China Dongxiang (Group) Co. Ltd. Announces Annual Results for the Year Ended 31 December 2010

Financial Highlights

*Together with the total interim dividends of Rmb 8.32 cents per share paid on 20 September, 2010, total dividends for 2010 are Rmb 18.08 cents, representing an increase of Rmb 0.04 cents as compared to the year of 2009.

(22 March 2011, Hong Kong) - The leading international sportswear brand enterprise in the PRC, China Dongxiang (Group) Co., Ltd. ("China Dongxiang" or "the Group"; stock code: 3818) announced its annual results for the year ended 31 December 2010.

In a market fraught with challenges, the Group still managed to achieve encouraging results. For the 12 months ended 31 December 2010, the Group recorded a turnover of RMB 4,261.6 million, representing a 7.3% year-on-year increase. During the year, the Group's gross profit margin remained at a satisfactory level at 59.7%. Profit attributable to equity holders of the Company amounted to RMB 1,463.7 million, up 0.3% year-on-year. Basic earnings per share were RMB 25.83 cents, up 0.3%. According to the Group's dividend policy, China Dongxiang propose to distribute 30% of profit attributable to equity holders for the year ended 31 December 2010 as dividend. Given the strong cash position, the board of directors of the Company has recommended to distribute an additional 40% of profit attributable to equity holders for the year ended 31 December 2010. As a result, the total dividend payout ratio for the year ended 31 December 2010 will be 70%.

Mr. Chen Yihong, Chairman of China Dongxiang, said, "In 2010, both brand operators and retailers in the market faced correlated business pressure. Despite the challenges, we still see a good prospect of rapid growth in the retail market given the ongoing rapid economic development. As a major player, China Dongxiang is ready to make self-adjustment and capitalize on the market expansion. We will apply pertinent approaches to strive for business growth."

The Kappa business, the core brand of the Group, accounted for 85.2% (2009: 85.5%) of the Group's total sales revenue for the year ended 31 December 2010. Sales of Kappa products increased by RMB238.2 million compared with the year ended 31 December 2009. Such growth was mainly driven by 5.5% and 15.8% growth in sales of apparel and footwear product, respectively. Increase in sales of footwear was mainly due to the introduction of new concepts, such as lightweight running shoes and casual footwear by the Group in the financial year. In addition, the number of Kappa Brand retail outlets directly or indirectly operated by the Group's distributors increased from 3,511 as of 31 December 2009 to 3,751 as of 31 December 2010, a net increase of 240.

Apart from developing the Kappa brand, the Group continues to enrich its brand portfolio. Its efforts included the introduction of Robe Di Kappa ("RDK"), Kappa's sister brand in China. Robe Di Kappa brings a new attitude and perspective towards sports and leisure to the world - the inner beauty of sports, with its artistically innovative line of products. The first Robe Di Kappa outlet was officially opened in Beijing in February 2010. The number of outlets had grown to 20 by the end of 2010.

During the year, the Group continued to push ahead with the development of online sales. Through joint efforts with www.taobao.com, the leader of e-commerce in China, consumers are able to purchase Kappa products over the Internet. Online sales of Kappa products grew by over 300% in 2010. The Group believes that online sales can complement physical retail outlets and serve as an effective platform for brand promotion.

In 2010, Kappa continued to adopt "We are One" as its brand building and marketing slogan. The Group reinforced its promotional efforts through television commercials, a series of World Cup South Africa marketing activities and cooperation with magazines and sports events sponsorships including China Open, HSBC Golf Championship, etc.

Product differentiation has always been one of the most important factors contributing to the success of the Group. Phenix Co., Ltd., the Group's subsidiary in Japan, developed a number of new technologies during the year, including curve zippers and embossment patterns, which added various new elements to the Group's up-and-coming products. Leveraging on R & D personnel and software of Phenix Co., Ltd., advanced technologies used in sportswear production have been transferred from Japan to our R & D center in Taicang, Jiangsu, the PRC. The exchange of personnel within the two technical centres enabled the Group to leverage on synergies related to the design and R&D of its products.

Looking ahead, The Group aims to strengthen its brand identity and further benefit from its differentiation to supply the market with a greater variety of products. The Group will extend its product range to cover more market segments and seek to strengthen its sports performance product range by focusing on the areas of soccer, tennis and training. The Group will also extend its style and fashion product range while rejuvenating its existing core casual range by adopting a new approach to the design of logos and national themes.

To raise the awareness of end-user needs, the Group will shift its focus from sell-in to sell-through by providing stronger support to distributors and from visual merchandising and training to assortment. This new approach will enable the Group to get closer to the market pulse and tighten partnerships with retailers.

Chairman Chen said, "Inevitably, we will be facing challenges to our Kappa business in the year 2011. Amid the ever-changing business environment, it also brings us more business opportunities to which we shall be able to pursue further growth of the Group in the long term. We believe that our growth dynamics will forge ahead through the operations of e-commerce, multi-brands and brand building integrated with retailing business. We are confident that the new management led by Ms. Zerbib together with our strong financial position will become our new growth engine."

About China Dongxiang (Group) Co. Ltd.
China Dongxiang (Group) Co., Ltd. (HKEx: 3818) is a leading international sportswear brand enterprise in China and was successfully listed on the Main Board of the Hong Kong Stock Exchange on 10 October 2007. The Group is primarily engaged in the design, development, marketing and wholesale of branded sportswear in China. Currently, China Dongxiang owns all rights to the internationally recognized Kappa and Robe Di Kappa (RDK) Brand in China, Macau and Japan. Its products convey an active, fashionable and youthful image and are warmly welcomed by China's fast growing and high potential consumers. The Group completed the acquisition of a Japan sportswear enterprise Phenix on 1 May 2008. Phenix, the most popular ski brand in Japan with the largest market share, has gained strong recognition in the international market.