XINGQUAN INTERNATIONAL SPORTS HOLDINGS LIMITED

Annual Report

2016

XINGQUAN INTERNATIONAL SPORTS HOLDINGS LIMITED

星泉国际体育用品控股有限公司(Incorporated in Bermuda under the Companies Act 1981 of Bermuda (Registration No. 42756))

(Registered as a foreign company in Malaysia under the Companies Act 1965 of Malaysia (Company No. 995177-V))

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HEAD OFFICEXINGQUAN INTERNATIONAL SPORTS HOLDINGS LIMITEDSouth China Industrial Zone, Huian, Quanzhou City, Fujian ProvinceThe People’s Republic of China, Postal Code: 362100Tel : (86) 595 8508 8999 Fax : (86) 595 8516 6111E-mail : [email protected]

REGISTERED OFFICE IN MALAYSIA - BRANCH802, 8th Floor, Block C, Kelana Square, 17 Jalan SS7/2647301 Petaling Jaya, Selangor Darul Ehsan, MalaysiaTel : (603) 7803 1126 Fax : (603) 7806 1387

w w w . x i n g q u a n - i n t e r n a t i o n a l . c o m

02 Corporate Information

04 Financial Highlights

06 Corporate Structure

07 Corporate History

08 Chairman’s Statement

10 Management Discussion and Analysis

12 Our Products

14 Directors’ Profile

20 Key Senior Management

21 Statement of Corporate Governance

TABLE OF CONTENTS

32 Audit Committee Report

34 Statement on Risk Management and Internal Control

37 Additional Compliance Information

38 Financial Statements

81 Additional Information

83 List of Properties

84 Statistic of Shareholdings

86 Warrant Information

90 Notice of Eighth Annual General Meeting

Proxy Form

2 XINGQUAN INTERNATIONAL SPORTS HOLDINGS LIMITED

Corporate InformatIon

BoarD of DIrECtorS

Dato’ Wu QIngQuanExecutive Chairman/ Chief Executive Officer

Wu LIanfaExecutive Director

ng SIo PEngNon-Independent Non-Executive Director

Zhou LIyISenior Independent Non-Executive Director

Dato’ haJI ramLy BIn haJI ZaharI Independent Non-Executive Director

tan Eng ChoonIndependent Non-Executive Director

ComPany SECrEtarIES

Kang Shew MengSeow Fei San

nomInatIng CommIttEE

ChairmanZhou Liyi

memberNg Sio PengTan Eng Choon

rEgIStErED offICEIn BErmuDa

Clarendon House2 Church StreetHamilton HM 11BermudaTel. No. : (441) 295 1422Fax. No. : (441) 299 4983

rEgIStErED offICE ofmaLaySIan BranCh

802, 8th FloorBlock C, Kelana Square17 Jalan SS7/2647301 Petaling JayaSelangor Darul EhsanMalaysiaTel. No. : (603) 7803 1126Fax. No. : (603) 7806 1387

hEaD offICESouth China Industrial ZoneHuian, Quanzhou CityFujian ProvinceThe People’s Republic of ChinaPostal Code: 362100Tel. No. : (86) 595 8508 8999Fax. No. : (86) 595 8516 6111E-mail : [email protected] : www.xingquan-international.com

Assistant SecretaryCodan Services Limited

auDIt CommIttEE

ChairmanTan Eng Choon

memberZhou LiyiDato’ Haji Ramly Bin Haji Zahari

rEmunEratIon CommIttEE

ChairpersonNg Sio Peng

memberZhou LiyiDato’ Haji Ramly Bin Haji Zahari

3ANNUAL REPORT 2016

Corporate Information (cont’d)

BErmuDa SharE rEgIStrar

Codan Services LimitedClarendon House2 Church StreetHamilton HM 11BermudaTel. No. : (441) 295 5950Fax. No. : (441) 292 4720

maLaySIan SharE rEgIStrar

Symphony ShareRegistrars Sdn BhdLevel 6, Symphony HousePusat Dagangan Dana 1Jalan PJU 1A/4647301 Petaling Jaya, SelangorMalaysiaTel. No. : (603) 7849 0777

PrInCIPaL BanKErS

China ConstructionBank CorporationQuanzhou Branch(中国建设银行泉州支行)

China ConstructionBank BuildingFengze StreetQuanzhou CityFujian Province PRCTel. No. : (86) 595 22163762

Industrial Bank Co., Ltd.Chendai Branch(兴业银行陈埭支行)Crossing of Qiyi RoadSijing, Chendai TownJinjiang CityFujian Province PRCTel. No. : (86) 595 85186801

auDItorS

SJ Grant ThorntonLevel 11, Sheraton Imperial CourtJalan Sultan Ismail50250 Kuala Lumpur MalaysiaTel. No. : (603) 2692 4022

StoCK EXChangE LIStIng

Main Market of Bursa MalaysiaSecurities BerhadStock Name : XINQUANStock Code : 5155


Summary of financial Performance

year ended 30 June

2012 2013 2014

rmB 000

2015 2016 2012 2013 2014

**rm 000

2015 2016

results

revenue 1,687,695 1,633,580 1,229,418 1,292,858 686,111 1,076,542 1,042,023 784,218 824,685 437,655

EBItDa 339,710 372,607 266,509 347,558 (499,336) 216,693 237,677 170,000 221,699 (318,515)

Profit/(loss) before tax

315,103 342,117 242,448 325,914 (519,499) 200,997 218,229 154,652 207,893 (331,377)

Profit/(loss) for the year attributable to owner of the parent

245,328 262,530 176,640 250,536 (542,102) 156,489 167,462 112,675 159,811 (345,794)

total comprehensive income/(loss) attributable to owner of the parent

242,924 295,476 173,269 205,329 (553,655) 154,956 188,477 110,524 130,975 (353,164)

Shareholders’ equity

1,211,601 1,494,665 1,727,457 1,921,411 1,439,629 727,994 898,074 1,037,948 1,154,486 865,006

total assets 1,358,879 1,600,807 1,819,505 2,017,664 1,527,996 816,487 961,850 1,093,255 1,212,320 918,101

Cash and cash equivalents

618,165 894,376 1,156,243 1,456,947 1,141,751 371,426 537,389 694,732 875,411 686,025

Weighted average number of ordinary shares(000)

307,330 307,330 311,119 338,063 372,794 307,330 307,330 311,119 338,063 372,794

Basic earnings/(losses) per share

0.80 0.85 0.57 0.75 (1.45) 0.51 0.54 0.36 0.48 (0.92)

net assets per share

3.95 4.86 5.11 5.68 3.86 2.37 2.92 3.07 3.41 2.32

Dividend - tax exempt(sen per share)

− − − − − 2 − − 2 −

return on equity (%)

20.25 17.56 10.23 13.04 (37.66) − − − − −

* Supplementary information in ringgit Malaysia are shown for reference only and has been made at the exchange rate of rM1 to rMB1.5677 for profit and loss items and rM1 to rMB1.6643 for balance sheet items as at 30 June 2016.

FINaNCIaL hIghLIghtS

rmB rm

5ANNUAL REPORT 2016

1688 1634

12291293

2012 2013 2014 2015 2016

686

532571

418

(236)

(542)

REVENUE(RMB million)

2012 2013 2014 2016

407

36

619626

309

38

775

209

28

335

657

120

13

173

380

2015

233

28

391

641

REVENUE BY PRODUCTS(RMB million)

GROSS PROFIT(RMB mil) / Margins (%)

2012 2013 2014 2015 2016

31.5%

35.0%

34.0%36.3%

-34.34%

315 324

242

326

(519)

PROFIT / (LOSS) BEFORE TAX(RMB million) / Margins (%)

2012 2013 2014 20162015

18.7%19.8% 19.72%

25.21%245 243

177

-79.0%

-75.7%

251

PROFIT / (LOSS) AFTER TAX(RMB million) / Margins (%)

2012 2013 2014 20162015

14.5% 14.9%14.4%

19.4%

511

Shoe 鞋子 Apparels 服装

Shoe Sole 鞋底 Accessories 配件

468

Financial Highlights (cont’d)


100% XIngQuan (fuJIan)

ShoES PLaStIC Co., LImItED (PrC)

Manufacturing and sales of shoe sole

XIngQuan IntErnatIonaL SPortS hoLDIngS LImItED(Bermuda)

100% XIngQuan (ChIna) LImItED Dormant

100% gErtoP IntErnatIonaL hoLDIngS LImItED Investment Holdings

100%aDDnICE hoLDIngS LImItED (hong Kong)

Investment Holdings

100%aDDnICE (ChIna)Co.,

LImItED (PrC)Manufacturing of shoes and sales of

shoes, apparels and accessories

100%gErmany toP (fuJIan)

SPortS ProDuCt Co. LtD (PrC)

Sales of shoes, apparels and accessories

100%gErtoP EuroPa

IntErnatIonaL LImItED

Wholesale trade of clothes and footwear

100%fuJIan

aDDnICE SPort gooDS Co., LImItED (PrC)Manufacturing of shoes and sales of

shoes, apparels and accessories

100%XIngQuan

footWEar matErIaL Co., LImItED (PrC)Lease of factory

and land

100% XIngQuan IntErnatIonaL

InvEStmEnt LImItED Investment Holdings

Corporate StruCturE

7ANNUAL REPORT 2016

- Launch self operated point of sales (“POS”) in departmental stores

- Awarded Forbes Asia-Top 200 Companies - Best Under USD1 Billion

IPO on Bursa Malaysia

Signs WNBA player Miao Lijie

Jinjiang Xingquan was established for OEM manufacturing

Xingquan Footwear established to manufacture shoe soles

201220092006

Launch of “GERTOP” Brand

Signs NBA players Jason Kapono and JR Smith

Xingquan Plastics established and begins manufacturing for FILA, Spalding and Prince

20102007

Corporate hIStory

Addnice starts manufacturing footwear products under the “Addnice” brand

Xingquan Plastics starts manufacturing shoe soles for well know PRC sports brands Xtep, Peak, 361° and Qiaodan

200420021995 1999

Expands into sports apparel and accessories

Addnice Sports was established

200520032000


BuSInESS anD fInanCIaL rEvIEW

Our financial year ended 30 June 2016 was a challenging year for us as our revenue decreased by 46.9% and had our first total comprehensive loss.

I report that for the financial year ended 30 June 2016 (“FYE 2016”), our Group recorded revenue of RMB686.1 million as compared to the revenue of RMB1,292.9 million for the financial year ended 30 June 2015 (“FYE 2015”). We recorded a loss before taxation of RMB519.5 million and a loss after taxation of RMB542.1 million for FYE2016. The loss after taxation of RM542.1 million was due to the gross loss arose from a contract to supply tailored-made shoes and provision for doubtful debts.

our vErtICaL IntErgratED BuSInESS moDEL

We have developed a vertically integrated business model that combines our shoe sole production process with our shoe manufacturing process. By manufacturing a major portion of our own shoe soles for our shoes, we are able to lower production costs through our integrated business model and ensure that the quality of our products is consistently in accordance with our stringent quality control standards. In addition, having a vertically integrated business model also allows our Group to reduce the lead time for the development and production of our shoe products, trade fairs to sales, thereby giving us an advantage over our competitors in the introduction of new shoe products into the market.

As we manufacture our shoes ourselves, we are able to control the quality of our products from the production development stage to the manufacturing of our shoe products and shoe sole products.

CHaIrMaN’S StatEmEnt

Dear fellow shareholders,On behalf of the board of directors, I am pleased to present the annual report and the audited financial statements of Xingquan International Sports Holdings Limited (“XINGQUAN INTERNATIONAL”) and its subsidiaries (“XINGQUAN GROUP” OR “GROUP”) for the financial year ended 30 June 2016

9ANNUAL REPORT 2016

InDuStry rEvIEW, gEnEraL outLooK anD futurE ProSPECtS

China is one of the largest and the most heavily populated countries in the world. Apart from a huge population, the Chinese economy also has one of the fastest growth rates in the world. The rapid economic growth creates a growing emerging middle class. It was reported that this consumer segment as “the most important target consumer group for consumer goods companies who want to secure long-term success in the country. It is reported that China’s middle class increased by 22.1% to 80 million in January 2007, from 65.50 million in January 2005 and this segment of middle class is expected to increase to 700 million by 2020.

The PRC is one of the largest producers and exporters of clothing in the world. According to the National Bureau of Statistics of China, the total retail sales of garments, footwears, hats and knitwears for January to August 2015 rose by 7.2% year-on-year to reach RMB882.7 billion.

Nevertheless, we are aware that the global and China economics uncertainties may impact the spending pattern of Chinese consumers which may then impact our business. In addition, the change in consumer shopping behaviour and s t i f f competition from e-commerce players have also negatively affected our performance. In view of the above, our Board of Directors believes that the Group’s prospects for the financial year ending 30 June 2017 would be challenging.

DIvIDEnDS

Our Directors believes that it is prudent to conserve the available cash to ensure that we have sufficient funds to finance our working capital requirements. In addition, the global and China economics are uncertain and it is currently difficult to obtain reasonable funding from the capital market and borrowings from the financial institutions.

a notE of aPPrECIatIon

On behalf of the Board, I wish to extend my sincere thanks to all our valued customers, business associates, government authorities and shareholders for their continued support, co-operation and confidence in the Group.

I would also like to convey my sincere appreciation and gratitude to my fellow Directors for their invaluable guidance and contributions during this challenging year as well as to record my appreciation to our employees for their dedication, commitment and contributions to the Group.

Dato’ Wu QingquanExecutive Chairman of the Board of Xingquan International Sports Holdings Limited

Chairman’s Statement (cont’d)


oPEratIonS rEvIEW

The financial year ended 30 June 2016 (“FYE 2016”) marked another challenging year for us. We wish to announce our revenue of RMB686.1 million and loss attributable to owners of the Company of RMB553.7 million in FYE2016.

CurrEnt CaPaCIty anD EXPanSIon PLanS

Our factory at South China Industrial Zone, Huian, Quanzhou City in Fujian Province, PRC (“Huian”) started production in February 2011. Our production capacity for shoe at the Huian factory is approximately 5 million pairs while our production capacity for shoe soles at Chendai Town, Jinjiang City in Fujian Province is more than 30 million pairs.

fInanCIaL rEvIEW

revenue

Our revenue decreased by 46.9%, from RMB1,292.8 million in FYE2015 to RMB686.1 million in FYE2016. The decrease in revenue was mainly contributed by the decrease in sales volume of shoe sole from approximately 15.1 million pairs in FYE2015 to approximately 8.2 million pairs in FYE2016 and the decrease in sales volume of apparels from 3.4 million pieces in FYE2015 to 2.2 million pieces in FYE2016.

Cost of Sales

Our cost of sales increased by 11.8% from RMB824.4 million in FYE2015 to RMB921.7 million in FYE2016 mainly due to increase in cost of production per unit for shoe sole, shoes and apparels.

gross Profit/(Loss) and gross Profit/(Loss) margin

Our gross profit decreased by 150.3% from RMB468.4 million in FYE2015 to gross loss of RMB235.6 million in FYE2016. The decrease in the gross profit is mainly attributable to the gross loss arising from a contract to supply tailored-made shoes.

Selling and Distribution Costs

Our selling and distribution costs decreased by 30.3% from RMB142.9 million in FYE2015 to RMB99.6 million in FYE2016 mainly due to lower expenses in relation to market development costs and subsidy of renovation.

administrative Expense

Our administrative expenses increased by 314.5% from RMB49.2 million in FYE2015 to RMB203.9 million in FYE2016 mainly due to provision for doubtful debt of RMB157.5 million. It was provided on the trade receivable balances that have exceeded the Group’s credit term.

Profit / (Loss) Before tax

The loss before tax of RMB519.5 million for FYE2016 represents a decrease of 259.4% as compared to the profit before taxation of RMB325.9 million recorded for FYE2015. The decrease in profit before taxation was mainly due to the decrease in overall revenue, gross loss arose from a contract to supply tailored-made shoes amounting to RMB415.7 million and provision for doubtful debts amounting to RMB157.5 million.

MaNaGeMeNt DISCuSSIon anD anaLySIS

11ANNUAL REPORT 2016

Income tax Expense

Our income tax decreased by 70.0%, from RMB75.4 million in FYE2015 to RMB22.6 million in FYE2016 mainly due to the decrease of our profit before tax.

Profit / (Loss) for the year

As a result of the foregoing, we recorded a loss for the year of RMB542.1 million in FYE2016 compare to a profit for the year of RMB250.5 million in FYE2015.

total Comprehensive Income attributable to owners of the Company

We recorded a total comprehensive loss attributable to owners of the company of RMB553.7 million in FYE2016 compare to a total comprehensive income attributable to owners of the company of RMB205.3 million in FYE2015.

Working Capital management

Our trade receivable turnover days decreased from an average of 2.51 months in FYE2015 to 1.92 months in FYE2016 while our trade payable turnover days decreased from an average of 0.41 month in FYE2015 to 0.40 month in FYE2016. The decrease in trade receivable turnover days is mainly due to lower revenue being recorded for financial year and provision was made on the trade receivable balances that have exceeded the Group’s credit term.

financial Position and Liquidity

Our Group continued to enjoy a stable financial position, generated from normal business operation with cash inflows from operating activities amounting to RMB336.7 million for FYE2015. However, the loss for the year resulted cash outflows from operating activities amounting to RMB386.0 milllion for FY2016.

Banking Borrowings

As at 30 June 2016, our borrowings are RMB18.0 million (30 June 2015: RMB18.0 million).

Management Discussion and analysis (cont’d)


oUr ProDuCtS


our products (cont’d)


Dato’ Wu QIngQuan

Executive Chairman & Chief Executive Officer

Dato’ Wu Qingquan, male, aged 47, a citizen of China, is our Executive Chairman and Chief Executive Officer and was appointed to the Board of Directors of Xingquan International on 6 February 2009.

In 2006, he obtained a Master of Business Administration degree from Renmin University of China (中国人民大学).

Dato’ Wu Qingquan started his career in 1989 as a Purchasing and Sales Manager in Yanshang Shoe Factory, a company engaged in the manufacture of shoes and rubber products from 1989 to 1995. In 1995, he established Jinjiang Xingquan, a company engaged in the manufacture of shoes and shoe soles for local and international shoe manufacturers, jointly with his wife, Mdm Zhuang Hongji, and his brother Mr. Wu Lianfa where he was appointed as Purchasing and Sales Manager.

In 1999, Mr. Wu Shihu, his father and Mr. Wu Lianfa, his brother set up Xingquan Footwear where Mr. Wu Qingquan was appointed as a General Manager to manage the company. When his brother-in-law, Mr. Iao Ieok Chon established Xingquan Plastics in 2000, he joined the company and was later appointed as General Manager in 2006 to manage that company. Subsequently, after establishment of Addnice Sports in 2003, he joined the company and was appointed as General Manager in 2006. When Addnice China was set up in 2006, Wu Qingquan was appointed as General Manager of Addnice China. He was subsequently promoted to Managing Director and Chief Executive Officer of Addnice China in 2008.

Dato’ Wu Qingquan has 26 years of experience in the footwear industry. As a director in our Company, Addnice China, Addnice Sports and Xingquan Plastics, his responsibilities include developing and planning the overall strategic business direction and strategies for the Group, product design and development, purchasing, overseeing and monitoring the Group’s marketing activities and general corporate affairs of the Group and to ensure the smooth running of the production line for the manufacturing of shoes and shoe soles.

Dato’ Wu Qingquan is the Vice President of Chendai town, Jinjiang city Forth Executive Committee of the Chamber of Commerce (晋江市陈埭镇商会第四届执行委员会副会长), Honorary Vice President of Quanzhou Young Entrepreneur Association of the Fifth Council of the Chamber of Commerce (泉州市青年企业家协会、青年商会第五届理事会名誉副会长), the Council Member of the Eleventh Council of the Fujian Young Entrepreneur Association (福建省青年企业家协会第十一届理事会) and the Vice President of Fujian Overseas Chiness Businessmen Association (福建省侨商联合会成立大会).

Dato’ Wu Qingquan is the brother of Mdm Ng Sio Peng and Mr. Wu Lianfa and the brother in law of the ultimate substantial shareholder of Xingquan International, Mr. Iao Ieok Chon. He has no conflict of interest with the Company and has not been convicted of any offences within the past five (5) years, other than traffic offences, if any.

Dato’ Wu Qingquan attended all five (5) Board Meetings of the Company held during the financial year.

DIreCtorS’ ProfILE


mr. Wu LIanfaExecutive Director

mr. Wu Lianfa, male, aged 42, a citizen of China, is our Executive Director and was appointed to the Board of Directors of Xingquan International on 6 February 2009.

He completed his secondary school education in 1992. After he completed his secondary school education, he joined Yanshang Shoe Factory as a manager. In 1995, Mr. Wu Lianfa established Jinjiang Xingquan, jointly with his brother Mr. Wu Qingquan and Mdm Zhuang Hongji, his sister-in-law where he was appointed as Manager in charge of management and production, primarily responsible for production, marketing and general corporate affairs of the company.

In 2000, when his brother-in-law, Mr. Iao Ieok Chon established Xingquan Plastics, Mr. Wu Lianfa joined the company and was appointed as Manager in charge of management and production where he was primarily responsible for production, marketing and general corporate affairs of the company. He was promoted as Deputy General Manager of Xingquan Plastics in 2006 to assist the General Manager, Mr. Wu Qingquan. Subsequently, after the establishment of Addnice Sports in 2003, he was appointed as General Manager of Addnice Sports in charge of management and production.

Mr. Wu Lianfa has 23 years of experience in the footwear industry. As a director in our Company, Addnice Sports and Xingquan Plastics, his responsibilities in the Group include assisting Mr. Wu Qingquan in product design and development, overseeing and monitoring the Group’s marketing activities and general corporate affairs of the Group, purchasing, marketing and ensuring the smooth running of the production line for the manufacturing of shoes and shoe soles.

Mr. Wu Lianfa is the brother of Mdm Ng Sio Peng and Dato’ Wu Qingquan and the brother in law of the ultimate substantial shareholder of Xingquan International, Mr. Iao Ieok Chon. He has no conflict of interest with the Company and has not been convicted of any offences within the past five (5) years, other than traffic offences, if any.

Mr. Wu Lianfa attended all five (5) Board Meetings of the Company held during the financial year.

Directors’ profile (cont’d)


madam ng Sio Peng, female, aged 49, a citizen of Macau, is our Non- Independent Non-Executive Director and was appointed to the Board of Directors of Xingquan International on 6 February 2009. She was also appointed the chairperson of the Remuneration Committee on 1 June 2009. Madam Ng Sio Peng is a member of the Nominating Committee of the Company.

Madam Ng Sio Peng completed her secondary school education in 1984. Soon after her graduation, she joined Anshang Shoe Manufacturing Factory as a manager in the production department from 1984 to 1989.

She is married to Mr. Iao Ieok Chon and both of them were involved in renovation work in Macau from 1989 onwards. In 1998, Madam Ng Sio Peng and her husband, Iao Ieok Chon returned to Jinjiang City to seek business opportunities. In 2003, Madam Ng Sio Peng founded Addnice Sports and was appointed as a director of Addnice Sports. Madam Ng Sio Peng is currently a director of both Addnice Sports and Addnice China. She is not involved in the day to day running of the business of the Group but is involved in major decision making of the Group in her capacity as a Director and Substantial Shareholder of our Company. She also conducts market research and identifies business opportunities for our Group.

Madam Ng Sio Peng is the sister of Dato’ Wu Qingquan and Mr. Wu Lianfa and is the wife of the ultimate substantial shareholder of Xingquan International, Mr. Iao Ieok Chon. She has no conflict of interest with the Company and has not been convicted of any offences within the past five (5) years, other than traffic offences, if any.

Madam Ng Sio Peng attended all five (5) Board Meetings of the Company held during the financial year.

maDam ng SIo PEngNon Executive Director



Dato’ haji ramly Bin haji Zahari, male, aged 58, a Malaysian, is our Independent Non-Executive Director and was appointed to the Board of Directors of Xingquan International on 5 June 2015. He was also appointed a member of the Audit Committee and Remuneration Committee on 1 September 2015.

He obtained his Bachelor of Arts (Honours) in the Southeast Asia Studies from University of Malaya. He also obtained a Certificate of Public Management from National Institute of Public Administration (INTAN).

Upon graduation in 1980, he joined the Office of Regional Council of Dinding (Manjong), Perak as Assistant District Officer. From 1981 to 1993, he was the Assistant District Officer of District Office in Larut Matang and Pengkalan Hulu, Perak. In 1995, he was elected as Perak State Legislative Assemblyman for Manong constituency, and held the position until 2012. During his tenure as an Assemblyman, he was also the Perak Executive Councilor Member (EXCO) in charge of various portfolios from 1995 to 2012.

Dato’ Haji Ramly Bin Haji Zahari does not have any family relationship with any other directors or major shareholders of the Company. He has no conflict of interest with the Company and has not been convicted of any offences within the past five (5) years, other than traffic offences, if any.

Dato’ Haji Ramly Bin Haji Zahari attended four (4) Board Meetings of the Company held during the financial year.

Dato’ haJI ramLy BIn haJI ZaharI

Independent Non-Executive Director




mr. tan Eng Choon, male, aged 47, a Malaysian, is our Independent Non-Executive Director and was appointed to the Board of Directors of Xingquan International on 2 December 2011. He was also appointed the Chairman of the Audit Committee and a member of the Nominating Committee respectively on 2 December 2011.

He holds a Bachelor Degree in Accountancy from University of Malaya in 1994. He is a Malaysian CPA, fellow member of Associations of Chartered Certified Accountants, chartered member of the Institute of Internal Auditors–Malaysia chapter and a member of Malaysian Institute of Accountants.

He started his career with PricewaterhouseCoopers in Kuala Lumpur, Malaysia in 1994 before moving to China in 1998. He has over 20 years experience in internal and external auditing, financial management and internal controls. He is currently the managing director of, (ZJ (Shanghai) Advisory Co., Ltd.) and (Sapience Partners Limited)., a group of consulting companies that specialize in control / risk management, corporate finance and finance and accounting related advisory and outsourcing services. Prior to establishing these Companies, he was the Senior Manager of one of the Big 4 CPA firms’ risk management division in Shanghai. He was one of the pioneers that helped to expand the growth of this division and assisted in developing a few successful products/services for the China market. He has advised many MNCs and PRC enterprises on issues such as local regulations compliance, internal controls / corporate governance, accounting and finance, merger and acquisition deal issues.

Mr. Tan Eng Choon does not have any family relationship with any other directors or major shareholders of the Company. He has no conflict of interest with the Company and has not been convicted of any offences within the past five (5) years, other than traffic offences, if any.

Mr. Tan Eng Choon attended all five (5) Board Meetings of the Company held during the financial year.

mr. tan Eng ChoonIndependent

Non-Executive Officer



mr. Zhou Liyi, male, aged 47, a citizen of China, is our Senior Independent Non-Executive Director and was appointed to the Board of Directors of Xingquan International on 1 June 2009. He was also appointed a member of the Audit Committee, Nominating Committee and Remuneration Committee respectively on 1 June 2009. He has on 18 October 2013 appointed as Senior Independent Non-Executive Director and Chairman of the Nominating Committee.

He obtained his Bachelor of Business Management Degree from the Fuzhou University located in Fujian Province, China in July, 1990. Mr. Zhou Liyi started his career in August, 1990 as an assistant to the accountant with Putian Certified Public Accountants (“CPAs”) (莆田会计师事务所). In 1994, he qualified to practice as a Certified Public Accountant (“CPA”). In 1997, he obtained his qualification to practice as a Certified Public Valuer from the Chinese Institute of Certified Public Valuer. In 1998, he was promoted by Putian CPAs as a Deputy Supervisor of Public Accountant.

In 1999, he joined Xiamen Siming Certified Public Accountants (厦门思明会计师事务所) as a Division Manager and in 2000, he joined Xiamen Yonghe Certified Public Accountants Co. Ltd. (厦门永和会计师事务所有限公司) as a Partner. In 2000, he also obtained his qualification to practice as a Certified Tax Agent (“CTA”). In the same year, he joined Xiamen Jin Yonghe Certified Tax Agents Co. Ltd. (厦门金永和税务师事务所有限公司) as a Partner. In 2001, he converted his membership in the Chinese Institute of Certified Public Valuer from practicing member to non-practicing member.

In June 2007, he obtained his qualification to practice as a Senior CPA. Currently, he is the partner of Xiamen Yonghe Certified Public Accountants Co. Ltd. and Xiamen Jin Yonghe Certified Tax Agents Co. Ltd., practicing as a CPA and CTA. He is also currently a member of the Chinese Institute of CPAs and the Chinese Institute of CTAs.

Mr. Zhou Liyi does not have any family relationship with any other directors or major shareholders of the Company. He has no conflict of interest with the Company and has not been convicted of any offences within the past five (5) years, other than traffic offences, if any.

Mr. Zhou Liyi attended all five (5) Board Meetings of the Company held during the financial year.

mr. Zhou LIyISenior Independent

Non-Executive Officer


teo Cern yong, aged 42, Male, Malaysian, was appointed as the CFO of the Group in April 2011 and is in charge of our finance function and the financial reporting obligations. He has over 15 years of experience in the areas of finance and its related functions.

He graduated from the University of Malaya with a Bachelor of Accounting (Honours). Upon graduation, he began his career with an international accounting firm in Kuala Lumpur. Prior to joining Xingquan International, he was with a regional advisory company and local conglomerates based in Kuala Lumpur. He is a member of the supervisory board of Decheng Technology AG.

He does not have any family relationship with any other directors or major shareholders of the Company. He has no conflict of interest with the Company and has not been convicted of any offences within the past five (5) years, other than traffic offences, if any.

Chen huoChan, aged 45, Male, PRC, joined the Group in July 2008 and was appointed as the Marketing Director in June 2016 and is in charge of our sales and marketing strategy, forming marketing plan and its execution. He is also responsible for promotion initiatives, new products pricing strategy and building group’s distribution network.

He does not have any family relationship with any other directors or major shareholders of the Company. He has no conflict of interest with the Company and has not been convicted of any offences within the past five (5) years, other than traffic offences, if any.

yang hongmei, aged 40, Female, PRC, was appointed as the Assistant General Manager in June 2006 and is assisting the CEO on the Group’s overall operation and production activities. She is responsible for the production, facilities, environment and safety requirements of the Group.

She does not have any family relationship with any other directors or major shareholders of the Company. She has no conflict of interest with the Company and has not been convicted of any offences within the past five (5) years, other than traffic offences, if any.

KeY SeNIor managEmEnt

The Board of Directors of Xingquan International Sports Holdings Limited is pleased to report on the manner in which the Principles and Recommendations of Corporate Governance are applied and the extent of compliance thereon as set out in the Malaysian Code on Corporate Governance 2012 (“Code”).

The Board subscribes to and supports the belief that good corporate governance practices are pivotal to enhancing shareholders’ value. Hence, the Board is fully dedicated to continuously evaluate the Group’s corporate governance practices and procedures to ensure that the principles and best practices in corporate governance are applied and adhered to in the best interests of its stakeholders.

The Statement below sets out the manner in which the Group has applied the Code and the extent of compliance with recommendations advocated there.

1. ESTABLISH CLEAR ROLES AND RESPONSIBILITIES

1.1 Clear Functions of the Board and Management

The Board is responsible for oversight and overall management of the Company and the Group, whilst the Management is responsible for the day-to-day operations of the business and effective implementation of Board decisions.

The Board, in carrying out its stewardship responsibility, has delegated certain responsibilities to the Audit Committee, Nominating Committee and Remuneration Committee. All committees have clearly defined terms of reference. The Chairman of the various committees will report to the Board the outcome of the committee meetings. The ultimate responsibility for the final decision on all matters, however, rests with the entire Board.

To facilitate expeditious decisions, the Board has delegated certain functions to the Management. The Management consists of the Executive Chairman/Chief Executive Officer, Chief Financial Officer and Department Heads. The Management is duly authorised by the Board to approve business, operational and administrative decisions, review business strategies and operations and ensure adherence to policies and strategies approved by the Board.

1.2 Board Duties and Responsibilities

The Board has the following responsibilities, which facilitate the discharge of the Board’s stewardship responsibilities in the best interest of the Group:

• ReviewingandadoptingastrategicplanfortheGroup;• OverseeingtheconductoftheGroup’sbusinesstoevaluatewhetherthebusinessisbeingproperly

managed;• Identifyingprincipalrisksandensuretheimplementationofappropriatesystemstomanagethese

risks;• Successionplanning, including appointing, training, determining the compensation and,where

appropriate,replacingseniormanagement;• Developingandimplementinganinvestorrelationsprogrammeandshareholders’communications

policy for the Group, and• Reviewing the adequacy and integrity of theGroup’s internal control systems andmanagement

information systems, including systems for compliance with applicable laws, regulations, rules, directives and guidelines.

The Board is charged with, among others, the development of corporate objectives, the review and approval of corporate plans, annual budgets, major investments and financial decisions, and changes to the management and control structure within the Group including key risk management, financial and operational policies.

At each quarterly meeting, the Board deliberated and considered the Group’s financial results.


statement of CORPORATE GOvERNANCE

1. ESTABLISH CLEAR ROLES AND RESPONSIBILITIES (CONT’D)

1.3 Formalised Ethical Standards through Code of Conduct

The Group has in place codes of conduct to govern the standard of ethics and good conduct of the Directors. The code of conduct for Directors includes principles relating to their duties, conflict of interest and dealings in securities.

The code of conduct can be found at the Company’s website at www.xingquan-international.com.

1.4 Strategies Promoting Sustainability

The Group is committed to employing responsible practices with regard to the development and improvement of its employees, the environment as well as in our local communities. The employees are the greatest assets of the Group. As much as the Group commits to give back to the society, the Group also commits significant resources in nurturing human talents, technical skills upgrading, career development programs and lifelong learning. The Group aims to instil good civic values so that the employees too can act as ambassadors in advancing the worthy causes.

a. ENvIRONMENT HEALTH AND SAFETY

The Group is committed to protecting the health and safety of all individuals affected by the Group’s activities, including the Group’s employees, vendors and the public, and will not compromise the health and safety of any individual. The Group adopted the PRC’s environment health and safety measures and mitigates impacts on the environment by working with our stakeholders, peers and others to promote responsible environmental practices and continuous improvement.

b. SOCIAL ACCOUNTABILITY

The Group is committed to maintaining high standards of integrity and corporate governance practices in order to maintain excellence in its daily operations and to promote confidence in the Group’s governance systems.

c. SUSTAINABILITY

Stakeholder Relations

The Group will engage with stakeholders clearly, honestly and respectfully. The Group is committed to timely and meaningful dialogue with all stakeholders, including shareholders, customers, employees, governments and regulators among others.

Employee Relations

The Group will ensure that employees are treated fairly and with dignity and consideration for their goals and aspirations and that diversity in the workplace is embraced. The Group is committed to providing equal opportunity in all aspects of employment and will not engage in or tolerate unlawful workplace conduct, including discrimination, intimidation, or harassment.

Human Rights

The Group recognises that governments have the primary responsibility to promote and protect human rights. The Group will work with governments and agencies to support and respect human rights within our sphere of influence. The Group will not tolerate human rights abuses, and will not engage or be complicit in any activity that solicits or encourages human rights abuse.


statement of Corporate Governance (cont’d)

1. ESTABLISH CLEAR ROLES AND RESPONSIBILITIES (CONT’D)

1.5 Access to Information and Advice

All scheduled meetings held during the year were preceded by a notice issued by the Company Secretary in consultation with the Executive Chairman. The Executive Chairman ensures that all Directors have full and timely access to information, with Board Papers distributed ahead of meetings. The notice for each of the meeting is accompanied by the minutes of preceding Board meeting, together with relevant information and documents for matters on the agenda to enable the Directors to consider and deliberate knowledgeably on issues and facilitate informed decision making.

The Directors have access to all information within the Group in furtherance of their duty. They also have access to the advice and services of the Company Secretary and independent professionals as and when required.

1.6 Qualified and Competent Company Secretary

The Board is satisfied with the performance and support rendered by the Company Secretaries who are qualified under Section 139A of the Malaysian Companies Act, 1965, to the Board in the discharge of its functions. The Company Secretaries ensure that all Board meetings are properly convened, and that proper record of the proceedings and resolutions passed are recorded and maintained in the statutory register of the Company. The Company Secretaries also keep abreast of the evolving capital market environment, regulatory changes and developments in Corporate Governance through continuous training and update the Board timely.

1.7 Board Charter

The Board has formulated and adopted a charter (Board Charter) on 18 October 2013. The Board Charter sets out the composition, roles and responsibilities and processes of the Board. The conduct of the Board is also governed by the Bye-laws of the Company.

The Board Charter, which serves as a strategic guidance and effective oversight of management, is also intended to provide a concise overview of:

1. clarification of the roles and responsibilities of the Board, individual director, Executive Chairman/ Chief Executive Officer and management to facilitate the Board, individual director, Executive Chairman/ChiefExecutiveOfficerandmanagement’saccountabilitytotheCompanyanditsshareholders;

2. delegation of authority by the Board to various committees established in assisting the Board to executeitsdutiesandresponsibilities;and

3. Board operating procedures and practices pertaining to meetings, training and development, code of conduct and declarations on conflicts of interest.

The Board Charter, which is subject to periodic review by the Board after taking into the latest legal and regulatory requirements, is accessible through the Company’s website at www.xingquan-international.com.

At the Board meeting held on 30 May 2016, the Board reviewed and updated the Board Charter by incorporating the relevant amendments to the Bursa Securities Main Market Listing Requirements (“Listing Requirements”) that have impact on the Board and its Board committees in discharging their duties.



2. STRENGTHEN COMPOSITION

2.1 Nominating Committee

The Nominating Committee (“NC”) was set up on 1 June 2009 and presently its members are as follows:

Zhou Liyi (Senior Independent Non-Executive Director) - Chairman Madam Ng Sio Peng (Non-Independent Non-Executive Director) Tan Eng Choon (Independent Non-Executive Director)

The NC shall be appointed by the Board from amongst the Directors of the Company and in accordance with the Code which requires the NC to consist exclusively of Non-Executive Directors, the majority of whom are Independent Directors.

The terms of reference of the NC is available at the Company’s website at www.xingquan-international.com.

The responsibilities and duties of the NC shall be:

(i) to recommend the nomination of a person or persons for all directorships to be filled by the shareholdersorBoard;

(ii) to consider, in making its recommendations, candidates for directorship proposed by the Executive Chairman and within the bounds of practicability, by any other senior executive or any director or shareholder;

(iii) torecommendtotheBoard,directorstofilltheseatsonboardcommittees;

(iv) toidentify,evaluateandrecommendcandidatesforappointmentasCompanySecretary;

(v) to assess annually the effectiveness of the Board as a whole, the committees of the Board and the contributionofeachexistingindividualdirectorandthereafter,recommenditsfindingstotheBoard;

(vi) to review annually the required mix of skills and experience and other qualities, including core competencies which non-executive directors should bring to the Board and thereafter, recommend itsfindingstotheBoard;and

(vii) to review on annual basis the term of office of each of the audit committee members and performance of the audit committee and each of its members.

Summary activities of the NC

During the financial year, the following activities were carried out by the Nominating Committee:

(i) reviewedthemixofskillandexperienceandotherqualificationsoftheBoard;

(ii) reviewedtheeffectivenessoftheBoard,BoardCommitteesandtheDirectors;and

(iii) discussed the Company Directors retirement by rotation.



2. STRENGTHEN COMPOSITION (CONT’D)

2.2 Develop, Maintain, Review Criteria for Recruitment and Annual Assessment

(i) Recruitment or Appointment of Directors

The Board does not set specific criteria for the assessment and selection of director candidate. However, the consideration would be taken on the need to meet the regulatory requirement such as Bermuda Companies Act, 1981, Malaysian Companies Act, 1965 and Listing Requirement, the achievement in the candidate personal career, integrity, independence of the candidate, ability to make independent and analytical inquiries, ability to work as team to support the Board, possession of the required skill, qualification and expertise that would add value to the Board, understanding of the business environment and the willingness to devote adequate time and commitment to attend to the duties/functions of the Board.

In accordance with the Company’s Bye-laws, at each Annual General Meeting, one-third (1/3) of the Directors for the time being, or if their number is not a multiple of three (3), the number nearest to one-third (1/3) with a minimum of one (1), shall retire from office and an election of Directors shall take place provided always that each Director shall retire at least once in every three (3) years but shall be eligible for re-election. A Director retiring at a meeting shall retain office until the close of the meeting whether adjourned or not. An election of Directors shall take place each year.

The director who is subject to re-election and/or re-appointment at next Annual General Meeting shall be assessed by the Nominating Committee before recommendation is made to the Board and shareholders for the re-election and/or re-appointment. Appropriate assessment and recommendation by the Nominating Committee would be based on the yearly assessment conducted.

(ii) Annual Assessment

The NC met twice during the financial year ended 30 June 2016 to review and assess the effectiveness of the Board, its Committees and the contribution of each individual Director, including the required mix of skills and core competencies necessary for the Board to discharge its duties effectively and to discuss the retirement by rotation of directors at annual general meetings. Both meetings were attended by all the members.

At the NC meeting held on 29 August 2016, the NC had reviewed and of the view that the Board had

the required mix of skill, experience and the other qualities to serve the needs of the Company, thus no recommendation to the Board to change the composition of the Board and its Board committees was made.

At the Board meeting held on 19 October 2016, the NC presented their findings on the appraisal and evaluation on the effectiveness of the Board as a whole, the committees of the Board and the contribution of each existing individual director.

(iii) Gender Diversity Policy

The Board has established a gender diversity policy and the target has been achieved to have at least one woman participating on the Board.

The Board also endeavours to have diversity of Board and its workforce in terms of experience, qualification, ethnicity and age.




2.3 Remuneration Committee

The Remuneration Committee (“RC”) which is a sub-committee of the Board comprises three (3) members of one (1) Non-Independent Non-Executive Director and two (2) Independent Non-Executive Directors as follows:

Madam Ng Sio Peng (Non-Independent Non-Executive Director) - Chairperson Zhou Liyi (Senior Independent Non-Executive Director) Dato’ Haji Ramly Bin Haji Zahari (Independent Non-Executive Director)

The RC was appointed by the Board from amongst the Directors of the Company and in accordance with the Code which required the RC to consist exclusively or a majority of Non-Executive Directors.

The responsibilities and duties of the RC are to review and recommend to the Board of Directors the remuneration packages of Executive Directors of the Company in all its forms. The remuneration package of Non-Executive Directors is to be determined by the Board of Directors as a whole subject to the shareholders’ approval.

The RC met once during the financial year and had reviewed the remuneration packages of the Executive Directors. The meeting was attended by all the members.

At the RC meeting held in August 2015, the RC recommended to the Board to renew the service contracts of the Executive Directors for another three (3) years, commencing from 1 July 2015 to 30 June 2018.

For the financial year ended 30 June 2016, a total sum of RMB8,709,439 was paid to the Executive and Non-Executive Directors of the Company. The details of the Directors’ remuneration for the financial year ended 30 June 2016 are as follows:

Director Salaries and other Director Director emoluments Fee Allowance TotalCompany RMB RMB RMB RMB

Executive Directors 7,917,610 – – 7,917,610Non-Executive Director 659,518 109,737 22,574 791,829

Non- Executive ExecutiveRange of remuneration Directors Directors

Below RMB150,000 – 3RMB750,001 – RMB800,000 – 1RMB3,450,001 – RMB3,500,000 1 –RMB4,450,001 – RMB4,500,000 1 –




2.3 Remuneration Committee (cont’d)

Director Salaries and other Director Director emoluments Fee Allowance TotalGroup RMB RMB RMB RMB

Executive Directors 8,842,166 – – 8,842,166Non-Executive Director 919,218 109,737 22,574 1,051,529

Non- Executive ExecutiveRange of remuneration Directors Directors

Below RMB150,000 – 3RMB750,001 – RMB800,000 – 1RMB3,700,001 – RMB3,750,000 1 –RMB5,100,001 – RMB5,150,000 1 –

The Company has at its First Annual General Meeting held on 16 December 2009 obtained a shareholders’ mandate on payment of director fees of not exceeding RM250,000 per annum.

3. REINFORCE INDEPENDENCE

3.1 Annual Assessment of Independence

The Board adopted the concept of independence in tandem with the definition of Independent Director in the Listing Requirements through the assistance of the NC. The Board also carries out an annual assessment to ensure the effectiveness of the independence of its independent directors.

All Independent Directors fulfil the criteria of independence as defined in the Listing Requirements and act independently of management and do not participate in any business dealings.

Based on the confirmation received from each Independent Director and their conduct, the Board is satisfied with the level of independence demonstrated by all the Independent Directors and their ability to act in the best interest of the Company.

3.2 Tenure of Independent Directors

The Company does not have a formal policy to limit the tenure of independent directors. However, the Board takes cognisance of the Code’s recommendation to re-designate independent directors whose tenure exceed a cumulative term of nine (9) years as non-independent directors, or upon completion of nine (9) years, an Independent Director may continue to serve on the Board as an Independent Director subject to assessment by the Board and shareholders’ approval at the general meeting.

At present, none of the Independent Directors have been in service for more than nine (9) years.



3. REINFORCE INDEPENDENCE (CONT’D)

3.3 Separation of Positions of the Chairman and CEO

Under the Code, the role of the Chairman and Chief Executive Officer should be separate and should not be performed by the same individual. The Board continues to be mindful of the combined role of the Executive Chairman and Chief Executive Officer positions currently held by Dato’ Wu Qingquan. In the best interest of the Group, this combined role is maintained as the valuable knowledge in the Group’s business operation contributed by Dato’ Wu Qingquan is essential to the effective management of the Group. The balance of authorization is ensured by the operation of the senior management and the Board, which comprises experienced and fair minded individuals. The Board currently comprises two (2) Executive Directors, one (1) Non-Executive Director and three (3) Independent Non-Executive Directors and therefore has a strong independence element in its composition.

3.4 Composition of the Board

The Board takes cognisance that the Code recommends that where the chairman of the Board is not an independent director, majority of the Board must comprise of independent directors. However, the Board has decided to depart from this recommendation as the Board acknowledges that the Executive Chairman, Dato’ Wu Qingquan has vast experience in managing the Group’s operations. Dato’ Wu Qingquan has exercised his due care in the interest of the Company and shareholders during his tenure as an Executive Chairman of the Company and he has provided objectivity in decision making and ensured effective check and balance in the proceedings of the Board.

4. FOSTER COMMITMENT

4.1 Time Commitment

Board meetings are held at quarterly intervals with additional meetings held whenever necessary. Five (5) Board meetings were held during the financial year ended 30 June 2016.

The agenda for each Board meeting is circulated to all the Directors for their perusal well in advance of the Board meeting date. The Directors are given sufficient time to obtain further information and explanation, where necessary, in order to be briefed properly before the meeting.

The Board is satisfied with the level of time commitment given by the Directors towards fulfilling their roles and responsibilities. Details of the attendance of the Directors at the meetings for the financial year are as set out below:

Directors No. of meetings attended

Dato’ Wu Qingquan 5/5Wu Lianfa 5/5Ng Sio Peng 5/5Zhou Liyi 5/5Tan Eng Choon 5/5Dato’ Haji Ramly bin Haji Zahari 4/5

The Directors are required to submit update on their other directorships to the Company Secretary whenever there is a change. To facilitate the Directors in their time planning, an annual meeting calendar is prepared and circulated to the Directors before the beginning of each year.



4. FOSTER COMMITMENT (CONT’D)

4.2 Training

All the Directors have attended and successfully completed the Mandatory Accreditation Programme as required by Bursa Securities. Every Director will undergo continuous training to equip himself/herself to effectively discharge his/her duties as a director from time to time. The Company will provide briefing for new members of the Board, when necessary, to ensure they have a comprehensive understanding of the Group’s operations. The training needs of Directors would be assessed and proposed by the individual Director. Each Director determines the areas of training that he or she may require for personal development as a Director or as a member of a Board Committee.

During the financial year under review, the Directors attended seminars or briefings conducted by the regulatory authorities or members of professional bodies or industries, in order to keep abreast with the latest developments and updates, and to enhance and fulfil their responsibilities as Directors of the Company.

Seminars or briefings attended by the Directors during the financial year under review were as follows:

- Xiamen Accountant Advanced Training by Xiamen City Accounting Association

- China Registered Tax Agent Training

- Mandatory Accreditation Programme for Directors for Public Listed Companies

- Training on sales and services

- Analysis of marketing strategies of smartphone brands

- Briefing on the key consideration on the take-over of a PLC in Malaysia

The Company Secretaries circulated the relevant guidelines on statutory and regulatory requirements from time to time for the Board’s reference and briefed the Board on these updates quarterly.

5. UPHOLD INTEGRITY IN FINANCIAL REPORTING

5.1 Compliance with Applicable Financial Reporting Standards

The Board is responsible for ensuring that financial statements prepared for each financial year give a true and fair view of the Group’s state of affairs. The Directors took reasonable steps to ensure that the requirements of accounting standards were fully met. Quarterly financial statements were reviewed by the Audit Committee and approved by the Board of Directors prior to their release to Bursa Securities.

5.2 Assessment of Suitability and Independence of External Auditors

The Company through the Audit Committee, has an appropriate and transparent relationship with the external auditors. Audit Committee meetings are attended by the external auditors for purposes of presenting their audit plan and report and for presenting their comments on the audited financial statements.

The Audit Committee undertakes an annual assessment of suitability and independence of the external auditors. At the Audit Committee meeting held on 19 October 2016, the Audit Committee assessed the performance of the external auditors, Messrs. SJ Grant Thornton, based on the criteria set such as professional knowledge and competency, ability to meet deadlines, quality and quantity of human resource allocated to perform audit, work method used and cost of audit, the Audit Committee recommended their re-appointment decision to the Board, upon which the shareholders’ approval will be sought at the Annual General Meeting.



6. RECOGNISE AND MANAGE RISKS

6.1 Sound Framework to Manage Risks

The risk management and internal control system is regularly reviewed by Management and relevant recommendations are made to the Audit Committee and Board for approval. The Company continues to maintain and review its internal control procedures to ensure that its assets and its shareholders’ investments are protected.

6.2 Internal Audit Function

The Group’s internal audit function was outsourced to a professional audit firm who reports to the Audit Committee.

Details of the Group’s risk management and internal control system are set out in the Statement on Risk Management and Internal Control of this Annual Report.

7. ENSURE TIMELY AND HIGH QUALITY DISCLOSURE

7.1 Corporate Disclosure Policy

The Group has in place policies and procedures for compliance with the Listing Requirements. Persons responsible for preparing the disclosure will conduct proper verification, as well as coordinate the efficient disclosure of material information to the investing public. The Board is mindful that information which is expected to be material must be announced immediately to Bursa Securities.

7.2 Leverage on Information Technology for Effective Dissemination of Information

The Group maintains a corporate website at www.xingquan-international.com which provides information relating to annual reports, press releases, quarterly results, announcements and product information. In line with the Code, the Board Charter, Code of Conduct and other relevant documents or reports relating to Corporate Governance would be made available on the aforesaid website.

8. STRENGTHEN RELATIONSHIP BETWEEN COMPANY AND SHAREHOLDERS

8.1 Encourage Shareholder Participation at General Meeting

The Board acknowledges that general meetings are important avenues in engaging with shareholders and they provide a platform for Board dialogue and interaction with shareholders and investors who may seek clarification on the Group’s business, performance and prospects. Shareholders are notified of the AGM and provided with a copy of the Company’s Annual Report at least twenty-one (21) days before the meeting. At the AGM, shareholders are encouraged to ask questions or seek clarifications on the agenda of the meeting. All Directors are available to respond to questions from shareholders during the meeting. The external auditors are also present to provide professional and independent clarification on issues and concerns raised by the shareholders.



8. STRENGTHEN RELATIONSHIP BETWEEN COMPANY AND SHAREHOLDERS (CONT’D)

8.2 Encourage Poll voting

The rights of shareholders, including the right to demand for a poll, are found in the Bye-laws of the Company. At the Seventh Annual General Meeting of the Company held on 31 December 2015, the Director had notified the shareholders of their right to demand a poll vote at the commencement of the Annual General Meeting.

Following the amendments to the Listing Requirements in early 2016, going forward, all proposed resolutions put forth at general meetings will be decided by way of poll.

8.3 Effective Communication and Proactive Engagement

The Board recognises the importance of effective communication with shareholders. Quarterly reports on the Group’s results and announcements can be accessed from Bursa Securities’ website. The AGM is the main forum for dialogue with shareholders.

Any enquiry regarding the Company and its group of companies may be sent to [email protected]



The Audit Committee was established to act as a Committee of the Board of Directors (“Board”) with the objective of assisting the Board in the areas of corporate governance, systems of internal controls, risk management and financial reporting of the Group.

COMPOSITION

The composition of the Audit Committee must fulfil the following requirements:

• TheAuditCommitteemustbecomprisedofnofewerthan3members;• TheChiefExecutiveOfficer,ManagingDirectorandalternatedirectorsshallnotbeappointedasmembersofthe

AuditCommittee;• AuditCommitteemembersmustbenon-executivedirectors,withthemajoritybeingindependentdirectors;• ThemembersoftheAuditCommitteeshallelectachairman,whoshallbeanindependentdirectorfromamong

theirmembers;• AtleastonememberoftheAuditCommittee:

- mustbeamemberoftheMalaysianInstituteofAccountants;or- musthavepassedtheexaminationsspecifiedinpartIofthe1stScheduleoftheAccountantsAct1967;or- must be a member of one of the associations of accountants specified in Part II of the 1st Schedule of the

AccountantsAct1967;or- fulfils such other requirements as prescribed by the Bursa Malaysia Securities Berhad.

The terms of reference of Audit Committee can be found at the Company’s website at www.xingquan-international.com.

Summary of work of the Audit Committee

The following activities were carried out by the Audit Committee during the financial year under review:

i. Reviewed the audit plan with the external auditors for the statutory audit of the Group’s financial statements for thefinancialyearended30June2016;

ii. Reviewedanychangesinmajoraccountingpolicies;

iii. Reviewedanysignificantorunusualevents;

iv. Reviewed and assessed internal audit plan, scope of work to be performed by internal auditors, internal audit findingsandareasforimprovementandrecommendations;

v. Reviewedthecompliancewithaccountingstandardsandotherlegalrequirements;

vi. Reviewed the unaudited quarterly financial statements including the audited year end financial statements to ensure adequacy of the disclosure of information essential for a fair and true presentation of the financial affairs oftheGroupbeforerecommendingtotheBoardforapproval;

vii. Discussed and reviewed the Group’s audited year end financial statements together with the report of the Audit Committee with the external auditors in relation to the significant matters noted in the course of the audit of the Group’sfinancialstatementsaswellasnewdevelopmentonaccountingstandardsandregulatoryrequirements;and

viii. Consideredtheappointmentofexternalauditorsandtheirremunerations;and

ix. Reviewed the annual operations budget of the Group.

aUDIt COMMITTEE REPORT


audit Committee Report (cont’d)

Summary of work of the Internal Audit Function

The Group outsources the internal audit function to an external professional firm. The outsourced internal audit function reports independently to the Audit Committee and its role encompasses the examination and evaluation of the adequacy and effectiveness of the Group’s system of internal controls to provide reasonable assurance to the members of the Audit Committee.

The Group had a 3 years internal audit plan for FYE2014-2016 whereby it will audit the 3 main areas, Procurement/Capital Expenditure, Sales, Credit Control and Collection, Inventory Management and Human Resources. The internal audit activities carried out for the financial year ended 30 June 2016 include the following:

i. Reviewedthesystemofinternalcontrolsandkeyoperatingprocesses;

ii. Issuedreportsincorporatinginternalauditfindings,auditrecommendationsandmanagementresponse;

iii. Followed-upontheimplementationofcorrectiveactionplansorbestpracticesagreedwithmanagement;and

iv. Attended Audit Committee meetings to table and discuss the internal audit reports and followed up on matter raised.

At the Audit Committee meeting held in August 2016, the Audit Committee had requested for a 3 years internal audit cycle on eight (8) additional areas.

MEETINGS

The Audit Committee shall meet at least 4 times a year and such additional meetings as the Chairman shall decide in order to fulfil its duties. However, at least twice a year the Audit Committee shall meet with the external auditors without executive Board members present.

In addition, the Chairman may call a meeting of the Audit Committee if a request is made by any committee member, the Company’s Chief Executive, or the internal or external auditors.

The Company Secretary or other appropriate senior official shall act as secretary of the Audit Committee and shall be responsible, in conjunction with the Chairman, for drawing up the agenda and circulating it, supported by explanatory documentation to committee members prior to each meeting. The Secretary shall also be responsible for keeping the minutes of meetings of the Audit Committee, and circulating them to committee members and to the other members of the Board of Directors.

A quorum shall consist of a majority of independent directors.

By invitation of the Audit Committee, the Company must ensure that other directors and employees attend any particular Audit Committee meeting specific to the relevant meeting.

During the financial year under review, five (5) Audit Committee meetings were held and the summary of attendance by the members of the Audit Committee is as follows:

Audit Committee Members No. of meetings attended

Tan Eng Choon 5/5Zhou Liyi 5/5Dato’Haji Ramly bin Haji Zahari (appointed on 1 September 2015) 3/4


The Statement on Risk Management and Internal Control is made in accordance with Paragraph 15.26(b) of the Listing Requirements, the Statement on Risk Management and Internal Control: Guidelines for Directors of Listed Issuers and the Code.

The Board of Directors (“Board”) of Xingquan International Sports Holdings Limited is committed to maintain a sound, efficient and effective risk management and internal control and is pleased to provide the following statement which outlines the nature and scope of the Group’s risk management and internal control during the financial year under review.

BOARD’S ROLES AND RESPONSIBILITIES

The Board acknowledges their responsibility under the Listing Requirements to:

• Reviewtheriskmanagement framework,processesandresponsibilities toprovidereasonableassurance thatrisks are managed within tolerable ranges and embed risk management in all aspects of business activities via identifying principal risks and ensure implementation of appropriate control measures to manage the risks.

• Review theadequacyand integrityof the internalcontrol systemandmanagement informationsystemsandsystems for compliance with applicable laws, regulations, rules, directives and guidelines.

The Board confirms that there is an ongoing risk management process established to identify, evaluate, and manage significant risks to effectively mitigate the risks that may impede the achievement of the Group’s business and corporate objectives. It should be noted that an internal control system is designed to manage risks rather than eliminate them, and can provide only reasonable but not absolute assurance against any material misstatement or loss.

The review of the risk management and internal control reports and processes is delegated by the Board to the Audit Committee. The Audit Committee, assisted by Internal Auditors, provides independent assurance of the adequacy and reliability of the risk management processes and system of internal controls.

MANAGEMENT’S ROLES AND RESPONSIBILITIES

Management is accountable to the Board for the risks assumed under its respective areas of responsibility as well as for the execution of appropriate risk management discipline in line with risk management approved by the Board, aided by supporting guidelines, procedures and standards.

The Management is also responsible to:

• Identifytherisksrelevanttothebusinessoftherespectivecompaniestoachievetheirobjectives;

• Undertakeimplementationandmaintenanceoftheriskmanagementprocess;

• Ensuretheeffectivenessoftheriskmanagementprocessandimplementationofriskmanagementpolicies;and

• Identifysignificantchangestoriskoremergingrisks,takeactionsasappropriatetocommunicatetotheAuditCommittees and Board of Directors.

This risk management system is reviewed periodically to ensure it is relevant and adequate to manage the Group’s risks, which continue to evolve along with the changing business environment.

statement on RISK MANAGEMENT AND INTERNAL CONTROL


INTERNAL AUDIT’S ROLE

Internal auditing is an independent and objective assurance and consulting activity designed to add value and improve a company’s operation. It helps a company accomplish its objectives by bringing a systematic, disciplined approach to evaluate and improve the effectiveness of risk management, control and governance process. The internal audit function of the Group was outsourced to a professional service firm (“Internal Auditors”).

The Internal Auditors adopted a risk-based approach in undertaking the internal audits for the Group which involved the establishment of a comprehensive audit plan formulated through a risk assessment process, and included conducting necessary consultation sessions with the senior management and staff in order to identify the relevant risks faced by the Group. Comprehensive audit programs are then developed in order to identify any lapses in the system of internal controls.

The internal audit function independently focuses on the key areas of business risk based on a work programme agreed with the Audit Committee, and reports on the systems of financial and operational controls to the Audit Committee. The Internal Auditor advises management on areas for improvement and subsequently reviews the degree to which its recommendations have been implemented. The degree of compliance will be reported to the Audit Committee. The Audit Committee in turn reviews the effectiveness of the system of internal controls in operation and reports the results to the Board.

RISK MANAGEMENT FUNCTION

The Board recognises that risk management is a vital and integral part of the business operations. The Board acknowledges that all areas of the Group’s business activities involve some degree of risk and it is committed to ensure that the Group has an effective risk management framework, which allows the management to manage risk within defined risk parameters. Management is responsible for reviewing risks on an ongoing basis so that risks that may impede the achievement of objectives are adequately identified, evaluated, managed and controlled. All identified risks are dealt with and managed within limits and controls. These limits and controls are monitored closely and adjusted periodically, taking into account changes in market conditions, procedures and processes.

On a half yearly basis, Management prepares a report detailing the significant risks, the status of risk reviews and the status of implementation of action plans for review by the Audit Committee.

INTERNAL CONTROL FUNCTION

An internal control system encompasses the Group’s policies, processes, tasks, behavior and other aspects to facilitate an effective and efficient operation. It helps to ensure the quality of internal and external reporting by maintenance of proper record and processes that generate a flow of timely, relevant and reliable information from within and outside the company. It helps to ensure compliance with applicable laws and regulations and also with internal policies with respect to the conduct of business.

The key elements of the Group’s internal control processes are described below:

- A well defined organisational structure with clear lines of accountability that sets out the authority delegated to the Board and management committees.

- There is a clearly defined delegation of responsibilities to the Audit Committee and the management of the holding company and operating units who ensure that appropriate control procedures are in place.

- Performance reports such as quarterly financial review and other corporate matters are regularly provided to the directors and discussed at Board Meetings.

statement on Risk management and Internal Control (cont’d)


INTERNAL CONTROL FUNCTION (CONT’D)

- Adequate insurance coverage and physical safeguards on major assets to ensure the Group’s assets are sufficiently covered against any mishap that could result in material losses to the Group. An annual assessment and renewal exercise is undertaken in which Management reviews the coverage based on the current fixed assets inventory and the respective replacement value.

- Management meetings are regularly held to discuss and report on the operational performance, business strategy, key information, legal and regulatory matters of each business unit where plans and targets are established for business planning and budgeting process.

- The Audit Committee, on behalf of the Board, reviews and holds discussion with Management to deliberate on action plans addressing the internal controls issues identified by the external auditors.

- The Audit Committee, on behalf of the Board, considers the effectiveness of the operation of the internal control procedures in the Group during the financial year. The Audit Committee reviews internal control issues identified by management and evaluates the effectiveness of the Group’s risk management and internal control system.

- The Group has engaged an external professional firm to carry out the internal audit function. The Internal Audit function reports directly to the Audit Committee, carries out review of business processes to assess the effectiveness of the internal control and highlights any significant risk that may adversely affect the Group. The Audit Committee reviews and discusses with key management on the issues brought up by the Internal Auditors. The cost incurred by the Group for the internal audit function for the financial year ended 30 June 2016 was RMB20,000.

REvIEW OF THIS STATEMENT BY EXTERNAL AUDITORS

The External Auditors had reviewed this Statement on Risk Management and Internal Control for inclusion in the Annual Report for the financial year ended 30 June 2016 and reported to the Board that nothing had come to their attention that caused them to believe that the Statement on Risk Management and Internal Control was inconsistent with their understanding of the process the Board has adopted in the review of the adequacy and integrity of internal controls of the Group.

Recommended Practice Guide 5 (Revised 2015), Guidance for Auditors on Engagements to Report on the Statement on Risk Management and Internal Control (“RPG 5”) does not require the External Auditors to consider whether the Directors’ Statement on Risk Management and Internal Controls covers all risks and controls, or to form an opinion on the effectiveness of the Group’s risk and control procedures.

CONCLUSION

The Board has received assurance from the Chief Executive Officer and Chief Financial Officer that the Company’s risk management and internal control system is operating adequately and effectively in all material aspects, based on the risk management and internal controls framework adopted by the Group.

The Board is of the view that the Group’s system of risk management and internal controls in place for the year under review and up to the date of approval of this Statement, is adequate in safeguarding the shareholders’ investments, the interests of customers, regulators, employees and other stakeholders, and the Group’s assets. The Board acknowledges that there is an effective ongoing process for identification, evaluation and management of significant risks in the Group and is committed to continue to review the operations and effectiveness of the Group’s internal control including financial, operational, compliance and risk management.

The above statement is made in accordance with the resolution of the Board dated 19 October 2016.

statement on Risk management and Internal Control (cont’d)


aDDItIonal COMPLIANCE INFORMATION

1. UTILISATION OF PROCEEDS

The Group issued 147,106,235 ordinary shares of USD0.01 each (“Shares”), which was listed on Bursa Malaysia on 6 April 2016 and the utilisation of proceeds is as follows:

Proposed Proceeds Amount Intended Raised UtilisedPurpose Timeframe (RM’000) (RM’000)

Business Expansion Within 18 months 43,132 –Expense for the proposal Within 1 month 1,000 1,000

Total 44,132 1,000

2. AUDIT AND NON-AUDIT FEES

The audit fee for the Company and Group amounts to RM450,000 while the non-audit fee for reviewing the Statement on Risk Management and Internal Control for the financial year ended 30 June 2016 amounts to RM25,000, both payable to the External Auditors, SJ Grant Thornton.

3. MATERIAL CONTRACT

There was no other material contract entered into by company and/or its subsidiary company which involves Directors’, Chief Executive(s) and major shareholders’ interests during the financial year ended 30 June 2016.

4. CORPORATE SOCIAL RESPONSIBILITY

As our Group expands our business, we believe that our responsibility as a member of the community increases in aspects such as public welfare, environmental protection and education. We are committed to play our part in discharging our corporate social responsibility.

Legal Compliance

Our Group has been in compliance with laws and regulations and has settled the tax payments on a timely basis. During the financial year, our Group was not involve in any significant litigation, arbitrations or claims.

Protecting Labour Rights

Our Group complies with the laws, regulations and industry rules, such as entering into employment contracts, providing welfare for staff and relevant insurance. Our Group prohibits child lab or employment and forced labour while upholding gender equality and “equal work, equal pay” employment policies.

In addition, to protect the safety and health of the staff, our Group has set out safety guidelines and provides related trainings on occupational safety.

Environmental

Our Group complies with the applicable environmental regulations and rules, and have received all necessary permissions and approvals from the relevant regulatory authorities necessary for our business. The Group has passed the ISO14001:2004 Environmental Management System Certification for the Design, Production and Correlative Management Activities GYM Shoes and Liefallow Shoes.

We have worked with the relevant government agencies to provide jobs to the minority group.


FINANCIAL STATEMENTS

39 Directors’ Report

43 Statement by Directors

43 Statutory of Declaration

44 Independent Auditors’ Report

46 Consolidated Statement of Financial Position 47 Consolidated Statement of Profit or Loss and Other Comprehensive Income

48 Consolidated Statement of Changes in Equity

49 Consolidated Statement of Cash Flows

50 Notes to the Financial Statements

The Directors hereby submit their report together with the audited financial statements of the Group for the financial year ended 30 June 2016.

PRINCIPAL ACTIvITIES

The principal activity of the Company is investment holding. The principal activities of its subsidiaries are disclosed in Note 21 to the financial statements.

There have been no significant changes in the nature of these activities of the Company and of its subsidiaries during the financial year.

RESULTS

RMB’000 Loss for the financial year attributable to owners of the Company 542,102

There were no material transfers to or from reserves or provisions during the financial year, other than as disclosed in the financial statements.

In the opinion of the Directors, the results of the operations of the Group during the financial year were not substantially affected by any item, transaction or event of a material and unusual nature except for provision for doubtful debts amounted to RMB157,455,000 and gross loss arose from a contract to supply tailored-made shoes amounted to RMB415,718,000.

DIvIDENDS

There were no dividends proposed, declared or paid by the Company since the end of the previous financial year.

DIRECTORS

Directors who served since the date of the last report are:-

Dato’ Wu Qingquan Wu Lianfa Ng Sio Peng Zhou LiyiTan Eng ChoonDato’ Haji Ramly Bin Haji Zahari

DIRECTORS’ BENEFITS

During and at the end of the financial year, no arrangements subsisted to which the Company is a party, with the object or objects of enabling Directors of the Company to acquire benefits by means of the acquisition of shares in or debentures of the Company or any other body corporate.

Since the end of the previous financial year, no Director has received or become entitled to receive any benefit (other than a benefit included in the aggregate amount of emoluments received or due and receivable by Directors as shown in the financial statements) by reason of a contract made by the Company or a related corporation with the Director or with a firm of which the Director is a member, or with a company in which the Director has a substantial financial interest.


DIReCtoRs’ REPORT for the financial year ended 30 June 2016

DIRECTORS’ INTEREST

According to the Register of Directors’ Shareholdings, none of the Directors who held office at the end of the financial year had interests in shares or debentures of the Company or of its related corporations, except as follows:-

Holdings in which Holdings registered Director is deemed in the name of Director to have an interest The Company XingquanInternational Sports As at As at As at As atHoldings Limited 1.7.2015 Bought 30.6.2016 1.7.2015 Sold Bought 30.6.2016

Number of ordinary shares

Ng Sio Peng(1) – – – 179,608,411 – 89,804,205 269,412,616Dato’ Wu Qingquan 35,000 17,500 52,500 – – – –

Number of Warrant A

Ng Sio Peng(1) – – – 38,697,605 (38,600,000) 13,475 ∆ 111,080Dato’ Wu Qingquan 10,000 1,380 ∆ 11,380 – – – –

∆ Adjusted for the effects of the Rights Issue with Warrants during the financial year.

Holdings in which Holdings registered Director is deemed in the name of Director to have an interestThe CompanyXingquan International As at As at As at As atSports Holdings Limited 1.7.2015 Bought 30.6.2016 1.7.2015 Bought 30.6.2016

Number of Warrant B

Ng Sio Peng(1) – – – – 29,394,735 29,394,735Dato’ Wu Qingquan – 5,833 5,833 – – –

(1) Deemed interest by virtue of her substantial interest in Tai Zhen Xiang Holdings Limited.

ISSUE OF SHARES AND DEBENTURES

On 10 February 2016, the Company had made a par value reduction on its issued and paid-up ordinary share capital from USD33,806,300 divided into 338,063,000 issued and paid-up ordinary shares of USD0.10 each to USD3,380,630 divided into 338,063,000 issued and paid-up ordinary shares of USD0.01 each. As a result of the par value reduction, the authorised ordinary share capital of the Company was reduced from USD100,000,000 divided into 1,000,000,000 ordinary shares of USD0.10 each to USD10,000,000 divided into 1,000,000,000 ordinary shares of USD0.01 each. At the same time, the Company had increased the authorised share capital of the Company from USD10,000,000 divided into 1,000,000,000 ordinary shares of USD0.01 each to USD100,000,000 divided into 10,000,000,000 ordinary shares of USD0.01 each by creating 9,000,000,000 ordinary shares of USD0.01 each.

On 6 April 2016, the Company had increased its issued and paid-up ordinary share capital from USD3,380,630 to USD4,851,692 by way of issuance of 147,106,235 issued and paid-up ordinary shares of USD0.01 each pursuant to the Rights Issue of 147,106,235 new issued and paid-up ordinary shares of USD0.01 each (“Rights Shares”) at an issue price of RM0.30 per rights share together with 49,035,342 free warrants (“Warrant B”) on the basis of one Warrant B for every three existing issued and paid-up ordinary shares held. (“Rights Issue with Warrants”)

There were no issuance of debentures during the financial year.


Directors’ Report (cont’d)

WARRANTS

On 6 April 2016, pursuant to Rights Issue with Warrants, the Company issued a total of 49,035,342 Warrant B as well as additional 23,329,593 Warrant A as a consequential to the Rights Issue with Warrants.

The salient features of the Warrants A and B are disclosed in Note 10 to the financial statements.

OTHER STATUTORY INFORMATION

Before the financial statements of the Group were made out, the Directors took reasonable steps:-

(a) to ascertain that action had been taken in relation to writing off of bad debts and the making of provision for doubtful debts and satisfied themselves that adequate provision had been made for doubtful debts and there were nobaddebtstobewrittenoff;and

(b) to ensure that any current assets which were unlikely to be realised in the ordinary course of business including their values as shown in the accounting records of the Group have been written down to an amount which they might be expected so to realise.

At the date of this report, the Directors are not aware of any circumstances:-

(a) which would render it necessary to write off any bad debts or the amount of the provision for doubtful debts in thefinancialstatementsoftheGroupinadequatetoanysubstantialextent;or

(b) whichwouldrenderthevaluesattributedtocurrentassetsinthefinancialstatementsoftheGroupmisleading;or

(c) which have arisen which render adherence to the existing method of valuation of assets or liabilities of the Group misleadingorinappropriate;or

(d) not otherwise dealt with in this report or the financial statements which would render any amount stated in the financial statements misleading.

At the date of this report, there does not exist:-

(a) any charge on assets of the Group which has arisen since the end of the financial year which secures the liability ofanyotherperson;or

(b) any contingent liability of the Group which has arisen since the end of the financial year.

In the opinion of the Directors:-

(a) no contingent liability or other liability has become enforceable or is likely to become enforceable within the period of twelve months after the end of the financial year which, in the opinion of the Directors, will or may affecttheabilityoftheGrouptomeettheirobligationsasandwhentheyfalldue;and

(b) there has not arisen in the interval between the end of the financial year and the date of this report any item, transaction or event of a material and unusual nature likely to affect substantially the results of the operations of the Group for the current financial year in which this report is made.



SIGNIFICANT EvENTS DURING THE FINANCIAL YEAR

The significant events during the financial year are disclosed in Note 25 to the financial statements.

AUDITORS

The auditors, Messrs SJ Grant Thornton, have expressed their willingness to continue in office.

On behalf of the Board of Directors

DATO’ WU QINGQUAN

WU LIANFA

Dated: 30 September 2016



In the opinion of the Directors, the accompanying consolidated statement of financial position, consolidated statement of profit or loss and other comprehensive income, consolidated statement of changes in equity and consolidated statement of cash flows, together with the notes thereon, are drawn up in accordance with International Financial Reporting Standards so as to give a true and fair view of the financial position of the Group as at 30 June 2016 and of their financial performance and cash flows of the Group for the financial year ended on that date, and at the date of this statement, there are reasonable grounds to believe that the Group will be able to pay its debts as and when they fall due.

In the opinion of the Directors, the supplementary information set out on Note 26 in page 80 to the financial statements has been compiled in accordance with the Guidance on Special Matter No.1, Determination of Realised and Unrealised Profits or Losses in the Context of Disclosure Pursuant to Bursa Malaysia Securities Berhad Listing Requirements, issued by the Malaysian Institute of Accountants, and presented based on the format prescribed by Bursa Malaysia Securities Berhad.

On behalf of the Board of Directors

DATO’ WU QINGQUAN

WU LIANFA

Dated: 30 September 2016

statUtoRy DECLARATION for the financial year ended 30 June 2016

Pursuant to Paragraph 9.27 of the Main Market Listing Requirements of Bursa Malaysia Securities Berhad:

I, Teo Cern Yong, being the Officer primarily responsible for the financial management of Xingquan International Sports Holdings Limited, do solemnly and sincerely declare that the financial statements set out on pages 46 to 79 and the supplementary information set out on page 80 are in my opinion correct and I make this solemn declaration conscientiously believing the same to be true and by virtue of the Statutory Declarations Act, 1960.

Subscribed and solemnly declared by the abovementionedat Kuala Lumpur in the Federal Territory this day of 30 September 2016

TEO CERN YONG

Before me:

S.ARULSAMYW490Commissioner for Oaths

statement BY DIRECTORSfor the financial year ended 30 June 2016


REPORT ON THE FINANCIAL STATEMENTS

We have audited the financial statements of Xingquan International Sports Holdings Limited, which comprise consolidated statement of financial position as at 30 June 2016 of the Group, consolidated statement of profit or loss and other comprehensive income, consolidated statement of changes in equity and consolidated statement of cash flows of the Group for the financial year then ended, and a summary of significant accounting policies and other explanatory information, as set out on pages 46 to 79.

Directors’ Responsibility for the financial statements

The Directors of the Company are responsible for the preparation of financial statements so as to give a true and fair view in accordance with International Financial Reporting Standards. The Directors are also responsible for such internal control as the Directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud and error.

auditors’ Responsibility

Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with International Standards on Auditing. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on our judgement, including the assessment of risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, we consider internal control relevant to the entity’s preparation of financial statements that gives a true and fair view 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 statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

opinion

In our opinion, the financial statements give a true and fair view of the financial position of the Group as at 30 June 2016 and the financial performance and cash flows of the Group for the financial year then ended in accordance with International Financial Reporting Standards.

other Reporting Responsibilities

The supplementary information set out on Note 26 in page 80 to the financial statements is disclosed to meet the requirement of Bursa Malaysia Securities Berhad and is not part of the financial statements. The Directors are responsible for the preparation of the supplementary information in accordance with Guidance on Special Matter No. 1, Determination of Realised and Unrealised Profits or Losses in the Context of Disclosure Pursuant to Bursa Malaysia Securities Berhad Listing Requirements, as issued by the Malaysian Institute of Accountants (“MIA Guidance”) and the directive of Bursa Malaysia Securities Berhad. In our opinion, the supplementary information is prepared, in all material respects, in accordance with the MIA Guidance and the directive of Bursa Malaysia Securities Berhad.

InDePenDent AUDITORS’ REPORTto the members of Xingquan International sports Holdings limited


REPORT ON THE FINANCIAL STATEMENTS (CONT’D)

other matters

This report is made solely to the members of the Company, as a body, and for no other purpose. We do not assume responsibility to any other person for the content of this report.

SJ GRANT THORNTON(NO. AF: 0737)CHARTERED ACCOUNTANTS

OOI POH LIM(NO: 3087/10/17(J))CHARTERED ACCOUNTANT

Kuala Lumpur30 September 2016

Independent auditors’ Report (cont’d)


30 June 2016 30 June 2015 Note RMB’000 RMB’000

ASSETSNon-current assetsLand use rights 4 12,424 12,707Property, plant and equipment 5 225,353 250,419

237,777 263,126

Current assetsInventories 6 29,251 44,055Trade and other receivables 7 119,217 253,536Cash and bank balances 8 1,141,751 1,456,947

1,290,219 1,754,538

Total assets 1,527,996 2,017,664

EQUITY AND LIABILITIESCapital and reservesShare capital 9 31,699 230,886Reserves 10 1,407,930 1,690,525

Total equity 1,439,629 1,921,411

Non-current liabilityDeferred tax liability 11 3,465 3,233

Current liabilitiesTrade and other payables 12 66,615 68,017Borrowings 13 18,000 18,000Current tax payable 287 7,003

84,902 93,020

Total liabilities 88,367 96,253

Total equity and liabilities 1,527,996 2,017,664

Approved by the Board of Directors and signed on its behalf by:

Dato’ Wu Qingquan Wu LianfaDirector Director

Date: 30 September 2016 Date: 30 September 2016

ConsolIDateD statement OF FINANCIAL POSITIONas at 30 June 2016


Financial Financial year ended year ended 30 June 2016 30 June 2015 Note RMB’000 RMB’000

Revenue 3 686,111 1,292,858Cost of sales (921,690) (824,449)

Gross (loss)/profit (235,579) 468,409Other income 3 14,379 50,671Selling and distribution expenses (99,612) (142,908)Administrative expenses (197,771) (49,191)Finance costs 14 (916) (1,067)

(Loss)/Profit before tax 15 (519,499) 325,914Tax expense 16 (22,603) (75,378)

(Loss)/Profit for the financial year attributable to owners of the Company (542,102) 250,536

Other comprehensive loss:Item that may be subsequently reclassified to profit or lossCurrency translation differences (11,553) (45,207) Total comprehensive (loss)/income attributable to the owners of the Company (553,655) 205,329

(Losses)/Earnings per share (RMB cents)- Basic 17 (145.42) 74.11

Approved by the Board of Directors and signed on its behalf by:

Dato’ Wu Qingquan Wu LianfaDirector Director

Date: 30 September 2016 Date: 30 September 2016

ConsolIDateD statement of PRofIt oR lossAND OTHER COMPREHENSIvE INCOME

for the financial year ended 30 June 2016


ConsolIDateD statementOF CHANGES IN EQUITYfor the financial year ended 30 June 2016

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Financial Financial year ended year ended 30 June 2016 30 June 2015 Note RMB’000 RMB’000

Operating activities(Loss)/Profit before tax (519,499) 325,914Adjustments for:- Amortisation of land use rights 4 283 283Depreciation 5 23,260 24,912Interest expense 14 916 1,067Loss on disposal on property, plant and equipment 15 1,138 728Provision for doubtful debts 7 157,455 –Property, plant and equipment written off 5 932 120Unrealised gain on foreign exchange differences 3 (10,083) (45,830)Interest income 3 (4,296) (4,618)

Operating (loss)/profit before working capital changes (349,894) 302,576Decrease/(Increase) in inventories 14,804 (1,796)(Increase)/Decrease in receivables (22,289) 102,865(Decrease)/Increase in payables (2,658) 10,340

Net cash (used in)/from operations (360,037) 413,985Interest paid 14 (916) (1,067)Income tax paid (29,319) (80,885)Interest received 3 4,296 4,618

Net cash (used in)/from operating activities (385,976) 336,651

Investing activitiesAcquisition of property, plant and equipment 5 (1,870) (25,206)Proceeds from disposal of property, plant and equipment 759 639

Net cash used in investing activities (1,111) (24,567)

Financing activitiesDrawdown of bank loans 18,000 18,000Repayment of bank loans (18,000) (18,000)Dividends paid 18 – (11,375)Proceeds from rights issue with warrants, net of shares issuance expenses 71,873 –

Net cash from/(used in) financing activities 71,873 (11,375)

Net (decrease)/increase in cash and cash equivalents (315,214) 300,709Translation differences 18 (5)Cash and cash equivalents at beginning 1,456,947 1,156,243

Cash and cash equivalents at end 8 1,141,751 1,456,947

ConsolIDateD statement of PRofIt oR lossOF CASH FLOWS

for the financial year ended 30 June 2016


1 GENERAL INFORMATION

The financial statements of the Group for the financial year ended 30 June 2016 were authorised for issue in accordance with a resolution of the Directors on the date of the Statement by Directors.

The Company (Bermuda Company Registration No. 42756 and Malaysia Foreign Company Registration No. 995177-V) was incorporated in Bermuda on 15 December 2008 under the Bermuda Companies Act as an exempted company with limited liability under the name of Xingquan International Sports Holdings Limited and was listed on the Main Market of Bursa Malaysia Securities Berhad on 10 July 2009.

The registered office of the Company in Bermuda and Malaysia are Clarendon House, 2 Church Street, Hamilton, HM 11, Bermuda and 802, 8th Floor, Block C Kelana Square, 17 Jalan SS7/26, 47301 Petaling Jaya, Selangor Darul Ehsan, Malaysia respectively. The principal places of business of the Company are located at South China Industrial Zone, Huian, Quanzhou City, Fujian Province 362100, the People’s Republic of China (“PRC”) and Houyang Industrial Zone, Yanshang Village, Chendai Town, Jinjiang City, Quanzhou City, Fujian Province 362211, PRC.

2(A) BASIS OF PREPARATION

The financial statements are prepared in accordance with International Financial Reporting Standards (“IFRS”). These financial statements have been prepared under the historical cost convention, except as disclosed in the accounting policies below.

The Group’s principal operations are conducted in the PRC and thus the financial statements are presented in Renminbi (RMB) and all values are rounded to the nearest thousand (RMB’000) except when otherwise stated.

Fair value

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, regardless of whether that price is directly observable or estimated using another valuation technique. In estimating the fair value of an asset or a liability, the Group takes into account the asset or liability at the measurement date. Fair value for measurement and/or disclosure purpose in these consolidated financial statements is determined in such a basis except for measurements that have some similarities to fair value but are not fair value such as net realisable value in IAS 2 or value in use in IAS 36.

In addition, for financial reporting purposes, fair value measurement are categorised into Level 1, 2 or 3 based on the degree to which it inputs to the fair value measurement, in its entirely, which are described below:-

- Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access at the measurement date,

- Level 2 inputs are inputs, other than quoted prices within Level 1, that are observable for the assets or liabilities either directly or indirectly, and

- Level 3 inputs are unobservable inputs for the assets or liabilities.

notes to tHe FINANCIAL STATEMENTSfor the financial year ended 30 June 2016


notes to the financial statements (cont’d)

2(A) BASIS OF PREPARATION (CONT’D)

Significant accounting estimates and judgements

The preparation of the financial statements in conformity with IFRS requires the use of judgements, estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the financial year. Although these estimates are based on management’s best knowledge of current events and actions, actual results may differ from those estimates.

The critical accounting estimates and assumptions used and area involving a high degree of judgements are described below:-

Critical assumption used and accounting estimates in applying accounting policies

Depreciation of property, plant and equipment

Property, plant and equipment are depreciated on a straight-line basis over their estimated useful lives. Management estimates the useful lives of property, plant and equipment according to the common life expectancies applied in the industry. The carrying amounts of the Group’s property, plant and equipment as at 30 June 2016 were RMB225,353,000 (30 June 2015: RMB250,419,000). Changes in the expected level of usage and technological developments could impact the economic useful lives and the residual values of these assets, therefore future depreciation charges could be revised.

Income tax

The Group has exposure to income taxes in the PRC. Significant judgement is involved in determining the Group’s provision for income taxes. There are certain transactions and computations for which the ultimate tax determination is uncertain during the ordinary course of business. The Group recognises liabilities for expected tax issues based on estimates of whether additional taxes will be due. Where the final tax outcome of these matters is different from the amounts that were initially recognised, such differences will impact the income tax and deferred tax provisions in the period in which such determination is made.

Provision for inventory obsolescence

The Group reviews the ageing analysis of inventories at each reporting date, and makes provision for obsolete and slow moving inventory items identified that are no longer suitable for sale. The net realisable values for such inventories are estimated based primarily on the latest invoice prices and current market conditions. Possible changes in these estimates could result in revisions to the valuation of inventories.

Provision for bad and doubtful debts

Provision for bad and doubtful debts are based on an assessment of the recoverability of trade and other receivables. Provision are applied to trade and other receivables where events or changes in circumstances indicate that the balances may not be collectible. The identification of bad and doubtful debts requires the use of judgements and estimates. Where the expected outcome is different from the original estimate, such difference will impact carrying value of trade and other receivables and doubtful debt expenses in the period in which such estimate has been changed.

The accounting policies used by the Group have been applied consistently to all periods presented in these financial statements.



2(B) INTERPRETATIONS AND AMENDMENTS TO PUBLISHED STANDARDS EFFECTIvE IN 2016

On 1 July 2015, the Group adopted the new or amended International Accounting Standard (“IAS”), IFRS and International Financial Reporting Interpretations Committee (“IFRIC”) interpretations that are mandatory for application from that date. The nature and effect of each relevant new standard, interpretation and amendment adopted by the Group is detailed below:-

Amendments to IFRS 8 Operating segments

The amendments clarify that an entity must disclose the judgements made by management in applying the aggregation criteria to operating segments, including a brief description of operating segment that have been aggregated and the economic indicators assessed in determining whether the operating segments have similar economic characteristics. The reconciliation of segment assets to total assets is only required to be disclosed if the reconciliation is reported to chief operating decision maker, similar to the required disclosure for segment liabilities.

Amendments to IFRS 13 Fair value measurement

It clarifies in the Basis for conclusion that short-term receivables and payables with no stated interest rates can be measured at invoice amounts when the effect of discounting is immaterial.

Amendments to IAS 16 Property, plant and equipment

The amendment clarifies in IAS 16 that the asset may be revalued by reference to observable data on either the gross or the net carrying amount. In addition, the accumulated depreciation and amortisation is the difference between the gross and carrying amount of the assets.

Amendments to IAS 24 Related party disclosures

The amendement clarifies that a management entity (an entity that provides key management personnel services) is a related party subject to the related party disclosure. In addition, an entity that uses a management entity is required to disclose the expenses incurred for management services.

The above amendments do not have material impact on the financial statements of the Group.

2(C) IFRS NOT YET EFFECTIvE

At the date of authorisation of these financial statements, certain new standards, amendments and interpretations to existing standards have been published by the International Accounting Standards Board (“IASB”) but are not yet effective, and have not been adopted by the Group. Information on these expected to be relevant to the Group’s financial statements is provided below.

Management anticipates that all relevant pronouncements will be adopted in the Group’s accounting policies for the first period beginning after the effective date of the pronouncement. Information on new standards, amendments and interpretations that are expected to be relevant to the Group’s financial statements is provided below. Certain other relevant new standards and interpretations have been issued but are not expected to have a material impact on the Group’s financial statements.



2(C) IFRS NOT YET EFFECTIvE (CONT’D)

IFRS 9 Financial Instruments

IFRS 9 is issued during the financial year, which reflects all phases of the financial instruments project and replaces IFRS 39 Financial Instruments: Recognition and Measurement and all previous version of IFRS 9. The new standard introduces extensive requirements and guidance for classification and measurement of financial assets and financial liabilities which fall under the scope of IFRS 9, new “expected credit loss model” under the impairment of financial assets and greater flexibility has been allowed in hedge accounting transactions.

The Group is currently assessing the financial impact of adopting IFRS 9.

IFRS 15 Revenue from contracts customers

IFRS 15 presents new requirements for the recognition of revenue, replacing the guidance of IFRS 11 Construction Contracts, IFRS 18 Revenue, IC Int 13 Customer Loyalty Programmes, IC Int 15 Agreements for Construction of Real Estate, IC Int 18 Transfers of Assets from Customers and IC Int 131 Revenue – Barter Transaction Involving Advertising Services. The principles in IFRS 15 provide a more structured approach to measuring and recognising revenue. It establishes a new five-step model that will apply to revenue arising from contracts with customers. Under IFRS 15 revenue is recognised at an amount that reflects the consideration to which an entity expects to be entitled in exchange for transferring goods or services to a customer.

The Group is currently assessing the financial impact of adopting IFRS 15. IFRS 16 Leases

IFRS 16 replaces IAS 17 Leases. IFRS 16 eliminates the distinction between finance and operating leases for lessees. As off-balance sheet will no longer be allowed except for some limited practical exemptions, all leases will be brought onto the statements of financial position by recognising a “right-of-use” asset and a lease liability. In other words, for a lessee that has material operating leases, the assets and liabilities reported on its statements of financial position are expected to increase substantially.

The Group is currently assessing the financial impact of adopting IFRS 16.

2(D) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Consolidation

The financial statements of the Group include the financial statements of its subsidiaries made up to the end of the financial year. Information on its subsidiaries is disclosed in Note 21 to the financial statements.

The Group was formed as a result of the reorganisation exercise undertaken in 2009 for the purpose of the Company’s listing on the Main Market of the Bursa Malaysia Securities Berhad. The acquisition of 100% equity in Addnice Holdings Limited by Xingquan International Sports Holdings Limited pursuant to the reorganisation exercise under common control has been accounted for using the pooling-of-interests method of consolidation. Under the pooling-of-interest method, the consolidated financial statements of the Group have been presented as if the Group structure immediately after the reorganisation has been in existence since the earliest financial year presented. The assets and liabilities were brought into the consolidated statement of financial position at their existing carrying amounts. The pooling-of-interest method will continue to be used for the entities in existence up to the Group’s next reorganisation exercise.



2(D) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT’D)

Consolidation (cont’d)

All inter-company balances and significant inter-company transactions and resulting unrealised profits or losses are eliminated on consolidation and the consolidated financial statements reflect external transactions and balances only. The results of subsidiaries acquired or disposed of during the financial year are included or excluded from profit or loss from the effective date in which control is transferred to the Group or in which control ceases, respectively.

Business combination is accounted for using the purchase method. The cost of an acquisition is measured as the fair value of the assets given, equity instruments issued and liabilities incurred or assumed at the date of exchange, plus costs directly attributable to the acquisition. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date, irrespective of the extent of any non-controlling interest.

Any excess of the cost of the business combination over the Group’s interest in the net fair value of the identifiable assets, liabilities and contingent liabilities represents goodwill. The goodwill is accounted for in accordance with the accounting policy for goodwill.

Any excess of the Group’s interest in the net fair value of the identifiable assets, liabilities and contingent liabilities over the cost of business combination is recognised in profit and loss on the date of acquisition.

Where the accounting policies of a subsidiary do not conform to those of the Group, adjustments are made on consolidation when the amounts involved are considered significant to the Group.

Land use rights

Land use rights are stated at cost less accumulated amortisation and impairment losses, if any.

Amortisation is charged so as to write off the cost of land use rights, using the straight-line method, over its remaining useful life of fifty years. Land use rights represent up-front payment to acquire long-term interests in the usage of land.

Property, plant and equipment and depreciation

Property, plant and equipment are stated at cost less accumulated depreciation and impairment losses, if any. Depreciation is computed using the straight-line method to write off the cost of these assets over their estimated useful lives as follows:-

Plant and machinery 5 to 10 yearsFurniture, fixtures and office equipment 5 to 10 yearsMould equipment 5 yearsBuildings 20 years Motor vehicles 10 years

Depreciation methods, useful lives and residual values are reviewed, and adjusted as appropriate, at end of each reporting period as a change in estimates.

The cost of property, plant and equipment includes expenditure that is directly attributable to the acquisition of the items. Dismantlement, removal or restoration costs are included as part of the cost of property, plant and equipment if the obligation for dismantlement, removal or restoration is incurred as a consequence of acquiring or using the asset.




Property, plant and equipment and depreciation (cont’d)

Subsequent expenditure relating to property, plant and equipment that have been recognised is added to the carrying amount of the asset when it is probable that future economic benefits, in excess of the standard of performance of the asset before the expenditure was made, will flow to the Group and the cost can be reliably measured. Other subsequent expenditure is recognised as an expense during the financial year in which it is incurred.

For acquisitions and disposals during the financial year, depreciation is provided from the month of acquisition to the month before disposal respectively. Fully depreciated property, plant and equipment are retained in the books of accounts until they are no longer in use.

Gain or loss arising from the disposal of an asset is determined as the difference between the net disposal proceeds and the carrying amount of the asset, and is recognised in profit or loss.

Subsidiaries

A subsidiary is an entity controlled by the Group. Controls exists when the Group is exposed, or has rights, to variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. Potential voting rights are considered when assessing control only when such rights are substantive. Besides, the Group considers it has de facto power over an investee when, despite not having the majority of voting rights, it has the current ability to direct the activities of the investee that significantly affect the investee’s return.

Financial assets - categorisation and subsequent measurement

Financial assets, other than hedging instruments, can be divided into the following categories: financial assets at fair value through profit or loss, held-to-maturity investments, loans and receivables and available-for-sale financial assets. Financial assets are assigned to the different categories by management on initial recognition, depending on the purpose for which the assets were acquired. The designation of financial assets is re-evaluated and classification may be changed at the reporting date with the exception that the designation of financial assets at fair value through profit or loss is not revocable.

All financial assets are recognised on their trade date - the date on which the Group commits to purchase or sell the asset. Financial assets are initially recognised at fair value, plus directly attributable transaction costs except for financial assets at fair value through profit or loss, which are recognised at fair value and not include directly attributable transaction costs.

Derecognition of financial assets occurs when the rights to receive cash flows from the investments expire or are transferred and substantially all of the risks and rewards of ownership have been transferred. An assessment for impairment is undertaken at least once at the end of each reporting period whether or not there is objective evidence that a financial asset or a group of financial assets is impaired.

Non-compounding interest and other cash flows resulting from holding financial assets are recognised in profit or loss when received, regardless of how the related carrying amount of financial assets is measured.




Financial assets - categorisation and subsequent measurement (cont’d)

Loan and receivables

Loan and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They arise when the Group provides monies, goods or services directly to a debtor with no intention of trading the receivable. They are included in current assets, except for maturities greater than 12 months after the end of the reporting period. These are classified as non-current assets.

Loans and receivables include trade and other receivables. They are subsequently measured at amortised cost using the effective interest method, less provision for impairment. If there is objective evidence that the asset has been impaired, the financial asset is measured at the present value of the estimated future cash flows discounted at the original effective interest rate. Impairment losses are reversed in subsequent periods when an increase in the asset’s recoverable amount can be related objectively to an event occurring after the impairment was recognised, subject to a restriction that the carrying amount of the asset at the date the impairment is reversed does not exceed what the amortised cost would have been had the impairment not been recognised. The impairment or writeback is recognised in profit or loss.

Inventories

Inventories are stated at the lower of cost and net realisable value. Cost is determined using the weighted average method, and includes all costs in bringing the inventories to their present location and condition. In the case of manufactured products, cost includes all direct expenditure and production overheads based on the normal level of activity.

Net realisable value is the estimated selling price in the ordinary course of business less the estimated costs necessary to make the sale.

Cash and cash equivalents

Cash and cash equivalents comprise cash balances and bank deposits.

For the purpose of the consolidated statement of cash flows, cash and cash equivalents are presented net of bank overdrafts which are repayable on demand and which form an integral part of cash management.

Share capital

Ordinary shares are classified as equity. Incremental costs directly attributable to the issuance of new ordinary shares are deducted against the share premium account.

Warrants

The fair value of the warrants arising from the issuance of warrants, net of issue costs, are credited to warrants reserve which is non-distributable. Warrants reserve is transferred to the discount on shares account upon the exercise of warrants and the warrants reserve in relation to the unexercised warrants at the expiry of the warrants will be transferred to discount on shares account.




Dividends

Interim dividends are recognised as liability when they are declared.

Final dividends proposed by the directors are not accounted for in shareholders’ equity as an appropriation of retained profit, until they have been approved by the shareholders in a general meeting. When these dividends have been approved by the shareholders and declared, they are recognised as a liability.

Financial liabilities - categorisation and subsequent measurement

The Group’s financial liabilities include trade payables, accrued liabilities, other payables and bank borrowings.

Financial liabilities are recognised when the Group becomes a party to the contractual agreement of the instruments. All interest related charges are recognised as an expense in “finance costs” in profit or loss. Financial liabilities are derecognised if the Group’s obligations specified in the contract expire or are discharged or cancelled.

Borrowings are recognised initially at the fair value of proceeds received less attributable transaction costs, if any. Borrowings are subsequently stated at amortised cost which is the initial fair value less any principal repayments. Any difference between the proceeds (net of transaction costs) and the redemption value is taken to profit and loss over the period of the borrowings using the effective interest method. The interest expense is charged on the amortised cost over the period of the borrowings using the effective interest method.

Gains and losses are recognised in profit and loss when the liabilities are derecognised as well as through the amortisation process.

Borrowings which are due to be settled within twelve months after the end of the reporting period are included in current borrowings in the consolidated statement of financial position even though the original terms was for a period longer than twelve months and an agreement to refinance, or to reschedule payments, on a long-term basis is completed after the end of the reporting period. Borrowings to be settled within the Group’s normal operating cycle are classified as current. Other borrowings due to be settled more than twelve months after the end of the reporting period are included in non-current borrowings in the consolidated statement of financial position.

Trade and bills payables, accrued liabilities and other payables are initially measured at fair value, and subsequently measured at amortised cost, using the effective interest rate method.

Provisions

Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. Present obligations arising from onerous contracts are recognised as provisions.

The directors review the provisions annually and where in their opinion, the provision is inadequate or excessive, due adjustment is made.

If the effect of the time value of money is material, provisions are discounted using a current pre-tax rate that reflects, where appropriate, the risks specific to the liability. Where discounting is used, the increase in the provision due to the passage of the time is recognised as finance costs.




Contingencies

Where it is not probable that an inflow or an outflow of economic benefits will occur, or the amount cannot be estimated reliably, the asset or the obligation is not recognised in the consolidated statement of financial position and is disclosed as a contingent asset or contingent liability, unless the probability of inflow or 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 assets or contingent liabilities unless the probability of inflow or outflow of economic benefits is remote.

Operating leases

Rentals on operating leases are charged to profit or loss on a straight-line basis over the lease term. Lease incentives, if any, are recognised as an integral part of the net consideration agreed for the use of the leased asset. Penalty payments on early termination, if any, are recognised in profit or loss when incurred.

Income tax

Current income tax for current and prior periods is recognised at the amount expected to be paid to or recovered from the tax authorities, using the tax rates and tax laws that have been enacted or substantively enacted by the end of the reporting period.

Deferred income tax is recognised for all temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the financial statements except when the deferred income tax arises from the initial recognition of goodwill or an asset or liability in a transaction that is not a business combination and affects neither accounting or taxable profit or loss at the time of the transaction.

A deferred income tax liability is recognised on temporary differences arising on investments in subsidiaries, associates and joint ventures, except where the Group is able to control the timing of the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future.

A deferred income tax asset is recognised to the extent that it is probable that future taxable profit will be available against which the deductible temporary differences and tax losses can be utilised.

Deferred income tax is measured:-

(i) at the tax rates that are expected to apply when the related deferred income tax asset is realised or the deferred income tax liability is settled, based on tax rates and tax laws that have been enacted or substantively enactedbytheendofreportingperiod;and

(ii) based on the tax consequence that will follow from the manner in which the Group expects, at the end of reporting period, to recover or settle the carrying amounts of its assets and liabilities.

Current and deferred income taxes are recognised as income or expense in profit or loss, except to the extent that the tax arises from a business combination or a transaction which is recognised either in other comprehensive income or directly in equity. Deferred tax arising from a business combination is adjusted against goodwill on acquisition.




value-added tax (“vAT”)

The Group’s sales of goods in the PRC are subjected to VAT at the applicable tax rate of 17% for PRC domestic sales. Input VAT on purchases can be deducted from output VAT. The net amount of VAT recoverable from, or payable to, the taxation authority is included as part of “other receivables” or “other payables” in the consolidated statement of financial position respectively.

Revenue, expenses and assets are recognised net of the amount of VAT except where:-

• VATincurredonthepurchaseofassetsorservicesisnotrecoverablefromthetaxationauthority,inwhichcase VAT is recognised as part of the cost of acquisition of the assets or as part of the expense item as applicable;and

• ReceivablesandpayablesarestatedwiththeamountofVATincluded.

Employee benefits

Pursuant to the relevant regulations of the PRC government, the Group participates in a local municipal government retirement benefits scheme (the “Scheme”), whereby the subsidiaries in the PRC are required to contribute a certain percentage of the basic salaries of their employees to the Scheme to fund their retirement benefits. The local municipal government undertakes to assume the retirement benefits obligations of all existing and future retired employees of the subsidiaries. The only obligation of the Group with respect to the Scheme is to pay the ongoing required contributions under the Scheme mentioned above. Contributions under the Scheme are charged to profit or loss as incurred. There are no provisions under the Scheme whereby forfeited contributions may be used to reduce future contributions.

Key management personnel

Key management personnel are those persons having the authority and responsibility for planning, directing and controlling the activities of the entity. Directors and certain general managers are considered key management personnel.

Impairment of non-financial assets

The carrying amounts of the Group’s non-financial assets subject to impairment are reviewed at end of each reporting period to determine whether there is any indication of impairment. If any such indication exists, the asset’s recoverable amount is estimated.

If it is not possible to estimate the recoverable amount of the individual asset, then the recoverable amount of the cash-generating unit to which the asset belongs will be identified.

For the purpose of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows (cash-generating units). As a result, some assets are tested individually for impairment and some are tested at cash-generating unit level.

All individual assets or cash-generating units are tested for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable.




Impairment of non-financial assets (cont’d)

An impairment loss is recognised for the amount by which the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of fair value, reflecting market conditions less costs to sell and value-in-use, based on an internal discounted cash flow evaluation. With the exception of goodwill, all assets are subsequently reassessed for indications that an impairment loss previously recognised may no longer exist.

Any impairment loss is charged to profit or loss.

Revenue recognition and cost of sales

Revenue is recognised when the significant risks and rewards of ownership have been transferred to the buyer. Revenue excludes goods and services taxes and is arrived at after deduction of trade discounts. No revenue is recognised if there are significant uncertainties regarding recovery of the consideration due, associated costs or the possible return of goods.

Cost of goods sold includes direct material costs, direct labour costs, design costs and direct manufacturing overheads including depreciation of production equipment and electricity consistent with revenue earned. Cost of goods sold excludes warehousing cost, which historically have not been significant.

Dividend income from investments is recognised gross when the right to receive the dividend has been established.

Interest income is recognised on a time-apportioned basis using the effective interest rate method.

Foreign currencies

Functional and presentation currency

Items included in the financial statements of each entity in the Group are measured using the currency of the primary economic environment in which the entity operates (“functional currency”). The functional currency of the Company is Malaysia Ringgit. The financial statements are presented in Renminbi instead of Malaysia Ringgit as the primary economic environment in which the Group operates is the PRC.

Conversion of foreign currencies

Transactions and balances

Transactions in a currency other than the functional currency (“foreign currency”) are translated into the functional currency using the exchange rates at the dates of the transactions. Currency translation differences from the settlement of such transactions and from the translation of monetary assets and liabilities denominated in foreign currencies at the closing rates at the reporting date are recognised in profit or loss, unless they arise from borrowings in foreign currencies, other currency instruments designated and qualifying as net investment hedges and net investment in foreign operations. Those currency translation differences are recognised in the currency translation reserve in the consolidated financial statements and transferred to profit or loss as part of the gain or loss on disposal of the foreign operation.

Non-monetary items measured at fair values in foreign currencies are translated using the exchange rates at the date when the fair values are determined.

Non-monetary items that are measured in term of historical cost in a foreign currency are translated using the exchange rates at the date of the translation.




Conversion of foreign currencies (cont’d)

Group entities

The results and financial positions of all the entities within the Group that have functional currencies different from the presentation currency are translated into the presentation currency as follows:-

(i) Assetsandliabilitiesaretranslatedattheclosingrateatthereportingdate;

(ii) Income and expenses are translated at average exchange rates (unless this average is not a reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates, in which case income andexpensesaretranslatedatthedatesofthetransactions);and

(iii) All resulting exchange differences are recognised as a separate component of equity.

Operating segments

For management purposes, operating segments are organised based on their products and services which are independently managed by the respective segment managers responsible for the performance of the respective segments under their charge. The segment managers are directly accountable to the chief executive officer who regularly reviews the segment results in order to allocate resources to the segments and to assess segment performance.

Related parties

A related party is a person or entity that is related to the entity that is preparing its financial statement (“the reporting entity”). A related party transaction is a transfer of resources, services or obligations between the reporting entity and its related party, regardless of whether price is charged.

(a) A person or a close member of that person’s family is related to the reporting entity if that person:-

(i) hascontrolorjointcontroloverthereportingentity;(ii) hassignificantinfluenceoverthereportingentity;or(iii) is a member of the key management personnel of the reporting entity.

(b) An entity is related to the reporting entity if any of the following conditions applies:-

(i) theentityandthereportingentityarememberofthesamegroup;(ii) oneentityisanassociateorjointventureofthereportingentity;(iii) boththeentitiesarejointventuresofthesamethirdparty;(iv) oneentityisajointventureofathirdentityandtheotherentityisanassociateofthirdentity;(v) the entity is a post-employment benefit plan for the benefits of employees of either the reporting

entityoranentityrelatedtotheGroup;(vi) the entities controlled or jointly-controlled by a person identified in the preceding paragraph

above;(vii) a person who has control or joint control over the reporting entity has significant influence over the

entityorisamemberofthekeymanagementpersonneloftheentity;or(viii) the entity, or any member of a group of which it is a part, provides key management personnel services

to the Group.



3 REvENUE AND OTHER INCOME

Revenue represents the net invoiced value of goods sold, after allowance for returns and trade discounts.

An analysis of the Group’s revenue and other income is as follows:-

2016 2015 RMB’000 RMB’000RevenueSale of goods 686,111 1,292,858

Other income Interest income 4,296 4,618Realised gain on foreign exchange differences – 223Unrealised gain on foreign exchange differences 10,083 45,830

14,379 50,671

4 LAND USE RIGHTS

Land use rights RMB’000CostAt 1 July 2014, 30 June 2015 and 30 June 2016 14,134

Accumulated amortisationAt 1 July 2014 1,144Amortisation for the financial year 283

At 30 June 2015 1,427Amortisation for the financial year 283

At 30 June 2016 1,710

Net carrying amountAt 30 June 2016 12,424

At 30 June 2015 12,707

2016 2015Amount to be amortised RMB’000 RMB’000

Not later than one year 283 283Later than one year and not later than five years 1,132 1,132Later than five years 11,009 11,292

12,424 12,707

Land use rights represent leasehold interests in land located in Fujian province, PRC.

Then net carrying amount of land use right amounted to RMB32,044 (2015: RMB32,875) is pledged for banking facilities granted to one of the subsidiaries.



5 PROPERTY, PLANT AND EQUIPMENT

Furniture, fixtures Plant and and office Mould Motor machinery equipment equipment Buildings vehicles Total RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000

Cost At 1 July 2014 110,992 4,846 6,862 221,670 1,119 345,489 Additions 24,245 – – – 961 25,206 Disposals (5,091) – – – – (5,091) Written off – – (2,385) – – (2,385)

At 30 June 2015 130,146 4,846 4,477 221,670 2,080 363,219 Additions – – 1,788 – 82 1,870 Disposals (3,549) – – – (961) (4,510) Written off – – (3,729) – – (3,729)

At 30 June 2016 126,597 4,846 2,536 221,670 1,201 356,850

Accumulated depreciation At 1 July 2014 46,869 2,837 4,635 39,075 461 93,877 Depreciation for the financial year 12,137 895 748 11,003 129 24,912 Disposals (3,724) – – – – (3,724) Written off – – (2,265) – – (2,265)

At 30 June 2015 55,282 3,732 3,118 50,078 590 112,800 Depreciation for the financial year 10,871 631 554 11,003 201 23,260 Disposals (1,652) – – – (114) (1,766) Written off – – (2,797) – – (2,797)

At 30 June 2016 64,501 4,363 875 61,081 677 131,497

Net carrying amount At 30 June 2016 62,096 483 1,661 160,589 524 225,353

At 30 June 2015 74,864 1,114 1,359 171,592 1,490 250,419



5 PROPERTY, PLANT AND EQUIPMENT (CONT’D)

Depreciation expense

2016 2015 RMB’000 RMB’000 Depreciation expense is charged as follows:-Cost of sales 17,002 18,717Administrative expenses 6,163 6,172Selling and distribution expenses 95 23

23,260 24,912

All property, plant and equipment held by the Group are located in Fujian province, PRC.

The net carrying amount of buildings amounted to RMB1,497,307 (2015: RMB2,028,585) is pledged for banking facilities granted to one of the subsidiaries.

6 INvENTORIES

2016 2015 RMB’000 RMB’000

Raw materials 8,698 10,174Work-in-progress 4,811 4,671Finished goods 15,742 29,210

29,251 44,055

7 TRADE AND OTHER RECEIvABLES

Trade receivables generally have credit terms ranging from 30 to 90 days (2015: 30 to 60 days).

2016 2015 RMB’000 RMB’000

Trade receivables 260,608 204,275Less: Provision for doubtful debts At 1 July – – Additions 157,455 –

At 30 June 157,455 –

103,153 204,275

Other receivables Non-trade receivables 847 –Deposits 190 1,061Prepayments 2,631 2,552Advances paid to suppliers 12,396 45,648

119,217 253,536



7 TRADE AND OTHER RECEIvABLES (CONT’D)

The ageing analysis of the Group’s trade receivables is as follows:-

Individually Gross impaired Net2016 RMB’000 RMB’000 RMB’000

Neither past due nor impaired 103,153 – 103,153Past due more than 90 days and impaired 157,455 (157,455) –

260,608 (157,455) 103,153

2015

Neither past due nor impaired 204,275 – 204,275

204,275 – 204,275

Non-trade receivables mainly consist of proceed on disposal of motor vehicle.

Deposits mainly consist of rental deposits paid for rental of premises.

Prepayments mainly consist of prepaid rental.

Advances paid to suppliers relate to deposits paid to outsource manufacturers for apparels, accessories and shoes.

Trade and other receivables are denominated in Renminbi.

8 CASH AND BANK BALANCES

2016 2015 RMB’000 RMB’000 Cash and bank balances 1,141,751 1,456,947

1,141,751 1,456,947

For the purpose of the consolidated statement of cash flows, the financial year end’s cash and cash equivalents comprise the following:-

2016 2015 RMB’000 RMB’000

Cash on hand 360 214Cash at bank 1,141,391 1,456,733

1,141,751 1,456,947



8 CASH AND BANK BALANCES (CONT’D)

Cash and bank balances are denominated in the following currency:-

2016 2015 RMB’000 RMB’000 Renminbi 1,141,364 1,456,836Ringgit Malaysia 251 26Hong Kong Dollar 136 85

1,141,751 1,456,947

The Renminbi is not freely convertible into foreign currencies. Under the PRC Foreign Exchange Control Regulations and Administration of Settlement, Sales and Payment of Foreign Exchange Regulations, the Group is permitted to exchange Renminbi for foreign currencies through banks that are authorised to conduct foreign exchange business.

9 SHARE CAPITAL

Number of shares’000 Amount USD’000 2016 2015 2016 2015Authorised:Ordinary share at par value USD0.01/0.10 each Balance at beginning of financial year 1,000,000 1,000,000 100,000 100,000Less: Par value reduction of 1,000,000,000 ordinary shares of USD0.10 to USD0.01 each – – (90,000) –Add: Creation of 9,000,000,000 ordinary shares of USD0.01 each 9,000,000 – 90,000 –

Balance at end of financial year 10,000,000 1,000,000 100,000 100,000

Issued and fully paidOrdinary share at par value USD0.01/0.10 each Balance at beginning of financial year 338,063 338,063 33,806 33,806Less: Par value reduction of 338,063,300 ordinary shares of USD0.10 to USD0.01 each – – (30,426) –Add: Additional from rights issue with warrants of 147,106,235 ordinary shares of USD0.01 each 147,106 – 1,471 –

Balance at end of financial year 485,169 338,063 4,851 33,806

RMB’000 RMB’000

Equivalent to RMB 31,699 230,886

The new ordinary shares issued during the financial year rank pari pasu in all respect with the existing ordinary shares of the Company.



9 SHARE CAPITAL (CONT’D)

The holders of ordinary shares are entitled to receive dividends as declared from time to time and are entitled to one vote per share at meeting of the Company. All shares rank equally with regards to the Company’s residual assets.

10 RESERvES

Contributed surplus account

The contributed surplus account arise from par value reduction by the cancellation of USD0.09 of the par value of the issued and paid-up ordinary shares of USD0.10 each into issued and paid-up ordinary shares of USD0.01 each.

2016 2015 RMB’000 RMB’000

At 1 July – –Add: Par value reduction 208,664 –

At 30 June 208,664 –

Share premium

The share premium represents the excess of issue price over the par value of the shares issued, net of shares issuance expenses.

Merger reserve

The merger reserve arises from the difference between the nominal value of shares issued and the nominal value of shares of subsidiaries acquired under the pooling of interests method of accounting.

Statutory reserve

In accordance with the relevant laws and regulations of the PRC, the subsidiaries established in the PRC are required to transfer 10% of its profits after tax prepared in accordance with the accounting regulation in the PRC to the statutory reserve until the reserve balance reaches 50% of the respective registered capital. Such reserve may be used to reduce any losses incurred or for capitalisation as paid-up capital.

Warrant reserve and Discount on shares

The warrants reserve and discount on shares are in respect of the allocated fair value of the free warrants issued. Warrant A (2012/2017)

On 16 May 2012, the Company issued 169,031,500 free detachable Warrant A on the basis of one Warrant A for every two issued and paid-up ordinary shares of USD 0.10 each from the Bonus Issue of Warrants.

On 6 April 2016, the Company issued additional 23,329,593 free detachable Warrant A as a consequential to the Rights Issue with Warrants.



10 RESERvES (CONT’D)

Warrant reserve and Discount on shares (cont’d)

Warrant B (2016/2021)

On 6 April 2016, the Company issued 49,035,342 free detachable Warrant B on the basis of one Warrant B for every three rights shares subscribed pursuant to its Rights Issue with Warrants.

The main features of the warrants are as follows:-

Tenure Issue Expiry Exercise price (years) date date (RM)

Warrant A (2012/2017) 5 16.5.2012 15.5.2017 0.88#Warrant B (2016/2021) 5 6.4.2016 5.4.2021 0.40

# Adjusted from RM1.00 to RM0.88 for the effect of the Rights Issue with Warrants during the financial year.

The warrants shall be exercisable at any time during the tenure of the warrants of five (5) years commencing on, and inclusive of, the date of issue of the warrants and ending on the date preceding the fifth (5th) anniversary of the date of admission of the warrants to the Official List, or if such date is not a Market Day (any day between Monday to Friday, which is not a public holiday and on which Bursa Malaysia Securities Berhad is open for the trading for securities), then it shall be the Market Day immediately preceding the said non-Market Day.

Subject to the provision in the respective Deed Polls, the exercise price and the number of warrants held by each warrant holder shall be adjusted by the Board of Directors of the Compnay in consultation with the adviser and certification of the external auditors, in the event of alteration to the share capital of the Company.

Warrants not exercised during the Exercise Period will thereafter lapse and cease to be valid for any purposes.

The fair value allocated to the warrants reserve is derived by adjusting the proceeds of the above issuance to the fair value of the shares and warrants on a proportionate basis. The discount on shares is a reserve account that is created to preserve the par value of the ordinary shares.

The movement of the warrants during the financial year are as follow:-

Number of Units At 1.7.2014 Issued At 30.6.2015 Issued At 30.6.2016

Warrant A (2012/2017) 169,031,500 – 169,031,500 23,329,593 ∆ 192,361,093Warrant B (2016/2021) – – – 49,035,342 49,035,342

169,031,500 – 169,031,500 72,364,935 241,396,435

∆ Adjusted for the effects of the Rights Issue with Warrants during the financial year.

As at the end of financial years ended 30 June 2016 and 30 June 2015, no warrants were exercised.



11 DEFERRED TAX LIABILITY

2016 2015 RMB’000 RMB’000

At 1 July 3,233 3,237Translation difference 232 (4)

At 30 June 3,465 3,233

The above deferred tax liability is made up from the withholding tax imposed on dividend declared.

Under the Enterprise Income Tax Law of PRC, withholding tax is imposed on dividends declared in respect of profits earned by PRC subsidiaries from 1 January 2008 onwards. Deferred tax liability has not been provided for in the consolidated financial statements in respect of temporary differences associated with undistributed earnings of the PRC subsidiaries amounting to approximately RMB838,633,000 (30 June 2015: RMB1,379,688,000) as at 30 June 2016 as the Group is able to control the timing of the reversal of the temporary differences and it is probable that the temporary differences will not reverse in the foreseeable future.

12 TRADE AND OTHER PAYABLES

2016 2015 RMB’000 RMB’000

Trade payables 15,631 27,701 Other payables VAT payable 22,824 8,350Salary payable 3,709 7,176Deposits from distributors 1,300 1,300Withholding tax payable 11,272 11,272Accruals and other payables 11,879 12,218

66,615 68,017

Trade payables are generally settled within 60 days (2015: 60 days).

Accruals mainly comprise accrued marketing expenses and accrued sales rebates. Other payables mainly relate to amount payable for social security insurance.

Trade and other payables are denominated in the following currencies:-

2016 2015 RMB’000 RMB’000 Renminbi 65,531 67,126Ringgit Malaysia 1,041 851Hong Kong Dollar 43 40

66,615 68,017



13 BORROWINGS

2016 2015 RMB’000 RMB’000 Bank loans Secured and repayable within one year 18,000 18,000

The Group’s borrowings are secured by charge on a subsidiary’s building, a subsidiary’s land use rights and guaranteed by a third party, a Director and a subsidiary of the Group.

Short-term bank borrowings bear effective interest rate at 4.6% to 5.6% (2015: 5.6% to 6.0%) per annum. Short-term bank borrowings which are at fixed interest rates are contractually repriced at intervals of 12 months.

Borrowings are denominated in Renminbi.

14 FINANCE COSTS

2016 2015 RMB’000 RMB’000

Interest expense Bank loans 916 1,067

15 (LOSS)/PROFIT BEFORE TAX

2016 2015 Note RMB’000 RMB’000

(Loss)/Profit before tax has been arrived at after charging:-

Depreciation 5 23,260 24,912Amortisation of land use rights 4 283 283Property, plant and equipment written off 5 932 120Provision of doubtful debts 7 157,455 –Loss on disposal on property, plant and equipment 1,138 728Cost of inventories included in cost of sales 759,357 647,870Research and development cost 2,694 2,946Directors’ remuneration - salaries and related costs 9,744 8,037- retirement scheme contribution 17 16- fees 132 125Key management personnel (other than Directors) - salaries and related costs 3,021 3,418- retirement scheme contribution 78 178Other than Directors and key management personnel - salaries and related costs 76,763 89,882- retirement scheme contribution 14,906 19,031Marketing expenses * 70,044 100,794Operating lease expense 5,572 5,849

* The expense is charged to selling and distribution expenses in the profit or loss.



16 TAX EXPENSE

2016 2015 RMB’000 RMB’000 Current year provision - PRC income tax 21,925 75,001Underprovision of tax expense in respect of prior year 678 377

22,603 75,378

Reconciliation between tax expense and accounting profit at applicable tax rates is as follows:-

2016 2015 RMB’000 RMB’000

(Loss)/Profit before tax (519,499) 325,914

Tax at applicable tax rate of 25% (2015: 25%) (129,875) 81,479Tax effect on non-deductible expenses 153,523 4,276Income not subject to tax (1,723) (10,754)Underprovision of tax expense in respect of prior year 678 377

22,603 75,378

Note:- Xingquan International Sports Holding Limited and Gertop International Holdings Limited (“GIHL”) were

incorporated in Bermuda as an exempted company with limited liability under the Companies Law of the Bermuda and accordingly, is exempted from payment of Bermuda Income Tax.

Addnice Holdings Limited (“Addnice HK”) and Xingquan International Investment Limited (“XIIL”) are incorporated in Hong Kong. No provision for Hong Kong profits tax was made as the Group has no assessable profits subject to Hong Kong profits tax.

In accordance with China Corporate Income Tax Law, which came into effect from 1 January 2008, Addnice (China) Co., Ltd. (“Addnice China”) , Fujian Aidinaisi Sports Goods Co., Ltd. (“Addnice Sports”), Xingquan (Fujian) Shoes Plastic Co., Ltd. (“Xingquan Plastics”), Xingquan Footwear Material Co., Ltd. (“Xingquan Footwear”), Germany Top (Fujian) Sports Products Co., Ltd. (“GERTOP”) and Xingquan (China) Co., Ltd. (“XCL”) are subject to corporate income tax of 25%.

Gertop Europa International Limited (“GEIL”) was incorporated in Hungary. No provision for Hungary profits tax was made as no assessable profits subject to Hungary profits tax.



17 (LOSSES)/EARNINGS PER SHARE

2016 2015 (Loss)/Profit after tax (RMB’000) (542,102) 250,536

Weighted average number of ordinary shares outstanding (’000) 372,794 338,063

Basic (losses)/earnings per share (RMB cents) (145.42) 74.11

Basic earnings per share is calculated based on the consolidated profit after tax and the weighted average number of shares in issue of 372,794,332 shares (2015: 338,063,000 shares) during the financial year. There were no diluted earnings per share is presented as the effect is anti-dilutive.

18 DIvIDENDS

2016 2015 RMB’000 RMB’000

Tax exempt dividends paid in respect of the financial year ended 30 June 2015 of RM0.02 (equivalent to RMB0.03) per ordinary share – 11,375

19 CAPITAL COMMITMENTS

2016 2015 RMB’000 RMB’000 Authorised and contracted for:-- Purchase of plant and machinery – 2,217

– 2,217

20 MATERIAL CONTRACT

On 9 October 2015, one of the subsidiaries, Addnice China, entered into a contract amounted RMB547,200,000 to supply tailored-made shoes. As at the date of this report, Addnice China has yet to completely fulfill the terms and conditions of this contract and Addnice China is subject to the potential liabilities as a result of non completely fulfillment of the terms and conditions of this contract. The Directors are of the view that the possibility of the occurrence of the potential liabilities is remote.



21 SUBSIDIARIES

Details of the Group’s subsidiaries at the end of the reporting period are as follows:-

Country of incorporation/ Principal place Percentage Name of business of equity held Principal activities 2016 2015 % % Directly HeldXIIL (1) * Hong Kong 100 100 Investment holding

Addnice HK (1) * Hong Kong 100 100 Investment holding

GIHL Bermuda 100 100 Dormant

Indirectly HeldGEIL @ Hungary 100 100 Dormant

Addnice China (2) * PRC 100 100 Manufacturing of shoes and sales of shoes, apparels and accessories

Addnice Sports (2) * PRC 100 100 Sales of shoes, apparels and accessories Xingquan Plastics (2) * PRC 100 100 Manufacturing and sales of shoe soles Xingquan Footwear (2) * PRC 100 100 Lease of factory and land

GERTOP (2) * PRC 100 100 Sales of shoes, apparels and accessories

XCL (2) * PRC 100 100 Manufacturing of shoe soles

(1) Audited by S.W Chan & Co, Certified Public Accountant for statutory purposes.

(2) Audited by Quanzhou Fengzhe Minghua LianHe, Certified Public Accountant for statutory purposes.

* Audited by SJ Grant Thornton for the purpose of expressing an opinion on the consolidated financial statements.

∆ Dormant company which no statutory audit was required under Bermuda Companies Act.

@ Dormant company which no statutory audit was required under Hungary Company Act 4 of 2006.



22 SEGMENT INFORMATION

22.1 Business segments

The Group’s primary format for reporting segment information is business segments, with each segment representing a product category. The Group’s business segment is organised into three main business segments.

• Design,manufacturingandsalesofshoesoles.• Design,manufacturingandsalesofleisurefootwear.• Designandsaleofapparelsandaccessories.

Management monitors the operating results of its business units separately for the purpose of making decisions about resource allocation and performance assessment. Segment performance is evaluated based on operating profit or loss which in certain respects, as explained in the table below, is measured differently from operating profit or loss in the consolidated financial statements.

Group other income, expenses and income taxes are managed on a group basis and are not allocated to operating segments except for segment results.

Group assets and liabilities that are not related to any of the operating segments are not allocated to operating segments.



22 SEGMENT INFORMATION (CONT’D)

22.1 Business segments (cont’d)

Shoe Leisure Apparels and Financial year ended 30 June 2016 soles footwear accessories Eliminated Total RMB’000 RMB’000 RMB’000 RMB’000 RMB’000

External revenue 119,592 172,660 393,859 – 686,111Inter-segment revenue 80,899 42,733 17,743 (141,375) –

200,491 215,393 411,602 (141,375) 686,111

ResultsSegment results 25,467 (364,077) 103,031 – (235,579)Other income 14,379Selling and distribution expenses (99,612)Administrative expenses (197,771)Finance costs (916)

Loss before tax (519,499)Tax expense (22,603)

Loss after tax (542,102)

Other informationSegment assets 101,900 79,197 180,660 (4,000) 357,757

Unallocated assets - Land use rights 12,424- Other receivables 16,064- Cash and bank balances 1,141,751

Total assets 1,527,996

Segment liabilities 6,476 2,790 6,365 – 15,631

Unallocated liabilities - Borrowings 18,000- Other payables 50,984- Current tax payable 287- Deferred tax liability 3,465

Total liabilities 88,367

Capital expenditures 1,788 25 57 – 1,870Depreciation of property, plant and equipment 9,074 4,324 9,862 – 23,260Property, plant and equipment written off 931 – 1 – 932Loss on disposal on property, plant and equipment 1,138 – – – 1,138Amortisation of land use rights 283




22.1 Business segments (cont’d)

Shoe Leisure Apparels and Financial year ended 30 June 2015 soles footwear accessories Eliminated Total RMB’000 RMB’000 RMB’000 RMB’000 RMB’000

External revenue 233,959 391,472 667,427 – 1,292,858Inter-segment revenue 16,339 52,891 52,492 (121,722) –

250,298 444,363 719,919 (121,722) 1,292,858

Results Segment results 67,712 133,094 267,603 – 468,409Other income 50,671Selling and distribution expenses (142,908)Administrative expenses (49,191)Finance costs (1,067)

Profit before tax 325,914Tax expense (75,378)

Profit after tax 250,536

Other informationSegment assets 147,615 131,662 224,472 (5,000) 498,749 Unallocated assets - Land use rights 12,707- Other receivables 49,261- Cash and bank balances 1,456,947

Total assets 2,017,664

Segment liabilities 14,203 4,990 8,508 – 27,701 Unallocated liabilities - Borrowings 18,000- Other payables 40,316- Current tax payable 7,003- Deferred tax liability 3,233

Total liabilities 96,253

Capital expenditures 24,065 422 719 – 25,206Depreciation of property, plant and equipment 9,391 5,738 9,783 – 24,912Property, plant and equipment written off 119 – 1 – 120Loss on disposal on property, plant and equipment 728 – – – 728Amortisation of land use rights 283




22.2 Geographical segments

As the business of the Group is engaged entirely in the PRC, no reporting by geographical location of operations is presented.

22.3 Major customers

The Group does not have any revenue from a single external customer which represents 10% or more of the Group’s revenue.

23 FINANCIAL INSTRUMENTS

(a) Risk management objectives and policies

The Group does not have written risk management policies and guidelines. However, the Board of Directors meet periodically to analyse and formulate measures to manage the Group’s exposure to market risk, including principally changes in interest rates and currency exchange rates. Generally, the Group employs a conservative strategy regarding its risk management. As the Group’s exposure to market risk is kept at a minimum level, the Group has not used any derivatives or other instruments for hedging purposes. The Group does not hold or issue derivative financial instruments for trading purposes.

As at reporting date, the Group’s financial instruments consisted mainly of cash and bank balances, trade and other receivables, trade and bills payables, accrued liabilities and other payables and bank borrowings.

23(a).i Interest rate risk Interest rate risk is the risk that the fair value or future cash flows of the Group’s financial instruments

will fluctuate because of changes in market interest rates. The Group’s exposure to interest rate risk arises primarily from short-term bank borrowings and deposits with banks. The Group’s policy is to maintain all its borrowings on a fixed rate basis. The Group’s exposure to investment in other financial assets with floating rate is not expected to be significant. Thus, fluctuations in the interest rate will not have an impact on the Group’s profitability for the financial years ended 30 June 2016 and 30 June 2015. Accordingly, no sensitivity analysis is presented.

23(a).ii Foreign currency risk

Foreign currency risk is the risk that the value of a financial instrument will fluctuate due to changes in foreign exchange rates. Foreign currency risk arises when transactions are denominated in foreign currencies. The Group does not expect major exposure to foreign currency risk in the future as majority of the cash held are denominated in Renminbi and the Group conducts its sale and purchase transactions in Renminbi. As the cash held in foreign currency is minimal and immaterial to the Group, as such, no sensitivity analysis is presented.

23(a).iii Liquidity risk

Liquidity risk is the risk that the Group will encounter difficulty in raising funds to meet commitments associated with financial instruments that are settled by delivering cash or another financial asset. Liquidity risk may result from an inability to sell a financial asset quickly at close to its fair value.



23 FINANCIAL INSTRUMENTS (CONT’D)

(a) Risk management objectives and policies (cont’d)

23(a).iii Liquidity risk (cont’d)

The Group’s exposure to liquidity risk arises primarily from mismatches of the maturities of financial assets and liabilities. The Group’s objective is to maintain a balance between continuity of funding and flexibility through use of stand-by credit facilities. The table below analyses the maturity profile of the Group’s financial liabilities based on contractual undiscounted cash flows:-

Between Less than 2 and 5 Over 1 year years 5 years Total RMB’000 RMB’000 RMB’000 RMB’000

As at 30 June 2016 Trade and other payables 32,519 – – 32,519 Borrowings 18,000 – – 18,000

50,519 – – 50,519

As at 30 June 2015 Trade and other payables 48,395 – – 48,395 Borrowings 18,000 – – 18,000

66,395 – – 66,395

The Group ensures that there are adequate funds to meet all its obligations in a timely and cost-effective manner. The Group maintains sufficient level of cash and cash equivalents and has available adequate amount of committed credit facilities from financial institutions to meet its working capital requirements.

23(a).iv Credit risk

Credit risk is the risk that one party to a financial instrument will fail to discharge an obligation and cause the other party to incur a financial loss. The Group’s exposure to credit risk arises primarily from trade and other receivables and bank deposits. For trade receivables, the Group adopts the policy of dealing only with customers of appropriate credit history to mitigate credit risk. For other financial assets, the Group adopts the policy of dealing only with high credit quality counterparties.

The carrying amounts of trade and other receivables and cash and bank balances represent the Group’s maximum exposure to credit risk in relation to its financial assets. The Group’s top 10 trade receivables contributed in aggregate to 81.48% (2015: 46.62%) of the total trade receivables balances as at reporting period. The Group performs ongoing credit evaluation of their customers’ financial condition and requires no collateral from its customers. Cash and bank balances of the Group are held by reputable financial institutions.

23(a).v Market risk

Price risk is the risk that the value of a financial instrument will fluctuate due to changes in market prices whether those changes are caused by factors specific to the individual security or its issuer or factors affecting all securities traded in the market.

The Group does not hold any quoted or marketable financial instrument, hence is not exposed to any movement in market prices. Accordingly, no sensitivity analysis is presented.



23 FINANCIAL INSTRUMENTS (CONT’D)

(b) Fair value measurement

The carrying amount of the financial assets and financial liabilities with a maturity of less than one year is assumed to approximate their fair values.

The Group does not anticipate that the carrying amounts recorded at the end of the financial year would be significantly different from the values that would eventually be received or settled.

(c) Fair values hierarchy

No fair value hierarchy had been disclosed for financial assets and financial liabilities as the Group does not have financial instruments measured at fair value.

24 CAPITAL MANAGEMENT

The Group’s objectives when managing capital are:-

(a) To safeguard the Group’s ability to continue as a going concern, so that it continues to provide returns for shareholdersandbenefitsforotherstakeholders;

(b) TosupporttheGroup’sstabilityandgrowth;and (c) To provide capital for the purpose of strengthening the Group’s risk management capability.

The Group actively and regularly reviews and manages its capital structure to ensure optimal capital structure and shareholders returns, taking into consideration the future capital requirements of the Group and capital efficiency. The Group currently does not adopt any formal dividend policy.

25 SIGNIFICANT EvENTS DURING THE FINANCIAL YEAR

On 10 February 2016, the Company had made a par value reduction on its issued and paid-up ordinary share capital from USD33,806,300 divided into 338,063,000 issued and paid-up ordinary shares of USD0.10 each to USD3,380,630 divided into 338,063,000 issued and paid-up ordinary shares of USD0.01 each. As a result of the par value reduction, the authorised ordinary share capital of the Company was reduced from USD100,000,000 divided into 1,000,000,000 ordinary shares of USD0.10 each to USD10,000,000 divided into 1,000,000,000 ordinary shares of USD0.01 each. At the same time, the Company had increased the authorised share capital of the Company from USD10,000,000 divided into 1,000,000,000 ordinary shares of USD0.01 each to USD100,000,000 divided into 10,000,000,000 ordinary shares of USD0.01 each by creating 9,000,000,000 ordinary shares of USD0.01 each.

On 6 April 2016, the Company had increased its issued and paid-up ordinary share capital from USD3,380,630 to USD4,851,692 by way of issuance of 147,106,235 issued and paid-up ordinary shares of USD0.01 each pursuant to the Rights Issue of 147,106,235 new issued and paid-up ordinary shares of USD0.01 each (“Rights Shares”) at an issue price of RM0.30 per rights share together with 49,035,342 free warrants (“Warrant B”) on the basis of one Warrant B for every three existing issued and paid-up ordinary shares held. (“Rights Issue with Warrants”)



26 SUPPLEMENTARY INFORMATION – DISCLOSURE OF REALISED AND UNREALISED PROFIT/LOSS

The breakdown of the retained profits of the Group as at 30 June 2016 and 30 June 2015 into realised and unrealised profits is presented in accordance with the directive issued by Bursa Malaysia Securities Berhad dated 25 March 2010 and prepared in accordance with Guidance on Special Matter No.1., Determination of Realised and Unrealised Profits or Losses as issued by the Malaysian Institute of Accountants.

30 June 2016 30 June 2015 RMB’000 RMB’000 Total retained profits of the Company and its subsidiaries - Realised 830,347 1,337,730- Unrealised 6,618 42,597

836,965 1,380,327Consolidation adjustments (10,848) (11,848)

826,117 1,368,479


STATEMENTS OF FINANCIAL POSITIONas at 30 June 2016

30 June 30 June 2016 2015 RM’000 RM’000

ASSETSNon-CurrentLand use rights 7,465 7,635Property, plant and equipment 135,404 150,465

142,869 158,100

CurrentInventories 17,576 26,471Trade and other receivables 71,632 152,338Cash and bank balances 686,025 875,411

775,233 1,054,220

Total assets 918,102 1,212,320

EQUITY AND LIABILITIESCapital and ReservesShare capital 19,046 138,729Reserves 845,961 1,015,757

Total equity 865,007 1,154,484

Non-Current LiabilityDeferred tax liability 2,082 1,943

Current LiabilitiesTrade and other payables 40,026 40,869Borrowings 10,815 10,816Current tax payable 172 4,208

51,013 55,893

Total equity and liabilities 918,102 1,212,320

Note:

The presentation currency of these financial statements is Renminbi (“RMB”). Supplementary information in Ringgit Malaysia (“RM”) for the financial year ended 30 June 2016 with comparatives are shown for reference only and has been made at the same exchange rate of RMB1 to RM0.6009 at 30 June 2016. This translation should not be construed as a representation that the RMB amounts actually represented have been, or could be, converted into RM at this or any other rate.

aDDItIonal INFORMATION


additional Information (cont’d)

CONSOLIDATED STATEMENT OF COMPREHENSIvE INCOMEfor the financial year ended 30 June 2016

Year ended Year ended 30 June 30 June 2016 2015 RM’000 RM’000

Revenue 437,655 824,685Cost of sales (587,925) (525,897)

Gross (loss)/profit (150,270) 298,788Other income 9,172 32,322Selling and distribution expenses (63,540) (91,158)Administrative expenses (126,154) (31,378)Finance costs (584) (681)

(Loss)/Profit before taxation (331,376) 207,893Taxation (14,418) (48,082)

(Loss)/Profit for the year attributable to owners of the company (345,794) 159,811Other comprehensive income after taxCurrency translation differences (7,369) (28,837)

Total comprehensive income/(loss) attributable to the owners of the company (353,163) 130,974

Earnings/(losses) per share (RM sen)- Basic (92.77) 47.27

Note:

The presentation currency of these financial statements is Renminbi (“RMB”). Supplementary information in Ringgit Malaysia (“RM”) for the financial year ended 30 June 2016 with comparatives are shown for reference only and has been made at the same exchange rate of RMB1 to RM0.6379 at 30 June 2016. This translation should not be construed as a representation that the RMB amounts actually represented have been, or could be, converted into RM at this or any other rate.


The summary of the information on landed properties owned by our Group is as follows:

Approximate Audited Net Land Area / Book value Approximate Approximate Description Status/ as at 30 June age of Tenure / Total Built-up of Property/ Registered 2016 Building Expiry Date AreaAddress Existing Use Owner RMB’000 (Years) of Lease sq. metres

Yanshang Village, A 5 floors Xingquan On land 16 50 years, from 1,678 / 5,461.99Chendai Town, workshop Footwear 32 24 February 2005 toJinjiang City, building 24 February 2055Quanzhou City, On building Fujian Province, 1,077PRC 362211

Yanshang Village, A 3 floors Xingquan On land 16 Collective 1,984 / 3,625.08Chendai Town, workshop Footwear 19 owned landJinjiang City, building by administrativeQuanzhou City, On building allocation, no fixedFujian Province, 718 tenure limit.PRC 362211

Houyang Industrial Hostels Xingquan On land 4 50 years, from 504 / 4,240Zone, Yanshang Plastics 37 3 June 2008 toVillage, Chendai 2 June 2058Town, Jinjiang City, On building Fujian Province, 8,285PRC 362211

South China A 5 floors Addnice On land 5 50 years, from 62,759 / 100,598Industrial Zone, workshop China 12,336 22 February 2010 toHuian, building and 22 February 2060Quanzhou City, hostels On building Fujian Province, 149,520 PRC 362100

lIst of PROPERTIES


statIstIC of SHAREHOLDINGS

Authorised Ordinary Share Capital : USD100,000,000Issued and Paid-up Ordinary Share Capital : USD4,851,692 comprising 485,169,235 ordinary shares of

USD0.01 eachClass of Shares : Ordinary shares of USD0.01 eachVoting Rights : One vote per ordinary share

ANALYSIS OF SHAREHOLDINGS

No. of No. of Size of Holdings Holders % Holdings %

1 - 99 45 2.03 764 0.00100 - 1,000 223 10.07 137,750 0.031,001 - 10,000 913 41.24 5,284,655 1.0910,001 - 100,000 795 35.91 29,687,100 6.12100,001 - 24,258,460* 237 10.70 180,646,350 37.2324,258,461 and above** 1 0.05 269,412,616 55.53

Total 2,214 100.00 485,169,235 100.00

* Less than 5% of issued holdings** 5% and above of issued holdings

DIRECTORS’ SHAREHOLDINGS AS AT 30 SEPTEMBER 2016

Direct interest Indirect interest No. of No. ofName of directors shares held % shares held %

Dato’ Wu Qingquan 52,500 0.01 – –Wu Lianfa – – – –Ng Sio Peng – – 269,412,616(1) 55.53Dato’ Haji Ramly bin Haji Zahari – – – –Tan Eng Choon – – – –Zhou Liyi – – – –

Note:(1) Deemed interested by virtue of Ng Sio Peng’s substantial shareholdings in Tai Zhen Xiang Holdings Limited.

SUBSTANTIAL SHAREHOLDERS AS AT 30 SEPTEMBER 2016

Direct interest Indirect interest No. of No. ofName of Substantial Shareholders shares held % shares held %

Tai Zhen Xiang Holdings Limited 269,412,616 55.53 – –Ng Sio Peng – – 269,412,616(1) 55.53Iao Ieok Chon – – 269,412,616(2) 55.53

Notes:(1) Deemed interest by virtue of her interest in Tai Zhen Xiang Holdings Limited(2) Deemed interest by virtue of his interest in Tai Zhen Xiang Holdings Limited


LIST OF TOP 30 HOLDERS AS AT 30 SEPTEMBER 2016

No. Name Holdings %

1 RHB NOMINEES (ASING) SDN BHD 269,412,616 55.53 RHB OSK SECURITIES HONG KONG LIMITED FOR TAI ZHEN XIANG HOLDINGS LIMITED2 DB (MALAYSIA) NOMINEE (ASING) SDN BHD 22,859,100 4.71 BNYM SA/NV FOR STICHTING EFFECTENBEWAARBEDRIJF HOF HOORNEMAN3 ALLIANCEGROUP NOMINEES (TEMPATAN) SDN BHD 16,221,200 3.34 PLEDGED SECURITIES ACCOUNT FOR KOON YEW YIN (6000051)4 CIMSEC NOMINEES (TEMPATAN) SDN BHD 8,346,000 1.72 CIMB BANK FOR KOON YEW YIN (MY0951) 5 RHB NOMINEES (ASING) SDN BHD 7,384,600 1.52 EXEMPT AN (BP) FOR RHB SECURITIES HONG KONG LIMITED A/C CLIENTS (RETAIL)6 LAI MING CHUN @ LAI POH LIN 6,353,000 1.317 TA NOMINEES (TEMPATAN) SDN BHD 5,434,100 1.12 PLEDGED SECURITIES ACCOUNT FOR YAP SUNG PANG8 TA NOMINEES (TEMPATAN) SDN BHD 5,347,300 1.10 PLEDGED SECURITIES ACCOUNT FOR KOON YEW YIN9 JF APEX NOMINEES (TEMPATAN) SDN BHD 5,017,800 1.03 PLEDGED SECURITIES ACCOUNT FOR OOI SIEW LOOI (STA 2)10 MAYBANK NOMINEES (TEMPATAN) SDN BHD 4,219,000 0.87 PLEDGED SECURITIES ACCOUNT FOR KOON YEW YIN11 TA NOMINEES (ASING) SDN BHD 4,088,900 0.84 PLEDGED SECURITIES ACCOUNT FOR SYLVAIN LAINE12 MAYBANK NOMINEES (TEMPATAN) SDN BHD 3,255,500 0.6713 LEE SOON SHENG 3,160,000 0.6514 RICKOH CORPORATION SDN BHD 3,000,000 0.6215 OOI CHENG HUAT @ OOI PENG HUAT 2,934,000 0.6016 MO GUAN CHOON 2,600,000 0.5417 KON CZE YAN @ KOON CZE YAN 2,431,600 0.5018 KENANGA NOMINEES (TEMPATAN) SDN BHD 2,404,800 0.50 PLEDGED SECURITIES ACCOUNT FOR KOON YEW YIN (002) 19 PHUAH SOON KEE 2,297,000 0.4720 MAYBANK SECURITIES NOMINEES (TEMPATAN) SDN BHD 2,113,600 0.44 PLEDGED SECURITIES ACCOUNT FOR YAP SUNG PANG (MARGIN)21 CHOW YIT SEONG 2,020,900 0.4222 MAYBANK NOMINEES (TEMPATAN) SDN BHD 1,876,100 0.39 PLEDGED SECURITIES ACCOUNT FOR TANG KING HUA23 TAN LOON TOW 1,602,900 0.3324 CHOR KIANG MONG 1,518,500 0.3125 NG YEE 1,100,000 0.2326 MAYBANK NOMINEES (TEMPATAN) SDN BHD 1,030,000 0.21 PLEDGED SECURITIES ACCOUNT FOR NG KIM KEE27 NG SENG MONG @ WONG SIN MONG 1,015,000 0.2128 RHB NOMINEES (TEMPATAN) SDN BHD 1,010,000 0.21 PLEDGED SECURITIES ACCOUNT FOR KOON YEW YIN29 ALLIANCEGROUP NOMINEES (TEMPATAN) SDN BHD 1,000,000 0.21 PLEDGED SECURITIES ACCOUNT FOR KOH KIN LIP (8058900)30 RHB NOMINEES (TEMPATAN) SDN BHD 959,900 0.20 PLEDGED SECURITIES ACCOUNT FOR CHONG WOI KEONG

statistic of shareholdings (cont’d)


WARRANT A 2012/2017 INFORMATION

Total Warrant A issued : 192,361,093

ANALYSIS OF SHAREHOLDINGS AS AT 30 SEPTEMBER 2016


1 - 99 158 8.37 5,925 0.01100 - 1,000 180 9.53 96,689 0.051,001 - 10,000 848 44.92 3,122,571 1.6210,001 - 100,000 445 23.57 15,230,745 7.92100,001 – 9,618,053* 255 13.51 149,223,755 77.579,618,054 and above** 2 0.11 24,681,408 12.83

Total 1,888 100.00 192,361,093 100.00


LIST OF DIRECTORS’ WARRANT A HOLDINGS AS AT 30 SEPTEMBER 2016

No. of No. of Warrants Warrants Held Held Total Through Through WarrantName of Directors Own Name Nominees holdings %

Dato’ Wu Qingquan 11,380 – 11,380 0.01Wu Lianfa – – – –Ng Sio Peng – 111,080 111,080 0.07Dato’ Haji Ramly bin Haji Zahari – – – –Tan Eng Choon – – – –Zhou Liyi – – – –

WARRANT A HOLDERS WITH HOLDINGS OF 5% AND ABOvE AS AT 30 SEPTEMBER 2016 No. ofName of Substantial Warrant holders warrants held %

Phuah Soon Kee 12,518,329 6.51Koay Kim Eam 12,163,079 6.32

WaRRant INFORMATION


Warrant Information (cont’d)


No. Name Holdings %

1 PHUAH SOON KEE 12,518,329 6.512 KOAY KIM EAM 12,163,079 6.323 WONG FOOK INN 9,029,969 4.694 CHOR KIANG MONG 6,636,237 3.455 MAYBANK NOMINEES (TEMPATAN) SDN BHD 4,522,499 2.35 PLEDGED SECURITIES ACCOUNT FOR NG KIAN BOON6 CHOW YIT SEONG 4,297,808 2.237 WONG FOOK INN 3,792,003 1.978 SEOW HEE YOONG 3,414,066 1.779 LIM CHEE CHENG 2,901,956 1.5110 MAYBANK NOMINEES (TEMPATAN) SDN BHD 2,874,935 1.49 PLEDGED SECURITIES ACCOUNT FOR LIANG KAM SOON11 LIM KAM LIN 2,731,252 1.4212 OW CHONG KAH 2,560,549 1.3313 LOKE PAK JOEN 2,518,690 1.3114 ROSLAN BIN ABU BAKAR 2,138,022 1.1115 JF APEX NOMINEES (TEMPATAN) SDN BHD 2,134,531 1.11 PLEDGED SECURITIES ACCOUNT FOR OOI SIEW LOOI (STA 2)16 YEOH WEE LEE 2,079,843 1.0817 LOK GUU POH 1,746,977 0.9118 RICKOH CORPORATION SDN BHD 1,707,033 0.8919 ALLIANCEGROUP NOMINEES (TEMPATAN) SDN BHD 1,694,970 0.88 PLEDGED SECURITIES ACCOUNT FOR OOI CHIN HOCK20 PUBLIC NOMINEES (TEMPATAN) SDN BHD 1,678,421 0.87 PLEDGED SECURITIES ACCOUNT FOR LIEW SOON HOOK @ LIEW SOON HOCK (E-TMR/MTH)21 ROSLAN BIN ARIFFIN 1,569,008 0.8222 RHB NOMINEES (TEMPATAN) SDN BHD 1,477,200 0.77 PLEDGED SECURITIES ACCOUNT FOR CHONG WOI KEONG23 LAI MING CHUN @ LAI POH LIN 1,433,907 0.7524 TAN GUAT KHIM 1,410,417 0.7325 CHONG WOI KEONG 1,397,100 0.7326 TIEW DAI HUAT 1,382,696 0.7227 ALLIANCEGROUP NOMINEES (TEMPATAN) SDN BHD 1,365,626 0.71 PLEDGED SECURITIES ACCOUNT FOR ROSLAN BIN ARIFFIN28 MAYBANK SECURITIES NOMINEES (TEMPATAN) SDN BHD 1,251,824 0.65 PLEDGED SECURITIES ACCOUNT FOR LIM CHEE SING (R01-MARGIN)29 LEE WAN HONG 1,234,558 0.6430 LIM KAM LIN 1,194,923 0.62


WARRANT B 2016/2021 INFORMATION

Total Warrant B issued : 49,035,342

ANALYSIS OF SHAREHOLDINGS AS AT 30 SEPTEMBER 2016


1 - 99 6 1.92 297 0.00100 - 1,000 80 25.64 48,500 0.101,001 - 10,000 158 50.64 701,854 1.4310,001 - 100,000 52 16.67 1,772,774 3.62100,001 – 2,451,766* 12 3.85 3,632,166 7.412,451,767 and above** 4 1.28 42,879,751 87.45

Total 312 100.00 49,035,342 100.00


LIST OF DIRECTORS’ WARRANT B HOLDINGS AS AT 30 SEPTEMBER 2016

No. of No. of Warrants Warrants Held Held Total Through Through WarrantName of Directors Own Name Nominees holdings %

Dato’ Wu Qingquan 5,833 – 5,833 0.01Wu Lianfa – – – –Ng Sio Peng – 29,934,735 29,934,735 61.05Dato’ Haji Ramly bin Haji Zahari – – – –Tan Eng Choon – – – –Zhou Liyi – – – –

WARRANT B HOLDERS WITH HOLDINGS OF 5% AND ABOvE AS AT 30 SEPTEMBER 2016

No. ofName of Substantial Warrant holders warrants held %

RHB Nominees (Asing) Sdn Bhd 29,934,735 61.05 RHB OSK Securities Hong Kong Limited For Tai Zhen Xiang Holidngs LimitedXie Zhidong 6,880,450 14.03Chan Lai Peng 3,524,666 7.19DB (Malaysia) Nominee (Asing) Sdn Bhd 2,539,900 5.18 BNYM SA/NV for Stichting Effectenbewaarbedrijf Hof Hoorneman





No. Name Holdings %

1 RHB NOMINEES (ASING) SDN BHD 29,934,735 61.05 RHB OSK SECURITIES HONG KONG LIMITED FOR TAI ZHEN XIANG HOLDINGS LIMITED2 XIE ZHIDONG 6,880,450 14.033 CHAN LAI PENG 3,524,666 7.194 DB (MALAYSIA) NOMINEE (ASING) SDN BHD 2,539,900 5.18 BNYM SA/NV FOR STICHTING EFFECTENBEWAARBEDRIJF HOF HOORNEMAN5 MAYBANK NOMINEES (TEMPATAN) SDN BHD 644,333 1.31 PLEDGED SECURITIES ACCOUNT FOR TAN KIT PHENG6 KENANGA NOMINEES (TEMPATAN) SDN BHD 626,000 1.28 PLEDGED SECURITIES ACCOUNT FOR KOON YEW YIN (002)7 JF APEX NOMINEES (TEMPATAN) SDN BHD 505,000 1.03 PLEDGED SECURITIES ACCOUNT FOR OOI SIEW LOOI (STA 2)8 LAI MING CHUN @ LAI POH LIN 420,000 0.869 MAYBANK NOMINEES (TEMPATAN) SDN BHD 347,900 0.71 PLEDGED SECURITIES ACCOUNT FOR TAN SUN PING10 OOI CHENG HUAT @ OOI PENG HUAT 346,000 0.7111 SJ SEC NOMINEES (TEMPATAN) SDN BHD 154,500 0.32 PLEDGED SECURITIES ACCOUNT FOR CHAN BOON YOK (SMT)12 LIM JIT HAI 130,000 0.2713 LAI TENG SIEW 125,000 0.2514 CHOW YIT SEONG 121,000 0.2515 LEE SOON SHENG 106,600 0.2216 SAI YEE @ SIA SAY YEE 105,833 0.2217 KOH HAN FOO 100,000 0.2018 MAYBANK NOMINEES (TEMPATAN) SDN BHD 89,000 0.18 PLEDGED SECURITIES ACCOUNT FOR KOON YEW YIN 19 KENANGA NOMINEES (TEMPATAN) SDN BHD 86,200 0.18 PLEDGED SECURITIES ACCOUNT FOR CHUNG KHIN SIN (002) 20 CIMSEC NOMINEES (TEMPATAN) SDN BHD 80,000 0.16 CIMB FOR LAI MING CHUN @ LAI POH LIN (PB) 21 CIMSEC NOMINEES (TEMPATAN) SDN BHD 73,500 0.15 PLEDGED SECURITIES ACCOUNT FOR CHIN LEN CHEE (IPOH GARDEN-CL)22 SAI YEE @ SIA SAY YEE 67,500 0.1423 OLIVE LIM SWEE LIAN 64,666 0.1324 MAYBANK NOMINEES (TEMPATAN) SDN BHD 55,333 0.11 PLEDGED SECURITIES ACCOUNT FOR YAP SUNG PANG 25 CIMSEC NOMINEES (TEMPATAN) SDN BHD 50,000 0.10 CIMB BANK FOR LOH KOK HOONG (MY0401) 26 RHB CAPITAL NOMINEES (TEMPATAN) SDN BHD 50,000 0.10 PLEDGED SECURITIES ACCOUNT FOR LOH KOK HOONG (1391001)27 MAYBANK NOMINEES (TEMPATAN) SDN BHD 46,000 0.09 TAN SENG28 KOH KAH HOCK 43,600 0.0929 MAYBANK NOMINEES (TEMPATAN) SDN BHD 41,666 0.08 PLEDGED SECURITIES ACCOUNT FOR LOW YEW HWA 30 PUBLIC NOMINEES (TEMPATAN) SDN BHD 41,500 0.08 PLEDGED SECURITIES ACCOUNT FOR CHN CHAI SENG (E-BPT)


notICe of tHeEIGHTH ANNUAL GENERAL MEETING

NOTICE IS HEREBY GIvEN THAT the Eighth Annual General Meeting of the Company will be held at Sime Darby Convention Centre, 1A, Jalan Bukit Kiara 1, 60000 Kuala Lumpur on Wednesday, 7 December 2016 at 9.30 a.m. for the following business:

AGENDAORDINARY

RESOLUTION NO.

1. To receive the Audited Financial Statements of the Company for the year ended 30 June 2016 together with the Directors’ and Auditors’ financial Reports thereon

2. To re-elect Zhou Liyi who retire by rotation in accordance with Bye-law 86 of the Company’s Bye-laws.

3. To appoint auditors and to authorise the Directors to fix their remuneration.

4. As Special Business to consider and if thought fit, to pass the following resolution, with or without modifications:

ORDINARY RESOLUTION - AUTHORITY TO ISSUE SHARES

“THAT subject always to the approvals of the relevant governmental and/or regulatory authorities, the Directors be and are hereby authorised pursuant to the Company’s Bye-law 12 to issue shares in the Company at any time until the conclusion of the next Annual General Meeting upon such terms and conditions and for such purposes as the Directors may in their absolute discretion deem fit provided that the aggregate number of shares to be issued pursuant to this Resolution does not exceed 10% of the issued share capital of the Company for the time being.”

5. To transact any other business for which due notice shall have been given in accordance with the Company’s Bye-laws and Bermuda Companies Act 1981.

1

2

3

4

BY ORDER OF THE BOARD

KANG SHEW MENGSEOW FEI SANSecretaries

Petaling Jaya28 October 2016


Notes:

(a) Only depositors whose names appear on the Record of Depositors as at 1 December 2016 shall be entitled to attend the said meeting or appoint proxies to attend, speak and/or vote on his/her behalf.

(b) A member shall be entitled to appoint up to two (2) proxies to attend and vote at the same meeting. Where a member appoints two (2) proxies, the appointment shall be invalid unless he specifies the proportions of his holdings to be represented by each proxy. A proxy may but need not be a member of the Company. The instrument appointing a proxy must be in writing under the hand of the appointor or his attorney duly authorised in writing or, if the appointor is a corporation, either under seal or at the hand of an officer or attorney duly authorised.

(c) Where a member is an authorised nominee as defined under the Central Depositories Act, it may appoint not more than two (2) proxies in respect of each Securities Account it holds with ordinary shares of the Company standing to the credit of the that Securities Account.

(d) Where a member of the Company is an Exempt Authorised Nominee which holds shares in the Company for multiple beneficial owners in one securities account (omnibus account), there is no limit to the number of proxies which the Exempt Authorised Nominee may appoint in respect of each omnibus account it holds.

(e) The instrument of proxy shall be deposited at the Company’s Share Registrar’s Office at Symphony Share Registrars Sdn. Bhd., Level 6, Symphony House, Pusat Dagangan Dana 1, Jalan PJU 1A/46, 47301 Petaling Jaya, Selangor, Malaysia, not less than forty-eight (48) hours before the time for holding the meeting.

(f) Re-election of Directors who retire by rotation in accordance with Bye-law 86

The two Directors who shall retire by rotation in accordance with Bye-law 86 are Mr. Zhou Liyi and Madam Ng Sio Peng. Madam Ng has indicated that she would like to retire and therefore the resolution pertaining to her re-election is not put up for members’ consideration at this meeting. Madam Ng Sio Peng shall accordingly retire upon the conclusion of the Eighth Annual General Meeting.

Explanatory Note on Special Business

• OrdinaryResolution4

The proposed Ordinary Resolution 4, if passed, will empower the Directors of the Company to allot and issue not more than 10% of the issued share capital of the Company subject to the approvals of all the relevant governmental and/or other regulatory bodies and for such purposes as the Directors consider would be in the interest of the Company. This authorisation will, unless revoked or varied by the Company in a general meeting, expire at the next Annual General Meeting of the Company.

As at the date of this Notice, no new shares in the Company were issued pursuant to the authority granted to the Directors at the Seventh Annual General Meeting held on 31 December 2015 and which will lapse at the conclusion of the Eighth Annual General Meeting.

The authority will provide flexibility to the Company for any possible fund raising activities, including but not limited to further placing of shares, for purpose of funding future investment project(s), working capital and/or acquisitions.

notice of the eighth annual General meeting (cont’d)


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XINGQUAN INTERNATIONAL SPORTS HOLDINGS LIMITED星泉国际体育用品控股有限公司

(Incorporated in Bermuda under the Companies Act 1981 of Bermuda (Registration No. 42756))(Registered as a foreign company in Malaysia under the Companies Act 1965 of Malaysia

(Company No. 995177-V))

PROXY FORM

I/We ............................................................................................................................................... (BLOCK LETTERS)

NRIC No./Company No. ..............................................................................................................................................

CDS Account number ..............................................................................., of (Address)…………….……………………

.....................................................................................................................................................................................

being (a) Member(s) of XINGQUAN INTERNATIONAL SPORTS HOLDINGS LIMITED 星泉国际体育用品控股有限公司 (Incorporated in Bermuda under the Companies Act 1981 of Bermuda (Company No. 42756)) (Registered as a foreign company in Malaysia under the Companies Act 1965 of Malaysia (Company No. 995177-V)) hereby appoint the following person(s):

Name of proxy, NRIC No. No. of shares to be represented by proxy

1.

2.

or failing him/her,

1.

2.

or failing him/her, THE CHAIRMAN OF THE MEETING as my/our proxy to vote for me/us on my/our behalf at the Eighth Annual General Meeting of the Company to be held at Sime Darby Convention Centre, 1A, Jalan Bukit Kiara 1, 60000 Kuala Lumpur on Wednesday, 7 December 2016 at 9.30 a.m. and at any adjournment thereof and to vote as indicated below:-

FOR AGAINST

ORDINARY RESOLUTION NO. 1




Please indicate with an “X” in the space above on how you wish to cast your vote. In the absence of specific directions, your proxy will vote or abstain as he/she thinks fit.

Signed this ............. day of .................................. , 2016 ________________________________ Signature / Seal of Member

Notes:

a) Only depositors whose names appear on the Record of Depositors as at 1 December 2016 shall be entitled to attend the said meeting or appoint proxies to attend, speak and/or vote on his/her behalf.

(b) A member shall be entitled to appoint up to two (2) proxies to attend and vote at the same meeting. Where a member appoints two (2) proxies, the appointment shall be invalid unless he specifies the proportions of his holdings to be represented by each proxy. A proxy may but need not be a member of the Company. The instrument appointing a proxy must be in writing under the hand of the appointor or his attorney duly authorised in writing or, if the appointor is a corporation, either under seal or at the hand of an officer or attorney duly authorised.

(c) Where a member is an authorised nominee as defined under the Central Depositories Act, it may appoint not more than two (2) proxies in respect of each Securities Account it holds with ordinary shares of the Company standing to the credit of the that Securities Account.

(d) Where a member of the Company is an Exempt Authorised Nominee which holds shares in the Company for multiple beneficial owners in one securities account (omnibus account), there is no limit to the number of proxies which the Exempt Authorised Nominee may appoint in respect of each omnibus account it holds.

(e) The instrument of proxy shall be deposited at the Company’s Share Registrar’s Office at Symphony Share Registrars Sdn. Bhd., Level 6, Symphony House, Pusat Dagangan Dana 1, Jalan PJU 1A/46, 47301 Petaling Jaya, Selangor, Malaysia, not less than forty-eight (48) hours before the time for holding the meeting.

✄

AFFIXPOSTAGE

STAMP

Fold this flap for sealing

Then fold here

1st fold here

The Share RegistrarSYMPHONY SHARE REGISTRARS SDN. BHD.Level 6, Symphony House,Pusat Dagangan Dana 1,Jalan PJU 1A/4647301 Petaling Jaya, SelangorMalaysia

Annual Report

2016

XINGQUAN INTERNATIONAL SPORTS HOLDINGS LIMITED

星泉国际体育用品控股有限公司(Incorporated in Bermuda under the Companies Act 1981 of Bermuda (Registration No. 42756))

(Registered as a foreign company in Malaysia under the Companies Act 1965 of Malaysia (Company No. 995177-V))

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HEAD OFFICEXINGQUAN INTERNATIONAL SPORTS HOLDINGS LIMITEDSouth China Industrial Zone, Huian, Quanzhou City, Fujian ProvinceThe People’s Republic of China, Postal Code: 362100Tel : (86) 595 8508 8999 Fax : (86) 595 8516 6111E-mail : [email protected]

REGISTERED OFFICE IN MALAYSIA - BRANCH802, 8th Floor, Block C, Kelana Square, 17 Jalan SS7/2647301 Petaling Jaya, Selangor Darul Ehsan, MalaysiaTel : (603) 7803 1126 Fax : (603) 7806 1387

w w w . x i n g q u a n - i n t e r n a t i o n a l . c o m

XINGQUAN INTERNATIONAL SPORTS HOLDINGS LIMITED

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