2008 Interim Results Corporate Presentation

1

This presentation is prepared by Xtep International Holdings Limited (the “Company”) and is solely for the purpose of corporate communication and general reference only. The presentation is not intended as an offer to sell, or to solicit an offer to buy or form any basis of investment decision for any class of securities of the Company in any jurisdiction. All such information should not be used or relied on without professional advice. The presentation is a brief summary in nature and do not purport to be a complete description of Company, its business, its current or historical operating results or its future prospects

This presentation is provided without any warranty or representation of any kind, either expressed or implied. The Company specifically disclaims all responsibilities in respect of any use or reliance of any information, whether financial or otherwise, contained in this presentation.

This presentation contains certain forward-looking statements with respect to the financial condition, results of operations and business of the Company. These forward-looking statements represent the Company’s expectations or beliefs concerning future events and involve known and unknown risks and uncertainty that could cause actual results, performance or events to differ materially from those expressed or implied in such statements. Certain statements, such as those that include the words “potential”, “estimated”, “expect”, “anticipates”, “objective”, “intends”, “plans”, “believes”, “estimates”, and similar expressions or variations on such expressions may be considered “forward-looking statements”.

Forward-looking statements involve inherent risks and uncertainties. Readers should be cautioned that a number of factors could cause actual results to differ in some instances materially, from those anticipated or implied in any forward-looking statement. Forward-looking statements speak only as of the date they are made, and it should not be assumed that they have been reviewed or updated in the light of new information or future events. Trends and factors that are expected to affect the Company’s results of operations are described in the “Business Review and Financial Review”.

Disclaimer

2

Results Highlights 5

Business Overview 19

Future Plans and Strategies 27

Open Forum 34

Major Achievements 3

Agenda

3

Major Achievements

4

� Successfully listed on the Main Board of the Stock Exchange of Hong Kong on 3 June 2008

— Approximately HK$2.1 billion raised

� 1H 2008 results outpaced FY2007 with robust growth momentum

— Turnover grew by 1.7 times to RMB1.4 bn

— Net Profit up by 2.1 times to RMB255 mn

— Gross profit margins increase to 36.8% (1H 2007: 32.2%)

� Diverse product mix

— Balanced range of product offering with 50% of footwear, 49 % of apparel and 1% of accessories

� Substantial sales network expansion

— Number of Xtep, Disney Sport and Koling retail outlets reached 5,115, up by 468 outlets

� Strong cash inflows

— Net cash generated from operating activities in 1H 2008 amounted to RMB 200 mn

� Dividend

— Proposed HK 5 cents per share, represent 38% pay out ratio

Accomplishments

5

Results Highlights

6

Financial Highlights

+ 2.3 p.t.15.8%18.1%Net profit margin

+ 4.6 p.t.32.2%36.8%Gross profit margin

+ 211.8%96.5300.8Operating profit

For the six months ended 30 June

-(54.5)199.7Operating cash inflow/ (outflow)

+ 214.1%81.1254.6Profit for the period

+ 213.7%165.0517.8Gross profit

+ 174.3%513.41,408.2Revenue

+ 190.0%5.5216.01Basic earnings per share

(RMB cents)(RMB cents)

--5.0Dividend per share (HK cents)

+ 165.5%5.5114.63Diluted earnings per share

Changes(%)

2007(RMB mn)

2008(RMB mn)

7

Financial Highlights

- 32

+ 13

- 9

- 10

N/A

N/A

+ 1,945.3

+ 2,318.1

+ 2,427.9

Changes (RMB mn)

94

30

56

68

N/A

N/A

99.0

279.8

903.5

31 December 2007(RMB mn)

47Average trade receivable days

58Average inventory turnover days

1.34Net asset per share (HK $)*

2,044.3Net cash

1.05Net cash per share (HK $)*

2,597.9Net asset

3,331.4Total asset

62Working capital days

43Average trade payable days

30 June 2008(RMB mn)

* Based on HK$ 1 = RMB 0.879 as at 30 June 2008

8

Financial Highlights

Total revenue breakdownby product category

Total revenue breakdownby product category

For the six months ended 30 June

1H 2008

1H 2007

Footwear Apparel Accessories

RMB2 mn(0.4%)

RMB134 mn(26.0%) RMB377 mn

(73.6%)

RMB703 mn(50.0%)

RMB18 mn (1.2%)

RMB687 mn(48.8%)

Total revenue breakdown by brandTotal revenue breakdown by brand

RMB mn

For the six months ended 30 June

74

439

1,308

595

0

200

400

600

800

1,000

1,200

1,400

1,600

1,800

1H 2007 1H 2008

+ 174%

513

1,408

Xtep Other brands OEM

32.2%

36.8%

30%

33%

35%

38%

40%GP margin

9

Revenue breakdown of Xtep brandby product category

Revenue breakdown of Xtep brandby product category

For the six months ended 30 June

1H 2008

1H 2007

Footwear Apparel Accessories

RMB2 mn(0.5%)

RMB134 mn(30.4%) RMB303 mn

(69.1%)

RMB662 mn(50.6%)

RMB14 mn (1.1%)

RMB632 mn(48.3%)

Revenue breakdown of Xtep brandRevenue breakdown of Xtep brand

RMB mn

For the six months ended 30 June

303

662134

632

14

2

0

200

400

600

800

1,000

1,200

1,400

1,600

1,800

1H 2007 1H 2008

+ 198.1%

439

1,308

Footwear Apparel Accessories

GP margin

Xtep Brand – Turnover Analysis

34.8%

36.3%

30%

33%

35%

38%

40%

10

Xtep Brand – Turnover Analysis

FootwearFootwear

RMB mn

For the six months ended 30 June

662.5

303.1

35.5%

34.5%

0

100

200

300

400

500

600

700

800

30%

33%

35%

38%

40%

+ 118.6%

GP margin

For the six months ended 30 June

68.9

45.2

75.0

48.4

0204060

80100120

Average Selling Price Average Selling Cost

1H 2007 1H 2008+ 8.9%

+ 7.1%

RMBFor the six months ended 30 June

1H 2007 1H 2008

Revenue

Unit ’000

4,397

8,834

0

2,000

4,000

6,000

8,000

10,000

12,000

+ 100.9

%

1H 2007 1H 2008

Volume

11

Xtep Brand – Turnover Analysis

ApparelApparel

RMB mn

For the six months ended 30 June

631.6

133.6

35.7%

37.2%

0

100

200

300

400

500

600

700

800

30%

33%

35%

38%

40%

+ 372.8%

GP margin1H 2007 1H 2008

RevenueFor the six months ended 30 June

38.724.9

44.9

28.2

0

20

40

60

80

Average Selling

Price

Average Selling Cost

1H 2007 1H 2008+ 16.1

+ 13.3%

RMBFor the six months ended 30 June

3,456

14,077

0

5,000

10,000

15,000

20,000

+ 307.3%

1H 2007 1H 2008

Volume

Unit ’000

12

Other Brands (Disney Sport & Koling)– Turnover Analysis

RMB 95 mnRevenueOther brands

723,000Volume

Apparel

49.2%Gross Profit Margin

For the six months ended 30 June

82.4Average Selling Price (RMB)

438,000Volume

Footwear

40.1%Gross Profit Margin

76.2Average Selling Price (RMB)

1H 2008

13

Xtep retail outlets increase by 1,872 (1H 08: 4,732, 1H 07: 2,860)

Xtep Brand – Outlets Distribution

38%

% of outlets by region% of outlets by regionNetwork distribution of Xtep brandNetwork distribution of Xtep brand

Eastern

Southern

Northern

As at 30 June 2008

25%

18%

19%

Western

> 250

> 150-250

> 50-150

<50

14

Xtep Brand– Turnover Analysis by Regions

For the six months ended 30 June

+ 45%197,436287,127Average sales per outlet (RMB)

+ 198%4391,308Revenue (RMB mn)

+ 105%2,2234,550Average numbers of outlets

Changes (%)1H 20071H 2008

502.7

389.7

187.9227.9

65.8105.4

189.0

78.7

0

100

200

300

400

500

600

Eastern Southern Western Northern

1H 2007 1H 2008RMB mn

For the six months ended 30 June

15

Cost Structure

Increased Outsourced Production PercentageIncreased Outsourced Production Percentage

For the six months ended 30 June

1H 20081H 2007

OutsourcedProduction Cost

27.5%

Others1.4%

Raw Materials58.9%

Direct Staff12.2%

OutsourcedProduction Cost

43.1%

Others1.1%

Raw Materials50.7%

Direct Staff5.1%

16

Cost Analysis

R&D costR&D costAdvertising and promotionAdvertising and promotion

RMB mn

For the six months ended 30 June

28.7

113.1

5.6%

8.0%

0

20

40

60

80

100

120

1H 2007 1H 20080.0%

2.0%

4.0%

6.0%

8.0%

10.0%

+ 294.1%

RMB mn

For the six months ended 30 June

6.6

22.5

1.3%

1.6%

0

5

10

15

20

25

1H 2007 1H 20080.0%

0.5%

1.0%

1.5%

2.0%

+ 240.9%

17

Strong Profit Growth

18

Strong Balance Sheet and Working Capital Improvement

Cash conversion daysCash conversion daysWorking capital daysWorking capital days

106

168

94

62

0

50

100

150

200

2005 2006 2007 1H 2008

days

5868

133

156

80 109

56 4770 74

3043

0

50

100

150

200

2005 2006 2007 1H 2008

Inventory

Accounts Receivable

Accounts Payable

days

19

Capital Expenditure

CAPEX Plan for 2008-2009CAPEX Plan for 2008-2009

230130Production facilities & operation centre

15570Distribution network & flagship stores

428

43

2009(HK$ mn)

20IT system

220Total

2008(HK$ mn)

20

Business Overview

21

Brand Buildingand

Marketing

Extensive Distribution Network

Product R&Dand

Design

Effective Management

andTraining

Business Overview

22

1. Brand Building and Marketing –Promotion by entertainment celebrities

Marketing and promotion cost accounted for 8.0% of the total revenue of1H 2008 (1H 2007: 5.6%)

� Image and brand representatives of

Xtep: Nicholas Tse, Jolin Tsai,

Wilber Pan and Twins

� Promotion activities included: The

22nd China Sports Show, canvass

session of the 6th Southeast Music

Chart Awards and the Autumn Sales

Fair 2008 etc

� Placing TV commercials and title

sponsorships

23

1.Brand Building and Marketing –Sponsorship of Sports Teams and Events

CX-Games

Sponsorship of Sports Events

“Xtep Cup” of 2008 Yangzhou ChinaJianzhen International Marathon

� Sole title sponsor of Women’s Chinese Basketball Association (WCBA) 07-08

� Sole title sponsor of (National Basketball League (NBL)

� Sponsor of “Xtep Cup” of Yangzhou China Jianzhen International Marathon

� Sole title sponsor of the CX-Games

� Sportswear sponsor of “Amway Nutrilite Healthy Run” in 21 cities

Women’s Chinese Basketball Association (WCBA)

24

1.Brand Building and Marketing –Olympics marketing

Xtep Olympic Train

24

� Sponsor of the Belarusian Olympic delegation awarded

4 gold, 5 silver and 10 bronze medals in the

2008 Beijing Olympics

� Sole sponsor of the Xtep Olympic Train

� Title sponsor for CCTV programme “特步賽場戰報”, and

secured TV commercials of CCTV during all finals of the

Beijing 2008 Olympic Games

Sponsor of the Belarusian Olympic team

25

2. Extensive Distribution Network

Rapid growth of the distribution network to matchwith the surging needs in the PRC market

Rapid growth of the distribution network to matchwith the surging needs in the PRC market

5,115

50

332

4,733

Number of retail outlets (As at 30 June 2008)

(51)

-

(6)

(45)

Consolidated

519

-

121

398

Addition

4,647

50

217

4,380

Number of retail outlets(As at 31 December 2007)

Koling Brand

Disney Sport Brand

Xtep Brand

Total

26

3.Product R&D and design

� Strong team of nearly 381 design and R&D experts

� Co-operated with South Korean, France and other foreign companies to keep abreast of the latest fashion trends and enhanceits R&D capabilities

� Organized 2 Sales Fairs (Autumn and Winter Sales Fair 2008) and launched 1,121 footwearproducts and 1,347 apparel products

R&D expenses increase 2.4 times to RMB 22.5 mn, accounted for 1.6% of the total revenue of 1H 2008 (1H 2007: 1.3%)

27

4.Effective Management and Training

DistributionManagement

DistributionManagement

DRPSystem

Distribution NetworkDistribution Network

Effective Management and Distribution NetworkEffective Management and Distribution Network

� Established exclusive long-term and stable relationshipwith most of the distributors

� Standardization of designs and decorations of all retailoutlets

� Integrated nationwide pricing system

� Trainings for distributors and retailers from Guangzhou,Wenzhou, Changsha, Anhui, Chongqing, Beijing,Guiyang and Shanxi, with over 800 attendees

� Number of outlets implementing DRP Management Systemaccounted for 25% of the total

Wholesaling Market Feedback

28

Future Plans and Strategies

29

Future Plans and Strategies

Optimizing and expanding sales

network

Strengthening design and R&D capabilities

Consolidating multi-brand strategies

Further consolidate and strengthen the leading position in the fashion

sportswear market in the PRC

Further consolidate and strengthen the leading position in the fashion

sportswear market in the PRC

Enhancing brand

recognition

Flagship Store Branding

30

Optimizing and Expanding Sales Network

� Focus on network expansion in 2nd and 3rd-tier cities

with rapid growth

— Eastern region: Jiangsu, Zhejiang, Anhui and Shandong

— Southern region: Hunan, Hubei and Guangdong

� Plan to further increase the number of outlets and

expand outlet area by the end of 2008

— Establish a total of 1,100 outlets of Xtep brand and

Disney Sport brand stores with additional outlet area of

approximately 100,000 sqm

� Enhance DRP management system with

coverage increase to approximately

30% at the end of 2008

31

Flagship Store Branding

� Establish flagship store to enhance brand image

— Flagship stores already established in Changsha, Wuhan

and Hefei

— Target to establish a total of 10 new flagship stores in

2008

32

Enhancing Brand Recognition

� Adhere to the marketing mode of combining sports and entertainment

— Title sponsor approximately 10 concerts titled “特步五星演唱會”

(Xtep’s Five Stars Concert) in the PRC’s major cities in 2009

— Title sponsor of the 2008 Pingpang Carnival, high-profile TV show on

Hunan Satellite TV

— Sole sports product partner for “2008 西安城牆國際馬拉松賽” (2008

Xian International Marathon) on 1 November 2008

— Sole sports product partner of the 11th National Games of China

33

Strengthening Design and R&D Capabilities

Organic silicone

� Gather domestic and overseas design and R&D professionals for product development and

application of advanced technology

� Emphasize on fashionable design and launch limited celebrities’ editions of footwear and apparel

products and accessories relating to brand representatives

� Equip the Group’s products with both functions and fashionable design and launch relevant

products according to customers from different regions to cater to market needs

X-DRIVER power technology X-polar shock resistant technology

X-wave whirling shock resistant technology

Biomimetic technology

34

180185-014

Consolidating Multi-brand Strategies

Leveraging the success of our Xtep brand, we offerdifferentiated brands across consumer segments

Leveraging the success of our Xtep brand, we offerdifferentiated brands across consumer segments

BrandTarget consumer group Price range Features

300—800

200—400

150—300

Daring, bold andalluring style

Casual and fun

Fashionable,trendy andaffordablesportswear

High-end

customers

Brand-conscious, trendy and

more affluentteenagers

Mass market

35

Open Forum

36

2008 Interim Results Corporate Presentation