, equipment, and land use rights. We expect to continue to make significant capital expenditures for the financial year ending 30 June 2009 for the acquisition of land use rights and construction for a new production facility and warehouse at the Wuli Industrial Park Phase One, a new production facility at the Jiangtou Industrial Park and a new corporate headquarters at the Huli Technology and Industrial Park. The following table sets forth a breakdown of our capital expenditures during the Track Record Period:

For the nine months For the financial year ended ended 30 June 31 March 2006 2007 2008 2009 RMB’000 RMB’000 RMB’000 RMB’000 Property, plant and equipment ...... 1,190 970 69,268 8,936 Construction in progress ...... — — 10,636 67,129 Land use rights ...... — 22,267 1,671 64,412 Total ...... 1,190 23,237 81,575 140,477

Our capital expenditures for the financial years ended 30 June 2006, 2007 and 2008 and the nine months ended 31 March 2009 consisted of expenditures on property, plant and equipment, construction in progress and land use rights. Our capital expenditures increased by approximately 19 times from RMB1.2 million for the financial year ended 30 June 2006 to RMB23.2 million for the financial year ended 30 June 2007, primarily due to an increase of RMB22.3 million in purchase of land use rights for the new production facility and warehouse at the Wuli Industrial Park Phase One as well as the existing production facilities at the Jiangtou Industrial Park. Our capital expenditures increased by 251.1% to RMB81.6 million for the financial year ended 30 June 2008 as compared to the financial year ended 30 June 2007, primarily due to an increase of RMB68.3 million in purchase of property, plant and equipment as well as an increase of RMB10.6 million in construction in progress for the new production facility and warehouse at the Wuli Industrial Park Phase One. For the nine months ended 31 March 2009, we spent RMB8.9 million in purchase of property, plant and equipment for new production facility, RMB67.1 million in construction in progress for the new production facility and warehouse at the Wuli Industrial Park Phase One and RMB64.4 million in land use rights for Wuli Industrial Park Phase One and Huli Technology and Industrial Park.

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The following table sets forth our projected capital expenditures for the financial year ending 30 June 2009, which includes the acquisition of land use rights and construction for Wuli Industrial Park Phase One, Wuli Industrial Park Phase Two, Jiangtou Industrial Park and Huli Technology and Industrial Park:

For the financial year ending 30 June 2009 RMB’000 Property, plant and equipment ...... 11,467 Construction in progress (Property, plant and equipment) ...... 70,943 Land use rights ...... 64,412 Total ...... 146,822

Contractual obligations The following table sets forth the aggregate amounts of our contractual obligations on a combined basis as of 30 June 2006, 2007 and 2008 and 31 March 2009:

As of As of 30 June 31 March 2006 2007 2008 2009 RMB’000 RMB’000 RMB’000 RMB’000 Contracted for commitment in respect of: Construction of new factory buildings ...... — — 37,474 11,688 Acquisition of land use rights ...... — 2,118 43,357 2,118 Advertising and marketing expenses ...... 5,317 79,955 28,380 764,928 Total ...... 5,317 82,073 109,211 778,734

The contractual commitments as of 31 March 2009 were primarily related to advertising and marketing expenses in relation to our sponsorship for sportswear products for CCTV Channels 5 (sports channel)’s reporters and journalists and our sponsorship provided as a Guangzhou 2010 Asian Games sportswear prestige partner ( ). We expect to finance the above capital expenditures and commitments primarily through a combination of the proceeds from this [Š], cash generated from operating activities and bank loans.

Off-balance sheet commitments and arrangements As of the Latest Practicable Date, we have not entered into any off-balance sheet transaction.

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SELECTED COMBINED BALANCE SHEET DATA As of As of 30 June 31 March 2006 2007 2008 2009 RMB’000 RMB’000 RMB’000 RMB’000 Non-current assets ...... 20,266 40,892 112,080 244,937 Current assets ...... 249,064 350,030 1,040,235 1,950,639 Current liabilities ...... 197,592 263,791 831,145 1,541,814 Net current assets ...... 51,472 86,239 209,090 408,825 Total assets less current liabilities ...... 71,738 127,131 321,170 653,762 Non-current liabilities ...... — — 3,584 16,555 Net assets ...... 71,738 127,131 317,586 637,207

NET CURRENT ASSETS Details of our current assets and liabilities as of each of the balance sheet dates during the Track Record Period are as follows:

As of As of 30 June 31 March 2006 2007 2008 2009 RMB’000 RMB’000 RMB’000 RMB’000 Current assets Inventories ...... 35,241 68,943 181,056 131,655 Trade and other receivables ...... 93,518 138,394 673,767 1,597,444 Amounts due from related parties ...... 98,936 106,546 38,017 — Pledged bank deposits ...... 9,600 12,600 38,500 91,700 Cash and cash equivalents ...... 11,769 23,547 108,895 129,840 249,064 350,030 1,040,235 1,950,639 Current liabilities Bank loans ...... 43,000 60,000 149,500 227,000 Trade and other payables ...... 154,255 173,005 534,713 1,141,338 Amounts due to a shareholder of the Company ...... — 29,082 142,149 129,995 Current taxation ...... 337 1,704 4,783 43,481 197,592 263,791 831,145 1,541,814 Net current assets ...... 51,472 86,239 209,090 408,825

Our net current assets increased by 67.5% from RMB51.5 million as of 30 June 2006 to RMB86.2 million as of 30 June 2007, primarily due to an increase of RMB44.9 million in trade and other receivables and an increase of RMB33.7 million in inventories as a result of an increase in sales volume. Such increase was partially offset by an increase of RMB29.1 million in amounts due to a shareholder of the Company due to shareholder loans, the proceeds of which were used to fund our expansion, and an increase of RMB18.8 million in trade and other payables due to an increase in sales volume.

Our net current assets increased by 142.5% from RMB86.2 million as of 30 June 2007 to RMB209.1 million as of 30 June 2008, primarily due to an increase of RMB535.4 million in trade and other receivables and an increase of RMB112.1 million in inventories as a result of an increase in sales volume. Such increase was partially offset by an increase of RMB361.7 million in trade and other payables as a result of an increase in sales volume and an increase of RMB113.1 million in amounts due to a shareholder of the Company. Amounts due to

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FINANCIAL INFORMATION a shareholder of the Company increased due to shareholder loans, the proceeds of which were used to fund our expansion.

Our net current assets increased by 95.5% from RMB209.1 million as of 30 June 2008 to RMB408.8 million as of 31 March 2009, primarily due to an increase of RMB923.7 million in trade and other receivables as a result of an increase in sales volume and an increase of RMB53.2 million in pledged bank deposits as a result of an increase in our bills payables. Such increase was partially offset by an increase of RMB606.6 million in trade and other payables as a result of an increase in sales volume and an increase of RMB77.5 million in bank loans used for payment for our suppliers.

As of 30 April 2009, we had net current assets of approximately RMB448.4 million. The key components of our current assets as of such date included inventories of RMB87.5 million, trade and other receivables of RMB1,663.7 million, pledged bank deposits of RMB71.7 million and cash and cash equivalents of RMB154.1 million. The key components of our current liabilities included bank loans of RMB247.0 million, trade and other payables of RMB1,116.1 million, amounts due to a shareholder of the Company of RMB129.8 million and current taxation of RMB35.7 million.

INVENTORY ANALYSIS During the Track Record Period, inventory was one of the principal components of our current assets. The value of our inventories accounted for approximately 14.1%, 19.7%, 17.4% and 6.7% of our total current assets as of 30 June 2006, 2007 and 2008 and 31 March 2009, respectively. We conduct physical stock counts at the end of each financial year and we record a specific provision if the estimate of the net realisable value of any inventory is below the corresponding cost of such inventory, as a result of, among other things, being obsolete or damaged. During the Track Record Period, we were not required to and did not make any inventory provisions because we only commenced mass production upon confirmation of purchase orders with our customers prior to 2008. Beginning in 2008, we procured a portion of raw materials and commenced production, before receipt of purchase orders, of a portion of the indicated purchase volume of certain products for which we received high purchase volume indications from our distributors during their preview of the prototype products, and we procured the majority of raw materials and commenced mass production of the majority of our products upon confirmation of purchase orders with our distributors or customers.

The following table is a summary of our balance of inventories, which was stated at cost, as of each of the balance sheet dates during the Track Record Period:

As of As of 30 June 31 March 2006 2007 2008 2009 RMB’000 RMB’000 RMB’000 RMB’000 Raw materials ...... 24,885 29,845 23,112 12,915 Work in progress ...... 540 7,758 110,070 34,478 Finished goods ...... 9,816 31,340 47,874 84,262 Total ...... 35,241 68,943 181,056 131,655

Our inventories increased by 95.6% from RMB35.2 million as of 30 June 2006 to RMB68.9 million as of 30 June 2007, primarily due to the increase in sales volume and the timing of deliveries of finished goods requested by our customers.

Our inventories increased significantly by 162.6% from RMB68.9 million as of 30 June 2007 to RMB181.1 million as of 30 June 2008, primarily due to a significant increase in work in progress from RMB7.8 million as of 30 June 2007 to RMB110.1 million as of 30 June 2008. The amount of work in progress increased significantly primarily due to the increase in sales volume and the fact that the amount of work in progress as of 30 June 2008 included work in progress for products that we used to commence production at a later time due to a change of our production schedule at the beginning of 2008, as further explained below.

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Prior to 2008, we only commenced mass production upon confirmation of purchase orders with our customers. We moved our production schedule forward beginning in 2008 by commencing production of a portion of the indicated purchase volume of certain products for which we received high purchase volume indications from our distributors during their preview of the prototype products, which takes place approximately one month prior to the sales fairs that follows. As a result of the adoption of new production schedule starting from 2008, we commenced production of a portion of products during the second quarter of the calendar year based on the indicated purchase volume received from our distributors during their preview in April 2008. As explained above, prior to the change of our production schedule in 2008, in previous years, such production only took place in the third quarter of the calendar year after confirmation of purchase orders with our customers. We believe that the new production schedule allows us to better control production costs and manage delivery schedules.

Our inventories decreased by 27.3% from RMB181.1 million as of 30 June 2008 to RMB131.7 million as of 31 March 2009, primarily due to improved inventory control and stock clearance as a result of the relocation of our warehouse in March 2009.

As of 30 April 2009, all of the finished goods in stock as of 30 June 2006, 2007 and 2008 and RMB76.4 million, or 90.7%, of finished goods in stock as of 31 March 2009 were subsequently consumed or sold above cost. As of 30 April 2009, RMB93.8 million, or 71.2%, of our inventories as of 31 March 2009 of RMB131.7 million were consumed or sold.

The following table sets forth our average inventory turnover days for the Track Record Period:

For the nine months For the financial year ended ended 30 June 31 March 2006(1) 2007(1) 2008(1) 2009(2) Average inventory turnover days ...... 39 64 47 26

Notes: (1) Average inventory turnover days is equal to the average of the starting and ending inventory balances of the period divided by cost of sales and multiplied by 365 days. (2) Average inventory turnover days for the nine months ended 31 March 2009 is equal to the average of the starting and ending inventory balances of the period divided by cost of sales and multiplied by 274 days.

Our average inventory turnover days increased by 64.1% from 39 for the financial year ended 30 June 2006 to 64 for the financial year ended 30 June 2007, primarily due to increases in production volume and inventories as a result of increased sales.

Our average inventory turnover days decreased by 26.6% from 64 for the financial year ended 30 June 2007 to 47 for the financial year ended 30 June 2008, primarily due to our improved raw material procurement control and logistics management, as well as improved inventory control.

Our average inventory turnover days decreased by 44.7% from 47 for the financial year ended 30 June 2008 to 26 for the nine months ended 31 March 2009, primarily due to improved inventory control and stock clearance as a result of the relocation of our warehouse in March 2009.

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FINANCIAL INFORMATION

TRADE AND OTHER RECEIVABLES ANALYSIS The following table sets forth the aging analysis of our trade and other receivables for the Track Record Period:

As of As of 30 June 31 March 2006 2007 2008 2009 RMB’000 RMB’000 RMB’000 RMB’000 Trade and bills receivables ...... Within 90 days ...... 38,889 51,135 393,264 1,112,614 91 to 180 days ...... 18,521 17,023 94,973 263,808 181 to 360 days ...... 6,521 9,356 48,946 42,681 Over 360 days ...... 4,763 6,204 — — Subtotal ...... 68,694 83,718 537,183 1,419,103 Deposits, prepayments and other receivables ...... 24,824 54,676 136,584 178,341 Total ...... 93,518 138,394 673,767 1,597,444

We generally provide our distributors a credit period between 30 and 180 days, the exact term of which is determined based on such factors as past sales performance, credit history and their expansion plans. As a matter of policy, we do not grant credit periods of over 180 days to any of our distributors or customers. However, there may be instances when we grant payment extensions to certain of our distributors or customers, which will result in payments being made to us more than 180 days after the date of delivery of our 361° products. We grant these extensions on an ad hoc basis, usually in instances when we believe that the greater liquidity afforded to the distributor or customer by the credit extension would assist the distributor or customer in opening new 361° authorised retail outlets and expanding the 361° retail network. For the financial years ended 30 June 2006, 2007 and 2008 and the nine months ended 31 March 2009, out of a total of 494, 614 and 595 distributors and pre-2008 customers, and 30 distributors(1), respectively, we granted such payment extension to 82, 69 and 22 distributors or pre-2008 customers, and 8 distributors, respectively. We also maintain an overall credit limit with respect to each of our distributors, the amount of which varies depending on the particular distributor. Furthermore, we require distributors with balances that are more than one year from the date of billing to settle all outstanding balances before we grant them any further credit. Specific credit terms and repayment schedules are determined on a case by case basis with each distributor and with respect to each order of our 361° products. Our credit policy prior to the adoption of our new business model in 2008 is not different from our current credit policy as stated above except that we generally extended credit to customers for a period of 30 to 90 days. Prior to 2006, purchases by our customers were settled by wire transfer and cash. Since then, purchases by our distributors and customers have been settled by wire transfer. See “Risk Factors—If our distributors do not pay us for their purchases in a timely manner or at all, our financial condition and results of operations could be materially and adversely affected”.

As of 30 April 2009, RMB240.8 million, or 17.0%, of our trade and bills receivables as of 31 March 2009 of RMB1,419.1 million were settled.

Deposits, prepayments and other receivables as of 30 June 2006 were RMB24.8 million, primarily consisting of (i) RMB23.3 million for prepayment to our suppliers; and (ii) RMB1.1 million for prepayment for purchase of land use rights of Jiangtou Industrial Park. Deposits, prepayments and other receivables as of 30 June 2007 were RMB54.7 million, primarily consisting of (i) RMB32.7 million for prepayment to our suppliers; (ii) RMB16.7 million for our prepaid advertising expenses to build and promote our 361° brand; (iii) RMB3.5 million for advances to staff for the proposed establishment of a new separate department for apparel operations; and (iv) RMB0.9 million for prepayment for purchase of the land use right of Wuli Industrial Park Phase One. Deposits, prepayments and other receivables as of 30 June 2008 were RMB136.6 million, primarily consisting of (i) RMB59.9 million for prepayment to our suppliers; (ii) RMB53.0 million for our prepaid advertising expenses

Note: (1) No sales have been made to pre-2008 customers who are not our distributors since January 2009.

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FINANCIAL INFORMATION to build and promote our 361° brand; (iii) RMB20.5 million for bidding deposits for purchase of lands at the Wuli Industrial Park Phase One for construction of a new production facility and warehouse, and at the Huli Technology and Industrial Park for construction of a new corporate headquarters; and (iv) RMB0.9 million for prepayment for purchase of the land use right of Wuli Industrial Park Phase One. Deposits, prepayments and other receivables as of 31 March 2009 were RMB178.3 million, primarily consisting of (i) RMB127.4 million for prepayment to our suppliers; (ii) RMB17.0 million for prepayment for purchase of the land use right of Wuli Industrial Park Phase Two; (iii) RMB10.3 million for our prepaid advertising expenses; and (iv) RMB10.1 million for prepayment for [Š] expenses.

The following table sets forth our average trade and bills receivables turnover days for the Track Record Period:

For the nine months For the financial ended year ended 30 June 31 March 2006(1) 2007(1) 2008(1) 2009(2) Average trade and bills receivables turnover days ...... 64 75 86 111

Notes: (1) Average trade and bills receivables turnover days is equal to the average of the starting and ending trade and bills receivables balances of the period divided by revenues and multiplied by 365 days. (2) Average trade and bills receivables turnover days is equal to the average of the starting and ending trade and bills receivables balances of the period divided by revenues and multiplied by 274 days.

Our average trade and bills receivables turnover days increased by 17.2% from 64 for the financial year ended 30 June 2006 to 75 for the financial year ended 30 June 2007, primarily due to the granting of longer credit terms and payment extensions to our customers to afford them with greater liquidity to open larger 361° authorised retail outlets and to expand the 361° retail network. Our average trade and bills receivables turnover days increased by 14.7% from 75 for the financial year ended 30 June 2007 to 86 for the financial year ended 30 June 2008, and increased by 29.1% from 86 for the financial year ended 30 June 2008 to 111 for the nine months ended 31 March 2009, primarily due to the granting of longer credit terms to all of our distributors and the granting of payment extensions to some of our distributors upon the conversion to our exclusive distributorship business model to afford them with greater liquidity and to encourage distributors to expand the 361° retail network. See “Risk Factors—If our distributors do not pay us for their purchases in a timely manner or at all, our financial condition and results of operations could be materially and adversely affected”.

We do not believe that our average trade and bills receivables turnover days will continue to increase. As cash flows and profits from the businesses of our distributors and authorised retailers continue to stabilise on a going forward basis, we believe that our distributors and authorised retailers will not require longer credit terms from us to assist them in expanding the 361º retail network. Therefore, we currently do not intend to increase the length of credit periods that we currently offer to our distributors.

Impairment of trade and bills receivables We review trade and other receivables that are stated at cost or amortised cost as of each balance sheet date to determine whether objective evidence of impairment exists as of such date. If objective evidence of impairment exists, the amount of impairment loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows, discounted at the financial asset’s original effective interest rate (i.e. the effective interest rate computed at initial recognition of these assets), where the effect of discounting is material. Impairment losses recognised in respect of trade and bills receivables the recovery of which is considered doubtful but not remote are recorded using an allowance account.

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FINANCIAL INFORMATION

The movement in the allowance for doubtful debts during the Track Record Period, including both specific and collective loss components, is as follows:

For the nine months For the financial year ended ended 30 June 31 March 2006 2007 2008 2009 RMB’000 RMB’000 RMB’000 RMB’000 At beginning of the year/period ...... 3,495 3,976 5,378 14,279 Impairment loss recognised ...... 481 1,402 8,901 25,241 At end of the year/period ...... 3,976 5,378 14,279 39,520

As of 30 June 2006, 2007 and 2008 and 31 March 2009, our trade and bills receivables of RMB4.0 million, RMB5.4 million, RMB14.3 million and RMB39.5 million were individually determined to be impaired. The individually impaired receivables related to a number of customers, and we assessed that the receivables were not recoverable. Consequently, allowances for doubtful debts were recognised as of 30 June 2006, 2007 and 2008 and 31 March 2009. We do not hold any collateral over these balances. Our allowance for doubtful debts increased by 165.5% from RMB5.4 million as of 30 June 2007 to RMB14.3 million as of 30 June 2008, and further increased by 176.8% to RMB39.5 million as of 31 March 2009. Such increase was in line with the increase of 252.8% and 183.9% in our revenue during the corresponding periods as well as the granting of longer credit terms to all of our distributors and the granting of payment extensions to some of our distributors upon the conversion to our exclusive distributorship business model to afford them with greater liquidity and to encourage distributors to expand the 361° retail network.

TRADE AND OTHER PAYABLES ANALYSIS The following table sets forth the aging analysis of our trade and other payables for the Track Record Period:

As of As of 30 June 31 March 2006 2007 2008 2009 RMB’000 RMB’000 RMB’000 RMB’000 Trade and bills payables Within 90 days ...... 53,360 48,145 142,449 340,648 91 to 180 days ...... 74,079 69,458 328,327 640,921 Subtotal ...... 127,439 117,603 470,776 981,569 Other payables, accruals and receipts in advance Wages payable ...... 3,713 2,788 7,285 10,968 Other tax payable ...... 778 1,007 19,995 45,452 Other payables ...... 60 27,166 4,343 32,691 Accrued expenses ...... 4,642 3,805 — 31,000 Receipts in advance ...... 17,623 20,636 32,314 39,658 Subtotal ...... 26,816 55,402 63,937 159,769 Trade and other payables ...... 154,255 173,005 534,713 1,141,338

Our trade and other payables primarily relate to the purchase of raw materials from our raw material suppliers and outsourced products from contract manufacturers, and are non-interest-bearing with credit terms of 30 to 180 days. We may also be required to make deposits and advance payments to our suppliers. The maximum trade payable during the Track Record Period was approximately RMB81.2 million, which was related to the purchase of raw materials from such supplier for the nine months ended 31 March 2009. As of 30 April 2009,

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FINANCIAL INFORMATION

RMB129.6 million or 13.2% of our trade and bills payables as of 31 March 2009 were settled. Purchases by us from our raw material suppliers are settled by wire transfer or cash upon acceptance by us of such raw materials.

Our other payables, accruals and receipts in advance consist of wages payable, other tax payable, other payables, accrued expenses and receipts in advance.

Our wages payable decreased by 24.9% from RMB3.7 million as of 30 June 2006 to RMB2.8 million as of 30 June 2007, primarily because monthly wages were paid in the following month and the number of staff engaged in the month of June decreased from 2,997 in 2006 to 2,085 in 2007. Our wages payable increased by 161.3% from RMB2.8 million as of 30 June 2007 to RMB7.3 million as of 30 June 2008, and further increased by 50.6% from RMB7.3 million as of 30 June 2008 to RMB11.0 million as of 31 March 2009, primarily due to increases in salary levels and the number of employees.

Our tax payable increased by 29.5% from RMB0.8 million as of 30 June 2006 to RMB1.0 million as of 30 June 2007, and increased by approximately 19 times from RMB1.0 million as of 30 June 2007 to RMB20.0 million as of 30 June 2008, and further increased by 127.3% from RMB20.0 million as of 30 June 2008 to RMB45.5 million as of 31 March 2009, primarily due to an increase in value-added tax payable, which was due to increases in our gross profit.

Our other payables as of 30 June 2006 was RMB60,000, consisting of deposits received from one of our customers. Our other payables as of 30 June 2007 were RMB27.2 million, consisting primarily of (i) RMB16.4 million for payables in connection with payment for the purchase of land use rights at the Wuli Industrial Park Phase One for construction of a new production facility and warehouse, and a new corporate headquarters at the Huli Industrial Park; and (ii) RMB10.5 million for payables in connection with advertising expenses. Our other payables as of 30 June 2008 were RMB4.3 million, consisting primarily of (i) RMB2.4 million for payables in connection with sales fairs expenses; and (ii) RMB1.4 million for payables in connection with advertising expenses. Our other payables as of 31 March 2009 were RMB32.7 million and primarily consisted of RMB26.7 million for construction in progress in Wuli Industrial Park Phase One and Jiangtou Industrial Park.

Our accrued expenses consist of accrual for advertising expenses as well as accrual for water and electricity charges. Our accrued expenses decreased by 18.0% from RMB4.6 million as of 30 June 2006 to RMB3.8 million as of 30 June 2007, primarily due to a decrease in accrual for advertising expenses. We did not record any accrued expenses as of 30 June 2008. We recorded accrued expenses as of 31 March 2009 which related to accrual for advertising expenses of RMB31.0 million.

Receipts in advance consist of prepayments received from our distributors or customers in relation to their orders placed with us. Our receipts in advance increased by 17.1% from RMB17.6 million as of 30 June 2006 to RMB20.6 million as of 30 June 2007, increased by 56.6% from RMB20.6 million as of 30 June 2007 to RMB32.3 million as of 30 June 2008, and increased by 22.7% from RMB32.3 million as of 30 June 2008 to RMB39.7 million as of 31 March 2009, primarily due to a receipt from Guangzhou Asian Games Council in the sum of RMB24.3 million for the expenses to be spent in advertising and promotional events as well as increased sales volume, which resulted in increased prepayments made to us.

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FINANCIAL INFORMATION

The following table sets forth our average trade and bills payables turnover days for the Track Record Period:

For the nine months For the financial ended year ended 30 June 31 March 2006(1) 2007(1) 2008(1) 2009(2) Average trade and bills payables turnover days ...... 164 151 111 122

Notes: (1) Average trade and bills payables turnover days is equal to the average of the starting and ending trade and bills payables balances of the period divided by cost of sales and multiplied by 365 days. (2) Average trade and bills payables turnover days is equal to the average of the starting and ending trade and bills payables balances of the period divided by cost of sales and multiplied by 274 days.

Our average trade and bills payables turnover days decreased by 7.9% from 164 for the financial year ended 30 June 2006 to 151 for the financial year ended 30 June 2007, and by 26.5% from 151 for the financial year ended 30 June 2007 to 111 for the financial year ended 30 June 2008. The decreases were primarily due to our increased use of certain new raw material suppliers. These new suppliers generally provided raw materials of higher quality but granted us shorter credit periods than our then existing suppliers. In addition, as our operating cash flow improved in the financial year ended 30 June 2008, we were able to satisfy our payment obligations with our suppliers within shorter periods. The decreases in our average trade and bills payables turnover days were not due to a deterioration of our credit standing or financial condition. Our average trade and bills payables turnover days increased by 9.9% from 111 for the financial year ended 30 June 2008 to 122 for the nine months ended 31 March 2009 primarily due to the increase in use of bills payables to settle purchase from suppliers as a result of increases in sales.

The extent of our average trade and bills payables turnover days in the near future will primarily depend on various factors such as credit terms granted by our suppliers and our ability to satisfy payment obligations with our suppliers. Going forward, we intend to source from our existing suppliers the additional raw materials we will require in connection with the expansion of our footwear production capacity from 13.6 million pairs of footwear to 15.3 million pairs by December 2009. As we increase our procurement volume and strengthen relationships with our suppliers, we expect our suppliers may offer us longer credit periods, which will contribute to an increase in our future average trade and bills payables turnover days. However, as our cash flows permits, we intend to satisfy our payment obligations with our suppliers before their due date which will cause our future average trade and bills payables turnover days to decrease. We cannot give any assurance that our suppliers will not shorten our credit periods.

Bills payable of RMB48.0 million, RMB60.0 million, and RMB46.5 million as of 30 June 2006, 2007 and 2008 respectively were guaranteed by Bieke Fujian. In addition, bills payable of RMB92.0 million and RMB141.0 million as of 30 June 2008 and 31 March 2009 were guaranteed by Mr. Ding Wuhao, Mr. Ding Huihuang, Mr. Ding Huirong, all of whom are our Controlling Shareholders, Mr. Ding Jiantong, our Shareholder, and/or Mr. Ting Tong Bun. Our Directors confirm that the above guarantees will be released prior to the [Š].

ADVANCES TO RELATED PARTIES We made unsecured and interest-free advances to Mr. Ting Tong Bun during the Track Record Period at his request to satisfy his personal short-term financial needs unrelated to the operation of our Group. Pursuant to an undertaking dated 20 August 2008 and entered into by Sanliuyidu Fujian, Mr. Ting Tong Bun and Mr. Ding Huihuang, Mr. Ding Huihuang has undertaken to Sanliuyidu Fujian to repay the outstanding balance of approximately RMB49,994,976.6 which Mr. Ting Tong Bun owed to Sanliuyidu Fujian as of 31 July 2008. Such advances were fully repaid by Mr. Ding Huihuang prior to the [Š] and will not continue after the [Š]. Our PRC legal advisers, Tian Yuan Law Firm, have confirmed that such advances, being advances made to an individual, did not violate any PRC laws and regulations and the articles of association of Sanliuyidu Fujian; and

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FINANCIAL INFORMATION our Directors confirmed that these advances had been approved and properly recorded in our Group’s management accounts and are legal and valid under PRC laws, and such loan advancing activities would not continue after the [Š].

In addition, we also made unsecured and interest-free advances to Bieke Fujian during the Track Record Period to pre-pay part of the consideration for the land and properties pursuant to an agreement between Bieke Fujian and us dated 5 August 2003, details of which are set out in the section headed “History and Corporate Structure—Our history”, and to satisfy Bieke Fujian’s liquidity needs for settlement of its payables incurred before it ceased sportswear business operations in June 2003. Such advances were fully repaid prior to the [Š]. Our Directors confirm that these advances had been approved and properly recorded in our Group’s management accounts. According to our PRC legal advisers, Tian Yuan Law Firm, such loan advancing activities between enterprises contravened certain provisions of the Lending General Provisions ( ) promulgated by the PBOC in 1996. According to the Lending General Provisions, the PBOC may impose a fine equivalent to one to five times of the income (i.e. interests) generated from such advances. As such advances were interest-free, we did not generate any income from such advances. Accordingly, as confirmed by our PRC legal advisers, Tian Yuan Law Firm, it is unlikely that the PBOC would impose a fine on us by reason of such advancing activities. In any event, our Controlling Shareholders have agreed to indemnify our Group for any losses or any damages suffered by our Group as a result of any penalty imposed on us by the PBOC arising from the said advances made. Our Directors confirmed that such loan advancing activities had been terminated prior to the [Š] upon repayment in full by Bieke Fujian and would not continue after the [Š].

In order to ensure such loan advancing activities will not recur in the future, regular training will be given to all of our Directors and senior management by our company secretary [Š] and/or other external advisers on the requirements of the Listing Rules. Monthly internal reporting mechanisms relating to notifiable transactions or transactions not made in the ordinary course of business will be adopted and our Directors and senior management will review such transactions to ensure their legality. We will also engage legal advisers to advise us on Hong Kong and PRC related regulatory and compliance matters as necessary.

INDEBTEDNESS Borrowings The following table sets forth our indebtedness as of each of the balance sheet dates during the Track Record Period:

As of As of 30 June 31 March 2006 2007 2008 2009 RMB’000 RMB’000 RMB’000 RMB’000 Current Bank loans—secured ...... — — 15,000 40,000 Bank loans—unsecured ...... 43,000 60,000 134,500 187,000 Amounts due to a shareholder of the Company ...... — 29,082 142,149 129,995 43,000 89,082 291,649 356,995

The following table sets forth the maturity profile of our bank loans as of each of the balance sheet dates during the Track Record Period:

As of As of 30 June 31 March 2006 2007 2008 2009 RMB’000 RMB’000 RMB’000 RMB’000 Analysed into: Bank loans repayable within one year ...... 43,000 60,000 149,500 227,000

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FINANCIAL INFORMATION

As of 30 April 2009, being the latest practicable date for the purpose of this indebtedness statement in this document, our total indebtedness amounted to RMB247.0 million, consisting of short-term secured bank loans of RMB40.0 million and short-term unsecured bank loans of RMB207.0 million. We confirm that there has not been any material change in our indebtedness since 30 April 2009.

As of 30 April 2009, being the latest practicable date for the purpose of this indebtedness statement in this document, our Group had banking facilities of RMB564.5 million, of which RMB528.5 million were utilised (which amount includes bank loans and bills payables). The above bank loans are all denominated in RMB. The bank loans bear fixed interest rates ranging from 5.6% to 6.0% per annum for the financial year ended 30 June 2006, ranging from 5.6% to 6.2% per annum for the financial year ended 30 June 2007, and ranging from 6.2% to 8.2% per annum for the financial year ended 30 June 2008. Due to their short maturity, the carrying amounts of current bank loans are approximately equal to their fair values.

The bank loans of RMB66.0 million as of 31 March 2009 were secured by the following interests and/or guaranteed by the following guarantors: • RMB5.0 million was secured by properties and land use right held by Sanliuyidu Fujian; • RMB15.0 million was secured by land use right held by Sanliuyidu Fujian; • RMB20.0 million was secured by properties and land use right held by Sanliuyidu Fujian, as well as guaranteed by (a) Sanliuyidu China, (b) Mr. Ting Tong Bun, (c) Mr. Ding Jiantong, (d) Mr. Ding Wuhao, (e) Mr. Ding Huirong and (f) Mr. Ding Huihuang; • RMB1.7 million was guaranteed by (a) Sanliuyidu China, (b) Mr. Ting Tong Bun, (c) Mr. Ding Jiantong, (d) Mr. Ding Wuhao, (e) Mr. Ding Huihuang, (f) Mr. Ding Huirong, (g) an Independent Third Party which is our raw material supplier and (h) shareholders of such raw material supplier; • RMB4.3 million was guaranteed by (a) Sanliuyidu China, (b) Mr. Ting Tong Bun, (c) Mr. Ding Jiantong, (d) Mr. Ding Wuhao, (e) Mr. Ding Huihuang, (f) Mr. Ding Huirong and (g) certain Independent Third Parties; • RMB10.0 million was guaranteed by (a) Sanliuyidu Fujian, (b) Mr. Ding Wuhao, (c) Mr. Ting Tong Bun, (d) Mr. Ding Huihuang, (e) Mr. Ding Huirong, (f) Mr. Ding Jiantong, (g) an Independent Third Party which is our raw material supplier and (h) a shareholder of such raw material supplier; and • RMB10.0 million was guaranteed by (a) Sanliuyidu Fujian, (b) Mr. Ding Jiantong, (c) Mr. Ding Wuhao and (d) Mr. Ding Huihuang.

The bank loans of RMB15.0 million as of 30 June 2008 were secured by interests in leasehold land held for own use under operating leases with a carrying value of RMB5,945,000.

The bank loans of RMB149.5 million as of 30 June 2008 were guaranteed by several guarantors: • RMB90.0 million was guaranteed by (a) Bieke Fujian which is wholly-owned by Mr. Ting Tong Bun, (b) Mr. Ding Huirong and (c) certain Independent Third Parties which were our raw material suppliers; • RMB10.0 million was guaranteed by Sanliuyidu China; • RMB20.0 million was guaranteed by (a) Sanliuyidu China, (b) Mr. Ting Tong Bun and (c) an Independent Third Party which was our raw material supplier; • RMB9.5 million was guaranteed by Sanliuyidu Fujian; and • RMB20.0 million was guaranteed by (a) Sanliuyidu Fujian, (b) Mr. Ding Wuhuo and (c) an Independent Third Party which who was our raw material supplier.

The bank loans of RMB60.0 million as of 30 June 2007 were guaranteed by (a) Bieke Fujian and (b) certain Independent Third Parties which were our raw material suppliers.

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FINANCIAL INFORMATION

The bank loans of RMB43.0 million as of 30 June 2006 were guaranteed by several guarantors: • RMB40.0 million was guaranteed by (a) Bieke Fujian and (b) certain Independent Third Parties which were our raw material suppliers; and • RMB3.0 million was guaranteed by an Independent Third Party which was our raw material supplier.

Our Directors confirm that the above guarantees will be released prior to the [Š]. Certain guarantees were provided by our raw material suppliers in response to the request by the lending bank for a guarantee from an Independent Third Party acceptable to them. We and/or our Connected Persons did not provide any cross- guarantee and/or counter-guarantee to these raw material suppliers.

The amount of approximately RMB142.1 million due to a controlling shareholder of the Company as of 30 June 2008 was equivalent to the HK$160 million loan from Mr. Ding Huihuang in paying up the registered capital of Sanliuyidu China. The total loan amount was HK$160 million, interest-free and unsecured. Please refer to the relevant disclosure under the section headed “History and Corporate Structure—Our history” for details of the above loan. All outstanding amount owned by our Company to Mr. Ding Huihuang has been waived by him on 10 June 2009.

Gearing ratios Our gearing ratio was 16.0%, 15.3%, 13.0% and 10.3% as of 30 June 2006, 2007 and 2008 and 31 March 2009, respectively. Gearing ratio is derived by dividing interest-bearing debt incurred in the ordinary course of business by total assets.

Our gearing ratio decreased from 16.0% as of 30 June 2006 to 15.3% as of 30 June 2007, and to 13.0% as of 30 June 2008 primarily due to an increase in inventories and trade and other receivables which resulted in an increase in total assets. Our gearing ratio decreased from 13.0% as of 30 June 2008 to 10.3% as of 31 March 2009, primarily due to an increase in trade and other receivables which resulted in an increase in total assets.

Contingent liabilities As of 30 April 2009, we had no material contingent liabilities. We are not involved in any current material legal proceedings, nor are we aware of any pending or potential material legal proceedings involving us. If we were involved in such material legal proceedings, we would record any loss contingencies when, based on information then available, it is likely that a loss has been incurred and the amount of the loss can be reasonably estimated.

Disclaimers Save as disclosed in “Financial Information—Indebtedness” above, and apart from intra-group liabilities, we did not have outstanding mortgages, charges, debentures, loan capital, bank overdrafts, loans, debt securities or other similar indebtedness, finance leases or hire purchase commitments, liabilities under acceptances or acceptance credits or any guarantees or other material contingent liabilities outstanding at 30 April 2009.

Our Directors confirm that, up to the Latest Practicable Date, there have been no material changes in our indebtedness and contingent liabilities since 30 April 2009.

DIVIDEND AND DIVIDEND POLICY Our Company declared a dividend of RMB45.3 million in December 2008 and a dividend of RMB31.4 million in June 2009. All such declared dividends were paid out prior to the [Š]. Save as above, no other dividends were paid by us or any of our subsidiaries to their then shareholders during the Track Record Period.

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No dividends may be declared or paid other than out of profit and reserves of our Company lawfully available for distribution, including share premium. We may declare dividends via a general meeting but the amount may not exceed the amount recommended by our Directors. We may from time to time also pay interim dividends as determined by our Directors to be justified by our profit and may also pay half yearly or at other intervals at a fixed rate if the Directors are of the opinion that the profit available for distribution justifies the payment.

Our Board of Directors will declare dividends, if any, in Hong Kong dollars on a per Share basis and will pay such dividends in Hong Kong dollars. The amount of any dividends to be declared or paid in the future will depend on, among other things, our results of operations, cash flows and financial condition, operating and capital requirements, the amount of distributable profit, the constitution of our Company, the Companies Law, applicable laws and regulations and other factors that our Directors may consider as relevant. Shareholders will be entitled to receive such dividends pro rata according to the amounts paid up or credited as paid up on the Shares. The declaration, payment, and amount of dividends will be subject to the absolute discretion of our Directors. Our future declaration of dividends may or may not reflect on its historical declarations of dividend. There is no assurance as to whether the dividend distribution will occur as intended, the amount of dividend payment or the timing of such payment.

Subject to the factors described above, our Board of Directors currently intends to recommend at the relevant shareholders meetings of the Company an annual dividend of no less than 20% of the net profit available for distribution to our Shareholders in the foreseeable future.

RELATED PARTY TRANSACTIONS With respect to the related parties transactions set out in our combined financial statements included in the accountants’ report set out in Appendix I to this document, our Directors confirm that these transactions were conducted on normal commercial terms and/or that such terms were no less favourable to our Group than terms available to Independent Third Parties and were fair and reasonable and in the interest of our Shareholders as a whole.

For a discussion of related party transactions, see Appendix I to this document.

DISTRIBUTABLE RESERVES As of 31 March 2009, we did not have any distributable reserves available for distribution to the Shareholders of our Company.

WORKING CAPITAL Our Directors are of the opinion that, taking into consideration of the financial resources presently available to our Company, including banking facilities and other internal resources, and the estimated net proceeds of the [Š], our Company has sufficient working capital for its working capital requirements at least in the next 12 months commencing from the date of this document.

DISCLOSURE REQUIRED UNDER THE LISTING RULES Our Directors have confirmed that there are no circumstances which, had we been required to comply with Rules 13.13 to 13.19 in Chapter 13 of the Listing Rules, would have given rise to a disclosure requirement under Rules 13.13 to 13.19 of the Listing Rules.

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FINANCIAL INFORMATION

NO MATERIAL ADVERSE CHANGE Our Directors confirm that, up to the Latest Practicable Date, there has been no material adverse change in our financial or trading position or prospects since 31 March 2009 and there is no event since 31 March 2009 which would materially affect the information shown in our combined financial statements included in the accountants’ report set out in Appendix I to this document, in each case except as otherwise disclosed herein.

QUANTITATIVE AND QUALITATIVE INFORMATION ABOUT MARKET RISKS Interest Rate Risk We do not have any significant exposure for risk of changes in market interest rates as our debt obligations were all with fixed interest rates.

Foreign Currency Risk We mainly operate in the PRC with most of the transactions settled in RMB. Our assets and liabilities, and transactions arising from its operations are mainly denominated in RMB. We have not used any forward contract or currency borrowing to hedge our exposure as foreign currency risk is considered to be minimal.

Credit Risk It is our policy that all customers who wish to trade on credit terms are subject to credit verification procedures. In addition, receivable balances are monitored on an ongoing basis and we generally require no collateral from our customers to secure their payment obligations.

The credit risk of our other financial assets which comprise cash and cash balances, pledged deposits and other receivables, arises from default of the counterparty, with a maximum exposure equal to the carrying amounts of these instruments.

As of 30 June 2006, 2007 and 2008 and 31 March 2009, approximately 7.8%, 7.7%, 21.6% and 13.7% of our total trade receivables were due from our largest customer, respectively, and approximately 21.0%, 23.6%, 44.8% and 52.3% of the total trade receivables were due from our five largest customers, respectively.

Commodity price risk The principal raw materials used in the production of our footwear products are leather, synthetic leather, fabrics, rubber, plastics and sole. We are exposed to fluctuations in the prices of these raw materials which are influenced by global as well as regional supply and demand conditions. Fluctuations in the prices of raw materials could adversely affect our financial performance. We historically have not entered into any commodity derivative instruments to hedge the potential commodity price changes.

Liquidity Risk Liquidity risk is the risk of non-availability of funds to meet all contractual financial commitments as they fall due. We do not have any significant exposure to liquidity risk as we were in a net current asset position as of 30 June 2006, 2007 and 2008 and 31 March 2009.

Effects of Inflation According to the China Statistical Bureau, China’s overall national inflation rate, as represented by changes in the general consumer price index, was approximately 1.8%, 1.5%, 4.8% and 5.9% in the years ended 31 December 2005, 2006, 2007 and 2008, respectively. The inflation rate in China has been subject to an upward

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FINANCIAL INFORMATION trend since 2007. Although there can be no assurance as to the impact in future periods, inflation has not had a significant effect on our business during the Track Record Period. As of the Latest Practicable Date, our business has not been materially affected by any inflation or deflation.

For an additional discussion of quantitative and qualitative information about market risks, see note 21 to our combined financial statements included in the accountants’ report set out in Appendix I to this document.

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FUTURE PLANS

[Š]

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APPENDIX I ACCOUNTANTS’ REPORT

The following is the text of a report, prepared for the purpose of incorporation in this document, received from the auditors and reporting accountants of our Company, KPMG, Certified Public Accountants, Hong Kong.

8th Floor Prince’s Building 10 Chater Road Central Hong Kong

[Š] 2009

The Directors 361 Degrees International Limited [Š]

Dear Sirs

Introduction We set out below our report on the financial information relating to 361 Degrees International Limited (the “Company”) and its subsidiaries (hereinafter collectively referred to as the “Group”), including the combined income statements, the combined statements of changes in equity and the combined cash flow statements of the Group, for each of the years ended 30 June 2006, 2007 and 2008 and the nine months ended 31 March 2009 (the “Relevant Period”), and the combined balance sheets of the Group as at 30 June 2006, 2007 and 2008 and 31 March 2009 and the balance sheet of the Company as at 31 March 2009, together with the notes thereto (the “Financial Information”), for inclusion in the document of the Company dated [Š] 2009 (the “Document”).

The Company was incorporated in the Cayman Islands on 1 August 2008 as an exempted company with limited liability under the Companies Law. Cap 22 (Law 3 of 1961, as consolidated and revised) of the Cayman Islands. Pursuant to a group reorganisation (the “Reorganisation”), as detailed in the section headed “Corporate Reorganisation” in Appendix VI to the Document, which was completed on 15 August 2008, the business operations together with the relevant assets and liabilities of Sanliuyidu (Hong Kong) Sports Goods Co., Ltd. (the “Predecessor Entity”), Sanliuyidu (Fujian) Sports Goods Co., Ltd. ( ) and Sanliuyidu (Xiamen) Industry and Trade Co., Ltd. ( ), details of which are set out in Section A below, were transferred to the Group and the Company became the holding company of the subsidiaries now comprising the Group. The Company has not carried on any business since the date of its incorporation, save for the Reorganisation.

As at the date of this report, no audited financial statements have been prepared for the Company and the companies comprising the Group, except for Sanliuyidu (China) Co., Ltd. ( ), Sanliuyidu (Fujian) Sports Goods Co., Ltd. and Sanliuyidu (Xiamen) Industry and Trade Co., Ltd., as they are newly incorporated and have not been involved in any business transactions since their respective dates of establishment/incorporation other than the Reorganisation, or are not subject to statutory audit requirements under the relevant rules and regulations in their jurisdictions of incorporation. We have, however, reviewed all significant transactions of these companies from their respective dates of establishment/incorporation to 31 March 2009 for the purpose of this report.

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APPENDIX I ACCOUNTANTS’ REPORT

The statutory financial statements of the other companies now comprising the Group, which were prepared in accordance with the relevant accounting rules and regulations applicable to enterprises with foreign investment in the People’s Republic of China (“PRC”), were audited during the Relevant Period by the respective auditors as indicated below:

Name of company Financial period Auditors Sanliuyidu (China) Co., Ltd. For the period from XiaMen XinChang Certified ( ) 21 April 2005 (date of Public Accountants Co., Ltd establishment) to (Note) ( ) 31 December 2006 For the year ended Quanzhou Weze Accountant 31 December 2007 (Note) ( ) For the year ended Quanzhou Huatian Certified 31 December 2008 Public Accountants, Ltd (Note) ( ) Sanliuyidu (Fujian) Sports Goods Co., Ltd. For the years ended XiaMen XinChang Certified ( ) 31 December 2005 and Public Accountants Co., Ltd 2006 (Note) ( ) For the year ended Quanzhou Weze Accountant 31 December 2007 (Note) ( ) For the year ended Quanzhou Huatian Certified 31 December 2008 Public Accountants, Ltd (Note) ( ) Sanliuyidu (Xiamen) Industry and For the period from Quanzhou Huatian Certified Trade Co., Ltd. 19 May 2008 (date of Public Accountants, Ltd ( ) incorporation) to (Note) 31 December 2008 ( )

Note: The English translation of the company names is for reference only. The official names of these companies are in Chinese.

Basis of preparation The Financial Information has been prepared by the directors of the Company based on the audited financial statements or, where appropriate, unaudited management accounts of the companies now comprising the Group, on the basis set out in Section A below, after making such adjustments as are appropriate. Adjustments have been made, for the purpose of this report, to restate these financial statements to conform with Hong Kong Financial Reporting Standards (“HKFRSs”) promulgated by the Hong Kong Institute of Certified Public Accountants (“HKICPA”), the disclosure requirements of the Hong Kong Companies Ordinance and the applicable disclosure provisions of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited. HKFRSs include Hong Kong Accounting Standards and Interpretations.

Respective responsibilities of directors and reporting accountants The directors of the Company are responsible for the preparation and true and fair presentation of the Financial Information in accordance with HKFRSs. This responsibility includes designing, implementing and maintaining internal control relevant to the preparation and the true and fair presentation of the Financial Information that is free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances.

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APPENDIX I ACCOUNTANTS’ REPORT

Our responsibility is to form an opinion on the Financial Information based on our audit.

Basis of opinion As a basis for forming an opinion on the Financial Information, for the purpose of this report, we have carried out appropriate audit procedures in respect of the Financial Information for the Relevant Period in accordance with Hong Kong Standards on Auditing issued by the HKICPA and have carried out such additional procedures as we considered necessary in accordance with Auditing Guideline “Prospectuses and the Reporting Accountant” (Statement 3.340) issued by the HKICPA. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance as to whether the Financial Information is free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the Financial Information. The procedures selected depend on the auditor’s judgement, including the assessment of the risks of material misstatement of the Financial Information, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and true and fair presentation of the Financial Information in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the directors, as well as evaluating the overall presentation of the Financial Information.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

We have not audited any financial statements of the companies now comprising the Group in respect of any period subsequent to 31 March 2009.

Opinion In our opinion, for the purpose of this report, all adjustments considered necessary have been made and the Financial Information, on the basis of presentation set out in Section A below and in accordance with the accounting policies set out in Section C below, gives a true and fair view of the Group’s combined results and cash flows for the Relevant Period, and the state of affairs of the Group as at 30 June 2006, 2007 and 2008 and 31 March 2009 and the Company’s state of affairs as at 31 March 2009.

Corresponding financial information For the purpose of this report, we have also reviewed the unaudited corresponding financial information of the Group comprising the combined income statement, the combined statement of changes in equity and the combined statement of cash flows for the nine months ended 31 March 2008, together with the notes thereon (the “Corresponding Financial Information”), for which the directors are responsible, in accordance with Hong Kong Standards on Review Engagements 2410 “Review of Interim Financial Information Performed by the Independent Auditor of the Entity” issued by the HKICPA. Our responsibility is to express a conclusion on the Corresponding Financial Information based on our review.

A review consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with Hong Kong Standards on Auditing and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion on the Corresponding Financial Information.

Based on our review, for the purpose of this report, nothing has come to our attention that causes us to believe that the Corresponding Financial Information is not prepared, in all material respects, in accordance with the same basis adopted in respect of the Financial Information.

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APPENDIX I ACCOUNTANTS’ REPORT

A BASIS OF PRESENTATION Mr Ding Huihuang, Mr Ding Wuhao and Mr Ding Huirong owned various companies in the British Virgin Islands, Hong Kong and the PRC which are principally engaged in the manufacturing and trading of sporting goods, including footwear, apparel and accessories in the PRC. To rationalise the corporate structure in preparation of the [Š] of the Company’s shares on The Stock Exchange of Hong Kong Limited, the Company underwent the Reorganisation, as detailed in the section headed “Corporate Reorganisation” in Appendix VI to the Document.

As the companies that took part in the Reorganisation were controlled by the same group of ultimate equity holders, Mr Ding Huihuang, Mr Ding Wuhao and Mr Ding Huirong through their interests in Ming Rong International Company Limited, Dings International Company Limited and Hui Rong International Company Limited (referred to as “the controlling equity holders”) before and after the Reorganisation and, consequently, there was a continuation of the risks and benefits to the controlling equity holders and therefore this is considered as a business combination under common control and Accounting Guideline 5 “Merger Accounting for Common Control Combinations” has been applied. The Financial Information has been prepared using the merger basis of accounting as if the Group had always been in existence. The net assets of the combining companies are combined using the existing book values from the controlling equity holders’ perspective.

The Financial Information relating to the combined income statements, the combined statements of changes in equity and the combined cash flow statements of the Group as set out in Section B of this report for the Relevant Period include the results of operations of the companies comprising the Group (or where the companies were incorporated/established at a date later than 1 July 2005, for the period from the date of incorporation/establishment to 31 March 2009) as if the current group structure had been in existence throughout the Relevant Period. The combined balance sheets of the Group as at 30 June 2006, 2007 and 2008 and 31 March 2009 as set out in Section B of this report have been prepared to present the state of affairs of the companies comprising the Group as at those dates as if the current group structure had been in existence as at the respective dates.

Intra-group balances and transactions are eliminated in full in preparing the Financial Information.

As at the date of this report, the Company has direct and indirect interests in the following subsidiaries, all of which are private companies, particulars of which are set out below:

Attributable equity interest Place and date of Issued and fully held by incorporation/ paid-up/ the Company Name of company establishment registered capital Direct Indirect Principal activities Sanliuyidu Holdings Company British Virgin Islands US$100/ 100% — Investment holding Limited (the “BVI”)/ US$50,000 20 February 2008 361 Enterprise Company Limited Hong Kong/ 22 April HK$1/ — 100% Investment holding 2008 HK$10,000 Sanliuyidu (Fujian) Sports Goods PRC/ 7 July 2003 HK$80,000,000/ — 100% Manufacturing and Co., Ltd. HK$80,000,000 trading of sporting ( ) goods (Notes (i) and (iii)) Sanliuyidu (China) Co., Ltd. PRC/ 21 April 2005 HK$160,000,000/ — 100% Manufacturing and ( ) HK$160,000,000 trading of sporting (Notes (i) and (iii)) goods Sanliuyidu (Xiamen) Industry and PRC/ 19 May 2008 RMB100,000,000/ — 100% Trading of Trade Co., Ltd. RMB100,000,000 sporting goods ( ) (Notes (ii) and (iii))

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APPENDIX I ACCOUNTANTS’ REPORT

Notes: (i) These entities are wholly foreign owned enterprises established in the PRC. (ii) The entity is a limited liability company established in the PRC. (iii) The English translation of the company names is for reference only. The official names of these companies are in Chinese.

Pursuant to the Reorganisation, the business operations together with the relevant assets and liabilities of the Predecessor Entity, Sanliuyidu (Fujian) Sports Goods Co., Ltd. and Sanliuyidu (Xiamen) Industry and Trade Co., Ltd. were transferred to the Group.

Because the ultimate equity holders controlled the aforesaid business operations of the Predecessor Entity transferred to the companies comprising the Group before the Reorganisation and continue to control the companies comprising the Group after the Reorganisation, the Financial Information has been prepared as a reorganisation of businesses under common control. Accordingly, the relevant assets and liabilities of the Predecessor Entity transferred to the companies comprising the Group have been recognised at historical cost.

For the purpose of this report, the results of operations of the Predecessor Entity for the Relevant Period have been included in the Group’s combined income statements, combined statements of changes in equity and combined cash flow statements for the Relevant Period. The state of affairs of the Predecessor Entity as at 30 June 2006, 2007 and 2008 and 31 March 2009 have been included in the Group’s combined balance sheets at the respective dates.

Particulars of the Predecessor Entity are set out below:

Attributable equity interest Issued and fully held by Place and date paid-up/ the Company Name of company of incorporation registered capital Direct Indirect Principal activity Sanliuyidu (Hong Kong) Sports Hong Kong/ HK$10,000/ — 100% Investment holding Goods Co., Ltd. 6 April 2004 HK$10,000 ( ) (Note (i))

Note: (i) Sanliuyidu (Hong Kong) Sports Goods Co., Ltd., a limited liability company wholly owned by the ultimate equity holders, transferred its business operations together with relevant assets and liabilities to 361 Enterprise Company Limited and has become an inactive company since February 2009.

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APPENDIX I ACCOUNTANTS’ REPORT

B FINANCIAL INFORMATION 1 Combined income statements Nine months ended Section C Years ended 30 June 31 March Note 2006 2007 2008 2008 2009 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 (Unaudited) Revenues ...... 2 262,923 373,346 1,317,069 853,651 2,423,679 Cost of sales ...... (235,865) (296,423) (969,041) (651,292) (1,632,354) Gross profit ...... 27,058 76,923 348,028 202,359 791,325 Other revenue ...... 3 824 1,591 2,467 1,031 5,827 Other loss ...... 3 — — (1,948) — (54) Selling and distribution expenses . . (9,977) (36,484) (106,409) (62,507) (286,288) Administrative expenses ...... (5,668) (12,699) (39,595) (24,561) (68,209) Profit from operations ...... 12,237 29,331 202,543 116,322 442,601 Finance costs ...... 4(a) (1,250) (3,026) (5,371) (3,457) (11,883) Profit before taxation ...... 4 10,987 26,305 197,172 112,865 430,718 Income tax ...... 5(a) 19 (3,394) (18,199) (10,209) (66,513) Profit for the year/period ...... 11,006 22,911 178,973 102,656 364,205 Dividends payable to equity shareholders of the Company attributable to the year/period: 8 Dividends declared during the year/ period ...... ———— 45,342 Dividends declared after the balance sheet date ...... ———— 31,400 — — — — 76,742

Basic earnings per share (RMB) . . . 9 0.007 0.015 0.119 0.068 0.243

The accompanying notes form part of the Financial Information.

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APPENDIX I ACCOUNTANTS’ REPORT

2 Combined balance sheets As at Section C As at 30 June 31 March Note 2006 2007 2008 2009 RMB’000 RMB’000 RMB’000 RMB’000 Non-current assets Fixed assets ...... 10 —Property, plant and equipment ...... 19,272 17,358 88,655 158,072 —Interests in leasehold land held for own use under operating leases ...... — 22,189 23,425 86,865 19,272 39,547 112,080 244,937 Deferred tax assets ...... 18(b) 994 1,345 — — 20,266 40,892 112,080 244,937 Current assets Inventories ...... 11 35,241 68,943 181,056 131,655 Trade and other receivables ...... 12 93,518 138,394 673,767 1,597,444 Amounts due from related parties ...... 19 98,936 106,546 38,017 — Pledged bank deposits ...... 13 9,600 12,600 38,500 91,700 Cash and cash equivalents ...... 14 11,769 23,547 108,895 129,840 249,064 350,030 1,040,235 1,950,639 Current liabilities Bank loans ...... 15 43,000 60,000 149,500 227,000 Trade and other payables ...... 17 154,255 173,005 534,713 1,141,338 Amounts due to a shareholder of the Company . . . 19 — 29,082 142,149 129,995 Current taxation ...... 18(a) 337 1,704 4,783 43,481 197,592 263,791 831,145 1,541,814 Net current assets ...... 51,472 86,239 209,090 408,825 Total assets less current liabilities ...... 71,738 127,131 321,170 653,762 Non-current liabilities Deferred tax liabilities ...... 18(b) — — 3,584 16,555 NET ASSETS ...... 71,738 127,131 317,586 637,207 CAPITAL AND RESERVES ...... 20 Share capital ...... 52,084 82,724 82,724 1 Reserves ...... 19,654 44,407 234,862 637,206 TOTAL EQUITY ...... 71,738 127,131 317,586 637,207

The accompanying notes form part of the Financial Information.

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APPENDIX I ACCOUNTANTS’ REPORT

3 Combined statements of changes in equity Nine months ended Section C Years ended 30 June 31 March Note 2006 2007 2008 2008 2009 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 (Unaudited) Total equity at 1 July ...... 43,145 71,738 127,131 127,131 317,586 Net income recognised directly in equity: Exchange differences on translation of financial statements of operations outside PRC ...... — 1,842 11,482 11,424 757 Net profit for the year/period ...... 11,006 22,911 178,973 102,656 364,205 Total recognised income and expense for the year/period ...... 11,006 24,753 190,455 114,080 364,962 Dividends declared or approved during the year/period ...... 8 — — — — (45,342) Movements in equity arising from capital transaction Issue of shares ...... 20(b) — — — — 1 Capital injection ...... 20(b) 17,587 30,640 — — — 17,587 30,640 — — 1 Total equity at 30 June/ 31 March .... 71,738 127,131 317,586 241,211 637,207

The accompanying notes form part of the Financial Information.

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APPENDIX I ACCOUNTANTS’ REPORT

4 Combined cashflow statements

Nine months ended Section C Years ended 30 June 31 March Note 2006 2007 2008 2008 2009 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 (Unaudited) Operating activities Profit before taxation ...... 10,987 26,305 197,172 112,865 430,718 Adjustments for: —Depreciation ...... 4(c) 2,749 2,884 4,600 3,121 6,568 —Amortisation of land lease premium for property held for own use ..... 4(c) — 78 435 323 972 —Finance costs ...... 4(a) 1,250 3,026 5,371 3,457 11,883 —Interest income ...... 3 (144) (245) (362) (181) (1,077) —Loss on disposal of fixed assets ..... 3 — — 1,948 — 54 —Foreign exchange loss ...... — 1,842 6,577 6,518 757 Operating profit before changes in working capital ...... 14,842 33,890 215,741 126,103 449,875 (Increase)/decrease in inventories ..... (20,646) (33,702) (112,113) (53,627) 49,401 Increase in trade and other receivables ...... (68,495) (45,057) (535,373) (383,026) (939,876) (Increase)/decrease in amounts due from related parties ...... (42,461) (7,610) 68,529 87,187 38,017 Increase in trade and other payables . . . 77,410 2,317 378,141 223,724 579,910 Cash (used in)/generated from operations ...... (39,350) (50,162) 14,925 361 177,327 Income tax paid ...... (518) (2,378) (10,191) (8,046) (14,844) Net cash (used in)/ generated from operating activities ...... (39,868) (52,540) 4,734 (7,685) 162,483 Investing activities Payment for purchases of fixed assets . . (2,279) (6,623) (98,008) (41,758) (97,563) Proceeds from disposal of fixed assets ...... —— 2,059 — 26 Increase in pledged bank deposits ..... (2,978) (3,000) (25,900) (2,600) (53,200) Interest received ...... 144 245 362 181 1,077 Net cash used in investing activities . . (5,113) (9,378) (121,487) (44,177) (149,660) Financing activities Proceeds from new bank loans ...... 60,000 72,000 149,500 64,000 265,500 Repayment of bank loans ...... (27,000) (55,000) (60,000) (49,000) (188,000) Proceeds from new shares issued ...... 20(b) — — — — 1 Proceeds from capital injection ...... 20(b) 17,587 30,640 — — — Increase/(decrease) in amounts due to a shareholder of the Company ...... — 29,082 117,972 105,448 (12,154) Interest paid ...... (1,250) (3,026) (5,371) (3,457) (11,883) Dividends paid ...... ———— (45,342) Net cash generated from financing activities ...... 49,337 73,696 202,101 116,991 8,122 Net increase in cash and cash equivalents ...... 4,356 11,778 85,348 65,129 20,945 Cash and cash equivalents at beginning of the year/period ...... 7,413 11,769 23,547 23,547 108,895 Cash and cash equivalents at end of the year/period ...... 14 11,769 23,547 108,895 88,676 129,840

The accompanying notes form part of the Financial Information.

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APPENDIX I ACCOUNTANTS’ REPORT

C NOTES TO THE FINANCIAL INFORMATION 1 Significant accounting policies (a) Statement of compliance The Financial Information set out in this report has been prepared in accordance with Hong Kong Financial Reporting Standards (“HKFRSs”), which collective term includes Hong Kong Accounting Standards (“HKASs”) and Interpretations, promulgated by the Hong Kong Institute of Certified Public Accountants (“HKICPA”). Further details of the significant accounting policies adopted are set out in the remainder of this Section C.

The Group did not prepare combined financial statements previously. This is the Group’s first HKFRS combined Financial Information and HKFRS 1 “First-time adoption of Hong Kong Financial Reporting Standards” has been applied.

The HKICPA issued a number of new and revised HKFRSs. For the purpose of preparing this Financial Information, the Group has adopted all these new and revised HKFRSs applicable to the Relevant Period, except for any new standards or interpretations that are not yet effective for the accounting periods beginning on or after 1 January 2009. The revised and new accounting standards and interpretations issued but not yet effective for the accounting periods beginning on or after 1 January 2009 are set out in note 26.

The Financial Information also complies with the disclosure requirements of the Hong Kong Companies Ordinance and the applicable disclosure provisions of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited.

The accounting policies set out below have been applied consistently to all periods presented in the Financial Information.

(b) Basis of combination and measurement The Financial Information comprises the Company and its subsidiaries and has been prepared using the merger basis of accounting as if the Group had always been in existence, as further explained in Section A.

The Financial Information is presented in Renminbi (“RMB”), rounded to the nearest thousand. The measurement basis used in the preparation of the Financial Information is the historical costs basis.

The preparation of the Financial Information in conformity with HKFRSs requires management to make judgements, estimates and assumptions that affect the application of policies and reported amounts of assets, liabilities, income and expenses. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making the judgements about carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates.

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period or in the period of the revision and future periods if the revision affects both current and future periods.

Judgements made by management in the application of HKFRSs that have significant effect on the Financial Information and estimates with a significant risk of material adjustment in the next year are discussed in note 24.

(c) Subsidiaries Subsidiaries are entities controlled by the Group. Control exists when the Group has the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities. In assessing control, potential voting rights that presently are exercisable are taken into account.

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APPENDIX I ACCOUNTANTS’ REPORT

The income and expenses of a subsidiary are included in the Financial Information from the date that control commences until the date control ceases. Merger accounting is adopted for common control combinations in which all of the combining entities or businesses are ultimately controlled by the same party or parties both before and after the business combination, and that control is not transitory.

Intra-group balances and transactions and any unrealised profit arising from intra-group transactions is eliminated in full in preparing the Financial Information. Unrealised losses resulting from intra-group transactions are eliminated in the same way as unrealised gains but only to the extent that there is no evidence of impairment.

(d) Property, plant and equipment Items of property, plant and equipment are stated in the balance sheet at cost less accumulated depreciation and impairment losses (see note 1(f)).

The cost of self-constructed items of property, plant and equipment includes the cost of materials, direct labour, the initiate estimate, where relevant, of the cost of dismantling and removing the items and restoring the site on which they are located, and an appropriate proportion of production overheads and borrowing costs (see note 1(q)).

Depreciation is calculated to write off the cost of items of property, plant and equipment, less their estimated residual value, if any, using the straight line method over their estimated useful lives as follows: • Buildings situated on leasehold land are depreciated over the shorter of the unexpired term of lease and their estimated useful lives, being no more than 20 years after the date of completion. • Plant and machinery ...... 5-10years • Motor vehicles ...... 5years • Office equipment and other fixed assets ...... 2-5years

Both the useful life of an asset and its residual value, if any, are reviewed annually.

Gains or losses arising from the retirement or disposal of an item of property, plant and equipment are determined as the difference between the net disposal proceeds and the carrying amount of the item and are recognised in profit or loss on the date of retirement or disposal.

(e) Operating lease charges Where the Group has the use of assets held under operating leases, payments made under the leases are charged to profit or loss in equal instalments over the accounting periods covered by the lease term, except where an alternative basis is more representative of the pattern of benefits to be derived from the leased assets. Lease incentives received are recognised in profit or loss as an integral part of the aggregate net lease payments made. Contingent rentals are charged to profit or loss in the accounting period in which they are incurred.

The cost of acquiring land held under an operating lease is amortised on a straight line basis over the period of the lease term of 50 years.

(f) Impairment of assets (i) Impairment of trade and other receivables Trade and other receivables that are stated at cost or amortised cost are reviewed at each balance sheet date to determine whether there is objective evidence of impairment. Objective evidence of impairment includes observable data that comes to the attention of the Group about one or more of the following loss events: • significant financial difficulty of the debtor; • a breach of contract, such as a default or delinquency in interest or principal payments;

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APPENDIX I ACCOUNTANTS’ REPORT

• it becomes probable that the debtor will enter bankruptcy or other financial reorganisation; and • significant changes in the technological, market, economic or legal environment that have an adverse effect on the debtor.

If any such evidence exists, any impairment loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows, discounted at the financial asset’s original effective interest rate (i.e. the effective interest rate computed at initial recognition of these assets), where the effect of discounting is material. This assessment is made collectively where financial assets carried at amortised cost share similar risk characteristics, such as similar past due status, and have not been individually assessed as impaired. Future cash flows for financial assets which are assessed for impairment collectively are based on historical loss experience for assets with credit risk characteristics similar to the collective group.

If in a subsequent period the amount of an impairment loss decreases and the decrease can be linked objectively to an event occurring after the impairment loss was recognised, the impairment loss is reversed through profit or loss. A reversal of an impairment loss shall not result in the asset’s carrying amount exceeding that which would have been determined had no impairment loss been recognised in prior years.

Impairment losses recognised in respect of trade debtors and bills receivable included within trade and other receivables whose recovery is considered doubtful but not remote are recorded using an allowance account. When the Group is satisfied that recovery is remote, the amount considered irrecoverable is written off against trade debtors and bills receivable directly and any amounts held in the allowance account relating to that debt are reversed. Subsequent recoveries of amounts previously charged to the allowance account are reversed against the allowance account. Other changes in the allowance account and subsequent recoveries of amounts previously written off directly are recognised in profit or loss.

(ii) Impairment of other assets Internal and external sources of information are reviewed at each balance sheet date to identify indications that the following assets may be impaired or, an impairment loss previously recognised no longer exists or may have decreased: • property, plant and equipment; • prepaid interest in leasehold land classified as being held under an operating lease; and • investments in subsidiaries.

If any such indication exists, the asset’s recoverable amount is estimated.

• Calculation of recoverable amount The recoverable amount of an asset is the greater of its net selling price and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of time value of money and the risks specific to the asset. Where an asset does not generate cash inflows largely independent of those from other assets, the recoverable amount is determined for the smallest group of assets that generates cash inflows independently (i.e. a cash-generating unit).

• Recognition of impairment losses An impairment loss is recognised in profit or loss whenever the carrying amount of an asset, or the cash-generating unit to which it belongs, exceeds its recoverable amount. Impairment losses recognised in respect of cash-generating units are allocated to reduce the carrying amount of the assets in the unit (or group of units) on a pro rata basis, except that the carrying value of an asset will not be reduced below its individual fair value less costs to sell, or value in use, if determinable.

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APPENDIX I ACCOUNTANTS’ REPORT

• Reversals of impairment losses An impairment loss is reversed if there has been a favourable change in the estimates used to determine the recoverable amount. A reversal of impairment loss is limited to the asset’s carrying amount that would have been determined had no impairment loss been recognised in prior years. Reversals of impairment losses are credited to profit or loss in the year in which the reversals are recognised.

(g) Inventories Inventories are carried at the lower of cost and net realisable value. Cost is calculated using the weighted average cost formula and comprises all costs of purchase, costs of conversion and other costs incurred in bringing the inventories to their present location and condition. Net realisable value is the estimated selling price in the ordinary course of business less the estimated costs of completion and the estimated costs necessary to make the sale. When inventories are sold, the carrying amount of those inventories is recognised as an expense in the period in which the related revenue is recognised. The amount of any write-down of inventories to net realisable value and all losses of inventories are recognised as an expense in the period the write-down or loss occurs. The amount of any reversal of any write-down of inventories is recognised as a reduction in the amount of inventories recognised as an expense in the period in which the reversals occur.

(h) Trade and other receivables Trade and other receivables are initially recognised at fair value and thereafter stated at amortised cost less allowance for impairment of doubtful debts (see note 1(f)), except where the receivables are interest free loans made to related parties without any fixed repayment terms or the effect of discounting would be immaterial. In such cases, the receivables are stated at cost less allowance for impairment of doubtful debts.

(i) Interest-bearing borrowings Interest-bearing borrowings are recognised initially at fair value less attributable transaction costs. Subsequent to initial recognition, interest-bearing borrowings are stated at amortised cost with any difference between the amount initially recognised and redemption value being recognised in profit or loss over the period of the borrowings, together with any interest and fees payable, using the effective interest method.

(j) Trade and other payables Trade and other payables are initially recognised at fair value and are subsequently stated at amortised cost unless the effect of discounting would be immaterial, in which case they are stated at cost.

(k) Cash and cash equivalents Cash and cash equivalents comprise cash at bank and on hand, demand deposits with banks and other financial institutions, and short-term, highly liquid investments that are readily convertible into known amounts of cash and which are subject to an insignificant risk of changes in value, having been within three months of maturity at acquisition.

(l) Employee benefits (i) Salaries, annual bonuses, paid annual leave, contributions to defined contribution retirement plans and cost of non-monetary benefits are accrued in the year in which the associated services are rendered by employees. Where payment or settlement is deferred and the effect would be material, these amounts are stated at their present values. (ii) Contribution to appropriate local defined contribution retirement schemes pursuant to the relevant labour rules and regulations in the PRC are recognised as an expense in profit or loss as incurred, except to the extent that they are included in the cost of inventories not yet recognised as an expense.

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APPENDIX I ACCOUNTANTS’ REPORT

(m) Income tax Income tax for the year comprises current tax and movements in deferred tax assets and liabilities. Current tax and movements in deferred tax assets and liabilities are recognised in profit or loss except to the extent that they relate to items recognised directly in equity, in which case they are recognised in equity.

Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted or substantively enacted at the balance sheet date, and any adjustment to tax payable in respect of previous years.

Deferred tax assets and liabilities arise from deductible and taxable temporary differences respectively, being the differences between the carrying amounts of assets and liabilities for financial reporting purposes and their tax bases. Deferred tax assets also arise from unused tax losses and credits.

All deferred tax liabilities, and all deferred tax assets to the extent that it is probable that future taxable profit will be available against which the asset can be utilised, are recognised. Future taxable profit that may support the recognition of deferred tax assets arising from deductible temporary differences includes that which will arise from the reversal of existing taxable temporary differences, provided those differences relate to the same taxation authority and the same taxable entity, and are expected to reverse either in the same period as the expected reversal of the deductible temporary difference or in periods into which a tax loss arising from the deferred tax assets can be carried back or forward. The same criteria are adopted when determining whether existing taxable temporary differences support the recognition of deferred tax assets arising from unused tax losses and credits, that is, those differences are taken into account if they relate to the same taxation authority and the same taxable entity, and are expected to reverse in a period, or periods, in which the tax loss or credit can be utilised.

The amount of deferred tax recognised is measured based on the expected manner of realisation or settlement of the carrying amount of the assets and liabilities, using tax rates enacted or substantively enacted at the balance sheet date. Deferred tax assets and liabilities are not discounted.

The carrying amount of a deferred tax asset is reviewed at each balance sheet date and is reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow the related tax benefit to be utilised. Any such reduction is reversed to the extent that it becomes probable that sufficient taxable profit will be available.

Additional income taxes that arise from the distribution of the dividends are recognised when the liability to pay the related dividends is recognised.

Current tax balances and deferred tax balances, and movements therein, are presented separately from each other and are not offset. Current tax assets are offset against current tax liabilities, and deferred tax assets against deferred tax liabilities, if the Group has the legally enforceable right to set off current tax assets against current tax liabilities and the following additional conditions are met: (i) in the case of current tax assets and liabilities, the Group intends either to settle on a net basis, or to realise the asset and settle the liability simultaneously; or (ii) in the case of deferred tax assets and liabilities, if they relate to income taxes levied by the same taxation authority on either; • the same taxable entity; or • different taxable entities, which, in each future period in which significant amounts of deferred tax liabilities or assets are expected to be settled or recovered, intend to realise the current tax assets and settle the current tax liabilities on a net basis or realise and settle simultaneously.

(n) Provisions and contingent liabilities Provisions are recognised for liabilities of uncertain timing or amount when the Group has a legal or constructive obligation arising as a result of a past event, it is probable that an outflow of economic benefits

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APPENDIX I ACCOUNTANTS’ REPORT

will be required to settle the obligation and a reliable estimate can be made. Where the time value of money is material, provisions are stated at the present value of the expenditures expected to settle the obligation.

Where it is not probable that an outflow of economic benefits will be required, or the amount cannot be estimated reliably, the obligation is disclosed as a contingent liability, unless the probability of outflow of economic benefits is remote. Possible obligations, whose existence will only be confirmed by the occurrence or non-occurrence of one or more future events are also disclosed as contingent liabilities unless the probability of outflow of economic benefits is remote.

(o) Revenue recognition Provided it is probable that the economic benefits will flow to the Group and the revenue and costs, if applicable, can be measured reliably, revenue is recognised in profit or loss as follows: (i) Sale of goods Revenue is recognised when the customer has accepted the related risks and rewards of ownership. Revenue excludes value added tax or other sales taxes and is after deduction of any trade discounts and goods return. (ii) Interest income Interest income is recognised as it accrues using the effective interest method. (iii) Government grants Government grants are recognised in the balance sheet initially when there is reasonable assurance that they will be received and that the Group will comply with the conditions attaching to them. Grants that compensate the Group for expenses incurred are recognised as revenue in profit or loss on a systematic basis in the same periods in which the expenses are incurred. Grants that compensate the Group for the cost of an asset are initially recognised as deferred income and subsequently recognised as revenue in profit or loss upon satisfaction of the conditions attaching to the grants.

(p) Translation of foreign currencies Items included in the financial statements of each of the Group’s entities are measured using the currency of the primary economic environment in which the entity operates (the “functional currency”). The Financial Information is presented in RMB, which is also the Company’s presentation currency and functional currency.

Foreign currency transactions during the year are translated at the foreign exchange rates ruling at the transaction dates. Monetary assets and liabilities denominated in foreign currencies are translated at the foreign exchange rates ruling at the balance sheet date. Exchange gains and losses are recognised in profit or loss.

Non-monetary assets and liabilities that are measured in terms of historical cost in a foreign currency are translated using the foreign exchange rates ruling at the transaction dates.

The results of operations outside PRC are translated into RMB at the exchange rates approximating the foreign exchange rates ruling at the dates of the transactions. Balance sheet items are translated into RMB at the foreign exchange rates ruling at the balance sheet date. The resulting exchange differences are recognised directly as a separate component of equity.

On disposal of an operation outside PRC, the cumulative amount of the exchange differences recognised in equity which related to that operation is included in the calculation of the profit or loss on disposal.

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APPENDIX I ACCOUNTANTS’ REPORT

(q) Borrowing costs Borrowing costs are expensed in profit or loss in the period in which they are incurred.

(r) Research and development and advertising Expenditure on research and advertising activities is recognised as an expense in the period in which it is incurred.

(s) Related parties For the purposes of the Financial Information, a party is considered to be related to the Group if: (i) the party has the ability, directly or indirectly through one or more intermediaries, to control the Group or exercise significant influence over the Group in making financial and operating policy decisions, or has joint control over the Group; (ii) the Group and the party are subject to common control; (iii) the party is an associate of the Group or a joint venture in which the Group is a venturer; (iv) the party is a member of key management personnel of the Group or the Group’s parent, or a close family member of such an individual, or is an entity under the control, joint control or significant influence of such individuals; (v) the party is a close family member of a party referred to in (i) or is an entity under the control, joint control or significant influence of such individuals; or (vi) the party is a post-employment benefit plan which is for the benefit of employees of the Group or of any entity that is a related party of the Group.

Close family members of an individual are those family members who may be expected to influence, or be influenced by, that individual in their dealings with the entity.

(t) Segment reporting A segment is a distinguishable component of the Group that is engaged either in providing products or services (business segment), or in providing products or services within a particular economic environment (geographical segment), which is subject to risks and rewards that are different from those of other segments.

The Group operates in a single business segment, manufacturing and sales of sporting goods in the PRC. Accordingly, no segmental analysis is presented.

2 Revenues The principal activities of the Group are manufacturing and trading of sporting goods, including footwear, apparel and accessories in the PRC. Revenues represent the sales value of goods sold less returns, discounts and value added taxes and other sales taxes, which may be analysed as follows:

Nine months ended Years ended 30 June 31 March 2006 2007 2008 2008 2009 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 (Unaudited) Footwear ...... 240,325 345,890 866,134 599,087 1,133,237 Apparel ...... 21,229 22,739 432,737 248,211 1,232,942 Accessories and others ...... 1,369 4,717 18,198 6,353 57,500 262,923 373,346 1,317,069 853,651 2,423,679

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APPENDIX I ACCOUNTANTS’ REPORT

3 Other revenue and other loss Nine months ended Years ended 30 June 31 March 2006 2007 2008 2008 2009 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 (Unaudited) Other revenue Interest income ...... 144 245 362 181 1,077 Government grants ...... 680 1,346 2,105 850 4,750 824 1,591 2,467 1,031 5,827 Other loss Loss on disposal of fixed assets ...... — — (1,948) — (54)

Government grants of RMB680,000, RMB1,346,000 and RMB2,005,000, RMB850,000 and RMB4,750,000 during the years ended 30 June 2006, 2007 and 2008 and for the nine months ended 31 March 2008 and 2009 respectively, were received from several of local government authorities for the Group’s contribution to local economies, of which the entitlement was unconditional and under the discretion of the relevant authorities.

The remaining government grants of RMB100,000 during the year ended 30 June 2008 were granted for subsidising the Group’s research project in the PRC of which the entitlement was conditional. Grants were recognised as deferred income initially and credited as other revenue in profit or loss upon the satisfaction of the conditions attaching to the grants.

4 Profit before taxation Profit before taxation is arrived at after charging:

Nine months ended Years ended 30 June 31 March 2006 2007 2008 2008 2009 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 (Unaudited) (a) Finance costs: Interest on bank borrowings wholly repayable within five years ...... 1,250 3,026 5,371 3,457 11,883 (b) Staff costs: Contributions to defined contribution retirement plans ...... 23 98 315 164 2,113 Salaries, wages and other benefits ...... 35,366 41,799 70,949 47,910 84,457 35,389 41,897 71,264 48,074 86,570 (c) Other items: Auditors’ remuneration ...... 17 28 50 25 45 Amortisation of land lease premium ...... — 78 435 323 972 Depreciation ...... 2,749 2,884 4,600 3,121 6,568 Operating lease charges in respect of properties ...... 289 289 663 483 2,556 Research and development costs ...... 167 222 3,639 1,149 10,831 Cost of inventories ...... 235,865 296,423 969,041 651,292 1,632,354

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APPENDIX I ACCOUNTANTS’ REPORT

5 Income tax in the combined income statements (a) Taxation in the combined income statements represents: Nine months ended Years ended 30 June 31 March 2006 2007 2008 2008 2009 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 (Unaudited) Current tax—PRC income tax Provision for the year ...... 855 3,745 13,270 9,417 53,542 Deferred tax Origination and reversal of temporary differences ...... (874) (351) 4,929 792 12,971 Actual tax (credit)/expense ...... (19) 3,394 18,199 10,209 66,513

(i) Pursuant to the rules and regulations of the Cayman Islands and the British Virgin Islands, the Group is not subject to any income tax in the Cayman Islands and the British Virgin Islands. (ii) No provision has been made for Hong Kong Profits Tax as the Group does not earn any income subject to Hong Kong Profits Tax during the Relevant Period. (iii) Pursuant to the income tax rules and regulations of the PRC, the companies comprising the Group are liable to PRC enterprise income tax as follows: • Sanliuyidu (Fujian) Sports Goods Co., Ltd. is a foreign investment enterprise and, pursuant to the Income Tax Law of the PRC For Enterprises with Foreign Investment And Foreign Enterprises (effective as of 1 July 1991), is entitled to tax concessions whereby the profit for the first two financial years beginning with the first profit-making year is exempted from income tax in the PRC and the profit for each of the subsequent three years is taxed at 50% of the prevailing tax rate set by the local authorities. The first profit-making year of Sanliuyidu (Fujian) Sports Goods Co., Ltd was 2004. Accordingly, Sanliuyidu (Fujian) Sports Goods Co., Ltd is exempted from PRC enterprise income tax from 1 January 2004 to 31 December 2005 and the applicable rate for the period from 1 January 2006 to 31 December 2007 and 1 January 2008 to 31 December 2008 is 12% and 12.5% respectively. With effect from 1 January 2009, the applicable tax rate is 25%. • Sanliuyidu (China) Co., Ltd. is a foreign investment enterprise and, pursuant to the Income Tax Law of the PRC For Enterprises with Foreign Investment And Foreign Enterprises (effective as of 1 July 1991), is entitled to tax concessions whereby the profit for the first two financial years beginning with the first profit-making year is exempted from income tax in the PRC and the profit for each of the subsequent three years is taxed at 50% of the prevailing tax rate set by the local authority. The first profit-making year of Sanliuyidu (China) Co., Ltd. is 2008. Accordingly, Sanliuyidu (China) Co., Ltd. is exempted from PRC enterprise income tax during the Relevant Period. • Sanliuyidu (Xiamen) Industry & Trade Co., Ltd. is a limited liability company incorporated under the laws of the PRC in 2008 and is subject to a tax rate of 25%. (iv) Under the Corporate Income Tax Law of the PRC with effect from 1 January 2008 onwards, non-resident enterprises without an establishment or place of business in the PRC or which have an establishment or place of business but the relevant income is not effectively connected with the establishment or a place of business in the PRC, will be subject to withholding income tax at the rate of 10% on various types of passive income such as dividends derived from sources in the PRC. Pursuant to the double tax arrangement between the PRC and Hong Kong effective on 8 December 2006, the withholding income tax rate will be reduced to 5% if the investment by the Hong Kong investor in the invested entities in the PRC is not less than 25%. On 22 February 2008, the Minister of Finance and State Administration of Tax approved Caishui (2008) No. 1, pursuant to which dividend distributions out of retained earnings of foreign investment enterprises prior to 31 December 2007 will be exempted from withholding income tax. Deferred tax liabilities of RMB7,154,000, RMB3,017,000 and RMB19,281,000 in respect of the withholding income tax on dividends has been recognised for the year ended 30 June 2008 and for the nine months ended 31 March 2008 and 2009 respectively.

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APPENDIX I ACCOUNTANTS’ REPORT

(b) Reconciliation between tax (credit)/expense and accounting profit at applicable tax rates:

Nine months ended Years ended 30 June 31 March 2006 2007 2008 2008 2009 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 (Unaudited) Profit before taxation ...... 10,987 26,305 197,172 112,865 430,718 Notional tax on profit before taxation, calculated at the rates applicable in the jurisdictions concerned ...... 2,637 6,314 48,987 28,046 107,680 Tax effect of non-deductible expenses ...... 79 824 532 150 2,798 Tax effect of profits entitled to tax exemption in the PRC . . . (2,735) (3,744) (31,320) (17,987) (43,965) Actual tax (credit)/expenses ...... (19) 3,394 18,199 10,209 66,513

6 Directors’ remuneration

Details of directors’ remuneration are set out below:

Year ended 30 June 2006 Basic salaries, Contributions allowances to retirement and other benefits Discretionary Name of directors Fee benefits schemes bonus Total RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 Executive directors Ding Wuhao ...... — 83 5 — 88 Ding Huihuang ...... — 83 5 — 88 Ding Huirong ...... — — — — — Wang Jiabi ...... — — — — — Non-executive directors Mak Kin Kwong ...... — — — — — Sun Xianhong ...... — — — — — Liu Jianxing ...... — — — — — Total ...... — 166 10 — 176

Year ended 30 June 2007 Basic salaries, Contributions allowances to retirement and other benefits Discretionary Name of directors Fee benefits schemes bonus Total RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 Executive directors Ding Wuhao ...... — 158 8 — 166 Ding Huihuang ...... — 158 8 — 166 Ding Huirong ...... — — — — — Wang Jiabi ...... — — — — — Non-executive directors Mak Kin Kwong ...... — — — — — Sun Xianhong ...... — — — — — Liu Jianxing ...... — — — — — Total ...... — 316 16 — 332

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APPENDIX I ACCOUNTANTS’ REPORT

Year ended 30 June 2008 Basic salaries, Contributions allowances to retirement and other benefits Discretionary Name of directors Fee benefits schemes bonus Total RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 Executive directors Ding Wuhao ...... — 437 5 — 442 Ding Huihuang ...... — 389 5 — 394 Ding Huirong ...... — 274 3 — 277 Wang Jiabi ...... — 297 3 — 300 Non-executive directors Mak Kin Kwong ...... — — — — — Sun Xianhong ...... — — — — — Liu Jianxing ...... — — — — — Total ...... — 1,397 16 — 1,413

Nine months ended 31 March 2008 (Unaudited) Basic salaries, Contributions allowances to retirement and other benefits Discretionary Name of directors Fee benefits schemes bonus Total RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 Executive directors Ding Wuhao ...... — 271 — — 271 Ding Huihuang ...... — 254 3 — 257 Ding Huirong ...... — 138 3 — 141 Wang Jiabi ...... — 162 3 — 165 Non-executive directors Mak Kin Kwong ...... — — — — — Sun Xianhong ...... — — — — — Liu Jianxing ...... — — — — — Total ...... — 825 9 — 834

Nine months ended 31 March 2009 Basic salaries, Contributions allowances to retirement and other benefits Discretionary Name of directors Fee benefits schemes bonus Total RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 Executive directors Ding Wuhao ...... — 1,148 2 — 1,150 Ding Huihuang ...... — 916 2 — 918 Ding Huirong ...... — 916 2 — 918 Wang Jiabi ...... — 538 2 — 540 Non-executive directors Mak Kin Kwong ...... — — — — — Sun Xianhong ...... — — — — — Liu Jianxing ...... — — — — — Total ...... — 3,518 8 — 3,526

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APPENDIX I ACCOUNTANTS’ REPORT

During the Relevant Period, no amount was paid or payable by the Group to the directors or any of the five highest paid individuals set out in note 7 below as an inducement to join or upon joining the Group or as compensation for loss of office.

The amount paid to the executive directors represented mainly allowances provided for certain business trips outside China. The Group did not pay any remuneration to Ding Huirong and Wang Jiabi, executive directors for the two years ended 30 June 2007 because they did not make any business trips outside China that required allowances from the Group during the period. All of the executive directors have agreed to waive their salaries during the Relevant Period in order to enhance the capital base of the Group and facilitate the Group’s expansion. The executive directors will receive director fees determined by reference to market rates after [Š].

7 Individuals with highest emoluments The five highest paid individuals of the Group during the Relevant Period include 2, 2, 4, 4, and 3 directors for the years ended 30 June 2006, 2007 and 2008 and the nine months ended 31 March 2008 and 2009 respectively, whose emoluments are disclosed in note 6. The aggregate of the emoluments in respect of the remaining individuals are as follows:

Nine months ended Years ended 30 June 31 March 2006 2007 2008 2008 2009 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 (Unaudited) Salaries and other emoluments ...... 203 369 385 159 2,648 Contributions to retirement benefits scheme ...... 14 23 5 3 5 217 392 390 162 2,653 Number of senior management ...... 3 3 1 1 2

The above individuals’ emoluments are within the following bands:

Nine months ended Years ended 30 June 31 March 2006 2007 2008 2008 2009 Number of Number of Number of Number of Number of individuals individuals individuals individuals individuals (Unaudited) Nil to RMB500,000 ...... 3 3 1 1 — RMB500,001 to RMB1,000,000 ...... — — — — 1 RMB1,000,001 to RMB2,000,000 ...... — — — — 1

8 Dividends Dividends payable to equity shareholders of the Company attributable to the year/period:

Nine months ended Years ended 30 June 31 March 2006 2007 2008 2008 2009 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 (Unaudited) Dividends declared during the year/period ...... — — — — 45,342 Dividends declared after the balance sheet date .... — — — — 31,400 — — — — 76,742

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APPENDIX I ACCOUNTANTS’ REPORT

Dividends presented during the Relevant Period represent dividends declared by Sanliuyidu (Fujian) Sports Goods Co., Ltd. to their then shareholders before it became a subsidiary of the Company.

The dividends proposed after the balance sheet date have not been recognised as liabilities at the balance sheet date.

The rate of dividend per share is not presented as it is not indicative of the rate at which future dividends will be declared.

9 Basic earnings per share The calculation of basic earnings per share for the Relevant Period is based on the net profit attributable to equity shareholders of the Company for each of the years ended 30 June 2006, 2007 and 2008 and the nine months ended 31 March 2008 and 2009, and on the number of shares in issue as at the date of the completion of [Š] as if the shares were outstanding throughout the entire Relevant Period.

There were no dilutive potential ordinary shares during the Relevant Period and, therefore, diluted earnings per share are not presented.

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APPENDIX I ACCOUNTANTS’ REPORT

10 Fixed assets

Interests in leasehold land Office held for equipment own use and other under Plant and fixed Motor Construction operating Buildings machinery assets vehicles in progress Sub-total leases Total RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 Cost: At 1 July 2005 ...... — 24,461 39 — — 24,500 — 24,500 Additions ...... — 863 143 184 — 1,190 — 1,190 At 30 June 2006 ...... — 25,324 182 184 — 25,690 — 25,690 Accumulated depreciation and amortisation: At 1 July 2005 ...... — 3,659 10 — — 3,669 — 3,669 Charge for the year ..... — 2,726 12 11 — 2,749 — 2,749 At 30 June 2006 ...... — 6,385 22 11 — 6,418 — 6,418 Net book value: At 30 June 2006 ...... — 18,939 160 173 — 19,272 — 19,272

Interests in leasehold land Office held for equipment own use and other under Plant and fixed Motor Construction operating Buildings machinery assets vehicles in progress Sub-total leases Total RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 Cost: At 1 July 2006 ...... — 25,324 182 184 — 25,690 — 25,690 Additions ...... — 514 456 — — 970 22,267 23,237 At 30 June 2007 ...... — 25,838 638 184 — 26,660 22,267 48,927 Accumulated depreciation and amortisation: At 1 July 2006 ...... — 6,385 22 11 — 6,418 — 6,418 Charge for the year ..... — 2,820 47 17 — 2,884 78 2,962 At 30 June 2007 ...... — 9,205 69 28 — 9,302 78 9,380 Net book value: At 30 June 2007 ...... — 16,633 569 156 — 17,358 22,189 39,547

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APPENDIX I ACCOUNTANTS’ REPORT

Interests in leasehold Office land held equipment for own and other use under Plant and fixed Motor Construction operating Buildings machinery assets vehicles in progress Sub-total leases Total RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 Cost: At 1 July 2007 ...... — 25,838 638 184 — 26,660 22,267 48,927 Additions ...... 43,391 20,813 1,276 3,788 10,636 79,904 1,671 81,575 Disposals ...... — (5,803) — — — (5,803) — (5,803) At 30 June 2008 ...... 43,391 40,848 1,914 3,972 10,636 100,761 23,938 124,699 Accumulated depreciation and amortisation: At 1 July 2007 ...... — 9,205 69 28 — 9,302 78 9,380 Charge for the year ..... 26 3,845 191 538 — 4,600 435 5,035 Written back on disposals ...... — (1,796) — — — (1,796) — (1,796) At 30 June 2008 ...... 26 11,254 260 566 — 12,106 513 12,619 Net book value: At 30 June 2008 ...... 43,365 29,594 1,654 3,406 10,636 88,655 23,425 112,080

Interests in leasehold Office land held equipment for own and other use under Plant and fixed Motor Construction operating Buildings machinery assets vehicles in progress Sub-total leases Total RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 Cost: At 1 July 2008 ...... 43,391 40,848 1,914 3,972 10,636 100,761 23,938 124,699 Transfer from construction in progress ...... 47,225 — — — (47,225) — — — Additions ...... — 1,601 6,111 1,224 67,129 76,065 64,412 140,477 Disposals ...... — (430) — — — (430) — (430) At 31 March 2009 ...... 90,616 42,019 8,025 5,196 30,540 176,396 88,350 264,746 Accumulated depreciation and amortisation: At 1 July 2008 ...... 26 11,254 260 566 — 12,106 513 12,619 Charge for the period .... 1,496 3,154 1,127 791 — 6,568 972 7,540 Written back on disposals ...... — (350) — — — (350) — (350) At 31 March 2009 ...... 1,522 14,058 1,387 1,357 — 18,324 1,485 19,809 Net book value: At 31 March 2009 ...... 89,094 27,961 6,638 3,839 30,540 158,072 86,865 244,937

Fixed assets with aggregate net book value of RMB5,945,000 and RMB57,926,000 are pledged as security for certain bank loans of the Group totalling RMB15,000,000 and RMB40,000,000 as at 30 June 2008 and 31 March 2009 respectively. At 31 March 2009, the Group was applying for certificates of ownership for buildings, with net book value of RMB47,225,000 as at 31 March 2009 from the relevant PRC government authorities.

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APPENDIX I ACCOUNTANTS’ REPORT

11 Inventories Inventories in the combined balance sheets comprise:

As at As at 30 June 31 March 2006 2007 2008 2009 RMB’000 RMB’000 RMB’000 RMB’000 Raw materials ...... 24,885 29,845 23,112 12,915 Work in progress ...... 540 7,758 110,070 34,478 Finished goods ...... 9,816 31,340 47,874 84,262 35,241 68,943 181,056 131,655

All the inventories as at 30 June 2006, 2007 and 2008 and 31 March 2009 were carried at cost.

12 Trade and other receivables As at As at 30 June 31 March 2006 2007 2008 2009 RMB’000 RMB’000 RMB’000 RMB’000 Trade debtors ...... 72,670 89,096 525,942 1,411,323 Bills receivable ...... — — 25,520 47,300 Less: allowance for doubtful debts ...... (3,976) (5,378) (14,279) (39,520) 68,694 83,718 537,183 1,419,103 Deposits, prepayments and other receivables ...... 24,824 54,676 136,584 178,341 93,518 138,394 673,767 1,597,444

All of the trade and other receivables are expected to be recovered within one year, except that the Group’s deposits, prepayments and other receivables totalling RMB908,000, RMB21,456,000 and RMB20,500,000 at 30 June 2007 and 2008 and 31 March 2009, respectively are expected to be recovered or recognised as expenses after more than one year.

(a) Ageing analysis Included in trade and other receivables are trade debtors and bills receivable (net of allowance for doubtful debts) with the following ageing analysis, based on the date of invoice, as of the balance sheet date:

As at As at 30 June 31 March 2006 2007 2008 2009 RMB’000 RMB’000 RMB’000 RMB’000 Within 90 days ...... 38,889 51,135 393,264 1,112,614 Over 91 days but less than 180 days ...... 18,521 17,023 94,973 263,808 181 to 360 days ...... 6,521 9,356 48,946 42,681 Over 360 days ...... 4,763 6,204 — — 68,694 83,718 537,183 1,419,103

(b) Impairment of trade debtors and bills receivable Impairment losses in respect of trade debtors and bills receivable are recorded using an allowance account unless the Group is satisfied that recovery of the amount is remote, in which case the impairment loss is written off against trade debtors and bills receivable directly (see note 1(f)(i)).

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APPENDIX I ACCOUNTANTS’ REPORT

The movement in the allowance for doubtful debts during the Relevant Period, including both specific and collective loss components, is as follows:

As at As at 30 June 31 March 2006 2007 2008 2009 RMB’000 RMB’000 RMB’000 RMB’000 At beginning of the year/period ...... 3,495 3,976 5,378 14,279 Impairment loss recognised ...... 481 1,402 8,901 25,241 At end of the year/period ...... 3,976 5,378 14,279 39,520

At 30 June 2006, 2007 and 2008 and 31 March 2009, the Group’s trade debtors and bills receivable of RMB3,976,000, RMB5,378,000, RMB14,279,000 and RMB39,520,000 were individually determined to be impaired. The individually impaired receivables related to a number of customers and management assessed that the receivables were not recoverable. Consequently, specific allowances for doubtful debts were recognised at 30 June 2006, 2007 and 2008 and 31 March 2009. The Group does not hold any collateral over these balances.

(c) Trade debtors and bills receivable that are not impaired Trade debtors and bills receivable are due within 30 to 180 days from the date of billing. Further details on the Group’s credit policy are set out in note 21(a).

The ageing analysis of trade debtors and bills receivable that are neither individually nor collectively considered to be impaired are as follows:

As at As at 30 June 31 March 2006 2007 2008 2009 RMB’000 RMB’000 RMB’000 RMB’000 Not past due ...... 19,324 29,466 280,852 1,126,043 Less than 1 month past due ...... 19,565 21,669 112,412 150,199 1 to 3 months past due ...... 18,521 17,023 94,973 118,466 More than 3 months past due ...... 11,284 15,560 48,946 24,395 Amount past due ...... 49,370 54,252 256,331 293,060 68,694 83,718 537,183 1,419,103

Receivables that were neither past due nor impaired relate to a wide range of customers for whom there was no recent history of default.

Receivables that were past due but not impaired relate to a number of independent customers that have a good track record with the Group. Based on past experience, management believes that no impairment allowance is necessary in respect of these balances as there has not been a significant change in credit quality and the balances are still considered fully recoverable. The Group does not hold any collateral over these balances.

13 Pledged bank deposits Bank deposits are pledged to banks as security for certain banking facilities (see note 17).

14 Cash and cash equivalents Cash and cash equivalents represent cash at bank and in hand. The amounts were placed with banks in the PRC and remittance of funds out of the PRC is subject to the exchange restriction imposed by the PRC government.

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APPENDIX I ACCOUNTANTS’ REPORT

15 Bank loans As at 30 June 2006, 2007 and 2008 and 31 March 2009, the bank loans were repayable as follows:

As at As at 30 June 31 March 2006 2007 2008 2009 RMB’000 RMB’000 RMB’000 RMB’000 Within 1 year or on demand ...... 43,000 60,000 149,500 227,000

As at 30 June 2006, 2007 and 2008 and 31 March 2009, the bank loans were secured as follows:

As at As at 30 June 31 March 2006 2007 2008 2009 RMB’000 RMB’000 RMB’000 RMB’000 Bank loans —secured ...... — — 15,000 40,000 —unsecured ...... 43,000 60,000 134,500 187,000 43,000 60,000 149,500 227,000

The amounts of banking facilities and the utilisation at each balance sheet date are set out as follows:

As at As at 30 June 31 March 2006 2007 2008 2009 RMB’000 RMB’000 RMB’000 RMB’000 Facility amount ...... 101,000 122,500 530,000 553,500 Utilisation at the balance sheet date ...... 101,000 122,500 293,000 535,500

Certain bank loans of RMB40,000,000, RMB60,000,000, RMB90,000,000 were guaranteed by a related party at 30 June 2006, 2007 and 2008 respectively. In addition, bank loans of RMB40,000,000 and RMB46,000,000 at 30 June 2008 and 31 March 2009 were jointly guaranteed by certain shareholders of the Company and a related party. Details of guarantees are disclosed in note 23(e).

At 30 June 2008 and 31 March 2009, certain banking facilities of the Group were secured by mortgages over their interests in leasehold land held under operating leases with a carrying value of RMB5,945,000 and RMB16,058,000 respectively.

At 31 March 2009, certain banking facilities of the Group were secured by mortgages over their fixed assets with carrying value of RMB41,868,000.

16 Employee retirement benefits Defined contribution retirement plans Pursuant to the relevant labour rules and regulations in the PRC, the PRC subsidiaries now comprising the Group participate in a defined contribution retirement benefit scheme (the “Scheme”) organised by the PRC municipal government authority in the Fujian Province whereby the Group is required to make contributions to the Scheme at the rate of 18% of the eligible employees’ salaries. The local government authority is responsible for the entire pension obligations payable to retired employees.

The Group has no other material obligation for the payment of pension benefits associated with the Scheme beyond the annual contributions described above.

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APPENDIX I ACCOUNTANTS’ REPORT

17 Trade and other payables

As at As at 30 June 31 March 2006 2007 2008 2009 RMB’000 RMB’000 RMB’000 RMB’000 Trade payables ...... 69,439 55,103 327,276 673,069 Bills payable ...... 58,000 62,500 143,500 308,500 Receipts in advance ...... 17,623 20,636 32,314 39,658 Other payables and accruals ...... 9,193 34,766 31,623 120,111 Total ...... 154,255 173,005 534,713 1,141,338

All of the trade and other payables are expected to be settled or recognised as income within one year or are repayable on demand.

Certain bills payable of RMB48,000,000, RMB60,000,000, RMB46,500,000 were guaranteed by a related party at 30 June 2006, 2007 and 2008 respectively. In addition, bills payable of RMB92,000,000 and RMB141,000,000 at 30 June 2008 and 31 March 2009 respectively were jointly guaranteed by certain shareholders of the Company and a related party. Details of the guarantees are disclosed in note 23(e).

Bills payable as at 30 June 2006, 2007 and 2008 and 31 March 2009 were secured by pledged bank deposits as disclosed in note 13.

Included in trade and other payables are trade creditors and bills payable with the following ageing analysis as of each balance sheet date:

As at As at 30 June 31 March 2006 2007 2008 2009 RMB’000 RMB’000 RMB’000 RMB’000 Due within 1 month or on demand ...... 34,663 21,102 49,174 152,366 Due after 1 month but within 3 months ...... 18,697 27,043 93,275 188,282 Due after 3 months but within 6 months ...... 74,079 69,458 328,327 640,921 Total ...... 127,439 117,603 470,776 981,569

18 Income tax in the combined balance sheets (a) Current taxation in the combined balance sheets represents: As at As at 30 June 31 March 2006 2007 2008 2009 RMB’000 RMB’000 RMB’000 RMB’000 Provision for PRC income tax ...... 855 3,745 13,270 53,542 Tax paid ...... (518) (2,041) (8,487) (10,061) 337 1,704 4,783 43,481

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APPENDIX I ACCOUNTANTS’ REPORT

(b) Deferred tax assets/(liabilities) recognised: The components of deferred tax assets/(liabilities) recognised in the combined balance sheets and the movements during the Relevant Period are as follows:

Allowance Withholding for doubtful tax on debts dividends Total RMB’000 RMB’000 RMB’000 At 1 July 2005 ...... 120 — 120 Credited to profit or loss ...... 874 — 874 At 30 June 2006 ...... 994 — 994 At 1 July 2006 ...... 994 — 994 Credited to profit or loss ...... 351 — 351 At 30 June 2007 ...... 1,345 — 1,345 At 1 July 2007 ...... 1,345 — 1,345 Credited/(charged) to profit or loss ...... 2,225 (7,154) (4,929) At 30 June 2008 ...... 3,570 (7,154) (3,584) At 1 July 2008 ...... 3,570 (7,154) (3,584) Credited/(charged) to profit or loss ...... 6,310 (19,281) (12,971) At 31 March 2009 ...... 9,880 (26,435) (16,555)

19 Amounts due from related parties and amounts due to a shareholder of the Company Amounts due from related parties are unsecured, interest-free and recovered during the period ended 31 March 2009.

Amounts due to a shareholder of the Company are unsecured, interest-free and repayable on demand.

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APPENDIX I ACCOUNTANTS’ REPORT

20 Capital and reserves (a) The Group Statutory Exchange Other Retained Capital reserve reserve reserve profits Total RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 At 1 July 2005 ...... 34,497 1,297 — — 7,351 43,145 Capital injection ...... 17,587 — — — — 17,587 Profit for the year ...... — — — — 11,006 11,006 Appropriation to statutory reserve ...... — 1,651 — — (1,651) — At 30 June 2006 ...... 52,084 2,948 — — 16,706 71,738 At 1 July 2006 ...... 52,084 2,948 — — 16,706 71,738 Capital injection ...... 30,640 — — — — 30,640 Exchange differences on translation of financial statements of operations outside PRC ...... — — 1,842 — — 1,842 Profit for the year ...... — — — — 22,911 22,911 Appropriation to statutory reserve ...... — 3,437 — — (3,437) — At 30 June 2007 ...... 82,724 6,385 1,842 — 36,180 127,131 At 1 July 2007 ...... 82,724 6,385 1,842 — 36,180 127,131 Exchange differences on translation of financial statements of operations outside PRC ...... — — 11,482 — — 11,482 Profit for the year ...... — — — — 178,973 178,973 Appropriation to statutory reserve ...... — 26,846 — — (26,846) — At 30 June 2008 ...... 82,724 33,231 13,324 — 188,307 317,586 At 1 July 2008 ...... 82,724 33,231 13,324 — 188,307 317,586 Issue of shares ...... 1 — — — — 1 Arising from the reorganisation ...... (82,724) — — 82,724 — — Exchange differences on translation of financial statements of operations outside PRC ...... — — 757 — — 757 Profit for the year ...... — — — — 364,205 364,205 Appropriation to statutory reserve ...... — 54,951 — — (54,951) — Dividends paid during the year ...... — — — — (45,342) (45,342) At 31 March 2009 ...... 1 88,182 14,081 82,724 452,219 637,207

(b) Share capital For the purpose of this report, share capital at 30 June 2006, 2007 and 2008 represents the aggregate amount of paid-in capital of the companies comprising the Group at those dates, after elimination of investments in subsidiaries.

During the years ended 30 June 2006 and 2007, the equity holders of Sanliuyidu (Fujian) Sports Goods Co., Ltd. injected capital totalling RMB17,587,000 and RMB30,630,000 respectively to the entity, which was satisfied by cash.

Sanliuyidu (Hong Kong) Sports Goods Co., Ltd. was incorporated on 6 April 2004 with an authorised share capital of HK$10,000 comprising 10,000 shares of HK$1 each. The capital was issued and fully paid in cash at par during the year ended 30 June 2007.

Upon completion of the Reorganisation, the Company became the holding company of the Group. Share capital at 31 March 2009 represents the share capital of the Company (note 25).

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APPENDIX I ACCOUNTANTS’ REPORT

(c) Nature and purpose of reserve (i) Statutory reserve Pursuant to applicable PRC regulations, certain PRC subsidiaries are required to appropriate 15% of their profit-after-tax (after offsetting prior year losses) to the reserve until such reserve reaches 50% of the registered capital. The transfer to the reserve must be made before distribution of dividends to shareholders. The statutory reserve can be utilised, upon approval by the relevant authorities, to offset accumulated losses or to increase registered capital of the subsidiary, provided that the balance after such issue is not less than 25% of its registered capital.

(ii) Exchange reserve The exchange reserve comprises all foreign exchange differences arising from the translation of the financial statements of operations outside PRC. The reserve is dealt with in accordance with the accounting policy set out in 1(p).

(iii) Other reserve On 25 July 2008, the Controlling Shareholders transferred the entire equity interest in Sanliuyidu (Fujian) Sports Goods Co., Ltd. and the business of Sanliuyidu (Hong Kong) Sports Goods Co., Ltd. to 361 Enterprise Company Limited for cash consideration of HK$1. The difference between the historical carrying value of equity acquires and acquisition consideration is treated as an equity movement and recorded in “Other reserve”.

(d) Capital management The Group’s primary objectives when managing capital are to safeguard the Group’s ability to continue as a going concern, so that it can continue to provide returns for shareholders and benefits for other stakeholders, by pricing products and services commensurately with the level of risk and by securing access to finance at a reasonable cost. The Group actively and regularly reviews and manages its capital structure to maintain a balance between the higher shareholder returns that might be possible with higher levels of borrowings and the advantages and security afforded by a sound capital position, and makes adjustments to the capital structure in light of changes in economic conditions. The Group monitors its capital structure on the basis of a debt-to-adjusted capital ratio. This ratio is calculated as net debt divided by adjusted capital. The Group defines net debt as interest-bearing bank loans less pledged bank deposits and cash and cash equivalents. Adjusted capital comprises all components of equity, and includes amounts due to a shareholders of the Company. The net debt-to-adjusted capital ratio as at 30 June 2006, 2007 and 2008 and 31 March 2009 were as follows: As at As at 30 June 31 March 2006 2007 2008 2009 RMB’000 RMB’000 RMB’000 RMB’000 Bank loans ...... 43,000 60,000 149,500 227,000 Bills payable ...... 58,000 62,500 143,500 308,500 Less: Pledged bank deposits ...... (9,600) (12,600) (38,500) (91,700) Cash and cash equivalents ...... (11,769) (23,547) (108,895) (129,840) Net debt ...... 79,631 86,353 145,605 313,960 Equity ...... 71,738 127,131 317,586 637,207 Add: Amounts due to a shareholder of the Company ...... — 29,082 142,149 129,995 Adjusted capital ...... 71,738 156,213 459,735 767,202 Net debt-to-adjusted capital ratio ...... 1.11 0.55 0.32 0.41

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APPENDIX I ACCOUNTANTS’ REPORT

Neither the Company nor any of its subsidiaries is subject to externally imposed capital requirements during the Relevant Period.

21 Financial instruments Exposure to credit, liquidity, interest rate, commodity price and currency risks arises in the normal course of the Group’s business. These risks are limited by the Group’s financial management policies and practices described below.

(a) Credit risk (i) Trade and other receivables The Group’s credit risk is primarily attributable to trade and other receivables. Credit evaluations are performed on all customers requiring credit over a certain amount. These receivables are due within 30 to 180 days from the date of billing. Debtors with balances that are more than 1 year from the date of billing are requested to settle all outstanding balances before any further credit is granted.

The Group’s exposure to credit risk is influenced mainly by the individual characteristics of each customer. The default risk of the industry and country in which customers operate also has an influence on credit risk but to a lesser extent. Further quantitative disclosures in respect of the Group’s exposure to credit risk arising from trade and other receivables are set out in note 12.

At the balance sheet date, the Group has a certain concentration of credit risk as 8%, 8%, 22% and 14% of the total trade receivables were due from the Group’s largest customer, and 21%, 24%, 45% and 52% of the total trade receivables were due from the Group’s five largest customers as at 30 June 2006, 2007 and 2008 and 31 March 2009 respectively.

The maximum exposure to credit risk is represented by the carrying amount of each financial asset in the combined balance sheets.

(ii) Deposits with banks The Group mitigates its exposure to credit risk by placing deposits with financial institutions with established credit ratings. Given the high credit ratings of the banks, management does not expect any counterparty to fail to meet its obligations.

(b) Liquidity risk Individual operating entities within the Group are responsible for their own cash management, including the short term investment of cash surpluses and the raising of loans to cover expected cash demands, subject to approval by the Company’s board when the borrowing exceeds certain predetermined levels of authority. The Group’s policy is to regularly monitor current and expected liquidity requirements and its compliance with lending covenants, to ensure that it maintains sufficient reserves of cash and adequate committed lines of funding from major financial institutions to meet its liquidity requirements in the short and longer term.

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APPENDIX I ACCOUNTANTS’ REPORT

The following table details the remaining contractual maturities at the balance sheet date of the Group’s financial liabilities, which are based on contractual undiscounted cashflows (including interest payments computed using contractual rates or, if floating, based on rates current at the balance sheet date) and the earliest date the Group can be required to pay:

30 June 2006 30 June 2007 30 June 2008 31 March 2009 Total Within Total Within Total Within Total Within contractual 1 year or contractual 1 year or contractual 1 year or contractual 1 year or Carrying undiscounted on Carrying undiscounted on Carrying undiscounted on Carrying undiscounted on amount cash flow demand amount cash flow demand amount cash flow demand amount cash flow demand RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 Bank loans ...... 43,000 44,682 44,682 60,000 61,939 61,939 149,500 157,208 157,208 227,000 242,331 242,331 Trade and other payables ...... 154,255 154,255 154,255 173,005 173,005 173,005 534,713 534,713 534,713 1,141,338 1,141,338 1,141,338 Amounts due to a shareholder of the Company . . . — — — 29,082 29,082 29,082 142,149 142,149 142,149 129,995 129,995 129,995 197,255 198,937 198,937 262,087 264,026 264,026 826,362 834,070 834,070 1,498,333 1,513,664 1,513,664

(c) Interest rate risk (i) Interest rate profile The Group’s interest rate risk arises primarily from bank loans, pledged bank deposits and cash and cash equivalents.

The following table details the interest rate profile of the Group’s interest-generating financial assets and interest- bearing financial liabilities at the balance sheet date:

30 June 2006 30 June 2007 30 June 2008 31 March 2009 Effective Effective Effective Effective interest interest interest interest rate RMB’000 rate RMB’000 rate RMB’000 rate RMB’000 Fixed rate borrowings Bank loans ...... 5.6%-6% 43,000 5.6%-6.2% 60,000 6.2%-8.2% 149,500 5.3%-8.2% 227,000 Variable rate deposits Pledged bank deposits ..... 1.8% (9,600) 3.33% (12,600) 3.33% (38,500) 0.36%-1.98% (91,700) Cash and cash equivalents . . 0.72% (11,769) 0.72% (23,547) 0.72% (108,895) 0.01%-0.36% (129,840) (21,369) (36,147) (147,395) (221,540) Total net borrowings ...... 21,631 23,853 2,105 5,460

(ii) Sensitivity analysis At 30 June 2006, 2007 and 2008 and 31 March 2009, it is estimated that a general increase/decrease of 100 basis points in interest rates, with all other variables held constant, would increase/decrease the Group’s profit after tax and retained profit by approximately RMB214,000, RMB361,000, RMB1,474,000 and RMB2,215,000 respectively. Other components of equity would not be affected by the changes in interest rates.

The sensitivity analysis above has been determined assuming that the change in interest rates had occurred at the balance sheet date and had been applied to the exposure to interest rate risk for financial instruments in existence at that date. The 100 basis point increase or decrease represents management’s assessment of a reasonably possible change in interest rates over the period until the next annual balance sheet date. The analysis is performed on the same basis for the Relevant Period.

(d) Commodity price risk The major raw materials used in the production of the Group’s products include polymers and plastics. The Group is exposed to fluctuations in the prices of these raw materials which are influenced by global as well

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APPENDIX I ACCOUNTANTS’ REPORT

as regional supply and demand conditions. Fluctuations in the prices of raw materials could adversely affect the Group’s financial performance. The Group historically has not entered into any commodity derivative instruments to hedge the potential commodity price changes.

(e) Foreign currency risk The Group is exposed to currency risk primarily through the amounts due to a shareholder of the Company that are denominated in a currency other than the functional currency of the operations to which they relate. The currency giving rise to this risk is primarily Hong Kong dollars (“HKD”).

(i) Exposure to currency risk The following table details the Group’s major exposure at the balance sheet date to currency risk arising from recognised liabilities denominated in a currency other than the functional currency of the entity to which they relate.

As at As at 30 June 31 March 2006 2007 2008 2009 HKD’000 HKD’000 HKD’000 HKD’000 Amounts due to a shareholder of the Company ...... — 54,200 164,520 176,216

(ii) Sensitivity analysis The following table indicates the approximate change in the Group’s profit after tax and retained profits in response to reasonably possible changes in the foreign exchange rates to which the Group has significant exposure at the balance sheet date.

30 June 2006 30 June 2007 30 June 2008 31 March 2009 Increase/ Effect on Increase/ Effect on Increase/ Effect on Increase/ Effect on (decrease) profit after (decrease) profit after (decrease) profit after (decrease) profit after in foreign tax and in foreign tax and in foreign tax and in foreign tax and exchange retained exchange retained exchange retained exchange retained rates profits rates profits rates profits rates profits RMB’000 RMB’000 RMB’000 RMB’000 HKD ...... 1% — 5% (2,710) 5% (7,236) 5% (7,769) (1)% — (5)% 2,710 (5)% 7,236 (5)% 7,769

The sensitivity analysis has been determined assuming that the change in foreign exchange rates had occurred at the balance sheet date and had been applied to exposure to currency risk for financial instruments in existence at that date, and that all other variables, in particular interest rates, remain constant.

The stated changes represent management’s assessment of reasonably possible changes in foreign exchange rates over the period until the next annual balance sheet date. Results of the analysis as presented in the above table represent an aggregation of the effects on each of the group entities’ profit after tax and retained profits measured in the respective functional currencies, translated into Renminbi at the exchange rate ruling at the balance sheet date for presentation purposes. The analysis is performed on the same basis for the Relevant Period.

(f) Fair values All financial instruments are carried at amounts not materially different from their fair values as at 30 June 2006, 2007 and 2008 and 31 March 2009.

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APPENDIX I ACCOUNTANTS’ REPORT

(g) Business risk The Group’s primary business is the design, manufacturing and distribution of branded sports footwear, apparel and related accessories. The Group’s financial results are influenced by the rapidity with which designs are copied by competitors and reproduced at much lower prices, as well as by the Group’s ability to continue to create new designs that find favour in the market place, maintain a larger network of distributors, manufacture sufficient quantities to meet fashionable sales, and dispose of excess inventories without excessive losses. Based on these factors, the Group may experience significant fluctuations in its future financial results.

22 Commitments (a) Contractual commitments outstanding at each balance sheet date not provided for in the Financial Information were as follows:

As at As at 30 June 31 March 2006 2007 2008 2009 RMB’000 RMB’000 RMB’000 RMB’000 Advertising and marketing expenses ...... 5,317 79,955 28,380 764,928

(b) Capital commitments outstanding at each balance sheet date not provided for in the Financial Information were as follows:

As at As at 30 June 31 March 2006 2007 2008 2009 RMB’000 RMB’000 RMB’000 RMB’000 Authorised and contracted for ...... — 2,118 80,831 13,806

(c) At each balance sheet date, the Group had total future minimum lease payments under non-cancellable operating leases payable as follows:

As at As at 30 June 31 March 2006 2007 2008 2009 RMB’000 RMB’000 RMB’000 RMB’000 Within 1 year ...... — — 2,115 1,328

The Group leases warehouses under operating leases expiring in one year with options to renew the leases when all terms are renegotiated. None of the leases include contingent rentals.

23 Material related party transactions In addition to the transactions and balances disclosed in notes 6, 15, 17 and 19 to the Financial Information, the Group entered into the following related party transactions:

(a) During the years ended 30 June 2006, 2007 and 2008, the Group leased certain interests in leasehold land held for own use under operating leases and buildings from a related company, Bieke (Fujian) Shoes Company Ltd. (a company wholly-owned by Mr Ting Tong Bun, who is the father-in-law of a controlling shareholder of the Group, Mr Ding Huihuang), at annual rental expenses of RMB289,000, RMB289,000 and RMB313,000 respectively.

The Group acquired the above mentioned interests in leasehold land held for own use under operating leases and buildings from Bieke (Fujian) Shoes Company Ltd. during the year ended 30 June 2008 and nine

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APPENDIX I ACCOUNTANTS’ REPORT

months ended 31 March 2009. The consideration paid for interests in leasehold land held for own use under operating leases and buildings during the year ended 30 June 2008 amounted to RMB547,000 and RMB42,100,000 respectively, while consideration paid for interests in leasehold land held for own use under operating leases during the nine months ended 31 March 2009 amounted to RMB8,239,000.

The directors of the Company have confirmed that the terms of the above transactions are no less favourable to the Company than terms available to or from independent third parties.

The directors of the Company have confirmed that the above transactions will not be continued upon [Š]of the Company’s shares on The Stock Exchange of Hong Kong Limited.

(b) Key management personnel remuneration Remuneration for key management personnel, including amounts paid to the directors disclosed in note 6 and certain of the highest paid employees as disclosed in note 7, is as follows:

Nine months ended Years ended 30 June 31 March 2006 2007 2008 2009 RMB’000 RMB’000 RMB’000 RMB’000 Short-term employee benefits ...... 560 919 2,974 7,399 Post-employment benefits ...... 19 31 26 23 579 950 3,000 7,422

Total remuneration is disclosed in “staff costs” (see note 4(b)).

The directors of the Company expect the above transactions will be continued upon [Š] of the Company’s shares on The Stock Exchange of Hong Kong Limited.

(c) Advances to/from related parties Included in the balances as set out in note 23(d) are unsecured and interest free advances made to/from related parties of the Group which are not expected to continue after the [Š] of the shares of the Company, the maximum balances of which during the years ended 30 June 2006, 2007 and 2008 and nine months ended 31 March 2009 are as follows:

Nine months ended Years ended 30 June 31 March 2006 2007 2008 2009 RMB’000 RMB’000 RMB’000 RMB’000 Short term advances to related parties —Mr Ting Tong Bun ...... 94,515 94,515 119,548 49,995 —Bieke (Fujian) Shoes Company Ltd...... 10,000 28,364 38,910 18,819 104,515 122,879 158,458 68,814 Short term advances from a shareholder of the Company —Mr Ding Huihuang ...... — (29,082) (142,149) (142,149)

The directors of the Company have confirmed that the above transactions will not be continued in the future after the [Š] of the Company’s shares on The Stock Exchange of Hong Kong Limited.

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APPENDIX I ACCOUNTANTS’ REPORT

(d) Balances with related parties As at the balance sheet dates, the Group had the following balances with related parties:

As at As at 30 June 31 March 2006 2007 2008 2009 RMB’000 RMB’000 RMB’000 RMB’000 Amounts due from/(to) —Mr Ting Tong Bun ...... 94,515 84,050 41,295 — —Bieke (Fujian) Shoes Company Ltd...... 4,421 22,496 (3,278) — 98,936 106,546 38,017 — Amounts due to a shareholder of the Company —Mr Ding Huihuang ...... — (29,082) (142,149) (129,995)

Included in amounts due from Bieke (Fujian) Shoes Company Ltd. are prepayment of RMB4,400,000 and RMB22,430,000 as at 30 June 2006 and 2007 for the acquisition of interests in leasehold land held for own use under operating leases and buildings as disclosed in note 23(a). Details of the terms for the above balances with related parties are disclosed in note 19. There was no provision made against these amounts at 30 June 2006, 2007 and 2008.

The directors have confirmed that the amounts due to a shareholder of the Company as stated above have been waived by the relevant related party prior to the [Š] of the shares of the Company on The Stock Exchange of Hong Kong Limited.

(e) Certain bank loans and bills payable totalling RMB88,000,000, RMB120,000,000 and RMB136,500,000 were guaranteed by Bieke (Fujian) Shoes Company Ltd. (a related party) at 30 June 2006, 2007 and 2008 respectively. In addition, certain bank loans and bills payable totalling RMB132,000,000 and RMB187,000,000 were guaranteed by Mr Ding Wuhao, Mr Ding Huihuang, Mr Ding Huirong and Mr Ding Jiantong (shareholders of the Company) and/or Mr Ting Tong Bun (a related party) at 30 June 2008 and 31 March 2009 respectively. The Group was not required to pay any guarantee fees to the guarantors.

The directors of the Company have confirmed that these guarantees would be released prior to the [Š]ofthe Company’s shares on The Stock Exchange of Hong Kong Limited.

24 Accounting estimates and judgements Estimates and judgements are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances.

The selection of critical accounting policies, the judgements and other uncertainties affecting application of those policies and the sensitivity of reported results to changes in conditions and assumptions are factors to be considered when reviewing the Financial Information. The principal accounting policies are set forth in note 1. The Group believes the following critical accounting policies involve the most significant judgements and estimates used in the preparation of the Financial Information.

(a) Depreciation Property, plant and equipment are depreciated on a straight-line basis over the estimated useful lives, after taking into account the estimated residual value. The Group reviews the estimated useful lives of the assets regularly in order to determine the amount of depreciation expense to be recorded during any reporting period. The useful lives are based on the Group’s historical experience with similar assets and taking into account anticipated technological changes. The depreciation expense for future periods is adjusted if there are significant changes from previous estimates.

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APPENDIX I ACCOUNTANTS’ REPORT

(b) Impairment If circumstances indicate that carrying value of an asset may not be recoverable, the asset may be considered “impaired”, and an impairment loss may be recognised in profit or loss. The carrying amounts of assets are reviewed periodically in order to assess whether the recoverable amounts have declined below the carrying amounts. These assets are tested for impairment whenever events or changes in circumstances indicate that their recorded carrying amounts may not be recoverable. When such a decline has occurred, the carrying amount is reduced to recoverable amount.

The recoverable amount is the greater of the fair value less costs to sell and the value in use. In determining the value in use, expected cash flows generated by the asset are discounted to their present value, which requires significant judgement relating to level of sales volume, sales revenue and amount of operating costs. The Group uses all readily available information in determining an amount that is a reasonable approximation of recoverable amount, including estimates based on reasonable and supportable assumptions and projections of sales volumes, sales revenue and amount of operating costs.

(c) Impairment for bad and doubtful debts The Group estimates allowance for impairment of doubtful debts resulting from inability of the customers to make the required payments. The Group bases the estimates on the ageing of the trade receivables balance, customer credit-worthiness, and historical write-off experience. If the financial condition of the customers were to deteriorate, actual write-offs would be higher than estimated.

(d) Net realisable value of inventories Net realisable value of inventories is the estimated selling price in the ordinary course of business, less estimated costs to completion and selling expenses. These estimates are based on the current market condition and the historical experience of manufacturing and selling products of similar nature.

It could change significantly as a result of changes in customer preferences and competitor actions in response to severe industry cycles. Management reassesses these estimates at each balance sheet date.

25 Financial information of the Company The Company was incorporated on 1 August 2008 with authorised capital of HK$380,000 divided into 3,800,000 shares of HK$0.1 each. On 1 August 2008, 51 fully paid shares, 24 fully paid shares and 25 fully paid shares, each of HK$0.1 each ranking pari passu in all respects were allotted and issued to Hui Rong International Company Limited, Ming Rong International Company Limited and Dings International Company Limited respectively. On 15 August 2008, 5,049 fully paid shares, 2,376 fully paid shares and 2,475 fully paid shares, each of HK$0.1 each ranking pari passu in all respects were allotted and issued to Hui Rong International Company Limited, Ming Rong International Company Limited and Dings International Company Limited respectively.

The Company has not carried on any business since its date of incorporation except for the investment in Sanliuyidu Holdings Company Limited. As at 31 March 2009, the Company’s balance sheet included only cash balance of RMB194 and investment in subsidiary of RMB688, representing the issued share capital of RMB882. Investment in subsidiary is stated at cost and details of the subsidiaries comprising the Group at 31 March 2009 are set out in Section A.

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APPENDIX I ACCOUNTANTS’ REPORT

26 Possible impact of amendments, new standards and interpretations issued but not yet effective for the Relevant Period Up to the date of issue of this Financial Information, the HKICPA has issued a number of amendments, new standards and interpretations which are not yet effective in respect of the financial periods included in the Relevant Period, and which have not been adopted in this Financial Information.

The Group is in the process of making an assessment of what the impact of these amendments, new standards and new interpretations is expected to be in the period of initial application. So far it has concluded that the adoption of them is unlikely to have a significant impact on the Group’s results of operations and financial position.

In addition, the following developments may result in new or amended disclosures in the Financial Information:

Effective for accounting periods beginning on or after HKFRS 8 Operating segments 1 January 2009 Revised HKAS 1 Presentation of financial statements 1 January 2009 HKAS 23 (March 2007) Borrowing costs 1 January 2009

D SUBSEQUENT EVENTS The following significant transactions took place subsequent to 31 March 2009:

(a) Share Option Scheme Pursuant to a written resolution of the shareholders of the Company passed on 10 June 2009, the Company has conditionally adopted the [Š] Share Option Scheme and the Share Option Scheme. The principal terms of the [Š] Share Option Scheme and Share Option Scheme are set out in the Section headed “[Š] Share Option Scheme” and “Share Option Scheme” in Appendix VI to the Document.

(b) Dividends Pursuant to the Board resolution dated 10 June 2009, the Company declared dividends of approximately RMB31,400,000 to the then shareholders from retained earnings for the financial year ended 31 March 2009. Such dividends were fully paid before [Š].

E SUBSEQUENT FINANCIAL STATEMENTS No audited financial statements have been prepared by the Company or any of the companies comprising the Group in respect of any period subsequent to 31 March 2009.

Yours faithfully,

Certified Public Accountants Hong Kong,

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APPENDIX III PROFIT FORECAST

The forecast of the combined profit after taxation of our Group for the year ending 30 June 2009 is set out in the paragraph headed “Profit forecast” in the section headed “Financial Information” in this document.

(1) BASIS AND ASSUMPTIONS The forecast of the combined profit after taxation of our Group for the year ending 30 June 2009 prepared by our Directors is based on the audited accounts of our Group for the nine months ended 31 March 2009 unaudited combined results of our Group for the one month ending 30 April 2009 and a forecast of the combined results of our Group for the remaining two months ending 30 June 2009. The forecast has been prepared on the basis of the accounting policies consistent in all material aspects with those currently adopted by our Group as summarised in the accountants’ report, the text of which is set out in Appendix I to this document and is based on the following principal assumptions: (a) there will be no material changes in existing government policies or political, legal (including changes in legislation or regulations or rules), fiscal or economic conditions in Hong Kong, the PRC or any other places in which any member of our Group is incorporated, carries on business; (b) there will be no material changes in the bases or rates of taxation or duties applicable to the activities of our Group in Hong Kong, in the PRC, or any other place in which our Group operates or in which any member of our Group is incorporated; and (c) there will be no material adverse changes in the foreign currency exchange rates and interest rates from those currently prevailing.

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APPENDIX IV PROPERTY VALUATION

The following is the text of a letter, summary of values and valuation certificates, prepared for the purpose of incorporation in this document received from Jones Lang LaSalle Sallmanns Limited, an independent valuer, in connection with its valuation as at 31 March 2009 of the property interests of the Group.

Jones Lang LaSalle Sallmanns Limited 17/F Dorset House Taikoo Place 979 King’s Road Quarry Bay Hong Kong tel +852 2169 6000 fax +852 2169 6001 Licence No: C-030171

[Š] 2009

The Board of Directors 361 Degrees International Limited Jiangtou Industrial Park Chendai Town Jinjiang City Fujian Province The PRC

Dear Sirs,

In accordance with your instructions to value the properties in which 361 Degrees International Limited (the “Company”) and its subsidiaries (hereinafter together referred to as the “Group”) have interests in the People’s Republic of China (the “PRC”), we confirm that we have carried out inspections, made relevant enquiries and searches and obtained such further information as we consider necessary for the purpose of providing you with our opinion of the capital values of the property interests as at 31 March 2009 (the “date of valuation”).

Our valuation of the property interests represents the market value which we would define as intended to mean “the estimated amount for which a property should exchange on the date of valuation between a willing buyer and a willing seller in an arm’s-length transaction after proper marketing wherein the parties had each acted knowledgeably, prudently, and without compulsion”.

We have valued the property interest in Group III which is held for future development by direct comparison approach assuming sale of the property interest in its existing state with the benefit of immediate vacant possession and by making reference to comparable sales transactions as available in the relevant market.

Due to the nature of the buildings and structures of property interests in Group I and the particular locations in which they are situated, there are unlikely to be relevant market comparable sales readily available. The property interests have therefore been valued on the basis of their depreciated replacement cost.

Depreciated replacement cost is defined as “the current cost of replacement (reproduction) of a property less deductions for physical deterioration and all relevant forms of obsolescence and optimisation”. It is based on an estimate of the market value for the existing use of the land, plus the current cost of replacement (reproduction) of the improvements, less deductions for physical deterioration and all relevant forms of obsolescence and optimisation. The depreciated replacement cost of the property interest is subject to adequate potential profitability of the concerned business.

In valuing the property interests in Group II which are currently under construction, we have assumed that they will be developed and completed in accordance with the latest development proposal provided to us by the Group. In arriving at our opinion of value, we have taken into account the construction cost and professional fees relevant to the stage of construction as at the date of valuation and the remainder of the cost and fees to be expended to complete the development.

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APPENDIX IV PROPERTY VALUATION

We have attributed no commercial value to the property interests in Group IV, which are leased by the Group, due either to the short-term nature of the lease or the prohibition against assignment or sub-letting or otherwise due to the lack of substantial profit rent.

Our valuation has been made on the assumption that the seller sells the property interests in the market without the benefit of a deferred term contract, leaseback, joint venture, management agreement or any similar arrangement, which could serve to affect the values of the property interests.

No allowance has been made in our report for any charge, mortgage or amount owing on any of the property interests valued nor for any expense or taxation which may be incurred in effecting a sale. Unless otherwise stated, it is assumed that the properties are free from encumbrances, restrictions and outgoings of an onerous nature, which could affect their values.

In valuing the property interests, we have complied with all requirements contained in Chapter 5 and Practice Note 12 of the Rules Governing the Listing of Securities issued by The Stock Exchange of Hong Kong Limited; the RICS Valuation Standards (6th Edition) published by the Royal Institution of Chartered Surveyors; and the HKIS Valuation Standards on Properties (1st Edition 2005) published by the Hong Kong Institute of Surveyors.

We have relied to a very considerable extent on the information given by the Group and have accepted advice given to us on such matters as tenure, planning approvals, statutory notices, easements, particulars of occupancy, lettings, and all other relevant matters.

We have been shown copies of various title documents including State-owned Land Use Rights Certificates, Building Ownership Certificates, Real Estate Title Certificates and official plans relating to the property interests and have made relevant enquiries. Where possible, we have examined the original documents to verify the existing titles to the property interests in the PRC and any material encumbrance that might be attached to the property interests or any tenancy amendment. We have relied considerably on the advice given by the Company’s PRC legal advisers—Tian Yuan Law Firm, concerning the validity of the property interests in the PRC.

We have not carried out detailed measurements to verify the correctness of the areas in respect of the properties but have assumed that the areas shown on the title documents and official site plans handed to us are correct. All documents and contracts have been used as reference only and all dimensions, measurements and areas are approximations. No on-site measurement has been taken.

We have inspected the exterior and, where possible, the interior of the properties. However, we have not carried out investigation to determine the suitability of the ground conditions and services for any development thereon. Our valuation has been prepared on the assumption that these aspects are satisfactory and that no unexpected cost and delay will be incurred during construction. Moreover, no structural survey has been made, but in the course of our inspection, we did not note any serious defect. We are not, however, able to report whether the properties are free of rot, infestation or any other structural defect. No tests were carried out on any of the services.

We have had no reason to doubt the truth and accuracy of the information provided to us by the Group. We have also sought confirmation from the Group that no material factors have been omitted from the information supplied. We consider that we have been provided with sufficient information to arrive an informed view, and we have no reason to suspect that any material information has been withheld.

Unless otherwise stated, all monetary figures stated in this report are in Renminbi (RMB).

The continued turmoil and instability in the financial markets is continuing to cause volatility and uncertainty in the world’s capital markets and real estate markets. There are low levels of liquidity in the real estate market and transaction levels are significantly reduced, resulting in a lack of clarity as to pricing levels and the market drivers. This, combined with a general weakening of sentiment towards real estate, has resulted in a

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APPENDIX IV PROPERTY VALUATION continual reappraisal of local property prices. Many transactions that are occurring involve vendors who are more compelled to sell, or purchasers who will only buy at discounted prices. In this environment, prices and values are going through a period of heightened volatility whilst the market absorbs the various issues and reaches its conclusions. The period required to negotiate a sale may also extend considerably beyond the normally expected period, which would also reflect the nature and size of the property.

Our valuation is summarised below and the valuation certificates are attached.

Yours faithfully, for and on behalf of Jones Lang LaSalle Sallmanns Limited Paul L. Brown B.Sc. FRICS FHKIS Director

Note: Paul L. Brown is a Chartered Surveyor who has 26 years’ experience in the valuation of properties in the PRC and 29 years of property valuation experience in Hong Kong, the United Kingdom and the Asia-Pacific region.

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APPENDIX IV PROPERTY VALUATION

Summary of Values

Group I – Property interests held and occupied by the Group in the PRC

Capital value attributable Capital value Interest to the Group in existing state as at attributable as at No. Property 31 March 2009 to the Group 31 March 2009 RMB RMB

1. 3 parcels of land, 15 buildings 54,352,000 100% 54,352,000 and various structures No. 165 Qianjin Road Jiangtou Village Chendai Town Jinjiang City Fujian Province The PRC

2. A parcel of land and a building 565,000 100% 565,000 located at Gouxi Hou Huatingkou Village Chendai Town Jinjiang City Fujian Province The PRC Sub-total: 54,917,000 54,917,000

Group II – Property interests held under development by the Group in the PRC

Capital value attributable Capital value Interest to the Group in existing state as at attributable as at No. Property 31 March 2009 to the Group 31 March 2009 RMB RMB

3. A parcel of land and 5 buildings 22,655,000 100% 22,655,000 under construction located at Jiangtou Industrial Park Jiangtou Village Chendai Town Jinjiang City Fujian Province The PRC

4. 2 parcels of land and 5 buildings 41,012,000 100% 41,012,000 under construction (Lot No. GY2008-64) Wuli Industrial Park Jinjiang City Fujian Province The PRC Sub-total: 63,667,000 63,667,000

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APPENDIX IV PROPERTY VALUATION

Group III – Property interest held for future development by the Group in the PRC

Capital value Capital value Interest attributable in existing state as at attributable to the Group as at No. Property 31 March 2009 to the Group 31 March 2009 RMB RMB

5. A parcel of land (Lot No.2008G24) 35,361,000 100% 35,361,000 located at the southeast side of Andun Road Huli Technology and Industry Park Huli District Xiamen City Fujian Province The PRC Sub-total: 35,361,000 35,361,000

Group IV – Property interests rented and occupied by the Group in the PRC

Capital value Capital value Interest attributable in existing state as at attributable to the Group as at No. Property 31 March 2009 to the Group 31 March 2009 RMB RMB

6. Levels 8 to 13 No commercial value 100% No commercial value Taiyangdao Mansion No.24 Huli Avenue Huli District Xiamen City Fujian Province The PRC

7. A parcel of land, 4 warehouses and No commercial value 100% No commercial value various structures located at the western side of Qixin Road Nanyong Village Dongyong Town Panyu District Guangzhou City Guangdong Province The PRC

8. Units 805 and 806 No commercial value 100% No commercial value Taida Times Center No.15 Guanghua Road Chaoyang District Beijing The PRC Sub-total: Nil Nil

Grand Total: 153,945,000 153,945,000

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APPENDIX IV PROPERTY VALUATION

VALUATION CERTIFICATE

Group I – Property interests held and occupied by the Group in the PRC

Capital value in Particulars of existing state as at No. Property Description and tenure occupancy 31 March 2009 RMB

1. 3 parcels of The property comprises 3 parcels of land with a The property is 54,352,000 land, 15 buildings total site area of approximately 25,811.5 sq.m. and currently and various 15 buildings and various structures erected occupied by 100% interest structures thereon which were completed in various stages the Group for attributable to No. 165 Qianjin between 1993 and 2007. production and the Group: Road ancillary office RMB54,352,000 Jiangtou Village The buildings have a total gross floor area of purposes. Chendai Town approximately 71,199.05 sq.m. Jinjiang City Fujian Province The buildings and structures mainly include an The PRC office building, industrial buildings, dormitories, storage sheds and roads.

The land use rights of the property have been granted for terms expiring on 4 February 2058, 6 March 2058 and 30 December 2056 respectively, for industrial use.

Notes: 1. Sanliuyidu (China) Co., Ltd. (“Sanliuyidu China”) is an indirect wholly-owned subsidiary of the Company. Fujian Jinjiang Wanshile Shoes Plastic Co., Ltd. ( )(“Wanshile”) is an independent third party of the Company. Bieke (Fujian) Shoes Co., Ltd. ( )(“Bieke Fujian”) is a company wholly-owned by a connected party of the Company. 2. Pursuant to a Transfer Agreement dated 25 May 2008 entered into between Wanshile and Sanliuyidu China, the land use rights of a parcel of land (of the property) with a site area of approximately 2,816.5 sq.m. were transferred to Sanliuyidu China with a consideration of RMB1,076,100. 3. Pursuant to 2 Transfer Agreements dated 25 May 2008 entered into between Bieke Fujian and Sanliuyidu China, the land use rights of 2 parcels of land (of the property) with a total site area of approximately 22,995 sq.m. were transferred to Sanliuyidu China with a total consideration of RMB8,785,330. 4. Pursuant to 3 State-owned Land Use Rights Certificates—Jin Guo Yong (2008) Di Nos. 00518, 00519 and 00607 ( ), the land use rights of 3 parcels of land with a total site area of approximately 25,811.5 sq.m. have been granted to Sanliuyidu China for a term of 50 years expiring on 4 February 2058, 6 March 2058 and 30 December 2056 respectively, for industrial use. 5. Pursuant to a Jinjiang Real Estate Transfer Agreement dated 27 March 2008 entered into between Wanshile, Bieke Fujian and Sanliuyidu China, 4 buildings (of the property) with a total gross floor area of approximately 12,588.08 sq.m. were transferred to Sanliuyidu China with a consideration of RMB6,850,000. 6. Pursuant to a Transfer Agreement dated 27 May 2008 entered into between Bieke Fujian and Sanliuyidu China, 10 buildings (of the property) with a total gross floor area of approximately 56,201.45 sq.m. were transferred to Sanliuyidu China with a consideration of RMB36,190,000. 7. Pursuant to 2 Building Ownership Certificates—Jin Fang Quan Zheng Chen Dai Zi Di Nos. 06-200582-001 and 06-200584-001 ( ), 15 buildings with a total gross floor area of approximately 71,199.05 sq.m. are owned by Sanliuyidu China. 8. Pursuant to a Mortgage Agreement entered into between Jinjiang Qingyang Branch of Industrial Bank Co., Ltd and Sanliuyidu China, the land use rights of the property with a site area of approximately 21,564 sq.m. and 11 buildings of the property with a total gross floor area of approximately 58,610.97 sq.m. are subject to a mortgage for a maximum loan amount of RMB50,000,000. 9. Pursuant to a Mortgage Agreement entered into between Jinjiang Branch of China Construction Bank and Sanliuyidu China, the land use rights of the property with a site area of approximately 4,247.5 sq.m. and 4 buildings of the property with a total gross floor area of approximately 12,588.08 sq.m. are subject to a mortgage for a maximum loan amount of RMB11,194,100.

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APPENDIX IV PROPERTY VALUATION

10. We have been provided with a legal opinion regarding the property interest by the Company’s PRC legal advisers, which contains, inter alia, the following: a. Sanliuyidu China has legally obtained the State-owned Land Use Rights Certificates of the property and has the rights to use and occupy the land use rights in accordance with the valid terms stipulated in the Land Use Rights Certificates; however, due to the land use rights of the property are subject to mortgages, Sanliuyidu China cannot transfer, mortgage or otherwise dispose of the land use rights of the property without consent from the mortgagees; and b. Sanliuyidu China has legally obtained the Building Ownership Certificates of the buildings of the property and has the rights to use and occupy these buildings in accordance with the relevant PRC laws; however, due to these buildings of the property are subject to mortgages, Sanliuyidu China cannot transfer, mortgage or otherwise dispose of these buildings of the property without consent from the mortgagees. 11. We are of the opinion that the capital value of the property as at the date of valuation would be RMB54,352,000 on the assumption that the consents from the mortgagees had been obtained.

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APPENDIX IV PROPERTY VALUATION

VALUATION CERTIFICATE

Capital value Particulars of in existing state as at No. Property Description and tenure occupancy 31 March 2009 RMB 2. A parcel of land The property comprises a parcel of land The property is 565,000 and a building with a site area of approximately currently occupied located at 253.87 sq.m. and a building erected by the Group as 100% interest Gouxi Hou thereon which was completed in 1998. staff quarters. attribute to the Huatingkou Group: Village The building has a gross floor area of RMB565,000 Chendai Town approximately 819.7 sq.m. Jinjiang City Fujian Province The land use rights of the property have The PRC been granted for a term of 50 years expiring on 5 September 2058 for industrial use.

Notes:

1. Sanliuyidu (China) Co., Ltd. (“Sanliuyidu China”) is an indirect wholly-owned subsidiary of the Company. 2. Pursuant to a Jinjiang City Rural Collectively-owned Land Use Rights Transfer Contract dated 27 November 2007 entered into between Sanliuyidu China and an independent third party, the land use rights of a parcel of land with a site area of 253.87 sq.m. were transferred to Sanliuyidu China with a consideration of RMB125,665.65.

3. Pursuant to a State-owned Land Use Rights Certificate—Jin Guo Yong (2009) Di No.00067 ( ), the land use rights of a parcel of land with a site area of approximately 253.87 sq.m. have been granted to Sanliuyidu China for a term of 50 years expiring on 5 September 2058 for industrial use. 4. Pursuant to a Building Transfer Agreement dated 17 October 2008 entered into between Sanliuyidu China and an independent third party, a building with a gross floor area of approximately 819.7 sq.m. was transferred to Sanliuyidu China with a consideration of RMB770,000. 5. Pursuant to a Building Ownership Certificate—Jin Fang Quan Zheng Chen Dai Zi Di No.06-200606 ( ), a building with a gross floor area of approximately 819.7 sq.m. is owned by Sanliuyidu China. 6. We have been provided with a legal opinion regarding the property interest by the Company’s PRC legal advisers, which contains, inter alia, the following: a. Sanliuyidu China has legally obtained the State-owned Land Use Rights Certificate of the property and has the rights to use, occupy, transfer, mortgage, lease, or otherwise dispose of the land use rights in accordance with the valid term stipulated in the State-owned Land Use Rights Certificate; b. Sanliuyidu China has legally obtained the Building Ownership Certificate of the property and has the rights to use, occupy, transfer, lease, mortgage or otherwise dispose of the building in accordance with the relevant PRC laws; and c. The property is not subject to mortgage or any other encumbrances.

IV-8 THIS WEB PROOF INFORMATION PACK IS IN DRAFT FORM. The information contained in it is incomplete and is subject to change. This Web Proof Information Pack must be read in conjunction with the section headed “Warning” on the cover of this Web Proof Information Pack.

APPENDIX IV PROPERTY VALUATION

VALUATION CERTIFICATE

Group II – Property interests held under development by the Group in the PRC

Capital value in Particulars of existing state as at No. Property Description and tenure occupancy 31 March 2009 RMB 3. A parcel of land The property comprises a parcel of land The property is 22,655,000 and 5 buildings with a site area of approximately currently under under construction 58,090 sq.m. and 5 buildings which were construction. 100% interest located at Jiangtou being constructed thereon as at the date attributable to the Industrial Park of valuation. Group: Jiangtou Village RMB22,655,000 Chendai Town The buildings (“CIP”) are scheduled to Jinjiang City be completed in December 2009. Upon Fujian Province completion, the buildings will have a The PRC total gross floor area of approximately 94,730 sq.m. and the details are set out as follows:

Planned Gross Usage Floor Area (sq.m.) Industrial 40,266 Dormitory 54,464 Total: 94,730

The total construction cost of the buildings is estimated to be approximately RMB76,136,000, of which RMB174,650 had been paid as at the date of valuation.

The CIP is in various construction stages.

The land use rights of the property have been granted for a term of 50 years expiring on 1 June 2057 for industrial use.

Notes: 1. Sanliuyidu (Fujian) Sports Goods Co., Ltd. (“Sanliuyidu Fujian”) is an indirect wholly-owned subsidiary of the Company. 2. Pursuant to a State-owned Land Use Rights Grant Contract dated 20 June 2007 entered into between Jinjiang Municipal Bureau of State- owned Land and Resources and Sanliuyidu Fujian, the land use rights of a parcel of land with a site area of approximately 58,090 sq.m. were contracted to be granted to Sanliuyidu Fujian for a term of 50 years expiring on 1 June 2057 for industrial use. The land premium was RMB4,356,750. 3. Pursuant to a State-owned Land Use Rights Certificate—Jin Guo Yong (2007) Di No. 01198 ( ), the land use rights of the property with a site area of approximately 58,090 sq.m. have been granted to Sanliuyidu Fujian for a term of 50 years expiring on 1 June 2057 for industrial use. 4. We have not been provided with any construction permits for the CIP, and as confirmed by Sanliuyidu Fujian, it is expected that the construction permits would be obtained by December 2009. 5. In the valuation of this property, we have attributed no commercial value to the CIP with a total planned gross floor area of approximately 94,730 sq.m. without any construction permits. However, for reference purpose, we are of the opinion that the capital value of the CIP (excluding the land) as at the date of valuation would be RMB27,519,000 assuming all relevant construction permits have been obtained and the CIP could be freely transferred.

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APPENDIX IV PROPERTY VALUATION

6. Pursuant to a Mortgage Agreement entered into between Jinjiang Branch of China Construction Bank Corporation and Sanliuyidu Fujian, the land use rights of the property with a site area of approximately 58,090 sq.m. are subject to a mortgage for a maximum loan amount of RMB23,476,000. 7. We have been provided with a legal opinion regarding the property interest by the Company’s PRC legal advisers, which contains, inter alia, the following: a. Sanliuyidu Fujian has legally obtained the State-owned Land Use Rights Certificate of the property and has the rights to use and occupy the land use rights in accordance with the valid terms stipulated in the Land Use Rights Certificate; however, due to the land use rights of the property are subject to a mortgage, Sanliuyidu Fujian cannot transfer, mortgage or otherwise dispose of the land use rights of the property without consent from the mortgagee; b. According to a Legality Confirmation Letter issued by the Jinjiang Municipal Bureau of Planning Construction and Housing Administration, Sanliuyidu Fujian has the legal rights to construct the CIP, and will not be investigated for relevant responsibility; and c. There is no legal impediment for Sanliuyidu Fujian to obtain the relevant Construction Work Planning Permits, Construction Work Commencement Permits of the CIP and Building Ownership Certificates after the CIP has been completed and passed the building completion inspection procedures. 8. We are of the opinion that the capital value of the parcel of land of the property as at the date of valuation would be RMB22,655,000 on the assumption that the consents from the mortgagee had been obtained.

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APPENDIX IV PROPERTY VALUATION

VALUATION CERTIFICATE Capital value in Particulars of existing state as at No. Property Description and tenure occupancy 31 March 2009 RMB

4. 2 parcels of land and The property comprises 2 parcels of The property is 41,012,000 5 buildings under land with a site area of currently under construction (Lot No. approximately 102,531 sq.m. and construction. 100% interest GY2008-64) 5 buildings which were being attribute to the Wuli Industrial Park constructed thereon as at the date of Group: Jinjiang City valuation. RMB41,012,000 Fujian Province The PRC The buildings (“CIP”) are scheduled to be completed in June 2009. Upon completion, the buildings will have a total gross floor area of approximately 144,616 sq.m. and the details are set out as follows: Planned Gross Usage Floor Area (sq.m.) Industrial 123,578 Dormitory 21,038 Total: 144,616

.. The total construction cost of the buildings is estimated to be approximately RMB103,565,000, of which RMB50,900,631.71 had been paid as at the date of valuation.

The CIP is in various construction stages.

The land use rights of the property have been granted for a term of 50 years expiring on 7 November 2058 for industrial use.

Notes: 1. Sanliuyidu (China) Co., Ltd. (“Sanliuyidu China”) is an indirect wholly-owned subsidiary of the Company. 2. Pursuant to a State-owned Land Use Rights Grant Contract entered into between Jinjiang Municipal Bureau of State-owned Land and Resources and Sanliuyidu China, the land use rights of a parcel of land with a site area of approximately 102,531 sq.m. were contracted to be granted to Sanliuyidu China for a term of 50 years expiring on 7 November 2058 for industrial use. The land premium was RMB33,330,000. 3. Pursuant to 2 State-owned Land Use Rights Certificates—Jin Guo Yong (2009) Di Nos. 00093 and 00094 ( ), the land use rights of the property with a total site area of approximately 102,531 sq.m. have been granted to Sanliuyidu China for a term of 50 years expiring on 7 November 2058 for industrial use. 4. We have not been provided with any construction permits for the CIP, and as confirmed by Sanliuyidu China, it is expected that the construction permits would be obtained by December 2009. 5. In the valuation of this property, we have attributed no commercial value to the CIP with a total planned gross floor of approximately 144,616 sq.m. without any construction permits. However, for reference purpose, we are of the opinion that the capital value of the CIP (excluding the land) as at the date of valuation would be RMB82,307,000 assuming all relevant construction permits have been obtained and the CIP could be freely transferred. 6. Pursuant to a Mortgage Agreement entered into between Jinjiang Qingyang Branch of Industrial Bank Co., Ltd and Sanliuyidu China, the land use rights of a parcel of land of the property with a site area of approximately 62,641 sq.m. are subject to a mortgage for a maximum loan amount of RMB36,000,000.

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APPENDIX IV PROPERTY VALUATION

7. We have been provided with a legal opinion regarding the property interest by the Company’s PRC legal advisers, which contains, inter alia, the following: a. Sanliuyidu China has legally obtained the State-owned Land Use Rights Certificates of the property and has the legal rights to use and occupy the land use rights in accordance with the valid terms stipulated in the State-owned Land Use Rights Certificates; however, due to the land use rights of the property are subject to a mortgage, Sanliuyidu China cannot transfer, mortgage or otherwise dispose of the land use rights of the property without consent from the mortgagee; b. According to a Legality Confirmation Letter issued by Jinjiang Municipal Bureau of Planning Construction and Housing Administration, Sanliuyidu China has the legal rights to construct the CIP, and will not be investigated for relevant responsibility; and c. There is no legal impediment for Sanliuyidu China to obtain the relevant Construction Work Planning Permits, Construction Work Commencement Permits of the CIP and Building Ownership Certificates after the CIP has been completed and passed the building completion inspection procedures. 8. We are of the opinion that the capital value of the parcels of land of the property as at the date of valuation would be RMB41,012,000 on the assumption that the consents from the mortgagee had been obtained.

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APPENDIX IV PROPERTY VALUATION

VALUATION CERTIFICATE

Group III – Property interest held for future development by the Group in the PRC

Capital value in Particulars of existing state as at No. Property Description and tenure occupancy 31 March 2009 RMB

5. A parcel of land The property comprises a The property is 35,361,000 (Lot No. 2008G24) parcel of land with a site area currently vacant. located at of approximately 100% interest the southeast side of 7,857.93 sq.m. attribute to the Andun Road Group: Huli Technology and The land use rights of the RMB35,361,000 Industry Park property have been granted for Huli District a term of 50 years expiring on Xiamen City 31 August 2058 for office use. Fujian Province The PRC

Notes:

1. Sanliuyidu (Xiamen) Industry & Trade Co., Ltd. (“Sanliuyidu Xiamen”) is an indirect wholly-owned subsidiary of the Company. 2. Pursuant to a State-owned Land Use Rights Grant Contract dated 19 August 2008 entered into between Xiamen Municipal Bureau of Land Resources & Housing Administration and Sanliuyidu Xiamen, the land use rights of a parcel of land with a site area of approximately 7,857.906 sq.m. were contracted to be granted to Sanliuyidu Xiamen for a term of 50 years expiring on 31 August 2058 for office use. The land premium was RMB33,000,000. 3. Pursuant to a State-owned Land Use Rights Certificate—Xia Guo Tu Fang Zheng Di Di No. 00010259 ( ), the land use rights of a parcel of land with a site area of approximately 7,857.93 sq.m. have been granted to Sanliuyidu Xiamen for a term of 50 years expiring on 31 August 2058 for office use. 4. We have been provided with a legal opinion regarding the property interest by the Company’s PRC legal advisers, which contains, inter alia, the following: a. Sanliuyidu Xiamen has legally obtained the State-owned Land Use Rights Certificate of the property and has the rights to use, occupy, transfer, mortgage, lease or otherwise dispose of the land use rights in accordance with the valid term stipulated in the State-owned Land Use Rights Certificate; and b. The property is not subject to mortgage or any other encumbrances.

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APPENDIX IV PROPERTY VALUATION

VALUATION CERTIFICATE

Group IV – Property interests rented and occupied by the Group in the PRC

Capital value in Particulars of existing state as at No. Property Description and tenure occupancy 31 March 2009 RMB

6. Levels 8 to 13 The property comprises the whole of The property is No commercial value Taiyangdao Mansion Levels 8 to 13 of a 13-storey office currently occupied No.24 Huli Avenue building completed in about 2004. by the Group for Huli District office purpose. Xiamen City The property has a total leased area of Fujian Province approximately 4,900 sq.m. The PRC The property is leased to Sanliuyidu Xiamen from an independent third party for a term of 3 years commencing from 1 August 2008 and expiring on 31 July 2011, at an annual rent of RMB705,600, exclusive of management fees, water and electricity charges.

Notes:

1. Sanliuyidu (Xiamen) Industry & Trade Co., Ltd. (“Sanliuyidu Xiamen”) is an indirect wholly-owned subsidiary of the Company. 2. Pursuant to a Tenancy Agreement, the property is leased to Sanliuyidu Xiamen from Xiamen City Huli District Government offices Administrative Bureau ( ) (the “Lessor”), a branch of Xiamen City Huli District People’s Government, for a term of 3 years commencing from 1 August 2008 and expiring on 31 July 2011 at an annual rent of RMB705,600, exclusive of management fees, water and electricity charges. 3. As confirmed by Sanliuyidu Xiamen, the Tenancy Agreement mentioned in note 2 has not been registered with the relevant local authority. 4. We have been provided with a legal opinion on the legality of the Tenancy Agreement to the property issued by the Company’s PRC legal advisers, which contains, inter alia, the following: a. The Lessor has obtained 6 Building Ownership Certificates relating to the property and has the legal rights to let out the property; b. As confirmed by the Lessor, the property is not subject to mortgage or any other material encumbrances; c. Due to the allocated land nature of the property, the Lessor should obtain the consent from relevant local government authorities when leasing the property and turn in the land profit generated from rent. The Tenancy Agreement is legal, valid and binding on both signing parties, and its legality will not be affected by the lack of lease registration and the consent from local government authorities to lease the property which is erected on allocated land; and d. The existing use of the property is consistent with the authorised use stipulated in the Building Ownership Certificates.

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APPENDIX IV PROPERTY VALUATION

VALUATION CERTIFICATE

Capital value in Particulars of existing state as at No. Property Description and tenure occupancy 31 March 2009 RMB

7. A parcel of land, The property comprises a parcel of land The property is No commercial value 4 warehouses and with a site area of approximately currently occupied various structures 8,235 sq.m. and 4 warehouses and by the Group for located at the various structures erected thereon which storage purpose. western side of were completed in about 2000. Qixin Road Nanyong Village The 4 warehouses have a total gross Dongyong Town floor area of approximately 10,691.5 Panyu District sq.m. Guangzhou City Guangdong The property is leased to Sanliuyidu Province China from 2 independent third parties The PRC for a term expiring on 15 May 2010, at a monthly rent of RMB117,606.5 inclusive of management fees.

Notes:

1. Sanliuyidu (China) Co., Ltd. (“Sanliuyidu China”) is an indirect wholly-owned subsidiary of the Company. 2. Pursuant to a Tenancy Agreement, the property is leased to Sanliuyidu China from 2 independent third parties (the “Lessor”), for a term of one year commencing from 16 May 2008 and expiring on 15 May 2009 at a monthly rent of RMB117,606.5 inclusive of management fees. The Tenancy Agreement had been renewed after the date of valuation. 3. Pursuant to a Tenancy Agreement dated 15 May 2009, the property is leased to Sanliuyidu China from the Lessor, for a term of one year commencing from 16 May 2009 and expiring on 15 May 2010, at a monthly rent of RMB117,606.5 inclusive of management fees. 4. As confirmed by the Company, the Tenancy Agreements mentioned in note 2 and 3 have not been registered with the relevant local authority. 5. We have been provided with a legal opinion on the legality of the Tenancy Agreement to the property issued by the Company’s PRC legal advisers, which contains, inter alia, the following: a. Pursuant to 4 Real Estate Co-ownership Certificates, the Lessor together with other co-owners are the legal owners of the property; and the Lessor has the legal rights to let out the property with the consent of other co-owners;

b. As confirmed by the Lessor, the property is subject to a mortgage in favour of Pancheng Rural Credit Co-operatives of Guangzhou City ( ); c. The Tenancy Agreement is legal, valid and binding on both signing parties; and the lack of registration of the Tenancy Agreement will not affect the legality of the Tenancy Agreement; and d. The existing use of the property is consistent with the authorised use stipulated in Real Estate Co-ownership Certificates.

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APPENDIX IV PROPERTY VALUATION

VALUATION CERTIFICATE

Capital value in existing state as at No. Property Description and tenure Particulars of occupancy 31 March 2009 RMB

8. Units 805 and 806 The property comprises 2 units on The property is No commercial value Taida Times Center the 8th floor of a 16-storey office currently occupied by No. 15 Guanghua Road building completed in about 2006. the Group for office Chaoyang District purpose. Beijing The property has a total lease area of The PRC approximately 445.88 sq.m.

The property is leased to Sanliuyidu Fujian from an independent third party for a term of 3 years commencing from 1 March 2009 and expiring on 29 February 2012 at a monthly rent of RMB71,340 inclusive of management fees, exclusive of water and electricity charges.

Notes:

1. Sanliuyidu (Fujian) Sports Goods Co., Ltd. (“Sanliuyidu Fujian”) is an indirect wholly-owned subsidiary of the Company. 2. Pursuant to a Tenancy Agreement, the property is leased to Sanliuyidu Fujian from an independent third party (the “Lessor”) for a term of 3 years commencing from 1 March 2009 and expiring on 29 February 2012 at a monthly rent of RMB71,340 inclusive of management fees, exclusive of water and electricity charges. 3. We have been provided with a legal opinion on the legality of the Tenancy Agreement to the property issued by the Company’s PRC legal advisers, which contains, inter alia, the following: a. As the Lessor has not obtained Building Ownership Certificates of the property, the legality and validity of the Tenancy Agreement are uncertain. However, the Lessor has obtained Land Use Rights Certificate of the property; b. Sanliuyidu Fujian may be required to register in local authority for the Tenancy Agreement, and may be liable for a fine not less than RMB200 and not more than RMB500; and c. There would be no material adverse effect on Sanliuyidu Fujian due to the lack of lease registration.

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APPENDIX V SUMMARY OF THE CONSTITUTION OF OUR COMPANY AND CAYMAN ISLANDS COMPANIES LAW

Set out below is a summary of certain provisions of the Memorandum and Articles of our Company and of certain aspects of the Companies Law.

Our Company was incorporated in the Cayman Islands as an exempted company with limited liability on 1 August 2008 under the Companies Law. The Memorandum and the Articles comprise its constitution.

1. MEMORANDUM OF ASSOCIATION (i) The Memorandum states, inter alia, that the liability of members of our Company is limited to the amount, if any, for the time being unpaid on the Shares respectively held by them and that the objects for which our Company is established are unrestricted, and that our Company shall have and be capable of exercising all the functions of a natural person of full capacity irrespective of any question of corporate benefit, as provided in section 27(2) of the Companies Law and in view of the fact that our Company is an exempted company that our Company will not trade in the Cayman Islands with any person, firm or corporation except in furtherance of the business of our Company carried on outside the Cayman Islands.

(ii) Our Company may by special resolution alter its Memorandum with respect to any objects, powers or other matters specified therein.

2. ARTICLES OF ASSOCIATION The Articles were adopted on 10 June 2009. The following is a summary of certain provisions of the Articles:

(i) Directors (a) Power to allot and issue shares and warrants Subject to the provisions of the Companies Law and the Memorandum and Articles and to any special rights conferred on the holders of any shares or class of shares, any share may be issued with or have attached thereto such rights, or such restrictions, whether with regard to dividend, voting, return of capital, or otherwise, as our Company may by ordinary resolution determine (or, in the absence of any such determination or so far as the same may not make specific provision, as the board may determine). Subject to the Companies Law, the rules of any Designated Stock Exchange (as defined in the Articles) and the Memorandum and Articles, any share may be issued on terms that, at the option of our Company or the holder thereof, they are liable to be redeemed.

The board may issue warrants conferring the right upon the holders thereof to subscribe for any class of shares or securities in the capital of our Company on such terms as it may from time to time determine.

Subject to the provisions of the Companies Law and the Articles and, where applicable, the rules of any Designated Stock Exchange (as defined in the Articles) and without prejudice to any special rights or restrictions for the time being attached to any shares or any class of shares, all unissued shares in our Company shall be at the disposal of the board, which may offer, allot, grant options over or otherwise dispose of them to such persons, at such times, for such consideration and on such terms and conditions as it in its absolute discretion thinks fit, but so that no shares shall be issued at a discount.

Neither our Company nor the board shall be obliged, when making or granting any allotment of, offer of, option over or disposal of shares, to make, or make available, any such allotment, offer, option or shares to members or others with registered addresses in any particular territory or territories being a territory or territories where, in the absence of a registration statement or other special formalities, this would or might, in the opinion of the board, be unlawful or impracticable. Members affected as a result of the foregoing sentence shall not be, or be deemed to be, a separate class of members for any purpose whatsoever.

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APPENDIX V SUMMARY OF THE CONSTITUTION OF OUR COMPANY AND CAYMAN ISLANDS COMPANIES LAW

(b) Power to dispose of the assets of our Company or any subsidiary There are no specific provisions in the Articles relating to the disposal of the assets of our Company or any of its subsidiaries. Our Directors may, however, exercise all powers and do all acts and things which may be exercised or done or approved by our Company and which are not required by the Articles or the Companies Law to be exercised or done by our Company in general meeting.

(c) Compensation or payments for loss of office Pursuant to the Articles, payments to any Director or past Director of any sum by way of compensation for loss of office or as consideration for or in connection with his retirement from office (not being a payment to which the Director is contractually entitled) must be approved by our Company in general meeting.

(d) Loans and provision of security for loans to Directors There are provisions in the Articles prohibiting the making of loans to Directors.

(e) Disclosure of interests in contracts with our Company or any of its subsidiaries A Director may hold any other office or place of profit with our Company (except that of the auditor of our Company) in conjunction with his office of Director for such period and, subject to the Articles, upon such terms as the board may determine, and may be paid such extra remuneration therefor (whether by way of salary, commission, participation in profit or otherwise) in addition to any remuneration provided for by or pursuant to any other Articles. A Director may be or become a director or other officer of, or otherwise interested in, any company promoted by our Company or any other company in which our Company may be interested, and shall not be liable to account to our Company or the members for any remuneration, profit or other benefits received by him as a director, officer or member of, or from his interest in, such other company. Subject as otherwise provided by the Articles, the board may also cause the voting power conferred by the shares in any other company held or owned by our Company to be exercised in such manner in all respects as it thinks fit, including the exercise thereof in favour of any resolution appointing our Directors or any of them to be directors or officers of such other company, or voting or providing for the payment of remuneration to the directors or officers of such other company. Subject to the Companies Law and the Articles, no Director or proposed or intended Director shall be disqualified by his office from contracting with our Company, either with regard to his tenure of any office or place of profit or as vendor, purchaser or in any other manner whatsoever, nor shall any such contract or any other contract or arrangement in which any Director is in any way interested be liable to be avoided, nor shall any Director so contracting or being so interested be liable to account to our Company or the members for any remuneration, profit or other benefits realised by any such contract or arrangement by reason of such Director holding that office or the fiduciary relationship thereby established. A Director who to his knowledge is in any way, whether directly or indirectly, interested in a contract or arrangement or proposed contract or arrangement with our Company shall declare the nature of his interest at the meeting of the board at which the question of entering into the contract or arrangement is first taken into consideration, if he knows his interest then exists, or in any other case, at the first meeting of the board after he knows that he is or has become so interested. A Director shall not vote (nor be counted in the quorum) on any resolution of the board approving any contract or arrangement or other proposal in which he or any of his associates is to his knowledge materially interested, and if he shall do so his vote shall not be counted (nor is he counted in the quorum for that resolution) but this prohibition shall not apply to any of the following matters, namely: (1) any contract or arrangement for giving to such Director or his associate(s) any security or indemnity in respect of money lent by him or any of his associates or obligations incurred or undertaken by him or any of his associates at the request of or for the benefit of the Company or any of its subsidiaries;

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APPENDIX V SUMMARY OF THE CONSTITUTION OF OUR COMPANY AND CAYMAN ISLANDS COMPANIES LAW

(2) any contract or arrangement for the giving of any security or indemnity to a third party in respect of a debt or obligation of the Company or any of its subsidiaries for which the Director or his associate(s) has himself/themselves assumed responsibility in whole or in part whether alone or jointly under a guarantee or indemnity or by the giving of security; (3) any contract or arrangement concerning an offer of shares or debentures or other securities of or by the Company or any other company which the Company may promote or be interested in for subscription or purchase, where the Director or his associate(s) is/are or is/are to be interested as a participant in the underwriting or sub-underwriting of the offer; (4) any contract or arrangement in which the Director or his associate(s) is/are interested in the same manner as other holders of shares or debentures or other securities of the Company by virtue only of his/their interest in shares or debentures or other securities of the Company; (5) any contract or arrangement concerning any other company in which the Director or his associate(s) is/are interested only, whether directly or indirectly, as an officer or executive or a shareholder or in which the Director and any of his associates are not in aggregate beneficially interested in 5 percent. or more of the issued shares or of the voting rights of any class of shares of such company (or of any third company through which his interest or that of any of his associates is derived); or (6) any proposal or arrangement concerning the adoption, modification or operation of a share option scheme, a pension fund or retirement, death, or disability benefits scheme or other arrangement which relates both to Directors, his associates and employees of the Company or of any of its subsidiaries and does not provide in respect of any Director, or his associate(s), as such any privilege or advantage not accorded generally to the class of persons to which such scheme or fund relates.

(f) Remuneration The ordinary remuneration of our Directors shall from time to time be determined by our Company in general meeting, such sum (unless otherwise directed by the resolution by which it is voted) to be divided amongst our Directors in such proportions and in such manner as the board may agree or, failing agreement, equally, except that any Director holding office for part only of the period in respect of which the remuneration is payable shall only rank in such division in proportion to the time during such period for which he held office. Our Directors shall also be entitled to be prepaid or repaid all travelling, hotel and incidental expenses reasonably expected to be incurred or incurred by them in attending any board meetings, committee meetings or general meetings or separate meetings of any class of shares or of debentures of our Company or otherwise in connection with the discharge of their duties as Directors.

Any Director who, by request, goes or resides abroad for any purpose of our Company or who performs services which in the opinion of the board go beyond the ordinary duties of a Director may be paid such extra remuneration (whether by way of salary, commission, participation in profit or otherwise) as the board may determine and such extra remuneration shall be in addition to or in substitution for any ordinary remuneration as a Director. An executive Director appointed to be a managing director, joint managing director, deputy managing director or other executive officer shall receive such remuneration (whether by way of salary, commission or participation in profit or otherwise or by all or any of those modes) and such other benefits (including pension and/or gratuity and/or other benefits on retirement) and allowances as the board may from time to time decide. Such remuneration may be either in addition to or in lieu of his remuneration as a Director.

The board may establish or concur or join with other companies (being subsidiary companies of our Company or companies with which it is associated in business) in establishing and making contributions out of our Company’s monies to any schemes or funds for providing pensions, sickness or compassionate allowances, life assurance or other benefits for employees (which expression as used

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APPENDIX V SUMMARY OF THE CONSTITUTION OF OUR COMPANY AND CAYMAN ISLANDS COMPANIES LAW

in this and the following paragraph shall include any Director or ex-Director who may hold or have held any executive office or any office of profit with our Company or any of its subsidiaries) and ex-employees of our Company and their dependents or any class or classes of such persons.

The board may pay, enter into agreements to pay or make grants of revocable or irrevocable, and either subject or not subject to any terms or conditions, pensions or other benefits to employees and ex-employees and their dependents, or to any of such persons, including pensions or benefits additional to those, if any, to which such employees or ex-employees or their dependents are or may become entitled under any such scheme or fund as is mentioned in the previous paragraph. Any such pension or benefit may, as the board considers desirable, be granted to an employee either before and in anticipation of, or upon or at any time after, his actual retirement.

(g) Retirement, appointment and removal At each annual general meeting, one third of our Directors for the time being (or if their number is not a multiple of three, then the number nearest to but not less than one third) will retire from office by rotation provided that every Director (including those appointed for a specific term) shall be subject to retirement by rotation at least once every three years at the general meeting. Our Directors to retire in every year will be those who have been longest in office since their last re-election or appointment but as between persons who became or were last re-elected Directors on the same day those to retire will (unless they otherwise agree among themselves) be determined by lot. There are no provisions relating to retirement of Directors upon reaching any age limit.

Our Directors shall have the power from time to time and at any time to appoint any person as a Director either to fill a casual vacancy on the board or as an addition to the existing board. Any Director so appointed shall hold office only until the next following general meeting (in case of filling casual vacancy) or until the next following annual general meeting (in the case of an addition to the Board) and shall then be eligible for re-appointment of our Company and shall then be eligible for re-election. Neither a Director nor an alternate Director is required to hold any shares in our Company by way of qualification.

A Director may be removed by a special resolution of our Company before the expiration of his period of office (but without prejudice to any claim which such Director may have for damages for any breach of any contract between him and our Company) and may by ordinary resolution appoint another in his place. Unless otherwise determined by our Company in general meeting, the number of Directors shall not be less than two. There is no maximum number of Directors.

The office or director shall be vacated: (1) if he resigns his office by notice in writing delivered to our Company at the registered office of our Company for the time being or tendered at a meeting of the Board; (2) becomes of unsound mind or dies; (3) if, without special leave, he is absent from meetings of the board (unless an alternate director appointed by him attends) for six (6) consecutive months, and the board resolves that his office is vacated; (4) if he becomes bankrupt or has a receiving order made against him or suspends payment or compounds with his creditors; (5) if he is prohibited from being a director by law; (6) if he ceases to be a director by virtue of any provision of law or is removed from office pursuant to the Articles.

The board may from time to time appoint one or more of its body to be managing director, joint managing director, or deputy managing director or to hold any other employment or executive office with our Company for such period and upon such terms as the board may determine and the board may

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APPENDIX V SUMMARY OF THE CONSTITUTION OF OUR COMPANY AND CAYMAN ISLANDS COMPANIES LAW

revoke or terminate any of such appointments. The board may delegate any of its powers, authorities and discretions to committees consisting of such Director or Directors and other persons as the board thinks fit, and it may from time to time revoke such delegation or revoke the appointment of and discharge any such committees either wholly or in part, and either as to persons or purposes, but every committee so formed shall, in the exercise of the powers, authorities and discretions so delegated, conform to any regulations that may from time to time be imposed upon it by the board.

(h) Borrowing powers The board may exercise all the powers of our Company to raise or borrow money, to mortgage or charge all or any part of the undertaking, property and assets (present and future) and uncalled capital of our Company and, subject to the Companies Law, to issue debentures, bonds and other securities of our Company, whether outright or as collateral security for any debt, liability or obligation of our Company or of any third party.

Note: These provisions, in common with the Articles in general, can be varied with the sanction of a special resolution of our Company.

(i) Proceedings of the Board The board may meet for the despatch of business, adjourn and otherwise regulate their meetings as they think fit. Questions arising at any meeting shall be determined by a majority of votes. In the case of an equality of votes, the chairman of the meeting shall have an additional or casting vote.

(j) Register of Directors and Officers The Companies Law and the Articles provide that our Company is required to maintain at its registered office a register of directors and officers which is not available for inspection by the public. A copy of such register must be filed with the Registrar of Companies in the Cayman Islands and any change must be notified to the Registrar within thirty (30) days of any change in such directors or officers.

(ii) Alterations to constitutional documents The Articles may be rescinded, altered or amended by our Company in general meeting by special resolution. The Articles state that a special resolution shall be required to alter the provisions of the Memorandum, to amend the Articles or to change the name of our Company.

(iii) Alteration of capital The Company may from time to time by ordinary resolution in accordance with the relevant provisions of the Companies Law: (a) increase its capital by such sum, to be divided into shares of such amounts as the resolution shall prescribe; (b) consolidate and divide all or any of its capital into shares of larger amount than its existing shares; (c) divide its shares into several classes and without prejudice to any special rights previously conferred on the holders of existing shares attach thereto respectively any preferential, deferred, qualified or special rights, privileges, conditions or restrictions as our Company in general meeting or as the directors may determine; (d) sub-divide its shares or any of them into shares of smaller amount than is fixed by the Memorandum, subject nevertheless to the provisions of the Companies Law, and so that the resolution whereby any share is sub-divided may determine that, as between the holders of the shares resulting from such sub-division, one or more of the shares may have any such preferred or other special rights, over, or

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APPENDIX V SUMMARY OF THE CONSTITUTION OF OUR COMPANY AND CAYMAN ISLANDS COMPANIES LAW

may have such deferred rights or be subject to any such restrictions as compared with the others as our Company has power to attach to unissued or new shares; or (e) cancel any shares which, at the date of passing of the resolution, have not been taken, or agreed to be taken, by any person, and diminish the amount of its capital by the amount of the shares so cancelled.

The Company may subject to the provisions of the Companies Law reduce its share capital or any capital redemption reserve or other undistributable reserve in any way by special resolution.

(iv) Variation of rights of existing shares or classes of shares Subject to the Companies Law, all or any of the special rights attached to the shares or any class of shares may (unless otherwise provided for by the terms of issue of that class) be varied, modified or abrogated either with the consent in writing of the holders of not less than three-fourths in nominal value of the issued shares of that class or with the sanction of a special resolution passed at a separate general meeting of the holders of the shares of that class. To every such separate general meeting the provisions of the Articles relating to general meetings will mutatis mutandis apply, but so that the necessary quorum (other than at an adjourned meeting) shall be two persons holding or representing by proxy not less than one-third in nominal value of the issued shares of that class and at any adjourned meeting two holders present in person or by proxy whatever the number of shares held by them shall be a quorum. Every holder of shares of the class shall be entitled to one vote for every such share held by him.

The special rights conferred upon the holders of any shares or class of shares shall not, unless otherwise expressly provided in the rights attaching to the terms of issue of such shares, be deemed to be varied by the creation or issue of further shares ranking pari passu therewith.

(v) Special resolution-majority required Pursuant to the Articles, a special resolution of our Company must be passed by a majority of not less than three-fourths of the votes cast by such members as, being entitled so to do, vote in person or, in the case of such members as are corporations, by their duly authorised representatives or, where proxies are allowed, by proxy at a general meeting of which not less than twenty-one (21) clear days’ and not less than ten (10) clear business days (as defined in the Listing Rules) notice, specifying the intention to propose the resolution as a special resolution, has been duly given. Provided that, except in the case of an annual general meeting, if it is so agreed by a majority in number of the members having a right to attend and vote at such meeting, being a majority together holding not less than ninety-five (95)% in nominal value of the shares giving that right and, in the case of an annual general meeting, if so agreed by all Members entitled to attend and vote thereat, a resolution may be proposed and passed as a special resolution at a meeting of which less than twenty-one (21) clear days’ and not less than ten (10) clear business days (as defined in the Listing Rules) notice has been given.

A copy of any special resolution must be forwarded to the Registrar of Companies in the Cayman Islands within fifteen (15) days of being passed.

An ordinary resolution is defined in the Articles to mean a resolution passed by a simple majority of the votes of such members of our Company as, being entitled to do so, vote in person or, in the case of corporations, by their duly authorised representatives or, where proxies are allowed, by proxy at a general meeting held in accordance with the Articles.

(vi) Voting rights (generally and on a poll) and right to demand a poll Subject to any special rights or restrictions as to voting for the time being attached to any shares by or in accordance with the Articles, at any general meeting on a poll every member present in person or by proxy or, in the case of a member being a corporation, by its duly authorised representative shall have one vote for

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APPENDIX V SUMMARY OF THE CONSTITUTION OF OUR COMPANY AND CAYMAN ISLANDS COMPANIES LAW

every fully paid share of which he is the holder but so that no amount paid up or credited as paid up on a share in advance of calls or instalments is treated for the foregoing purposes as paid up on the share. On a poll, a member entitled to more than one vote need not use all his votes or cast all the votes he uses in the same way.

At any general meeting a resolution put to the vote of the meeting is to be decided by way of a poll.

If a recognised clearing house (or its nominee(s)) is a member of our Company it may authorise such person or persons as it thinks fit to act as its representative(s) at any meeting of our Company or at any meeting of any class of members of our Company provided that, if more than one person is so authorised, the authorisation shall specify the number and class of shares in respect of which each such person is so authorised. A person authorised pursuant to this provision shall be deemed to have been duly authorised without further evidence of the facts and be entitled to exercise the same powers on behalf of the recognised clearing house (or its nominee(s)) as if such person was the registered holder of the shares of our Company held by that clearing house (or its nominee(s)).

Where our Company has any knowledge that any shareholder is, under the rules of the Designated Stock Exchange (as defined in the Articles), required to abstain from voting on any particular resolution of our Company or restricted to voting only for or only against any particular resolution of our Company, any votes cast by or on behalf of such shareholder in contravention of such requirement or restriction shall not be counted.

(vii) Requirements for annual general meetings An annual general meeting of our Company must be held in each year, other than the year of adoption of the Articles (within a period of not more than 15 months after the holding of the last preceding annual general meeting or a period of 18 months from the date of adoption of the Articles, unless a longer period would not infringe the rules of any Designated Stock Exchange (as defined in the Articles)) at such time and place as may be determined by the board.

(viii) Accounts and audit The board shall cause true accounts to be kept of the sums of money received and expended by our Company, and the matters in respect of which such receipt and expenditure take place, and of the property, assets, credits and liabilities of our Company and of all other matters required by the Companies Law or necessary to give a true and fair view of our Company’s affairs and to explain its transactions.

The accounting records shall be kept at the registered office or at such other place or places as the board decides and shall always be open to inspection by any Director. No member (other than a Director) shall have any right to inspect any accounting record or book or document of our Company except as conferred by law or authorised by the board or our Company in general meeting.

A copy of every balance sheet and profit and loss account (including every document required by law to be annexed thereto) which is to be laid before our Company at its general meeting, together with a printed copy of our Directors’ report and a copy of the auditors’ report, shall not less than twenty-one (21) days before the date of the meeting and at the same time as the notice of annual general meeting be sent to every person entitled to receive notices of general meetings of our Company under the provisions the Articles; however, subject to compliance with all applicable laws, including the rules of the Designated Stock Exchange (as defined in the Articles), our Company may send to such persons a summary financial statement derived from our Company’s annual accounts and the directors’ report instead provided that any such person may by notice in writing served on our Company, demand that our Company sends to him, in addition to a summary financial statement, a complete printed copy of our Company’s annual financial statement and the Directors’ report thereon.

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APPENDIX V SUMMARY OF THE CONSTITUTION OF OUR COMPANY AND CAYMAN ISLANDS COMPANIES LAW

Auditors shall be appointed and the terms and tenure of such appointment and their duties at all times regulated in accordance with the provisions of the Articles. The remuneration of the auditors shall be fixed by our Company in general meeting or in such manner as the members may determine.

The financial statements of our Company shall be audited by the auditor in accordance with generally accepted auditing standards. The auditor shall make a written report thereon in accordance with generally accepted auditing standards and the report of the auditor shall be submitted to the members in general meeting. The generally accepted auditing standards referred to herein may be those of a country or jurisdiction other than the Cayman Islands. If so, the financial statements and the report of the auditor should disclose this fact and name such country or jurisdiction.

(ix) Notices of meetings and business to be conducted thereat An annual general meeting shall be called by notice of not less than twenty-one (21) clear days and not less than twenty (20) clear business days (as defined in the Listing Rules) and any extraordinary general meeting at which it is proposed to pass a special resolution shall (save as set out in sub-paragraph (v) above) be called by notice of at least twenty-one (21) clear days’ and not less than ten (10) clear business days (as defined in the Listing Rules), and any other extraordinary general meeting shall be called by at least fourteen (14) clear days’ notice and not less than ten (10) clear business days (as defined in the Listing Rules). The notice must specify the time and place of the meeting and, in the case of special business, the general nature of that business. In addition notice of every general meeting shall be given to all members of our Company other than such as, under the provisions of the Articles or the terms of issue of the shares they hold, are not entitled to receive such notices from our Company, and also to the auditors for the time being of our Company.

Notwithstanding that a meeting of our Company is called by shorter notice than that mentioned above, it shall be deemed to have been duly called if it is so agreed: (a) in the case of a meeting called as an annual general meeting, by all members of our Company entitled to attend and vote thereat; and (b) in the case of any other meeting, by a majority in number of the members having a right to attend and vote at the meeting, being a majority together holding not less than ninety-five (95)% in nominal value of the issued shares giving that right.

All business shall be deemed special that is transacted at an extraordinary general meeting and also all business shall be deemed special that is transacted at an annual general meeting with the exception of the following, which shall be deemed ordinary business: (a) the declaration and sanctioning of dividends; (b) the consideration and adoption of the accounts and balance sheet and the reports of the directors and the auditors; (c) the election of directors in place of those retiring; (d) the appointment of auditors and other officers; (e) the fixing of the remuneration of the directors and of the auditors; (f) the granting of any mandate or authority to the directors to offer, allot, grant options over or otherwise dispose of the unissued shares of our Company representing not more than twenty (20)% in nominal value of its existing issued share capital; and (g) the granting of any mandate or authority to the directors to repurchase securities of our Company.

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APPENDIX V SUMMARY OF THE CONSTITUTION OF OUR COMPANY AND CAYMAN ISLANDS COMPANIES LAW

(x) Transfer of shares All transfers of shares may be effected by an instrument of transfer in the usual or common form or in a form prescribed by the Designated Stock Exchange (as defined in the Articles) or in such other form as the board may approve and which may be under hand or, if the transferor or transferee is a clearing house or its nominee(s), by hand or by machine imprinted signature or by such other manner of execution as the board may approve from time to time. The instrument of transfer shall be executed by or on behalf of the transferor and the transferee provided that the board may dispense with the execution of the instrument of transfer by the transferee in any case in which it thinks fit, in its discretion, to do so and the transferor shall be deemed to remain the holder of the share until the name of the transferee is entered in the register of members in respect thereof. The board may also resolve either generally or in any particular case, upon request by either the transferor or the transferee, to accept mechanically executed transfers.

The board in so far as permitted by any applicable law may, in its absolute discretion, at any time and from time to time transfer any share upon the principal register to any branch register or any share on any branch register to the principal register or any other branch register.

Unless the board otherwise agrees, no shares on the principal register shall be transferred to any branch register nor may shares on any branch register be transferred to the principal register or any other branch register. All transfers and other documents of title shall be lodged for registration and registered, in the case of shares on a branch register, at the relevant registration office and, in the case of shares on the principal register, at the registered office in the Cayman Islands or such other place at which the principal register is kept in accordance with the Companies Law.

The board may, in its absolute discretion, and without assigning any reason, refuse to register a transfer of any share (not being a fully paid up share) to a person of whom it does not approve or any share issued under any share incentive scheme for employees upon which a restriction on transfer imposed thereby still subsists, and it may also refuse to register any transfer of any share to more than four joint holders or any transfer of any share (not being a fully paid up share) on which our Company has a lien.

The board may decline to recognise any instrument of transfer unless a fee of such maximum sum as any Designated Stock Exchange (as defined in the Articles) may determine to be payable or such lesser sum as our Directors may from time to time require is paid to our Company in respect thereof, the instrument of transfer, if applicable, is properly stamped, is in respect of only one class of share and is lodged at the relevant registration office or registered office or such other place at which the principal register is kept accompanied by the relevant share certificate(s) and such other evidence as the board may reasonably require to show the right of the transferor to make the transfer (and if the instrument of transfer is executed by some other person on his behalf, the authority of that person so to do).

The registration of transfers may be suspended and the register closed on giving notice by advertisement in a relevant newspaper and, where applicable, any other newspapers in accordance with the requirements of any Designated Stock Exchange (as defined in the Articles), at such times and for such periods as the board may determine and either generally or in respect of any class of shares. The register of members shall not be closed for periods exceeding in the whole thirty (30) days in any year.

(xi) Power for our Company to purchase its own shares The Company is empowered by the Companies Law and the Articles to purchase its own Shares subject to certain restrictions and the Board may only exercise this power on behalf of our Company subject to any applicable requirements imposed from time to time by any Designated Stock Exchange (as defined in the Articles).

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APPENDIX V SUMMARY OF THE CONSTITUTION OF OUR COMPANY AND CAYMAN ISLANDS COMPANIES LAW

(xii) Power for any subsidiary of our Company to own shares in our Company There are no provisions in the Articles relating to ownership of shares in our Company by a subsidiary.

(xiii) Dividends and other methods of distribution Subject to the Companies Law, our Company in general meeting may declare dividends in any currency to be paid to the members but no dividend shall be declared in excess of the amount recommended by the board.

The Articles provide dividends may be declared and paid out of the profit of our Company, realised or unrealised, or from any reserve set aside from profit which the directors determine is no longer needed. With the sanction of an ordinary resolution dividends may also be declared and paid out of share premium account or any other fund or account which can be authorised for this purpose in accordance with the Companies Law.

Except in so far as the rights attaching to, or the terms of issue of, any share may otherwise provide, (a) all dividends shall be declared and paid according to the amounts paid up on the shares in respect whereof the dividend is paid but no amount paid up on a share in advance of calls shall for this purpose be treated as paid up on the share and (b) all dividends shall be apportioned and paid pro rata according to the amount paid up on the shares during any portion or portions of the period in respect of which the dividend is paid. Our Directors may deduct from any dividend or other monies payable to any member or in respect of any shares all sums of money (if any) presently payable by him to our Company on account of calls or otherwise.

Whenever the board or our Company in general meeting has resolved that a dividend be paid or declared on the share capital of our Company, the board may further resolve either (a) that such dividend be satisfied wholly or in part in the form of an allotment of shares credited as fully paid up, provided that the shareholders entitled thereto will be entitled to elect to receive such dividend (or part thereof) in cash in lieu of such allotment, or (b) that shareholders entitled to such dividend will be entitled to elect to receive an allotment of shares credited as fully paid up in lieu of the whole or such part of the dividend as the board may think fit. The Company may also upon the recommendation of the board by an ordinary resolution resolve in respect of any one particular dividend of our Company that it may be satisfied wholly in the form of an allotment of shares credited as fully paid up without offering any right to shareholders to elect to receive such dividend in cash in lieu of such allotment.

Any dividend, interest or other sum payable in cash to the holder of shares may be paid by cheque or warrant sent through the post addressed to the holder at his registered address, or in the case of joint holders, addressed to the holder whose name stands first in the register of our Company in respect of the shares at his address as appearing in the register or addressed to such person and at such addresses as the holder or joint holders may in writing direct. Every such cheque or warrant shall, unless the holder or joint holders otherwise direct, be made payable to the order of the holder or, in the case of joint holders, to the order of the holder whose name stands first on the register in respect of such shares, and shall be sent at his or their risk and payment of the cheque or warrant by the bank on which it is drawn shall constitute a good discharge to our Company. Any one of two or more joint holders may give effectual receipts for any dividends or other moneys payable or property distributable in respect of the shares held by such joint holders.

Whenever the board or our Company in general meeting has resolved that a dividend be paid or declared the board may further resolve that such dividend be satisfied wholly or in part by the distribution of specific assets of any kind.

All dividends or bonuses unclaimed for one year after having been declared may be invested or otherwise made use of by the board for the benefit of our Company until claimed and our Company shall not be constituted a trustee in respect thereof. All dividends or bonuses unclaimed for six years after having been declared may be forfeited by the board and shall revert to our Company.

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APPENDIX V SUMMARY OF THE CONSTITUTION OF OUR COMPANY AND CAYMAN ISLANDS COMPANIES LAW

No dividend or other monies payable by our Company on or in respect of any share shall bear interest against our Company.

(xiv) Proxies Any member of our Company entitled to attend and vote at a meeting of our Company is entitled to appoint another person as his proxy to attend and vote instead of him. A member who is the holder of two or more shares may appoint more than one proxy to represent him and vote on his behalf at a general meeting of our Company or at a class meeting. A proxy need not be a member of our Company and shall be entitled to exercise the same powers on behalf of a member who is an individual and for whom he acts as proxy as such member could exercise. In addition, a proxy shall be entitled to exercise the same powers on behalf of a member which is a corporation and for which he acts as proxy as such member could exercise if it were an individual member. On a poll or on a show of hands, votes may be given either personally (or, in the case of a member being a corporation, by its duly authorised representative) or by proxy.

(xv) Call on shares and forfeiture of shares Subject to the Articles and to the terms of allotment, the board may from time to time make such calls upon the members in respect of any monies unpaid on the shares held by them respectively (whether on account of the nominal value of the shares or by way of premium). A call may be made payable either in one lump sum or by instalments. If the sum payable in respect of any call or instalment is not paid on or before the day appointed for payment thereof, the person or persons from whom the sum is due shall pay interest on the same at such rate not exceeding twenty (20)% per annum as the board may agree to accept from the day appointed for the payment thereof to the time of actual payment, but the board may waive payment of such interest wholly or in part. The board may, if it thinks fit, receive from any member willing to advance the same, either in money or money’s worth, all or any part of the monies uncalled and unpaid or instalments payable upon any shares held by him, and upon all or any of the monies so advanced our Company may pay interest at such rate (if any) as the board may decide.

If a member fails to pay any call on the day appointed for payment thereof, the board may serve not less than fourteen (14) clear days’ notice on him requiring payment of so much of the call as is unpaid, together with any interest which may have accrued and which may still accrue up to the date of actual payment and stating that, in the event of non-payment at or before the time appointed, the shares in respect of which the call was made will be liable to be forfeited.

If the requirements of any such notice are not complied with, any share in respect of which the notice has been given may at any time thereafter, before the payment required by the notice has been made, be forfeited by a resolution of the board to that effect. Such forfeiture will include all dividends and bonuses declared in respect of the forfeited share and not actually paid before the forfeiture.

A person whose shares have been forfeited shall cease to be a member in respect of the forfeited shares but shall, notwithstanding, remain liable to pay to our Company all monies which, at the date of forfeiture, were payable by him to our Company in respect of the shares, together with (if the board shall in its discretion so require) interest thereon from the date of forfeiture until the date of actual payment at such rate not exceeding twenty (20)% per annum as the board determines.

(xvi) Inspection of register of members Pursuant to the Articles, the register and branch register of members shall be open to inspection for at least two (2) hours on every business day (as defined in the Articles) by members without charge, or by any other person upon a maximum payment of HK$2.50 or such lesser sum specified by the board, at the registered office or such other place at which the register is kept in accordance with the Companies Law or, upon a

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APPENDIX V SUMMARY OF THE CONSTITUTION OF OUR COMPANY AND CAYMAN ISLANDS COMPANIES LAW

maximum payment of HK$1.00 or such lesser sum specified by the board, at the Registration Office (as defined in the Articles), unless the register is closed in accordance with the Articles.

(xvii) Quorum for meetings and separate class meetings No business shall be transacted at any general meeting unless a quorum is present when the meeting proceeds to business, but the absence of a quorum shall not preclude the appointment of a chairman.

Save as otherwise provided by the Articles the quorum for a general meeting shall be two members present in person (or, in the case of a member being a corporation, by its duly authorised representative) or by proxy and entitled to vote. In respect of a separate class meeting (other than an adjourned meeting) convened to sanction the modification of class rights the necessary quorum shall be two persons holding or representing by proxy not less than one-third in nominal value of the issued shares of that class.

A corporation being a member shall be deemed for the purpose of the Articles to be present in person if represented by its duly authorised representative being the person appointed by resolution of the directors or other governing body of such corporation to act as its representative at the relevant general meeting of our Company or at any relevant general meeting of any class of members of our Company.

(xviii) Rights of the minorities in relation to fraud or oppression There are no provisions in the Articles relating to rights of minority shareholders in relation to fraud or oppression. However, certain remedies are available to shareholders of our Company under Cayman law, as summarised in paragraph 3(vi) of this Appendix.

(xix)Procedures on liquidation A resolution that our Company be wound up by the court or be wound up voluntarily shall be a special resolution.

Subject to any special rights, privileges or restrictions as to the distribution of available surplus assets on liquidation for the time being attached to any class or classes of shares (i) if our Company shall be wound up and the assets available for distribution amongst the members of our Company shall be more than sufficient to repay the whole of the capital paid up at the commencement of the winding up, the excess shall be distributed pari passu amongst such members in proportion to the amount paid up on the shares held by them respectively and (ii) if our Company shall be wound up and the assets available for distribution amongst the members as such shall be insufficient to repay the whole of the paid-up capital, such assets shall be distributed so that, as nearly as may be, the losses shall be borne by the members in proportion to the capital paid up, or which ought to have been paid up, at the commencement of the winding up on the shares held by them respectively.

If our Company shall be wound up (whether the liquidation is voluntary or by the court) the liquidator may, with the authority of a special resolution and any other sanction required by the Companies Law divide among the members in specie or kind the whole or any part of the assets of our Company whether the assets shall consist of property of one kind or shall consist of properties of different kinds and the liquidator may, for such purpose, set such value as he deems fair upon any one or more class or classes of property to be divided as aforesaid and may determine how such division shall be carried out as between the members or different classes of members. The liquidator may, with the like authority, vest any part of the assets in trustees upon such trusts for the benefit of members as the liquidator, with the like authority, shall think fit, but so that no contributory shall be compelled to accept any shares or other property in respect of which there is a liability.

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APPENDIX V SUMMARY OF THE CONSTITUTION OF OUR COMPANY AND CAYMAN ISLANDS COMPANIES LAW

(xx) Untraceable members Pursuant to the Articles, our Company may sell any of the shares of a member who is untraceable if (i) all cheques or warrants in respect of dividends of the shares in question (being not less than three in total number) for any sum payable in cash to the holder of such shares have remained uncashed for a period of 12 years; (ii) upon the expiry of the 12 year period, our Company has not during that time received any indication of the existence of the member; and (iii) our Company has caused an advertisement to be published in accordance with the rules of the Designated Stock Exchange (as defined in the Articles) giving notice of its intention to sell such shares and a period of three months, or such shorter period as may be permitted by the Designated Stock Exchange (as defined in the Articles), has elapsed since the date of such advertisement and the Designated Stock Exchange (as defined in the Articles) has been notified of such intention. The net proceeds of any such sale shall belong to our Company and upon receipt by our Company of such net proceeds, it shall become indebted to the former member of our Company for an amount equal to such net proceeds.

(xxi) Subscription rights reserve The Articles provide that to the extent that it is not prohibited by and is in compliance with the Companies Law, if warrants to subscribe for shares have been issued by our Company and our Company does any act or engages in any transaction which would result in the subscription price of such warrants being reduced below the par value of a share, a subscription rights reserve shall be established and applied in paying up the difference between the subscription price and the par value of a share on any exercise of the warrants.

3. CAYMAN ISLANDS COMPANY LAW The Company is incorporated in the Cayman Islands subject to the Companies Law and, therefore, operates subject to Cayman law. Set out below is a summary of certain provisions of Cayman company law, although this does not purport to contain all applicable qualifications and exceptions or to be a complete review of all matters of Cayman company law and taxation, which may differ from equivalent provisions in jurisdictions with which interested parties may be more familiar:

(i) Operations As an exempted company, our Company’s operations must be conducted mainly outside the Cayman Islands. The Company is required to file an annual return each year with the Registrar of Companies of the Cayman Islands and pay a fee which is based on the amount of its authorised share capital.

(ii) Share capital The Companies Law provides that where a company issues shares at a premium, whether for cash or otherwise, a sum equal to the aggregate amount of the value of the premiums on those shares shall be transferred to an account, to be called the “share premium account”. At the option of a company, these provisions may not apply to premiums on shares of that company allotted pursuant to any arrangement in consideration of the acquisition or cancellation of shares in any other company and issued at a premium. The Companies Law provides that the share premium account may be applied by the company subject to the provisions, if any, of its memorandum and articles of association in (a) paying distributions or dividends to members; (b) paying up unissued shares of the company to be issued to members as fully paid bonus shares; (c) the redemption and repurchase of shares (subject to the provisions of section 37 of the Companies Law); (d) writing-off the preliminary expenses of the company; (e) writing-off the expenses of, or the commission paid or discount allowed on, any issue of shares or debentures of the company; and (f) providing for the premium payable on redemption or purchase of any shares or debentures of the company.

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APPENDIX V SUMMARY OF THE CONSTITUTION OF OUR COMPANY AND CAYMAN ISLANDS COMPANIES LAW

No distribution or dividend may be paid to members out of the share premium account unless immediately following the date on which the distribution or dividend is proposed to be paid, the company will be able to pay its debts as they fall due in the ordinary course business.

The Companies Law provides that, subject to confirmation by the Grand Court of the Cayman Islands (the “Court”), a company limited by shares or a company limited by guarantee and having a share capital may, if so authorised by its articles of association, by special resolution reduce its share capital in any way.

The Articles includes certain protections for holders of special classes of shares, requiring their consent to be obtained before their rights may be varied. The consent of the specified proportions of the holders of the issued shares of that class or the sanction of a resolution passed at a separate meeting of the holders of those shares is required.

(iii) Financial assistance to purchase shares of a company or its holding company Subject to all applicable laws, our Company may give financial assistance to Directors and employees of our Company, its subsidiaries, its holding company or any subsidiary of such holding company in order that they may buy shares in our Company or shares in any subsidiary or holding company. Further, subject to all applicable laws, our Company may give financial assistance to a trustee for the acquisition of shares in our Company or shares in any such subsidiary or holding company to be held for the benefit of employees of our Company, its subsidiaries, any holding company of our Company or any subsidiary of any such holding company (including salaried Directors).

There is no statutory restriction in the Cayman Islands on the provision of financial assistance by a company to another person for the purchase of, or subscription for, its own or its holding company’s shares. Accordingly, a company may provide financial assistance if the directors of the company consider, in discharging their duties of care and acting in good faith, for a proper purpose and in the interests of the company, that such assistance can properly be given. Such assistance should be on an arm’s-length basis.

(iv) Purchase of shares and warrants by a company and its subsidiaries Subject to the provisions of the Companies Law, a company limited by shares or a company limited by guarantee and having a share capital may, if so authorised by its articles of association, issue shares which are to be redeemed or are liable to be redeemed at the option of the company or a shareholder. In addition, such a company may, if authorised to do so by its articles of association, purchase its own shares, including any redeemable shares. However, if the articles of association do not authorise the manner or purchase, a company cannot purchase any of its own shares unless the manner of purchase has first been authorised by an ordinary resolution of the company. At no time may a company redeem or purchase its shares unless they are fully paid. A company may not redeem or purchase any of its shares if, as a result of the redemption or purchase, there would no longer be any member of the company holding shares. A payment out of capital by a company for the redemption or purchase of its own shares is not lawful unless immediately following the date on which the payment is proposed to be made, the company shall be able to pay its debts as they fall due in the ordinary course of business.

A company is not prohibited from purchasing and may purchase its own warrants subject to and in accordance with the terms and conditions of the relevant warrant instrument or certificate. There is no requirement under Cayman Islands law that a company’s memorandum or articles of association contain a specific provision enabling such purchases and the directors of a company may rely upon the general power contained in its memorandum of association to buy and sell and deal in personal property of all kinds.

Under Cayman Islands law, a subsidiary may hold shares in its holding company and, in certain circumstances, may acquire such shares.

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APPENDIX V SUMMARY OF THE CONSTITUTION OF OUR COMPANY AND CAYMAN ISLANDS COMPANIES LAW

(v) Dividends and distributions With the exception of section 34 of the Companies Law, there are no statutory provisions relating to the payment of dividends. Based upon English case law, which is regarded as persuasive in the Cayman Islands, dividends may be paid only out of profit. In addition, section 34 of the Companies Law permits, subject to a solvency test and the provisions, if any, of the company’s memorandum and articles of association, the payment of dividends and distributions out of the share premium account (see paragraph 2(m) above for further details).

(vi) Protection of minorities The Cayman Islands courts ordinarily would be expected to follow English case law precedents which permit a minority shareholder to commence a representative action against or derivative actions in the name of the company to challenge (a) an act which is ultra vires the company or illegal, (b) an act which constitutes a fraud against the minority and the wrongdoers are themselves in control of the company, and (c) an irregularity in the passing of a resolution which requires a qualified (or special) majority.

In the case of a company (not being a bank) having a share capital divided into shares, the Court may, on the application of members holding not less than one fifth of the shares of the company in issue, appoint an inspector to examine into the affairs of the company and to report thereon in such manner as the Court shall direct.

Any shareholder of a company may petition the Court which may make a winding up order if the Court is of the opinion that it is just and equitable that the company should be wound up or, as an alternative to a winding up order, (a) an order regulating the conduct of the company’s affairs in the future, (b) an order requiring the company to refrain from doing or continuing an act complained of by the shareholder petitioner or to do an act which the shareholder petitioner has complained it has omitted to do, (c) an order authorising civil proceedings to be brought in the name and on behalf of the company by the shareholder petitioner on such terms as the Court may direct, or (d) an order providing for the purchase of the shares of any shareholders of the company by other shareholders or by the company itself and, in the case of a purchase by the company itself, a reduction of the company’s capital accordingly.

Generally claims against a company by its shareholders must be based on the general laws of contract or tort applicable in the Cayman Islands or their individual rights as shareholders as established by the company’s memorandum and articles of association.

(vii) Management The Companies Law contains no specific restrictions on the power of directors to dispose of assets of a company. However, as a matter of general law, every officer of a company, which includes a director, managing director and secretary, in exercising his powers and discharging his duties must do so honestly and in good faith with a view to the best interests of the company and exercise the care, diligence and skill that a reasonably prudent person would exercise in comparable circumstances.

(viii) Accounting and auditing requirements A company shall cause proper books of account to be kept with respect to (i) all sums of money received and expended by the company and the matters in respect of which the receipt and expenditure takes place; (ii) all sales and purchases of goods by the company; and (iii) the assets and liabilities of the company.

Proper books of account shall not be deemed to be kept if there are not kept such books as are necessary to give a true and fair view of the state of the company’s affairs and to explain its transactions.

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APPENDIX V SUMMARY OF THE CONSTITUTION OF OUR COMPANY AND CAYMAN ISLANDS COMPANIES LAW

(ix) Exchange control There are no exchange control regulations or currency restrictions in the Cayman Islands.

(x) Taxation Pursuant to section 6 of the Tax Concessions Law (1999 Revision) of the Cayman Islands, our Company has obtained an undertaking from the Governor-in-Cabinet: (a) that no law which is enacted in the Cayman Islands imposing any tax to be levied on profit, income, gains or appreciation shall apply to our Company or its operations; and (b) that the aforesaid tax or any tax in the nature of estate duty or inheritance tax shall not be payable on or in respect of the shares, debentures or other obligations of our Company.

The undertaking for our Company is for a period of twenty years from 12 August 2008.

The Cayman Islands currently levy no taxes on individuals or corporations based upon profit, income, gains or appreciations and there is no taxation in the nature of inheritance tax or estate duty. There are no other taxes likely to be material to our Company levied by the Government of the Cayman Islands save certain stamp duties which may be applicable, from time to time, on certain instruments executed in or brought within the jurisdiction of the Cayman Islands. The Cayman Islands are not party to any double tax treaties.

(xi) Stamp duty on transfers No stamp duty is payable in the Cayman Islands on transfers of shares of Cayman Islands companies except those which hold interests in land in the Cayman Islands.

(xii) Loans to directors There is no express provision in the Companies Law prohibiting the making of loans by a company to any of its directors.

(xiii) Inspection of corporate records Members of our Company will have no general right under the Companies Law to inspect or obtain copies of the register of members or corporate records of our Company. They will, however, have such rights as may be set out in our Company’s Articles.

An exempted company may, subject to the provisions of its articles of association, maintain its principal register of members and any branch registers at such locations, whether within or without the Cayman Islands, as the directors may, from time to time, think fit. There is no requirement under the Companies Law for an exempted company to make any returns of members to the Registrar of Companies of the Cayman Islands. The names and addresses of the members are, accordingly, not a matter of public record and are not available for public inspection.

(xiv)Winding up A company may be wound up compulsorily by an order of the Court; voluntarily; or under supervision of the court. The Court has authority to order winding up in a number of specified circumstances including where it is, in the opinion of the Court, just and equitable to do so.

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APPENDIX V SUMMARY OF THE CONSTITUTION OF OUR COMPANY AND CAYMAN ISLANDS COMPANIES LAW

A company may be wound up voluntarily when the members so resolve in general meeting by special resolution, or, in the case of a limited duration company, when the period fixed for the duration of the company by its memorandum expires, or the event occurs on the occurrence of which the memorandum provides that the company is to be dissolved, or, the company does not commence business for a year from its incorporation (or suspends its business for a year), or, the company is unable to pay its debts. In the case of a voluntary winding up, such company is obliged to cease to carry on its business from the time of passing the resolution for voluntary winding up or upon the expiry of the period or the occurrence of the event referred to above.

For the purpose of conducting the proceedings in winding up a company and assisting the Court, there may be appointed one or more than one person to be called an official liquidator or official liquidator; and the Court may appoint to such office such person or persons, either provisionally or otherwise, as it thinks fit, and if more persons than one are appointed to such office, the Court shall declare whether any act hereby required or authorised to be done by the official liquidator is to be done by all or any one or more of such persons. The Court may also determine whether any and what security is to be given by an official liquidator on his appointment; if no official liquidator is appointed, or during any vacancy in such office, all the property of the company shall be in the custody of the Court. A person shall be qualified to accept an appointment as an official liquidator if he is duly qualified in terms of the Insolvency Practitioners Regulations. A foreign practitioner may be appointed to act jointly with a qualified insolvency practitioner.

In the case of a members’ voluntary winding up of a company, the company in general meeting must appoint one or more liquidators for the purpose of winding up the affairs of the company and distributing its assets. A declaration of solvency must be signed by all the directors of a company being wound up voluntarily within twenty-eight (28) days of the commencement of the liquidation, failing which, its liquidator must apply to Court for an order that the liquidation continue under the supervisor of the Court.

Upon the appointment of a liquidator, the responsibility for the company’s affairs rests entirely in his hands and no future executive action may be carried out without his approval. A liquidator’s duties are to collect the assets of the company (including the amount (if any) due from the contributories), settle the list of creditors and, subject to the rights of preferred and secured creditors and to any subordination agreements or rights of set-off or netting of claims, discharge the company’s liability to them (pari passu if insufficient assets exist to discharge the liabilities in full) and to settle the list of contributories (shareholders) and divide the surplus assets (if any) amongst them in accordance with the rights attaching to the shares.

As soon as the affairs of the company are fully wound up, the liquidator must make up an account of the winding up, showing how the winding up has been conducted and the property of the company has been disposed of, and thereupon call a general meeting of the company for the purposes of laying before it the account and giving an explanation thereof. At least twenty-one (21) days before the final meeting, the liquidator shall send a notice specifying the time, place and object of the meeting to each contributory in any manner authorised by the company’s articles of association as published in the Gazette in the Cayman Islands.

(xv) Reconstructions There are statutory provisions which facilitate reconstructions and amalgamations approved by a majority in number representing seventy-five (75)% in value of shareholders or class of shareholders or creditors, as the case may be, as are present at a meeting called for such purpose and thereafter sanctioned by the Court. Whilst a dissenting shareholder would have the right to express to the Court his view that the transaction for which approval is sought would not provide the shareholders with a fair value for their shares, the Court is unlikely to disapprove the transaction on that ground alone in the absence of evidence of fraud or bad faith on behalf of management.

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APPENDIX V SUMMARY OF THE CONSTITUTION OF OUR COMPANY AND CAYMAN ISLANDS COMPANIES LAW

(xvi) Compulsory acquisition Where an offer is made by a company for the shares of another company and, within four months of the offer, the holders of not less than ninety (90)% of the shares which are the subject of the offer accept, the offeror may at any time within two months after the expiration of the said four months, by notice in the prescribed manner require the dissenting shareholders to transfer their shares on the terms of the offer. A dissenting shareholder may apply to the Court within one month of the notice objecting to the transfer. The burden is on the dissenting shareholder to show that the Court should exercise its discretion, which it will be unlikely to do unless there is evidence of fraud or bad faith or collusion as between the offeror and the holders of the shares who have accepted the offer as a means of unfairly forcing out minority shareholders.

(xvii) Indemnification Cayman Islands law does not limit the extent to which a company’s articles of association may provide for indemnification of officers and directors, except to the extent any such provision may be held by the court to be contrary to public policy (e.g. for purporting to provide indemnification against the consequences of committing a crime).

4. GENERAL Conyers Dill & Pearman, our Company’s special legal counsel on Cayman Islands law, have sent to our Company a letter of advice summarising certain aspects of Cayman Islands company law. This letter, together with a copy of the Companies Law, is available for inspection as referred to in the paragraph headed “Documents delivered to the Registrar of Companies” in Appendix VII to this document. Any person wishing to have a detailed summary of Cayman Islands company law or advice on the differences between it and the laws of any jurisdiction with which he is more familiar is recommended to seek independent legal advice.

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APPENDIX VI STATUTORY AND GENERAL INFORMATION

A. FURTHER INFORMATION ABOUT OUR GROUP 1. Incorporation Our Company is incorporated in the Cayman Islands under the Companies Law as an exempted company with limited liability on 1 August 2008. Our Company have been registered as a non-Hong Kong company under Part XI of the Companies Ordinance and our principal place of business in Hong Kong is at 43/F, Gloucester Tower, The Landmark, 15 Queen’s Road Central, Hong Kong. Ms. Choi Mun Duen of B2, 5/F, Chermain Heights, 9 Eastbourne Road, Kowloon Tong, Kowloon, Hong Kong, has been appointed as the authorised representative of our Company for the acceptance of service of process and notices in Hong Kong.

As our Company is incorporated in the Cayman Islands, it operates subject to the relevant law of the Cayman Islands and its constitution which comprises a memorandum of association and an articles of association. A summary of the relevant aspects of the Companies Law and certain provisions of Articles of Association is set out in Appendix V to this document.

2. Changes in share capital of our Company (a) As of the date of incorporation of our Company, its authorised share capital was HK$380,000 divided into 3,800,000 shares of HK$0.1 each. On the same date, one Share of HK$0.1 of our Company was allotted and issued nil paid to Codan Trust Company (Cayman) Limited, which was subsequently transferred to Hui Rong International. On the same date, 50, 24 and 25 nil paid Shares were respectively allotted and issued to Hui Rong International, Ming Rong International and Dings International. (b) On 15 August 2008, Hui Rong International, Ming Rong International, Dings International and our Company entered into a share transfer agreement pursuant to which Hui Rong International, Ming Rong International and Dings International transferred their respective shareholdings in Sanliuyidu Holdings to our Company in consideration of (i) the crediting as fully paid the 51, 24 and 25 nil paid Shares in the share capital of our Company held by Hui Rong International, Ming Rong International and Dings International, respectively, and (ii) the issue of 5,049, 2,376 and 2,475 Shares in our Company credited as fully paid to Hui Rong International, Ming Rong International and Dings International, respectively. (c) On 30 August 2008, Hui Rong International transferred 200 Shares in our Company to Jian Tong Investments. (d) On 3 December 2008, Hui Rong International transferred 1,250 and 1,250 Shares in our Company to Jia Wei International and Jia Chen International respectively. (e) On 10 June 2009, Shareholders’ resolutions were passed to approve, among other things, (i) the increase of authorised share capital of our Company and (ii) the [Š].

Immediately following completion of the [Š] and the [Š] and assuming that the [Š] is not exercised, the authorised share capital of our Company will be HK$1,000,000,000 divided into 10,000,000,000 Shares, of which 2,000,000,000 Shares will be issued fully paid or credited as fully paid, and 8,000,000,000 Shares will remain unissued. Other than pursuant to the general mandate to issue Shares referred to in the paragraph headed “Written resolutions of our Shareholders passed on 10 June 2009” in this Appendix and pursuant to the [Š] Share Option Scheme and the Share Option Scheme, we do not have any present intention to issue any of the authorised but unissued share capital of our Company and, without prior approval of our Shareholders in general meeting, no issue of Shares will be made which would effectively alter the control of our Company.

Save as disclosed in this document, there has been no alteration in our Company’s share capital since its incorporation.

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APPENDIX VI STATUTORY AND GENERAL INFORMATION

3. Changes in share capital of our subsidiaries The following alterations in the share capital or registered capital of our subsidiaries took place within the two years immediately preceding the date of this document: (a) When Sanliuyidu Fujian was incorporated, its sole registered shareholder was Mr. Ting Tong Bun, the father-in-law of Mr. Ding Huirong, one of our executive Directors. According to the Sanliuyidu Fujian Trust Agreement entered into on 25 December 2002 by and among Mr. Ting Tong Bun and Mr. Ding Wuhao, Mr. Ding Huirong and Mr. Ding Huihuang, pursuant to which Mr. Ding Huihuang, Mr. Ding Huirong and Mr. Ding Wuhao agreed to jointly establish and contribute capital in the proportion of 24%, 51% and 25%, respectively, and Mr. Ting Tong Bun agreed to act as the shareholder and legal representative of this new company but would not contribute any share capital, would have no dividend rights and would not be involved in the management of this new company. Our PRC legal advisers, Tian Yuan Law Firm, confirmed that the Sanliuyidu Fujian Trust Agreement did not violate any PRC laws and regulations and was valid and enforceable among the parties involved. Pursuant to a share transfer agreement dated 25 July 2008, 361 Enterprise acquired from Mr. Ting Tong Bun 100% equity interest in Sanliuyidu Fujian for a consideration of HK$1; (b) Pursuant to a share transfer agreement dated 25 July 2008, 361 Enterprise acquired from Sanliuyidu Hong Kong 100% equity interest in Sanliuyidu China for a consideration of HK$1; (c) Pursuant to a share transfer agreement dated 15 August 2008, our Company acquired from Hui Rong International, Ming Rong International and Dings International the entire issued share capital of Sanliuyidu Holdings in consideration of (i) the crediting as fully paid the 51, 24 and 25 nil paid Shares in the share capital of our Company held by Hui Rong International, Ming Rong International and Dings International, respectively, and (ii) the issue of 5,049, 2,376 and 2,475 Shares in our Company credited as fully paid to Hui Rong International, Ming Rong International and Dings International, respectively.

Save as set out above and in the paragraph headed “Corporate Reorganisation” under the section headed “History and Corporate Structure” in this document, there has been no alteration in the share capital of any of our subsidiaries of our Company within the two years immediately preceding the date of this document.

4. Written resolutions of our Shareholders passed on 10 June 2009 [Š]

5. Repurchase of our Shares This section includes information relating to the repurchases of securities, including information required by the Stock Exchange to be included in this document concerning such repurchase.

(1) Provisions of the Listing Rules The Listing Rules permit companies whose primary listing is on the Stock Exchange to repurchase their securities on the Stock Exchange subject to certain restrictions, the most important restrictions are summarised below:

(i) Shareholders’ approval All proposed repurchases of Shares must be approved in advance by an ordinary resolution of the Shareholders in a general meeting, either by way of general mandate or by specific approval in relation to a particular transaction.

Pursuant to the written resolutions passed on 10 June 2009 by all our Shareholders, a general unconditional mandate (the “Repurchase Mandate”) was given to our Directors to exercise all powers

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APPENDIX VI STATUTORY AND GENERAL INFORMATION

of our Company to repurchase Shares ([Š]) with a total nominal value of not more than 10 per cent of the aggregate nominal value of our share capital in issue or to be issued immediately following the completion of the [Š] (without taking into account the exercise of the [Š]), details of which have been described above in the paragraph headed “Written resolutions of our Shareholders passed on 10 June 2009”.

(ii) Source of funds Any repurchases of Shares by us must be paid out of funds legally available for the purpose in accordance with our Articles of Association, the Listing Rules and the Companies Law. We are not permitted to repurchase our Shares on the Stock Exchange for a consideration other than cash or for settlement otherwise than in accordance with the trading rules of the Stock Exchange from time to time.

(iii) Shares to be repurchased The Listing Rules provide that the Shares which are proposed to be repurchased by us must be fully- paid up.

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APPENDIX VI STATUTORY AND GENERAL INFORMATION

(2) Reasons for repurchases Our Directors believe that it is in the best interests of our Company and our Shareholders for our Directors to have general authority from the shareholders to enable them to repurchase Shares in the market. Such repurchases may, depending on market conditions and funding arrangements at the time, lead to an enhancement of the net asset value per Share and/or earnings per Share and will only be made where our Directors believe that such repurchases will benefit our Company and our Shareholders.

(3) Funding of repurchases In repurchasing Shares, we may only apply funds legally available for such purpose in accordance with our Company’s memorandum and Articles of Association, the Listing Rules, the Companies Law and the applicable laws and regulations of the Cayman Islands.

On the basis of our Company’s current financial position as disclosed in this document and taking into account its current working capital position, our Directors consider that, if the Repurchase Mandate is exercised in full, it might have a material adverse effect on our working capital and/or gearing position as compared with the position disclosed in this document. However, our Directors do not propose to exercise the Repurchase Mandate to such an extent as would, in the circumstances, have a material adverse effect on our working capital requirements or the gearing levels which in the opinion of our Directors are from time to time appropriate for us.

(4) General None of our Directors nor, to the best of their knowledge having made all reasonable enquiries, any of their associates (as defined in the Listing Rules) currently intends to sell any Shares to us.

Our Directors have undertaken to the Stock Exchange that, so far as the same may be applicable, they will exercise the Repurchase Mandate in accordance with the Listing Rules and the applicable laws and regulations of the Cayman Islands.

If, as a result of any repurchase of Shares, a shareholder’s proportionate interest in the voting rights is increased, such increase will be treated as an acquisition for the purposes of the Hong Kong Code on Takeovers and Mergers (the “Takeovers Code”). Accordingly, a shareholder or a group of shareholders acting in concert could obtain or consolidate control of us and become obliged to make a mandatory offer in accordance with rule 26 of the Takeovers Code. Save as aforesaid, our Directors are not aware of any consequences which would arise under the Takeovers Code as a consequence of any repurchases pursuant to the Repurchase Mandate.

We have not made any repurchases of our own securities in the past six months.

No Connected Person has notified us that he/she has a present intention to sell Shares to us, or has undertaken not to do so, if the Repurchase Mandate is exercised.

B. CORPORATE REORGANISATION AND SHARE TRANSFERS AFTER THE CORPORATE REORGANISATION 1. Corporate reorganisation The Corporate Reorganisation which was effected in preparation for the [Š], whereby our Company became the holding company of our Group, included the following major steps: (a) The following companies were incorporated: • Sanliuyidu Holdings was incorporated in the BVI on 20 February 2008; and • 361 Enterprise was incorporated in Hong Kong on 22 April 2008.

VI-5 THIS WEB PROOF INFORMATION PACK IS IN DRAFT FORM. The information contained in it is incomplete and is subject to change. This Web Proof Information Pack must be read in conjunction with the section headed “Warning” on the cover of this Web Proof Information Pack.

APPENDIX VI STATUTORY AND GENERAL INFORMATION

(b) On 1 August 2008, our Company was incorporated under the laws of the Cayman Islands as an exempted company and it allotted and issued one nil paid Share to Codan Trust Company (Cayman) Limited. The Share was transferred to Hui Rong International on the same date and the following Shares of our Company were issued nil paid to the relevant investment vehicles of our Controlling Shareholders:

Number of Shares Name of Shareholders Issued Hui Rong International ...... 51 Ming Rong International ...... 24 Dings International ...... 25

(c) On 15 August 2008, Hui Rong International, Ming Rong International, Dings International and our Company entered into a share transfer agreement pursuant to which Hui Rong International, Ming Rong International and Dings International transferred their respective shareholdings in Sanliuyidu Holdings to our Company in consideration of (i) the crediting as fully paid the 51, 24 and 25 nil paid Shares in the share capital of our Company held by Hui Rong International, Ming Rong International and Dings International, respectively, and (ii) the issue of 5,049, 2,376 and 2,475 Shares in our Company credited as fully paid to Hui Rong International, Ming Rong International and Dings International, respectively.

2. SHARE TRANSFERS AFTER THE CORPORATE REORGANISATION AND [Š] (a) On 30 August 2008, Hui Rong International transferred 200 Shares in our Company to Jian Tong Investments. (b) On 3 December 2008, Hui Rong International transferred 1,250 and 1,250 Shares in our Company to Jia Wei International and Jia Chen International respectively. (c) On 10 June 2009, Shareholders’ resolutions were passed to approve, among other things, (i) the increase of authorised share capital of our Company and (ii) the [Š]. (d) Conditional on the share premium account of our Company being credited as a result of the [Š], the sum of HK$149,999,000 will be capitalised and applied in paying up in full at par 374,997,500, 359,997,600, 359,997,600, 29,999,800, 187,498,750, and 187,488,750 Shares for allotment and issue to Dings International, Hui Rong International, Ming Rong International, Jian Tong Investments, Jia Wei International and Jia Chen International and such Shares to be allotted and issued shall rank pari passu in all respects with the then existing issued Shares of our Company.

C. FURTHER INFORMATION ABOUT OUR BUSINESS 1. Summary of the Material Contracts The following contracts (not being contracts entered into in the ordinary course of business) were entered into by our Group within the two years preceding the date of this document and are or may be material: (a) a share transfer agreement dated 25 July 2008 entered into between Sanliuyidu Hong Kong and 361 Enterprise pursuant to which Sanliuyidu Hong Kong transferred its 100% equity interest in Sanliuyidu China to 361 Enterprise at a consideration of HK$1; (b) a share transfer agreement dated 25 July 2008 entered into between Mr. Ting Tong Bun and 361 Enterprise pursuant to which Mr. Ting Tong Bun transferred its 100% equity interest in Sanliuyidu Fujian to 361 Enterprise at a consideration of HK$1; (c) a novation agreement dated 25 July 2008 entered into between Sanliuyidu Hong Kong, 361 Enterprise and Mr. Ding Huihuang pursuant to which a loan owed from Sanliuyidu Hong Kong to Mr. Ding Huihuang in the amount of HK$160,000,000 were novated to 361 Enterprise;

VI-6 THIS WEB PROOF INFORMATION PACK IS IN DRAFT FORM. The information contained in it is incomplete and is subject to change. This Web Proof Information Pack must be read in conjunction with the section headed “Warning” on the cover of this Web Proof Information Pack.

APPENDIX VI STATUTORY AND GENERAL INFORMATION

(d) a share transfer agreement dated 15 August 2008 entered into between Hui Rong International, Ming Rong International, Dings International and our Company pursuant to which Hui Rong International, Ming Rong International and Dings International transferred their respective shareholdings in Sanliuyidu Holdings to our Company in consideration of (i) the crediting as fully paid the 51, 24 and 25 nil paid Shares in the share capital of our Company held by Hui Rong International, Ming Rong International and Dings International, respectively, and (ii) the issue of 5,049, 2,376 and 2,475 Shares in our Company credited as fully paid to Hui Rong International, Ming Rong International and Dings International, respectively; (e) an undertaking dated 20 August 2008 entered into by Sanliuyidu Fujian, Mr. Ting Tong Bun and Mr. Ding Huihuang pursuant to which Mr. Ding Huihuang has undertaken to Sanliuyidu Fujian to repay the outstanding balance of RMB49,994,976.62 which Mr. Ting Tong Bun owed to Sanliuyidu Fujian as of 31 July 2008; (f) a deed of novation dated 9 June 2009 entered into among 361 Enterprise, our Company and Mr. Ding Huihuang pursuant to which the payment obligation under a debt in the amount of HK$175,170,318 owed by 361 Enterprise to Mr. Ding Huihuang were novated to our Company; (g) a deed of waiver dated 10 June 2009 signed by Mr. Ding Huihuang in favour of our Company pursuant to which Mr. Ding Huihuang agreed to waive all rights as a creditor against our Company in connection with a debt in the amount of HK$175,170,318 owed by our Company; (h) the Deed of Non-competition; (i) [Š]; and (j) the Deed of Indemnity.

VI-7 THIS WEB PROOF INFORMATION PACK IS IN DRAFT FORM. The information contained in it is incomplete and is subject to change. This Web Proof Information Pack must be read in conjunction with the section headed “Warning” on the cover of this Web Proof Information Pack.

APPENDIX VI STATUTORY AND GENERAL INFORMATION

2. Intellectual Property Rights of our Group Trademarks As of the Latest Practicable Date, we have registered the following trademarks:

Registration Trademark Place of Registration Class Number Expiry Date

PRC 1 4074874 20 January 2017

PRC 3 3929640 6 September 2016

PRC 5 3929639 13 September 2016

PRC 6 5004936 20 October 2018

PRC 7 3929638 13 April 2016

PRC 9 3929637 13 April 2016

PRC 11 3929636 27 December 2015

PRC 12 3929635 13 April 2016

PRC 16 3929634 6 September 2016

PRC 23 3929633 27 April 2017

PRC 24 3929632 27 April 2017

PRC 30 3929630 20 January 2016

VI-8 THIS WEB PROOF INFORMATION PACK IS IN DRAFT FORM. The information contained in it is incomplete and is subject to change. This Web Proof Information Pack must be read in conjunction with the section headed “Warning” on the cover of this Web Proof Information Pack.

APPENDIX VI STATUTORY AND GENERAL INFORMATION

Registration Trademark Place of Registration Class Number Expiry Date

PRC 31 5004926 20 September 2018

PRC 32 3929629 6 March 2016

PRC 33 3929628 6 December 2015

PRC 34 3929627 6 December 2015

PRC 35 3929626 6 October 2016

PRC 36 3929625 6 October 2016

PRC 37 3929624 6 October 2016

PRC 38 3929623 6 October 2016

PRC 39 3929622 20 November 2016

PRC 40 3929621 6 October 2016

PRC 41 3929620 20 November 2016

PRC 42 3929619 6 October 2016

PRC 43 3929618 6 October 2016

VI-9 THIS WEB PROOF INFORMATION PACK IS IN DRAFT FORM. The information contained in it is incomplete and is subject to change. This Web Proof Information Pack must be read in conjunction with the section headed “Warning” on the cover of this Web Proof Information Pack.

APPENDIX VI STATUTORY AND GENERAL INFORMATION

Registration Trademark Place of Registration Class Number Expiry Date

PRC 44 3929617 6 October 2016

PRC 25 3576467 27 September 2015

PRC 25 3011117 27 April 2013

PRC 18 3433331 6 December 2014

PRC 25 3006892 6 May 2015

PRC 25 3734446 13 June 2016

PRC 28 3433330 6 October 2014

PRC 25 3734445 27 November 2018

PRC 18 3775148 6 October 2016

PRC 25 3172937 6 May 2015

PRC 25 3775147 20 September 2016

PRC 28 3775146 6 October 2016

PRC 35 3361373 27 July 2014

VI-10 THIS WEB PROOF INFORMATION PACK IS IN DRAFT FORM. The information contained in it is incomplete and is subject to change. This Web Proof Information Pack must be read in conjunction with the section headed “Warning” on the cover of this Web Proof Information Pack.

APPENDIX VI STATUTORY AND GENERAL INFORMATION

Registration Trademark Place of Registration Class Number Expiry Date

PRC 35 3374957 27 June 2014

PRC 18 3433334 6 December 2014

PRC 25 3433333 13 December 2014

PRC 28 3433332 6 October 2014

PRC 1 4074873 27 March 2018

PRC 3 3929616 27 September 2016

PRC 5 3929615 27 September 2016

PRC 6 5004921 20 October 2018

PRC 7 3929614 13 April 2016

PRC 8 5004920 20 October 2018

PRC 9 3929613 13 April 2016

PRC 11 3929612 20 June 2016

PRC 12 3929611 13 April 2016

VI-11 THIS WEB PROOF INFORMATION PACK IS IN DRAFT FORM. The information contained in it is incomplete and is subject to change. This Web Proof Information Pack must be read in conjunction with the section headed “Warning” on the cover of this Web Proof Information Pack.

APPENDIX VI STATUTORY AND GENERAL INFORMATION

Registration Trademark Place of Registration Class Number Expiry Date

PRC 16 3929610 27 September 2016

PRC 18 3198991 6 April 2014

PRC 18 3751776 6 November 2016

PRC 23 3929609 13 February 2019

PRC 24 3929608 27 April 2017

PRC 25 1509113 20 January 2011

PRC 25 1565247 6 May 2011

PRC 28 3198961 20 February 2014

PRC 29 3929607 6 March 2016

PRC 30 3929606 20 January 2016

PRC 31 5004909 20 September 2018

PRC 32 3929605 27 December 2015

PRC 33 3929604 6 December 2015

PRC 34 3929603 6 December 2015

VI-12 THIS WEB PROOF INFORMATION PACK IS IN DRAFT FORM. The information contained in it is incomplete and is subject to change. This Web Proof Information Pack must be read in conjunction with the section headed “Warning” on the cover of this Web Proof Information Pack.

APPENDIX VI STATUTORY AND GENERAL INFORMATION

Registration Trademark Place of Registration Class Number Expiry Date

PRC 35 3929602 27 January 2019

PRC 36 3929601 27 November 2016

PRC 37 3929598 27 November 2016

PRC 38 3929597 27 November 2016

PRC 39 3929596 27 January 2019

PRC 40 3929595 27 January 2019

PRC 41 3929594 6 October 2016

PRC 42 3929593 20 January 2017

PRC 43 3929592 27 January 2019

PRC 44 3929591 6 October 2016

PRC 3 1568343 13 May 2011

PRC 9 1618526 13 August 2011

PRC 18 1632630 13 September 2011

PRC 25 1509110 20 January 2011

PRC 25 1581177 6 June 2011

PRC 18 1656661 27 October 2011

PRC 25 1645182 6 October 2011

VI-13 THIS WEB PROOF INFORMATION PACK IS IN DRAFT FORM. The information contained in it is incomplete and is subject to change. This Web Proof Information Pack must be read in conjunction with the section headed “Warning” on the cover of this Web Proof Information Pack.

APPENDIX VI STATUTORY AND GENERAL INFORMATION

Registration Trademark Place of Registration Class Number Expiry Date

PRC 18 1656663 27 October 2011

PRC 25 833683 20 April 2016

PRC 25 1581179 6 June 2011

PRC 25 3407568 13 November 2014

PRC 18 1656662 27 October 2011

PRC 25 1581178 6 June 2011

PRC 35 4144144 13 December 2017

PRC 35 4250635 13 March 2018

PRC 25 4250638 20 April 2018

PRC 35 4250637 13 March 2018

PRC 25 672909 6 January 2014

PRC 25 781713 6 October 2015

PRC 25 833632 20 April 2016

VI-14 THIS WEB PROOF INFORMATION PACK IS IN DRAFT FORM. The information contained in it is incomplete and is subject to change. This Web Proof Information Pack must be read in conjunction with the section headed “Warning” on the cover of this Web Proof Information Pack.

APPENDIX VI STATUTORY AND GENERAL INFORMATION

Registration Trademark Place of Registration Class Number Expiry Date

PRC 25 835630 27 April 2016

PRC 25 835678 27 April 2016

PRC 25 1509111 20 January 2011

PRC 25 1509112 20 January 2011

PRC 25 1561565 27 April 2011

PRC 25 1561566 27 April 2011

PRC 18 1644617 6 October 2011

PRC 25 1645183 6 October 2011

PRC 25 781714 6 October 2015

PRC 25 1786818 13 June 2012

PRC 25 3006419 20 January 2013

PRC 25 3006519 27 January 2014

PRC 25 3283641 27 February 2014

VI-15 THIS WEB PROOF INFORMATION PACK IS IN DRAFT FORM. The information contained in it is incomplete and is subject to change. This Web Proof Information Pack must be read in conjunction with the section headed “Warning” on the cover of this Web Proof Information Pack.

APPENDIX VI STATUTORY AND GENERAL INFORMATION

Registration Trademark Place of Registration Class Number Expiry Date

PRC 25 3283642 6 April 2014

PRC 25 3283643 6 May 2014

PRC 25 1709454 6 February 2012

PRC 25 3006418 20 January 2013

PRC 25 3007031 6 April 2013

PRC 25 3007032 20 January 2013

PRC 25 3007033 6 February 2014

PRC 25 3007034 20 January 2013

PRC 25 3007035 13 March 2014

PRC 25 3011120 27 January 2014

PRC 25 3011122 6 March 2014

PRC 25 3011123 20 July 2013

PRC 25 3011124 6 March 2014

VI-16 THIS WEB PROOF INFORMATION PACK IS IN DRAFT FORM. The information contained in it is incomplete and is subject to change. This Web Proof Information Pack must be read in conjunction with the section headed “Warning” on the cover of this Web Proof Information Pack.

APPENDIX VI STATUTORY AND GENERAL INFORMATION

Registration Trademark Place of Registration Class Number Expiry Date

PRC 25 3103218 13 August 2013

PRC 25 3562703 27 August 2015

PRC 25 4551181 13 December 2018

PRC 35 4551180 6 October 2018

PRC 25 4551183 6 December 2018

PRC 35 4551182 6 October 2018

Designations under the 25 854347 28 February 2015 Madrid Agreement and Protocol (Note 1)

Designations under the 25 854348 28 February 2015 Madrid Agreement and Protocol (Note 2)

Designations under the 18,25,28 887991 1 March 2016 Madrid Agreement and Protocol (Note 3)

Russia 25 298915 24 December 2013

Russia 25 283700 24 December 2013

Hong Kong 25 300165221 24 February 2014

VI-17 THIS WEB PROOF INFORMATION PACK IS IN DRAFT FORM. The information contained in it is incomplete and is subject to change. This Web Proof Information Pack must be read in conjunction with the section headed “Warning” on the cover of this Web Proof Information Pack.

APPENDIX VI STATUTORY AND GENERAL INFORMATION

Registration Trademark Place of Registration Class Number Expiry Date

Macau 18 N/023103 15 November 2013

Macau 25 N/023104 15 November 2013

Taiwan 25 01275227 15 August 2017

Taiwan 18 01260935 30 April 2017

Taiwan 25 01261097 30 April 2017

Taiwan 28 01261199 30 April 2017

Taiwan 18 01077010 30 November 2013

Taiwan 25 01079471 31 December 2013

Taiwan 25 01085795 15 February 2014

Taiwan 18 01262894 15 May 2017

Taiwan 25 01085796 15 February 2014

Taiwan 18 01272632 31 July 2017

Brunei 25 38.354 27 December 2016

Jordan 25 95763 9 January 2017

VI-18 THIS WEB PROOF INFORMATION PACK IS IN DRAFT FORM. The information contained in it is incomplete and is subject to change. This Web Proof Information Pack must be read in conjunction with the section headed “Warning” on the cover of this Web Proof Information Pack.

APPENDIX VI STATUTORY AND GENERAL INFORMATION

Registration Trademark Place of Registration Class Number Expiry Date

Laos 25 15151 3 January 2017

Qatar 25 43005 29 January 2017

Saudi Arabia 25 955/31 26 September 2016

United Arab Emirates 25 85071 16 January 2017

New Zealand 25 786704 31 March 2018

Singapore 25 T0407027Z 4 May 2014

Notes: (1) This mark has been registered in Algeria, Austria, Belarus, Benelux, Croatia, Cuba, Czech Republic, Democratic People’s Republic of Korea, Denmark, Egypt, Finland, France, Germany, Italy, Kazakhstan, Kyrgyzstan, Latvia, Liberia, Norway, Poland, Portugal, Romania, Russian Federation, Slovakia, Spain, Sweden, Switzerland, Tajikistan, United Kingdom, Ukraine, Uzbekistan and Viet Nam through designations under the Madrid Agreement and Protocol. (2) This mark has been registered in Algeria, Austria, Belarus, Benelux, Croatia, Cuba, Czech Republic, Democratic People’s Republic of Korea, Denmark, Egypt, Finland, France, Germany, Italy, Kazakhstan, Kyrgyzstan, Latvia, Liberia, Norway, Poland, Portugal, Romania, Russian Federation, Slovakia, Spain, Sweden, Switzerland, Tajikistan, United Kingdom, Ukraine, Uzbekistan and Viet Nam through designations under the Madrid Agreement and Protocol. (3) This mark has been registered in Albania, Algeria, Antigua and Barbuda, Armenia, Australia, Austria, Azerbaijan, Belarus, Benelux, Bhutan, Bosnia and Herzegovina, Bulgaria, Croatia, Cuba, Cyprus, Czech Republic, Democratic People’s Republic of Korea, Denmark, Egypt, Estonia, Finland, France, Germany, Georgia, Greece, Hungary, Iceland, Ireland, Islamic Republic of Iran, Italy, Japan, Kazakhstan, Kenya, Kyrgyzstan, Latvia, Lesotho, Liberia, Liechtenstein, Lithuania, Monaco, Mongolia, Morocco, Mozambique, Netherlands Antilles, Norway, Poland, Portugal, Republic of Korea, Republic of Moldova, Romania, Russian Federation, San Marino, Serbia and Montenegro, Sierra Leone, Singapore, Slovakia, Slovenia, Spain, Sudan, Swaziland, Sweden, Switzerland, Tajikistan, The former Yugoslav Republic of Macedonia, Turkey, Turkmenistan, Ukraine, United Kingdom, United States, Uzbekistan, Viet Nam and Zambia through designations under the Madrid Agreement and Protocol.

VI-19 THIS WEB PROOF INFORMATION PACK IS IN DRAFT FORM. The information contained in it is incomplete and is subject to change. This Web Proof Information Pack must be read in conjunction with the section headed “Warning” on the cover of this Web Proof Information Pack.

APPENDIX VI STATUTORY AND GENERAL INFORMATION

As of the Latest Practicable Date, applications have been made for the registration of the following trademarks: Place of Application Trademark Application Class Number Application Date

PRC 2 5004938 16 November 2005 (Note 1)

PRC 4 5004937 16 November 2005 (Note 1)

PRC 8 5004935 16 November 2005 (Note 1)

PRC 10 5004934 16 November 2005 (Note 1)

PRC 14 5004933 16 November 2005 (Note 1)

PRC 14 6545599 3 February 2008

PRC 15 5004932 16 November 2005 (Note 1)

PRC 17 5004931 16 November 2005 (Note 1)

PRC 19 5004930 16 November 2005 (Note 1)

PRC 22 5004929 16 November 2005 (Note 1)

PRC 26 5004928 16 November 2005 (Note 1)

PRC 27 5004927 16 November 2005

PRC 29 3929631 26 February 2004

VI-20 THIS WEB PROOF INFORMATION PACK IS IN DRAFT FORM. The information contained in it is incomplete and is subject to change. This Web Proof Information Pack must be read in conjunction with the section headed “Warning” on the cover of this Web Proof Information Pack.

APPENDIX VI STATUTORY AND GENERAL INFORMATION

Place of Application Trademark Application Class Number Application Date

PRC 45 5004925 16 November 2005

PRC 2 5004923 16 November 2005 (Note 1)

PRC 4 5004922 16 November 2005 (Note 1)

PRC 10 5004919 16 November 2005 (Note 1)

PRC 14 5004918 16 November 2005 (Note 1)

PRC 14 6545600 3 February 2008

PRC 15 5004917 16 November 2005 (Note 1)

PRC 17 5004916 16 November 2005 (Note 1)

PRC 18 5144281 27 January 2006 (Note 1)

PRC 19 5004915 16 November 2005 (Note 1)

PRC 20 5004914 16 November 2005 (Note 1)

PRC 21 5004913 16 November 2005 (Note 1)

PRC 22 5004912 16 November 2005 (Note 1)

VI-21 THIS WEB PROOF INFORMATION PACK IS IN DRAFT FORM. The information contained in it is incomplete and is subject to change. This Web Proof Information Pack must be read in conjunction with the section headed “Warning” on the cover of this Web Proof Information Pack.

APPENDIX VI STATUTORY AND GENERAL INFORMATION

Place of Application Trademark Application Class Number Application Date

PRC 25 5004902 16 November 2005 (Note 1)

PRC 26 5004911 16 November 2005 (Note 1)

PRC 27 5004910 16 November 2005

PRC 28 5144277 27 January 2006

PRC 45 5004899 16 November 2005

PRC 18 5144280 27 January 2006

PRC 25 5004924 16 November 2005

PRC 28 5144284 27 January 2006 (Note 1)

PRC 43 6557383 19 February 2008

PRC 18 7108078 11 December 2008

PRC 25 7108071 11 December 2008

PRC 28 7108061 11 December 2008

PRC 35 7108053 11 December 2008

VI-22 THIS WEB PROOF INFORMATION PACK IS IN DRAFT FORM. The information contained in it is incomplete and is subject to change. This Web Proof Information Pack must be read in conjunction with the section headed “Warning” on the cover of this Web Proof Information Pack.

APPENDIX VI STATUTORY AND GENERAL INFORMATION

Place of Application Trademark Application Class Number Application Date

PRC 38 7122514 19 December 2008

PRC 25 7108072 11 December 2008

PRC 25 7108074 11 December 2008

PRC 18 7108080 11 December 2008

PRC 25 7108069 11 December 2008

PRC 28 7108063 11 December 2008

PRC 35 7108051 11 December 2008

PRC 38 7122507 19 December 2008

PRC 18 7081490 27 November 2008

PRC 25 7081495 27 November 2008

PRC 28 7081502 27 November 2008

PRC 18 7158656 9 January 2009

PRC 25 7158660 9 January 2009

VI-23 THIS WEB PROOF INFORMATION PACK IS IN DRAFT FORM. The information contained in it is incomplete and is subject to change. This Web Proof Information Pack must be read in conjunction with the section headed “Warning” on the cover of this Web Proof Information Pack.

APPENDIX VI STATUTORY AND GENERAL INFORMATION

Place of Application Trademark Application Class Number Application Date

PRC 28 7158669 9 January 2009

PRC 18 7158652 9 January 2009

PRC 25 7158663 9 January 2009

PRC 28 7158668 9 January 2009

PRC 18 7142303 30 December 2008

PRC 25 7142333 30 December 2008

PRC 28 7142315 30 December 2008

PRC 25 7142338 30 December 2008

PRC 35 7142349 30 December 2008

PRC 38 7142354 30 December 2008

PRC 25 7142339 30 December 2008

PRC 35 7142347 30 December 2008

PRC 38 7142359 30 December 2008

VI-24 THIS WEB PROOF INFORMATION PACK IS IN DRAFT FORM. The information contained in it is incomplete and is subject to change. This Web Proof Information Pack must be read in conjunction with the section headed “Warning” on the cover of this Web Proof Information Pack.

APPENDIX VI STATUTORY AND GENERAL INFORMATION

Place of Application Trademark Application Class Number Application Date

PRC 18 5582471 4 September 2006

PRC 25 5582470 4 September 2006

PRC 28 5582469 4 September 2006

PRC 35 5582468 4 September 2006

PRC 18 5627788 25 September 2006

PRC 25 5627787 25 September 2006

PRC 28 5627786 25 September 2006

PRC 35 5627785 25 September 2006

PRC 25 4250636 2 September 2004 (Note 1)

PRC 18 5218478 17 March 2006 (Note 1)

PRC 28 5218461 17 March 2006 (Note 1)

PRC 38 6137107 29 June 2007

PRC 40 6137106 29 June 2007

VI-25 THIS WEB PROOF INFORMATION PACK IS IN DRAFT FORM. The information contained in it is incomplete and is subject to change. This Web Proof Information Pack must be read in conjunction with the section headed “Warning” on the cover of this Web Proof Information Pack.

APPENDIX VI STATUTORY AND GENERAL INFORMATION

Place of Application Trademark Application Class Number Application Date

PRC 41 6137105 29 June 2007

PRC 18 5218466 17 March 2006 (Note 1)

PRC 28 5218463 17 March 2006 (Note 1)

PRC 35 4428923 22 December 2004 (Note 2)

PRC 18 5218477 17 March 2006 (Note 1)

PRC 25 5218467 17 March 2006

PRC 28 5218476 17 March 2006 (Note 1)

PRC 18 5218460 17 March 2006 (Note 1)

PRC 25 5218468 17 March 2006 (Note 1)

PRC 28 5218464 17 March 2006 (Note 1)

PRC 18 5218462 17 March 2006

PRC 25 5218484 17 March 2006

PRC 28 5218465 17 March 2006

PRC 25 5525393 7 August 2006

VI-26 THIS WEB PROOF INFORMATION PACK IS IN DRAFT FORM. The information contained in it is incomplete and is subject to change. This Web Proof Information Pack must be read in conjunction with the section headed “Warning” on the cover of this Web Proof Information Pack.

APPENDIX VI STATUTORY AND GENERAL INFORMATION

Place of Application Trademark Application Class Number Application Date

PRC 18 6706762 7 May 2008

PRC 25 6706767 7 May 2008

PRC 28 6706778 7 May 2008

PRC 18 6706760 7 May 2008

PRC 25 6706770 7 May 2008

PRC 28 6706775 7 May 2008

PRC 25 6749146 27 May 2008

PRC 25 6749150 27 May 2008

PRC 25 6749151 27 May 2008

PRC 25 6749153 27 May 2008

Cambodia 25 KH/06/26929 29 December 2006

Indonesia 25 D002006042506 28 December 2006

Malaysia 25 07000008 3 January 2007

Mexico 25 866981 9 July 2007

VI-27 THIS WEB PROOF INFORMATION PACK IS IN DRAFT FORM. The information contained in it is incomplete and is subject to change. This Web Proof Information Pack must be read in conjunction with the section headed “Warning” on the cover of this Web Proof Information Pack.

APPENDIX VI STATUTORY AND GENERAL INFORMATION

Place of Application Trademark Application Class Number Application Date

Philippines 25 42007500001 2 January 2007

Thailand 25 649821 5 January 2007

Argentina 25 2817763 17 April 2008

Brazil 25 900846992 4 September 2008

Canada 25 1389718 2 April 2008

Chile 25 820803 22 May 2008

Colombia 25 08-43767 19 April 2008

India 25 1671299 1 April 2008

Pakistan 25 251972 11 June 2008

Paraguay 25 09612 26 March 2008

Peru 25 353329 7 May 2008

Uruguay 25 389.796 19 March 2008

Notes: (1) The application for the registration of this trademark has been preliminarily approved and published by the Trademark Bureau under the State Administration for Industry and Commerce ( ). (2) The application for the registration of this trademark has been refused by the Trademark Bureau under the State Administration for Industry and Commerce ( ) and our Company is appealing against this rejection.

VI-28 THIS WEB PROOF INFORMATION PACK IS IN DRAFT FORM. The information contained in it is incomplete and is subject to change. This Web Proof Information Pack must be read in conjunction with the section headed “Warning” on the cover of this Web Proof Information Pack.

APPENDIX VI STATUTORY AND GENERAL INFORMATION

Domain Names As of the Latest Practicable Date, we have registered the following domain names:

Domain Name Registration Date Expiry Date

26 March 2008 26 March 2011 26 March 2008 26 March 2011 26 March 2008 26 March 2011 26 March 2008 26 March 2011 26 March 2008 26 March 2011 26 March 2008 26 March 2011 26 March 2008 26 March 2011 8 November 2005 8 November 2015 9 April 2007 9 April 2012 8 November 2005 8 November 2015 26 March 2008 26 March 2011 26 March 2008 26 March 2011 361sports.com.cn 15 November 2004 14 November 2009 361sports.asia 11 March 2008 11 March 2010 361sports.cn 15 November 2004 14 November 2009 361sports.hk 11 December 2007 11 December 2010 361sports.tw 11 December 2007 11 December 2010 361sport.com 19 November 2003 19 November 2014 361sport.com.cn 15 November 2004 14 November 2009 361sport.asia 11 March 2008 11 March 2010 361sport.cn 3 April 2004 3 April 2012 361sport.hk 11 December 2007 11 December 2010 361group.asia 26 March 2008 26 March 2011 361group.hk 26 March 2008 26 March 2011 361group.tw 26 March 2008 26 March 2011 361runner.com 11 December 2007 11 December 2009 361cubs.com 11 December 2007 11 December 2009 361.mobi 5 July 2006 5 July 2011

VI-29 THIS WEB PROOF INFORMATION PACK IS IN DRAFT FORM. The information contained in it is incomplete and is subject to change. This Web Proof Information Pack must be read in conjunction with the section headed “Warning” on the cover of this Web Proof Information Pack.

APPENDIX VI STATUTORY AND GENERAL INFORMATION

Patents As of the Latest Practicable Date, we have registered the following patents:

Type Place of Application Patent Number Effective Period Utility Model PRC ZL 200520104907.9 From 3 August 2005 to 2 August 2015 Utility Model PRC ZL 200620100072.4 From 20 April 2006 to 19 April 2016 Utility Model PRC ZL 200720008693.4 From 6 November 2007 to 5 November 2017 Utility Model PRC ZL 200720008694.9 From 6 November 2007 to 5 November 2017 Utility Model PRC ZL 200820101073.X From 8 January 2008 to 7 January 2018 Utility Model PRC ZL 200820101074.4 From 8 January 2008 to 7 January 2018

As of the Latest Practicable Date, we have made applications for the registration of the following patents:

Type Place of Application Application Number Application Date Utility Model PRC 200820146254.4 10 November 2008 Utility Model PRC 200820229084.6 26 November 2008

3. Further information about our PRC establishments (a) Sanliuyidu Fujian (i) nature of the company: Wholly foreign-owned enterprise (ii) term of business operation: 50 years commencing on 7 July 2003 and expiring on 6 July 2053 (iii) total investment: HK$100,000,000 (iv) registered capital: HK$80,000,000 (fully paid) (Note 1) (v) attributable interest of the company: 100% (vi) scope of business: Manufacturing sports footwear, apparel, bags, socks, hats and gloves

(b) Sanliuyidu China (i) nature of the company: Wholly foreign-owned enterprise (ii) term of business operation: 50 years commencing on 21 April 2005 and expiring on 20 April 2055 (iii) total investment: HK$250,000,000 (iv) registered capital: HK$160,000,000 (fully paid) (Note 2) (v) attributable interest of the company: 100% (vi) scope of business: Manufacturing apparel, sports footwear, bags, case, socks, hats, gloves, knitwear, textile, industrial arts products, sports equipment, sole and paper carton

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APPENDIX VI STATUTORY AND GENERAL INFORMATION

(c) Sanliuyidu Xiamen (i) nature of the company: Domestic enterprise (ii) term of business operation: 30 years commencing on 19 May 2008 and expiring on 19 May 2038 (iii) registered capital: RMB100,000,000 (fully paid) (Note 3) (iv) attributable interest of the company: 100% (v) scope of business: Wholesale of sportswear, apparel, sports footwear and hats

Notes: (1) The registered capital of Sanliuyidu Fujian has been fully paid in accordance with the relevant PRC laws and regulations. Although there was a delay in the payment of the initial registered capital, the Jinjiang City Bureau of Commerce ( ) confirmed the binding legal effect of the certificate of approval according to a confirmation letter dated 22 August 2008. Our PRC legal advisers, Tian Yuan Law Firm, have advised that the delay in the payment of the registered capital will not be subject to any penalty imposed by the relevant government authority and will not have adverse effect on the legal existence of Sanliuyidu Fujian. Our Directors confirmed that such delay did not have any impact on our operation and no penalty has been imposed by the relevant governmental authority for the delay. As such, our Directors considered that indemnity from our Controlling Shareholders will not be necessary. (2) The registered capital of Sanliuyidu China has been fully paid in accordance with the relevant PRC laws and regulations. Although there was a delay in the payment of the initial registered capital, pursuant to the approval issued by the Department of Foreign Trade and Economic Cooperation of Fujian Province ( ) on 17 September 2008, the revised payment schedule of the initial registered capital of Sanliuyidu China was approved and we have duly paid up the registered capital accordingly. Our PRC legal advisers, Tian Yuan Law Firm, have advised that the delay in the payment of the registered capital will not be subject to any penalty imposed by the relevant government authority and will not have an adverse effect on the valid legal existence of Sanliuyidu China. Our Directors confirmed that such delay did not have any impact on our operation and no penalty has been imposed by the relevant governmental authority for the delay. As such, our Directors considered that indemnity from our Controlling Shareholders will not be necessary. (3) Our PRC legal advisers, Tian Yuan Law Firm, confirmed that, the registered capital of Sanliuyidu Xiamen has been fully paid without any delay in payment in accordance with the relevant PRC laws and regulations.

D. FURTHER INFORMATION ABOUT THE DIRECTORS 1. Directors’ service contracts Each of our Directors has entered into a service contract with us for an initial fixed term of 3 years commencing from the [Š] and will continue thereafter until terminated by not less than 3 months’ notice in writing served by either party on the other, which notice shall not expire until after the fixed term.

Each of our Directors is entitled to the respective basic salary set out below. Each of the executive Directors is also entitled to a discretionary bonus, provided that the aggregate amount of the bonuses payable to all our executive Directors in respect of any financial year may not exceed 5% of our audited consolidated or combined net profit (after taxation and payment of such bonuses) in respect of that financial year. An executive Director may not vote on any resolution of our Directors regarding the increment of annual salary and the amount of the discretionary bonus payable to him.

The current basic annual salaries of the executive Directors and independent non-executive Directors are as follows:

Name Annual Amount Mr. Ding Wuhao ...... RMB1,780,000 Mr. Ding Huihuang ...... RMB1,420,000 Mr. Ding Huirong ...... RMB1,420,000 Mr. Wang Jiabi ...... RMB770,000 Mr. Mak Kin Kwong ...... HK$560,000 Mr. Sun Xianhong ...... RMB320,000 Mr. Liu Jianxing ...... RMB210,000

VI-31 THIS WEB PROOF INFORMATION PACK IS IN DRAFT FORM. The information contained in it is incomplete and is subject to change. This Web Proof Information Pack must be read in conjunction with the section headed “Warning” on the cover of this Web Proof Information Pack.

APPENDIX VI STATUTORY AND GENERAL INFORMATION

Save as aforesaid, none of our Directors has or is proposed to have a service contract with us or any of our subsidiaries (other than contracts expiring or determinable by the employer within 1 year without the payment of compensation (other than statutory compensation)).

We have not entered into any service contract with our Directors which is for a duration that may exceed 3 years or which is not determine by us within 1 year without payment of compensation (other than statutory compensation).

2. Directors’ remuneration during the Track Record Period For the financial years ended 30 June 2006, 2007 and 2008 and the nine months ended 31 March 2009, the aggregate of the remuneration paid and benefits in kind granted to our Directors by us and our subsidiaries was approximately RMB176,000, RMB332,000, RMB1.4 million and RMB3.5 million, respectively.

Save as disclosed in this document, no other emoluments have been paid, or are payable, in respect of the three financial years ended 30 June 2006, 2007 and 2008 and the nine months ended 31 March 2009 by us to our Directors.

Under the arrangements currently in force, we estimate that the aggregate of the remuneration payable to, and benefits in kind receivable by, our Directors (excluding discretionary bonus) for the financial year ending 30 June 2009 will be approximately RMB4.9 million.

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APPENDIX VI STATUTORY AND GENERAL INFORMATION

E. DISCLOSURE OF INTERESTS 1. Disclosure of Interests Interests and short positions of our Directors in our share capital and our associated corporations following the [Š] and the [Š]

Immediately following completion of the [Š] and the [Š] and taking no account of any Shares which may be allotted and issued pursuant to the [Š] Share Option Scheme and the Share Option Scheme or the exercise of the [Š], the interests or short positions of our Directors and the chief executive in our Shares, underlying Shares and debentures and our associated corporations, within the meaning of Part XV of the SFO which will have to be notified to our Company and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO (including interests and short positions which he is taken or deemed to have under such provisions of the SFO) or which will be required, pursuant to section 352 of the SFO, to be recorded in the register referred to therein or which will be required to be notified to us and the Stock Exchange pursuant to the Model Code for Securities Transactions by Directors of Listed Companies contained in the Listing Rules, will be as follows:

Interests and short positions in our Shares, underlying Shares and debentures and our associated corporations:

Long Positions in our Company Approximate percentage of interest in our Company Name of Director Capacity/Nature of interest Number of Shares (Note 5) Mr. Ding Wuhao (Note 1) ...... Interest in controlled corporation 375,000,000 18.75% Mr. Ding Huihuang (Note 2) ...... Interest in controlled corporation 360,000,000 18.00% Mr. Ding Huirong (Note 3) ...... Interest in controlled corporation 360,000,000 18.00% Mr. Wang Jiabi (Note 4) ...... Interest in controlled corporation 187,500,000 9.375%

Notes: (1) Mr. Ding Wuhao, an executive Director, owns the entire issued share capital of Dings International, which owns 375,000,000 Shares upon completion of the [Š] and the [Š]. Mr. Ding Wuhao is interested in the 375,000,000 Shares held by Dings International under the SFO. He is the brother-in-law of both Mr. Ding Huihuang and Mr. Ding Huirong. (2) Mr. Ding Huihuang, an executive Director, owns the entire issued share capital of Ming Rong International, which owns 360,000,000 Shares upon completion of the [Š] and the [Š]. Mr. Ding Huihuang is interested in the 360,000,000 Shares held by Ming Rong International under the SFO. He is the elder brother of Mr. Ding Huirong and the brother-in-law of Mr. Ding Wuhao. (3) Mr. Ding Huirong, an executive Director, owns the entire issued share capital of Hui Rong International, which owns 360,000,000 Shares upon completion of the [Š] and the [Š]. Mr. Ding Huirong is interested in the 360,000,000 Shares held by Hui Rong International under the SFO. He is the brother of Mr. Ding Huihuang and the brother-in-law of Mr. Ding Wuhao. (4) Mr. Wang Jiabi, an executive Director, owns the entire issued share capital of Jia Wei International, which owns 187,500,000 Shares upon completion of the [Š] and the [Š]. Mr. Wang Jiabi is interested in the 187,500,000 Shares held by Jia Wei International under the SFO. (5) Assuming the [Š] is not exercised and no options granted under the [Š] Share Option Scheme prior to the [Š].

Interests and short positions discloseable under Divisions 2 and 3 of Part XV of the SFO Immediately following completion of the [Š] and the [Š] and taking no account of any Shares which may be allotted and issued pursuant to the [Š] Share Option Scheme and the Share Option Scheme or the exercise of the [Š], in addition to the interests disclosed under paragraph (a) above, so far as our Directors are aware, the following persons are expected to have interests or short positions in our Shares or underlying Shares which are required to be disclosed to the provisions of Divisions 2 and 3 of Part XV of the SFO or, are expected to be, directly or indirectly, interested in 10% or more of the nominal value of any class of share capital carrying rights to vote in all circumstances at general meetings of any member of our Group.

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APPENDIX VI STATUTORY AND GENERAL INFORMATION

Interests and short positions in our Shares and underlying Shares:

Approximate percentage of Capacity/Nature of Number of shareholding Name interest Shares (Note 6) Dings International (Note 1) ...... Beneficial owner 375,000,000 18.75% Ming Rong International (Note 2) ...... Beneficial owner 360,000,000 18.00% Hui Rong International (Note 3) ...... Beneficial owner 360,000,000 18.00% Jia Wei International (Note 4) ...... Beneficial owner 187,500,000 9.375% Jia Chen International (Note 5) ...... Beneficial owner 187,500,000 9.375%

Notes: (1) The entire issued share capital of Dings International is owned by Mr. Ding Wuhao, an executive Director. (2) The entire issued share capital of Ming Rong International is owned by Mr. Ding Huihuang, an executive Director. (3) The entire issued share capital of Hui Rong International is owned by Mr. Ding Huirong, an executive Director. (4) The entire issued share capital of Jia Wei International is owned by Mr. Wang Jiabi, an executive Director. (5) The entire issued share capital of Jia Chen International is owned by Mr. Wang Jiachen. Mr. Wang Jiachen is the brother of Mr. Wang Jiabi. (6) Assuming the [Š] is not exercised and no options granted under the [Š] Share Option Scheme prior to the [Š].

2. Disclaimers Save as disclosed in this document: (a) none of our Directors nor any of the parties listed in the section headed “Other Information—Consents of Experts” of this Appendix is interested in the promotion of our Company, or in any assets which have been, within the two years immediately preceding the date of this document, acquired or disposed of by or leased to us or any of its subsidiaries, or are proposed to be acquired or disposed of by or leased to our Company or any of its subsidiaries; (b) none of our Directors nor any of the parties listed in the section headed “Other Information—Consents of Experts” of this Appendix is materially interested in any contract or arrangement subsisting at the date of this document which is significant in relation to our business; and (c) none of our Directors or their associates (as defined in the Listing Rules) or the existing Shareholders (who, to the knowledge of our Directors, owns more than 5% of our issued share capital) has any interest in any of the five largest customers or the five largest suppliers of our Group.

F. [Š] SHARE OPTION SCHEME Summary of Terms The purpose of the [Š] Share Option Scheme is to give our employees, advisors, consultants and business partners an opportunity to have a personal stake in our Company and help motivate them to optimise their future performance and efficiency to our Group and/or to reward them for their past contributions, to attract and retain or otherwise maintain on-going relationships with such employees, advisors, consultants and business partners who are significant to and/or whose contributions are or will be beneficial to the performance, growth or success of our Group. The principal terms of the [Š] Share Option Scheme, approved by our Shareholders pursuant to the written resolutions of our Shareholders dated 10 June 2009, are substantially the same as the terms of the Share Option Scheme except that: (a) the subscription price per Share under the [Š] Share Option Scheme shall be at a 20% discount to the [Š]; and (b) all options granted under the [Š] Share Option Scheme can only be exercised in the following manner and, in any event, cannot be exercised for a period of twelve months after the [Š]:

Exercise period Maximum percentage of options exercisable Anytime after the first anniversary of the [Š] 30% of the total number of options granted Anytime after the second anniversary of the [Š] 60% of the total number of options granted Anytime after the third anniversary of the [Š] 100% of the total number of options granted

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APPENDIX VI STATUTORY AND GENERAL INFORMATION

The option period shall commence on the first anniversary of the [Š] and expire on the fifth anniversary of the [Š].

The total number of Shares which may be issued upon the exercise of all options granted under the [Š] Share Option Scheme is 20,380,000 Shares, representing 1.019% of the enlarged issued share capital of our Company immediately after completion of the [Š] and the [Š], assuming that the [Š] is not exercised. No options under the [Š] Share Option Scheme were granted to any of our Connected Persons. Save for the options which have been granted as of the Latest Practicable Date, no further options will be granted under the [Š] Share Option Scheme on or after the [Š].

Application has been made to the Listing Committee of the Stock Exchange for the approval of the [Š]in the 20,380,000 Shares to be issued pursuant to the exercise of the options granted under the [Š] Share Option Scheme.

Outstanding Options Granted As of the Latest Practicable Date, options to subscribe for an aggregate of 20,380,000 Shares (representing 1.019% of the enlarged issued share capital of our Company immediately after completion of the [Š] and the [Š], assuming that the [Š] is not exercised) at an exercise price equal to a 20% discount to the [Š] have been conditionally granted to 91 participants by our Company under the [Š] Share Option Scheme. All the options under the [Š] Share Option Scheme were granted on 10 June 2009 at a consideration of HK$1.0 paid by each grantee and no further options will be granted under the [Š] Share Option Scheme prior to the [Š].

A full list of such grantees containing all the details in respect of each option required under paragraph 10 of the Third Schedule to the Companies Ordinance and Rule 17.02(1)(b) of and paragraph 27 of Part A of Appendix I to the Listing Rules is set out below:

Number of Percentage Shares to be of total issued issued upon share capital full exercise of of the [Š] our Company Date of Share (assuming no joining our Option exercise of the No. Name of grantee Title Address Group entitlement [Š])

Senior Management 1. Vice president Room 1003, Building 6, October 2003 1,100,000 0.055% (Xia Youqun) Guanya Chengshi Garden, No.1 Fengze Street, Fengze District, Quanzhou City, Fujian Province 2. Head of capital operation No.165, Qianjin Road, August 2005 1,000,000 0.05% (Chen Yongling) department Jiangtou Industrial Park, Chendai Town, Jinjiang City, Fujian Province 3. Head of human resources and Room 404, Building 1, January 2005 2,890,000 0.1445% (Hou Zhaohui) administration departments Garden No.1 Wuyuanwan Huli District, Xiamen City, Fujian Province 4. Head of design department of Room C1-302, October 2003 330,000 0.0165% (Zhu Geming) footwear division Yangguang Bali District 1, Quanxiu Road, Fengze District, Quanzhou City, Fujian Province

VI-35 THIS WEB PROOF INFORMATION PACK IS IN DRAFT FORM. The information contained in it is incomplete and is subject to change. This Web Proof Information Pack must be read in conjunction with the section headed “Warning” on the cover of this Web Proof Information Pack.

APPENDIX VI STATUTORY AND GENERAL INFORMATION

Number of Percentage Shares to be of total issued issued upon share capital full exercise of of the [Š] our Company Date of Share (assuming no joining our Option exercise of the No. Name of grantee Title Address Group entitlement [Š]) 5. Head of research and Room 1105, No.24, October 2003 330,000 0.0165% (Wang Zhiqian) development of footwear Jinqiao Road, Siming division District, Xiamen City, Fujian Province 6. Head of design department of Room 303, Unit 7, January 2005 330,000 0.0165% (Yang Guang) apparel division Building 20, Beichenggen District, Changping District, Beijing 7. Head of sales department No.165, Qianjin Road, September 2006 330,000 0.0165% (Zhao Jingli) Jiangtou Industrial Park, Chendai Town, Jinjiang City, Fujian Province 8. Head of brand management Room 301, No.15, April 2008 280,000 0.014% (Ling Jun) department Lane 717, Wenshui East Road, Hongkou District, Shanghai 9. Head of equipment and Building 1, October 2007 280,000 0.014% (Li Xiang) accessories division Baiziyuan, Baiziwan Road, Chaoyang District, Beijing 10. Company secretary B2, 5/F, Chermain September 2008 550,000 0.0275% (Choi Mun Duen) Heights, 9 Eastbourne Road, Kowloon Tong, Kowloon, Hong Kong Sub-total: 7,420,000 0.371% Other employees 11. Head of finance department No.165, Qianjin Road, September 2005 3,330,000 0.1665% (Huang Xiaoling) Jiangtou Industrial Park, Chendai Town, Jinjiang City, Fujian Province 12. Head of distribution channel No.101, Door 17, September 2007 280,000 0.014% (Chang Shuo) management department Building 38, Jiayuanerli, Beijing 13. Head of production systems No.67, Group 4, Yinhe July 2008 280,000 0.014% (Jia Mingguo) Village, Guifu Town, Qu County, Sichuan Province 14. Head of human resources Room 201, No.10, August 2008 250,000 0.0125% (Zhong Qinghui) management department Lane 718, Tacheng Road, Jiading District, Shanghai 15. Head of production Room 1802, May 2005 250,000 0.0125% (Shen Hongmei) department of apparel division Building 7B, No.160, Haode Road, Shishi City, Fujian Province

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APPENDIX VI STATUTORY AND GENERAL INFORMATION

Number of Percentage Shares to be of total issued issued upon share capital full exercise of of the [Š] our Company Date of Share (assuming no joining our Option exercise of the No. Name of grantee Title Address Group entitlement [Š]) 16. Head of marketing No.15, Door 1, July 2008 250,000 0.0125% (Li Hongwei) management department Building 103, Yuqing Road, Weiyang District, Xi’an City, Shaanxi Province

17. Vice head of distribution 2-4-2, No.88 Anshan September 2005 220,000 0.011% (Tan Ji) channel management Road, Shahekou department District, Dalian City, Liaoning Province

18. Vice head of brand No.165, Qianjin Road, January 2005 220,000 0.011% (Zhao Feng) management department Jiangtou Industrial Park, Chendai Town, Jinjiang City, Fujian Province

19. Manager of logistics Gongting Group, March 2007 100,000 0.005% (Luo Zheng) department Xinfeng Village, Fengmuqiao Town, Ningxiang County, Hunan Province

20. Information technology 5-2, Building 66, No.77, January 2008 100,000 0.005% (Luo Zheng) manager Qixing Road, Qixing District, Guilin City, Guangxi Province

21. Apparel design manager Room 1004, August 2008 100,000 0.005% (Sun Lei) Building 29, Panjiayuan, Chaoyang District, Beijing

22. Manager of cost management First Group, Wenshu September 2005 100,000 0.005% (Zheng Fuqin) department Village, Daji Town, Xianyou County, Fujian Province

23. Manager of moulding Group 2, Shihezhai July 2008 100,000 0.005% (Zeng Youguang) workshop Village, Bamiao Town, Kaijiang County, Sichuan Province

24. Manager of footwear upper 3-1, Building 112, July 2008 100,000 0.005% (Xie Xianliang) workshop Ankang District, Hanfeng Town, Kai County, Chongqing

25. Management of financial 2-4, No.4, Guanyinyan, August 2006 100,000 0.005% (Huang Xiubin) management department Wanzhou District, Chongqing

26. Manager of marketing Group 4, September 2005 90,000 0.0045% (Yang Zhixiong) department Tiandengshugang Village, Dingsidang Town, Xishui County, Hubei Province

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APPENDIX VI STATUTORY AND GENERAL INFORMATION

Number of Percentage Shares to be of total issued issued upon share capital full exercise of of the [Š] our Company Date of Share (assuming no joining our Option exercise of the No. Name of grantee Title Address Group entitlement [Š]) 27. Manager of sales department No.103, Tianyang, January 2005 80,000 0.004% (Huang Ruiying) Wendou Village, Shuitou Town, Nan’an City, Fujian Province

28. Manager of cutting workshop Group 5, Jinxing July 2008 80,000 0.004% (Liu Shichun) Village, Jingbian Town, Qu County, Sichuan Province

29. Manager of high frequency No.228, Yancuo July 2008 80,000 0.004% (Wu Xingwei) workshop Village, Xindian Town, Xiang’an District, Xiamen City, Fujian Province

30. Manager of product planning No. 165, Qianjin Road, October 2007 60,000 0.003% (Qing Ying) department Jiangtou Industrial Park, Chendai Town, Jinjiang City, Fujian Province

31. Quality control Manager of No.120, Minzhu Road, September 2005 60,000 0.003% (Dai Keqing) apparel division Sijiachang Town, Songzi City, Hubei Province

32. Product manager of footwear Room 306, Building 1, October 2005 60,000 0.003% (Wang Zhenlai) division Ganglongxin Village, Renmin West Road, Shima Town, Longhai City, Fujian Province

33. Development manager of Room 1206, Building 1, November 2005 60,000 0.003% (Chen Fangrong) footwear division Zhangsheng Yayuan, Citong South Road, Fengze District, Quanzhou City, Fujian Province

34. Design manager of footwear Room 206, Building 17, January 2005 60,000 0.003% (Zhang Mingsheng) division Fuxing Garden, Jin’an District, Fuzhou City, Fujian Province

35. Technical manager of Room 703, Building 8, October 2005 60,000 0.003% (Zhan Wenping) footwear division Zhangsheng Yayuan, Citong South Road, Fengze District, Quanzhou City, Fujian Province

36. Manager of training No.148, Niushan November 2008 60,000 0.003% (Chen Xiaowu) department Village, Xiayuan, Gushan Town, Jin’an District, Fuzhou City, Fujian Province

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APPENDIX VI STATUTORY AND GENERAL INFORMATION

Number of Percentage Shares to be of total issued issued upon share capital full exercise of of the [Š] our Company Date of Share (assuming no joining our Option exercise of the No. Name of grantee Title Address Group entitlement [Š]) 37. Manager of remuneration No.48 Dongyu, Mushan December 2008 60,000 0.003% (Li Qingmei) audit department Village, Hushi Town, Putian County, Fujian Province 38. Manager of production Shangang Group, Shaxi July 2008 60,000 0.003% (Wu Zengchang) department Village, Shaxi Town, Lujiang County, Anhui Province 39. Manager of technical Zhangshuwan Group, July 2008 60,000 0.003% (Liu Xingfa) department Yunlu Village, Reshi Town, Taoran County, Hunan Province 40. Regional sales manager Room 401, Unit 2, October 2005 60,000 0.003% (Yan Minchuan) Building 3, Jinyuan Community, Yong’an City, Fujian Province 41. Regional sales manager Room 503, Building 6, September 2005 60,000 0.003% (Liu Fobiao) Donghuan Xincheng, Hetang District, Zhuzhou City, Hunan Province 42. Regional sales manager No. 10, Checuo September 2005 60,000 0.003% (Jiang Chunfeng) Huangcuo, Xiyuan Street, Jinjiang City, Fujian Province 43. Regional sales manager Room 504, Building March 2008 50,000 0.0025% (Yu Tenglong) 434, Teyun Dormitory, Xianyue Road, Xiamen City, Fujian Province 44. Regional sales manager A2-01, Yujing July 2008 50,000 0.0025% (Huang Mingdong) Longcheng, Hongshan Bridge, Kaifu District, Changsha City, Hunan Province 45. Regional sales manager Group 1, Yuanshan March 2009 50,000 0.0025% (Wang Baochu) Village, Zhouxiang Town, Xiaochang County, Hubei Province

VI-39 THIS WEB PROOF INFORMATION PACK IS IN DRAFT FORM. The information contained in it is incomplete and is subject to change. This Web Proof Information Pack must be read in conjunction with the section headed “Warning” on the cover of this Web Proof Information Pack.

APPENDIX VI STATUTORY AND GENERAL INFORMATION

Number of Percentage Shares to be of total issued issued upon share capital full exercise of of the [Š] our Company Date of Share (assuming no joining our Option exercise of the No. Name of grantee Title Address Group entitlement [Š]) 46. Assistant to vice president Room 802, Building B, June 2008 50,000 0.0025% (Chen Libin) Houbandong District, Quanzhou City, Fujian Province

47. Head of public relations 9-10, No.4 Xisan Street, March 2009 50,000 0.0025% (Fu Tao) department in Beijing Yuzhong District, Chongqing

48. Manager of human resources Room 101, Building 22, May 2005 50,000 0.0025% (Li Bo) department Zhanghu Huanjiu Factory, Shayang County, Hubei Province

49. Manager of public relations Room 404, Building 7, October 2005 50,000 0.0025% (Wang Peng) department Nanyuanxin Village, Huxin Road, Guichi District, Chizhou City, Anhui Province

50. Manager of production West Room, 2nd Floor, January 2008 50,000 0.0025% (Jiang Tao) department of equipment and Unit 3, Building 1, accessories division Wenjiaoju Jiashuyuan, Jiefang Road, Pingyu County, Henan Province

51. Manager of training Room 501, No.259, January 2008 50,000 0.0025% (Lan Feng) department of distribution Xinglong Road, Huli channel management District, Xiamen City, department Fujian Province

52. Manager of production No.11, Lane 4, Wang January 2005 50,000 0.0025% (Gao Chuanbao) department of apparel division Building, Group 2, Xiacao District, Caohe Town, Qichun County, Hubei Province

53. Manager of merchandising Room 601, Unit 1, May 2008 50,000 0.0025% (Yao Zhong) department of apparel division Building 25, No.278, Xunyang East Road, Xunyang District, Jiujiang City, Jiangxi Province

54. Quality control officer of No.25, Group 7, Huaxi July 2008 40,000 0.002% (Yu Congfu) moulding workshop Village, Zhaojia Town, Kai County, Chongqing

55. Quality control officer of Min Group, Village 2, July 2008 40,000 0.002% (Tan Ke) footwear upper workshop Shizhai Village, Changsha Town, Kai County, Chongqing

56. Quality control officer of No.79, Group 3, Huqiao July 2008 40,000 0.002% (Zhou Bin) cutting workshop Village, Changsha Town, Kai County, Chongqing

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APPENDIX VI STATUTORY AND GENERAL INFORMATION

Number of Percentage Shares to be of total issued issued upon share capital full exercise of of the [Š] our Company Date of Share (assuming no joining our Option exercise of the No. Name of grantee Title Address Group entitlement [Š]) 57. Quality control officer of high No.78-1, Chenjia Street, July 2008 40,000 0.002% (Ran Fuguo) frequency workshop Changsha Town, Kai County, Chongqing

58. Officer of embroidery Qiantou Group, Shaxi July 2008 40,000 0.002% (Zhang Huafang) workshop Village, Shatian Town, Guangfeng County, Jiangxi Province

59. Manager of finished product No.93, Zhongshe, August 2008 40,000 0.002% (Zhang Limin) management department Zhuoqi Village, Gangwei Town, Longhai City, Fujian Province

60. Manager of e-commerce No.31, Sanli, Tiefeng October 2005 40,000 0.002% (Qiu Xinming) department Village, Lufeng Shezu Town, Shanghang County, Fujian Province

61. Manager of event execution No.35, Chushui, June 2005 40,000 0.002% (Lin Kaizheng) department Zhonghe Farm, Linan Town, Xianyou County, Fujian Province

62. Manager of external affairs Room 4, No.16, January 2008 40,000 0.002% (Zhu Yujin) department Liangkeng, Zhengdun Village, Zhenghu Town, Sha County, Fujian Province

63. Manager of general affairs Group 1, Leizhaoqian January 2008 40,000 0.002% (Zhao Ming) department Village, Xindian Town, Linyao County, Gansu Province

64. Quality control manager Group 10, Dayou May 2008 30,000 0.0015% (Wu Shaobo) Village, Babaigong Town, Nan County, Hunan Province

65. Manager of technical No.64, Erzhong East February 2008 30,000 0.0015% (Wang Xiaohong) department of apparel division Road, Donghu Daidao, Longcheng Town, Pengze County, Jiujiang City, Jiangxi Province

66. Recruitment manager No.9, Liangcuo, April 2009 20,000 0.001% (Lu Zhanwu) Nantang Village, Heshi Town, Luojiang District, Quanzhou City, Fujian Province

67. Human resources manager of Room 2406, No. 2, March 2009 20,000 0.001% (Wu Wenxin) design department in Hua Gang East Street, Guangzhou Tianhe District, Guangzhou City, Guangdong Province

VI-41 THIS WEB PROOF INFORMATION PACK IS IN DRAFT FORM. The information contained in it is incomplete and is subject to change. This Web Proof Information Pack must be read in conjunction with the section headed “Warning” on the cover of this Web Proof Information Pack.

APPENDIX VI STATUTORY AND GENERAL INFORMATION

Number of Percentage Shares to be of total issued issued upon share capital full exercise of of the [Š] our Company Date of Share (assuming no joining our Option exercise of the No. Name of grantee Title Address Group entitlement [Š]) 68. Manager of legal department West 29-2-6, China January 2008 20,000 0.001% (Zhou Pingbo) Mining University, Xuzhou City, Jiangsu Province Sub-total: 7,960,000 0.398% Relationship with us

Business partners

69. Shareholder of distributor Room 403, No. 27 600,000 0.03% (Zhang Zhongyue) Baolihuayuanqinquan Street, Gongyedadaozhong No.400, Haizhu District, Guangzhou City, Guangdong Province 70. Shareholder of distributor Room C, Floor 15 400,000 0.02% (Zhang Zhonghui) Building 7, Qiyunxin Village, No.128 Dongbinhe Road, Shenhe District, Shenyang City, Liaoning Province 71. Shareholder of distributor Room 601, No. 60 300,000 0.015% (Shi Weijiu) Building 23, Jinxin Garden, Qingliangmen Street, Gulou District, Nanjing City, Jiangsu Province 72. Shareholder of distributor Room 1701, Building 3, 300,000 0.015% (Lin Qingxian) Huashizaoyuan, Donghua City, Chongwen District, Beijing 73. Shareholder of distributor No.180, Village 5, 300,000 0.015% (Lin Jiancheng) Xinjiang’an, Jiang’an District, Wuhan City, Hubei Province

74. Shareholder of distributor Room 903, 300,000 0.015% (Ding Hongbin) Junchuangguoji, No.50 Zhonghuabeida Street, Shijiazhuang City, Hebei Province

75. Shareholder of distributor No.249, Liuyizhong 200,000 0.01% (Ye Meng’en) Road, Fuzhou City, Fujian Province

76. Shareholder of distributor Room 704, Building D, 200,000 0.01% (Wang Zesheng) Dongsi Street No.338, Kunming City, Yunnan Province

VI-42 THIS WEB PROOF INFORMATION PACK IS IN DRAFT FORM. The information contained in it is incomplete and is subject to change. This Web Proof Information Pack must be read in conjunction with the section headed “Warning” on the cover of this Web Proof Information Pack.

APPENDIX VI STATUTORY AND GENERAL INFORMATION

Number of Percentage Shares to be of total issued issued upon full share capital of exercise of our Company the [Š] Share (assuming no Option exercise of the No. Name of grantee Relationship with us Address entitlement [Š]) 77. Shareholder of distributor No.167-13, Nanji Street, Daowai 200,000 0.01% (Jin Chunmei) District, Harbin City, Heilongjiang Province 78. Shareholder of distributor Room 1505, 200,000 0.01% (Ding Yuchi) Shennongyujingyuan, Lusong District, Zhuzhou City, Hunan Province 79. Shareholder of distributor Room 2001, Unit 2, Building 8 200,000 0.01% (Li Jianping) Chenshizhiguang, Changshu City Jiangsu Province 80. Shareholder of distributor No.2, Unit 2, Floor 6, Building 3, 180,000 0.009% (Huang Yong) Huayangnian, Liushi Road, Yufeng District, Liuzhou City, Guangxi Province 81. Shareholder of distributor Room 1902, Unit 3, Building 1, 180,000 0.009% (Cheng Jianli) Caiherenjia, Jianggan District, Hangzhou City, Zhejiang Province 82. Shareholder of distributor Room 1002, Unit 1, Building 7, 150,000 0.0075% (Ding Qingquan) Laiyinbandao, Jianshe West Road, Nanchang City, Jiangxi Province 83. General manager of distributor Room 1403, Mingzhu Building, 150,000 0.0075% (Zou Huiqiang) No. 6 Wuzhishan Road, Haikou City, Hainan Province

84. Shareholder of distributor Building 6, Jinxiu Hotel, 150,000 0.0075% (Ding Senyuan) Changying West Road, Xi’an City Shaanxi Province 85. Shareholder of distributor Room 1103, Building 18, 150,000 0.0075% (Li Huaxiong) Bojingwan District, Huancheng Road, Hefei City, Anhui Province 86. General manager of distributor Room 201, Building 6, Yanhe 150,000 0.0075% (Sun Yongping) Garden, Yanhe District, Huai’an City, Jiangsu Province 87. Shareholder of distributor Room 16-3, Building A, 150,000 0.0075% (Li Guangguo) Jiliang Square, No.9 Shanxi Road, Yuzhong District, Chongqing 88. Shareholder of distributor Room 602, No.8 Tuandao 150,000 0.0075% (Jia Xiang) Second Road, Shinan District, Qingdao City, Shandong Province 89. Shareholder of distributor No.357 Baoshan Road, Urumqi, 150,000 0.0075% (Jin Dongmei) Xinjiang Autonomous Region

VI-43 THIS WEB PROOF INFORMATION PACK IS IN DRAFT FORM. The information contained in it is incomplete and is subject to change. This Web Proof Information Pack must be read in conjunction with the section headed “Warning” on the cover of this Web Proof Information Pack.

APPENDIX VI STATUTORY AND GENERAL INFORMATION

Number of Percentage Shares to be of total issued issued upon full share capital of exercise of our Company the [Š] Share (assuming no Option exercise of the No. Name of grantee Relationship with us Address entitlement [Š]) 90. Shareholder of distributor No.402, Door 2, Building 21, 140,000 0.007% (Huang Zhenjiang) Huayuanjiuhuali, Nankai District, Tianjin 91. Shareholder of distributor Room 1-5-1, Building 6, 100,000 0.005% (Ding Mingquan) Liangyunbinfen Four Seasons, Shahekou District, Dalian City, Liaoning Province Sub-total: ...... 5,000,000 0.25%

Total ...... 20,380,000 1.019%

The total number of Shares to be issued under all options granted under the [Š] Share Option Scheme represents 1.019% of our Company’s enlarged issued share capital immediately after completion of the [Š] and the [Š] (assuming no exercise of the [Š]). If all options are exercised, this would have a dilutive effect on the shareholdings of our Shareholders of approximately 1.009%. However, as the options are exercisable for a period of up to 5 years, any such dilution and impact on earnings per Share will be staggered over several years. No further options will be granted under the [Š] Share Option Scheme after the [Š].

G. SHARE OPTION SCHEME The following is a summary of principal terms of the Share Option Scheme conditionally approved by a resolution of all the Shareholders passed on 10 June 2009 and adopted by a resolution of the Board on 10 June 2009 (the “Adoption Date”). The terms of the Share Option Scheme are in compliance with the provisions of Chapter 17 of the Listing Rules.

1. Purpose The purpose of the Share Option Scheme is to give the Eligible Persons (as mentioned in the following paragraph) an opportunity to have a personal stake in our Company and help motivate them to optimise their future performance and efficiency to our Group and/or to reward them for their past contributions, to attract and retain or otherwise maintain on-going relationships with such Eligible Persons who are significant to and/or whose contributions are or will be beneficial to the performance, growth or success of our Group, and additionally in the case of Executives (as defined below), to enable our Group to attract and retain individuals with experience and ability and/or to reward them for their past contributions.

2. Conditions of the Share Option Scheme The Share Option Scheme shall come into effect on the date on which the following conditions are fulfilled: (a) subject to (b) and (c) below, the approval of all the shareholders of our Company for the adoption of the Share Option Scheme; (b) the approval of the Stock Exchange for the [Š], a maximum of 200,000,000 Shares to be allotted and issued pursuant to the exercise of the Options in accordance with the terms and conditions of the Share Option Scheme; and (c) [Š].

VI-44 THIS WEB PROOF INFORMATION PACK IS IN DRAFT FORM. The information contained in it is incomplete and is subject to change. This Web Proof Information Pack must be read in conjunction with the section headed “Warning” on the cover of this Web Proof Information Pack.

APPENDIX VI STATUTORY AND GENERAL INFORMATION

3. Who may join

The Board may, at its absolute discretion, offer options (“Options”) to subscribe for such number of Shares in accordance with the terms set out in the Share Option Scheme to:

(a) any executive director of, manager of, or other employee holding an executive, managerial, supervisory or similar position in any member of our Group (“Executive”), any full-time or part-time employee, or a person for the time being seconded to work full-time or part-time for any member of our Group (“Employee”);

(b) a director or proposed director (including an independent non-executive director) of any member of our Group;

(c) a direct or indirect shareholder of any member of our Group;

(d) a supplier of goods or services to any member of our Group;

(e) a customer, consultant, business or joint venture partner, franchisee, contractor, agent or representative of any member of our Group;

(f) a person or entity that provides design, research, development or other support or any advisory, consultancy, professional or other services to any member of our Group; and

(g) an associate of any of the persons referred to in paragraphs (a) to (c) above.

(the persons referred above are the “Eligible Persons”)

4. Maximum number of Shares

The maximum number of Shares which may be issued upon exercise of all options to be granted under the Share Option Scheme and any other schemes of our Group shall not in aggregate exceed 10 per cent. of the Shares in issue as of the [Š], excluding Shares which may fall to be issued upon the exercise of the [Š] (the “Scheme Mandate Limit”) provided that:

(a) our Company may at any time as the Board may think fit seek approval from our Shareholders to refresh the Scheme Mandate Limit, save that the maximum number of Shares which may be issued upon exercise of all options to be granted under the Share Option Scheme and any other schemes of our Company shall not exceed 10 per cent. of the Shares in issue as of the date of approval by Shareholders in general meeting where the Scheme Mandate Limit is refreshed. Options previously granted under the Share Option Scheme and any other schemes of our Company (including those outstanding, cancelled, lapsed or exercised in accordance with the terms of the Share Option Scheme or any other schemes of our Company) shall not be counted for the purpose of calculating the Scheme Mandate Limit as refreshed. Our Company shall send to our Shareholders a circular containing the details and information required under the Listing Rules.

(b) Our Company may seek separate approval from our Shareholders in general meeting for granting Options beyond the Scheme Mandate Limit, provided that the Options in excess of the Scheme Mandate Limit are granted only to the Eligible Person specified by our Company before such approval is obtained. Our Company shall issue a circular to our Shareholders containing the details and information required under the Listing Rules.

(c) The maximum number of Shares which may be issued upon exercise of all outstanding options granted and yet to be exercised under the Share Option Scheme and any other schemes of our Group shall not exceed 30% of our Company’s issued share capital from time to time. No options may be granted under the Share Option Scheme and any other share option scheme of our Company if this will result in such limit being exceeded.

VI-45 THIS WEB PROOF INFORMATION PACK IS IN DRAFT FORM. The information contained in it is incomplete and is subject to change. This Web Proof Information Pack must be read in conjunction with the section headed “Warning” on the cover of this Web Proof Information Pack.

APPENDIX VI STATUTORY AND GENERAL INFORMATION

5. Maximum entitlement of each participant No Option may be granted to any one person such that the total number of Shares issued and to be issued upon exercise of Options granted and to be granted to that person in any 12 month period exceeds 1% of our Company’s issued share capital from time to time. Where any further grant of Options to such an Eligible Person would result in the Shares issued and to be issued upon exercise of all Options granted and to be granted to such Eligible Person (including exercised, cancelled and outstanding Options) in the 12-month period up to and including the date of such further grant representing in aggregate over 1 per cent. of the Shares in issue, such further grant shall be separately approved by the shareholders of our Company in general meeting with such Eligible Person and his associates abstaining from voting. Our Company shall send a circular to our Shareholders disclosing the identity of the Eligible Person, the number and terms of the Options to be granted (and Options previously granted) to such Eligible Person, and containing the details and information required under the Listing Rules. The number and terms (including the subscription price) of the Options to be granted to such Eligible Person must be fixed before the approval of our Company’s shareholders and the date of the Board meeting proposing such grant shall be taken as the offer date for the purpose of calculating the subscription price of those Options.

6. Offer and grant of Options Subject to the terms of the Share Option Scheme, the Board shall be entitled at any time within 10 years from the Adoption Date to offer the grant of an Option to any Eligible Person as the Board may in its absolute discretion select to subscribe at the subscription price for such number of Shares as the Board may (subject to the terms of the Share Option Scheme) determine (provided the same shall be a board lot for dealing in the Shares on the Stock Exchange or an integral multiple thereof).

7. Granting Options to Connected Persons Subject to the terms in the Share Option Scheme, only insofar as and for so long as the Listing Rules require, where any offer of an Option is proposed to be made to a director, chief executive or a substantial shareholder (as defined in the Listing Rules) of our Company or any of their respective associates, such offer must first be approved by the independent non-executive Directors of our Company (excluding the independent non-executive Director who or whose associates is the grantee of an Option).

Where any grant of Options to a substantial shareholder (as defined in the Listing Rules) or an independent non-executive Director of our Company, or any of their respective associates, would result in the securities issued and to be issued upon exercise of all Options already granted and to be granted (including Options exercised, cancelled and outstanding) to such person in the 12-month period up to and including the date of such grant: (a) representing in aggregate over 0.1% of the relevant class of securities in issue; and (b) ([Š]), having an aggregate value, based on the closing price of the securities at the date of each grant, in excess of HK$5 million, such further grant of Options must be approved by shareholders of our Company (voting by way of a poll). Our Company shall send a circular to Shareholders containing the information required under the Listing Rules. All Connected Persons of our Company must abstain from voting in favour at such general meeting.

Approval from the shareholders of our Company is required for any change in the terms of Options granted to a participant who is a substantial shareholder or an independent non-executive Director of our Company, or any of their respective associates.

VI-46 THIS WEB PROOF INFORMATION PACK IS IN DRAFT FORM. The information contained in it is incomplete and is subject to change. This Web Proof Information Pack must be read in conjunction with the section headed “Warning” on the cover of this Web Proof Information Pack.

APPENDIX VI STATUTORY AND GENERAL INFORMATION

8. Offer period and number accepted An offer of the grant of an Option shall remain open for acceptance by the Eligible Person concerned for a period of 28 days from the offer date provided that no such grant of an Option may be accepted after the expiry of the effective period of the Share Option Scheme. An Option shall be deemed to have been granted and accepted by the Eligible Person and to have taken effect when the duplicate offer letter comprising acceptance of the offer of the Option duly signed by the Grantee together with a remittance in favour of our Company of HK$1.00 by way of consideration for the grant thereof is received by our Company on or before the date upon which an offer of an Option must be accepted by the relevant Eligible Person, being a date not later than 28 days after the Offer Date (the “Acceptant Date”). Such remittance shall in no circumstances be refundable.

Any offer of the grant of an Option may be accepted in respect of less than the number of Shares in respect of which it is offered provided that it is accepted in respect of board lots for dealing in Shares on the Stock Exchange or an integral multiple thereof and such number is clearly stated in the duplicate offer letter comprising acceptance of the offer of the Option. To the extent that the offer of the grant of an Option is not accepted by the Acceptance Date, it will be deemed to have been irrevocably declined.

9. Restriction on the time of grant of Options The Board shall not grant any Option under the Share Option Scheme after a price sensitive development has occurred or a price sensitive matter has been the subject of a decision until such price sensitive information has been announced pursuant to the requirements of the Listing Rules. In particular, no Option shall be granted during the period commencing two months immediately preceding the earlier of the date of the Board meeting (as such date is first notified to the Stock Exchange in accordance with the Listing Rules) for the approval of our Company’s results for any year, half-year, quarterly or any other interim period (whether or not required under the Listing Rules) and the deadline for our Company to publish an announcement of its results for any year or half-year under the Listing Rules, or quarterly or any other interim period (whether or not required under the Listing Rules), and ending on the date of the results announcements.

10. Minimum holding period, vesting and performance target Subject to the provisions of the Listing Rules, the Board may in its absolute discretion when offering the grant of an Option impose any conditions, restrictions or limitations in relation thereto in addition to those set forth in the Share Option Scheme as the Board may think fit (to be stated in the letter containing the offer of the grant of the Option) including (without prejudice to the generality of the foregoing) qualifying and/or continuing eligibility criteria, conditions, restrictions or limitations relating to the achievement of performance, operating or financial targets by our Company and/or the grantee, the satisfactory performance or maintenance by the grantee of certain conditions or obligations or the time or period before the right to exercise the Option in respect of all or any of the Shares shall vest provided that such terms or conditions shall not be inconsistent with any other terms or conditions of the Share Option Scheme. For the avoidance of doubt, subject to such terms and conditions as the Board may determine as aforesaid (including such terms and conditions in relation to their vesting, exercise or otherwise) there is no minimum period for which an Option must be held before it can be exercised and no performance target which need to be achieved by the grantee before the Option can be exercised.

11. Amount payable for Options The amount payable on acceptance of an Option is HK$1.0.

VI-47 THIS WEB PROOF INFORMATION PACK IS IN DRAFT FORM. The information contained in it is incomplete and is subject to change. This Web Proof Information Pack must be read in conjunction with the section headed “Warning” on the cover of this Web Proof Information Pack.

APPENDIX VI STATUTORY AND GENERAL INFORMATION

12. Subscription price The subscription price in respect of any particular Option shall be such price as the Board may in its absolute discretion determine at the time of grant of the relevant Option (and shall be stated in the letter containing the offer of the grant of the Option) but the subscription price shall not be less than whichever is the highest of: (a) the nominal value of a Share; (b) the closing price of a Share as stated in the Stock Exchange’s daily quotations sheet on the offer date; and (c) the average closing price of a Share as stated in the Stock Exchange’s daily quotation sheets for the 5 business days (as defined in the Listing Rules) immediately preceding the offer date.

13. Exercise of Option (i) An Option shall be exercised in whole or in part (but if in part only, in respect of a Board Lot or any integral multiple thereof) within the Option Period in the manner as set out in this Share Option Scheme by the grantee (or his legal personal representative(s)) by giving notice in writing to our Company stating that the Option is thereby exercised and specifying the number of Shares in respect of which it is exercised. Each such notice must be accompanied by a remittance for the full amount of the aggregate subscription price for the Shares in respect of which the notice is given. Within 30 days after receipt of the notice and, where appropriate, receipt of a certificate from our auditors pursuant to the Share Option Scheme, our Company shall accordingly allot and issue the relevant number of Shares to the grantee (or his legal personal representative(s)) credited as fully paid with effect from (but excluding) the relevant exercise date and issue to the Grantee (or his legal personal representative(s)) share certificate(s) in respect of the Shares so allotted. (ii) The exercise of any Option may be subject to a vesting schedule to be determined by the Board in its absolute discretion, which shall be specified in the offer letter. (iii) The exercise of any Option shall be subject to the members of our Company in general meeting approving any necessary increase in the authorised share capital of our Company. (iv) Subject as hereinafter provided: (a) in the event that the grantee dies or becomes permanently disabled before exercising an Option (or exercising it in full), he (or his legal representative(s)) may exercise the Option up to the Grantee’s entitlement (to the extent not already exercised) within a period of 12 months following his death or permanent disability or such longer period as the Board may determine; (b) in the event that the grantee ceases to be an Executive for any reason (including his employing company ceasing to be a member of our Group) other than his death, permanent disability, retirement pursuant to such retirement scheme applicable to our Group at the relevant time or the transfer of his employment to an affiliate company or the termination of his employment with the relevant member of our Group by resignation or termination on the ground of misconduct, the Option (to the extent not already exercised) shall lapse on the date of cessation of such employment and not be exercisable unless the Board otherwise determines in which event the Option (or such remaining part thereof) shall be exercisable within such period as the Board may in its absolute discretion determine following the date of such cessation; (c) if a general offer is made to all holders of Shares and such offer becomes or is declared unconditional (in the case of a takeover offer) or is approved by the requisite majorities at the relevant meetings of shareholders of our Company (in the case of a scheme of arrangement), the Grantee shall be entitled to exercise the Option (to the extent not already exercised) at any time (in the case of a takeover offer) within one month after the date on which the offer becomes or is declared unconditional or (in the case of a scheme of arrangement) prior to such time and date as shall be notified by our Company;

VI-48 THIS WEB PROOF INFORMATION PACK IS IN DRAFT FORM. The information contained in it is incomplete and is subject to change. This Web Proof Information Pack must be read in conjunction with the section headed “Warning” on the cover of this Web Proof Information Pack.

APPENDIX VI STATUTORY AND GENERAL INFORMATION

(d) if a compromise or arrangement between our Company and its members or creditors is proposed for the purpose of or in connection with a scheme for the reconstruction of our Company or its amalgamation with any other company, our Company shall give notice thereof to the Grantees who have Options unexercised at the same time as it dispatches notices to all members or creditors of our Company summoning the meeting to consider such a compromise or arrangement and thereupon each Grantee (or his legal representatives or receiver) may until the expiry of the earlier of: (i) the Option Period (in respect of any particular Option, the period commencing immediately after the business day (as defined in the Listing Rules) on which the Option is deemed to be granted and accepted in accordance with the Share Option Scheme and expiring on a date to be determined and notified by our Directors to each Grantee provided that such period shall not exceed the period of 10 years from the date of the grant of a particular Option but subject to the provisions for early termination thereof contained in the Share Option Scheme); (ii) the period of two months from the date of such notice; or (iii) the date on which such compromise or arrangement is sanctioned by the court, exercise in whole or in part his Option. (e) in the event a notice is given by our Company to its members to convene a general meeting for the purposes of considering, and if thought fit, approving a resolution to voluntarily wind-up our Company, our Company shall on the same date as or soon after it dispatches such notice to each member of our Company give notice thereof to all Grantees and thereupon, each Grantee (or his legal personal representative(s)) shall be entitled to exercise all or any of his options at any time not later than two business days (as defined in the Listing Rules) prior to the proposed general meeting of our Company by giving notice in writing to our Company, accompanied by a remittance for the full amount of the aggregate subscription price for the Shares in respect of which the notice is given whereupon our Company shall as soon as possible and, in any event, no later than the business day (as defined in the Listing Rules) immediately prior to the date of the proposed general meeting referred to above, allot the relevant Shares to the Grantee credited as fully paid.

14. Ranking of Shares The Shares to be allotted upon the exercise of an Option will be subject to all the provisions of the articles of association and the laws of the Cayman Islands from time to time and shall rank pari passu in all respects with the then existing fully paid Shares in issue on the allotment date or, if that date falls on a day when the register of members of our Company is closed, the first date of the re-opening of the register of members, and accordingly will entitle the holders to participate in all dividends or other distributions paid or made on or after the allotment date or, if that date falls on a day when the register of members of our Company is closed, the first day of the re-opening of the register of members, other than any dividend or other distribution previously declared or recommended or resolved to be paid or made if the record date therefore shall be before the allotment date.

A Share issued upon the exercise of an Option shall not carry rights until the registration of the Grantee (or any other person) as the holder thereof.

15. Life of Share Option Scheme Subject to the terms of this Scheme, the Share Option Scheme shall be valid and effective for a period of 10 years from the date on which it becomes unconditional, after which no further options will be granted or offered but the provisions of the Share Option Scheme shall remain in full force and effect to the extent necessary to give effect to the exercise of any subsisting Options granted prior to the expiry of the 10-years period or otherwise as may be required in accordance with the provisions of the Share Option Scheme.

VI-49 THIS WEB PROOF INFORMATION PACK IS IN DRAFT FORM. The information contained in it is incomplete and is subject to change. This Web Proof Information Pack must be read in conjunction with the section headed “Warning” on the cover of this Web Proof Information Pack.

APPENDIX VI STATUTORY AND GENERAL INFORMATION

16. Lapse of Share Option Scheme An Option shall lapse automatically and not be exercisable (to the extent not already exercised) on the earliest of: (a) the expiry of the option period; (b) the expiry of any of the period referred to paragraphs related to exercise of Option; (c) subject to the period mentioned in paragraph headed “Exercise of Option” in this section, the date of the commencement of the winding-up of our Company; (d) there is an unsatisfied judgement, order or award outstanding against the grantee or our Board has reason to believe that the grantee is unable to pay or to have no reasonable prospect of being able to pay his/its debts; or (e) a bankruptcy order has been made against any director or shareholder of the Grantee (being a corporation) in any jurisdiction.

No compensation shall be payable upon the lapse of any Option, provided that our Board shall be entitled in its discretion to pay such compensation to the grantee in such manner as it may consider appropriate in any particular case.

17. Adjustment In the event of any alteration to the capital structure of our Company while any Option remains exercisable, whether by way of capitalisation of profits or reserves, rights issue, consolidation, reclassification, reconstruction, sub-division or reduction of the share capital of our Company, the Board may, if it considers the same to be appropriate, direct that adjustments be made to: (a) the maximum number of Shares subject to the Share Option Scheme; and/or (b) the aggregate number of Shares subject to the Option so far as unexercised; and/or (c) the subscription price of each outstanding Option.

Where the Board determines that such adjustments are appropriate (other than an adjustment arising from a [Š]), the auditors appointed by our Company shall certify in writing to the Board that any such adjustments are in their opinion fair and reasonable, provided that: (a) any such adjustments shall be made on the basis that the aggregate Subscription Price payable by the Grantee on the full exercise of any Option shall remain as nearly as practicable the same as (but shall not be greater than) as it was before such event; (b) no such adjustments shall be made the effect of which would be to enable a Share to be issued at less than its nominal value; (c) any such adjustments shall be made in accordance with the provisions as stipulated under Chapter 17 of the Listing Rules and supplementary guidance on the interpretation of the Listing Rules issued by the Stock Exchange from time to time (including the supplemental guidance attached to the letter from the Stock Exchange dated 5 September 2005 to all issuers relating to Share Option Schemes); and (d) the issue of securities as consideration in a transaction shall not be regarded as a circumstance requiring any such adjustments.

VI-50 THIS WEB PROOF INFORMATION PACK IS IN DRAFT FORM. The information contained in it is incomplete and is subject to change. This Web Proof Information Pack must be read in conjunction with the section headed “Warning” on the cover of this Web Proof Information Pack.

APPENDIX VI STATUTORY AND GENERAL INFORMATION

18. Cancellation of Options not exercised The Board shall be entitled for the following causes to cancel any Option in whole or in part by giving notice in writing to the Grantee stating that such Option is thereby cancelled with effect from the date specified in such notice (the “Cancellation Date”): (a) the Grantee commits or permits or attempts to commit or permit a breach of the restriction on transferability of Option or any terms or conditions attached to the grant of the Option; (b) the Grantee makes a written request to the Board for the Option to be cancelled; or (c) if the Grantee has, in the opinion of the Board, conducted himself in any manner whatsoever to the detriment of or prejudicial to the interests of our Company or its subsidiary.

The Option shall be deemed to have been cancelled with effect from the Cancellation Date in respect of any part of the Option which has not been exercised as of the Cancellation Date. No compensation shall be payable upon any such cancellation, provided that the Board shall be entitled in its discretion to pay such compensation to the Grantee in such manner as it may consider appropriate in any particular case.

19. Termination Our Company may by resolution in general meeting at any time terminate the operation of the Share Option Scheme. Upon termination of the Share Option Scheme as aforesaid, no further Options shall be offered but the provisions of the Share Option Scheme shall remain in force and effect in all other respects. All Options granted prior to such termination and not then exercised shall continue to be valid and exercisable subject to and in accordance with the Share Option Scheme.

20. Transferability The Option shall be personal to the Grantee and shall not be assignable and no Grantee shall in any way sell, transfer, charge, mortgage, encumber or create any interest (legal or beneficial) in favour of any third party over or in relation to any Option or attempt so to do (save that the Grantee may nominate a nominee in whose name the Shares issued pursuant to the Scheme may be registered), except with the prior written consent of the Board from time to time. Any breach of the foregoing shall entitle our Company to cancel any outstanding Option or part thereof granted to such Grantee.

21. Amendment The Share Option Scheme may be altered in any respect by a resolution of the Board except that the following shall not be carried out except with the prior sanction of an ordinary resolution of the shareholders of our Company in general meeting, provided always that the amended terms of the Scheme shall comply with the applicable requirements of the Listing Rules: (i) any material alteration to its terms and conditions or any change to the terms of Options granted (except where the alterations take effect under the existing terms of the Scheme); (ii) any alteration to the provisions of the Scheme in relation to the matters set out in Rule 17.03 of the Listing Rules to the advantage of Grantee; and (iii) any alteration to the aforesaid termination provisions.

H. OTHER INFORMATION 1. Tax indemnity Our Controlling Shareholders (together, the “Taxation Covenantors”) have, under a deed of indemnity referred to in paragraph (j) of the sub-section headed “Summary of the Material Contracts” in this Appendix, given joint and several indemnities to our Company for itself and as trustee for its subsidiaries in connection with, among other things, (a) any taxation which might be payable by any member of our Group in respect of any income, profits or gains earned, accrued or received or alleged to have, or which should have been earned or

VI-51 THIS WEB PROOF INFORMATION PACK IS IN DRAFT FORM. The information contained in it is incomplete and is subject to change. This Web Proof Information Pack must be read in conjunction with the section headed “Warning” on the cover of this Web Proof Information Pack.

APPENDIX VI STATUTORY AND GENERAL INFORMATION accrued or received on or before the [Š]; (b) any taxation claim which might be payable by any member of our Group under or by reason of any transfer of any property to any member of our Group or to any other person, entity or company made or deemed to have been made on or before the [Š]; and (c) all damages, losses and liabilities arising from or in connection with any property claim and/or any other liability claim to the extent that the events leading to such damages, losses and liabilities occurred prior to the [Š] and any such damages, losses and liabilities are not paid by the insurer under any relevant insurance policy (if any).

The Taxation Covenantors will however, not be liable under the deed of indemnity for taxation claim or liability to the extent that: • provision or allowance has been made for such taxation in the audited accounts of any member of our Group for the three years ended 30 June 2008 and nine months ended 31 March 2009; • such taxation or liability would not have arisen but for any act or omission by any member of our Group voluntarily effected without the prior written consent or agreement of the Taxation Covenantors, otherwise than in the ordinary course of business before the [Š] or carried out, made or entered into pursuant to a legally binding commitment created on or before the [Š]; • such taxation or liability is discharged by another person and that no member of our Group is required to reimburse such person in respect of the discharge of the taxation or liability; • our Company is primarily liable as a result of transactions entered into or pursuant to a legally binding commitment created in the ordinary course of business any member of our Group after the [Š]; and • such claim arises or is incurred as a consequence of any retrospective changes in the law coming into effect after the [Š] or such claim arises or is increased by an increase in rates in taxation after the [Š] with retrospective effect.

2. Litigation As of the Latest Practicable Date, neither we nor any of our subsidiaries are/is engaged in any litigation, arbitration or claim of material importance, and no litigation, arbitration or claim of material importance is known to our Directors to be pending or threatened by or against us, that would have a material adverse effect on its results of operations or financial condition.

3. Properties Our Controlling Shareholders have undertaken to indemnify our Group against any damages, losses or liabilities which are or become payable or incurred by any members of our Group as a direct or indirect result of any title defects of the properties of our Group after the [Š]. For more information, please see the section headed “Business—Properties” in this document.

4. Preliminary Expenses Our estimated preliminary expenses are approximately US$3,800 (RMB26,401.3) and have been paid by us.

5. [Š]

6. No Material Adverse Change Our Directors confirm that there has been no material adverse change in our Company’s financial or trading position or prospects since 31 March 2009 (being the date to which our latest audited combined financial statements were made up).

VI-52 THIS WEB PROOF INFORMATION PACK IS IN DRAFT FORM. The information contained in it is incomplete and is subject to change. This Web Proof Information Pack must be read in conjunction with the section headed “Warning” on the cover of this Web Proof Information Pack.

APPENDIX VI STATUTORY AND GENERAL INFORMATION

7. Binding Effect This document shall have the effect, if an application is made in pursuance hereof, of rendering all persons concerned bound by all the provisions (other than the penal provisions) of sections 44A and 44B of the Companies Ordinance so far as applicable.

8. Miscellaneous (1) Save as disclosed in this document: (a) within the two years immediately preceding the date of this document, no share or loan capital of our Company or any of our subsidiaries has been issued or agreed to be issued fully or partly paid either for cash or for a consideration other than cash; (b) no share or loan capital of our Company or any of our subsidiaries is under option or is agreed conditionally or unconditionally to be put under option; (c) neither our Company nor any of our subsidiaries have issued or agreed to issue any founder shares, management shares or deferred shares; (d) within the two years immediately preceding the date of this document, no commissions, discounts, brokerage or other special terms have been granted in connection with the issue or sale of any shares or loan capital of any member of our Group; (e) within the two years preceding the date of this document, no commission has been paid or payable (except commissions to the Underwriters) for subscription, agreeing to subscribe, procuring subscription or agreeing to procure subscription of any shares in our Company; (f) [Š]; and (g) we have no outstanding convertible debt securities. (2) There has not been any interruption in the business of our Group which may have or have had a significant effect on the financial position of our Group in the twelve (12) months immediately preceding the date of this document.

9. Qualifications of experts The following are the qualifications of the experts who have given opinion or advice which are contained in this document:

Name Qualification

KPMG Certified Public Accountants Conyers Dill & Pearman Cayman Islands attorneys-at-law Tian Yuan Law Firm PRC legal advisers to our Company Jones Lang LaSalle Sallmanns Limited Property valuer

10. Consent of Experts [Š]

11. [Š]

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