ANTA SPORTS PRODUCTS LIMITED Annual Report 2012 ANTAANTA SportsSports PProductsroducts LLimitedimited IncorporatedIncncncorpoor oraorratedteeded inin thethheeC CaymanCayaymaymymanan IslandsIslIIss andanandndssw withwithitithth limitedlilimimitmiteedd lialiabilityiaabilbbilititytyty StockSSttocock Code:CoCoddee: 202020202020 As the sportswear partner of the COC, we provided high-quality winning outfit to the CSD from 2009 through 2012. We are proud to extend this exclusive partnership for the next four years. The 16th Asian Games November 2010 The 6th East Asian Games The 2nd Guangzhou, China October 2013 Winter Youth Olympic Games Tianjin, China February-March 2016 The 3rd Asian Indoor Games Lillehammer, Norway November 2009 The 4th Asian Indoor and The 30th Summer Olympic Games Hanoi, Vietnam July-August 2012 Martial Arts Games London, United Kingdom The 7th Asian Winter Games June-July 2013 February 2011 Incheon, South Korea Almaty, Kazakhstan The 17th Asian Games September-October 2014 Incheon, South Korea The 3rd Asian Beach Gamesames August 2012 Haiyang, China The 4th Asian Beach Games The 21st November 2014 Winter Olympic Games Phuket, Thailand February 2010 Vancouver, Canada The 22nd The 1st Winter Olympic Games The 2nd Asian Youthuth Games Asian Youth Games The 1st February 2014 August 2013 July 2009 Winter Youth Olympic Games Sochi, Russia Nanjing, China Singapore January 2012 The 2nd Asian Beach Games Innsbruck, Austria The 2nd December 2010 The 1st Summer Youth Olympicympic GamesGames Muscat, Oman Summer Youth August 2014 Olympic Games Nanjing, China August 2010 The 31st Singapore Summer Olympic Games The 5th East Asiann GaGamesmes August 2016 December 2009 Rio de Janeiro, Brazil Hong Kong SAR, Chinahina The 5th Asian Beachach GamesGames 2016 Nha Trang, Vietnamm International sporting events held in 2009-2012 International sporting events to be held in 2013-2016 CONTENTS 2 Corporate Information 3 Group Structure 6 Financial Overview 7 Results Highlights 8 Five-Year Financial Summary 10 Milestone of 2012 14 Chairman’s Statement 20 Market Review 22 Brand-driven Business Model 23 Business Review – Brand Management 26 COC and ANTA 28 London Olympics and ANTA 30 Kevin Garnett’s China Tour 32 Kids Sportswear Series 33 Sports Lifestyle Series 36 Fila Business in the PRC 40 Business Review – Distribution Network Management 42 Business Review – Supply Chain Management 45 Financial Review 49 Prospects 52 Corporate Social Responsibility Report 57 Report of the Directors 64 Corporate Governance Report 70 Directors and Senior Management 72 Independent Auditor’s Report 73 Consolidated Statement of Comprehensive Income 74 Consolidated Statement of Financial Position 75 Statement of Financial Position 76 Consolidated Statement of Changes in Equity 77 Consolidated Statement of Cash Flows 78 Notes to the Consolidated Financial Statements 105 Significant Accounting Policies 113 PrincipalSubsidiaries 116 Glossary Investors Information (Inside Back Cover) CORPORATE INFORMATION Board Executive Directors Ding Shizhong (Chairman) Ding Shijia (Deputy Chairman) Lai Shixian Wang Wenmo Wu Yonghua Zheng Jie Independent Non-Executive Directors Yeung Chi Tat Lu Hong Te Dai Zhongchuan Company Secretary Ling Shing Ping FCPA FCCA Board committees Audit Committee Yeung Chi Tat (Chairman) Lu Hong Te Dai Zhongchuan Remuneration Committee Lu Hong Te (Chairman) Dai Zhongchuan Ding Shizhong Nomination Committee Lu Hong Te (Chairman) Yeung Chi Tat Lai Shixian Authorised representatives Lai Shixian Ling Shing Ping Registered offices Cayman Islands Office Cricket Square, Hutchins Drive, P.O. Box 2681, Grand Cayman KY1-1111, Cayman Islands Hong Kong Office Unit No. 4408, 44th Floor, COSCO Tower, 183 Queen’s Road Central, Hong Kong Head offices in the PRC Jinjiang Office Dongshan Industrial Zone, Chidian Town, Jinjiang City Fujian Province, PRC Postal code: 362212 Xiamen Office No. 99 Jiayi Road, Guanyinshan, Xiamen, Fujian Province, PRC Postal code: 361008 Share registrars and transfer offices Cayman Islands Principal Register Royal Bank of Canada Trust Company (Cayman) Limited 4th Floor, Royal Bank House, 24 Shedden Road, George Town, Grand Cayman KY1-1110, Cayman Islands Hong Kong Branch Registrar Computershare Hong Kong Investor Services Limited Shops 1712–1716, 17th Floor, Hopewell Centre, 183 Queen’s Road East, Wanchai, Hong Kong Legal adviser Norton Rose Hong Kong Auditor KPMG Internal control review adviser KPMG Advisory (China) Limited Public relations consultant Hill+Knowlton Strategies Asia Principal bankers Agricultural Bank of China Bank of China Limited Bank of China (Hong Kong) Limited Industrial and Commercial Bank of China China Construction Bank Corporation (Hong Kong Branch) The Hongkong and Shanghai Banking Corporation Limited 2 ANTA Sports Products Limited Annual Report 2012 GROUP STRUCTURE Anta Anta Anta Shine Well International (BVI) Holdings (BVI) Investments (BVI) 0.26% Public Talent Trend 57.41% 6.72% 4.83% 0.04% 30.74% ANTA Sports Products Limited (Cayman Islands) HKEX Stock Code: 2020 100% ANTA Enterprise (BVI) Motive Force (BVI) Offshore Companies Offshore Investment Holding Investment Holding 85% ANTA Int'l (HK) Anda Int'l Inv (HK) Fila Marketing (HK) Full Prospect (Cayman Islands) Management Investment Holding Retailing of Fila Products Investment Holding Services in Hong Kong Fila Macao (Macao) Full Prospect IP Speed Benefi t (HK) Retailing of Fila (Singapore) Sourcing of Fila Products Products in Macao Holding of Fila PRC Trademarks ANTA ANTA China ANTA Xiamen ANTA Quanzhou Xiamen ANTA Fila China (PRC) Changting (PRC) (PRC) (PRC) Trading Trading of (PRC) Sportswear Apparel Footwear (PRC) Sporting Goods Apparel Trading and Manufacturing Manufacturing Sportswear Manufacturing Footwear Trading Manufacturing 55% Athletic Dongyida Chenfeng Xiamen Xiamen Jinjiang Material Xiamen Fila (PRC) (PRC) (PRC) (PRC) ANTA ANTA ANTA Supply Retailing of Sportswear Shoe Sole Shoe Sole E-commerce (PRC) Trading (PRC) Sporting Goods Domestic Companies Domestic Manufacturing Manufacturing Manufacturing (PRC) Investment (PRC) Shoe Sole and Trading Sportswear Holding and Sportswear Manufacturing Retailing Trading of Trading Sporting Goods Xiamen ANTA Anqing ANTA Industrial (PRC) (PRC) Sportswear Sportswear Trading Manufacturing Annual Report 2012 ANTA Sports Products Limited 3 FINANCIAL OVERVIEW Year ended 31 December 2012 2011 Changes As at 31 December 2012 2011 Changes (RMB million) (RMB million) (%) (%) (%) (% points) Gearing ratio(1) 9.9 – 9.9 Turnover 7,622.8 8,904.8 14.4 Return on average total 20.7 28.7 8.0 Gross profit 2,893.2 3,762.4 23.1 shareholders’ equity(2) Profit from operations 1,563.3 2,011.5 22.3 Return on average total 14.9 22.7 7.8 assets(3) Profit attributable to equity 1,358.7 1,730.1 21.5 shareholders Average total 72.0 79.0 7.0 shareholders’ equity to Free cash inflow 1,610.0 1,219.5 32.0 average total assets (days) (days) (days) (RMB cents) (RMB cents) (%) Earnings per share Average inventory 51 38 13 – Basic 54.48 69.37 21.5 turnover days(4) Average trade receivables 34 26 8 – Diluted 54.40 69.20 21.4 turnover days(5) Shareholders’ equity per 270.72 255.47 6.0 Average trade payables 47 37 10 share turnover days(6) Cautionary Statement Regarding Forward- (HK cents) (HK cents) (%) Looking Statements Dividend per share This Annual Report 2012 contains certain forward-looking – Interim 23 26 statements with respect to the fi nancial conditions, results of – Final 17 26 operations and business of the Group. These forward-looking statements represent the Group’s expectations or beliefs – Special 8 – concerning future events and involve known and unknown 48 52 7.7 risks and uncertainties that could cause actual results, performance or events to differ materially from those expressed or implied in such statements. Certain statements, that include (%) (%) (% points) wordings like “potential”, “estimated”, “expects”, “anticipates”, “objective”, “intends”, “plans”, “believes”, “estimates”, and Gross profit margin 38.0 42.3 4.3 similar expressions or variations on such expressions may be considered “forward-looking statements”. Operating profit margin 20.5 22.6 2.1 Margin of profit attributable to 17.8 19.4 1.6 Forward-looking statements involve inherent risks and equity shareholders uncertainties. Readers should be cautioned that a number of Effective tax rate 21.6 20.2 1.4 factors could cause actual results to differ in some instances materially, from those anticipated or implied in any forward- Advertising and promotional 10.5 13.7 3.2 looking statement. Forward-looking statements speak only at expenses (as a percentage the date they are made, and it should not be assumed that they of turnover) have been reviewed or updated in the light of new information Staff costs (as a percentage 9.7 8.5 1.2 or future events. Trends and factors that are expected to affect of turnover) the Group’s results of operations are described in the section R&D costs (as a percentage 3.8 3.7 0.1 “Management Discussion and Analysis”. of cost of sales) Notes: (1) Gearing ratio is equal to the bank loans divided by the total assets at the end of the relevant year. (2) Return on average total shareholders’ equity is equal to the profit attributable to the equity shareholders divided by the average balance of total shareholders’ equity. (3) Return on average total assets is equal to the profit attributable to the equity shareholders divided by the average balance of total assets. (4) Average inventory turnover days is equal to the average balance of inventories