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1 C. banner International Holdings Limited 千百度國際控股有限公司 Stock Code 股份代號 :1028 Interim REPORT 2012 中期報告 C. banner International Holdings Limited 千百度國際控股有限公司

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3 Contents 2 Corporate Information 5 Financial Highlights 7 MANAGEMENT DISCUSSION AND ANALYSIS 16 GENERAL INFORMATION 21 REPORT ON REVIEW OF condensed consolidated FINANCIAL statements 24 CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION 26 CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY 27 CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS 28 NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 23 CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

4 Corporate Information BOARD OF DIRECTORS Executive Directors: Mr. Chen Yixi (Chairman) Mr. Li Wei (Chief Executive Officer) Mr. Huo Li Mr. Xu Tingyu (Chief Financial Officer) Non-executive Directors: Mr. Miao Bingwen Mr. Ho Chi Kit Mr. Wu Guangze Mr. Li Xinhui (alternate Director to Mr. Ho Chi Kit) Independent non-executive Directors: Mr. Kwong Wai Sun Wilson Mr. Xu Chengming Mr. Li Xindan AUTHORISED REPRESENTATIVES Mr. Huo Li Ms. Mok Ming Wai AUDIT COMMITTEE Mr. Kwong Wai Sun Wilson (Chairman) Mr. Miao Bingwen Mr. Xu Chengming Mr. Li Xindan Mr. Ho Chi Kit REMUNERATION COMMITTEE Mr. Li Xindan (Chairman) Mr. Miao Bingwen Mr. Xu Chengming Mr. Kwong Wai Sun Wilson Mr. Ho Chi Kit -2- C.banner International Holdings Limited Interim Report 2012

5 Corporate Information NOMINATION COMMITTEE Mr. Chen Yixi (Chairman) Mr. Xu Chengming Mr. Li Xindan Mr. Kwong Wai Sun Wilson Mr. Ho Chi Kit STRATEGY COMMITTEE Mr. Chen Yixi (Chairman) Mr. Li Wei Mr. Miao Bingwen Mr. Ho Chi Kit Mr. Wu Guangze COMPANY SECRETARY Ms. Mok Ming Wai REGISTERED OFFICE Canon s Court 22 Victoria Street Hamilton HM12 Bermuda PRINCIPAL PLACE OF BUSINESS IN HONG KONG 8th Floor, Gloucester Tower, The Landmark 15 Queen s Road Central, Hong Kong STOCK CODE 1028 COMPANY WEBSITE COMPLIANCE ADVISOR First Shanghai Capital Limited LEGAL ADVISER Sidley Austin Level 39 Two International Finance Centre 8 Finance Street Central, Hong Kong Canon s Court 22 Victoria Street Hamilton HM12 Bermuda

6 Corporate Information AUDITOR Deloitte Touche Tohmatsu Certified Public Accountants SHARE REGISTRARS Principal Share Registrar and Share Transfer Agent Appleby Management (Bermuda) Ltd. Argyle House 41a Cedar Avenue Hamilton HM12 Bermuda Appleby Management (Bermuda) Ltd. Argyle House 41a Cedar Avenue Hamilton HM12 Bermuda Hong Kong Branch Share Registrar and Transfer Office Computershare Hong Kong Investor Services Limited Shops , 17th Floor Hopewell Centre 183 Queen s Road East Wanchai Hong Kong PRINCIPAL BANKERS Agricultural Bank of China, Nanjing Xinjiekou sub-branch DBS (Bank) Ltd., Hong Kong Branch China Merchants Bank, Nanjing Chengxi sub-branch Bank of China, Nanjing Economic Development Zone sub-branch -4- C.banner International Holdings Limited Interim Report 2012

7 Financial Highlights Six months ended 30 June RMB 000 RMB 000 (unaudited) (unaudited) Revenue 1,130, ,000 Gross profit 705, ,137 Operating profit 189, ,533 Income tax expense (43,961) (49,886) Net profit attributable to equity holders of the Company 140, ,647 % % Gross profit margin Operating profit margin Net profit margin RMB cents RMB cents Earnings per share Basic Diluted June December % % Gearing ratio Note: Gearing ratio = notes payable and bank loans/total assets -5-

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9 Management Discussion and Analysis

10 Management Discussion and Analysis BUSINESS REVIEW C.banner International Holdings Limited (the Company ) and its subsidiaries (collectively, the Group ) operate under a vertically integrated business model which includes the design and development, outsourcing, manufacturing, marketing, wholesaling and retailing of shoes. It is China s second largest retailer of middle to high-end formal and leisure women shoes (according to the 2011 Euromonitor Report), with an approximate 7.4% market share in Euromonitor % It also acts as an OEM or ODM manufacturer for international shoe companies operating in overseas markets. OEM ODM -8- C.banner International Holdings Limited Interim Report 2012

11 Management Discussion and Analysis The Group retails shoes under its self-developed C.banner, EBLAN, FABIOLA and sundance brands, as well as under the licensed naturalizer brand. The Group introduced a fifth self-developed brand MIO during the first half of the year. The Group s self-developed and licensed brands are mainly distributed through department stores in China s first-to-third tier cities. It also wholesales its self-developed brands through authorized distributors. As of 30 June 2012, the Group oversaw a network of 1,964 sales outlets, including 1,449 proprietary outlets and 515 third-party outlets. This included a net addition of 138 proprietary outlets and 78 third-party outlets during the interim period. Given the slowing growth of the Chinese economy, sales volumes during the period grew in line with expectations, with same-store sales growth reaching 6.4% during the first half of ,964 1, % -9-

12 Management Discussion and Analysis The following table shows the geographic distribution of our stores: C.banner EBLAN sundance MIO naturalizer Distribution Proprietary Third-party Proprietary Third-party Proprietary Third-party Proprietary Third-party Proprietary Regions outlets outlets outlets outlets outlets outlets outlets outlets outlets Total Northeast Beijing Tianjin Northwest Central China Eastern China Zhejiang Shanghai Southwest Southern China Total Note: (1) Northeast region includes Jilin province, Liaoning province and Heilongjiang province; (2) Beijing region includes Beijing, Inner Mongolia Autonomous Region, Zhangjiakou city and Qinhuangdao city in Hebei province; (3) Tianjin region includes Tianjin, Shandong province and Hebei province (except Zhangjiakou city and Qinhuangdao city); (4) Northwest region includes Shanxi province, Shaanxi province, Qinghai province, Gansu province, Henan province, Xinjiang Autonomous Region and Ningxia Autonomous Region; (5) Central China region includes Hunan province and Hubei province; (6) Eastern China region includes Jiangsu province (except Wuxi city and Suzhou city), Anhui province and Jiangxi province; (7) Zhejiang region includes Zhejiang province and Wuxi city and Suzhou city in Jiangsu province; (8) Shanghai region includes Shanghai; (9) Southwest region includes Sichuan province, Guizhou province, Yunnan province, Chongqing city and Tibet Autonomous Region; and (10) Southern China region includes Guangdong province, Hainan province, Guangxi Autonomous Region and Fujian province. (1) (2) (3) (4) (5) (6) (7) (8) (9) (10) -10- C.banner International Holdings Limited Interim Report 2012

13 Management Discussion and Analysis The Group also attracted strategic investments from three leading private equity investors during the period, in recognition of the Group s impressive growth record. The three firms, China Consumer Capital Fund L.P., China Champion Holdings Limited and MousseDragon, L.P. have subscribed for a collective RMB189.0 million worth of convertible bonds issued by the Group. China Consumer Capital Fund L.P. China Champion Holdings Limited MousseDragon, L.P The Group also took 51% stake in Mega Brilliant International Limited ( Mega Brilliant ) during the period in order to continue the expansion of its women s footwear operations. Based in the Mainland China, Mega Brilliant engages in the design, outsourcing and sale of leather products and textiles. Mega Brilliant International Limited Mega Brilliant 51% Mega Brilliant FINANCIAL REVIEW For the six months ended 30 June 2012, the Group s total revenue rose 21.8% to RMB1,130.4 million compared to the same period of last year. Operating profit rose 5.2% to RMB189.9 million in the period under review. Profit attributable to owners of the Company increased 7.2% to RMB140.0 million compared to the same period of last year , % 5.2% % Revenue For the six months ended 30 June 2012, the Group s total revenue rose 21.8% to RMB1,130.4 million, compared to RMB928.0 million in the first half of last year , % The Group s revenue mix includes income from retail and wholesale operations and contract manufacturing. Revenue from the contract manufacturing business fell 10.8% during the first half of 2012 as the Group reallocated contract production lines to produce its own proprietary brands % -11-

14 Management Discussion and Analysis Revenue distribution is as follows: For the six months ended 30 June % of Total % of Total % RMB( 000) Revenue RMB( 000) Revenue Growth % % % Retail and Wholesaling 1,031, , Contract Manufacturing 98, , Total 1,130, , Profitability For the six months ended 30 June 2012, the Group s gross profit rose 22.1% to RMB705.8 million, an increase of RMB127.6 million from RMB578.1 million in the first half of last year. As of 30 June 2012, the gross profit margin was 62.4%, an increase of 0.1 percentage point from 62.3% in the corresponding period of last year % % 62.3% 0.1 For the six months ended 30 June 2012, distribution and selling expenses reached RMB478.5 million. This represented an increase of RMB118.8 million or 33.0% from the corresponding period of last year, which was primarily attributed to higher salary and commissions for salespersons, advertising and marketing expenses and department store commissions. As of 30 June 2012, distribution and selling expenses accounted for 42.3% of total revenue, compared to 38.8% in the corresponding period of last year % % 38.8% For the six months ended 30 June 2012, administrative and general expenses reached RMB55.2 million, an increase of RMB20.1 million or 57.3% compared to the same period of last year. This increase is mostly attributable to higher salaries and benefits for management and executives, company legal fees and intermediary costs. As of 30 June 2012, administrative and general expenses accounted for 4.9% of the total revenue, compared to 3.8% in the same period of last year % % 3.8% -12- C.banner International Holdings Limited Interim Report 2012

15 Management Discussion and Analysis For the six months ended 30 June 2012, other income and expenses and other gains and losses recorded a net gain of RMB19.1 million, compared to a net loss of RMB943,000 in the same period of last year. The main source of other income was from government grants, interests income on deposits and gains from foreign exchange ,000 For the six months ended 30 June 2012, the Group recorded no finance costs, compared to corresponding period in 2011 where RMB980,000 were related to interest expenses for a USD9.8 million loan made on 9 March , For the six months ended 30 June 2012, income tax expense fell by RMB5.9 million to RMB44.0 million, a decline of 11.9%, compared to RMB49.9 million in the corresponding period of last year. This decline was mostly attributed to an increase in preferred tax credit. The effective income tax rate for the first half of 2012 was 23.2%, a fall of 4.4 percentage points from 27.6% in the same period of last year % % 27.6% 4.4 For the six months ended 30 June 2012, profit attributable to owners of the Company rose 7.2% to RMB140.0 million, an increase of RMB9.4 million from RMB130.6 million in the same period of last year % Liquid Assets and Financial Resources As of 30 June 2012, the Group had bank balances and cash of RMB785.2 million (31 December 2011: RMB504.0 million) For the six months ended 30 June 2012, net cash from operating activities was RMB85.2 million, an increase of RMB6.3 million compared to RMB78.9 million in the same period of last year For the six months ended 30 June 2012, net cash inflows from investing activities was RMB7.0 million, compared to a net cash outflow of RMB5.0 million from investing activities during the same period of last year. The inflow was primarily related to the acquisition of a 51% stake in the Mega Brilliant and proceeds from the disposal of a professionally managed investment fund. The net inflow was partially offset by a RMB80 million investment in structured bank deposits Mega Brilliant 51% 80 For the six months ended 30 June 2012, net cash inflow from financing activities was RMB189 million from an issue of convertible bonds

16 Management Discussion and Analysis As of 30 June 2012, the net current assets of the Group were RMB1,473.0 million, compared to RMB1,206.2 million as of 31 December The net increase was RMB266.8 million or 22.1% , , % Pledge of Asset As of 30 June 2012, the Group had no short-term bank loans. As of the same date, it had pledged bank deposits of RMB5.5 million, compared to RMB14.6 million as of 31 December Contingent Liabilities The Group did not have any substantial or contingent liabilities as of 30 June Foreign Exchange Risk Management The Group s sales are mainly denominated in RMB, while its contract manufacturing business is mainly denominated in USD. As the contract manufacturing business accounted for only 8.7% of total revenue, the board of directors (the Board ) does not foresee exchange rate fluctuations having a substantial impact on the Group s business. However, the Board will closely monitor the effects of the exchange rate on the contract manufacturing business and mitigate the impact. 8.7% For the six month ended 30 June 2012, the Group recorded a RMB716,900 gain from currency exchange, compared to a RMB78,000 gain in the corresponding period of last year. The Group did not hold any derivative instruments for hedging against foreign exchange risk ,900 78,000 Human Resources As of 30 June 2012, the Group had 11,531 employees (31 December 2011: 10,624 employees). The Group provides its employees with competitive remuneration packages including mandatory pension funds, insurance and medical benefits. In addition, the Group pays discretionary bonuses to qualified employees, according to business performance and their individual work performance , , C.banner International Holdings Limited Interim Report 2012

17 Management Discussion and Analysis FUTURE OUTLOOK Despite uncertainties in the global and Chinese economies, the Group remains committed to further growing its market share in China, maintaining healthy sales levels and delivering satisfactory returns to its shareholders. It will continue to pursue a multi-brand strategy during the rest of the year, while also enhancing the quality and efficiency of its outlets and raising the standard of its products. The Group will further grow the value of each of its brands by opening new stores and expanding their online presence. It plans to open around 100 proprietary outlets and around 50 third-party retail outlets in the second half of 2012, while continuing to work with third-party providers to create an online platform to sell its products The Group plans to better manage its inventory level in order to improve efficiency and reduce the number of inventory turnover days to a reasonable level. On the manufacturing side, the Group will continue to scale back its OEM business during the rest of the year in order to allocate more capacity for its proprietary products. It also aims to increase the number of production lines to 16, growing the Group s total manufacturing capacity to 7.2 million pairs of shoes by the end of OEM The Group will also proactively consider selective acquisitions or other forms of co-operation in order to further expand its brand portfolio and market share. INTERIM DIVIDENDS The directors (the Directors ) do not recommend the payment of an interim dividend for the six months ended 30 June During the six months ended 30 June 2011, total dividends of USD per share amounting to USD9,801,000 (equivalent to RMB64,441,000) was proposed and paid to shareholders ,801,000 64,441,

18 General Information MODEL CODE FOR SECURITIES TRANSACTIONS BY DIRECTORS The Company has adopted the Model Code for Securities Transactions by Directors of Listed Issuers (the Model Code ) as set out in Appendix 10 to the Rules Governing the Listing of Securities (the Listing Rules ) on The Stock Exchange of Hong Kong Limited (the Hong Kong Stock Exchange ) as its own code of conduct regarding directors securities transactions. 10 The Company confirms that, having made specific enquiry of all the Directors, the Directors have complied with the required standards as set out in the Model Code throughout the period for the six months ended 30 June CORPORATE GOVERNANCE The Group is committed to maintaining high standards of corporate governance to safeguard the interests of shareholders and to enhance corporate value and accountability. The Company has complied with all applicable code provisions under the Code on Corporate Governance Practices (from 1 January 2012 to 31 March 2012) and Corporate Governance Code (from 1 April 2012 to 30 June 2012) (the CG Code ) as set out in Appendix 14 to the Listing Rules for the six months ended 30 June The Company will continue to review and enhance its corporate governance practices to ensure compliance with the CG Code INTERESTS AND SHORT POSITIONS OF THE DIRECTORS IN SHARES, UNDERLYING SHARES AND DEBENTURES OF THE COMPANY AND ITS ASSOCIATED CORPORATIONS As at 30 June 2012, the interests and short positions of the directors and chief executive of the Company in any shares, underlying shares and debentures of the Company or any of its associated corporations (within the meaning of Part XV of the Securities and Futures Ordinance (the SFO )) (i) which are required to be notified to the Company and the Hong Kong Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO, or (ii) which are required, pursuant to Section 352 of the SFO, to be entered in the register kept by the Company, or (iii) which are required to be notified to the Company and the Hong Kong Stock Exchange pursuant to the Model Code were as follows: XV (i) XV 7 8 (ii) 352 (iii) -16- C.banner International Holdings Limited Interim Report 2012

19 General Information Approximate percentage interest Total number of shares/ in the Company Name of Director Nature of interest underlying shares held Mr. Chen Yixi (note 3) Interest in a controlled corporation 630,563,000 (L) (note 1) 31.53% (L) ,207,000 (S) (note 2) 5.06% (S) 2 Mr. Li Wei (note 4) Interest in a controlled corporation 324,402,500 (L) 16.22% (L) 4 75,777,500 (S) 3.79% (S) Mr. Miao Bingwen (note 5) Interest in a controlled corporation 293,141,300 (L) 14.66% (L) 5 74,908,700 (S) 3.75% (S) Mr. Wu Guangze (note 6) Interest in a controlled corporation 124,033,400 (L) (note 7) 6.20% (L) 6 7 Notes: 1. The letter L denotes long position in the shares of the Company. 2. The letter S denotes short position in the shares of the Company. 3. Mr. Chen Yixi is the beneficial owner of all the issued share capital of High Score Holdings Limited ( High Score ) which holds 630,563,000 shares of the Company in long position and 101,207,000 shares of the Company in short position. 4. Mr. Li Wei is the beneficial owner of all the issued share capital of Media Value Holdings Limited ( Media Value ) which holds 324,402,500 shares of the Company in long position and 75,777,500 shares of the Company in short position. 5. Mr. Miao Bingwen is the beneficial owner of all the issued share capital of Sure Manage Investments Limited ( Sure Manage ) which holds 293,141,300 shares of the Company in long position and 74,908,700 shares of the Company in short position. 6. Mr. Wu Guangze is the beneficial owner of all the issued share capital of Famous Sino Limited which in turn holds 70% shareholding in China Consumer Capital Partners Limited. China Consumer Capital Partners Limited is the holding company of China Consumer Capital Fund, L.P. which is interested in 52,986,600 shares of the Company in long position. Also, Mr. Wu Guangze holds 90% shareholding in China Consumer Capital Partners II Limited, the holding company of China Consumer Capital Fund II L. P. which is interested in 71,046,800 shares of the Company in long position. 7. These shares include 9,687,600 underlying shares of the Company which may be issued by the Company upon conversion of the convertible bonds in the principal amount of RMB18,902,445 issued by the Company to China Consumer Capital Fund, L.P. and a total of 71,046,800 underlying shares of the Company which may be exchanged with High Score, Media Value and Sure Manage (collectively, the BVI Shareholders ) upon exercise of the exchangeable bonds in the aggregate principal amount of HK$170,512,320 issued by the relevant BVI Shareholders to China Consumer Capital Fund II, L.P L 2. S 3. High Score Holdings Limited High Score 630,563, ,207, Media Value Holdings Limited Media Value 324,402,500 75,777, Sure Manage Investments Limited Sure Manage 293,141,300 74,908, Famous Sino Limited China Consumer Capital Partners Limited 70% China Consumer Capital Partners Limited China Consumer Capital Fund, L.P.52,986,600 China Consumer Capital Partners II Limited 90% China Consumer Capital Fund II L. P. 71,046, ,687,600 China Consumer Capital Fund, L.P. 18,902,445 71,046,800 BVI China Consumer Capital Fund II, L.P. 170,512,320 High Score Media Value Sure ManageBVI

20 General Information Save as disclosed above, as at 30 June 2012, none of the directors or chief executives of the Company had any interests or short positions in the shares, underlying shares and debentures of the Company or any of its associated corporations (within the meaning of Part XV of the SFO) which would be required to be notified to the Company and the Hong Kong Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO, or which would be required, pursuant to Section 352 of the SFO, to be entered in the register referred to therein, or otherwise to be notified to the Company and the Hong Kong Stock Exchange pursuant to the Model Code XV XV INTERESTS AND SHORT POSITIONS OF SUBSTANTIAL SHAREHOLDERS IN SHARES AND UNDERLYING SHARES OF THE COMPANY As at 30 June 2012, to the best knowledge of the Directors, the following persons (not being a Director or chief executive of the Company) had interests or short positions in the shares or underlying shares which fall to be disclosed to the Company under the provisions of Divisions 2 and 3 of Part XV of the SFO as recorded in the register required to be kept by the Company pursuant to section 336 of the SFO: XV Name of shareholder Nature of interest Total number of shares/ underlying shares held Approximate percentage interest in the Company High Score Beneficial owner 630,563,000 (L) (note 1) 1 101,207,000 (S) (note 2) % (L) 5.06% (S) Media Value Beneficial owner 324,402,500 (L) 75,777,500 (S) 16.22% (L) 3.79% (S) Sure Manage Beneficial owner 293,141,300 (L) 74,908,700 (S) 14.66% (L) 3.75% (S) China Champion Holdings Limited (note 3) 3 Beneficial owner 319,743,600 (L) (note 4) % (L) China Champion Group Limited (note 3) 3 CVC Capital Partners Asia Pacific III L.P. (note 3) 3 Interest in a controlled corporation Interest in a controlled corporation 319,743,600 (L) 15.99% (L) 319,743,600 (L) 15.99% (L) CVC Capital Partners Asia III Limited (note 3) 3 Interest in a controlled corporation ,743,600 (L) 15.99% (L) C.banner International Holdings Limited Interim Report 2012

21 General Information Name of shareholder Nature of interest Total number of shares/ underlying shares held Approximate percentage interest in the Company CVC Capital Partners Advisory Company Limited (note 3) 3 CVC Capital Partners Finance Limited (note 3) 3 CVC Group Holdings L.P. (note 3) 3 CVC MMXII Limited (note 3) 3 CVC Capital Partners 2012 Limited (note 3) 3 CVC Capital Partners SICAV-FIS S.A. (note 3) 3 Interest in a controlled corporation Interest in a controlled corporation Interest in a controlled corporation Interest in a controlled corporation Interest in a controlled corporation Interest in a controlled corporation 319,743,600 (L) 15.99% (L) 319,743,600 (L) 15.99% (L) 319,743,600 (L) 15.99% (L) 319,743,600 (L) 15.99% (L) 319,743,600 (L) 15.99% (L) 319,743,600 (L) 15.99% (L) Notes: 1. The letter L denotes long position in the shares of the Company. 2. The letter S denotes short position in the shares of the Company. 3. China Champion Holdings Limited is wholly-owned by China Champion Group Limited, which is owned as to 88% by CVC Capital Partners Asia Pacific III L.P.. CVC Capital Partners Asia Pacific III L.P. is wholly-owned by CVC Capital Partners Asia III Limited, which is wholly owned by CVC Capital Partners Advisory Company Limited. CVC Capital Partners Advisory Company Limited is wholly owned by CVC Capital Partners Finance Limited, which is wholly-owned by CVC Group Holdings L.P.. CVC Group Holdings L.P. is wholly-owned by CVC MMXII Limited, which is wholly-owned by CVC Capital Partners 2012 Limited. And, CVC Capital Partners 2012 Limited is wholly-owned by CVC Capital Partners SICAV-FIS S.A.. Therefore, the above companies are deemed to be interested in 319,743,600 shares of the Company in which China Champion Holdings Limited is interested. 4. These shares include 71,042,400 underlying shares of the Company which may be issued by the Company upon conversion of the convertible bonds in the principal amount of RMB138,617,930 issued by the Company to China Champion Holdings Limited and a total of 122,717,200 underlying shares of the Company which may be exchanged with the BVI Shareholders upon exercise of the exchangeable bonds in the aggregate principal amount of HK$294,521,280 issued by the relevant BVI Shareholders to China Champion Holdings Limited L 2. S 3. China Champion Holdings Limited China Champion Group Limited China Champion Group Limited CVC Capital Partners Asia Pacific III L.P. 88% CVC Capital Partners Asia Pacific III L.P. CVC Capital Partners Asia III Limited CVC Capital Partners Asia III Limited CVC Capital Partners Advisory Company Limited CVC Capital Partners Advisory Company Limited CVC Capital Partners Finance Limited CVC Capital Partners Finance Limited CVC Group Holdings L.P. CVC Group Holdings L.P. CVC MMXII Limited CVC MMXII Limited CVC Capital Partners 2012 Limited CVC Capital Partners 2012 Limited CVC Capital Partners SICAV-FIS S.A. China Champion Holdings Limited319,743, ,042,400 China Champion Holdings Limited 138,617, ,717,200 BVI China Champion Holdings Limited 294,521,280 BVI

22 General Information Save as disclosed above, and as at 30 June 2012, the Directors were not aware of any persons (who were not Directors or chief executive of the Company) who had an interest or short position in the shares or underlying shares of the Company which would fall to be disclosed under Divisions 2 and 3 of Part XV of the SFO, or which would be required, pursuant to Section 336 of the SFO, to be entered in the register referred to therein XV PURCHASE, SALE OR REDEMPTION OF THE COMPANY S LISTED SECURITIES For the six-month period ended 30 June 2012, neither the Company nor any of its subsidiaries has purchased, sold or redeemed any of the Company s listed securities. SHARE OPTION SCHEME The Company adopted a share option scheme (the Share Option Scheme ) on 26 August 2011 which has become effective upon the Company s Listing on 23 September The purpose of the Share Option Scheme is to attract and retain or otherwise maintain on-going business relationship with the eligible persons whose contributions are or will be beneficial to the long-term growth of the Group; and to motivate the eligible persons to optimize their performance efficiency for the benefit of the Group. Since the effective date of the Share Option Scheme, no share options had been granted, exercised or cancelled by the Company under the Share Option Scheme and there was no outstanding share option under the Share Option Scheme. AUDIT COMMITTEE The Audit Committee had reviewed together with the management of the Company and auditor the accounting principles and policies adopted by the Group and the unaudited interim report for the six months ended 30 June C.banner International Holdings Limited Interim Report 2012

23 REPORT ON REVIEW OF CONDENSED CONSOLIDATED FINANCIAL STATEMENTS TO THE BOARD OF DIRECTORS OF C.BANNER INTERNATIONAL HOLDINGS LIMITED INTRODUCTION We have reviewed the condensed consolidated financial statements of C.banner International Holdings Limited (the "Company") and its subsidiaries (collectively referred to as the "Group") set out on pages 23 to 47, which comprise the condensed consolidated statement of financial position as of 30 June 2012 and the related condensed consolidated statement of comprehensive income, statement of changes in equity and statement of cash flows for the six-month period then ended, and certain explanatory notes. The Main Board Listing Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited require the preparation of a report on interim financial information to be in compliance with the relevant provisions thereof and International Accounting Standard 34 Interim Financial Reporting ( IAS 34") issued by the International Accounting Standards Board. The directors of the Company are responsible for the preparation and presentation of these condensed consolidated financial statements in accordance with IAS 34. Our responsibility is to express a conclusion on these condensed consolidated financial statements based on our review, and to report our conclusion solely to you, as a body, in accordance with our agreed terms of engagement, and for no other purpose. We do not assume responsibility towards or accept liability to any other person for the contents of this report SCOPE OF REVIEW We conducted our review in accordance with Hong Kong Standard on Review Engagements 2410 Review of Interim Financial Information Performed by the Independent Auditor of the Entity issued by the Hong Kong Institute of Certified Public Accountants. A review of these condensed consolidated financial statements consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with Hong Kong Standards on Auditing and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion

24 REPORT ON REVIEW OF CONDENSED CONSOLIDATED FINANCIAL STATEMENTS CONCLUSION Based on our review, nothing has come to our attention that causes us to believe that the condensed consolidated financial statements is not prepared, in all material respects, in accordance with IAS Deloitte Touche Tohmatsu Certified Public Accountants Hong Kong 23 August C.banner International Holdings Limited Interim Report 2012

25 CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME FOR THE SIX MONTHS ENDED 30 June 2012 Six months ended 30 June Notes RMB 000 RMB 000 (unaudited) (unaudited) Revenue 3 1,130, ,000 Cost of sales (424,615) (349,863) Gross profit 705, ,137 Other income and expenses, other gains and losses 4 19,061 (943) Distribution and selling expenses (478,470) (359,673) Administrative and general expenses (55,220) (35,108) Finance costs (980) Share of losses of joint ventures (1,258) (900) Profit before tax 5 189, ,533 Income tax expense 6 (43,961) (49,886) Net profit for the period 145, ,647 Net profit and total comprehensive income for the period Attributable to owners of the Company 140, ,647 Non-controlling interests 5, , ,647 RMB cents RMB cents Earnings per share Basic Diluted

26 CONDENSED CONSOLIDATED statement of financial position AT 30 June June 31 December NOTES RMB 000 RMB 000 (unaudited) (audited) Non-current assets Property, plant and equipment 9 123, ,899 Prepaid lease payments 15,111 15,302 Investment properties 46,000 46,000 Intangible assets 2,292 2,190 Interest in joint ventures 5,648 6,994 Goodwill 5,725 Deferred tax assets 10 18,827 17,256 Long-term deposit 9,302 9, , ,105 Current assets Inventories 567, ,840 Trade receivables , ,555 Other receivables and prepayments 42,658 57,330 Available-for-sale investments 12 75,611 Structured bank deposits ,200 67,000 Pledged bank deposits 5,453 14,589 Bank balances and cash 785, ,997 1,842,343 1,523,922 Current liabilities Trade payables , ,947 Other payables 208, ,446 Income tax liabilities 32,431 56,616 Deferred revenue 15 17,798 12, , ,681 Net current assets 1,472,971 1,206,241 Total assets less current liabilities 1,699,612 1,413, C.banner International Holdings Limited Interim Report 2012

27 CONDENSED CONSOLIDATED statement of financial position AT 30 June June 31 December NOTES RMB 000 RMB 000 (unaudited) (audited) Non-current liabilities Deferred tax liabilities 10 7,827 9,836 Convertible bonds ,903 Derivative financial instruments 16 34, ,846 9,836 1,543,766 1,403,510 Capital and reserves Share capital , ,087 Reserves 1,292,303 1,201,423 Total equity attributable to owners of the Company 1,494,390 1,403,510 Non-controlling interests 49,376 1,543,766 1,403,

28 CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE SIX MONTHS ENDED 30 June 2012 Equity attributable to owners of the Company PRC Investment Convertible statutory revaluation bonds equity Non- Share Share reserve reserve reserve Accumulated Sub- controlling capital premium profits total interests Total RMB 000 RMB 000 RMB 000 RMB 000 RMB 000 RMB 000 RMB 000 RMB 000 RMB 000 At 1 January 2011 (audited) ,271 98,093 83, , , ,086 Net profit and total comprehensive income for the period 130, , ,647 Dividend paid (Note 7) 7 (64,441) (64,441) (64,441) At 30 June 2011 (unaudited) ,271 98,093 83, , , ,292 At 1 January 2012 (audited) , , , ,330 1,403,510 1,403,510 Acquisition of a subsidiary (Note 19) 19 43,500 43,500 Net profit and total comprehensive income for the period 140, ,041 5, ,917 Gain on fair value changes of available-for-sale investments Reclassified to profit or loss on disposal of available-for-sale investments (605) (605) Recognition of equity component of convertible bonds (Note 16) 16 41,005 41,005 41,005 Dividend recognised as distribution to shareholders (Note 7) 7 (86,000) (86,000) (86,000) Dividend recognised as distribution to convertible bond holders (Note 7) 7 (4,166) (4,166) (4,166) At 30 June 2012 (unaudited) , , ,129 41, ,205 1,494,390 49,376 1,543, C.banner International Holdings Limited Interim Report 2012

29 CONDENSED CONSOLIDATED STATEMENT of CASH FLOWs FOR THE SIX MONTHS ENDED 30 June 2012 Six months ended 30 June Notes RMB 000 RMB 000 (unaudited) (unaudited) Net cash from operating activities 85,194 78,864 Investing activities: Payments for acquisition of property, plant and equipment (23,461) (21,503) Payments for acquisition of intangible assets (370) (346) Proceeds from disposal of property, plant and equipment Interest received 1,502 1,229 Acquisition of a subsidiary 19 23,507 Placement of pledged bank deposits (12,083) (26,418) Proceeds from release of pledged bank deposits 21,219 41,704 Proceeds from disposal of available-for-sale investments 76,216 Investment in structured bank deposits (80,000) Net cash from (used in) investing activities 6,991 (4,964) Financing activities: Short-term bank loans raised 64,716 Repayment of short-term bank loans Dividends paid (64,441) Expenses relating to proposed listing (12,661) Proceeds from issue of convertible bonds 189,024 Net cash from (used in) financing activities 189,024 (12,386) Net increase in cash and cash equivalents 281,209 61,514 Cash and cash equivalents at 1 January , ,409 Cash and cash equivalents at 30 June, 6 30 represented by bank balances and cash 785, ,

30 NOTES TO THE condensed CONSOLIDATED FINANCIAL STATEMENTS FOR THE SIX MONTHS ENDED 30 June GENERAL AND BASIS OF PREPARATION The Company was incorporated in Bermuda under the Companies Act as an exempted company with limited liability on 26 April The Company s shares were listed on the Main Board of The Stock Exchange of Hong Kong Limited (the Hong Kong Stock Exchange ) on 23 September The condensed consolidated financial statements have been prepared in accordance with the applicable disclosure requirements of Appendix 16 to the Rules Governing the Listing of Securities on the Hong Kong Stock Exchange and International Accounting Standard ( IAS ) 34, Interim Financial Reporting PRINCIPAL ACCOUNTING POLICIES The condensed consolidated financial statements have been prepared on the historical cost basis except for certain properties and derivative instrument that are measured at fair value. 2. Except for the accounting policy of convertible bonds which are new instruments issued during the current period set out below, the other accounting policies and method of computation used in the condensed consolidated financial statements for the six months ended 30 June 2012 are the same as those followed in the preparation of the Group s annual consolidated financial statements for the year ended 31 December (1) Convertible bonds Convertible bonds issued by the Company contain liability component, redemption premium derivative component and conversion component are classified into respective items on initial recognition. Conversion component that will be settled by the exchange of a fixed amount of cash for a fixed number of the Company s own equity instruments is classified as an equity instrument. Redemption premium derivative component not closely related to the host debt contract is classified as derivatives on initial recognition. At the date of issue, both the liability component and redemption premium derivative component are recognised at fair value. (1) The difference between the gross proceeds of the issue of the convertible bonds and the fair value assigned to the liability component and redemption premium derivative component, representing the conversion component for the holder to convert the bonds into equity, is included in equity (convertible bonds equity reserve) C.banner International Holdings Limited Interim Report 2012

31 NOTES TO THE condensed CONSOLIDATED FINANCIAL STATEMENTS FOR THE SIX MONTHS ENDED 30 June PRINCIPAL ACCOUNTING POLICIES (CONTINUED) (1) Convertible bonds (continued) In subsequent periods, the liability component is carried at amortised cost using the effective interest method, and the redemption premium derivative component is measured at fair value with changes in fair value recognised in profit or loss. The interest charged on the liability component is calculated by applying the original effective interest rate. 2. (1) The equity component, representing the option to convert the liability component into ordinary shares of the Company, will remain in convertible bonds equity reserve until the option is exercised (in which case the balance stated in convertible bonds equity reserve will be transferred to share premium). Where the option remains unexercised at the expiry date, the balance stated in convertible bonds equity reserve will be released to the accumulated profits. No gain or loss is recognised in profit or loss upon conversion or expiration of the option. Transaction costs that relate to the issue of the convertible bonds are allocated to the liability component, redemption premium derivative component and conversion component in proportion to their relative fair values. Transaction costs relating to the liability component are included in the carrying amount of the liability portion and amortised over the period of the convertible bonds using the effective interest method. Transaction costs relating to the redemption premium derivative component is charged to profit or loss immediately. Transaction costs relating to the conversion component is included in conversion bonds equity reserve. -29-

32 NOTES TO THE condensed CONSOLIDATED FINANCIAL STATEMENTS FOR THE SIX MONTHS ENDED 30 June PRINCIPAL ACCOUNTING POLICIES (CONTINUED) In the current interim period, the Group has applied, for the first time, certain amendments to International Financial Reporting Standards ( IFRSs ) issued by International Accounting Standards Board ( IASB ): 2. Amendments to IAS 12 Deferred Tax: Recovery of Underlying Assets 12 Under the amendments to IAS 12 Recovery of Underlying Assets, investment properties that are measured using the fair value model in accordance with IAS 40 Investment Properties are presumed to be recovered through sale for the purposes of measuring deferred taxes, unless the presumption is rebutted in certain circumstances The Group measures it investment properties using the fair value model. As a result of the application of the amendments to IAS 12, the directors reviewed the Group s investment property portfolios and concluded that the Group s investment properties are held under a business model whose objective is to consume substantially all of the economic benefits embodies in the investment properties over time, and that the presumption set out in the amendments to IAS 12 is rebutted. Previously, the Group recognised deferred taxes on changes in fair value of investment properties on the basis that the entire carrying amounts of the properties were recovered through use. As a result, the application of the amendments to IAS 12 in the current interim period has had no material effect on the amounts reported in these condensed consolidated financial statements and/or disclosures set out in these condensed consolidated financial statements C.banner International Holdings Limited Interim Report 2012

33 NOTES TO THE condensed CONSOLIDATED FINANCIAL STATEMENTS FOR THE SIX MONTHS ENDED 30 June REVENUE AND SEGMENT INFORMATION The following is an analysis of the Group s revenue and results by operating segments, that is retail and wholesale of branded fashion footwear ( Retail and wholesale ) and contract manufacturing of footwear ( Contract manufacturing ), for the period under review: 3. Six months ended 30 June RMB 000 RMB 000 (unaudited) (unaudited) Segment revenue Retail and wholesale external sales 1,031, ,656 Contract manufacturing external sales 98, ,344 inter-segment sales 2,948 Segment revenue 1,130, ,948 Eliminations (2,948) 1,130, ,000 Segment results Retail and wholesale 186, ,114 Contract manufacturing 4,206 10, , ,413 Unallocated finance costs (980) Share of losses of joint ventures (1,258) (900) Profit before tax 189, ,533 Inter-segment sales are charged at prevailing market prices. -31-

34 NOTES TO THE condensed CONSOLIDATED FINANCIAL STATEMENTS FOR THE SIX MONTHS ENDED 30 June REVENUE AND SEGMENT INFORMATION (CONTINUED) The following is an analysis of the Group s assets by operating segments: June 31 December RMB 000 RMB 000 (unaudited) (audited) Segment assets Retail and wholesale 1,989,028 1,638,093 Contract manufacturing 456, ,261 Total segment assets 2,445,585 1,851,354 Eliminations (387,974) (127,321) Unallocated 11,373 6,994 Total consolidated assets 2,068,984 1,731, OTHER INCOME AND EXPENSES, OTHER GAINS AND LOSSES 4. Six months ended 30 June RMB 000 RMB 000 (unaudited) (unaudited) Government grants (note 1) 1 11,084 7,934 Interest income on bank deposits 4, Investment income (note 12) Rental income 474 Legal and professional fees (note 2) 2 (9,961) Net foreign exchange gains Others 1, ,061 (943) Note 1: The amount mainly represented the local tax refund received from the local governments where the Group entities were located. 1 Note 2: The amount mainly represented the legal, professional and related expenses incurred for the application of the listing of the Company s shares in the Hong Kong Stock Exchange C.banner International Holdings Limited Interim Report 2012

35 NOTES TO THE condensed CONSOLIDATED FINANCIAL STATEMENTS FOR THE SIX MONTHS ENDED 30 June PROFIT BEFORE TAX Profit before tax has been arrived at after charging the following items: 5. Six months ended 30 June RMB 000 RMB 000 (unaudited) (unaudited) Depreciation of property, plant and equipment 10,511 7,331 Amortisation of prepaid lease payments (included in administrative and general expenses) Amortisation of intangible assets (included in administrative and general expenses) Total depreciation and amortisation 10,970 7,722 Cost of inventories recognised as an expense (including allowance for inventories obsolescence) 424, , INCOME TAX EXPENSE 6. Six months ended 30 June RMB 000 RMB 000 (unaudited) (unaudited) Current tax: Enterprise income tax 47,541 50,526 Deferred tax credit Current period (3,580) (640) 43,961 49,

36 NOTES TO THE condensed CONSOLIDATED FINANCIAL STATEMENTS FOR THE SIX MONTHS ENDED 30 June INCOME TAX EXPENSE (CONTINUED) The Company together with certain subsidiaries of the Company incorporated in Bermuda, the British Virgin Islands are not subject to any income tax in their respective jurisdiction. 6. No provision for Hong Kong Profits Tax has been made for both periods as the subsidiaries of the Company incorporated in Hong Kong do not have significant assessable profit arising from Hong Kong. Subsidiaries of the Company established in the People s Republic of China (the PRC ) are subject to PRC Enterprise Income Tax at a rate of 25% (six months ended 30 June 2011: 25%) pursuant to the relevant PRC Enterprise Income Tax laws. 25% % Under the relevant tax law and implementation regulations in the PRC, withholding income tax is applicable to dividends payable to investors that are non-prc tax resident enterprises", which do not have an establishment or place of business in the PRC, or which have such establishment or place of business but the relevant income is not effectively connected with the establishment or place of business, to the extent such dividends have their sources within the PRC. Under such circumstances, dividends distributed from the PRC subsidiaries to non-prc tax resident group entities in Hong Kong shall be subject to the withholding tax at 5%. As at 30 June 2012, except for those provided for as set out in Note 10, in relation to withholding income tax for the remaining undistributed profits of RMB615,516,000 (31 December 2011: RMB519,458,000) retained by PRC entities, no deferred tax has not been provided for as the directors of the Company did not anticipate to distribute such profits from its PRC subsidiaries in the foreseeable future. 5% ,516,000 ( ,458, C.banner International Holdings Limited Interim Report 2012

37 NOTES TO THE condensed CONSOLIDATED FINANCIAL STATEMENTS FOR THE SIX MONTHS ENDED 30 June DIVIDENDS During the current interim period, a dividend to shareholders of RMB0.043 per share in respect of the year ended 31 December 2011 amounting to RMB86,000,000 in aggregate was proposed and approved by shareholders. A dividend to convertible bondholders of RMB0.043 per share in respect of the year ended 31 December 2011 amounting to RMB4,166,000 in aggregate was distributed. The directors of the Company do not recommend the payment of an interim dividend for the six months ended 30 June ,000, ,166, During the six months ended 30 June 2011, dividends of USD per share amounting to USD9,801,000 (equivalent to RMB64,441,000) in aggregate was proposed and paid to shareholders ,801,000 64,441, EARNINGS PER SHARE The calculation of basic and diluted earnings per share attributable to owners of the Company is based on the following data: 8. Six months ended 30 June RMB 000 RMB 000 (unaudited) (unaudited) Earnings Earnings for the purposes of basic earnings per share 140, ,647 Number of shares ( 000) Number of ordinary shares for the purpose of basic earnings per share 2,000,000 1,700,000 Effect of dilutive potential ordinary shares attributable to convertible bonds 8,516 Weighted average number of ordinary shares for the purpose of diluted earnings per share 2,008,516 1,700,000 Number of ordinary shares for the purpose of basic earnings per share 2,008,516 1,700,000 RMB cents RMB cents Earnings per share Basic Diluted