BILLABONG INTERNATIONAL LIMITED ABN 17 084 923 946 2 Contents

2 Chairman’s Report 22 Retail 4 CEO’s Report 23 Governance Overview 6 Financial Overview 24 Board Of Directors 9 KEY HIGHLIGHTS 26 Group Operating Centres 10-21  Marketing 28 Corporate Directory Highlights 10 11 ELEMENT 12 TIGERLILY 13 RVCA 14 KUSTOM 15 NIXON 16 DAKINE 17 VONZIPPER 18 XCEL 19 HONOLUA 20 SECTOR 9 21 PALMERS

All results are in AUD terms unless otherwise stated. Detailed information the financial performance of Billabong International Limited and the remuneration of senior executives is available in the Full Financial Report 2010-11 located on the Company’s website www.billabongbiz.com. 1 The 2010-11 financial year, while successful from a strategic positioning and development perspective, ultimately proved quite challenging for Billabong International Limited.

The Group’s transition from a Surf Dive ‘n’ (SDS), Jetty Surf wholesale-focused business to and Rush Surf. Together, these an operation with more balanced helped lift direct-to-consumer exposure to wholesale and retail sales revenue to 38% of total coincided with a harsh external Group revenue (from 24% in the environment characterised by prior corresponding period). The extreme macroeconomic and strategy behind these acquisitions currency volatility. There was also a was to enhance the route to downturn in consumer sentiment market to provide the end flowing from events such as consumer with greater access to sovereign debt issues in the US and Europe and a run of natural the Group’s branded products disasters throughout Australasia. and counter the increasing The Group’s reweighting between margin demands from some wholesale and retail was most large action sports retailers who, apparent through the acquisition at the same time, were increasing of Canada’s largest specialty their vertical product offers and boardsport retailer, West 49, thereby reducing the available and leading Australian retailers shelf space for the Group’s . C H airman’s report

2 As a reminder, in August 2010 the retail margins. It is for this reason International Limited. Following Group nominated the 2010-11 that the profit contribution from direct shareholder consultation financial year as one of transition. acquired retail assets generally and expert external advice, a This language was designed to starts to flow from year two.T here comprehensive remuneration reflect the move deeper into retail is also a one-off timing delay in review was undertaken. This has and its immediate consequences, the recognition of sales and profit led to a number of changes, which being a significant lift in revenue due to the difference in sales are outlined in the Director’s with little or no immediate reporting between wholesale Report in Billabong International’s contribution to profit and initial and retail businesses. 2010-11 Full Financial Report, in margin dilution. This is due to the relation to the future structure While the general consumer fact that the Group has acquired of remuneration to better align environment in and businesses with relatively low executive and shareholder interests. Canada slowed some of the standalone margins and there is clearing of inventory in acquired Finally, on behalf of the Board of little immediate ability to change retail and caused a wholesale Directors I thank all shareholders the product mix due to the inventory build-up in certain for their support of Billabong need to sell through all existing parts of the business, these issues International Limited in an inventory – whether it be in are short term and the Group’s extremely challenging year of store, in the retailer’s warehouse broader strategic vision to build change and I also thank our or on order from suppliers. This a more sustainable business employees for their ongoing sell-through process generally model remains firmly on track. commitment to building the takes nine to 12 months. It is only The Group has an unrivalled suite world’s premier boardsport after this period that the Group of brands and retail assets and company. has the ability to bring new the platform is now set to deliver excitement into store by focusing growth into the future. on its preferred mix of third party brands and the introduction During the year, the Board of higher levels of the Group’s of Directors responded to brands into store. This, ultimately, shareholder concerns about delivers margin expansion given the structure of executive Ted Kunkel the inclusion of wholesale and remuneration within Billabong Chairman

3 CEO’s report

Strong revenue growth underpinned by strategic retail acquisitions and the integration of the exciting RVCA brand were key highlights for the Billabong Group in the 2010-11 financial year.

Global sales revenue of $1.68 The Group’s focus through the billion was up 23.8% in constant 2010-11 financial year extended currency terms or up 13.6% well beyond the retail acquisitions, in reported Australian dollar with other highlights including: terms compared to the prior corresponding period. The lift - the enhancement of the in revenues was apparent in the Group’s brand portfolio with the Group’s three regional segments, addition of RVCA, the winner of with constant currency growth of the Surf Industry Manufacturers 32.5% in the Americas, 11.5% in Association 2010 Men’s Apparel Europe and 19.5% in Australasia. Brand of the Year award. RVCA However, net profit after tax (NPAT) is a lifestyle brand that provides in constant currency terms was a platform of expression for the down 6.9%, primarily as a result subcultures of art, music, fashion of challenging global trading and sport. It performed very conditions and the initial impact strongly in its home market of the store in Japan had reopened. of strategic investments made by US in its first year in the Group and the Group during its transition year. its growth potential is significant - the Group has been building NPAT was down 18.4% in reported as it pushes into newer markets its online retail presence in Australian dollar terms, reflecting including Australia and Europe. recent years and, in the 2010-11 the substantial appreciation of - the opening up of new markets financial year, sales doubled to the Australian dollar throughout throughout Asia continued. now approach $50 million. The the year. The Group achieved constant Group’s premier sites were Swell. com in the US and SurfStitch.com The integration of acquired retail currency revenue growth in assets in Canada and Australia excess of 30% and strong margin in Australia, with each stocking is progressing to plan, with the growth in Asia. The profitable and product from more than 200 Group removing back office and measured expansion strategy is brands and viewed as a leader in warehouse costs by consolidating being led by the Billabong and the boardsports category in their those functions into existing Nixon brands, principally through respective countries . The Group operations where appropriate. their presence in company also continued to roll out other The space available to the owned retail stores and shop- multi-branded online initiatives Group’s own brands is starting in-shop concepts. Growth in in locations including the United to increase, exciting third party the established market of Japan Kingdom, Canada and South brands are being supported but was impacted through the year Africa and a number of brand- on better terms and stores are in the wake of the devastating specific sites in other markets. being rebranded and refreshed. earthquake and tsunami that - surfStitch.com was relocated In Australia, IT systems for the struck the region. A total of 19 from to Burleigh Heads acquired retail assets are also company owned stores were on the Gold Coast. This positions being progressively migrated to a directly impacted by the natural SurfStitch alongside the common platform. These actions disasters and were temporarily headquarters of the Group’s ultimately help the Group deliver closed. Pleasingly, no employees Australian operations, leading to higher retail margins and this were injured in the disasters. By enhanced operational efficiencies. should become evident from the the close of the financial year all 2011-12 financial year. but one company owned retail - a range of new retail concepts 4 were opened in Australia, with currency hedge rates for product banners and more than 630 bricks showcase stores for Element purchases in the second half. and mortar company owned retail established on the Gold Coast There was double-digit sales doors in markets including Canada, and in Melbourne and the first growth in markets including the US, South America, the UK, Nixon concept store unveiled at Germany and , while France, Spain, Germany, Australia, Bondi Junction in Sydney. While newer markets within Eastern , , Japan the Australian retail market was Europe experienced very strong and greater Asia. It is a strong very challenging, these stores growth. Consumer sentiment business and, with its transition year highlight the strong product and sales softened throughout now complete, one with strong offer and enhance the growth Europe in the final two months of underlying growth prospects. prospects of the two brands. the financial year on the back of While the external consumer - Volatility in the US, the Group’s concerns around sovereign debt environment remains challenging, largest sales market, eased issues throughout the region. the developments within the through the year and this led to Stepping back and looking at the business have established a the emergence of what appeared overall business, the Billabong stronger base on which future to be a soft recovery. Order Group is strategically well growth will be built. I thank all Billabong Group employees for patterns within the wholesale positioned to compete effectively, their commitment and drive as account base were generally deliver sustainable growth and, the Group seeks to deliver on its cautious, but company owned over time, improve its return on retail remained well inventoried strategic goals. capital employed. The Group and this led to improved revenue now comprises a compelling and and margin expansion and comprehensive mix of brands and demonstrated the benefit of company owned retail shopfronts. ensuring there is always fresh It has 13 brands, each among product in store. the leaders in their respective - the Group experienced a categories within the boardsports good year in Europe, despite market, a collection of fast-growing Derek O’Neill the negative impact of weaker and industry-leading online retail Chief Executive Officer 5 FINANCIAL overview

Net Profit After Tax (NPAT) for the year ended 30 June 2011 was $119.1 million, a decrease of 6.9% in constant currency terms (a decrease of 18.4% in reported terms) compared to the prior corresponding period (pcp).

Reported NPAT was significantly and Australasia increased 19.5% • the impact of a number of natural adversely impacted by the over the pcp. disasters in key territories including unfavourable effect of the Consolidated gross margins floods in , earthquakes appreciation of the AUD, in remained strong at 53.8% (54.6% in in New Zealand and the earthquake particular against the Euro and the the pcp in constant currency terms). and subsequent tsunami in Japan; USD relative to the pcp. EBITDA of $191.9 million represents • lower gross margins in Europe, Group sales revenue of $1,683.3 a decrease of 16.2% in constant which were adversely impacted million, excluding third party currency terms (a decrease of 24.3% by considerably lower product royalties, represents a 23.8% in reported terms) compared to purchase hedge rates in the second increase on the pcp in constant the pcp. The consolidated EBITDA half for the summer 2011 season currency terms (up 13.6% in margin of 11.4% decreased by 5.7% compared to the pcp; reported terms). At a segment level, compared to that of the pcp of 17.1%, • as anticipated, the initial combined in constant currency terms, sales principally reflecting: dilutive impact on margins of the revenue in the Americas increased • the impact of a very weak retail recent acquisitions of retailers West 32.5%, Europe increased 11.5% environment in Australia; 49 in Canada and Surf Dive ‘n’ Ski 6 (SDS)/Jetty Surf and Rush Surf, $12.3 million; and falling in August 2010 (with no both in Australia – these margins • an increase in global overhead comparable expenditure in the are expected to increase as the costs (which include corporate pcp) and foreign exchange losses. Group’s strategy to lift Billabong overhead, international advertising family brand share is realised over Segment Analysis and promotion costs, central In addition to the specific factors time (excluding these acquisitions, sourcing costs and foreign EBITDA margins would have been discussed by segment below, exchange movements) of $19.1 13.1%, down from 17.1% in the EBITDA margins have been affected million to $64.8 million compared pcp); by the allocation of increased global to $45.7 million in the pcp. This overhead costs (which include • the unfavourable regional mix increase is primarily attributable to corporate overhead, international impact of the appreciation of the costs associated with the roll-over advertising and promotion AUD against the USD and the Euro and extension of the Syndicated costs, central sourcing costs and relative to the pcp; Debt Facility, timing of advertising foreign exchange movements) as • one-off acquisition related costs and promotion expenditure due discussed above and the allocation (M&A) and restructuring costs of to the Teahupoo Tahiti WCT event of these costs to each segment. 7 FINANCIAL overview cont.

Australasia soft summer and hi-summer Group continued to see solid Compared to the pcp in reported indent, combined with cool, wet improvement in the important terms, sales revenue increased 17.9% summer weather along Australia’s US market, in particular within to $501.9 million (up from $425.7 east coast, including major rainfall, company owned retail operations. million) and EBITDA decreased floods and cyclones in Queensland 38.1% to $55.2 million (down from in particular, led to weak sales Europe $89.2 million). EBITDA margins at company owned retail and Compared to the pcp in reported were lower at 11.0% compared lower repeat business within the terms, sales revenue decreased 1.9% with 20.9% in the pcp, principally wholesale account base. to $337.6 million (down from $344.0 million) and EBITDA decreased reflecting the combined impact of Sales revenue lifted strongly 22.3% to $54.2 million (down from a very weak retail environment in compared to the pcp in constant Australia, natural disasters including currency terms in Asia. $69.8 million). EBITDA margins earthquakes in New Zealand and of 16.1% were down compared the earthquake and subsequent Americas to the pcp of 20.3%, principally tsunami in Japan, one-off M&A and Compared to the pcp in reported reflecting weaker product purchase restructuring costs ($7.4 million), the terms, sales revenue increased hedge rates for the summer 2011 anticipated initial dilutive impact of 18.4% to $843.7 million (up from season compared to the pcp, the recent acquisitions of retailers $712.6 million) principally as a higher product input costs and the SDS/Jetty Surf and Rush Surf in result of the acquisition of West 49 abovementioned impact of the Australia (margins are expected to in Canada and EBITDA decreased allocation of global overhead costs. increase as the Group’s strategy to 13.1% to $80.2 million (down from Excluding the allocation of global lift Billabong family brand share is $92.3 million). EBITDA margins were overhead costs, EBITDA margins realised over time) and the above lower at 9.5% compared with 13.0% were 19.9% compared with 23.4% in mentioned impact of the allocation in the pcp, principally reflecting the pcp. of global overhead costs. Excluding the anticipated initial dilutive the allocation of global overhead impact of the recent acquisition Compared to the pcp in constant costs, EBITDA margins were 14.9% of West 49 (margins are expected currency terms, sales revenue compared with 24.0% in the pcp. to increase as the Group’s strategy increased 11.5% and EBITDA decreased 10.3%. Compared to the pcp in constant to lift Billabong family brand share currency terms, sales revenue is realised over time), one-off M&A Europe’s sales revenue growth in increased 19.5% and EBITDA and restructuring costs ($4.6 million) constant currency terms compared decreased 37.2%. and the above mentioned impact to the pcp was driven principally Sales revenues in the Australasian of the allocation of global overhead by the Element, Nixon and DaKine segment increased over the pcp costs. Excluding the allocation of brands in Germany, France and principally as a result of the addition global overhead costs, EBITDA central European countries and of new company owned retail, margins were 13.4% compared improved performance in company including the acquisitions of SDS/ with 16.0% in the pcp. owned retail, offset by continued Jetty Surf and Rush Surf in Australia. Compared to the pcp in softness in some key southern However, the performance of the constant currency terms, sales territories, including Spain which underlying Australian business revenue increased 32.5% and is traditionally a strong area for the weighed on the region. A very EBITDA increased 2.0%. The Billabong brand. 8 NPAT $119.1 MILLION

SALES REVENUE $1.68 BILLION

EBITDA $191.9 MILLION

EPS 47.4 cents per share

ORDINARY PARTIALLY FRANKED DIVIDEND

K EY HIGHLIGHTS 29 cents per share (full year)

BILLABONG INTERNATIONAL LIMITED - YEAR ENDED 30 JUNE (AS REPORTED, AUD)

FY 2010-11 FY 2009-10 FY 2008-9 FY 2007-8 FY 2006-7 FY 2005-6

Income Statement ($million)

Third Party Sales 1,683.3 1,482.3 1,669.1 1,347.6 1,222.9 1,018.2

EBITDA 191.9 253.3 284.8 292.0 259.1 235.2

Depreciation (40.2) (35.0) (37.6) (27.1) (21.4) (14.4)

Amortisation (1.8) (0.6) (0.5) (0.1) (0.4) (1.3)

Impairment (0.0) (0.0) (9.5) (0.0) (0.0) (0.0)

EBIT 149.9 217.7 237.2 264.8 237.3 219.5

Net Interest Expense (23.0) (14.7) (31.2) (19.2) (15.5) (6.6)

Profit Before 126.9 203.0 206.0 245.6 221.8 212.9 Income Tax

Income Tax Expense (8.9) (57.8) (53.2) (69.3) (54.2) (67.2)

Profit for the Year 118.0 145.2 152.8 176.3 167.6 145.7

Non-controlling 1.1 0.8 0.0 0.1 (0.4) 0.2 Interest** Profit Attributable to Members 119.1 146.0 152.8 176.4 167.2 145.9 of Billabong International Limited Basic Earnings 47.4 58.3 cents 69.2 cents 85.7 cents* 81.2 cents* 70.8 cents* per Share

Dividend per Share 29.0 cents 36.0 cents 45.0 cents 55.5 cents 50.5 cents 44.0 cents

* EPS has not been adjusted to reflect the increased issued capital following an equity issue in the 2008-09 financial year. ** Previously called ‘Minority Interest’. 9 of an inflatable designed in collaboration with team rider Shane Dorian specifically for the needs of the big wave community, the development of a new line of ‘stitch-less’ and the successful launch of a product collaboration with the family of the late musician Bob Marley. In the digital space, Billabong pages now have more than two million combined friends, an online clip of a Billabong Girls summer photo shoot had more than one million views and a surf game developed for iPhone and iPad users was nominated for Best Sport Game in the annual International Mobile Gaming Awards. Billabong continued to build out its television offering on the Sony Billabong is an authentic IPTV network, with the channel boardsport brand and one of the launching into approximately surfing world’s heritage marques. 80 countries and accessed free- The brand’s identity is represented of-charge through internet- through its marketing, which connected Sony televisions and is focused on its culturally- media consoles. In community relevant association with initiatives, Billabong staged its boardsport athletes and events. most successful edition of the In 2010-11, marketing highlights Design For Humanity charity event included Australian team surfers in Los Angeles, lifted to more than Jack Freestone winning the 35 million the number of recycled World Junior Championships, plastic bottles used in its range of Mitch Parkinson winning the made from recycled Gromsearch International title and materials and continued the winning the 50th international rollout of its SurfAid edition of the Pro Bells International Schools Program Beach in his quest for the 2011 global citizenship initiative. world title. Parkinson also won his Billabong also mourned the loss of third consecutive Triple Crown surfing great , a three- of Surfing in . In the 2011 time world who passed Billabong XXL Big Wave Awards away on 2 November 2010. Andy Frenchman Benjamin Sanchis will be forever remembered. won the Biggest Wave award, Hawaiian Shane Dorian won the www.billabong.com Monster Paddle and Monster Tube awards and Hawaiian Keala Kennelly won the Girls Best Performance award, while in Innsbruck the Billabong Air&Style event was staged in front of a sellout crowd of 11,000. Innovative product development through the year included the unveiling 10 Element is a socially conscious brilliant photography from lifestyle brand with a heritage world-renowned Element staff in . Through the photographer, Brian Gaberman. 2010-11 financial year the brand Element also grew its accessories continued to build its presence category, which included the in locations outside of its main release of a limited collection market of the US and grew sales of the tried and true “Mohave” strongly in Europe. The brand backpack series. Element skate started the year by signing one shoes launched a new marketing of skateboarding’s biggest stars, campaign, ‘Changing Lives Mark Appleyard, a winner of through Skateboarding’ to benefit Thrasher Magazine’s ‘Skater of and expand Elemental Awareness, the Year’ award and Transworld the brand’s non-profit foundation. Skateboarding’s ‘Best Street Skater’ Element Advocates, including award. Element then signed double-amputee Amy Purdy, 16-year-old skateboarder Nyjah continue to inspire audiences with Huston, whose unprecedented compelling stories and artistic winning streak makes him one talents. Element’s innovative and of the most accomplished extensive product range was skateboarders of all time. Iconic rewarded with the opening of a team member Bam Margera flagship retail store on Australia’s starred in the ‘Jackass 3-D’ film, which broke box office records. Gold Coast, with the store To coincide Element launched a embodying the , feel and soul matching product line that was of the brand. Element continued a huge success. Element’s ‘MAKE to work closely with licensed IT COUNT’ 2011 International brand Plan B, which introduced Series surpassed an apparel line endorsed by expectations. Receiving more than Ryan Sheckler, who is revered as 16 million media impressions, the the most popular skateboarder contest series achieved its goals in the world. Fellow team rider of supporting underprivileged Paul Rodriguez was the first youth and growing brand loyalty. skateboarder to release a video Product initiatives through the part on iTunes - ‘Me, Myself and I’. year included the expansion of The part became the number one the Element Emerald Collection, segment downloaded on iTunes. a line of eco-friendlier casual footwear. The fashion forward www.elementskateboards.com line of premium t-shirts was released, and backed by www.elementeden.com 11 Tigerlily utilises unique fabrics that traditionally available in surf and a blend of fashion and retail. A key initiative through classic themes to develop the year was the launch of a a line of premium women’s signature capsule collection, swimwear and apparel. The brand Jodhi Meares for TL, in boutiques continued to grow its presence in and swim retailers nationally. Australia in the 2010-11 financial The collection was launched in year. Central to its growth Sydney’s Watsons Bay, with the was the opening of Tigerlily event attracting national media boutiques, including a flagship store in Westfield Sydney City, a coverage and key players in the further three stores in Sydney – Australian fashion scene. Tigerlily Bondi Junction, Chatswood and completed the planning on a Warringah Mall – and one within number of brand extensions, the premium Australian brand which include a new line of section of Claremont Quarter in footwear for delivery in store in . Tigerlily also Australia from late in calendar opened its first international store 2011. The brand also extended at Newmarket in Auckland, New its line of swimwear separates Zealand. The stores give Tigerlily to focus on the growing swim the ability to create a complete market in Australia. brand experience and one that differentiates its product from www.tigerlilyswimwear.com.au

12 RVCA is a design-driven lifestyle under the ongoing direction of its athletes, including skateboarder brand that brings together like- inspirational founder, Pat Tenore. Leo Romero who won Thrasher minded individuals from a cross RVCA maintained its focus on its Magazine’s 2010 Skater of the Year section of subcultures to deliver Artist Network Program (ANP) – a title. RVCA is also involved in the a platform of expression for art, venture established to showcase sport of mixed martial arts (MMA), music, fashion and sport. It is the talents of both accomplished principally through its support of widely regarded as the most and unknown artists who push the iconic MMA warriors BJ Penn and exciting emerging brand within boundaries of creative excellence. Vitor Belfort. Aligned to its athlete the action sports sector and its This saw RVCA, along with brand support program is RVCA’s VA- performance was recognised by advocates, stage a series of Sport program which comprises a the Surf Industry Manufacturer’s events including a workshop performance based apparel range Association, which awarded RVCA with Parisian boutique Colette in the 2010 Men’s Apparel Brand partnership with New York based designed for athletes to help of the Year title. The brand was artists, the Luck You Collective. The in the maintenance of comfort acquired by the Billabong Group brand also supported major art and style through rigorous cross at the start of the 2010-11 financial events, including the Los Angeles training. The range crosses over year and has since experienced Museum of Contemporary Art’s all key RVCA’s sports, including tremendous sales growth and a ‘Art in the Streets’, the first major MMA, surfing, skateboarding and successful integration into the US museum exhibition of the general fitness. Group. The brand is now poised for history of graffiti and street art. significant international expansion RVCA continues to support key www..com

13 Kustom is a footwear brand amount of production waste. focusing on the casual beach Based on the results of a partial and surf lifestyle market. Through life cycle assessment of the range, the 2010-11 financial year, the Kustom purchased carbon offsets brand achieved growth in its to minimise the environmental home market of Australia. Product cost of the shoes. Kustom then development remained a key focus developed simple messaging for the brand, with a particular about the environmental benefits emphasis on the identification of the shoe and, combined with of more environmentally standout design, this led to a sustainable materials and strong consumer response and production methods. This led saw the shoe become the leading to the development of the seller in the Kustom range. In other Shoe With No Footprint line of marketing, the brand continued footwear. The range includes to host its annual Kustom Airstike shoes made from hemp or surfing competition, which traditional cotton canvas, while was won by Hawaiian Flynn Novak with a progressive new move. the glues used to bind materials Kustom also maintained a strong are non-toxic. The laces for the connection with surfing through shoes are made from recycled sponsorship of a range of athletes, plastic bottles, the in-sole boards including Australians Chris are constructed from a range of ‘Chippa’ Wilson, Joel Parkinson recycled materials and the soles and Josh Kerr. are made using a manufacturing technique that reduces the www.kustomfootwear.com

14 Nixon is a premium watch and of a collaboration watch with accessories brand and is the clear The Beastie Boys with the category leader in the global proceeds donated to charity. boardsports channel. The brand Nixon maintained its support performed strongly in the 2010- sponsorship of a range of world 11 financial year, with double- tour surfing events and was the digit sales growth and margin official timekeeper of the Vans expansion. Innovative product in Hawaii development, including the and the summer and winter X launch of its RPM headphones Games. The brand also brought with their studio-quality sound, back its premier remained the cornerstone of event, The Nixon JibFest, voted the brand’s success and it was Torey Pudwill on to its skate well supported by considered team and marketing initiatives to clearly and Nathan Fletcher on to its differentiate it within the surf team. Demand for Nixon and boardsports sector. This led to its diverse product range led to the brand being recognised in the opening of concept stores at the Surf Industry Manufacturer’s Berkeley in California and Bondi Association Image Awards for the Junction in Sydney. The creative best men’s advertising campaign work environment within Nixon for 2010. Nixon teamed with also saw the brand recognised in a range of leading music acts, the US-based Outside Magazine’s including the creation of specialty fourth annual Best Place To Work products in limited quantities list. for The White Stripes and and the development www.nixonnow.com

15 DaKine is a leader in the design and development of technical bags and accessories for the surf, skate, , ski, , windsurf and kite disciplines. The brand grew its sales in the 2010-11 financial year, supported by sponsorship of events and athletes and strategic media placement. In snow, DaKine sponsored team skier Tanner Hall’s film Retallack: The Movie, snowboarder Eric Jackson returned from injury for a stand out part in the film Good Luck, Annie Boulanger filmed a major part in an Absinthe Films project online content. In , and rider Sammy Carlson won an DaKine riders Philip Koster, Dario X-Games gold medal in the Ski Ojeda, Kevin Pritchard and Ingrid Slopestyle. In surf, Hawaiian team Larouche each recorded strong rider Matt Meola won producer results to be among the leaders Taylor Steele’s Innersection film in their respective competitive project, DaKine accessories were series. In kite, DaKine kiteboarder placed in the feature film Soul Rob Douglas broke the world Surfer, John Florence, Damien speed sailing record and DaKine Hobgood and sponsored the KB4Girls clinics each had significant competition presented by nine-time world victories and Ian Walsh continued champion kiteboarder Kristin to push the boundaries of big Boese. Among key product wave surfing with headline launches, DaKine introduced performances in Hawaii and Fiji. the Re-Gen Collection of bags In bike, DaKine rider Matt Hunter built with 100% recycled PET secured multiple magazine fabrics made from discarded covers, Geoff Gulevich was plastic bottles, the AC Series of featured in Anthill Productions’ products featuring a progressive Follow Me film andD arcy Turenne artistic collaboration between launched her film, The Eighth in-house designers and talented Parallel, and hosted rider camps international artists, and the Girls in Canada and Sweden. In skate, high-end Premier Collection Transworld Skateboarding’s Street Skater of the Year Torey Pudwill featuring a handcrafted mix was signed to the athlete roster, of premium materials, quality Theotis Beasley turned pro and construction, and custom secured multiple video parts embellishments. and DaKine sponsored several events and produced innovative www.dakine.com 16 VonZipper is a fashion forward imagery and marketing, based on the 2011 world tour, big wave brand centred around the around its sponsored athletes, surfer Greg Long winning SIMA’s alternative mindset, with a product characters and events, continued Waterman of the Year title, exciting focus on the eyewear, accessory to differentiate the brand, with junior prospects Ian Gentil and and premium apparel market. a strong focus on motion media Jack Freestone joining the team The brand performed strongly and social networking. For the and surfer/musician Donavon in the 2010-11 financial year, second year in a row, sponsored Frankenreiter touring the globe in with good growth in US sales snowboarder John Jackson won support of a new album. VonZipper and market presence across all both TransWorld Snowboarding maintained its sponsorship of business categories. In the eyewear and Snowboarder Magazine’s the qualifying trials at world tour division, VonZipper released prestigious Rider’s Poll Award for surfing events in South Africa and its innovative melanin-infused Men’s Rider of the Year and Men’s Tahiti and became the eyewear MelOptics Lens technology which Video Part of the Year. Fellow sponsor of the Billabong Pipeline provides superior eye protection VonZipper snowboarder Dan Brisse Masters. Within the community, and visual acuity. Adding style to won a gold medal in the X-Games VonZipper provided support to substance, VonZipper released Real Snow competition and moto the and 11 new sunglass styles and 10 X rider Taka Higashino medalled Boarding For Breast Cancer, new styles to its optical collection. at the X-Games. VonZipper’s Surf donated eyewear through its VonZipper also licensed the team had great success in 2011, Charity for Clarity initiative and Modern Amusement eyewear with Joel Parkinson returning from maintained representation within collection and launched a new injury to win the Vans Triple Crown the Surf Industry’s Manufacturers price-point, fast-fashion sunglass of Surfing in Hawaii, Association. brand called Dot Dash. VonZipper’s finishing fourth on the world lifestyle and personality-focused tour, Josh Kerr earning a place www.vonzipper.com 17 Building upon solid sales trends out of six years competing on through the 2010-11 financial the World Tour. Team rider Greg year, Xcel continued to grow Long was chosen by SIMA as both its core specialty wetsuit their 2011 Waterman of the Year business and its sun protective for his contributions to the sport product line among non-coastal of surfing and commitment to outdoor markets. Its surf, dive, community and environmental and military and company causes. Hawaiian and US mainland owned retail market segments team riders continued to post each posted solid sales increases. excellent results in regional and Xcel was voted the Surf Industry national competitions, as Xcel Manufacturer’s Association (SIMA) expanded its athlete roster in Wetsuit of the Year, the third time tandem with growth into stand- in four years that the brand has up paddle and related outdoor received the prestigious award as markets. Paddle team rider voted on by retailers and industry Kanesa Duncan-Seraphin won peers. Marketing efforts remained the elite Molokai2Oahu World focused on athletes and events. At Paddleboard Championship title, Jeffreys Bay, South Africa, the Xcel her eighth win in 10 attempts Pro Showdown at Supertubes at the famed 32-mile crossing continued its growth as a world- in which she holds the current class specialty competition, world record. Operationally, highlighting regional talent and Xcel maintained its sustainable offering the winner a coveted initiatives, from choosing cleaner wildcard entry into the 2011 manufacturing processes and Billabong Pro J-Bay Association of improving environmentally- Surfing Professionals (ASP) World friendlier product to recycling Tour event. Team rider Bede factory and administrative output Durbidge finished yet another at its solar-powered , consistent year on the ASP World Hawaii, headquarters. The Xcel Skin Cancer Fund continued to Tour, finishing sixth in the 2010 promote skin cancer awareness, World Title race. Durbidge has with sales of UV Performance Gear now finished in the top 10 in four raising over $39,000 to date for the fund. Projects underwritten by the fund and launched within the past year included local youth-oriented educational and awareness initiatives. Xcel’s summer awareness campaign, developed in partnership with the University of Hawaii Cancer Center, was also recognised as part of the Hawaii State Cancer Plan 2010-2015, an action plan to reduce the burden of cancer in Hawaii by focusing on cancer control and prevention efforts statewide. www.xcelwetsuits.com

18 Honolua is a brand rooted in Hawaii and one that celebrates the waterman culture, which is undergoing a global renaissance through rising participation rates in stand-up and a growing appreciation for the heritage of surfing. In the 2010-11 financial year, Honolua retained its place as one of the defining brands of the waterman category. Honolua was a beneficiary of the continued emergence of the waterman market, particularly the growing industry acceptance within the men’s demographic. The brand continued to support grassroots paddle events across its key market of the US. The events included the prestigious Downwinder series, consisting of four regional events drawing some of the best paddlers in the US. Honolua also maintained its support of the Santa Monica Pier Paddle Race and Ocean Festival, which doubled as part of the World Paddle Association’s championship qualifying series and featured some of the top paddlers in the country. Participation in the event doubled on the prior year and generated strong media interest. Honolua’s team of sponsored athletes was enhanced with the signing of Hawaiian Aaron Napoleon, one of the world’s most respected watermen. www.honoluasurf.com 19 Sector 9 is the original a focus for the brand, with new for the surf, skate gloves and pucks developed and snowboarding lifestyles. In for downhill skateboarding, the 2010-11 financial year the removable slide pucks built into brand achieved strong double apparel, lightweight performance digit sales growth, with particular developed using strength in the US, Australia and snowboard-style construction Canada, on improved margins. and a new moulded carbon fibre The brand began direct European high-end racing board released. distribution from 1 January 2011 Sector 9’s Gullwing Trucks with and achieved good initial success. their patented Kush technology Sector 9 also grew the licensed continued to evolve, while the Arbor Skateboards division by brand lifted its commitment more than 60%, giving the brand to safety through the release good momentum into 2012. A of certified race helmets in number of product collaborations conjunction with helmet specialist were released through the year, Predator. Sector 9 also retained its including a line of four Bob Marley commitment to sponsored riders branded bamboo skateboards and re-signed surf team athletes which have sold strongly at retail. Joel Tudor, Gavin Beschen, Dave Sector 9 also released a range Rastavich, Jen Smith and Holly of Sea Shepherd Conservation Beck and downhill skate riders Society skateboards, with including Louis Pilloni, Jeff Budro, royalties from sales supporting Scott “scoot” Smith and Australian the ocean protection group. Jackson Shapiera. The brand’s Other collaborations included the strong overall performance was Movember charity event to support also acknowledged through the men’s health and the legendary year by International Association of artists Roy Gonzales and Pat Colon Skateboard Companies. to support the art community. Product development remained www.sector9.com 20 Palmers is a well-established developer and manufacturer of surf wax, surf hardware and apparel, with a particular focus on the Australian market. In the 2010-11 financial year Palmers maintained its market position. Within core surf accounts, the brand’s hero category of accessories – which includes wax, deck grips, legropes and board covers - performed well, as did its limited apparel range of t-, boardshorts and walkshorts. Among key brand initiatives, Palmers developed a new formula for its Mighty Mounds range of wax and evolved its apparel range into the workwear market. The workwear apparel, which includes tops and bottoms, saw the brand extend beyond its traditional surf retail account base and into some workwear-focused specialty stores. Within marketing, Palmers was well represented by athletes. These include surfer Josh Kerr, who requalified for the 2011 Association of SurfingP rofessionals World Tour and released his signature Kerrazy Kronicles. www.palmerssurf.com.au

21 RETAIL

The Billabong Group took greater ownership of its route to market in the 2010-11 financial year, with company owned retail store numbers lifting to 639 from 380 in the prior year. A total of 324 new stores were either acquired or opened through the period, while a total of 65 stores were closed. The greatest contributor to the lift in store numbers was the acquisition of the listed West 49 retail business in Canada. The purchase of the 138-door chain was announced on 30 June 2010 and completed on 31 August 2010. Subsequent to the acquisition, the Off The Wall chain, a loss-making banner within the West 49 group, was closed to improve overall profitability of the business.T here were also several retail acquisitions in the Australian market in the first half of the financial year, including the 36-door Queensland-based Rush Surf banners and the combined 38-door Surf Dive ‘n’ Ski business in New South Wales and Jetty Surf in Victoria. A comprehensive performance improvement plan was kicked off post-acquisition to maximise synergies and operational efficiency from the acquired businesses, with key initiatives including: migration of all New Zealand and Australian retail stores within the Billabong Group on to a single software platform (acquired with the Surf Dive 'n' Ski business); rationalisation of warehouses from four to one; and upgrading of the retail support team and processes (particularly planning and buying). Billabong retained the acquired retail banners as multi-branded stores, meaning they sell a mix of Billabong Group brands and competing boardsport brands. A similar philosophy is also adopted in the Group’s primary online businesses, the Australia-based SurfStitch. com and the US-based Swell.com. Both online businesses experienced significant sales growth in the 2010-11 financial year and werethe industry leaders in the boardsports category in their respective territories. The Group also operates online businesses in markets including Canada, South Africa and the United Kingdom and plans are under way to leverage the intellectual property within the existing online operations to develop further sites in markets including Europe. 22 The Board of Directors is responsible to shareholders for the performance of the Group and believes that high standards of corporate governance underpin the Company’s objective of maximising returns to shareholders. The Board is committed to the highest level of governance and endeavours to foster a culture that rewards ethical standards and corporate integrity. To this end, the Group considers it complies with the practices set out in the ASX Corporate Governance Principles and Recommendations guidelines. Underpinning the guidelines are eight key principles, being: • Lay solid foundations for management and oversight • Structure the Board to add value • Promote ethical and responsible decision making • Safeguard integrity in financial reporting • Make timely and balanced disclosure • Respect the rights of shareholders • Recognise and manage risk • Remunerate fairly and responsibly Greater detail on compliance with each of the principles is available in the Company’s 2010-11 Full Financial Report and on the website

governan c e overview www.billabongbiz.com.

23 Ted Kunkel (Non-Executive Chairman) Ted Kunkel was previously the President and Chief Executive Officer of Foster’s Group Limited and associated companies. He has extensive international business experience.

Derek O'Neill (CEO) Derek O'Neill was appointed as Chief Executive Officer effective 1 January, 2003. He has previously held senior management positions with Billabong, including General Manager of Billabong’s European operations from 1992-2003. In 2002, Derek was awarded a Chevalier d'Ordre de Merite Nationale for services to business in France.

Tony Froggatt (Non-Executive Director) Tony Froggatt was the CEO of Scottish and Newcastle PLC brewing company based in Edinburgh, UK until he retired on 31 October 2007 to return to Australia. He has extensive marketing and distribution knowledge in Australia, Western and Central Europe and Asia particularly in the international food and beverages sectors. He is a current non-

B OARD OF DIRE C TORS executive director of Brambles Limited and Coca-Cola Amatil Limited. He is also a former director of AXA Asia PacificH oldings Limited and National Mutual Life Association of Australasia Limited.

Margaret Jackson AC (Non-Executive Director) Margaret Jackson was a Partner of KPMG Peat Marwick’s Management Consulting Division and National Chairman of the KPMG Micro Economic Reform Group until 30 June 1992, when she resigned to pursue a full-time career as a company Director. Ms Jackson was previously a director of Australia and New Zealand Banking Group Limited, The Broken Hill Proprietary Company Limited, John Fairfax Holdings Limited, Southcorp Limited and Pacific Dunlop Limited and chairman of Qantas Airways Limited. Margaret is also President of Australian Volunteers International and the Advisory Board chairman for the Salvation Army Southern Territory. She is also currently a director and chairman of FlexiGroup Limited. Margaret was awarded a Companion of the Order of Australia in the General Division (AC) in June 2003 for service to business in diverse and leading Australian corporations and to the community in the area of support for medical research, the arts and education. 24 Allan McDonald (Non-Executive Director) Allan McDonald has extensive experience in the investment and commercial banking fields and is presently associated with a number of companies as a consultant and company director. Mr McDonald is a director of Astro Japan Property Group Limited and Astro Japan Property Management Limited (the responsible entity for the Astro Japan Property Trust), which are associated with listed stapled securities of the Astro Japan Property Group. He is also a director and chairman of Brookfield Funds Management Limited, the responsible entity of the Multiplex SITES Trust, and Brookfield CapitalM anagement Limited, the responsible entity of BrookfieldA ustralian Opportunities Fund, Multiplex European Property Fund and BrookfieldP rime Property Fund. He is also a former director and chairman of Ross Human Directions Limited.

Gordon Merchant AM (Non-Executive Director) Gordon Merchant founded Billabong’s business in 1973 and has been a major stakeholder in the business since its inception. Mr Merchant has extensive experience in promotion, advertising, sponsorship and design within the surfwear apparel industry. Mr Merchant was awarded a Member of the Order of Australia in the 2010 Australia Day Honours List for service to business, particularly the manufacturing sector, and for his support of medical, youth and marine conservation organisations and surf lifesaving. He is also a director of Plantic Technologies Limited.

Paul Naude (Executive Director) Paul Naude was appointed President of Billabong's American operations in September 1998 and established Billabong USA as a wholly owned activity in North America. He has been involved in the surfing industry since 1973 with extensive experience in apparel brand management.

Colette Paull (Non-Executive Director) Colette Paull was one of the earliest employees of the Billabong business in 1973. Since that time, Ms Paull has been broadly involved in the development of Billabong’s business from its initial growth within Australia to its expansion as a global brand. Ms Paull previously held the position of Company Secretary until 1 October 1999. She is also a director of Plantic Technologies Limited. 25 GROUP OPERATING CENTRES

AUSTRALIA HONG KONG PERU GSM (OPERATIONS) PTY LTD GSM (CENTRAL SOURCING) PTY LTD SANMAREE PTY LTD ACN 085 950 803 27th Floor Langham Place Office Tower (Sucursal del Perú) Office & Queensland Office 8 Argyle Street Av. Benavides 1744 1 Billabong Place Mongkok Kowloon, HONG KONG Miraflores PO Box 283 PH: +85 2 2439 6676 Lima 18, PERU Burleigh Heads QLD 4220, AUSTRALIA FAX: +85 2 2439 6007 PH: + 51 1 243 3157 PH: +61 7 5589 9899 FAX: + 51 1 243 3159 FAX: +61 7 5589 9800 PT BILLABONG INDONESIA SINGAPORE Incorporated in Indonesia GSM TRADING (SINGAPORE) PTY LTD GSM BRASIL LTDA Istana Kuta Galleria 8 Jalan Kilang Timor #03-05 Incorporated in Brazil Block Techno 12A-B Kewalram House, SINGAPORE 159305 Rua Natividade 139 Jalan Patih Jelantik PH: +65 6270 9181 Sao Paulo SP CEP 04513-020, BRAZIL Kuta Bali 80361, INDONESIA FAX: +65 6270 0127 PH: + 55 11 3618 8600 PH: + 62 361 769157 FAX: + 55 11 3618 8636 FAX: + 62 361 769158 SOUTH AFRICA GSM TRADING (SOUTH AFRICA) CANADA JAPAN PTY LTD GSM (CANADA) PTY LTD GSM (JAPAN) LIMITED 2A Da Gama Road 5825 Kieren Street Incorporated in Japan Jeffreys Bay Eastern Cape, 6330 Ville St Laurent 4-3-2 Ohtsu-Grand Building 6F SOUTH AFRICA Quebec H4S 0A3, CANADA Bakuro-Machi Chuo-Ku PH: +27 42 200 2600 PH: +1 514 336 6382 Osaka 541-0059, JAPAN FAX: +27 42 293 2478 FAX: +1 514 336 1753 PH: +81 6 4963 6170 FAX: +81 6 4963 6171 THAILAND CHILE GSM OPERATIONS (THAILAND) LTD GSM CHILE LIMITADA KOREA Incorporated in Thailand Incorporated in Chile GSM (KOREA) PTY LTD Room No. 2501/5 25th Floor San Ignacio 500 modulo 11 Myeong Lim B/D , 51-8 159 Serm Mit Tower Building Quilicura Santiago 872-0019, CHILE Gangnamgu, Nonhyeondong Sukhumvit 21 Road North-Klongtoey PH: + 56 2 218 7041 Seoul, REPUBLIC OF KOREA Wattana Bangkok, THAILAND FAX: + 56 2 219 3753 PH: +82 2 512 0934 PH: +66 26652862 FAX: +82 2 512 0935 FAX: +66 26652864 FRANCE GSM (EUROPE) PTY LTD NEW ZEALAND USA 100 Avenue Des Sabotiers GSM (NZ OPERATIONS) LIMITED BURLEIGH POINT LTD ZA De Pedebert 40150 Incorporated in New Zealand Incorporated in California Soorts-Hossegor, FRANCE 44 Arrenway Drive Albany 117 Waterworks Way PH: +33 55843 4205 Auckland 0632, NEW ZEALAND Irvine CA 92618, USA FAX: +33 55843 4089 PH: +64 9 475 0888 PH: +1 949 753 7222 FAX: +64 9 414 5039 FAX: +1 949 753 7223

26 27 DIRECTORS Ted Kunkel Non-Executive Chairman Derek O’Neill Chief Executive Officer Tony Froggatt Non-Executive Director Margaret Jackson AC Non-Executive Director Allan McDonald Non-Executive Director Gordon Merchant AM Non-Executive Director Paul Naude Executive Director Colette Paull Non-Executive Director

COMPANY SECRETARY Maria Manning B.Bus (Acc), CPA and FCIS

SENIOR MANAGEMENT Chief Executive Officer: Derek O’Neill Chief Financial Officer: Craig White General Manager, Billabong Australasia: Shannan North General Manager, Billabong Europe: Franco Fogliato General Manager, Billabong North America: Paul Naude

ANDY IRONS 1978 - 2010

28 PRINCIPAL AND SOLICITORS REGISTERED OFFICE Allens Arthur Robinson: 1 Billabong Place, Burleigh Heads Level 28, Deutsche Bank Place, QLD 4220 Corner of Hunter & Phillip Streets Sydney NSW 2000 Telephone: +61 7 5589 9899 Clayton Utz: Facsimile: +61 7 5589 9800 71 Eagle Street Brisbane QLD 4000 POSTAL ADDRESS Freehills: PO Box 283, 101 Collins Street Melbourne VIC 3000 Burleigh Heads QLD 4220 Minter Ellison: 159 Varsity Parade Varsity Lakes QLD 4227 INTERNET Corporate: www.billabongbiz.com BANKERS Marketing: www.billabong.com Australia and New Zealand Banking Group Limited: 324 Queen Street Brisbane QLD 4000 SHARE REGISTRY Computershare Investor Services Bank of America Merrill Lynch: Pty Limited Level 38, Governor Phillip Tower 1 Farrer Place Sydney NSW 2000 GPO Box 2975 Melbourne VIC 3001 Commonwealth Bank of Australia: Telephone Australia: 240 Queen Street Brisbane QLD 4000 1300 850 505 HSBC Bank Australia Limited: Telephone International: 300 Queen Street Brisbane QLD 4000 +61 3 9415 4000 National Australia Bank Limited: Facsimile: 100 Creek Street Brisbane QLD 4000 +61 3 9473 2500 Email: Société Générale: [email protected] RESO/CLT/ENT, TOUR GRANITE 17 Cours VALMY, 75886 PARIS Cedex 18 FRANCE AUDITORS Westpac Banking Corporation: PricewaterhouseCoopers 260 Queen Street Brisbane QLD 4000 Riverside Centre, 123 Eagle St Brisbane QLD 4000 STOCK EXCHANGE LISTING Billabong International Limited shares are listed on the Australian Securities Exchange (ASX). The home branch is Brisbane. Ticker: BBG.

ANNUAL GENERAL MEETING The Annual General Meeting of Billabong International Limited will be held in the Sorrento Room of the SofitelH otel at Broadbeach, Gold Coast, on Tuesday, 25 October 2011, at 10.00am. A formal Notice of Meeting and Proxy Form will be made available to all shareholders.

Corporate Directory

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